Canada's export economy is poised to get a boost from plans announced today by Ceres Global Ag Corp. (TSX-CRP) (Ceres) to develop a commodity logistics hub in Northgate, Saskatchewan connected to BNSF Railway's United States rail network.
Ceres has purchased 1,500 acres of land at Northgate, Saskatchewan where it intends to construct a new commodity logistics hub including two high efficiency rail loops, each capable of handling unit trains of up to 120 railcars. One loop will be dedicated to a grain handling and shipping facility, and the other to transloading and shipping oil. In addition, a logistics centre will unload imported equipment and materials for Saskatchewan's booming resource economy.
The connection to BNSF's network will give shippers direct access to customers in 28 states, numerous Pacific and Gulf ports, and Mexico along BNSF's 32,000 mile network, including over 45 crude-by-rail destinations. Access to many other strategic interior locations and Atlantic ports are available through BNSF's rail connections.
Construction is planned to commence in the spring, subject to receipt of all necessary permits and approvals and finalization of agreements with project partners, with initial grain and oil shipments expected later in 2013. The total capital cost is budgeted to be $90 million. The facility will be built out over three years, and has been designed ultimately to handle up to 40 million bushels of grain annually and 70,000 barrels of oil per day. More than 100 construction jobs will be created, and about 30 ongoing jobs once the facility is fully operational.
The Scoular Company (Scoular), a major U.S.-based agricultural marketing company, is partnering with Ceres on the project. Scoular will fund, own and operate the grain handling facility. Ceres' grain subsidiary, Riverland Ag, will be a major customer of the grain facility, and will work closely with Scoular on the procurement of certain grains.
"The Northgate hub is good news for Canada's economy and particularly good for Saskatchewan and Western Canada. It will help ease the bottleneck of getting commodities - especially grain and oil - out of Saskatchewan and will provide a new and competitive option for shippers and exporters," said Michael Detlefsen, President of Ceres. "Ceres is delighted to have Scoular as a partner on this project, and to be introducing a new, major buyer of grain to the Canadian market."
"The Saskatchewan farmer is poised for much greater participation in an expanding and highly competitive global market," said Bob Ludington, Chief Operating Officer of Scoular. "This important project gives high quality Canadian wheat direct line access to U.S. and Mexican flour millers, and will open extensive new markets for Canadian canola. The Northgate hub will serve to shrink the distance between Canadian supply and global demand, expanding the marketing options for area producers tremendously."
The facility will also be very good news for Canadian oil producers looking for new, cost-competitive ways to get Saskatchewan oil to higher priced markets. "We are building on the significant experience we have gained from our investment in the Stewart Southern Railway, one of the largest transporters of oil by rail in Western Canada. Our discussions are nearing completion with a number of Canadian energy companies for take-or-pay oil transloading contracts at the Northgate facility," said Detlefsen.
Saskatchewan's economic development will also benefit from the facility's new import and distribution centre for equipment and materials needed by its booming energy and agricultural industries.
Based on a comprehensive and detailed environmental study, the facility has been designed to mitigate impacts on the environment. Engineering design work is well advanced, and the project team is working closely with regulatory authorities to secure the necessary permits and approvals.
Through the "Beyond the Border" initiative, Canada and the U.S. are committed to harmonizing customs processes in order to both enhance security and facilitate the efficient cross-border flow of commercial goods. As the Northgate commodity logistics hub will be a new inport-export facility, the parties are working closely with authorities on both sides of the Canada-U.S. border to design the most efficient border processes possible.