BNSF, other railroads, say they’re not giving preference to oil over coal

04/11/2014 7:03 PM

04/11/2014 7:04 PM

A year ago, the coal-fired power plant that provides electricity to Denton and three other Texas cities had nearly two months’ supply of fuel on hand to meet peak demand during hot summer months.

This week, that same plant east of College Station had barely 10 days worth of coal, and that could be a problem for Texas electricity users if the situation doesn’t improve, Bob Kahn, CEO of Texas Municipal Power Agency, said at a federal regulatory hearing this week..

Kahn was among a parade of witnesses who told the U.S. Surface Transportation Board on Thursday that service issues among railroads are causing big problems for power generators, farmers and other big shippers. Their testimony continued a string of criticisms this year that railroads’ growing focus on oil shipments have squeezed out other cargo like grain, chemicals and coal.

Railroads moved virtually no crude oil just a few years ago, but a surge in production in North Dakota’s Bakken shale region has strained rail capacity in the Midwest. Much of the shippers’ ire was directed at Fort Worth-based BNSF Railway, the nation’s largest hauler of crude oil in trains, mostly from North Dakota.

Representatives from BNSF and other carriers told the transportation board that a brutal winter, combined with a record grain harvest, was to blame for the delays. The STB mediates disputes between railroads and their customers.

BNSF said it is hiring thousands of new workers, ordering new locomotives and expanding track capacity enough to absorb half the growth in U.S. rail volumes last year.

“We’re not 100 percent there yet, and it’s something we continue to work on week by week,” testified Stevan Bobb, the executive vice president and marketing chief for BNSF.

While acknowledging the problems and the shippers’ frustrations, railroad officials said they aren’t shoving other commodities aside for crude oil.

“I make more money hauling grain than I do hauling crude,” said Keith Creel, the president and operating chief at Canadian Pacific Railway.

Kahn said his agency’s problems with coal shipments began almost a year ago. He warned that if shortages curtail electricity generation at Texas coal-fired power plants this summer “those consequences could be significant, painful and headline-making news.”

The state depends on coal deliveries by rail to generate a third of its electricity, and lately railroads have not kept up, according to a transcript of Kahn’s comments. He headed the Electric Reliability Council of Texas, the state’ largest power grid, from 2007 to 2009.

“They keep saying, ‘Don’t worry, you’re not going to run out of coal,’” he testified. “We don’t see it getting any better.”

Robbie Searcy, spokeswoman at the Electric Reliability Council of Texas in Austin, said ERCOT “currently does not have concerns about grid reliability associated with rail deliveries to generators in our region.

“However, we will continue to communicate with generation companies in the ERCOT region to evaluate the potential for coal deliveries to affect reliability during our upcoming peak demand season and the remainder of the year,” Searcy said in an email Friday.

ERCOT serves about 85 percent of Texas power demand and has been evaluating its capacity to meet growing electricity use.

“The extreme delays to Amtrak and other users of the network are a symptom of a fragile network that is strained and struggling to react,” Federal Railroad Administrator Joseph Szabo told Thursday’s hearing.

Bob Wisness, the president of the North Dakota Grain Growers Association, said the rail snarls had put his state’s farmers in jeopardy. Millions of bushels of wheat, barley and corn are “unmarketable” because of rail deliveries that are weeks and months late.

“We have had big crops before,” he testified, “but we have never had service this poor from the railroads.”

One particular problem spot has been Chicago, the nation’s leading rail hub, where 1,300 freight and passenger trains intersect every day. A snowfall total of 80 inches made this winter the city’s third worst on record.

Chicago is where BNSF and Canadian Pacific hand off crude oil shipments to CSX and Norfolk Southern for delivery to East Coast refineries. That traffic continues to increase.

Canadian Pacific’s Creel testified that he expects things to improve in four to six weeks.

“I think it’s a very abnormal situation,” he said. “We’ve just got a big hole to dig out of.”

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