(The following article by Dusting Bleizeffer was posted on the Casper Star-Tribune website on July 25.)
GILLETTE, Wyo. — Coal traffic on Wyoming’s main rail line out of the Powder River Basin is still 10 percent to 20 percent lower than normal due to ongoing repairs after a series of two derailments in mid-May.
And the congestion may continue for months to come as workers dig in for major repair and improvement efforts.
The snarled coal traffic has already resulted in higher bills for some Midwest utility customers. And power plants that burn Powder River Basin coal have been advised to reserve their stockpiles for base-loads only rather than pump extra megawatts into the open market.
“What we’re trying to do now is repair the track so that we can move as many trains as quickly and as safely as possible. But to do those track repairs, as you can imagine, you have to stop train traffic to let the workers have time on that track,” Union Pacific spokeswoman Kathryn Blackwell said.
An unusual amount of rainfall during April and May is blamed for the May 14-15 derailments on the triple-track line between Wright and Douglas. UP and Burlington Northern Santa Fe have initiated a joint plan to remove coal dust on about 100 miles of roadbed and begin replacing ties and tracks on about 14 miles of the line.
The triple-track is jointly owned by UP and BNSF. BNSF maintains the track. At full capacity, the route serves more than 100 trains per day. It is the main export route for coal mines in the basin, which produce more than 370 million tons of coal annually — one-third of the U.S. coal supply.
“We had some utility customers that were selling some of their power out into the grid. And they really shouldn’t be doing that at a time when we are facing some of these issues. They really need to make sure that they reserve the power that they need,” Blackwell said.
However, some in the industry have speculated that the struggle to meet coal delivery commitments may hurt Powder River Basin producers by tempting utilities to get coal elsewhere or shift toward natural gas generation.
Despite the current rail snarl, coal producers in the region have expressed optimism in plans to repair and improve coal traffic throughout the basin.
In a teleconference last week for Peabody Energy’s second-quarter earnings report, Peabody President and CEO Greg Boyce indicated he expects a full recovery of the triple-track and even additional traffic on all routes in 2006.
“It is our view that the rail capacity will easily exceed 400 million tons,” Boyce said. “The issue with the rail performance right now is an issue of getting the tracks up to their standard level of maintenance.”
Additionally, Boyce said he expects the railroads’ plans to repair and enhance rail traffic should bump up total export capacity enough to handle a “pent-up” demand of 30 million tons or more, which utilities will need to replenish their stockpiles.
Peabody Energy recently announced huge gains in earnings for the second quarter of 2005, crediting higher coal prices throughout the United States. The company’s net income of $95 million was more than double that of the same period in 2004.
Arch Coal Inc. will announce its second-quarter results today. The company’s first-quarter revenue had increased to a record $600.5 million, up 49 percent vs. the same period last year. Arch said it realized per-ton increases of 14 percent at its Powder River Basin operations; 10 percent at its Western bituminous operations; and 27 percent at its Central Appalachian operations.
NewsTracker
* Last we knew: Back-to-back train derailments in mid-May drastically slowed the flow of coal out of the southern Powder River Basin.
* The latest: Repairs are ongoing. Traffic is about 80 percent of the desired flow.
* What’s next: Burlington Northern Santa Fe and Union Pacific will continue to make repairs and initiate a plan for increasing coal traffic basinwide.