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 Today

The Maritime Industry's original and most viewed E-News Service

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


S&P Raises Steamship Mutual outlook to Positive

Poor’s has revised its outlook on Steamship Mutual to Positive from Stable. The A- financial strength rating has been reaffirmed. In their announcement Standard

Norwegian Escape with Biggest Scrubbers sets Sail

On a sunny October day in the German harbor-town of Hamburg, M/V Norwegian Escape, a brand new cruise ship, sets sail for the first time. On board are five Yara SOx scrubbers – one for each engine.

ZIM Integrated Shipping Remains Profitable

Despite challenging market environment with freight rates reaching historic lows in several key trades,  ZIM Integrated Shipping Services continues to outperform


ESL Shipping to Enter the Renewable Energy Market

ESL Shipping and AB Fortum Värme have signed an agreement for biofuel transport. The agreement provides ESL Shipping with access to the renewable fuels transport market.

Deltamarin to Designs First LNG Handysize Bulk Carriers

Deltamarin Ltd proudly announces that it has signed a contract to design the world’s first LNG handysize bulk carriers, which will point the way towards greener shipping of commodities.

Asia Fuel Oil-Cracks, Spreads Tight; Bunker Prices Climb

Asia's fuel oil crack for benchmark 180-centistroke rebounded to a discount of $6.79 a barrel on Wednesday, gaining as bunker prices firmed on the possibility of


Henriksen Unveils Strongest SOLAS Boat Lifting Hook

H Henriksen of Norway has received SOLAS certification for a new off-load single-point boat lifting hook capable of holding up to 22.5-tonnes. The quick release

S&P Raises Steamship Mutual outlook to Positive

Poor’s has revised its outlook on Steamship Mutual to Positive from Stable. The A- financial strength rating has been reaffirmed. In their announcement Standard

SSA Welcomes Decision To Extend BEO

The Singapore Shipping Association (SSA) has welcomed the decision by Singapore’s Minister for Trade and Industry to extend the Competition (Block Exemption


McAllister Towing – 150 Years of Family Business

“Early in 1864, a young man names James McAllister stood on board a sailing vessel where he served as a mate. The boat was about to set sail from the Red Bay of

Lightering Operations Begin for Sunken Lake Barge

Lightering operations has begunn for the  tanker barge Argo sunken in Lake Erie as Unified Command responders took advantage of a favorable weather window, the U.

Helm Announces Maintenance & Compliance Release

In line with the Subchapter M waterways rules which are due to come into effect in 2016, Helm Operations will introduce the full capability of it’s latest Maintenance and Compliance solution,


Evergreen Line Orders Ten 2,800 teu Ships

Taiwanese shipping company Evergreen is ordering ten 2,800 TEU container ships from Japanese shipbuilder Imabari Shipbuilding Co.,Ltd and compatriot CSBC Corporation.

ZIM Integrated Shipping Remains Profitable

Despite challenging market environment with freight rates reaching historic lows in several key trades,  ZIM Integrated Shipping Services continues to outperform

Controversial Nicaragua Canal Project Postponed

China's Hong Kong Nicaragua Development (HKND) Co. said it is delaying the start of construction on a controversial $50 billion inter-ocean canal across Nicaragua until late 2016.

Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Navigation Offshore Oil Pipelines Salvage Ship Electronics
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: 0.1193 sec (8 req/sec)