June 30, 1975

STATEMENT & COMMENTS

of

ENERGY TRANSPORTATION SYSTEMS, INC.

P. O. Box 3965, San Francisco, Calif. 94119

to

U. S. SENATE COMMITTEE ON PUBLIC WORKS

on

S. 1777 AND SENATE NATIONAL FUELS AND ENERGY POLICY STUDY

The Senate Committee on Public Works is to be commended not only

for recognizing the value of the nation's vast coal reserves but, more important, for taking decisive action to put those energy assets to work. There has been much discussion of the potential of coal, but not enough has been done to realize that potential. This Committee's effort to shape a more cohesive national coal policy can make a vital contribution to the nation's energy future.

If as a result of the Committee's effort there is a substantial shift toward

the use of domestic coal to produce electricity, the United States will be assured of more reliable fuel supplies, the balance of payments problem

will be eased and the influence of foreign oil producers on the U. S. economy will be significantly reduced.

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Many electric utilities already have recognized the benefits of expanded coal use and are moving in that direction as they plan their new power plants. These utilities represent every section of the country and include such diverse organizations as Atlantic City Electric, Carolina Power & Light Co., Central Nebraska Public Power & Irrigation District, Florida Power Corp.,

Houston Lighting & Power Co., Oklahoma Gas & Electric Co., Southern

California Edison Co., and Wisconsin Electric Power Co.

The very large reserves of low sulfur coal in the western

states have proven particularly attractive, since western coal can

ease the problems of operating major generating plants within strict air quality standards.

For utilities serving urban areas, the basic problem lies in getting the low sulfur western coal to their plants. With the distances involved, transportation can amount to as much as 80% of the delivered cost of the coal. Thus, the questions concerning choice of transportation mode-rail, barge, pipeline and EHV transmission--are highly important. relate not only to making more coal available where it is needed, but also to the equally important questions of the costs of doing the job and the impact on the consumer.

They

Coal slurry pipelines can be an effective means of expanding the use

1House Committee on Interior and Insular Affairs Hearing Record on H. R. 1863.

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of coal. By providing stabilized lower cost transportation, pipelines can make coal a practical fuel over a wider area than would be possible with traditional surface transportation. Wherever they are operated, the low transportation costs of coal pipelines will assist the utilities in holding down their electric rates. And pipelines can do the job without significant impact on the environment or on the communities through which they pass.

There are a variety of coal slurry pipelines in the planning and

development stage west of the Mississippi River. Individual pipeline systems are proposed to supply new power plants located in Arkansas, Nevada, Oregon, Utah, and Texas. In addition, a coal slurry pipeline has been transporting coal across Arizona since 1970, and coal pipelines are planned to operate within Canada. (See Exhibit A, attached.) They have been thoroughly described and discussed during hearings last year before the Senate Committee on Interior and Insular Affairs, prior to Senate passage of the Coal Pipeline Act of 1974, and in a series of House Interior and Insular Affairs Committee hearings now under way on H. R. 1863.

Since a variety of pipeline proposals and studies were discussed during the Senate Public Works Committee hearing just concluded, however, it

might be useful to briefly describe the specific pipeline Energy Transportation Systems, Inc. (ETSI) has under development. The ETSI pipeline serves

as a typical example of the benefits this technology can bring the nation.

ETSI is a company affiliated with Bechtel, Lehman Brothers and the Kansas-Nebraska Natural Gas Co. It is two years into a program, involving a substantial investment of money thus far to develop a pipeline system which will carry 25 million tons of coal annually from Wyoming to Arkansas. The coal is to be used in a new power plant facility which Middle South Utilities is developing to shift from a heavy emphasis on natural gas to a diversified generating base which will include coal and nuclear power.

Middle South Utilities serves 1.3 million customers in

The pipe

Arkansas, Louisiana, Mississippi and Southeastern Missouri. line will be 1,036 miles long and will be buried its entire length. The only surface facilities will be a well field, a coal preparation plant at the head of the line, 10 pump stations widely spaced along the right of way and a dewatering facility in the terminal area. The pipeline will be safe, silent and largely invisible. After construction, the land above it

will be restored to its former uses.

Slurry pipelines have yet another environmental advantage. They are highly automated and thus do not require a large work force. In sparsely populated Wyoming, for example, the ETSI line will require only 75 people to operate it and thus will not involve the heavy social impact of many other forms of energy development.

The ETSI pipeline will cost approximately $750,000,000 to build, in

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This is an

cluding allowances for inflation over the next few years. investment of about $2.240,000 per worker, and it illustrates the basis for coal pipelines' economic advantage over railroads under many circumstances. A high proportion of operating cost, typically 75%, is related to the initial investment, which is a fixed amount. A relatively small share of costs is subject to inflation. Thus, a major coal slurry pipeline starts out with an advantage because of its efficiency and economy of scale, and the advantage grows steadily because it is relatively well protected from inflation.

The

The long-term savings anticipated by Middle South Utilities from the use of the ETSI pipeline have often been cited, and they remain a solid example of what pipeline transportation can mean to consumers. President of MSU has testified that his company can save a total of $14 billion over 30 years if permitted to receive 25 million tons of coal

2

annually by pipeline instead of rail. Savings to the company mean savings to consumers, since transportation costs are a part of electric rates.

Economies of this order undoubtedly led Virginia H. Knauer, Special
Assistant to the President for Consumer Affairs, to say that "encouragement

2The MSU forecast of a $14 billion savings is calculated by comparing the transportation price ETSI is prepared to commit for 30 years with the best available tariffs for unit trains. Since rail tariffs are not fixed-they have risen 30% just in the past 18 months--current unit train estimates were adjusted over the 30-year period to reflect historical trends in inflation.