Coal

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Coal Transportation Rates to the Electric Power Sector

With Data through 2010  |  Release Date: November 16, 2012  |  Next Release Date: May 2014  |  Correction

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Trends, 2001 - 2010

Transportation infrastructure overview

In 2010, railroads transported over 70 percent of coal delivered to electric power plants which are generally concentrated east of the Mississippi River and in Texas. The U.S. railroad market is dominated by four major rail companies that account for 99 percent of U.S. coal rail shipments by volume.

Deliveries from major coal basins to power plants by mode

 

The Powder River Basin of Wyoming and Montana, where coal is extracted in huge surface mines and sold at prices of around $8 to $15 per ton, is by far the largest supplier of coal for U.S. power plants. Much of this coal is transported in unit trains of 120 coal cars going from a single mine to a single power plant over distances that can exceed 1,000 miles (Interactive map and Figure 2).

East of the Mississippi—where river systems are well-developed—transport by barge often is lower cost than rail when sellers and buyers are located on or near river systems (Figure 3). Truck, used mainly for short transport distances, is the third largest (by tons hauled) transport mode for coal (Figure 4).

Coal transport mode, 2010
  Origins  
Mode East of Mississippi River West of Mississippi River Total U.S.
Rail 56% 81% 72%
Truck 13% 9% 10%
Barge & collier 30% 1% 11%
Slurry pipeline, tramway, and conveyor belt 2% 9% 7%
Major railroad transport volumes, 2010
Railroad million short tons Share
BNSF 273 35%
UP 219 28%
CSX 145 19%
NS 134 17%
Others 8 1%

National overview

Nominal rates for transporting coal by rail from mines to electric generators increased 46 percent nationally from $11.83 to $17.25 per ton over 2001-2010, an average increase of 4.3 percent annually (Table 1 and Figure 5). Figure 5. U.S. average rail transport cost of coal to electric generating plantsfigure data Rates grew slowly in the early decade and then picked up steam, including a 10.5 percent spike in 2005, with relatively large increases until 2009 when the wake of the recession impacted shipping rates, causing a 2.3 percent decline in national rates. Prices quickly recovered however, growing 9.2 percent in 2010 to reach $17.25, six percent above the pre-recession annual average peak (or three percent higher in real terms).

Real rates (Chain-type Price Index, 2005) increased 19 percent nationally from 2001-2010. While rail transportation costs increased from $13.04 to $15.54 per ton (19 percent), total delivered coal prices rose from $27 to $40 per ton, almost 50 percent. Most of the increase occurred after 2004. Since coal commodity prices rose faster than transport costs, the share transportation costs comprised of total delivered cost fell from 48 percent to 39 percent. In dollar per ton terms, transport added $3 dollars while mine prices increased $11 over the 2001-2010 timeframe.

Regional breakdown

The U.S. average price masks substantial swings in real regional prices among the six major U.S. coal basins over the period 2001-2010, ranging from a 14 percent increase for Powder River Basin rates, to 149 percent for Southern Appalachia (Figure 6). Figure 6. Average rail transport cost of coal to the power sector by major coal basinfigure data Though this represents a sizable increase for coal originating from Southern Appalachia, the coal volumes are small.

In contrast to the national picture, average coal transport rates originating from Uinta (principal coal-producing regions of Colorado and Utah, see Interactive map), Central Appalachian (CAPP), and Southern Appalachian (SAPP) Basins rose rapidly from 2001 through 2007, moderated thereafter, and by 2010 fell slightly from their earlier peak values (Figure 6). Coal originating from the Illinois Basin (ILB) experienced rising rail rates until 2005, declining rates from 2005 to 2007, and rapidly rising rates after 2007. Rail transport rates for coal originating from the Northern Appalachian (NAPP) and Powder River Basins (PRB) had a moderate upward trend over the 2001-2010 period. Annual real growth rates per short ton (2005 dollars) for each basin are indicated in the table below.

Coal Producing Basin Annual Rate of
Increase, 2001-2010
Northern Appalachian 2.4%
Central Appalachian 3.6%
Southern Appalachian 10.6%
Illinios 5.2%
Powder River Basin 1.5%
Uinta 1.6%

In spite of having the largest increase from 2008-10 (47 percent), Illinois Basin coal remained the least expensive for transportation with real rates of $9.96 per ton. Central Appalachian Basin, the highest cost on a dollar per ton basis with real rates of $19.53 per ton, traded the top spot with Uinta Basin several times from 2001 through 2010. Coal delivered from ILB and Appalachian basins to various states experienced some of the largest increases in rail transport rates between 2001 and 2010. Conversely, coal deliveries from PRB to Missouri, Texas, Illinois, and Oklahoma had some of the smallest rate increases, even on a dollar per million Btu basis. While some routes for PRB experienced above-average rate increases (deliveries to Minnesota and Nebraska), in the case of deliveries to Iowa and Kansas, PRB rates actually fell from 2001-2010.

When the national and regional rate data are further disaggregated at the state to state level, changes reveal rather dramatic disparities. While the average real rate for shipping coal from a mine to a coal power plant by rail increased 19 percent nationwide between 2001 and 2010, average rates between specific states varied widely, ranging from a decline of 23 percent (Wyoming to Kansas) to an increase of 83 percent (Virginia to Tennessee) — a 106 percentage point swing. Figure 7.  State-to-state percent change in rail transport rates to electric power sector, 2001 through 2010.figure data Figure 7 shows the percent change in average real rates for those state-to-state routes for which data was able to be published over the time period. The Figure shows that 10 state-to-state pairs experienced a 50 percent or higher increase in real rates. All of these pairs, except the route from Wyoming to Minnesota, had coal origins east of the Mississippi River. Five state-to-state pairs, three with western origins and two with eastern origins, had declining real rates over the 2001-2010 period.

Barge and truck transportation costs of coal to electric generating plants for 2008-2010 averaged between $4.46 and $5.77 per ton (real 2005 dollars). Rates fell during the recession in 2009, but rebounded slightly in 2010 (Table 2). Barge and truck rates are quite variable at the state-to-state level (Tables 15 through 18).

Barge transport makes up less than 1 percent of western coal, however, significant river transportation networks in the east enable it to comprise almost one-third of coal transportation. Truck transportation over short distances comprises around 10 percent of coal transportation.

Coal to gas coal switching: A look at competing coal basins

Significant coal to gas displacement in the electric power sector has resulted in natural gas and coal generation reaching parity in the United States in 2012. This trend is often referred to as coal to gas ‘switching’, though it typically involves increased utilization of gas plants in the generating fleet rather than physically switching out coal boilers to gas burning ones in a particular plant. Nonetheless, preceding significant coal to gas switching was a different switch affecting coal markets: PRB coal displacing Appalachian coal. EIA examined the changing basin footprints in the eastern U.S. and the role transportation costs played in the outcome.

Production and delivery points were mapped by basin with their total delivered costs to determine which was lowest. While coal from all three Appalachian Basins (Northern, Central, and Southern), Illinois Basin, and Powder River Basin compete within the eastern United States, for this report EIA analyzed PRB and CAPP, the major basins in play.

In order to approximate the economically optimal coal basin for a geographic area, the eastern U.S. was divided into small cells which were assigned an actual or estimated delivery cost based on EIA-923 Survey data. Each plant receiving CAPP or PRB coal in 2007 and 2010 were mapped and their data used to estimate costs for other cells by interpolating values based on inverse distance weights, a statistical method for conducting spatial analysis. Comparing the total delivery cost in each cell allows delineation of the eastern U.S. between PRB and CAPP as the most economical basin.

Figure 8.  Lowest delivered cost by coal basin.

Figure 8 shows the estimated optimal economic area between CAPP and PRB for 2007 and 2010: CAPP is strong in light shaded areas, PRB in darker. Costs for CAPP include the sum of mine prices and transport costs. For PRB, the same variables apply but, in addition, EIA added a $1/million Btu charge on top to approximate additional costs of having a lower heat content coal (i.e. larger boilers, bigger storage and handling areas, lower efficiency). Note: this $1 adder was determined based on research by the U.S. Department of Energy and was only incorporated into the GIS analysis below; it is not in any other elements of this report. See Methodology for greater detail.

The resulting assessment shows a stark deterioration in the regional competitiveness of CAPP coal compared to PRB over the timeframe (2007-2010). CAPP delivered coal prices in 2010 ranged from $2.13 to $7.69 per million Btu while PRB costs (including assumed $1 adder) ranged from $1.80 to $5.16 per million Btu (both in Btu weighted annual average, nominal dollars). In 2007, prior to subsequent price increases, CAPP was price competitive over the wider Ohio River Valley, the northeast, and most of the southeast with the exception of Mississippi and Alabama. Only three years later, CAPP had been displaced over most of the Midwest outside of the Ohio River and virtually all of the Southeastern United States. Outside of its immediate production area, CAPP maintained its advantage over the northeastern United States.

The decline in competitive market area for CAPP can be attributed entirely to mine price. From 2007-2010, delivered coal prices per million Btu increased, on average, by 53 percent for CAPP compared to 22 percent for PRB. Upon further examination of the data, this divergence was in spite of changes in rail transportation costs. Rail transport costs for CAPP coal increased by less than half a percent from 2007-2010. PRB rates for coal transportation increased by an average of 18 percent over the same period, effectively slowing the erosion of CAPP's relative competitiveness to PRB. Rather, mine prices account for virtually all of the change in final CAPP coal delivered prices between 2007 and 2010. In only three years, these higher prices for CAPP steam coal (especially in light of recent low natural gas prices) have eroded much of its domestic market potential.

 

See next section — Methodology

Deliveries from major coal basins

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Deliveries from:


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Map Source: U. S. Energy Information Administration

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In this report:

Background

Trends, 2001 - 2010

Methodology

Tables:

Estimated transportation rates for coal delivered to electric power plants, U.S. averages:

  1.   by rail
  2.   by barge & truck

Estimated average rail transportation rates for coal originating in:

  1.   Northern App. Basin
  2.   Central App. Basin
  3.   Southern App. Basin
  4.   Illinois Basin
  5.   Powder River Basin
  6.   Unita Basin

Estimated rail transportation rates for coal, basin to State:

  1.   STB (nominal $/ton)
  2.   STB (real $/ton)
  3.   STB (nominal $/ton-mile)
  4.   STB (real $/ton-mile)
  5.   EIA (nominal $/ton)
  6.   EIA (real $/ton)

Estimated barge transportation rates for coal, state to state:

  1.   EIA (nominal $/ton)
  2.   EIA (real $/ton)

Estimated truck transportation rates for coal, state to state:

  1.   EIA (nominal $/ton)
  2.   EIA (real $/ton)

Estimated rail transportation rates for coal comparing EIA and STB:

  1.   state to state - 2008
  2.   state to state - 2009
  3.   basin to state - 2008
  4.   basin to state - 2009

Estimated rail transportation rates for coal, state to state:

  1.   STB (nominal $/ton)
  2.   STB (real $/ton)
  3.   STB (nominal $/ton-mile)
  4.   STB (real $/ton-mile)
  5.   EIA (nominal $/ton)
  6.   EIA (real $/ton)

Note: STB = U.S. Surface Transportation Board Carload Waybill Sample