FREIGHT RAIL & THE ENERGY INDUSTRY KEY FACTS

• Railroads account for 60 to 70% of ethanol movement.
• Each rail car carries enough coal to power 20 homes for an entire year.
• Over 99.99% of hazmat shipments arrive without incident.

Railroads have helped power America since its earliest days. In fact, the first big haul for America’s first major railroad was transporting coal from Western Maryland and Virginia to Baltimore. In the years since, the role of railroads in the energy industry has continued to grow. As energy sources and consumption patterns have changed, the freight rail industry has adjusted to customer needs. This allows them to continue safely and efficiently moving energy products.

Freight railroads safely transport crude oil.

Crude oil is a fundamental component in countless products. It ranges from transportation fuels and plastics to everyday items like polar fleece jackets, toiletries, and medicines. Given its pivotal role, railroads are critical to the nation’s crude oil logistics. They leverage their expansive network and adaptability.

As crude oil is classified as a hazardous material, the freight rail industry continuously updates its hazmat operations to ensure its safe transportation. Rigorous employee training on hazmat handling and annual instruction for tens of thousands of first responders underscore their commitment to safety. Additionally, the industry embraces innovative technologies. This includes route analysis software and wayside sensors to enhance track inspections and security measures. Because of this unwavering dedication to safety standards, over 99.99% of hazmat, including crude oil, reaches its destination without incident.

To further enhance safety, railroads advocate for robust tank car standards. They support federal regulations that mandate higher-grade steel, enhanced thermal protection, and improved valves and fittings. Additionally, thicker tanks are required. Per carload, the hazmat accident rate is at its lowest ever and down 80% since 2005 based on preliminary data.

Crude Oil Production & Rail Shipments

The “shale revolution” initially led to a decline in U.S. crude oil production from 9.6 million barrels per day in 1970 to five million barrels per day in 2008. Yet, with the rise of shale oil, production surged to 12.3 million barrels per day in 2019. It settled at 11.3 million in 2020. Notably, Texas, North Dakota, New Mexico, Oklahoma, and Colorado played key roles in this increase.

Historically, pipelines dominated crude oil transportation, but increased production surpassed pipeline capacity growth, notably in North Dakota. Railroads bridged this gap, with originated crude oil carloads on U.S. Class I railroads skyrocketing from 9,500 in 2008 to 493,146 in 2014. Although new pipelines led to a decline, carloads rebounded in 2018 and 2019. In 2014, crude oil comprised 1.6% of originated and 1.7% of terminated carloads. By 2021, these shares dropped to 0.3% and 0.6%, respectively, reflecting changes in transportation dynamics. In 2014, railroads handled around 11% of U.S. crude oil production at its peak.

[1] “Originated” carloads are loaded carloads beginning a rail journey; “terminated” carloads are loaded carloads completing a rail journey. U.S. Class I originations do not equal U.S. Class I terminations because some crude oil that originates on U.S. Class I railroads is terminated by U.S. short line railroads or railroads in Canada. Likewise, some crude oil that terminates on U.S. Class I railroads originates on railroads in Canada or on U.S. short line railroads.

Ethanol

Ethanol — a renewable fuel made from corn and other plant materials — is an important commodity for U.S. railroads. The U.S. ethanol industry — and railroad carloads of ethanol — has grown tremendously. This growth occurred since methyl tertiary butyl ether (MTBE), a gasoline additive, was banned from use in 2006. Coupled with high oil and low corn prices, the ban gave rise to ethanol’s replacement of MTBE as a fuel additive. Since then, Government policies requiring renewable and biofuels have only strengthened the demand for this energy resource.

Because of its alcohol content, ethanol cannot move in oil pipelines, making railroads the chief mode of transport for this commodity. Each U.S. Class I railroad transports ethanol, with some serving several dozen plants. Railroads account for 60 to 70% of ethanol movement. An estimated 15 to 20% of ethanol rail movements originate on short line and regional railroads. This is not surprising, given the rural nature of many short lines and much of America’s ethanol production. Ethanol production is concentrated in the Midwest, where most of the corn used in ethanol production is grown. But many of the major markets for ethanol are on the East Coast, California, and Texas.

Coal

Coal remains a key commodity, accounting for 28% of total rail tonnage and 12% of revenue, despite significant declines from its 2008 peak. U.S. coal production in 2023 was 577 million tons, with 90% used for electricity and industrial purposes and the rest exported for steelmaking and power generation. Each rail car carries enough coal to power 20 homes for an entire year.

Shifts in energy markets have reduced coal’s role in electricity generation, which fell to 16% in 2023. This is down from 52% in the 1990s, as natural gas and renewables gained share. Nonetheless, nearly 75% of coal shipments are delivered by rail. This highlights the crucial role of freight railroads in nationwide coal distribution. While coal volumes have declined, it remains a vital rail commodity and a significant part of the energy supply chain.