US Rail Jams Force Rush to Roads and Rivers

Posted by Eric Haun
Thursday, August 28, 2014
Photo: Susannah Skiver

U.S. coal-burning power utilities are being forced to turn to barges and more expensive trucks to move coal, desperate to shore up stockpiles left dangerously low by the widespread bottlenecks on rail networks.

The shift in how coal is being delivered to some power plants from mining regions such as Illinois Basin and comes amid persistent railroad delays that began during last year's severe North American winter.

The delays have been perpetuated also by a surge in rail deliveries of crude oil and grain, leaving power producers such as FirstEnergy Corp scrambling for transport alternatives before winter sets in, potentially adding to costs.

About 40 percent of U.S. power is generated from coal-burning plants, and 75 percent of U.S. coal relies on freight railroads to get to power plants, according to Wood Mackenzie, an energy consultancy.

"We have been impacted by railroad performance but have been able to offset those shortfalls by utilizing truck and barge deliveries," said Stephanie Walton, a spokeswoman for FirstEnergy, whose nine coal-fired plants account for 57 percent of its capacity.

Duke Energy Corp, too, was able to avoid a disruption in coal supply as many of its Midwest plants are accessible by barges, Chief Executive Lynn Good told Reuters.

Although railroads are spending billions to bolster their shipping capacity for coal and other products, industry experts warn that those plans aren't moving fast enough to eliminate the risk of a second straight winter of gridlock on the tracks.

"It may well be that coal that has moved historically by rail is now going to water due to the bottleneck nationwide on rail movements," said Michael Toohey, chief executive of Waterways Council Inc, a trade association for shippers and barge operators.

Toohey estimates that coal shipments by barges are cheaper than rail by about $14 per ton on average.

Coal in Containers
For many utilities, the solution isn't a straight-forward pick from among barges or trucks.

Transporting by barge, while cheaper than rail, is limited to plants located near rivers. Some companies are using third-party docks for barge deliveries and then trucking coal over to power plants that do not have adequate infrastructure.

But trucking is typically used over short distances and is substantially more expensive than barge and rail.

Utilities that sell power at rates set by regulators can pass on additional costs to customers. But companies such as American Electric Power Co Inc and FirstEnergy that sell at competitive prices would be affected, BGC Financial analyst Kit Konolige said.

The workaround for several utilities is intermodal shipment, which cuts fuel costs by 15-20 percent by moving goods in standardized containers using trucks, trains and ships.

According to Justin Long, an analyst at financial services firm Stephens Inc, intermodal shipment volumes rose 6 percent this year.

Currently a stop-gap option, intermodal coal shipments may become more widespread if rail problems continue, Wood Mackenzie analyst Matt Preston said, potentially threatening the long dominant market share of railroads.

Utilities that bank solely on rail still face serious delivery delays, especially on lines run by Berkshire Hathaway Inc's Burlington Northern Santa Fe (BNSF).

Xcel Energy Inc said inventory levels at its Sherco plant in Minnesota - which is served only by BNSF and burns three train loads, or 30,000 tons of coal every day - were "far below optimal levels."

"No other rail carriers can deliver coal to this plant and our permits do not authorize trucking to the plant, so the only thing we can do is push for better service from BNSF," Xcel Energy spokeswoman Mary Sandok said.

The problem is compounded for plants sourcing coal from Wyoming's Powder River Basin, which accounts for 40 percent of total U.S. coal output, but is accessible only by rail.

BNSF said in February it would spend part of its $5 billion capital budget this year to address infrastructure and service issues.

Analysts, however, say it could take a year or more for BNSF to resolve problems, though they expect other railroads to improve their performance in the coming months.

Preston said the fact that utilities will soon have to retire coal plants to comply with environmental regulations could be deterring railroads from improving services to older plants.

"It's unclear how much energy railroads are putting into developing resources, which may be needed only for the next year or two," Preston said.

(By Swetha Gopinath and Sweta Singh; diting by Feroze Jamal)

Maritime Reporter June 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Bulk Carrier Trends

Proforma DAs on the Go

DA-Desk has launched a new service under its PortSpend ManagementTM solution, the Proforma Disbursement Account (PDA) Approval Mobile App. The mobile app is available

Shipping Gloomiest Since 2009

The shipping industry is the most pessimistic in six years about its prospects as a fleet surplus persists, according to a survey by law firm Norton Rose Fulbright, says a report in Reuters.

South Korea Tops in Shipbuild Orders

South Korean shipbuilders, led by industry leader Hyundai Heavy Industries Co., have secured the largest amount of new orders in the first six months of the year to retain the top slot,

Finance

Buoys in Disputed Waters Roil South China Sea Dispute

Buoys stretched "as far as eye could see" - Philippine sailor. The Philippine navy recently found a large steel marker bearing Chinese inscriptions and hundreds

Navis N4 TOS Open in Liverpool Terminal

Peel Ports, owners and operators of the Port of Liverpool, has achieved a major milestone in its multi-million investment program to transform the port into Europe’s

AkzoNobel’s Carbon Credits Methodology Wins Award

AkzoNobel’s landmark carbon credits methodology for the shipping industry has won the Best Offsetting Project award in the 2015 Voluntary Carbon Market Rankings.

Energy

Buoys in Disputed Waters Roil South China Sea Dispute

Buoys stretched "as far as eye could see" - Philippine sailor. The Philippine navy recently found a large steel marker bearing Chinese inscriptions and hundreds

White House: Iran Talks Deadline Could Slip

The White House said Tuesday's deadline for negotiators in Vienna to come to a final, firm agreement on Iran's nuclear program could slip. When asked if President

Port of New Orleans Goes Green

Green Marine, a North American environmental certification program for the marine, port and terminal industry, officially recognized the Port of New Orleans recently as a certified Green Port.

News

White House: Iran Talks Deadline Could Slip

The White House said Tuesday's deadline for negotiators in Vienna to come to a final, firm agreement on Iran's nuclear program could slip. When asked if President

SUNY Maritime College to Host e-Navigation Underway 2015

The State University of New York Maritime College will host the e-Navigation Underway 2015 – North America conference from September 28 to 30 on its Throggs Neck, N.

Port of New Orleans Goes Green

Green Marine, a North American environmental certification program for the marine, port and terminal industry, officially recognized the Port of New Orleans recently as a certified Green Port.

Barges

Carlyle Group Acquires LMC

Global alternative asset manager The Carlyle Group today announced the acquisition of Lauderdale Marine Center (LMC), the nation's largest yacht repair facility

Propulsion Under Wireless Remote Control

Thrustmaster of Texas, Inc. has been supplying wireless remote controls for thrusters since the 1980s, offering products that are supported through their lifecycles

ContainerTug B.V. Releases Two New Models

Young Dutch ship design, engineering and construction company ContainerTug B.V. follows on the introduction of the ContainerTug 600S early last year with the release

Intermodal

Port of New Orleans Goes Green

Green Marine, a North American environmental certification program for the marine, port and terminal industry, officially recognized the Port of New Orleans recently as a certified Green Port.

Navis N4 TOS Open in Liverpool Terminal

Peel Ports, owners and operators of the Port of Liverpool, has achieved a major milestone in its multi-million investment program to transform the port into Europe’s

GEORG FORSTER Calls Southampton for the First Time

The CMA CGM Group announced that the CMA CGM GEORG FORSTER called England for the first time on July 6th.    With its 1,305 ft. (398m) length and 177 ft. (54m) width,

Logistics

Navis N4 TOS Open in Liverpool Terminal

Peel Ports, owners and operators of the Port of Liverpool, has achieved a major milestone in its multi-million investment program to transform the port into Europe’s

K&L Gates Welcomes Martinko

The Washington D.C., office of global law firm K&L Gates LLP has welcomed Stephen Martinko as a government affairs counselor in the public policy and law practice.

ISS Inks Service Pact with Technip

Inchcape Shipping Services (ISS) and Techniphave signed a contract to provide marine agency services and logistics for the Rashid C project in the Middle East. Currently

 
 
Maritime Contracts Maritime Security Maritime Standards Naval Architecture Offshore Oil Pipelines Ship Electronics Ship Simulators Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2034 sec (5 req/sec)