Coal customers slam BNSF, UP coal dust tariffs

Coal shippers told the U.S. Surface Transportation Board on Oct. 1 that a BNSF Railway tariff, which imposes the costs of coal dust suppression from rail cars on shippers and not the railroad, is bad policy.

In response to STB’s decision served in this proceeding on July 31, the Western Coal Traffic League, American Public Power Assn., Edison Electric Institute and the National Rural Electric Cooperative Assn. filed with the board on Oct. 1 a joint opening evidence and argument brief. The members of these groups operate dozens of coal-fired power plants around the country that fire the notoriously dusty Powder River Basin coal that is the subject of this long-running argument.

In a previous case called Dust I, the board found that BNSF’s publication of the Original Coal Dust Tariff was an unreasonable practice. The board strongly admonished BNSF to work collaboratively with its coal shippers to develop a reasonable alternative, the shippers noted.

“Unfortunately, BNSF failed to heed the Board’s advice,” they added. “As one BNSF manager put it, the ‘substance’’ of coal dust rules ‘is not a proper subject of negotiation between railroads and their shippers.’ BNSF proceeded to ignore shippers and published its Revised Coal Dust Tariff in July of 2011. BNSF’s failure to work with its shippers has led to this proceeding – Dust II. Coal Shippers’ opening evidence and argument demonstrates that BNSF’s unilateral actions have resulted in its repetition of the errors that led the Board to reject the Original Coal Dust Tariff.”

The coal shipper groups, among other things, said:

  • The Revised Coal Dust Tariff, like the Original Coal Dust Tariff, is unreasonable because it is “rooted in bad science.” The coal shippers said they presented detailed evidence in Dust I demonstrating that BNSF’s Original Coal Dust Tariff was grounded in bad science, including a faulty and arbitrary attempt to measure coal dust emissions from moving coal cars. The board agreed with that contention, they added. “BNSF’s Revised Coal Dust Tariff is similarly flawed, and must be rejected because it is predicated on faulty and arbitrary testing of coal dust emissions from moving coal cars,” the shippers said.
  • The Revised Coal Dust Tariff, like the Original Coal Dust Tariff, is unreasonable because it places all compliance costs on coal shippers. The revised tariff requires shippers to apply expensive surfactants to their coal cars, at a publicly estimated cost of $50m to $150m, the shippers said. “It is unreasonable for shippers to pay these huge sums because the law places the payment responsibility on BNSF and payment of the charges results in shippers double paying for the same services,” they added. “Payment of these additional sums is particularly outrageous because BNSF, and Union Pacific Railroad Company (‘UP’), are already earning billions of profits annually on the coal traffic subject to the Revised Coal Dust Tariff.”
  • The Revised Coal Dust Tariff, like the Original Coal Dust Tariff, is unreasonable because it contains no enforcement provisions. “In Dust I, shippers emphasized that the Original Coal Dust Tariff contained no enforcement provisions,” the shippers said. “The Board cited the lack of such provisions in rejecting the Original Coal Dust Tariff. Nevertheless, the Revised Coal Dust Tariff contains no enforcement provisions, a particularly egregious oversight in light of statements reported in the trade press that BNSF may shut down coal trains or impose draconian financial penalties. Coal transportation, as the Board has repeatedly observed, is vital to national energy security, and that security is too important for BNSF to be permitted to play cat and mouse games with its tariff enforcement.”
  • The Revised Coal Dust Tariff, like the Original Coal Dust Tariff permits arbitrary train profile monitoring, the shippers said. “Several years ago, private sector negotiations led to an agreement between Powder River Basin (‘PRB’) coal shippers, PRB mine operators, and PRB railroads (BNSF and UP): mines would install loading chutes to load trains to meet a streamlined ‘profile’ intended to reduce coal dust emissions from moving coal cars. All PRB mines now employ these chutes. Nevertheless, BNSF proposes to monitor compliance with its profiling requirements at locations that are far from PRB mines. This monitoring procedure produces arbitrary, skewed results, because once a train leaves the mine, train profiles can and do change for causes beyond shipper’s control, including wind, train speed, and train vibration.”

National Coal Transportation Assn. criticizes the UP, the other PRB railroad

Also offering Oct. 1 comments was the National Coal Transportation Assn. (NCTA), a non-profit association based in Littleton, Colo., that has more than 145 members consisting of producers and consumers of coal mined in North America and other entities which are interested in coal’s transportation and related issues. NCTA also accused the UP of not playing by the board-imposed rules after the March 2011 decision in Coal Dust I. It said that shortly after Coal Dust I, UP announced it would develop its own coal dust standard guided by the board decision in Coal Dust I.

“However, UP eventually abandoned the development of its own standard and adopted the revised BNSF tariff provision for its customers, effective October 1, 2011,” the NCTA said. “UP accomplished this by issuing two very similar letters to its customers in early September, 2011, which were accompanied by the addition of Items 215 and 216 to UP Circular 6603-C.4 The first letter, directed to UP customers who did not ship via contracts with UP, informed them that ‘UP is adopting a coal dust standard that will apply to your traffic.’ The adopted standard was Item 100, the contents of which BNSF had apparently also adopted as an operating rule for the Powder River Basin Joint Line in addition to adding it to BNSF Price List 6041-B. In its letters to its customers, UP stated that the Joint Line operating rules applied to trains operated by UP, and that UP depended on ‘shippers and their loading operators to comply with those standards.’ UP further asked its customers for their plans for complying with the BNSF standard by October 7, 2011.”

For its customers shipping coal under contracts, UP stopped short of stating that it had adopted a coal dust standard that would apply to their traffic, but nevertheless also notified them of the BNSF operating rule and that the UP expected its shippers and their loading operators to comply with the BNSF operating rules, the NCTA contended. “While UP indicated its expectation that its contract customers were also required to comply with the BNSF operating rule, it made a ‘recommendation’ that these customers comply with the BNSF standard by adopting the loading practices in Item 100,” it added. “In any event, UP stated that all new contracts would be subject to the BNSF coal dust standard as contained in the BNSF operating rule.”

BNSF’s revised coal dust control standard, while it contains a “safe harbor” provision, still falls short of meeting the reasonableness standard of federal code, the NCTA said. BNSF has still not demonstrated that the base “reduce by at least 85%” standard for dust emissions is valid or how such a standard, even if valid, provides shippers with certainty about the criteria being applied, NCTA added. “Thus, shippers have no certainty that they must take steps to comply with a standard, let alone utilize a ‘safe harbor’ alternative,” it added. “As for that alternative, shippers are essentially limited to the specific chemical sprays that BNSF selects, as the hurdles and costs of obtaining approval for an alternative means of meeting the base standard are high. Finally, should the Board nevertheless determine that the BNSF’s revised standard passes muster under § 10702, then the Board must also address in this proceeding the key related issues of (1) the appropriate penalties for non-compliance; (2) the equitable sharing of the costs and benefits of controlling coal dust loss from rail cars; and (3) the appropriate allocation of liability for requiring rail shippers to treat their loaded railcars with chemical suppressants selected exclusively by BNSF.”

BNSF, UP say the BNSF tariff complies with what the board has ruled

BNSF said in its Oct. 1 opening statement that its new dust rules are reasonable and not unduly burdensome for coal shippers. It said in the 238-page filing that the board should act promptly to confirm the reasonableness of the safe harbor provisions. “Uncertainty created by the pendency of this proceeding is delaying progress in bringing in-transit coal dust losses under control in the Powder River Basin (‘PRB’),” the BNSF wrote. “Most of the BNSF’s shippers are ready to implement BNSF’s Coal Loading Rule, but many shippers are reluctant to undertake any coal dust mitigation measures while this proceeding is pending.”

The BNSF added: “BNSF is confident that if the Board concludes, as it should, that the loading measures set out in the safe harbor provisions of BNSF’s Coal Loading Rule are reasonable, there will be widespread compliance with BNSF’s loading requirements. All major PRB mines are ready to implement the necessary loading practices, and they are just waiting for their customers to instruct them to comply with BNSF’s loading requirements. BNSF therefore urges the Board to act promptly in this proceeding so that BNSF and its shippers can ensure reliability of PRB coal transportation by controlling coal dust losses in transit.”

The UP said in its Oct. 1 opening, much shorter brief that the board instituted this proceeding just on the narrow issue of the safe harbor provision and that this provision in the BNSF tariff is reasonable under board policy. BNSF’s tariff is also reasonable since it is a cost-effective approach to suppressing coal dust, the UP added.

Shippers are free, if they can prove they are effective, to use any dust-suppression agents not in the group of five currently approved by the BNSF, the UP added. It also pointed out that its own tariff is similar to that of the BNSF.

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.