Oil Trains for Lima- Break Out Discussion

[CG Tower]

Hi all:

There was mention in "The Definitive" thread regarding unit oil coming down the DT&I for Husky. I decided to break that discussion out of that thread seeing that has little to do with the ND&W.

First, all of this discussion is for a project that will not come to fruition for another 2 to 2 1/2 years, if the timetable holds, but the Potash turnaround is now 6 weeks off schedule, and Husky's project is dependent on that projects completion. With that bit of knowledge, keep in mind that these plans WILL change (they have already).

I am privy to these discussions with my work, so you are hearing it from me, which hears it from the people making these decisions. Feel free to believe what you want...or who you want...depending on your desired outcomes. Also know that there are some elements of this conversation that will not be discussed at this time.

Here is what I know and can tell:

1) Oil MAY come from one of two places depending on the price: Alberta oil sands or Eastern Ohio.

2) The oil WILL come out of Chicago if it comes from Alberta.

3) Husky is going to be investing in additional rail infrastructure in Lima for the oil rack and also the coke racks. The locations of these projects is still in the engineering phases. Fortunately, the former rail lines in Lima were once equipped for these facilities. Its now a matter of "undoing" some things long removed.

4) At present the details are being worked out how that oil COULD come across the CF&E and routed through Lima. This would require a level of cooperation between G&W/CSX and NS. However, all lines stand to benefit from this business.

5) Daily car counts into and out of the refinery COULD blow the current daily car counts completely off the charts. Sadly, this is one variable I cannot reveal yet...but...lets just say that when I saw the numbers...

6) In bound oil MAY or MAY NOT be unit train...it could be as small as 15 to 30 cars...or a full unit train. Again, depending on many, many variables.

Now all of what I have said COULD/MAY/WILL change in the next 24-30 months. This is a very fluid situation...I learn new things every day and new additions to the process. This is the first large scale capital infrastructure program I've been involved with, so, this is fascinating on many levels.

Please notice the stress on the words above. This is for a reason...because indeed, changes will happen with this project.

To that end, know that I'll let you know things as I can tell you...feel free to speculate...but try to keep it reasonable.

Eric at CG Tower

[bnsf8000]

The talk about this subject has come up before. It would be very interesting if this comes to fruition. If it would come from the Alberta oil sands, it would be nice if it could come around the EJ&E/CN routing. At least go out and around. Or is there a better way?

If it goes on the CF&E there's a lot of upgrading to do. In terms of track, roadbed and such. Would there need to be a siding or two to be constructed? The Pennsy has been left to go downhill for so long. Unless they would fleet some trains one way to add capacity. Actually, any number on how many trains we would be talking per week?

With NS running their OCS and I think track geometry earlier it looks like the CF&E may start humming a little. Seems like more NS trains are coming to the CF&E fairly soon. I'm wondering if the trains they have run W1E [31E], 67W and 19A were test trains. Have heard rumor about NS on the CF&E in another way also. Or is part of something larger in the long term? Have also heard rumors that CN/CP have looked at the CF&E. CSX could/will be in the mix also. These next few years could really get interesting on the CF&E. Let's hope the economy stays somewhat good.
Plus, hopefully the CF&E will continue to exist and the other railroad/ railroads will run over the top of the line.

PW

[brc0227]

Speaking of oil in eastern Ohio. I was told one reason NS has kept the west Virginia secondary. Is because of potential oil business in eastern Ohio. One of our last big meetings we had. They showed us some maps and charts. Showing that NS and WL&E we're the 2 railroads with trackage through that area that would be able to haul oil. I know it's not oil trains in Lima as the thread title states. But your mention of oil in eastern Ohio reminded me of the discussion from the big wigs about it.

[MSchwiebert]

Now for the macroeconomic question, (which probably wasn't disclosed) - at what price point for crude, does the viability for the project go away? I know that the extraction cost for tar sands has improved steadily over the years, but there is still a gap between it and conventional oil.

[CG Tower]

Well, that wasn't disclosed, but...project will go forward regardless.

Now for the macroeconomic question, (which probably wasn't disclosed) - at what price point for crude, does the viability for the project go away? I know that the extraction cost for tar sands has improved steadily over the years, but there is still a gap between it and conventional oil.

[howeld]

Heard today that the refinery project got cancelled or at least put on hold. Any truth?

[CG Tower]

Heard today that the refinery project got cancelled or at least put on hold. Any truth?

Put on hold, not cancelled...the price of oil dropped, so, some plans have just been delayed...

CG Tower

[howeld]

Thanks for the conformation. There was talk delay till at least 2018 if at all.

[midland sub]

Last year when G&W had the CFE-I&O available one of the concerns for the CFE was if and when Husky did start refining Alberta tar sands how would CSX look at new traffic potential. The concern by the possible suitor wasn't that CSX would take the line back for themselves, but force whoever controlled the line into selling it back and it ending up in Paducah & Louisville operation. Just as quickly as the CFE went up on the block, so was it taken off the block. So whether it was part of the potential gas traffic off the OC who knows.

If any of the eastern Ohio oil reaches Lima I don't see it coming via an all G&W routing OC-I&O. First stumbling block is NS and the lack of an interchange between the I&O-OC in Columbus. NS isn't moving on allowing the OC access to the I&O at Russ even though the OC already has rights on NS at Russ. NS would be stupid to allow that to happen and lose the potential of them getting the traffic themselves from the OC in Columbus and delivering it directly to Husky. Second stumbling block is the G&W themselves. For whatever reason the fiefdom otherwise known as the Ohio Valley Region marches to the beat of their own drum. They would need to build the new northeast connection in Wash CH on the Midland that was rumored to be in the works shortly after the G&W acquired RA. But the reality is the OC runs the region and the I&O is the middle kid that basically is ignored until something bad happens. At this point Railamerica would be a welcome return than the current befuddled mess. They're making Railamerica look like the Apple of the rail industry..... If they were able to overcome their own ineptness or basically be absorbed into the OC like McBride wants, after dumping several million into the Wash CH project the entire DT&I would need still need to be rebuilt. Really too much to overcome if things continue the way they are run....