Monday, November 24, 2014 7:55:59 AM
Group Asks Regulator to Impose Timetable on BNSF for Steps to Relieve Track Congestion
By CASSANDRA SWEET and JOHN W. MILLER Nov. 23, 2014 6:55 p.m. ET
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Saying they are running short on coal, electric utilities from Minnesota to Texas are trying to pressure Warren Buffett ’s BNSF Railway Co. to speed up deliveries on its congested tracks before the worst of the winter weather hits.
One group of utilities has petitioned federal regulators to impose a timetable on BNSF to add workers and improve tracks leading east from coal fields in Wyoming. Utilities also are negotiating directly with BNSF.
In Minnesota, politicians and regulators warn that consumers could pay millions of dollars in extra charges if utilities have to buy high-cost backup power because they can’t operate their coal-fired power plants.
BNSF, which is owned by Berkshire Hathaway Inc., says it is working to fix delivery problems while also meeting growing demand from shippers of coal, grain and oil. The railroad says it has invested $5.5 billion in its system this year, added 500 locomotives to a fleet of 7,000, hired 6,000 new employees and added 5,000 railcars.
The company plans to spend $6 billion more in 2015. “It will take some time to build up enough infrastructure to absorb all the demand,” said BNSF spokesman Michael Trevino.
The company is fighting the proposal by a utilities group called the Western Coal Traffic League for a federally imposed timetable for upgrades, calling it unnecessary. Last month the group asked the Surface Transportation Board to ensure that BNSF improves its service.
The group says it isn’t asking for special treatment for coal shipments. Rather, it wants rail executives “to tell us a plan, put some milestones in there and have some accountability,” said Bette Whalen, the group’s president. Ms. Whalen is coal and rail specialist principal at the Lower Colorado River Authority, which operates power plants in Texas.
Some of the group’s utilities depend on BNSF, one of the largest shippers of coal from the West, for their coal supply, and don’t have an alternative, Ms. Whalen said. Other members also get coal shipments from Union Pacific Corp. , which she said has done a better job serving coal customers.
The board is still considering the group’s request, a spokesman for the regulator said.
Utilities prefer to have at least a 30-day supply of coal on hand so that they can keep generators operating if bad weather or equipment problems prevent deliveries. But this year nearly a quarter of U.S. coal plants had less than 30 days’ worth of coal, up from 13% at this time last year, according to the U.S. Department of Energy.
Demand for coal to generate electric power has been rising since 2012.
Allete Inc. ’s Minnesota Power temporarily shut two smaller coal plants in September to conserve coal for the company’s large coal plant in Cohasset, Minn., said David McMillan, the utility’s executive vice president. The plants are designed to run exclusively on coal from the Powder River Basin in Wyoming and Montana. Because of shortages, the utility has spent about $24 million since last December buying power from other companies, he said, adding that such charges are passed on to customers. The company restarted one of the plants this week.
“We got dangerously low last winter, and we don’t want to see that repeat,” Mr. McMillan said. “We’re going to be in a period of concern until they get this congestion problem solved.”
U.S. rail shipments of oil and other petroleum products jumped 13% this year through October compared with year-ago levels, while coal shipments inched up less than 1%, according to the U.S. Energy Information Administration. Rail shipments of grain rose 15% because of an above-average harvest.
“We’re trying to move oil, we’re trying to move grain, and we’re trying to move coal; competition for train tracks is up,” says Beverly Jones Heydinger, chairwoman of the Minnesota Public Utilities Commission.
Minneapolis-based Xcel Energy Inc., which owns utilities in eight states, said all its coal plants that are served by BNSF have less than 30 days’ worth of coal. “That is not a good place to be,” said Tom Imbler, the company’s vice president of commercial operations, adding that plants that are served by rival Union Pacific Railway have adequate supplies. Xcel isn’t a member of the group that petitioned the regulator.
Coal producers also are chafing from the rail-service problems. St. Louis-based Peabody Energy Corp. , the biggest producer in the Powder River Basin, says coal shipments from its Western operations, including Wyoming mines that supply power plants in Minnesota, fell 2% in the third quarter because customers couldn’t find enough rail capacity.
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