A dispute that began last year between a Navajo Nation-owned coal company that operates the Spring Creek Mine in southeast Montana and BNSF Railway, one of the largest railroad companies in the United States, has spread from a federal courthouse in Billings to Washington D.C.
In December, Navajo Transitional Energy Company filed a breach of contract lawsuit in U.S. District Court in Billings against Texas-based BNSF. The company alleged that BNSF’s preferential treatment of other mines 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.
The lawsuit is still working its way through the legal system, but now NTEC has gone to the U.S. Surface Transportation Board, the independent federal agency charged with overseeing the nation’s railroads, demanding an “emergency service” order — essentially asking the federal government to force BNSF to move coal from the Spring Creek Mine to Roberts Bank, British Columbia, where it can be loaded onto ships for export to Asia. The issuance of an emergency service order is rare, though last year the STB issued one to force Union Pacific to quickly move corn to a California poultry producer that said millions of chickens were about to die if they weren’t fed soon (the chickens reportedly survived, at least until it was time to ship them off to the supermarket).
The Surface Transportation Board will hold a hearing in Washington, D.C., on May 10 regarding NTEC’s request. The coal company, which is owned entirely by the Navajo Nation and provides up to 30% of its annual budget, said the tribe could lose millions if the board doesn’t force BNSF to increase its service. But the railroad said issuing such an order in this instance would be unprecedented and that NTEC is simply looking to make more money on export coal while the market is hot.
Coal company sues BNSF, alleging the railroad gave competitors better service
On Monday, the Navajo Transitional Energy Company filed a breach of contract lawsuit in U.S. District Court in Billings against the Texas-based BNSF. The company alleges that BNSF’s preferential treatment of other mines has caused the company to lose more than $150 million in revenue and incur more than $15 million in demurrage penalties in…
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 the spring of 2022, the railroad told the coal mine that it would be able to move only about 3 million tons of product, adding that it “did not feel any obligation” to meet NTEC’s previous goal. BNSF said the reason was well-publicized service issues that were impacting all the major railroads.
NTEC disagreed, stating that the railroad had a “common carrier obligation” to move as much coal as the company could provide. Under federal law, railroads are required to provide transportation or service to anyone or any company “on reasonable request.”
NTEC attorneys also noted in the lawsuit that BNSF was still moving a substation 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.
Last year, BNSF and NTEC tried to negotiate a new contract for 2023. As part of that process, according to NTEC attorneys, the railroad asked the company to drop its claims for damages. The coal company did not comply and now does not have a contract to move a specific amount of coal, instead relying on the common carrier obligation. NTEC attorneys state, however, that the service issues continue and that BNSF is still not moving enough coal from the Spring Creek Mine.
For its part, BNSF states that the corridor it uses to move Spring Creek coal to market — through Montana, Idaho and Washington, to British Columbia — is among the busiest on its network and that it’s trying its best to provide solid service for all of its customers. The railroad argued that issuing an emergency service order in this instance would be unfair to other customers who rely on the railroad and would be an excessive response.
“Emergency service orders and injunctions are extraordinary remedies, and neither is justified here. More importantly, there is no emergency. There is no threat to a water supply or potential disruption of the food chain, as in other emergency service situations recently addressed by the Board,” attorneys for the railroad wrote in a filing to the STB.
Those attorneys continued, writing that in the railroad’s opinion, NTEC already receives “significantly more” service than other mines BNSF serves.
“NTEC is asking the Board to order BNSF to provide extra service — to increase its minimum monthly volume of coal transportation to NTEC to a level that NTEC has previously received in only four of the prior 38 months that NTEC has been in this export market,” they wrote. “The market for coal exports to Asia is very attractive right now, and NTEC’s desire to dramatically increase its business in that market is understandable. But it does not create an emergency that justifies extraordinary Board action.”
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