Early-stage oil shipments could start as soon as September because much of the required rail infrastructure is already in place.
While arguably better known as a coal region – it accounts for about 40% of US coal production – the PRB has massive reserves of crude oil, too. The US Geological Survey estimates the basin contains about 1 billion barrels of recoverable oil.
To be called Black Thunder Terminal, the entity will develop a rail terminal to provide crude oil handling, storage, rail loading and marketing services to other PRB producers and downstream refiners.
Arch will contribute reclaimed land, rail switching and loop and other existing infrastructure assets at its Black Thunder mining complex in Campbell County, Wyoming.
Meritage will provide capital and build and operate the crude oil terminal on land east of Arch’s active operations but near the basin’s crude oil production activity. It will own the majority interest in Black Thunder Terminal.
The JV is subject to approvals, which the companies expect to get in the next three to six months.
The terminal will have the ability ramp up outbound shipping capacity from 10,000 barrels per day in the initial phase to 120,000bpd via outbound trains. Significant acreage is available for further expansions too.
The terminal will be served by BNSF Railway Company.
Meritage Midstream chairman and chief executive officer Steve Huckaby said that with its ideal land position and significant infrastructure in place, Arch was the perfect partner.
“This is a natural, common-sense and forward-thinking partnership that will produce a positive outcome for both companies and their customers and investors – as well as the region and the country,” he said.
Arch chief operating officer Paul Lang said the JV was a great fit for the coal miner.
“The joint venture will allow us to optimise our assets and unlock the value of our existing infrastructure without any impact to our coal loading operations,” he said.
As with many US oil and gas products, technology is playing a part in bringing out the PRB oil.
Huckaby said new drilling technologies were being applied to legacy oil fields in the basin, allowing operators to expand their drilling programs.
“Approximately 25 rigs are operating in the region, more than 430 horizontal drilling permits were issued in the PRB in 2012 and 222 have been issued thus far in 2013,” he said.
“What the basin lacks is sufficient pipeline and rail infrastructure at the right location to move crude oil and condensate to the highest value markets.
