News•February 5, 2013

New Rail Traffic Data Reflects Big Shift Away From Coal

The recent shift away from coal and toward natural gas to generate electricity in the U.S. has had major impacts across the country, from rapid economic growth and pollution concerns in rural Pennsylvania and Ohio to lost jobs in the coal-mining belt of Appalachia. So, too, has the record expansion in U.S. oil production from newly accessible deposits, such as the Bakken Shale in North Dakota. According to the Energy Information Administration (EIA), U.S. crude oil production increased by a record 780,000 barrels of oil per day in 2012.

Now another ripple effect can be added to the list of energy market-related shifts, with data from freight railroad operators showing a major decline in the amount of coal transported by train in the U.S. in 2012, at the same time as oil shipments have dramatically increased. That is significant since most of the coal that is burned by U.S. power plants is shipped via rail, so the drop in coal transport clearly reflects the broader market trends. The trend may be concerning to freight rail operators, since according to the Association of American Railroads (AAR), “no single commodity is more important to America’s railroads than coal.” Coal accounted for 43.3 percent of freight rail tonnage and 24.7 percent of rail gross revenue in 2011, AAR said on its website.

Thunder Basin National Grassland. Just behind these tracks is the largest coal field in North America.
Credit: Flickr/stpaulgirl.

The EIA data released Tuesday shows that coal had the biggest decline in railcar loadings of any commodity moved by train in 2012, with an 11 percent drop, which amounts to a loss of about 726,000 carloads compared to 2011.

On the other hand, crude oil and other petroleum products saw the biggest increase in railcar loadings among commodities last year, with a jump of 46 percent compared to 2011. Crude oil was responsible for nearly all of the increase, accounting for an estimated 38 percent of the combined deliveries in oil and petroleum products during 2012, up from just 3 percent the year before.

However, even after the decline, coal remained the dominant category of commodities moved by rail in 2012, accounting for 41 percent of total carloads.

Normally, crude oil and petroleum products produced in the U.S. are transported by pipelines, such as the Alaska Pipeline, which moves oil from the North Slope of Alaska to the port of Valdez. However, the swift expansion in domestic oil production has taken place in areas that lack pre-existing pipeline infrastructure, making rail transport a more attractive option for energy companies seeking to move oil to refineries and then to market.

In recent years, electric utilities have moved to take advantage of more price-competitive natural gas, which has reduced coal use nationwide. Coal accounted for 37.2 percent of U.S. electricity generation through November 2012, according to the EIA, which was down 42.5 percent from the same 11-month period in 2011. During the same period, electricity generation from natural gas grew from about 25 percent to 31 percent. When burned, natural gas releases fewer planet warming greenhouse gases, particularly carbon dioxide, compared to coal, so the large-scale shift to natural gas electricity generation has helped reduce U.S. greenhouse gas emissions. However, the growth of so-called “unconventional” natural gas, which is recovered from shale deposits through a process known as hydraulic fracturing, or “fracking,” has been accompanied by growing concerns about air and water pollution and local opposition to drilling projects.