PPL/Talen asks for rail board to revise rail takeover related to Montour coal plant

PPL EnergyPlus LLC, which is in the process of being re-named Talen Energy Marketing LLC, on June 4 asked the U.S. Surface Transportation Board for a revision in a May 15 board approval of a railroad takeover related to the coal-fired Montour power plant in Pennsylvania.

The board on May 15 approved a Norfolk Southern Railway (NSR) takeover of nearly 283 miles of rail line, in the process partially rejecting a complaint from this now-former unit of PPL Corp. (NYSE: PPL).

Montour and PPL EnergyPlus were turned over to the new Talen Energy (NYSE: TLN) just ahead of Talen Energy’s June 1 IPO.

In the May 15 decision, the board authorized, subject to conditions, the acquisition by NSR of 282.55 miles of rail line in New York and Pennsylvania, owned by the Delaware & Hudson Railway. The Delaware and Hudson Railway is a wholly owned, indirect subsidiary of Canadian Pacific Railway Co. The rail lines subject to NSR’s application, known as the D&H South Lines, consist of about 267.15 route miles of the D&H Freight Main Line between Sunbury/Kase, Pa., and Schenectady, N.Y., and 15.40 miles of the Voorheesville Running Track between Voorheesville Junction and Delanson, N.Y., for a total of 282.55 miles of line.

PPL EnergyPlus had asked the board to put a condition on this approval that would preserve the option in the future to access the alternative CSX Transportation rail system for coal deliveries to Montour. The board did grant a condition, but PPL EnergyPlus said in the June 4 filing that the condition was too narrowly drawn to be usable.

It wrote: “Specifically, and consistent with analogous agency precedent, the pro-competitive condition granted by the Board in favor of PPL in Decision No. 6 should be revised to (1) direct that Applicant Norfolk Southern Railway Company (‘NS;) grant the trackage rights described in the Decision by negotiated agreement with relevant parties, subject to Board intervention in the event that a voluntary agreement cannot be reached; and (2) direct that the trackage rights be granted to a rail carrier designated by PPL, following its construction of the connecting track discussed in the Decision.”

The requested condition would preserve PPL’s pre-transaction option to access line-haul service provided by CSX Transportation (CSXT) for Montour coal traffic via the D&H South Lines. Since D&H service over the lines already had “atrophied” and would cease altogether following NS’ acquisition, direct access to CSXT through trackage or haulage rights represented the most efficient and effective remedial alternative, PPL argued.

In contrast to the standard conditions imposed in such cases, Decision No. 6 states that “contingent upon PPL actually constructing a connection to the D&H South Lines, the Board will grant” trackage rights to preserve PPL’s competitive options. PPL said: “The implication of this language is that upon construction of the new track connecting the Montour Station to the D&H South Lines, PPL will have to return to the Board for some form of order compelling NS to permit another carrier to operate over the Lines in order to serve Montour. This relief is inconsistent with the precedents cited supra, which imposed the obligation to grant procompetitive rights on the applicant carrier(s) when the decision approving the transaction(s) at issue was served, regardless of when in the future they might be exercised.

“PPL submits that the impact of this error is material. Regardless of the magnitude of the burden of presentation or persuasion that PPL might have to bear in order to secure a future Board order, the fact that it may have to submit to a procedure before finally securing relief – and presumably respond again to any opposition that might be advanced by NS or any other party – would set PPL apart from previous beneficiaries of trackage rights conditions imposed under 49 U.S.C. §11324(c) in an adverse fashion. PPL would be forced to expend time and resources as a threshold condition of relief that its identically-situated predecessors only faced as a last resort.

“Consistent with established precedent, the Board should revise the condition imposed in Ordering Paragraph 9 of Decision No. 6 to provide that contingent on PPL’ s construction of the connecting tracks, NS will grant trackage rights to a second carrier to provide competitive service, on terms negotiated in the first instance by PPL, NS and the second carrier. The Board would retain jurisdiction to prescribe such terms if – and only if – the parties are not able to reach agreement within a defined time period.” 

Another point of error with regard to the PPL condition was the board’s apparently exclusive designation of D&H as the carrier to which trackage rights would be awarded, wrote PPL. “As the Board acknowledged in Decision No. 6, PPL’s prospective build-out to the D&H South Lines is part of a ‘long-term expansion strategy’ that will extend well into the future. Once construction of the connecting line is completed, PPL’ s need for service to Montour from a carrier other than NS will continue indefinitely. However, there are no assurances that D&H service through Schenectady or elsewhere will be available. As NS’ own Application in this docket showed, D&H has reduced service generally in the Northeast in recent years, and additional service discontinuances and/or transfers of franchises to NS are planned in connection with NS’ takeover of the D&H South Lines.”

The Montour station is located in Montour County, Pa. It includes two coal-fired steam units with a combined capacity of about 1,550 MW. Montour consumes between 3.0 million 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.

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.

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.