Some public utilities are in a tussle with BNSF Railway over the cost to control coal dust on tracks serving the Powder River Basin, and the end result could cost as much as $100 million annually.
From a Midwestern utility’s perspective, the largest expense for burning Powder River Basin coal is transportation. While spot prices for Northern Appalachian coal hover around $54 per ton, Powder River Basin coal is going for about $10.40, according to the U.S. Energy Information Administration.
The cost to ship Powder River Basin coal by rail to the Midwest and points further east somehow -- almost magically -- is really close to the difference between the two prices. So keeping transportation costs low is extremely important to both Powder River Basin coal producers and the railroads that serve them.
But one expense nobody can afford to ignore is coal dust.
Back-to-back derailments on the southern Powder River Basin "joint line" in 2005 snarled coal deliveries by more than 20 million tons in a short amount of time. This major supply disruption forced some utilities to buy replacement coal and natural gas on the open market at a cost of millions of dollars.
An investigation revealed that the cause was an accumulation of coal dust in on the rail bed, which prevented water from properly draining. Since, Union Pacific and BNSF Railway have spent hundreds of millions on an array of efficiencies and improvements to their coal systems. They also collaborated with mines to develop lower-profile loading of rail cars to reduce dusting.
But additional coal dust suppression measures may be required, such as covering coal cars or applying a latex coating, according to those in the industry. Although covers are a huge capital expense, they could provide some efficiency savings. Filling coal cars with less coal is another potential solution, but that runs counter to efficiency and tariff considerations.
Whatever the method of coal dust suppression, it’s likely to add another $100 million annually to the cost of shipping Powder River Basin coal, according to Arkansas Electric Cooperative Corp. BNSF Railway wants utilities to pick up the tab, and utilities argue it’s the responsibility of the railroad.
Either way, it’s a potential setback to the efficiencies gained by the recent BNSF and Union Pacific investments aimed at maintaining Powder River Basin coal’s competitiveness. And in the end, the tab will be picked up by those who flip on the light switch.
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