West Texas Rail Revival: A Timely Rescue for the Oil Boom Era.

A vital link in rail transportation in West Texas was saved from deterioration just as the oil industry was beginning to develop in that area from hydraulic fracturing. Now, Texas Pacifico Transportation Ltd. is undergoing exponential expansion from the explosive growth of oil wells in the area. “The oil companies have plans to drill 4,000 wells within the next few years,” Executive Vice President Federico Díaz-Page reports. “We are not at the peak of demand.”

Texas Pacifico Transportation Ltd. transports sand to oil wells for use in hydraulic fracturing, as well as crude oil from the wells. Its route stretches nearly 400 miles from San Angelo Junction to Presidio at Texas’ border with Mexico. The majority of the short-line railroad’s traffic moves between San Angelo Junction and Fort Stockton.

Texas Pacifico also moves steel for wind turbines, pipe, grain during the harvest season, some fertilizers, pelletized wood from mesquite trees and zeolite, which is used in water softening and fertilizers. In 2011, Texas Pacifico moved 3,900 rail cars, and in 2012, it transported materials in 10,600 cars. The short line railroad expects to move up to 40,000 cars in 2013, and Diaz-Page expects most of this growth to be from the oil industry.

One reason for the expected exponential increase in oil shipments is the preference of oil companies in the area for unit trains. The oil companies are constructing loop tracks at their facilities so they can load unit trains of at least 100 crude oil tanker cars.

Cotton Switch
Not all sectors in the area are booming. In 2012, the railroad shipped approximately 1,500 grain cars, and only a few more were steel or other materials. In 2013, Diaz-Page expects to transport only 400 grain cars because the drought in the area reduced the crop size. Farmers plant cotton in the second half of the year, and it is light enough that it can be trucked rather than transported by rail, a method which is more cost-efficient for heavier cargo.

Besides adding rail cars, Texas Pacifico also has grown its fleet of diesel locomotives. At the beginning of 2012, the railroad leased nine locomotives, but by the end of the year, it leased 24. That number should be sufficient in 2013 because of the railroad’s locomotive usage and locomotive use and liability agreements (LULAs) with other railroads with which it connects.

Approximately 80 percent of Texas Pacifico’s traffic comes from or goes to the Burlington Northern and Santa Fe Railroad, and the rest is from the Union Pacific, Kansas City Southern or Canadian Pacific railroads through the Fort Worth and Western Railroad. According to the railroad’s locomotive usage and liability agreements, Texas Pacifico provides a crew to run those railroad’s locomotives when they arrive on its tracks. This eliminates changing locomotives and saves time.

The locomotives Texas Pacifico leases feature the latest technological features, including direct communication of engineers and conductors with dispatchers, global positioning systems to indicate a locomotive’s location and speed, and transmission to dispatchers of how much diesel fuel is being burned and the average consumption of fuel.

Technology also is used in Texas Pacifico’s two rail yards – one at San Angelo and the other at Fort Stockton – to assemble manifest trains from cars that arrive on different trains and are headed to different destinations. Cars for the same destination are assembled in blocks by employees following directions the railroad’s computer receives from each car’s waybill that includes information such as the destination, weight of the car and the shipper.

Restoration of the Line
The rail line now managed by the Texas Pacifico was abandoned before 2000 but was purchased by the state of Texas. A Mexican railroad company, Grupo Mexico – which owns Texas Pacifico Transportation Ltd. – obtained the concession from the state for an operations agreement to run the line. Diaz-Page estimates Grupo Mexico owns nearly 6,000 miles of railroads in Mexico.

“Grupo Mexico lost a little over $1 million per year, but they also invested in the rail line, so they brought it to a better condition, along with the state,” Diaz-Page relates. “The state got a few grants, and Grupo Mexico matched the investment with a percentage. So between $30 million and $40 million were put into the line to modernize it and get the track repaired.”

Because of current track conditions, the top speed on the railroad is 25 miles per hour, which is a good industry average speed. “One mile of new track costs $1 million,” Diaz-Page points out.

“When you have 400 miles, $40 million is not a lot. We keep maintaining it, tamping and aligning, and keep replacing ties and rails.”