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Railroads Struggle to Deliver Coal to Utilities

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Predictably, BNSF is trying the strong arm/blackmail approach to try and reign in support of coal producers for proposed rail legistlation aimed at addressing the captive rail shipper inequity.......... From the Casper Star-Tribune: Railroad warns against more regulation By DUSTIN BLEIZEFFER Star-Tribune energy reporter MORAN -- A railroad official warned Wyoming mining leaders Thursday that efforts to persuade Congress to better regulate rail rates could convince railroads to shift capital spending away from expanding coal delivery capacity -- a key component to growing Wyoming's coal mining industry. "If they cap our ability to raise our revenue, then we will pull capital out of this business, very quickly," said Steve Robb, group vice president of BNSF Railway's coal business unit. Robb spoke to a roomful of miners attending the Wyoming Mining Association's annual convention here at Jackson Lake Lodge this week. Robb recommended that mine industry leaders ask their congressional representatives to back away from "re-regulating" the rail industry. He said although coal haulage makes up a significant portion of BNSF Railway's business, it provides the least amount of return on capital expenditures. The company gets a much better rate of return on capital spent on hauling consumer goods -- a market that is rapidly expanding. Wyoming's 400 million tons of annual coal production is widely distributed among 36 states in the nation to fuel electrical generation plants. The rail industry has been under significant scrutiny this past year due in part to interruptions and increased demand for coal which left many utilities shortchanged of Powder River Basin coal. Utilities have also raised concerns that rapidly rising shipping rates may not be based on real costs of services, and that many utilities are "captive" customers served by only one rail company. In an interview Thursday, Wyoming Rural Electric Association Executive Director Shawn Taylor took issue with Robb's comments concerning shipping rate regulations. Taylor said utilities are not asking that the rail industry be re-regulated. "We need the railroads, and we want them to thrive and be successful," Taylor said. "But we want assurances on delivery, fair and transparent rates and accountability." Taylor cited an ongoing case between BNSF Railway and Basin Electric Power Cooperative. When Basin's 20-year rail delivery contract for its Laramie River Station power plant near Wheatland -- a "captive" BNSF Railway customer in eastern Wyoming -- expired, BNSF Railway allegedly tripled its rate. Basin has asked the federal Surface Transportation Board for relief, but BNSF Railway maintains it is not gouging. The rail industry's shortfall in coal deliveries has also left Laramie River Station with only a week's worth of reserves in recent months, which could lead to reduced electrical generation and higher utility costs to Wyoming customers. Robb said BNSF Railway has already spent millions of dollars to expand export capacity out of the Powder River Basin. The railroad will spend $167 million to expand capacity this year and plans to spend hundreds of millions more with Union Pacific to ramp up capacity on their jointly owned main line south out of the basin. The railroads expect they will meet anticipated demand to ship 425 million tons of coal annually on that southern line alone by 2009. "That's a big number, and it's going to require us to build a lot of railroad," Robb said. "We are spending the money today because we think we can get those returns where they need to be."
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