Coal company sues BNSF, alleging the railroad gave competitors better service

A Navajo Nation-owned coal company that operates the Spring Creek Mine in southeast Montana stated in court documents this week that BNSF Railway — one of the largest railroad companies in the United States, and one that dominates the Montana rail network — is giving preferential service to other mines in the region. 

On Monday, the Navajo Transitional Energy Company filed a breach of contract lawsuit in U.S. District Court in Billings against Texas-based BNSF. The company alleges that BNSF’s preferential treatment of other mines has caused NTEC to lose more than $150 million in revenue and incur more than $15 million in demurrage penalties in 2022. A demurrage penalty is a fee paid by a company when a ship is not loaded by an agreed upon deadline.

“BNSF is, simply put, abusing its monopoly power and picking winners and losers,” said Matt Babcock, NTEC’s vice president of sales and marketing, in a press release. “And it’s not only at the expense of our business and our customers but at the expense of the Navajo Nation.”

A spokesperson for BNSF declined to speak about the case with Montana Free Press. 

Traditionally, shippers that have an issue with a railroad company’s service can go to the U.S. Surface Transportation Board, the federal regulator that oversees the rail network. But NTEC officials said that avenue didn’t help in this case so the company decided to take BNSF to court instead. 

NTEC ships coal from its Spring Creek Mine in Big Horn County to Roberts Bank, British Columbia, where it is transferred onto ships for export to Asia. BNSF is the only rail carrier that can move NTEC’s coal the 1,500 miles from the mine to the port. In 2021, NTEC shipped 5.1 million tons of coal from the Spring Creek Mine, averaging 28.4 trainloads per month, according to the lawsuit. In 2022, the company expected to ship approximately 5.5 million tons of coal over BNSF rails, and in mid-2021 began working with the railroad to sign a new annual contract for service. That deal was signed in December 2021. 

But the coal company alleges that once the new year arrived, BNSF began moving fewer coal trains for NTEC, about 18 per month instead of the 30 per month that would be needed to hit the 5.5 million ton target. 

In April and May, NTEC and BNSF officials met at the railroad’s headquarters in Fort Worth, Texas. It was there that BNSF officials said the railroad would likely be able to transport only about 3 million tons of coal out of Spring Creek in 2022 and that the company “did not feel any obligation” to meet the 5.5 million ton mark agreed to in December 2021. BNSF officials also said it was likely that service wouldn’t improve until the fourth quarter of 2022 at the earliest, according to the lawsuit. The railroad’s executives noted that NTEC was not the only freight customer suffering from poor service and that the entire rail industry was struggling to meet demand.

That was indeed accurate. Earlier this year, service on America’s largest freight railroads, including BNSF, which operates on more than 32,000 miles of track in the western U.S., had gotten so bad that the U.S. Surface Transportation Board held hearings to figure out why. Railroad executives blamed the lingering impacts of the pandemic and the “Great Resignation” for its woes. But shippers, union leaders and railroaders pointed to a different issue: a practice called “Precision Scheduled Railroading,” a method of operation and management that often tries to move more freight with fewer employees and locomotives. As a result, the number of railroad workers has dropped dramatically in recent years (from more than 200,000 in 2015 to 146,000 in 2022, according to the U.S. Bureau of Labor Statistics), and those who remain are being asked to do more. 

The impacts of those cuts came to a head in spring 2022, with at least one BNSF railroader telling the STB that the rail system was in “absolute gridlock.”

NTEC alleges that BNSF’s actions show it was prioritizing “maximum profits over customer needs.”

And according to NTEC’s attorneys, BNSF was still moving a substantial amount of coal for other customers. According to the lawsuit, from January to August 2021 the railroad moved 561 coal trains to the Westshore Terminal in Roberts Bank, British Columbia; during that same period in 2022, the railroad moved 570 coal trains to the port. NTEC’s attorneys say some of those trains were for new customers who had not shipped coal with BNSF in 2021. 

“In other words, BNSF elected not to move NTEC’s coal to Westshore even as BNSF’s year-over-year train count to the port increased substantially,” attorneys write. 

Besides losing millions of dollars in revenue from not being able to fulfill its own contracts with customers, NTEC says the company had to pay fines at the port because it couldn’t load ships in a timely manner. As of Nov. 30, BNSF had moved only 2.99 million tons of NTEC coal to Westshore, according to court documents. 

The Navajo Nation created NTEC in 2013 and acquired the Spring Creek Mine in 2019. The energy company usually provides the Navajo Nation with $50 million annually, making up about 30% of its annual budget.