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Republished from triplepundit.com
By Jan Lee
Coal has been the driving force behind the U.S. rail system for more than a century. The stories of locomotives chugging along as workers fed shovels full of coal into the burners may be a thing of the past, but that chunky byproduct has still been largely responsible for keeping the American rail system afloat. According to the American Association of Railroads, coal amounted to almost a third of gross tonnage carried by U.S. rail in 2016. It also amounted to more than 13 percent of rail revenue. And while that may not sound like a large percentage, 70 percent of the coal used by energy companies that year arrived by rail.
Understandably, the shrinking demand for coal in energy production has translated to less revenue for rail companies as well. By 2015, the U.S. Energy Information Administration reported, coal consumption had dropped 29 percent, down almost a third since its peak in 2007.
That continuing decline is not only impacting revenues for rail companies like BNSF Railand Union Pacific, but it is forcing companies to rethink how America’s oldest automated form of transport can keep running.
Last week CSX Rail’s CEO made an announcement that put this shift into stark relief: “Fossil fuels are dead,” said Hunter Harrison, who has been charged with the difficult task of increasing the efficiency of the country’s third-largest rail system. Harrison, who has built his reputation on revitalizing both U.S. and Canadian rail companies, is driven by what he calls “precision railroading,” in which trains run on a system managed by a centralized hub, rather than by the rail yard. It also means a lot less leeway for expenditures that simply don’t make sense — like buying rail cars that fit a niche, declining, market.
His declaration that he’ll stop buying coal cars because “coal is not a long-term issue” may have been shocking to investors, but Harrison isn’t alone in his opinion.
[As] coal usage in the U.S. power sector declines, so will the number of trains needed to transport it,” explains Tali Trigg in her Scientific American blog post. “[That’s] a lot of trains, often going back empty once the coal has been delivered.”
“Stranded asset risk will trump
“Stranded asset risk will trump rhetoric” when it comes to “ploughing money into U.S. coal extraction” write Bloomberg new energy experts. They point out that the UK, whose energy industry, like that of the U.S. was forged on the mining and sale of coal now represents a measly 4 percent of energy production in the British Isles. That’s remarkable, given the industry’s iron-clad grip on the UK’s economy as late as the 1980s and 90s. But across the world, in countries that have relied upon fossil fuel extraction and mining, a new attitude about what can drive rail is taking shape. Even when it comes to transportation in the country’s biggest commercial center, where Harrison first made his prediction last year.
Fossil fuels are “probably dead,” Harrison told listeners at a J.P. Morgan Transportation Conference in New York in March 2016.
“I’m not maybe as green as I should be, but I happen to think the climate is changing [and] they’re not going to fool me anymore,”