Frontiersmen of the Powder River Basin

Posted by Fred Frailey
on Friday, September 25, 2009

It's safe for me to say that Powder River Basin coal from eastern Wyoming changed the face of American railroading. The revenues from hauling this coal kept several Midwest railroads solvent. More important, that coal revenue financed the rebuilding and upgrading of railroad infrastructure in the western two-thirds of the country.  

Today you can easily forget that all this didn't just happen. People made it happen, people like Lou Menk, the chairman of Burlington Northern throughout the 1970s, and his vice chairman, Bob Downing. Menk is no longer with us, but at age 96, Downing (pictured at left) remains spry and entertaining. On Sept. 24, he shared his memories of those early Powder River Basin days with attendees at this year's meeting of the Lexington Group in Transportation History in Sheridan, Wyo.

BN predecessors Great Northern and Northern Pacific got their feet wet in unit-train operations starting May 1, 1969, when they began supplying low-sulphur PRB coal to a Minnesota Power & Light generating station from Colstrip, Mont. But it was Amax that dropped the big bomb: It wanted a 15-mile branch built from near Gillette, Wyo., to a new strip mine it called Belle Ayr. That was the start of the Orin Subdivision, most of which is jointly owned today by BNSF Railway and Union Pacific.

"We started very small," says Downing. Total coal tonnage for all of BN in 1970 was 3.5 million tons. "By 1973, we knew we had a way to go to get Powder River Basin coal to market. But there were risks."

The two biggest risks: track condition and the threat (very real at the time) of competition from coal-slurry pipelines. BN's former Burlington Route lines radiating out of Alliance, Neb., into Wyoming were in good shape for the two or three trains each way a day they saw back then. But they were not in shape for heavy unit coal trains. And the railroad had little cash. So BN deferred rebuilding its network for coal trains to see whether a buildup of traffic to justify rebuilding would occur.

As for coal slurry, construction giant Bechtel Corp. threw its weight behind this technology, claiming it could move coal from Wyoming to markets for less than railroads could. It sought a federal law giving it eminent domain for acquiring necessary land. The possibility (later disproven) that Bechtel's economic claims for coal slurry might actually be true hung over the railroad industry for years.

In 1972, the first piece of the Orin Sub was built (financed by a loan from Amax) to Belle Ayr Mine. A cluster of other mines were being built to the south and needed a rail link. Now it was time for BN to step up to the plate. The railroad back then, says Downing, had very little welded rail — in fact, very little heavy rail of the sort that is universally used today.

So Downing in 1974 put together a $2 billion plan to build the rest of the 127-mile Orin Subdivision and to rebuild the BN coal corridors as far south as Texas and as far east as Chicago. It was a monumental task. Back then, railroads could not finance capital purchases through leveraged leases. But BN's people persuaded the Internal Revenue Service and Interstate Commerce Commission to permit them. Nor could railroads enter into long-term contracts with their customers. Instead, everything had to move on a public tariff. Again, BN led the campaign at the ICC to permit contracts, which were necessary to attract investors in BN debt.

BN's board was divided, says Downing. Two board members in particular were vociferous in their opposition to putting the company at risk in this manner. At the critical August 1974 board meeting, Menk appealed for the support of his directors and begged for them to approve the building/rebuilding plan. After the vote in favor, director Norton Simon stormed out of the meeting past a group of BN managers waiting outside. Soon thereafter he resigned.

"Lou and I got on an elevator after that meeting," says Downing. "We were by ourselves. He turned to me and said, 'This had better work, or you and I will be looking for a job.'"

It did work, and as they say, and the rest is history.

On July 1, 1980, Lou Menk retired. His successor, Dick Bressler, came from Arco, the energy company, and knew nothing about railroads. On his fourth day at BN, Bressler came to Gillette, Wyo., to meet Alliance Division superintendent Bill Greenwood (above), later to become BN's chief operating officer. The two men hi-railed through the coalfields. Not an hour into their trip, recounts Greenwood, Bressler turned to him in their vehicle and said: "This railroad business is really doggy. If I had been CEO at the time, we would never have done any of this investment in coal."  

Can you believe that? For Powder River Basin to have happened required men with big shoulders. Thank you, Lou Menk and Bob Downing, for rising to the challenge. — Fred W. Frailey

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