Monday, March 18, 2013

Future of Coal Traffic for the Freight Railroads

Union Pacific Railroad coal train
 (photograph by Dave Honan)
A watershed moment is coming for the US freight railroads.  Coal traffic, once accounting for as much as 50% of the traffic on some lines, is on the decline.  Coal no longer is king.

In many ways, coal is so much a product of the 19th century.  In its day, coal-fired machines performed tasks with the strength of hundreds of men.  Coal powered machines in factories.  Coal powered the transportation of the the day:  steam ships and steam locomotives.  Coal heated homes.  And coal was an early fuel in the generation of electricity.

Coal powered the industrial revolution.  Coal polluted the air and the lungs of many.

The 20th century brought new fossil fuels.  It took a half century, but diesel fuel displaced coal in locomotives.  Oil and gas replaced coal in the furnaces of American homes.  The newer fuels were far less visible in their pollution of the air, in terms of plumes of coal smoke, and in terms of particulates (otherwise known as soot).  

Perhaps one of the last bastions of coal remains in power generation.  In most cases, railroads transport the coal.

Today, the trends in power generation show the signs, that within a decade or two, coal-fired plants will be relegated to the history books, in much of the US.

While the environmentally minded may be seeing this a result of air quality regulations.  Clearly, this is part of the trend, but the principal driver is the economics of natural gas. 

My work as a civil engineer exposes me to all aspects of what we call infrastructure, from roads and bridges to railroads and transit to utilities and power generation.   

Taking what I hear from professionals in the power industry and from what I observe with various projects, the trend for years has been towards gas-fired generating facilities.  This trend dates back long before the lower gas prices associated with hydraulic fracturing or "fracking."

It takes 15 to 20 years to get a new power plant from someone's idea to the day they flick the switch and generate power.  Virtually all are privately funded (though publicly regulated).  Those who develop new power plants have to take the long view.  And for the last couple of decades, that trend has been towards natural gas.

Simply put, gas has usurped the kingship of coal.   Gas plants today are much more efficient in their use of fuel and far less polluting than coal.  (Granted, gas-firing still produces particulates and green-house gasses, but to a lesser extent than coal.)  Even older coal-fired plants are being converted to natural gas.

Clearly, with all the controversy of environmental impacts of fracking and the fact that natural gas does produce green-house gases, gas is far from the ideal fuel from an environmental perspective.

Still, be it the current trend from coal to natural gas or the eventual progression to renewable power generation, the conclusion for the US freight railroads is clear:  coal traffic is in permanent decline.

(See also my guest editorial in Railway Age.  In that editorial, I was countering the notion that the decline in coal traffic is driven by environmental regulation, whereas my view is that the economics of natural gas that is driving the trend.)