• Effect of Coal and Competition on Railroading Industry

  • For topics on Class I and II passenger and freight operations more general in nature and not specifically related to a specific railroad with its own forum.
For topics on Class I and II passenger and freight operations more general in nature and not specifically related to a specific railroad with its own forum.

Moderator: Jeff Smith

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  by GulfRail
 
The fact of the matter is there are cheaper, cleaner alternatives to coal that are already out there and are causing coal's decline: cheap natural gas, wind power, solar energy, hydroelectric power and even nuclear power are all eating away at coal's market share. BNSF and Union Pacific should be able to hold out for a while longer, since Powder River coal is lower in sulfur and cheaper than Appalachian coal, but Norfolk Southern and CSX should both start preparing for a post-coal world as soon as possible. In the long run, that means building up carload and intermodal traffic to offset the loss of coal, as well as investing in better customer service and their marketing departments. It will be a painful and difficult transition for both, but its an absolute necessity if Norfolk Southern and CSX don't want to end up like the Anthracite Roads.
  by rr503
 
http://www.nytimes.com/2016/06/20/us/as ... -dust.html" onclick="window.open(this.href);return false;
Fair use:
Today, about 66 percent of the electricity in the United States is produced by coal and natural gas, and just 7 percent is produced by renewable sources such as wind and solar. But market forces and government regulations are rapidly changing that picture.

A glut of inexpensive natural gas has cut into coal’s dominance of America’s power market. And President Obama’s climate change regulations, known as the Clean Power Plan, take direct aim at coal, the No. 1 cause of planet-warming greenhouse gases.
I hate to say it, but good riddance to coal. It has done immeasurable damage to our planet.
As for the future, I agree with GulfRail. Railroads are going to have to be more aggressive than ever on all fronts, from short haul intermodal to loose carload freight. They also should try to harness the new reality, maybe running water trains to drought stricken areas, or trying to make themselves a crucial part of the supply chain in renewables.

One great example is what Tesla is doing. They are building a massive (MASSIVE!) factory near Reno, and plan to ship all their batteries by rail to their auto plants. That is the kind of stuff railroads need to go after, and do it well too, as with the advent of JIT logistics, day wide delivery windows are just unacceptable. If they spend too much time going after/gearing their networks towards conventional traffic (like fossil fuels) they will perish. It's do or die for them.
  by Gilbert B Norman
 
It is ironic that our most abundant natural energy source has been so "whipping boyed", and that the energy source once believed to be in virtual control of some "not so nice guys" has been found to be so abundant either in our own hands or in those of a "most friendly" (Canada). I should point out that the shale oil deposits have been known to geologists for at least 100 years. I guess I was awake when the Geology professor during 1963 said "there's plenty of oil in the Dakotas, but it costs too much to produce".

Meanwhile, back on the Black stuff.

The New York Times reports today on the Obama administration's efforts to "clean up coal"; it appears from the article to have been as successful as the Solyndra project:

http://www.nytimes.com/2016/07/05/scien ... sippi.html" onclick="window.open(this.href);return false;

Fair Use:
Coal represents a conundrum: It is among the dirtiest sources of fuel, producing roughly 45 percent of the emissions that contribute to climate change. And yet the world still relies on it for power, with more than a quarter of the electricity used globally coming from coal plants.

Southern Company proposed a promising idea with the Kemper project. Providing a cleaner way to use coal, which is cheap and abundant in the United States, the plant also offered the means to preserve many coal-mining jobs that are fast disappearing in this part of the country.

Kemper County, with mostly two-lane roads cutting through clay hills and pine forest, has an average per capita income of $14,837 and an unemployment rate roughly double the national average. To the region, the plant offered more than clean power: It promised hope, at least 12,000 jobs and long-term savings. As construction ramped up, the county took in over $8 million annually in extra tax money, which went toward repairing roads, bridges and schools, lowering local property taxes, and clearing debt.
It almost seems that this failure, along with a similar project in Manitoba "reportedly not doing well" is analogous to the Battle of the Bulge, where Hitler played his last trump card - and lost.

disclaimer: author holds long position UNP
Last edited by Gilbert B Norman on Tue Jul 05, 2016 8:36 am, edited 3 times in total.
  by SemperFidelis
 
I just heard a report on National Public Radio about the development of a not too costly resin that can be applied to power plants smokestacks that pulls carbon dioxide out in order for it to be stored deep underground.

For all the nonsense about the Presidents "War on Coal", it (as has been noted by folks here) really is a case of simple market forces. Natural gas is cheaper and it is killing coal with or without help from the President. The irony in all this being that the folks shouting the loudest about coal's demise are normally those shouting the loudest about how wonderful the free market is.
  by Gilbert B Norman
 
The bad news just keeps on coming:

http://www.wsj.com/articles/coal-glut-e ... 1470070765" onclick="window.open(this.href);return false;

Fair Use:
Western coal producers once saw exports to Asia as their future. For many, that dream is fading.

A global glut has flooded overseas markets that were once expected to buy coal produced along a belt stretching from Utah to Montana that includes the Powder River Basin. The industry is also losing long-sought shipping outlets on the West Coast, where local communities have blocked construction of coal terminals amid concerns about climate change and pollution.

Out of seven West Coast export terminals proposed in the past five years—which combined could have handled over 125 million tons of coal annually—not one has opened..
Volks, let's get real. If the Chinese want to buy the stuff from us, why not build port facilities to handle coal efficiently. There is only one way to reasonably and practically ship coal - and that is rail.

Coal is not any kind of HAZMAT; if some gets spilled in transit, we'll you just sweep it up and pay a minimal shortage claim. I'm at a loss to see the issue.

disclaimer: author holds long position UNP
  by electricron
 
Over the years, there has been nothing consistently cheaper than coal as a fuel.
So, why is coal more expensive today than yesterday, or even just recently?
Regulations!

The EPA has set emissions standards, not only on brand new coal plants but old ones as well, so high that it has become too expensive to meet them.
For example, scrubbers on the exhaust stacks could remove 80% of the particulates, and scrubbers are relatively cheap to install. But the EPA wasn't happy with an 80% reduction in particulates, it wanted 90%. That extra 10% reduction requires completely redesigning the plant to achieve - therefore it is cheaper for the utility companies to close the plant. That reduces demand for coal, and more coal mines close.
But one would think the electric companies will eventually build new plants to take advantage of the cheap coal. Alas, the utility companies can't trust government - the EPA - from wanting a 95% reduction in the future. Or a reduction of another form of pollution, like CO2 emissions. Companies aren't going to invest in infrastructure that might only be usable for 5 years, not the 50 year life they need to make it a worthwhile investment.
Just last year, the EPA stated no more regulations were needed, but a new study was released this year, and the EPA is looking at introducing more regulations next year. The emissions target everyone designs these plants for keeps getting changed. It's become impossible to design anything that might last 10 or even 15 years before it becomes obsolete by government decree. Companies need life spans of plants of 50 years. That's why the EPA used to grandfather existing plants from new regulations, that's why your 1990 car can pollute more than your 2015 car. But recently the EPA has been targeting the old plants as well. It's the targeting of the existing plants by the new regulations that's making it impossible to build new "relatively clean" coal power plants, not the cost of buying the coal.

I'm not going to debate whether having coal power plants is wise or not, but I just wanted to point out why coal power plants are a dying breed. The price of "buying" coal is NOT rising as much as the price of "burning" the coal is. ;)

And to take this one step further and slightly off-topic. When regulations force a closure of a manufacturing plant in a big city, the local economy gets hurt. But in the big cities, there are other manufacturing plants, other means to fund the local economy, and eventually something else replaces the plant that's been closed down. But in small cities and towns, the local economy gets destroyed, nothing ever replaces it, and the town dies.

Look at Detroit, the closure of the first plant barely affected it, but as more and more plants have closed, it's local economy has been affected. Detroit is less than half the size it was 20 years ago. Homes in some neighborhoods values have fallen from $100,000 in value to less than $10,000 in value. And it was a much larger city than it is today. I'm not even sure we can blame its decline to regulations. But the decline of the coal industry can be blamed on regulations - and coal mines are NOT located near any large cities. :(
  by Gilbert B Norman
 
Ron, I sincerely respect and agree with your thoughts.

America has more coal than the Arabs have oil; let's dig it - and let the railroads handle it!!!!
  by mmi16
 
Observation on my carrier. Coal has picked up in the past couple of months. Not near the levels of several years ago, however, well above the levels of earlier this year. Will the increased loadings continue? The future will tell.
  by Gilbert B Norman
 
Mr. MMI's observation is enforced by this recent Journal article.

And in support of Mr. Benton's observation:

http://www.wsj.com/articles/trump-victo ... 1478706531" onclick="window.open(this.href);return false;

Finally, let us not forget that there is no reasonable and practical means other than rail to handle coal.


final disclaimer: author no longer holds any position CSX; "portfolio rebalance".
  by gokeefe
 
I would remain very skeptical of the coal industry's prospects. As the price of oil has crept back up above $50/barrel activity in the shale deposits has increased unleashing yet another wave of cheap natural gas into an already oversupplied market. That's the outlook on the domestic front ...

Overseas China now appears prepared to regulate emissions to an extent and at a level that would make the EPA blush. I doubt they will do much to help the U.S. coal industry when their own miners (in the admittedly far dirtier lignite deposits) are being put out of their jobs by the tens of thousands.

I had wondered how CSX and NS were going to weather a coal downturn. For the moment it appears they will more than survive this latest transition in the energy sector. Given that the Dakota Access Pipeline appears to be heading for regulatory demise I would look for a slight increase in oil by rail traffic over the course of 2017. The new car safety standards will help greatly in what I think could be the next round of major oil by rail shipments.
  by David Benton
 
I would agree, short term, the simple market effect of cheap natural gas will negate any regulatory efforts to promote coal .
Long term , hopefully consumer, voter and international pressure, will force govt to consider cleaner ( as in less Co2 per kwh ) energy forms.
  by gokeefe
 
I think it is also worth considering in BTU terms the total exports of coal vs. natural gas now that the Sabine Pass LNG export terminal is online.
  by rr503
 
Also, short of subsidizing coal operators, Trump et al can't really do much to increase coal production. As previous posters have said, energy companies see the future in natural gas, and will invest accordingly. There is only so much damage he can do.
  by eustis22
 
<tt>Last weekend, the CEO of Michigan’s largest electric utility reiterated that his company is still planning to retire all eight of its remaining coal plants by 2030 — whether or not Trump tries to repeal President Obama’s climate policies. "All of those retirements are going to happen regardless of what Trump may or may not do with the Clean Power Plan," DTE Energy’s Gerry Anderson told MLive.com’s Emily Lawler.


....In Michigan, a new coal plant costs $133 per megawatt hour. A natural gas plant costs half that. Even wind contracts cost about $74.52 per megawatt hour. "I don't know anybody in the country who would build another coal plant," Anderson said.</tt>

As dead as the steam locomotives.
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