FARMINGTON — The Navajo Nation is seeking funds to study the feasibility of an estimated $300 million freight rail that could export coal from the Four Corners to a planned railhead in Thoreau, along the transcontinental railway and to international seaports.
The "prefeasibility study" of the rail will cost $150,000, said Peter Deswood, a senior economic specialist for the Nation, and it will narrow the project's estimated cost and determine the Nation's contribution.
Deswood said the Nation will also meet on Friday with Blue Horse Energy, the company contracted to operate the other project, the Thoreau Industrial Park Railhead. In the meeting, he said, the two parties will discuss when the company will hire an engineering firm to design a master plan of the railhead, which will identify the project's cost.
The railhead, experts say, could spur the development of the freight rail into Farmington. But they are at different stages.
In late December, the Nation and Burlington Northern Santa Fe — one of the two largest railroad companies in North America — agreed to have the industrial park railhead operational by June, 2015. The Nation would use the railhead to move coal to ports for export and BNSF would use the connecting spur off the transcontinental railway for maintenance operations.
Deswood said the Nation and the companies leasing the industrial park lots will fund the site's construction on reservation land. So far, seven companies, including Navajo Agricultural Products Industry, have committed to leases, he said.
BNSF will fund upgrades to the rail's siding within its right of way, he said, though a BNFS official wouldn't confirm that.
Officials have declined to discuss the railhead's cost as the parties negotiate their financial commitments, but one early estimate pegged the Nation's share at approximately $8 million, not including the price of an off-ramp and traffic light required for vehicle access to the site. "There still seems some confusion of who pays what," said BNSF Regional Manager of Economic Development LaTonya Finch, adding that until the confusion is resolved, she will provide no funding details.
If the railhead is built and leasing companies fill its industrial park, Ray Hagerman, Four Corners Economic Development CEO, said the demand could drive the construction of more railheads north of Thoreau to accommodate interested companies. A freight rail would link the hubs, he said.
Navajo Mine would be the primary beneficiary of the rail, he said. When the San Juan Generating Station shuts down two of its four coal-burning stacks and the Four Corners Power Plant closes three of its five, he said the mine will need new markets.
"They're going to have to sell their coal elsewhere," he said. "That other market is probably on the global scale, like China, or India, or somewhere else."
Once the coal is carted to the Thoreau railhead, it could travel inexpensively on the connecting transcontinental railway to international seaports, he said. Officials are upgrading the Port of Guaymas in Mexico for shipping energy products, he said.
But the feasibility of the freight rail, Finch said, is unknown. "It's very, very preliminary," she said.
Hagerman predicts the rail's cost would be shared between the Nation, BNSF, the state of New Mexico, private sources and other public funding.
Farmington Mayor Tommy Roberts wouldn't say how much money the city of Farmington's might contribute, as the project is still in the early planning stages.
I think there's a lot of discussion to be done to determine how that extension will be funded," he said. "But in general, I'm very supportive."
Mayoral Candidate Matt Dodson also supports the rail. From the time he spent working in oil fields, he said he knows trains transport oil more quickly and cost effectively than trucks. Dodson said he is concerned that the rail could import higher-quality coal mined in Wyoming, cutting into Navajo Mine's local market. If he knew Wyoming coal wouldn't compete, he'd cast his vote of approval, if elected mayor, he said.
Roberts and Dodson agreed that the rail would boost the region's economy.
Hagerman said regional demand already justifies the rail. To profit, BNSF requires at least 100 loaded cars a day traveling up and down the rail's length — and that won't be an issue, he said. According to current demand, he said, the region could ship 35 to 40 cars in and out a day. He said that does not include Navajo Mine coal, NAPI agriculture, oil and gas companies, and the 60 trucks a day hauling coal about 150 miles to the transcontinental railway from Hesperus, Colo., to Gallup. "There's a vested interest from Colorado especially that we get rail to Farmington," he said.
And, according to the New Mexico State Rail Plan — a 223-page document that outlines the state's five-year goal for its railroad project — the Farmington Metropolitan Statistical Area produces $3.5 billion from its freight transportation-dependent industries, such as retail and mining. That is 62 percent of the area's total output, according to the plan, and it is also the source of 21,333 jobs.
Hagerman said he's astonished a city the size of Farmington has no rail.
"I mean, we have to have a rail up here sometime," he said. "We just do."
Executive Vice President of Aztec Well Servicing Jason Sandel, also a Farmington city councilor, also believes the rail line would benefit the region, but he cautions loading all the "eggs in one basket." He said Farmington should consider the rail as one of several options for exploiting the Mancos Shale formation, where some companies are expanding their drilling operations.
Hagerman estimates the rail project is more than 50 percent likely to occur.
"But some of it, I just don't know," he said. The project hinges on the Nation, he said. Most of the rail would span the Nation's eastern border, and much of its funding would likely come from Navajo coffers, he said.
He said a definitive timeline is currently not possible. But often, two years is required to design a rail of this length with another two years to build it, he said.
"If this is going to happen, it could happen in five years," he said.
But Hagerman said he will need some level of commitment from the players by the end of 2014. If he doesn't get that, the rail line will not be a top priority for the organization, he said.
BNSF is "trying to study" the feasibility of the freight rail to Farmington, Finch said.
"There's certainly desire on the part of many, many in the community," she said. "But a project of this scale and scope obviously requires more than desire."