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kevarc, Confidentiality granted, I think you've answered most of the question regarding price. You affirm that the cost of transporting the coal is higher than the mine price of the coal ($/ton). My own previous research on Northern PRB coals had mine prices in the $5 - $10 per ton range back in the late 1990's. For 8800 btu/lb coal at $10/ton, that comes out to about $0.57/mmBtu. If you're paying $20/ton for the haul, the delivered price of your coal on a $/mmBtu basis is about $1.70/mmBtu, of which $1.14/mmBtu is for transportation. Depending on your plant type and the assuming your process costs are about $1.25/mmBtu for an older pulverized coal plant, that means the transportation costs are about equal to the process costs. In transportation economics, there is a theory of cost wherein if your transportation costs are more than the cost of the commodity at the point of origin, the tendency wil be for moving process costs closer to the point of origin so that you have an increasing value added price component of your commodity to justify the increase in transporation costs. Since in your case the cost of transportation may be double the commodity price at the point of origin, and nearly equal to the process costs, the theory would suggest that your rent collectors would be looking toward locating future processing plants closer to the point of origin of the commodity. As you have stated, it depends on the capacity of the transmission system to determine the viability of essentially replacing rail transportation with "coal by wire". I do know that the major utility in the inland PNW is moving forward with transmission line upgrades to allow greater access to power generated mineside in Montana and Wyoming rather than constructing it's own coal generation plant here in the inland PNW, so in their minds the cost of upgrading transmission is less than the costs of building a coal plant here and transporting it in by rail. Apparently, their board of directors were more convinced by the prevailing negatives regarding the ever increasing costs of rail transportation (most of which is predicated on the stories in the energy press of the laments of captive coal plant operators), rather than taking a more sophisticated study of locating such a plant in an area with competitive rail access (on both ends) and using that for the cost comparison. Of course, for electricity, only the primary intermediate commodity can be moved by rail, while the final output product can only move by wire, so the point may be moot for you guys. But if you consider the technology for converting coal into a liquid fuel, the theory is more applicable that such plants would be located mineside or within major coal producing districts, and the output product would more likely move via pipeline rather than rail. Combine that with the new acceptance of using nuclear power rather than coal, and it would seem the railroads have not done themselves any favors with this abuse of differential pricing. Future energy plant construction managers will put a heavy emphasis on the current practices of the rail industry in deciding where and what form these plants will take. If the railroads are successful in pricing the cost of captive coal-based energy beyond the costs for the alternatives, they will have themselves to blame for a future energy industry that tended away from the scenario that would benefit them in the long run, and instead toward a scenario in which rail is more irrelevant and/or less impactful on the final cost of that energy.
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