BNSF TO OFFER COAL TRANSPORT OPTION CONTRACTS VIA INTERNET
The Burlington Northern and Santa Fe Railway Co. said Tuesday it will begin offering coal transportation option contracts, to be auctioned on the Internet starting May 25.
The option contracts give purchasers the right to move a trainload of coal via BNSF from one of three groups of Powder River Basin mines to one of 11 rail/water terminals at a specified price and at time intervals from three months to 18 months from date of the auction.
“This innovative product provides utilities, mines and others with the opportunity to lock in transportation capacity and price up to 18 months in advance,” said Tom Kraemer, BNSF's group vice president, coal. “Participants in the market have been able to purchase advance commitments for coal and electricity for some time; rail transportation options are the link that completes the supply chain.”
Minimum bids for the options available in the May 25 auction is $400 for each option contract. Pricing for the transportation itself is provided through a matrix of specific transportation charges for each origin/destination pair, BNSF said.
Purchasers of options are not required to use the underlying transportation. Auction participants must register on the BNSF Web site at http://www.bnsf.com/business/coal/options/. Additional information is also available at the site.
“Federal, sates and private institutions have pressed for structural change in the regulatory and commercial framework that has governed the electric power industry for years,” Kraemer said. “This transportation in the nature of the market will create new customers, products, service offerings and, most importantly, new opportunities.”
BNSF offers similar advance-transportation-purchase programs to customers in other lines of business, including the Certificate of Transportation weekly auction program established in 1988 for agricultural products customers, and the Loading Origin Guarantees weekly action, established in January 2000 for forest products customers.