In response to the invitation contained in the May 20, 1975 Congressional Record, I am attaching, for the record, a statement on the above subject. In summary, I believe the purpose of this proposal can be most readily accomplished by deregulation of the price of natural gas and liquid fuels. With such deregulation, the market place will provide the incentives for conversion to the most economical fuel. The higher prices which would be anticipated for both natural gas and oil will provide the necessary incentives for conservation of these scarce resources. Deregulation will further provide the incentives for rapid expansion of coal production and promote the exploration and development of oil and natural gas reserves. A second significant point would be the substitution of ambient standards for sulphur dioxide in place of point source standards. In this way, maximum use of the higher sulphur eastern coals can be achieved. Attachment Copy to: Senator Henry M. Jackson Senator Warren G. Magnuson Very truly yours, Edgar B. Spre Comments on the National Petroleum and Natural Gas Since its inception, the steel industry has been a major producer and consumer of coal. With this background of experience and with our interest in energy independence, the steel industry is certainly in sympathy with the objective of more reliance on domestic energy, the purpose of the National Petroleum and Natural Gas Conservation and Coal Substitution Act of 1975. However, we do have reservations about certain portions of the Act as it is now written. The following sections will indicate these reservations, provide the background for them, and offer recommendations for improvements in the Act. At present, approximately two thirds of the total energy consumed in the steel industry is directly coal based. The remaining one third, which comprises natural gas, oil, and purchased electricity, is used in areas that have not lent themselves to coal-based energy, either through a lack of technical or economic viability. This background encourages us to suggest changes leading to improvement in specific areas of the National Petroleum and Natural Gas Conservation and Coal Substitution Act of 1975. 55-305) 75 pt. 3 32 -2 Coal Supplies, Labor, and Transportation Since the end of the Second World War, the use of coal as a fuel in the United States has steadily decreased, primarily because of regulated low pricing of natural gas as well as the importation of cheap liquid-petroleum fuels. This unrealistic pricing has discouraged exploration for new reserves, and our rate of consumption has exceeded the rate of discovery of new natural-gas supplies. Proved reserves of domestic natural gas have shrunk to about 10 times the present annual consumption rate and the number of exploratory wells that have been drilled has steadily declined. This pricing policy, coupled with an aggressive sales program by the gas utilities, has caused an unhealthy conversion to natural gas as a fuel. At the same time, cheap foreign oil has been imported to the detriment of our own domestic oil industry as well as the coalmining industry. Just at the time we need a productive coal industry, we are faced with a moribund coal industry that has had to compete with low gas and oil pricing for the last two decades. In addition, stringent smoke control regulations, requirements of treatment to reduce sulfur emissions, and existing and pending strip-mine regulations have further discouraged the use of coal as a fuel in the United States. Faced with all of these handicaps, it is not surprising that the coal industry is not now capable of sufficient coal production to replace, in the near future, oil and gas fuels which have recently become less -3 and less available to industrial users, or increasingly expensive. One immediate corrective action that could be made to counter act the ills of the last 20 years would be to remove oil and gas from price controls. This would at least permit the price of fuels to seek their proper level in the market place, thus helping to insure that scarce resources are utilized most efficiently. We would expect that such deregulation would probably result in a substantial increase in the price of natural gas and might result in additional increases in the price of petroleum products. This would certainly provide a strong incentive for industry to rapidly convert to coal as a fuel for purely economic reasons. It would also stimulate further exploration and development of additional supplies of all types of energy, as well as substantially reduce energy waste and what are now rather marginal uses of energy. Many of today's present ills would not have occurred under a free competitive market, and it behooves us, as a nation, to restore fuels to the competitive market place. We note that it appears totally inconsistent to maintain in effect a mandatory program on price control of oil and natural gas and, at the same time, institute another mandatory program requiring conversion from these fuels to a coal-based economy. Certainly a free market place is preferable to this contradictory type of control. The present timing specified by the National Petroleum and Natural Gas Conservation and Coal Substitution Act of 1975 would require -4 This is an a doubling of coal production over the next 10 years. Act. Currently, about 52 percent of the nation's coal is produced from deep mines and 48 percent from strip mines. If new mining capacity is developed with this same split in tonnage, about 175 new two-millionton-per-year deep mines would be required by 1985. In addition, about half of the mines in present production would also have to be replaced. Such an accelerated mine-development program would severely strain both the capital-generating abilities and the physical capacities of the mining-equipment, transportation, and coal industries, and would be possible only if assigned an overriding national priority. This time span could be somewhat eased in the case of strip mining; however, only certain coal reserves are available for strip mining. In the East, only a small portion of the total coal requirements |