CALGARY, Alberta — Railway company Canadian Pacific (CP) has optioned out of building a railroad spur into the Powder River Basin of Wyoming and Montana.
The option came as part of CP's acquisition of Dakota Minnesota & Eastern railroad in 2007, and would have allowed a 260-mile extension spur to be built into the PRB. Instead the company today announced it will take a non-cash charge of about $180 million — $107 million after tax — on its option to build into the Powder River Basin. Components of the charge include the option, engineering design costs, land and capitalized interest.
The railway also announced its plans to indefinitely defer the plans "based on continued deterioration in the market for domestic thermal coal, including a sharp deterioration in 2012."
According to the Wyoming Mining Association, that represents about a 20 percent drop this year and another 20 percent for 2013. The railway's move is symbolic of the current domestic mood for coal. With low natural gas prices and high regulatory and public resistance to coal, the industry has faced numerous challenges. Partly because of that mood, coal has sought ways to increase exportation, including via new ports in the northwest that have faced plenty of resistance.
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