Coal Railroad’s Delay Reflects Hurdles for Exports

Coal companies want to move more of their product to markets in Asia as domestic demand wanes

By Matthew Brown, Associated Press

BILLINGS – U.S. coal industry efforts to tap into the growing export market are struggling to gain traction, as bureaucratic hurdles and resistance from environmentalists slow proposed mines in the Northern Plains, ports on the West Coast and now a proposed coal railroad in Montana.

The Surface Transportation Board said Friday it will take until next April to complete its draft analysis of the Tongue River Railroad. That’s the second significant delay in work originally scheduled for completion last year.

The $403 million proposed rail line is jointly owned by BNSF Railway, Arch Coal, Inc. and candy-industry billionaire Forrest Mars, Jr.. If built, it would open the door to new mines in the Powder River Basin along the Montana-Wyoming border — home to one of the largest coal reserves in the world and the supplier of about 40 percent of the fuel burned in the U.S.

Surface Transportation Board spokesman Dennis Watson said the decision to bump back the schedule on the railroad study was made to accommodate the “intense interest” in the project. The additional time will give all sides a chance to make their views known, he said.

Coal companies want to move more of their product to markets in Asia as domestic demand wanes due to stricter pollution rules and competition from cheap natural gas. The quickest route is through the West Coast. Yet despite modest growth in recent months, West Coast export volumes remain severely constrained by limited port capacity.

The railroad’s sponsors say that in addition to international markets, there is more than enough domestic demand for coal from Arch’s proposed Otter Creek mine, which the rail line would serve.

Midwest utilities including Minnesota Power and Wisconsin Electric Power Company have told transportation officials they support the rail line.

“The Tongue River rail line will be built if, as the owners believe, there will be a demand for Otter Creek coal in the coming years,” the railroad’s attorney, David Coburn, wrote in a filing with the Surface Transportation Board.

Elected officials in Washington and Oregon and environmentalists have opposed proposals to sharply expand that capacity, and several projects have been scrapped or stalled. That has direct bearing on mines and related projects in the Powder River Basin, including southeastern Montana’s Tongue River Railroad.

Concerns have previously been raised about the railroad’s potential negative impacts on farmers and ranchers and American Indian cultural sites in the area.

BNSF spokesman Matt Jones said the railroad’s sponsors still were targeting completion of the line by the time Arch’s mine is ready to ship coal.

But the timing of that, too, is uncertain.

Otter Creek, located near Ashland, Montana, is the site of a 1.4 billion ton reserve. Company executives once predicted Otter Creek could open next year.

It’s now more than two years behind its original permitting schedule and is likely years away from opening given the time needed to develop the mine’s infrastructure.

Just a few years ago, the industry’s export aspirations appeared to be coming to fruition, with record volumes being shipped out of U.S. ports. Growth has since stalled, and projections from the U.S. Department of Energy and others show modest or even negative coal exports growth over the next decade.

Railroad opponents assert that long-term trends are stacked against coal and the Tongue River Railroad, as the U.S. and other governments take steps to reduce pollution from power plants that use the fuel.

“I’m no expert, but it seems like there’s not going to be a whole lot of money to be made in coal. Maybe the big investors are realizing it’s not a good idea,” said Mark Fix, a rancher along the Tongue River whose land would be bisected by one of the railroad route alternatives that is under consideration by the federal transportation board.

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