(The Associated Press circulated the following article by Erik Schelzig on December 4.)
CHARLESTON, W.Va. — Surging demand for coal has left railroads serving central Appalachia’s coal fields scrambling to increase capacity, and some coal producers complaining they are not being served quickly enough.
Railroads transport two-thirds of coal nationwide, and CSX Corp. and Norfolk Southern Corp. – the two main railroads serving central Appalachia – have reported significant increases in revenue from coal transportation for the first nine months of the year.
Jacksonville, Fla.-based CSX has moved 59,000 more loads of coal during the period, and Norfolk, Va.-based Norfolk Southern has moved 39,400 more coal cars.
But both companies say they could be moving more if they had the capacity.
“We’re moving record volumes of coal, but we’re tight on power, that is the availability of locomotives to move it,” said Norfolk-Southern spokesman Robin Chapman. “What you’re getting is a more than usual amount of trainloads of coal in our rail yards waiting for power to move them. This has also created a shortage of empties for our customers.”
But increasing capacity is a gradual process, said CSX spokesman Gary Sease.
“You don’t build the church for Easter Sunday,” he said. “You build a railroad to meet capacity for normal demand. For periods of abnormal demand, sometimes that capacity is stretched.”
The current shortage may stem from conservative forecasting in the industry, said Tom White, spokesman for the Association of American Railroads.
“One of the things that threw us a curve ball is that most of our customers last year did not forecast the volume that we ended up having,” he said.
CSX had up to 2,000 coal cars sitting in storage “not that long ago,” Sease said. It’s now trying to refurbish 3,600 coal cars at its Raceland, Ky., repair shop by the end of the year. The company owns 20,000 coal cars, and runs an additional 12,000 cars owned by the utilities.
Railcar manufacturers are reporting an increase in orders for all types of cars, but backlogs are at their highest level since 1998.
Rail problems have contributed to reduced sales numbers for West Virginia’s largest coal producer, Massey Energy Co., according to the company’s most recent quarterly filing.
“As we have coal piled up in one location, they may not have a train there when they need to be,” said Massey spokeswoman Katharine Kenny. “It disrupts the system.”
The disruptions have caught the attention of Norfolk Southern Chairman David Goode. In a recent quarterly conference call, Goode said the company’s objective is to get the coal to market “as rapidly as possible.”
“I’ve learned over the years you have to take the coal business as it comes and just be prepared to handle it,” he said. “That’s all we can do.”
The issue hasn’t caused shortages at coal-fired power plants, said Bill Brier, vice president for policy with the Edison Electric Institution in Washington, D.C. Increased energy costs are forcing utilities to keep stockpiles low.
“We’re in regular contact with (the railroads). They know what our demand is,” Brier said. “The return of the economy has strained the demand for rail cars.”
That demand compounds the already challenging rail situation in central Appalachia. Most mines in southern West Virginia and eastern Kentucky are served by a single rail line, and the per-mile transport costs are increased because of a difficult topography.
That contrasts with northern Appalachian and western coal mines more often served by competing railroads, which can drive down costs and serve as insurance if one of the lines is disrupted.
And rail service did not catch many breaks with the weather this year, as hurricanes and storms that did extensive damage to rail system along the Eastern Seaboard. Arch Coal Inc. reported that railroad disruptions resulted in missed shipments of about 200,000 tons of coal during the third quarter.
“The challenges continue with the railroads,” said Arch spokeswoman Kim Link. “The hurricanes didn’t help and now we’re not only into grain season, but we’re also into holiday season, and a lot of kids want to have their toys delivered.”
The Association of American Railroads estimates that 80,000 new freight railroad jobs will be created over the next six years, and both rail companies and coal producers emphasize that they are working together to improve the service.
“To their credit, as coal companies have complained, they’ve responded by graduating large classes of engineers,” said Massey’s Kinney. “I think all of the coal companies have congratulated them with their responsiveness, but things can’t change immediately.”