PPL wants to preserve option for Powder River Basin coal at big Montour plant

The PPL EnergyPlus LLC unit of PPL Corp. (NYSE: PPL) told the U.S. Surface Transportation Board that any board approval of a planned takeover of a Pennsylvania railroad must ensure continued access for new alternative coal supplies, including “Western” coal, for the Montour power plant, which now mostly takes Pittsburgh-seam coal out of Northern Appalachia.

That statement was made in PPL comments filed Jan. 21 with the board in a case concerning the proposed acquisition and operation by Norfolk Southern Railway (NS) of a total of 282.55 miles of rail line and related facilities roughly between Sunbury, Pa., and Schenectady, N.Y., that currently are owned and operated by the Delaware and Hudson Railway (D&H), a wholly-owned, indirect subsidiary of Canadian Pacific Railway (CP).

“PPL submits that the Board should condition any approval of NS’ acquisition of the D&H South Lines on its agreement to preserve PPL’s access to potential alternative rail transportation service to the Montour Generating Station near Sunbury, access which otherwise would be lost as a result of the subject transition,” said the filing. “Specifically, the Board should impose post-acquisition conditions under 49 U.S.C. §11324(c), mandating that NS (1) enter into appropriate agreements with PPL and CSX Transportation, Inc. (‘CSXT’) for trackage or haulage rights on reasonable terms over the D&H South Lines for loaded and empty trains moving between points served by CSXT and the Montour Station; and (2) enter into a new or an extended trackage or haulage rights agreement with CP on reasonable terms over the Southern Tier Lines, for the handling of loaded and empty trains moving via Buffalo, NY between points served by CSXT and/or CP and the Montour Station.”

A PPL affiliate and subsidiary of PPL Energy Supply LLCPPL Generation LLC – owns and operates the Montour Station. PPL’s responsibilities include the marketing of generation from Montour, and the procurement and transportation of fuel for the station. Notable is that this is one of the power plants that PPL Corp. wants to contribute to the new Talen Energy.

The Montour station is located in Washingtonville, Montour County, Pa., about 20 miles north of the town of Sunbury. It includes two coal-fired steam units with a combined capacity of about 1,550 MW. Montour consumes between 3.0 and 3.7 million tons of coal each year. Montour can utilize coal from a large number of mines in Appalachia and the Illinois Basin. However, its principal, current sources are in Western Pennsylvania, Northern West Virginia and Eastern Ohio, which are served by NS or short line railroads that connect with NS for the line haul service to Montour.

Rail is Montour’s only means to get coal

Coal moves to Montour by rail, typically in unit trains of up to 130 PPL-supplied railcars. Currently and for many years prior, NS has been the sole provider of coal delivery service to Montour, as it is the only railroad that has tracks which physically connect to the delivery loop at the station. Occasionally, some coal used at Montour originated at mines served by CSXT, and was interchanged to NS at Lurgan, Pa., for delivery to Montour. However, NS strictly limited the volumes that PPL could transport in this way.

The D&H South Lines connect with the existing NS system near Sunbury and run generally north-by-northeast through Scranton, Pa., Binghamton, N.Y., and Oneonta, N.Y., to Schenectady. At Schenectady, the lines connect through various yards and switching tracks with the remainder of the CP system in New York. However, they also permit the handling of trains in interchange to and from CSXT, which owns and operates the former Consolidated Rail Corp. (Conrail) lines between the Albany area and, inter alia, Buffalo, N.Y., and Cleveland, Ohio, and (via CSXT’s own lines and trackage rights over those of NS) on to Chicago.

Prior to 2005, D&H had trackage rights over the Southern Tier Lines as a result of the “Final System Plan” developed by the U.S. Railway Association in the 1970s as part of the process leading to the creation of Conrail. However, in that year, with the Board’s approval, those trackage rights were discontinued as part of a series of transactions involving NS, D&H and CP. In their place, also with the Board’s endorsement, NS and D&HICP entered into a haulage rights agreement to preserve the latter’s ability to, inter alia, move freight between the D&H South Lines and connections with the rest of the CP system, and CSXT, at Buffalo. That agreement currently is in effect, but according to the NS application would be cancelled as part of the transactions that are the subject of this proceeding.

After its acquisition of the D&H South Lines NS will provide haulage service at agreed-upon charges for CP’s account between various shortline junctions on these lines, and/or lines currently operated by NS, and the Schenectady area, to preserve these carriers’ and their customers’ access to the CP system (including CP’s connections to CSXT) following NS’ takeover.

PPL says it is looking at getting coal from other sources, including ‘Western’ coal

PPL said its long-term fuel strategy includes both consideration of expanding the scope of its Eastern coal sources to include origins served by CSXT, and the prospect that lower sulfur Western coal may come into use at Montour. PPL has investigated and identified a feasible “build out” option from Montour to a point on the D&H South Lines, through which PPL could access CP/CSXT service for the delivery of coal from new Eastern or Western origins. The most direct routing would utilize CP’s haulage rights between Buffalo and Binghamton, though the coal also could be routed via CSXT to the Schenectady area, thence south on the D&H South Lines.

PPL retained consultants in 2013 to explore alternative routings for a new connecting line between Montour and the D&H South Lines. That analysis concluded that it would be feasible to construct a 17-mile connection from Montour to Jerseytown, Pa., thence along an abandoned former railroad right-of-way and parallel to NS’ existing tracks to Bloomsburg, thence over a new or refurbished bridge to the CP line along the Susquehanna River. This potential alternative for Montour access to CSXT and/or CP service for Eastern or Western coal would be foreclosed were NS to acquire the D&H South Lines and consummate the other, related transactions as proposed in the application, PPL told the board.

Henry W. Baumann, Director of Coal Purchasing and Transportation for PPL EnergyPlus, said in attached testimony: “Rail transportation of coal from Western origins – such as the Powder River Basin in Wyoming – to Pennsylvania necessarily would involve service by at least two carriers: BNSF Railway or Union Pacific Railroad from the mines to a Midwestern interchange hub; and one or more Eastern railroads for the delivery leg. Obviously, NS could perform the latter service, as it has lines that reach common interchange points such as Chicago, and it is the railroad that currently has tracks to the Montour Station. However, PPL actively has considered whether an alternative delivery arrangement also might be feasible, as CSXT and the CP Rail System also interchange with the Western railroads in the vicinity of Chicago. CSXT has connections in the Albany/Schenectady/ Selkirk, NY area with the Delaware & Hudson (CP) lines that run to Sunbury, PA, which is about 20 miles from Montour. CP also currently has rights to haulage service over NS from Buffalo to Binghamton, where NS connects with the D&H/CP lines south to Sunbury and north to Schenectady. As recently as 2013, we engaged in discussions with CP concerning its use of the haulage rights to deliver Western coal from a Chicago interchange via Buffalo.”

Early in 2013, PPL engaged L.E. Peabody & Associates, a consulting firm, to perform a study of the feasibility of constructing a connecting track from the Montour delivery loop to the CP/D&H lines. Thomas D. Crowley, an economist and President of L. E. Peabody & Associates, said in his own attached testimony: “Our analysis determined that PPL has a feasible option to access a second rail carrier for service to Montour through construction of a rail line connecting to CP near Bloomsburg, PA. The line would be 17.17 miles in length, and the estimated construction costs equal [figure redacted from public version of the statement].”

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.