Coming Soon: Tongue River Railroad Draft Environmental Impact Statement

I know you have waited with bated breath for the issuance of the draft Environmental Impact Statement (DEIS) for the proposed Tongue River Railroad (TRR). Vicki Rutson, the Director of the Office of Environmental Analysis from the Surface Transportation Board said we can expect to see a release of the DEIS at the end of April (yes, this April) and that the dates and locations of the public hearings will be announced at that time which I imagine will be held in southeastern Montana sometime in later May. You should expect to see a extensive document based on their proposed scope of study.

You may remember that the public scoping hearings for this project were held in November of 2012. Much has changed since then, for example, Arch Coal’s stock in November of 2012 was hovering around $6.60/share and this morning when I checked, it was 89 cents/share. If Arch Coal’s (ACI) stock price stays below one dollar for longer than 30 days the New York Stock Exchange will initiate the delisting process. Also, the Montana Department of Environmental Quality (DEQ) just sent them yet another Deficiency Notice on their Otter Creek Permit Application. The new deficiency notice is 65-pages long. The first one they received in 2013 from DEQ was 42 pages.

One thing that I’m very interested in is ICF International’s (the third party contractor hired to complete the environmental analysis on the TRR) analysis of TRRC’s supposed market for Otter Creek coal. The company, which has zero employees, has only made vague statements about their market. They said they plan to sell to domestic electric utilities, specifically those in Montana and possibly the Midwest which “represent the prime demand potential.” Really? Montana? I’m not sure there is a boiler in the state that could burn Otter Creek coal without significant upgrades or mixing it with a lower sodium coal. The other market they identify is Asia but as we all know coal demand in China is expected to peak this year or next and they have no export capacity on the West coast.

TRRC admits they don’t know where they are going to sell the coal. As stated in the final scope of study, “the coal market TRRC asserts, is so volatile that more accurate predictions are impossible.” (Page 6, Final Scope of Study, STB)

To summarize: The export window is closing fast. Arch Coal has no permit to construct the Otter Creek mine and no domestic market for the coal. Even if they did have a permit they don’t have the resources to construct a greenfield mine. At the pace they are going, even if they did have money, they’d be lucky to get it operational by 2019. Oh, and they just withdrew an application for a federal coal lease of around 1 billion tons in Wyoming near an existing mine where they have all the infrastructure they need citing “weak market conditions.”  It will cost, at minimum, $400 million dollars to build the Tongue River Railroad from Otter Creek to Colstrip.

Someone remind me why are we still talking about this project? As John Oliver says, how is this still a thing?

I think that is appropriate question to ask the STB when they visit us in May to hear what we think.