Booming Oil, Gas Industry Drives Tank-Trailer Surge

By Denise L. Rondini, Special to Transport Topics

This story appears in the April 28 print edition of Transport Topics.

The past few years’ boom in the oil and natural-gas recovery technique known as hydraulic fracturing has led to a corresponding boom in the tank and bulk trailer business, both for haulers and for manufacturers of the equipment.

“It’s a tank-trailer heaven right now,” said Daniel Furth, president of National Tank Truck Carriers. “Tank trucking today is outperforming other segments of the trucking industry because of the shale plays.”

That’s generating demand for tank and bulk trailers. A recent survey of over-the-road trailers found that oil-field service employed 41.9% of tank trailers used in 2012, compared with 17.1% in 2006 — resulting in greatly expanded production of the trailers.

Fracking involves forcing liquids, chemicals and sand into oil and gas wells at high pressure to free deposits of natural gas and oil trapped underground. Tank trailers are needed to haul supplies and raw material into well sites as well as to haul out oil, gas and waste products.

“The increased oil exploration activities through horizontal fracking in the U.S. and Canada since 2010 has led to a tremendous increase in production of tank trailers used in oil rigs in the last four years,” SpecialtyTransportation.net, a trailer-industry analyst, stated in an e-mail. “The sudden surge in fracking operations caused exponential growth in the dry bulk tanker trailer and vacuum tanker trailer categories in 2011 and 2012.”

“Even on an absolute basis, while all other categories in the tanker truck trailer segment have either decreased or increased marginally since 2007, the manufacture of trailers catering to the oil-exploration segment of the oil and gas industry has increased by an estimated 52% in 2011 and 155% in 2012 over 2007,” STN reported.

Dry bulk haulers, which also are used in fracking operations to haul sand, made up 23% of the tank-trailer market.

Another type of tank trailer —noncoded vacuum tank trailers used in fracking operations — has jumped more than 300% since 2007, STN’s study showed.

Carriers also are benefiting from the growth of oil-field business.

For example, Gary Enzor, CEO of Quality Distribution, based in Tampa, Fla., said the tank hauler is “excited about the positive impact the unconventional oil and gas market will have on all three of our business segments.”

Enzor said Quality — which ranks No. 35 on the Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers — believes its energy business could see double-digit growth, with its chemical hauling and intermodal business expected to expand by single digits.

“This business is more dynamic than our other segments and requires more agility,” Enzor added.

Noel Perry, managing director of FTR Consulting Services in Bloomington, Ind., said that about 190,000 trucks are used in oil and gas exploration in the United States and Canada.

According to trailer-coating provider Tnemec Co., of Kansas City, Mo., “Typically 150,000 gallons of fracking fluids containing 800 gallons of chemicals are used per well.” That works out to at least 30 truckloads per well.

“It’s a fairly simple story,” Perry said. “Fracking takes a lot of water, and it takes a fair amount of equipment.”

Wells that are fracked tend not to produce for as long as traditional wells, so new wells need to be drilled on an ongoing basis, Perry said.

“The number of trucks needed is directly proportional to the number of wells being drilled,” he said.

Given that most fracking sites are located in relatively remote areas, everything needed at the wellhead and on the site as a whole has to be brought in by trucks. In addition, most of the wells are not producing enough to justify installing pipelines.

Jay Morfitt, director of strategic planning and marketing at Heil Trailer International, based in Cleveland, Tenn., said that the market for petroleum tanks has remained strong.

“We have seen continued growth in this side of the business,” he said. “In fact, the industry volume is running at the highest clip since 2008. We hit the low point in 2009 and things were flat for a while, but now it is a nice elevated curve.”

Randall Swift, Heil’s president and CEO, said that in 2010 and 2011, fracking drove demand for both liquid crude-oil trailers and dry bulk frack-sand trailers.

“It pushed out lead times; it caused many new entrants to come into the market. It definitely changed the landscape of our business,” Swift said.

He added that the market since has fallen from those historical peak levels, but “we have seen it rebound a little bit.”

Swift continued, “Despite the drop-off, it is still a new market segment that has really moved the historical floor upward. Where in a normal bad time of year we might have fallen a lot lower on our volumes, now you are always going to have some of that fracking business. I think from that perspective, fracking probably has raised the floor of the industry, which is a good thing for all of us.”

Tanker manufacturer Polar Tank Trailer and chemical and petroleum hauler Trimac Transportation did not respond to requests for comment.

With the strong demand and remote locations of much of the fracking activity, industry capacity is tight, leading operators to seek to tie up haulers and carriers to offer premium pay to drivers.

“Increasingly, smart shippers are locking up their carriers rather than shopping and putting out for bid each and every piece of business,” Furth said. “Capacity constraints are real and tightening every day.”

Chris Cameron, senior solutions architect at Elemica, a supply chain operations network headquartered in Exton, Pa., said fracking operators are concerned with productivity and are willing to pay higher rates to truckers to keep fracking operations on track.

“These guys have payrolls that total $25,000 an hour, and when they need water, sand and chemicals, they need them now. As a result, they are willing to pay more to have supplies delivered when they need them,” Cameron said, adding that locking up a carrier allows fracking operators to keep well sites operating around the clock.

Industry analysts expect a continued increase in drilling in the shale plays in 2014, STN said in its e-mail to Transport Topics.

“The STN view is that, even after new pipelines come into service and there is a decline in demand for tanker trailers from current shale plays, demand for such trailers will hold steady at a moderate rate as new small wells continue to be drilled and the oil production from these small wells may not be significant enough to justify pipeline connectivity.”

“The fracking boom in Texas, North Dakota, Colorado, Pennsylvania, etc., may have permanently changed the landscape of the tank trailer industry,” said Matt Niemeier, liquid tank trailer product manager for MAC LTT in Kent, Ohio. “When demand for trailers surpassed production capacity, the door was opened for smaller manufacturers to grow and new players to get into the industry.”

John Felmy, chief economist for the American Petroleum Institute in Washington, D.C., said, “We have a vast amount of natural gas and oil that is in shale formations that are yet to be developed.”