Turbulent Transports: The Greening of the Railroads
Buffett says rail is environmentally friendly, but look inside the cars for evidence to the contrary.
Warren Buffett's decision to buy the 131-year-old Burlington Northern Santa Fe (BNI) railroad is the biggest bet of his career, one which he called an all-in wager on the economic future of the United States. Earlier this week, federal antitrust regulators gave Berkshire Hathaway (BRK.A) the green light to purchase the 77% of the company it didn't own for $26.4 billion.
In announcing his decision, Buffett contended that railroads are the transportation for the future because they're generally more efficient and greener than trucks.
"It is the most efficient way of moving goods in the country," Buffett said of railroads in an interview with Charlie Rose. "It is the most environmentally friendly way of moving goods, and both those things are going to be very important." Railroads, he said, are "far, far more attractive in terms of global warming than using trucks, for example."
Buffett's environmental appeal makes sense. That said, for all their efficiency, railroads haul huge quantities of coal -- one of the dirtiest products out there. For example, about 10% of the electricity produced in the US comes from coal hauled by Burlington Northern, the railroad says.
"This is a $34 billion dollar bet that coal will remain the centerpiece of American energy policy in the future," Frank O'Donnell, the president of environmental group Clean Air Watch, wrote in a note to reporters. "Buffett clearly believes that coal use will remain strong."
So which is it: green or not? The answer, not surprisingly, lies somewhere in the middle.
The railroad industry has been making an environmental pitch to capture more freight volume from trucks. As Congress considers how to modernize the nation's infrastructure, the industry is jockeying for center stage. According to Burlington Northern's website, railways are four times more fuel efficient than trucks. The company says, "American railroads move 40 percent of our nation's freight, but account for just 2.2% of all transportation-related greenhouse gas emissions."
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter