Wyoming coal shipping cut

Union Pacific Corp. said it will cut coal shipments from Wyoming mines as much as 20 percent at least until November and possibly into 2006, while repairs are made to track along the busiest U.S. rail line.

Union Pacific, the largest U.S. railroad, said on its Web site that it will allocate shipments among utilities that receive the coal and mines in the Powder River Basin that ship it, filling 80 percent to 85 percent of demand. Repairs may stretch into next year if the area has a wet summer or an early winter that limits work time, spokesman Robert Turner said.

"It looks like it will be done in November," he said in an interview Tuesday.

The shipments have been slowed since two derailments in May as record rain and snow weakened portions of the 107 miles of track jointly used with competitor Burlington Northern Santa Fe Corp. Union Pacific, based in Omaha, Neb., has said the shipment reductions cut second-quarter earnings at least 7 cents a share. The railroad said it met 82 percent of coal demand on the line last month.

"If you average it out, it means everybody taking that coal is going to get a third of a train less a week," said coal-market analyst Bill Wolf at John T. Boyd Co. in Canonsburg, Pa. "If you're a small generator getting one train every two weeks, that could be significant."

Union Pacific has said second-quarter earnings would be 75 cents to 85 cents a share, including the effect of reduced coal shipments. Profit matching the 79-cent average estimate in a Thomson Financial analyst survey would be the first increase in six quarters. Union Pacific has been hurt by train delays and higher fuel costs.

Turner declined to say whether the lower coal shipments would hurt third-quarter earnings.

American Electric Power Co., a utility that's the biggest U.S. coal user, has some plants that "have the capability to blend Powder River Basin coal with eastern coal, and we are blending in somewhat less from the Powder River Basin," said Melissa McHenry, a spokeswoman for the Columbus, Ohio-based company. The utility bought 75 million tons of coal last year and gets as much as 35 percent from Wyoming.

Spot prices of some Powder River Basin coal have risen 8.3 percent to $8.52 a ton since the derailments, according to data compiled by Bloomberg. That's triple the rate of increase for coal shipped by rail from Pennsylvania.

"We are greatly concerned about the impact" and "extensive repair and maintenance," Union Pacific said in a notice posted on its Web site after the close of business Friday on July 1. "Our customers can be assured that we will do everything possible to ensure that the allocation process is fair."