Oil and gas operators are not the only companies benefiting from the boom in the development of the Bakken formation in North Dakota, as railroad companies are seeing growth from the increased transportation demands from this area.

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Railroads support drilling activity in various ways, including the inbound shipment of supplies needed to develop properties like proppant, steel and other materials, along with the transport of crude oil by railcar due to a shortage of pipeline capacity. Railroads also transport materials to help in the construction of roads needed to reach drill sites.

Union Pacific Moves Forward
Union Pacific (NYSE:UNP) reported that the company expects railcar shipments of Bakken crude oil to total 16,000 carloads in 2011, triple the level of 2010. The company reported a 15% increase in revenues in the Industrial Products segment in the first quarter of 2011. This growth was led by a 35% increase in nonmetallic mineral shipments (frac sand) and a 15% increase in steel and scrap shipments (drill pipe).

Canada's Growth
Canadian Pacific Railway (NYSE:CP) is investing $100 million to expand the company's operations in North Dakota from 2010 to 2012. These funds will be used to increase rail capacity and upgrade track and equipment. The company is seeing growth from the inbound shipment of sand and steel into the basin, as well as the outbound shipment of crude oil to refineries and other delivery points. Canadian National Railway (NYSE:CNI) also offers transportation services to operators in the Williston Basin. The company boasts in its marketing brochure that using the railroad to ship crude oil is the most environmentally friendly method and emits less greenhouse gases than any other. Canadian National Railway has capacity to transport up to 60,000 barrels of oil per day on its network.

Kinder Partners Up
Kinder Morgan Energy Partners LP (NYSE:KMP) is partnering with Watco Companies, LLC, a privately owned railroad company, to build rail trans load facilities in North Dakota and other areas. These facilities will have the ability to unload and load frac sand, crude oil, drill pipe and other materials.

Big Plans for Hess
Hess Corp. (NYSE:HES) is one of the operators that is developing the Bakken on its leasehold in North Dakota. The company has 900,000 acres and plans to operate 18 rigs in 2011 with a goal of increasing production to 80,000 barrels per day by 2015. Hess Corp. is spending $1.6 billion in 2011 on field development across its portfolio, part of which will be used to build a crude oil rail loading and storage facility in the area.

The Bottom Line
Railroads are getting a spurt in growth from the development of various shale and other unconventional formations in North America. The Bakken is one of these areas, and the railroad industry is investing to meet the needs of oil and gas operators. (For additional reading, also take a look at How Does Crude Affect Gas Prices?.)

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