Intermountain Power Agency gets into the railroad business – kind of

The old saying about “this is no way to run a railroad” kind of applies here, but the Intermountain Power Agency has no plan to run the railroad it just designed to carry coal to its Intermountain power plant in Utah.

On Dec. 17, IPA made a massive filing with the U.S. Surface Transportation Board that outlines a “stand-alone” railroad that it has designed on paper. This is part of a long-running dispute with the Union Pacific Railroad over what IPA calls excessive rates to haul coal to the Intermountain plant. Under board rules, a complaining party like IPA has to design a railroad on paper to prove that it can get rates better than those being offered by the incumbent rail carrier, in this case the UP.

In a complaint filed May 30 at the board, IPA challenged the reasonableness of the common carrier rates established by the Union Pacific for the transportation of coal in unit train service from a point of interchange with the Utah Railway (URC) at Provo, Utah, to the Intermountain plant at Lynndyl, Utah. URC provides upstream service on the interline movements with the UP under a long-term rail transportation contract with IPA.

IPA is presenting its evidence concerning quantitative market dominance, variable costs, the jurisdictional threshold rate level, and qualitative market dominance. It wants:

  • a board determination that UP possesses market dominance over the transportation of coal to its plant;
  • a determination that the challenged rates exceed a maximum reasonable level and are therefore unlawful;
  • a prescription of lawful maximum rates for coal shipments to its plant; and
  • an award of reparations payable by UP to IPA for alleged overcharges collected by UP for common carrier coal transportation to the plant since Nov. 2, 2012, in excess of the rates prescribed by the board, together with interest.

IPA originally challenged UP’s rates in a December 2010 case. On May 2, 2012, IPA filed a motion for leave to withdraw so it could be reworked.

IPA is a political subdivision of the state of Utah and is the owner of the Intermountain Power Project (IPP). IPP’s plant, the Intermountain Generating Station (IGS), is located in western Utah in Millard County. IGS generates more than 13 million megawatt hours of energy each year from its two coal-fired units and serves approximately 2 million customers. The two IGS units have a total capacity of 1,800 MW and consume a total of approximately 5 million to 6 million tons of coal per year.

Notable is that the Los Angeles Department of Water and Power, a participant in the plant, said this past fall in an integrated resource plan that it is working with various other plant parties to convert it to firing natural gas around 2023. The department is doing this to meet new California and city of Los Angeles greenhouse gas reduction initiatives.

IGS’s output is committed, through long-term power sale contracts, to 36 utility entities located in Utah and California (which in turn serve customers in Utah, California, Colorado, Wyoming, Arizona, Nevada and Idaho). Rail service to IGS is provided exclusively by the UP.

The challenged rates in this proceeding apply to coal shipments to IGS from one origin, which is a point of interchange with the URC at Provo, Utah. IPA anticipates that its shipments of coal from this origin over the next 10 years will be in the range of 2.5 million to 3.5 million tons per year.

IGS is located on UP’s main line between Salt Lake City, Utah, and Los Angeles. The second-nearest railroad to IGS is the URC, whose tracks are located approximately 90 rail miles from the plant. Given the distance involved, there is no practical option for a rail build-out from IGS, IPA noted.

IPA operates and maintains approximately 400 railcars, consisting of both aluminum and steel cars. It owns a railcar service facility in Springville, just south of Provo. IPA has undertaken major upgrades to that facility in the past three years, including the construction of a new overpass, as well the installation of additional track facilities to accommodate longer unit trains.

IPA says trucking very limited due to citizen complaints

“Trucking high volumes of coal to IGS is operationally infeasible, prohibitively expensive and politically impractical,” said IPA. “For the past ten years, IPA has typically trucked less than five percent of its coal to IGS. Most of those truck deliveries have been associated with periodic changes in mining operations at the SUFCO Mine operated by Arch Coal, which is located in Sevier County, UT – approximately 115 miles east of IGS. For operational reasons, the amount of SUFCO coal that IPA can efficiently burn at IGS is limited to [redacted]. Over the last five years, IPA has shipped an average of approximately 240,000 tons of coal per year by truck from the SUFCO Mine.”

It added: “The remaining portion of deliveries from SUFCO, averaging around 1.75 million tons per year, have been shipped by rail via UP at the Sharp loadout near Levan, Utah. The SUFCO Mine is an underground mine that operates a longwall as well as continuous mining equipment. Truck transport from SUFCO is not continuous and regular, but is used primarily during periods when SUFCO is moving its longwall. IPA encounters community opposition to trucking from SUFCO to IGS during periods when such truck shipments are voluminous on a monthly basis. IPA has requested and UP has provided common carrier rates for rail shipments of SUFCO coal from Sharp. IPA is currently utilizing these rates, but has not challenged them in this proceeding.”

The distance from Provo and the volumes to be shipped from that interchange make trucking an infeasible option, IPA noted. The Provo interchange point with URC is approximately 90 rail miles from IGS. The volume of coal to be shipped from this origin (between 2.5 million and 3.5 million tons per year) and the associated costs, make motor carriage over these distances infeasible.

The most recent full year (2011) data show truck shipments of approximately 700,000 tons. The majority of those tons were from the new Coal Hollow strip mine in Utah, from which IPA began receiving coal in 2011. This mine is not served by any rail carrier, and the mine determined that trucking was the most feasible and economic means of delivering the coal given the location of the nearest potential rail transload point, which would have required circuitous truck movements of approximately 110 miles from the mine.

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.