MATERIAL S ERVICE S T HE M ARCELLUS S HALE R ACE – C IRCA 2011 Opportunities for PA Rail Operators in the “Last Mile”

MATERIAL S ERVICES About this topic… Marcellus overview – For rail road operators, a game changer Sand: from basic element to hot commodity Partnering with a transloader and frack sand hauler 2

THE MARCELLUS SHALE The Most Significant Economic Development in PA… ever? 3

Geographic Location 4 Note that drilling depths (4,000-9,000 feet) far exceed traditional vertical natural gas drilling. Shale drilling requires horizontal penetrations

A Keystone State Bonanza 5

This is NOT a short-term play… 6 TCF = Trillions of cubic feet of natural gas

Sand – Central to the Marcellus Shale When a Ubiquitous Material becomes a Precious Commodity 7

The 5% Solution! 8 Although comprising just over 5% of the material used to make up a the shale fracturing fluid… sand is virtually the only SOLID material. Hundreds of millions of tons are now consumed annually for natural gas extraction.

Not just a beach topic anymore… 9

Transportation – the key issue 10

The “last mile” opportunity… establishing a partnership Transloading and Frack Sand Hauling 11

MATERIAL S ERVICES Who Uses the Sand? Well services firms called “fracker’s” – Halliburton, Schlumberger, Pumpco, Fractech – BJ Services, CalFrac, Trican, Universal But sand can be ordered, or producted, from anywhere in the hierarchy  starting with the energy company – EOG is building its own sand mine in WI – FracTech has a sand source Most sand is sold by sand producer 12

Sand to the Well Pad 13

Transloading is Essential 14 - Barge to Port - Barge to Rail - Rail to Storage - Rail to Truck

Arrow Materials… is Transloading! 15