Heavy Traffic Still Ahead February 2014 Report prepared for WORC Western Organization of Resource Councils Heavy Traffic Still Ahead WORC Western Organization of Resource Councils Heavy Traffic Still Ahead Prepared For: Western Organization of Resource Councils 220 South 27th Street Billings, MT 59101 (406) 252-9672 Prepared By: Terry C. Whiteside Whiteside & Associates 3203 Third Avenue North, Suite 301 Billings, Montana 59101 (406) 245-5132 Gerald W. Fauth III G. W. Fauth & Associates, Inc. 116 S. Royal Street Alexandria, VA 22314 (703) 549-6161 Copyright © 2014 Table of Contents Introduction 1 Executive Summary 4 Methodology and Purpose 6 Overview 7 Updated Potential Annual PRB to PNW Export Coal Tons 10 Recent Related Developments 11 Tongue River Railroad 11 Cloud Peak & Cherry Point Agreement 11 Ambre/Cloud Peak Decker Litigation 11 Cloud Peak’s Youngs Creek & Crow Tribe Agreements 12 Expansion & Proposed Sale of Ridley Terminals 12 BNSF’s Expansion of Bakken Oil Capacity 12 Vancouver Washington Oil Terminal 13 Lac-Mégantic Train Derailment 13 Casselton, North Dakota Explosive Derailment 13 Related Capital Improvement Projects 15 BNSF Improvement Projects 15 BNSF / WSDOT Agreement 15 Other Related Mitigation Projects 18 Proponents 19 PRB to PNW Export Coal Transportation Market 21 Train Sizes & Trains Per Day 23 Current and Proposed PNW Export Coal Terminals 25 Westshore 25 Neptune 27 Ridley 27 Fraser Surrey 28 Cherry Point 29 Longview 31 Morrow 33 County Coal Ltd. Terminals 33 Potential Loaded and Empty PRB to PNW Export Coal Trains 35 2013 PRB to PNW Railroad Export Coal Movements 36 Potential 2018 PRB to PNW Railroad Export Coal Movements 37 Potential 2023 PRB to PNW Railroad Export Coal Movements 38 BNSF’s Bakken Oil Movements to PNW 39 Railroad Routes Impacted By Potential PRB to PNW Export Coal Movements 42 BNSF Routing Options 43 BNSF/MRL Route Via Helena, Montana 43 BNSF Route Via Great Falls, Montana 43 BNSF’s Route Via Stevens Pass / Cascade Tunnel 44 BNSF’s Route Via Columbia River Gorge 44 BNSF’s Route Via Stampede Pass & Tunnel 44 Washington State Rail Plan 45 Major Rail Traffic Choke Points & Bottlenecks 47 Huntley (Jones Jct.) to Mossmain (BNSF/MRL — 24.8 Miles) (Billings) 47 Sandpoint to Spokane (BNSF — 78.3 Miles) 48 Other Major Rail Congestion Areas 49 Spokane to Pasco (BNSF —149.4 miles) 49 BNSF’s Directional Routing over the “Iron Triangle” 49 Pasco to Vancouver (Columbia River Gorge) (BNSF — 219.8 Miles) 50 Spokane to Everett (Cascade Tunnel) (BNSF — 301.1 Miles) 51 Mossmain to Sandpoint (MRL — 564.2 Miles) 52 Mossmain to Shelby (BNSF — 322.9 Miles) 52 Shelby to Sandpoint (Hi-Line) (BNSF — 337.9 Miles) 53 Impact on Existing Rail Traffic 54 Import and Export PNW Intermodal Container Traffic 54 PNW Export Grain Traffic 55 PNW Passenger & Commuter Traffic 56 Regulatory Review 57 Conclusions 59 Endnotes 60 List of Figures Figure 1 7 Summary of Potential PRB to PNW Export Coal Movements Figure 2 8 Summary of Potential PRB to PNW Export Coal Trains Per Day Figure 3 10 Potential Annual PRB to PNW Export Coal Tons Figure 4 14 Casselton, North Dakota Oil Train Derailment Figure 5 17 Publicly-Funded Rail Projects in Washington Figure 6 18 Other Related Mitigation Projects in Washington, Montana and Wyoming Figure 7 22 UP Slide Showing Current/Potential Export Coal Flows Figure 8 23 Trains Per Day Based on 125-Car and 150-Car Trains at Various Tonnage Levels Figure 9 26 Potential PRB Coal Tons and Trains to Westshore Figure 10 28 Potential PRB Coal Tons and Trains to Ridley Figure 11 28 Potential PRB Coal Tons and Trains to Frasier Surrey Figure 12 30 Map of Proposed Cherry Point Coal Terminal and Rail Lines Figure 13 31 Potential PRB Coal Tons and Trains to Cherry Point Figure 14 32 Potential PRB Coal Tons and Trains to Longview Figure 15 32 Map of Proposed Longview Coal Terminal Figure 16 33 Potential PRB Coal Tons and Trains to Morrow Figure 17 34 Potential PRB Coal Tons and Trains to County Coal, BC Figure 18 34 Potential PRB Coal Tons and Trains to County Coal, WA Figure 19 35 Potential PRB to PNW Export Coal Trains Per Day Moving in 125-Car and 150-Car Unit Trains Figure 20 36 Estimated 2013 PRB to PNW Railroad Export Coal Movements Figure 21 37 Potential 2018 PRB to PNW Railroad Export Coal Movements Figure 22 38 Potential 2023 PRB to PNW Railroad Export Coal Movements Figure 23 39 North Dakota Crude Oil Production Figure 24 41 Potential Bakken Crude Oil Railroad Movements to the PNW Figure 25 42 BNSF’s PRB to PNW Routes Figure 26 50 Illustration of BNSF’s Directional Routing Over The “Iron Triangle” Figure 27 55 Comparison of BNSF Intermodal Service Goal Hours For Movements To Chicago, IL Figure 28 55 Railroad Shipments of Farm Products - 2010 to PNW Destinations Figure 29 58 Comparison of Potential PRB to PNW Export Coal Volumes With Projected Coal Volumes With DM&E List of Appendices Appendix 1 63 Responses from MRL and UP to WORC’s Request for Information Appendix 2 66 Railroad Line Segments Impacted by Bakken Crude Oil Shipments to PNW Terminals Appendix 3 67 Railroad Line Segments Impacted by Railroad PRB to PNW Export Coal Movements Introduction The Western Organization of Resource Councils (WORC) is a regional network of grassroots community organizations with 10,000 members and 38 local chapters. WORC member organizations are: Dakota Rural Action; the Dakota Resource Council; the Northern Plains Resource Council; Oregon Rural Action; the Powder River Basin Resource Council; and the Western Colorado Congress. WORC’s mission is to advance the vision of a democratic, sustainable, and just society through community action. WORC is committed to building sustainable environmental and economic communities that balance economic growth with the health of people and stewardship of their land, water, and air resources. WORC is concerned about the potential impacts associated with the recent and projected significant increases in U.S. coal exports and related railroad shipments. In July, 2012, WORC published “Heavy Traffic Ahead - Rail Impacts of Powder River Basin Coal to Asia By Way of Pacific Northwest Terminals” (HTA 2012), which addressed these issues.1 Heavy Traffic Ahead highlighted the fact that major energy companies, such as Ambre Energy (Ambre), Arch Coal (Arch), Cloud Peak Energy (Cloud Peak) and Peabody Energy (Peabody), and major transportation companies, such as Berkshire Hathaway’s subsidiary BNSF Railway, Inc. (BNSF), Union Pacific Corporation (UP), SSA Marine and others, are actively engaged in projects to move significant volumes of coal from current and proposed mines in the Powder River Basin (PRB) in Montana and Wyoming to existing and proposed Pacific Northwest (PNW) export coal terminals. These major energy and transportation companies have spent hundreds of millions of dollars and plan to spend hundreds of millions more on a variety of projects to expand the U.S. coal exports market in order to compensate for recent and projected declines in domestic coal markets and to take advantage of the growing Asian coal market. These companies have encouraged and worked directly with Federal and State authorities to direct and spend hundreds of millions more of public money to improve related privately-owned transportation infrastructure. The State of Washington, for example, plans to spend over $800 million (mostly from Federal grants), on railroad infrastructure improvements, most of which will be directed to improvements of BNSF’s existing infrastructure in Washington to improve passenger rail service, but which will also facilitate potential export coal rail movements.2 Currently, three PNW export terminals, all in British Columbia (BC), handle significant volumes of coal: Westshore Terminals (Westshore) near Roberts Bank, BC, approximately 20 miles south of Vancouver, BC; Neptune Terminal (Neptune) near North Vancouver, BC; and Ridley Terminals (Ridley) in northern BC near Prince Rupert, BC. Historically, these Canadian export coal terminals have handled primarily Canadian metallurgical coal. However, these Canadian export terminals are proposing to significantly expand their coal export capacities, in part to handle growing perceived demand for PRB export steam coal. These existing Canadian export coal terminals are described in more detail below. In reviewing this report, it should be noted that export coal tons are often expressed in metric “tonnes” in Canada, whereas in the U.S. railroad coal volume is most often expressed in short tons (1 metric tonne equals 2,204.62 lbs – 1 ton, or short ton, equals 2,000 lbs): Heavy Traffic Still Ahead February 2014 1  Westshore — Westshore,Canada’s largest export coal terminal, shipped a re- cord 27.3 million metric tonnes or 30 million short tons in 2011. It recently spent over $100 million in equipment upgrades, which will expand its capac- ity to 33 million tonnes (36 million tons). U.S. export coal shipments from Westshore reached a record 8.2 million tonnes (9 million tons) in 2011.3  Neptune — Neptune recently submitted a project permit application to Port Metro Vancouver to expand the terminal’s coal handling capacity from ap- proximately 8.5 to 18 million tonnes (9.4 to 19.8 million tons) per year.4  Ridley — Ridley has an annual shipping capacity of 12 million tonnes (13.2 million tons), but plans are currently underway to increase the annual capac- ity to 25 million tonnes (27.6 million tons) by the end of 2014.5 Arch Coal currently has a five-year agreement which gives Arch a throughput capacity at the terminal up to 2.5 million tonnes (2.8 million tons) of coal for 2012 through 2015.6 Despite the significant planned increase in the annual throughput capacity (over 30 million tons) associated with the three existing Canadian export coal terminals, two new massive U.S. export coal terminals have been proposed and are currently being considered in the State of Washington to meet anticipated large PRB export coal tonnage demands and goals at significantly reduced railroad transportation costs. In addition to these massive new U.S. export coal terminals in Washington, the permitting process is well under way for a coal transloading facility near Boardman, OR.  Cherry Point — The Gateway Pacific Terminal project near Bellingham, WA (Cherry Point) would have a capacity of 48 million tonnes (52.9 million tons).7  Longview — The Millennium Bulk Terminals (MBT) project near Longview, WA (Longview) would have a capacity of 44 million tonnes (48.5 million tons).8  Morrow — The Morrow Pacific project, a planned export coal transloading facility at Port of Morrow near Boardman, OR, would handle 8 million tonnes (8.8 million tons) per year. The proposed Cherry Point and Longview export coal terminals would be two of the largest export coal terminals in North America and would have a combined capacity exceeding 100 million tons per year. The three U.S. terminals -- Cherry Point, Longview and Morrow -- represent a total planned capacity of approximately 110 million tons per year. As a result, the potential annual PRB coal export volumes via PNW terminals are enormous. In the past year, other export coal plans have been changed, revised, delayed, moved forward and/or solidified and new proposals and plans have been announced and put forward. The plans for two proposed terminals in Oregon, St. Helens and Coos Bay, and one in Washington, Gray’s Harbor, have been scrapped or set aside for the time being, but plans for three new PNW export coal terminals have emerged. The recently announced PNW export coal terminal plans are: Heavy Traffic Still Ahead February 2014 2