Is Warren Buffett's Railway Buy a Billion Dollar Bet on Big Coal?


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The initial reaction to news that the Oracle from Omaha was investing billions of dollars in BNSF railway was positive--Mike noted that it could lead to a number of positive developments: potentially more passenger rail lines, a higher profile for railroad transportation in general, and further investment in other rail lines from other finance big guns. But there's a downside to his purchase as well--the rail Buffett bought transports some 1/5th of America's coal. Is Buffett's investment therefore a bet that coal will need to be shipped into the foreseeable future?That's The New Republic's Bradford Plumer's take:

the BNSF railway serves a lot of coal fields in the West, including Wyoming's vast Powder River Basin, and hauls enough coal on its routes to supply about 10 percent of the electricity in the United States. So Buffett's essentially betting that coal's going to remain a major part of the U.S. energy mix for quite some time, even as the country moves to cut carbon emissions.
Does that mean Buffett doesn't think climate legislation would put a damper on one of the main economic drivers of his new railway? Essentially, yes--if and when the bill passes, it will come loaded with enough protections to ensure that coal will be around a while yet. As Plumer writes:
Is it crazy to bet on coal in the face of looming climate legislation? Eh, not really. As a new Greenpeace report points out, the House climate bill actually does quite a bit to ensure that coal has a bright future. There's $10 billion for research into capturing carbon emissions from coal-fired plants, plus billions more for deployment. And the bill ... will enable utilities to keep some of their older, dirtier plants chugging along for years to come. Environmentalists have been lobbying to change some of these provisions in the Senate, but Buffett seems awfully confident that won't happen.
Suddenly that $44 billion investment isn't looking so inspiring anymore . . .

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