Coal dust slows rails

According to equity research firm Morgan Stanley, coal dust was blamed for derailments on the main line coming out of the Powder River Basin in Wyoming. The coal dust that had accumulated in the railroad ballast led to instability which was blamed for two large derailments. The solution reported by the Burlington Northern Santa Fe (BNSF) is to "undercut" a portion of the joint line. This will likely result in slower train throughput during the maintenance season through October.

Morgan Stanley analyst James Valentine estimates the joint line capacity will be reduced to 58-59 trains per day through October, down from 65 trains per day. Of the total decline, BNSF will lose one or two trains per day and the Union Pacific (UP) will lose three or four per day. "We've never seen such good prospects for Western coal in our 13 years of watching the coal industry from a railroader's perspective," says Valentine. Eastern coal is in decline while Illinois Basin coal has not picked up any of the slack, he continues. Increased demand for Powder River Basin coal by domestic utilities could translate to 5% annual growth for the BNSF and UP from 2006 to 2008.