Late Breaking Rail Industry News - From Railway Age Site
May 4, 2006
Look for the whole truth on coal, railroads urge FERC
The trains that deliver coal to utilities are an important part of the electricity supply chain, but they aren’t the whole story, the railroads have reminded the Federal Energy Regulatory Commission (FERC). In a letter dated May 3, the Association of American Railroads urged the FERC to hold a public workshop examining the whole supply chain. The AAR letter followed by one day a joint letter to the FERC from the American Public Power Association, the National Rural Electric Cooperative Association, and the Edison Electric Institute calling for a workshop on “railroad coal-delivery challenges.”
The AAR urged the commission also to look at these other aspects of maintaining an adequate coal supply: “Utility management of coal inventories. Patterns and consequences of heavy investment in gas-fired plants and its impact on companies that produce and transport coal. Unloading capacity at power plants. Coal producers’ ability to meet rapidly increasing demand. Lack of adequate investment in transmission line capacity. Capacity of waterways to move coal. Impact of higher natural gas prices on coal demand.”
“It’s a complex, interconnected issue that involves the complete supply chain, from production to transportation to the receiving end,” AAR President and CEO Edward R. Hamberger told the FERC.
“The railroad industry is moving more coal than ever before,” added Hamberger, “posting a record 415 million tons from the Powder River Basin alone in 2005. And 2006 is expected to set yet another record of about 450 million tons. Likewise, eastern coal deliveries during 2005 to utilities were up on the two major eastern railroads—6.3% from Norfolk Southern and 7% on CSX.”
Well, at this point the AAR is just shooting itself in the foot. There are no real capacity and delivery issues with waterways. If the AAR really wants the utilities to invest in more transmission, then perhaps they can just build all their coal fired plants mineside and totally bypass having to move coal by rail. Mines can ramp up fairly quickly to meet any so-called “unexpected” increase in demand. The demand by AAR that utilities stockpile a greater coal inventory flies directly in the face of today’s JIT and warehouse on wheels environment (and the railroads don’t seem to be demanding other rail customers do the same, aka demanding that ports stockpile more Asian containers!)
And the most ironic demand by the AAR involves the move in the 80’s and 90’s toward more natural gas fired plants. For the major issue that pushed utilities to switch from coal to natural gas was the railroad’s heavy handedness/incompetence in delivering coal in a timely and cost competitive manner in the first place. Talk to any utility representative and mention the words “railroads” and “coal” and you will get some of the blackest looks and cuss words muttered under the breath that one can imagine.
So go ahead, AAR, demand an investigation of so-called “other” factors in coal supply problems, 'cause this one’s gonna boomerang right smack dab into your face.
FM here is the basis for the waterways comment
"The continuing inability to maximize vessel carrying capacity is jeopardizing the Lakes’ largest coal shipper’s ability to keep pace with demand for coal- coal-generated energy in the future warned Fred L. Shusterich, President of Midwest Energy Resource Company in Superior, Wisconsin. “In order to keep pace with the coal-generated energy demands of the Great Lakes basin, Congress must fund a comprehensive plan to restore the Great Lakes system to its project depth as quickly as possible and subsequently maintain the project depth into the future.”
Speaking before the 11th Annual Informational Breakfast for the Great Lakes Delegation hosted by the Great Lakes Maritime Task Force in Washington, DC on Wednesday, Shusterich noted Midwest Energy Resources Company (MERC) has the capacity to annually ship 25 million tons of low sulfur western coal to Great Lakes power plants and projects loading 22 million tons in 2006.
"The majority of coal shipped from the MERC terminal transits the St. Marys River enroute to our customers. 1,000-foot-long vessels are losing as much as 18 inches of loaded draft when the St. Marys River is the controlling depth on a voyage. When the
But the question is - how is that “low sulpher Western coal” getting to the Great Lakes in the first place? And if that coal is further being shipped to coal fired plants within NA, why isn’t that coal moving by rail all the way from mine to plant anyway?
It should be obvious that the weak link in this particular supply chain is the NA railroad network. And the AAR has represented the mindset of abandoment and retrenchment for the past three decades. So it is rather hypocritical for the AAR to be so defensive of the railroad industry’s tactics over the years, since it is by and large the railroad’s tactics that brought about the bulk of the current problem.
Why doesn’t the AAR just 'fess up and admit they eft-up?
MERC gets coal from primarily Montana, but also about 25 percent from Wyoming.
MERC customers were not seriously affected by the problems in the SPRB because they stockpile as much as 6 - 7 million tons of coal at MERC, Indeed when Wisconsin Energies need to buy coal due to their shortage they turned to MERC.
As to why this coal is shipped via laker rather than railroads, two reasons, it has always been cheaper to use the ships for part of the haulage even when RR rates were regulated, and about half of the powerplants have no rail access or they have a very limited access not designed for unit trains.
Actually, what neither the AAR peice nor our resident expert FM have mention is that the electric coal market was significantly changed by deregulation of the utilities (not the RRs). Under regulation the utilities were required to hold minimumn stockpiles of coal(or other fuels depending upon the power plant in question) on site as a protection against outages due to inadequate fuel supplies. Once they were deregulated utilities sought to reduce costs by reducing the amount of this inventory trying to reach as close to a “just in time” type of logistcs model. They hoped to put this extra cash in their pockets. Unfortunately, they have cut their margins too thin and with congestion on the rails and high demand for new railcars utilities have been unable to acqire enough new equipment to make up the shortfall. Just a question of the utilities trying to blame their own failings to properly plan (read greed) their logistical chain with enough redundancy to take up the slack in the event of issues not unlike some of the issued in the oil industry with inadequate refining capacity and poor planning of the introduction of ethanol as a fuel additive.
So, sorry, FM it isn’t quite as clear cut an issue with the RRs as you would have us believe.
The REAL source of the electrical power shortages that can occur any where, any time, are in the inability of electrical utilities or generating companies to build new power plants! We can’t build new fossil fuel plants, regardless of what is burned, coal,fuel oil, natural gas, municipal waste (I know it ain’t a fossil fuel, but ya can’t build a power plant that is also an incinerator!) The environmentalist elite will yak on and on and on and kill any attempt to build one! Nukes? Forget it!! Wind power? Only in Washington, DC! You can hear the screams of the NIMBYs, so forget that. Solar? You have to be joking about that source, since it is not efficient enough and is unreliable across most of the fruited plain. Then there are the NIMBYs again,too! Hydro power involves “ruining wild rivers” and they are ungodly expensive! We in the NYSSR are still paying for the Niagara Project, which is in it’s 5th decade, and still ain’t paid for. And there are St. Lawrence power generators which failed to live up to expectations! At least that’s what we are told about! So, when it gets hot in the summer, and the brownouts and blackouts kick us around, remember who to blame. Not the railroads, they can move the coal efficiently enough, blame the people that will not allow new power plants to be built where we need them!
On other threads, the question was posed about why not put the power station right next to the mine. The answer usually given was that the utility would then have to build very expensive power lines to the customers, which they are not eager to do. It would appear that the utilities are saying to the railorads: “Invest in your infrastructure, so we don’t have to invest in ours.” Ironic, when it seems no power companies are willing to commit themselves to the DM&E PRB coal venture!
Murphy, you know better. Most of these are regulated utilities. They can’t make those kind of “investments” because they are not generally part of the statutory rate base upon which they are permitted to set rates.
Murphy, you know perfectly well the utilities have continued to grow their transmission investments while the railroads were retrenching theirs. While there are some proposals for mineside power plants planned in part in reaction to the negative experiences utilities have had with railroads, for the most part it is more logical to haul the coal to the power plant by rail rather than trying to transmit electricity the same distance. There are constraints to how much power you can send by wire, and the number of transmission lines you would need to send all coal power from Wyoming to the Midwest or California would be staggering. Then there are limitations to having a power plant mineside, as once the coal runs out the plant is stranded. For the most part, mineside power plants make more sense for lignite mines than subbituminous mines, since lignite is difficult to transport by open top hopper (it tends to spontaneously combust when dry and exposed to air).
Plus, with railroads you can send other stuff besides coal. Can’t do that with transmission lines.
But if you have any evidence of utilities tearing out transmission capacity to
Well…actually I don’t know better. The point I was trying to make, is that all this press about UP & BNSF not being able to keep up with coal demand hasn’t convinced The Acme Power Company to come out and say “By golly, we think this DM&E idea is just swell, and would be interested in talking to those fine folks”. It would seem that there should be a slew of power companies making some buzz about DM&E. That would sure help DME line up financing, wouldn’t it?
Well, about 15 electric utilities have come out in support of the DM&E including the following which went so far as to make formal appearances before the STB:
Arkansas Electric Cooperative Corporation
Muscatine Power And Water Company
MidAmerican Energy Company
Interstate Power
What is odd, is that where I live, S.D., the DM&E issue is in the news nearly every other day. No mention is given of the support given by these utilities. Maybe DM&E needs a better PR man?[V]
I am a tad confused. Are utilities able to invest in a venture like the DME if they are monitored by public utility boards? Maybe I am just not following this right.
I have no doubt that even if a PR man put that stuff in a press release, a reporter would take it out in the story. It’s not just one step removed to expect every press release to include the same list of supporters going back ten years, but I think too many steps to expect media to repeat it every day. That kind of information makes the actual news about once. Murphy, reality check here. Do you really make decisions and conclusions based on what you don’t read in the news?
MichaelSol: Reality check- Your mention of the utilities in support of DM&E is the first mention I’ve heard of it. I’m not saying there isn’t support from the utilities, I’m just saying no one hears about it , apparantly.
As far as what you don’t read in the news: A day doesn’t go by, that I don’t read something and wonder what parts were left out, simply to lean the story toward the author’s way of thinking.[V]
Does this mean that DM&E can count on 15 utiltiy customers the day they drive the golden spike? Or, are 15 utilities hoping DM&E will be a usefull tool in driving down the price for hauling coal?
Well, that’s how it works. These companies will make an announcement, and it was publicized five, eight , ten years ago … how old is the DM&E proposal? Which newspaper will continue to republish old press releases, especially when there is considerable current news about the proposal?