A couple of thoughts on Buffet’s acquisition of the BNSF railroad this week and how it may or may not be tied into cap & trade.

I’m assuming that Buffet took into account the bill that already passed in the House earlier. A good deal of BNSF’s traffic originates from Wyoming’s Powder River Coal Basin, and I’m thinking one of three things happens that buffet anticipated in his purchase of the railroad.

1) The current version that passed in the House dies the gruesome, nasty death it deserves in the senate. Online loadings of coal contiue as-is- primarily to power plants in the midwest.

2) The bill passes, but in this version, the coal from Wyoming is deemed ‘clean’ by their standards. Again, carloadings continue for BNSF and railroads that service the Alleghanies like CSX, Norfolk Southern, Reading & Northern or Alleghany & Ohio are harder hit, since the legislation affects coal that originates on their lines.

3) The bill passes and Powder River coal is verboten along with the black diamonds from the Alleghanies. BNSF shifts whatever traffic it lost from coal to ethanol instead [The siren song of ethanol is what lured to invest in railways in the first place]. Ethanol cannot be transported via pipeline- trains are basically the only way to move it in sufficient quantites.

Granted #3 would be the most radical and farfetched scenario, but I think Buffet set himself up to come out ahead no matter what happens in regard to cap and trade.