FARMINGTON — The Navajo Nation and Burlington Northern Santa Fe -- one of the two largest railroad companies in North American -- agreed Tuesday to have the Thoreau Industrial Park Railhead operational by June 2015, officials say.
The railhead could link the proposed $300 million freight railroad that would likely end in Farmington to the transcontinental rail that spans most of the country. The railhead could also drive the construction of that freight line, said Ray Hagerman, CEO of Four Corners Economic Development, an organization dedicated to stimulating the area economy.
Seven companies have confirmed they plan to lease space at the railhead, and each would build on the site an office, storage and loading facilities, and rails sections to hold cars, said Peter Deswood, a senior economic specialist for the Navajo Nation. He said Navajo Agricultural Products Industry is one of the lessees.
The Navajo Nation and BNSF have been teleconferencing weekly with oil and natural gas industry officials around the country to discuss the ongoing project, he said.
But there may not be enough room for all interested parties, Hagerman said.
"If you got it full on one end, then you got to put those people at the other end," he said.
The Navajo Nation's surplus of interested companies -- many of which are oil and natural gas industries -- could drive the construction of other railheads north of Thoreau, and one, possibly, in Farmington, Hagerman said. The freight rail could then connect the scattered hubs, he said.
Hagerman said oil travels in three ways: by pipeline, truck or train. Pipelines pump oil 4 to 5 miles an hour. Speed limits dictate trucks. Trains transport it 40 miles an hour. And, he said, three truckloads fill one railcar.
Rail is quicker and cheaper, Hagerman said.
Deswood said the Nation is trying to also acquire lots east of the railhead to accommodate more lessees.
In addition to oil and natural gas, experts say the freight rail could export coal. They say when the San Juan Generating Station shuts down two of its four coal-burning stacks and the Four Corners Power Plant closes three of its five, the area's two coal mines -- Navajo Mine and San Juan Mine -- will need new markets. Gov. Susana Martinez said Monday in an interview with The Daily Times that those markets could be found globally.
While exporting its coal is not preferable because it loses millions, Deswood said it's a "viable alternative."
The railhead "enhances" the Nation's potential to participate in the freight line, he said.
He said also the Nation's participation in constructing the freight rail depends on the yield of the Mancos Shale formation, an oil and natural gas glut spanning much of northwest New Mexico that industries have been probing for oil.
"They have had some success," said Wally Drangmeister, director of communications for the New Mexico Oil and Gas Association, an organization that promotes safe and responsible oil and natural gas development. "We are going to have to wait and see the extent as to what can be expanded and grown."
WPX Energy's first six oil wells drilled in Gallup pump on average 819 barrels of oil a day, according to company data. The company plans to drill up to another eight wells, and it estimates by the end of the year it will produce a daily average of 3,400 barrels of oil.
North Dakota and Montana's Bakken oil is projected to pull in January more than 1 million barrels of oil per day, according to the U.S. Energy Information Administration's forecasts. It is a multibillion dollar formation.
Deswood said Mancos Shale's initial results are encouraging.
The Thoreau railhead would split from the transcontinental rail in Thoreau, he said, and it would sit on about 300 acres of Nation-owned land less than a mile east of the intersection of New Mexico Highway 371 and Interstate 40.
The site would include rail spurs for trains parked off the transcontinental rail to load and unload and cars to be added or subtracted, according to project documents. The spurs would hold up to three 100-car trains, but more could be built if production of the Mancos Shale boomed, he said.
The Nation would also build a Highway 371 off-ramp for freight trucks and a state-mandated traffic light at the ramp, he said. But it needs to first trade for or buy approximately 80 acres of Navajo Housing Authority land northwest of its 300 acres, he said.
The Nation hasn't calculated those costs yet, he said.
Deswood estimates the Nation's contribution would be more than $8 million, but that excludes the price for the off-ramp and the traffic light.
Nation officials plan to hire an engineering firm to calculate its share of the project's costs in the next three weeks, he said.
Deswood said BNSF committed to more than $9 million for the railhead's construction. The money would build an electrical switch to merge trains from the main line to the railhead, a control and the switching that BNSF will operate from Texas, and 7,900 feet of rail siding, he said.
But BNSF Regional Manager of Economic Development LaTonya Finch said the company is neither "contemplating nor committing" to funding the estimated $9 million.
"In accordance with the proposed funding strategy, the $9 (million) cost is a shared investment by the Navajo Nation, BNSF and all committed tenants," she wrote in an email Friday. "BNSF has never committed to funding the estimated $9 (million) costs."
Finch was unable to provide the names of the six other BNSF customers that Deswood said are committed to leasing railhead land.
The Nation will contract Blue Horse Energy to operate the railhead, Deswood said. Its officials expect to complete the contract in about two weeks, he said.
The Nation will also allow the private, local ownership of business spurred from the construction, such as truck stops, hotels, or vehicle and train repair shops, he said.
Even without the construction of the freight rail line from Farmington to the transcontinental rail, Deswood said the Thoreau railhead will be useful.
The railhead will allow trains to pull off the mainline when idle, arranging its cars, or loading and unloading, he said. Parked trains blocking rail traffic cause many derailments, he said.
"This really is spurred by safety," he said.