The Corporate Committee on Energy Conservation of Phillips Petroleum Company, of which I am chairman, has studied the proposed Bill S.1777, on substitution of coal for oil and natural gas in steam boilers and other combustion units. Phillips Petroleum Company agrees there is an urgent national need to economically and systematically substitute the abundant energy resource, coal, for the limited energy resources, oil and gas, and endorse the overall objectives of S.1777. However, we are opposed to legislative mandate on matters such as this and include remarks later herein on our preference for the free market approach. On the basis, however, that fuel substitution may be forced by legislation, we have some comments and suggestions on S.1777 which we recommend for consideration during your deliberations on the bill. 1. The term "conversion" should not be applied to the retrofitting of plants presently using natural gas or fuel oil in steam boilers and other combustion units, to permit firing with coal. Combustion equipment used for natural gas or fuel oil cannot, in most instances, be modified to handle a solid fuel. Therefore, most, if not all, such equipment would have to be scrapped and replaced with completely new, costly equipment, specially designed to burn a specific coal in an environmentally acceptable manner. Because of time limitations, space limitations, and loss of production from downtime for modifications in the few instances where considered practical, it will be more economical, in most cases, to replace the entire apparatus (combustion chamber, boiler tubes, and enclosure). 2. The capital cost to Phillips to scrap all our existing steam boilers firing over 50 million BTU's per hour and replace them with coal-fired boilers, would exceed one billion dollars exclusive of the cost for more coal mines, improved and enlarged coal transportation and handling facilities. The addition of equipment necessary to meet EPA air quality standards would add considerably more to the cost. Some state and local air standards are even more severe than EPA's and would further raise the equipment costs. Most coals cannot be burned under EPA regulations without removal of sulfur either before or after combustion. Much development effort is in progress. No continuous stack gas clean up system has been developed which is generally considered to be reliable. The Honorable Jennings Randolph Page -2- At a minimum, this boiler replacement would be the equivalent of taking at least two years of Phillips' present total capital expenditures and spending it only for this purpose, ignoring all other needs, including the search for new reserves of domestic oil and natural gas. Please note that this analysis applies only to individual boilers having 50 million BTU/hr size or larger. It does not include other combustion units or small multiple boiler installations having combined capacity greater than 50 million BTUs/hr that are also included in the present version of S.1777. If those other units are considered, the effects would be even more devastating. Such expenditures would cause a complete dislocation of our efforts toward economic recovery in this country and effectively halt the search for oil and gas reserves. If the criteria were changed to require replacement at only those plant locations where total boiler firing rate is over 1,000 million Btu/hr, then the equivalent oil savings in our case would be 80% as much as replacing all units over 50 million Btu/hr. The number of units involved would be reduced from 180 boilers at 30 locations to 83 boilers at 5 locations. Capital costs would be cut in half (exclusive of sulfur dioxide removal to meet EPA or state regulations). This raises our recommendation that the minimum size of fuel-burning equipment requiring conversion should be set only after a thorough study of the capital requirements and the oil and gas savings realized. The Federal Energy Administration has already collected data from industry sufficient to form the basis for such a study. 3. The dates written into the bill for compliance for existing operations are impossible to meet. The amount of coal required by Phillips if we converted only our boilers that would be affected by the present version of the bill to coal-firing would be about 20 thousand tons per day. This is equivalent to the production of two average-size mines. Taking into account the requirements of other companies, there are thousands of existing boilers and other combustion units that would have to be scrapped and replaced with new ones. In addition, this effort would also require a tremendous amount of new coal mining, washing, crushing, screening and handling equipment. It would also require building new railroad lines in addition to rebuilding many that are in existence. Thousands of new locomotives and rail cars would be required as well as expensive new coal-loading, receiving and handling equipment. When considered on a national basis, all this would not be possible in the time frame currently proposed by S.1777. There is not enough manpower or manufacturing facilities to produce all these items. Further, the vast sums of capital required would be difficult, if not impossible, to obtain and the effect on the national economy would be highly inflationary. 4. A number of plants do not have the unused space available to construct coal handling and storage facilities. Some plants are completely hemmed in by surrounding industries or homes, and the principle of eminent domain would have to be provided in the legislation in order to obtain the necessary space in some cases. This would involve dislocations of businesses and people and would further upset the economy and complicate strict observance of the provisions of the bill. The Honorable Jennings Randolph Dean-117-75 Page -3- 5. 6. 7. 8. The disposal of ash residues would present serious problems in many areas. Ground space is not generally available, accessibility to areas where disposal is possible may be difficult, and EPA regulations generally do not permit easy disposal. Energy conservation, in the past as well as currently, includes equipment for the recovery of heat from boiler and furnace stack gases by boiling water to produce steam, and use of certain low grade by-product gases containing combustible components as boiler and furnace fuel, etc. The bill should clearly state that it is not intended to prevent or discourage this beneficial use of these heat sources, particularly when such use reduces the demand for other types of fuels and/or is required by environ mental considerations. Because of major variations in the properties of coal such as heating value, ash, sulfur content, moisture, etc., each unit must be designed for the specific coal to be used. If the design must be broad enough to permit the possible use of several different coals, the efficiency of the unit will decrease resulting in cost and energy wastage. The bill specifically concerns conversion of steam boilers, except on page 9, section (g), the term is used "that contains fossil-fuel fired boilers, burners, or other combustors of fuel," which is not consistent with all other references. This should be changed to ensure that only fuels used in producing steam is subject to conversion. We suggest that you eliminate "burners, or other combustors of fuel." If this definition were allowed to stand, then it could be interpreted to include all process heaters in our refineries and gas processing plants. To include these "combustors of fuel" under the bill would be a disaster. Process heaters are usually integral to processing units within a refinery, are usually smaller than typical boilers and it is not feasible to centralize them as is typically done with boilers. In most cases the temperatures are much higher than for steam and it is highly uneconomical to transport the hot streams a long distance due to heat losses. The heaters are frequently in congested areas in the process units and there would not normally be room for the coal and ash handling facilities. 9. We have considered the comments about S.1777 given your committee by the American Boiler Manufacturers Association and we strongly endorse all their other points which we have not covered above. 10. As indicated earlier in this letter, we strongly recommend that natural gas prices be deregulated and that the free market forces be allowed to operate. When the artificially low price of natural gas is brought into line with other forms of energy, the incentive to use coal will again exist. We are, therefore, against this bill in its entirety. However, if we must have forced coal utilization then the time table must be greatly liberalized and the number of affected units drastically reduced or we will have an ill-advised, regulatory mandate which will create new havoc for our industry. The Honorable Jennings Randolph Page --4- In summary, Phillips Petroleum Company believes that by allowing the free enterprise system to function in conjunction with gradually increasing gas prices, the utilization of coal will come nautrally and in time to allow significant conservation of our limited hydrocarbon fuel reserves. In no way should statements in this letter be considered as a commitment by Phillips to make any level of specific capital expenditures for conversion to coal fuel. Dollar figures mentioned herein are for purposes of demonstration and are approximate only. I would be pleased to discuss these points further with you or your committee. We have enclosed two extra copies of this letter for your convenience. Very truly yours, LED:1rh Enclosures L. E. Dean, Chairman |