Edit post

Edit your reply below.

Post Body
Enter your post below.
[quote user="beaulieu"][quote user="futuremodal"][quote user="beaulieu"] My turn. My take is that Warren Buffett believes that Global Warming mitigation policies are going to radically change things. Transportation is still going to be needed. Even if PRB coal diminishes, no other mode of transportation has a viable means to transition to alternative fuels as easily as rail.  Biofuels are only a means of transition, not a solution. Hydrogen is a Chimera, the only large source of Hydrogen is to extract it from water. This is going to take more energy than it produces, yes you can strip it from Hydrocarbons like Oil and Natural Gas. They are in short supply now, and obtaining Hydrogen from this source does nothing to reduce the liberation of CO2.  In case you haven't guessed yet the viable source of power is Electricity and Electrification. Look for it to happen first in the LA Basin. Already BNSF and UP have agreements to eliminate operation of pre- Tier 2 locomotives from the basin. What happens when Tier 3 debuts? What was missing from previous Electrification studies, was the traffic density that many mainlines now have.[/quote]Whether Warren thinks this way or not, there is no concievable way for CO2 mitigation policies to have anything but a profoundly negative effect on the railroads.  The only viable replacement for coal fired power plants are nuclear plants, and nuclear plants have nothing to offer the railroads in terms of income potential.  This whole biofuels movement is a crock as well, there is no physical way for biofuels to amount to more than a mere 5% give or take of the US liquid fuel demand.  We are already seeing the economic impact of current ethanol mandates in terms of the effect on food prices, and that is an indication of a natural economic ceiling for such endeavors.The only possible saving grace for railroads in a CO2 constrained world is if CTL projects blossom, which might result in coal movements of some distance.  But it's not the same as need to haul coal for power plants.  Most power plants are located closer to the consumer markets, while most fuel plants can be located a world away from the consumer markets.  The likelyhood is that most such plants would be mineside, and the output would then move by pipeline rather than rail.  Only ethanol must move by rail.Of course, there's the other prospect regarding CO2 regulation - maybe, just maybe, our elected officials will wake up and smell the fraud of the whole MMGW movement, and alleviate us from any such economically disasterous nonsense.  Warren is a certified lefty, so that does indicate a certain degree of mental incompetence.  If so, BH will be the next Enron.[/quote] CTL does nothing for Carbon Emissions. If the Government goes with a Cap and Trade scheme, the railroads being a large carbon emitting entity versus several thousand small trucking companies, would be well placed to create a revenue stream by electrifying and then selling the unneeded carbon emissions to pay down the debt incurred. With any CO2 mitigation scheme, the most efficient fuel user will be affected the least, across land, that is the railroads. Transportation ranks right up there with power generation as a source of Carbon Emissions. [/quote]What CTL does is to transfer the burden of CO2 management from easy-to-regulate point sources to not-so-easy-to-regulate non-point sources, e.g. from one smokestack to a multitude of tailpipes.  In a power plant, all the carbon is combusted and sent up the smokestack.  In a CTL plant, most of the carbon is converted to liquid form, thus not a major source of CO2 until it is combusted in the vehicles.One cannot sequester CO2 in vehicles.  You can only try to make your vehicle more efficient in it's use of fuel.  And despite the pollyanna-ish outlook that a CO2 tax will cause a transfer of modal choice from trucks and autos to trains, the reality is that people will continue to drive their own cars despite the added costs, and it still takes trucks to get the goods from dock to dock.  Remember?  US railroads have all but stopped serving retail outlets.  Do you really concieve of a future where railroads go back to the days of mostly carload consists?  For that matter, do you really expect a capacity constrained industry to forgo the import intermodal in deference to more TOFC?More than likely, a demand for greater trucking efficiency will lead to more liberal GVW allowances.And of course, the most spectorial outlook for railroads from CO2 regulation is a reduction in coal hauling as the Eco Gestapo forces coal fired power plants to shut down.  And what coal is produced for CTL will come from more readily available local sources currently out of vogue due to sulfer content.  Gasification eliminates sulfer concerns, so there'd be less PRB coal and more Illinois coal used for these plants.Coal is currently the lifeblood of the rail industry, accouting for 40% of the business and much of the higher R/VC ratio's.  Thus there is an inherent contradiction for an investor to both desire greater CO2 regulation and put much of his egg collection in the railroad basket.  The two ends do not mesh.After all is said and done, Buffett's BNI involvement is more likely to mirror his Coca Cola experience than his insurance successes.
Tags (Optional)
Tags are keywords that get attached to your post. They are used to categorize your submission and make it easier to search for. To add tags to your post type a tag into the box below and click the "Add Tag" button.
Add Tag