Freight Recession??

[neroden]

The story here is all about coal. The drop in other bulk commodities is cyclical, typical for a recession (such as the one the Federal Reserve just induced by raising interest rates), and the railroads can ride it out. The drop in coal is "secular" (to use the term of art) and permanent.

CN has less than 7% of its revenue from coal and it's doing fine, so there's a role model for the other railroads to follow. Presumably they'll adjust eventually...

 

[jis]

Redacted

 

[afigg]

To get this back on-topic with regards to the coal shipment component of the slow-down (or recession) in rail freight, the business section of the Washington Post has an interesting article on how the shift in electrical power plants from coal plants to natural gas plants is happening even more quickly than the EPA projections from mid-2015. (Although, having some knowledge of lead time on governments reports like this, I expect the EPA projections were probably made in 2014 or 2013).

Wash Post: One statistic shows just how dramatically our energy system is changing. Some excerpts which tell the tale that NS and CSX may have seriously over-estimated the amount of domestic coal shipment for power plants in the coming years and decades.

In mid-2015, when the Environmental Protection Agency released its Clean Power Plan, it made a prediction of sorts. Under the new policy to cut greenhouse gas emissions in the electricity sector, the EPA said, coal use would decline and the use of natural gas and renewables would increase. The result, by the year 2030, would be a country in which coal, once the leading source of U.S. power, would only provide about 27 percent of the projected generation, with natural gas providing about 33 percent.

Well. According to new data just released in the 2016 Sustainable Energy in America Factbook a project of Bloomberg New Energy Finance, produced for the Business Council for Sustainable Energy the shift may be happening a lot faster than the EPA thought less than a year ago.

In detailing just how transformative the year 2015 was for the U.S. electricity system, the report notes that coal only accounted for 34 percent of U.S. electricity last year versus 39 percent just a year earlier, in 2014, and 50 percent in 2005. Thats a steep decline indeed.

In contrast, the burning of natural gas buoyed by cheap prices brought on by the shale gas boom produced nearly as much of our electricity. Natural gas is now within striking distance of being the largest source of US power, producing just over 32% of US generation in 2015, notes the report.

It is not just natural gas, but also wind power and that electrical power demand has been flat in recent years due to improved efficiency.

In a separate report released earlier this week, the Federal Energy Regulatory Commission also underscored the strength of this transition. It noted that for new installed electricity generating capacity in 2015, only 3 megawatts worth of coal was added, versus 5,942 megawatts (5.94 gigawatts) of natural gas and 7,977 megawatts (7.97 gigawatts) of wind, the latter representing slightly less than Bloombergs number, which the Factbook calls an estimate.

And even as this transition occurs more natural gas and renewables, less coal the United States seems to be neither using much more electricity nor paying more for it. Since 2007, electricity demand has been flat, compared to a compounded annual growth rate of 2.4% from 1990 to 2000, notes the Factbook. This has been helped along by greater energy efficiency, among other factors. ....

The coal export market has been hit by the steep slowdown in China's building boom and the strong dollar. Coal exports should eventually see some rebound when the dollar declines and other emerging markets such as India build a bunch of coal power plants, but the coal export boom days may be totally over. Likely to be several rough years for CSX and NS.

 

[jis]

India has a huge amount of coal reserve that it can extract and use much cheaper than importing from the US. I'd be very surprised if it imports much coal from the US. At present also it seems to be focusing a bit more on nuclear.

 

[neroden]

India now has an explicit policy to stop importing coal. They did the math and burning imported coal is just way too expensive to be competitive with anything.

There's also a pretty large solar buildout in India at the moment.

China *also* now has an explicit policy to stop importing coal for power ASAP (I think metallurgical coal is exempted). *And* a policy that they won't build any more net coal-burning capacity. (This is quite new.)

The coal-export-overseas business is drying up incredibly fast. It's basically dead already. Australia's coal industry is seeing the effects of this already. For India and China, importing from *Australia* is being halted -- importing from the US, which is much farther, makes no sense whatsoever.

On the electricity trends in general, wind deployment is increasing exponentially, with the gigawatts deployed roughly doubling every three years. Solar is on an exponential curve too, but it's doubling every *two* years. The flat electricity demand is partly due to the switch to LEDs, which basically eliminates the lighting load. But there is also an incredible amount of "low-hanging fruit" in electric heating: replacing resistive heating with heat pumps, superinsulating, etc. This is actually changing very slowly so I'm not sure how much impact it's having so far.

 

[Bob Dylan]

"Clean Coal!"

Another Big Lie!

 

[cirdan]

India now has an explicit policy to stop importing coal. They did the math and burning imported coal is just way too expensive to be competitive with anything.

There's also a pretty large solar buildout in India at the moment.

From what I've read India's policy is a bit ambiguous.

On the one hand there is a massive build out of solar going on, bringing electricity to rural regions that never had it before.

On the other hand, the government is concerned about the electricity price and its effect on poverty and thus has legislation in place depressing the retail price to the point that it requires huge susbidies. Most of these susbidies are flowing into coal and the low price they are causing are presenting a barier to entrepreneur driven solar investment.

At some point in the future India is going to have to face this contradiction and clean it up.

 

[jis]

It will be a very very long time before India stops subsidizing electricity for villages and for the farming sector. If we are waiting for that to happen look at our grand children and then maybe.

The same subsidization is driving solar installations in villages, and the biggest strides are being made in micro-solar installations rather than in gian projects.

And then there is huge untapped hydroelectric potential up in the Himalayas but they also have a huge upfront cost, and a few political issues specially on the western rivers. The new water treaty with Bangladesh including that of sharing generated power with Bangladesh has eased such concerns to quite an extent in the east.

Meanwhile, new super thermal power plants keep popping up with regularity. At least now there is enough capacity to avoid regular daily load shedding in all major urban areas. But the situation in many rural areas is still marginal. Hence the push for local generation using micro-facilities instead of depending on the grid.

But the bottom line to the topic of the thread is, do not look at India to rescue the coal industry in the US. It will not happen. It is cheaper to clean up India's own coal in massive coke ovens reclaiming some of the bad stuff for reuse, and burn it than to import coal from the US.

 

[dlagrua]

President Obama's term will be up at the end of the year. Amtrak president Joe Boardman has resigned and won't be there either. Point is that the way Amtrak is affected could be quite different.

To preserve Amtrak service, the coal mines need to reopen driving more traffic to the freight lines and giving the private railroads more reason and more revenue to keep the routes viable. Without coal and oil traffic it is possible that UP, BNSF, NS and CSX routes that host the Cardinal, California Zephyr, and Silver Star could abandon parts of the lines that they travel on and no matter what Washington does, this would be the end of those trains.

A lot will depend on the new president and his/her policies regarding the freight railroads and passenger rail that depends on those routes.

 

[Acela150]

Joe Boardman hasn't resigned so to speak.. He put in for his retirement.. Meaning he'll collect his RR Retirement and not work for another railroad. If he resigned he could work else where and wouldn't collect.

 

[jis]

Depending on coal traffic to maintain passenger service is a fool's errand.

 

[A Voice]

Without coal and oil traffic it is possible that UP, BNSF, NS and CSX routes that host the Cardinal, California Zephyr, and Silver Star could abandon parts of the lines that they travel on and no matter what Washington does, this would be the end of those trains.

No, it wouldn't. Portions of train routes have been abandoned previously - including the former route of the Silver Star north of Raleigh into Virginia - without discontinuance of the train; It was simply rerouted. Sometimes that it easier than others, but the California Zephyr, for one, has an obvious alternate route through Wyoming (used prior to discontinuance of the Rio Grande Zephyr).

But as has been pointed out already, talk of outright line abandonment is very premature. This doesn't happen on a whim due to an immediate downturn in traffic, and most (or all) routes have some utility to the railroad beyond just coal traffic.

 

[neroden]

Coal is dead.

It's also incredibly incompatible with passenger service. Coal drags travel at 30 mph or less; passenger service at 50 mph and up. It's like mixing farm equipment and fast cars.

What you want to see for mixed passenger/freight lines is fast freight: high speed intermodals.

 

[sldispatcher]

As seems to be the norm on this forum, no one wants to discuss the REAL reason for coal's decline, and the resulting thousands of layoffs.....

...a regulatory environment that has made continuing with coal uneconomical for the energy producers.

That is a direct result of choices made from Washington, DC and imposed on the industry. Alternative energy sources are booming in response to subsidies (except for natural gas), not necessarily from market forces.

I get disheartened when we celebrate gains in an industry (energy) that are highly subsidized and not realizing that we could have used a fraction of those dollars to vastly overhaul and even expand the existing Amtrak fleet. There was no market "need" for coal to decline. It was forced on them.

Now, railroad employees, miners, and more will pay the price. And ironically, even now, Amtrak may also wind up paying the price.

 

[Ryan]

Ha, that's pretty funny.

I know, the government is so evil for making sure that we can actually breathe when we go outside.

Pre-Clean Air Act New York was just awesome!!!

 

[cirdan]

I don't know if it makes sense to speak of regulatory interventions against coal threatening Amtrak, and thus implying that without that regulation Amtrak would be better off.

Without regulation and intervention, we wouldn't have Amtrak.

In fact, without regulation and intervention, most railroads would probably never have got built in the first place.

 

[neroden]

Coal hasn't been paying for the damages it caused. Actually, it still isn't.

And yet solar is already cheaper. Without subsidies.

Solar deployments double every two years, wind deployments double every three years. The price of solar drops about 10% per year. This will presumably stop eventually, but not for quite a while... I think a lot of people haven't been paying attention to how fast the situation with solar power has changed.

 

[Eric S]

Let's see - coal mining employment has been declining since the mid 1980s. And the biggest growth, in absolute not relative terms, of energy production in the last few years has been natural gas, due to very low natural gas prices.

So, yeah, sure looks like the declines in coal production and employment are due to environmental regulations, of course.

 

[NW cannonball]

Coal ain't just bad for the atmosphere, it's radioactive.

Here's a semi-reliable source http://www.scientificamerican.com/article/coal-ash-is-more-radioactive-than-nuclear-waste/

estimated radiation doses ingested by people living near the coal plants were equal to or higher than doses for people living around the nuclear facilities.

Radiation from uranium and other elements in coal might only form a genuine health risk to miners, Finkelman explains. "It's more of an occupational hazard than a general environmental hazard," he says. "The miners are surrounded by rocks and sloshing through ground water that is exuding radon."

Here's another paper on the possible use of coal ash as a uranium source

Perhaps 1 to 3 percent of the domestic uranium requirement could be met from coal ash

More relevant to Amtrak on host freight railroads, coal hauling will remain a low-profit business for a decade or two, and maybe fade slowly away, or not.

And low-profit, that's what coal-hauling is. That's why those 10,000 ton payload coal trains are dispatched with less than 1 horsepower per ton (on flat ground) and are not guaranteed to arrive at your coal-fired plant this week, this month - heh.

Naah, the economics is against coal, there will be the usual politcal "last stands" of the coal barons, but --

<edit> just saw post from Eric S -- right - methane moves by pipleline - way cheaper than train - and cleaner and easier to burn, especially in the gas turbine power plants that have been proliferating since the 80's.

And not radioactive

Coal is dying, coal miners have been dying at work for centuries. Let's give up on coal mining for now

 

[tommylicious]

just a harbinger of the looming, inevitable general recession.

 

[afigg]

As seems to be the norm on this forum, no one wants to discuss the REAL reason for coal's decline, and the resulting thousands of layoffs.....

...a regulatory environment that has made continuing with coal uneconomical for the energy producers.

That is a direct result of choices made from Washington, DC and imposed on the industry. Alternative energy sources are booming in response to subsidies (except for natural gas), not necessarily from market forces.

I will chime in here with my 2 cents. Regulations are a factor in the recent decline in domestic coal production and power plants that burn coal, but the real reason for the sudden shift in the past 3-4 years has been the low cost of natural gas and the greater efficiency & simpler operational aspects of co-generation gas power plants. Those in WV, KY. etc blaming the current administration for the loss of coal mines and (the long decline In) coal mining jobs are ignoring the fundamental economic and technology changes that are also driving it.

 

[Bob Dylan]

In tbe long run the death of Coal will benefit not only the Coal producing Regions but also the Country as a whole!

Now that Governor for life Rick Perry is gone, and his scheme to build 15 New Coal Fired Power Plants in Texas is DOA, the City of San Antonio needs to quit using Coal for their Power Plants and Texas,of all places, will be well on the road to clean power!

As I said in an earlier post, "Clean Coal" is a Big Lie!

 

[NW cannonball]

As seems to be the norm on this forum, no one wants to discuss the REAL reason for coal's decline, and the resulting thousands of layoffs.....

...a regulatory environment that has made continuing with coal uneconomical for the energy producers.

That is a direct result of choices made from Washington, DC and imposed on the industry. Alternative energy sources are booming in response to subsidies (except for natural gas), not necessarily from market forces.

I will chime in here with my 2 cents. Regulations are a factor in the recent decline in domestic coal production and power plants that burn coal, but the real reason for the sudden shift in the past 3-4 years has been the low cost of natural gas and the greater efficiency & simpler operational aspects of co-generation gas power plants. Those in WV, KY. etc blaming the current administration for the loss of coal mines and (the long decline In) coal mining jobs are ignoring the fundamental economic and technology changes that are also driving it.

so right. gas is cheap now, per BTU, and cheaper to ship by pipeline, cheaper to burn (cheaper plant by far than coal, less piles of ash) . Econ 101

And I (and the host railroads, eventually) won't really miss the slow underpowered coal drags on the mains

 

[sldispatcher]

I understand your viewpoints. I can see why you would want to believe that as well. But I looked up price data and not sure I see the same picture. A 10 year comparison reveals fairly equal price points. So it is not the cost of the raw material..maybe the shipping...and maybe the energy production side that have caused one to be more favorable than the other (i.e. regulations)?

I do agree that less rail traffic certainly makes it easier for Amtrak to keep on time. But I do lament the loss of rail lines. I lament the near collapse of coal movements on the former DRGW Moffat Line. I am not excited about the thousands of rail industry jobs that have been lost.

A freight recession could, as others have pointed out, allow some states to assume infrastructure responsibility of some rail lines that may not otherwise be as useful (examples have been pointed out above). That could be a plus for Amtrak.

I would love to see much more accessible and frequent service by rail in this country. But it will take change on the parts of politicians, railroads, and unions to do it And right now, not one of those parties seem willing to relent and talk to the other. Freight recession or otherwise.

 

[neroden]

The shipping costs for coal are brutal. They're actually a major factor in the economic non-viability of coal-burning power plants, except the ones located right next to coal mines. Gas, wind, and solar are *all* cheaper.