Senator Jennings Randolph

Page 2

June 26, 1975

content and the fact that it often needs to be heated to
maintain its liquid state, there are no other markets capable
of absorbing such large quantities. In the long run market
forces may find new products which can be derived from it,
but in the meantime the demand for residual would decline dras-
tically.

as

3. S. 1777 allows only coal an alternative to oil and
natural gas. In the Pacific Northwest this is a highly
unreasonable alternative. There are alternatives to oil and
natural gas other than coal and additional ones will appear
at future dates. Many of these are not currently economically
feasible, but may become so in the future. These alternatives
include the extensive use of hog fuel and spent pulping liquor,
and future possibilities such as municipal waste, auto tires
and even grass straw. We must maintain the flexibility to
select options. Simultaneously, the nearest source of coal is
hundreds of miles away. It has a relatively low BTU content,
the railroads are not prepared to haul it, and there is very
little experience in using it. In short, an entire production,
distribution, burning and ash disposal system would have to be
built. Ironically, by the time the conversions required in this
bill can be implemented, we will probably have an oil refinery
in Portland and an LNG plant in Newport.

4. It is highly unlikely that a time period of ten years is
adequate for industry and utility conversion considering the
problems associated with the doubling of coal production, the
expansion of transportation capability and the capital invest-
ment requirements.

5. Requiring industry to shift from oil to coal will increase
costs for local homeowners. If oil is not sold to industrial
accounts, the distributors' overhead will have to be spread
among the remaining customers.

6. The size limitation of 50 million BTUS per hour is highly
unrealistic. This is only about 8 barrels of oil per hour or
roughly 2 tons of coal. There are thousands of boilers in this
country which come under this classification.

Again, we recognize the intent of this bill and the obvious desire to expand the usage of coal and to further implement the intent of the Energy Supply and Environmental Coordination Act. Coal will be included in industry's future planning. We see this as positive step. In the Northwest all new base load electrical generation capacity is nuclear or coal. This is also a positive step. But the energy problem took many years to create and much of it can be attributed to past national policies, including the regulation of interstate natural gas pricing. The country needs a coordinated total energy policy. We also need legislation which can eliminate over-regulated and unnecessary obstacles to the development

Senator Jennings Randolph

Page 2

June 26, 1975

and utilization of various fuels. With these actions, accompanied by market forces, we can eventually

-

in the most economical and environ

mentally sound manner work ourselves out of the energy shortage.

John F. McDonald

Vice President

Governmental Affairs

2229

Public Service Electric and Gas Company 80 Park Place Newark, NJ. 07101 201/622-7000

July 11, 1975

Senate Committee on Public Works

Room 4204

Dirksen Senate Office Building
Washington, D. C. 20510

ATTENTION: Mr. Richard Grundy

Professional Staff Member

Dear Mr. Grundy:

I enclose herewith ten copies of answers to the questions
posed by the Committee on Public Works in conjunction with
the National Fuel and Energy Policy study as those questions
appeared in the Congressional Record of May 20, 1975. These
questions relate to S1777 which has been introduced and is
presently being considered.

If you desire additional information, Public Service Electric
and Gas Company will cooperate.

Sincerely,

Jahn Mchoral

John F. McDonald

Vice President

Governmental Affairs

JFMCD: vr

Encs. (two envelopes)

FROM THE CONGRESSIONAL RECORD

SENATE

S8667

Questions and Policy Issues

Question No. 1

What are the present situation and future outlook (through 1985 and beyond) with respect to the United States' capability to support a doubling in coal production and use by 1985 with respect to the adequacy of

a. Coal reserves?

b.

C.

d.

e.

f.

Coal mining capacity?

Coal transportation capacity (by railroad,
waterways, or pipelines)?

The end-use capabilities?

Manpower for coal mining and conversion of
end-use facilities?

Available capital funds?

If in your judgement, this objective will not be achieved by 1985, what would be a reasonable time schedule?

Answer:

There is no doubt that coal reserves exist which are capable of supporting a doubling of coal production and use by 1985. The ability of mining capacity and transportation to keep pace with this increased demand, however, can be answered best by those more closely related to those aspects of the industry. It is the conclusion of most outside observers that a stable, orderly growth of the coal industry will not take place, however, until there is a positive national long term commitment.

The capability of the industrial community to provide end-use facilities for the increased coal production needs to be evaluated on an individual basis. At PSE&G, we have 7 units which have been designated by the FEA as possible candidates for future reconversion from oil to coal. Complete reconversion of these units would result in a twofold increase in our present rate of coal consumption. This rate of consumption, however, would not start for several years if major additional pollution control facilities are required and would shortly begin to decline in 1980 as older, inefficient units are first unloaded then retired. No new baseload fossil fuel units are planned, as all future baseload needs will be met with nuclear energy.

The reconversion of PSE&G's units to coal with the installation of flue gas desulferization systems and associated replacement capacity will cost an additional $485 million in capital costs, including escalation, through 1979. It should be noted that this investment will add no new capacity to the system as it would if it were applied instead to new construction. It is also important to consider the fact that some units are scheduleċ

Question No. 1 (continued)

for retirement before 1985. It would be an economic advantage to forego reconversion of these units and divert the capital which is saved to the financing of new construction.

The increased financing requirements of the proposed reconversion program would require substantial additional rate relief over and above that required for other purposes. Without the necessary rate relief, scheduled construction of two 1100 mw nuclear units would be delayed by about two years.

It is our belief that new coal mines which will be required to meet the increased demand will not be available unless producers are assured of a long-term market plus a guaranteed adequate return on investment. Additionally, utilities may have to advance capital, guarantee loans, or buy mines outright in order to obtain sufficient coal supplies. This additional financing requirement would further aggravate a utility's ability to raise the capital needed for new construction.