BNSF sues federal regulator over coal shipment mandate

Western U.S. Class I railway BNSF is suing the Surface Transportation Board for compelling BNSF via a mandate to ship more coal from Navajo Transitional Energy Co.’s (NTEC’s) mine in Montana.

The 5th U.S. Circuit Court of Appeals in New Orleans received BNSF’s petition on July 26. BNSF’s headquarters in Fort Worth, Texas, is within the 5th Circuit’s jurisdiction.

BNSF (NYSE: BRK-B) didn’t lay out its argument for why it’s suing STB in its filing to the court. However, the railway did say through its attorneys that it believed that STB’s mandate was “contrary to law, in excess of the STB’s statutory authority, arbitrary and capricious, an abuse of discretion, unsupported by substantial evidence, and otherwise not in accordance with law.”

The railway is asking the courts to set aside STB’s order. BNSF also said STB hadn’t responded to a request on July 17 for a partial stay of the order.

STB’s order — a preliminary injunction — calls for BNSF to transport 4.2 million tons of coal from the Spring Creek mine to the Westshore Terminals export facility in British Columbia in 2023. This translates into approximately 23 trains per month, according to BNSF.

The board also called for BNSF to transport an additional 1 million tons of coal, or approximately six more trains per month, to the extent that additional train sets and crews become available. In STB’s decision, NTEC indicated that BNSF had met that threshold in 2021 but wasn’t able to meet it in 2022 and 2023.

STB’s June decision compelling BNSF to ship more coal from NTEC wasn’t unanimous. Two board members voted against STB’s injunction because of uncertainties over whether STB’s actions were proper in light of the common carrier obligation. The common carrier obligation is a federal mandate that compels the freight railroads to ship goods upon a reasonable request. But the dissenting votes in the 3-2 decision said the common carrier obligation lacks clarity on how STB should handle shipper-railroad disputes like the one between BNSF and NTEC.

NTEC had approached STB in April, saying it was seeking to transport export coal from its Spring Creek mine in Big Horn County, Montana, to Westshore Terminal, located at Roberts Bank in British Columbia. NTEC had also wanted BNSF to guarantee rail service so that NTEC’s customers could have sufficient time to arrange for the ocean transport of the coal.

As the proceeding went forward at STB, other coal companies weighed in out of concern that their rail service would be affected should STB grant NTEC’s request.

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