(The following article by Dustin Bleizeffer was posted on the Casper Star-Tribune website on May 7.)
GILLETTE, Wyo. — Wyoming’s minerals industries may face higher railroad shipping rates as Union Pacific adjusts its prices in order to balance growing demand for service across its western operations, according to reports.
UP, the nation’s largest railroad, notified its customers in April that it didn’t have enough manpower to meet growing demand for rail transportation. The company said it has hired more than 500 new employees, canceled a New York to Los Angeles route and added about 200 engines to help remedy the situation.
Bob Turner, UP senior vice president of corporation, said the railroad will also raise shipping rates where demand outstrips UP’s ability to provide service.
“We’re using pricing as a method to control supply-and-demand,” Turner said in a phone interview this week.
Rates are negotiated privately between UP and its customers. Two soda ash companies in Wyoming declined to comment about rail rates.
Trona producers in southwestern Wyoming were already dealing with the pressure of rising natural gas prices and ocean freight fees, not to mention China trade troubles, said Dennis Kostick, soda ash specialist at the U.S. Geological Survey in Washington D.C.
“Unfortunately, UP does have kind of an edge when it comes to rail rates (for Wyoming soda ash),” Kostick said. “With Green River being where it is on the map compared to where the ports are, you’ve got a lot of overland transportation to contend with.”
Compounding transportation costs is the fact that a contract for ocean freight vessels dedicated for soda ash recently expired and was re-negotiated at nearly four times the prior rate, Kostick said.
“So you’ve got everybody with their hands out saying ‘I want more money,’ and something’s got to break,” Kostick said.
Soda ash is refined from trona ore and is used in the production of glass and detergents. Wyoming produces approximately 12 million tons of soda ash annually and is one of the largest exporters of trona in the world, according to the Wyoming Mining Association. The industry employs about 3,000 people in the state. Coal employs nearly 5,000 people in the state.
Wyoming’s coal and soda ash exports make up a large portion of the state’s total revenue. Coal contributes about $375 million to the state annually through various taxes, rents and fees, and trona contributes about $44 million.
Rail shipping costs are typically paid by the customer, not the mining company. However, mining companies often end up absorbing at least some portion of a shipping hike because their customers are compelled to pay less for the commodity, said Marion Loomis, director of the Wyoming Mining Association.
Wyoming’s trona and soda ash industry is more susceptible to rate hikes because it is served almost entirely by UP, whereas both UP and Burlington Northern Santa Fe Railway export Wyoming’s coal.