HUTCHINSON, Kan. — Mervis Railcar and the Hutchinson/ Reno County Chamber of Commerce announced Thursday that construction of its facility in Hutchinson has been delayed. Mervis Railcar cites the rapid drop in crude oil, which has decreased approximately 50 percent since August 2014, as the primary driver of this decision.
The Hutchinson facility has been designed to provide maintenance services for railroad tanker cars. The demand for such services is anticipated to continue as a result of pending federal regulatory safety requirements and limited pipeline capacity. However, as oil prices dropped, US production in areas such as the Bakken oil fields in North Dakota dropped sharply; limiting the number of rail tanker cars required to ship oil.
“We continue to review current and expected future trends in the oil and rail car industries,” Adam Mervis, CEO of Mervis Industries, said. “The rapid and precipitous fall in the price of oil and the resulting drop in rig counts, combined with the expectation of declining oil production in the areas that ship crude by rail, have required us to review our financial assumptions and design parameters. We are also digesting the new federal rules covering the shipment of hazardous materials by rail issued Friday to determine what impact they will have on the industry and the facility.”
Site preparation at the Kansas Enterprise Industrial Park had been tentatively scheduled to begin in February or March of 2015. The company does not have an estimate of when site work may begin, but has indicated they still intend to construct a facility in Hutchinson.
“This is certainly a disappointing development,” said Jason Ball, President of the Hutchinson / Reno County Chamber. “Given the macro‐economic trends in oil production and transportation we understand Mervis Railcar’s need to re‐evaluate its business plan. Our office is actively working with Adam and his team and will continue to assist in any way that we can. Kansas, and Hutchinson, stands ready to bring this project to completion.”
Adam Mervis also said, “We still feel that Hutchinson would be an ideal location for this facility and appreciate the work of our partners in the community. We look forward to beginning construction once we have completed our evaluation of the impact of recent disruptions in oil markets.”
Mervis Railcar, a division of Mervis Industries based in Danville, Illinois announced their plans to locate at $40 million, 150 person facility in Hutchinson in October 2014. The facility will be one of the largest in the nation, providing maintenance services for rail tanker cars including cleaning, painting, and weld repairs.