Coal competing with oil and gas for space on rail

October 18, 2014 at 10:26 am  •  Posted in Oil and Gas  •  0 Comments

Railroad coal shipments hit a 20-year low in 2013, down from their peak in 2008. Today, natural gas prices are back on the rise, and coal is again in high demand at power plants. But railroads that have committed their load capacity to crude oil, frack sand loads, and grain are at risk of losing transport business to trucking and barge companies.

Coal shipments have been on the decline since 2008 as low gas prices invigorated coal-to-gas switching at power plants. In 2008, coal reached a 20-year peak in railroad shipments. By 2013, it was at the lowest point during the same period of time.

Coal, which for the past several years has been facing stiff competition from shale in the power sector, is now having to elbow its way back into the railroad business where it has historically accounted for the largest chunk of tonnage and revenue.

“If you have a plant that’s captive to one single mode of transportation, it’s a good idea to look for others,” advised Tony Reed, coal and transportation procurement manager at Southern Co. “If that idea didn’t make sense in the past, time to dust it off.”

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