Aqua Subsidiary Wants Y&S Railroad for Shale Pipelines
YOUNGSTOWN, Ohio – Aqua Infrastructure LLC, a subsidiary of Aqua America Inc., is seeking approval of a letter of intent to purchase the Youngstown & Southern Railroad, now owned by the Columbiana County Port Authority.
"They've been involved with providing water as the shale industry develops," Tracy Drake, the port authority CEO, said of Aqua. "They're asking us to enter into a letter of intent so they could begin their due diligence."
Karl Kyriss, president of Aqua Infrastructure, says its primary business would be to use the rights of way along the shoulder of the railroad to run a pipeline intended to transport water to users throughout the Utica shale.
"As you’re well aware, there's a lot of growing activity related to the Utica shale," Kyriss told The Business Journal Friday. "We've built one project in Pennsylvania to provide water to drillers, and this gives us the opportunity at a similar project in Ohio."
The project would require construction of new pumping stations near the sources of water, Kyriss said.
One condition of the potential purchase is maintaining the railroad, he noted, and Aqua has every intention of doing that, he added. "We have a lot of sources of water,” Kyriss said, “and a good relationship with regulators who like the way we manage our operations."
It's still too early to determine where the pumping stations would be located and just how far the pipelines would run along the Y&S, Kyriss said. "What is good about railroad rights of way is that they tend to be straight and flat,” he stated. “That makes my job easier."
Transporting that water to and from well sites is key to developing business in the industry, as oil and gas exploration continues in the Utica shale in eastern Ohio and the Marcellus shale in western Pennsylvania.
Aqua America is one of the largest publicly traded water utilities in the country.
In May, Aqua America subsidiary Aqua Ohio announced it has leased land in Struthers so trucks could fill their tanks from Hamilton Lake. From there, the water is hauled to drilling sites and used in hydraulic fracturing.
The process involves injecting millions of gallons of water and sand into the earth at high pressure to fracture rock 8,000 feet below. Oil and gas is then released from the tiers of rock.
A special board meeting of the port authority is scheduled for Wed., Feb. 6 in its offices in East Liverpool. Terms of the Aqua Infrastructure purchase proposal are not public, Drake noted, and more will be divulged at the meeting Wednesday.
The port authority has owned the Y&S since 2000, and has tried at least four times to sell the railroad.
In August, an environmental services company, Tervita Corp. based in Calgary, Canada, announced it was pulling out of an agreement that called for the company to pay $2.9 million for the 36-mile short line that runs from Darlington, Pa., through Columbiana County to Youngstown.
Tervita's board determined that the cost of environmental remediation at two points along the railroad outweighed the benefits of purchasing the short line, and the company backed out.
Drake reports that a subsequent environmental test conducted by Tetra Tech of Canfield showed that Tervita's concerns were unfounded, and did not justify reneging.
In October, the Ohio Rail Commission agreed to a $900,000 payment from the port authority to satisfy a $1.1 million loan the agency used to make improvements to the line. That allowed the port authority to market the Y&S as essentially debt free, and Drake says he and other officials started talking to other interested parties.
"When Tervita pulled their disappearing act, and we had proven that their position was not correct, we started to talk to others," Drake said.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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