Meritage Forms JV To Develop Rail Terminal

Meritage Midstream Services II LLC and Arch Coal Inc. (NYSE: ACI) have executed a letter of intent to create a joint venture.

The new entity, to be called Black Thunder Terminal LLC, will develop a rail terminal to provide crude oil handling, storage, rail loading and marketing services to producers in Wyoming’s Powder River Basin 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, Wyo. Meritage will contribute capital and will build and operate the crude oil terminal on property east of Arch’s active operations and located near the basin’s crude oil production activity. Meritage will own the majority interest in Black Thunder Terminal LLC.

Because much of the required rail infrastructure is already in place, early stage crude oil transloading operations from inbound trucks to outbound trains are expected to begin at Black Thunder as early as September 2013. As demand from producers and refiners warrants, the Black Thunder Terminal will have the ability to increase outbound shipping capacity from 10,000 barrels per day in the initial phase to 120,000 barrels of crude oil per day via outbound unit train. Significant acreage is available for further expansions. The terminal will be served by BNSF Railway Co.

The proposed joint venture between Arch Coal and Meritage is subject to customary approvals, which the companies expect to receive in three to six months.

Meritage Midstream Services II LLC is a privately-held company providing oil and gas producers with a full complement of midstream services. The company is headquartered in Golden, Colo.

Arch Coal Inc. engages in the production and sale of steam and metallurgical coal from surface and underground mines located in the US. The company is headquartered in St. Louis, Mo.