STATEMENT

OF

THE AMERICAN PAPER INSTITUTE

ON

S.1777

"NATIONAL PETROLEUM AND NATURAL GAS CONSERVATION

AND COAL SUBSTITUTION ACT OF 1975"

FOR PRESENTATION

TO THE

COMMITTEE ON PUBLIC WORKS

OF THE

U.S. SENATE

July 1, 1975

American

Pape 260 Madison Avenue, New York, N.Y. 10016/(212) 883-8000

serving the pulp, paper and paperboard industry

Institute

cable address: AMPAPINST New York

The American Paper Institute, the national trade association of the
pulp, paper and paperboard industry, submits for the record the
following information and views with regard to S.1777, The National
Petroleum and Natural Gas Conservation and coal substitution Act
of 1975.

The members of the American Paper Institute produce more than 90
percent of the nation's pulp, paper and paperboard. In 1974, the
paper and allied products industry produced 61 million tons of
paper and paperboard, had net sales of $30 billion and operated
production facilities in all but one of the states of the Union.
It paid nearly $8 billion in wages, salaries and benefits to some
700,000 employees.

The Pulp and Paper Industry is One of the Major Manufacturing
Consumers of Fuel and Energy.

The U.S. pulp and paper industry is a major manufacturing consumer
of energy and is therefore vitally concerned with the development
of a national energy program which will assure stable, environ-
mentally acceptable sources of energy at reasonable costs.
therefore fully support the broad intent of S.1777.

We

Diagram I indicates the sources of energy consumed by the pulp
and paper industry in 1973. Fuel oil and natural gas together
contributed over 40 percent of the industry's total energy re-
quirements in that year. (According to the 1971 Census of Man-
ufactures, the pulp, paper and paperboard industry ranked as the
largest manufacturing consumer of fuel oils.) It should also be
noted that nearly another 39 percent of the industry's requirements
was obtained from its own process wastes- spent pulping liquors,
bark and hogged fuel (wood residues).

The American Paper Institute now collects monthly energy use data
in cooperation with the Federal Energy Administration and the
Department of Commerce in order to monitor the industry's progress
towards its voluntary energy conservation goal. This goal was set
last October at 10 percent reduction in purchased energy use per
unit of output between 1972 and 1980, provided that environmental
requirements do not interfere. These monthly data indicate that
the percentage contribution of natural gas has declined somewhat
and those of fuel oil and process wastes have grown.

- 2

There are Several Major Constraints to the Implementation of S.1777.

The Committee, in its list of questions and policy issues, recognizes the many factors whose impact must be carefully evaluated before the conversion program envisioned in S.1777 is put into effect. We will therefore limit our comments to what we consider to be the principal constraints to the successful implementation of this bill.

Manufacturing and Time Constraints

The Federal Energy Administration is probably the best central source of information with regard to the number, capacity and special characteristics of boilers which would be converted in accordance with S.1777, as it has recently completed a survey of boilers at major fuel burning installations in order to implement the coal conversion provisions of the Energy Supply and Coordination Act of 1974. We therefore suggest that the Committee obtain this information if it has not already done so.

Recently the American Paper Institute has polled a sample of its member companies for information and views with regard to coal conversion as proposed in the bill. According to this poll only some 26 percent of boilers now burning oil or gas in the pulp and paper industry are capable of being converted to coal. These are boilers which at one time burned coal or which were built with provision for conversion to coal. It should also be noted that the companies polled varied significantly with regard to the percentage of convertible boilers (from 9 to 75 percent).

At present, up to three years are required to plan for and install new coal burning equipment. A significant constraint here is the backlog of orders held by equipment suppliers. Under these circumstances, it is extremely doubtful that the nation's available resources of specially skilled engineering and construction manpower, as well as of capacity to manufacture boiler, coal handling, mining, transportation and environmental control equipment, could meet the demand which would be generated by S.1777 within the January 1, 1980 time limit. Moreover, at some paper industry manufacturing sites land is not available for coal storage and handling facilities.

Environmental Constraints

The Committee is already aware that the Environmental Protection Agency has endorsed lime and limestone based flue gas desulfurization equipment as a viable means of meeting emission standards under the Clean Air Act. This endorsement has become the center of massive controversy. Electric utilities and manufacturers are disputing EPA's claims for this equipment as well as advancing the proposition that tall stacks and noncontinuous controls can do the job.

- 3

A study by the National Academy of Sciences National Academy of Engineering - National Research Council, Commission on Natural Resources* concludes that "the probality would appear to be greater than 90 percent that a lime scrubbing unit could be ordered with a reasonable prospect for reliable performance in a closed loop unsaturated mode for use in a power plant burning a medium sulfur coal (one to three percent sulfur) where the chlorine content is below about 0.04 percent,' (p.410) and further that "the chemical knowledge base is not yet adequate to permit confident design of a commercial limestone scrubber for a medium or high sulfur coal to operate in a closed loop mode. (p.428)

This lack of consensus alone on the effectiveness of currently available flue gas desulfurization technology raises serious questions as to prospects for massive conversion to coal envisioned in S.1777. Moreover, the FEA now estimates that vendors of this equipment will not have the capacity to meet the demands of planned new plants and the retrofitting of existing coal burning facilities until late 1977 at the earliest. Clearly, the large additional demand that would be generated by S.1777 could not be met except over a considerable period of years beyond 1977.

The Committee should also keep in mind that several states have adopted clean air standards of such severity as to almost completely eliminate any possibility of conversion to coal with the pollution abatement technology presently available.

Economic Constraints

Based on our survey of what we consider to be a representative sample of our member companies, API has concluded that the average capital cost of conversion to coal in compliance with S.1777 would be approximately $13,000 per daily short ton of pulp, paper and paperboard capacity. The range for individual companies would be from $7,500 to $22,500 per daily short ton of capacity.

By applying the average cost to the industry's 1973 capacity, we arrived at an estimated total capital cost of conversion for all paper industry boilers now using fuel oil and natural gas of some $4.4 billion. Admittedly, this is a rough estimate. But it does give some indication of the order of magnitude of the capital which would be required to achieve compliance.

We are particulary concerned that these proposed non-productive outlays would coincide with mandated outlays for pollution control facilities in our industry which are expected to reach at least $8 billion and may be as high as $10 billion over the next decade. At a time of growing concern over the availability of capacity not only in pulp and paper but also in many of the industries supplying the

*Air Quality and Stationary Source Emission Control, Senate Committee on Public Works Committee Print No. 94-4, March, 1975.