The Honorable Jennings Randolph

July 3, 1975

At the present time, it takes approximately three
years and in excess of 30 million dollars to develop
a deep or underground mine that will produce three
million tons of coal per year. Until such time as
the air pollution control criteria are permanently
relaxed to the point where coal from existing and
developed coal reserves can be burned and sensible
strip mining legislation is enacted, the financial
community cannot be expected to invest the huge sums
of money required to double our coal production by
the year 1985. Investors will not, and indeed should
not, be expected to invest in projects which, due to
the lack of a firm government policy, could by
government mandate be outmoded or even termed illegal
within a relatively short time after they have been
placed in operation.

(2) Being unsuccessful to obtain relief in the above areas, the only areas left open to industry are the installation of flue gas scrubber systems which are still unproven, expensive and unreliable, the purchase of low sulfur western coal or the purchase of low sulfur coal produced in foreign markets.

When we speak of western coal, we must be concerned with
a transportation system that will be woefully inadequate
in supplying all needs east of the Mississippi River. It
has been suggested by many experts that western rail trans-
portation can be augmented with coal slurry pipelines which
would transport large quantities of coal. However, opera-
tion of these lines requires tremendous quantities of water,
and proponents of this type of transportation have failed to
say where these quantities of water are going to come from,
particularly when the coal is being mined in areas that are
already considered to be "arid."

If we must rely more heavily on foreign coal, our nation's balance of trade will be adversely affected to the point where it will be in as much trouble as it presently is with our large imports of foreign oil.

(3) When we consider coal conversion, coal substitution, and coal allocation, we must be cognizant of several factors:

a.

While there might be those who disagree with us, it
is our opinion that there is a relatively small per-
centage of excess coal on today's market. The
Federal Energy Administration estimates that if all

The Honorable Jennings Randolph

b.

C.

July 3, 1975

the units presently under order were converted
from oil or gas to coal firing, our national
requirements would increase by an additional 20
to 30 million tons, or more, of coal per year.
When these companies are forced into the coal
market, competition for the existing supplies
will be increased, with an inevitable increase
in price. These increases must be passed on to
our customers with a resulting hardship to those
in the lower income brackets.

At the present time, each state, and in many cases
each county or group of counties in a particular
area, has its own air pollution control criteria.
In an attempt to abide by these regulations, we
purchase coal to meet the criteria in the specific
area in which each of our particular plants operates.
For instance, in Alabama we presently have two cri-
teria. In the northern portions of the state, we
can burn coal having a maximum sulfur content of
2.5%, while in the southern portion of the state,
we are limited to a maximum sulfur content of
1.07%. This situation will be further compounded
in the near future as plants presently under con-
struction come on line and the sulfur content of
coal used at these plants will be limited to a
maximum of 0.7%.

In this regard, we feel we do a fairly good job of
purchasing coal to meet these criteria, while at
the same time maintaining minimum stockpiles and
buying at prices which are competitive in our area.
However, if coal allocation were to take place,
we question how we could have the necessary assurance
that the coal used to replace that taken from us
would be satisfactory to meet our particular envi-
ronmental needs and, further, if the company were to
suffer a financial loss from this transaction, how
would we and our customers be compensated for our
loss?

Last, but far from least, all coal will not burn in
all boilers. For instance, all of the boilers on
our system are designed to burn relatively high Btu
(11,800 Btu/lb.), high volatile (+30%) coal having a
high ash fusion temperature (+2100°F). As a result
of this, all the coal purchased by our company must

The Honorable Jennings Randolph

July 3, 1975

at least have all of the above specifications
along with a basic maximum sulfur content.
All of which is to say, that, if our coal were
diverted to another company, it could give them
just as serious operating problems as we might
have with a coal that would not meet our specifi-
cations and was allocated to us. Any allocation
or diversion scheme which is developed must take
into account the type and/or characteristics of
the boilers being used as well as the coal being
diverted from one station to another. If these
conditions are not taken into account, the
reliability of the energy supply in large areas
of the country could be adversely affected.

Suffice it to say that literally volumes could be written in response to the committee's 40 questions and their several subdivisions. However, in our particular case, we have only tried to point out a few of the aspects that directly concern us and emphasize our belief that a strong National Energy Policy should be agreed upon before legislation of this nature is enacted into law.

We appreciate the opportunity to comment on the committee's questions and hope that our remarks will be helpful in its deliberations.

Sincerely yours,

Jessed Vogtle

Jesse S. Vogtle

Senior Vice President

JSV: hrj

This responds to your letter of June 13, 1975, inviting the American
Boiler Manufacturers Association (the "ABMA") to answer questions and
submit comments on S.1777, the proposed National Petroleum and Natural
Gas Conservation and Coal Substitution Act of 1975.

The members of the ABMA are vitally interested in S.1777 because it
would have direct and substantial impacts on the boiler manufacturing
industry, on its customers and suppliers, and on the public at large.
We are pleased to have been asked to supply information to your
Committee. We are supplying that information by way of the enclosed
memorandum, which is entitled, "Comments of the American Boiler Manu-
facturers Association on S.1777". Some of the conclusions of that
memorandum are the following:

- Electric powerplant units representing 100,000 megawatts of capacity now burning oil or gas would by 1985 have to burn coal. Most of these units cannot be converted and will have to be replaced. For this electric power generating capacity to become capable of burning coal (by replacement and where feasible by conversion) would cost an estimated 30 billion dollars if there were steam generating equipment manufacturing capacity available to undertake the task. That manufacturing capacity does not exist and if it were to be created solely for a one-time, short-term, massive increase in demand, the capital and operating costs would likely result in electric generating equipment costs far exceeding 30 billion dollars.

About 42,000 steam generating units in 17,000 plants other than electric powerplants would have to be replaced because they cannot feasibly burn coal. These units include those in a variety of industries such as paper, steel, rubber, petroleum refining, and many thousands in hospitals, schools, government buildings, greenhouses, office buildings, commercial buildings and apartment complexes.

The replacement costs by 1985 for all 42,000 units assuming the manufacturing capacity existed to meet such a demand, would be 68 billion dollars. The amount of oil and gas consumption directly avoided would be about 3.2 million barrels per day.

If only the 300 largest installations, (containing 400 units) i. e. those in excess of 300 million Btu's per hour heat input, were required to be replaced, the capital cost would be $11 billion and the oil and gas consumption directly avoided would be 1.6 million barrels per day.

The $57 billion replacement costs for the 41,600 other units would achieve an oil and gas savings of 600,000 barrels per day, or a barrel per day saving purchased at a price of $68,000.

An undetermined, but quite large proportion of the plants for the 42,000 units affected could not use coal in any event, because of lack of space and access, pollution control considerations, and other impediments. The alternatives in many cases would be prohibitively expensive. The use of electricity, to the extent that it may be an alternative, would cause a greater total energy consumption to perform tasks that otherwise would be performed by oil or gas fired steam.

Some of the facts mentioned above, and others arrayed in the enclosed memorandum, strongly suggest that members of the ABMA do not possess the vast manufacturing and financial capabilities which would be required if the deadlines of S.1777 were imposed. We are not pleased that this is the conclusion which the facts dictate, but we would not wish to provide your Committee with an unrealistically optimistic report. In concluding, we wish to express our appreciation for your having invited our comments. We are particularly pleased that the Committee's hearings on S.1777 were begun and have been completed so soon after the bill was introduced, because any delay in the consideration of coal conversion measures can only aggravate the uncertainty which already hangs over the marketplace and delays the making of decisions on orders for new and replacement steam generating equipment. We hope that further Congressional deliberations will also be conducted with a view to minimizing the impact of uncertainty on our industry, which like many others in the capital goods sector, is feeling the effects of recession.

Sincerely yours,

William B. Marx

William B. Marx
Executive Director

M. H. Jackson

W. H. Jackson
President

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