Economy

Running low on coal, utilities ask regulators to prod railroads

Vehicles drive through blowing snow on East Yellowstone Highway east of Casper, Wyo. on Wednesday, Nov. 12, 2014.
Vehicles drive through blowing snow on East Yellowstone Highway east of Casper, Wyo. on Wednesday, Nov. 12, 2014. AP

Ongoing rail service problems have left power plants from Minnesota to Texas low on coal as an early blast of winter weather hit the nation’s midsection this week.

Some fear the stage has been set for a repeat of last winter, when heavy snowfall and subzero temperatures crippled rail operations in the Upper Midwest and Chicago, which had ripple effects across the rest of the country.

Anticipating heavy electricity use this winter, coal customers and groups representing them have written letters to federal regulators in recent weeks to complain about delayed deliveries and low stockpiles.

“Our members are having a hard time receiving the coal they need to operate their plants,” said Will Coffman, senior government relations representative for the American Public Power Association, a trade group.

Last year’s problems have become this year’s problems as overall rail traffic rises to levels not seen since before the last recession and railroads struggle to handle large volumes of grain, coal, automobiles and increasingly, crude oil.

Utilities have focused their frustration particularly on BNSF Railway, the nation’s leading coal hauler and a subsidiary of Warren Buffett’s Berkshire Hathaway, a multinational conglomerate that oversees various subsidiaries.

BNSF and the nation’s other major railroads say they’re working to fix the problems, investing in new track and locomotives and hiring new employees. Responding to power companies’ complaints, BNSF said that coal service is improving.

“October was the best month for deliveries since August 2013,” the company wrote, “and we expect service improvements to continue.”

But heavy consumers of coal from Wyoming’s Powder River Basin say they’re not seeing enough progress and want federal regulators to force action. Some utilities want the federal Surface Transportation Board to force railroads to prioritize coal shipments over others, an action the rail industry is all but certain to oppose.

Members of the Western Coal Traffic League, an association of coal consumers, asked the board last month to require BNSF to submit a coal service recovery plan. It also asked the board to review the plan, make any necessary changes and enforce it.

It said utilities across the country’s midsection have had to shut down power generating units to preserve coal stockpiles, file emergency notices of coal shortages with the U.S. Department of Energy and seek alternative fuel sources, such as natural gas, at higher cost.

In its response, BNSF said the traffic league’s petition would do nothing to improve coal service beyond steps the railroad has already taken.

“We believe that we are taking all practical and reasonable steps to improve coal velocity and service to our customers,” said the Oct. 28 letter, signed by Roger Nober, BNSF’s top lawyer and a past chairman of the Surface Transportation Board.

In a more strongly worded document opposing the traffic league’s petition, the railroad said the board could not impose operating requirements on railroads unless it declared a service emergency, and it added the recent problems don’t meet the test for a service emergency.

Several utilities and power associations and Minnesota’s two U.S. senators, meanwhile, submitted letters supporting the utility companies’ position.

An Oct. 31 letter co-signed by the American Public Power Association and three other utility groups told the three members of the Surface Transportation Board that last year, stockpiles provided power plants some protection from rail service disruptions.

“The situation is far worse this year,” the letter said. “Stockpiles are low and rail service is more vulnerable.”

Ameren, which operates coal-fired power plants in Illinois and Missouri, wrote in a Nov. 3 letter that two BNSF-served Missouri plants, accounting for a third of the company’s power generation in the state, had low supplies. It also said that its Missouri power plants couldn’t substitute natural gas for coal and that it needed additional deliveries to maintain its stockpiles.

In a statement Thursday, as temperatures in Missouri plunged into the 20s and 30s, Ameren said it would continue to monitor the situation.

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