(The Associated Press circulated the following story by Josh Funk on December 8.)
GILLETTE, Wyo. — The nation’s two largest railroads have hauled record amounts of coal from the mines in Wyoming and Montana this year, but Union Pacific Corp. and Burlington Northern Santa Fe Corp. still struggle to keep up with utility demand and existing contracts.
If utilities run low on coal during the high demand of winter, they might be forced to buy fuel on the open market at higher prices that could be passed on to customers, said Jim Owen, with the utility trade group Edison Electric Institute.
“It’s been a fairly contentious issue in the last 18 months,” said Owen, whose group represents nearly three-quarters of all U.S. utilities.
The problems began in May 2005 when two derailments on the main line leading out of the Powder River Basin revealed that accumulated coal dust in the rail bed made the line unstable. Repairs disrupted traffic and slowed deliveries for months.
Then last winter, some utilities worried about depleting their on-site stockpiles, and one, Entergy Corp., sued Union Pacific over the delivery problems. Entergy says it lost “tens of millions of dollars,” and its lawsuit is pending in state court in Arkansas.
“Utilities have made no secret of the fact that deliveries have been a problem,” Owen said.
Last winter, some utilities imported coal from overseas to help make up for the delivery problems. The U.S. Energy Information Administration said 30.5 million tons of coal were imported in 2005, up 11.7 percent from the previous year.
The delivery problems, spot market purchases and imports cost the utilities, “and ultimately their customers,” more money, Owen said.
The problems have eased somewhat this year, but Owen said utilities were still not getting all the coal they want and contracted for. A mild winter this year could ease concerns, he said.
The continuing railroad delivery problems aren’t the whole story, because utilities all across the country are burning more coal.
Last year, coal consumption nationwide increased 1.9 percent, to 1.13 billion tons, according to a report from the Energy Information Administration. Wyoming produced 406.4 million tons of that to remain the leading coal-producing state in the nation, and Montana’s mines added 40.4 million tons.
Track capacity on Burlington Northern’s and Union Pacific’s networks is the main obstacle to delivering more coal, but mines and utilities also have a role to play because the pickup and delivery track setup affects how quickly trains can be loaded or unloaded.
“This is very much a team sport to get this much coal moved,” said Pat Hiatte, a spokesman for Burlington Northern.
Railroad officials say they are trying to meet the rising coal demand, and industry analyst Donald Broughton of A.G. Edwards & Sons said railroads shouldn’t take all the blame for the problems, because the facilities at the mines and utilities are part of the issue.
Everyone would benefit from higher capacity, he said. It’s just a matter of determining who will pay for all the improvements.
“The finger-pointing and crying about who needs to do more is just good old-fashioned negotiating, in my mind,” Broughton said.