The electric utility that serves the Duluth region is mothballing four coal-powered generators, and not because the Environmental Protection Agency told it to.
No, Minnesota Power is idling these generators for three months because the railroad isn’t delivering enough coal. Railroads are crazy busy— carrying oil from North Dakota for one thing— and the delays are driving their customers nuts.
Al Rudeck is the vice president of strategy and planning for Minnesota Power. The Burlington Northern Santa Fe railroad has delivered the utility’s coal for decades. I asked him: Has this kind of thing happened before?
"This is unprecedented," he said. "We’ve never had to shut our units off because we can’t get the coal we need. This year they’ve had a lot of challenges on the rail system, in terms of congestion, weather, and a lot of business."
Railroads have also had a lot of unhappy customers. Farmers can’t get a bumper crop to market. On some days, according to the Alliance of Automobile Manufacturers, car-makers have had as many as 200,000 vehicles sitting outside factories, waiting to be picked up by trains.
The group, which represents most of the auto industry, sent its top lobbyist, Shane Karr, to testify before the U.S. Senate in September. "This is the first time the industry has been out there publicly, saying, 'We need the railroads to pay attention to our problems,'" he says.
Professor Allan Zarembski runs the railroad engineering program at the University of Delaware. "On some of the high-demand routes, railroads are reaching capacity," he says. "And so railroads have to now start increasing capacity. The downside of that is that increasing capacity is not something you do in a couple of hours."
If a railroad already has a right-of-way, he says, laying new track could take a year... or three. Meanwhile, it’s not like those customers have other options. No other railroad even serves Minnesota Power.
Which is why it’s such a great time to be in the railroad business: Profits are way up. "It's a renaissance in the railroad industry," says Eric Marshall, a portfolio manager for Hodges Mutual Funds, which has been investing in railroads for more than ten years.
"The barriers to entry are high," he says. "You and I couldn’t go out and start a railroad today, regardless of how much money we had, because we couldn’t get all the easements to build a railroad across the country."
So, for now, Minnesota Power is stockpiling the coal it can get, hoping to build up a supply for the winter.
“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VABEFORE YOU GO