Energy doesn’t help anybody if it can’t get where it’s wanted, and Montana forms a crucial link in the energy transportation chain, railroad leaders at the Asia-Montana Energy Summit said Thursday.
But that’s threatened by political forces that focus on issues having nothing to do with business, warned Montana Attorney General Tim Fox. That’s why his office has entered lawsuits challenging other states’ ability to limit Montana rail exports.
The discussion was part of the University of Montana’s Mansfield Center global energy conference. Fox was joined by Burlington Northern-Santa Fe executive vice president Steve Bobb and Montana Rail Link Chairman Bill Brodsky.
Fox accused state regulators in Oregon and Washington of blocking permits for Pacific coal export facilities “with unrealistically broad requirements assessing foreign environmental impacts.” He warned that violated the U.S. Constitution’s interstate commerce clause, by preventing Montana coal shippers from reaching markets.
That remark later drew fire from Jim Jensen of the Montana Environmental Information Center.
“I find it rich that we’re all about state’s rights until another state acts,” Jensen said. “Then we have to sue under the federal Constitution.”
Jensen argued that Montanans need to recognize their state budget was dependent on coal severance taxes and look harder at the environmental effects of that addiction.
Montana Public Service Commissioner Travis Kavulla added that politics was thoroughly intertwined in energy production. He warned that any attempt to manipulate energy policy would produce local tangles of job creation and loss, environmental benefits and costs, and competitive battling between different industries hoping for government favor.
International speakers at the Asia-Montana summit noted that North America’s status as the world’s biggest energy-exporting region will play a huge role in development of China, Japan, South Korea and the rest of the Pacific Rim.
“The most important change in global energy is U.S. shale oil,” said Jin Park, former foreign affairs and trade chairman of the National Assembly of the Republic of Korea. “You are now the largest producer in the world. And with the policy of the Obama administration turning toward Asia, we are seeing more of both military and economic engagement.”
That’s important as Asia’s other sources of energy grow more chaotic, Park said. Conflict in the Middle East has made petroleum supplies from there risky, while Russia’s continued intervention in the Ukraine and the collapse of its economy make that supply equally suspect.
But to reach those Asian markets, American energy has to make it to the Pacific Coast. And much of that will go by rail.
BNSF’s rail system dates back 130 years to the earliest trains in Montana. It now runs about 1,600 cars of freight a day through the state, and 2 million cars annually. It has about 2,600 employees spread from Chicago to Seattle.
While BNSF trains cross the northern tier of the state, Montana Rail Link operates the tracks across its southern half. Brodsky said the company’s 995 miles of track had seen a 22 percent increase in business over the past five years. The company employs about 1,200 people, including 358 new hires in the past year.
“2014 was the safest year for both personnel and derailments in our history,” Bobb said. “And the U.S. freight rail network is in the best shape it’s ever been.”
The transportation business today remains just short of its industry peak in 2006, when cargo from California ports was streaming inland. After a steep decline triggered by the 2007 recession, traffic volumes are nearly back to that 2006 level.
Both men suggested looking to Canada to see how a truly robust rail system performs. MRL’s parent company, Washington Corp., has a small rail line with just 60 miles of main line around Vancouver, British Columbia. Brodsky said that service handles more oil and petroleum freight than all of MRL’s Montana track.
Bobb said the challenge is to develop commodity transportation in all ways possible – trains, trucks, pipelines, planes and ships. Each has advantages and limitations. For example, pipelines like the proposed Keystone XL carry petroleum cheapest and fastest, but trains can carry many kinds of petroleum products that won’t flow through a pipeline. Trains can also take the fuel to markets pipelines can’t reach.
Montana sends 406,102 carloads of freight out on BNSF trains each year, and three-quarters of them carry coal. About 60 percent of that went to export markets, with South Korea being the biggest customer, Bobb said.
Business in the oil-rich area along the Montana-North Dakota border has driven a surprisingly heavy boost in crude oil transport and industrial equipment, Bobb added. Brodsky agreed, noting that even though MRL gets much less petroleum activity than BNSF, it still carried 52 oil trains across Montana last year.