H.J. Huneycutt

Is Berkshire’s Burlington Move All About Coal?

I think saying it's a "bet on coal" is an oversimplification. BNSF does depend on coal for a good chunk of their revenues, but growth is coming due to (a) consolidation in the industry, (b) a better operating environment for railroads, (c) higher oil prices, (d) problems associated with funding for the highway system that could potentially undermine the subsidizes that have benefited truckers for decades, and (e) environmental favoritism.

In essence, rail will grow because the future outlook for trucking is questionable at best. The trucking industry can't compete nearly as effectively in a world with $4/gallon gasoline and increasing tolls and fees.

As far as coal goes, BNSF is in the best position because Western coal tends to be cleaner than Eastern coal; but really, all BNSF has to do is maintain its current coal shipments. Coal doesn't have to see radical growth for the company to grow significantly over the next two decades.