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Rail regulators cancel Tongue River project citing Arch Coal bankruptcy

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020


Rail regulators cancel Tongue River project citing Arch Coal bankruptcy

Theripple effects of Arch Coal Inc.'sbankruptcy filing continue to be felt as the U.S. Surface Transportation Boardannounced that it would not move forward on permitting for the company'sproposed Tongue River RailroadCo. Inc. project, which was intended to transport Montana coal outof the region.

Theproposed 42-mile line would have connected Arch's Otter Creek in the Powder River Basinwith a BNSF Railway Co.track, facilitating shipments to domestic buyers or overseas customers viaterminals on the West Coast.

However,after the company filed for bankruptcy in January, Arch Coal its permitting efforts for themine due to lengthy delays by the Montana Department of Environmental Quality in March of this year. According tothe company's own presentation,the mine would have produced up to 20 million tons of coal per year, making itone of the country's largest.

Citingthe suspension andArch's restructuring, the STB announced April 26 that it would haltconsideration of the rail project.

"Atthis time, there appears to be little prospect that Otter Creek Coal's minepermit will be secured in the foreseeable future," the federal agencysaid. "Otter Creek Coal and its parent, Arch, have both filed forbankruptcy, and Otter Creek Coal has suspended its application for an MDEQmining permit indefinitely. While it is possible that Otter Creek Coal oranother party could restart the mining permit application process in thefuture, it is unclear whether and when this might occur. Therefore, to keepthis docket open would serve no purpose."

MathewJones, spokesman for BNSF and speaking on behalf of Tongue River Railroad, saidit was "disappointed with the decision," noting that shouldconditions improve in the future, " renewing the project will require a new permit applicationand environmental review."

Thedecision came in response to a request from the andRocker Six Cattle Co. to terminate the project

TheSTB cancellation is one of many downstream projects to be impacted by thebroader coal industry downturn over the last year.

Inaddition to financial losses for those firms responsible for transporting coal,including CSX Transportation Inc.and BNSF, coal export terminalshave faced increased financial scrutiny due to waning prices in the U.S. andlower demand abroad.