A tourist short line railroad’s slogan is “the journey is the destination.” This also aptly describes the transportation capacity and safety issues related to the increase in domestic crude oil and natural gas production.
There are significant capacity issues with existing railroad equipment and infrastructure for transporting domestic crude oil. The rapid increase in the volume of crude oil has swamped parts of the rail system. As a result, for the first time in decades, there is insufficient capacity to move other rail traffic expeditiously and still accommodate crude oil.
Complaints, particularly from the agricultural sector but also from coal-based utilities, describe a very congested rail system with erratic service. Rail capacity is strained. There is too much tonnage chasing too few trains and limited trackage that can handle it. These kinds of problems are costly to remedy and require long-term investments that many railroads are unwilling to make without corresponding long-term traffic commitments.
A similar situation exists for natural gas and domestic pipeline capacity. Although gas production is booming, pipeline expansion has been limited by customers, notably utilities that are not willing to sign long-term contracts. In some cases “cheap” gas is frustrating for consumers who are limited to the existing constrained pipeline capacity. For example, New England has not seen a huge benefit from lower natural gas prices, a result of an impasse between pipeline owners and utilities over new capacity. In the meantime, demand for gas has increased. It has risen from 15% of the electricity used in New England in 2000 to nearly 50% today.
These domestic energy transport supply-side issues suggest that the situation is ripe for the barge industry, particularly for crude oil. It’s clear that the railroads cannot handle all of it, now or in the foreseeable future. Unlike rail, there is abundant infrastructure for barges on the major waterways and tributaries.
Clearly, there is a place at the crude oil and natural gas table for the barge industry.
