In a bold bid to cover U.S. railroads against a potential hit to their lucrative coal hauling business from emerging energy policies, the industry’s top trade group is asking Congress to create “contingent allowances” for carriers.
Edward R. Hamberger, president and CEO of the Association of American Railroads, told lawmakers in the recently formed Congressional Coal Caucus one in five rail jobs is linked to coal shipments, which generate about 25 percent of total revenue for U.S. Class I railroads.
“Without coal, the U.S. rail network would face a need for vast restructuring with greatly reduced capacity to invest in the nation’s rail network infrastructure,” Hamberger said.
That caucus, launched in January with six House members from coal states and both political parties, was seen as a group to fight pending legislation that would cut climate-heating greenhouse gas emissions. Burning of carbon-rich coal by power plants generates nearly half of U.S. electricity, so many see new climate legislation or government regulation as something that will clamp down hard on coal use.
Hamberger urged Congress to support development of carbon capture and storage technologies for coal-burning plants, which has not yet been tried on a commercial level. The Obama administration also supports CCS projects.
But the AAR said some legislative proposals “risk drastic cuts in coal use,” and so railroads want an “insurance policy” against the potential impact on their traffic and revenue. He did not detail how the contingent allowances would work, such as whether they would generate direct payments similar to federal crop subsidies or give railroads extra carbon allowances they could sell to other industries.
But he said the allowances that AAR envisions “should be made available to railroads whose revenues from coal decrease as a result of the enactment of climate change legislation.”
Without this backstop, Hamberger said railroads could face billions of dollars in costs from lost value of rail assets – track networks and rolling stock that serve mines – plus lost revenue from diminished coal transportation.
The AAR also tied that result to the other mission emerging for railroads of taking more freight off the nation’s highways, saying the effects would hurt railroads’ ability to serve intermodal and other non-coal shippers. “If railroads cannot afford to renew and expand their capacity,” the trade group said, “more traffic will move by less efficient, less environmentally friendly and already overcrowded highways.”
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