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Railroad Transportation Problems / Coal Shortages

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Trucks take coal unloaded from barges on the Arkansas River to the White Bluff Steam Electric Station at Redfield. In late September, workers began unloading the Indonesian coal, which was purchased to make up for shortfalls due to railroad transportation problems.

Trucks take coal unloaded from barges on the Arkansas River to the White Bluff Steam Electric Station at Redfield. In late September, workers began unloading the Indonesian coal, which was purchased to make up for shortfalls due to railroad transportation problems.

Since the spring of 2005, the railroad companies that deliver coal to Arkansas' three coal-fired plants have failed to deliver 100 percent of the coal they are under contract to transport. This failure has led to higher electric bills for Arkansans.

As of late mid-October, the three plants - the Independence Steam Electric Station at Newark, the White Bluff Steam Electric Station at Redfield and the Flint Creek Power Plant at Gentry - were still only getting 90 percent of the coal they are under contract to receive. As a result, Arkansas Electric Cooperative Corporation (AECC) and the co-owners of the plants are having to buy coal from other sources at higher prices than the Powder River Basin coal they had expected to receive. And there's no sign that the coal deliveries will reach 100 percent soon.

The shortages began in the spring of 2005 when Union Pacific Railroad and the Burlington Northern Santa Fe Railway said heavy rain and flooding had damaged the train tracks leading out of Wyoming's Powder River Basin, which limited travel on the tracks and cut into coal deliveries to power plants across the country, including Arkansas. The railroads said they were under "force majeure," meaning that they weren't liable to meet their contractural obligations because of an "Act of God". At Arkansas' power plants, coal deliveries were down 15 percent throughout the summer and fall of 2005 and increased to about 90 percent in January. As a result, the use of two of AECC's coal plants were restricted, which forced AECC and Entergy to turn to other sources of fuel to meet their generation demands. The higher cost power led to higher-than-normal electric bills for their consumers.

Coal imported from Indonesia is unloaded from a barge along the Arkansas River. The coal is then transported by truck to the nearby White Bluff Steam Electric Station at Redfield.

Coal imported from Indonesia is unloaded from a barge along the Arkansas River. The coal is then transported by truck to the nearby White Bluff Steam Electric Station at Redfield.

It is becoming more clear that the track damage isn't fully to blame for the transportation problems. Since the flood damage of last year, the railroads have made repairs to the tracks but are still not delivering the amount of coal they are supposed to under their contracts. In addition, the railroads hauled a record amount of coal out of the Powder River Basin mines in 2005 and are continuing to break records this year. As a result, the railroads are making record profits.

It now appears that the railroads have overbooked their capacity by adding new contracts for shipping coal in which they can charge higher prices and make more money than they can with their existing contracts with customers such as AECC. The railroads have paid a small amount of damages to the utilities for failing to deliver the full amount of coal requested, which is part of the contract. And in so doing, the railroads claim they are meeting their contractural obligations even though they aren't delivering 100 percent of the coal they agreed to deliver.

Utilities have made complaints with the Surface Transportation Board, the federal agency that is supposed to oversee the railroads, about the transportation problems and unfair fuel surcharges but the agency hasn't taken any action. In the meantime, the cooperatives and ACRE, along with other members of the CURE (Consumers United for Rail Equity) group will continue to visit with members of Congress and seek support for legislation that would increase railroad competition. This important issue is just one more way ACRE is working for employees and members of the Electric Cooperatives of Arkansas.