...not ta mention that Wall Street is late ta the game. Again...

A note out Friday from J.P. Morgan analysts points out how, beneath all this winters snow, railroads are emerging as a rare investment opportunity. Heres why.

Severe cold has sent natural gas prices soaring 45% since the start of the year, which in turn drove up the cost of generating electricity using gas-fired turbines. That prompted some utilities to fire up their old coal-burning units while those with newer, dual-fired power plants simply switched from pricy gas to cheaper coal to keep down generating costs.

This surge in demand has shaken coal prices from their long slumber. Since last summer, Powder River Basin coal prices are up about 19% and Central Appalachian prices are up nearly 25% as utilities replenish their stockpiles. The steepest price spike was seen in December, when the first blast of arctic air hit the East.

So whats this got to do with transportation? Simple. According to the Association of American Railroads, 70% of the coal mined in the United States gets to the power plant by rail. Its by far the biggest cargo carried on U.S. rails, accounting for 41% of all rail tonnage and 21.6% of rail gross revenue in 2012. And that was a slow year.

As for the lurking opportunity, J.P. Morgan analysts matter-of-factly write the improving domestic coal outlook is not yet reflected in the rail stocks.

They sees the best railroad plays opening in the East, with CSX Corp.  and Norfolk Southern Corp. NSC  sitting pretty since their networks serve the nations highest concentration of coal-burning utilities. Its also the part of the country hit hardest by the cold weather, with power generation in their service territories up 9.4% so far this year compared with 7.2% nationwide.

Omaha-based Union Pacific Corp. UNP is also hauling a lot more coal as utilities rebuild their supplies. In December, coal stockpiles in its service territory had dwindled on average to about a 50-day supply from a 77-day supply a year earlier while power generation in the region is up 5.4% just since New Year.

So far, however, railroad share prices are not keeping pace with gains in the coal market. Since the start of the year, CSX stock is down 4.6%, Norfolk Southern shares are down 2.2% and Union Pacific shares are up a mere 2%.

J.P Morgan argues that at some point, coal should provide a positive catalyst for these railroad stocks since it accounts for so much of their revenue. And right now might be the best time to get on board. And let's not forget BNSF, a wholly owned subsidiary of Berkshire Hathaway [BRK-B].

Jim Jelter

Thunderwagon5000 wrote:

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People should just stay home and burn wood for heat.

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 OK. Thanks.

Forgot the 'barge' thing... Lotsa crude from Gulf rigs are brought in ta refineries ashore via lightering barges. Every now and then...

Mississippi Oil Spill Highlights Risk of U.S. Oil Boom

Photographer: Andrew Burton/Getty Images

A barge crash that spilled enough oil to temporarily shut a stretch of the Mississippi River highlights the transportation risks of the U.S. energy boom just as regulators respond to several rail accidents involving crude.

A 65-mile portion of the river about 50 miles (80 kilometers) upstream from New Orleans reopened with restrictions yesterday as federal and state officials responded to a Feb. 22 spill, which stalled shipments of goods including grain and chemicals on the nations busiest waterway.

Were facing the imminent risk of a barge disaster or a rail disaster as more oil is shipped to the Gulf of Mexico for refining, Jonathan Henderson, a spokesman for the New Orleans-based Gulf Restoration Network, said by phone after attending a meeting with U.S. Coast Guard officials.

A surge in U.S. oil production, reflecting in part advances in drilling techniques, has unlocked millions of barrels of oil from geologic formations such as North Dakotas Bakken shale, reducing U.S. reliance on imports. It has also ignited a debate over how to safely get the oil to refineries after a series of rail accidents involving oil tank cars, including a July derailment that killed 47 in a Quebec city.

Backers of TransCanada Corp. (TRP)s proposed Keystone XL project from Alberta to the U.S. Gulf Coast have said expanding pipeline capacity would be the safest means to transport crude.

Shipments Rise

Barge and tanker shipments of crude from the Midwest to the Gulf Coast jumped from virtually nothing in 2005 to 21.5 million barrels in 2012, according to the U.S. Energy Information Administration. The U.S. Gulf received a record 4.9 million barrels of crude from the Midwest in October.

Were shipping four times more crude oil than we used to, and we havent seen a fourfold rise in incidents, Brigham McCown, a former director of the U.S. Pipeline and Hazardous Materials Safety Administration under President George W. Bush, said in a phone interview. We need all modes of transportation for crude shipments, he said.

A barge carrying light crude, like the type produced in the Bakken Shale, collided Feb. 22 with a tugboat on the river near Vacherie, Louisiana, about 50 miles from New Orleans, according to the U.S. Coast Guard. Photos from the incident show a gaping hole in the side of the barge.

About 31,500 gallons -- or 750 barrels -- spilled into the river, and so far, 1,021 gallons of oil and water have been recovered, Petty Officer Matthew Schofield, a Coast Guard spokesman, said in a phone interview. He said he didnt have details on the total amount of crude the barge was carrying, or where it originated.

Coast Guard

The Coast Guard said 29 vessels were backed up along the river during the shutdown.

Anne McCulloch, a spokeswoman for the American Waterways Operators, an Arlington, Virginia-based industry group, said in an e-mail yesterday that its members, which include tugboat and barge operators, are working with government agencies so that river commerce can proceed safely and efficiently.

Water transportation is the safest, most efficient means of transporting many essential commodities, including petroleum products, McCulloch said.

She said the growth in barge shipments has not led to an increase in spills. In fact, she said, we have seen an increase in the amount of oil carried on the water and a dramatic decrease in the amount of oil spills.

Keystone Pipeline

The Louisiana spill takes place amid debate over the Keystone XL pipeline, a $5.4 billion project that would ship crude from oil sands in Western Canada to the Gulf Coast for refining. Supporters, including the American Petroleum Institute, an industry group for producers including Exxon Mobil Corp. (XOM) of Irving, Texas, and Chevron Corp. (CVX) of San Ramon, California, have said the conduit will support thousands of jobs and move oil safely.

Sabrina Fang, an API spokeswoman, declined to comment on the Louisiana spill.

With the boom in U.S. oil production, the industry is increasingly relying on rail and barge shipments to get the crude to refineries. Oil shipments by train have jumped 400 percent since 2005, according to the Association of American Railroads.

States including California, New York and Maine are drafting emergency response plans after oil-train derailments, including the fatal crash in Quebec and a December explosion of 400,000 gallons of crude on a BNSF Railway Co. train in North Dakota.

Eddie Scher, a spokesman for the San Francisco-based Sierra Club, said oil companies need to be more careful in handling and shipping their product. Disasters including the 2010 Gulf of Mexico oil spill are not acts of God, he said in a phone interview. In every case, theyre companies cutting corners.

...and then this barge hit:http://abcnews.go.com/US/wireStory/oil-closes-orleans-port-part-miss-river-22642815