NCTA Issue 1, 2018 by National Coal Transportation Association

ISSUE 1 | 2018

Grid Reliability Lessons Learned

from the Bomb Cyclone Reflections:

JACK CRANFILL 2018 O&M Conference

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NCTA Scholarship Winners

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Contents 16

ISSUE 1 | 2018

FEATURES

DEPARTMENTS

Know Your Chairman: Harry Mullins

A Lifetime with the NCTA

Message from the NCTA President – Emily Regis

Loving the Export Market

PUBLISHED BY:

Production, Distribution and Transportation Trends

Message from the NCTA Executive Director – Tom Canter

National Coal Transportation Association

NCTA Membership Benefits

Grid Reliability: Lessons Learned from the Bomb Cyclone

NCTA Committee Updates

NCTA Visits Washington D.C.

Calendar of Events

STB Update

Members Sound Off

2017 NCTA Scholarship Recipients

Membership List

Alternative Approaches to Pricing Coal Transportation Services

Index to Advertisers

Reflections: Jack Cranfill

View from the Caboose

4 W. Meadow Lark Lane Suite 100 Littleton, CO 80127-5718 Phone: 303-979-2798 Fax: 303-973-1848 www.movecoal.org Editor: Pat Scherzinger Phone: 303-993-7172 scherzinger@ nationalcoaltransportation.org Production By: Suckerpunch Creative Inc. info@suckerpunch.ca www.suckerpunch.ca

CONFERENCES 12

2017 Fall Meeting & Conference Review

Denver, Colorado, September 18-20, 2017

Spring General Conference Preview

Palm Coast, Florida, April 23-25, 2018

2018 Operations and Maintenance Conference Preview

Nashville, Tennessee, June 11-13, 2018

The opinions expressed by the authors of the articles appearing in the Coal Transporter are those of the respective authors and do not necessarily reflect the opinion of the NCTA, its Board of Directors or its member companies. Publication of the articles does not constitute an endorsement of the views that may be expressed.

30 COAL TRANSPORTER | 1

President’s Report / Emily Regis

A Message from NCTA President, Emily Regis

Coal – A Necessary Part of the Energy Mix

’ve been President of NCTA for a few months now having been elected in September 2017, and I will say I’m delighted and honored to be trusted with the job but admit I have stepped into it with some trepidation. Having worked in this industry for 18+ at Arizona Electric Power Cooperative/Arizona G&T Cooperatives, I have witnessed the many changes of the industry while coal hangs on to its diminishing piece of the electricity generation mix. Ours is an industry that seems under siege right now, and that is unfortunate, as coal generation is part of an “all of the above” sound energy strategy. We fulfill a vital mission, providing reliable and affordable power generation for our members, customers, and consumers. We can be proud of the responsible way we’re fulfilling that mission. Let’s consider how coal generation contributes to the grid – and our nation’s energy needs. It provides a safe and reliable means for generating electricity. It brings stable good paying jobs to a

2 | COAL TRANSPORTER

variety of industries in both rural and metropolitan areas. It is made in America. Coal and fossil fuels in general are good for prosperity and have played an essential role in making life better for all human beings living on this planet. Where would we be without coal’s contribution to steel production and cement manufacturing? Coal is also used in hand soap, laundry detergent, drinking water filtration systems, toothpaste and a massive variety of medicines. The list goes on for many more products we use on a daily basis. Coal has allowed countries with billions of people to raise their standard of living and develop their economies. And what about the major contribution coal has played in the electricity generation industry? Environmentalists and others, including many scientists, consider fossil fuels the root cause of climate change. For some, there is a moral conviction that using coal as a generation fuel is a destructive force. Unfortunately, the political climate makes it difficult to rebut the arguments

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President’s Report / Emily Regis

are reducing emissions from burning fossil fuels every year in this country, and it’s forecast we’ll continue to do so. Emissions from burning fossil fuels is less of a problem every year. I would argue that the predictions of disaster are somewhat overblown, and that in fact, living conditions are improving in most parts of the world, certainly in our own country. We will continue to work toward making things even better – fossil fuels included!

Speaking of arguments, one we often hear is that if we shutter all coal fired power plants, all the climate change problems of the world will be solved.

Emily at the Apache Generating Station in Cochise, Arizona. that put the cause of potential climate change at our door. It seems there is no room for alternative points of view, and the contributions we’ve made to the highest standard of living in the modern world are lost in the arguments. Speaking of arguments, one we often hear is that if we shutter all coal fired power plants, all the climate change problems of the world will be solved. Somehow coal has become an easy target and is taking all the blame. Right or wrong, if fossil fuels have played a role in causing irreversible changes to the planet then nothing can be done to change that. One might argue that shuttering all the coal plants in the world would not solve the problem and that the problem is therefore one that will require sacrifice from every industry that uses fossil fuels. However, I have a different perspective. We have intelligence and ingenuity, and we have and will continue to come up with solutions to problems and adapting with new technology. Natural or man-made, climate change is a challenge that we as humans can and will find a solution to. The fact is - we

4 | COAL TRANSPORTER

An argument can be made that fossil fuels have laid the foundation for many benefits; more and better production of agricultural produces and other food supplies; ever-better access to medical technologies that increase life span and have helped lower child mortality and death from a host of other causes; ever-better transportation and infrastructure; the energy provided by fossil-fuel generation is the foundation for countless benefits that have, in fact, made life better. And since no single fuel source can achieve all of these things by itself, coal becomes an essential part of the entire energy mix required to maintaining a high quality of life on this planet. With the role that coal and other fossil fuels play in producing safe reliable energy we should be arguing that any energy mix should include – and not exclude – fossil fuel generation, even as we look for other sources of energy. Another argument against burning coal is the expense driven by environmental controls and the competition with cheaper and cleaner natural gas. Yet, coal plants are still running even with the burden of expensive compliance chemicals and controls and it has been economical to do so. And we continue to learn how to burn coal cleaner and more efficiently than ever with every new environmental constraint and regulation. Achieving and using clean coal technology is a challenge we embrace. So the next person I meet who wants to challenge me about the way I make my living, I will simply ask them what are they are doing to make the world a better place to live in. This will either spark a lively discussion or provoke an argument but I know how to start the conversation, “let me tell you why coal and other fossil fuel generation is a vital part of our nation’s energy mix!” s

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Executive Director’s Message / Tom Canter

A Message from NCTA’s Executive Director, Tom Canter

Grid Reliability Is a Challenge

espite affirmations by FERC, various public service commissions, environmental activists, and independent system operators, recent events show that the electric grid is being stressed by weather events and an infrastructure that is increasingly based on a paradigm of reducing carbon. All other factors appear to be secondary as a “group think” world waits for a extreme temperature increase based on the computer-generated “hockey stick” curve. The government of the state of South Australia has bet the future of its power supply substantially on intermittent sources. It already proudly relies on about 40% of its electricity supply from intermittent sources and desires to increase intermittent power supply to 50% by the year 2030. Such reliance

Coal is indispensable for grid reliability and resiliency and we should rethink the headlong rush to eliminate capitalized coal-fired plants for uncertain or intermittent generation sources. is not without challenges and outright failure. The summer of 2016-17 seemed to have a load shedding blackout every month affecting as many as 1.7 million residential customers in a thinly-populated state. The Prime Minister of Australia, Malcolm Turnbull, has stated that the policy favoring wind and solar without supplemental supply or transmission of electric power from conventional power plants is turning South Australia into a “basket case” with Third World levels of reliability. It also eliminates the cheap energy advantage held by Australia in the past to attract industry. This decreases job opportunities. This is a case study for the deleterious effects of moving to an inordinate reliance on intermittent power supply. No lesson is learned here. On the contrary, the government is doubling down and adding stored energy to the mix in 2018 as a solution. Yes, they are installing smaller Tesla storage lithium-ion batteries in 50,000 units of public housing in the state. This is a neat linking of socialism and environmentalism (again). Adjacent to a large wind farm, there is also a single $50 million battery that will power up to 30,000 homes for about

6 | COAL TRANSPORTER

one hour in the event of a blackout. Whoopee! Following the money, Tesla is purchasing intermittent power at negative prices during the periods that wind is generating unneeded electricity. Tesla then sells the stored electric power to the grid during peak demand for a rather nice profit. It is difficult to see how consumers benefit from this arrangement. Now, for a recent case study in the U.S., let’s review the recent cold snap (the “Bomb Cyclone”, no, I didn’t make this up!) in January 2018. The Senate Energy and Natural Resources Committee held a hearing to review the performance of the Electric Power System during the event. The American Coalition for Clean Coal Electricity (ACCCE) has promulgated an excellent summary of this public hearing. Among the witnesses was the CEO of the system operator, PJM. Without question, the system was stressed during this four-day (at a minimum) event. The analysis of the PJM testimony by ACCCE shows that coal-fired generation was the largest generation source at 37% with wind at 2%. Let’s hear applause for looking out the window and seeing your fuel source during a severe weather event. Natural gas provided 22% of generation, but had 14 times more forced outages due to fuel supply issues of transportation, prioritization, and production. Yes, severe cold weather does affect natural gas supply and residential heating has a much higher curtailment priority. No one wants folks to freeze. Of course, coal can have forced outages as well and reclaiming coal can be challenging in severe weather, but the record shows the forced outage rate considering all causes of coal was about 40% better than the rate of natural gas plant outages during this January event. What’s the point? Coal is indispensable for grid reliability and resiliency and we should rethink the headlong rush to eliminate capitalized coal-fired plants for uncertain or intermittent generation sources. Current planning is to retire over 50 Gigawatts of coal-fired generation paid for by the ratepayers. A future generation may well question the wisdom of eliminating a viable, sustainable, and affordable (without taxpayer subsidy) fuel source if they have to endure a period of global cooling. Have a safe day producing energy and wealth for the good people of North America. s

Know Your Chairman / Harry Mullins

Know Your Chairman:

Harry Mullins

Senior Railcar Specialist Southern Company Fuel Services

“Have a passion for what you do each and every day. If you are not having fun while working, find something else to do.”

arry Mullins serves as a Senior Railcar Specialist for Southern Company Fuel Services. In this role, he is part of the Southern Company Railcar Maintenance team that is responsible for the maintenance of approximately 13,000 railcars. This includes cars used for coal, limestone, and gypsum. His particular area of responsibility is for the maintenance of the Georgia Power fleet. Harry and his team in the railcar group are constantly adjusting to the many changes in the coal business. Working to stay ahead of the game is exciting and requires that the plants, logistics, and railcar groups collaborate on a daily basis. Harry’s favorite part of the job is the ability to interface with many different people across North America including power plant personnel, corporate employees, co-owners, the railroads, vendors, and private railcar shop contractors. Most of all, he appreciates working with his fellow railcar maintenance team members. “I truly enjoy my role in helping the power plants be successful. When the power plants are successful, I can see the results of our work as a railcar maintenance team.” Harry graduated from the University of Southern Mississippi in Hattiesburg in 1973 with a BS in Health and went on to earn a MS in Recreation in 1975. While at Southern Mississippi, he was a student athletic trainer for all sports and really learned to appreciate the value of teamwork. Harry put his education to work right away with the Coweta County School System in Newnan, Georgia, where he taught classes at the elementary level and served as an

Athletic Trainer at Newnan High School from 1974-1978. In 1978, Harry took a position with Georgia Power in the Water Quality Lab at Plant Yates. While at Plant Yates, he moved through different quality control responsibilities, eventually becoming responsible for all coal sampling and weighing at the plant. In 1989, he transferred to Georgia Power Fuel Services group where he expanded his coal sampling and weighing expertise to all of the Georgia Power plants. Later he became part of the Southern Company Fuel Services, taking on the sampling and weighing issues for all Southern’s power plants and coal vendors across North America. Harry transferred to the Railcar team with Southern Company Fuel Services in 2001. It was an opportunity to do something entirely different and learn something new. His past experiences in the power plants and knowing many of the people there made this an easy transition. Shortly after becoming part of the Fuel Services Railcar team, he became involved with the NCTA O&M group. He had known several active NCTA members from his previous responsibilities in sampling and weighing. He realized quickly that he needed to surround himself with people that knew more than he did about railcar maintenance, who had more experience than he had, or who did things differently than Southern did. Harry credits the NCTA with providing an avenue to meet knowledgeable people in the industry and to grow from those experiences. He feels fortunate that Southern recognizes the value of NCTA and has allowed the railcar team to participate in committee activities.

“I truly enjoy my role in helping the power plants be successful. When the power plants are successful, I can see the results of our work as a railcar maintenance team.” 8 | COAL TRANSPORTER

Reid, Madison, Wallace and Miller Eventually Harry was elected to serve on the NCTA O&M Executive committee and took on his current position as Committee Chairman in 2016. The one time student is now the master. “Our O&M members are dedicated, experienced people with a world of knowledge. Each member in the NCTA O&M brings different ideas and views. No matter how small or large their company is, their views are important.”

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Harry and his wife Susan have been married since 1975. They have two daughters and four grandchildren. Susan is retired from teaching and works part time with the University of West Georgia. Their lives center on their girls, both of whom live nearby, and their grandchildren. Harry never got too far from his roots as an educator, serving as elected member of the Coweta County Board of Education for 20 years. He ranks serving on the Board of Education and helping his community as one the most rewarding things he has ever done. Harry has been an active member of the First Baptist Church in Newnan since 1975. Those that know Harry even casually know that he is an avid hunter and fisherman. He has enjoyed doing so in many places all the way from Alaska to Mexico and appreciates the fact, that by living in the South, he can hunt and fish year-round. He has introduced his grandchildren to the great outdoors and the joys of hunting and fishing. “I get to spend quality time with them while sitting on a dove field, sitting in a deer stand, or sitting in a boat. I enjoy hearing, “Buddy, I want to go hunting” or “Buddy, I want to go fishing”. Those times with them are important to me.” Although he has worked for Southern Company for 39 years, he has no plans to retire. Harry always says, “Have a passion for what you do each and every day. If you are not having fun while working, find something else to do”. Both Southern and the NCTA are lucky that Harry’s still having fun. s

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NCTA / A Historical Perspective

My Involvement with NCTA It’s been a Lifetime By Pat Scherzinger

Post 1996 Spring Conference in Westwood Village, CA 10 | COAL TRANSPORTER

hen I say I have been involved with the NCTA for a lifetime, I mean that literally. It just hasn’t been my lifetime, but my son Joe’s. He was just three months old when I attended my first NCTA meeting. It was the spring of 1991 at the Hyatt at Fisherman’s Wharf in San Francisco. He came along with me, as my in-laws were able to drive up from Los Angles and care for him while I attended the sessions. My journey to that first NCTA meeting had not really been all that much fun. While I had been in the fuel group at Portland General Electric (PGE) for six years at that point, I had learned much more about litigation and arbitration than I had anything else. Dusty Slover was one of the first people I met in the coal business, so that kind of says it all. At one time I could actually quote portions of the Staggers Rail Act. It wasn’t that PGE was particularly litigious; it was that the legacy coal contract signed before the plant was even built combined with the pre-Staggers rail tariffs made the plant uncompetitive in the PNW. In addition to all that hydro, PGE also had a perfectly good 1,000 MW nuclear plant. In those days the activists were focused on shutting down the nuclear plant and removing the dams and left coal alone. When the legal maneuvering came to an end, the plant had a clean slate and I had a new MBA. Hey, a girl has to do something while waiting around. It was so much fun to actually fuel the coal plant. Without a long term agreement, we were buying spot coal so there was a lot of RFP activity. We had two rail routes, the shorter northern route originated by the BNSF and terminated by the Union Pacific and the longer southern route that was exclusive to the Union Pacific. I even got to purchase some shiny new aluminum train sets. Our PGEX cars sported distinctive reflective red rose decals. The NCTA was a fundamental part of the fun, providing the opportunity to meet many of the coal people that I had been working with. While most of the marketing representatives made the trip to visit me in Portland, it was always a good chance to meet people on the

operating side. I was a fairly dedicated session attendee and left each conference feeling I had a good overview of coal market influences that I may not have otherwise been able to keep up on. Occasionally I found it necessary to skip a presentation or two and “work the hallways” for some coal or to solve a problem. There was no better place for a buyer to be. So where was Joe all this time? He was enjoying being part of the NCTA as well. Every September Joe and his sister Kate got to go to Denver to hang out with their Aunt, Uncle and cousins while Mom attended the Fall Conference. He also was able to attend a few other Spring Conferences, especially those that were held in California where he could visit his Grandparents. In 1994, I was asked if I was interested in serving on the NCTA Board of Directors. I was happy to accept. It was a great opportunity to get more involved. I was serving on the board when the NCTA hired Tom Canter as its Executive Director, expanded the membership to include Associate Members, and started hosting annual golf events at the Spring and O&M Conferences. All these actions seemed like the right thing to do. Coal was not just a business; it was a community of people striving to keep the lights on. The committees were the heart of the organization and in my mind they separated it from the numerous groups that seemed to be just putting on conferences for profit. Back at work things were also changing. The activists were finally

“In 1994, I was asked if I was interested in serving on the NCTA Board of Directors. I was happy to accept. It was a great opportunity to get more involved. ” successful at getting the nuclear plant shut down. The coal plant was running baseload and gas was making a comeback well before the fracking boom. The PNW was ideally situated to take gas out of Western Canada and/or the Rockies. It was an exciting time with a steep learning curve. I worked with a bunch of wonderful people on the gas side but many of the players were transient and I’d occasionally find someone flat out lying to me about why my gas didn’t show up. I never had those experiences on the coal side. The other big thing that happened was that the company was purchased by Enron. Like my experiences on the gas side, Enron was that combination of bright, hardworking, wonderful people with those few rotten apples thrown in to spoil the bushel. At first things were great. The first question asked by management was no longer “do we have that in rates”? After a while everything seemed to center on earnings management. I left PGE in 2001 and Enron went bankrupt shortly thereafter, taking a huge hunk of my 401K with it. I did mostly consulting on the gas side after leaving PGE, as that was where the work was needed with many utilities new to the game. I stayed in touch with Tom and slowly

added some NCTA work to my business. I learned early on in my career to never let technology get away from me after seeing a VP that made his secretary print out his email. The NCTA needed to get into the new century and I was happy to expand its web presence and create the capability for online registration. As the association grew, so did my workload and by 2009, I didn’t have time to do much else. I moved to Colorado, taking Joe along to finish high school. Since I worked from home, Joe knew as much about the NCTA as anyone. I won’t expand on the last 10 years except to say it has been a pleasure. I especially enjoyed walking through a conference venue and seeing so many people I know. Taking pictures made things even more personal and the magazine has helped to document all the great events for posterity. I did not anticipate leaving the NCTA as yet another casualty to the war on coal, but that’s how things have played out. I’m not retired so if you need help, give me a call. All my phone numbers are still good. My last “official” day with NCTA was two days after Joe turned 27. Like I said, it’s been a lifetime. s

My NCTA measuring stick – then and now.

COAL TRANSPORTER | 11

NCTA 2017 Fall Conference / Review

NCTA 2017 Fall Conference Grand Hyatt - Denver, Colorado | September 18-20, 2017

he NCTA held its 43rd annual Business Meeting and General Conference at the Grand Hyatt in Denver, Colorado, September 18-20, 2017. While much has changed over the past year, the mugging coal endured during the prior administration still begs the question “Will coal continue to be the world’s energy source for economic growth?” The bleeding may have been stopped for now, but the patient is still on life support. The conference took a good look at the industry from the 30,000 foot level in order to put things into context while also drilling down into specific topics. John Gray, SVP, at the Association of American Railroads presented an overview of the economy. Caryl M. Pfeiffer of LG&E and KU Services discussed what it would take to make America’s coal great again and Ann Warner of the Freight Rail Customer Alliance offered a shipper’s view of rail transportation. Deb Miller, one of the three

Commissioners on the Surface Transportation Board, was a special guest speaker on the opening day. She updated the group on CSXT service issues, rate case regulation, and reciprocal switching. In the rate case discussion, Ms. Miller referenced the Transportation Research Board study that was completed in 2015. The NCTA was a participant in that study through its Executive Director. Markets were a key focus for this event and they were all covered by experts – domestic thermal markets, coal trading marketplace, waterborne coal markets, and the current state of natural gas supply and demand. Energy policy was also on the forefront as the number of things being politicized these days is truly sad. Unfortunately grid stability and the real cost of wind and solar fall onto the bucket of political topics covered. Mike McKenna of MWR Strategies did a heroic, and may I add entertaining, job of covering DOE Grid Stability Study as a stand-in presenter for Travis Fisher.

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Mike then went on to cover his own topic of the real cost of wind and solar generation. A panel, moderated by Amy Oliver Cooke of the Energy Policy Institute, discussed the battle at the state and local level to make energy and environmental policy now that the EPA is no longer dictating new laws on a daily basis. Randy Eminger, Energy Policy Network and Stan Dempsey, Colorado Mining Association served as panelists. The attendees were pleased to get updates from the Union Pacific’s Linda Brandl and the BNSF’s Jason Plett on their respective company’s efforts to normalize service in the wake of Hurricane Harvey. Both organizations should be commended for their rapid recovery. In addition to a full agenda, participants enjoyed time to network at several hosted receptions and customer events. The receptions were held in the 38th floor Pinnacle Club where guests could enjoy panoramic views of the Rocky Mountains and the city below. s

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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 Voting 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 conferences 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.

Waterborne Transportation Committee

The Waterborne Transportation Committee is the NCTAâ&#x20AC;&#x2122;s newest working group. It focuses on the coal industryâ&#x20AC;&#x2122;s unique logistical, regulatory, and infrastructure needs when moving coal by water - the Great Lakes, rivers, terminals, barge capacity, ocean shipping, rail to water logistics, and much more.

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 meets in Washington, D.C. periodically 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 $1,850 for Voting Members and $1,650 for Associate Members 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

Coal Markets / US Exports

US Producers Learn to Love Export Market By Jim Thompson, Executive Director, US Coal, IHS Markit

e hear a good deal about the Sixties, that turbulent, colorful decade during which youth captured the culture, the Beatles reigned and many who are now bald sang “be sure to wear some flowers in your hair.” It is generally understood the cultural decade we know as the Sixties really began around 1964 and extended to the mid-Seventies, when it succumbed improbably to the Disco Era, fluffy haircuts, gold chains and truly ghastly clothing. One could argue the decade of peace and

love died violently beneath the heel of a platform shoe. In roughly the middle of the cultural Sixties, Stephen Stills wrote and recorded the iconic “Love the One You’re With.” Hmm, maybe we are a bit too hard on the Disco Era. “Well there’s a rose in a fisted glove, and the eagle flies with the dove. And if you can’t be with the one you love, honey, love the one you’re with.” Every Sixties lyric wasn’t Dylanesque. But Stills speaks these days to US coal producers. Low-cost natural gas and tax-benefited renewables have joined with energy efficiency to significantly reduce the size of domestic coal demand. Meanwhile coal chugs along nicely, fueling economic development in Asia, Africa, the Middle East and beyond.

It should come as no surprise US coal producers have learned to love the one they’re with. Exports boomed in 2017 and are likely to increase this year. When official statistics become available, US exports will finish at circa 100 million tons and represent about 13.0% of total US coal production, according to Dr. James Stevenson, Senior Director Coal, IHS Energy. US exports totaled 60.27 million tons in 2016 and represented 8.27% of 728.36 million tons of total production. “US exporters enjoyed a paradigm change – or so one could argue,” Dr. Stevenson said. “There appears to be a transition of US exports from a traditional mix of ‘baseload’ and swing supply to what we now see as a strong regular need for US coal. In other

Production in the Appalachia Basin has become particularly dependent upon exports.

16 | COAL TRANSPORTER

words, a greater percentage of US coal has taken on a fundamental role in the seaborne market. “The global met and thermal markets are much more balanced than they were 18 months ago, and fundamentally the US coal is needed to balance the market. Arguably with a fairly thin pipeline of production projects globally, US exports will be needed for quite some time. “We expect 2018 exports to be up a little from 2017 levels, though perhaps with some weakening in the second half depending on what prices do, especially on the metallurgical side. A lot still depends on the demand for met coal. Demand surprised to the upside in 2017, and if it does so again, we’re probably set for a fairly tight market.” International prices have been sufficiently high to support US exports. Critically larger US thermal exports have not caused an obvious downturn in international prices – buttressing the view that US coal was needed to balance overall supply and demand.

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A Shale Gale Blows

Meanwhile US natural gas prices are likely to be sufficiently low this year and in the mid-term to encourage coal to continue and potentially expand its forays into the seaborne market. Gas has its own set of market price challenges. “The challenge of going into global markets with products that have interdependent markets is that pricing in any particular segment can be negatively impacted by fundamentals from another segment,” Sam Andrus, Executive Director and head of North American Natural Gas research for IHS Markit, noted. “Oil is clearly driving the bus, or barge, or whatever mode of transport allegory you choose to use. “The US is expected to increase oil production in 2018 by over 1 MMbbl/d and throw off an extra 2.5 Bcf/d of associated gas. When combined with all the pipeline capacity being added out of the Marcellus, we are expecting 2018 gas production to be over 7 Bcf/d higher than 2017.” Lennon and McCartney had something to say on the subject. “She said

that living with me is bringing her down, yeah. She would never be free when I was around. She’s got a ticket to ride… but she don’t care.” “Ever since the Shale Gale began to blow in 2007, the US energy sector has been on a journey, transitioning from an international price taker to price maker,” Andrus said. “However, going global through a ramping up of exports is not without some domestic challenges. “As the Shale Gale ramped up in 2012 and a warm winter left gas markets long supply, price fell, causing gas to displace coal for power generation and coal producers to look to export markets. One could suggest we were simply exporting natural gas in solid form, but to coal producers it didn’t feel like they were exporting gas. “Then we ported fracking technology to oil, and we all remember well what that did to oil and gas markets in 2014. It took an act of Congress to allow the US to return to the export markets with domestic oil. The US now enters a rather unique period in which

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we are exporting hydrocarbons in three phases – solid, liquid and gas.” Coal dynamics have changed as the nation’s energy positioned has both strengthened and shifted. Domestic thermal markets are deeply sensitive to inter-fuel price competition. Enter coal exports to provide an outlet to producers when domestic markets are weak. Implications are felt throughout the US coal chain – and no this isn’t a reference to one of those thick gold chains puffy-haired, silk-clad dancers wore while dancing madly underneath a rotating disco ball. Exports provide coal producers, railroads and barge companies a growth market unavailable on the domestic side. Exports also provide fluidity to a market that otherwise would suffer through periods of stagnation. This is especially important to transporters. Domestic generators generally do not enjoy consistent demand for their product – power – and struggle to provide railroads and barge companies the fuel delivery ratability needed to optimize transportation.

Holy Storage, Batman!

Coal production and transportation performance during the harsh 2017-2018 winter suggest companies have adjusted to what IHS Markit dubbed the New Fuel Dynamic. “Coal’s window of domestic opportunity was opened, if only for a moment, by the chilly winter blast during the month of January,” Andrus said. “Not only did that goose coal demand outright, but the ‘peaky’ nature of the demand also put a serious draw to natural gas storage inventories. “The winter overall may be only marginally colder than normal, but we set record storage withdrawals (over 300 Bcf in a single week) when the ‘cyclone bomb’ exceeded anything the Polar Vortex threw at us.” While there were kinks in the coal chain, it didn’t break. There were no pleas for relief from the Surface Transportation Board. Power generators didn’t warn of inventory depletion. There was little panic at the whispered words “polar vortex.” The export market’s ability to sustain market opportunities at a time when 18 | COAL TRANSPORTER

Exports are keeping US mines afloat. domestic coal demand had been rather anemic surely played a significant role in allowing producers and transporters to respond to the spike in coal usage. One must also acknowledge that generator coal inventory positions were strong, but that wasn’t the entire story. Exports are keeping US mines afloat and supporting robust availability of rail equipment and crews. As ZZ Top sang, the export story is “bad” – in a good way – and “nationwide.”

Strong Scorecards

Production in Appalachia and the Illinois Basin has become particularly dependent upon exports. Pittsburgh seam producers in NAPP have seen a significant increase in demand for their product from India and beyond. CAPP producers have taken advantage of strong demand for metallurgical coal and a surprisingly healthy appetite for thermal coal. Exports through the three coal terminals at Hampton Roads on the East Coast were up 12.69 million tons year/ year in 2017. Most of the coal – as we shall see, not all – was from CAPP mines. Exports totaled 34.97 million tons in 2017, up 56.98% from 22.28 million tons the prior year. In the meantime, 2017 NAPP exports were 26.2 million tons, up 41.62% from 18.5 million tons in 2016. Near the end of 2017, availability of

NAPP coal was extremely tight despite the challenge of low gas prices in PJM, a consumer breadbasket. Approximately 12.5 million tons of Illinois Basin coal was exported in 2017 – the bulk of it through Gulf ports near New Orleans, but another circa 2 million tons through Hampton Roads. The seaborne market has prevented the Illinois Basin from being deeply over-produced. “I think one of the most interesting themes for US high-sulfur producers right now – the world appears to have come to terms with dealing with highsulfur coal,” Dr. Stevenson said. “And the biggest upside is from India. “India has historically been limited to importing high-sulfur for its industrial markets – primarily brick making and cement. But in 2017 we saw the generation sector taking high-sulfur coal. And obviously the generation sector is a much bigger market – so potentially represents significant upside for US high-sulfur exports.” At this writing, the ink was nearly dry on a decision by the government of Turkey to relax sulfur restrictions on coal consumers in that country. Turkey had limited consumers to 1.0% sulfur. The limit is expected to be raised to 3.0% sulfur, which will open another new market for US coal. In 2017, Turkey imported an estimated 32 million metric tons of coal, but

the market has been growing at a rate of 1.5-2.0 million annual metric tons. Western coal producers also benefited from the export largess. Western bituminous and Powder River Basin mines were active contributors to the seaborne market. Rockies exports totaled 7.1 million tons in 2017, up 91.89% from 3.7 million tons the prior year. Coal was shipped both to the seaborne market and to Mexico via rail. Combined Powder River Basin and Signal Peak Energy exports totaled 10.7 million tons in 2017, according to IHS Markit estimates, up 57.35% from 6.8 million tons the prior year. Further ocean terminal options would allow those exports to increase – quite substantially, or so market indicators suggest. The US coal chain has responded quite well to a dramatically changed market landscape. As domestic demand stabilizes, coal producers might shed some of their international ambitions. For now, though, the seaborne market is attractive, which is much more than you can say for that lime green leisure suit.

Fiercer Gale Wild Within me

At the same time, the outlook for the domestic coal market looks like a bad haircut, and while low gas prices aren’t the lone reason, they are an important one. “But for the grace of the ‘cyclone bomb,’ which carved a 400 Bcf hole in gas storage and increased summer injection demand by 2 Bcf/d, summer gas and coal prices (well at least gas prices) could have gotten very ugly,” Andrus said. “Gas is more of a just-in-time fuel, even for LNG exports, rather than acting as a squirreled-away stockpile ahead of the upcoming season. “So ride those coal exports for all they are worth, because there is a lot more oil – and associated gas – coming our way over the next 36 months, while global LNG markets are poised to become very seasonal and likely to feel coal’s pain during the spring shoulder. “The US pipeline grid is expected to add more than 15 Bcf/day of incremental capacity out of Appalachia over the same time period. Who knew, when Appalachia producers said ‘get me out of here,

anywhere but Appalachia,’ they were hauling gas to Louisiana into a coming tsunami of associated gas out of Texas. “Gas may be free to move about the country, but it is likely to find ‘No Vacancy’ signs in most windows of demand opportunity. For over 150 years we have been hearing ‘Go West,’ and that admonition remains true today. Coal and gas exports indeed will need to go west towards China and India. “Get yourself a ticket to ride the export train because, domestically, gas is going to bring you down.” As we monitor efforts to improve domestic prospects, coal producers can take solace in the fact export tickets are rather attractively priced this year. Prospects for 2019 also appear positive. Love the one you’re with. s Dr. James Stevenson and Sam Andrus contributed to this article. They may be reached, respectively, at james.stevenson@ihsmarkit.com and sam.andrus@ihsmarkit.com. Jim Thompson can be reached at jim.thompson@ihsmarkit.com.

COAL TRANSPORTER | 19

Markets / Western Coal

Western Coal

Production, Distribution and Transportation Trends By Bob Burnham, President, Burnham Coal, LLC

hat is happening with coal production and its impacts on railroads in the US? That is a broad question, particularly with my focus having been on Western coal and more specifically the Powder River Basin. I’ll narrow the focus down to coal production in six western states and its impact of the two primary railroads: the Burlington Northern and the Union Pacific. The western states selected are obvious: Arizona, Colorado, Montana, New Mexico, Utah and Wyoming. (The Energy Information Administration’s (EIA) definition of the Western coal region includes Texas and North Dakota lignite and several low-production states.)

My usual disclaimer is “Be careful with predictions, especially about the future”. There are numerous unknowns that will impact the coal/rail industry. The EIA has forecast between 198 million tons and 448 million tons in 2050 based on four scenarios: 1. Their reference case. 2. Their reference case without the Clean Power Plan. 3. A high oil and gas resource and technology scenario. 4. A high oil and gas resource and technology scenario without the Clean Power Plan. I haven’t gone into the details of each scenario due to limitations on the length of this article. Suffice it to say there is a wide range of estimates, depending on assumptions made. Other assumptions include: 1. What is going to happen with natural gas prices? 2. What about efforts to ban fracking (availability and price implications)? 3. What is going to happen with the national midterm elections? 4. Who is going to win the next presidential election? 5. Etc. etc. etc.

Coal Distribution by Consumer Type 600

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20 | COAL TRANSPORTER

Montana

Colorado

Utah

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Electric Power

Industrial Plants Excluding Coke

Export

Arizona

Arizona is relatively easy to analyze. Coal distribution averaged 7.8 million tons per year between 2006 and 2014 before falling to 6.6 and 5.8 million tons in 2015 and 2016. MSHA data indicates 6.2 million tons were produced in 2017. All of the coal is produced at Peabody’s Kayenta mine and shipped by private rail to the Navajo power plant near Page. No coal is exported. The question here is what is going to happen with the Navajo power plant? The Salt River Project plans to shut down the plant in 2019. Peabody has found potential investors that have indicated an interest in buying and continuing to operate the plant. If the plant continues to operate, the mine will continue to operate; otherwise the mine will be closed. In either case there will be no impact on the primary railroads.

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Tramway, Conveyor, & Slurry Pipeline

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So, let’s look at the history for each state from 2006 and 2016 and see what conclusions I can come up with. (I’ll stick with EIA coal distribution data to minimize confusion over differences in data sets.). Graphs illustrating market sectors, mode of transportation and in-state versus out-of-state distribution along with a discussion for the combined states and individually follow. In a nutshell, western coal production and rail shipments are tied to Wyoming coal, sold to electric power generators and shipped by rail. In 2006, 576.4 million tons of coal were distributed from the six western, coal producing states. Distribution peaked at 597.1 million tons in 2008, falling to 379 million tons in 2016. Of the 5.8 billion tons of coal distributed between 2006 and 2016, almost 80% of the coal came from Wyoming. Domestic distribution accounted for 5.7 billion tons of coal of which 5.6 billion tons went to the electric power sector. Industrial plants took 152 million tons and other domestic consumers took an, almost negligible, four million tons. Exports accounted for 150 million tons. Rail transportation accounted for 90% of the domestic distribution and, I think it is fair to assume, all of the export coal. Trucks and conveyors each accounted for 5% of the domestic distribution. Other modes of transportation reported accounted for less than 1% of the coal and included Great Lakes, Ocean Vessels, River and Tidewater Piers all of which had to originate with a railroad. All in all, out of 5.6 billion tons of coal distributed from six western states, 4.9 billion tons went to the electric power sector and was transported by rail (88%). Wyoming accounted for 4.3 billion tons. Exports are a favorite topic these days. Between 2006 and 2016, EIA reports that 150 million tons were exported from western, coal producing states. Total exports from these states ranged from six million tons in 2009 to 21 million tons in 2013. Exports have varied significantly from state to state and year to year with Montana taking over as the leading coal exporting state since 2011.

9 8 7 6 5 4 3 2 1 0

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COAL TRANSPORTER | 21

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Railroad

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 In State Shipments

Out of State Shipments

Coal Distribution by Consumer Type - Montana 50

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Coal Distribution by Transportation Type - Montana 50

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Colorado production peaked at 40 million tons in 2004 before beginning a fairly steady drop through 2016. By 2006, coal distribution had dropped to 33 million tons and hit a low of 13 million tons in 2016. Of 254 million tons of domestic distribution between 2006 and 2016, 227 million tons (90%) went to the electric power sector and 25 million tons (10%) went to industrial plants. Exports accounted for an additional 27 million tons. MSHA data indicates 15 million tons were produced in 2017. Of the coal distributed between 2006 and 2016, 82% was shipped by rail and 16% was delivered by truck (mine-mouth operations). The remainder was shipped by various means such as Great Lakes, Ocean Vessel (to Hawaii) and River, suggesting a rail origin. Since 2006, rail shipments to power plants peaked at 28 million tons in 2007 before falling to eight million tons in 2016. Of this, out-of-state distribution has fallen from 22 million tons in 2007 to four million tons in 2016. In-state distribution has averaged six million tons per year with a peak of 7 million tons in 2008 and a low of five million tons in 2016. Included in the out-of-state rail shipments is approximately two million tons per year moved from the Deserado mine, in Colorado, to the Bonanza Power Plant, in Utah, that is moved on a private railroad. In-state distribution tends to be short hauls from mine to power plant. The second largest consumers of Colorado coal are the Industrial Plants which accounted for 1.5 million tons in 2016, of which 1.3 million tons were moved by rail. Finally, since 2006, export coal shipments have varied from a low of 0.3 million tons in 2007 to 6.5 million tons in 2012 with one million tons moved in 2016. So where does that leave us. Colorado coal producers are losing the out-of-state electric power consumers that drove the production to a record high in 2004 and are more and more limited to in-state, near-by power plants. The in-state market will be reduced by about one million tons when Tri-State retires Unit 1 at the Craig Station in 2025. As for the primary railroads, they have lost the longer, out-of-state hauls leaving short hauls like the Colowyo to Craig Station or Foidel Creek (twenty miles) to the Hayden Plant. Industrial Plants are harder to predict but it looks like they are a declining market. Exports are a coveted, but as shown by recent history, a highly variable market.

Montana

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22 | COAL TRANSPORTER

Tramway, Conveyor, & Slurry Pipeline

Truck

Export

Between 2006 and 2016, Montana coal distribution ranged from 32 million tons in 2016 to 44 million tons in 2014, averaging 40 million tons per year. During the same time period, domestic distribution ranged from 42 million tons in 2007 to 26 million tons in 2016, averaging 33 million tons per year. Exports were highly variable with a low of 0.4 million tons in 2007, a high of 13.1 million tons in 2011 and 6.8 million tons in 2016. MSHA data indicates 35 million tons were produced in 2017. Between 2006 and 2016, 346 million tons (96%) of Montanaâ&#x20AC;&#x2122;s domestic coal went to the electric power sector peaking at 40 million tons in 2007 and falling to 24 million tons in 2016. Between 2006 and 2016, 243 million tons of Montana coal were shipped by rail representing 67% of the domestic distribution. Rail shipments peaked at 28 million tons in 2008

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Electric Power Consumer Shipped by Railroad - Montana 30

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 In State Shipments

Out of State Shipments

Coal Distribution by Consumer Type - New Mexico 30

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Electric Power

Industrial Plants Excluding Coke

Coal Distribution by Transportation Type - New Mexico 30

New Mexico

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before dropping to 17 million tons in 2011 and 16 million tons in 2016. Conveyors delivered 98 million tons of coal with a high of 11 million tons in 2008 and a low of 8 million tons in 2011. Virtually all of the in-state deliveries are for coal produced at the Rosebud (Colstrip) mine and delivered to the Colstrip power plant by conveyor. Focusing on the coal shipped by rail to the electric power sector, virtually all of the coal goes to out-of-state markets. These shipments peaked at 26 million tons in 2008 before falling to 15 million tons in 2011 and 2016. The second largest consumer type for Montana coal is the export market. Between 2006 and 2017, Montana sold 75 million tons (17% of total distribution) on the export market. These sales ranged from less than 0.5 million tons per year in 2006 and 2007 to 13 million tons in 2011 and 7 million tons in 2016. The Spring Creek and Bull Mountain (Signal Peak) mines supply the bulk of the export coal. What is the outlook for Montana? The state will lose an 8 to 10 million ton per year market if the Colstrip Plant is closed by 2027. That won’t impact the primary railroads. Additional markets, which will impact the railroads, will be lost as plants such as TransAlta’s Centralia plant is shut down between 2020 and 2025 or Xcel’s Sherburne County units 1 and 2 between 2023 and 2026. Exports will become a more important market but are a highly variable market.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Electric Power

24 | COAL TRANSPORTER

Industrial Plants Excluding Coke

Export

Between 2006 and 2016, New Mexico coal distribution ranged from 26 million tons in 2006 to 15 million tons in 2016, with a fairly steady decline throughout the time period. Virtually all of the coal went to the electric power sector and there were virtually no exports (EIA shows 200 tons in 2012). MSHA reports 13 million tons of coal were produced in 2017. EIA transportation data for New Mexico appears to include the Navajo Mine Railroad in 2006 and 2007 but not thereafter. After 2007, it appears that all Navajo and San Juan mine production is reported as truck deliveries to the captive Four Corners and San Juan plants. EIA’s reported rail shipments for 2008 and beyond, approximates McKinley, Lee Ranch and El Segundo production. New Mexico coal sold to the electric power sector and delivered by rail goes to plants in Arizona and New Mexico with the majority of the coal delivered to Arizona going to the Cholla and Springerville plants. New Mexico sales go to the Escalante plant near the El Segundo mine and are moved on Western Energy’s Escalante-Western Railroad. Future production depends on the continued operation of the power plants currently served. Public Service Company of New Mexico has announced plans to shut down the San Juan plant in 2022 and pull out of its share of the Four Corners plant in 2031. This will not impact the primary railroads. Deliveries to plants in Arizona had a significant drop in 2016. After years of the delivery of seven to eight million tons per year, deliveries fell to four million tons in 2016. If the total burn in Arizona power plants is reduced, it will have a negative impact on the primary railroads. The other possibility is an increase in the volume of coal being shipped from Wyoming to Arizona. Such an increase would cut New Mexico production while maintain rail shipments and increasing the length of the haul.

Wyoming It will come as no surprise that Wyoming, and more specifically, the Powder River Basin is the 500-pound gorilla in the Western coal industry. Between 2006 and 2016, 4.5 billion tons of coal were distributed to domestic markets and 38 million tons were distributed to export markets. Distribution peaked at 464 million tons in 2008 and dropped to 298 million tons in 2016. MSHA data indicated Wyoming production increased to 316 million tons in 2017, with 305 million tons coming from the Powder River Basin. The domestic electric power sector accounted for 4.4 billion tons (98% of domestic distribution) with industrial plants taking 79 million tons (2%). Railroads moved 4.3 billion tons while conveyors and trucks moved 155 million tons. (the bulk

of the coal moved by conveyors and trucks came from mines in Southern Wyoming and went to the two coal-fired power plants in Southern Wyoming.) EIA characterized the remaining coal as having moved by Great Lakes or River, so that coal should properly be characterized as originating on a railroad. Of the coal distributed to the electric power sector, 4.2 billion tons moved by rail with 156 million tons going to in-state markets and 4.1 billion tons going to out-of-state markets. Even with the drop in distribution in 2016, the percentage of coal going to the electric power sector and moved by rail has remained fairly constant. Future production and coal transportation depends on the continued operation of the power plants currently served. This leads to falling production as utilities continue to close power plants. s

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Out of State Shipments

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Infrastructure / Grid Reliability

By Jordan McGillis, Policy Analyst, Institute for Energy Research

Grid Reliability

Lessons Learned from the Bomb Cyclone

or thirteen straight days spanning the final week of 2017 and the first of 2018, the mercury failed to rise above the freezing point in Boston. The “anomalously cold arctic outbreak,” as it was deemed by the National Weather Service, brought over a foot of snow to the Atlantic coast, caused solid sea ice to lodge along Cape Cod, and set or tied dozens of cold weather records across the northeast. On January 7 alone, daily low temperature records were matched or eclipsed in all four of New England’s principle metropolitan areas, with Boston dropping to -2°F, Providence to -3°F, and Hartford and Worcester to -9°F. A prolonged cold weather event like this, as anyone in the energy industry can tell you, stresses the reliability of the electricity system. The PJM Interconnection, for reference, experienced three of its top ten winter peak demand days of all time during the episode. In the aftermath of the cold period the U.S. Senate Committee on Energy and Natural Resources convened a hearing to provide policymakers an account of the grid’s performance. Called to testify were Kevin McIntyre, Chairman of the Federal Energy Regulatory Commission; Bruce Walker, Assistant Secretary at the Department of Energy; Charles Berardesco, Interim President and CEO of the North American Electricity Reliability Corporation; Allison Clements, President of Goodgrid, LLC;

Andrew Ott, President and CEO of PJM Interconnection, LLC; and Gordon van Welie, President and CEO of ISO New England, Inc. Echoing optimistic media coverage of the electricity system’s performance during the cold period, commentary from the witnesses offered an approving assessment, with FERC Chairman McIntyre evaluating in his written testimony that, “Although we are still receiving and reviewing data, it appears that, notwithstanding stress in several regions, overall the bulk power system performed relatively well” and adding during questioning by the committee that, “While there were no significant reliability problems during this recent cold weather event, wholesale energy prices were high, reflecting the stress on the system.” But testimony from the two witnesses closest to the operating level should concern us all.

The Role for Coal

PJM CEO Andrew Ott delivered a tempered, but sobering perspective on the role coal must play in providing reliability and the future for the coal market in his region in the future. During the cold weather event, PJM transmitted 45,000 megawatts of electricity from coal-fired resources—over 40 percent of its output—but Ott fears the reliability of coal is not properly compensated. “(T)he pricing doesn’t always reflect [the reliability characteristics of coal],” he told lawmakers. “Therefore when they go sell their energy forward, the fact they were run for reliability during the cold weather, the price isn’t reflected in the forward price. That’s unfair; it puts them at a disadvantage and we need to fix it.” With the Department of Energy recommendations to FERC for onsite pricing having been rejected, the coal industry is indeed relegated to an uphill struggle while affordable natural gas and politically-favored wind pull ahead. As Department of Energy Assistant Secretary Walker communicated, the connection between regulatory burdens and the retiring of baseload power plants is a live issue that requires critical examination with reliability placed at the fore. “What A “bomb cyclone” is defined by was apparent during this weather event,” a very specific and very extreme said Walker, “was the continued reliance drop in atmospheric pressure – on baseload generation and a diverse 24 millibars in 24 hours. generation portfolio. Without action that

26 | COAL TRANSPORTER

recognizes the essential reliability services provided by strategically diversified generation portfolio, we cannot guarantee the resilience of the electric grid.”

New England’s Woes

The most chilling testimony, however, was presented by ISO New England’s van Welie who in no uncertain terms told the committee that his region should plan for rolling blackouts during future winters. Van Welie’s prepared statement and answers to lawmakers’ questions, buffered by ISO New England’s recent Operational FuelSecurity Analysis, present devastative evidence to anchor Walker’s concerns about bad policy driving good energy off the grid. According to ISO New England, in 23 out of 27 possible future scenarios, the region will be plagued by fuel insecurity. “Energy shortfalls due to inadequate fuel,” van Welie informed the committee, “would occur with almost every future fuel-mix scenario requiring frequent use of emergency actions including load shedding to protect grid reliability.” For a country with more wealth, energy resources, and human capital than the world has ever before seen, it is utterly shameful that citizens will soon find themselves out in the cold – for it is not a deprivation of nature or an unexpected calamity that puts New England in this position, but a failure of policy. In searching for the culprit for its coming fuel-security crisis, New England must first look itself in the mirror. Beginning in the 1990s, New England states spearheaded by Massachusetts enacted distortionary policies to lead the market away from reliable fossil fuel energy. A key example is the Renewable Portfolio Standard, which intended to jolt the adoption of wind and solar energy. TH_CoalTransporter_022011:Layout 1 2/17/2011 2:40 PM Page 1

New England should plan for rolling blackouts during future winters. Renewable Portfolio Standards are market-share mandates for particular forms of energy. Politicians pick a magic number and require that percentage of energy be produced from the sources they prefer – turning a percentage of the field over to certain industries and investors. The various policies at the federal and state level, like Renewable Portfolio Standards, were sold as a way to shore up the energy system, but the result has been to destabilize fuel security. Along with typically low natural gas prices, subsidized wind and solar projects displace coal and nuclear generation – the most reliable sources during periods of high demand. As described by

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The 1,600-MW Brayton Point Power Station in Somerset, Massachusetts, was decommissioned in May 2017.

ISO New England in its report, mandated incentives and statesponsored long-term contracts (“a major driver of the growth of renewable resources in the region”) enable wind and solar projects to undercut the prices that coal must charge to maintain operations. These subsidies are, of course, paid by consumers in their taxes and/or bills, and allow renewable investors to profit from a guaranteed market share and/or price. This comes on top of the wind production tax credit and the various and sundry EPA rules targeting coal-fired power plants. Nevertheless, contrary to the expectations of wind and solar bulls, the closures of coal plants like Brayton Point and nuclear plants like Vermont Yankee do not necessarily auger broad inroads into the fuel mix for renewables, but more often portend expansion for natural gas. As the report explains, “More renewable resources can help lessen the region’s fuelsecurity risk but are likely to drive coal- and oil-fired generation retirements, requiring high LNG imports to counteract the loss of stored fuels.” In 2000, natural gas represented 18 percent of New England’s electricity fuel mix; by 2017 that figure had climbed to 45 percent; and by 2025 ISO New England forecasts natural gas will supply 56 percent of New England’s electricity. Coal, on the other hand, has fallen from supplying 12 percent of New England’s electricity in 2000 to 3 percent in 2017, and is expected be extinguished entirely by 2025. Non-hydro renewables, meanwhile, were at 5 percent in 2000 and remain at 5 percent today, but are expected to rise to 11 percent by 2025. The ascendance of natural gas production through the shale revolution has been a net positive for consumers nationwide, but the combination of policies that hamper coal-fired generation and others that subsidize wind and solar production has left New England dependent on a fuel source that cannot be stored onsite and thus cannot always be trusted during times of peak demand, as we have seen this winter. Coupled with New England’s (and neighboring New York’s) political hostility to new gas infrastructure, this is a recipe for disaster. 28 | COAL TRANSPORTER

Massachusetts’ Self-Inflicted Wound

Massachusetts, the hub of New England in terms of population, culture, and business, deserves particularly scrutiny. We will focus here on the state’s Renewable Portfolio Standard—one of many important factors in distorting the economics of the region’s electricity. Under the Massachusetts Class I Renewable Portfolio Standard, all retail electricity suppliers must provide a minimum of 12 percent of kilowatt-hour (kWh) sales to end-use customers in the state from politically-favored energy resources. By the end of 2018, that figure will rise to a minimum of 13 percent and it will continue to increase by one percent each year thereafter. The eligible resources include solar photovoltaics, solar thermal electric energy, wind energy, tidal energy, fuel cell, landfill gas, certain new hydroelectric facilities or new incremental hydroelectric energy, biomass, and geothermal energy. Retail electricity suppliers demonstrate compliance with the mandate through a certificate system based on the emissions characteristics of the purchased eligible resources. Alternatively, suppliers can pay a fee, which was in 2017 equivalent to $67.70 per MWh. An assessment of the state’s RPS, prepared by the Northeast Clean Energy Council, describes the dynamic between the renewable mandate and reliable coal power in stark terms: “As more renewables come online, they act as ‘must‐take’ resources, causing generation from conventional resources like natural gas and coal to reduce or be displaced. Even in the Base Case, the anticipated growth of renewables results in the retirement of all but one New England coal unit during the study period.” Of course, that is precisely the purpose of the RPS. The mandate was written to coerce the desired activity of politicians. An ineluctable aspect of that coercion is the early retirement of coal-fired generation. The most recent noteworthy casualty was the 1,600-MW Brayton Point Power Station in Somerset, Massachusetts, which was officially decommissioned in May 2017. Brayton Point was the largest coal plant in New England, but after a failed gambit to implement an expensive cooling system in 2013 it was determined that closure was necessary.

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By prioritizing de-carbonization, the state of Massachusetts has unwittingly—but predictably—doomed itself to a future without reliable power. The politically-compelled shift to wind and solar energy is driving reliable electricity generation into premature retirement and the resulting insufficiency of secure fuel arrangements will necessitate operator-imposed blackouts in the future.

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Policy Suggestions

New England’s future fuel insecurity is a travesty that other regions of the U.S. should study. As Assistant Secretary Walker said on Capitol Hill, “[This] should give us pause to step back and think about the diversity of mix.” The lesson January’s cold weather episode and ISO New England’s prognostications provide to other regions is that coal’s onsite storage and dispatchability make it an instrumental resource—and that it will remain so for years to come. Fortunately, no other region is as gas dependent while being simultaneously so gas-infrastructure poor. But what applies to each and every region of the country is that we must value, laud, and properly compensate the reliability and resiliency coal provides. A reliable electricity system is one of the key markers not only of a strong economy, but of a healthy civilization. Coal is a resource that can insure our system can withstand threats both natural and man-made. At the state level this means standing athwart Renewable Portfolio Standards like the one that hampers Massachusetts. Some states, like Kansas in 2015, have rolled back their renewable mandates; the remaining states ought to follow suit. At the federal level, one small correction that can be made to create a more equitable market opportunity for coal is reforming the IRS guidance for the Production Tax Credit (PTC). Though the PTC is set to phase out between this year and 2020, the IRS guidance will allow for subsidies to flow from taxpayers to wind energy firms at the expense of both energy customers and reliable coal power deep into the 2030s, clearly violating Congress’s intention. Three specific provisions of the guidance that are overly lenient are (1) the physical work test, which requires only that developers excavate for a foundation, set anchor bolts into the ground, or place concrete pads of the foundation in order to demonstrate “physical work of a significant nature;” (2) the safe harbor test, which requires only that 5 percent of project costs were expended in the first year of development; and (3) the completion timeline, through which developers are given four years to complete projects, meaning the ten-year PTC payment period for some projects might not begin until December 31, 2023.

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New England’s coming fuel-security crisis is a cautionary tale. In addition to the standard barrage from the federal government, the region has been walloped by a one-two punch of electricity mandates that have driven reliable coal energy off the grid and a dearth of gas infrastructure that will leave it vulnerable in coming winters to fuel shortfalls. By properly valuing coal’s resiliency characteristics, challenging state renewable mandates, and addressing the wasteful IRS guidance for the PTC we can give the electricity sector a fighting chance to achieve an fuel mix that gives us resiliency in the face of Old Man Winter. s

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5:39

NCTA 2018 Spring Conference / Preview

NCTA 2018

Spring Conference Hammock Beach Resort, Palm Coast, Florida | April 23-25, 2018

he NCTA will hold its Spring Conference at the beautiful Hammock Beach Resort in Palm Coast, Florida. The 22nd annual golf tournament will be held Monday afternoon April 23. Monday evening NCTA will host a Coastal Dinner Party on the Great Lawn, an event that will allow plenty of time for networking. Tuesday and Wednesday mornings will be plenary sessions with special breakout sessions on Tuesday afternoon.

PROGRAM:

As always, the diverse Spring Conference agenda will get you up-to-date on the many issues challenging the coal, transportation, and utility industries. The Eastern Logistics and Planning and the Waterborne Transportation Committees will take the opportunity to hold brief sessions during the time set aside on Tuesday afternoon for breakout sessions. Confirmed speakers for this event at press time include: • David Ryan, Associated Terminals • Chuck Arnold, Ingram Barge • Bob Burnham, Burnham Coal • Ken Eriksen, Informa Economics IEG • Martin Lew, Commtrex • Kelvin Dowd, Slover and Loftus • Jim Thompson, IHS Markit • Russ Epting, CSX

30 | COAL TRANSPORTER

REGISTRATION:

Registration is required for each attendee at the NCTA Spring Meeting. The fee is $700.00 for attendees representing a member company and $900.00 for all other attendees when registering prior to April 2, 2018. In addition to the conference, the fee includes Monday’s reception and dinner, and continental breakfast on Tuesday and Wednesday. Beginning April 2nd, an additional $100 fee will apply for all late registrants. All registrations by a nonmember company for more than three individuals will be registered at the member rate. There are additional fees for dinner guests and the optional golf tournament.

SPONSORSHIP:

Conference sponsorship opportunities are available for many of the scheduled events including the reception, breakfast, session breaks, and golf. You can also elect to include your advertising materials in the conference packets or show your support through a conference banner. We recognize our sponsors in multiple ways before, during, and after the event. It is easy to pay online through the registration process or by requesting an invoice.

Check the NCTA website for the agenda and all the latest information.

ACCOMMODATIONS:

The AAA Four Diamond-rated Hammock Beach Resort features over 300 accommodations, including a 12-story tower of luxury suites. It is famed for its two spectacular golf courses. The Ocean Course, where the NCTA will play its annual tournament, was designed by Jack Nicklaus and features six holes directly along the Atlantic Ocean. The Conservatory Course was designed by Tom Watson and is one of Florida’s longest layouts, characterized by waterfalls, babbling brooks, and field stone work. For the aquatically inclined, there is a multi-level water and swim pavilion, indoor atrium pool, spa and fitness center, and of course 2.4 miles of spectacular Atlantic beach on the Palm Coast. The property is located just south of St. Augustine, America’s oldest city, and just north of Daytona Beach. s

RESERVATIONS: 1-877-834-8862, or direct 866-342-1070 ROOM RATES PER DAY: $239.00/day Single/Double includes internet access. The room rate includes complimentary local and 1-800 calls, pool access with floats, beach chairs, towels and umbrellas, fitness center and health spa access, self-parking, and high speed internet access. The block cutoff date for guaranteed reservations is Monday, April 2, 2018. Hammock Beach Resort is located at 200 Ocean Crest Drive, Palm Coast, FL 32137

MONDAY, APRIL 23 8:00 am – 11:30 am NCTA Board of Directors Meeting 1:00 pm – 5:00 pm 22nd Annual Golf Tournament Ocean Course 6:30 pm – 9:30 pm Reception and Dinner – Grand Lawn

TUESDAY, APRIL 24 7:00 am – 8:00 am 8:00 am – Noon Noon – 1:00 pm 1:00 pm – 3:30 pm

Continental Breakfast General Session – Atlantic Ballroom Lunch by Individual Arrangement Eastern L&P and Waterborne Transportation Committee Meetings

WEDNESDAY, APRIL 25 7:00 am – 8:00 am Continental Breakfast 8:00 am – 11:30 am General Session – Atlantic Ballroom

COAL TRANSPORTER | 31

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.

Committee Meetings The Eastern Logistics & Planning Committee and the Waterborne Transportation Committee will meet on Tuesday afternoon April 24th at the Hammock Beach Resort in Palm Coast, Florida. This meeting will be held in conjunction with the annual Spring Conference. A recap of the Western Logistics and Planning Committee’s March 14 meeting in Denver will be available in the next issue. Working committees of NCTA are a unique opportunity for volunteers in the industry to cooperate in the exchange of ideas to improve communications and the logistics infrastructure. If you have agenda ideas or audience response questions for future meetings please contact: Eastern Logistics and Planning: Chairman Edwin Fisher (Arch Coal), or Western Logistics and Planning: Chairman Jeff Zerkle (American Electric Power). s

Operations and Maintenance Harry Mullins (Southern Company) continues to lead as Chairman of the Executive Committee. After a successful 2017 event, Kevin Johnson (NPPD) is continuing to serve in the role of Program Chairman for the 2018 Operations and Maintenance Conference. It will be held this June at the Marriott at Vanderbilt University in Nashville, Tennessee. Cathy LeFevers (Duke) is the Vice-Chairman and Tom Sedarski has taken over her former job as Chairman of the Site Selection Committee. His committee is well down the road in identifying a great location for 2019. There is currently an open position on the Executive Committee. The committee has elected to wait until elections at the June Conference to fill this seat. If you are interested in serving, please contact Jeremy Bowers at jbowers@oppd.com. Jeremy is chairing the Nominating Committee. In between the annual conferences, the O&M group offers members value through its series of webinars. If you would like to make a webinar presentation or have an idea for one, please contact Tod Boothe at kevin.boothe@luminant.com. Tod is now chairing this educational outreach program. It is a good thing he goes by Tod or we would otherwise have three Kevins on the committee! Kevin Koepke (ARS) is heading the technical review group within the O&M Committee. Now that the wheel study is complete, the committee is looking to tackle the next “big thing”. To that end, Kevin recently surveyed O&M participants 32 | COAL TRANSPORTER

Kevin Koepke and Cathy Lefevers at the 2017 Conference. to find out what issues were of the most concern to them. The results of the survey are being used to both focus the tech review committee’s efforts and to guide the program committee in setting up the agenda for the 2018 conference. If you are new to the NCTA and curious about the history and purpose of the O&M Committee, please read the piece titled “Benefits of the NCTA O&M Group”. It was authored by current Committee Chairman and maintenance guru Harry Mullins. s

Education Committee The Education Committee administered the NCTA scholarship program with Jared Wicklund of The Empire District Electric Company serving as Chairman with Sharon Robinson of Black Hawk Mining assisting as Vice-Chairman. In September of 2017, four scholarships were awarded to students who are children of employees of NCTA member companies. Check out their bios in this issue. s

Benefits of the NCTA O&M Group The NCTA O&M began as a group of private car users meeting in a hotel to discuss railcar issues they were experiencing. Through the years it evolved into the NCTA O&M group. Its primary purpose is the same, to help others in solving their railcar maintenance problems and provide an educational service for others. The O&M is made up of people that truly are interested in railcar maintenance. It is a body consisting of suppliers, vendors, manufactures, leasing companies, utility people, railcar maintenance contractors, and others. As the coal industry has evolved, so has the O&M group. Some are primarily managing the maintenance on coal cars while others are also managing the maintenance on limestone cars, gypsum cars, ash cars or any other cars related to the coal business in some form or fashion. The NCTA O&M Conference is an excellent opportunity to meet railcar owners and listen to their concerns as well as their successes. The speakers, technical papers presented, and discussion topics are determined by the members. The executive committee encourages members to recommend what they want on the agenda at the conference. At the annual conference, there are two different round table discussions. One roundtable discussion is for the utility members only. This allows the utility members to discuss any issues they are having in a closed session. It has proven to be an avenue for members to get to know each other and realize that others may be experiencing the same issues you are. The other roundtable discussion is open to all members. The O&M Conference is held in different locations each year. The conference rotates from eastern, central and western locations. Where possible, it is held close to a manufacturing facility so members can have an opportunity to visit a facility they would not be able to

otherwise. The NCTA O&M Conference is also an excellent opportunity for suppliers to meet railcar owners or users. There is a huge advantage in having many railcar owners or users in one location. If you are new to the railcar maintenance area, the NCTA is a great way to meet people that may have more experience or similar experiences. We all learn from each other no matter how small or large the company is that you work for. The discussion session with the private maintenance shop providers has become a very interactive session. During these sessions, they can discuss what they are seeing in their shops across the county. As the railroading industry has changed so have the discussion areas. The use of technology in determining mechanical defects has been evolutionary in the railroading industry. At the NCTA O&M conference you will have the opportunity to listen to and meet many of the leaders in collecting, understanding and utilizing the data in the most productive way. The down time where members can discuss their concerns and successes has proven to be very beneficial over the years. The O&M Executive Committee consists of both of utility and non-utility members. Each member is elected to a 3-year term by NCTA members at the annual O&M Conference. s

COAL TRANSPORTER | 33

2018 Operations and Maintenance Conference / Preview

2018 Operations and Maintenance Conference Nashville, Tennessee | June 11-13, 2018

he Operations and Maintenance Conference is a unique event dedicated to the study of the technology, design, maintenance, operations, and repair of railcars in unit train service. A major focus this year will be on technology and the use of electronic data for to help guide maintenance plans. The traditional private car owner roundtable will allow attendees to discuss maintenance issues and review best practices. The roundtable will consist of two Monday sessions, with the morning session opened to NCTA voting members and the afternoon session open to all NCTA members. The conference will feature all the usual events including an opening night reception, continental breakfast, dinner for attendees and guests on Tuesday evening, and will conclude with the annual golf tournament.

REGISTRATION

Registration is required for each attendee at the O&M conference. The conference fee is $600 for members and $800 for non-members. After May 21st, an additional fee of $100 will be added for late registrants. The registration fee covers the registration packet of information, admission to all meeting proceedings, the welcoming reception on Monday evening, continental breakfast on Tuesday and Wednesday, dinner and entertainment on Tuesday night, and all refreshment breaks. There is a charge for each guest of a registrant that participates in the Tuesday dinner and/or golf.

SPONSORSHIPS

Conference sponsorship opportunities are available at three levels of support - Platinum $2,500, Gold $1,500, and Silver $1,000. Please contact Tom Canter at 303-979-2798 or by email to tom@nationalcoaltransportation.org for additional details on sponsorships and company recognition.

ACCOMMODATIONS

With 301 spacious guestrooms and six suites across 11 floors, the Marriott at Vanderbilt University provides guests with comfort and convenience. When you wake up, you won’t wonder where you are, as the rooms have a fun and colorful “Music City” décor. Room amenities include pillow-top mattresses with down comforters, work desks, and wireless internet access. Some rooms provide amazing views of the Vanderbilt stadium. There are over 50 restaurant options within walking distance. Across the street is the 132-acre Centennial Park featuring a full size replica of the Parthenon that was constructed for the 1897 Tennessee Centennial Exposition. Downtown is just 5 minutes away and a complimentary shuttle will take you there and anywhere else within a 2-mile radius. The delectable Park25 Bistro and Starbucks Coffee are onsite dining options. s

2018 CMA MUSIC FESTIVAL

The NCTA Conference immediately follows the 2018 CMA Music Festival, the 47th annual gathering of the Stars of Country Music and their fans in Nashville. This means that room availability will be tight the proceeding weekend but if you are a country music fan, it’s a great opportunity to see some of your favorite artists. The top performers in the industry come out for concerts, autograph sessions, and picture opportunities. The CMA Music Festival takes place around three venues in the downtown area of Nashville. The first is the Music City Center where all of the booths are contained in air conditioned comfort. The Riverfront Park stage and many other stages around the downtown area feature shows all day long from some of the best of the past and present and the up and coming stars in country music. At night, Nissan Stadium lights up the town with the best music labels in town showing off the top artists of today all together in one place. If you want to attend the CMA Fest, you should not delay in making plans. s 34 | COAL TRANSPORTER

MONDAY, JUNE 11 9:00 am – 12:00 pm 12:00 pm – 1:15 pm 1:30 pm – 3:30 pm 6:00 pm – 7:00 pm

RESERVATIONS: 615-340-5192 Private Car Owners Roundtable – Voting Members Lunch by Individual Arrangement Private Car Owners Roundtable – All Members Welcoming Reception

TUESDAY, JUNE 12 7:30 pm – 8:00 am 8:00 am – 12:00 pm 12:00 pm – 1:30 pm 1:30 pm – 5:00 pm 6:00 pm – 9:30 pm

Continental Breakfast – Parthenon ABC General Conference – Parthenon ABC Lunch by Individual Arrangement General Conference – Parthenon ABC Dinner and Entertainment – Crescent View Room

WEDNESDAY, JUNE 13 7:30 am – 8:00 am 8:00 am – 11:30 pm 1:00 pm – 6:00 pm

or 1-800-285-0190

ROOM RATES PER DAY:

$229.00 Single/Double Taxes are additional but there is no resort fee. Wireless internet access is included. The cutoff date for the NCTA room block is Monday May 21, 2018. Check-in time is 4:00 PM and check-out time is 12:00 noon. Parking is $27/day to self-park and $32/day for Valet parking. The Nashville Marriott at Vanderbilt University is located at 2555 West End Avenue, Nashville, Tennessee 37203.

Continental Breakfast – Parthenon ABC General Conference – Parthenon ABC Golf Tournament – TBD

COAL TRANSPORTER | 35

Visit / Washington DC

Is the War on Coal Over?

The NCTA’s Visit to Washington D.C. By Emily Regis

t was a small group of NCTA Board members and invited guests that gathered in Washington D.C. in mid-October 2017 for our annual visit to the hill. This was our chance to meet with stakeholders in the coal industry and catch up on regulatory and other matters related to coal and rail, and sit in on the STB’s RETAC committee meeting. After the surprising results of the 2016 presidential election, I was very curious. What is the atmosphere now in this city where not so long ago the White House administration claimed to be actually at war with the coal industry? Now, after nine months into the Trump administration I wondered, is the war on coal over? One place to find out for sure would be at the NCTA’s traditional “Big Cheese Luncheon” (Big Cheese – No Bologna). This meeting of the minds luncheon was established years ago by our Executive Director in order to make the best use of the NCTA Board’s time spent in D.C. We invite the people that

36 | COAL TRANSPORTER

we want to meet with to one location for a roundtable discussion. It’s more focused and we save time by not having to run all over the Hill. This lively meeting has become one of the mainstays of any NCTA Board visit to Washington D.C., with representatives from various D.C. organizations now asking for the opportunity to join us for the discussion. It was on a gorgeous October morning when the small contingent of NCTA representatives departed from our hotel in Alexandria via Metro to the offices of the Edison Electric Institute just off of Pennsylvania Avenue in downtown Washington D.C. There we were graciously directed to no less than the “Thomas Alva Edison Conference Room” for our luncheon and meeting. Our invited guests consisted of representatives from EEI,

National Mining Association, Thompson Hine Law Firm, ACCCE, Freight Rail Customer Alliance (FRA), Slover and Loftus Law Firm, L E Peabody & Associates and American Waterways Council. Lunch was served and everyone was offered an opportunity to speak as we went around the room. We heard the latest and greatest on coal and rail from these folks who have their finger on the pulse of the industry, many with a strong opinion of where the industry is headed. Here is a little of what we heard. With the departure of Dan Elliot from the STB and only two commissioners in place months after the STB Reauthorization Bill mandated an increase in the Board seats to five, will we see any action from this agency before the end of the year? Most think the two commissioners

will stay on, but it’s unlikely that a fiveperson board will be seated before the 2018 election. Will the EPA move to repeal the Clean Power Plan and what will it be replaced with? There were diverging opinions on this with best case being a full repeal of the CPP with no replacement. With many states already making things happen to pursue their own environmental compliance agendas, what hope do we have of sustainable changes at the EPA level and how effective will regulatory change be in turning things around for coal? Many agree this will be a slow process with little impact while the economics of producing and burning natural gas maintains a competitive edge over coal. And what do we think of the Department of Energy proposal to require a 90-day supply of coal for coal fired plants? Do we actually need that much coal on the ground? Does the public really want a fully renewable electric grid and do they understand what this means for reliability and sustainability in the future? And, do we have the leadership in place to carry out the most basic functions in the White House let alone make the kind of reforms that are needed? It’s a lot to take in as we wrapped up our lunch meeting and split into groups to keep other appointments at the offices of the Association of American Railroads and the STB where the discussion on coal and rail continued. After a long day of navigating sidewalk construction and security checks at various agency offices we were happy to take a break at our favorite Italian restaurant in Georgetown, Filomena’s Italian Restaurant where we compared notes over plates of pasta amidst over-the-top Halloween decorations hanging from the

Above: NCTA enjoyed meeting with the AAR. Nichole Fimple, Emily Regis, Tom Canter, Ron Hynes.

Left: STB Vice Chairman Deb Miller, Tom Canter, Acting Chairman Ann Begeman

ceiling and filling every corner. We could all agree the tenor of the new administration has most everyone in this town bewildered and wary of the President’s next move. And one thing is for sure, the electric grid is never going to be the same without coal as a base load fuel. I took a look around as we rode through the dark in our Lyft car back to the hotel past the glowing Lincoln and Washington memorials, illuminated by powerful electric flood lights. What an amazing thing coal fired energy can do to light up the darkness? Is the war on coal over? Not sure, but keeping the lights on with or without coal is not a job to be taken lightly. s

COAL TRANSPORTER | 37

Surface Transportation Board / Update

Surface Transportation Board Update

By Sandra Brown, Partner, Thompson Hine LLP

38 | COAL TRANSPORTER

he STB Reauthorization Act of 2015, P.L. 114-110, was signed into law on December 18, 2015 and one of its features was to expand the STB from three members to five. After over two years, no new seats have been filled and the STB now only has two members. Vice Chairman Daniel R. Elliott III left the STB on September 30, 2017, leaving the two remaining members, Acting Chairman, Ann D. Begeman, and now Vice Chairman, Deb Miller. Begeman’s current term extends until December 31, 2020 but Miller’s term expired December 31, 2017. Miller is currently serving under a one-year holdover period that is permitted under the STB’s statute. The STB members must be appointed by the President and confirmed by the Senate, though no more than three members may be appointed from the same party. The members serve five-year terms and if appointed after a term is started, fill the remainder of that term. Members are limited to two terms. There is precedent for the STB to legally function with only one STB member as many industry observers may recall when then-Chairman Nober did so for more than year in 2003. For an agency that impacts important issues like interstate commerce and now has a

governing statute specifying a five-member leadership, it seems unimaginable for that to happen again, but such a scenario is possible given that the nomination process can be lengthy and Vice Chairman Miller must depart or be re-nominated by the end of 2018. The last new nomination to the STB was Miller, and she was first nominated on September 25, 2013 but not confirmed until April 9, 2014. While there have been some names in the rumor mill for possible new STB members, President Trump has no nominations pending for the STB. Adding to this mix is that the political climate in DC is toxic and government shutdown threats occur regularly. In fact, the government did shutdown from January 20 to January 23, 2018 but the majority of that time was over a weekend so the impact was minimal. At the time of this writing, another potential government shutdown was looming. So where does that leave a small agency of only 116 employees, according to the “STB Plan for a Possible Lapse in Appropriations,” which was prepared January 19, 2018? The STB’s budget request for FY 2018 seeks funding for 142 full-time equivalents (“FTE”) which is still lower than the FTEs for the agency in 2010, when the agency was designed for only three STB members.

Slow action at the STB has not gone without notice. On January 16, 2018, 73 leaders of American manufacturing, agriculture and energy industries, and some of the largest freight customers, sent a letter to President Trump urging him to fill the STB seats and name a permanent Chair of the STB. The letter was an impressive list of the trade associations that make up the Rail Customer Coalition as well as many individual company Presidents and CEOs. Prior to that, on January 3, two ranking members of the relevant House committees wrote a letter to President Trump urging him to “prioritize filling these vacant seats immediately.” The letter was sent from Ranking Member of the House Committee on Transportation and Infrastructure, Peter DeFazio (D-OR) and Ranking Member of the Subcommittee on Railroads, Pipelines, and Hazardous Materials, Michael Capuano (D-MA). The letter emphasized the importance of the STB as a critical mediator in numerous rail matters and investigator for service matters like the recent operational difficulties of CSX Transportation, Inc.(“CSXT”). CSXT’s service problems resulted in a “listening session” at the STB on October 11, 2017. The listening session was originally scheduled for September

but was postponed due to Hurricane Irma. The lead spokesman for CSXT at the listening session was its President and CEO, Hunter Harrison, who joined CSXT in March 2017 and died on December 16, 2017. While CSXT seemed to get its service back to a more acceptable level by the end of 2017, Norfolk Southern Railway’s service has deteriorated recently.

STB Reporting The STB has been busy filing various reports and responding to Congress. As a result of the STB independence from the Department of Transportation that occurred under the STB Reauthorization Act of 2015, the STB filed its fiscal year 2017 Performance and Accountability Report (PAR). The PAR is to satisfy the Government Performance and Results Modernization Act of 2010 to report the STB’s performance results against its established goals. On January 25, the STB also responded to a request from the House Oversight and Government Reform Committee. The Committee was seeking guidance documents from all federal agencies issued since January 1, 2008 so the Committee can better understand how agencies use non-legally binding guidance documents.

Other quarterly reports published by the STB include a report on Unfinished Regulatory Proceedings, a report on Rate Case Review Metrics, and a report on Formal and Informal Service Complaints. The STB also corresponds with the U.S. Senate and House Oversight Committees on a quarterly basis under Quarterly Correspondence to U.S. Senate and House Oversight Committees. The quarterly reports and other updates on the implementation of the STB Reauthorization Act can be found on the STB’s home page, under Quick Links: “STB Reauthorization” or by the following link: http:www.stb.dot. gov/stb/rail/ReauthorizationAct.html.

Regulatory Reform Task Force The STB’s Regulatory Reform Task Force (“RRTF”) issued a status report on November 21, 2017. The RRTF was created in response to Executive Order No. 13777 on February 24, 2017 directing all agencies to establish a RRTF to review and recommend regulations for repeal, replacement, or modification. The STB’s RRTF November report provided the status on the following actions of the task force: • Finalized rules in Offer of Financial Assistance (OFA) Rulemaking, Docket No. EP 729;

COAL TRANSPORTER | 39

• Proposed changes in Ex Parte Communications in Rulemakings, Docket No. EP 739; • Recommended a proposed rule to replace Outdated Procedural/ Filing Rules; • Considering a proposal to repeal the requirement to file water carrier tariffs; • Held a public listening session regarding the goals of the RRTF on July 25, 2017; • Working on a proposal to revise the STB’s Environmental Rules; • Considering a proposal to update recordations to permit electronic signatures; and • Considering a number of licensing updates and simplifications.

Year End 2017 / Early 2018 Decisions On December 4, 2017, the STB issued a final decision in Docket No. EP 733, Expediting Rate Cases, which provided rules to expedite the process of challenging rail rates in accordance with the shortened procedural schedule for resolving these disputes adopted by Congress in the STB Reauthorization Act of 2015. The new rules establish a pre-filing notice, require a STB-appointed liaison to the parties, streamline discovery, and made other adjustments to the evidentiary submissions in rate cases. In late 2017, the STB also issued a decision in Revisions to the Cost-of-Capital Composite Railroad Criteria, Docket No. EP 664 (Sub-No. 3) (served October 25, 2017). This final rule updated one of the screening criteria used to create the “composite railroad” for the STB’s annual cost-of-capital determination. With this change, a company’s stock must be listed on either the New York Stock Exchange (NYSE) or the Nasdaq Stock Market (NASDAQ) rather than on either the NYSE or American Stock Exchange (AMEX), as the AMEX no longer exists. On January 11, 2018, the STB issued the rate reasonableness decision in Consumers Energy Co. v. CSX Transportation, Inc.,

40 | COAL TRANSPORTER

Docket No. NOR 42142. The STB found that CSXT has market dominance and that the challenged tariffs were unreasonably high for the rail movement from the Chicago interchange to West Olive, Michigan. However, the STB prescribed rates over 400% R/VC under the Stand-Alone Cost test. The STB also found that the shipper had not shown that CSXT is revenue adequate under the revenue adequacy constraint.

Rulemakings Expected in 2018 For 2018, the following rulemakings are expected to be developed or get a decision from the STB, as described in the Report on Pending STB Regulatory Proceedings dated December 31, 2017: • Review of the General Purpose Costing System, Docket No. EP 431 (Sub-No. 4); • Ex Parte Communications in Rulemakings, Docket No. EP 739; and • Review of Commodity, Boxcar, and TOFC/COFC Exemptions, Docket No. EP 704 (Sub-No. 1). The STB’s Report on Pending STB Regulatory Proceedings listed the date for the next action in this proceeding as TBD; however, Acting Chairman Begeman’s Semiannual regulatory agenda published in the Federal Register on January 12, 2018 listed this proceeding as the only priority to be reviewed or developed in the next 12 months.

Major STB Policy Initiatives Remain on Hold The December 2017 Report on Pending STB Regulatory Proceedings also confirmed that several major policy initiatives remain on hold pending potential changes to the STB’s membership due to the change of administration. These proceedings are listed as TBD because the two members could not agree on the projected target date for the next STB action. These proceedings include:

• Rail Fuel Surcharges (Safe Harbor), Docket No. EP 661 (Sub-No 1); • Expanding Access to Rate Relief, Docket No. EP 665 (Sub-No. 2); • Reciprocal Switching / Competitive Switching Rules, Docket No. EP 711 (Sub-No. 1); and • Railroad Revenue Adequacy, Docket No. EP 722.

Positive Train Control In an area that the STB watches closely, the House subcommittee on Railroads, Pipelines, and Hazardous Materials for the House Transportation and Infrastructure Committee recently announced it will hold a hearing on February 15, 2018 on Positive Train Control (“PTC”). The hearing was announced in the midst of several high-profile train accidents including one involving Members of Congress. PTC includes advanced technologies to automatically stop trains and take human error out of the equation. The requirement for passenger and Class I freight railroads to install PTC came in the Rail Safety Improvement Act of 2008. The original deadline for installation was the end of 2015. In late 2015, Congress extended the deadline until the end of 2018 with the potential for a two-year extension on implementation until the end of 2020. The freight and passenger railroads are in different phases of installation and implementation, but the Association of American Railroads (“AAR”) reports that the Class I freight railroads will install all required components by the 2018 deadline. However, the AAR policy paper is silent on whether the Class I railroads will have fully implemented an operational PTC system by that date. In sum, 2018 could either be a big year for the STB with multiple nominations and confirmations for new members to the STB, which would likely result in action on proceedings currently on hold, or it could be a year with no significant policy action and end in December with an agency of just one member. In this political climate, it is anyone’s guess. s

NCTA CALENDAR

July 31st, 2018 Scholarship Application Deadline

OF EVENTS

September 11th, 2018 Presentation of NCTA Scholarship Awards: David L. Laffere Scholarship Three Memberâ&#x20AC;&#x2122;s Children Scholarships

April 23rd-25th, 2018 Spring Conference Hammock Beach Resort, Palm Coast, Florida

September 10th-12th, 2018 Forty-Fourth Annual Business Meeting and Conference Omni Interlocken Resort, Broomfield, Colorado

June 11th-13th, 2018 Operations and Maintenance Conference Marriott at Vanderbilt University, Nashville, Tennessee

December 30th, 2018 Receipt at NCTA office of all re-certification forms for the UMLER Fee Waiver for Calendar Year 2019

2018

July 10th, 2018 Advertising and Editorial Deadline for Issue 2, 2018 of the Coal Transporter Magazine

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steel customers in more than 25 countries on six continents. Peabody offers significant scale, high-quality assets, and diversity in geography and products. Peabody is guided by seven core values: safety, customer focus, leadership, people, excellence, integrity and sustainability. For further information, visit PeabodyEnergy.com.

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NCTA Scholarship Recipients

2017 Scholarship Recipients The NCTA awarded four scholarships to children of the employees of NCTA member companies at its annual fall conference in Denver. These are the talented and hard-working recipients.

Allison Yaeger University of Missouri | Electrical and Computer Engineering

Recipient of the 2017 David Laffere Scholarship Award

Allison Yaeger is a junior at the University of Missouri in Columbia. She is studying electrical and computer engineering. She is a member of the Eta Kappa Nu electrical and computer engineering honor society as well as a member of the Mizzou engineering student council. Last summer she interned with LS Power, where she worked closely with other engineers and was exposed to many aspects of the power industry. For the summer of 2018, she has already accepted an internship position with Garmin in Kansas City. She is looking forward to this new experience and learning what her future career could hold. Allison was born and raised in Saint Louis, Missouri and attended high school at Lutheran High School South. Allison grew up with a penchant for math and science and was inspired to study electrical engineering by her parents, both of whom are also electrical engineers. Allison has an older sister and two younger brothers who all love playing basketball. In her free time, she enjoys reading and scrapbooking. Being from Saint Louis, she supports the local teams, attending Cardinals and Blues games with a stop at Ted Drews frozen Custard afterwards! s Allison is the daughter of Scott and Maria Yaeger (Peabody Energy)

Daniel Riordan Ohio University | Chemical and Biomolecular Engineering Daniel Riordan attends Ohio University where he is a top member of the Chemical and Biomolecular Engineering program’s Class of 2018. He already has a significant amount of experience having worked as a co-op engineer or researcher at Battelle Memorial Institute, Honda of America Manufacturing, Varo Engineers, and the Oak Ridge National Laboratory. In these positions, Daniel has had the opportunity to create and improve the materials used in fuel cells, as well as develop advanced techniques to recover rare earth elements from coal and coal by-products. Daniel led one of Ohio University’s award winning teams competing in New Mexico State University’s WERC Environmental Design Contest and is an Engineering Ambassador for Ohio University’s Russ College of Engineering and Technology. When not at the student recreation center or on a round-trip run from campus to Radar Hill, Daniel enjoys rock climbing, hiking in the mountains, and taking his bike out on the Hockhocking Adena Bikeway. Daniel graduates this coming May and plans on pursuing a career where he can develop new technologies and systems for the energy industry. s Daniel is the son of Timothy Riordan (American Electric Power)

42 | COAL TRANSPORTER

Missy Kimlinger Saint Louis University | Biochemistry with Philosophy minor Missy Kimlinger is currently a senior at Saint Louis University studying Biochemistry with a minor in Philosophy. She will graduate in May and plans to attend medical school at Vanderbilt University. Missy hopes to someday become an Ear, Nose, and Throat physician. Her desire is partly inspired by her father, who has a balance disorder, and her younger sister, who has moderate to severe hearing loss. As an undergraduate, she was involved in a research project studying noise-induced hearing loss in chinchillas. She hopes to continue researching hearing loss in medical school to help in the development of a future drug to help slow hearing loss or restore hearing. At school, Missy spends much of her time as a teaching assistant for Chemistry courses and volunteering at St. Louis Children’s Hospital. She is also involved in research in the Chemistry department, developing a 3D printed device to help with detection of low concentrations of important biomolecules. In her free time, Missy enjoys running and is training for her first marathon. s Missy is the daughter of Joe and Sheila Kimlinger (Dynegy)

Tori Parks Black Hills State University | Professional Accountancy Tori Parks was born and raised in Douglas, Wyoming, a town that thrives on the production of coal. After graduating from high school, she moved to Spearfish, South Dakota to attend Black Hills State University. Tori will graduate this coming May with a degree in professional accountancy. After graduation, she will begin taking sections the four part CPA exam. In August, Tori will begin working for a public accounting firm. She is looking forward to working with a variety of clients from across the state of Wyoming and learning more about their backgrounds in ranching, farming, oil, mining, and railroading. She has a younger brother and a border collie named Reece. She played softball, volleyball, and ran track. At school she stays busy working as a preschool teacher at the college’s daycare center, while taking a heavy course load. When she’s not at work or studying, she spends time with Reece. When the weather is nice, they love to get out and explore all the beauty that the Black Hills area has to offer. s Tori is the daughter of Richard and Tara Parks (Cloud Peak Energy)

COAL TRANSPORTER | 43

Rail Transportation / Pricing

Alternative Approaches to

PRICING COAL TRANSPORTATION SERVICES By Timothy D. Crowley, Executive Vice President & Brian A. Despard, Vice President, L.E. Peabody & Associates, Inc.

44 | COAL TRANSPORTER

apacity factors for coal plants nationwide have seen significant declines since the boom in shale natural gas production, with increased development of renewables also playing a role. Lower coal plant capacity factors have created challenges not only for coal-fired generators, but also for coal producers and railroads that ship coal. Lower coal plant capacity factors are not the only issue driven by lower power prices. The month-to-month, or even week-to-week, volatility in the demand for coal at many power plants makes managing coal supply and coal transportation contracts a significant challenge. This article discusses alternative approaches to pricing coal transportation services. These approaches address the challenges faced by railroads and coalfired generators. Historically, pricing in rail transportation contracts has been based on a rate per ton that is escalated through time. These contracts typically included performance guarantees and penalties for contract tonnage requirements not shipped. Rail transportation contracts

with these terms work fine when coal plants are dispatching at about 70% to 85% of their capacity annually and coal burn volumes are consistent and easy to forecast. In the current coal transportation market, with annual coal plant capacity factors for many plants ranging from 50% to 70%, rail transportation contracts with one rate per ton for all tons and strict contract tonnage requirements do not meet the needs of coal-fired generators who want to be able to maximize dispatch and manage coal supply risk. Prior to the current coal transportation market, there was a period of time where railroads and coal-fired generators were waiting to see if natural gas prices would remain at historic lows before looking for new ways to price rail services. If natural gas prices increased back to historic levels, power prices would increase in kind, coal plants would have higher capacity factors and neither the railroads nor coal-fired generators would need to find new ways to price coal transportation via rail. It would be business as usual… however, this has not happened. Given today’s electric generating market and the sustained low prices of natural gas, it is long past due for coal-fired generators and railroads to explore new ways of structuring rail transportation contracts so that plant dispatch can be optimized, thus creating more value for both the railroad and the shipper.

cost of coal, the cost to transport coal, the cost of variable operating and maintenance costs and the costs related to environmental controls and allowances. The lower the plant’s variable, or dispatch costs the more the plant will dispatch. The cost of rail transportation is usually the largest component of a plant’s dispatch costs. For example, a Midwestern plant that burns coal from the Powder River Basin, WY may pay $12/ton for coal and $25/ton for rail transportation. These prices, when expressed on a $/MWh basis translate to $7.36/MWh and $15.34/MWh, respectively, assuming a coal heat content of 8,800 btu/lb. and a plant heat rate of 10,800 btu/lb. Add in $1.50/MWh for variable operating and maintenance expense and $0.50/MWh for environment control costs, and the plant’s dispatch cost is $24.70/MWh. Rail transportation then is roughly two-thirds of the total dispatch cost of the plant. Chart No. 1 demonstrates that lowering a plant’s rail transportation rates, which in turn lowers a plant’s dispatch

costs, can lead to increased generation and more gross margin that the generator and railroad can share. Gross margin is defined as revenues realized from operating a plant minus the variable costs incurred with operating a plant. A common way to measure increased value, or gross margin from lower dispatch costs is with the use of a monte carlo dispatch model, or real option valuation, which simulates a plant’s dispatch considering a range of possible power prices. A simpler way to demonstrate increased value from lower dispatch costs is with a price duration curve, which is a tool that allows for a quick estimation for how much a power plant will dispatch against a set of power prices. A price duration curve is developed by sorting power prices for a certain period from largest to smallest and plotting these prices against a factor of volume. Chart No. 1 also demonstrates, through a hypothetical coal plant, how gross margin increases when dispatch costs are lowered assuming a discounted rail rate, compared to the same annual

Chart No.1 - Impact of Lowering Dispatch Costs on Plant Generation

Lower Rail Rates Generate More Combined Margin Before we explore ways to price transportation services that creates value for both railroads and coal-fired generators, we must first discuss the impact dispatch costs have on optimizing value. In order for a coal-fired generator to turn its plant on, it must be assured that it will be able to recover its variable cost of producing electricity. These variable costs include the

COAL TRANSPORTER | 45

price duration curve discussed above. The price duration curve in the chart reflects hourly prices for a year formed into onpeak and off-peak price blocks, which are then sorted from highest to lowest. As shown in Chart No. 1, a 25% discount in the rail rate moves the plant’s capacity factor from 53% to 79% in the hypothetical example. Obviously, it is no surprise that lowering a plant’s dispatch cost results in more generation. The important thing to determine is how the change in gross margin, both to the generators and the railroad, from lower dispatch costs resulted in increased margin to both parties due to the discounted rail rate. Table No. 1 shows the economics behind this upward shift in generation shown in Chart No. 1. As can be seen in Table No. 1, lowering the transportation rate results in a higher dispatch rate for the plant and a higher overall combined margin for both generators and railroads. Specifically, the increase in capacity factor shown in Chart No. 1 appears in Line 3 of Table No. 1. This increase in capacity factor translates to an increase in the generator’s gross margin of $22.2 million (Line 4 from Table No. 1). However, the railroad’s margin decreases by $10.8 million (Line 8 in Table No. 1) as a result of lowering the transportation rate. So, after the railroad is made whole on its margin, there is $11.3 million in additional margin for the generator and the railroad to share (Line 9 in Table No. 1).

The question then becomes, how to share the additional margin generated from lower rail rates. The answer is to develop a pricing mechanism that lowers a plant’s dispatch cost but fairly compensates both the generator and the railroad. L. E. Peabody & Associates, Inc. proposes two (2) rail transportation pricing approaches that allow for the equitable sharing of value between generators and railroads.

Approach 1: Tying Rail Rates to Power Prices The first approach involves tying rail rates to the power prices realized by a coal-fired plant. This approach can be used in an organized market where an independent system operator (“ISO”) clears supply offers and demand bids by location in a dayahead market to create prices commonly referred to as locational marginal prices (“LMP”). The plant’s LMP is the most accurate measure for representing the price at which the plant is compensated for its production. Tying rail rates to natural gas prices, a concept that has been tossed around, is much less efficient than tying rail rates to LMP’s because an LMP already reflects the impact of natural gas prices. That is, a plant’s LMP factors in the competitive offers from other plants, including natural gas plants, that are able to move power toward loads. Also, LMP’s include the impact on the price of transmission flows to and from the plant. The idea of tying rail

Table No. 1 - Summary of Increased Combined Margin from Lowering Dispatch Costs Item

No Rail Discount

Rail Discount

Difference1

Tons Burned (millions)

2.84

4.27

1.42

Electricity Produced (millions of MWh’s)

4.63

6.95

2.32

GENERATOR’S GROSS MARGIN

Plant Capacity Factor

53%

79%

26%

Gross Margin (millions)

$33.1

$55.2

$22.2

2.84

4.27

1.42

RAILROAD’S MARGIN Tons Shipped (millions) Revenues (millions) Variable Costs (millions)

Margin (millions)3 Combined Margin (millions)

$71.1

$80.0

$8.9

$39.5

$59.3

$19.8

$31.6

$20.7

($10.8) $11.3

Rail Discount Case minus No Rail Discount Case. No Rail Discount Case assumes rail rate is set at 180% of variable costs. Rail Discount Case reflects variable cost per ton implied by No Rail Discount Case. 3 Revenues minus Variable Costs. 4 Generator’s Gross Margin Difference plus Railroad’s Margin Difference. 1 2

46 | COAL TRANSPORTER

rates to power prices allows for rail rates to vary with power prices. Under this approach, when power prices for a coal-fired plant are lower than expected, rail rates are discounted so that the plant can dispatch more than it otherwise would under a single transportation rate for all tons. When power prices for a coal-fired generator are higher than expected, rail rates include a premium, which is affordable to a generator because they are realizing a higher than expected gross margin. Pricing for this approach requires setting a range (or schedule) of rail rates to a range (or schedule) of power prices. Table No. 2 shows a hypothetical example of a rail rate/power price schedule following the pricing approach described.

Table No. 2 - Hypothetical Rail Rate/Power Price Schedule LMP ($/MWh)

Corresponding Transportation Rate ($/Ton)

<$20

$18.75

$20 to $23

$20.83

$23 to $25

$22.92

$25 to $26

$25.00

$26 to $28

$27.08

$28 to $30

$27.08

>$30

$31.25

Tying rail rates per ton to power prices per MWh requires the plant’s heat rate and the expected heat content of the coal being delivered to be tied into the rail transportation rate calculation. The rail rate/power price schedules can be calculated monthly or annually. A dispatch cost based on the lowest rail rate in the rail rate/power price schedule would reflect the lowest cost a generator would be willing to offer into an ISO’s day-ahead market. A generator’s offer into a day-ahead market would need to consider this lowest rail rate in the schedule. When a generator’s offer is accepted for a given day, that day’s LMP, using the rail rate/power price schedule, determines the rail rate to be charged for deliveries that equal that day’s coal burn. This daily process in continued for a month, at which point the generator is invoiced for the quantity of coal delivered that month based on rail rates determined by the actual daily LMP’s for the month. This approach requires monthly or quarterly true-ups for

differences between tonnages delivered and tonnages actually burned for a month.

Many coal plants no longer serve as baseload resources.

Approach 2: Fixed Demand Charge with Variable Service Charge The second approach involves dividing rail rates into a fixed demand charge and a variable service charge. Projecting coal burns for a plant has become more difficult because the volume of coal needed for a given month in today’s market is much more uncertain now than it was when coal plants had high baseload capacity factors. Many coal plants now operate as intermediate resources rather than baseload resources. In fact, many coal plants today have capacity factors similar to capacity factors for natural gas combined-cycle plants prior to the decline in natural gas prices. The way natural gas pipelines deal with volume uncertainty for intermediate combinedcycle plants is to charge generators a fixed demand charge that gives generators the right to schedule natural gas deliveries at a variable energy charge.

Railroads could adopt a similar approach and price in the same manner as natural gas pipelines. They could charge a fixed demand charge that allows a generator to call, or schedule a varying number of trains monthly at a variable service charge. This approach would allow railroads to recover fixed costs regardless of tonnages shipped. This approach also allows a generator to “sink” a fixed demand charge as a fixed cost and reduce its variable rail charge within its dispatch cost calculation. The resulting lower dispatch cost will allow the plant

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to dispatch more, increasing net revenues, which recovers the fixed transportation demand charge and more. The railroad increases its net revenues by charging the generator, within its fixed demand charge, for the right, or option to vary its number of scheduled trains within a month. This approach works as essentially a call option for rail service. We are currently working on both rail transportation pricing options with clients and expect that alternative rail rate pricing structures like these will become more common in the future. s

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NCTA / Member Sound-Off

Member Sound-Off The Coal Transporter asked members and associates to offer their opinions on a current topic relative to the Association.

ransitions are great times to evaluate things and decide if you want make changes going forward. Since the Coal Transporter will have a new Editor, we asked Members to Sound Off about the magazine to find out which features Members value and which can go by the wayside. The magazine has attempted to balance the technical, operational and regulatory aspects of our business with the personal side. On the technical front we’ve focused on things like infrastructure, AAR rules, the STB, and a large variety of other serious issues challenging our members. On the personal side, we’ve covered all our conferences and committee meetings using lots of images, regularly featured an in depth biography of a member of our community in the “reflections” section, presented our annual scholarship winners, and introduced you to various members of the NCTA leadership team. With just two issues published each year, the magazine has never attempted to share breaking news. We are proud that over the last decade, the content has been almost exclusively original, with a high editorial to advertising ratio. This issue is no exception.

Where Have we Been?

There are a lot of industry magazines out there and one can only do so much reading on an airplane. We asked readers how well the Coal Transporter stacks up against the competition. The main purpose of this question was to determine if the magazine just needed some tweaks or a complete overhaul. We really don’t want it lining the bird cage. That’s what the New York Times is for. The good news is that 91% of the survey respondents thought the Coal Transporter is somewhat or much better than the competition. We’ll take that with a grain of salt because if one isn’t a regular reader of the magazine, that person is unlikely to take a survey about it. It answers the question though. Tweaks it is.

How the Coal Transporter Stacks up Against the Competition

The second group of questions was geared at determining how effective certain portions of the magazine are in building a sense of community. After all, this is an Association magazine. Three sections of the magazine were singled out: • The Conference recaps that contain numerous pictures taken at the event with each photo captioned. • The Committee Report section that covers the ongoing efforts by the working groups within the organization to streamline and problem solve industry issues. • And finally, this Member Sound-Off section where members can express their personal opinions on a variety of topics, some serious and some not so much. So how effective are these sections?

Do Parts of the Coal Transporter Help to Develop a Sense of Community? 70%

Conference Recaps

Committee Reports

Member Sound-Off

60% 50%

80% 40% 70% 30%

60% 50%

20%

40%

10%

30%

Very Helpful

20% 10% 0% Much Better 48 | COAL TRANSPORTER

Somewhat Better About the Same Somewhat Worse Much Worse

Somewhat Helpful

Neutral

Not Very Helpful

Not at all Helpful

The conference photos are a pretty big hit. Reinforcing the match between a name and a face is a very helpful thing both for personal and business relationships. Even those that were

unable to attend a given conference find value in finally seeing for themselves just who it is at the other end of the phone. Likewise, the committee reports seem to help the group to coalesce. Our regular semi-annual committee meeting schedule has been under stress of late due to travel constraints, but historically they have been some of the most productive and educational NCTA events. The Member Sound-Off section has mixed reviews. While it does allow people to state their opinions and be heard, maybe certain questions have fallen flat with readers. And to finalize our baseline, we asked readers which sections or specific articles have been their favorite. Here is a sampling of the responses:

“Featured power plants, regulation write-ups, sound off, articles about our recent retirees.” Albert Serna, CPS Energy

“Getting to know the board is always interesting.” Kevin Johnson, Nebraska Public Power District

“I find Mr. Canter’s articles to be very informative.” Daniel Hart, Alpha Products, Inc.

“I liked the railcar return checklist that was in the last issue.” Laura Quast, Oglethorpe Power Corporation

“Always really enjoy the Reflections pieces about old friends. Also like reading about the Board members and any personal stories.” Emily Regis Arizona Electric Power Cooperative, Inc.

“Editorials” Gary Kaliher Newmont Mining Corp (Retired)

“Favorite sections are articles on people.” Gayle TenBrink, TrinityRail

“Industry updates.” Bruz Hicks, ARS

“Member sound off.” John Mayer, Associated Electric Cooperative, Inc.

“Past photos and conference updates.” Kevin Koepke, Appalachian Railcar Services

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“The article that I wrote for the inaugural edition.” John Jennings, Lexair, Inc.

“Try to be as politically neutral as possible. While Republicans have lately been friendlier to coal companies, not everyone in the organization is Republican and some don’t feel that Republicans are as friendly to individual employees’ interests.”

“The Executive Director’s Message... I’ve always appreciated the diligence Mr. Canter took when composing his messages.”

Kathy Brown, Arch Coal

Chris Cornett, Grand River Dam Authority

“The Member Spotlight is interesting, and gives good insight into the issues faced by other utilities.” Marcus Craig, Kansas City Power & Light

Where Should we go?

Not all articles are going to be interesting to every reader. At one point, if I saw one more article about the EPA’s War on Coal, I was ready to scratch my eyes out. (Notice that no one mentioned the EPA in their list of favorites.) We can always improve and change things up to keep the magazine fresh. Respondents were asked if there a portion of the magazine they feel should be eliminated or alternatively, some areas or topics that should be routinely covered? Here is some of what they had to say:

I’d like to thank everyone who offered suggestions for the future. Even if your comment was not printed, the new editor will get a copy.

The View From the Caboose

One respondent in the survey said that it would be “great to read something positive now and then.” While positive news has been in extremely short supply, we have attempted to add a little levity with the occasional cartoon and particularly with the musings of Pete Moss and Ann Thrawsite. Before they get laid off too, we thought we’d better check to see if anyone was tuning in. While Pete and Ann’s interactions carried little of the drama of the Strzok/Page texting, they did have their moments.

Reading the View Viewfrom fromthe theCaboose Caboose ReadingFrequency Frequency of of the

0% 12%

“Definitely agree with the comment on War on Coal. I think we should focus on aspects such as how the industry is adapting to the renewable space. Additionally, coal is no longer the same base load generation it has been in the past - we need to focus on the impacts this causes to transportation and the rest of the supply chain.”

18%

Karen Bramley, Tampa Electric Company

24% “Articles on commercial issues would be helpful: contract matters, wholesale power markets, operating and environmental constraints that limit types of coal that can be used.”

Most of the Time About Half of the Time

Dennis Rackers, NIPSCO

46% “STB issues, particularly rate matters, would always be of greater interest.”

Always Once in a While Never

Joe Leingang, Basin Electric Power Cooperative / Western Fuels Association

“Perhaps a section where people might want to share changes in their jobs - promotions, new hires, etc.?” Gayle TenBrink, TrinityRail

“Politics.” Bill Wallace, Cloud Peak Energy

50 | COAL TRANSPORTER

I guess a follow up question would be, are people reading because they enjoy it, or is it like the car crash on the highway that you just can’t help but look at? Honestly, Pete can be a car crash at times. It has been my pleasure to serve as your editor for the past eight years. I’d like to thank all those that contributed editorial content and advertisers that made it economically possible to produce. I’d especially like to thank Jennifer Karton, our designer extraordinaire, Jody Dundas, and the rest of the Suckerpunch team for teaching me the ropes and giving the magazine its visual pizazz. s

Reflections / Jack Cranfill

JACK

CRANFILL A Character with Character

COAL TRANSPORTER | 51

Reflections / Jack Cranfill continued

ost people who know Jack Cranfill would describe him as a “character”. In the MacMillan Dictionary, a “Character” is someone with qualities that make them different from most people and interesting to know. That description fits Jack to a tee. If you ask Jack, being a character comes from being part of his family. “You cannot separate me from that fact. While I am known in the industry and have been involved for many decades, it all still comes back to family with me.” John C. “Jack” Cranfill Jr. was born in Lexington, Kentucky on November 24, 1947, the first born child of John C. Cranfill and Dorothy “Dotty” Laverne Rothan Cranfill. In 1955, the family moved to Somerset, Kentucky where his dad started a small auto parts store called Auto Electric. It was a true Mom and Pop operation as his mom kept the books for the store. Jack’s dad was not mean-natured, but he was stern. He taught Jack that the most important thing you have in life is your word so you should always keep it and that you should give a man an honest day’s work for an honest day’s pay. The later lesson may have been particularly important to his dad since Jack started working at

Jack and Jan 52 | COAL TRANSPORTER

the auto parts store at the age of 11. His mom Dotty taught Jack how to laugh, to love, and to give. Jack credits her for the fact that he is one of the happier people you will meet. She was also very wise. Jack’s wife Jan once asked her, “How do you be a great mother-in-law?” Her answer: “Keep your mouth shut.” His mom never had a driver’s license until she was in her 60’s. The State police that gave the driver’s test hung out at the auto parts store (which also happened to be the starting point for the driver’s test) or she would not have passed the test! While Jack was the oldest, he was joined in time by two brothers, Bob and Larry, and two sisters, Linda and Michelle. In spite of the fact that there is an 18 year age difference between the youngest and the oldest, the siblings remain very close. His sister Linda hosted a mere 70 family members just this past Thanksgiving. The family has been gathering prior to Christmas for as long as Jack can remember. The most recent gathering was December 15th at his brother Bob’s house where the family shared food and sang Christmas carols using the same music sheets they’ve used since Jack was a small child. Instead of exchanging gifts, they bring gifts for the homeless and

Jack Sr. and Jack Jr. on New Year’s Eve

many in the family serve dinner to the homeless and give out the gifts during Christmas week. The gang also loves to party together. Once in the 1980’s when they were all in their 30’s, the three Cranfill brothers were on the dance floor at the Country Club, and created “the Cranfill Shuffle”. To this day all the kids and grandkids learn the dance so watch out when the Cranfill clan takes over a dance floor! Jack’s never knew his maternal grandmother Anna Waldhause Rothan and only knew his maternal grandfather Martin Rothan for a short while. Jack recalls that Martin loved spicy food and that it was often on the menu when the family went for a visit. Martin wrote a book on umpiring titled the New Baseball Rules and Decisions Book. It’s out of print today, but you can still pick up a copy on eBay if you’re lucky. On his father’s side, there were some real characters. Jack’s grandfather was Mitty Beatrice Cranfill and his brother, Jack’s great uncle, was Otha Dora. Jack is not quite sure how their parents came up with those names, but it may have had something to do with the fact that his great grandfather married a full blooded Cherokee. His grandfather Mitt was very different. He did not believe in banks

Jack’s Mom Dotty

so he buried his money. He was the poster child for the phase “one man’s trash is another man’s treasure” as he collected discarded items from the alleys in Lexington that later became antiques. He had a monkey for a pet and kept a fire going year around in his bed room. Jack’s grandmother was Mamie, a good woman but tough.

Nuns Will Teach you Character

As a child, Jack attended the small three room St. Mildred’s Catholic School in Somerset - 1st, 2nd and 3rd grade in the one room, 4th, 5th and 6th grade in another room and 7th and 8th in the last room. There is nothing like a Catholic school for teaching children that not following rules carries consequences. The experience proved significant to Jack’s life, teaching him respect and discipline. It was significant in other ways as well. When he finished up at St. Mildred’s, there were 8 people in his 8th grade class. He then attended Somerset High School where there were 160 freshmen, most of whom he did not know. The Catholic students were not automatically put into the accelerated classes as some of the higher achieving public students were, so Jack figured out that if you can do math people will think you are smart. He also learned that if you can make people laugh or smile, you will start being included.

“I tell people we weren’t poor, we just didn’t have anything. I learned it’s not things that are important, but your imagination and friends. We brewed sassafras tea from tree roots. We built “forts” in the field across from our house. We played “Kick the Can” because everyone can afford a can. We caught lightening bugs. We roasted marshmallows. We played whiffle ball and badminton. When your friends are in the same boat you are, you really don’t notice what you don’t have.” Jack attended the University of Kentucky, the first person in his family to go to college despite knowing nothing about the entrance process, acquiring student loans (a blessing in disguise), or otherwise securing financial assistance. Initially he lived with his grandparents in Lexington. Mamie moved her clothes out of the closet and put a cot in there for him. Mitt would wake him at 6 am to chop wood. Figuring that wasn’t what college was meant to be, he went out for fraternity rush the next semester and found a fraternity that would let him run the kitchen in exchange for his board. He was so happy that he was able to experience true college life and finally “come out of the closet!” Jack worked his way thru college doing any job he could find. One year he had 14 W-2 forms when it was time to do his taxes. This pay-as-yougo route was a long one and it took seven years for

A Huge Cast of Characters – The Cranfill/ Rothan Clan.

“I tell people we weren’t poor, we just didn’t have anything. I learned it’s not things that are important, but your imagination and friends.” COAL TRANSPORTER | 53

Reflections / Jack Cranfill continued

Jack to complete his Bachelor of Science in Chemical Engineering. Jack claims that “I chose Chemical Engineering because I would not have to take a foreign language - in my mind Spanish would be tougher than Physical Chemistry!” Three years into his program, he began questioning his choice of Chemical Engineering as he felt he was surrounded by people wired very differently than he was. He went to the Placement Center and took a personality test. The results indicated that he was least qualified to be was a minister (that told Jack the test was probably pretty good) and the next least thing was an engineer. In spite of this, he decided to stay the course, but planned to eventually get into technical sales.

A Character Meets his Match

By his junior year in high school, Jack was no longer at the bottom of the social food chain but by no stretch close to the top. He saw this freshman girl walking towards him in the hallway and he asked someone who she was. She was Janet DeBord. He says it was just like he knew she was the “one”. A few weeks later, Jack was at a Sock Hop

and Jan was dancing with the guy she was going steady with. “I tapped him on the shoulder and said I wanted to dance with her - he said no, but I did so anyway - I brought her in close and said I don’t want to scare you, my name is Jack, I know you are Jan and I want you to break up with him and go out with me - I then let go so she could go back to her date - two weeks later they were broken up and we had our first date.” Jack and Jan were married in Somerset, Kentucky in 1970. The fact that Jack was a Catholic and Jan was a Baptist presented a few challenges. Jan’s parents would not come to the Catholic Church and Jack’s parents had issues if the priest was not part to the ceremony. Jack met with the Baptist Minister, the local Catholic Priest and the Catholic Bishop and somehow got them all to agree. It was one of the first hints that he may be good at sales. At that point you could have sold tickets to the event and the joint wedding went off without lightening hitting the Baptist church! The newlyweds were both still in college and they moved into a 10 x 30 trailer. They both worked and

Jack and Jan at the prom

Jack with Eric Linn at a NCTA golf outing 54 | COAL TRANSPORTER

carried full class loads. Date night was going to the grocery together. “I could add up in my head how much we had in the cart and would look and say what do we need more than what’s in the cart - those days were as happy as any we had until we had kids!”

Work Will Test Your Character

After graduating in 1971, Jack’s took a job as an engineer for Consol in Beckley, West Virginia. He was shocked to get the offer as he was in Chemical Engineering and had never even seen a mine. The HR person from Consol was very social and they just seemed to hit it off. Jack did well at Consol, which was a double edged sword. They wanted him to get his foreman’s license and work underground to get that experience. That was not something he wanted to do and once he told them no, he knew he needed to move on. The next job he got was with Nalco. It wouldn’t be his last job at Nalco, but we’ll get back to that. He and Jan were able to move back to Kentucky and settled in Louisville. Jan taught at Jefferson Town High School, allowing Jack and Jan to buy their first home. Jack thrived and was the Top New Account Producer at Nalco in 1976. Not everything was rosy though as he was not good at the corporate game. He turned down a promotion to district manager so his family would not have to move. He would eventually get a district manager job at ARCO. They contacted him when they were starting up a new water treatment company in 1979 and he was promoted to district manager in 1981. He stayed with the company through many

Jack loves this industry because, for the most part, people are real. ownership changes. In 1994, he joined AKJ Industries. He knew the owners from his days with ARCO and Jack was tasked with starting up a chemical division from scratch. The group was

very successful, to the point that Nalco bought the chemical division of AKJ Industries in 2014. Jack worked for Nalco until he retired in November of 2016 but started doing consulting work for them again in mid-2017. Jack loves this industry because, for the most part, people are real. He was reluctant to start down the path of mentioning those that have had an impact on him for fear he would leave someone out or tell embarrassing stories. Besides, I told him that he couldn’t go over 3,000 words so that pretty much killed that. Jack’s first NCTA meeting was at one of the Spring Conference’s held at the Silverado in Napa, California. He did not know a soul when he got on the Wine Train for the annual conference dinner. He ended up sitting with Kevin Deschler, who was still with Ameren at the time, and a couple from FreightCar America. Jack told them two things the wine was on him and on the way back when they served dessert, “people would be pulling chairs up to join our table because we would be having so much fun.” Both things came true. The next morning, Jack got an invitation from FreightCar America to join their wine tours. Since then, Jack and others from AKJ and Nalco have been very active in the NCTA not only through regular conference attendance but also with the work of the various committees, particularly the Western Logistics and Planning Committee. Jack has also been active with other industry groups including the ACC, Eastern Fuel Buyers, Michigan Coal and Rail, and Lexington Coal Exchange.

Children Help Develop Character

Jack and Jan have two children. Their daughter Shelley and her husband David and their four children live 15 minutes away. Jack describes his daughter as one of the nicest, most caring people you would ever meet. Son Trey and his wife Cara live in Lexington with their two children. Trey works with Nalco which means Jack gets to work with him, an experience he cherishes. Jack says he’s never met anyone who did not like Trey.

Jack is one of the happiest people you’ll ever meet.

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Reflections / Jack Cranfill continued

When his kids were young, Jack served as a Sunday School Teacher and Youth Leader. One exercise queried the kids on what they wanted to be when they grew up and also asked what their parents wanted them to be. He knew he and Jan were doing something right when daughter Shelley’s response to the second question was “happy”. It made him proud. Jack coached his son Trey in baseball from T-ball thru Babe Ruth leagues Jack shared the coaching duties with Head Coach Jack Lashley (“Bad” Jack) and served as assistant coach (“Good” Jack). The Jacks knew baseball well and

Jack and Jan at daughter Shelley’s wedding 56 | COAL TRANSPORTER

kept the nucleus of the kids they started with in T-ball together thru Little League and Babe Ruth. Their teams dominated and in 1992, the year most of the boys were 15, they won the State Championship and went on to the nationals. The kids and their families were like family to Jack. “Then life happens - some of the kids that you love and you know have the capacity to be good take a wrong turn - you hear about drugs and arrests - it breaks your heart, but it also teaches you that you always need to be attentive and involved with your kids and grandkids no matter what their age is.” Jack and Jan are enjoying life as grandparents to Jack, Grayson, Tanner, Callie Jane, Emma Finley and Cambell. “I can remember when my first grandchild Jack was born. I thought, ‘Where has all this love I wasn’t using been?’ It’s been that way for each grandchild.” All the kids are very different but special in their own way. Grandson’s Jack and Grayson were invited to Barcelona by FC Barcelona to play soccer. It was a great trip and learning experience for both. Jack was also part of a Quick Recall team, an academic quiz bowl competition. Jack’s team won the Louisville Catholic league championship recently. Apparently, the youngest Jack takes after his grandmother. If you’re in the mood to feel really stupid, “Old” Jack encourages you to attend one of these events and compete with these middle school kids.

Kids, even those that love you dearly, can be brutally honest at times. Tanner was a little tyke when his Grandfather had to get on his brother Grayson for some infraction. Tanner looked up at Jack and said “Bad Pappy”, sticking up for his brother. Callie Jane drew a picture of Jack with very little hair. When he asked her about it, she said “Pappy, that’s all you’ve got.” Emma Finley tells all her friends that “Pappy is a trickster.” The youngest, Cambell, is a loving child, with a smile that lights up a room. All of the grand kids are athletic and active. It keeps Jack and Jan busy going to games, shows, and mass. Jack claims he doesn’t know where they got it, but his none of his grandkids have ever met a stranger!

Character and Vices can go Together One of the unique pastimes Jack enjoys as a Kentucky native is going to Churchill Downs. Horse racing is a passion for Jack and going to Churchill Downs is like Norm going to “Cheers”. Everyone knows his name. As usual, Jack has gotten the entire family involved, starting a family wagering pool prior to the 2012 Kentucky Derby. The pool hit a superfecta that paid $42,000 dollars. The word spread, and next year the pool had even more money to work with. “We had over 200 people from all over

the country (my family is social!) in our pool, so no one made a lot of money, but we cashed in for over $300K before we went bust.” Fortunately, they’d taken some distributions along the way. Jack still enjoys seeing his friends in the coal industry so semi-retirement is good for him. He hopes the combination of part-time consulting with Nalco, family involvement, and spending time doing things that “my wonderful wife” wants to do will continue for the foreseeable future. Throw in a few trips to the race track trips, and who could ask for more? Finally, there are two things that you might not know about Jack. First, God gave him the ability to write poetry. He can do it on the fly on a bar room napkin, entertaining the crowd regardless if it’s good or still needs work (notice I didn’t use the word bad). Or his poetry can be meaningful. He was invited to the wedding of a customer’s daughter on two different occasions to write a poem and read it at the rehearsal dinner. While he typically didn’t write poetry for Jan, he did so on

“In a garish way, it’s like attending your own funeral while still alive.” her 60th birthday. Titled “Though My Eyes”, he wanted her to know he still saw her as that girl walking down the high school hallway, as his newlywed wife, as the mother of their children going above and beyond, as his lover and friend, as the best grandmother God ever made, and as the person he wanted to spend retirement with. The family has gotten into the act as well. For Jack’s 70th birthday, Shelley & Trey reached out to family and friends and asked them to share a story or a note for his birthday. They were presented to Jack in a box and he opens one each day. Some days start off with a smile, some with a cry and sometimes both. Jack say there are no negatives yet, but it is early in the process! “In a garish way, it’s like attending your own funeral while still alive.”

Jack in his Derby finest The second thing you might not know about Jack is that he has a 0 and 1 record mud wrestling women. This story is probably better told by the “character” himself over a refreshing drink at an NCTA reception. We do have editorial standards you know. s

COAL TRANSPORTER | 57

NCTA Membership List A. Stucki Company AKJ | NALCO Alliant Energy Alltranstek LLC Alpha Products, Inc. Ameren Missouri American Electric Power Amsted Rail Appalachian Railcar Services Arch Coal Sales, Inc. Arizona Electric Power Coop. Arizona Public Service Arkansas Electric Cooperative Associated Electric Power Cooperative Associated Terminals, LLC Aventics Corporation Basin Electric Power Coop. Blackhawk Mining, LLC Bowie Resource Partners CDG Engineers, Architects, Planners CIT Rail City Utilities of Springfield Cleco Cloud Peak Energy Colorado Springs Utilities CONSOL Energy Inc. Consumers Energy Company Contura Coal Sales, LLC Cooper Consolidated CPS Energy Crown Products & Services, Inc.

CSX Coal & Ore Terminals Dairyland Power Cooperative David J. Joseph Company Detroit Edison Duke Energy Dynegy, Inc. Ecofab Australasia The Empire District Electric Company Entergy Services, Inc. Exponent, Inc. FirstEnergy Florida Power & Light Co. FreightCar America GATX GE Transportation Grand River Dam Authority The Greenbrier Companies Hall St. Coal Terminal Hendricks River Logistics High Country Railcar IHS - Energy Publishing, LLC iIRX Impala Terminals Burnside Kansas City Power & Light KCBX Terminals Co. Kiewit Mining Group Inc. Kinder Morgan Terminals Levin Richmond Terminal Lexair, Inc. LG&E and KU Energy Lighthouse Resources, Inc. Locomotive Service, Inc.

Lower Colorado River Authority Luminant Energy Maxeefish LLC MCRL Coal Car Topping MEAG Power Metro East Industries, Inc. MidAmerican Energy Co. Midland Railway Supply Midwest Industrial Supply, Inc. Miner Enterprises Inc. Minnesota Power MinTech Enterprises Mitsui Rail Capital, LLC Muscatine Power and Water Nebraska Public Power District New York Air Brake Northern Indiana Public Svc. NV Energy OG&E Electric Services Oglethorpe Power Corp. Omaha Public Power District Otter Tail Power Company PacifiCorp Peabody Energy Platte River Power Authority Portland General Electric Progress Rail Services, Corp Rail Link Railroad Financial Corporation RAS Data Services RESIDCO RGCX Railcar Leasing

RungePincockMinarco Salt River Project Sandy Creek Energy Station Seminole Electric Cooperative Shur-Co, LLC SMBC Rail Services LLC Southern Company Operations Standard Steel Strato, Inc. T Parker Host Tampa Electric Company Tennessee Valley Authority Three Rivers Marine & Rail Terminals The Timken Company Transportation and Logistics Advisors, LLC Transportation Services Inc. TrinityRail Tri-State G&T Association TUCO/NexGen Coal Services Tucson Electric Power Co. Wabtec Corporation WEC Energy Group Wells Fargo Rail Westar Energy Western Farmers Electric Western Fuels Association, Inc. Westmoreland Coal Sales Co. WestRail, a Division of Aero Transportation Products Xcel Energy Xcoal Energy & Resources

Index to Advertisers Associated Terminals, LLC . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover Appalachian Railcar Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Aventics Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 CDG Engineers, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Cloud Peak Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Cooper Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Crown Products & Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

58 | COAL TRANSPORTER

CSX Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 FreightCar America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Lexair, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Front Cover NexGen Coal Services, Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Peabody Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Progress Rail Services, Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Savage Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Slover & Loftus LLP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Thompson Hine, LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Xcoal Energy & Resources . . . . . . . . . . . . . . . . . . . . . . . Outside Back Cover

e s i t r Adve oal Transporter ! C e h t in Thank you to all our advertisers!

We appreciate your contributions to the ongoing success and impact of the Coal Transporter magazine. Edition closing dates: Issue II, 2018...........July 10th, 2018 Issue I, 2019............February 8th, 2019 Issue II, 2019...........July 8th, 2019 Please remember the Coal Transporter when allocating your advertising dollars. For more information contact Melinda Canter at 720-227-1049 or at nctaadvertising@gmail.com

COAL TRANSPORTER | 59

The View from the Caboose

The humo sometime rous s serio , sometim us ra es mbl of be st frie ings nd Pete and A s nn.

THE VIEW FROM THE CABOOSE By Pete Moss & Ann Thrawsite

ANN: Hi Pete, how have you been? I haven’t even gotten any texts from you lately. I was starting to worry. PETE: I’ve sworn off of texting. You never know who is going to be reading them, Deep State and all. ANN: I don’t think you have anything to worry about. PETE: First the IRS and now the DOJ and FBI. It’s time to go to ground PDQ. ANN: Don’t be paranoid. What do you have to hide? PETE: Err, nothing. I’m just an ordinary guy trying to get by. But you never know when I might accidently say something that might offend someone. My mouth is literally in front of my brain. My fingers are too and I can’t always get by with blaming it on the auto-correct. ANN: Well, we are becoming the land of the kinda-sorta free and the home of the easily offended. But I wouldn’t worry unless that’s a Columbo act you’ve been putting on all these years and you’re someone else entirely. PETE: Columbo? ANN: You know the detective in his rumpled overcoat and messy hair that always seems to be bumbling about, but it’s all an act. In reality, he’s cunning and waiting to pounce. Just when the criminal thinks he’s gotten away with his crime, Colombo says something like, “Oh, there’s just one more thing…” Gotcha! PETE: No, not me. I’m pretty much confused most of the time. For example, those FBI agents that sent each other 50,000 texts. When in the world did they have time to do their jobs? See, totally confused. ANN: You got me on that one. Funny, I never heard anyone ask about that. 60 | COAL TRANSPORTER

PETE: I could be someone else though. I’d totally rock it going undercover as a spy. Apparent there is good money in just making stuff up. I have a very creative mind and the whole point is to come up with something offensive. Sounds like a good fit for me. ANN: Enough already. Let’s get back to the business at hand – making reliable energy available to the good people in North America. PETE: Yes, Ma’am! ANN: The best way to get back in the groove after a long cold winter is to catch up with all the latest at the NCTA Spring Conference. This year it is in Florida. Do you want to meet up in Orlando and drive over together? It’s only about a 90 minute drive. PETE: That sounds like a plan. Can we stop by and see my friend Mickey? He has a great vacation home there. ANN: Does he have big ears and a high voice? PETE: Now who’s being insensitive and honestly, a little offensive? Mick and I have been friends since we were wee ones in Dublin. His ears are just fine. His voice is fine too, except for the soccer ball incident of ’02, but he doesn’t like to talk about that. ANN: So, so, so, sorry. I was thinking of someone else. PETE: Well, I judge people on all the things they do right, not on one innocent misstep. I’ll see you on April 23rd. Let’s be in Palm Coast in time for the Golf Tournament. I hear that ocean course at Hammock Beach is awesome. s

Have something to say to Pete? Send comments or questions to pete@nationalcoaltransportation.org

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