Appeals court sends Tongue River coal railroad back to board for more work

The long-planned and much-delayed construction of the coal-hauling Tongue River Railroad in Montana will once again get argued before the U.S. Surface Transportation Board due to a Dec. 29 decision by the U.S. 9th Circuit Court of Appeals.

Environmental groups, including the Northern Plains Resource Council, have appealed basically every procedural decision by the board, and its predecessor, the Interstate Commerce Commission, in the 28 years that the project has been proposed. They routinely cite the environmental impacts of the roughly 130-mile railroad, which would connect at both ends with the BNSF Railway and would cut through the coal-reserve-rich Otter Creek region.

Things have gotten more interesting recently because while the theory was always out there that the TRR would open up huge new coal reserves for development, no coal company had come forward with a firm plan to use the railroad. But Arch Coal (NYSE:ACI) has in the past couple of years amassed 1.5 billion tons of reserves in the region for its planned Otter Creek strip mine and has also taken a stake in the Tongue River Railroad Co. (TRRC) to further the railroad’s development.

Feds approved three different versions of TRR

The case before the appeals court arose out of three applications by TRRC that resulted in three decisions called TRRC I, II, and III. The Northern Plains Resource Council, Mark Fix, the city of Forsyth, Native Action Inc. and United Transportation Union-General Committee of Adjustment had challenged TRRC II and III on a number of environmental and public convenience and necessity grounds.

“We hold that the Board failed to take the requisite ‘hard look’ at certain material environmental impacts inherent in TRRC II and III in the manner required by the National Environmental Policy Act (NEPA) prior to approving those applications,” the court said. “We further hold that the Board did not err in its public convenience and necessity analyses, except with respect to its reliance on the viability of TRRC II during the approval of TRRC III. Accordingly, we reverse and remand in part, and affirm in part.”

In 1983, the TRR filed an application with the ICC to construct an 89-mile railroad line between Miles City and Ashland, Mont. The purpose of the line was to serve possible new coal mines in the Ashland area. The plan was to connect the new line to the main line railroad at Miles City, presently owned by the BNSF. The ICC approved the TRRC I application in 1986. The issuance of the TRRC I approval was not officially before the appeals court in this litigation, though many of the circumstances that were appealed grew out of it.

In 1989, the TRRC filed an application with the ICC to construct and operate an approximately 41-mile-long railroad line from Ashland to Decker, Mont. This line, TRRC II, was intended to connect with TRRC I to create a combined railroad line of approximately 130 miles.

The ICC was concerned about potential environmental impacts that would be caused by the construction of TRRC II’s preferred route. As a result, the ICC also evaluated an alternate route called the “Four Mile Creek Alternative,” which was approximately ten miles longer than the TRRC’s preferred route requested in its TRRC II application. In October 1996, the board issued its decision approving TRRC II, utilizing the Four Mile Creek Alternative with numerous mitigation conditions. The board also required that the TRRC build the entire line from Ashland to Decker and the 89-mile line from Miles City to Ashland, approved in TRRC I, within three years of the date of its TRRC II decision. The petitioners sought reconsideration of TRRC II, which the board denied, and then sought relief in federal court.

Subsequently, the TRRC (and BNSF through intervention) also petitioned for reconsideration of TRRC II, claiming that new studies showed the Four Mile Creek Alternative was not viable from an engineering and operational perspective, and, instead, proposed a new alternative, the 17.4-mile “Western Alignment.” The board denied the TRRC petition for reconsideration in December 1997 on the grounds that its objections could have been raised earlier, but left open the possibility that the TRRC could file a new application for the Western Alignment. In 1998, petitioners’ appeals in this matter were ordered held in abeyance pending the board’s decision in TRRC III. In 1999, the board revoked the condition that the entire line be built within three years of its TRRC II decision, and did not impose any future time limit on construction of the line.

In April 1998, the TRRC filed a new application to build the Western Alignment rather than the Four Mile Creek Alternative. That proceeding is called TRRC III. In October 2007, the board approved the construction and operation of the Western Alignment along with numerous mitigation measures. Petitioners then appealed to the federal court.

Board failed to measure impact of new coal mines

Petitioners contend, among other things, that the board’s cumulative impact analysis in TRRC III ignores the combined impacts of future coalbed methane well development and coal mining projects in southeastern Montana. Petitioners further contend that the board failed to account for the combined effects of the referenced projects and the likely effects on air quality, wildlife, and water quality of the proposed construction and operation of the TRRC railroad. “We agree with Petitioners’ contentions concerning the cumulative foreseeable effects of CBM wells and the Otter Creek Coal Mine,” the appeals court noted.

The board’s own explanation that the projected Otter Creek mines were not foreseeable is arbitrary and capricious, the appeals court ruled. The board knew that in 2002 the federal government transferred and to the state of Montana for coal development and the board’s environmental review included a map with the sites of future coal mines. Arch’ Coal’s Otter Creek mine would in part be on land transferred to the state in that transaction. Even more significantly, the board relied on the coal mine development in Otter Creek to justify the financial soundness of the proposal, since it included the tonnage forecasts in its 2007 final decision. So the appeals court said the board violated the National Environmental Policy Act by not covering the impacts of those prospective mines in its environmental review.

In evaluating the new TRRC III application, the board also did not review new evidence of operational and safety concerns, and instead considered the Four Mile Creek Alternative as “currently authorized,” and the “no-build” alternative considered in TRRC III. By the time the board prepared an environmental impact statement in October 2004, the board was well aware of the concerns that the TRRC and BNSF had raised about the viability of the Four Mile Creek Alternative from a safety and operational perspective. Moreover, in 2004, the board was aware that the TRRC had asked to suspend proceedings due to financial problems in 2000, after which review was suspended for almost three years, the appeals court noted. The board also did not revisit the financial viability of the Four Mile Creek Alternative when it considered it the “no-build” alternative in TRRC III in light of the changed financial circumstances.

“Thus, we conclude that the Board’s decision in TRRC III was arbitrary and capricious in light of the evidence it had before it regarding the TRRC and BNSF’s safety concerns that arose subsequent to the Board’s approval of TRRC II,” the appeals court said. The court found that the board’s decision not to review new evidence of operational and safety concerns for the Four Mile Creek Alternative in TRRC III to be arbitrary and capricious, and reversed and remanded the board’s decision on that ground.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.