Pleasant Prairie coal coming in by barge

Trains Magazine General Discussion
1

My nephew drives for a local trucking outfit. He just told me today that his company had a deal with WEPCO (Wisconsin Electric & Power Company) to haul coal from Jones Island (the Milwaukee port) to the coal plant in Pleasant Prairie. He said the deal was for 800,000 tons of coal to ship via barge! He was told by WEPCO that it is actually cheaper to bring in coal this way. He has yet to ascertain the origin of the coal.

His truck will load about 25 tons; his truck gets an average of 6mpg; it is 40 miles from Jones Island to Pleasant Prairie (80 mile round-trip); he makes about $18/hour; he gets in 5 trips per day, totalling 125 tons delivered each day.

This amount of coal will require 32,000 round-trips between Pleasant Prairie and Jones Island, totalling 1,280,000 miles of truck travel, using up 213,333 gallons of fuel, costing about $586,666.00 (a 2.75/gallon), would take a single driver 6400 days (17.5 YEARS, working 7 days per week at 5 round-trips per day, or 25.6 years working 5 day/week), earning wages of $1,267,200 during this time. I do not know how many trucks my nepew’s employer is going to dedicate to this service, nor how long this deal is supposed to take to complete.

When I worked for the CNW (80’s), WEPCO’s contract called for charges of one penny per ton per mile for Powder River coal to be delivered to Pleasant Prairie. Back then the trains were usually 12,000 net tons; so the cost for each train was about $120,000. 800,000 tons would require about 666 trains at a total cost of around $80,000,000.

I do not have any idea of how much it costs to ship coal by barge. I do not know if this coal is to be in addition to the coal brought in by rail (UP), or if it is in lieu of rail shipments; nor do i know if there are any changes in the source of coal for Oak Creek (WI) power plant, which by the way is building a new huge coal-burning plant. When I get more info, I’ll pass it along.

2

Well, I guess this pretty much proves the Pleasant Prairie plant isn’t “captive”. I don’t know why they didn’t build the thing on a lake harbor in the first place so they could recieve coal directly by barge/lake boat and eliminate the truck haul. (it’s located something like 4-5 miles from Lake Michigan.)

I have heard from a “reliable source” that the UP considers itself to be “full”. That means its pricing managers are going to push rates up. It also means that power company coal buyers are going to push back. Pushing rates up is the right thing to do, but it will divert some business to other modes. But as long as the UP is “full”, that don’t make much no never mind.

If they want the freight back, the UP will just lower the rate. Otherwise, they can easily replace the diverted coal traffic and stay “full”.

I hope your nephew gets a new car, Vegas vacation, etc. out of this deal.

3

No disrespect to your nephew, but since that much tonnage will be moving from Jones to Pleasant, aren’t there some poorly used hopper cars and a switcher somewhere that could be used to shuttle the coal? 800,000 tons plus tare cracking the pavement. And more traffic congestion.

4

Obviously, this proves that the Pleasant Prairie coal plant is captive (insert sarcastic smilie here). Otherwise they could just turn to an alternative Class I, or at least do as tomtrain suggests and have the utility run a short haul shuttle train between port and plant using older but still servicable 264k hoppers. But as usual what occurs under rail captivity is that the shipper is forced into using the transport mode of last resort, at a much higher cost to its customers.

Actually, what it proves is that the closed access rail system is resulting in a growing occurance of economic inefficiencies. This is just the latest example of railroads causing wasteful actions rather than ameliorating them.

Could it be that the closed access rail system is causing an increase in supply chain fuel usage rather than providing an overall decrease in supply chain fuel use? It certainly looks that way, and if so, why should the nation continue to tolerate this needless wastefulness of critical fuel supplies?

As per numerous posts from the last few years, here in the PNW we have had a few examples of short haul shuttle trains that use the older cars for hauling grain from farm elevators to a barge port. Both the Class I’s bailed out on this higher revenue transport option, but luckily a few of the shortline operators have availed themselves of this concept, and since the short haul shuttle trains only have trucks as the logical competition (since shorthaul is the truckers specialty) the railroads can charge a higher ton/mile rate than those glorified long haul unit trains running on the Class I’s. When you consider that long haul unit trains typically charge $0.02 - 0.03 per ton mile, while these short haul shuttles are charging $0.07 - 0.08 per ton mile, anyone can see where the real profit potential lies. It all comes down to revenue ton/miles per annum.

When the Mensa rejects at BN took out the only key rail link between commodity supply points and the main barge

5

(insert Einstein smilie here): You’re saying that the railroad is forcing the power company to switch to barges/trucks, and pay more for transportation? "Splain that one to me. (insert Lucy smilie here)[;)]

6

Pleasant Prairie isn’t that captive to UP. If you are familiar with Google Earth you can
look at the Powerplant in a high resolution satellite photograph. It is located at
42 degrees 32 minutes 18 seconds North Latitude
87 degrees 54 minutes 16 seconds West Longitude

The track immediately to the East of the plant is the Union Pacific mainline (formerly
the C&NW Newline Subdivision). Three-tenths of a mile to the west is CP’s C&M Subdivision there is nothing in the way to prevent WE Energies from connecting their trackage to the CP although the unloading loop is laid out for trains coming from the UP side. This would allow them to get bids from BNSF/CP as well. Of course the coal coming in by barge could be from Illinois Basin, or Appalachian sources.

7

Ah, once again we see the Flim Flam Man presenting his presumptions as fact, thus justifying open access, AKA the plan to save the world. For example, we have the presumption that a that high ton-mile charges for short haul business produces more profit than long haul business at lower per ton mile charges. Anybody that has ever done rail cost studies would note such a generalized assertion is bogus.

I do not know any of the specifics of this move, I don’t know the source of the coal and since I don’t work for the Union Pacific I have no idea what they would face for costs to move the coal from the dock to the power plant. Neither does anybody else not in the employ of the UP.

This I do know. When I work for a company that sold a substantial amount of coal to Wisconsin Electric, they had some very sharp folks in the fuel procurement department handling transportation matters. I would be very surprised to learn that WEPCO did not look at every option for moving this coal. I can also state that the coal company I worked for had substantial tonnage moving rail-barge-rail and rail-barge truck. The carriers that served our mines had every opportunity to establish straight rail rates on these moves, but rates at competitive levels did not meet their revenue needs. Neither we nor our customers had any problem with that situation. The route that produced the lowest cost to the utility for the transportation got the business.

By the way, the Canadian Pacific’s Chicago-Milwaukee line is within spitting distance of WEPCO’s Pleasant Prairie plant. As long as some trucking is already in the plan, it would seem that CP Rail-Truck could be an option, thus taking WEPCO out from under the monopolistic thumb of those wicked folks over at the UP.

Jay

8

W. Virginia has very good low sulpher coal that can be delivered to the plant via some routes by barge-truck or rail-lake boat-truck. There is also a rail-barge transfer facility in Chicago that can be part of a rail-barge-truck delivery to the plant.

The CP line close to the plant is also an option - there would be no significant problem moving the coal from the CP to the plant. There is also a CN line within economical trucking distance.

That’s a lot of competition for moving coal to the plant.

Only if someone is narrow minded enough to consider only direct rail delivery as being “captive” could such a fooli***hing be claimed.

Trains, trucks, barges, lake boats are really just tools. A manager can use the tools singally or in combination. They get paid to figure these things out.

We all know that coal has increased in value as a substitute for petroleum. That has changed things; natural gas and oil generation plants have suffered in comparison to coal plants. Saying that plant is captive to UP coal movement and using this as an example to promote an unproven political objective such as Open Access is basically silly.

9

FWIW Pleasant Prairie burned 4.85 million tons of coal in 2000 according to John Carr’s Western Coal Compendium, so coal consumption next year should be in the same range, in which case the 800k tons of coal coming by barge and truck will be a small proportion of the total burn.

10

Actually, a few years ago the CP installed a set of crossovers just north of 95th street. They are dispatcher-controlled, and in addition to the crossovers, they built an access track into the power plant. The controlpoint is called “WEPCO”.

My guess, partially reinforced by the tonnage quoted by beaulieu, is that maybe WEPCO negotiated a one-time deal to get this coal at some fantastic price. And I do not know what the duration of the contract is, such as is all 800,000 tons to be delivered in one year, five years, whatever.

Tomtrain-I do not know if Jones Island is equipped anymore to transload coal from barge to rail. Certainly if they can, the rail move you would think would be cheaper. And as both CP and UP have access to Jones Island, the utility could get them to compete for price (if the railroads even WANT the business). And I completely agree about the potential damage to the highways. I was going to mention that in my original post, but when I considered the number of trucks I see every day on I94, I realized that 32,000 more trucks on that highway is a mere drop in the bucket. Oh, and no disrespect taken…he is “just” a truck driver, and has no interest in this, other than it is more steady employment for him; he doesn’t care if he’s hauling coal, rock, dirt, whatever, as long as he gets paid. He only told me about it because he knew I like trains and used to work for the CNW.

11

Zardoz! There you are! I misplaced you and couldn’t find you for ever so long!

You are back and I am [:D]

Mook

12

The fact that this deal was even made shows that Pleasant Prairie is hardly captive to Union Pacific. 800,000 tons of coal would require only 80 unit coal trains based on a net tonnage of 10,000 tons each so this deal is probably a spot purchase.

13

The Middletown http://www.ibiblio.org/hyperwar/USN/ships/AO/AO-71_Neshanic.html
 is scheduled to load 23,000 tons of coal at MERC http://www.midwestenergy.com/
 on Oct 25th and Nov 5th. Figgure 3 days for the voyage and start looking for the ship.

800,000 tons is not coming from Superior or Chicago this year.
Since the joint line problems iin May we have been shiping a lot of coal to new customers.

Kurt

14

Zardoz

Thanks for the update. As a taxpayer and an occasional user of I-94, I too would prefer that the movement was off the highway, but it is what it is. I am inclined to think that you are correct in that this is a spot deal and isn’t necessarily going to continue for the long term.

I recently read somewhere that the Powder River producers have gotten about a 50% up tick on the mine price. Demand for coal is increasing as the price for the optional fuel, natural gas, is making a big jump. That all may account for the reopening of some Eastern mines which has been mentioned here on the forum.

Interesting times.

Jay

15

WEPCO may facilitate the dispersal of the cash for the coal, but it is their customer base that will have the hand grenade dropped in their shorts, as the costs are passed thru. Just like in Kansas when the Board of Weststar Energy allowed it’s coroprate officers [Wetig and co.] to bleed millions out of their coffers for personal agrandisements, and now they come to the customers for more raises in rates to make up shortfalls in corporate projections…When they have you by the jools your hearts and minds will follow!![soapbox][yeah][yeah]

16

Thanks, Jen. It’s good to know someone missed me!

17

It is true that fuel cost are past through as a separate line item. At least that is the case for my natural gas bill from WEPCO and my electric bill from from Alliant. I don’t know how other states work, but the Wisconsin Public Service Commision does not allow a free ride on any old fuel cost. Upon complaint ( and there is a watchdog group that does that frequently), the utility will have to show that they made their best effort to control the fuel cost.

Financially, it is also in the best interest of the utility to keep fuel costs in line. There is some elasticity in demand. When the consumer bill goes up, usage goes down. The increase in the bill has no effect on the utility’s margin, so if usage goes down, total profit goes down.

Jay

18

As usual, the Bobsey twins spew forth their collective illogic. I will correct.

  1. It was greyhounds who first brought up the issue of open access in this case, stating that since PP can haul in coal by truck it proves that PP is not captive. Again, the accepted definition (by both the railroads and rail shippers) of a “captive shipper” is one in which said shipper only has physical access to one Class I railroad, or one in which a major supplier only has physical access to one Class I, e.g. somewhere along the line haul there is opportunity for monopolistic rate setting by one or more of the railroads. If the entire line haul is handled under competitive bid by the railroads, there is no captivity.

  2. It was assumed by greyhounds and myself that PP only had access to one Class I (UP). Apparently, PP also has a new spur courtesy of CP according to zardoz, so they are only captive in the duopolistic sense. However, for this particular move, it is not clear if either CP and/or UP can have coal transloaded from barge to rail via Jones Island. I would think that if they can load trucks from barge, they should be able to load rail hoppers from barge. In the larger picture, what usually happens when the big boys decline business, someone else simply steps in to take advantage of the niche opportunity. But since those rail lines are not open for such niche players, the default action always ends up on the highways at taxpayer expense.

  3. What has so obviously been missed by the con crowd is that under OA, the opportunity arises for someone to use rail in this situation if the other rail service providers decline to bid. If WEPCO put out bids for someone to haul coal from Jones to PP, what would there be to stop an independent rail service provider from handling that move under OA that of course is impossible under CA? I guess we need to keep asking ourselves - is rail really that much more efficient than trucking under most conditions? It’s a safe bet that under OA

19

Where’s that smilie icon who’s turning his necktie up into a hangman’s noose when you need it? Oh, that’s right, we killed that thread.[V]. I do not wi***o fight the open access thread over again.[xx(]
I do note, however,that allowing duopoly to run rampant will only lead to triopoly,quadopoly,etc… Where will it end, I ask you? Are we doomed to the eventuality of googleopoly? Even then, there may be some who will say there is not enough competition[:O][:-,]

20

Murphy, remember from the OA thread that pricing under triopoly is statistically insignificant from competitive pricing, thus the “three or more” ideal. No need to pedantisize! (Yes, I made that last word up, but it’s roots come from the word “pendantic” meaning to emphasize petty minutiae)

For this particular subject, the connection is the realization of an opportunity lost, wherein under the closed access system the idea of the niche player is nonexistant, but under OA the niche player is paramount. There was an opportunity for some railroad niche player to handle this 800,000 tons of coal using older spare 264k hoppers/gondolas (or whatever means he can contrive, to bad those older RoadRailers were scrapped!) and in doing so keeping alot more trucks off congested highways, but alas due to our closed access rail system this opportunity defaulted to the truckers (and the taxpayers) as usual.

This is an issue the railroad industry needs to address.