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New NCTA director plans to expand focus to commodities aligned with coal sector

SNL Image

Union Pacific trains delivering coal in the Powder River Basin.
Source: Alan J. Nash

➤ National Coal Transportation Association to expand focus to the transport of other commodities used by coal-fired utilities.

➤ U.S. Surface Transportation Board expected to be more active on coal-related issues in the coming months.

➤ National Coal Transportation Association continues to deal with a consolidating coal market.

John Ward began serving as executive director of the National Coal Transportation Association, or NCTA, earlier this year after former Executive Director Thomas Canter retired. Ward said he has worked in the coal industry for decades, including at a utility that owned a coal mining subsidiary, in the coal ash part of the business and serving on the American Coal Council board as well as the National Coal Council, previously. He serves as the American Coal Ash Association's government relations committee chairman.

S&P Global Market Intelligence interviewed Ward on Aug. 13 at the American Coal Council's Coal Market Strategies 2019 conference in Utah. The following is a transcript of that conversation edited for brevity and clarity.

S&P Global Market Intelligence: How have your first 105 days on the job been?

SNL Image

John Ward began serving as executive director of the National Coal Transportation Association earlier this year.
Source: S&P Global Market Intelligence

John Ward: Obviously, the NCTA is dealing with the same sort of market consolidation issues that every coal-related organization is facing right now. But even more than that within NCTA's transportation niche, I think we're heading into a period of activity that's greater than what we've seen in the last several years.

The Surface Transportation Board [or STB] has added new members and has recently increased its activity significantly. That's right in the square spot of NCTA's mission: to deal with transportation-related issues. We're expecting that there will be probably two new proceedings initiated at the STB in the coming months here: one related to the demurrage and accessorial charges hearing that was already held, and I think we'll probably see some kind of a formal proceeding following on the heels of a recent rate reform task force report.

What are your thoughts on the demurrage and accessorial issues going on?

Most of the major railroads now are pursuing some form or another of precision scheduled railroading [or PSR], and I think everyone in this industry and the other shipper communities supports the goals of precision scheduled railroading, which is increased efficiency of the rail network for the benefit of everybody. ... The shippers groups were pretty unanimous in that while the various efforts toward precision scheduled railroading seem to be yielding some benefits for the railroads, a lot of the shippers feel like that's coming at the expense of what shippers are being asked to do. ... It's going to be a big issue. There's going to be a lot of things to sort out with this.

So when you say the shippers, that includes coal producers?

Well the coal producers and the coal consumers are kind of in this boat together because the producers are obviously relying on the railroads to pick up on time and the consumers are looking for on-time deliveries. ... The implementation of PSR is also having effects that are showing up in our operational side of NCTA's mission as well. For instance, one of the things that railroads are looking at doing now is longer train sets. We're going to get congestion off the railroads by having bigger trains. Larger trains is fewer trains. ... Nobody really knows what those longer train sizes mean in terms of maintaining the rail cars, the equipment.

In addition to the demurrage issues before the STB and some of these other issues that you described, are there any other challenges on the transportation front that you've noticed in your first three or four months on the job?

In the past, NCTA has been focused pretty strictly on coal, coal and the rail cars. But when you look at the NCTA members, they don't only deal with coal. They also coordinate the shipping of a lot of other commodities that are either used or produced by the power plants. So you've got coming into the power plants, by rail and by barge, limestone and trona and all kinds of other commodities that are used to run emissions control equipment. And then, after you burn coal, you've got synthetic gypsum from the scrubbers and coal ash that is produced from the coal, and a lot of that material moves out by rail car and by barge to be beneficially used in other places. ... We're going to expand our vision a little bit and start looking at some of those other commodities in addition to coal.

Does this have anything to do with coal being on the decline and just broadening out your guys' view or the markets that you work on, or is it just strictly to touch on your clients that also work in sectors outside of coal?

I think it's a little of both. The business and management issues that a consolidating industry faces are different from the issues that an expanding industry faces. ... We now face a different set of issues for managing that still very large commodity. We're not talking about building coal cars anymore. We're talking more about "how do you maintain an aging fleet of those coal cars?" But we're also saying "all right, in this consolidating industry the same people who are dealing with those issues are also dealing with transportation-related issues on these aligned products."

What is going well within the relationship between coal and transportation companies?

There is no question that the railroads are committed to running efficient and reliable transportation systems. Their response to the flooding issues this year have been nothing short of heroic. It's clear everybody wants to do the right thing here. The issues that are coming up before the STB and before Congress are just discussions that need to be had. As the coal industry consolidates and the rail industry is trying to move toward greater efficiency, these discussions about "how do we do that fairly, how do we do that in a way that everybody is continuing to help each other through this?" — that's how those conversations should happen.