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Railroad shipping: AAR chief makes case for coal

By Jeff Berman, Group News Editor
May 27, 2010

Even though coal carloads are down roughly 3 percent year-over-year, the commodity’s importance to the freight railroad industry is not to be overlooked. That was the message from Association of American Railroads (AAR) President and CEO Edward R. Hamberger in recent testimony for the Congressional Caucus on Coal.

In his testimony, Hamberger explained that railroads deliver 70 percent of all coal shipments to their final destinations, in turn moving enough coal to meet the electricity needs of every home in America. He added that twice as much coal today can be transported at nearly the same rates from 30 years ago.

Coal, said Hamberger, represents about 25 percent of total revenue for U.S. Class I railroads, with one in every five Class I jobs related to coal transport. And in 2009, coal accounted for 45 percent of tonnage and 25 percent of revenue for these railroads.

“Without coal, the U.S. rail network would face a need for vast restructuring with greatly reduced capacity to invest in the nation’s rail network infrastructure,” Hamberger said.

He added that policymakers should take steps to ensure the continued use of affordable domestic coal resources in the U.S. and called for support for the development of carbon-capture-storage (CCS) technologies and aligning carbon reduction timetables with its commercial availability.

Even though he stressed the need for new technologies, there are various legislative proposals that have the potential to curtail future coal usage, which could hamper the railroad industry’s ability to gain the returns needed to finance future infrastructure expansions and upgrades.

Some of these proposals pertain to carbon emissions from coal, which could result in “drastic cuts in coal use,” noted Hamberger. If such proposals eventually become law, railroads are calling for an “insurance policy” that would guard against negative effects to railroads due to legislative actions addressing climate change, he said.

These insurance policies could be in the form of contingent allowances for railroads whose revenues from coal decrease due to climate change legislation.

With coal loadings down year-over-year, following an annual decline from 2008 to 2009 due to a reduced demand for electricity, which led to high coal stockpiles, there is uncertainty as to what will happen next for rail coal movements.

“Coal remains a mystery long-term, but on an international basis it is a big part of the story,” a railroad source told LM. “Increasingly, the majority of the utilities’ use of coal here could be gone. I don’t see any massive new coal fire plants being built until they perfect some new technology. But I also don’t see a big reduction here. So that means all the infrastructure dedicated to coal will not be wasted.”

About the Author

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Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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