Chapter 5

Coal 

Transportati on
153

Chapter 5: Coal Transportation 

This chapter focuses on coal transportation issues, especially on the importance and 

performance of transportation in providing coal for generating electricity in rural areas. 

Coal is a major source of energy in the United States. In 2006, it was responsible for about onethird of domestic energy production,68 and almost half the electric power generation 

(Figure 5-1). 

Because coal plays such an important role as an energy source for the generation of electricity, 

its costs—including delivery costs—significantly impact the price the consumer pays for 

electricity. The cost of coal delivered to electric plants has increased every year since 2000; the 

delivered cost of coal was 9.7 percent higher in 2006 than in 2005.69

Figure 5-1: U.S. electric power industry net generation, 2007 

Source: EIA, Power Plant Operations Report, Form EIA-923

 
154

Coal production in the United States has been increasing since the oil embargo, and the 

subsequent oil price increase, of 1974. In 2006, a record 1,163 million tons were produced. All 

this increase has been west of the Mississippi River. Production in the historic coal-mining 

regions of Appalachia and the Midwest have been in slow decline. Although U.S. production is 

shifting to the Western States, the places coal is used have remained much the same, resulting 

in changed coal transportation flows. 

The rapid growth of Western coal production (mostly from Wyoming and Montana) means that 

most coal is transported by rail; water transportation is unavailable in western coal-producing 

areas. Coal is the primary rail commodity in both tonnage (46 percent) and revenue (23 

percent) of Class I railroads and is second only to mixed shipments, which are mostly 

intermodal, in carloads.70 

Railroads have made major investments to carry Western coal. In 1979, an entirely new rail line 

(the longest newly constructed line in the U.S. since World War I) was opened in the Powder 

River Basin of Wyoming. Originally single track, this line is now mostly triple track, with some 

sections having a fourth track. Thousands of miles of mainline railroad connecting the Powder 

River Basin to coal-consuming areas have been rebuilt or upgraded. Other rail shippers have 

benefitted from these investments as well, since few rail lines carry only coal. However, 

shippers and the electric power industry are unsure that railroads will be able to continue 

investing in capacity at the needed pace, as energy demand increases.71 

The following sections describe where coal is produced, where it is consumed, and the 

transportation system that ties together the production and consumption areas of the nation, 

especially to the rural areas. 
155

Production 

U.S. coal production has been increasing since the early 1970s. Production growth shifted 

significantly during that period to the Western States (Figure 5-2). The three major coalproducing areas in the U.S. today are the Appalachian area, the Interior area, and the Western 

area. At present, the Appalachian area produces 33.3 percent of the country’s coal, the Interior 

area 12.5 percent, and the Western area 43.2 percent (Figure 5-3). All the growth in U.S. coal 

production since the 1970s has been in the West, mostly low-sulfur coal from Wyoming and 

Montana. This is in part the result of low mining costs (the coal is in very thick seams, close to 

the surface, and can be strip-mined), and in part because of the increased demand for cleaner 

coal resulting from provisions in the Clean Air Act that limit sulfur dioxide emissions. 

Figure 5-2: U.S. coal production by region, 1949-2007 

Source: EIA, Annual Energy Review 2007; Report No. DOE/EIA-0384 (2007). June 2008 

 
156

Figure 5-3: Coal production by region, 2008, million tons and percent change from 2007 

Source: EIA, U.S. Coal Supply and Demand: 2008 Review 

<http://www.eia.doe.gov/cneaf/coal/page/special/feature08.pdf>

Significant coal mining occurs in 20 States in these three regions, with three States being 

responsible for most of the production. In 2001, Wyoming, West Virginia, and Kentucky 

accounted for 70 percent of the coal shipped by rail. By 2006, Wyoming was the largest coalproducing state, at 446.7 million tons—about 40 percent of U.S. coal production. Over half of 

U.S. coal is now produced west of the Mississippi River (Figure 5-2). Campbell County in 

Wyoming produces the most coal of any of the Powder River Basin (PRB) counties. It is located 

far away from the demand centers for PRB coal. 

 
157

Census data from 2002 provides a snapshot of the distribution of coal mines (in terms of 

numbers and value of coal shipments) by State and the relative positioning of these States and 

mines to the transportation system (inland waterway system and main line railroads). The 

established Appalachian coal-producing States have many mines and are positioned close to 

the river system and main rail lines (see Figure 5-5). The growing production areas in Montana 

and Wyoming are characterized by fewer mines, and by their great distances from a river 

system to transport the coal and their limited access to main line railroads. Only BNSF and 

Union Pacific (UP) have access to the PRB. Canadian Pacific Railway (CP) (through its purchase 

of Dakota, Minnesota and Eastern Railroad) has the option of building a line into the PRB, and 

has received approval from the Surface Transportation Board to do so. However, the uncertain 

future demand for coal and the current recession have caused CP to defer any construction 

plans indefinitely. 

Figure 5-4: Coal trains passing in Wyoming. 

Source: Union Pacific Railway 

 
158

Figure 5-5: Number of coal mines per state 

Source: U.S. Census Bureau, Econ 02 Report Series. 2002. 

The transportation issues associated with the western movement of the coal industry are even 

more evident in Figure 5-6, which maps the value of coal shipments by State. Many shipments 

originate in parts of the West that have limited transportation. An illustration of the efficiency 

problems that result from limited transportation access occurred in 2004 and 2005, when 

disruptions in the railroad and water systems, and hence to coal delivery, led to coal stock 

drawdowns. 

 
159

Figure 5-6: Value of coal shipments per state 

Source: U.S. Census Bureau, Econ 02 Report Series. 2002 

A Case Study of Rail Disruption: The Joint Line* 

The Joint Line Railroad, jointly owned and operated by BSNF and UP, is a 103 mile stretch of railway 

in the PRB dedicated to coal, serving 8 of the 14 active coal mines in the region. It is the most 

heavily used section of rail line in the world. Although it runs three tracks for most of its length, 

and four tracks on steep hills, it is the only rail line serving these mines. 

In May 2005 a combination of heavy rain and coal dust accumulation in the roadbed destabilized 

tracks, causing two trains to derail within days of each other and disrupting traffic for almost two 

years while the roadbed was repaired. The stoppage caused the railroads to default on contracts 

to transport coal to several power companies, causing the power companies to draw down their 

stockpiles of coal to unprecedented levels, buy more expensive coal from other sources, and buy 

electricity from other generators to meet demand. 

* U.S. Department of Energy, Deliveries of Coal from the Powder River Basin: Events and Trends 2005-2007

<www.oe.netl.doe.gov/docs/Final-Coal-Study_101507.pdf> 
160

Demand and Utilization 

The demand for coal derives from its use in generating electricity. The total U.S. consumption 

of coal in 2006 was 1,163 million tons, with the electric power sector consuming 1,027 million 

tons or 88 percent of the total.72 The remainder is utilized by coke plants and other industrial 

users. Figure 5-7 shows the total consumption over the period 1987–2006. In a typical year, 

very little coal is imported (approximately 3 percent of total U.S. consumption) and exports 

usually are about 4–5 percent of total U.S. consumption. Transportation demand for coal is 

influenced by factors such as weather (within and between years) and the economy. In 2008, 

imports jumped to over 7 percent of domestic consumption because of increased international 

demand, demonstrating that the international market should not be ignored. 

Figure 5-7: U.S. coal consumption by sector, 1987-2006 

Source: EIA, Annual Energy Review 2007; Report No. DOE/EIA-0384 (2007) 

<http://www.eia.doe.gov/emeu/aer/coal.html> 

In 2008, 49.8 percent of the electric power in the U.S. was generated from coal (Figure 5-8). 

The next largest contributors to the electricity supply were nuclear, with 20.3 percent of the 

total, and natural gas, with 20 percent. Minor contributors to the total—but important sources 

in some areas of the country—include hydro-electric, with 6.4 percent, and petroleum and 

other, with 3.5 percent. Note that these percentages are relatively unchanged from 2007 but 

have been changing somewhat over the past decade. 
161

Figure 5-8: Share of electric power sector net generation by energy source, 2007 and 2008 

Source: EIA, Form EIA-906, Power Plant Report and Form EIA-923, Power Plant Operations Report

Most coal production is concentrated in a few States, but the coal must be transported to 

electric power plants throughout the country. Total U.S. electricity net generation in 2007 was 

4,156.7 million megawatt hours, and has been increasing for the past five decades.73 States 

vary significantly in their contribution to the total, as can be seen in Figure 5-9. Texas, 

Pennsylvania, Florida, California, and Illinois generate the most electricity, and Texas, California, 

and Florida consume the most. In 2005, total U.S. energy consumption was 100,369 trillion Btu; 

over 10 percent was consumed by Texas alone, and almost a quarter by Texas, California, and 

Florida.74 
162

Figure 5-9: U.S. electric industry net generation by State, 2007 

Note: Data is displayed as 5 groups of 10 States and the District of Columbia. 

Sources: EIA, Power Plant Operations Report, Form EIA-923 

Regions differ in their consumption of coal for electric power just as States do. Figure 5-10 

shows consumption levels in 2008 by census region and the percent change from 2007. For 

example, the East North Central Region used 239.2 million tons of coal to produce electric 

power in 2008, up 0.9 percent from the previous year. The low coal demands in the Pacific 

Contiguous and the New England Regions are worthy of note. 

The Pacific Region relies more on hydroelectric generation and natural gas for electric power 

than other regions. Despite the fact that the Pacific Region includes California—one of the 

heaviest-consuming states—the electric power sector only consumed 9.2 million tons of coal in 

2008. Although California is the fourth largest generator of electricity, coal accounts for only 1 

percent of its generation. 
163

Figure 5-10: Electric power sector coal consumption by census region, 2008 

The demand for coal for electricity is increasing or remaining steady, more of the increase in 

demand for electricity is being satisfied by other sources of energy, especially natural gas.75 

From 1990 to 2007, several States have reduced the proportion of electricity they make from 

coal and have relied more on other sources for electricity. As illustrated in Figure 5-11, in 1990 

eight States generated over three-fourths of their total electricity capacity from coal. By 2007, 

only three States relied this heavily on coal (Figure 5-12). This figure also shows that more 

States fell into the two lowest proportion categories (0–12 percent and 12–31 percent) in 2007 

than in 1990. 

 
164

Figure 5-11: Proportion of electricity capacity from coal, 1990 

Source: EIA, Net Generation by State, Type of Producer and by Energy Source (EIA-906) 

Figure 5-12: Proportion of total electricity capacity from coal, 2007 

Source: EIA, Net Generation by State, Type of Producer and by Energy Source (EIA-906) 
165

Electric power providers can be characterized in various ways. This discussion highlights the 

importance of an efficient and reliable transportation system to U.S. customers, particularly in 

rural communities, for affordable and reliable electricity. 

Producers of electric power are classified into two sectors: 

• The electric power sector, which includes electric utilities and independent power 

producers 

• The combined heat and power sector, which includes electric power, commercial, and 

industrial providers. 

Electricity providers are located far from where coal is mined, requiring a vigorous 

transportation system to link coal producers to electricity generators. In 2008, approximately 

3,150 electric utility providers were dispersed across the United States. Figures 5-12 and 5-13 

show the numbers of electricity producers and coal producers by State in 2007 and 1990. 

Figure 5-13: Number of electricity producers per State, 1990 

Source: EIA, Net Generation by State, Type of Producer and by Energy Source (EIA-906) 
166

Figure 5-14: Number of electricity producers per State, 2007 

Source: EIA, Net Generation by State, Type of Producer and by Energy Source (EIA-906) 

Table 5-1 shows the 3,150 Electricity Utility providers in 2008 were owned in three different 

ways: 

• Investor-Owned Utilities (IOUs) 

• Publicly Owned 

• Cooperatively Owned (Coops) 

 
167

Table 5-1: Electric utility providers by type of ownership 

InvestorOwned Publicly 

Owned Cooperatives Total 

Number of Organizations 220 2,000 930 3,150 

Number of Total Customers 102 m 20 m 17 m 140 m 

Size (median number of customers) 400,000 2,000 12,500 

Customers, % of total 73% 15% 12% 

Revenues, % of total 76% 14% 10% 

kWh sales, % of total 74% 16% 10% 

Source: EIA, RUS Data, CFC. 2005 

About 73 percent of the total customers, 76 percent of the total revenue, and 74 percent of the 

kilowatt hours (kwh) sales are attributed to the IOUs. Only 7 percent of providers are IOUs, but 

they tend to be larger and serve many more customers—with the median number of customers 

served by an investor-owned utility being about 200 times as many as served by publicly-owned 

utilities. 

The customer base also varies by type of provider; IOUs and Publicly Owned Utilities play a 

large role in commercial and industrial electricity provision, and Cooperatives’ main customers 

are the residential market (Table 5-2). 

Table 5-2: Sales by customer type and by type of ownership 

Sales (billion kilowatt hours) InvestorOwned 

Publicly 

Owned Cooperatives Total 

Residential 937 202 213 1,360 

Commercial 1,017 207 75 1,285 

Industrial 725 153 83 954 

Other 4 3 0 7 

Total 2,683 564 372 3,619 

Source: EIA, RUS Data, CFC. 2005; NRECA Strategic Analysis. February 2008

 
168

Cooperatives play an important role in providing electricity to farms and families in rural areas. 

They serve the most rural areas, have the fewest customers and the lowest revenue per mile of 

transmission line. In February 2008, the 864 distribution and 66 generation and transmission 

cooperatives served:76

• 40 million people in 47 States. 

• 17.5 million businesses, homes, schools, churches, farms, irrigation systems, and other 

establishments. 

• Some 2,500 of 3,141 counties in the US (80 percent of the nation’s counties). 

• About 12 percent of the U.S. population. 

• These cooperatives: 

• Own assets worth $100 billion. 

• Own and maintain 2.5 million miles, or 42 percent, of the nation’s electric distribution 

lines, covering three-quarters of the nation's landmass. 

• Deliver 10 percent of the total kilowatt hours sold in the United States each year. 

• Generate nearly 5 percent of the total electricity produced in the United States 

each year. 

• Employ 67,000 people. 

• Retire more than $500 million in capital credits annually. 

• Pay more than $1.2 billion in State and local taxes.77

 
169

Figure 5-15 shows the distribution of the Electric Cooperative Network across the U.S. 

Figure 5-15: America’s electric cooperative network 

Source: EIA, RUS Data, CFC, NRECA Strategic Analysis. 2005. <http://www.nreca.org/AboutUs/Coop101/CooperativeFacts.htm> 

Despite the increased importance of alternative sources of energy, forecasts by the Energy 

Information Administration indicate that coal will continue to be the primary fuel for energy 

generation in the United States though 2030. They project that the Rocky Mountain, Central 

West, and East North Central regions will show the largest increases in coal demand, by about 

100 million tons each, from 2005 through 2030. 
170

Transportation Flows 

Railroads move most of the coal from where it is produced to where it is converted to electric 

power. In 2006, 71 percent of the total tonnage of coal was hauled by railroads, 11 percent by 

trucks, 9 percent by river barges, and the remainder by other or mixed modes of 

transportation.78 

Rail’s share of total coal transportation has increased about 5 percent from 2001 to 2006, with 

most of this increase coming at the expense of river barges and other modes. From a cost 

perspective, water transportation is least expensive way to transport coal, but it is not available 

at most mines or destination points, particularly in the growing coal-producing mining regions 

of the West. For example, Campbell County, Wyoming, is the largest PRB County, but is not 

close to either water or its destinations. Rail is the only feasible transportation mode for coal 

shipped out of this county.79 In 2004, 98 percent of all coal shipped from Wyoming to other 

areas was via rail. 

Access to water transportation for coal shipments, either upriver or downriver, is limited to a 

few western areas in Washington, Oregon, and California; along the East Coast; down from the 

Midwestern and Southern States to the Gulf of Mexico; and areas around the Northern States 

through the Great Lakes. The coal waterborne transportation flows throughout the country in 

2007 are shown in Figures 5-15 (up-bound) and 5-16 (down-bound). 

Figure 5-16: Total annual up-bound waterborne coal shipments, 2007 
171

Figure 5-17: Total annual down-bound waterborne coal shipments, 2007 

Access to rail for coal transportation is more dispersed, as shown in Figure 5-18. The largest 

volumes of coal shipped by rail from the PRB area in Wyoming are shown by the more solid 

lines in the map. The finer lines in the map show the transport of smaller volumes of coal 

around the country, particularly moving towards the demand areas in the Midwest and Eastern 

States. 

Figure 5-18: Density of coal shipments by rail 

Source: Federal Railroad Administration analysis of STB Rail Waybill Sample 
172

In the Carload Waybill Sample (CWS) Christensen analyzed for 1987-2006, more coal was 

transported by rail than any other commodity. Figure 5-19 shows the trends in real revenue, 

tonnage, ton-miles, and real revenue per ton-mile (RPTM) for this 20-year period.80 

By comparing coal production (Figure 5-2) to tonnage (Figure 5-19) it can be seen that coal 

tonnage increased almost twice as fast as production, reflecting a modal shift towards rail. 

Also, coal ton miles increased faster than tonnage as the overall length of haul increased 

(reflecting the western movement of coal production). As noted by Christensen, in 2006 the 

median coal waybill originating in an Appalachian State was 409 miles, while the median coal 

waybill originating in Campbell County was 1,113 miles. 

Figure 5-19: Annual rail shipments of coal in 1987-2006 by real revenue, tonnage, ton-miles, 

and real revenue per ton-mile 

Source: CWS data for 1987-2006. Graphic from Laurits Christensen Associates 

There have been major changes in the composition of coal shipments over the past two 

decades, partially reflecting the increased use of large unit trains for long distance coal 

shipments.81 The average distance hauled (weighted by tonnage) increased over 50 percent; 

tons per carload have increased moderately; ton-miles in shipments greater than 100 carloads 

increased from 60 to 89 percent of the total movements; and the share of shipments in 

privately owned cars increased from the mid-1990s to the early 2000s and spiked in 2006. This 

latter change is due to PRB shipments being primarily in privately owned cars and Appalachian 

shipments in railroad-owned cars. However, in 2004-2005, privately owned car shipments from 

Appalachian States also increased. Average shipment sizes increased dramatically over this 

period: 

• 583 tons and 6 carloads per waybill in 1987 

• 5,080 tons and 46 carloads per waybill in 2005 

• 9,634 tons and 86 carloads per waybill in 2006 

0

0.5

1

1.5

2

2.5

3

19871988198919901991199219931994199519961997199819992000200120022003200420052006

Index (1987=1)

Revenue Tonnage Ton-miles RPTM
173

The large change in 2006 from the levels in the previous year is probably an aberration rather 

than a significant change in the trend. Recall that there were significant rail and water 

transportation disruptions in 2004–2005. Hence the figures reported above for railroad 

shipments represent lower than usual shipments in 2005 and higher than usual shipments in 

2006 as the utility providers used up their stockpiles in 2005 and built them back up in 2006. 

Rail Rates 

Coal purchases by utility companies are usually controlled by long-term contracts with mines, 

but corresponding long-term transportation contracts are not common.82 In the past, coal 

transportation contracts were often for 10 years, but now they are usually 1–5 years long. 

Because of the importance of the railroad system in transporting coal from production to 

power generation areas, rail rates and their vacillations are of deep concern to the electric 

generation industry. 

The most recent study of railroad rates by the STB from 1985–2007 found that inflationadjusted rail rates increased in the last 3 years of their study, but had declined in every year but 

one between 1985 and 2004.83 Their results suggest that in 2007 alone shippers spent $7.8 

billion more than they would have with the 2004 rates. Citing the Christensen study, they 

conclude that most of the recent rate increases reflect input price increases (mainly fuel) and 

declining productivity, rather than enhanced market power. Figure 5-20 shows the decline in 

the STB Rail Rate Index from 1985 to 2000, the flattening out of the index until 2004, and then 

the increase in the index since 2004. 

Figure 5-20: STB rail rate index, 1985 to 2007 

Source: STB, Office of Economics, Environmental Analysis & Administration, Section of Economics, Study of 

Railroad Rates: 1985–2007. 2009. 
174

The STB conducted additional analyses of grain and coal rates because these shippers are 

concerned about service and rates as they relate to rail car ownership and length of haul. Coal 

rail rates over the 1987 to 2007 period, by car ownership, are presented in Figure 5-21. Rates 

are presented as real rates per ton-mile. This figure shows a consistent decline in rates for both 

railroad-supplied and privately owned cars until 2004, when both increased. It should be 

noted, however, that these are only the point-to-point rates, and do not show underlying 

changes. For example, shippers have been carrying more of other costs, such as the costs for 

their own railcars, storage costs, and siding and track costs. This cost-shifting effectively 

increased the rates from 1987 to 2004, partially nullifying the effect of the rate decline that 

otherwise would have resulted from increased efficiency. 

Part of the discount for privately owned equipment might reflect differences in the mix of 

shipment sizes and distance hauled. Privately owned equipment is used almost exclusively in 

shuttle train service between a single mine and a single destination, trips that pay the lowest 

rates. Railroad-owned equipment, however, is more likely to be used for smaller shipments, 

and often for shorter hauls, which incur higher rates. The discount for privately owned 

equipment hovered between 34 and 40 percent for the period.84 

Figure 5-21: Coal rates and car ownership 

Source: STB, Office of Economics, Environmental Analysis & Administration, Section of Economics, Study of 

Railroad Rates: 1985–2007. 2009. 

 
175

Rates for all shipment distances declined from 1988 to 2001. After 2001, rates in the shortdistance category increased dramatically—32 percent between 2001 and 2007—but the 

increases in other categories were not so extreme. The trends in coal rates per ton-mile, by 

shipment distance, are shown in Figure 5-22. Four distance categories are analyzed: short 

(<500 miles), medium (500–1,000 miles), long (1,000–1,500), and very long (>1,500 miles). 

Figure 5-22: Coal rates and shipment distance 

Source: STB, Office of Economics, Environmental Analysis & Administration, Section of Economics, Study of 

Railroad Rates: 1985–2007. 2009. 

In Christensen Associates’ 2008 study, a pricing model was developed to analyze the impact of 

cost characteristics and market structure (railroads and their modal competition) indicators on 

railroad rates for various commodity groups (measured as revenue per ton-mile (RPTM)). 

Christensen found that length of haul was associated with a large negative effect on RPTM and 

shipment size was associated with a small positive effect. However, the combined effect of 

increasing shipment size (by both tons and tonnage per car) might be associated with a 

decreased rate per ton-mile, depending upon the relative change considered. Their model 

allowed them to estimate the implicit payment (in the form of rate reduction) for privately 

owned (shipper-supplied) cars. The implicit payment was found to be $223 per carload from 

2001 to 2003 and $214 from 2004 to 2006—about a 15 percent discount from the average 

carload rate for 2007.*

 

 

*

 An average carload of coal in 2007 carried 113.5 tons at an average rate per ton of $13.50, so an average rate 

per carload of coal was $1,532. 
176

The market structure indicators they considered were: 

• Distance from origin to nearest port or waterway facility 

• Distance from destination to nearest port or waterway facility 

• Railroad competitors at origin 

• Railroad competitors at destination. 

Based on the model, Christensen calculated the effects on railroad rates of increasing the 

distance to the water. Their results indicate that a distance of 100 miles from water at points of 

origin cost 8 percent, and a distance of 500 miles from water at points of origin was worth 11 

percent higher rates. Interestingly, when the period from 2004 to 2006 was examined, the 

distance impact on rail rates was essentially zero. 

A similar analysis done in the same Christensen study for distance of points of termination from 

water, found that 100 miles was worth 7–9 percent higher rates, and that most of this effect 

occurred at 50 miles. They found that the RPTM is lower in counties with railroad competitors 

present than in counties served by a single railroad. Their results also suggest that the marginal 

effect of an increased number of railroad competitors at the termination county is larger than 

the effect of increased numbers of competitors at the origination county. 

In summary, Christensen’s pricing model results for coal suggest that coal rail rates are 

impacted by shipment cost and market structure characteristics. Increased competition at the 

origin modestly reduces rates while increased competition at the destination results in sizable 

rate reductions. Also, rail rates are impacted by water transportation competition, with a 

greater impact at the destination end than at the origin end. 

Christensen Associates also calculated adjusted marginal costs (adjusted MC) and Lerner 

Markup Indexes (LMI) for non-interchanged shipments, using the results from the various 

commodity pricing models. They found very low adjusted MCs for commodities hauled in largescale bulk shipments such as coal (and grain), which was consistent with expectations because 

these are generally less time-sensitive from a quality deterioration perspective. The railroadspecific markup calculations show below-average markups for coal shipments carried by BNSF 

and UP, suggesting effective competition at the point of origin via joint lines serving the South 

PRB area. Christensen points out that while industry MCs increased in 2004–2006, some 

commodities like coal avoided generic cost increases by cost-saving changes, such as increased 

average car loadings and the length of haul. Hence the overall MCs remained fairly constant for 

coal, but the shippers may have incurred higher costs due to the adjustments that were made. 

The shippers note that their adjustments and incurred costs stemmed from the expiration of 

many long-term, lower-priced contracts during this period and their inability to renegotiate 

favorable contracts. 
177

Service 

This section examines rail service components and markers, such as train speed, reliability, 

capacity and stockpiles, on-time delivery statistics, and consumer complaints. 

Train Speed 

Average train speeds are frequently used as a proxy for service quality. Variability in speeds can 

also be a marker for service quality; large variations in speed indicate problems (unpredictable 

performance). Christensen used Association of American Railroads Railroad Performance 

Measures (RPM) data to calculate average train speed for different train types across a 

railroad’s network, and compared changes in average speed across train types to assess 

reliability. Their data led them to the following observations: 

• Between 1999 and 2005, average train speed for large Western railroads decreased 

while the speed for their Eastern counterparts increased. 

• In 2003 and 2004, declines in average train speed and increases in dwell time occurred 

for most railroads. 

• The intermodal trains are the fastest (followed by multilevel trains). 

• Coal unit trains tend to be the slowest (manifest and grain units are sometimes slower). 

Stakeholder interviews by Christensen revealed the concern that intermodal trains are given 

preferential treatment (with respect to speed) but the aggregate-level data in the study did not 

support this claim. 

Table 5-3 and Figure 5-23 show the changes in average train speed by railroad and train type 

for the period from 1999-2005. These data also do not support any large bias towards 

intermodal trains, as this train type generally experienced speed declines over the period. 

Table 5-3: Changes in average speed by railroad and train type, 1999-2005 

All Inter modal Manifest Multi level Coal Unit Grain Unit 

BNSF -0.8% -1.6% -0.2% -2.0% 0.3% 0.7% 

CN 0.3% -0.3% 0.2% 1.7% -0.6% 0.3% 

CP -3.0% -3.3% -4.6% -1.4% -1.5% -3.2% 

CSX 1.1% -0.1% 1.1% 1.3% 0.5% 1.1% 

KCS 0.2% -0.4% 0.6% -0.4% 2.8% 2.5% 

NS 2.9% 1.2% 3.8% 1.9% 0.8% 2.5% 

UP -2.5% -3.7% -2.4% -3.2% -0.6% -2.6% 

Source: Laurits Christensen Associates 
178

Figure 5-23: Changes in average speed by railroad and train type, 1999-2005 

Source: Laurits Christensen Associates 

A coefficient of variation (CV) is often used as a measure of the variability in average train 

speed. It is the ratio of the standard deviation to the average train speed, and is useful when 

comparing train types that have different average speeds. Table 5-4 presents CVs by railroad 

and train type. These data show that grain and coal units have the greatest variation and 

intermodal has the lowest CV. From this Christensen concluded that even though the average 

speed for all train types declined over this period, coal and grain units received the least 

reliable service and intermodal received the most reliable service. 

 

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

BNSF CN CP CSX KCS NS UP

All Inter modal Manifest Multi level Coal Unit Grain Unit
179

Table 5-4: Variability in average train speed by railroad and train type, measured by 

coefficients of variation 

Inter modal Manifest Multi level Coal Unit Grain Unit 

1999-2005 

BNSF 3.6% 3.6% 4.2% 4.9% 4.6% 

CN 3.9% 5.1% 6.1% 8.0% 9.4% 

CP 5.1% 5.6% 6.8% 5.9% 7.3% 

CSX 3.5% 5.1% 6.3% 4.4% 6.3% 

KCS 5.5% 7.0% 5.6% 8.2% 8.9% 

NS 3.2% 4.4% 5.4% 4.5% 7.1% 

UP 3.6% 3.5% 3.9% 4.9% 5.1% 

2006-2007 

BNSF 3.8% 4.3% 3.9% 4.4% 4.4% 

CN 3.5% 3.5% 5.3% 5.9% 4.5% 

CP 4.0% 3.6% 5.9% 8.9% 5.2% 

CSX 3.4% 3.8% 4.5% 3.4% 4.3% 

KCS 6.0% 4.6% 6.0% 6.5% 5.2% 

NS 3.6% 4.1% 5.1% 3.6% 5.7% 

UP 3.6% 3.1% 3.2% 4.2% 3.7% 

Source: Laurits Christensen Associates 

Reliability 

A Congressional Research Service (CRS) report for Congress on September 26, 2007, addressed 

reliability issues in rail transportation of coal to power plants.85 The study identified 11 

episodes since 1990 that caused disruptions in coal supply to power plants due to rail 

transportation problems. They were caused by weather, surges in demand, difficulties with rail 

system integration subsequent to railroad mergers, and major unplanned maintenance. 

2005-2007 

Train derailments in May 2005 triggered a large-scale maintenance project on the PRB Joint 

Line, causing delays and coal delivery shortfalls through most of the year on the UP and BNSF 

systems. Delivery shortfalls for some shippers linger into 2006. UP imposes an embargo on 

accepting new customers for PRB coal shipments that continues until March 27, 2007. 
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2004 

Rail system capacity is stressed by sharp increases in intermodal and grain traffic. UP 

experiences shortfalls in Colorado and Utah coal shipments and some problems in the PRB due 

to being short-staffed and needing more locomotives. NS and CSX have shortfalls in shipments 

of eastern coal to domestic generators due to a surge in coal export demand and capacity 

limitations exacerbated by hurricane damage. 

2003 

Delays in the UP shipments of coal from Colorado and Utah due to shortage of staff and 

locomotives. 

1999-2000 

Severe congestion and delivery shortfalls in the East due to problems with the integration of 

the Conrail system into NS and CSX. 

1997-1998 

Severe delivery shortfalls throughout the UP system because of problems with the integration 

of SP after the merger. 

Mid-year 1998 shortfalls in eastern coal shipments on the NS system, reportedly due to 

insufficient locomotives. 

Early 1996 

Eastern coal shipments are disrupted by harsh winter weather and difficulty meeting a surge in 

power plant demand for coal. 

1994-1995 

Surge in demand for PRB’s low-sulfur coal stemming from passage of the Clean Air Act of 1990 

leads to congestion and delivery shortfalls on the UP and BNSF systems. 

In the first part of 1994, delivery shortfalls of eastern coal are experienced on the Conrail 

systems due to harsh winter weather and difficulties implementing a maintenance program. 

1993 

Coal shipment shortfalls, primarily in the Midwest, due to widespread summer flooding. 

1991 

PRB coal delivery shortfalls due to congestion on the UP system. 

This CRS Report also identifies other, more persistent, indicators of service issues in 

transporting coal by railroads. The decline in rail speed discussed above is a leading issue. 

Capacity limits on the rail system contribute to service problems. After experiencing 

uneconomic excess capacity for years, the railroads have brought capacity and demand for 

services into better alignment. But unexpected events, such as weather and sudden demand 

increases, still result in periodic congestion. Also, the electric power industry and other 
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industrial shippers claim that railroads are increasingly unwilling to offer strong service quality 

guarantees. 

Capacity & Coal Stockpiles 

Capacity also has a bearing on service. The historic uneconomic excess capacity in the railroad 

industry has been brought more into alignment with demand, but at the cost of limited buffer 

capacity. When rail system capacity is constrained it can be a factor in allowing railroads to 

raise rates. 

Coal stockpiles also serve as a buffer to shortages of rail capacity and disruptions to service 

(Figure 5-24). The stockpiles declined from 2002 to 2005, probably due to efforts by power 

companies to cut costs and to improve their financial profiles. These stockpile declines have 

occurred over a time in which more coal is being shipped longer distances from Western 

mines, making the power industry (and their ability to provide power to their customers) more 

vulnerable. However, since the end of 2005, coal stocks have increased, which may possibly 

reflect the difficulty that the power industry (and other industries) have had in obtaining strong 

service guarantees from the railroads and their recognition of the risk of being caught with 

short supplies. 

Figure 5-24: Year-end coal stocks, 1999-2008

(Million Tons) 

Sources: EIA, Quarterly Coal Report, October-December 2008, DOE/EIA-0121(2008/Q4) (Washington, DC, April 

2009); and Coal Industry Annual, DOE/EIA-0584, various issues." 
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On-time Delivery 

The Argus on-time delivery indexes provide a measure of the reliability of railroads in delivering 

a product to the final destination.86 The on-time indexes for coal and grain were calculated for 

each quarter from June 1997 through September 2008. Figure 5-25 shows the index for four 

major railroads and the average for the railroads for coal shipments. Burlington Northern and 

Union Pacific are generally better, with average index values of 3.68 and 3.34, respectively. CSX 

is generally slightly less consistent with on-time delivery performance, with an index value of 

3.28. Variations in on-time delivery can be evaluated using the Coefficient of Variation (CV), a 

statistic which measures the variation in on-time deliveries for a railroad relative to the average 

on-time delivery for that railroad. The CV expresses the variability of on-time deliveries for a 

railroad in percent terms, where the variability is that which occurred over the 1997 – 2008 

time period. On the basis of the reliability of on-time deliveries, BNSF was the most reliable 

over the time period 1997-2008, with a CV of 13 percent while UP was less reliable with a CV of 

18 percent. Figure 5-26 shows the on-time delivery index (across four Class I railroads) for coal 

and grain, for the same time period. In the earlier years in this data series, coal deliveries were 

more reliable than grain. Since around 2002, coal on-time delivery experienced a fairly steady 

decrease, until coal deliveries were less reliable than grain deliveries in about ten of the years. 

Both grain and coal deliveries have increased in on-time delivery and reliability since about 

2006. 

Figure 5-25: On-time delivery index for coal shipments, 1997-2008 

Source: Argus Media Group, Coal, On-Time-Delivery Index 

 
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Figure 5-26: On-time average for rail shipments: grain and coal 

Source: Argus Media Group, Coal, On-Time-Delivery Index 

Consumer Complaints 

Consumer complaint statistics kept by the STB are another indicator of service by the railroads. 

Table 5-5 below summarizes the number of complaints to the STB by commodity group, from 

2005–2008. Fewer complaints have been lodged against coal shipping than against other 

commodities, possibly because coal is a major source of revenue for the railroads, and because 

it has fewer origination and destination pairs, enabling more efficient shipping. 

Table 5-5: Summary of STB consumer complaint statistics, 2005-2008 

Complaint Per Commodity Group 2008 2007 2006 2005 

Forest Products* 8 8 17 17

Agricultural 23 23 13 17

Metals and Minerals 4 11 9 11

Industrial 3 0 NA NA

Chemicals 21 13 10 5

Intermodal 5 0 5 2

Coal 5 0 1 2

Automobile 2 0 0 0

*Prior to 2007, this category was labeled paper products.

Source: STB, Rail Consumer Complaint Statistics, 2005–08 
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Paper Barriers 

Captive rail customers are shippers, typically moving bulk commodities such as coal or grain 

that must rely on a single railroad to deliver their products because there is no other costeffective transportation mode. Historically, 20–30 percent of the Nation’s rail movements have 

been “captive,” with many of these movements covering rural America.87 Shippers continue to 

express concerns that the system Congress established to ensure competition in the national 

rail system and to protect rail customers in captive markets is not working as intended. A 

Government Accounting Office (GAO) report in 2007 also concluded that “concerns about 

competition and captivity remain as traffic is concentrated in fewer railroads” and that “[the 

STB’s] rate relief processes are largely inaccessible and rarely used.”88

On a per-ton basis, rates paid by shippers in a captive area are at least twice the rate as those 

for shippers in non-captive areas. Figure 5-27 illustrates the freight rail rate differences across 

four commodities, in captive and non-captive markets. 

Figure 5-27: Captive vs. competitive freight rail rates 

Source: Testimony before Senate Commerce, Science and Transportation Committee, Subcommittee on Surface 

Transportation and Merchant Marine Infrastructure, Safety, and Security, October 23, 2007, Glenn English, CEO, 

National Rural Electric Cooperative Association , Captive vs. Competitive Freight Rail Rates 
185

Chapter 11 of this study examines STB processes for rail rate grievances and shippers’ concerns 

about those processes. Shippers believe the rate grievance processes take too long, are too 

costly, and are ineffective in providing practical rate relief to captive shippers. They are 

concerned about the limited eligibility of rail rates to be challenged, and from the limited use of 

the process by those eligible.*

 The STB itself indicated that only 12 percent of rail rates are 

subject to their review. 

In addition to shippers’ belief that the rate process does not work as Congress intended, captive 

shippers are also concerned that rulings of the STB have reduced rail competition, especially 

two rulings—the paper barriers, or tie-in agreements, and the bottleneck decision, both of 

which are discussed in this chapter, but also in Chapter 8—on rail service performance. 

Paper barriers refer to a restriction in an agreement by Class I railroads to lease or sell lines to a 

smaller railroad that prohibits the smaller railroad from interchanging traffic with any other 

connecting railroad. According to the GAO in 2007, about 500 short line railroads have been 

created since the 1980s by Class I railroads selling a portion of their lines. Paper barriers in 

these sales are believed to be widespread, but their extent is not actually fully known because 

they are included in confidential contracts. 

Although this type of agreement prevents access to competitive service, the GAO suggests that 

elimination of paper barriers could reduce the overall capacity of the railroad industry because 

Class I railroads might abandon lines rather than selling them to smaller railroads. Railroads are 

required to consider “reasonable” offers of financial assistance when abandoning a line. 

However, paper barriers are sometimes put in place so that a large railroad can sell or lease a 

line on attractive terms to a smaller carrier, and still retain the revenue from interchange 

traffic. If the large railroad were forced to compete for the interchange traffic, it might demand 

a higher price or lease payment, possibly resulting in abandonment rather than sale of a line. 

In general for most industries, restrictions on a purchaser’s ability to conduct business with 

other parties would violate antitrust law. Many shippers believe that were it not for the 

antitrust exemption on STB-approved transactions, paper barriers put in place by some 

railroads also would violate antitrust law. Due in part to the anticompetitive nature of paper 

barriers and the incongruity of deregulating an industry while at the same time allowing 

antitrust exemptions to remain, Congress is now considering legislation to remove all antitrust 

exemptions from the railroad industry. 

Shippers argue that the regulatory system established by Congress to ensure competition in the 

railroad industry is not working as intended, and that many vital industries (such as coal, 

agriculture and farming, and chemical manufacturers and processors) have faced deteriorating 

service and excessive rates for the rail service available to them. Mr. Glenn English, CEO of the 

National Rural Electric Cooperative Association and Chairman of Consumers United for Rail 

 

*

 Movements exempt from STB jurisdiction include any rail movement for which there is a contract and other 

traffic specifically exempted from regulation, including inter-modal and boxcar movements. 
186

Equity, has testified before many House and Senate Committees. He argues that memberowned, not-for-profit organizations such as his have the obligation of providing an affordable 

and reliable supply of electricity to consumers. He further argues that there is a national public 

interest in the operation of the rail system. Of course, if railroads cannot earn an adequate 

return on their assets, investments will not be made and both capacity and service quality 

will fall. 

Coal delivery problems add costs to consumers. For example, the two railroads delivering PRB 

coal to Eastern States fell short on their deliveries by 15 percent over the three year period, 

2005-2007, forcing the utilities to switch domestic sources, import coal, and use more natural 

gas; and as a result, raise their electric prices. NRECA estimated that in 2006 alone, the cost of 

replacing the PRB coal deficit was over $2 billion. 

Because many of the short line railroads are interconnected with more than one major railroad, 

the existence of paper barriers can create an impediment to competition. With less 

competition, shippers believe railroads are able to charge higher rates and provide less service 

for transporting coal to electric generation facilities, resulting in higher electricity rates for 

consumers, particularly rural consumers. 

Most coal moved by rail to electric generating stations does not move on short line railroads, so 

paper barriers are not typically an issue in coal movements. However, where a utility power 

plant has access to only one railroad, in some cases utilities have constructed costly “build out” 

rail lines to reach competing railroads and so secure lower rail rates for their coal movements. 

Bottleneck Rates 

According to the GAO study in 2006, bottlenecks occur when “some shippers have more than 

one railroad that serves them at their origin and/or destination points, but have at least one 

portion of a rail movement for which no alternative rail route is available.”89 This portion is 

referred to as the “bottleneck segment.” The rate for the bottleneck segment is referred to as 

the bottleneck rate. 

The STB has ruled that railroads do not have to provide a rate for the bottleneck segment. 

Since the 1996 bottleneck decision, the discussion has focused on differential pricing, 

protection for captive shippers, and the financial health of the railroads.90 The STB’s rationale 

was that the statute and case law preclude it from requiring a railroad to provide service on a 

portion of its route when the railroad serves both the origin and destination points (and 

provides a rate from the origin to the destination on their railroad alone). 

An example of the issue of bottleneck rates is Powder River Basin coal moving from Wyoming 

to Rodemacher, LA. As a result of the STB bottleneck decision, Lafayette, LA, homeowners pay 

an additional $300 per year and Lafayette educational institutions pay an additional $1.5 million 

per year for their electricity.91 Coal moves via the UP which has track for the entire trip, 

including the last crucial and exclusive leg of about 20 miles, from Alexandria, LA, to 

Rodemacher. 
187

If the shipper could get quotes from competing carriers, the coal could be brought from 

Wyoming to Kansas City via BNSF. It then could be switched to KCS or to UP, to Alexandria, LA, 

and finally to UP for the last leg of the movement. 

In the bottleneck ruling, a contract with a competing carrier must be in place before the STB 

will force the railroad to do the interchange, but shippers have found they can not get a 

contract quote, saying that these duopoly railroads will not compete because of a fear of 

retaliation on other segments of their own railroad. Hence, shippers believe no remedy or 

relief is available to them through lower rates brought about by competition. 

Further, requiring a rate challenge over the entire length of haul is not felt by shippers to be 

reasonable or fair, as the rate over the entire length of haul could be determined to be 

reasonable, even though the rate over the bottleneck segment alone could be quite high. From 

the shippers’ point of view, rates should be challengeable in the bottleneck segment alone. 

An example from the grain industry points out the impact of these bottleneck rates. One 

shipper told USDA that the market has wanted corn to move from eastern Illinois to domestic 

markets in the East, but it has instead been moving to the Gulf because a premium is paid for 

export, and because of high rail rates to eastern markets. An affected shipper asked the 

originating carrier to quote a rate to a junction point that could theoretically allow the grain to 

move into more lucrative eastern markets, but the rate to the junction was almost precisely the 

difference in the eastern premium and Gulf rates, thus negating any possible benefit of a 

competitive market. 

The legality of bottleneck practices was confirmed in a seminal court case involving coal rates 

and MidAmerican Energy Co. in the 8th Circuit Court in 1999.92 In this case, the ruling was that a 

railroad did not have to offer a bottleneck rate (for the short-haul portion) when it served the 

entire route. The 8th Circuit affirmed STB’s previous decision in 1996 that separately 

challengeable bottleneck rates can be required whenever a shipper has a contract over the 

non-bottleneck segment of a through movement. 

The concern shippers have expressed about bottleneck rates is similar to concerns they have 

about paper barriers—a reduction in competition raises rates and lessens service. The 

bottleneck ruling allows railroads to engage in a “tying” arrangement that would be prohibited 

by antitrust law were it not for the antitrust exemption for railroads. A “tying” arrangement is 

one in which a firm will not sell product/service A without also selling product/service B.93 

Some shippers also believe bottleneck rates can also cause a loss in efficiency, resulting in 

longer routes and greater fuel consumption. A recent report prepared by Nelson in 2008 

focuses on economic efficiency (including the use of fuel). His research finds “that the 

bottleneck rule fosters conduct that is supportive of the perceived short-term economic selfinterests of individual railroads, but is inconsistent with economic efficiency and the public 

interest. The conduct is detrimental to captive and competitive shippers as well as to the 

longer-term interests of railroads.” The Nelson study concludes that the impact on economic 
188

efficiency is major, conservatively $1.3 billion per year, and that it leads to an extra 

consumption of over 103 million gallons of diesel fuel per year (and associated carbon 

emissions and environmental, national energy policy, and security problems). In addition, the 

study concludes that bottleneck practices cause railroad reliability problems. 

The Nelson study was not specific to coal but applies to it. Bottleneck rates are an important 

issue for coal producers and utility companies. Dairyland Power Cooperative testified before 

the U.S. Senate Judiciary Subcommittee on October 3, 2007, with regard to railroad 

competition (and S.772—Railroad Antitrust Enforcement Act).94 Dairyland burns coal in three 

plants in western Wisconsin, most of which comes from the PRB in Wyoming. For their coal 

delivery, they are “captive” to the only two railroads that serve the PRB and argued that the 

market power of these railroads has resulted in them paying more and receiving less. Paper 

barriers and bottlenecks are included on their list of concerns. They cite 2005 figures, in which 

Dairyland experienced a 13 percent shortfall of scheduled shipments and then faced a rate 

increase averaging 23 percent in the following year. They estimate this to have resulted in a 

$35 million annual increase in costs. 

A policy proposed by GAO would require railroads to offer a rate and service for a bottleneck 

segment. GAO states, “On the one hand, requiring railroads to establish bottleneck rates would 

force short-distance routes on railroads when they served an entire route and could result in 

loss of business and potentially subject the bottleneck segment to a rate complaint. On the 

other hand, this approach would give shippers access to a second railroad, even if a single 

railroad was the only railroad that served the shipper at its origin and/or destination point, and 

could potentially reduce rates.” 

The AAR maintains that forcing rates on bottleneck segments would cause the total rate for 

through movements to be below the costs of operation on that movement. This could, 

according to the AAR, lead to a net revenue loss of several billion dollars a year. 

The Nelson study concluded: “The original bottleneck decision acknowledged the Congressional 

intent that in rationalizing interchange practices, carriers should retain efficient routes. Carriers 

have used the bottleneck decision to insulate themselves from competition through 

intermediate participation by other carriers, even where such participation would improve 

efficiency. This has produced private benefits at the expense of economic efficiency and the 

public interest.” 
189

Recent Decision by STB in Favor of Coal Shippers 

A recent decision by the STB in the Western Fuels Association, Inc. and Basin Electric 

Cooperative, Inc. case (February 2009) was made in favor of the utilities and consumers.95 The 

utilities had challenged the rates charged by BNSF from mines in the PRB to their electric plant 

in Moba Junction, WY. The utility plant is captive to BNSF and provides electricity for grids 

serving consumers in nine States. The STB found that the railroad was charging a rate that was 

unlawfully high (roughly six times the variable cost). BSNF was ordered to lower its rates by 

about 60 percent. The order awards $100 million in past overcharges to utilities and an 

additional $245 million through reduced coal transportation rates through 2024. Electricity 

consumers in the nine States will benefit directly from this ruling. 

This case has been referred to by some shippers as a very important rail rate case that may 

represent a turning point in the effort to protect captive shippers from monopoly pricing. 

Shippers have pointed out this is the single largest award to a captive shipper by the STB, and is 

the first meaningful relief awarded to a captive rail customer through a full, contested rate case 

since 2001. However, they also indicate this decision came more than 4 years after filing, and 

the plaintiffs spent approximately $9 million prosecuting their case. Concern still remains by 

shippers that most captive rail customers will be denied access to meaningful rate relief 

because of the cost in both time and money; and the complexity of the STB rate challenge 

process. 

Conclusions 

Coal is a major source of energy in the United States and is an important commodity for the 

transportation system. Despite the growth of alternative energy sources, coal will continue to 

be a major source of power for rural consumers. Because coal plays such an important role in 

generating electricity, its costs—including its delivery costs—are reflected in the price 

consumers pay for electricity. 

Coal is produced in 20 States around the country. In recent years production has moved 

westward due to the demand for coal with lower sulfur content. Because coal is primarily used 

for generating electricity, demand is distributed around the country. With concentrated 

production areas and dispersed demand, an efficient and effective transportation system is 

critical for consumers to have an affordable and reliable supply of electricity. 

Railroads are the most important mode of transportation for moving coal from areas of 

production to areas of energy generation. As production moved west, the average distance of 

shipment, size of shipment, and private-car ownership have all increased. Railroads have 

concentrated on the more profitable long-haul unit-train movements, abandoning or selling 

less-used track and facilities. Shippers often find it necessary to own their rail cars and loading 

facilities to get connecting service to main lines, shifting the costs of siding, track, storage, and 

loading to them from the railroads. 
190

Rail rates declined from 1985-2004, but have increased steeply since then. Coal shippers are 

concerned that limited competition at origin and destination points has allowed railroads to 

charge higher rates than are justified and to pass on more costs to shippers, while reducing the 

level of service (speed, reliability, capacity). Of particular concern are paper barriers, which 

constrain shortline railroads from interchanging with competing mainline railroads, and 

bottleneck rates, which eliminate competition and potential efficiencies among railroads that 

should be available to shippers. 

Railroads have made substantial investments since the 1970s in facilities for handling Western 

coal, including 103 miles of new railroad line in Wyoming and the upgrade or rebuilding of 

many thousands of miles of mainline track. These investments have added capacity to the rail 

network and benefitted all shippers, not just coal shippers. 

Analysis using industry average data conceals problems that occur for captive shippers. Despite 

the recent decision by the STB in the Western Fuels and Basin Electric case (made in favor of 

the utilities and consumers), captive rail customers fear that the cost and complexity of the STB 

process still will deny them access to the process set up by Congress to ensure competition. 

Railroads are vital to coal transportation, and coal is the largest single commodity handled by 

railroads. Over the past 35 years, railroads have made substantial investments in track, signals, 

freight cars, and locomotives to handle this traffic. Railroads are entitled to a return on this 

investment. On the other hand, shippers are entitled to reliable service at reasonable rates, 

and this has not always been consistently provided by the railroads. In those instances when 

service is poor or rates are unreasonably high, rural electricity rates are impacted.