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Old King Coal

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Garl B. Latham

Ruminations of a foaming professional.

Old King Coal

  • Comments 12

 

The history of coal production goes back even farther than the history of railroading. Here in North America, the first commercial mine began operation around 1730, approximately 100 years before the first common carrier railroad - the B&O - ran its first train (which, by the way, was powered by oats, not coal).

Still, it's certain those two industries came to maturity together. After all, it was the power of coal which fostered the Industrial Revolution.

Coal has been integral to the fortune and fame of many a domestic road. My youngest daughter, Phoebe, is well aware of that. Just ask her about Anthracite!

A major shot in the arm came with the development of Powder River Basin reserves, now the single largest source of U.S. coal and one of the biggest in the world. Once emission control standards made sub-bituminous, low sulfur dioxide coal attractive, a few western roads, led by the Burlington Northern, came to realise what that might mean to company coffers. It took a lot of guts, but the end result speaks for itself. After all, it's hard to argue with segments of quadruple-main line.

Down here in Texas, some of the earliest unit trains sported reporting marks like UFIX (Houston Lighting and Power) and SATX (City Public Service Board of San Antonio). SATX always seemed the most profoundly apropos to me, even though I knew the suffix "X" was due to private car ownership.

You know, it's a beautiful thing to see a long line of clean, new aluminum bathtub hoppers (I can hardly bring myself to call them gondolas!) strung out along the undulating profile that is Texas prairie, providing a valuable service and making some serious money. When giving such a consist a roll-by, I often think of the late, great John W. Barriger. As the story is told, during his time at the helm of the Pittsburgh and Lake Erie (a New York Central System subsidiary), he was riding on the rear platform of his business car along the Hudson River's east shore. While overtaking a manifest equipped with Pacemaker boxes, he exclaimed, "Look at those high cars roll! Finest sight in the world."

Oh, yes; our railroads are still indebted to coal and its revenue stream. The lading seems ideally suited to this industry. We're talking heavy bulk commodities shipped over and over again between two points with a fixed consist (let's call it a "unit train"). Reasonable transportation alternatives are practically non-existent - and the stuff never complains about temperatures or humidity or dust.

Overall, North American railroads derive more than one-third of their operating profits from coal. It's pretty impressive.

There is one wee problem on the horizon, however: U.S. industry, especially power plants (which account for over 90% of consumption), are beginning to use less and less coal.

In fact, coal consumption at the end of last year stood approximately 10% below its mid-'08 levels.

Surely, some of the blame rests with the availability of an even more environmentally sensitive (and increasingly abundant) alternative fuel: natural gas.

Back to San Antonio for just a moment. Today's C.P.S. Energy is greatly benefiting from Texas' Eagle Ford Shale development, one of the most active gas fields on the planet (and one of the greatest beneficiaries of the modern production method known as hydraulic fracturing, or "fracking"). The Eagle Ford development (pronounced "eaglefurd" in the petroleum industry, as if a single word) has the potential, as one wag put it, to maintain a "chronic oversupply" of product for the entire life span of anyone reading this tome.

Last week, C.P.S. made public its decision to purchase an 800 mega-watt combined cycle natural gas generating plant, which will replace the energy output of its oldest coal facility. The utility said that, based upon "expected" environmental regulatory changes (please note), necessary upgrades to the coal plant would have cost them over one billion dollars more than the new plant's purchase price.

According to C.P.S.' press release, "natural gas makes up 23% of the U.S. power mix. ... Thanks to the discovery of the shale plays, and the advanced technology to safely and responsibly develop them, this affordable and stable energy source is [now] available..."

Ending their blurb was an interesting (and possibly prophetic) statement: "The CPS purchase signifies a growing trend of large utilities making the switch to cleaner and more efficient natural gas."

Far from coincident, A.A.R. stats indicate the coal business is down five times more than the overall decline in this year's traffic levels.

Granted, we're far from the panic stage. Some (such as CSX) have publicly pinned hopes on increased intermodal and merchandise traffic to help offset the decline in coal. I wonder if that's realistic. What of our New Panamax reality?

Tighter environmental regulations (of the existing sort) on coal fired plants will force some to close - and force some serious changes in direction.

David Vernon of Bernstein Research estimates that a net 15% of the current coal-fired power plants will shut down production in the next three years; equivalent to 106 million tons or 10% of current demand.

So, what does the long-term future hold for our old king, coal? I honestly wonder.

Will tonnage eventually stabilise at a decent (but far from spectacular) level? Will something else come along to claim coal's preeminent position? Will that new king be as railroad friendly?

It's hard to say. Someday, though, we'll likely be crying out, "The King is dead; long live the King!"

We just don't know who it will be, yet!

 

 

  • Hey, Garl, the sky is NOT falling, and the world as we know it is not coming to an end. Perhaps a bit less focus on passengers and a bit more on the real business of railroads and you would have a somewhat different perspective.

    Coal will be a mainstay product for railroads for a long time to come.  There is no "holy writ" that it must always be the number one commodity.  Even though BNSF has the Powder River Basin coal, it stopped being the road's number one business as long ago as 2005.  We live in an ever-changing world.  Good business executives will figure out how to run their businesses profitably under a variety of scenarios. Note from the weekly traffic report issued by the AAR that overall traffic is up or even.  That means other commodities are increasing at the same or faster rate than coal is decreasing.  And, other comodities are more profitable.  No sad tears for the railroads, nor are they asking for sympathy.

    You comment that reasonable transportation alternatives to coal are non-existent.  Perhaps, but the thrust of your blog seems to be that reasonable fuel alternatives to coal are readily available.  These are the same wannabe capitalists who think nothing of filing a rate case at a state PUC seeking higher rates to pay for a new generating plant a few years before customers will get their first kilowatt from the station.  Funny, but if a railroad tried to collect before actually moving the goods you'd be able to hear the screams of rage all the way to Washington.  No sad tears for the hypocrites of the utility industry.  They were happy as clams when the ICC regulated in their favor, and for more than 30 years since Staggers they have been whining about the change to a market-based regime for transportation.

    Remember, Garl, there are statistics and then there are damned lies. Yes, many coal plants are being taken off line.  But these are the older, smaller plants that never were going to have scrubbers and other environmental upgrades.  They just are going out of service a bit earlier than forecast.  As for the switch to natgas, let us know when gas producers are willing to negotiate long-term fixed-price contracts as coal producers routinely do.  Gas has a history of price volatility and I would not be surprised if fewer gas-fired plants are actually built than the utilities would have you believe.  I'm cynical enough to suspect that a lot of what you are seeing on this subject is propaganda intended to "scare" railroads into cutting their coal transportation rates.  After all, there is a history of chicanery on the part of utilities.  Perhaps it's something in the air or water down there in Texas?

  • Coal-powered electric grid + electric-powered locomotives pulling unit coal-trains / double stacks / mixed goods / intermodal / package express / fast mail / (AMTRAK 1) the Presidential armoured train / passengers & their pets / military personnel & heavy equipment / sports team / circus / fast-food- franchise trains...Won't have to fret so much about the Straights of Hormuz or all that awful 'pain at the pump' or having to rent-a-kar at the aerodrome from Star Trek Capt. Stewart.

  • More drech from Railwayist.  Incorrigible.

  • I see traffic falling 10% as part of the euphemism of stabilization and pressure for utilities to meet clean air standards.  Tar sands and fracking weren't viable until oil prices  were high enough; and railroads are getting a piece of that business, able to anywhere there are tracks with a freedom of market.  Some LNG could go anywhere by rail too.

    Environmental rules are one reason we won't see coal-fired steam locomotives regularly pulling passengers or double-stacks.

  • You are wrong coal breath. First of all, The old Chicago and Northwestern Transportation Co. had every bit as much to do with getting into the Powder River Basin as any railroad. We should have bought the UP but nobody was packin a pair in downtown Chicago. Slackers. Coal is not going away. After seeing China, I am happy we have the EPA to a point. If we fix the economy , we fix jobs and the demand goess up again. Let's get some jobs back in the USA. The rest will happen.

  • Right on, Systemsnut.  Steam locomotives?  HarveyK400 knows not of what he speaks.  Sure, thousands of additional employees just to keep the creatures serviced and serviceable.  That really would contribute to lower operating ratios and more efficient railroads.  Bah, humbug.  You're also right about environmental rules.  I like being able to breathe, whether HarveyK400 thinks we should or not.

  • As far as business ~ there's far more dollar value in truckloads going long distance on the interstate. Getting it onto rail was not realistic in the days of dirt cheap diesel and given the massive subsidy advantage that trucks have over rail freight ~ but electric freight rail is an established mature technology, and a short haul hybrid electric truck loading dock to railhead and long haul electric rail railhead to railhead could, under the Millenium Institute modelling, replace long haul trucking consuming 7% of our petroleum consumption. At our current 50% import share, that's 14% of our net petroleum imports.

    It implies a change in operating approach as big as the transition after WWII, but there's plenty of dollars out there looking to move stuff long distances, and where river and canal barge is too slow or unavailable, electric rail freight is the most energy efficient option available.

    As far as coal itself ~ tonnages seem likely to fall by big percentages, but as petroleum goes through price spikes over the next few decades, coal will become more attractive as a base chemical feedstock, and biocoal has compelling advantages as a firming energy supply to allow volatile renewable energy sources to act as baseline energy ... so while tonnages will drop, possibly substantially, its going to continue to play an appreciable role as a bulk freight market for the foreseeable future.

  • Reality check time.  This may come as news to some, but we have a fundamentally free-market economy.  Buyers of freight transportatin determine the routing of their goods.  They base their decision on a variety of considerations, price being one of the largest and environmental considerations ranking high, too.  As we have a Congress that demonstrates its inability to pass a basic surface transportation program, the odds on government participating in a full-scale electrification are nil or close to it.  Transportation service providers commit their limited capital to those projects that will give them the best return.  Somehow, I don't think electrification makes the cut, at least not in the near term.  Coal will continue to be a major commodity to be moved by rail because rail is the most efficient way to get it from mine to utility plant.  And while there may not be nearly as many new coal-fired utility plants built in the future, current generating stations will be in service for many years to come.  

  • Keep your ears & eyes open and your cameras ready:

    NEW 'KING of CLEAN COAL' Superpowered Locomotives will soon be tearin' across the tracks.

    Coming soon to a theatre near U...

    Battle of the beasts of power: BIG BOYS vs BIG RIGS...

  • Railwayist, you jerk.  You can't even stick your nose into someone else's exchange without making a fool of yourself.  I guess that's because you're a fool?

  • I have been doing this rail and transit thing for forty years. I do everything electrical. You have heard of the snowball in hell?  That's the chance we now have of converting to all electric power for rail. Hmm, lets see, what will it cost to convert 250,000 miles of main line to overhead catenary? That mileage is doubled by double tracks. A foot of copper catenary is about 1/3 of a pound. Copper is nearing $3.00 a pound! (guess) Now you do the math, cuz I'm not even going to touch it. Then double that number and add it to the cost of the copper for the structures to hold it overhead. Then add another of the same whole number for a TPSS every 5 miles. Then have each and every Con Ed. of the country spend the same amount to get 30 KV to everywhere USA? GET REAL. That is just for Material! No design or labor!

  • Yeah, but the idea of 100% -anything- is generally crap.  I'd expect that we'll see more electrification once electric storage system for streetcars get more feasible, as hybrid systems for heavy equipment get commoditized, and rail equipment becomes more modular.

    It's a lot easier to make a cheaper system if you don't have to power the system continuously, and another few decades of battery and capacitor development may get us there.  Right now, this is mostly done for aesthetics, and it's too damned expensive to use on a wider scale.

    It still would probably not make sense over much of the longer-haul routes.