Western US rail shipments fire up coal expectations for 1981

The National Coal Association sees 1981 as the year in which coal can regain its role as the nation's energy king. The association's optimism finds reflection in the expectations of the Burlington Northern and Union Pacific railroads for a combined 20-million-ton rise in shipments of Western coal to customers -- especially power plants -- this year.

The Burlington Northern (BN) and Union Pacific (UP) are not only two of the nation's principal coal-hauling roadS, they also own Western coal reserves totaling more than 26 billion tons.

John Kenefick, UP president, said recently that the road's movement of more than 1 million tons of coal to Long Beach and Los Angeles for export "demonstrated to various Pacific Rim countries that we can respond to their energy needs for moving coal originating from the Western United States."

The UP's export coal movement began with a single 84-car train in April 1980, and total export tonnage was 1.2 million. If loadings continue as expected, 1981 deliveries to the two ports could amount to 3 million tons, it was estimated.

The bulk of export coal handled by the UP has moved to Japan, Taiwan, and South Korea, all countries experimenting with US coal in their paper, cement, and steel industries. Steam coal for utilities in those countries has yet to become a major factor in UP's present export market.

The Union Pacific is "physically and financially able to handle great volumes of export coal, and has demonstrated its willingness to transport larger tonnages by increasing our rail capacity as the need occurs," Mr. Kenefick asserted.

The 14.7-billion-ton reserves of the BN are second in the US only to the tonnage owned by Consolidation Coal Company, a subsidiary of Continental Oil Company. The UP reserves, third largest in the country, top 12 billion tons. The Western coal owned by the roads is of prime economic importance because it is of low sulfur content. This gives it greater acceptability over coal from mines in Eastern states for fueling electric power plants, because Western coal more readily meets clean air standards.

The coal lands of both roads were acquired in the railroad-building years of the 1800s and today are virtually a checker-board pattern with lands owned by the federal government, lands under close US supervision. The Department of Interior is reported to have some plans for leasing of Western government lands for mining in 1982 and 1983, the first leasing probably in Wyoming's Powder River Basin. Such leases, where they adjoin railroad-owned acreage, would facilitate future large-scale mining.

In their dual positions as major coal-hauling roads, and as owners of a large part of America's coal reserves, both the Union Pacific and Burlington Northern have taken a strong interest in what promises to be a huge future market by 1990 and beyond for US coal, especially Western coal, among Pacific Rim countries, including Japan, Taiwan, and South Korea, and the development of the West Coast loading ports that will be necessary to move the coal aboard ship.

The UP, which already is carrying coal to Long Beach, Calif., for export, is currently maintaining direct contact with foreign industrial coal users and, at a recent daylong meeting here, devoted to the question of how to develop Western coal ports, indicated the road's readiness to meet rail requirements.

At a subsequent hearing before an Oregon legislative committee in Salem on trade and economic development, a BN spokesman said that with respect to the Port of Astoria, one of three mentioned as possibilities in Oregon, his road was ready to do whatever was necessary to upgrade facilities, "provided it makes economic sense to do so."

The Pacific market for US coal has been estimated, by the year 2000, to be around 100 million tons a year.

Another Western-based firm with direct interest in development of a Pacific Rim coal market is Northern Energy Resources Inc. (NERCO), of Portland, which is the coal-mining subsidiary of Pacific Power & Light Company here. NERCO operates seven surface coal mines in Montana, Wyoming, Indiana, and Alabama and is the eighth largest coal mine in the nation. NERCO's 1980 tonnage figure was 14,582,690.

Gerard K. DRummond, NERCO president, told a Fossil Energy Symposium in Boston , early in March, that this company "is enthusiastic about coal export prospects." He added that NERCO "is focusing its Eastern (Indiana and Alabama) coal acquisition strategy on coals which will compete favorably" in Western European markets, and also that "as a major Western coal producer, we are looking hard at the coal needs of the Pacific Rim countries." NERCO already has singed one contract for export of coal from a Gulf Coast port and "is negotiating at least two others."

As might be expected, both the BN and UP spend considerable money on upgrading their rail lines and adding up-to-date equipment. Recent examples are installations by both roads of centralized-traffic-control (CTC) systems, one of which -- the BN's Donkey Creek to Guerney route in Wyoming -- was designed to accelerate movement of 110-car unit coal trains in Wyoming's Powder River Basin.

The BN CTC system in the Donkey Creek to Guernsey area is often under the direction of a woman supervisor, Terry M. Taffe, who controls train movements there out of her Alliance, Neb., post.

The UP's latest CTC installation was a 225-mile system from North Platte to Cheyenne, Wyo., to facilitate movement of upwards of 70 trains a day.

Not too long ago, the BN completed and opened to traffic a 116-mile stretch of all-new Wyoming trackage, at a $1 million-a-mile cost, between Orrin and Gillette, to speed up coal movement from the Powder River Basin to utilities in the Southwest and Louisiana. That was the longest stretch of new track laid down by any railroad in the US in 50 years.

Some of the coal hauling business handled by each railroad comes from reserves owned by the roads and mined under contract by various mining companies. In 1980, for instance, production from UP-owned mines reached 13.2 million tons, an increase over 1979 of 2.7 million tons, with top production in the mid-1980s expected to exceed 20 million tons.

In response to a question at a security analysts' meeting in April 1980, James C. Wilson, president of Rocky Mountain Energy Company, the UP's mining subsidiary, foresaw annual coal tonnage as high as 30 million tons but added that "timing of that is pretty much dictated by the electric power industry breaking through the many regulations and frustrations that it faces in moving toward coal or converting from the present use of oil."

Coal tonnage mined from BN reserves was somewhat lower in 1980, at 11.1 million tons, than in 1979, when output was 12.6 million tons, and 1981 production should be close to 1980 levels.

One of the major lessees of BN coal is Peabody Coal Company, which recently sublet -- with BN approval -- some of its acreage for mining by another producer. In all, some 43 leases have been signed on BN lands by 22 mining firms.