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Rolling coal on the rails

If Alberta approves new coal mines, how will we ship our grains to the West Coast?

Rail shipping is vital to the Canadian economy and especially important to Prairie farmers.

The coal question is one that should be on the mind of every western Canadian grain producer, and one that every farm organization should be asking right now. It is a question that every federal, provincial and local politician representing rural ridings should be asking. 

Unfortunately, I don’t know of anyone who is asking it.

Even the Alberta government, whose change in coal policy could result in a massive amount of metallurgical coal being mined from the eastern slopes of the Rockies and destined for export from the West Coast is not asking how rail shipments of this much coal may have an impact on the movement of grains and oilseeds and any other products and goods moved by rail through the Rockies.

The worst part is that when I asked the Alberta government, CN rail and CP rail, they seemed surprised, and then avoided answering the question.

This question stems from the rescinding of the 1976 Alberta Eastern Slopes Coal Policy by the current Alberta government last May. The policy change was done without public consultation and the change effectively opened about 1.4 million hectares of the eastern slopes to coal exploration and mining. It has an impact on not only mountainous areas, but protected wilderness areas and grazing lease lands.

The change ignited the ire not only of environmentalists, but ranchers in the area, and farmers and the public downstream of the mines who depend on rivers flowing out of the eastern slopes for their irrigation and water supplies. When the scope of the policy change became apparent last December there was a huge public outcry, but the government announced the old coal policy would be reinstated. 

In fact, prior to the new policy, a number of exploration permits had already been granted, primarily to Australian coal mining companies seeking high-quality metallurgical coal for export to Asia for use in the production of steel. In a February 8 news conference, Alberta Energy Minister Sonya Savage noted exploration projects were underway for the Aries, Blackstone, Cabin Ridge, Chinook, Elan South and Isolation South proposed mines. The project area for these six mines covers 65,000 ha at the headwaters of the Oldman, Crowsnest and Clearwater Rivers.

According to the Canadian Parks and Wilderness Society, as of February 12, 2021, the Alberta government had leased 194,281 ha of lands for coal exploration since rescinding the coal policy last May. The society claims the government’s policy change did not cancel these leases, but merely paused them to allow for public consultations.

As well, two eastern slope mines have already proceeded from exploration to the review process required before beginning operation. The Tent Mountain mine operated from the 1940s until 1983. Its ownership is seeking to reopen and expand this mine to another 750 ha near Coleman, Alta. If approved, it would produce coal for the next 14 years.

The government is also reviewing the Grassy Mountain mine proposal for a new open pit mine in southwestern Alberta which is projected to produce 4.5 million tonnes of processed coal per year for the next 25 years.

If just the Tent Mountain and Grassy Mountain projects were to proceed and if mine output met expectations, these mines would produce about 7.75 million tonnes of coal per year, all destined for the West Coast, all to be moved by rail through the Rockies. At 90 tonnes per car that would be over 86,000 additional rail cars a year of coal to be moved through the mountains, roughly two trains per day 365 days a year. And we know winter rail movement is often delayed or diminished due to cold, snow, avalanches or track issues.

Grain producers remember what happened a few years ago when there was a big push to move more oil by rail. Rail service for grain movement declined. And most of the increased movement of oil by rail was south rather than west so there were not near the constraints that the Rockies impose on rail capacity. 

Do we even have the rail capacity to increase coal shipments?

Our rail carriers already move a lot of coal. According to the Coal Association of Canada, our railroads currently move over 30 million tonnes of coal annually, 80 per cent of that through B.C. Therefore, the Tent and Grassy Mountain mines alone would increase the amount of coal moved through the Rockies by roughly 25 per cent. So, I asked CN and CP what percentage of rail capacity is currently being used given the limited track and locomotive power through the Rockies. And how many additional tonnes of coal could be moved to the West Coast without having an impact on movement of other goods.

Here are the replies I received:

Mathieu Gaudreault, senior advisor in media relations at CN, responded: “At CN, we are proud of the accomplishments of our dedicated team of railroaders as their work ensures that our network is running safely and that we keep meeting our customers’ needs.

“In order to stay ahead of the demand, CN has invested over $10 billion since 2018, in tracks, locomotives and railcars, including the purchase of over 2,500 new high-capacity grain hopper cars. These investments benefit our grain customers as well as customers from the other sectors we serve. It is important to remember that the record grain shipments of the last twelve months have come at the same time as CN is shipping very high volumes of many other commodities such as lumber, potash, propane and consumer goods.

“CN works continuously at refining its assessment of anticipated volumes to be moved based on overall crop production and insights gained from maintaining open lines of communications and consultations with stakeholders in the grain supply chain as well as various industry associations and elected officials. Those open lines of communications are key to our success as they allow us to extract accurate and timely forecasts on volumes and industry patterns that are essential to our service planning processes.”

Andy Cummings, manager of media relations with CP rail wrote: “CP is well positioned to continue to move Canadian grain, with more than 4,000 new hopper cars added to its fleet via purchase or lease. Details on CP’s grain-handling are here. As you’ll note, CP is 14 per cent ahead of last year’s volumes crop-year to date.”

Both companies totally avoided my question as to the impact a large increase in coal shipments would have and if they had the rail capacity through the mountains for a significant increase in coal production. When pushed for further clarification, I was told this was the only comment they were prepared to make with respect to my questions.

Has the Alberta government consulted with the railroads to ensure there is capacity to move the coal from proposed mines before issuing leases?

I can understand the railroads’ reluctance, as private companies, to reveal their capacity to move additional coal through the mountains but surely the Alberta government would have consulted with the railroads before leasing large sections of the eastern slopes to coal mining companies. After all, those leases only generate $3.50/ha a year over the 15-year term of a lease and once in production the government only earns one per cent of the revenue of coal produced. Therefore, you would assume the government would look at the impact increased coal shipping by rail would have on all other commodities and goods moved by rail.

When I asked Jerry Bellikka, chief of staff for Alberta’s Minister of Energy, if the government had consulted with the railroads to ensure rail capacity before issuing coal leases he responded:

“The Government of Alberta is not involved in the process of shipping coal by rail. This is the sole responsibility of private industry. Coal companies that export their product are responsible for ensuring any necessary infrastructure and rail agreements are in place. Typically, proponents would ensure these arrangements are made, as necessary, as they plan a coal mining project. It’s also important to note that the rail industry is regulated by the federal government.”

Rail shipping is vital to the Canadian economy and especially important to Prairie farmers. According to Stats Canada, 538,000 carloads of agricultural products were moved by rail in 2019. Yet, by tonnage, coal is second only to iron ore in terms of commodities moved by rail in Canada. Yet Alberta is pushing hard to increase coal production without any consideration of the ability of rail to handle increased tonnage.

Complicating the matter even more is the decision by the U.S. to stop Keystone XL. With oil prices rebounding, will we see additional oil competing for rail service as well? 

And there are other western commodities, besides grain and oilseeds, which also compete for rail service. For example, potash accounts for the most tonnage of any commodity moved out of Saskatchewan with 41.5 per cent moving by rail to the West Coast.

We cannot wait until there are rail movement backlogs to ask whether or not we have the capability to increase coal mining and exports. Then it is too late. This question should have been asked even before new coal mines were considered much less land leased for them.

So I ask the question again:

Will the shipping of coal by rail to the West Coast displace the shipping of grains and oilseeds to West Coast ports? 

And more importantly: 

Who else in agriculture and the government is asking this question right now?

The track record

This would not be the first time increased costs resulting from business decisions by third parties would have a negative impact on western grain producers and society in general.

Perhaps the best example is the impact that consolidation of the elevator and rail systems had on farm costs of moving grain from farm gate to rail. The abandonment of branch lines, the demand by rail for large car spots, and the decision by grain companies to move to large inland terminals from a local elevator system all contributed to higher trucking costs for farmers.

Initially, cost savings by grain companies from reduced rail charges resulting from faster loading times were passed back to farmers in the form of trucking premiums but those have now all but disappeared.

But there is even a bigger external cost now being borne by governments. Deterioration of the highway system because so much more grain is being moved longer distances by truck instead of rail is becoming obvious. No one questioned what the highway costs would be for elevator consolidation. And there was no discussion as to who would pay for added highway maintenance and repair because of the changes brought on by the changes to the elevator and rail system.

We cannot make this same mistake again.

This article was originally published as 'The coal question' in the April 2021 issue of Country Guide West.

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