Warren Buffett Goes Long Coal With BNSF… No, Wait…

Obligatory Train Photo

Is Billionaire Warren Buffett’s $34 billion investment in BNSF railroad actually an investment in coal as the energy of the future?

Burlington Northern Santa Fe railroad carries 1/5th of the nation’s coal, principally from the Rocky Mountain West, which contains the Powder River Basin’s low sulfur coal, to the Midwest.

Moving coal accounted for Вј of BNSF’s revenue through Q3 of 2009.

The Vine’s Bradford Plumer argues that Buffett, knowing the importance of coal for the railroad’s revenue, is thus betting that coal’s going to remain a major part of the U.S. energy mix for quite some time…”

Reuters’ John Kemp says much the same.

The Economist plays both sides, arguing that Buffett is doubling down on the carbon-intensive economy. Wait, no, maybe heв’s planning on “weaning BNSF off coal and moving into other freight areas…”

You can see can see how quickly this discussion devolves into incoherence without any guidance from the Oracle of Omaha himself.

And the problem with oracles, as Julius Caesar discovered, is that they’re awfully vague.

Let’s look at the evidence.

The Kerry-Boxer climate change bill invests pretty heavily in carbon capture and storage (CCS), to the tune of about $10 billion a year, So it appears as if the black lumpy stuff has a role to play yet in America’s energy future.

But Buffett himself said nothing about the equisitely complicated legislation.

He made general statements about the importance of rail in Americaв’s economic future in Berkshire Hathaway’s press release on the deal and said, basically, nothing at all to the New York Times’ DealBook.

(As an aside, GER, a former resident of Wyoming, can attest that those mile-long coal trains winding their way from the Powder River Basin through the high plains of Wyoming are a 19th century wonder to behold.)

There are lots of other reasons to bet on railroads: crumbling road and bridge infrastructure and high fueld prices makes trucking seem less viable; Asia craves coal, so maybe it’s really a bet on China’s energy future.

In any case, I would say that this “Buffett goes long coal” argument is a little thin right now.

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