Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Energy Industry Pullback Means Profound Shift for Region's Railroads Anticipated Decline in Shipments Expected to Free Up Space, Ease Transit Delays

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Energy Industry Pullback Means Profound Shift for Region's Railroads Anticipated Decline in Shipments Expected to Free Up Space, Ease Transit Delays

Article excerpt

Railroad executives expect the rails around Pittsburgh this fall to carry much less coal, crude oil and frack sand as low oil and gas prices persist.

That's good news for customers - think farmers shipping their crops and the Amtrak train service moving passengers around the country - who in 2014 saw their shipments stack up in traffic jams caused in part by the U.S. shale boom and a record grain harvest.

"Unexpected and substantial volume growth strained many parts of our network last year," acknowledged James Squires, president and CEO of Norfolk Southern Railway, in a filing with the U.S. Securities and Exchange Commission last month.

But the profound shift in energy-related traffic - although it has freed up space for shipments by other customers - is also hitting the carriers' bottom lines.

Virginia-based Norfolk Southern's second-quarter coal shipments dropped 21 percent from the year-ago quarter, and the company expects further decline as electric utilities convert to cheap natural gas. Falling commodity prices and a strong U.S. dollar have also made it difficult for coal to compete internationally, Mr. Squires wrote, and low oil prices "will also remain a headwind in our crude oil markets."

The story was much the same for Jacksonville, Fla.-based CSX Transportation Corp., the other main line operator in the Pittsburgh area. The company expects its third-quarter coal volume to be down 15 percent as electric utilities burn less coal, along with another 15 percent decline for crude oil and shipments of sand used in hydraulic fracturing operations as shale drillers pull back production.

"CSX's earnings and ability to invest have been diminished by sharp declines in coal," wrote chairman and CEO Michael Ward.

He noted the company has furloughed 600 employees, most of them engineers and conductors, in areas that have seen a decline in traffic as utilities increasingly shift away from contracts with Appalachian mines in favor of lower-cost coal from the Illinois Basin.

Genesee & Wyoming Inc., a Connecticut-based short line rail operator, in August shaved off 18 percent, or $83 million, of its 2015 income projection because of coal, metal and energy declines. …

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