NCTA Issue 2, 2010 by National Coal Transportation Association

ISSUE 2 | 2010

Featured Member:

Ameren Energy Leading the Way to a Secure Energy Future

Spring 2011 Back to the Broadmoor

New

Feature:

AAR Interchange Rules

Looking to lower your overall operating costs?

Is the big decision to Repair or Replace?

Do you manage a fleet of coal or aggregate hauling cars that are past due for preventive maintenance on their door operating systems? Do you have cars that are operating sporadically or not at all? Are you tired of costly spill cleanups due to vandalism or some other inadvertent operation of your doors? If so, you should consider replacing your door operating valves with new state-of-the-art Lexair Second Generation Railcar Valves. From an added benefits and features standpoint, it is less expensive and more cost effective to replace valves on older cars with our newer, improved design. Changing to these new valves with all their great features helps assure correct and proper operation of your cars. This action will assist you in lowering your overall costs and help you keep your “cost-per-mile” of operation as low as possible.

Second Generation Valve Features:

• Main valve element is based on our rugged “sliding shoe” construction – the same trouble-free design that has been used in our railcar valves for over two decades. • A sequenced mechanical lock maintains the valve in the “door close” position regardless of outside forces or vibration. • The locking feature is released only when an electrical or manual signal to shift has been received. • A visual indicator is operated via the lock mechanism that clearly shows whether the valve is in the “door close” position with the valve element locked in place or if the valve is in the unlocked or “door open” position. • Because they are mechanically locked in the “door close” position, the valves may be mounted in any position or orientation - the valve element does not have to be perpendicular to the rails. • The units can easily be modified so that they can be linked to ECP Brake Systems in the future for communication of valve position status. • The modular design allows the main valve unit to be removed/replaced in minutes without disturbing the electrical connection or plumbing when repair due to age or service conditions becomes necessary. • Self closing solenoid cover/junction box can be locked to prevent unauthorized access to manual overrides. • Our patented “Safety Check” technology (U.S. Patents 7,093,455 and 7,328,661) is available as a “no-charge” option. • Innovative lock/indicator features latest Lexair, Inc. technology (Patent Pending).

Typical Before Installation Photos

Typical After Installation Photos

Website: www.lexairinc.com E-mail: jjennings@lexairinc.com Ph: 859-255-5001 Fax: 859-255-6656

Contents

ISSUE 2 | 2010

Trends in Energy Policy

EPA’s War on Coal

34 China: Energy Giant

PUBLISHED BY: National Coal Transportation Association 4 W. Meadow Lark Lane Suite 100 Littleton, CO 80127-5718 Phone: 303-979-2798 Fax: 303-973-1848 www.nationalcoaltransportation.org Editor: Pat Scherzinger Phone: 303-993-7172 scherzinger@ nationalcoaltransportation.org

22 FEATURES

DEPARTMENTS

Meet Your Board: Kent Smith

Message from the NCTA President – Bob Neff

Member Profile: Ameren Energy

The Emergence of China as an Energy Giant

Message from the NCTA Executive Director – Tom Canter

Tres Amigas Electricity Superstation

NCTA Membership Benefits

NCTA Welcomes New Members

Trends in Energy Policy: A Recipe for Disaster

NCTA Committee Updates

2010 Field Manual of the AAR Interchange Rules

Calendar of Events

The EPA’s Three Front War on Coal

Reflections: Casey Kaptur

42 Statistics 52

Members Sound Off

View from the Caboose

Production By: Suckerpunch Creative Inc. info@suckerpunch.ca www.suckerpunch.ca

CONFERENCES

Membership List

Index to Advertisers

Cover Photo Courtesy: Pat Scherzinger

NCTA Spring General Conference Recap

San Antonio, Texas, April 11-14, 2010

2010 O&M Conference Wrap-up

Coeur d’Alene, Idaho, June 14-16, 2010

©2010 NCTA. All rights reserved. The contents of this publication may not be reproduced in whole or part, without the prior written consent of NCTA. The opinions expressed by the authors of the articles contained in Coal Transporter are those of the respective authors and do not necessarily represent the opinion of the NCTA or its member companies.

COAL TRANSPORTER | 1

President’s Report / Bob Neff

President’s Report A Message from NCTA’s Outgoing President, Bob Neff.

The NCTA Role in an UnCAIRing World

am amazed by the constant barrage of new challenges that confront coal production, coal transportation, and coal generation. On top of the EPA Greenhouse Gas endangerment finding, carbon cap and trade legislation (and the latest subset- utility only carbon legislation), proposed EPA rules on regulating coal ash as a hazardous waste, challenges to BLM coal reserve leasing process by the WildEarth Society, EPA delays in granting wastewater discharge permits in the east, renewable portfolio mandates requiring higher cost electricity, the latest challenge is the EPA’s proposed replacement to the 2005 Clean Air Interstate Rule (CAIR), the 1,361 page Transport Rule. The Transport Rule tries to address the flaws in the CAIR rule which caused it to be struck down by the U.S. Court of Appeals. The rule requires 32 states to reduce power plant emissions, and will likely result in a reduction in coal generation. All of these issues are lengthy and complex. Just reading and understanding the details surrounding any one of these subjects is a daunting task. Trying to predict

2 | COAL TRANSPORTER

the outcome of proposed legislation, agency rules, and court rulings is very difficult. To understand the implications and interactions on markets of the likely outcome of all of the initiatives is almost impossible. What can the NCTA do in the face of an onslaught of new regulations? The NCTA mission is to provide education and facilitate the resolution of coal transportation issues.

inter-industry cooperation to solve real world problems faced by coal producers, transporters, and coal consumers. The Operations & Maintenance committee held their annual meeting in June in Coeur d’Alene, Idaho, the eastern Logistics and Planning Committee met in Charleston, while the Western Logistics and Planning Committee met in Deadwood, South Dakota in July. All of these

The NCTA mission is to provide education and facilitate the resolution of coal transportation issues. To accomplish that, our conferences strive to provide the insight into issues facing the coal industry and their effect on coal transportation. Our 36th Annual Business Meeting in Denver on September 13, 14 and 15th once again provided a forum for education and discussion of the many important topics currently in the forefront of our industries. Through the work of our subcommittees, the NCTA will continue to facilitate

NCTA conferences provided opportunities to learn from a variety of speakers as well as fellow attendees. As NCTA moves forward through changing times, the contributions of its members are what keep the organization thriving and moving in new directions. Thanks to our members and everyone who participates on committees or contributes in other ways to further the NCTA mission. s

Miner draft gears provide million-mile protection. Long-Haul Durability Whether it’s a short run from the mine to the plant, or they’re coming cross-country from the Powder River Basin, coal hoppers are put through punishing service day in and day out. Utilizing the industry-proven friction clutch design, combined with durable and resilient spring packages as well as sturdy cast alloy steel housings, our draft gears are built to provide years of trouble-free protection – keeping your cars in service.

Long-Haul Dependability Miner draft gears have consistently demonstrated that their superior capacity actually increases over time, even in the most demanding unit-train service applications. In fact, our draft gears are known to perform as good as or better after prolonged use. Tests have shown Miner draft gears to provide double-digit increases in capacity after 1,000,000 miles of service.

Long-Haul Security As a pioneer and industry leader in draft gear design, Miner has over 100 years experience and over 1,000,000 units currently in service. When you put our draft gears on your coal cars, you can rest assured they will be there for the long haul.

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Perfecting Railcar Performance

Executive Director’s Message / Tom Canter

“It’s the Economy, Stupid” A Message from NCTA’s Executive Director, Tom Canter.

y apologies to James Carville, but the above capsule statement was the theme for the NCTA Fall Conference. Many of the speakers addressed the relationship between the cost of energy and its effect on a viable economy. Federal and state policy and legislative initiatives have direct consequences on our standard of living. In a growing economy, the “economic trickle down” theory may have skeptics, but there is little argument against the fact that a contracting economy will “trickle down” and devastate the standard of living of the poor and the middle class. Hypocritically, the same politicians that pontificate regarding the need to have all “safety nets” extend beyond the horizon want to “necessarily have electricity rates skyrocket”. Under the rubric of “climate change”, Congress has been working on legislation that is clearly the largest tax increase on the middle class ever imposed in the United States. As a consequence of the mid-term elections, it is more likely that this cost imposition on the middle class will now be imposed by regulation rather than legislation. In a recent study commissioned by the American Coalition for Clean Coal Electricity, it is noted that 58 million households earning less than $50,000 per year already expend 18% of their after-tax household income on energy. It is not good to double energy costs to over one-third of your take-home pay while the cost of food, housing, and health care also increase because of rising energy costs. Poor Grandma Olson. The good news is that electricity costs have risen much less than natural gas and gasoline pricing over the last decade. (Thanks to coal and nuclear generation). Green jobs, where are they? It may be too early to pronounce judgment on the taxpayer and ratepayer subsidies for green jobs through renewable energy mandates in the U.S. However, there are now data for Germany and Spain. According to a German think tank (with a name too long for this short article), the initial subsidy in Germany equated to $240,000 per job created. In 2010, it is now evident that the offsetting factors of jobs lost to higher energy costs coupled with the loss of green jobs to Asian countries that can make solar

4 | COAL TRANSPORTER

panels and wind generators cheaper than in Germany, have negated new job creation. The study from Juan Carlos University in Madrid concludes the state subsidies in Spain created a “bubble” of investment in renewables that is now collapsing. The financial instability and debt in Spain has cancelled or reduced the government subsidies. The Spanish renewable industry is predicted to lose 40,000 jobs in 2010 while unemployment is already over 20%. However, there is hope for Spain, because the U.S. DOE has awarded $295 million of Stimulus money to Spanish energy giant Iberdrola to produce renewable energy equipment. Just when you thought “green jobs” couldn’t be shipped overseas! The nations that currently have real GDP growth and cash reserves are creating wealth in the traditional way. They convert natural resources into higher value products that are demanded by the marketplace and the standard of living of their populace is increased. They do not flagellate themselves over their use of low cost energy, and they are willing to use renewable energy sources only when it is rational. In a surprise, China is starting to offer the latest environmental technology to North America. This was not supposed to happen, but a country with economic growth and capital reserves will eventually be innovative. Frankly, the BRIC countries recognize that a nation does not raise its standard of living by redistributing ever decreasing financial assets amongst the population or by being a debtor. Closing on a more cheerful note, North America has reason to be optimistic. The coal miners are the world’s most productive, the electric utility grid reliability is a marvel, and the coal transportation system moves coal in an efficient manner by rail, water, and truck. We all owe a debt to the workers in our industries that perform the tough and challenging jobs to provide us electricity for our needs and our leisure. Now, if we can just keep the folks in Washington, DC (that have a woeful lack of technical experience and understanding) from legislating changes in the laws of physics, we will be just fine. I trust that my next message will be more cheerful. Have a safe day providing energy to the good people of North America. s

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aggart Global designs, builds and operates state-of-the-art coal preparation plants and material handling systems for clients worldwide in the coal production, power generation, steel making and material handling sectors. We offer ﬂexible contract services to meet the unique needs of your project, and our construction, electrical and international procurement divisions bring specialized expertise to deliver a project that’s on time, within budget and beyond your expectations. Whether you’re adding a new facility or system, modifying an existing plant or seeking to outsource operations, take advantage of Taggart’s innovative and proven solutions to improve performance, increase efﬁciencies and accelerate return on investment.

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North America I South America I Africa I Asia I Australia

Meet Your Board / Kent Smith

MEET YOUR BOARD Kent Smith By Kate Tanquary

B Kent Smith

Vice President of Commercial Operations Arch Coal Sales, Inc.

What stands out personally for me is all of the great people I’ve met in the industry through the NCTA. - Kent Smith

6 | COAL TRANSPORTER

oard member Kent Smith is the Vice President of Commercial Operations for Arch Coal, Inc. As VP of Commercial Ops., Kent functions as a liaison between Arch Coal’s sales department and their mines, of which there are twenty-one across six states. He oversees logistics and works to optimize production in the marketplace. Although currently residing near Arch Coal’s headquarters in St. Louis, Missouri, Kent spent most of his life in West Virginia. He broke into the industry while still in college studying mathematics and took night classes in order to work while he finished his degree. Kent sees a deeper connection between his education and his career, beyond the utility of the field. “If you think about math,” he says, “it’s about working out problems. That’s what I’ve done most of my life.” Kent’s first position was as a clerk for Valley Camp Coal Company in 1978, but he gradually worked his way up the ranks to become Director of Operations Support. For most his early career, Kent worked closely with the mines, which gave him valuable insight that now helps him mediate between the two worlds of sales and mining. “Some of the best people I’ve met in my life work at coal mine,” he says. “I think my experience helps me better understand their issues. Communication is much better because I’ve already gained their trust and understand the terminology used.” Kent appreciates the “challenge of doing something different every day.” Even while managing quality issues and navigating unexpected road bumps, Kent enjoys

the camaraderie of his field. If asked about the best parts of his job, Kent replies: “A lot of really, really good people. I’ve worked for great people and worked with great people.” Kent has worked with the NCTA for five years and has been a member of the NCTA board for two years. “It’s a great forum for open communication between different parts of the energy transportation system,” Kent says. After many conferences and experiences with NCTA’s Kent believes the NCTA’s best asset is its members. “What stands out personally for me is all of the great people I’ve met in the industry through the NCTA.” While the economy is still recovering from its recession, Kent is hard at work examining ways to make the most out of lower volumes of coal, making Arch’s operations run smoother and more efficiently. Looking towards the future, Kent is concerned with helping to find the best value in the current down market. In his spare time, Kent coaches youth sports in basketball, volleyball and softball. He also enjoys biking, jogging and reading. Kent has been married to his wife Susan for 33 years and they have two sons, a daughter and a granddaughter. One of Kent’s favorite NCTA conference locations so far was the Broadmoor in Colorado Springs, Colorado. s

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lower operating and maintenance costs. No one builds more coal cars than FreightCar America. That should not come as a surprise – we’ve been at it for more than a century! In addition to coal cars, FreightCar America designs and builds bulk commodity cars, flat cars, intermodal cars, coil steel cars and mill gondolas. Contact us to find out more about the purchase or lease of the best railcars manufactured by the industry’s most innovative railcar builder.

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NCTA Membership Profile / Ameren Corporation

An Ameren coal train at the Labadie plant

Ameren

Leading the Way to a Secure Energy Future

By Susan Gallagher, Director Corporate Communications, Ameren

oal is the lifeblood of Ameren Corporation–parent of the largest electric utility company in Missouri and the second largest electric company in Illinois. Significant investments made in Ameren’s coal-fired generating plants have not only resulted in greatly reduced emissions, but additional investments of tens of millions of dollars for coal-handling facilities improvements combine to ensure fuel flexibility in coal sourcing and competitive access for transportation. These investments provide alternatives and sourcing independence for coal---which fires almost a dozen Ameren generating plants supplying power to millions of households and businesses.

8 | COAL TRANSPORTER

The numbers tell the story: In 2009, 83 percent of the 104 million kilowatt-hours of electricity Ameren companies sold came from coal-fired generation. Ameren is the 5th largest purchaser of coal in the United States and the nation’s Number One buyer of Powder River Basin (PRB) coal. Ameren is among the nation’s largest investor-owned electric and gas utilities, with about $24 billion in assets. Created by the year-end 1997 merger of St. Louis-based Union Electric Company and Central Illinois Public Service Company (based in Springfield, Ill.), the company grew in 2003 with the acquisition of Central Illinois Light Company in Peoria and again in 2004 with the acquisition of Illinois Power Company, based in Decatur.

Ameren companies now provide energy services to 2.4 million electric and nearly one million natural gas customers throughout a 64,000-square-mile territory. Ameren now ranks 14th in megawatt hour sales in the U.S. and 19th in total sales among all Fortune 500 utility companies.

10,000 Megawatts of Coal-Fired Capacity Of Ameren’s total generating capacity of 16,800 megawatts, approximately 10,000 megawatts of capacity is coal-fired --- 5,400 megawatts at four plants in Missouri, and another 4,800 megawatts at seven plants in Illinois. The remaining generation comes from a single-unit nuclear plant in Missouri, natural gas-fired combustion turbines and three hydroelectric plants. Ameren prides itself on a long, successful tradition of cost containment, low rates and highly rated customer service, as well as nine decades of uninterrupted cash dividend payments to stockholders. The company has also gained national recognition for its efforts to develop and employ technologies that improve air quality at its coal plants, while meeting its region’s rising demand for energy. “We are a company with a meaningful voice in shaping the energy future for our region,” says Thomas R. Voss, Ameren’s chairman, president and chief executive officer. “At Ameren, we’ve always been proud of our low energy prices— and the source of that low-cost structure has clearly been coal-fired power.”

40 Million Tons Burned Annually

Ameren plants typically burn 40 million tons of coal a year—2009’s burn was a bit lower at 37.6 million tons. In recent years more than 95 percent of the coal burned in Ameren plants came from the Powder River Basin, with the remainder coming from the Illinois basin. Ameren’s 11 coal-fired plants are operated by three subsidiary generating companies. The four coal plants in Missouri are operated by Ameren Missouri as part of its traditional regulated utility operation; they consume approximately 57% of Ameren’s burn. These plants, shown in the table below, include the 6th

largest coal-fired plant in the nation in terms of coal consumption, the Labadie Plant. Labadie consumes approximately two trains of PRB coal per day. Ameren’s Illinois plants are operated by Ameren Energy Resources Company (AER). When the state of Illinois restructured the electric utility industry in late 2007, the former coal-fired plants of Central Illinois Public Service and Central Illinois Lighting were separated from electric delivery facilities to form merchant generating companies. Ameren combined these plants with Ameren’s 80% interest in Electric Energy, Inc.’s Joppa, Ill., plant, already a merchant generator, to form Ameren Energy Resources Company.

longer trains and to modify its handling facilities to unload trains quickly. Of the company’s nine plants that receive PRB trains directly, seven now have the capability to handle 150-car trains with typical unloading times of 6 to 8 hours. With current railroad cycle times, Ameren has approximately 45 trains in service between Missouri and Illinois power plants and Wyoming’s Powder River Basin, with an additional 10 trains stored. With the decrease in rail traffic due to the economic slowdown and the resultant faster PRB cycle times, fewer trains are currently needed to meet Ameren’s demand. “Many utilities are in the same

Ameren Missouri Plants Plant

Capacity (MW)

2009 Coal Burn (tons)

Labadie Meramec Rush Island Sioux Total

2,405 841 1,181 986 5,413

10,100,000 3,200,000 4,800,000 3,100,000 21,200,000

Coal Transportation Critical

AER plants also were converted to burn PRB coal, and with the Powder River Basin over 1,000 miles from Ameren plants, reliable transport for that coal became increasingly critical to meet the region’s soaring demand for power, especially in the hot, muggy summer months. That has involved moving as much coal as possible in each train and unloading trains quickly when they arrive at each power station. Ameren has invested over $60 million at its coal-fired plants to upgrade its receiving facilities to handle

Served By:

Car Type

UP, BNSF UP, Barge Mississippi River BNSF, Barge Mississippi River BNSF, Barge Mississippi River

Hopper Hopper Hopper Hopper

situation,” says Robert Neff, Ameren vice president, Coal Supply. “The railroad transport times were reduced by 30% or more when rail traffic fell with the economic recession. However it is unknown how long these reduced transit times will remain; the transit time may revert to prior longer cycles if the economy improves. While we have made recent efforts to trim our fleet by turning back leased equipment and selling cars, we are still retaining our ability to respond to longer cycle times should the economy improve, and rail velocities slow.”

Ameren Energy Resources Plants (Illinois) Plant

Capacity (MW)

2009 Coal Burn (tons)

Coffeen Duck Creek Edwards Hutsonville Joppa Meredosia Newton Total

900 410 715 151 1,002 464 1,198 4,840

2,600,000 1,100,000 2,900,000 300,000 4,400,000 300,000 4,600,000 16,200,000

Served By:

Car Type

NS, Truck BNSF, KJRY, Truck UP, TPW, Truck Truck UP, BNSF, CN, Barge Ohio River Barge Illinois River, Truck CN, Indiana RR, Truck

Hopper Rotary Rotary Hopper Rotary

COAL TRANSPORTER | 9

“With the installation of scrubbers, the option for Illinois basin coal will allow us to reduce the risk associated with PRB rail rate increases. We are also able to reduce associated volatile diesel fuel surcharges, which are much smaller on shorter local moves. All of our fuel initiatives are designed to ensure a measure of transport independence and to allow diversification of types of coal we can burn.” Robert Neff, Ameren’s Vice President, Coal Supply

10 | COAL TRANSPORTER

Ameren owns or leases approximately 8,000 rail cars with reporting marks of UCEX, CAEG and JE. The UCEX fleet serves the Missouri plants, while the Illinois cars have railroad markings for Ameren’s two Illinois railroad shortlines, the Joppa and Eastern Railroad, and the Coffeen and Western Railroad.

Flexible Fuel Supply Key to Controlling Costs-Transportation Alternatives and Basin Switching Having alternatives in coal supply and transportation is Ameren’s key to controlling fuel costs. All of Ameren’s coalfired plants were initially designed to burn Illinois coal. Union Electric Company, now doing business as Ameren Missouri, was the nation’s largest buyer of Illinois coal until 1992. In the early 1990s, the company was able to greatly reduce sulfur dioxide (SO2) emissions to comply with amendments to the Clean Air Act by switching to low-sulfur

Powder River Basin coal—in fact, plants over-complied with environmental regulations and banked significant SO2 allowances in those years. As a result of the Clean Air Act Amendments, all Ameren plants were systematically converted to burn PRB coal. However, the conversion to PRB coal presented new challenges to the Ameren staff handling coal transportation. Since only two western railroads serve the PRB mines, UP and BNSF, competitive access to both carriers became critical to managing transportation costs. In the late 1990’s, Ameren embarked on a strategy to have competitive access to both western rail carriers at all of its plants. With an investment of over $120 million, Ameren built or acquired three shortline railroads, built out spurs at two plants, and installed barge facilities at three plants to gain access to competing rail carriers. The evolving fuel, emissions and transportation environment continues to provide challenges for coal plants, and Ameren is responding with new fueling strategies. While western rail

competition ceased in 2004 and PRB rates increased dramatically, new requirements for even greater reduction of emissions were being imposed on coal-fired plants. These regulatory mandates caused Ameren to build new wet scrubbers at three of its coal-fired plants, with additional scrubbers to be phased in over the next 10 years. These scrubbers are reopening the door to burning local coals from the Illinois basin, as the plants were originally designed to do. Of Ameren’s 11 coal-fired plants, seven are in Illinois, three are on the Missouri-Illinois border and one is in Missouri about 50 miles from the Missouri-Illinois border. All of these plants have transportation alternatives to the western PRB carriers, allowing a return to burning Illinois coal as Ameren plants receive emission controls. “With the installation of scrubbers, the option for Illinois basin coal will allow us to reduce the risk associated with PRB rail rate increases,” Neff adds. “”We are also able to reduce associated volatile diesel fuel surcharges, which are much smaller on shorter local

moves. All of our fuel initiatives are designed to ensure a measure of transport independence and to allow diversification of types of coal we can burn.”

Pushing coal at Labadie plant

CAIR, CAMR Pose Challenges to Coal Generation Ameren’s strong track record for reducing emissions from its coal-fired plants has continued into the 21st century. Since 1990, Ameren’s Missouri plants have reduced their SO2 emissions rate by 77 percent and its nitrogen oxide (NOx) emissions rate by 84 percent. In the same timeframe, Ameren’s Illinoisbased merchant generating plants have reduced their SO2 emissions rate by 81 percent and its NOx emissions rate by 75 percent. To further reduce mercury emissions, in 2009 Ameren installed activated carbon injection systems at the Edwards, Meredosia, Newton, and Joppa power plants. With activated carbon injection systems, powdered activated carbon absorbs the oxidized mercury from the flue gas, and the mercury is then collected

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“At Ameren, we’ve always been proud of our low energy prices—and the source of that low-cost structure has clearly been coal-fired power.” Thomas R. Voss, Ameren’s Chairman, President and Chief Executive Officer

Specializing in commercial transactions, litigation and arbitration in the fields of energy, coal transportation and administrative law.

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“We are a company with a meaningful voice in shaping the energy future for our region,” Thomas R. Voss, Ameren’s Chairman, President and Chief Executive Officer

An Ameren coal train unloads at the Rush Island plant

with the fly ash in the plant’s particulate collection device. The company has also upgraded its control systems to improve particulate collection to the point that the plants are collecting more than 99 percent of all particulate emissions from their stacks. However, despite Ameren’s and the industry’s success in cleaning up the air, the requirements for cutting emissions grow ever more rigorous. The Clean Air Interstate Rule (CAIR) is expected to present an even tougher challenge to coal-fired generation with its stringent rules for reducing SO2 and NOx. The rule was contested in court and its implementation has been held up for years with the court finally sending CAIR back to the U.S. Environmental Protection 12 | COAL TRANSPORTER

Agency (EPA) for further action to remedy the rule’s flaws. The EPA is issuing a new proposed version of the Clean Air Interstate Rule in 2010 and a final version will be in place in 2011.

Latest challenges: Ash Management, Climate Change Ash management is another challenge coal-fired generators face. Ameren, which has operated coal ash impoundments for decades, currently operates 35 active earthen dam impoundments. The vast majority of these facilities are located in remote areas and surrounded by farm land. Of the active ponds, 16 are lined; 19 are unlined. The company has a

robust dam safety program that covers ash pond impoundments as well as its hydroelectric dam facilities. Ameren has been proactive in its response to the need to reuse coal combustion by-products. Ameren typically recycles more than half its coal combustion waste into beneficial uses; 70% was recycled in 2009. However in 2008, Ameren companies recycled 2.2 million tons of ash—10% more than the 2 million tons of ash the companies generated in that year. The Labadie Plant has won national recognition for its concrete packaging facility that is recycling more than 10,000 tons of fly ash and 60,000 tons of bottom ash annually into about two million bags of high quality concrete mix.

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Coal-Key to a Secure Energy Future “All of these initiatives point to the fact that we look for the most cost-effective ways to provide clean energy to our customers,” says Voss. “Coal-fired generation plays a critical role today in providing energy not only to our region but to the entire nation. And coal will continue to be a critical part of the fuel mix in the near future as we focus on providing our customers with secure, clean and reliable energy solutions. Our plants have been leaders in lowering costs, and are wellpositioned in their markets. However, we anticipate increasingly stringent environmental regulation and the likelihood that climate change regulation and legislation will force significant reductions in carbon dioxide and the imposition of yet more costly controls on plant emissions. All of this will pose fresh challenges for the energy industry. At Ameren we strive daily for balance in order to meet today’s challenges head-on, while planning for the future.” s

505 Sansome, Suite 1800 San Francisco, CA 94111 Phone: 415-398-4510 Fax: 415-398-4816 www.hlmx.com

COAL TRANSPORTER | 13

Membership Criteria Membership in the association shall be open to entities that are producers or consumers of coal produced in North America and other entities which are interested in its transportation and related issues. Entities or their affiliates whose primary business is providing transportation of coal by rail, barge, truck, pipeline slurry, or any other mode shall not be eligible for membership. One individual from each member company is designated to act as its representative. However, any individual employed by the member may participate in association activities.

Classes of Membership Regular Members:

Actual or potential producers or consumers of coal shall be entitled to apply to become voting members of the association in accordance with provisions in the bylaws and policies adopted by the Board of Directors.

Associate Members:

Individuals or entities who are interested in the transportation of coal or related issues, but who do not otherwise qualify for admission as voting members, may seek admission as a non-voting member. Associate members may serve and be empowered by the committee chair to vote on committees, but shall not have the right to vote in general or special meetings of NCTA.

Honorary Individual Members:

For good cause shown including but not limited to exemplary and outstanding service to the NCTA, a former Designated Representative of a Voting Member may be appointed an Honorary Individual Member of the National Coal Transportation Association. Honorary members may serve and be empowered to vote by the committee chair on committees, but do not have the right to vote in general or special meetings of NCTA. Membership dues and registration fees and other assessments of NCTA may be waived for Honorary Individual Members.

Membership Benefits

Your company may belong to more industry associations than just NCTA, but no other association provides the unique combination of education and real world results that come from NCTA membership. The financial impact associated with the procurement and delivery of coal demands this focus. NCTA maintains a high level of national prominence and credibility by participating in hearings, workshops, and symposiums, coordinating with ad hoc coalitions, providing resource material for governmental agencies, negotiating and educating on issues of general membership concern with carriers. 14 | COAL TRANSPORTER

Conferences with Character

For three days in the spring and fall of each year, NCTA provides coal industry professionals with an exclusive opportunity to share their outlook and knowledge and to exchange ideas. NCTA conferences provide its members the opportunity to learn from the experiences of others with similar responsibilities and from outside experts in an open and noncompetitive environment. Think of the ideas you can borrow, the pitfalls you can avoid and the valuable insight you can give and receive. Members attend all conference at a preferential rate.

Logistics and Planning Subcommittees

The Eastern and Western Logistics & Planning Subcommittees do much of the heavy lifting to solve problems with respect to the efficient operation of the coal delivery process. An important source of strength is the NCTA working committee system that is made possible by the dedication and expertise of our member representatives and the cooperation of the rail carriers. Each Logistics & Planning group meets at least twice annually. These working group meetings are open meetings and are free to attend.

Operations & Maintenance Subcommittee

For companies that do not have the resources, or have diminished resources to support company representation on industry and consensus-based technical panels, the O&M subcommittee helps to fill this gap. The annual conference program provides excellent information on new technologies and best practices for coal car design, maintenance, and repair.

Access to Railcar Leasing Exchange Board

NCTA members have exclusive access to a railcar leasing exchange board where excess train capacity can be posted for lease and where members can post railcar needs. With 86,000 private cars owned and operated by NCTA members, this is a good place to start when you need to adjust your capacity requirements.

Commitment to Education

Education is a hallmark of NCTA. NCTA educates its members through its annual conferences and publications.

NCTA also supports education through its scholarship program that awards scholarships to students in transportation at several major universities as well as to the dependent sons and daughters of employees of member companies.

Policy Insights

The Board of Directors continues to meet in Washington, D.C. each year to visit governmental agencies and other trade associations. Maintaining a presence in Washington enables NCTA to have input into federal policymaking and to better represent member concerns on federal issues. NCTA fosters relationships with key personnel and departments within the Department of Energy, the Department of Transportation, the Surface Transportation Board, the Federal Railroad Administration, and with various elected representatives. NCTA is an educational entity and does not officially lobby for or against legislation. However, we do actively participate in hearings and rulemaking proceedings of interest to our membership.

Membership in NCTA is a sound business decision with a solid return on investment

Communications

Through its ever growing web presence, NCTA communicates with the world about the coal industry and with NCTA member companies - linking potential customers to its members and linking its members to other useful Web sites throughout the Internet. A “Members Only” section provides detailed member contact information, valuable updates on current subcommittee initiatives, a railcar leasing marketplace and other items of interest exclusively to NCTA members. The conference archives date back to 2004, creating a virtual library of information on energy and transportation issues. The semi-annual Coal Transporter magazine focuses on getting to know people in the industry, as well as informing NCTA members and the coal industry as a whole of new and relevant events occurring within the organization. Membership in NCTA is a sound business decision with a solid return on investment and we look forward to serving you. A member company of the National Coal Transportation Association is not just another utility, coal supplier, rail equipment supplier, or coal related services organization. It is part of a tradition of excellence that through affiliation with NCTA, it signals exceptional commitment and obligation to the market, its customers and to the public.

Annual Dues

The annual dues for membership in NCTA are $1,250.00 payable in January of each year.

Application for Membership

All entities or persons desiring membership in the association should apply using the online application or contacting the NCTA for a membership application. The application will include the name, principal business activity and business address of the applicant and the full contact information for the applicant’s proposed Designated Representative. Application forms, along with payment of the annual dues, should be returned to the Executive Director of the Association. The Board of Directors shall approve or disapprove all applications for membership and shall make a determination as to the class of membership into which the applicant shall be admitted. s COAL TRANSPORTER | 15

New Member Announcement

NCTA WELCOMES ITS NEWEST MEMBERS!

he board of directors of the National Coal Transportation Association is pleased to announce that the applications for membership in NCTA of the following coal industry participants were approved. They join NCTAâ&#x20AC;&#x2122;s existing member companies working every day through NCTA to foster the cooperation needed to resolve issues faced by coal consumers, coal producers, transporters, rail equipment manufacturers. and services companies. A complete list of NCTA member companies can be found on NCTA Web site: www.nationalcoaltransportation.org/membership/members.html

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NCTA 2010 Spring Conference / Review

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he NCTA 2010 Spring Conference was held April 11-14th at the Omni La Mansión del Rio in San Antonio, Texas. Ideally situated along the historic River Walk along the banks of the Paseo del Rio in downtown San Antonio, it was a perfect base of operations for the NCTA. Early arrivals experienced the widest range of activity on the river from the bustling weekend crowds and mariachi bands playing into the wee hours to the calm and serenity of Sunday morning when only the ducks were out and about. The 14th annual NCTA golf tournament was held at the Quarry Golf Club just a short drive from the hotel. Designed by Keith Foster, the Quarry is recognized around the country for its unique setting and design. The old stone quarry on the back nine was the perfect backdrop for some of the group’s own “unique” shots. Over 100 people participated in the tournament. Also on Monday, CPS Energy conducted a tour of the coal facilities at their new Spruce II 800 MW coal plant located on nearby Calaveras Lake. Those who were lucky enough to secure a spot on the tour saw the plant as it was undergoing test burns. The NCTA hosted dinner for attendees in the Iberian Ballroom on Monday night. Forty-two guests were also in attendance. The Cactus Country Band was on hand to play country favorites such as San Antonio Rose and the Orange Blossom Special with a bit of Rock and Roll thrown in. Two-time NCTA scholarship winner Stayci McClure and her parents were special guests at the dinner with Stayci sharing some thoughts on her educational experience and future plans with the gathering. The conference opened with a welcome from Richard Peña Sr., Vice President of Energy Development for the hometown utility, CPS Energy. The keynote address was given by Daniel R. Elliott III, the Chairman of the Surface Transportation Board. This was his first opportunity to attend a NCTA event and we hope he will be back. The next two speakers also hailed from Washington, Grace Soderberg the Director, Energy Supply for the Edison Electric Institute and John Wetzel, a Vice President at the Association of American Railroads. In fact the

Nate Carter, Larry Rose, Susan Arigoni DC contingent to this event was strong, accounting for almost half the speakers and additionally covering the topics of Coal Ash Regulation, the Politics of Global Warming and Positive Train Control Implementation. On the business end of things, industry experts covered supply and demand for coal, natural gas, and railcar leasing. Other speakers included Phil Harris (Tres Amigas) looking at a unique transmission interconnect system (see a follow up article in this edition); Charles Barney on GRDA’s use of its plant visitor centers for community education; and Mike Brashier (the “Captain”) stepping in for Mark Knoy to discuss the challenges in the barge industry. Back for his second appearance at the NCTA was Professor John Doggett, Senior Lecturer at the McCombs School of Business, University of Texas at Austin. One can only wish that everyone would have the opportunity to hear him speak and be exposed to some of the statistics he has to offer with respect to energy growth worldwide. A complete listing of conference speakers and their presentations can be found in the members section of the website. In addition to the great line up of speakers, the conference included a roundtable discussion on coal dust mitigation and a panel of experts who engaged the audience in a discussion of processes and technology targeted at the enhancement of coal logistics. The venue for the 2011 Spring Conference is the Broadmoor in Colorado Springs, Colorado. Site of the record setting 2008 conference, a trip to the Broadmoor is worth the lesson in customer service alone. This time we will have twice the conference space and both dinner and golf will be on the Broadmoor property.

Joshua Herzing and Lisa Arthur

Karen Bramley and John Bridges

Dana Koenig and Dan Linklater

Professor John Doggett COAL TRANSPORTER | 19

NCTA 2010 Spring Conference / Review

Todd Tranausky and Chris Newman

NCTA President Bob Neff and STB Chairman Daniel Elliott

Tony Rowser and Mark Strazala

Bob Sarvela

John Faulconer

2010 Sponsors Event Sponsors: Alliance Coal LLC Alpha Natural Resources Arch Coal Sales, Inc. Peabody Energy

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The Emergence of China as an Energy Giant By John N. Doggett

22 | COAL TRANSPORTER

n July the International Energy Agency announced that in 2009, China passed the United States to become the largest consumer of energy in the world. What made this announcement so startling was that in 2000, China used only 50% as much energy as the United States. We are in the middle of an unprecedented global economic and energy revolution. China, India, Brazil and a host of other emerging economies have become significant consumers of energy. China and India have also become major importers of coal and other natural resources from Indonesia, Australia, Africa, Latin America and the United States. However, it was not always like that. At the end of World War II, China, India and Brazil were economic basket cases. Yet by 2001, Goldman Sachs said that they would be the dominant economies of the 21st century. Few took Goldman’s predictions seriously back then. After all, in August 1991, India had only two weeks of foreign exchange reserves left before it was bankrupt. In 1994, 6,100% inflation beset Brazil. From 1958 to 1961, a massive famine that killed 36 million people devastated China. Five years later, China descended into a decade of anarchy and terror called the Cultural Revolution. By 1976, China’s economy lay in shambles and she had half the GDP per capita of India. Goldman saw that the leaders of China, India and Brazil had made the hard economic and political decisions that unleashed the entrepreneurial spirit of their people. Goldman saw countries with 40% of the world’s population. Goldman realized that a massive transformation in how these countries competed was already underway. Let us focus on China, because what China has accomplished is beyond stunning. Since 1978, China’s economy has doubled in size every eight years. Since 1981, the number of poor Chinese fell by a half billion people. Since 2001, when China joined the World Trade Organization, China’s economy has tripled in size and its trade surplus with the world has increased thirteen times.

China’s growth over the past three decades has broken all records for economic growth. No country in modern times has grown by 8.9% a year for thirty straight years. No country has ever invested 44% of its GDP on capital projects and infrastructure. By April of last year, China passed America as the largest market for new automobiles. This is even more remarkable when you realize that they banned the private ownership of automobiles in China until 1983. To understand the enormity of this economic revolution, one must go back to the beginning of the Cold War. The Cold War was a battle between capitalism, free markets and personal freedom on our side and communism, government ownership and repression on their side. For half a century we told the world that our way of life was better. We backed up our words with blood, tears and treasure. We fought wars in Korea and Vietnam and supported anticommunist regimes in every part of the world. We fought the Cold War on many fronts. In retrospect, the key battle was for the hearts and minds of the people living under the yoke of communist dictators. Communist leaders knew that if the truth about life in the West ever reached their people, it would be much harder to subjugate them. As a result, they tightly censored the press, radio, television and the movies. By the 1980s, satellite dishes, pirated video tapes and CDs told people in Eastern Europe that their leaders had lied to them. In 1989 the Berlin Wall fell and the Cold War was over. Two years later, on Christmas Day, 1991, the Soviet Union ceased to exist. While most of us think Hollywood television programs and movies depict an amoral America, viewers in communist countries were not focused on the story line. What they looked at was the lifestyle that they portrayed in television programs and movies from America. They focused on our homes, our cars, our electronics, our neighborhoods, the quality of our infrastructure and the quality of our freedom.

China’s growth over the past three decades has broken all records for economic growth. No country in modern times has grown by 8.9% a year for thirty straight years.

COAL TRANSPORTER | 23

Why is this important? Because when we won the Cold War, we told the world that the American way of life was the gold standard. Let us return to China to see how this plays out today. In July, the 2010 Wealth Report1 stated that the number of millionaires in China increased by 6.1 % to 875,000. This report defined a Chinese millionaire as a person with assets of at least 10 million Yuan (US$1.47 million). Of the 875,000 millionaires, 55,000 have 100 million Yuan or more (US$14.7 million), up 7.8 percent from 2009. Some 1,900 boast assets of one billion Yuan or more (US$147 million), and 140 are worth at least 10 billion Yuan (US $1.4 billion). Today, China has more millionaires and billionaires than any other country except the United States. China’s millionaires spend an average of 1.7 million Yuan (US$147 thousand) each per year. They own an average of three cars and 4.4 luxury watches, with the Mercedes‑Benz E‑class and Patek Philippe the most popular. Their favorite sport is golf and they take vacations in Australia, France and the US.2 What is even more stunning is the coming explosion of the Chinese middle class. Goldman Sachs and McKinsey predict that a half billion Chinese will become members of the middle class in the next ten years. These new middle class citizens will want and can buy all of the trappings of the middle class. Walmart, for example, predicts that they will have more stores in China by 2030 than they will have in the United States. The energy implications of this massive expansion of the world’s middle class are unavoidable. In 2006, the G7 (the US, Japan, Germany, France, Britain, Italy & Canada) held $1,253,900,000,000 in foreign exchange (FOREX) reserves. By 2007 China had $1,500,000,000,000 in FOREX reserves. Remember, this was a country that was bankrupt at the end of the Cultural Revolution in 1976. Today, China has $2,447,100,000,000. China is using this money to buying companies in every part of the world. They are buying hundreds of thousands of acres of land in Africa and Latin America to guarantee access to natural resources and food. They are buying assured access to the energy assets that they will need to continue to grow their economy. In 2008, China became the largest producer of Greenhouse gasses. At the Copenhagen Climate summit, China refused to commit to reducing the amount of greenhouse gasses she emitted. Instead, China promised to reduce its greenhouse gas growth rate by 40-45%. Like everything else that it does, China sees this commitment as a way to develop a dominant position in the renewable energy space. US Secretary of Energy Chu said that “The leaders of China are all saying, ‘This [climate change] is a very big deal for us.

If we continue business as usual, continue to grow our carbon emissions, it would be devastating for the world, devastating for China.’ But they also say ‘this is our great economic opportunity.’ And for that reason, they’re investing over $100 billion a year in the clean energy economy.” In 2008, China’s installed wind capacity made it the 5th largest in consumer of wind in the world. Last year China became the 3rd largest consumer of wind. By 2011, China will become the largest consumer of wind power in the world. China is building six massive wind farms across the country. Each has the generating capacity of 16 large coal‑fired plants. Each of the six projects totally dwarfs anything else, anywhere else in the world, says Steve Sawyer, the secretary general of the Global Wind Energy Council, an industry group in Brussels. Since May of this year, Gansu Province has been installing 40‑MW of wind power every day. This is equivalent to one new 300‑MW coal plant a week in just one of seven regions that are developing at least 10,000 MW of wind power. Last October, an Austin-Texas firm signed a contract with Chinese partners to develop a $1.5 Billion wind‑power project in West Texas. This is the largest US‑China joint investment in American renewable energy to date. It is also the first US‑China joint venture in an utility‑scale wind power project. To make sure you understand how they are playing the new game, listen to this. Chinese banks will finance the deal, and a year old Chinese wind turbine company will make the wind turbines at a factory in the United States. The reason China is spending so much money to secure access to energy is because Goldman Sachs has another prediction. Goldman says that if the Chinese economy continues to grow at 5% a year, China’s economy will be larger than ours in 2035 and will be twice the size of ours by 2050. This translates into a Chinese economy that is nine times larger than it is today. Goldman also predicts that the Indian economy will grow by twelve times by 2050 and challenge the US for the title of the second largest economy in the world. This massive, rapid economic growth has great significance for the coal industry. Eighty percent (80%) of China’s energy and 70% of India’s energy comes from coal. China consumes three times as much coal as the United States. In fact, today, China consumes more coal than the US, Europe and Japan combined. To fuel their continuing growth, China and India must consume much more coal over the next three decades. That coal will come from Indonesia, Australia, Africa and the United States. China’s continued reliance on coal and her commitment to clean energy has made China the world’s leading builder of super-

In May, China closed the following energy deals: $ $ $ $ $ $ 1

$1.3 billion to buy 45% percent of an Alberta tar sands project May $3 billion investment in an offshore Brazilian oil field May $3 billion for a 40% percent stake in an Argentine oil company Majority ownership in a contract to drill Iraq’s lucrative Missan field $20 billion to develop the Orinoco Belt in Venezuela $23 billion to build three refineries in Nigeria 2010 Wealth Report by the Hurun Research Institute.

24 | COAL TRANSPORTER

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critical and ultra‑supercritical coal plants. China is also importing and developing coal gasification technology. Since 2007, Larsen & Toubro, an Indian company, has sold ten coal gasification plants for more than $350 million to Chinese companies. One contract is for the world’s largest and heaviest coal gasification plant. It will weigh 1,740 tons and have a rated capacity of 3,400 tons of coal a day. What is more astonishing is China’s emergence as a developer of cleaner coal technology. The Thermal Power Research Institute is China’s world‑leading laboratory on cleaner coal. It has just licensed its latest design to Future Fuels in the US. Future Fuels will pay about $100 million to import from China a 130‑foot‑high maze of equipment that turns coal into a gas before burning it. This method reduces toxic pollution and makes it easier to capture and sequester gases like carbon dioxide underground. Future Fuels will ship the equipment to Pennsylvania and have Chinese engineers teach American workers how to assemble and operate it. One last point. China is serious about making the investments necessary to support the continued explosive growth of its economy. This year, they launched the Emma Maersk super container ship. This ship can handle 15,000 containers with a crew of just 13 men. Too wide for the Panama or Suez Canals, it is strictly trans‑Pacific. Cruising at 31 knots means goods arrive four days before other container ships on a China to California run. The Danes built it at a cost of US $145,000,000+. However, most of the containers that China sends to America are shipped back to China empty. It is time for us to focus our efforts on again becoming the most dynamic, innovative, entrepreneurial, capitalist economy in

26 | COAL TRANSPORTER

the world. It is time for us to invent and market products that we can stuff into those empty containers going back to China. It is time for us to compete. America’s challenge is clear. The time to debate whether to invest in cleaner coal technology is over. If we do not want to lose yet another industry to the Chinese and Indians, we have to agree to improve the BTU efficiency and reduce the emissions of coal. We also have to develop 21st century Made in America coal gasification technology. We are in the greatest economic race that our nation has ever seen. The time for dithering is over. Let’s get after it. s John N. Doggett is an award winning Senior Lecturer at the McCombs School of Business at The University of Texas at Austin. John is also a Senior Research Fellow at UT’s IC2 Institute and co‑founder of UT’s International Idea to Product CompetitionJ. John’s research and teaching focus is on global competition, entrepreneurship and sustainable energy. Since 2003 John has led MBA business observation tours to China and India. John has taught seminars on global competition and entrepreneurship at universities in Hong Kong, Japan, Singapore, Taiwan, Mexico, Thailand, Malaysia and Austria. John has extensive consulting experience working with start‑ups to Fortune 500 firms in Asia, Europe and the US. John is a Board member of two Austin‑based software companies and a Los Ange‑ les‑based propane engine manufacturer. John is also an Advisory Board member of a green building supply startup in Austin. John received his BA degree from Claremont Men’s College in Claremont, California, his Juris Doctor degree from Yale Law School and his MBA degree from Harvard Business School.

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Tres Amigas Electricity Superstation By Phillip G. Harris, Chief Executive Officer, Tres Amigas

he regionalized nature of our power supplies has minimized the development of the country’s newer and cleaner sources of power. The current isolation of energy producers and consumers also has reduced the overall efficiency of power production and transmission, hampered grid reliability and increased the cost of electric power for many residents and businesses. The SuperStation will address all of these issues. For the first time, the Tres Amigas SuperStation will make it practical to offer a broad mix of energy resources to electric customers, allowing them to access low-cost energy across multiple regions. The SuperStation will also provide the technical capabilities necessary to manage the modern electricity grid. Finally, the project will help our Nation meet its renewable energy targets and create new ‘green collar’ jobs while also reducing greenhouse gas emissions and pollution.

A Technology and Economic Tour De Force

The SuperStation will be constructed in Clovis, New Mexico, near the border of Texas. This location is in close proximity to current and planned transmission lines for all three of America’s power grids, providing both strategic and operational advantages. The project offers an array of benefits for the region and the country:

Environment: The SuperStation encourages investment in clean, renewable energy. • America cannot meet its renewable energy objectives without a reliable means of transmitting the clean energy produced in rural areas, where wind, sun and geothermal resources are plentiful, to high-demand urban load centers. • By allowing these vital energy resources to interconnect via the SuperStation and sell power throughout the nation, America can, for the first time, fully take advantage of its vast renewable energy potential. • This, in turn, will help to reduce greenhouse gas emissions and pollution while also promoting America’s energy independence.

Innovation: The SuperStation will employ cutting edge technologies and set a high standard for modernizing our nation’s aging power grid.

• The SuperStation will operate using the latest and best available technologies, including underground direct current (DC) superconductor cables, voltage source converters, and energy storage systems. • It will also encourage faster adoption of advanced, more efficient power grid technologies. • The U.S. is falling behind Europe and Asia in the adoption of renewable energy and in clean energy technology innovation. The Tres Amigas SuperStation will serve as a high technology showcase and will facilitate access to energy markets for the nation’s most innovative developers of advanced clean energy technologies. 28 | COAL TRANSPORTER

Jobs: The SuperStation will be a driving force for a new wave of job growth in the energy sector, helping to reinvigorate the U.S. economy. • The Tres Amigas project will create both short and long-term jobs in construction, maintenance, scientific research, and clean energy technologies. • It will incentivize new energy providers throughout the country to commit to new construction by providing a nation-wide marketplace for the energy they produce. • For local energy producers, market access to the Tres Amigas national energy market hub will encourage local and state policymakers to create the most hospitable environment for job growth in their respective regions. • America’s energy costs will decrease as companies compete to provide the most economical energy sources for American businesses and consumers.

Revolutionizing America’s Power Markets

The Tres Amigas SuperStation will have an initial power transfer capacity of up to 5 gigawatts (GW), or enough power for approximately 5 million U.S. households. Based on a modular design, the Tres Amigas energy market hub will be easily expandable to accommodate future growth. Over time, the SuperStation could accommodate up to 30 GW of power transfer capacity. The SuperStation’s ability to transmit, for the first time ever, significant amounts of power across the three main U.S. interconnections will increase the value of regional transmission investments, both in place and planned, due to the newly created enhanced ability to use those assets. Electric system reliability near the SuperStation will also be improved because the three interconnections will be linked through a robust station with black-start capability and voltage source converters that can provide substantial, controllable reactive power for the region. Electrically, the SuperStation will appear as a large generator to each interconnection. For operators, Tres Amigas has the potential to solve voltage and stability problems created by large intermittent generation resources such as wind farms and solar power plants. The SuperStation will also have significant reactive power capability that can be controlled at each synchronous interconnection. This real-time dynamic support will improve stability, transfer capability and transmission efficiency. In addition to optimizing the value of America’s existing power grid, the state-of-the-art transmission technology utilized by the SuperStation will provide reliable and cost-effective transmission services consistent with the standards and regional reliability requirements outlined by the North American Electric Reliability Corporation (NERC). s

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NCTA 2010 Operations and Maintenance Conference / Review

2010 Operations & Maintenance Conference The Coeur d’Alene Resort, Coeur d’Alene, Idaho | June 14-16, 2010

ottom line, Goldilocks would have loved it. Last year, Georgia’s Jekyll Island weather was a bit too hot. Two years ago, Michigan’s Bay Harbor in was a bit too cold. But Coeur d’Alene, Idaho, it was “just right”. Well, at least until tee time, but that is another story. However, there were no mama, papa or baby bears in sight as the NCTA Operations & Maintenance Committee conducted its annual conference June 14-16, 2010 at the Coeur D’Alene Resort in Coeur D’Alene, Idaho. For the majority, this was their first visit to the Idaho Panhandle and most left with the hope that it would not be their last. With sunny blue skies for much of the time, a sparkling lake, good friends and great speakers, this is one O&M event that will be talked about for years. The big news of the day was the retirement of Art Lewis, the longtime chairman of the Operations and Maintenance Committee. Art, the fleet manager for American Electric Power, has been a driving force on the O&M Committee for nearly 10 years, overseeing the adoption of Committee Guidelines, establishing a volunteer Executive Committee, improving communications with the AAR and FRA in Washington DC, and nurturing the educational aspects of the Roundtable for the benefit of private car owners. Art was the recipient of plaques and pictures, toasts and roasts, all tokens of appreciation for his support and service to the NCTA. Hopefully, Art will remain active with the committee and we will see him at future events. John Casto of FirstEnergy Solutions will take over as Chairman of the Operations and Maintenance Committee. For further

30 | COAL TRANSPORTER

Private Car Owner Roundtable details and a listing of the other members of the O&M Executive Committee, please see the Committee Report section of the magazine. The private car owner Roundtable began on morning Monday and continued into the afternoon. This year several maintenance shops were invited to give a brief presentation to the Roundtable on what their particular shop has determined to be the most common and repetitive repairs needed on all types of coal cars. Presentations by the various shops were well received and appreciated by Roundtable members. The O&MÂ committee continues to explore ideas for keeping the Roundtable sessions educational and informative to members while at the same time maintaining a forum condusive to open discussion of issues members may have concerning their coal car fleets. Mondayâ&#x20AC;&#x2122;s opening reception was held under clear skies on the front lawn of the resort. Attendees had ample time to network connecting with old friends as well as meet the voice on the other

Carmen and Rob Sparks

Bob and Linda Neff

If only all coal cars where chocolate...

Art Lewis

COAL TRANSPORTER | 31

Jason Van Orsdol, Peter Jones, and Mark Brecht end of the phone. This was truly an international event, with attendees from Austria, South Africa, Australia, Brazil, and Canada. The conference sessions Tuesday and Wednesday covered a wide range of topics including a morning session of speakers covering the latest on ECP brakes. Three of the major Class 1 carriers were on the agenda including the Norfolk Southern, BNSF and the Union Pacific Railroad. On the technical side topics included bearing seals, asymmetric wheel wear, thermal cracks, vehicle/track interaction and the effects of biomass on rail equipment. From an

Kathy, Ann, and Kurt Stroer

32 | COAL TRANSPORTER

Wolfgang Schoech and Gordon Bachinsky

equipment management perspective, speakers touched on inspections, remote monitoring, defect tracking, and car leasing fundamentals. The agenda also had an international flair, covering coal movements in other countries and the Australian experience with premium heavy haul wheels. Following the day long conference session on Tuesday, it was time to relax and take in the view aboard the Mishan-Nock. Attendees and their guests cruised on Lake Coeur d’Alene while dining on local favorites including a delicious Idaho baked potato bar with all the trimmings and huckleberry cobbler.

It was prime time to network while also getting a chance to see some amazing lakefront homes and some even more amazing scenery. The final event of the conference was the annual golf tournament held on the Coeur d’Alene Golf Course, home of the world famous floating green. With a park like atmosphere of lush fairways highlighted with over thousands of red geraniums and views of the lake from nearly every hole, it’s one of America’s most beautiful courses.While skies were finally overcast on this final day, it was still an incredible round of golf. s

Steve & Judy Dobies with Terry & Mary Kay McCreery

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Jim Owens, Jason Rea, and Marcus Yancey

John Oswalt, Austin Riley, Group Caddy, Tom Canter, Rich Kotan

COAL TRANSPORTER | 33

IREA / Energy Policies

Current and Proposed Federal and State

Energy Policies are a Recipe for

Disaster T

About the IREA IREA’s 5,000 squaremile service territory is within ten counties to the east, west and south of Denver. With nearly 139,000 members, Intermountain Rural Electric Association is one of the largest and fastest growing memberowned electric distribution cooperatives in the United States.

34 | COAL TRANSPORTER

Since there are no stock-holders, IREA’s profits are returned to its members through capital credit refund checks.

he early organizers of the electric utility industry wisely formed regulated monopolies to provide service. This encouraged investment in the necessary infrastructure and prevented the construction of duplicate facilities, which would have required higher rates and created an unnecessary additional physical impact. Electric utilities were granted exclusive territories and they built generation plants or purchased energy to meet peak loads. They also built transmission lines, substations and distribution facilities needed to serve homes and businesses. The industry provided abundant, low cost, reliable electricity. This resulted in a quality of life and robust economy that were envied throughout the world. Until about 20 years ago, the industry was operated by the utilities’ boards, management and staff. In the last 20 years, the change has been dramatic. Now important policies and operating decisions are dictated by politicians and regulators, often at the behest of special interest groups. The result has been more costly energy and threatened reliability. First, we still must build base generation to meet peak load. Coal, gas-fired, nuclear and large hydro units fill this need. We also build transmission lines, substations and distribution facilities as needed. In addition, we are now mandated to include a percentage of costly and intermittent renewable resources, primarily wind and to a lesser degree, solar. Solar is very expensive so it plays a much smaller role than wind. The wind will blow 25 to 30 percent of the time and the sun will shine about 25% of the time. Because of intermittency, the renewable resources must be backed up by conventional power plants, resulting in a duplication of facilities. Wind and solar facilities are almost always located far from load centers, requiring additional costly transmission lines. Since those lines carry intermittent energy, they are significantly underutilized and, therefore, very costly on a kWh transmittal basis. Ultimately, wind power is almost twice as expensive as coal power, and solar is several times more expensive than coal. Besides the tremendous cost, increased renewable mandates will cause grid instability problems. A study prepared for the U.S. Department of Energy examined 10% wind and 1% solar; 20% wind and 3% solar; and 30% wind and 5% solar. The study showed integration problems at all levels with serious problems beginning at the 20% level. Many experts believe that 30% integration simply is not feasible. Utilities doubt that they can integrate 20%, let alone 30%. At present, we know of only two states that mandate renewables at 30% or higher. One is California and the other is Hawaii. Neither state has achieved that goal. California’s 30% standard has proven problematic for the utilities and for the state as well. High energy costs have driven businesses out of state, creating an economic crisis. Legislation has been introduced to repeal the 30% mandate.

The most serious threat we face is the passage of “cap and trade” or carbon tax legislation. This one factor alone could immediately raise rates 30% to 50%. Here in Colorado, the renewable energy mandate initially required that 10% of retail energy sales be from renewable sources, not including hydroelectric power. The investor-owned utilities were required to provide a set aside for solar. Three years later, the investor-owned utilities’ mandate increased to 20%. Legislation is pending that will increase that mandate to 30% with significant set asides for solar, mainly rooftop installations1. Cooperatives and municipal utilities are still at the 10% mandate, but we anticipate that will be increased in the future. Expense and reliability are not the only concerns. Utilities are being pushed into an economically unsustainable business model. By law we must accommodate any consumer’s solar and wind installation, thereby reducing revenue for infrastructure we already have built. If the consumer generates more than he uses, we must run the meter backwards, effectively purchasing the excess at retail. Is there another business model where the business must purchase its product from customers at the cost it charges customers? There has been legislation introduced that would have mandated an energy conservation tax. Although the legislation did not pass, Colorado state government requires investor-owned utilities and strongly urges cooperatives to offer subsidies to consumers for installing new, more efficient appliances, and other energyreducing equipment or materials, and renewable generation, including extremely expensive solar or wind facilities. A bill has been introduced that would promote the construction of renewable facilities by letting the Public Utilities Commission require that utilities lend money for customer-installed generation and pay high rates for the energy produced in the hope that the loan will be repaid, regardless of how inefficient the installation may be. One bill encourages the Division of Parks and Outdoor Recreation to undertake renewable energy generation projects on state land to supply or offset all of its electrical needs. It goes without saying that all of these proposals require utilities to accommodate the facilities and provide backup. All of these proposals reduce our revenue, strand investment and increase cost. Some utilities have introduced inverted rate structures where the more you use the higher the rate. This is a form of energy rationing, punishing those who exceed the prescribed usage quota. Our concern is that it won’t be too long before this becomes a mandate. The theory is that forcing people to use less energy will avoid new investments in generation, but there is no shortage of generation. Indeed, with a troubled economy, foreclosures, and forced conservation, there will be stranded generation investment. This will result in the shutdown of some plants. What plants will be shut down? Low cost coal of course. That is already occurring. This, again, will drive up rates. The most serious threat we face is the passage of “cap and trade” or carbon tax legislation. This one factor alone could immediately raise rates 30% to 50%. 1 This legislation has now passed in Colorado

Recent government manipulation of the electric utility industry is largely driven by the theory that manmade CO2 is causing global warming, yet global warming doomsayers are being widely discredited. Public opinion in the U.S., the U.K. and other countries shows that the pendulum has swung against the proposition that mankind is responsible for global warming. All of the current and proposed policies can only result in electric rates skyrocketing. Estimates of the doubling and tripling of electric rates are the norm. We are in a man-made energy crisis that never should have happened. We have hundreds of years of coal and gas remaining. Wind and solar energy will only be niche players now and in the future. Because of all the problems we face as a nation, the silent majority has been awakened. We must continue to bring the truth about electric energy to their attention. IREA was created to bring our members the best possible service at the lowest possible cost. We will always pursue that objective. s

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COAL TRANSPORTER | 35

NCTA COMMITTEE

UPDATES

NCTA Committee work is at the heart of the Association. The committees provide valuable information and education to members, foster best practices, improve communications among the parties, and keep members up-to-date on new rulings and technologies. This is where members get payback many times over for their annual membership fees.

Eastern Logistics & Planning

The Eastern Logistics and Planning Committee is a veritable fountain of knowledge. Committee meetings held in Ponte Vedra, Florida and Charleston, South Carolina have been filled with both information on transportation logistics as well as related information on markets, regulation and the political realities of Washington. In late July, EL&P Chairman Scott Clayton stepped down due to other commitments and Jan Figgins, the current Vice Chairman, has agreed to step into the Chairman position. Edwin Fisher of ICG Inc., has agreed to fill the position of Vice Chairman. At the most recent Eastern L & P Committee meeting held on October 13, 2010 at the new Consol Energy Center in Pittsburgh, Pennsylvania, railroad updates were provided by Joe Osborne of the Norfolk Southern and Jack Burgess of the CSX. Peter Stephaich of Campbell Transportation Co provided insight into the challenges faced on the countryâ&#x20AC;&#x2122;s inland waterways and Rich Scharf of CONSOL Energy discussed methane origins, uses, and hazards and touched on recovery techniques in areas such as the Marcellus Formation. Following the meeting, Consol will hosted an evening of hockey with the hometown Pittsburgh Penguins taking on the Toronto Maple Leafs. It was a great opportunity to network and have a bit of fun. s

Charleston SC

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36 | COAL TRANSPORTER

NCTA COMMITTEE

UPDATES Western Logistics & Planning

The Western Logistics & Planning Committee met on July 15, 2010 in Deadwood, South Dakota. Chairman Greg Key and Vice-Chairman Kathy Brown led the meeting. After introductions, Bill Baumberger led a discussion on a proposed format for nominating brokered (3rd party) trains. Nonstandard and untimely notifications to the mines for loading brokered trains are causing scheduling inefficiencies. Further refinements to this form including a version which would allow multi-train notification are expected in the near future. The program also included an update on Wyoming mining issues from Marion Loomis, Executive Director of the Wyoming Mining Association and rail service updates from Andy Schroeder (Union Pacific Railroad) and Will Cunningham (BNSF Railway). After the break, Dr. Sheila Hanson gave an overview of work being conducted at the Energy & Environmental Research Center at University of North Dakota, including projects on enhanced lignite and CO2 Sequestration. A discussion of diesel fuel hedging strategies by Trevor Pettus of Ameren and an audience response Q&A session rounded out the day. Presentations from this meeting including the ARS segment results are available on the NCTA website. Key issues for the Western Logistics and Planning Committee this year include refining the NCTA Coal Forecasting process, improving the nominating process for brokered trains (see sidebar) and the restoration of monthly train loading statistics for the joint line. The next meeting of the Western Logistics and Planning Committee will be in January of 2011. For input and ideas for this meeting, please contact Chairman Greg Key (Ameren) or Vice-Chairman Kathy Brown (Arch Coal). s

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38 | COAL TRANSPORTER

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Art has certainly left his mark on the committee.

Operations and Maintenance

The Operations and Maintenance Committee remains active year around looking out for the interests of NCTA member companies through their expertise on operating rules and regulations and detection of car maintenance concerns and costs. The committee is recently completed its annual private car owner roundtable and general conference in beautiful Coeur dâ&#x20AC;&#x2122;Alene, Idaho. It was the end of an era as long time committee Chairman Art Lewis stepped down as a result of his retirement from American Electric Power. Art intends to stay involved in the business by doing some consulting between golf and fishing. Art leaves the Committee in the capable hands of the new Chairman, John Casto of FirstEnergy Solutions. John recently served as Vice-Chairman of the O&M Committee. In this position he took the lead on several recent initiatives such as the car count project, O&M discussion board and executive committee election procedures. John is hitting the ground running. Other members of the O&M Executive Committee include new Vice-Chairman Carmen Sparks (Luminant), Harry Mullins (Southern Company), Dennis Wanless (Xcel Energy), Rich Kotan (OPPD), Willie Yager (TUCO/Nexgen), Kevin Waite (DTE), Mike Gray (First Union), Robin Anderson (Mitsui) and Gayle TenBrink (TrinityRail). The executive committee meets monthly by teleconference. The 2011 Operations and Maintenance Conference is scheduled for June 13-15, 2011 at Hyatt Regency Lake Tahoe in Incline Village, Nevada. Just 34 miles from the Reno/Tahoe International Airport, Incline Village is located on the lakeâ&#x20AC;&#x2122;s north shore. s

Art Lewis and John Casto

COAL TRANSPORTER | 39

Brokered Train Nominations

Calendar of Events

2011

Standardized forms being developed

ominations to the mines for brokered trains are sometimes hit and miss in terms of when the information arrives and what data is included. Not only is this situation causing scheduling inefficiencies but it is also a disservice to those dedicated individuals that have to sort the information out often afterhours. The Western Logistics and Planning Committee is working on standardized forms that will alleviate this problem. Your input is welcome as the committee works to refine and implement this form. s

Broker Nomination Form - BNF - 2010.002 Multiple Train Nomination Form TO:

Mine

FROM:

Nominating Party

DATE: Estimated Load Date

Tracer Car

Inbound ID

Outbound ID

Consignee Customer (End User)

Contract / UI

Special Instructions

January 15, 2011 Advertising and Editorial Deadline for Issue 1, 2011 of the Coal Transporter Magazine. February 23-24, 2011 Winter Board of Directors Meeting Ponte Vedra Inn & Club, Ponte Vedra, Florida April 24-27, 2011 Spring General Conference The Broadmoor, Colorado Springs, Colorado June 14-16, 2011 Operations and Maintenance Conference Hyatt Regency Lake Tahoe, Incline Village, Nevada June 25, 2011 Advertising and Editorial Deadline for Issue 2, 2011 of the Coal Transporter Magazine. September 12-14, 2011 Thirty-Seventh Annual Business Meeting and Conference Brown Palace Hotel, Denver, Colorado

10.001 n Form - BNF - 20 Broker Nominatio on ati Train Loading Inform Inbound ID: Today's Date: Mine: Final Destination

Outbound ID: Requested By: Company ID:

(Plant): BWARN TRAINS-LINE-UPS/BTM LINEUPS 02/12/2010 5:46 PM

Unique Indentifier: ETA at Mine: Side Release Other Treatments Additional Notes:

40 | COAL TRANSPORTER

Dust Treatment Information

2012 April 14-19, 2012 Spring General Conference The Greenbrier, White Sulphur Springs, West Virginia

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STATS AT A

GLANCE

One picture is worth

a thousand words

World Carbon Dioxide Emissions 14,000

USA Japan

Million Metric Tons CO2

12,000

Brazil Russia

10,000

China India

8,000

Europe

6,000

4,000

2,000

2005

2006

2007

2015

2020

2025

2030

Year

2035

Source: U.S. Energy Information Administration / International Energy Outlook 2010

Coal Combustion Product (CCP) Uses

0.4% 2.1% 3.0%

1.2% 2.7% 17.3% 14.1%

19.0%

6.2% 0.2%

6.9% 23.1%

42 | COAL TRANSPORTER

0.5% 1.5% 1.8%

Concrete/ConcreteProducts/Grout

Blasting Grit / Roofing Granules

Blended Cement / Raw Feed for Clinker

Mining Applications

Flowable Fill

Gypsum Panel Products

Structural Fills / Embankments

Waste Stabilization / Solidification

Road Base / Sub-base

Agriculture

Soil Modification / Stabilization

Aggregate

Mineral Filler in Asphalt

Miscellaneous/Other

Snow and Ice Control

American Coal Ash Association Coal Combustion Product (CCP) Uses

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2010 Field Manual of the AAR Interchange Rules Overview of Rule 95

he Association of American Railroads (AAR) introduced Rule 95 in 1970 in an effort to clarify responsibility for damaged freight cars when interchanged. Rule 95 is divided into two sections: 95A covers situations in which the handling line has knowledge of doing damage and acknowledges responsibility, while 95B addresses situations in which damage is evident but the responsible party is not identified. While thousands of freight cars are interchanged on a daily basis, (from railroad to railroad, railroad to industries, and back again) mishaps and accidents happen. Damage to equipment should not be taken lightly, since what may seem to be a minor incident can create serious to catastrophic problems if damage is overlooked. The following is a brief overview of Rule 95.

95A – Handling Line1 – At Any Time This section applies only when the handling line has knowledge of damage or loss to any car or listed appurtenances regardless of extent unless otherwise defined in Rule 95 Section A. This rule covers your equipment when it is cornered, sideswiped, fire damaged, collision, derailed, submerged, and other handling line defects listed in the rule. Example #1: The handling railroad derails a train (Rule 95.A.3). They would be responsible for repairing the car(s), or making temporary repairs and applying a defect card (per rule 102). The railroad will notify the car owner or their agent for shop disposition, or request a depreciated value statement (per Rule 107) if they feel the damage is beyond repair.

95B – Delivering Line2 – In Interchange3 This section only applies to cars moving without defect card protection in existence on car and damaged to the extent of or in a condition as shown in section B. If the car has a condition listed in section B then the car must have a defect card attached when offered in interchange except when documented evidence is sufficient to identify a responsible party and/or party having prior knowledge of cardable defects. Receiving party referred to includes delivery home to private industry tracks.

Example #2: You receive your aluminum coal car at the industry track or contract shop and it has Rule 95B.3. (a) Which states: Damage which in this case two (2) adjacent metal posts are cut through thickness of metal in the web. The delivery line is notified and under the rule they are responsible to apply a defect card, or a joint inspection certificate is submitted to the delivery line per Rule 103. Example #3: You receive your aluminum coal car at the industry track or contract shop and it has one (1) metal side post cut through the thickness of metal in the web. In this case if you do not have clear evidence that the railroad damaged the car under Rule 95A, you the car owner would be responsible for the repairs. Tips to minimize disputes with damaged cars; Tip 1 – Inspect your cars upon receipt to your industry track. If it is damaged document the damage and contact the delivery line per Rule 89.B.2. Tip 2 – Document the condition (such as an outbound checklist) of your car prior to the release into interchange. Tip 3 – Have an expert available in the rules that can guide you through the process. Tip 4 – If the railroad reports damaged cars regardless of Rule 95 or Rule 108 damage, have the car inspected by someone that is familiar with current rules.

Editor’s Note: This is the first in a continuing series that examines some of the most important AAR Interchange Rules. Knowing these rules and how they affect private car owners can keep your fleet in service and save you money.

Tip 5 – Do not assume the railroad damaged your car.

What has one of our NCTA Members initiated on Rule 95? An NCTA utility member company is concerned that Rule 95 is outdated and requires an update. When Rule 95 was written in the 1970’s, aluminum railcars were almost non-existent. This utility, working with the NCTA Operations and Maintenance Executive Committee, has solicited input from coal railcar manufacturers regarding the different tolerances of repairing aluminum versus steel. This issue has also been brought to the attention of the EEC and the AAR Arbitration and Rules Committee with a request that Rule 95 be revised to reflect the differences in aluminum versus steel railcars. Example #4: According to Rule 95.B.6.b, any side sill bent or buckled in excess of 2 ½ inches, vertically or horizontally, within a space of 6 feet between inside edges of a body bolster would require replacement. However, on an aluminum railcar a deformation of 5/16” or less upward the side sill should be replaced. Input to the issue concerning the need to update Rule 95 is welcome. Please send your comments to the NCTA Operations and Maintenance Executive Committee via Chairman John Casto (castoj@firstenergycorp.com). s

The photo shows damage caused lifting a car, however the railroad would not have bad order it or place a defect card the car because it is less than two inches. Closer inspection shows cracking in the horizontal flat just inboard of the bolster stake. 1 Handling Line is described as the Railroad of record in the AAR Train II System having possession of an interchange freight-car. (See Appendix A of 2010 Field Manual of the AAR Interchange Rules) 44 | COAL TRANSPORTER

2 Delivering line is defined by the rules as a subscriber offering a freight car in interchange

3 Interchange is defined as the transfer or delivery of a freight car from one subscriber to another as indicated in the AAR Train II system

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The EPA’s

Three Front

War on Coal By Pat Scherzinger

46 | COAL TRANSPORTER

fter years of promoting renewable energy and disparaging coal in the United States, non-hydro renewables still only represent about 4% of the county’s installed generating capacity. Diversifying the energy supply portfolio is a good thing as long as done rationally and in a manner that doesn’t undermine the economic value of existing supply and cause further damage to the fragile economy.

the extremely short trip from a scientific dialog to calling those that respectfully disagreed with their conclusions as “flatearthers”. Nothing agitates the public more than feeling that they have been manipulated. The public has not missed the purpose of the moving the discussion from “warming” to “climate change”. They also see nuanced explanations of “weather” versus “climate” have been necessary to support the underlying theory.

Proposition 23 would have suspended California’s Global Warming Solutions Act of 2006 (AB 32) until unemployment dropped to 5.5 percent. California’s current rate of unemployment is 12.4 percent, one of the highest in the United States. It is estimated that opponents of the proposition outspent supporters of the measure by more than two to one to ensure its defeat. Another change in the landscape’s grand plan for economic management

Unfortunately for many, change is not coming quickly enough. Three major setbacks have occurred for the global warming alarmists: Climategate, the economic recession, and the 2010 elections. In the first instance, the leaked emails from the University of East Anglia’s Climate Research Unit raised the questions concerning the process used to “close the book” on the science of man made global warming. It raised the question in the mind of the public about

In spite of this new skepticism among the public, the renewable energy movement may have remained unaffected were it not for the economic recession. Americans are starting to grapple with the reality that there is an insufficient amount of capital to solve every problem. Even in California, a leader in renewable generation, some recognition has been given to the link between energy prices and the economy. Although defeated on election day,

of energy resource prices was October’s announcement that the Chicago Climate Exchange (CCX) will be ending carbon trading at the end of the year. Founded in 2000 as a voluntary method of carbon trading, its ultimate success was tied to the idea that one day cap and trade would be mandatory. Some estimates were that trading on the exchange would eventually become a 10 trillion market. Without a mandatory requirement, the exchange attracted COAL TRANSPORTER | 47

The EPA is using the Clean Air Act, the Endangered Species Act and existing regulations to implement its agenda. Actions on all fronts will increase the cost of electricity, deepening and prolonging the recession and making America less competitive in global markets. sellers but few buyers leading to its demise. The 2010 elections make it highly unlikely that a mandatory trading will be imposed in the near future. CCX was sold in April 2010 for $600 million to the IntercontinentalExchange (Symbol: ICE), an electronic futures and derivatives platform based in Atlanta and London. The sale allowed investors such as Al Gore’s Generation Investment Management and Goldman Sachs to cash out. While all these events may seem to be a bit of a reprieve from certain rate hikes for energy consumers, they just forced the administration to change tactics to achieve its goals. At front and center in this effort is the Environmental Protection Agency (EPA). AT_Halfpage7.125x4.75.pdf

CMY

48 | COAL TRANSPORTER

5/10/10

The EPA’s Three Front Assault on Coal The use of administrative agencies to further the White House’s political agenda is nothing new, especially when the other party controls Congress. The Administration can shape policy without the negotiation and compromises inherent in passing legislation. Often regulations can be implemented under the radar of the general public as there is less scrutiny and media coverage generated when administrative agencies act. Legislators do not have to go on the record when regulations are promulgated as they do when legislation is passed. EPA has made it abundantly clear that absent climate change legislation, they would head down a regulatory path. 3:18 PM

The EPA is using the Clean Air Act, the Endangered Species Act and existing regulations to implement its agenda. Three of its focus areas are already impacting coal fired generation. These areas are coal mine permiting, coal ash regulation, and greenhouse gas regulation. Actions on all fronts will increase the cost of electricity, thereby deepening and prolonging the recession, and making America less competitive in global markets.

The EPA and Coal Ash Regulation The most recent look by the EPA at coal ash regulation began as a result of the December 22, 2008, failure of surface impoundments at the Tennessee Valley Authority’s (TVA) Kingston Fossil Plant.

In that incident, 5.4 million cubic yards of fly ash sludge releasing onto adjacent property and into the Emory River creating an environmental incident and a clean up effort that is still ongoing. In May of 2010, the EPA announced plans to regulate coal ash and asked for public comments on two approaches. Both proposals would fall under the Resource Conservation and Recovery Act (RCRA). One option is drawn from authorities available under Subtitle C, under which the ash would be classified as hazardous and would be subject to strict requirements for waste management and disposal. The second option includes remedies under Subtitle D, which gives EPA authority to set performance standards for facilities. In a bit of an attempt of “having your cake and eating it too”, the EPA proposal offered that, “Under both approaches proposed by EPA, the agency would leave in place the Bevill exemption for beneficial uses of coal ash in which coal combustion residuals are recycled as components of products instead of placed in impoundments or landfills. Large

      

Concrete in the DC Subway contains plenty of coal ash. quantities of coal ash are used today in concrete, cement, wallboard and other contained applications that should not involve any exposure by the public to unsafe contaminants. These uses would not be impacted by today’s proposal.” Not everyone is buying the logic or the market impact to beneficial uses of ash with a hazardous waste designation. Even on Capitol Hill where convoluted logic is routine, the EPA was asked how coal ash could be hazardous in a landfill but magically not hazardous if it was recycled. Market support for continued use of coal

ash under a Subtitle C designation would erode for fear of litigation risk alone. Given that the Washington Metro subway system and many major government buildings are constructed with concrete containing coal ash, the government may want to look at its own risk profile. Electric Power Research Institute (EPRI) estimates that disposal costs for coal combustion products range from $5 to $60/ton. Revenue from selling coal ash products to ready-mix concrete plants, wallboard manufacturers, agricultural soil amendment distributors, roadway builders, and others is for the most part in $10–$20/ton range, although prices can be as high as $60/ton. Typically 40-45 percent of the ash that the industry generated finds a beneficial use. These sales offset current energy prices would not only be lost to ratepayers, but would be replaced with additional disposal costs. The EPA website contains a 50 page document on “Using Coal Ash in Highway Construction: A Guide to Benefits and Impacts.” Concrete made with fly ash extends the life of construction projects by decades, minimizing the need for and

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environmental impacts of rebuilding and creating infrastructure that saves taxpayers money. For a chart of Coal Combustion Product Uses, please see the Stats at a Glance page in this issue.

The EPA and Mine Permitting

In a 31 page immediately effective “Guidance Document” issued on April 1, 2010, the EPA launched a new assault on the permitting of mountaintop coal mining. The guidance set benchmarks for measuring the conductivity of water in streams and waterways and called for permits to be evaluated in terms of environmental justice. This followed action taken by EPA in September of 2009 when 79 proposed surface coal-mining projects in Appalachian states were held up for further, “detailed reviews” of their pending permits. The National Mining Association has sued them. The State of West Virginia has sued them. The Kentucky Coal Mining Association and the State of Kentucky has sued them. The NMA lawsuit, filed in July, contends that the EPA and the Army Corps of Engineers use of agency “guidance” as a substitute for formal rulemaking is in violation of the Administrative Procedures Act as it circumvents requirements for public notice and comment. The suit also claims that the EPA’s action usurped authorities of the states and other federal agencies and that the new benchmarks for assessing water quality were “arbitrary and capricious”. In a press release on the lawsuit NMA President and CEO Hal Quinn explains “NMA members’ efforts to navigate this unlawful process and obtain reasonable and predictable permit terms have been unsuccessful, leaving us no choice but to challenge the EPA and Corps policy in court. Detailed agency guidance is not a valid substitute for lawful rulemaking based on public notice and comment. The agencies’ continued abuse of the law to impose arbitrary standards on mining operations, state agencies and other federal regulatory bodies threatens the entire region with further economic misery and stagnant employment.” A lawsuit filed by the West Virginia Department of Environmental Protection in Charleston federal court in early October names the Environmental Protection Agency and its administrator, Lisa 50 | COAL TRANSPORTER

Jackson, as defendants. Two weeks later Kentucky Governor Steve Beshear directed his Energy and Environment Cabinet to join with the Kentucky Coal Association in a lawsuit against EPA. The lawsuit was filed U.S. District Court, Eastern District of Kentucky, Pikeville Division. Like the NMA lawsuit, both states challenging the EPA’s arbitrary rules, guidance and oversight regarding coal mining permits under the Clean Water Act (CWA). Additionally both state filings cited the threat of EPA’s actions to end the responsible mining of coal and the jobs that go with it.

The EPA and Greenhouse Gases From a Supreme Court decision in 2007 to an endangerment finding in 2009, to a brand new “Guidance” just released, the EPA has been creeping up on the regulation of CO2 and other gases including methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride. The latest guidance released on November 11th is offered up as a vehicle to help state and local authorities in selecting the best-available control technology. It isn’t a rulemaking, according to the EPA. The EPA’s carbon regulations under the Clean Air Act are set to begin January 2 and will apply when companies propose to build or modify industrial sources of “pollution”, such as power plants. The rules will be implemented by states through a permitting process when companies seek permission to build or upgrade operations. As it did with mine permitting, the use of a guidance document avoids the necessity for public comment that a rulemaking would require. This is the plan B approach for the Obama Administration which was unsuccessful in passing cap and trade legislation through Congress. In a 2008 interview with the San Francisco Chronicle, Obama stated that “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.” With an annual budget of over $10 billion dollars, the EPA hopes to do what Congress would not. Not a good sign for the struggling economy. With the states each developing their own approach to GHGs through the permitting process, companies that operate in multiple states will have their work cut out for them. Rather than add clarity and the

certainty necessary for capital investment decisions, the new guidance on GHG will make the permitting process an even bigger battleground than it has been in recent years. Tracking new regulations, assuring compliance, monitoring, measurement, accounting and reporting will be new administrative burdens that will be additive to the cost of compliance, creating dozens of more reasons for companies to just give up and move production and jobs overseas. There will be a new Congress in Washington in January and there is already talk of using the Congressional Review Act or funding limitations to derail any of the EPA’s new regulations that are viewed as end runs to the legislative process and harmful to the economy.

The EPA and Environmental Justice The EPA increasingly cites the need for consideration of Environmental Justice in its policy making. Environmental Justice is defined as the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. It will be achieved when everyone enjoys the same degree of protection from environmental and health hazards and equal access to the decision-making process to have a healthy environment in which to live, learn, and work. In March of 2010 the American Coalition for Clean Coal Electricity (ACCCE) released a study quantifying the increasing energy cost burdens on American families. In the study, the approximately one-half of U.S. households who have average pre-tax annual incomes less than $50,000 are projected to spend 19% of their after-tax income on energy costs in 2010, up from 12% in 2001. Lower-income families are more vulnerable to energy cost increases than higher-income families because energy represents a larger portion of their household budgets. Families earning less than $10,000 pay over 69 percent of their after tax income for energy expenditures. Energy includes electricity, heating, cooling, and transportation. Given these statistics, it is difficult to understand how this war on coal could be considered just. s

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NCTA / Member Sound-Off

Member Sound-Off

The Coal Transporter asked NCTA members to offer their opinions on a current topic in the coal industry.

This year the NCTA began a formal process of getting feedback on each of its major conferences immediately following each event. The feedback surveys were designed to be completed in about two minutes and contained plenty of room for comments. This issue’s member sound-off section features some of the feedback received, some FAQ, and some explanation of the tradeoffs we make when pulling it all together. Quick Review of Conference Formats

pring Conference: The Spring Conference kicks off for early arrivals with a Sunday night reception. Monday is the annual golf tournament followed by a dinner open to all conference attendees and their guests. Tuesday morning is a general conference session. Tuesday afternoon has been filled with a variety of events over the past decade including special panel presentations, breakout meetings, and facility tours. It also provides the opportunity for business meetings and additional networking. Wednesday morning is again a general session with the conference ending at noon, allowing plenty of time for return travel home. Operations and Maintenance Conference: The Operations and Maintenance Conference starts mid-morning Monday for private car owners choosing to participate in the Roundtable discussion. Monday night is a reception. Tuesday’s general session runs all day and is followed by a dinner open to all conference attendees and their guests. Wednesday morning is a conference general session followed by the annual golf tournament that afternoon. Fall Business Meeting and Conference: Dubbed by NCTA staff affectionately as “all work and no play”, the fall conference features two lively receptions, the annual membership meeting, and a day and a half long agenda packed with the latest information in the industry. The conference typically opens with a special guest speaker to inspire and invigorate the audience. Some of these speakers get talked about for many years afterwards and provide a much needed perspective to the daily grind. 52 | COAL TRANSPORTER

The Feedback: What is the primary reason someone attends a NCTA Conference?

Main Reason for Attending Spring Conference 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Content

Networking

Personal Growth

Speakers

If you are in marketing, it is easy to understand that why networking opportunities are so important. Customers too realize the importance of networking as a means to foster competition and secure goods and services particularly in a constrained market. Education is important too, especially considering it is the primary mission of the NCTA. Finding the balance between a being a “boarding school” and a “boondoggle” is an ongoing challenge for the NCTA and its conference offerings. Not only is this balance different for each individual and company but the overall balance shifts with the economy and the marketplace.

The Feedback: Are NCTA Conferences a good value? 80%

Operations and Maintenance Conference Rating

70% 60% 50% 40% 30% 20% 10% 0%

Premium event at economy price

Good value for money

On par with other events

Pricey, but beats a day in the office

Can I get a refund?

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NCTA / Member Sound-Off Attendees overwhelming rate their NCTA conference experience as a good value for the money or a premium event at an economy price. The data shown is for the 2010 Operations and Maintenance Conference but results for the Spring Conference in San Antonio were similar. The NCTA strives to keep conference costs low while maintaining our standards on venue quality, service, and location. Some venues clearly work better than others. Our next two conferences will be at five star properties, the Broadmoor and the Greenbrier, which we know you will enjoy. Much of the feedback was open ended. Here is a sampling of what members are saying…..

MOST BENEFICIAL ASPECT OF THE CONFERENCE Spring Conference “It is hard to not rave about John Doggett. He is very uplifting and relevant.” “Soliciting anonymous questions in advance for the Efficient Coal Logistics Panel was a fantastic idea that led to a very productive session. Suggest the concept be carried forward. Likewise using the polling system in Coal Dust Mitigation breakout session was very effective.” “The networking with people that you don’t regularly communicate with. Great opportunity to get together and talk about the industry outside of day to day tasks.” “Networking. Getting a sense of what others see as critical issues. Meeting STB staff.” “Networking. Networking. Networking.”

Operations and Maintenance Conference “Getting an opportunity to network with all of the people involved in the coal chain (utilities, railroad, mines) in one location. ” “The round table is always very beneficial, of the presenters, the topic of DDCT - Damage Defective Car Tracking System and EPC brakes were most beneficial. ” “Better understanding the coal transportation needs for capacity and efficiency improvements” “Coeur d’Alene in particular was the perfect setting to mix a great learning and networking opportunity with a very relaxing, vacation-like atmosphere. ”

54 | COAL TRANSPORTER

“The Round Table sessions. It was great having shop representatives in to discuss current maintenance trends. ”

SUGGESTIONS FOR FUTURE EVENTS… Spring Conference “My husband recently went to a conference and they had a networking session where everyone would meet for 2 minutes, exchange a few words and business cards. I feel like I didn’t have quite the chance to meet everyone I set out to meet and this would be a great opportunity to meet additional people while I’m at the conference. I’m not sure this is feasible but perhaps something like this could be modified for the larger group.” “I think the Monday night NCTA dinner would be better if it was not a sit down dinner. It is the only time everyone is together, and if we had appetizers and drinks only, everyone could move around and mingle more. The short amount of time before dinner is not enough time to socialize before sitting at a table all evening. Soft background music would be nice.” “On golf outing, make sure that it starts earlier by about 1.5 hours, so that people do not have to rush back to get ready for the evening dinner.” “We need to hold more conferences in the East. We need to try and have all the main speakers completed in one day.” “Every few years one should be held in the wine country, regardless of the states politics.” Many of the comments on the Spring meeting had to do with the timing, format, and venue. Some issues are quite simple to address. Some choices are economic decisions. Others involve those pesky, proverbial tradeoffs where it is impossible to please all of the people all of the time. For example, we would love to start golf at 11 am but unless one is willing to buy the course for the entire day, a tournament either starts at 8am or 1pm. It is the tariff of the golf world, if you will. With respect to the venue, this clearly falls into the “you can’t please everyone” category. Moving the spring meeting around provides variety and often attracts extra participation from the region in which the conference is held. We have made a conscious decision to avoid areas such as California that clearly have anti-coal policies. These areas are also the first to slap on an “energy surcharge” to your nightly hotel stay whenever they see their power rates spike. Finally, the annual spring conference dinner format is an issue for some attendees who find the experience confining. Talking to nine people for ten minutes each at a reception is a different

experience than sitting between two people over dinner over the same period of time. From our perspective, it is a social event that promotes a sense of shared purpose and community among our attendees. Everyone can participate in this event. They are other opportunities, both in the spring and especially in the fall where the marketers can compete for buyers time and eventually sit them between two people over dinner for 90 minutes. Everyone’s got to eat!

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Operations and Maintenance Conference “Could the list of attendees that we can access prior to the conference have emails and job titles on it like the one we receive at the conference? It’s nice to have an opportunity to contact people prior to the conference to set up opportunities to meet. Sometimes it’s hard to find people in a crowd at the conference (especially if you’re new to NCTA).” “I also think maybe taking a few minutes to introduce people that are new to the conference would be nice. I sat next to someone that had never been to an NCTA event before, so that may have also helped with the networking part of things if people knew who that person was.”

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“General update presentation on railcar maintenance developments.” “Provide a summary or some output of the roundtable discussions with the suppliers....preferably during the 3-day event so that suppliers can have a chance to ask questions and/or respond...or get a contact for follow up.”

Thanks to all the attendees that suggested presentation topics for future events! COAL TRANSPORTER | 55

Mountains of Casey Kaptur

By Kate Tanquary

asey J. Kaptur was born in Chicago and grew up in the Chicago area. He received his BA in Chemistry from Purdue University in 1972, and after teaching for a semester continued on to graduate school at the University of Illinois for his MBA. After graduating, Casey found himself in a situation remarkably similar to this year’s recent graduates. “When I got out of school in 1975,” he says, “then, like now, it was a recession and the number of companies that were hiring was very limited.” On a typewriter Casey painstakingly composed hundreds of copies of his résumé and sent them out to companies in all manner of industry. One response came from the Ralston Purina Company, famous for their pet food, who wanted Casey to help them sell a new kind of soy burger. Certain that he didn’t want to get into sales, Casey declined Ralston Purina’s

56 | COAL TRANSPORTER

Experience: offer. Instead, Casey took a job with the former Standard Oil of Ohio (Sohio) and went to work in their Chemical division. Casey recalls the busy year he had when he first joined up with Sohio in 1975-1976, as “Sohio was in the process of building the Alaska Pipeline,” a project which began in 1974 and concluded in 1977.

A Line to the Future

“Even though they were sending every nickel they had up to Alaska to finish the pipeline, [Sohio] could still see a time when the oil was going to start to flow, the cash was going to start to flow, and they were looking at a lot of different kinds of investments. What were they going to do to invest this money once they got it?” The trigger for the pipeline had been the 1973 oil crisis, when the first Arab embargo had sent the price of energy skyrocketing. Casey remembers that historic time in the industry: “Not only were there the gasoline shortages that made all the headlines, but there were also shortages of basic petrochemicals such as ethylene, styrene, and other chemical building blocks. There was a lot of emphasis on domestic energy production. Sohio’s idea was that we would take

the cash flow and the oil coming from Alaska and build petrochemical plants to manufacture these basic building blocks.” The benefit of manufacturing petrochemicals was obvious to both Sohio and Casey. “They end up in everything,” he says. Everything from lubricants, adhesives, plastic containers, inks, dyes and paints. Unfortunately, Sohio was beaten to the punch. By the time Sohio had cash to invest in petrochemicals, other firms had already done so. “When the pipeline was finished,” Casey says, “other people had beaten us to that strategy.” With new petrochemical manufacturing plants springing up everywhere, there was oversupply in the market and the plan Sohio had hatched was no longer regarded as viable.

Coal on the Home Front

Although the petrochemical plan had fallen short, Casey would soon get involved with a much different beast. On April 17, 1977, Jimmy Carter gave a famous speech in front of the White House fireplace, comparing the American energy crisis to be the “moral equivalent of war” and vowing an increase in domestically produced energy. “And that meant coal,” says Casey.

“When I got out of school in 1975, then, like now, it was a recession and the number of companies that were hiring was very limited.” Casey Kaptur

COAL TRANSPORTER | 57

Sohio’s coal division, Old Ben Coal, was located in Chicago, IL. “Which, conveniently, was where I was from,” says Casey. “So I asked about a transfer to Old Ben Coal.” In 1978, Casey got his wish and moved back to his hometown of Chicago. “Ironically, I joined their marketing department and I was soon involved in coal sales, after telling Ralston Purina that I never wanted to be a sales guy.” Casey started out dealing with contracts, but in 1980 moved to the sales division and worked directly with Old Ben Coal’s customers for the next seven years. “I sold coal from Old Ben’s Midwest mines in Illinois and Indiana,” Casey says. “It was one of the best jobs I’ve ever had. I really enjoyed getting out and meeting with the customers; trying to find out what they needed, trying to find out how our products could help them. People will ask, ‘What is marketing?’ My answer, based in large part on that Old Ben experience is, ‘marketing is understanding your customer’s business and trying to figure out how your products can help them solve their problems.”

customers, an effort abetted by the 1990 Clean Air Act Amendments and their curbs on sulfur dioxide emissions. Casey and his colleagues at ARCO immediately saw their opening. “We were gearing up to take our low-sulfur Western coal into these Midwest markets that had previous used higher sulfur coal from the Illinois basin.” After a relatively short time with ARCO, Casey was promoted to head marketing efforts in the US and continued to excel in his efforts until ARCO Coal’s U.S. operations were sold in 1998 to Arch Coal.

Export Terminals and Foreign Exchange

“For me, the time I spent with ARCO was very interesting.,” says Casey. “One of the more interesting projects was my involvement with the Los Angeles Export Terminal (LAXT), built to export Colorado and Utah coal to Pacific Rim markets, primary the Japanese electric utilities. LAXT was a consortium of about 40 members. U.S. based entities, including coal producers, the Union Pacific Railroad, and the

Casey & crew ride the rapids through the Royal Gorge.

New Directions out West

Upon Old Ben Coal’s decision to expand in 1987, a new business development group in charge of mergers and acquisitions was formed in Cleveland, OH and Casey was promoted to head the operation. His return to the home office in Cleveland for the next three years saw him focus primarily on mergers and acquisitions in the Midwest, but he also paid attention to opportunities in the East and the West. But as Casey puts in, “things change” and in 1990 British Petroleum, which had bought out Old Ben’s parent Sohio in 1987, decided to remove itself from the coal business. On the advice of a colleague who was also looking for opportunities after Old Ben Coal, Casey applied for a marketing position with ARCO Coal. Though no longer a direct salesman of coal, Casey worked on innovating ARCO’s marketing strategy in order to sell the company’s increasing production of western coal to Midwestern

Port of Los Angeles owned 51% of the venture. Japanese consumers, banks, and trading companies owned the other 49%. The Port of Los Angeles was both an equity participant and landlord. Through a series of mergers and acquisitions, Casey eventually became Chairman of the Board of LAXT. Although Casey left LAXT when ARCO sold its coal interests to Arch, he had a front row seat to watch events in the export market unfold. In an unfortunate circumstance that combined high lease fees from the Port of Los Angeles, a strong US dollar and lower Australian coal prices, exports from LAXT became uneconomic and the terminal was forced to cease operation. LAXT was “just a little bit ahead of its time,” says Casey, in the wake of much current talk about the western export terminals. But he has a few words of advice for anyone else looking to attempt a viable export terminal in the west: “The viability of US coal exports, particularly steam coal exports, is tied to strength of

“It’s not enough to have a handshake. It’s not enough to have the consumers of the coal be part Casey Kaptur of the project. You need contracts. You need volume to move through the facility.” 58 | COAL TRANSPORTER

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the dollar, and the coal producers have very little control over foreign exchange rate. And that’s a risk in the business that you’re going to have to accept.” Contracts, with firm volume and price commitments, are the number one answer to stabilizing an otherwise unstable market. “It’s not enough to have a handshake. It’s not enough to have the consumers of the coal be part of the project. You need contracts. You need volume to move through the facility.”

Old Friends, New Ideas

Casey was first introduced to the NCTA when the organization was still known as the WTCA, the Western Coal Transportation Association. In the 1980s, when PRB coal was beginning to penetrate the Midwest and compete with the Midwestern coal that he was selling, Casey felt like he needed to know more about the PRB and the rest of the West in order to compete. Because the company Casey worked for at the time, Old Ben Coal, owned some Western properties, Casey was able to conAn Old Industry’s New Tricks vince his company to join the WTCA and began attending conferences. With so many opportunities open to explore after the sale of ARCO One of his most memorable moments with the association took Coal’s U.S. operations to Arch, Casey decided to go back to school place during an early conference in Arizona. He was having drinks to pursue a PhD in Mineral Economics from the Colorado School of with a fellow attendee by the pool, where the hotel had not skimped Mines. A number of factors went into this decision, including both on decorative touches like little drink umbrellas. “This was a fancy his love of learning and the need he saw for operational innovation resort, so the drink probably cost like, six bucks. So this fellow, he that he observed during his earlier career. “When I had been at the holds up his drink and he says: ‘Do you know that this drink now costs University of Illinois, there was a lot of interesting work in what was more than a ton of PRB coal?’” For Casey, this was a major insight. He then the newly emerging field of operations research; the application realized that the superior economics and the low sulfur content of the of quantitative methods to efficiencies and PRB coal would someday drive a tremendous optimization in business. At the time, much of expansion. “When I moved from Cleveland and that work was theoretical because although “Coal is more than economic; the Illinois Basin eastern production, I had my eyes on the west,” he explains. “Not only bethe benefits were obvious, the methods were cause I love Colorado, but because it was pretty really computationally intensive. And so it was it’s also a strategic resource clear that the PRB and the Colorado and Utah hard to implement in 1975.” But by 1998, underground mines were going to become when I went back to the School of Mines, the for the country. In the end, I major factors in the eastern markets, and that computer age had taken hold, and calculations has turned out to be true.” that would have taken weeks in 1975 could believe we’re going to find a be completed in seconds. Casey recalls his passion for the study of new methods: “These way, once again, to overcome Life Is Like a Mountain things were no longer theoretical. They were Casey’s powers of perception are tied to a there and available for industry.” He also these issues and be able to long history with the coal industry, and he has knew that with the consolidation of the coal seen its ups and downs from the inside. “The industry throughout the 1980s and 1990s, utilize this strategic resource.” coal industry has been very good to me over coal companies had hired few new tech-savvy the years. It’s going through a tough time right Casey Kaptur now, but I think we’ll come through that. Ever college graduates. He saw his opportunity to update his knowledge of operation research since I got involved with the coal industry we’ve techniques in order to bring them back to the had increasingly more stringent environmental coal and utility industries. regulations, but every time those things have come along the coal and As Casey worked on his PhD for three years, he did part-time the utilities industries have responded and found a way to meet those work with Resources Data International (RDI) where he wrote one regulations, often at a much lower cost than was predicted.” He notes of the first guides to risk management in coal, a study entitled “A that coal production has climbed steadily over the years, while pollutPractical Guide to Risk Management in Coal.” He also worked as a ants like ash, sulfur-dioxides and nitrogen-oxides have gone down. If consultant under his own Evergreen Energy Economics firm for a carbon legislation occurs, he predicts the industry will rise to meet the challenge. “Coal is more than economic; it’s also a strategic resource brief period before he was offered a position with Pincock, Allen and for the country. In the end, I believe we’re going to find a way, once Holt, a Lakewood, Colorado based international mineral resource again, to overcome these issues and be able to utilize this strategic consulting firm in 2001. By 2002, Casey had completed enough resource.” coursework at the Colorado School of Mines to earn his Masters in Casey has been married for 29 and has two children, both colMineral Economics. With his new position at PAH and two children lege graduates living on the East Coast. He has traveled to a number in middle school keeping him more than busy, Casey “temporarily” of countries, including South America, New Zealand, and many places suspended his pursuit of a Ph.D. “I still find the idea intriguing.” he in Europe. An avid outdoorsman, Casey takes every advantage of says, “All I have to do now is find the time.” the great opportunities that surround him in Colorado. “I love living His work at PAH includes both traditional coal consulting in Colorado. It’s a wonderful place if you love the outdoors, and I do,” and application of operations research. “I do a lot of traditional he says. Casey’s activities include skiing, biking, fishing, hiking and market research, which I enjoy, but I really get excited about climbing. He has climbed 49 of the “14ers” in Colorado, meaning developing quantitative methodology to coal and utility industry mountains about 14,000ft, of which there are 88 in the United States. problems,” he says. Some of Casey’s most memorable undertakings Colorado claims more than half of these mountains, but Casey has at PAH have been studies of optimal coal inventory levels, his already climbed a few of the out-of-state 14ers like Mt. Rainer in representation of the Crow tribe of southwest Montana in their Washington. He still has a few to go, but luckily he doesn’t seem to be efforts to develop the coal deposits on their land, and giving expert ready to stop any time soon. s testimony in court cases. 60 | COAL TRANSPORTER

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The View from the Caboose

THE VIEW FROM THE CABOOSE

The humo sometime rous s serio , sometim us r es of be amblings st Pete friends and A nn.

By Pete Moss & Ann Thrawsite

Pete: Ann, did you hear the theme of the NCTA Fall Conference this year was “It’s the Economy Stupid.’ It sounds like someone had their britches in a bunch.

and more expensive, from arbitrary mountaintop removal restrictions, to coal ash regulations, to attempts to regulate CO2 as a pollutant under the Clean Air Act.

Ann: Well I suppose that there is some frustration with the convoluted logic of those that think that making electricity from coal more expensive is the best way to make alternative energy resources more competitive. Personally, I think it is a strategy doomed to failure.

Pete: No, no, no. I meant the country needs an Economy Protection Agency. We need someone that actually does a cost benefit analysis (does the government even do these anymore?) and looks at the downstream impacts of raising the price of hamburger. I really don’t think we need another ethanol fiasco do we?

Pete: Hey, they could raise the price of hamburger so that we could all be eating steak instead. Ah, I love a good steak… But, dag nab it, even I know that wouldn’t work. Some of us would just end up going hungry and it would probably be me. Ann: No Pete, I think you’d be fine. But, you might have to cut back on your trips to the pub and that in turn would most likely put them out of business faster than you can say Sláinte. And then everyone that worked there would be out of jobs and they are the ones that would go hungry. Pete: The pub out of business. Oh the horror!! I think I’m going to have nightmares. How could they do such a thing? Ann: Eating steak instead of hamburger sounds nice at first which is how the politicians justify these things to the public, but everything has consequences.

Ann: You are really onto this steak versus hamburger analogy aren’t you? Pete: I’m just trying to find something that people can relate to. Besides, if hamburgers are a global problem, we really haven’t done a thing if my pub goes out of business here (sniff, sniff) and 200 million new hamburger stands open up in China. I guess none would open up in India though so I suppose my analogy is starting to lose some steam. Ann: It certainly is. But I get it. If you are going to try to solve a “problem” and you are likely to destroy your economy in the process, the least you could do is make sure the “problem” gets solved. Pete: You’re darn tootin’. I’ll drink to that, at least while I still can (sniff, sniff).

Pete: Well what this country needs is an EPA, not that I’m for bigger government or more bureaucrats.

Ann: Poor Pete. s

Ann: We already have an EPA and they are certainly not helping the situation. In fact, it’s quite the opposite. Every action they take anymore seems aimed at making coal less accessible

Have something to say to Pete?

62 | COAL TRANSPORTER

Send comments or questions to pete@nationalcoaltransportation.org

America’s pioneering spirit lives on. Tenaska, one of the country’s largest independent power producers, is going beyond traditional power generation processes to produce clean energy. Under development are two pioneering, coal-fueled projects utilizing commercial scale, proven technologies designed to capture and store carbon dioxide. Both will be among the first of their kinds in the world, serving as outstanding examples of Tenaska’s continued focus on innovation and a can-do spirit. www.tenaska.com Learn more about Taylorville Energy Center and Tenaska Trailblazer Energy Pioneering the Power Center at www.cleancoalillinois.com and www.tenaskatrailblazer.com. of Tomorrow.

NCTA Membership List 3M Company A. Stucki Company AIG Rail Services, Inc. AKJ Industries Alliance Coal, LLC Alliant Energy Alltranstek LLC Alpha Natural Resources AmerenEnergy Services American Electric Power American Railcar Industries, Inc. Amsted Rail Arch Coal Sales Company, Inc. Arizona Electric Power Coop. Arizona Public Service Company Arkansas Electric Cooperative Corp, Associated Electric Coop., Inc. Associated Terminals LLC Babcock & Brown Rail Management Basin Electric Power Cooperative Benetech, Incorporated Bosch Rexroth Corp. CANAC, Inc. CDG Engineers, Architects, Planners CIT Rail Resources City Utilities of Springfield Cleco Corporation Cloud Peak Energy Colorado Springs Utilities Colowyo Coal Company CONSOL Energy, Inc. Constellation Energy Consumers Energy Company CPS Energy Dairyland Power Cooperative

David J. Joseph Company Dayton Power & Light Company Detroit Edison DTE Rail Services, Inc. Duke Energy Dynegy Marketing and Trade Ecofab Australiasia Ellcon-National, Inc. Empire District Electric Co. Enserco Energy Energy Publishing, Inc. Entergy Services, Inc. Exelon Generation Company Exponent, Inc. FirstEnergy Corporation First Union Rail Corporation Florida Power & Light Co. FreightCar America GATX Rail GE Rail Services Global One Grand River Dam Authority Great River Energy Greenbrier Rail Services Helm Financial Corporation Hill & Associates, Inc. Holland Company Idaho Power Company International Coal Group Jim Walter Resources, Inc. Kansas City Power & Light Kiewit Mining Group, Inc. Koch Carbon, Inc. Lexair, Inc. Locomotive Service, Inc. Lower Colorado River Authority Luminant Macquarie Rail, Inc.

Maxeefish LLC MEAG Power MidAmerican Energy Co. Midland Railway Supply Midwest Generation, LLC Midwest Industrial Supply, Inc. Miner Enterprises Inc. Minnesota Power Mitsui Rail Capital, LLC Momar Incorporated Muscatine Power & Water Nalco Company National Steel Car Nebraska Public Power District Newmont Mining Corporation New York Air Brake Northern Indiana Public Service Norwest Corporation NRG Power Marketing Oglethorpe Power Corp. Oklahoma Gas & Electric Co. Omaha Public Power District Ontario Power Generation Inc. Otter Tail Power Company PacifiCorp Patriot Coal Corporation Peabody COALSALES Co. Pincock Allen & Holt Platte River Power Authority Portland General Electric Company Precision Roller Bearing Company Progress Rail Services, Inc. Rail Link, Inc. Railroad Financial Corporation RAS Data Services Resource Fuels, LLC Rhino Energy, LLC

Salt River Project Seminole Electric Power Cooperative Shur-Co Sierra Pacific Resources Southern Company Services Standard Steel Strato Inc. Structural Composites of Indiana SunGard Energy Taggart Global, LLC Tampa Electric Company TBS Mining Teck Coal Limited Tenaska, Inc. Tennessee Valley Authority Texas Municipal Power Agency The Timken Company Transportation Services, Inc. TrinityRail Tri-State Generation and Transmission Association TUCO/NexGen Services Tucson Electric Power Company UtahAmerica Energy Wabtec Corporation Watco Transportation Services We Energies Westar Energy, Inc. Western Farmers Electric Coop. Western Fuels Association, Inc. Westmoreland Coal Sales Company Wisconsin Public Service Corp. Wood Mackenzie Xcel Energy Zinkan Enterprises, Inc.

Index to Advertisers AEP/Cook Coal Terminal. . . . . . . . . . . . . . . . 39 Alpha Coal Sales Co, LLC. . . . . . . . . . . . . . . 27 Amsted Rail. . . . . . . . . . . . . . . . . . . . . . . . . 21 Arch Coal, Inc.. . . . . . . . . . . . . . . . . . . . . . . 53 Associated Terminals. . . . . . . . . . . . . . . . . . 48 Benetech, Inc. . . . . . . . . . . . . . . . . . . . . . . . 45 Cloud Peak Energy. . . . . . . . . . . . . . . . . . . . 61 Donohue Railroad Equipment, Inc.. . . . . . . . . 10 EcoFab. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 FreightCar America . . . . . . . . . . . . . . . . . . . . 7 Fuel Tech, Inc. . . . . . . . . . . . . . . . . . . . . . . 59 GKG Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 64 | COAL TRANSPORTER

Helm Financial Corporation. . . . . . . . . . . . . . 13 Ingram Barge. . . . . . . . . . . . . . . . . . . . . . . . 37 Lexair, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . IFC Macquarie Rail. . . . . . . . . . . . . . . . . . . . . . . 16 Maxeefish. . . . . . . . . . . . . . . . . . . . . . . . . . 49 Midwest Industrial Supply, Inc. . . . . . . . . . . . 17 Miner Enterprises, Inc.. . . . . . . . . . . . . . . . . . 3 Momar MinTech. . . . . . . . . . . . . . . . . . . . OBC NexGen Coal Services, Ltd. . . . . . . . . . . . . . 26 Osmose Railroad Services . . . . . . . . . . . . . IBC Peabody Energy. . . . . . . . . . . . . . . . . . . . . . 36 Pincock Allen & Holt. . . . . . . . . . . . . . . . . . . 13

PRB Coal Usersâ&#x20AC;&#x2122; Group. . . . . . . . . . . . . . . . . 51 Railroad Friction Products Corporation. . . . . . 41 Slover & Loftus LLP. . . . . . . . . . . . . . . . . . . 11 Structural Composites of Indiana. . . . . . . . . . 25 Suckerpunch Creative Inc. . . . . . . . . . . . . . . 55 Taggart Global. . . . . . . . . . . . . . . . . . . . . . . . 5 TBS Shipping. . . . . . . . . . . . . . . . . . . . . . . . 55 Tenaska. . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Timken. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 WestRail, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 43

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Extend the service life of your bridges with Osmose. Osmose Railroad Services, Inc. • P.O. Box 8276 • Madison, WI 53708 (800) 356-5952 • (608) 221-2292 • FAX (608) 221-0618 RRDiv@Osmose.com ©2007 Osmose is a registered trademark of Osmose, Inc.