USA environmental groups are fighting the export of Powder River and Montana coal, just as they have fought the development of coal-fired power plants in the USA. I cannot predict who will win that debate.

What this means for the US railroads is an interesting question. They have made an enormous capital investment in infrastructure to move coal out of the Powder River Basin and Montana south and east to destinations from Texas to Georgia to Pennsylvania to Minnesota. A relatively small amount comes west. Now, continued return on that huge south-and-east investment is endangered.

Moving enormous amounts of coal to export via West Coast ports would require an even greater investment than was made to move the coal the other way. The RRs cannot be expected to make such investments until the current level of uncertainty about how much the traffic will develop is much reduced.

Back in the 1980s and 1990s, there was considerable investment made for exporting North American coal to the Pacific Rim. Some of the investments turned out to be arguably the worst North American freight transportation investments of the last 50 years. For example, the Province of British Columbia wrote off about C$4 billion on the Tumbler Ridge project. The Port of Los Angeles wrote off about $400 million on the LAXT coal terminal. The UP invested heavily in upgrading the profile and capacity of their LA&SL line. The coal business to justify that investment did not materialize, but fortunately UP got the APL contract and enough container traffic developed to recover their investment. I think they got lucky.

The routing of the coal to Prince Rupert is hardly optimal, but it requires little capital investment. It gets the Powder River Basin and Montana coal a start in the Asian market.

If the Powder River Basin and Montana coal companies are successful in securing Asian customers at prices that are profitable at them, and if governments and environmental lobbies allow sufficient coal port capacity on the West Coast to develop, there will a lot of very challenging strategic planning to do.

And hopefully, the result will be much better than the debacles of the 1980s and 1990s.

Best regards,

Rob L.

Fred Frailey published a blog at Trains.com (http://cs.trains.com/TRCCS/blogs/fred-frailey/archive/2011/01/24/i-am-just-trying-to-help-the-president.aspx) which also suggested that instead of using the historical 2008 routings for TIH, the railroads designate the routings and networks for TIH in 2015. I think this plays well to the HazMat routing systems Oliver Wyman has built for some of the U.S. railroads in that it takes real traffic flows and analyzes routing alternatives and could proactively be used to designated the TIH corridors and thus the routes that would be PTC protected.

Fred estimated that this would shave at least 10,000 miles off the currently projected 73,000 miles that are slated for PTC, which would be big savings.