Union Pacific Railway, one of two railroad companies that haul coal out of the Powder River Basin, is under fire for curtailing shipments to customers, including power plants. The failure to meet customer coal demand has resulted in less coal-fired power generation and higher costs to ratepayers for natural gas purchases to replace coal power.
Coal-fueled power plants nationwide have responded by “curtailing operations for parts of the year in order to conserve fuel for peak seasons,” National Coal Transportation Association Executive Director John Ward told WyoFile. “The winter of 2021 saw a historic drawdown in coal stockpiles as a result of rising natural gas prices and bad weather. Continuing poor railroad service has prevented rebuilding those stockpiles.”
Xcel Energy in Colorado, for example, says it’s incurred more than $123 million in fuel replacement costs due to reduced coal-by-rail shipments — an unanticipated expense that it proposes to pass on to its Colorado customers.
“In order to maintain coal inventories at levels needed for reliability, [Xcel has] implemented, and is implementing, measures to reduce coal use at its coal-fired power plants,” the company stated in a rate-adjustment filing to the Colorado Public Utilities Commission.
Thirty-eight of 45 utilities responding to a survey this fall reported they had to reduce coal-fired power generation due to shortfalls in coal-by-rail deliveries this year, according to the Surface Transportation Board’s Rail Energy Transportation Advisory Committee. So far, it’s unclear whether any coal-fired power plants in Wyoming are impacted, according to the Wyoming Office of Consumer Advocate.
“That’s not to say that it couldn’t potentially play out,” WOCA Administrator Anthony Ornelas said. “But no utility that I’m frequently in contact with has raised a similar issue yet in the state of Wyoming.”
Wyoming impacts
Most coal-fired power plants in the state do not rely on rail for coal deliveries and instead get their supply delivered by conveyor or trucks from small mines located at or near the operations. Two coal plants in the state do, however, rely on coal-by-rail deliveries: Laramie River Power Station east of Wheatland and Dave Johnston at Glenrock.
PacifiCorp, which operates the Dave Johnston plant, said it doesn’t disclose information about fuel supply deliveries and electrical generation output in real time because it is confidential information that is economically sensitive for its customers. Basin Electric Power Cooperative, which operates Laramie River Station, didn’t respond to WyoFile’s inquiries.
“If the trains were running the way they should be running we’d be having a very, very good production year in the Powder River Basin. It’s very frustrating.”
Travis Deti, Wyoming Mining Association
Wyoming coal producers, however, are feeling the pinch of compromised rail service, as are Wyoming taxpayers. After several years of decline, producers have seen an uptick in demand and pricing for Powder River Basin coal — more demand than railroads have been able to meet, according to Wyoming Mining Association Executive Director Travis Deti. Lagging rail service has choked coal production by about 30 million tons this year, Deti estimated. That equates to about 12.5% of Wyoming’s annual coal production and an estimated loss of $60 million in revenue to the state, according to Deti.
“The coal is in demand and we just can’t get it there,” Deti said. “If the trains were running the way they should be running, we’d be having a very, very good production year in the Powder River Basin. It’s very frustrating.”
Federal heat
Union Pacific was called to testify before the federal Surface Transportation Board this week. The board — which oversees railroad shipping rates and service issues, among other aspects of the industry — asked Union Pacific executives to explain the railroad’s dramatic increase in delivery “embargoes” on coal, grain and other commodities and how it intends to improve service.
The Association of American Railroads’ embargo program allows railroads to temporarily — for up to one year — curtail requested or agreed-upon shipping volumes between freight and commodity suppliers and their buyers. Union Pacific began using embargoes in 2018. It imposed temporary shipping limits on customers about 600 times in 2021 and more than 1,100 times this year — more than all other railroads combined, according to the Surface Transportation Board. Here’s a list of Union Pacific’s current embargoes.
The company blames hiring challenges and system “bottlenecks” for the need to impose curtailed shipments, yet it is taking rail cars and locomotives out of service. Those parked railcars and locomotives, however, are contributing to congestion at railyards throughout Union Pacific’s system, according to testimony.
Surface Transportation Board Chairman Martin J. Oberman noted that even as Union Pacific imposes more embargoes, its rail delivery performance continues to decline.
“So what can we expect next year?” Oberman asked Union Pacific’s Vice President of Customer Care and Support Bradley Moore. “Your [embargoes] keep going up and you’re not improving your fluidity. Where are we going, because I am stumped.”
Moore denied a direct correlation and said Union Pacific plans to increase its workforce, continue adding automation technologies and better match its train inventory with customer demand to improve service. The company needs to continue its rail delivery embargo program to meet system challenges, he said.
Coal representation
Meantime, there are several vacancies on the Surface Transportation Board’s Rail Energy Transportation Advisory Committee and there’s no current representation for coal producers. Gov. Mark Gordon and U.S. Sens. John Barrasso and Cynthia Lummis implored the board to fill the vacancies and include coal-industry representation.
“Lack of rail service is keeping coal from being shipped to utilities under service contracts and is even reducing the amount of mined coal,” Gordon wrote to Oberman in November. “The recent [Rail Energy Transportation Advisory Committee] meeting heard comments that failure to deliver coal under existing service contracts is the fault of the coal production industry being unable to have the product to load rail cars. However, I have heard from coal producers throughout Wyoming, many of which have coal waiting to be put on trains.”
Oberman responded and agreed to fill vacancies and include coal-production representation by March.
Dustin,
Thanks for your work. I can’t figure out the math behind the railroads decisions on anything but I am betting it’s to please investors and owners.
The Surface Transportation Board (Board) just gave notice of nine vacancies on its Rail Energy Transportation Advisory Committee (RETAC) back on December 27th, including for three representatives from coal producers so I expect that will be resolved so enough, though late to the party. Not sure how that solves any problems since the board has 25 voting members. And that includes the railroads.
From afar, it seems like the real problem is a lack of political willpower on the part of Barrasso and Lummis to force the hand of rails. The politicians have two conflicting interests. Big railroads and big coal. When they’re in bed with both, they usually pass the buck and the blame to someone else.
Gene said it well in his comment below:
“It’s odd how the Railroad “embargoes” have exactly the same effect as the rail worker’s strike that the U.S Congress worked so hard to avoid.”
Maybe Barrasso can explain it. He was the number one cheerleader for railroads.
As a railroader here in Wyoming the answer to the rail problems is pretty clear cut.
First let’s remember that class One Railroads nation wide are now going on year seven where they have made ever increasing profits each and every quarter.
They are all shooting for the magic ratio of out of each and every dollar they take in, 40 cents is PROFIT to them and their owners and stockholders.
Forty cents on the dollar. Let that sink in. FORTY cents on every dollar.
How did they accomplish this one might ask?
Well go no further then a railroad yard out side of Gillette Wyoming in the heart of coal country. Go count how many locomotives are parked. Every three, sometimes four locomotives represent a coal train that is NOT MOVING. And I am willing to bet there is or was 300 plus locomotives parked. There are other places there is as many if not more. Times that across the railroads nation wide…. And now trains don’t move.
But record PROFITS continue. And the profits are felt by each and every consumer NATION WIDE.
Also consider how many yards nation wide have been closed down where trains were either serviced or made up.
This too help drive PROFITS to RECORD levels across all the companies.
And now the biggest problem that exists is total lack of manpower to even run the trains. Nation wide the Class One Railroads laid off, fired, eliminated 30 percent of the jobs for Engineers and Trainmen. Yep, THIRTY percent.
And the ones they expected to come crawling back to the various companies did not.
There are now locations across each and every Class One Railroads that are offering as much as $50,000 dollars to hire out. But darn few folks are even trying for the jobs.
And just why is that?
Well consider the so very recent labor problems within the railroad industry. In the realm of Engineer and Trainmen each and every company has imposed nothing short of horrible attendance policies. Up to this last year, the company I work for allowed me seven days off a month of which only two could be weekend days and Friday counts as a weekend.
No more.
They have now put in place a point system that assigns points to certain days. Weekends are higher point values and holidays are even higher points. Mind you most folks one sees in locomotive cabs at any hour on any day to include holidays are getting NOT one red cent extra for working that day. Even if one sick and the doctor tells you not to go to work because you will make others sick, the railroads will and does deduct points even for that. Yes there is a way to earn points back, but if a person takes off say Christmas, it will take at least 45 days being available for work to get those points back.
So in theory one almost has work/on call 28 days a month. Remember too, most railroaders only find out they are going to work when the phone rings at maybe 2am or 4pm.
Nobody should have to be subjected to such working conditions. In fact many of us currently working for railroads won’t even allow our children to apply for the jobs.
Yes President Biden was all proud of the fact he helped craft a “labor agreement” that saw wage increases and a additional ONE day off a year. Some unions voted to take that deal. Of course one Union President was just voted out of office for even “tentatively agreeing” to the deal.
Yes there was a so called wage increase. What Biden and members of our own Congressional members didn’t tell you is that it didn’t even keep up with inflation, in real dollars the workers lost.
But the companies are still making RECORD profits each and every year.
Congress just had a great opportunity to change some of these practices. Both our own Senators Barraso and Lummis voted to force folks like myself back to work instead of striking against some very real unfair working conditions. We as workers do not have the financial resources to battle multi billion dollar companies in trying to get contracts that in the long run would of benefited Wyoming not to mention the rest of the Nation as a whole. But just look at how much money the for mentioned members of Congress received from railroads and the management of railroads in campaign contributions.
Barrasso has said more then once how he utterly hates unions and will NEVER support railroad workers but he will support the companies. Even when those companies are hurting employees in other industry. Your article mentions Coal. How about the Bentonite produced in our state? Soda Ash? Gypsum products like sheet rock? Agriculture products? Sulfur? How much is our State losing in TAX dollars because railroads cannot or won’t ship their products? Tax dollars that individuals may have to cough up in higher taxes in other areas.
If one wants to point the finger on why there is a supply chain crisis in our country, out of ten fingers at least six of them need to point at the Class One Railroad Management of our country in their ruthless approach to making RECORD PROFITS. Congress because of their hands off approach to an industry that is vital to the Country as Sen Loomis said, deserve at least two of the fingers because in her case she will NOT even listen to the folks who actually operate the trains and frankly I don’t think she even wants to learn the very real problems in the railroad world. She does not care how it affects industry in Wyoming. She may say she cares, but her actions as a Senator prove otherwise.
Until Congress steps up and demands real honest change in the Railroad Industry nation wide, we the Citizens will be forced to continue to contribute to the ever higher profits that railroads are making on the backs of Citizens and industry that are very much at the mercy of railroads.
with the worlds largest deposit of coal in the state there should be no limit on construction of coal fired plants.
this will keep utility cost’s down.
in return wyoming will continue to abide by the 1922 water compact.giving the over-industrialized blue states water.
this will allow said blue states to continue to fill their swimming pools,water their golf courses,& keep their populations with a abundant supply of shower water.
It’s currently a tough situation but let’s just hope that in the long run there’s a positive side, considering climate change and the contribution coal generation makes to it. Hopefully, problems like this will hasten innovation in renewable energy sources.
We need a thorough criminal and civil investigation of the transportation industry. Things are done the hard way. Most shortages are contrived. There are obvious revenue sources that are ignored.
nobody is going to overtake china for coal production or coal fired electrical plants.
lucky the goal fired plants in wyoming have the worlds largest coal deposit within the state.
I wish somebody would explain how supply and demand economics works to people who say “Go Away!” and then the same people saying “Please Stay”!
This is a typical example of “GO AWAY!! We want to kill (cancel) you because you are BAD!!!” …..
“ok, we’ll adjust…… we’ll move/sell/reassign trains to what you tell us we need to do”
“NO!! GO AWAY LATER!!! Not now…… people need you to do the right thing right NOW!!!” Then go away…..
“We run trains… make up your mind. We can’t afford to be UberHeats and take a multi million dollar asset and turn on a dime about what we should do, just to stay solvent. Trains are big, heavy and expensive to run and maintain …. make up your freaking mind and make a commitment to more than ‘right now, we need you!’. Then go away forever.”
It’s odd how the Railroad “embargoes” have exactly the same effect as the rail worker’s strike that the U.S Congress worked so hard to avoid. Congress didn’t support a few extra sick days, but they can tolerate “embargoes” without a thought.
Coal is shipped almost exclusively by rail, the railroads “own” the rails upon which transport occurs thus any way this is curtailed whether by cost
“embargos” or whatever else — explain to me and to others why this is not restraint of trade, and is that not illegal?