-21

$14 billion over 30 years if it can receive its coal by slurry line instead of rail. That is a direct saving to the MSU customer, of course, because transportation costs are a part of his electric rates. The opportunity to make such a huge saving arises from the fact that over a long haul such as Wyoming to Arkansas, transportation can amount to as much as 80% of the delivered price of the coal.

The economic advantage was evident in the statement last year of Virginia Knauer, Special Assistant to the President for Consumer Affairs, to the Senate Interior Committee. She stated that granting the right of eminent domain to developers of coal pipelines "would substantially

facilitate the general interests of consumers in the economical production and availability of energy." She also noted that in view of anticipated increased demand for coal, "it is in the interest of all consumers that various efficient, alternative mechanisms of transport be developed. "

3. What lead-times are typically required for the construction of the necessary facilities to support a national policy of greater coal utilization from the standpoint of-

***

b. transportation;

***

Transportation facilities can be expanded in pace with the development

of new coal mines and coal-fired power plants as long as all available

forms of transporation are permitted a role.

-22

A coal slurry pipeline can be designed and constructed within

three years.
This is approximately the length of time it takes to open a
new surface mine. It takes about five years to build a new power plant.

Railroad expansion will take place gradually as coal use increases.

The major constraints are shortages of the special steel products required for coal car and locomotive fabrication, shortages of the type cited by John W. Hanifin, President of the Chessie System, in his testimony

before the Committee on June 11, 1975. Delivery lead times for coal cars

have risen as high as two years recently, according to railway press reports, because of limited manufacturing capacity and shortages of special steel products.

4. What Federal policies would provide optimum
balance of incentives for expansion of the United
States' capacity for coal production, transporta-
tion, and use consistent with applicable environ-
mental policies and with the preservation of nation-
al security, the preservation of competition, the
assurance of a reasonable rate of return on invest-
ments, the maintenance of full employment, the
control of inflation, and reasonable consumer
prices?

A federal policy of granting eminent domain to coal slurry

pipelines which are judged beneficial would encourage a balanced transportation

system. Where they can be used efficiently, coal slurry lines offer a

way of expanding energy transportation capacity with minimal environmental impact and with great economic benefit to the electric utilities and thus

to the customers they serve.

-23

The federal government will not be in a position to make judgments on eminent domain for coal pipelines unless Congress enacts enabling legislation similar to the Coal Pipeline Act, passed by the Senate in 1974, and H. R. 1863, which is now before the House Interior Committee.

In its report on the Coal Pipeline Act of 1974, the Senate Interior Committee said: "Because any major coal pipeline will cross lands owned by many different people and excessive delay in negotiations could impede transportation of the coal needed to meet national energy needs, the Committee believes that carefully restricted federal eminent domain authority This is particularly true in light of the fact that coal

is necessary.

pipelines would frequently have to cross rights-of-way owned by railroads. Since railroads would in many instances be direct

competitors of the

pipeline in the coal transportation business, they could be unwilling to grant rights-of-way for pipelines. In fact, testimony at the Committee hearings indicated that railroads have refused to allow presently proposed pipelines

to cross railroad rights-of-way. Where the pipeline is in the national interest, private self-interests cannot be allowed to prevent its construction. "'

5. On the basis of experience from implementation of the Energy Supply and Environmental Coordiantion Act of 1974, what in your judgment, are the principal constraints on implementation of the National Petroleum and Natural Gas Conservation and Coal Substitution Act of 1975? What legislation do you believe would be needed to remove these constraints?

55-305 75 pt. 3 18

-24

Inadequate coal transportation capacity has periodically restricted the full use of available coal production. Stanley Ragone, Senior Vice President of the Virginia Electric & Power Company, expressed reservations to this Committee about futu re rail capacity for reliably delivering utility coal. In a recent article in Electric Light and Power, John J. Regan of Eastern Associated Coal Corporation reviewed the transportation situation and commented that "Under present conditions the railroad industry has

not kept pace with the demand for coal transportation.

He said that

both rail and barge companies will have to commit substantial funds to expansion and will need adequate encouragement and support from the federal government.

Mr. Regan said: "An expanded transportation system to move double our current coal production is absolutely necessary if we are to come close to energy self-sufficiency. Transportation managements have the right to know that the Federal Energy Administration and the Environmental Protection Agency will encourage the development

of coal on a long term basis. When this encouragement is given, transportation will not be a major impediment to national energy self-sufficiency.

Commenting on the role of coal slurry pipelines, Mr. Regan observed the "the question of federal eminent domain for coal pipelines is a subject of great controversy. Opponents believe eminent domain would impose an unfair competitive hardship on other transportation modes. But as we look to coal production two or three times that of the present, it's certain we'll need every mode of transport we can get. "

-25

Enabling legislation, which would establish authority within the federal government to grant eminent domain for coal slurry pipelines, is essential if this supplemental mode is to be of service in expanding the use of coal. Enabling legislation would be similar to the Coal Pipeline Act of 1974, which was passed by the Senate, and H. R. 1863, which is now under consideration by the House Interior Committee.

12. What are the present and anticipated incentives and disincentives affecting achievement of a doubling of coal production and usage by 1985 consistent with national environmental policies? What are your specific recommendations for optimizing the possibility for achievement of this objective?

***

b. If these incentives are inadequate, what changes would be required in order to close projected gap between supply and demand?

An expanded utility market is one of the fundamental incentives for expanding coal production. For the utilities, the incentive to switch to

coal lies in the fact that it is cheaper than imported oil, it is abundant, and as a domestic fuel, it offers a reliable long-term supply. In addition, natural gas is becoming unavailable and substantial lead times are involved in the utilization of nuclear fuel. Western coal also has the benefit of a lower

sulfur content.

Where a slurry pipeline can be used, there is a further incentive to shift to coal because of the economies involved. At long distance's from the mines, transportation can amount to as much as 80% of the total cost of the coal. Where slurry pipelines can deliver coal more cheaply than the presently