by Sonja Horoshko | May 8, 2014 10:05 am
Economic development in the Four Corners has long been hampered by a lack of major transportation infrastructure to carry goods in and out of the area.
But it’s possible that may change. A plan is under way to develop a coalition of investors to build a $533 million freight rail from the Gallup/Thoreau area in northwestern New Mexico at the I-40 Transcontinental Railway to San Juan County, N.M. It is a complex project that, if implemented, would vastly expand economic opportunities for private industry, railroads, tribes and government entities.
Late last year, officials from the New Mexico Department of Transportation rolled out for public input a five-year State Rail Plan that assesses existing freight and passenger rail systems.
The plan describes the benefits of proposed projects such as the freight line.
Farmington Mayor Tommy Roberts says the prospect is exciting, although it is at a very preliminary stage. “We look at our region of the state from an economic-development perspective and see very little infrastructure in place that can draw developers to the area. The talk of a freight rail is giving rise to talk of new industry in the area.”
Freight to be shipped
Rail service can reduce shipping costs of industrial and agricultural products and spur investment in new or expanding regional industries. It is expected that hydraulic fracturing within the San Juan Basin may be able to tap oil and gas reserves in amounts that are not practical for shipping by newly constructed pipelines, and the region has ample coal reserves which can be exported to foreign markets less expensively if truck shipping to loading facilities at I-40 is replaced by rail.
Farmington is especially reliant upon industries that depend on freight transportation. They account for 62 percent (about $3.5 billion) of the area’s total output and 44 percent of its employment (21,333 jobs, including 6,400 mining positions).
Most of these jobs are in oil and gas extraction. Energy-related mining and production activities in San Juan County include two coal mines, two coal-fired power plants, a natural-gas hub at Blanco, a petroleum refinery and a natural-gas power plant.
A substantial volume of the freight generated by crude oil, natural gas, and refined petroleum products moves by pipeline. Thus a rail line would be a boon to the area’s energy industry.
In addition, rail service to Farmington would reduce the costs of shipping agricultural products in commercially viable quantities.
Both of the coal-fired generating stations – the San Juan Generating Station near Waterflow, N.M., and the Four Corners Power Plant on the Navajo Nation – are fueled by mines in close proximity to the plants. Coal conveyor systems exist between the mines and the power plants but do not have any connections to the North American rail or highway networks.
Analyses of rail-dependent industries show coal is by far the highest-volume rail commodity in New Mexico, accounting for nearly 60 percent of all the state’s rail tonnage. Chemicals and allied products, a category that includes fertilizers and coal/gas/petroleum products in crude form – not extraction – is the second-largest commodity group, about 15 percent of the total.
The Four Corners region around Farmington has ample coal reserves which are currently exported by truck to the Transcontinental Railway loading hub facilities near Gallup on I-40.
Ray Hagerman, CEO of Four Corners Economic Development, based in Farmington, acknowledges that the Navajo Nation’s recent purchase of the BHP Mine in San Juan County has put the nation in a driving position (see Free Press, January 2014). After expected partial closures of stacks on both the aging coal-fired power plants in San Juan County, the Navajo Nation will need to sell its coal to new clients and those customers may be in a global market, explained Hagerman, including China and India. Rail transportation would make that economically feasible.
San Juan County in the Four Corners area ranks second among New Mexico’s oil and gas extraction industries. According to the U.S. Department of Energy, domestic crude-oil production is expected to rise through 2035 because of mounting world oil prices, growing use of shale oil, and the use of enhanced oil-recovery techniques.
In June 2013, Bloomberg Businessweek reported that America’s energy boom has left the middle of the country awash in cheap oil. But as pipeline companies scramble to spend billions of dollars to build new pipes to tap these hot new fields, they’re discovering that railroads have beaten them to the punch.
By laying a few extra miles of track and building new loading facilities, oil and gas operators are quickly connecting remote areas of oil production with the existing networks of big railroads such as Union Pacific and BNSF Railway.
On the other end, they’re running tracks directly into refining complexes as far away as Philadelphia and Puget Sound, the article said. These rail projects can often be finished in a matter of months at a cost that’s usually in the millions, not billions.
“Oil drips through a pipe at about 3 or 4 miles per hour while a train moves it 30 to 40 miles per hour.” said Hagerman.
“Also, pipelines are a dedicated transport. It isn’t possible to put a tractor or a load of new lumber in a pipeline.” All transport in the region is done by truck or pipeline.
“Our area is crisscrossed with pipelines, and although export trucking out of here would be impacted by a freight line, trucking from well-site to local refineries would not,” said Farmington’s Roberts.
New Mexico is a “bridge state,” one in which most freight activity is unrelated to economic activity. The majority of rail freight moving across New Mexico is traveling through the state, originating elsewhere. The lack of localized freight rails and the resulting high level of existing import / export truck freighting contribute significantly to pollution and greenhouse-gas emissions as well as wear and tear to infrastructure.
Freight rail is a two-way proposition. It brings goods into local markets and exports local products.
“The import mix would likely change for the better,” said Hagerman, “but the best benefit is the cheaper import of goods already being sold in the area. For example building materials will be cheaper, meaning homes and vacation homes would be cheaper. Further, even new automobiles would be cheaper.”
The rail plan suggests that if New Mexico can successfully shift freight away from trucks to the rail mode, it may be able to reduce the overall carbon footprint of goods’ movement. This would help further the state’s overall environmental goals while supporting similar policies throughout the region.
The majority of the land in the rail corridor between Thoreau and Farmington crosses the Navajo reservation and federal lands. Obtaining rights-of-way is one of the biggest challenges of the freight-rail project, but may also lead to successful partnerships.
“Although I do not know of specific partners at this point, demand for the rail will be driven by the types of industry that use it,” Roberts said. “We have a lot of raw-material resources in San Juan County and the possibility of exporting it by rail will attract business. The partners will most likely have an economic incentive.
“Now that the Navajo Nation owns the coal mine, I imagine the Navajo Nation may want to get their coal out to buyers.”
The new Navajo I-40 rail hub
In addition to the freight rail to Farmington, the rail plan identifies a transcontinental loading center under development at Thoreau in McKinley County on Navajo land. The 380-acre site of the Thoreau Industrial Park Railhead is anticipated to meet the needs of up to 20 companies when completed. Initial estimates put the facility’s cost at $21 million. It is projected to open as early as fall 2015.
Elrena Mitchell, owner of Blue Horse Energy, LLC, explains that her company, 100 percent Navajo-owned, is the master leasing arm of the rail-port project while BNSF is the rail partner.
The Navajo Nation Division of Economic Development awarded the contract to Blue Horse Energy in a competitive bid that put her work on a fast track.
“Our visionary team has been working on this for over seven years,” Mitchell said.
“The project is now on the path. We see this rail-port industrial park as impacting a much larger community than just the business that will establish around Thoreau.”
Mitchell is working with the local school and chapter house on strategic plans to bring economic improvement and health and education activities to area residents.
“But the benefits grow out from there. We know it will be advantageous to Navajo Agricultural Products Industries south of Farmington and the nearby Navajo Coal Mine if the rail can be built from our rail port to the Four Corners area.”
The Navajo Nation, BNSF, shippers and economic-development agencies in northwestern New Mexico and at the state level are working to determine the feasibility of building the freight line to Farmington.
“BNSF is open to the concept,” said company spokesperson Lena Kent. “However, in order to evaluate it further, we need additional details.”
Navajo Coal Mine CEO Steve Gunderson said in an email to the Free Press that he “has not heard of any definite plans or planning by anyone regarding the project.”
While initial funding for Blue Horse’s responsibilities at Thoreau is coming from the Navajo Nation, the New Mexico State Legislature recently approved $300,000 to study the feasibility of the projects.
Hagerman and Roberts hope the freight rail study will fill in the missing pieces for all interested parties. According to Hagerman, the feasibility RFP for the $150,000 portion of the freight-rail grant is about a month out. He anticipates the award will come in July with results by the end of the year.
Although estimated completion dates for the rail are projected around 2019, the economic energy of the rail venture is already being felt throughout the region.
Ed Morlan, director of Region 9 Economic Development District in Colorado, said the coal mines in Southwest Colorado could directly benefit from the freight rail in Farmington.
It’s estimated that the King Coal mine near Hesperus moves about 60 trucks a day to the Transcontinental Railway. The mine is owned by G.C.C. Energy LLC, a global cement, concrete and coal company headquartered in Chihuahua, Mexico.
“Transportation costs affect the markets. The King Coal Mine is very highquality, low-sulfur coal used in the cement industry,” Morlan said.
“That mine and the Southern Utes’ coal mine will benefit from this if it happens.
“It all adds up to an increase in commerce. It can inspire economic development for the whole region.”
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