Coal

My name is Lawrence T. Forbes. I am Vice President and Ore Traffic of Norfolk and Western Railway Company, which has general offices at Roanoke, Virginia. Norfolk and Western is among the largest carriers of coal in the United States. In 1974, N&W originated about 67 million tons of coal on its line and, including coal received from other rail carriers, handled slightly over 79 million tons. Both S.1777 and the broader subject of the nation's future fuel policy are of substantial interest to my company. I appreciate the opportunity to present

our views to the Committee.

The implementation of S. 1777 would return to N&W significant coal tonnage lost with the conversion of many utilities and industries to oil and gas-fired boilers. N&W welcomes this prospect and could accommodate the increased tonnage with no problem. We estimate that, between 1965 and 1973, conversion deprived us of coal movements aggregating approximately 11 million tons on an annual basis. Its return could be handled with our existing plant. This is indicated by contrasting the 67 million tons we originated in 1974 with, for example, the more than 80 million tons of such

2

coal we moved in the record year of 1967. The tonnage capacity of our car fleet was essentially the same in both years. N&W has had a number of other years in which originated coal exceeded 79 million tons and, in 1965 and 1966, that volume was handled with a car fleet whose capacity was smaller than that of 1974.

I would also point out that the additional coal which conversion would require is most assuredly available. West Virginia alone, which produces most of the coal originated by N&W, is estimated to have over 39 billion tons susceptible of mining by conventional surface and underground methods.1

As to the nation's future coal policy, the Committee has inquired of the capability of railroads to handle a doubled coal production by 1985. Assuming that this would fall equally upon the coal-carrying railroads, N&W would anticipate originating 144 million tons in that year. I estimate that this would call for the addition of about 46,000 100-ton hopper cars and 500 locomotives to our fleets during the 10-year period. At today's prices, the necessary investment would be approximately $1.1 billion for cars and $200 million for locomotives.

I believe an investment

of this magnitude just to handle increased coal tonnage is possible if, but only if, conditions are right for its profitable reSeveral of the Committee's questions bear on this point.

covery.

Table 2, Demonstrated Coal Reserve Base of the United States on January 1, 1974, U. S. Department of the Interior, Bureau of Mines.

3

In Question 4, the Committee inquires as to federal policies which might provide incentives for the expansion of transportation capability. An important incentive could come in the form of tax legislation. For example, House Bill 6860, The Energy Conservation and Conversion Act of 1975, recently passed by the House of Representatives, includes an extension of the present law permitting five-year amortization of railroad rolling stock as well as provisions for five-year amortization of other railroad equipment, including communications, signal and traffic control systems, classification yards, loading and unloading facilities and betterments and improvements to track. These provisions, by enhancing the recovery of costs of needed investments through tax deductions, would assist railroads to make the investments.

Another important item of tax legislation which would be of great value to our industry in generating capital requirements would permit amortization of the railroads' existing investments in grading and tunnel bores and the presently frozen costs of investment in track structures. Such legislation would permit the

industry to recognize through tax deductions the obsolescence inherent in its grading and track structure and would help generate additional investment dollars to improve track facilities to handle the increased traffic volume.

Questions 19-24 present the "disincentive" side of the coin insofar as they relate to government assistance to other forms of transportation. While railroads are regulated in almost all aspects of their operation, competing barge lines are virtually unregulated. Without regulatory restraints on pricing their services and with the considerable advantage of federally-funded rights of way, they have siphoned much important bulk traffic away from N&W and other railroads. In my opinion, widening their advantage through legislation would dim the prospect of the railroads' making the investment necessary to handle a doubled coal tonnage.

As to coal slurry pipelines, it is quite clear that their operations would be directed at the large, concentrated movements of steam coal to electric utilities which constitute the bulk of U. S. coal transportation. Diversion of coal from the rails would be great. This was the effect of the opening in 1957 of the only commercial pipeline yet built east of the Mississippi, which ran 108 miles in Ohio between Cadiz and Eastlake. The tonnage of the rail carrier which had supplied most of the Eastlake power plant's coal dropped 93 percent, from 24,225 cars in 1956 to 1700 in 1957. In addition to shrinking the railroads' traffic base, diversion would also, if the experience of this slurry operation is any index, increase the cost of power production. During the six years of the pipeline's operation, the Eastlake plant's