Effect of Coal and Competition on Railroading Industry

Gents, as I noted over at what is fast becoming a parallel topic, namely that discussing the transport of Bakken crude oil, actress Brooke Alexander - the TV pitch lady for the American Petroleum Institute, points out that most US imported oil is from Canada and Mexico. These certainly represent more friendly sources than the Middle East.

But back on the rails, it will be interesting to see if railroad transportation of domestic crude will continue to be the long-term transport mode, as distinct from "stop gap" until a pipeline is built.

Cowford wrote:

gokeefe wrote:Regardless, the implication almost certainly is that we are importing more crude than we need for present levels of demand.

The amount of crude we produce/refine and export/re-export pales in comparison to the amount of crude we import and consume domestically.

I don't think it's a lot....yet....however there does appear to be some small quantity of unnecessary import. I would completely understand if part of this was due to the vagaries of distribution efficiencies, i.e. more efficient to export distillates than to ship all the way across the country. Obviously the national petroleum market isn't necessarily integrated from the Pacific Coast to the Atlantic Coast.

Strangely , New Zealand has similiar statistics . (obviously much smaller qauntites involved than the USA ) . offically , we export slightly more oil than we import . wether the oil actually phyiscally leaves the country and is reimported i dont know . i suspect alot of this "movement " is on paper . in the form of trading between oil companies based in different countries , futures trading etc . i suspect there are tax benefits to exporting oil , that may make such movements worthwhile .

With regard to Mr. Norman's post, those who want to did a little deeper into the entire enrngy question might enjoy Daniel Yergin's The Quest, a study of all the major market forces affecting energy today, and written as a companion to The Prize, a brief history of the oil history written about five years ago. (Sorry, gents, but the index contains only four references to railorading, and the matter referenced isn't very stimulating.)

I share Mr. O'keefe's belief that, while coal production might encounter a few bumps in the road, it's integrated too fully into our economy to dry up that quickly, or that completely. One point worth raising is that the globalizing economy added a lot more volatility to rail operations heavily dependent upon coal traffic, as anyone who's spent some time near the former N&W main line in Virginia can attest.

I heard an advertisement on the radio about coal burning stoves coming back I don't remember where the place was that was selling them other than it was in the Central New York area and that they were pushing the idea for home use so it sounds like there could be some hope for coal even if its a few small truck loads going here and there.

I have a Harmon coal stove, the setup is the same as you have on a wood pellet stove. I burn anthracite rice size coal. Burns clean just no creosote to worry about.

scharnhorst wrote:I heard an advertisement on the radio about coal burning stoves coming back I don't remember where the place was that was selling them other than it was in the Central New York area and that they were pushing the idea for home use so it sounds like there could be some hope for coal even if its a few small truck loads going here and there.

There are some people in Maine who are doing the same thing. However, the volume is simply too low to make up for the expected losses of thermal coal to natural gas in power generation applications. Additionally, most thermal coal (bituminous) is not of the same grade or type as what is commonly used for home heating (anthracite).

An "ominous" report appearing in a recent Wall Street Journal "Heard on the Street" column:

http://online.wsj.com/article/SB1000142 ... %3Darticle

Brief passage:

• Even in this age of the "new iPad," there is still a lot of money to be made just hauling around rocks—specifically, coal.
  
  Railroads are still beholden to coal, which is tailor-made for the business. It is heavy and shipped in large volumes between the same set of fixed points—mine, power plant, foundry, port—over and over. Alternative means of transportation are limited. That makes for pricing power, big revenues and high margins. Although it isn't reported clearly, railroads derive an estimated 40% to 50% of their operating profit from hauling around coal, says David Vernon of Bernstein Research.
  
  Problem is, the U.S. is using less coal. On a 12-month rolling basis, coal consumption in November was 10% below its July 2008 peak. And the trend is down, especially as mild winter weather has curtailed already weak demand for electricity. Power generation accounts for more than 90% of coal use.

Be sure to read the Comments; I have posted one myself.

Could it be profitable for railroads to transport Liquefied Natural Gas (LNG) in bulk quantities? Could a single LNG tanker carry the same amount of energy as a single coal hopper?

And they refer to Ethanol as the "bomb train".

Mr. Norman,

I read the full article.

While first appearances certainly seem ominous I would submit the following:

1. Several of the ports mentioned are likely candidates for new traffic once the Panama Canal expansion is completed.

2. Given the potential for such expansion, greater demand for exported coal traveling to Asia may also be in the offing.

3. Lower U.S. demand for steam coal may be a blessing in disguise as the developing world seeks cheap sources of thermal energy to meet requirements for increased energy production.

Nobody else has the capacity or the resources to meet demand of this scale.

gokeefe wrote:Mr. Norman,

I read the full article.

While first appearances certainly seem ominous I would submit the following:

1. Several of the ports mentioned are likely candidates for new traffic once the Panama Canal expansion is completed.

2. Given the potential for such expansion, greater demand for exported coal traveling to Asia may also be in the offing.

3. Lower U.S. demand for steam coal may be a blessing in disguise as the developing world seeks cheap sources of thermal energy to meet requirements for increased energy production.

Nobody else has the capacity or the resources to meet demand of this scale.

Most of Eastern Europe still burns coal and with Ukraine being just one of the few country's slowly shutting down there out dated Nuclear Plants and converting them to coal burning steam plants the demand for coal there along with imports will only go up. Other country's in that area of the world are also looking at going back to burning coal and Pete as an alternet option due to the issues with Russia cutting off the oil and gas supply to Western Europe when someone refuses to pay them more money.

RedLantern wrote:Could it be profitable for railroads to transport Liquefied Natural Gas (LNG) in bulk quantities? Could a single LNG tanker carry the same amount of energy as a single coal hopper?

And they refer to Ethanol as the "bomb train".

There are cars made for it, so someone is running it profitably.

Energy-wise, a single coal hopper can carry up to 240,000 pounds of coal, or 108,862 kilograms. At 24 megajoules to the kilo, according to wiki, each car has a maximum energy value of 2.6 terajoules. Also according to wiki, it's 24 megajoules for each liter of LNG, so 108,862 kilograms becomes 108,862 liters, turning into a gallon equivalent of 28,758 gallons. Chart Industries says their LNG railcars holds 30,681 gallons, so same amount of potential energy. Important caveats for all forms regarding actual energy value per type of coal as well as end use efficiency.

RedLantern wrote:Could it be profitable for railroads to transport Liquefied Natural Gas (LNG) in bulk quantities? Could a single LNG tanker carry the same amount of energy as a single coal hopper?

And they refer to Ethanol as the "bomb train".

As part of our annual HAZMAT renewak course we took a look at LNG. I was as surprised to learn as anyone that it is far less volatile than one would think. The vapor cloud will catch fire but only once it has diffused to a certain extent in order to mix with oxygen. At high levels of saturation it cannot burn. I was struck by the video of the flames which showed a very loosely formed fire that was easily broken up by wind condition changes or other environmental effects. Make no mistake about it I wouldn't want to deal with an LNG tanked on fire anymore than the next person but I would certainly say that Ethanol is likely more difficult to fight. Reasons for this are several fold to include the tendency of the fire to get very hot and very dense and stay close to its fuel, making it harder to place a barrier between the vapor and the liquid.

Gilbert B Norman wrote:Merry Christmas, Gentlemen--

While the term railroad is not mentioned anywhere in this article appearing in Friday's Journal, the potential of severely and adversely affecting the railroad industry cannot be dismissed:

http://online.wsj.com/article/SB1000142 ... 10250.html

Brief passage:

After burning coal to light up Cincinnati for six decades, the Walter C. Beckjord Generating Station will go dark soon—a fate that will be shared by dozens of aging coal-fired power plants across the U.S. in coming years.

Their owners cite a raft of new air-pollution regulations from the Environmental Protection Agency, including a rule released Wednesday that limits mercury and other emissions, for the shut-downs.

But energy experts say there is an even bigger reason coal plants are losing out: cheap and abundant natural gas, which is booming thanks to a surge in production from shale-rock formations in the U.S.

"Inexpensive natural gas is the biggest threat to coal," says Jone-Lin Wang, head of global power research for IHS CERA, a research company. "Nothing else even comes close."

Some 24% of Railway Operating Revenues and 44% of the Tons originated on railroads today represent coal; with the efficiencies developed over the years I have been following industry affairs (coal was once handled in 50 ton Hopper cars and moved in consists of Merchandise trains), it is a safe assumption that so long as coal remains a dominant energy source, railroad will handle it.

But the Journal is reporting that state of affairs is under siege owing to environmental concerns.

Personally, I hold that the industry will be under severe threats during next decade of 2020; it the environmentalist initiatives favoring wind and geothermal generation become more dominant and if natural gas and nuclear interests, none of which have any need for railroad transportation, then the industry will be looking at the "hurts". Diversion from rails of Asian import traffic owing to the Panama Canal expansion from West Coast ports to Ports closest to the traffic's final destination will only result is less favorable line hauls. While the Eastern carriers such as CSX and NS will see increases, they will hardly be of size to offset those losses that BNSF and UP will sustain.

I sincerely hope such will not be the case, but are we staring at the '70's - the Dark Ages when I was in the industry - again?

Discussion, anyone?

Such comparisons to the 70s are not old. The "environmental" lobby IMHO is guilty of terrorism against the USA. Let them try the same tactics against Red China (a country engaging in consuming much US coal presently to meet their energy needs) and see if they can handle the "tank diplomacy" they will receive in return.

BTW, it's not true anyhow that natural gas and nuclear fuel have no need for rail transportation. Even nuclear waste can and does get transported by train; both CNG and LNG also are so transported. Not to mention, since the problems with the Keystone Pipeline, even shale oil is paying the bills for Canadian Pacific.

Today's New York Times has a front page article that I think is best described as an update on the outlook for export coal and the impact, favorable or otherwise, developments could have on the Crow indians and of concern to us here, the Class I railroad industry:

http://www.nytimes.com/2013/06/15/busin ... uture.html" onclick="window.open(this.href);return false;

Brief passage:

• CROW AGENCY, Mont. — Every few hours trains packed with coal pass through the sagebrush-covered landscape here in southern Montana, some on their way north to Canadian ports for shipment to Japan and South Korea. If the mining company Cloud Peak Energy has its way, many more trains will cross the prairie to far larger proposed export terminals in Washington State.
  
  It’s part of a push by the nation’s coal industry, hobbled by plummeting demand as Americans turn to cleaner natural gas, to vastly expand what it sends to Asia and Europe. But the aggressive effort to rescue the $40 billion industry is running into fierce opposition from environmental groups, who say pollution caused by burning coal should not be exported