A larger but older plant, say one forty years old, might have a An additional economic disincentive for converting gypsum plants to coal is the increased operating costs which would be incurred through such conversions. The need for additional major equipment (boilers, condensate return systems, pollution control equipment, coal handling and disposal equipment, etc.), substantially increased maintenance costs, additional personnel requirements, and the greatly increased consumption of energy are just a few of the factors that would contribute to these increased costs. Summary In summary, the most significant hardships which would need to be faced if U. S. Gypsum Company were to convert its existing board plants to burn coal would be as follows: The loss of substantial board producing capacity, with its consequences on Company profits and increased nation-wide construction costs. The need to consume roughly 40% more energy per unit of production in the manufacture of wallboard, utilizing steam kilns. The need to spend far more capital for coal conversion than is The incurrence of major additional operating costs associated Additional serious, but less significant, hardships would include the major outages which would be associated with plant conversions and the inordinate demands that would be placed on Company engineering and construction crews. Under present and foreseeable market conditions, if a general conversion of oil and/or gas fired equipment to coal were legislatively mandated, United States Gypsum Company would most probably find itself left with no economically feasible alternative but to discontinue operations at a majority, if not all, of its present wallboard producing locations. Sincerely, UNITED STATES GYPSUM COMPANY AM Holloway W. W. Holloway Director of Manufacturing WWH: mat The attached statement concerns the hearings on greater coal utilization being conducted by the Senate Committee on Public Works in conjunction with the National Fuels and Energy Policy Study. I respectfully request that this statement be made part of that record. Statement of Arthur D. Lewis Chairman, Board of Directors Committee on Public Works The United States Railway Association would like to comment on the Coal Slurry Pipeline Proposals, which are under consideration by the Committee on Public Works. In short, the bills provide coal.pipeline carriers with the power of eminent domain through U.S. District Courts should the right-ofway required to construct, operate or maintain a coal pipeline be unattainable through negotiation. The Association feels compelled to bring to the Committee's attention the implications raised by the coal slurry legislation not only on the rail industry but as it may affect broader transportation policy. The Association takes no formal position with regard to the bills. Rather, it seeks to lay out the potential effects enactment of the legislation might have on the rail industry and transportation policy so that the Committee can act with a complete a grasp as possible of the ramifications of the bills that have been introduced. To begin, the Association wishes to bring to the attention of the Committee the references to coal slurry pipelines that appear in its Preliminary System Plan. "Although there are no slurry pipelines at present within the Region, interest has been shown in transporting solids, particularly coal by this node. Large deposits of coal, combined with adequate water supply suggests that this mode may increase in importance as a competitive force." (Page 121, Volume I, PSP.) "Potentially there is another major transfer of traffic from railroads to pipelines in the movement of coal as slurry. This could occur if rail costs continue to increase in relation to pipeline costs. It would be catastrophic to the rail industry in the Region if coal slurry pipelines were developed to any major extent. Coal is the most important rail commodity in the Region and is profitable to the railroads at this time. Though the bankrupt railroads are not as heavily dependent on coal shipments as are the other railroads in the Eastern District, diversion of up to 20 percent of the coal tonnages originated on the bankrupt lines to coal slurry pipelines or to consumption at the coal mine site is possible. For This potential loss would occur over a very long term, however, and would require substantial reductions in the cost of pipeline transport. the short term, the worldwide shortage of crude petroleum is increasing the demand for coal and for movements of coal by rail. The immediate prospect is for increased coal shipments over the railroads in reorganization, not for diversion to pipeline transport." (Page 140, Volume I, PSP.) Therefore, it is important to consider the effect of encouraging coal slurry development on other modes of transportation. As pointed out in the Preliminary System Plan, public transportation policy is a patchwork of laws and regulations that do not allow for the development of a coherent .national transportation policy. The competitive situation as between the various modes of transportation has been distorted by the imbalance of public support for certain of these modes. The inequity already existing has placed the rail industry in a precarious economic position. Surely, the impact of still another competing mode, aided by explicit government power, on the rail industry should be carefully considered. The heart of the difficulty in the development of coal slurry pipelines is the "cream skimming" effect that it has on competition. the economies and environmental problems associated with coal slurry pipelines have not been completely resolved, it is clear that such pipelines are viable, if at all, only where high volume movements to a few large volume shippers are involved. While This sort of potential exploitation of a specialized market leaves the railroads left to serve the less profitable, diverse needs of other scattered electric utilities. Given the enormous involvement in plant and equipment which the rail industry must make if it is to cope with the increasing demand for coal, the Committee should consider the attractiveness of this investment to the private sector if it appears coal slurry pipelines pose a serious threat to the profit potential of the rail industry in this area. The Association does believe that there must be a balancing of the competing interests of the various modes of transportation. If such a balance cannot be achieved with respect to both market access and rate levels, the ultimate responsibility for supporting the common carrier transportation system will shift from the private consumer to the public taxpayer, and control of that system from private enterprise to government. The Committee should consider the extent to which the proposed legis lation adds another "patch" to the transportation system as well as the competitive impact it may have on an already threatened rail industry. |