Friends of the Earth calls for an environmental review of proposed changes to coal transport by rail

Coal companies already receive cheap and bountiful leases for coal development on public lands at below fair market value, and now they want to decrease the cost of shipping that coal across the nation. On September 5, 2014, Friends of the Earth, joined by the Western Organization of Resource Councils, Inc., and the Northern Plains Resource Council Inc., submitted comments to the Surface Transportation Board to request it prepare an environmental assessment to evaluate the potential environmental impacts of changing rates.

The Surface Transportation Board, which has regulatory oversight of railroad rates, instituted a rulemaking procedure earlier this year to consider how it evaluates rail shipping rates for coal. This proposed rulemaking came in response to a petition from the Western Coal Traffic League for the Surface Transportation Board to change its methodology for determining the railroad industry’s cost of capital in order to reduce the cost of shipping coal for the companies they represent.

The Surface Transportation Board annually determines whether a railroad carrier is revenue adequate, which means its revenue levels are enough to cover its total operating expenses and ensure enough profit to provide a sound transportation system. Revenue adequacy is achieved if the railroad carrier’s tax adjusted return on investment exceeds the current cost of capital, as calculated by the Surface Transportation Board. Revenue adequacy factors into the Board’s consideration of the reasonableness of rail freight rates such that a revenue adequate railroad will experience lower shipping costs and be able to increase the amount of coal traffic by rail.

If implemented, the changes proposed by the Western Coal Traffic League would lower the cost of capital and increase the number of revenue adequate railroads. According to the verified statement of Gerald W. Fauth III, an economic consultant with over 35 years experience related to the United States railroad industry, revenue adequate railroads are less constrained by coal rate increases, and may be able to increase coal transport by rail.

An increase in coal traffic by rail will cause significant environmental impacts because it incentivizes more coal production and consumption, which produces climate-disrupting greenhouse gas emissions that are already resulting in adverse impacts across the United States. Friends of the Earth is asking the Surface Transportation Board to conduct an assessment of the environmental impacts that any change would cause. Under the National Environmental Policy Act, if a proposed rulemaking has the potential for significant environmental impacts, the Surface Transportation Board is required to prepare an environmental assessment to evaluate the direct, indirect, and cumulative impacts of the rulemaking decision.

Changes to the economic valuation of revenue adequacy and rail freight rates would decrease the cost of coal transportation and incentivize further coal production. Coal is the dirtiest form of energy and accounts for one-third of the United State’s carbon emissions. Rather than make it cheaper to ship this dirty fuel across the country, we need our government to force companies to leave this dirty fuel in the ground.

Photo credit: http://en.wikipedia.org/wiki/Merry-go-round_train.