CSX, Other Railroads Get Boost from Shale Gas Shipments

MDN has previously written about how short line railroads in the Marcellus Shale region have seen a renaissance because of shale gas drilling. But the major rail lines, including the East’s largest railroad CSX, are also seeing a huge increase in shale gas shipping of fracking sand and equipment. And it’s happening just in time.

With the deep slide in the commodity price of natural gas, many electric generating plants are converting from coal to natural gas, reducing coal shipments which have been (and remain) the biggest commodity business for railroads.

CSX Corp.’s projected 40 percent gain this year in deliveries of fracking sand used for natural gas drilling may blunt a decline in coal shipments, the biggest commodity business for North American railroads.

Sand shipments matching the forecast would be the second annual gain of that magnitude for CSX, which is hauling fewer coal carloads as some utilities switch fuel sources to take advantage of a 60 percent slide in natural gas prices since early 2010.

Sand is used in hydraulic fracturing, or fracking, the technology now unlocking previously unavailable gas supplies in shale deposits such as the Marcellus formation in Northeastern Pennsylvania. Moving sand, pipe and other drilling equipment gives carriers such as CSX, the largest U.S. eastern railroad, new cargo as coal customers scale back.

Shale gas is “contributing mightily to all these stories about the end of the age of coal,” said Tony Hatch, an independent railroad analyst in New York. “The very same things that are affecting this change in coal are helping grow other things.”

Moving fracking sand into the Marcellus shale region, which stretches from New York to Tennessee, is “a great growth opportunity for us,” CSX Chief Executive Officer Michael Ward said in an interview last month. His company’s fracking-sand carloads grew over 40 percent to more than 12,000 in 2011.

While Rival Norfolk Southern doesn’t break out data for sand, the rail’s total carloads for the Marcellus Shale region rose 67 percent to 40,000 last year from 2010.*

*Wilkes-Barre (PA) The Times Leader/Bloomberg News (Feb 17, 2012) – Gas field shipments boosting railroads