U.S. coal exports are showing “signs of life,” though the U.S. still trails other coal exporting nations, but those signs won’t generate a strong enough rebound for U.S. rail freight coal traffic in 2009, according to the “Coal and Rail Quarterly” report issued by New York-based Dahlman Rose & Co.
"We have seen reports of contracts for delivery from the east coast to India in the last week. U.S. met[allurgical] coal exports were only 1.3 million tons in May, with none to India, while June saw 2.8 million tons booked, according to McCloskey’s,” the report says. “Chinese imports, both met and thermal, have reignited the Pacific market, but repercussions have been slow to reach the United States due to anemic electric and steel demand in the West."
Dahlman Rose also notes, “The thermal coal export story to Europe remains dormant outside of delivery of legacy business.” The report adds, “Like their domestic counterparts, European utilities are suffering from high inventories and recession-impacted electric demand."
In the U.S. itself, political maneuvering, and not legal action, is complicating coal production, particularly mountaintop mining, Dahlman Rose says. “Legal developments have generally favored the coal industry this year, with the most recent development comingfrom the U. S. Supreme Court ruling that the Army Corps of Engineers has authority over 404 valley fill permits, not EPA. The administration recently announced that it would seek modifications to the practice through an end to expedited reviews and tightened federal oversight. While the road to issuing permits is theoretically open, we believe the Army Corps continues to bend to political pressure, and do not expect a meaningful resumption of permit issuances. At risk is approximately 70 million tons/year of Central Appalachian low-cost production."
That puts additional pressure on freight railroads counting on a resurgence in coal traffic. “After seeing their volumes drop more than 15% during the first quarter, railroad carriers hopedthe worst was over. Unfortunately, the rail industry was betrayed by one of its most historically stable commodities. Indeed, coal volumes have plummeted nearly 12% in 2Q as both domestic and export demand for coal slumped drastically. Demand for domestic coal fell off due to the lack of demand from steel producers and a falloff in electrical demand from utilities,” the report says.
"Not only did utilities have slumping demand for power generation in the first quarter, but the rapidly falling price ofnatural gas compounded the difficulties for coal demand due to switching. This scenario led to a build up in stockpiles at domestic utilities with current stockpiles nearly 30% above normalized levels. Hence, even with increased burn from a hot summer we believe volumes to utilities will continue to remain under pressure for 2009. As a result, we do not see a rebound in rail emerging in 2009,” Dahlman Rose warns.
Shipments of ethanol may account for less than 1% of all U.S. rail freight volume, but for the ethanol industry itself the percentage at stake is far higher, with roughly 70% of all U.S. ethanol moves accomplished by rail, according to the Renewable Fuels Association.
Moreover, the association sees little change in the immediate future, according to Technical Director Kristy Moore. “There’s always going to be the economy of rail and the availability," Moore said. "There are railroad tracks crisscrossing the Midwest, where the majority of ethanol is produced. Rail has access, control terminals, and is cheaper than anything else right now.”
U.S. railroads moved 120,000 carloads of ethanol in 2007, according to the Association of American Railroads, up 20% from 2006.
U.S. Class I employment in May dropped to 151,536, down 1.77% from the previous month and down 8.33% from May 2008.
Operating crews, the biggest single category, again took the hardest hit. Transportation (train and engine) employment sank to 56,370,down 4.14% from April and 17.99% from May 2008.
The second biggest employment group, maintenance of way and structures, was up 0.18% from April to 35,442, but down 0.69% from May 2008.
Maintenance of equipment and stores employment, at 29,303, was off 1.05% from April and 3.75% below May 2008.
Professional and administrative employment was 13,411 in May, down 0.16% from April and 2.12% below May 2008.
The smallest group, transportation (other than train andengine), had 6,929 workers in May, off 0.9% from April but up 4.13% from May 2008.
The only category showing improvement from over both April 2009 and May 2008 were executives, officials, and staff assistants, which at 10,081 was up 0.40% from April and 0.11% from May last year.
U.S. transit systems beleaguered by operational fiscal woes got some potential relief Wednesday, as President Obama signed a supplemental appropriations bill including a provision sanctioning some stimulus package financing for operations funding. The bill allows public transit agencies to use up to 10% of their American Recovery and Reinvestment Act (ARRA) formula funds to cover operating costs of “equipment and facilities for use in public transportation.”
The American Public Transportation Association says the language also allows public transit agencies to amend previously submitted applications to redirect ARRA funds toward operating needs. The measure was included as a rider to House Resolution H.R. 2346, the Supplemental Appropriations Act of 2009, which provides funding for overseas military operations.
At the recent APTA Rail Conference held in Chicago, much discussion involved the strain on rail transit operators to maintain existing service levels, even with higher fares, at a time when stimulus package funding paradoxically fueling system expansion.
For its part, the Federal Transit Administration posted on its website a “question and answer” page attempting to anticipate queries from those potentially affected by the new option, noting diverting 10% of funds already approved in most cases would require minimal documentation.
Concerning funding for a federal Transportation Improvement Program (TIP) or Statewide Transportation Improvement Program (STIP), FTA notes “it would not be necessary to amend the TIP/STIP. The legislation does not provide additional funding for projects, but rather allows grantees to spend up to 10% of amounts apportioned to each area on operating costs. Grantees wishing to take advantage of this new eligibility in projects already programmed in TIPs and STIPs may do so without formally amending those documents.”
FRA cautions, “For projects not currently included in the TIP and STIP, the current requirements apply, calling for formal amendment of those documents to add the projects.”
The Surface Transportation Board Friday ruled Entergy Arkansas, Inc. and Entergy Services, Inc., could amend acomplaint challenging an interchange commitment contained in a lease between Union Pacific and the Missouri & Northern Arkansas Railroad Co., Inc. (MNA). TB said Entergy may pursue its interests using the section of the Interstate Commerce Act that deals with the rights and obligations of rail carriers to interchange with one another.
STB said it would defer ruling on Entergy's request that the Board revoke the prior approval of the lease agreement, noting that if Entergy does not obtain relief under section 10705, or Entergy declines to pursue that course, STB will then decide whether approval of the lease between UP and MNA should be revoked, modified, or left in place.
On Feb. 19, 2008, Entergy asked STB to revoke its approval of a 1992 lease between UP and MNA, in which UP leases 300 miles of track to MNA for free if it feeds 95% or more of its freight traffic to UP. The utility's Newark, Ark., power plant is served only by MNA. Entergy says MNA's lease with UP effectively rules out using another carrier to transport coal from Wyoming's Powder River Basin to an interchange with MNA's tracks and that enforcement of the interchange commitment is an unreasonable practice.
Entergy can request STB to use its authority under section 10705 to order MNA to interchange with a long-haul carrier other than UP. The Board stated that it can require a carrier to establish a new through-route with another carrier under Section 10705 whensuch a route is needed "to provide adequate, and more efficient or economic transportation" and invited Entergy to submit argument and evidence on these issues.
STB indicated that resolution ofthe case under section 10705 could "directly address and remedy theprecise problem about which Entergy complains." But STB also explained that the revocation of lease approval that Entergy seeks in its complaint "would be far broader in scope and effect" and could affect other entities. The Board also determined that relief was not available under the unreasonable practices and pooling provisions cited by Entergy in itscomplaint.
STB’s decision is available for viewing and downloading via the STB website, at www.stb.dot.gov, under "E-LIBRARY," thenunder "Decisions & Notices," beneath the date "06/26/09."
A shift in Toronto’s transport funding priorities could generate C$417 million for the Toronto Transit Commission, and would enable TTC to affirm its planned purchase of 204 streetcars from Bombardier Transportation before the deal expires. Toronto's City Council, in a 36-6 vote Friday, approved the measure.
The funds, one-third of the anticipated overall cost of roughly C$1.2 billion (US$1.0 billion), initially were expected from the Canadian federal government, but Ottawa said the purchase does not qualify for stimulus funding. Toronto had committed to one-third of the amount, with Ontario provincial funding supplying another one-third; the move would double the city’s investment in the purchase.
Streetcar funding would come at the expense of other capital projects, such as a bus midlife rebuilding program and a transit station modernization program, which would be deferred until after 2018.
Toronto’s city manager, deputy city manager, and chief financial officer have recommended that "City debt financing replace the one third federal funding budgeted for a total City debt funding amount of C$834 million for the TTC Capital Project No. CTT122 “Purchase of 204 Light Rail Vehicles (LRVs)."
The officers noted, “In summary, the City has budgeted its 1/3 share, the Province has committed its 1/3 share, and the TTC has deferred debt-financial projects sufficient to replace the expected Federal 1/3 Economic Stimulus funding share. The Bombardier bid expires on June 27, 2009 unless an unconditional award is made on or before that date."
SNC-Lavalin Group, Inc. has signed an agreement to manage the construction and maintenance of roads and railways for the 2014 Winter Olympics in Sochi, Russia, Canadian Trade Minister Stockwell Day said.
SNC signed the deal for an undisclosed amount with Russian Railways to provide 28 miles of roads and rails, including tunnels totaling 27 kilometers (about 17 miles) in length.
Montreal-based SNC-Lavalin, Canada's largest engineering company, has opened an office in Sochi, a port city on the Black Sea.
Last month Russian Railways said it planned to order up to US$765 million worth of high speed trains from Bombardier Transportation in anticipation of the 2014 Olympics.
Asserting that "there is simply not enough money to do what we need to do," U.S. Transportation Secretary Ray LaHood told a Congressional hearing Thursday that around $20 billion will be required through early 2011 to cover a shortfall in funding for highway and transit construction projects.
"The Obama Administration has a difficult problem--a system that can no longer pay for itself," LaHood (photo at left) told the Senate Environment and Public Works Committee. He pointed out that a primary source of funding has shrunk with the decline of fuel tax revenue. LaHood said the highway/transit trust find could be running near empty sometime in August.
LaHood believes an 18-month extension of the current funding law, which expires this fall, would give Congress time to draft a long-term measure with more reliable finding sources.
The Administration's proposal is opposed by Democratic members of the House Transportation Committee, who are supporting a six-year reauthorization of the expiring law that would increase funding by 40% over that period to $500 billion. They fear the proposed 28-month extension at current funding levels would delay a much-needed increase.
Freight traffic on U.S. railroads for the week ended June 20 still lagged 17.7% behind comparable levels from the same period a year ago, the Association of American Railroads said Thursday. Intermodal volume was down a nearly identical 17.8% from the year-ago period. Total volume of an estimated 27.76 billion tons miles was down 16.6% compared with the same week in 2008.
Once again, 18 of 19 carload freight commodity groups charted by AAR were down from last year, with declines ranging from 1.8% for farm products other than grain to 65.4% for metallic ores. As in some previous weeks, the "all other carloads" category defied the overall trend, up 11.9%.
For the first 24 weeks of 2009, U.S. railroads reported cumulative volume down 19.4% from the comparable 2008 period, while intermodal declined 16.9%.
Canadian freightcar traffic declined 23.7% for the week ended June 20 compared with the year-ago period, while intermodal fell 18.2%. For the first 24 weeks of 2009, Canadian volume slumped 24.1%, while intermodal fell 15.3%.
Mexico’s two major railroads reported freight car traffic down 8.1% for the week, and intermodal down 19.6%, compared with a year ago. For the first 24 weeks of 2009, Mexican freight car traffic slipped 14.2%, while intermodal slumped 20.9%.
Combined North American rail volume for the first 24 weeks of 2009 on 14 reporting U.S., Canadian, and Mexican railroads was down 20.1% from the comparable 2008 period, while intermodal fell 16.8%.
The American Short Line and Regional Railroad Association said Wednesday that bipartisan Congressional support was growing to extend and improve the short line railroad tax credit. House Resolution H.R. 1132, introduced by Rep. Earl Pomeroy (D-N.D,) and Rep. Jerry Moran (R-Kan.), has notched 101 co-sponsors, while counterpart Senate bill S. 461, introduced by Sen. Blanche Lincoln (D-Ark.) and Mike Crapo (R-Idaho), currently has 22 co-sponsors.
ASLRRA notes that more than 1,000 businesses relying on short line and regional railroads also are on record supporting the legislation, which would extend and improve the Short Line Rehabilitation Tax Credit, allowing short line and regional railroads to undertake critical projects, assuring continued investment in the nation’s transportation infrastructure.
The Section 45G Railroad Track Maintenance Credit is set to expire on December 31, 2009. The legislation proposes the credit be extended for three years, changed to allow eligibility for new short line railroads and an increase in the credit limitation.
The tax credit helps small railroads maximize infrastructure spending, which is important for railroads that serve small businesses that do not ship volumes high enough to fund all the rehabilitation needs of the railroad. The credit allows the railroad to take on and complete track upgrades quickly and efficiently. ASLRRA asserts this is particularly important at a time when the federal government is trying to spur immediate economic activity.
“America’s short line and regional railroads play a critical role in our nation’s transportation infrastructure by connecting rural communities, strengtheninglocal economies and protecting our environment,” said ASLRRA President Richard F. Timmons (photo at left). “As our economy is on the cusp of recovery, the tax credit is timely and vital to the small freight railroads and the local businesses and communities that rely on them to ship local products, create local jobs, and even divert trucks off of local roads.”
Rep. Pomeroy, author of H.R. 1132, said in a statement, "Small freight railroads are critical to the continued growth of the agriculture and oil and gas industries in North Dakota, and across the country. I believe the strong level of bipartisan support for this legislation demonstrates the impact short line railroads have on our economy, and I am confident that support for this legislation will continue to grow.”