July 18, 2012 / 1:33 PM / in 6 years

CP Rail to ship drilling sand for Smart Sand

TORONTO (Reuters) - Canadian Pacific Railway Ltd (CP.TO) said on Wednesday it has formed a partnership with Smart Sand to ship drilling sand to areas hosting unconventional oil and gas plays in North America, including the Bakken formation and Marcellus Shale.

Canada’s second biggest railroad said the two companies plan to build a new loading facility in Makoti, North Dakota that will supply sand used in the hydraulic fracturing process to the Bakken formation in the Williston Basin, beginning in early 2013.

The deal comes less than a month after CP signed a similar agreement with U.S. Silica Holdings Inc (SLCA.N) to transport drilling sand from the U.S. company’s mine in Sparta, Wisconsin.

A boom in oil and gas drilling has driven up demand for fracking materials, some of which are in short supply in the Rockies, Bakken and South Texas.

U.S. Silica recently said it would partner with Berkshire Hathaway Inc-owned (BRKa.N) BNSF Railway Co to build a silica sand storage facility in Texas to cater to the rapidly growing oil and gas activity in the Eagle Ford shale formation.

CP said Smart Sand’s primary facility, which opened in late June, is located near its rail line in Oakdale, Wisconsin. It will supply drill sand in a broad range of mesh sizes to the new loading facility.

The railroad operator, which recently appointed a new chief executive after losing a proxy battle to hedge fund Pershing Square Capital Management, has previously said it sees the oil and gas sector as a key growth area.

Reporting by Euan Rocha; editing by Jeffrey Benkoe

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