Canadian Pacific Railway (TSE:CP)(NYSE:CP) and U.S. Silica Holdings (NYSE:SLCA) announced Friday a multi-year agreement for the movement of frac sand from Silica’s mining and processing facility in Sparta, Wisconsin.
Silica is building a frac sand facility that will produce Northern White sand for use in shale basins across the United States and Canada.
The new facility is located on CP's rail line in Sparta, and under the agreement, CP will be the exclusive rail service provider for the movement of frac sand to destination markets.
Silica is the second largest domestic producer of commercial silica, a specialized mineral that is a critical input into the oil and gas proppants end market.
The design of the Sparta facility will allow Silica to build unit trains of frac sand with a focus on shipments into the Bakken shale in North Dakota, to support the area's mounting need for proppant.
The facility will produce and ship three different grades of dry sand, and is expected to be operational in the first quarter of 2013.
Financial details of the transaction were not disclosed.
"This new partnership will provide U.S. Silica greater access to critical, rapidly growing markets, and will significantly strengthen our overall offering," said Silica's president and CEO Bryan Shinn.
Canadian Pacific operates a North American transcontinental railway, providing freight transportation services, logistics solutions and supply chain expertise. It is the only North American railroad to serve the Bakken Formation, the Alberta Industrial Heartland and the Marcellus Shale.
"Canadian Pacific has proven expertise and has been serving the energy industry in North America for many years," said CP’s executive vice-president and chief marketing officer, Jane O'Hagan.
"We are pleased to continue to grow this important market through our partnership with U.S. Silica."
CP’s agreement with Silica is an important part of the railway's growing energy strategy that focuses not only on outbound crude oil, but also on the flow of input materials into shale and other energy developments.
"Our agreement with U.S. Silica leverages the strength of CP's network through Wisconsin with service to key energy regions throughout North America," concluded O’Hagan.
Last month, CP was embroiled in a strike and freight service suspension shortly after a months-long proxy fight with its biggest shareholder, Pershing Square Capital, which resulted in the resignation of former CEO Fred Green and five other board members.