BNSF pressured to deliver more coal

With coal supplies dwindling at major power plants, Xcel Energy and other electric utilities are putting increased pressure on BNSF Railway to increase deliveries from western mines.

Some power plants, including Xcel's giant Sherco station in Becker, Minn., are generating at reduced levels to conserve coal inventories. That prompted Ben Fowke, CEO of the Minneapolis-based utility, to ask federal regulators last month to focus on boosting coal supplies.

In La Crosse, Wis., Dairyland Power said one of its power plants that serves part of Minnesota could be forced to shut down in January for lack of coal. Rep. Tim Walz, D-Minn., and Sen. Chuck Grassley, R-Iowa, recently wrote to the U.S. Surface Transportation Board urging action to help Dairyland, a wholesale power cooperative that serves four states.

The coal-supply problem surfaced late last year, as BNSF and other railroads struggled to haul a record corn crop, more consumer goods and increasing numbers of tank cars filled with crude oil. Then came the winter's polar vortex, slowing down everything on the rails.

"It doesn't seem that it has improved that much, if at all," said Paul Gutierrez of Consumers United for Rail Equity, an advocacy group for utilities and other companies on shipping issues.

Gutierrez, an executive with the National Rural Electric Cooperative Association, said cooperative utilities in Kansas and Arkansas have recently reported coal shipping delays. Xcel said its Texas power plants also have been affected.

In Minnesota, coal stocks at power plants were down 22 percent in May compared with five-year average levels for the month. It was the lowest pre-summer stockpile since 2002, according to the most recent U.S. Energy Information Administration data.

Tom Imbler, the Denver-based vice president of commercial operations for Xcel, said the utility is "exerting all the pressure we can" on BNSF to address the problems.

"They are telling us that there isn't any immediate solution," he said in an interview. "This is a long-term problem."

Imbler said the coal supply is not in danger of running out soon at the Sherco plant. The plant has three large coal-burning generators that supply 24 percent of the power needed by Xcel's Upper Midwest customers. To conserve, Imbler said, the generators' output is being dialed back at night, and Xcel is purchasing replacement power off the grid.

"We believe that the chance that BNSF would allow the plant to run out of coal is very remote," he said.

BNSF is being pressured by regulators to address widespread rail delays. Under a federal order, it has issued weekly updates on agricultural commodity shipping. Meanwhile, the railroad is purchasing locomotives, adding train crews and investing $5 billion on maintenance and expansion, McBeth said.

Deb Mirasola, a Dairyland spokeswoman, said BNSF has agreed to increase shipments of coal to an Iowa dock so it can be shipped by barge to a power plant in Genoa, Wis., before the Mississippi River freezes.

"Because we only can receive coal by barge at the Genoa plant, we need to have between 165 and 195 days' worth of coal on hand to ensure we can generate through winter," Mirasola said.

That would take about three train loads of coal per week, compared with one or two per week historically, she added. Like the Sherco plant and many other Midwestern coal generators, the coal is mined in Wyoming or Montana.

At the Big Stone power plant in South Dakota, just across the border from Ortonville, Minn., the coal-burning generator is operating at a lower-output "conservation mode" because of reduced coal supplies from BNSF, said Cris Oehler, spokeswoman for Otter Tail Power Co. in Fergus Falls, the part-owner and operator of the plant.

Minnesota Power, which relies heavily on coal generation to supply the mining industry and other customers in northern Minnesota, reported that BNSF's deliveries are down, but not causing a crisis.

Not every coal-burning power plant is having problems. Xcel's Imbler said the Allen S. King Power Plant in Bayport, Minn., and the Black Dog Generating Station in Burnsville have adequate coal supplies. Both are served by Union Pacific Railroad, he said.

Some shippers have asked federal regulators to allow competing railroads to bid on coal shipping using BNSF tracks to reach places like Sherco, which is not served by any other railroad. But Imbler said Xcel looked at that option, and concluded that even Union Pacific doesn't have the capacity to increase the number of coal shipments to the plant.

David Shaffer • 612-673-7090 • @ShafferStrib