Access vs. Isolation

Preserving Appalachia’s Rail 

Connectivity in the 21st Century: Part Two

Prepared for the Appalachian Regional Commission March 2017
ABOUT THIS DOCUMENT

The report provided here is an outgrowth of discussions and activities originally undertaken by a 

volunteer group of policy-makers, scholars, and transportation professionals during the fall of 2015. 

Participants have freely contributed their time, energy, and considerable talents toward the 

preservation of freight transportation capacity in Appalachia. Nonetheless, the report’s content does 

not necessarily reflect the opinions of participants or the organizations they represent. A partial list 

of group members and their affiliations includes:

Dr. David Clarke, The University of Tennessee Dr. Craig Philip, Vanderbilt University

Matt Dietrich, Ohio Rail Development Com. Dr. Jennifer Shand, University of Cincinnati

Dr. Ted Grossardt, University of Kentucky Dr. Michael Smith, Western Carolina, Univ.

Liza Joffrion, Tennessee DOT Kent Sowards, Marshall University

Laura McNichol, Watco Companies
Access vs. Isolation: 

Preserving Appalachia’s Railway 

Connectivity in the 21st Century

For Further Information

CONTACT

Mark Burton1

865–974–4358

mburton3@utk.edu

 1 Mark Burton is a Research Associate Professor of Economics at the University of Tennessee and 

Director of Transportation Economics at the University’s Center for Transportation Research. 

Prior to returning to Tennessee, Dr. Burton was a faculty member at Marshall University in 

Huntington, West Virginia.
Contents

Exec Sum

The Background and Current Setting......................................................... ES-1

Looking to the Future................................................................................. ES-4

Framing a Public Sector Response............................................................. ES-4

OneINTRODUCTION .....................................................................1.

TwoCOAL: PRESENT AND FUTURE ...............................................3.

A Summary of Market Basics......................................................................... 3.

A Cyclical Bust that Doomed Aggressive Strategies...................................... 7.

The Future of Appalachian Coal: A Summary................................................ 8.

ThreeFREIGHT IMPLICATIONS .................................................10.

Appalachian Coal: Where It’s Mined, Where It’s Consumed....................... 11.

How Appalachian Coal Moves ..................................................................... 13.

Four LOOKING AHEAD...............................................................17.

The Fundamental Economic and Policy Landscape ..................................... 17.

The Ongoing Transition and It’s Already-Observed Effects........................ 18.

The Observed Transportation Sector Response ............................................ 20.

Predicting the Future of Appalachian Coal Production ................................ 22.

Long-Run Implications for Regional Freight Mobility................................. 23.

Incentives for and Methods of Network “Rationalization”........................... 27.
FivePUBLIC SECTOR RESPONSE..................................................32.

Public Sector Tools....................................................................................... 33.

Best Practices and Lessons Learned.............................................................. 38.

SixFINAL THOUGHTS...................................................................42.
Figures

Figure ES-1 – Domestic U.S. Coal Production ..................................................... ES-2.

Figure ES-2 – Average Weekly U.S. Coal Cars Loaded....................................... ES-3.

Figure 1 – Shares of Coal and Natural Gas in Electricity Generation......................... 4.

Figure 2 – Inflation Adjusted Natural Gas Prices and Marketed Gas Production....... 5.

Figure 3 – Vintage of Operational Coal-Fired Generating Capacity........................... 6.

Figure 4 – Nominal Benchmark Prices for Metallurgical Coal................................... 8.

Figure 5 – 2014 Coal Production in the Eastern U.S................................................. 12.

Figure 6 – 2014 Consumption of Eastern Coal.......................................................... 13.

Figure 7 – Simplified Regional Waterway and Railroad Networks.......................... 14.

Figure 8 – 2015 Generating Capacity Retirements.................................................... 19.

Figure 9 – Class I Railroad Response to Diminished Coal Traffic ........................... 21.

Figure 10 – Announced Coal-Fired Plant Retirements.............................................. 22.

Figure 11 – Current or Potential Class I Retrenchments........................................... 26.
Tables

Table ES-1 – CSX and NS Responses to Diminished Coal Volumes ................... ES-3. 

Table 1 – 2014 Coal Production in the Eastern U.S. ................................................. 11. 

Table 2 – Summary of Regional Waterway and Railroad Infrastructures ................. 15. 

Table 3 – Modes Used for 2014 Regional Coal Deliveries ....................................... 15. 

Table 4 – Coal’s 2014 Share of Regional Waterway and Railroad Traffic ............... 16. 

Table 5 – U.S. Electricity Generation ........................................................................ 19. 

Table 6 – Coal’s Share of Appalachian Navigation System Component and 

Tributary 2014 Traffic ............................................................................... 25. 

Table 7 – Appalachian Region Short-Lines ............................................................... 30. 

Table 8 – Short-Line Holding Company Presence in Appalachia ............................. 30. 

Table 9 – Indicators for State-Level Short-Line Programs ........................................ 35
Page 1

One INTRODUCTION

eginning in roughly 2015, an accelerated transition of electricity generation

from coal to alternative fuels combined with severe cyclical market 

disruptions to produce what has been a precipitous decline in domestic U.S. 

coal production and corresponding financial ills for U.S. coal concerns. The nation’s 

largest coal producers were quickly drawn into bankruptcy, many mining operations 

ceased, and, for a time, the flow of coal from many mining regions slowed to a

comparative trickle. The resulting economic upheaval has spanned much of the coalproducing United States, but the effects have been greatest in Appalachia.

As Appalachian coal producers staggered under rapidly declining demands, the 

number of unanswered questions grew quickly. How far, how fast, and for how long 

will the slump in coal production go? Which of the changes are transient and which 

are lasting? What portion of coal-related commerce will survive? And specifically 

within the transportation sector, how will an ongoing reduction in coal activity affect 

the future availability and affordability of freight transport for other goods to and 

from Appalachian communities?

In the fall of 2015, a concerned group of transportation and economic development 

professionals voluntarily began to gather and process the small amount of

information then available to address the freight-related questions. In January of 

2016, the results of this initial freight inquiry were presented to the Appalachian 

Regional Commission (ARC).1 This early work helped to carefully frame relevant 

issues but answered few long-run questions.

Since the initial assessment, the coal-related transportation landscape has continued 

to change. Class I railroads have begun to respond to diminished coal traffic by idling 

or downgrading specific coal-dependent facilities and routes and by curtailing a 

measurable amount of coal-related train operations.2 At the same time, coal 

 1 Mark L. Burton, et al, “Access vs. Isolation: Preserving Appalachia’s Railway Connectivity in the 21st

Century,” unpublished monograph, Center for Transportation Research, the University of Tennessee, 

January 2016.

2 “Class I” refers to a federal distinction that divides common carrier railroads into three classes based on 

annual revenues. There are currently seven Class I railroads operating in the U.S. These include, BNSF, 

Canadian National, Canadian Pacific, CSXT, Kansas City Southern, Norfolk Southern, and Union Pacific. 

Short-line and terminal railroads are classified as Class II and Class III. There are currently approximately 

550 Class II and III railroads in the U.S.

B
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producers have reorganized under bankruptcy protection, coal stockpiles have 

diminished, and a small but important share of lost coal production has returned to 

the Region.

As 2016 draws to a close, more information is available. The reorganization of 

domestic U.S. coal production makes it increasingly possible to distinguish between 

the long-run utility sector transition away from coal and the more temporary effects 

of cyclical disruptions. At the same time, the Region’s Class I and short-line railroads 

seem to have developed response strategies that reveal a concern for capacity 

preservation even as they work to cut short-run costs. Finally, through its 

Partnerships for Opportunity and Workforce and Economic Revitalization

(POWER) initiative, the Appalachian Regional Commission is supporting dozens of 

local regional efforts that, when combined with individual state activities, represent a 

meaningful first step toward broader regional economic stabilization.

The current document has two purposes. The first is to update, catalogue, and 

describe ongoing changes in Appalachian coal production and the corresponding 

responses of the Region’s freight providers. As we evaluate current events, we will 

distinguish (as much as possible) between temporary and lasting outcomes and offer 

qualitative forecasts of future conditions. 

Our second purpose is to explore potential local, state, and regional strategies that 

might effectively promote continued access to affordable freight transportation 

services. This portion of the work includes a summary of existing freight programs in 

Appalachian communities, a discussion of freight strategies used in other parts of the 

U.S., and a purposed focus on past, freight-related success stories within the 

Appalachian Region.

We have organized the remainder of this report as follows: Section 2 provides an

overview of coal production, coal industry restructuring, and production outlooks. 

Section 3 describes where eastern coal is produced, where it is consumed, and how it 

is currently moved. In Section 4, we explore the implications of changing coal 

volumes on freight transport in Appalachia, including the railroad industry’s 

response so far and what this response reveals about likely future railroad actions.

We also consider the implications of reduced coal volumes on other surface freight 

modes. Section 5 summarizes state-level freight programs currently available in

Appalachia and an overview of additional program strategies in use outside the 

Region. Final thoughts are provided in Section 6.
Page 3

Two COAL: PRESENT AND FUTURE

nergy markets are global, complicated, and fickle. Therefore, understanding 

the long-run outlook for the movement of Appalachian coal requires a focus 

on market basics and a stubborn insensitivity to headline-grabbing, short-run 

disturbances. In that light, we first attempt to summarize the long-run basics that 

will continue to define the markets for Appalachian coal. Once this is done, we will 

turn to descriptions of the market disruptions that have further perturbed 

production and transportation activities, albeit temporarily.

A SUMMARY OF COAL MARKET BASICS

Distilling complex international fuel and energy markets to arrive at a few basics 

requires many simplifications. Our intent here is to provide readers with a workable 

foundation for understanding current and foreseeable trends in the transportation of 

Appalachian coal.

BASIC NO. 1 For two or more generations, the majority of coal consumed in the 

U.S. has been “steam coal” used to generate electricity.

Historically, the U.S. has used coal for a variety of industrial purposes, including but 

not limited to electricity generation.3 As recently as 1965, barely half of the coal 

consumed in the U.S. was used for generation. However, since then, the electric 

utility share of domestic coal consumption has climbed consistently. By 1980, the 

utility share had reached 81 percent nationally; by 2000, this share was 91 percent; 

and in 2009, at the same time that coal’s contribution to electricity generation 

peaked, nearly 94 percent of all coal consumed in the U.S. was burned to produce 

electricity.4 Of all the major coal-producing regions, Appalachia is the least 

dependent on domestic utility consumption, but this consumption still accounts for 

roughly 70 percent of Appalachian coal output.

 3 In 1949, the year in which the EIA series begins, nearly 15 percent of all U.S. coal consumption was by the 

Transportation Sector, presumably as fuel for steam locomotives.

4 While the numbers reported in the text are national in nature, similar values emerge when the analysis 

included only those states that are most likely to burn Appalachian coal. For 2014, the national utility share 

of coal was roughly 93 percent. In those regions most likely to consume Appalachian coal the utility total 

represented 91 percent of total consumption. All data were obtained from the U.S. Energy Information 

Administration. See http://www.eia.gov/coal/data.php#consumption

E
Page 4

BASIC NO. 2 Both the absolute quantity of coal used in electricity production and 

coal-fired generation’s share of total production have continued to 

fall since 2001. For the most part, reduced coal-fired generation has 

been replaced with power generated through the consumption of 

natural gas.

Since 2001, coal’s share of total domestic electricity production has fallen from 51 

percent t0 33 percent in 2015. The actual amount of electricity produced from coal 

peaked in 2007 at just over 2 billion megawatts. 

During this same period the natural gas share of domestic electricity production has 

nearly doubled from 17.1 percent in 2001 to 33 percent in 2015. Indeed, early 

estimates suggest that natural gas has overtaken coal as a source of electricity

generation. The contribution from other fuel sources (both renewable and nonrenewable) has grown only slightly, increasing from 32 percent in 2001 to 34 percent 

in 2015. Fuel shares are shown in Figure 1.

Figure 1 – Shares of Coal and Natural Gas in Electricity Generation

Source: Energy Information Administration

BASIC NO. 3 While attributable to many factors, the transition from coal-fired to 

gas-fired electricity generation has been facilitated by increased 

domestic natural gas production that has helped keep both natural 

gas and down-stream electricity prices stable.

Perhaps the single biggest energy story of the new century is the emergence of 

hydraulic fracturing (fracking) as a prominent means of affordably recovering 
Page 5

natural gas and petroleum reserves that were previously deemed unrecoverable.5 In 

the northern prairie states and in western Canada, fracking has been used to unlock 

vast crude petroleum reserves. However, in the Southwest and, particularly, in the 

eastern U.S., fracking’s energy contributions are primarily in the form of natural gas. 

In combination, these additional supplies have created what some are calling an 

energy renaissance. 

Within the current context, increased (and still expandable) supplies of natural gas 

have allowed electricity producers to move relatively quickly toward the replacement 

of coal without causing a lasting increase in natural gas prices or in the downstream 

price of electricity. Figure 2 depicts domestic natural gas prices and output between 

1997 and 2015.

Figure 2 – Inflation Adjusted Natural Gas Prices and Marketed Annual Gas Production

Source: Energy Information Administration. Price=Average Henry Hub Spot Price

 5 Hydraulic fracturing has been practiced in the U.S. for more than a century. However, the combination of 

“slick water” fracking and horizontal drilling emerged in West Texas in the late 1990s.
Page 6

BASIC NO. 4 The pace of the ongoing transition from coal-fired electricity 

generation is largely dictated by the asset lives of existing coal-fired 

facilities, how quickly these facilities can be affordably retired, and 

the extent to which federal policies further encourage a reduced 

dependence on coal.

Coal-fired generating plants represent billions of dollars of utility firm investments. 

Accordingly, utility owners will be reluctant to retire these plants prematurely. Thus, 

information describing the design lives of the existing coal-fired facilities could, to 

some degree, help predict when, where, and how much coal will be needed in coming 

decades.

Figure 3 depicts the startup dates of the coal-fired generating capacity currently 

available for operation. Nearly two-thirds of this capacity entered service between 

1965 and 1984—and is now between 30 and 50 years old. If we undertake casual 

calculations that assume an average 50–70 year facility life (without substantial 

reinvestment), assume coal consumption rates that mirror electricity outputs, and 

assume no new coal-fired facilities will be built, then these data suggest that steam 

coal could account for as little as 17 percent of electricity production by 2036.6

Figure 3 – Vintage of Operational Coal-Fired Generating Capacity

Source: Energy Information Administration

 6 This is, by every measure, a gross calculation. It does not consider past or potential investments that may 

extend the lives or improve the efficiency of existing facilities; it does not consider adjustments to the 

frequency or extent of coal-fired facility dispatch; and it ignores the effects of future regulation or changing 

input prices on potential retirements. 
Page 7

BASIC NO. 5 Appalachian coal is less dependent on domestic electricity production

and more dependent on export markets than coal produced elsewhere 

in the U.S. This export dependence is expected to increase with or 

without implantation of the EPA’s Clean Power Plan (CPP).

The characteristics of the high-grade, bituminous coal produced in Central 

Appalachia make it suitable for both electricity generation and for metallurgical 

applications. This versatility, combined with proximity to eastern deep-draft ports 

has allowed Appalachian producers to substitute export opportunities for declining 

domestic demands. This pattern is expected to grow in its importance to regional 

production. Indeed, within its forecasts, the most recent release of the U.S. 

Department of Energy’s Annual Energy Outlook suggests:

Production of coal in the Appalachian region declined sharply before 2015 as 

domestic coal buyers shifted from Appalachian steam coal toward other coal 

sources or to other fuels for economic reasons. The Appalachian region remains a 

major source of metallurgical coal, whose markets are not directly affected by the 

CPP. With or without the CPP, Appalachia’s producers depend on sales of both 

metallurgical and steam coal in international markets.7

As discussed below, this dependence on international markets affects coal-related 

vulnerabilities for Appalachia.

A CYCLICAL BUST THAT DOOMED AGGRESSIVE STRATEGIES

The seemingly sudden collapse of coal that made headlines in 2015 and that

extended through much of 2016 has its roots in the long-run trends described above, 

but the downturn was more rapid and more daunting because of a coincident turn in 

international markets and failed strategies by U.S. producers. 

As the U.S. economy waddled and wobbled toward economic recovery in the late 

2000s, renewed growth was not accompanied by a rebound in steam coal volumes. 

At the same time, however, the international market for metallurgical coal was

booming. In response to this perceived opportunity, large U.S. coal producers 

leveraged existing assets and invested heavily in additional metallurgical coal 

capacity.8

Unfortunately, these investments were ill-timed. The international price for 

metallurgical coal peaked in 2011—the same year as many of the U.S. firm

investments—and began the precipitous and prolonged five-year slide depicted in 

 7 See, U.S. Department of Energy, Annual Energy Outlook: 2016, Released August 2015, p. ES-3.

8 In 2011, Alpha Natural Resources spent $7 billion to acquire Massey Energy, Arch Coal purchased the 

International Coal Group for $3.4 billion, and Peabody Energy acquired Australian producer MacArthur 

Coal for $5.2 billion.
Page 8

Figure 4. While not quite so dramatic, the decline in U.S. export coal followed 

essentially the same pattern.

Figure 4 – Nominal Benchmark Prices for Metallurgical Coal

 Source: Bloomberg

By 2015, the heavy debt incurred to acquire new metallurgical coal capacity 

combined with a tumble in international metallurgical coal prices and volumes—and 

the steady, ongoing decline in domestic steam coal markets—placed nearly every 

major U.S. coal producer in an untenable financial position. 

Alpha Natural Resources filed for Chapter 11 bankruptcy protection in August of 

2015; Arch Coal filed for similar protection in January of 2016; and finally, Peabody 

Energy—the world’s largest coal producer—filed for bankruptcy protection in April of 

2016. In total, the aggregate share value of U.S. coal producers fell from a 2011 high 

of $78 billion to a 2016 total of just over $12 billion.9

THE FUTURE OF APPALACHIAN COAL: A SUMMARY

Since mid-2016, the spot price of metallurgical coal has rebounded to more than 

$200 per ton, carried higher by increases in global steel production. At the same 

time, U.S. coal producers have emerged from reorganization, largely intact, and 

 9 To review the recent financial troubles of domestic coal producers, see: “Coal Miner Alpha Natural 

Resources Files for Bankruptcy,” Bloomberg, August 3, 2015, 

http://www.bloomberg.com/news/articles/20150803/coalmineralphanaturalresourcesfilesforbankruptcy; 

Arch Coal Files for Bankruptcy in Latest Blow to U.S. Miners Bloomberg, January 16, 2016, 

http://www.bloomberg.com/news/articles/20160111/archcoalfilesforbankruptcyreaches45billiondebtdeal; 

and Coal Slump Sends Mining Giant Peabody Energy Into Bankruptcy, Bloomberg, April 13, 2016, 

http://www.bloomberg.com/news/articles/20160413/peabodymajorityofitsusentitiesfileforchapter11
Page 9

existing inventories of steam coal have been reduced to more typical levels. By most 

appearances, the sharp, cyclical downturn that plunged coal producers into financial 

peril is easing. However, the passing of the immediate crisis does little to change the 

underlying trends or their long-run implications for the transportation of 

Appalachian coal.

For more than two generations, Americans have supported measures to improve air 

quality. The consumption of coal has been and remains a key target in those efforts. 

More recently, the ability to substitute natural gas for coal in the generation of 

electricity has made the fight against coal more affordable. Unless natural gas prices 

increase, coal volumes will continue to fall as fast as coal-fired generating capacity 

can be exhausted and retired. Surges in international demands may occasionally 

blunt this decline, but the overall outcome will change little. Coal’s role as a freight 

staple, particularly in the eastern U.S., is fading.
Page 10

Three FREIGHT IMPLICATIONS

he consumption of coal and the evolution of freight transportation in the U.S. 

have been inexorably linked for three centuries. In America’s colonial period, 

coal imports and exports often moved as ballast aboard sailing vessels. By the 

early 19th century, a desire to move coal and grain motivated the development of 

canal systems throughout the northeast and old Midwest. Later, particularly in 

eastern Pennsylvania and other parts of the Mid-Atlantic, the growing industrial use 

of coal and its value as an export fed the development of the earliest U.S. railroads.10

The commercial codependence of coal and freight transport survived throughout the 

20th century and, until very recently, seemed destined to endure indefinitely. Indeed, 

as recently as 2014, coal accounted for 39 percent of all U.S. railroad tonnage and 19 

percent of Class I railroad freight revenues.11 Similarly, in 2014, coal constituted 

roughly 32 percent of all inland waterway traffic and on the Ohio River represented 

nearly half (47 percent) of all commercial 2014 traffic passing through system 

locks.12

However, based on the long-run trends described in the previous section, the nature 

and extent of the commercial relationship between coal and freight transportation is 

almost certain to change. These changes will affect the freight carriers’ operations in 

every region of the U.S. and, in turn, affect the availability and pricing of freight 

services for non-coal freight customers. In the remainder of the current section, we 

focus on freight in Appalachia, beginning with a description of the status quo.

.

 10 For a thorough discussion of early freight traffic in the U.S., see, Albert J. Churella, The Pennsylvania 

Railroad, Volume 1: Building an Empire, 1846-1917 (American Business, Politics, and Society), University 

of Pennsylvania Press, 2012.

11 See Association of American Railroads, Analysis of Class I Railroads (various years).

12 For system tonnage, see, U.S. Army Corps of Engineers, Waterborne Commerce of the United States 2014, 

Part 2, p. 223. For lock statistics see, U.S. Army Corps of Engineers, Lock Use Performance and 

Characteristics, Public Lock Commodity Report (Calendar Years 1999-2015).

T
Page 11

APPALACHIAN COAL: WHERE IT’S MINED, WHERE IT’S CONSUMED

Again, markets for fuel and energy are global. Thus, constructing and relying on 

more limited geographic boundaries to simplify our analysis must be done carefully. 

Nonetheless, we confine our current review to coal produced and consumed in the 

United States, east of the Mississippi River. Even so, it will sometimes be necessary 

to include descriptions of other domestic and international influences. Table 1 

summarizes 2014 coal production in 11 eastern states. Counties within nine of these 

11 states lie within the Appalachian Region. Active coal mines and the more general 

coal-producing areas are depicted in Figure 5.

Within the region considered here, coal production is dominated by West Virginia, 

Kentucky, Pennsylvania, Illinois, Indiana, and Ohio. All of the West Virginia and 

Pennsylvania output and most of the coal produced in Kentucky are associated with 

the Appalachian Region, while Illinois, Indiana, and western Kentucky coal is from 

the Illinois basin. In total, the coal shown here represented roughly 40 percent of all 

domestic U.S. production in 2014.

Table 1 – 2014 Coal Production in the Eastern U.S.

PRODUCTION

Geographic 

Unit

2014 Coal 

Production 

(Tons in 

Thousands)

2014 Share of 

U.S. 

Production

2014 Export 

Volume 

(Tons in

Thousands)

Share of Total 

2014 U.S. 

Exports

Export Share of 

2014 State 

Total

Alabama 16,363 1.6% 12,049 12.4% 73.6%

Georgia - - - - -

Kentucky 77,335 7.7% 3,293 3.4% 4.3%

Maryland 1,978 0.2% 0.0% 0.0%

Mississippi 2,625 0.3% - - -

North Carolina - - - - -

New York - - - - -

Ohio 22,252 2.2% 101 0.1% 0.5%

Pennsylvania 60,910 6.1% 5,323 5.5% 8.7%

South Carolina - - - - -

Tennessee 839 0.1% - - 0.0%

Virginia 15,059 1.5% 6,748 6.9% 44.8%

West Virginia 112,187 11.2% 29,250 30.1% 26.1%

ARC States 309,548 30.7% 56,764 58.4% 18.5%

Delaware - - - - -

Florida - - - - -

Illinois 57,969 5.8% 10,170 10.5% 17.5%

Indiana 39,267 3.9% 85 0.1% 0.2%

Michigan - - - - -

New Jersey - - - - -

Region Total 406,784 40.4% 67,019 68.9% 16.6%
Page 12

US Total 1,000,049 100.0% 97,257 100.0% 9.7%

Source: Energy Information Administration

Figure 5 – 2014 Coal Production in the Eastern U.S.

 Source: Energy Information Administration

On average, roughly 90 percent of domestically produced coal is consumed within 

the U.S., mostly in the production of electricity. However, for Appalachian coal, 

exports play a more important role. Approximately 25 percent of all output from the 

study region moves to international markets, much of it as metallurgical coal. These 

exports are dominated by high-quality central Appalachian bituminous coal that 

moves primarily through Virginia ports and Alabama coal shipped via Mobile.

The remainder of the study region coal is shipped to consumers who are generally 

located in or relatively near the producing states. Figure 6 summarizes coal 

shipments from the study region states and also includes the volume of western coal

consumed by the receiving states.

Together, these patterns of production and domestic consumption, export volumes,

and port locations define the movement of coal throughout Appalachia and the 
Page 13

eastern U.S. The next task is to explore how coal is currently moved between where it 

is produced and where it is used.

Figure 6 – 2014 Consumption of Eastern Coal

Source: Energy Information Administration

HOW APPALACHIAN COAL MOVES

Much of the Region’s coal is consumed relatively close to where it is mined and 

nearly all of (domestic) consumption is east of the Mississippi River. When distances 

are sufficiently short (less than 100 miles) and volumes are small, coal is moved by 

truck. When volumes are large and inland navigation is feasible, coal moves by 

barge. Most often, however, coal moves by rail in unit trains that often operate 

directly between “prep” plants and electric generating facilities or, in the case of 

exports, deep-draft ports.

Both Kentucky and West Virginia have state designated coal-haul roadway systems 

designed to accommodate loaded coal trucks. In addition to these systems, the

general consensus is that coal truck travel is both possible and evident throughout 

the coal producing region wherever there are roadways of any form. Both barge and 

railroad transport are different. 

Private sector barge owners and towing companies operate on navigable waterways 

as determined by the U.S. Coast Guard on a system that is designed, constructed, and 
Page 14

maintained by the U.S. Army Corps of Engineers (Corps). On most reaches of these 

waterways, maintaining adequate water depth depends on establishing navigation 

pools created by dams that can be transited through navigation locks.13 With very 

few exceptions, railroad infrastructure is privately owned by rail carriers who create, 

maintain, and operate freight rail systems. A thumbnail sketch of mainline railroad 

trackage and main-stem waterway system components is provided in Figure 7. The 

extent of these systems within the Region is summarized in Table 2.

Figure 7 – Simplified Regional Waterway and Railroad Networks

 Source: Center for Transportation Research

Table 3 provides a summary of the freight transportation modes used to deliver 2014 

coal to final destination states. Table 4 reverses the analytical lens and depicts the 

importance of coal traffic as a share of overall freight activity for both rail and barge. 

Together, these data make clear the rigid interdependence that has historically 

existed between coal production and freight transportation. Focusing on West 

 13 Only two major waterway segments are devoid of locks and dams. These are the Missouri River below the 

head of navigation near Council Bluffs, Iowa to its confluence with the Mississippi and the lower Mississippi 

River for its entirety below St. Louis.
Page 15

Virginia, Kentucky, Pennsylvania, and Ohio, in 2014, 87 percent of all regional coal 

shipments were delivered by rail or barge. At the same time, coal traffic accounted 

for 47 percent of all locked tonnage on the Ohio River main stem and 68 of all rail 

shipments originating in these four states. At least historically, without the ability to 

move coal to where it is consumed, the Region’s coal reserves would have been of far 

less value; without the need to move coal, much of the Region’s transportation 

infrastructure would have been unnecessary.

Table 2 – Summary of Regional Waterway and Railroad Infrastructures

Railroad Network Waterway Network

Primary Class I Carriers* CSXT, NS Mainstem Ohio Miles*** 436

Total Freight RR Miles** 16,970 Navigable Tributary Miles*** 768

Number of Short-Line Carriers 83 Mainstem Ohio Locks*** 12

Total Regional Short-Line Miles 5,459 Navigable Tributary Locks*** 33

Holding Co. Short-Lines 35

Holding Co. Short-Line Miles 3,475

Source: Center for Transportation Research

*CXX and Norfolk Southern are the primary Class I carriers in the region. However, BNSF, Canadian Pacific, and the 

Canadian National also operate limited regional trackage.

** Total freight railroad mileage is estimated based on the state totals for the 13 ARC states combined with the ARC 

land areas within each state.

***Totals only include waterway mileages and the number of locks for operating portions of the inland navigation 

system within the Appalachian Region. Specifically, the upper portion of the Alleghany River where locks are in “caretaker” status are excluded from the tributary total.

Table 3 – Modes Used for 2014 Regional Coal Delivery

DOMESTIC EXPORT TOTAL

STATE

Other, 

Tons

(X1K)

Rail, Tons 

(X1K)

Barge, 

Tons

(X1K)

Truck, 

Tons

(X1K)

Domestic 

Total 

(X1K)

Export 

Total 

(X1K)

Grand 

Total (X1K)

Alabama - 1,603 2,514 2,088 6,205 12,049 18,254

Illinois 5,011 17,657 21,382 3,749 47,799 10,170 57,969

Indiana - 28,828 4,592 5,762 39,182 85 39,267

Kentucky 165 41,111 22,291 10,474 74,042 3,293 77,335

Maryland - - - 1,921 1,921 - 1,921

Mississippi - - - 2,625 2,625 - 2,625

Ohio - 3,515 16,527 3,997 24,039 101 24,140

Pennsylvania 1,676 35,147 8,952 9,813 55,587 5,323 60,910

Tennessee - 757 63 19 839 - 839

Virginia 1,041 5,777 1,701 2,697 11,216 6,748 17,964

West Virginia 5,222 39,812 35,426 2,476 82,937 29,250 112,187

Regional Total 13,115 174,206 113,449 45,622 346,392 67,019 413,411

U.S. (All States) 67,156 609,567 113,453 99,232 889,976 97,257 1,000,049

Source: Energy Information Administration
Page 16

Table 4 – Coal’s 2014 Share of Regional Waterway and Rail Traffic

Railroad 

Origin State

Loaded Coal 

Tons (in 

thousands)

Total 

Loaded Tons 

(in 

thousands)

Coal 

Percentage 

of Total

Ohio River Lock 

and Dam

2014 Coal 

Traffic 

Tons (in 

thousands)

2014 Total 

Traffic Tons 

(in 

thousands)

Coal 

Percentage 

of Total

Alabama 10,750 38,160 28.2% Ohio 52 21,513 87,930 24.5%

Kentucky 49,292 59,157 83.3% Ohio 53 11,694 76,478 15.3%

Ohio 15,571 66,191 23.5% Belleville 27,890 44,813 62.2%

Pennsylvania 32,961 51,551 63.9% Cannelton 36,545 69,895 52.3%

Virginia 19,485 32,232 60.5% Meldahl 20,797 46,182 45.0%

West Virginia 86,139 92,328 93.3% Dashields 14,591 20,309 71.8%

ARC TOTAL 214,198 430,583 49.7% Emsworth 14,294 18,616 76.8%

Illinois 21,322 115,899 18.4% Greenup 16,391 41,703 39.3%

Indiana 22,618 54,154 41.8% Hanibal 29,809 44,240 67.4%

Regional Total 258,138 678,863 38.0% Myers 23,083 64,174 36.0%

US Total 750,200 1,764,100 42.5% Markland 22,742 52,754 43.1%

McAlpine 35,847 69,930 51.3%

Mongomery 14,512 20,966 69.2%

Newburgh 40,845 77,995 52.4%

New Cumberland 20,540 31,208 65.8%

Pike Island 20,315 32,238 63.0%

Racine 29,022 46,287 62.7%

Robert Byrd 19,944 40,833 48.8%

Smithland 25,075 71,041 35.3%

Willow Island 26,814 41,660 64.4%

Ohio River Total 472,265 999,253 47.3%

Source: Association of American Railroads / U.S. Army Corps of Engineers
Page 17

Four LOOKING AHEAD

etting aside the often volatile role of coal exports, Section 2 suggests a 

pervasive long-run trend toward a reduced reliance on coal as a fuel for 

generating electricity that will continue to reduce the recovery of Appalachian 

coal for the foreseeable future. This changing pattern of coal use is affecting the local 

economies that currently depend on coal-related commerce and, from our 

perspective, will also measurably reduce the amount of coal-related freight activity. 

The questions are (1) where and by how much will coal traffic decline; (2) how will 

this reduced coal traffic affect the availability and pricing of remaining freight 

capacity; and (3) what (if anything) can and should the public sector do in response? 

We take up the first two questions here, while the third is discussed in Section 5.

THE FUNDAMENTAL ECONOMIC AND POLICY LANDSCAPE

Before launching into a detailed discussion of future coal activity in Appalachia, it is

probably useful to revisit a few of the underlying fundamentals. These include:

• The pace of further reduced reliance on coal is likely to depend on (1) the 

speed with which existing coal-fired capacity can be retired and (2) the 

forcefulness of the domestic policies that encourage that decreased reliance.

• Both public sector transportation policy-makers and private sector freight 

providers will respond to a demand for less coal by altering the extent and 

nature of regional freight capacity.

• Appalachia’s communities, states, and regional jurisdictions can affect the 

changes in freight transportation to ensure that these changes are consistent 

with other regional needs.

The first of these bullet points was discussed in Section 2. Coal-fired generating 

capacity comprises large and long-lived investments by electricity producers. These 

investments were made under the assumption that the corresponding facilities can

generate revenues sufficient to pay for their construction, where payoff durations are 

measured in decades. Utilities must either operate these coal-fired facilities until 

they are paid for or write off the remaining value of facilities that are retired 

prematurely. In the latter instance, somebody (usually, rate-payers or investors) 

must incur a loss.

S
Page 18

In spite of this financial reality, the pace with which the U.S. reduces its reliance on 

coal as a generating fuel is also a function of public policy and the speed with which 

voters wish to attain additional air quality improvements. Regardless of financial 

implications, utilities cannot ignore legal mandates.

The second point emphasizes the dynamic, interactive relationship that exists 

between coal producers, its users, and those who move it. Like coal-fired generating 

facilities, coal-reliant transportation capacity is, in many ways, long-lived, and

adjusting this capacity to reflect an unforeseen decline in freight demands takes 

time. 

Nonetheless, as described below, coal carriers have already begun to adjust 

operations and equipment fleets to reduced coal volumes. Changes to network 

infrastructure, while already somewhat evident, will come more slowly. Just as 

utilities hope to avoid stranding the cost of prematurely retired facilities, 

transportation providers would prefer to wear out coal-dependent investments 

rather than abandon them before they are paid for. This is particularly true for 

railroads that have invested private sector funds to create coal-dependent railroad 

networks.

Finally, while full descriptions of potential community, state, and regional responses 

are reserved for Section 5, we hope readers will be mindful that the long-run 

migration from a national reliance on coal may be inevitable, but the nature and 

effects of that migration’s impacts on locally available freight transportation is 

something that communities can affect. 

THE ONGOING TRANSITION AND ITS ALREADY OBSERVED EFFECTS

Figure 1 (Section 2) illustrates the decline in coal’s share of total U.S. electricity 

generation and the corresponding increase in the share of electricity produced with 

natural gas. Table 5 provides similar data for total electricity output, along with 

estimates of the U.S. population. These data show that, not only did coal’s share of 

production decline, but the total amount of electricity produced through coal also 

fell. While this reflects, to some degree, the reduced use of operable coal-fired plants, 

it more generally represents the full retirement of coal-fired facilities 

Nationwide, nearly 21 gigawatts (GW) of coal-fired electricity generation was retired 

between 2009 and 2014, representing 6 percent of the U.S. coal-fired capacity. This 

this trend continues today, unabated.14 In 2015, 94 coal-fired power plants closed, 

with the combined net summer capacity of 13,556 megawatts. Another 41 coal plants 

 14 See Union of Concerned Scientists, “TVA Pulls the Plug on More Coal Plants; Others Will Surely 

Follow,” November 18, 2013, 

http://blog.ucsusa.org/jeffdeyette/tvapullstheplugonmorecoalplantsotherswillsurelyfollow306
Page 19

were scheduled to close in 2016, with a combined net summer capacity of 5,326 

megawatts.15 Figure 8 depicts 2015 generating facility retirements across generating 

sources.

Table 5 – U.S. Electricity Generation

(Thousands of Megawatts for Utility Scale Facilities)

YEAR Coal-Fired

Natural Gas 

Fired

All Other 

Sources

Total 

(Utility-Scale 

Generation)

Estimated 

U.S. 

Population

2006 1,990,511 816,441 1,257,750 4,064,702 298,360,000

2007 2,016,456 896,590 1,243,700 4,156,746 301,230,000

2008 1,985,801 882,981 1,250,605 4,119,387 304,090,000

2009 1,755,904 920,979 1,273,448 3,950,331 306,770,000

2010 1,847,290 987,697 1,290,072 4,125,059 309,410,000

2011 1,733,430 1,013,689 1,353,021 4,100,140 311,770,000

2012 1,514,043 1,225,894 1,307,829 4,047,766 314,140,000

2013 1,581,115 1,124,836 1,360,013 4,065,964 316,540,000

2014 1,581,710 1,126,609 1,385,286 4,093,605 319,070,000

2015 1,356,057 1,335,068 1,396,255 4,087,380 321,560,000

Source: Energy Information Administration

Figure 8 – 2015 Generating Capacity Retirements

(Gigawatts)

Source: Energy Information Administration

 15 See Morning Consult, “Coal Plants Are Shutting Down, With or Without Clean Power Plan,” May 3, 2016, 

https://morningconsult.com/author/jack/
Page 20

THE OBSERVED TRANSPORTATION SECTOR RESPONSE

Transportation equipment is long-lived, but it is also mobile. Carriers can generally

use equipment in other regions of the U.S. and can often use it for moving 

commodities other than coal. Consequently, the impacts of diminished coal traffic on 

equipment investments are less pronounced and of less concern here. The impacts of 

diminished coal volumes on the infrastructure that forms line-haul route segments 

and terminal facilities is far more important to long-run regional prosperity.

Further, as noted above, roadways and inland navigation infrastructures are largely 

provided by the public sector, where no financial return is immediately required. In 

this environment, policy-makers can more easily resist decisions to downgrade or 

abandon facilities regardless of commercial inactivity.

In the case of railroads, however, infrastructure is almost exclusively owned by 

private sector firms. Firms build, maintain, and operate both line-haul trackage and 

terminal facilities. These private investments must earn revenues for investors. This 

fundamental distinction makes railroads more sensitive to both ongoing costs and 

prospects for future traffic. Therefore, it is not surprising that the first evidence of 

diminished coal volumes emerged on Appalachia’s railroads.

In the fall of 2015, seemingly without warning, both Norfolk Southern and CSX—the 

Region’s two Class I railroads—began announcing a sequence of both operating and 

infrastructure changes in response to declining coal volumes. These actions included 

closing terminal and yard facilities in Ashtabula, Ohio; Bluefield, West Virginia; 

Corbin, Kentucky; Erwin, Tennessee; Huntington, West Virginia; Knoxville, 

Tennessee, and Russell, Kentucky. Additionally, many route segments throughout 

the Region were downgraded, services were curtailed, and in one case, a secondary 

mainline route was leased to a short-line operator (NS from Columbus to southern 

West Virginia). These actions are depicted graphically in Figure 9, which underscores

that first-round cuts have been focused in Appalachia. In total, these changes led to 

the elimination or relocation of approximately 1,500 full-time positions.

Even ignoring further reductions in coal traffic, both CSX and NS are likely to 

undertake additional force reductions, route downgrades, and facility closures. As an 

example, in January 2016, NS announced its intentions to “dispose of” an additional 

1,500 route miles by 2020.16

 16 See Norfolk Southern, “Norfolk Southern announces further details of its strategic plan to reduce costs, 

drive profitability, and accelerate growth,” press release, January 27, 2016,

http://www.nscorp.com/content/nscorp/en/news/norfolksouthernannouncesfurtherdetailsofitsstrategicpla

ntoreduc.html
Page 21

Figure 9 – Class I Railroad Response to Diminished Coal Traffic

Source: Center for Transportation Research

While the cuts depicted in Figure 9 imposed observable hardships on specific 

Appalachian communities, there is one highlight that should be noted. Both Norfolk 

Southern and CSX have downgraded route segments, reduced services, and closed 

facilities, but neither carrier has engaged in any action that cannot be reversed. More 

specifically, neither NS nor CSX has undertaken the abandonment of any track 

segment within the Region nor have they liquidated terminal facilities. This is a 

welcome contrast to the wholesale route abandonments evidenced in the mid-1980s 

in response to regulatory reforms.
Page 22

PREDICTING THE FUTURE OF APPALACHIAN COAL PRODUCTION

Beginning with the Clean Air Act of 1970, Americans have shown a consistent 

preference for air quality improvements. Moreover, to the extent that burgeoning 

natural gas production makes it possible to reduce our reliance on coal-fired energy 

production without facing measurably higher electricity prices, the movement away 

from coal is likely to continue, regardless of U.S. environmental policy.

Figure 10 illustrates a sample of announced coal-fired facility retirements between 

now and 2036. For Appalachian coal, this tells much (but not all) of the foreseeable 

future story. The missing component is the volatile international demand for highquality, bituminous metallurgical coal that, in the recent past, has consumed roughly 

20 percent of Appalachian production.

Figure 10 – Announced Coal-Fired Plant Retirements (As of 2014)

Source: Energy Information Administration
Page 23

Ultimately, the next two decades are likely to see a continuation of the trend in 

evidence since 2008 whereby domestic coal volumes fall by roughly five percent 

annually. In any given year, this trend may be reinforced or offset by the effects of 

international demands. However, there are no data with which to effect forecasts of 

this international activity.

Following this course and treating exports as constant at current levels, over the next 

20 years, Appalachian coal production volumes drop by 55 percent (142 million tons) 

from their 2015 levels (252 million tons).17 Presumably, demands for the freight 

movement of coal will follow this same pattern.

LONG-RUN IMPLICATIONS FOR REGIONAL FREIGHT MOBILITY

The steady decline in the demand for Appalachian coal and for its transportation will 

measurably diminish the total amount of freight transported to and from the 

Region.18 In doing so, it also has the potential to influence the availability of freight 

services and the affordability of moving non-coal commodities. Evaluating this 

potential and exploring appropriate public sector responses is at the heart of our 

present work. In practice, truck, barge, and rail are often combined to move coal. 

However, for simplicity, we treat these modes separately here.

Motor Carriage

As noted above, when coal is to travel a modest distance and when volumes permit, it

is often trucked directly between prep plants and utilities. In other cases, trucks are 

used extensively to move coal between mining areas and barge loading facilities. 

Precise data on coal truck use are not available. However, using West Virginia as an 

example, the data in Table 3 suggest that roughly 35 million tons of coal moved 

outbound from that state by barge in 2014. Combining this figure with data 

describing rail movements suggests that approximately 60 percent of the West 

Virginia coal destined for barge transport reached the waterway by truck. This 

equates to 21.2 million tons annually. When the 2.4 million tons of utility-direct coal 

truck traffic are added, the resulting 23.6 million tons of West Virginia coal implies 

1,000 loaded coal truck trips per day, six days a week, 50 weeks per year. Even so, in 

many parts of West Virginia, residents would argue this estimate is low. 

 17 Here, we consider Appalachian coal to be all coal from Alabama, (eastern) Kentucky, Pennsylvania, 

Virginia, and West Virginia. Western Kentucky coal is excluded.

18 In addition to coal traffic, the use of coal-fired plants that are scrubber-equipped also requires the inbound 

movement of substantial quantities of limestone. Finally, at least in some cases, rail and barge are used to 

move fly ash, outbound to disposal locations outside the region.
Page 24

Consequently, to the extent that reduced coal volumes also reduce the use of coal 

trucks, Appalachia is likely to realize a net economic gain. While coal truck 

operations contribute fuel tax revenues to both the federal highway trust fund and to 

the individual states in which trucks operate, it is likely that the lost revenues from 

fewer coal truck miles will be less than the corresponding savings from reduced 

roadway and bridge spending. Moreover, because public sector provides roads and 

highways are shared by an array of users, it is exceedingly unlikely that reduced coal 

truck traffic will reduce the infrastructure available for non-coal freight 

transportation.

Commercial Navigation

Regionwide, Table 3 indicates that 113 million tons of (mostly) Appalachian coal 

used the inland waterway system to reach its destination in 2014. Even when we 

recognize that a portion of this total reflects the movement of Illinois basin coal, 

often to locations within Appalachia, it is clear that coal is the largest share of all 

waterway traffic in the Region. Based on lock volumes, coal’s share of 2014 barge 

traffic exceeded 47 percent (Table 4).

Like the roadways, construction on the locks and dams that support commercial 

navigation is partially funded through user fees. However, the balance of 

construction expenditures (currently 50 percent) and all of operation and 

maintenance (O&M) dollars are appropriated from general funds.19 Thus, waterway 

infrastructure must compete with other uses for federal resources. This means that 

periodically waterway-related efficiencies must be paired with corresponding federal 

expenditures to form benefit-cost ratios that are then compared to benefits and costs

from other transportation and non-transport candidate projects.20

Because Ohio River and tributary infrastructure is largely complete and not generally 

in need of additional capacity improvements, the effects of diminished coal traffic on 

federal support are unlikely to come quickly. Even when a review does take place, 

declines in coal traffic will only threaten the viability of the Region’s waterway 

resources if they are sufficient to make ongoing O&M expenditures unpalatable. The 

likelihood of this occurring on the main-stem Ohio is very small. However, system 

tributaries may be more vulnerable.

 19 For more information on inland waterway funding, see, Congressional Research Service, “Inland 

Waterways: Recent Proposals and Issues for Congress, May 3, 2013, 

https://www.fas.org/sgp/crs/misc/R41430.pdf

20 For an extensive description of the waterway project evaluation process, see, Acadia Group, “Applying 

Benefit-Cost Analysis to Freight Project Selection: Lessons from the U.S. Army Corps of Engineers,”

December 2012, http://onlinepubs.trb.org/onlinepubs/ncfrp/docs/NCFRP22_FR.pdf
Page 25

Table 6 provides 2014 tonnage values for Ohio system components and tributaries.

These data indicate that traffic volumes on the Tennessee River is less dependent on 

coal traffic than the Ohio River and its

Table 6 – Coal’s Share of Appalachian Navigation System Component and Tributary 2014 Traffic

Inland System 

Component and 

Tributaries

Number 

of Locks

2014 Coal 

Traffic 

(Tons in 

thousands)

2014 NonCoal Traffic 

(Tons in 

thousands)

2014 Total 

Traffic 

(Tons in 

thousands)

Coal's 

Share of 

2014 

Traffic

Ohio Main-Stem 20 472,265 527,215 999,479 47.3%

Allegheny 8 3,452 1,381 4,833 71.4%

Green 2 13,558 610 14,169 95.7%

Kanawha 3 16,519 4,281 20,800 79.4%

Monongahela 9 43,422 11,493 54,914 79.1%

Cumberland 4 7,902 7,987 15,889 49.7%

Tennessee 9 16,254 53,452 69,706 23.3%

Black Warrior 4 - 82 82 -

Tenn-Tombigbee 10 281 8,818 9,099 3.1%

 Source: U.S. Army Corps of Engineers

tributary waterway segments. Table 6 data indicate that between 71 percent and 96 

percent of this tributary traffic is coal. However, readers should note that Green 

River coal traffic is almost exclusively Illinois basin (rather than Appalachian) coal.

Freight Railroads

Because railroads build, maintain, and pay property taxes on the route segments 

over which they operate and because they are subject to ongoing financial scrutiny, 

they constantly monitor forecasted traffic volumes and revenues. Route segments are 

routinely improved or downgraded based on their roles in generating economic 

returns. Over an intermediate time-frame, segments that do not contribute to 

earnings may be taken out of service to avoid maintenance costs. However, in the 

long-run, under-performing lines are eventually disposed of, either through sales or 

leases to other railroads, or through abandonment.

As the various maps within this report illustrate, the coal producing areas of 

Appalachia are blanketed with Class I railroad branch-lines. However, if the future 

production of Appalachian coal follows the path predicted here, many of these coaldependent branches will disappear from future maps. Moreover, in most cases, this 

loss will not harm regional commerce. Without coal, a branch-line built exclusively 

to haul coal has little value when coal traffic disappears. However, the regional access 

afforded by secondary and primary mainline trackage is far more vital. These routes 

do carry non-coal freight to and from the Region. More importantly, the freight 

access these routes provide may help attract new commerce to the Region.

Railroad economics embody a number of unique characteristics, but the element that 

is most important here is referred to as “economies of density”. Economies of density 
Page 26

suggest that unit costs – the cost per carload, car-mile, or ton-mile – decrease as 

larger amounts of freight traffic are concentrated onto a particular route segment. In

railroading, these economies are seemingly inexhaustible.

Historically, robust coal volumes provided Appalachian rail routes with a great deal 

of traffic density, so that all traffic traveling these routes could be moved at relatively 

low unit costs. The loss of coal traffic and the desire to rebuild traffic densities is 

leading railroads to consolidate remaining traffic onto fewer routes where possible. 

For those routes where diverted traffic restores density, service quality and pricing 

may change very little. However, when network traffic is diverted away from routes, 

remaining customers are likely to observe less frequent service, diminished 

reliability, and (potentially) higher freight rates. It is consolidation that has 

prompted the system changes thus far. A desire for further consolidation will 

motivate further changes as coal traffic continues to decline.

When and where additional Class I trackage will be subject to downgrading or 

“disposal” is not entirely knowable. However, it is possible to identify route segments 

with futures that are, at least, vulnerable. Figure 11 includes the trackage already 

affected (Figure 9) and additional routes that may be subject to increasing pressure 

as coal traffic continues to decline. We emphasize that the inclusion of these routes is 

not based on any announced plans by either Norfolk Southern or CSX.
Page 27

Figure 11 – Current or Potential Class I Retrenchments

 Source: Center for Transportation Research

INCENTIVES FOR AND METHODS OF NETWORK “RATIONALIZATION”

“Network Rationalization” is a euphemism used for a freight provider’s decisions to 

downgrade, sell, lease, or abandon unprofitable route segments, facilities, or 

operations. To evaluate possible “rationalizations,” carriers must simultaneously 

consider large volumes of information describing the freight traffic generated locally 

along each candidate route segment or facility, and the role that each smaller 

network part plays in accommodating the whole of system-wide traffic. Generally, 

the ideal freight network exactly balances the benefits gained by reaching more 

customers in more places against the economies that result from operating smaller 

networks and densely packing as much traffic as possible onto fewer route-miles.21

Network rationalizations are essential to the management of all freight modes. 

However, because railroads own the networks over which they operate, the 

incentives and scope of possible actions are both greatest for this mode. Moreover, 

railroad capital is long-lived, so that railroad managers making decisions about what 

 21 Not surprisingly, these economies are referred to as Economies of Density which is the spatial analogue of 

the more commonly known Economies of Scale. 
Page 28

to keep and what to relinquish must evaluate current conditions and also predict the 

future value of each candidate route segment or facility. The overall process is full of 

uncertainty. Thus, carriers across all modes have learned that there is often value in 

postponing decisions on route disposition or considering alternatives that can later 

be reversed.22

Among the possible carrier actions, there are at least four choices. Faced with a need 

for change, a Class I railroad can (1) continue service along a route, but downgrade 

the capacity of that route; (2) leave the route in place, but discontinue service; (3) 

voluntarily sell or lease the subject route segment to another Class I railroad or to a 

short line, or; (4) relinquish all interest in a line through abandonment. Moreover, in 

the event the railroad seeks to abandon a railroad line, the law provides ways for 

affected jurisdictions to intervene in the disposition of the abandoned route even if 

the owning railroad’s application for abandonment is approved.

Three of these four actions are reversible by the owning railroad. A route that has 

been downgraded can be restored to any desired capacity. Routes taken out of service 

can be returned to service. And if control over a route is ceded to another railroad 

through lease or sale, the lease can be terminated, or the line (at least, potentially) 

can be repurchased. While each of these reversals entail varying degrees of expense, 

it is only the final option—route abandonment—that cannot be undone. 

Downgrading a Rail Route

Railroads can appreciably reduce maintenance costs by downgrading the level of 

performance expected from lesser-used routes. At least as an interim measure, this 

strategy can be an effective way of trimming costs without sacrificing long-run 

alternatives.

A rail route’s capacity is determined by the nature and extent of its physical 

characteristics – the number, alignment, and quality of mainline tracks; the length 

and spacing of sidings; the severity and frequencies of curves and grades; and the 

signal system(s) used to control train operations. In addition to designing and 

constructing track that will support a specific level of intended use, railroads must 

also maintain route segments based on prescribed federal standards that are 

(partially, at least) correlated to that planned use.

Specifically, the Federal Railroad Administration (FRA) divides rail infrastructure 

into six classes.23 When a railroad designates an intended class for a particular piece 

 22 In the world of economics and finance, integrating the value of retained flexibility into decision-making 

processes is rooted in Real-Options theory. For an application of this construct in a railroad setting see, 

Mark Burton and Charles Sims, “Understanding Railroad Investment Behaviors, Regulatory Processes, and 

Related Implications for Efficient Industry Oversight,” Review of Industrial Organization, September 2016.

23 There are actually five track classes, plus a category known as “exempted” track. For a full description see, 

Track and Rail and Infrastructure Integrity Compliance Manual, Volume II Track Safety Standards, 

Chapter 1: Track Safety Standards Classes 1 through 5, Federal Railroad Administration, January 2014.
Page 29

of track, it becomes responsible for ensuring the track and supporting structures 

meet the FRA standards associated with that designated class. It follows that, if a 

railroad wants to reduce maintenance-of-way expenditures for a route segment, it 

must sometimes reclassify that segment to reflect a reduced level of expected 

performance. In the current setting, the most likely reclassification is from Class 3, 

where the maximum allowed freight trains is 40 m.p.h., to Class 2, where the 

maximum freight train speed is capped at 25 m.p.h. As an example of this approach, 

Norfolk Southern has recently downgraded its route between Asheville and 

Salisbury, North Carolina from Class 3 to Class 2.

Service Discontinuance or Line Abandonment

From a legal standpoint, any shipper located along an active rail line operated by a 

railroad common carrier can demand transportation services from that carrier. A 

railroad has only two ways to avoid this obligation. It can completely abandon the 

rail route in question or, as an alternative, it can apply for a regulatory service 

discontinuance. While the administrative processes for these paths are similar, the 

outcomes are quite different. In the case of a service discontinuance, the railroad 

retains ownership, must leave the infrastructure in place, and is obligated to restore 

service if conditions warrant doing so. If the railroad abandons the subject trackage, 

it relinquishes all claims to the right-of-way and opportunities for service 

restoration.24

In both the case of a service discontinuance or an application for abandonment, the 

final decision rests with the Surface Transportation Board (STB). If there has been 

no local freight activity along the line for two years or more, the process is more or 

less automatic. However, any party with a legitimate interest can express those 

interests with the STB’s evaluation process. Moreover, the governing statutes 

promote the accommodation of shippers or local jurisdictions that can (a) arrange 

for a service alternative through external subsidies or a line sale or (b) preserve the 

existing right of way through a “trails” initiative. 

Selling or Leasing a Route to Another Railroad

In the last quarter of the 20th century, rail industry regulatory reforms were capped 

by the Staggers Rail Act of 1980 and are directly credited with a surge in short-line 

activity. After peaking at approximately 700 prior to World War II, the number of 

U.S. short-lines fell to roughly 200 by 1980.25 However, the Staggers-related changes 

to abandonment processes led to a burst in Class I branch-line spinoffs. Babcock et 

 24 For a detailed description of the abandonment or service discontinuance process see, Surface 

Transportation Board, OVERVIEW: Abandonments & Alternatives to Abandonments, April 1997. For a 

more community oriented description of the same processes, see Duane J. Rosa, “Economic Impact Of 

“Railroad Line Abandonment On Regional And Urban Areas: A Case Study,” Journal of Business Case 

Studies – Second Quarter 2014 Volume 10, Number 2, pp. 147-54.

25 See Fischer, et al (1981).
Page 30

al. (1997) indicate that 227 new short-line railroads were formed between 1980 and 

1989.26

The short-lines formed in the decades after Staggers have faced various fates. Many 

of the Staggers-related short-lines prospered, while others did not. Some of the 

smallest short-lines of the 1980s and 1990s were combined with other short-lines or 

acquired by holding companies, and some were reabsorbed by the Class I railroads 

that divested them or by competing Class I’s.

In a sense, the fact that not every short-line railroad prospers is irrelevant. In a time 

of tremendous structural change, the short-line alternative allowed Class I railroads 

to make badly needed reductions to their large, multistate networks, while 

simultaneously allowing communities to preserve railroad network access. In some 

cases, this preservation ultimately may have proven unnecessary, but in other cases, 

the continued rail access afforded through short-line development has had very 

visible economic impacts.

Short-lines clearly play a prominent role in Appalachian rail network access. The 

scope and scale of the Region’s short-line railroads are summarized in Table 7. To a 

large degree, the amount of short-line activity within any given state reflects the 

magnitude and nature of the freight traffic left behind in the wake of Class I railroad 

route rationalizations. However, the strength of local and state-level programs has 

also affected the extent of short-line activity in the various Appalachian states. 

Table 7 – Appalachian Region Short-Lines

State

Short-line 

Miles

Number of 

Shortlines

Average 

Length

Alabama 295 8 36.9

Georgia 123 4 30.8

Kentucky 196 2 98.0

Maryland 52 2 26.0

Mississippi 280 6 46.7

North Carolina 90 2 45.0

New York 256 6 42.7

Ohio 1,768 10 176.8

Pennsylvania 1,176 15 78.4

South Carolina 102 3 34.0

Tennessee 289 12 24.1

Virginia 175 1 175.0

West Virginia 657 12 54.8

TOTAL/AVERAGE 5,459 83 65.8

 Source: Center for Transportation Research

 26 For a further, popular discussion of Staggers and short-line railroads, see Stagl (2008).
Page 31

Many of today’s 550-plus short-lines were spun-off from Class I railroads. A smaller 

number have never been directly controlled by larger railroads and are a throwback 

to the 19th century industry structure. However, regardless of their histories, a large 

number of America’s short-lines are currently owned by and organized within 

holding companies that often operate properties in widely disparate geographic 

regions. Holding companies generally manage short-lines in ways that retain a 

localized focus and small-scale cost advantages, while simultaneously pursing the 

large-scale procurement, equipment management, and human resources advantages 

more typically associated with Class I railroads. Holding company activity within the 

Appalachian Region is summarized in Table 8.

Table 8 – Short-Line Holding Company Presence in Appalachia

Owning Entity

Short-line 

Miles

Number of 

Shortlines

Average 

Length

Genessee & Wyoming 1,415 14 101.1

Gulf & Ohio 73 2 36.5

Iron Horse Resources, Inc 59 1 59.0

OmniTRAX 120 1 120.0

Paducah & Louisville / CSX 158 1 158.0

Patriot 128 2 64.0

Pioneer 132 3 44.0

Public Sector 218 4 54.5

RJ Corman 407 3 135.7

Watco 765 4 191.3

TOTAL/AVERAGE 3,475 35 99.3

Percent of Total (63.7%) (42.2%) (151.0%)

 Source: Center for Transportation Research
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Five PUBLIC SECTOR RESPONSE

or more than a generation, the efficient movement of freight has been an 

increasingly prominent goal within the federal legislation that guides regional, 

state, and local transportation policies.27 In many ways, however, the resulting 

federal statutes simply codify and encourage a freight focus that has existed in 

Appalachia far longer. For more than 50 years, the thirteen states that combine to 

 27 In 2005 the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for 

Users (SAFETEA-LU) introduced “projects of national and regional significance” which openly embraced 

freight initiatives, including the Heartland Corridor. In July of 2012, President Obama signed a two-year 

transportation reauthorization bill, the Moving Ahead for Progress in the 21st Century Act (MAP-21) that 

built on SAFETEA-LU by providing incentives for states to develop statewide freight plans and strongly 

encouraging the development of state-level freight advisory committees. Finally, the most recent federal 

surface transportation bill, the Fixing America’s Surface Transportation (FAST) Act requires states to 

develop freight planning and statewide freight advisory committees.

F

INLAND OPPORTUNITIES FOR ALTERNATIVE USE

The continuing emergence of global trade and corresponding congestion at and near coastal 

deep-draft ports has led to the development of “inland” ports throughout Appalachia. 

Depending on specific commercial needs, facilities take many forms. 

The truck-rail inland ports at Front Royal, Virginia; Greer, South Carolina; Prichard, West 

Virginia; and (soon at) Chatsworth, Georgia are relatively small-scale, traditional intermodal 

terminals designed to efficiently extend the reach of larger coastal ports into Appalachia. The 

cross-dock operation at Somerset, Kentucky provides affordable all-rail access to inland 

producers who would lack this access otherwise. And, finally, the hybrid intermodal facility at 

Huntsville, Alabama effectively combines freight rail, trucking, and international airfreight 

services into a single, robust transportation setting.

Regardless of their specific form and function, these forward-looking inland ports provide two 

important benefits the regions they serve. First, within the current context, these facilities are a 

revenue-rich source of alternative freight activity that can preserve and improve traffic densities 

within railroad corridors where coal volumes are declining. 

Second, and perhaps more importantly, the development of inland port facilities can level the 

transportation playing field for Appalachian producers and product distributors who would

otherwise be disadvantaged by higher transportation costs and less reliable freight services. This 

way, efforts to preserve rail freight capacity by increasing the demand for non-coal freight 

movement can be made completely consistent with related economic development efforts.
Page 33

form the Appalachian Region have both individually and collectively promoted 

freight mobility as a way of developing and sustaining critical regional commerce.

While these state-level initiatives have certainly embraced the Appalachian 

Development Highway System (ADHS), they have also toppled modal silos by 

promoting multimodal strategies that link highway transport with inland barge 

transportation and freight railroads. Against this backdrop, the freight challenges 

tied to a diminished reliance on coal, while unwelcome, are not insurmountable.

The purpose of the current section is to help policy-makers identify and plan 

strategies for assuring continued affordable freight rail access. While the information 

provided is generally targeted at state-level policies, there are numerous examples 

where sub-state jurisdictions have worked successfully to preserve freight access and, 

in doing so, have created economic opportunities that would have otherwise been 

unavailable. As appropriate, we provide examples of these sub-state level efforts. At 

the same time, the current setting is one in which affected rail line segments often 

span more than one state. Therefore, we also consider the opportunities for and 

barriers to multi-state initiatives. 

Finally, public sector efforts to support freight access almost always require close 

public-private cooperation. Developing this cooperation in a railroad setting is 

sometimes difficult. Thus, we offer examples of best practices that have proven 

useful in the past.

PUBLIC SECTOR TOOLS28

Railroads have incentives for and well-tested ways of responding to economic 

change. Similarly, the public sector has means to guide railroad behaviors and help 

communities adapt to those changes. Many of the paths for public sector response 

are available through state sponsored rail programs. However, in some cases, federal 

resources and assistance from entities like ARC are uniquely valuable.

 28 Materials in this section are largely drawn from, Tennessee’s Short-Line Railroads: Programs, Policies, 

and Perspectives, Center for Transportation Research, The University of Tennessee, 2016.
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State-Sponsored Rail Programs

Statewide programs affecting freight vary considerably across the Appalachian 

Region. The scale, scope, and orientation of state-level transportation and economic 

development efforts differ by state, based on contrasting demographics, economics, 

and state-specific goals. This makes “apples-to-apples” comparisons of potential 

post-coal strategies difficult. Still, some form of cross-state reference is useful.

A forthcoming Transportation Research Board publication contains an extensive 

description of state-level rail programs for all 50 states. We summarize a subset of 

that information here in Table 9. These data include 30 states that have ongoing rail 

programs applicable to short-line railroads, eight of which are located within the 

Appalachian Region.29

Of the roughly 30 states included, 28 have short-line-applicable programs that can 

only be used in support of capital expenditures. There is, however, some variation in 

whether resources can solely be used to rehabilitate or improve existing facilities or 

whether these resources can also be used to expand network extent. From an 

eligibility standpoint, roughly two-thirds of the programs allow independent 

shippers or sub-state jurisdictions (like local rail authorities) to serve as program 

recipients and, surprisingly, more than one-quarter (27 percent) of the programs do 

not exclude Class I railroads from applying for program support.30 Of the freightapplicable programs, 77 percent can also be used to support passenger rail projects.

Of this subset of state rail programs for which short-line freight carriers qualify, 

roughly tw0-thirds provide funding through grants; two-thirds provide loans 

through revolving infrastructure funds or offer guarantees; and nearly two-thirds

have programs that extend both forms of financial support. Most grant programs 

simply require non-state matching funds from participants. Generally, the matching 

shares range between 10 and 25 percent. However, a significant portion of the states 

represented in Table 9 (27 percent) require that participants provide a match 

between 50 and 100 percent.

Two additional results of the cross-state comparison that are not apparent from the 

summary provided in Table 9 are, nonetheless, worth noting. First, the magnitude of 

the short-line support extended by Appalachian states appears to be greater than 

evidenced in many other states. This result is particularly true when funding is 

expressed on a per track-mile basis. Second, many other (though certainly not all) 

 29 This table excludes information for California, Florida and Texas and those states that do not 

have ongoing programs that are clearly available to Class III freight railroads. In making this 

judgment, we excluded grade-crossing improvement programs from consideration.

30 We do not have information that would indicate whether or not Class I railroads have 

successfully applied for program support.
Page 35

state programs now base distributions on the results of formal benefit-cost 

estimations. 

Table 9 – Indicators for State-Level Short-Line Programs

State

Class III 

Only

Class I

Allowed

Shipper 

Other Grants Loans

Tax 

Credit

>50% 

Match

Freight 

Only

Arkansas

Delaware

Florida

Georgia

Idaho

Illinois

Indiana

Iowa

Kansas

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

New Hampshire

New Jersey

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

South Dakota

Tennessee

Virginia

Wisconsin

Source: Center for Transportation Research

Federally-Sponsored Rail Programs 

Currently, there are, at least, seven active (or inactive) federal programs that may be 

useful to Appalachian communities that seek to preserve or enhance rail freight 

access. Four of these programs are available throughout the U.S. The remaining 

three programs are administered specifically by ARC. The seven programs include:

• The LOCAL RAIL FREIGHT ASSISTANCE (LSRA) program inactive grant program;

• The RAILROAD REHABILITATION AND IMPROVEMENT FINANCE (RRIF) loan program;

• The TRANSPORTATION INFRASTRUCTURE FINANCE AND INNOVATION (TIFIA) loan program;
Page 36

• The TRANSPORTATION INFRASTRUCTURE GENERATING ECONOMIC RECOVERY 

(TIGER) non-recurring grant program;

• The ARC’s AREA DEVELOPMENT FUND grants;

• ARC’s INDUSTRIAL ACCESS ROAD PROGRAM, an ongoing grant program; and

• The joint ARC-EDA PARTNERSHIPS FOR OPPORTUNITY AND WORKFORCE AND 

ECONOMIC REVITALIZATION (POWER) non-recurring grant program.

The Local Rail Service Assistance (LRSA) Program was established by the Regional Rail 

Reorganization Act of 1973 to provide financial support to states for the continuation of 

rail freight service on abandoned light density lines in the Northeast. The Railroad 

Revitalization and Regulatory Reform Act of 1976 expanded the program to all states.

The program was reauthorized in 1989 and renamed the Local Rail Freight Assistance

(LRFA) Program.31 In 1996, legislation was introduced to abolish this program 

(H.R.2216). However, no action was taken, so that the program, while inactive, exists.

The RRIF program was established by the Transportation Equity Act for the 21st Century 

(TEA-21) and amended by the Safe Accountable, Flexible and Efficient Transportation 

Equity Act: a Legacy for Users (SAFETEA-LU). Under this program the FRA 

Administrator is authorized to provide direct loans and loan guarantees up to $35 billion 

to finance development of railroad infrastructure. Up to $7 billion is reserved for projects 

benefiting freight railroads other than Class I carriers.

Direct RRIF loans can fund up to 100 percent of a railroad project with repayment 

periods of up to 35 years and interest rates equal to the cost of borrowing to the 

government. Eligible borrowers include railroads, state and local governments, 

government-sponsored authorities and corporations, joint ventures that include at least 

one railroad, and limited option freight shippers who intend to construct a new rail 

connection.32 As of 2015, less than one-third of the $2.7 billion in RRIF loan approvals 

were for freight-oriented projects. The balance has been for passenger projects that 

typically have included a large public-sector participant.33

The TIFIA program’s primary objective is to encourage public-private infrastructure 

endeavors and, thereby, fill existing funding gaps while limiting federal exposure. The 

program imposes minimum project threshold amounts of $10 million for transit 

projects, $15 million for intelligent transportation systems (ITS), and $50 million for all 

other eligible projects, which include a variety of areas applicable to short-line creation, 

rehabilitation, and improvements.

Like the RIFF program, TIFIA imposes a number of responsibilities on applicants. TIFIA

credit assistance is limited to 33 percent of total project costs; TIFIA loan must receive 

investment grade ratings from at least two nationally recognized credit rating agencies;

 31 Text is drawn directly from the FRA. See, www.fra.dot.gov/Page/P0225

32 Text is drawn directly from the FRA. See, www.fra.dot.gov/Page/P0128

33 CRS (2015, p. 13.)
Page 37

and applicants must demonstrate the availability of a dedicated repayment revenue 

stream.34

As one of the most popular currently available federal grant programs, the TIGER

program was initially designed as a federal response to the economic recession of 2007-

2009. Since its inception, TIGER, now with its eighth round completed, has provided 

nearly $4.6 billion to 381 projects in all 50 states. At least a small number of these grants 

have been for short-line railroads or projects with a significant short-line component. 

Like the loan-based TIFIA program, TIGER grants seek to leverage private sector 

funding. The 2015 TIGER round alone has leveraged $500 million in federal investment 

to support $1.4 billion in overall transportation investments.35

34 See https://www.transportation.gov/tifia/tifia-credit-program-overview

35 See https://www.transportation.gov/tiger

LOCAL ACTION: THE SEDA-COG EXAMPLE

Much of the current discussion is centered on 

state-level rail policies. However, assuming 

that state policies are accommodating, it is 

certainly possible for sub-state jurisdictions to 

act to preserve rail freight access. While this 

form of intervention is evident in several 

Appalachian states, one of the best and 

earliest actions involved Pennsylvania’s 

SEDA-Council of Governments (SEDACOG), an 

organization of 11 counties in the central portion of the state.

Very simply, in the mid-1970s, railroads in the Northeast were 

in financial crisis. In response, the federal government formed 

the Conrail system and enacted other transportation reforms. 

As federal regulations were eased in the early ’80s, Conrail was 

free to abandon unprofitable rail lines, some of which were in 

Central Pennsylvania.

Faced with probable abandonments, and little outside help, local leaders settled on a novel 

but risky alternative – the purchase and control of the subject rail lines. SEDACOG was 

interested in four specific segments — one from Northumberland to Berwick, and three 

shorter lines in Centre County. In combination, these lines served 21 industrial customers 

along 80 route miles.

Undertaking the purchase and control was an exacting process involving traffic analyses, 

market forecasts, and cost determinations. To execute these tasks and to acquire necessary 

funds, leaders formed the SEDA-COG Joint Rail Authority, an autonomous entity 

responsible for public oversight of the soon-to-be-acquired rail lines.

In the years to follow, those responsibilities were increased. Funds were needed to 

maintain and improve the lines, and additional lines were purchased, ensuring continued 

rail service in other parts of the region. A solid working relationship was developed 

between the Authority and the private operator it had chosen to operate trains and serve 

shippers on the lines.
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While particularly popular, the TIGER program is extremely competitive, with an 

application success rate of 2.9 percent. Indeed, experience suggests that virtually no 

TIGER applications succeed as a result of their initial submission. The application 

process includes the formal development of a benefit-cost analysis based on USDOT 

methods and standards. In this way, the TIGER program has become a test ground for 

the development of BCA criteria that are now applied more broadly throughout both 

federal and state grant programs. There is no dedicated source of TIGER program 

funding nor any guarantee of subsequent grant rounds.

Currently, ARC operates three grant programs that could potentially serve as resources 

for the Region’s short-line railroads. The first of these is the Commission’s traditional

Area Development Fund (ADF). ADF initiatives are developed and administered locally 

within ARC development districts and can be used for a wide array of specific facilities 

and activities aimed at improving economic conditions and generating employment.

ARC provides transportation assistance through its Local Access Road program. Grants 

under this program are recurring and may be used to develop roadway infrastructure 

that connects a potential industrial location to the greater transportation network. The 

second (non-recurring) grant program is ARC’s POWER initiative. Grant funds under 

this program are intended to offer economic relief to areas within the Appalachian 

Region that are currently suffering economic consequences associated with the national 

trend of reduced coal consumption.

BEST PRACTICES AND LESSONS LEARNED

As noted already, diminished coal volumes are unlikely to immediately impact roadway 

and waterway infrastructure availability, at least within the short-run. However, 

communities wishing to maintain affordable freight rail access may be called on to act 

quickly and with very little advance warning. Therefore, anticipating future challenges 

and understanding how to effectively use available resources are important preparatory 

steps.

General Best Practices: Statewide Freight Plans

The most recent federal surface transportation bill, the Fixing America’s Surface 

Transportation (FAST) Act continues to require that states develop statewide rail 

plans and that these plans be approved by the U.S. Secretary of Transportation.36 In 

this light, every state should have available basic information describing the nature 

and extent of railroad infrastructure, carrier operations, and traffic composition. In 

addition to collecting and updating this information, states may wish to include 

freight plan elements that:

 36 See 49 U.S. Code § 22702 as amended by Pub. L. 114–94, div. A, title XI, § 11315(a)(1), Dec. 4, 2015, 129 

Stat. 1674.)
Page 39

• Preserve the railroad infrastructure footprint, if at all possible;

• Support quick (if not automatic) state responses to potential abandonments;

• Create or identify potential sources of funding; and

• Integrate rail planning as fully as possible into broader statewide freight 

planning and plans for economic development.

Experience shows that, once lost, the railroad “footprint” is difficult (or often 

impossible) to recreate. Moreover, while retaining rights-of-way is essential to rail 

capacity preservation, the ability to restore service to an inactive route may also 

depend on the presence and condition of the infrastructure on that right-of-way. This 

is particularly true of tunnels, bridges, and other infrastructure components. North 

Carolina’s program for retaining abandoned trackage is exemplary in this regard.37

It is also important that states be prepared to act quickly in the face of potential 

abandonments. Federal reform legislation of the 1970s and 1980s included 

provisions that diminish the duration of abandonment proceedings. Moreover, 

railroad owners are not generally compelled to discuss system rationalization plans 

prior to executing them. Thus, it is easy for both on-line communities and state 

authorities to be surprised by proposed abandonments.38

Next, if short-line railroads share any common attribute, it is that they are financially 

fragile. Accordingly, states that choose to actively rely on short-lines as a means of 

preserving railroad capacity must be prepared to either provide direct financial 

assistance or, at the very least, provide sub-state jurisdictions with the legal authority 

and technical support necessary to pursue non-state funding for short-line 

acquisition, rehabilitation, and operations.

Finally, based on our experience, state rail policies are most effective and most easily 

executed when the role of rail freight within broader state programs is well 

understood. This is particularly important when states are faced with fairly sudden 

preservation decisions that must be met with a yes or no.

Corridor Initiatives

Roads, railroads, and waterways follow common geographic paths that combine to 

form transportation corridors within and between regions. Like threads linking 

beads in a strand, these corridors connect the economic interests that are common to 

the communities they serve. For this reason, these corridors provide natural 

organizational and planning opportunities for individual communities. Moreover, 

 37 For example, North Carolina purchased and nominally maintains a 14 mile segment of the former 

“Murphy Branch between Andrews and Murphy, NC. In the event that these communities ever wish to 

restore rail service, this state action will likely prove to have been quite valuable.

38 Accelerated abandonment processes were components of both the Railroad Revitalization and 

Regulatory Reform (4R) Act of 1976 and the Staggers Rail Act of 1980.
Page 40

the substantial economic and political resources of unified corridor initiatives often 

yield powers that would be less available to individual communities.

Within Appalachia, leaders and planners have identified numerous transportation 

corridors which are typified by the I-81 Corridor that links communities from 

southern Pennsylvania, Maryland, West Virginia, Virginia, and Tennessee.

Public-Private Partnerships

Nearly every productive rail freight preservation initiative has coupled public sector 

and private sector interests. There are indisputable gains achievable through publicprivate partnerships. Unfortunately, effectively blending public and private interests 

also imposes challenges that generally do not exist when a project lives wholly in one 

sphere or the other. Public-private partnership challenges are generally traceable to 

differing outlooks. Common sources of friction are often traceable to:

• Substantially different objectives;

• Differences in time horizons;

• Differing perspectives on risk or uncertainty; and

• Vastly different administrative practices and constraints; 

Private sector participation is generally motivated by anticipated profits. Thus, while

private sector partners may be mindful and proud of the partnership’s community or 

regional value, their first concern and most binding constraint is their ability to earn 

returns on required investments. Absent this ability, the partnership will not 

succeed. Public sector motives may be more diverse and can include the retention or 

attraction of new commerce, local, regional or state fiscal implications, 

environmental outcomes, etc. These divergent motives complicate strategies and

often imply vastly different time horizons for project partners.

Next, the issue of risk can challenge the viability of proposed public-private 

partnerships. For private sector participants, risk has very clear and understandable 

meaning and, in the extreme, can endanger commercial viability. On the public side 

of most partnerships, the downside consequences of poor project performance 

typically imposes less dire financial or fiscal penalties. In general, private sector 

partners will argue that public sector entities are better able to withstand 

unfavorable financial results and, therefore, can improve overall project performance 

by assuming a disproportionately large share of project risks. However, even if this 

assumption is true from a financial perspective, the associate political consequences 

can breed reluctance on the part of would-be public sector participants.

Finally, private sector participants and public sector entities conduct routine 

business very differently from one another. Private sector administrative processes 

are generally far more streamlined, so that larger decisions can be made and acted 

upon for quickly. On the other hand, private sector participants are also used to 
Page 41 

acting confidentially. For their part, most public sector entities must sacrifice 

flexibility, speed, and stealth in order to achieve requisite transparency and public 

confidence. These administrative differences can lead to very different expectations 

and considerable frustration on both sides of a public private partnership.

Ultimately, to succeed, both public sector and private sector participants must 

compromise and accept a project path that is, to some degree, foreign and 

uncomfortable. 

A PARTNERSHIP FOR THE HEARTLAND

Accommodating economic change while preserving and enhancing freight capacity can 

require partnerships that span many jurisdictions and both public and private sector 

interests. Affecting timely change in this sort of highly diverse environment brings a new set 

of challenges. However, the requisite extra effort can also yield significant rewards. Few 

projects exemplify this tradeoff better than Appalachia’s Heartland Corridor. 

In 1999, the ARC funded an intermodal study through Marshall University. The study 

documented the extent to which a lack of intermodal access disadvantaged many 

communities in the heart of Appalachia. The study outcome struck a resounding chord with 

regional business and economic development interests, as they recognized the economic 

and employment potential of the emerging global marketplace. 

At the same time, leaders at Norfolk Southern Corporation (NS), encouraged by the rapid 

growth in international container traffic at the ports in Norfolk, Virginia, were anxious to 

explore infrastructure improvements that would accelerate the railroad’s growing role as a 

national force in intermodal transport. 

The resulting initiative, ultimately known as the Heartland Corridor created a new doublestack-cleared container route from the Virginia Port Authority’s marine terminals in 

Hampton Roads through the heart of West Virginia to the logistics park at the 

Rickenbacker International Airport in Columbus, Ohio, and on to the Midwestern 

industrial heartland. 

This was an interdisciplinary effort driven 

collectively by transportation, economic 

development, and international trade interests, 

as well as an intermodal vision bringing 

together highway, rail, maritime, and aviation 

professionals. It required inter-jurisdictional 

cooperation, extending over 677 miles, 

involving three states, and the federal 

government. And, finally, success required 

carefully navigating the often varied needs and 

expectations of its public and 

private-sector partners.

From its inception in 2001 to the launch of the 

first high-speed double-stack trains in 2010, 

Heartland has been a testament to vision, 

persistence, and collaboration. It is a halfbillion-dollar investment that has increased 

transportation capacity and efficiency, 

enhanced global competitiveness, and offers 

new economic and employment opportunities 

in Central Appalachia.
Page 42

Six FINAL THOUGHTS

or more than a decade, the accelerated transition of electricity generation from 

coal to alternative fuels combined with cyclical, but trenchant, international 

market downturns to produce a rapid decline in Appalachian coal production

and a corresponding decrease in coal-related transportation activity. As expected, 

portions of this calamitous decline were transitory and there is a sense that, at least 

for now, the worst of the coal-related shocks have passed. Still, 2015 will likely stand 

as a watershed year, marking a lasting change in the relationship between coal, 

commerce, and Appalachian life.39

The fundamental forces that launched the 2015 declines have not abated. Thus, the 

current lull in coal’s declining importance—and we believe it is that—is a valuable 

opportunity to calmly and thoughtfully plan a coordinated, ongoing response to 

ongoing structural economic change. For us, this has meant examining the initial 

effects of diminished coal production on the availability and affordability of freight 

transportation and exploring if and how communities can preserve freight capacity.

The effects of reduced coal production were ubiquitous across transport modes. 

Hundreds of daily truck movements ceased and coal movements by barge fell by onethird. Still, the greatest visible transportation effects were on the region’s railroads,

where similar reductions in coal volumes combined with private network ownership 

to prompt facility closures, sharp workforce reductions, the curtailment of at least 

some services, and a semi-permanent disposal of some route segments.

As the decline in coal production has slowed, so has the rail industry’s response to 

diminishing coal traffic. Nonetheless, there is nearly universal agreement that 

Appalachian coal traffic will never return to its 2007 peak and that the 2015 

retrenchments were only the first difficult round in what is likely to be an ongoing

“rationalization” of Appalachian freight rail capacity. To the extent that this capacity 

may be important to Appalachia’s economic future, the current trend must be 

 39 To every extent possible, the ARC has responded to these new challenges. The Commission’s ongoing 

programs have focused with a new vigor to meet the region’s human needs and to nurture the fragile seeds of 

recovery. Moreover, to help in this regard, the federal government nearly doubled the ARC’s financial 

resources for fiscal 2016 through the launch and implementation of the POWER initiative described above.

F
Page 43

accepted as a warning. If rail capacity preservation—limited or extensive—is 

appropriate, now is an opportune time to begin preservation efforts.

Fortunately, while there is urgency in this conclusion, we also have confidence in the 

Region’s ability to frame and execute an effective response. Experience has left 

planners and policy-makers abundant tools, many of which are traceable to Class I 

railroad network reductions in the 1980s. The railroads also seem to have learned 

from experience. Even though they have acted quickly to reduce costs as coal 

volumes have fallen, they have done very little that is not reversible. Moreover, both 

the large Class I carriers and the short-line portion of the rail industry seem well

positioned to afford caution. Thus, while there is urgency, there is no crisis. In fact, 

in some cases, we would contend there is opportunity. 

Finally, we are convinced that ARC will (and should) continue to play a pivotal role 

in the Region’s adjustment to a “post-coal” freight environment. The network 

environment suggests that distinct states can benefit from common action. In that 

light, ARC stands as a crucial nexus, wherein states can effectively gather and process 

transportation information, coordinate program activities, and join to form a more 

unified voice in dealing with those outside the Region. 
Page 44
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