CASPER, Wyo. (AP) — Congested rail lines have slowed shipments of Powder River Basin coal from Wyoming and Montana during the first quarter of 2014, dragging down the profit margins of several major companies that mine there.
The shipping problems are expected to continue into the latter half of this year as utilities clamor to replace the coal stockpiles burned off during one of the coldest winters in recent memory, especially in populous, power hungry states in the East and Midwest.
Coal inventories in February were down 32 percent compared to the previous year and spot prices are up, according to the U.S. Energy Information Administration.
The congestion stems mainly from more oil being shipped via the rails and a backlog of traffic caused by weather delays this past winter, industry analysts say.
The problems are particularly acute for mines along the Burlington Northern Santa Fe's northern route out of the Powder River Basin, and increased rail shipments for the Bakken oil boom in North Dakota and Montana also added to traffic.
The rail constraints cost Arch Coal 4 million to 5 million tons in coal shipments during the fourth quarter of 2013 and first quarter of 2014, John Eaves, the CEO of the St. Louis-based company, told analysts in a conference call reporting the company's earnings.
Cloud Peak Energy shipped 1.2 million tons during the first quarter, compared to 1.4 million last year, due in part to congested rail service, company officials said.
They noted that mines in the northern part of the basin, like the Spring Mine in Montana, faced more problems while the Antelope Mine in the southern half of the basin in Wyoming saw shipments on the quarter increase.
BNSF spokesman Matthew Jones told the Casper Star-Tribune (http://bit.ly/1lPVfSP) that the railroad is working to alleviate the congestion by adding extra crews and equipment and investing $900 million in improvements along its northern corridor.
Still, it will likely be a while before rail service constraints are lessened, Ted O'Brien, president of Doyle Trading Consultants, an industry research firm, said.
"It probably won't be until the end of the year before systems are running at what we think is a normalized level," O'Brien said.
Information from: Casper (Wyo.) Star-Tribune, http://www.trib.com