Marcellus Shale Gas Exploration, Ethanol Production Net New-Business Growth for Norfolk Southern

by Julie Sneider (Progressive Railroading) ...Both ethanol production and Marcellus gas exploration have been among NS’ fastest-growing traffic opportunities — ethanol over the past decade and the shale-related activity just since 2008 — as a result of U.S. efforts to develop new or alternative sources of domestic energy, NS execs say.

They believe the U.S. appetite for developing domestic sources will intensify — both for clean environment (natural gas is a cleaner source of energy than petroleum) and national security reasons. And that desire for cleaner-burning fuels and energy independence from foreign oil will continue to feed the shale and ethanol opportunities.

...While NS executives’ enthusiasm over the Marcellus Shale gas exploration is understandable, shale-related moves have a way to go before they match ethanol production-related moves, says Toby Kolstad, president of Rail Theory Forecasts L.L.C.

As annual ethanol production zoomed from 2 billion gallons to 13 billion gallons during the past decade, the railroad industry responded by building 35,000 rail cars to handle the growth, he says.

...Of the 13 billion to 14 billion gallons of ethanol currently produced annually in the United States today, NS moves about 2 billion gallons of it on its network, says John Kraemer, NS group vice president-agriculture, fertilizer and consumer products. Even though the growth rate in U.S. ethanol consumption and production at the current blend level of 10 percent has leveled off, NS executives believe there still is room for growth in the Class I’s ethanol business.

...The number of NS’ ethanol carloads rose 124 percent between 2000 and 2005, and soared 226 percent between 2005 and 2010, according to information NS executives shared at an investor event in June. READ MORE