Railroads struggle to meet coal demand - East Valley Tribune: Business

Railroads struggle to meet coal demand

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Posted: Sunday, June 11, 2006 7:31 am | Updated: 4:49 pm, Fri Oct 7, 2011.

WHEATLAND, Wyo. - In the time it takes to microwave a frozen dinner, another 120 tons of coal is dumped from a railroad car at the Laramie River Station. It’s a scene that can occur 200 times a day.

To keep electricity flowing to some 1.6 million homes, the power plant burns up to 24,000 tons of coal every day.

Operating 24/7, the plant’s three generating units require a dependable, steady stream of coal.

This past year, however, the stream of coal was anything but steady, even though the plant is only about 100 miles from the largest producing coal mines in the United States — the Powder River Basin in northeast Wyoming, home to the nation’s top 10 producing coal mines.

As the power plant’s stockpile of coal, sapped by sporadic shipments, dwindled to less than a week’s supply, Basin Electric Power Cooperative had to make plans for scaling back the plant’s operations and power output.

‘‘The best I can characterize it is that we’re operating on the ragged edge,’’ Basin Electric spokesman Floyd Robb said.

Basin Electric is not alone. Power plants around the country have seen their coal stockpiles dwindle, mainly because of problems with shipping coal out of Wyoming and increasing worldwide demand for energy.

The result has been higher electric bills in some areas because power companies were forced to replace coal with more expensive natural gas to feed their plants.

‘‘People call us the Saudi Arabia of coal. But if you don’t get it to the power plants, it doesn’t matter,’’ said Mike Grisso, executive director of the Alliance for Rail Competition, a shippers’ organization.

The two main shippers of U.S. coal — BNSF Railway Co. and Union Pacific Railroad — say they are investing hundreds of millions of dollars in order to ship more Wyoming coal and keep up with an ever growing demand for power.

Anthony Hatch, an independent transportation analyst in New York, said he believes railroads will meet future demands for shipping coal. But it will take time because of the enormous task of expanding an industry that until only a few years ago was abandoning track as its business dwindled.

But until the rail system can match rail capacity and demand for service, there will be periods where rail shipments can’t keep up, he said.

With plentiful coal reserves and alternative fuels still too costly or years away from becoming reality, coal is seen by many as the most practical means to meet the nation’s and world’s growing power needs.

‘‘The economy is still rolling along so everybody expects production and demand to keep increasing,’’ said Fred Freme, industry statistician with the U.S. Energy Department’s Energy Information Administration. ‘‘It is the cheapest as far as electric generation goes.’’

Owned by six electric utilities, the Laramie River Station’s three 605-foot-tall stacks tower above the landscape of east-central Wyoming and the nearby community of Wheatland. Each of its three generators produce enough electricity to power roughly 550,000 homes.

To generate the electricity, Laramie River will burn up to 1,125 tons of coal an hour at full throttle.

The coal arrives by rail from mines north of Wheatland. Each BNSF train tugs about 135 open-top rail cars loaded to the brim with chunks of gleaming black coal.

The coal cars are pulled through a long, narrow building where a layer of coal dust covers the floors, railings and steps up to a half-inch deep. Like an amusement park ride, each 20-ton car is grabbed by four clamps and turned upside down. Its cargo of 120 tons of coal pours into a chute and is funneled to a conveyor belt, and then to holding bins.

It takes about 2 1/2 minutes to dump each rail car.

Richard Bower, engineering assistant at the plant, said ideally the plant would have 700,000 to 800,000 tons of coal on hand. But this winter, the plant’s coal supply dwindled as low as 150,000 tons, less than a week’s supply, prompting Basin Electric to consider curtailing power production.

‘‘It’s not increased generations causing the stockpile to go down,’’ Basin Electric spokesman Robb said. ‘‘It’s lack of coal deliveries.’’

Other power companies are having similar supply problems. Entergy Arkansas said its coal shipments declined up to 20 percent last year, forcing it to reduce operations at two power plants in Arkansas and to buy power on the open market. Wisconsin utilities incurred nearly $50 million in extra costs last year because of interruptions in coal shipments.

Entergy Arkansas has sued Union Pacific Railroad, claiming the railroad schemed to hold back deliveries of Wyoming coal in an effort to make more money. UP denied the claim, saying it actually turned down new contracts to ship coal in order to catch up with delayed shipments to existing customers.

Power generating companies are not expecting any improvement this year. David Wilks, president of energy supply for the Minneapolisbased Xcel Energy, testified before a Senate committee last month that power companies may be forced to buy up to $2 billion worth of natural gas to make up for a coal shortfall.

It used to be that people would set their clocks by the train coming into town. But the business of running the nation’s train traffic is much more complicated these days.

Today’s railroads use a rail system that had not added track and other infrastructure for decades. In fact, before 2003, railroads had been abandoning miles of unprofitable and underused lines.

Just in the area of coal, ‘‘the rails have to keep up with 20 (million) to 30 million tons of increased shipments each year,’’ David Khani, an industry analyst with of Friedman Billings Ramsey in Arlington, Va., said.

At the same time, increasing imports of goods from China and elsewhere are competing for space and time on the nation’s rail system, he said.

With little margin between coal supply and demand, any disruption in train traffic, especially in the movement of coal out of Wyoming, will influence coal prices around the country, he said.

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