The Tongue River Railroad Co. Inc. (TRRC) told the U.S. Surface Transportation Board in a Dec. 31 filing that opponents of its coal-hauling rail project in Montana are wrong to seek dismissal of its 2012 application for a revamped version of the project, and that the board should instead grant a TRRC request to put this proceeding on hold.
The railroad, co-owned by the BNSF Railway and Arch Coal (NYSE: ACI), was responding to a Dec. 11 motion to dismiss submitted by the Northern Plains Resource Council and Wally McRae/Clint McRae d/b/a Rocker Six Cattle Co. (collectively referred to by the railroad as “NPRC”).
TRRC wants to construct an approximately 42 mile long rail line in southeastern Montana that would be operated by the BNSF Railway. It would originate at Arch Coal’s planned Otter Creek surface mine in the Powder River Basin and at another possible coal mine site, and terminate at a tie-in with the current BNSF system at Colstrip, Montana.
The railroad said NPRC’s Dec. 11 motion was filed in apparent reaction to TRRC’s Nov. 25 petition to hold this proceeding in abeyance pending the issuance of a judicially-affirmed mine permit authorizing development of the Otter Creek coal mine, the source of the traffic that the TRRC rail line would initially serve. TRRC explained in its Nov. 25 petition that updated and more protracted timelines for the development of the mine and the rail line and near-term market weakness now allow the opportunity for sequential permitting of each project, obviating any risk that the coal mine that the TRRC line would serve might not be permitted by the Montana Department of Environmental Quality, where the mine permitting process has been delayed.
“NPRC has twisted this straightforward and logical request into something else entirely,” said the railroad. “NPRC accuses TRRC of somehow misleading the Board and seeks the extraordinary and legally groundless remedy of dismissing with prejudice TRRC’s pending construction application. As discussed below, NPRC’s allegations and arguments are far afield. The Board should deny NPRC’s groundless Motion.”
Among other things, the railroad said that NPRC incorrectly claims that TRRC’s recognition of “near-term market weakness” in its petition is an admission that NPRC is correct that there is no market for Otter Creek coal. “However, such an acknowledgement is not a concession that there will never be a market for the Otter Creek coal that would support the construction of the TRRC rail line,” it added. “Indeed, TRRC has consistently maintained that its rail line project has a time horizon longer than the current coal market, which it has acknowledged is weak. In its May 2015 Supplemental Reply, TRRC explained that ‘[w]hile the coal market has been volatile and struggling in recent years – making it difficult to predict what the market will be when the Otter Creek mine will begin producing coal – TRRC’s recent discovery and the Supplemental Verified Statement of Mr. Schwartz confirm that a market will in all likelihood exist for Otter Creek coal in several years when the mine may begin producing coal and the TRR is constructed.”
That is a reference to Seth Schwartz of consulting firm Energy Ventures Analysis, who has provided testimony in support of the railroad project.
The railroad added: “Indeed, the extensive record in this proceeding demonstrates that there is likely to be a market at that time. For example, in May 2015, Seth Schwartz, TRRC’s expert, challenged the conclusion of NPRC and its expert ‘that there is no market demand for Otter Creek coal by citing reports of recent declines in production, short-term energy forecasts, and more gradual projected rates of longterm growth in PRB demand in more recent long-term forecasts than in older forecasts.’ As Mr. Schwartz explained, ‘[n]one of these are evidence that there will be declining long-term demand for PRB coal and, correspondingly, no market for Otter Creek (Tongue River) coal.'”