Wyoming coal prices skyrocket

NEW YORK — The price of coal mined in Wyoming's Powder River Basin surged to record highs last week, as electric utilities bid aggressively in the market to make up for shipments lost by a host of problems that have dogged coal producers and railroads since May.

Most recently, torrential rains in Kansas at the beginning of October washed away hundreds of feet of track on Union Pacific Corp.'s lines near Topeka and damaged several rail bridges. The disruption caused a backup over a hundred trains long — many of them carrying Wyoming coal — and caused several utilities that depend on coal shipped on those lines to run dangerously low on supplies.

"It was pretty serious," said Stephen Doyle, a coal market consultant who advises investment firms about the industry. "It took out a whole week's worth of deliveries from all those lines that feed into Kansas City and St. Louis."

The price of Wyoming coal for delivery in 2006 rose 11 percent in the week ended Oct. 7, based on continuing strong demand from utilities that need the fuel to rebuild their stockpiles, market sources said. Next year's coal is now trading around $15.45 a ton, up from $10 in mid-July.

Last week's track problems aren't the first of the year. Power plant owners across the Midwest, Great Plains, Southeast and Southwest have been receiving on average about 85 percent of expected coal deliveries since May, after heavy precipitation caused two trains to derail in Wyoming and started a massive maintenance program by the railroads to repair the track.

The line is jointly owned by Union Pacific and Burlington Northern Santa Fe, the other railroad that hauls coal from the Powder River Basin.

The increase in coal prices also appears to have bolstered the price of sulfur dioxide allowances, which traded at a new high this week of $920 a ton. Some utilities have turned to higher-sulfur eastern coals to replace missed shipments from the West, a move that requires them to buy more sulfur allowances to cover the extra pollution that will result.

In a letter sent to customers Oct. 5, Union Pacific executive Jack Koraleski said it would be at least a week before service was back to normal after the Kansas disruptions.

In an announcement posted the next day, Union Pacific said the tracks had been fixed and that the company was trying to reduce the lengthy backup caused by the disruptions.