A Technology Assessment of Coal Slurry

Pipelines

March 1978

NTIS order #PB-278675
Library of Congress Catalog Card Number 77-600023

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402
ERNEST F. HOLLINGS, S.C. OLIN E. TEAGUE. TEX.

ADLAI E. STEVENSON, ILL. MORRIS K. UDALL ARIZ. W ASHINGTO N , D.C. 2051 0

CLIFFORD P. CASE, N.J. GEORGE E. BROWN, JR., CALIF.

TED STEVENS, ALASKA CLARENCE E. MILLER. OHIO

ORRIN Q. HATCH, UTAH JOHN W. WYDLER, N.Y.

RUSSELL W. PETERSON

March 2, 1978

Honorable Henry M. Jackson

Chairman, Committee on Energy

and Natural Resources

United States Senate

Washington, DC 20510

Honorable Harley O. Staggers

Chairman, Committee on Interstate

and Foreign Commerce

U.S. House of Representatives

Washington, DC 20515

Honorable Warren G. Magnuson

Chairman, Committee on Commerce,

Science and Transportation

United States Senate

Washington, DC 20510

Gentlemen:

On behalf of the Board of the Office of Technology Assessment,

we are pleased to forward the results of the assessment of coal slurry

pipelines requested by your committees.

This assessment will aid in congressional deliberation over

proposed coal slurry pipeline legislation, and we hope it will

contribute to resolving larger questions of transportation policy,

water resource allocation, and social costs and benefits of energy

Enclosure

. . .

/1/
Foreword

This assessment analyzes the costs and potential economic ,

social, and environmental impacts of coal slurry pipelines, and i t

represents the results of a project undertaken in mid-1 976 at the request of the Senate Committee on Energy and Natural Resources;

the Senate Committee on Commerce, Science, and Transportation;

and the House Committee on Interstate and Foreign Commerce. I n

addition to aiding in congressional deliberation on several bills that

propose granting Federal eminent domain to coal slurry pipelin e

enterprises, the study should contribute to resolving broader questions of transportation policy, western water allocation, an d

regional conflicts over energy development.

The pages that follow include a discussion of the possible effects on society of coal slurry pipeline development, a comparison

of pipeline and unit train costs, and an analysis of relevant legal and

regulatory issues. Findings address conditions under which slurry

pipelines may be attractive in terms of cost and the influence of

transportation regulatory policy. Also evaluated are the potentia l

impacts of SIurry pipeline development on the rail industry, consequences of pipeline water use as contrasted with community im -

pacts of increased coal train traffic, and implications of the power

of eminent domain at the Federal, as opposed to State, level.

This report is another in the series of energy assessments that

are being provided to the Congress for its consideration in th e

development of national energy policy.

RUSSELL W. PETERSON

Director

Office of Technology Assessment
Coal Slurry Pipeline

Advisory Panel

Al Ian R. Boyce

Assistant Vice President, Executive Dept.

Burlington Northern, Inc.

Al Chesser

President

United Transportation Union

Lynn Dickey

Energy Conservation Coordinator

State of Wyoming

Northcutt Ely*

Attorney

Law Offices of Northcutt EIy

Robert Georgine

President, Building & Construction Trades

Dept.

AFL-CIO

C. G. Groat

Chairman,

Department of Geological Sciences

University of Texas at E I Paso

Edwin A. Jaenke

Chairman of the Board

Agricultural Resources Corp. of America

John H. King

Director of Transportation

Georgia Pacific Corporation

● Resigned– August 1977

● * Resigned– March 1977

J. M. Lewallen

Director

Texas A & M Research Foundation

John Redmond

Director, Executive Vice President

Shell Oil Company (Retired)

James K. Rice

Independent Consultant

Industrial Water Management

Michael Rieber

Center for Advanced Computation

University of IIIinois at Urbana

P. H. Robinson

Chairman of the Board and Principal

Executive Officer

Houston Light & Power Company (Retired)

E. J. Wasp

Vice President

Energy Transportation Systems, Inc.

James Woolsey**

Attorney

Shea and Gardner

Iraj Zandi

Dept. of Civil and Urban Engineering

University of Pennsylvania

NOTE The Advisory Panel provided advice, critique, and assistance throughout this assessment, for

which the OTA staff IS deeply gratefuI The Advisory Panel, however, does not necessarily approve, disapprove, or endorse all aspects of this report OTA assumes full responsibility for the report and the accuracy of Its content

v i i
OTA Energy

Advisory Committee

Milton Katz, Chairman

Director, International Legal Studies, Harvard Law School

Thomas C. Ayers George E. Mueller

President and Chairman President and Chairman

of the Board of the Board

Commonwealth Edison Company System Development Corporation

Kenneth E. Boulding

Professor of Economics

Institute of Behavioral Science

University of Colorado

Eugene G. Fubini

Fubini Consultants, Ltd.

Levi (J.M.) Leathers

Executive Vice President

Dow Chemical USA

Wassily Leontief

Department of Economics

New York University

Gerard Piel

publisher, Scientific American

John F. Redmond, Retired

Shell Oil Company

John C. Sawhill

President

New York University

Chauncey Starr

President, Electric Power

Research Institute

vii i
OTA Coal

Slurry Pipeline

Project Staff

Lionel S. Johns, Energy Program Manqager

Richard E. Rowberg, Deputy Energy Program Manager

J. Bradford Hollomon, Project Director

Lynda L. Brothers

Marvin C. Ott

Administrative Staff

Lisa A. Jacobson Linda M. Parker Joanne M. Seder Rosaleen J. Sutton

Consultants

General Research Corp.

International Research & Technology Corp.

National Energy Law & Policy Institute — University of Tulsa College of Law

Science Applications, Inc.

Teknekron, Inc.

Richard L. Gordon

OTA

Publications

Staff

John C. Holmes, Publishing Officer

Kathie S. Boss Joanne Heming Cynthia M. Stern

ix
Contents

Chapter

1.

Il.

II 1.

Iv.

v.

vi.

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION ..., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ISSUES AND FINDINGS . . ..., . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COAL SLURRY PIPELINE AND UNIT SYSTEMS . . . . . . . . . . . . . . . . .

Technology Description . . . . . . . . . . . . . . . . . . .

Pipelines . . . . . . . . . . . . . . . . . ..., . . . . . . . . . . . . . . . .

Unit Trains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Coal Transportation Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Major Factors Influencing Coal Usage. . . . . . . . . . . . . . .

Scenario Description . . . . . . . . . . . . . . . . . . . . . . . . . .

Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost Comparisons and Traffic Assumptions . . . . . . . . . . . . . .

costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Traffic Assumptions, . . . . . . . . . . . . . . . . . . . . . .

ECONOMIC IMPACTS. . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rail

Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Methodology. . . . . . . . . . . . . . . . . . . .

Cost and Price Alternatives . . . . . . . . . . . . . . . .

Alternative Inconstant Rate and Cost Structure . . . . . . . . . . .

Alternative ll–Fuel Cost Adjustment . . . . . . . . .

Alternative lll—Historical Rate Decline. . . . . . . . . .

Alternative IV—Constant Operating Ratio . . . . . . . .

Alternative V—Minimum Necessary Net Income . . . . . . .

Pipeline Impact Analysis . . . . . . . . . . . . . . . . . . . . . . .

Lost Rail Tonnage . . . . . . . . . . . . . . . .

System Costs . . . . . . . . . . . . . . . . .

Economic impacts of Water Resource Allocation. . . . . . . .

ENVIRONMENTAL AND SOCIAL IMPACTS. . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .

Water Use by Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Water for the Wyoming Pipeline. . . . . . . . . . . . . . . .

Water for the Montana Pipeline . . . . . . . . . . . . . . .

Water for the Tennessee Pipeline . . . . . . . . . . . . . . . . . .

Water for the Utah Pipeline. . . . . . . . . .

Alternative Water Supply Sources. . . . . . . . . . . .

Coal-Water Interaction and Corrosion. . . . . . . . . . . .

Slurry Water Reuse and Impacts . . . . . . . . . . . . . . . . . . . . . . .

Page

3

9

15

27

27

27

29

33

34

37

41

48

48

55

63

63

63

64

66

67

68

68

70

70

74

74

80

84

87

87

88

91

100

100

102

103

104

105

xi
Contents—continued

Chapter Page

Community Disruption by Railroads. . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Construction Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Operational Impacts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Dust Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Disruption of Biological Communities. . . . . . . . . . . . . . . . . . . . . . . 117

Energy/Materials Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Occupational Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

VIl. LEGAL AND REGULATORY ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . 125

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Legal Provisions Which Favor Pipelines . . . . . . . . . . . . . . . . . . . . . . 125

Legal Provisions Which Favor Railroads . . . . . . . . . . . . . . . . . . . . . 126

Transportation Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Water Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Environmental Law... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

APPENDIX–BASELINE RAIL REVENUE AND COST PROJECTIONS . . . . . . . . . 141

Rail Revenue Projections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Rail Operating Expenditure Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

Capital investment Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

Employment and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Tax Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

LIST OF TABLES

Table

Number Page

1.

2.

3.

4.

5.

6.

7.

8.

Summary of Selected Worldwide Commercial Slurry Pipelines . . . . . . . . . . 32

CoaI SuppIy Regions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Assigned Coals, by State, “No CIeaning’’ Scenarios (l975) . . . . . . . . . . . . . . 36

Scheduled Additions to Capacity, for the Decade 1976-85, as of

April l, 1976, as Reported by Nine Regional Reliability Councils . . . . . . . . . 38

Planned Additions to Capacity for the Decade 1986-95, as of Aprill, 1976,

as Reported by Nine Regional Reliability Councils. . . . . . . . . . . . . . . . . . . . 39

Projected Regional Utility Coal Production . . . . . . . . . . . . . . . . . . . . . . . . . 42

Projected Utility Coal Distribution From Region of Origin to

State of End Use...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Sample Hypothetical Case Results . . . . . ........ . . . . . . . . . . . . . . . . . . 53

xii
LIST OF TABLES—Continued

Table

Number Page

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21,

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35,

36.

37.

Pipeline Traffic Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Comparative Railroad Revenue and Operating Cost Projections –

Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Comparative Railroad Revenue and Operating Cost Projections–

Alternative Il. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Comparative Railroad Revenue and Operating Cost Projections –

Alternative ill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Comparative Railroad Revenue and Operating Cost Projections—

Alternative IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Operating Income Projections for Southern and Western Railroads–

Alternatives l to lV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Minimum Necessary Net Income for Southern and Western Railroads . . . . . 73

Rail Revenues Necessary To Maintain Minimum Necessary Net Income

on Western Railroads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Lost Tonnage Impacts Upon Railroad Operating Costs. . . . . . . . . . . . . . . . . 75

Lost Tonnage Impacts Upon Net Railway Operating Revenues . . . . . . . . . . 75

Lost Tonnage Impact Upon Railroad Rolling Stock Requirements . . . . . . . 76

Lost Tonnage Impact Upon Railroad Investment Requirements. . . . . . . . . . 76

Lost Tonnage Impact Upon Railroad Employment and Compensation

by Route . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Railroad Operating Income 1980-2000—Lost Tonnage Scenario . . . . . . . . 79

Rail Revenues To Maintain Minimum Necessary Net income on Western

Railroads—Lost Tonnage Scenario. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Sensitivity of Potential Net Savings From Hypothetical Cost Slurry

Pipeline Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Water Requirements for Hypothetical Coal Slurry Pipelines . . . . . . . . . . . . 88

Water-Use Equivalents for Hypothetical Pipelines. . . . . . . . . . . . . . . . . . . . 90

Selected Data From Madison Formation WeIls and Springs, Powder

River Basin, Wyo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Estimated Water Obtained From Madison Wells . . . . . . . . . . . . . . . . .. ...100

Uses of Madison Ground Water in Wyoming, 1973. . . . . . . . . . . . . . . . ....100

Water Supply and Demand, Bighorn River Basin, Mont.. . ..............100

EPA Discharge Standards for New Sources, Steam Electric Power

Generating Point Source Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..105

Predicted injuries and Deaths Based on Present and Hypothetical Train

Traffic Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107

Annual Added Vehicle Operation Costs (1974 Dollars) and Travel

Time Due To Increased Coal Train Traffic . . . . . . . . . . . . . . . . . . . . . . .107

Summary of Noise Levels identified by EPA as Requisite to Protect

PubIic Health and Welfare with an Adequate Margin of Safety. . . . . . . .108

Population Exposed to Noise Levels Exceeding EPA Community

Noise Guidelines Along Case Study Routes . . . . . . . . . . . . . . . . . . . . . .109

Agricultural Land Use Along Hypothetical Wyoming-Texas

Pipeline Route. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113

Diesel Locomotive Emission Factors. . . . . . . . . . . . . . . . . . . . . . . . .115

. . .

XIII
LIST OF TABLES—Continued

Table

Number

Page

38.

39.

40.

41.

42.

43.

44.

45.

46.

Estimation of Vehicle Equivalent Diesel Locomotive Air-Pollutant

Emissions for 65 Million Tons of Coal per Year Between Wyoming

and Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Worst Case Ambient Air-Pollutant Concentrations for Unit Trains Carrying

65 Million Tons of Coal per Year From Wyoming to Texas . . . . . . . . . . . . .116

Wildfire Occurrence in Nebraska, 1971-76. . . . . . . . . . . . . . . . . . . . . .119

Wildfire Occurrence in Campbell and Converse Counties,

Wyo., 1971 -73 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............119

Acreage Burned by Wildfires in Nebraska, 1971 -76. . . . . . . . . . . . . . ......119

Steel and Energy Requirements for the Case Study Pipelines . ...........120

Steel and Energy Requirements of the Railroad Case Studies. . ..........121

Predicted Occupational Injuries and Lost Workdays From Case Study

Pipeline Construction and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . .122

Predicted Occupational Injuries, Lost Workdays, and Deaths From Case

Study Unit Train Service Expansion . . . . . . . . . . . . . . . . . . . . . . . .122

Appendix Tables

A - 1

A-2.

A-3.

A-4.

A-5.

A-6.

A-7.

A-8.

Historical and Projected Regional Revenue Shares by Commodity. .. ....142

Baseline Regional Railroad Revenue Projections . . . . . . . . . . . . . . . . . . .144

Historical and Projected Freight Car Loadings by Commodity . .........148

Projections of Class I Railroad Operating Expenditures . . . . . . . . . . . . . . .149

Rolling Stock Investment Requirements, 1975-2000 . .................151

Cumulative Way and Structures Investment Requirements for

Specific Long-Haul Coal Shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .152

Class I Railroad Labor Compensation Projections, 1980-2000 . . . . . . . . . . . 154

Class I Railroad Employment Projections, 1980-2000 . . . .............154

LIST OF FIGURES

Figure

Number Page

1.

2.

3.

4.

5.

6.

7.

8.

9.

Present and Proposed Coal Slurry Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . 28

Schematic of Slurry Pipeline System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Coal Supply Regions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Regional Reliability Councils of the National Electric Reliability Council . . 39

Year 1980 Potential Utility Coal Movements of More Than 5 Million

Tons per Year Over Distances Greater Than 200 Miles . . . . . . . . . . . . . . . . . 46

Year 1985 Potential Utility Coal Movements of More Than 5 Million

Tons per Year Over Distances Greater Than 200 Miles . . . . . . . . . . . . . . . . . 4 6

Year 1990 Potential Utility Coal Movements of More Than 5 Million

Tons per Year Over Distances Greater Than 200 Miles . . . . . . . . . . . . . . . . . 47

Year 1995 Potential Utility Coal Movements of More Than 5 Million

Tons per Year Over Distances Greater Than 200 Miles . . . . . . . . . . . . . . . . . 47

Year 2000 Potential Utility Coal Movements of More Than 5 Million

Tons per Year Over Distances Greater Than 200 Miles . . . . . . . . . . . . . . . . . 48

x i v
LIST OF FIGURES—Continued

Figure

Number Page

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

Slurry Facility First Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Pipeline First Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Annual Operation and Maintenance Costs, Slurry Preparation Facility . . 51

Annual Operation and Maintenance Costs, Slurry Dewatering Facility . . . 51

Annual Operation and Maintenance Costs per Pumping Station . . 5 1

Form of Typical Rail and Pipeline Cost Ranges for a Given Annual Tonnage 55

Results of Previous Coal Slurry Pipeline Cost Studies . . . . . . 56

Results of Previous Coal Unit Train Cost Studies . . . . . . . . . 57

Results of Case Studies Comparing Coal Slurry Pipeline and

Unit Train Costs . . . . . . . . . . . . . . . . . 58

Rail Versus Pipeline Cost Indifference Curves Based Upon Site-Specific

Case Study Conditions . . . . . . . . . . . . . . . . . . . 58

Transmission Water Requirements as a Function of Coal Throughput

Moisture Content . . . . . . . . . . . . . . . . . . . 88

Outcrops and Subsurface Extent of Madison Limestone and Major

Tectonic Features . . . . . . . . . . . . . .

Configuration of the Top of the Madison Group. . . . . . . . . . . . .

Depth From Land Surface to the Madison Limestone and Equival

Rocks in the Powder River Basin and Adjacent Areas . . . . .

Potentiometric Surface of the Madison in Eastern Wyoming, SOu

. . . . . . 92

. . 93

ent

. . . . . . . . 94

theastern

Montana, and Western South Dakota. . . . . . . . . . . . . . . 97

Potential Drawdown of Potentiometric Surface Near Edgemont and Provo,

S. D., According to 15,000 Acre-Feet per Year Withdrawal From the

Madison Formation in Niobrara County, Wyo., According to Different

Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Potential Drawdown of Potentiometric Surface Near Newcastle and Osage,

Wyo., Due to 15,000 Acre-Feet per Year Withdrawal From the Madison

Formation in Niobrara County, Wyo., According to Different Models . 99

Proposed Aqueducts, Bighorn River to Colstrip . . . . . . . .101

Typical Pipeline Construction Spread. . . . . . . . . . . . .110

x v
L Summary
1. Summary

Considerable public controversy currently

surrounds legislative proposals at both the

Federal and State levels that would grant the

power of eminent domain for right-of-way acquisition to coal slurry pipeline enterprises and

impose certain restrictions and requirements

upon their activities. Against this background,

the Chairmen of the Senate Committee on

Energy and Natural Resources, the Senate

Committee on Commerce, Science, and Transportation, and the House Committee on Interstate and Foreign Commerce, requested this

assessment of the potential economic, environmental, and social implications of coal

slurry pipeline development. The analysis presented here is intended to contribute to the information available to Congress on which to

base any determination concerning Federal

eminent domain legislation for coal slurr y

pipelines, and to provide an analytical framework against which a public agency might

evaluate the potential effects on the economy,

society, and environment of specific individual

pipeline proposals and their alternatives.

Four interrelated studies provide a basis for

systematicalIy evaluating the transport of coal

by pipeline compared to railroad. The first

establishes hypothetical baseline forecasts to

the year 2000 of volumes of utility steam coal

to be transported from nine producing regions

to each consuming State based on demand

growth, environmental regulation, and coaluse assumptions. The second study provides

rail and pipeline cost estimates and plausible

market scenarios, which have been used to

predict the possible impact of slurry pipeline

development on the total social cost of electric power, the cost and quality of service in

the railroad industry, employment levels, and

other economic measures. A third investigation identifies and evaluates the water resource, environmental and social impacts of

transporting hypothetical quantities of coal by

pipeline as contrasted with the corresponding

effects of moving the same amounts by rail.

The fourth examines the legal and regulatory

provisions relevant to rail and pipeline competition, water rights, environmental protection, and eminent domain. Finally, the coal

volume forecasts have been subjected to a sensitivity analysis to determine what effect the

findings of the economic study might have on

the original projections.

Major findings of the assessment are summarized below. They should be read with the

understanding that they are based upon simplifying assumptions and considerable speculation about the future.

●

●

●

Based on the analysis performed in this

assessment, coal slurry pipelines do represent under some specific circumstances

the least costly available means fo r

transporting coal measured in economic

terms. Whether this is true of any particular pipeline can only be determined by

detailed evaluation of the condition s

specific to the route.

The current regulatory framework does

not guarantee that choices between slurry

pipelines and rail will necessarily minimize the cost to society of transporting

coal. With the power of eminent domain,

coal pipelines would enjoy significan t

regulatory advantages over raiIroads.

These advantages would stem from the

differences between regulated tariffs and

cost of service, the ability of pipelines to

serve selected customers, and the prohibition of long-ter m contracts betwee n

railroads and their shippers.

The development of a substantial slurry

pipeline industry is likely to diminish the

growth in future revenues of competing

railroads, primarily in the West, unless

rates paid by remaining shippers are adjusted to compensate. However, average

3
4 ● Coal Slurry Pipelines

●

●

●

rail tariffs, adjusted for inflation, are

declining and are likely to continue to do

so for the next 20 years based on the market and cost assumptions of the analysis.

Even if railroads were to respond to pipeline competition by modifying their rate

structure to preserve the net income they

would otherwise have realized without

pipelines, the rate of decline in tariffs

would be lessened but not reversed.

The introduction of coal slurry pipelines is

not likely to affect materially the rate of

coal resource development and use on a

national scale. It may, however, affect the

regional pattern of coal mining and distribution in such a way as to expand the

use of western coal to greater distances

from this area of origin.

Pipelines employ less labor than does rail

over their respective useful lives, but if a

substantial pipelines industry were to de

velop, enough people would probably be

employed in construction and supplying industries to offset cumulative employment

impacts in the rail industry for the rest of the

century. Since railroad employment may

decline due to productivity improvements

before the year 1990 in any event, job losses

due to pipeline competition could con tribute to layoffs as opposed to reduced rates of

hiring in the railroad industry during that

period. In addition, agriculture may be affected locally by future water availability

impacts of slurry pipelines, as well as by the

cost and quality of service by railroads.

Railroads can also have direct adverse impacts on agriculture in the form of possible

disruption of ranching operations.

Sufficient unused quantities of suitable

water are physically present although not

necessarily legally available for the operation of several slurry pipelines from western coal-producing areas. Substantial institutional barriers impede in voluntary

displacement of present water rights, but

other possible future uses of remaining

supplies could be foreclosed by pipeline

development. When levels of use exceed

●

●

●

users’ rights, as is the case during years of

relative abundance of water, new appropriations may also displace present uses.

Under the prior appropriation system for

water allocation in many Western States,

slurry pipelines, like any new applications

of water, are accorded a lower priority

relative to existing rights. They therefore

may not be able to acquire water even if

they were to represent a more economicalIy productive use. The Federal Government has substantial power to control

water resource allocation for pipelines,

notwithstanding State provisions, if i t

should choose to exercise it. Even without

an explicit choice to exercise that power,

Federal certification of a pipeline project

based on a finding that it served the public interest could supersede State water

allocation authority under some circumstances.

The environmental choice between coal

pipelines as opposed to increased rail traffic primarily involves weighing the water

use and temporary construction activity

impacts of slurry pipelines against the

noise, land-use disruption, railroad crossing accidents, and inconvenience resulting from increased train traffic. All other

impacts examined are relatively insignificant or roughly equivalent for bot h

modes.

Several Federal statutes serve to protect

the environment against potential adverse

impacts of both raiIroads and pipelines, as

do a variety of Federal and State laws and

programs designed to improve safety at

rail-highway grade crossings, usually in

part at public expense. Federal en -

vironmental impact statements, however,

are generally not required for increases in

rail traffic, as opposed to extensions in

routes. They are also not necessarily required for slurry pipeline construction,

since building such a pipeline is possible

at present without major Federal action.

Usually, however, Federal or State environmental statements will be necessary
Ch. I Summary ● 5

for pipelines, especially if Federal certification is required as a condition for the

power of eminent domain.

• Not all States have statutes granting the

power of eminent domain to slurry pipelines. Those that do require that the pipelines serve a public purpose within the

State, and more recent statutes limit use

of State water for pipelines and subject

them to State regulation as common carriers.

Ž The development of a coal slurry pipeline

industry would be possible in the absence

of the power of eminent domain at the

Federal level. All other pipeline systems

except natural gas were built largely with

State eminent domain authority. On the

other hand, Federal legislation in this area

would facilitate coal slurry pipeline development by removing the need to direct

routes, possibly at prohibitive cost ,

around States without eminent domain

provisions, and by eliminating the requirement that the public in each State along a

pipeline route benefit from the operation.

Federal preemption, however, would limit

States’ powers to influence the form of

SIurry pipeline development.

A judgment concerning the desirability of

slurry pipelines as a form of coal transportation will depend on the subjective weights that

one assigns to the factors discussed above. The

overall issue, however, extends beyond the

question of whether coal slurry pipeline development by itself would have a favorable impact on society. The judgment will therefore

also depend on one’s views concernin g

broader problems, of which the coal slurry

pipeline controversy is only one aspect, These

include: 1 ) the current railroad regulatory

structure, 2) the present systems for allocating

water resources in the West, and 3) the availability of mechanisms by which conflicting

regional differences over energy development

can be reconciled.

In the absence of eminent domain provisions at the Federal or State level, coal slurry

pipelines are less Iikely than otherwise to compete successfully with established railroads.

On the other hand, if Federal eminent domain

legislation were passed without provisions for

equalizing the regulatory restrictions on each

mode, pipelines would enjoy significant advantages over railroads. One lies in the interstate Commerce Commission’s prohibition

of long-term contracts with shippers in the rail

industry. Such contracts, if permitted, could

facilitate investment in specific improvements

to provide more economical service when a

shipper is willing to be bound by rate and

volume provisions in return . Financing of

pipeline enterprises would not be possible

without long-term contractual arrangements,

probably containing escalation clauses t o

cover unforeseen cost increases. Also, common carrier obligations of railroads to provide

uneconomical service are probably more stringent than they would be for coal slurry pipelines. Although the situation may change as a

result of the Rail Revitalization and Regulatory Reform Act, the allowed return on rail

investment is lower than what is permitted for

pipelines now carrying other commodities. In

this context, however, slurry pipelines simply

represent another competing mode of transportation to be considered in the larger debate

concerning the merits of regulatory reform for

the railroad industry.

The second larger question is related to the

allocation of western water resources among

competing uses. If everyone agreed that the

present institutional mechanisms always Ied to

the best choices, a significant area of contention would be absent from the controversy

over coal slurry pipelines and over many other

forms of energy resource development as well.

Mine-mouth power generation and coal gasification and liquefaction, for example, require

even more water than do slurry pipelines to

process a given amount of coal. Some residents of wester n coal-producing States

therefore see expansion of this type of activity

as a potential threat to their Iimited water supplies. The prior appropriation system of water

rights, on the other hand, subordinates new

uses to present ones, making water acquisition
6 ● Coal Slurry Pipelines

for energy development difficult. Improving

the process by which water-use priorities are

established could therefore eliminate some of

the confIict over slurry pipelines.

Finally, other elements of the dispute over

coal slurry pipelines reflect conflictin g

regional interests regarding coal development

generally. Producing areas are expected to suffer adverse impacts, like the inconvenience

associated with expanded train traffic or increased competition for water, while th e

benefits accrue to other parts of the Nation in

the form of lower electric rates or reduced

dependence on gas or oil. In this respect, coal

slurry pipelines represent only one of the many

factors in the balance Congress must strike as

it fashions future energy legislation.
Il. Introduction
IL Introduction

President Kennedy suggested in early 1962

that coal slurry pipelines might represent a

way of transporting coal more economically,

thereby improving the depressed condition of

the coal mining industry. Since that time, a

substantial measure of public debate ha s

centered on the desirability of applying this

technology as an alternative to transportation

by rail. Two such pipelines have been built and

put into operation in this country. One was

closed after the introduction of competing

unit trains and the approval by the Interstate

Commerce Commission (ICC) of a separate

rate structure for this more efficient form of

rail service. Another has been carrying coal for

6 years and has demonstrated that a coal slurry

pipeline of the size required to serve a large

electric generating station is economically

feasible.

A slurry pipeline involves the pumping of

finely ground coal suspended in water or other

liquid medium through a pipe over a long

distance. At the terminus the coal and liquid

are separated and the coal is prepared for

combustion or other use. The primary rail competitor of slurry pipelines is the unit train, a

complete train of dedicated cars operating on

a regularly scheduled movement between a

single origin and a single destination. It con -

trasts with ordinary carload movements in

which many commodities are combined and

recombined in one train as they are transported from many origins to many destinations.

Most of the current public controversy surrounds legislative proposals at both th e

Federal and State levels to grant the power of

eminent domain for right-of-way acquisition to

coal slurry pipeline enterprises and to impose

certain restrictions and requirements upon

their activities. Against this background the

Chairmen of the Senate Committee on Energy

and National Resources, the Senate Committee on Commerce, Science, and Transportation, and the House Committee on Interstate

and Foreign Commerce requested this assessment of the potential economic, environmental, and social implication of coal slurr y

pipeline development and the implications of

legislating Federal eminent domain authority.

At least three major sets of policy questions

must be addressed to arrive at a legislative

conclusion. The first involves the desirability

from social, economic, and environmenta l

standpoints of developing a coal slurr y

pipeline industry. The second is related to the

extent to which the present regulatory and institutional arrangements would have to be

altered to provide for the allocation of coal

traffic between pipelines and railroads in a

way that would represent the least cost to

society. The third concerns the balance of

Federal and State control over such areas as

water resource allocation, land ownership, and

local environments, and how conflictin g

regional interests might be resolved.

The purpose of this assessment is to clarify

these issues in order to assist Congress in making a judgment concerning the general desirability of coal slurry pipelines and the utility of

eminent domain legislation as a means of

facilitating their development. The stud y

should also provide an analytical framework

against which a public licensing or regulatory

agency might evaluate specific individua l

pipeline proposals and their alternatives.

Resolution of the foregoing questions and

development of an analytical framework for

evaluating specific pipeline projects require a

comparison analysis of the costs, impacts, and

institutional and legal setting of the two

modes. The desirability of mining, transporting, and using coal is not addressed here. A

forthcoming OTA study on coal utilization will

examine many of these questions. In addition,

9
10 ● Coal Slurry Pipelines

modes with which long distanc e slurry

pipelines would not be likely to compet e

significantly, including trucks, belt conveyors,

and barges have not been considered in detail.

Finally, the transportation market in thi s

analysis is confined to steam coal for use by

domestic electric utilities, which constitute the

principal customers that could receive large

enough volumes of slurry coal for economical

pipeline operation.

Four interrelated studies contributed to the

analysis. One examined the legal regulatory

provisions relevant to rail and pipeline competition, water rights, environmental protection, and eminent domain. Another established

baseline forecasts to the year 2000 of volumes

of utility steam coal to be transported from

nine producing regions to each consuming

State based on hypothetical demand growth,

environmenta l regulation, and coal-use

assumptions. A third study provided rail and

pipeline cost estimates and plausible traffic

scenarios, which were examined to predict the

impact of slurry pipeline development on the

cost of electric power, the cost and quality of

service in the railroad industry, employment

levels, and other economic measures. A fourth

investigation identified and evaluated th e

water resource, environmental and social impacts of transporting hypothetical quantities

of coal by pipeline as contrasted with the corresponding effects of moving the sam e

amounts by rail. Finally, the coal volume

forecasts were subjected to a sensitivit y

analysis to determine what effect the findings

of the economic study might have on the

original projections. Complete reports on these

individual studies comprise the second volume

of this report.

In the legal and regulatory study, the existing legal systems, including relevan t

statutes, regulatory policies, and judicia l

precedents, were discussed with particular attention to contrasting the framework for coal

slurry pipelines with the regulatory environment for other similar or competing transportation modes. Issues examined included the

implications of common carrier status, rate

setting, and contractual arrangements be -

tween carriers and shippers. In addition, provisions of water law were explored to determine

what access a pipeline operator would have to

water sources under a variety of conditions

and how much control could be exercised over

the use of water for slurry pipeline purposes by

State agencies as opposed to the Federal

Government. Provisions of environmental law

related to pipeline and rail construction and

operation were also investigated, as were

precedents for and implications of granting the

power of eminent domain for acquisition of

transportation right-of-way at the Federal and

State level.

Assessing the potential economic and environmental consequences of coal slurr y

pipeline development necessitated forecasting

the coal transportation market in which coal

pipelines would compete. Although large industrial facilities, gasification plants, an d

foreign countries represent possible future

customers for slurry coal, this assessment concentrated on coal for steam production by

domestic electric utilities, since they represent

the predominant present users which could

receive coal in quantities that would take advantage of pipeline economies, A model of

utility industry behavior at the powerplant

level provided estimates of how much coal

would be purchased from what sources to

meet both hypothetical demand growth and

environmental requirements at the lowest cost.

These results were aggregated to arrive at total

projected coal flows from nine producin g

regions to 48 consuming States at 5-year intervals through the year 2000.

With this measure of demand for transportation as a starting point, the economic analysis

sought to establish relative cost relationships

for railroads and pipelines and to hypothesize

a plausible share of the traffic which pipelines

might capture if their development were not

constrained by institutional or legal factors.

Potential savings to customers served b y

pipelines could then be estimated, as well as

the impacts of diverting the traffic in question

from the railroad industry. The impacts of
Ch. II Introduction ● 1 1

pipeline development were evaluated as they

wouId affect the cost and quality of raiI service, availability of water for other uses ,

demands on related industries and markets,

levels of employment, and regional economic

development. Simplifying assumptions were

necessary to carry out the market, cost, and

impact analyses. Those related to markets and

costs are summarized at the end of chapter IV.

The impact analysis also depends on major

assumptions, detailed in chapter V and in the

appendix, including an approximately 2.9 percent annual rate of growth in both rail revenue

traffic and GNP, as well as continuation of present trends in some elements of rail costs.

To complement the economic analysis, a

simultaneous study encompassed the en -

vironmental impacts of constructing an d

operating coal pipelines, as contrasted with

the corresponding effects of moving the same

volumes of coal by railroad. With regard to

pipelines, particular attention was focused on

water use and disposal and construction impacts. Principal impacts unique to railroads included traffic accidents and interruption at

grade crossings, train-caused fires, diesel emissions, and land-use interference. Energy and

materials use, occupational health and safety,

and social impacts and perceptions were explored for both modes.

The coal-flow forecasting model mentioned

earlier embodied preliminary assumption s

about the cost of transportation, and additional analysis was therefore necessary to

determine what effect findings from th e

economic analysis related to rail and pipeline

costs might have on the coal transportation demand projections. This later work also incorporated some improvements in the model

and included data from the President’s National Energy Plan, which became available

after the first set of coal flows were derived.

In order to facilitate consideration o f

legislative options, a number of specific policy

issues are identified and analyzed. These comprise the subject of the third chapter. Chapter

IV includes descriptions of coal slurr y

pipelines and unit trains followed by the coal

flow forecasts, cost comparisons, and traffic

assumptions on which the economic and environmental analyses are based. Economic impacts are treated in chapter V and the appendix, and chapter VI covers environmental and

social impacts. The last chapter contains the

results of the legal and regulatory analysis. As

mentioned above, Volume I I consists of complete reports on the research results contributing to the assessment.

A predominately technical analysis such as

this one takes inadequate account of human

perceptions of, and attitudes toward, the facts

presented. Ultimately, the impacts of technology are, directly or indirectly, impacts on

people. Opportunities for citizen participation

and public comment based on this material

would contribute an important perspective.
Ill. Issues and Findings
Ill. Issues and Findings

The request to OTA for an assessment of

coal slurry pipelines is a consequence of proposed legislation which would grant suc h

pipelines Federal eminent domain powers. This

question and the controversy surrounding this

proposal presuppose certain more basic policy

issues. Should the Federal Government adopt a

policy of facilitating the development of coal

slurry pipelines? Does the present regulatory

and institutional environment encourage the

allocation of coal traffic on the basis of the

true cost to society? If not, should steps be

taken to try to achieve that result? Is such a

policy compatible with an effort to protect

State jurisdiction over matters such as water

resource allocation, land ownership, and local

environmental quality? The following specific

issues and findings were formulated to elucidate these underlying policy questions as well

as the more specific legislative issue of eminent domain.

In much of this analysis, the critical questions often extend beyond slurry pipelin e

development as an issue unto itself. These

questions are also not new. For example, the

effect of the regulatory environment on the

ability of railroads to compete with pipelines is

only a part of a larger problem concerning the

way in which railroads are regulated generally.

Also, potential water use by slurry pipelines is

controversial partly because water resources

in arid portions of the West are managed

arguably neither by a completely rational and

explicit planning process nor by the usual

market mechanism which applies to othe r

natural resources. Finally, some of the differences of opinion over slurry pipelines are

reflections of regional conflicts over energy

development generally. Hopefully, this assessment will contribute some to the resolution of

these larger questions, as well as the specific

issues related to the coal slurry pipelin e

debate.

Issue 1

Do slurry pipelines represent a less

costly way to move coal?

If one ignores regulatory distortions and

larger social costs, slurry pipelines can, ac:

cording to this analysis, transport coal more

economically than can other modes under certain circumstances. The following conditions

tend to favor pipelines on any particular route:

●

●

●

●

●

●

●

●

●

●

●

●

High annual volumes of coal shipped.

Long distances to be traversed.

High anticipated rates of inflation.

Low real interest rates.

Large closely spaced mines.

A secure market of severa l large

customers located in such a way as to permit them to receive coal from a single

pipeline.

Terrain characteristics favorable t o

pipeline excavation and construction.

Availability of sufficient water at low

delivered cost.

Low cost of electric power for pipeline

pumping relative to that of diesel fuel for

railroad locomotives.

Circuitous rail routes, poor track, or other

conditions unfavorable to railroads.

Inefficient rail operations, including short

or slow trains.

Absence of a parallel navigable waterway.

The choice of pipeline transportation over

rail represents in part a decision to incur

capital costs, which can be amortized at a

predictable rate, rather than operating costs,

which are subject to inflation. This common

business decision involves weighing the real interest rate one must pay on invested capital

against the uncertain inflation component of

future operating expenses. Comparisons of rail

and pipeline economics in this analysis are

based on total life cycle costs, and they take

the greater exposure of rail expenses to infla15
76 ● Coal Slurry Pipelines

tion into account. However, managers of electri c utiIities, whic h represent potentia l

customers for slurry pipelines, perceive an advantage in greater stability as well as lower

overalI levels in transportation tariffs.

The necessity to predict future construction

costs, labor productivity, and inflation rates

adds a major element of uncertainty to the

relative costs of the two modes. In fact, the

range of uncertainty associated with predictions of rail and pipeline costs in a given case

is often as great as the difference between

them. Pipeline financing requires long-term

purchase contracts with customers, which embody significant risk given the difficulty in

forecasting the future. Since the costs of errors

in judgment will probably be borne largely by

the public and not necessarily by the utility investors, regulatory agencies governing utilities

should therefore scrutinize long-term con -

tracts for pipeline transportation with great

care.

If pipeline economics do result in savings,

the benefit will accrue to the coal mining, electric utility, and pipeline industries. Regulatory

mechanisms can cause savings in the transportation and utility sectors to be passed on to

consumers. The mining industry is not similarly

constrained by regulation, but competition

may Iimit increases in mining revenues.

Since economic condition s favoring

pipelines or railroads are present to varying

degrees at different times and locations, and

since the determination of cost advantages entails considerable speculation about th e

future, Congress therefore faces the challenge

of formulating legislation sufficiently flexible

to allow choices to be made which suit specific

conditions. (For further discussion of costs, see

Coal Transportation Market, chapter IV.)

Issue 2

To what extent does the regulatory

structure surrounding each mode influence the apparent relative economic

attractiveness of railroads and slurry

pipelines?

Common carrier status and Interstate Commerce Commission (ICC) rate regulation place

railroads at a disadvantage relative to less

stringently regulated pipelines . Even if

pipelines were required to be common carriers

in name and subjected to the Interstate Commerce Act (lCA), they would still behave like

contract carriers in practice due to the practical requirements imposed by the economics

and mechanics of their operation. This has

three consequences.

First, pipelines could capture coal traffic

from railroads even where the incremental rail

cost is lower. Rail rates contain an element of

fixed system costs and losses which result from

the requirement to maintain certain unprofitable services, e.g., low-volume branch lines.

This creates a distortion in relative rates, permitting selection of pipeline transportation in

some cases where rail represents a lesser cost

to society.

Second, rate regulation which does no t

allow a “market” return on direct rail investment will not permit facility improvements

that would reduce total costs. “Real” costs as

estimated in this study are not as low as those

that railroads could achieve with an improved

ability to attract needed investment.

Third, prohibitions against long-term contracts with shippers impede railroads from

undertaking otherwise economical investments that wouId only pay for themselves over

a period of time.

Pipelines do not have the same fixed cost

structure or obligatio n to continue un -

profitable service, except as provided in contracts. Moreover, pipeline rate regulation

would probably provide for a return on investment substantially higher tha n ICC ha s

historically allowed on direct rail investment,

as exemplified by the recent San Antonio Rate

Case (Docket #36180). (This ’issue is discussed

more fully in chapter VI 1.)

Issue 3

Will development of coal slurry

pipelines adversely affect the health of
Ch. III Issues and findings ● 1 7

the railroad industry in such a way as to

jeopardize the quality or cost of service

to remaining shippers?

Under an assumption that pipelines carry a

share of coal traffic increasing to approximately 200 million tons per year by the end of the

century, western raiIroads wilI experience

slower increases in coal revenues than they

would otherwise have expected. Although any

reduction in revenue could represent a threat

to the financial health of a particular railroad,

the potential impact of coal slurry pipelines on

the railroad industry appears to be substantially less than that of either a possible adverse

regulatory policy or a decline in the present

rate of improvement in productivity.

The likely effect on railroad customers will

depend upon several conditions. The analysis

performed in this assessment suggests that

average rail road costs decline as the system expands to provide new service. If such is the

case, the critical questions are a) whether or

not the railroads would pass on these savings

to other shippers, and b) how large the savings

would be if pipelines did not enter the market.

If savings are not passed on to rail shippers,

slurry pipeline competition wiII affect the profitability of the rail industry and possibly the

quality of service it provides, but not the rates

paid by its customers.

Under current regulations, however, rail cost

savings wilI probably accrue, at Ieast in part, to

shippers through reduced rates of growth in

tariffs relative to general inflation. The most

probable effect on rail customers from pipeline competition will, therefore, be a lessening

of the present rate of decline in average tariffs

per ton-miIe adjusted for inflation.

Shippers faced with higher relative rai l

tariffs might adapt by switching to another

mode of transportation. As a consequence,

rate impacts wilI probably be felt more strongly by captiv e rail customers. Also, such

changes in transportation mode are not certain

to reduce total social costs.

The foregoing discussion presumes that

pipeline development would occur gradually

and would involve only new coal movements

and not those already carried by rail. Rapid

diversion of rail traffic after substantia l

resources have been invested to expand service would clearly have an additional adverse

impact on the rail industry.

Finally, some argue that more competition

would promote increased productivity an d

technological improvement in the rail in -

dustry. The magnitude of this effect depends

on the level of competitive forces already present and on the incentives built into th e

regulatory structure. Added competition may

also influence investor confidence in railroad

enterprises, making capital formation to implement improvements more difficult. (Chapter V

focuses largely on this issue.)

Issue 4

Will capacity limitation of other modes

necessitate the development of coal

slurry pipelines to carry projected coal

volumes?

The capacity of rail systems can be expanded faster than can coal mining or electric

power generation using coal, provided the

necessary investments in local raiI faciIities are

made. The same is true of slurry pipelines. Supplier industries and capital markets are adequate to meet the development needs of either

mode, although, continued low net incomes in

the rail industry may impede the capital formation needed to finance rail expansion.

The choice between transportation modes

wilI not be determined by their respective

capacity limitations. Sufficient investment in

either can keep transportation capabilities

abreast of foreseeable needs. The real question is which type of investment (rail o r

pipeline) makes the most sense economically,

socially, and environmentally. Similarly, the

amount of coal to be mined and consumed on

a national scale will not be affected as much

by transportation capacity or cost, especially

in the West, as by the environmental and

social costs of large-scale mining and combus-
18 ● Coal Slurry Pipelines

tion, the expense associated with converting

utility and industrial boilers from oil or gas to

coal, price trends in world oil markets, and the

national priority placed upon reducin g

dependence on foreign energy supplies.

The pattern of distribution of coal from producing areas to points of use, however, is sensitive to transportation costs. Thus, relative

reductions in coal freight rates in the West wilI

encourage the use of western coal at greater

distances from where it is mined. (This issue is

addressed in a forthcoming OTA assessment of

future coal utilization. )

Issue 5

What other economic factors represent relative advantages or disadvantages of coal slurry pipelines?

Three areas of economic impact resulting

from reliance on slurry pipelines or railroads

remain to be considered. These involv e

employment, agriculture, and impacts on the

distribution of income. Under the transportation scenarios considered in this study, the

total cumulativ e employmen t by slurr y

pipelines and railroads until the year 2000 is

roughly equivalent with or without slurr y

pipeline development. Pipelines over their

useful life are less labor intensive tha n

railroads, but during the construction period

labor requirements for pipelines are high.

Under the scenarios examined here, construction activity will continue until 2000 with

substantial employment in this sector and in

supplying industries as a result. Even without

the competition of pipelines for new coal traffic, railroad employment is expected to remain

at a constant level, or even decline, until 1990.

If slurry pipelines capture a significant portion

of the coal transport market during this period,

especialIy if they do so after railroads have expanded their operations to carry new coal traffic, the decline in railroad employment may

outstrip attrition and result in actual layoffs.

This effect, however, is not likely to be great

on a national scale.

Agriculture may be affected locally b y

future water availability impacts of slurr y

pipelines, as well as by the cost and quality of

service by railroads. Train traffic can also have

direct adverse impacts on agriculture in the

form of possible disruption of ranching operations.

After computing overall costs, questions of

equity remain. Not all will benefit or b e

burdened equally by a decision in favor of one

or another coal transport mode. A slurr y

pipeline may lower the shipping costs o f

utilities while raising them for noncoal rai l

users. Pipeline construction will benefit construction labor at the expense of railroa d

labor. Some industries will benefit from an expansion of coal unit trains while the communities through which they pass wilI experience

the disruptive effects of such expansion .

Balancing the conflicting interests involved is

a subjective and political process. (These considerations are also covered in chapter V.)

Issue 6

What will be the impacts of water use

for coal slurry pipeline development?

How might such impacts be mitigated?

The allocation of water for any use can

potentially have a significant impact upon: 1 )

the physical environment by diminishing surface stream flows or depleting ground water

supplies; and 2) the future economic and social

well-being of the populace in the water source

area as choices must be made between competing water uses in the future.

Physical environmental impacts are largely

a function of the ratio of pipeline water requirements to the size of physically available

surface and ground water flows. In none of

four hypothetical pipeline routes analyzed

would the water needed be a large enough percentage of the total supply to have a significant impact on stream water quality. In the

most extreme hypothetical case examined,

that of pipelines carrying 125 million tons of

coal per year from eastern Wyoming, th e

proportion would be 3 percent of available surface flows.

Economic and social impacts depend upon
Ch. III Issues and Findings ● 19

the degree to which pipeline water demands

infringe upon alternate uses for the same

water. Sufficient water is physically, although

not necessarily legally, available in thre e

western coal-producing areas studied to service both existing uses at present levels and a

substantial number of coal slurry pipeIines as

well. However, pipelines do compete directly

with other possible future uses. These include

alternative forms of energy development involving inter alia facilities for coal mining,

electric power generation, and shale oil. Consequently, a decision to construct a coal slurry

pipeline will require consideration now o f

alternative uses for water in the future. When

levels of use exceed users’ rights, as is the case

during years of relative abundance of water,

new appropriations may displace present, as

well as future, uses.

The water-related impacts of coal slurry

pipelines can be mitigated if sources of water

can be found which are usable for slurry but

not for most other purposes. There are three

promising possibilities: irrigation return flows;

primary or secondary sewage effluent; and

most important, saline ground water. In each

instance the water may need some purification

for use as a slurry medium but this appears to

be a manageable requirement. Sewage effluent will not be available in sufficient quantities in many areas to serve as more than a

supplementary water source, and the sizes and

locations of saline ground water sources are

generally not well known. An additional means

of mitigating the pressure on Iimited water

resources is to recycle the recovered slurry

water by return pipeline. The limiting factors

are the high but not necessarily prohibitive

cost of such a self-contained system and the

fact that not all of the water can be readily

separated from the coal.

It should be emphasized that coal slurry

pipeline water use represents only a small part

of a large set of issues surrounding water

resource allocation in the West. The National

Water Commission in 1973 described the situation as follows:

Water differs from other resources in

that to a large extent its allocation among

different uses is made outside a market

price system. Legal and administrative institutions based more often than not on

tradition rather than economic efficiency,

play a basic role in water allocation,

Therefore, public policy must be relied

upon to be a major determinant in the

flexible allocation of water resources to

achieve improved patterns of productive

uses. 1

Further discussion of water use impacts

contained under Water Use by Pipelines

chapter VI.

Issue 7

How does water law affect the viability

of coal slurry pipelines? Specifically,

who exercises control over water required for coal slurry pipelines, and

how might Federal or State authority be

affected by legislation?

is

in

State law governs access to surface and

ground waters within the State subject to two

major limitations: 1 ) waters shared with other

States, such as a river or lake that crosses State

boundaries, and 2) water controlled by the

Federal Government.

State governments exercise some control

over access to water for coal slurry pipelines in

a variety of ways. Water resource management

policy determines the rate at which ground

water sources are exploited, i.e., whether they

are mined or whether extraction is confined to

a rate not exceeding natural replenishment.

States can withhold water from use for purposes of conservation and planning for future

needs. Even if adequate water supplies are

physically available, any potential user must

qualify under State law as a “beneficial use” in

terms of the public interest. The courts have

yet to resolve definitively the question o f

whether coal slurry pipelines are a beneficial

use. Other State-imposed obstacles to providin g water for slurry include “us e

preference” policies, which could conceivably

1National Water Commission, Water Policies for the

Future, Washington, 1973, p. 319
20 ● Coal Slurry Pipelines

result in preemption of the water supply of a

pipeline by other users after the pipeline is

operational, and prohibitions on the exportation of water out of State. The latter type of

provision, however, is of uncertain constitutionality.

The Federal Government has ample power

under the Constitution to assure adequate

water supplies to a coal slurry pipeline, State

restrictions notwithstanding. That authority

derives primarily from the commerce an d

property clauses of the Constitution. Th e

former has been interpreted to give the Federal

Government authority over all navigable water

and the latter over water from Federal projects. Moreover, there is judicial precedent in

support of the preemption doctrine, i.e., where

there is a declared Federal interest in a policy,

State law cannot be permitted to contravene

that policy.

Despite these sweeping powers, Federal officials have traditionally administered Federal

law in a way that tends to preserve State controls over the distribution of water. Slurry

legislation presently pending before Congress

does not alter this situation. Control over

water supplies is unchanged in some proposed

bills, and in others the use of federally controlled water for slurry pipelines is expressly

forbidden. However, the First Iowa HydroElectric Cooperative v. Federal Power Commission

case suggests that the courts may rule that

Federal certification of a coal slurry pipeline

wil l negate State attempts to restric t

unallocated water to the project even though

Federal statutes seem to reserve control over

water to the States. To the extent the law is

uncertain, the proponent of a coal slurr y

pipeline who has been unable to obtain rights

to State water may seek to force such access

through Iitigation in the Federal courts.

If these matters are to be clarified, Congress

must address three issues through legislation.

First, it must be decided to what extent, if any,

water under Federal control should be made

available for coal slurry purposes. If it is decided that such water should be provided, that

intent should be made unambiguously clear to

the administrators of Federal projects through

legislation. Second, Congress is in a position to

decide the extent to which control of water

resources for a pipeline survives the enactment

of legislation authorizing Federal certification

and regulation of pipelines. Pending legislation

leaves little scope for State regulation of

pipelines. If the intent of Congress is t o

preserve meaningful State regulation then the

legislation should spell out what State administrators may do to control water for

pipeline use. Third, Congress can determine

the degree to which the Federal Government

wilI defer to State law in distributing water

from Federal sources.

The basic problem facing Congress i s

whether it is desirable and possible to reduce

the uncertainty surrounding water supplies for

coal slurry pipelines while protecting to a

substantial degree existing State jurisdiction

over water sources. (For further discussion of

water law, see Water Law, chapter VI l.)

Issue 8

What are the principal relative social

and environmental impacts aside from

economic benefits of railroads and

pipelines as coal carriers? To what extent can adverse impacts be mitigated?

Water requirements and possibly some transient effects of construction constitute the

principal source of adverse environmental and

social impacts associated with coal slurry

pipelines (see Issue 6 above), For railroads the

major negative impact is social — the disruptive effect of increased unit train traffic upon

the lives of individuals living or working near

the tracks. That disruption can take a variety

of forms: increased exposure to train noise, interruption of commuting and other automobile traffic, additional accidents at grade

crossings, and interference wit h cattle

movements on range land.

Some of the adverse impacts that result

from increased unit train activity can b e

mitigated. Grade separations permit the safe

movement of vehicle and pedestrian traffic

across tracks. Cattle passes may facilitate the
Ch. III Issues and Findings ● 2 1

movement of herds from one range to another.

New highway and rail construction can be

planned so as not to intersect if at all possible.

New tracks can be laid to avoid residential

areas, and land alongside existing track can be

zoned nonresidential. These “solutions” are

not without their drawbacks. Some, like vehicle grade separations, are expensive, and the

costs are often borne in part by the public. The

utiIity of grade crossings for cattle is uncertain.

Some impacts must simply be accommodated,

e.g., the nonresidential zoning of town land

alongside the tracks may be necessary where

no practical means are found to reduce exposure to train noise. To a significant degree,

whether the impacts of increased unit train

traffic prove manageable will depend on the

extent to which railroad companies and the

communities and landowners along the tracks

are able to cooperate and work together to

deal with those problems that arise.

Other environmental and social impact s

associated with either coal slurry pipelines or

unit trains, e.g., air pollution, construction impacts, revegetation, and occupational health

and safety, are not particularly serious or are

roughly equivalent for the two modes. (Environmental impacts are covered in chapter

VI with a specific section on Communit y

Disruption by Railroads.)

Issue 9

What present Federal or State environmental protection laws are relevant to potential adverse impacts of

railroads or slurry pipelines?

The major Federal environmental protection

laws relevant to coal slurry pipelines and unit

trains are the National Environmental Policy

Act (N EPA), and the Federal Water Pollution

Control Act (FWPCA). Also applicable, but less

important in this instance, are the Clean Air

Act (CAA), the Noise Control Act (NCA), the

Resource Conservation and Recovery Ac t

(RCRA), the Safe Drinking Water Act (SDWA),

and for protection of construction and operation personnel, the Occupational Safety and

Health Act (OSHA).

Under the requirements of NEPA any major

Federal action significantly affecting the environment must be preceded by an En -

vironmental Impact Statement (E IS). It is

technically possible at present to construct

and operate a slurry pipeline without a Federal

EIS, since no major Federal action or certification is required to initiate service. Increased

train traffic, the basic source of rail-related environmental problems, also does not require

an EIS. However, a number of activities in

connection with the construction and operation of both coal slurry pipelines and unit

trains may involve Federal action requiring an

EIS. These include construction or-I Federal

lands, crossing “navigable waters” or “waters

of the United States” (which includes most of

the Nation’s surface waters), and discharge of

wastes into waters of the United States .

Regulatory agencies granting certificates of

Public Convenience and Necessity for extension or abandonment of service must also file

EISs. Where Federal action is not involved,

pipeline and rail activities will require a State

E IS in some instances,

The waters of the United States are protected against pollution discharges from coal

slurry pipelines or unit trains under FWPCA.

The FWPCA does not cover ground water,

which wiII be partially protected by regulations to be promulgated by the Environmental

Protection Agency (EPA) under the SDWA and

the RCRA. For example, SDWA regulations will

govern the underground disposal of waste

water, and RCRA leaching of waste water,

from preparation of the coal slurry or from

dewatering facilities and possible holdin g

ponds. Railroad and pipeline construction activities will be subject to Federal regulations

concerning nonpoint source polIution and erosion runoff.

The Clean Air Act as amended provides for

comprehensive control of air pollution. Under

CAA, EPA has promulgated national primary

and secondary ambient air quality and stationary source standards and is implementing

regulations for a variety of pollutants. These

are indirectly applicable to coal slurr y
22 ● Coal Slurry Pipelines

pipelines in that they affect powerplants which

supply electricity to pumping stations. They

are not applicable to locomotive emissions.

Standards concerning particulate matter will

apply to coal dust emissions associated with

the preparation of coal for transport b y

pipelines or rail and the operation of unit

trains. Construction of a pipeline or rail line

will, in some States, be subject to standards

and regulations concerning fugitive dust .

Locomotive emissions may be regulated under

State implementation plans.

Other impacts associated with the construction and operation of one or the other of the

two transport modes and subject to Federal

regulation include train noise under NCA, and

railroad crossing safety under OS HA. Finally,

under some Federal environmental protection

statutes private parties could bring suit to

remedy pipeline- or rail-induced environmental damage by compelling EPA or other appropriate regulatory agency to- enforce the applicable statute. Several Federal and State programs are aimed at improving safety an d

reducing inconvenience at railroad highway

grade crossings, partially at public expense.

Provisions of the 1976 Federal Highway Act (23

USC 140, 203) are examples. (See Environrnental Law, chapter VIl.)

Issue 10

What present Federal and State laws

are applicable to land acquisition for a

coal slurry pipeline right-of-way? What

legal precedents are provided by other

commodities and transport modes?

The power of eminent domain is inherent in

the authority to govern and is limited only by

the principles of just compensation to the

owner of the expropriated property, the territorial jurisdiction of the government concerned, and the requirement that any grant of

eminent domain authority must serve a beneficial public purpose. Statutory limitations

may be imposed in connection with particular

grants of eminent domain authority. Congress

has the power to formulate legislation granting

rights-of-way over Federal public lands, national forest lands, and through powers of eminent domain, over private and State lands for

pipelines engaged in interstate commerce.

At present no Federal legislation grants eminent domain authority for coal slurry pipelines. Among States west of the Mississippi, six

have enacted eminent domain provisions for

that purpose. Others have no statutes which

could be interpreted as including such authority, and in the rest a slurry pipeline company

could not be sure it had the power of eminent

domain until the issue was litigated. Recent

State legislation granting eminent domain to

slurry pipelines limits their use of State water

and subjects them to State regulation as a

common carrier. The pipeline must be deemed

to fulfill a “public purpose” within a State to

qualify for a grant of eminent domain power

from any State.

The issue of eminent domain for coal slurry

pipelines arises in large part because railroads

and other landowners, under whose land pipelines would have to cross, have declined to

grant the necessary rights-of-way. In those instances where a railroad holds fee title to its

own right-of-way, it can presently prevent a

slurry pipeline from crossing the tracks. Where

the railroad holds only an easement, it cannot.

In the Western States much of the early railroad rights-of-way were acquired under the

Pacific Railroad Acts of 1862 and 1864, and the

type of right-of-way acquired thereunder is in

dispute. Recent court judgments tend to suggest that the railroads received only a limited

fee which would not empower them to prevent

crossing by a slurry pipeline, but further litigation will be required for a definitive resolution

of the matter. Even if the right to cross railroads is achieved, slurry pipelines will still

have to negotiate rights-of-way from other

landowners, not all of whom will necessarily

be sympathetic.

A precedent for a Federal grant of eminent

domain power to a transportation enterprise

exists in the 1947 Amendment to the Natural

Gas Act, which gave such authority to interstate natural gas pipelines. On the other

hand, the vast network of interstate oi l
Ch. Ill Issues and Findings ● 2 3

pipelines (with one brief exception) together

with ammonia fertilizer pipelines and railroads

have been built with only State eminent domain authority.

A compariso n of interstate coal slurr y

pipelines with interstate natural gas pipelines

indicates that although the granting of Federal

eminent domain to gas pipelines does not mandate such a grant to coal pipelines, it does furnish a legal precedent if Congress finds such a

grant to be in the national interest.

On the other hand, comparison of coa l

slurry pipelines with oil pipelines suggests that

State eminent domain authority may not be as

effective in meeting needs of the former as it

has been for the latter. (This area is discussed

further under Eminent Domain in chapter VIl.)

Issue 11

What would be the direct consequences of and alternatives to granting

coal slurry pipelines eminent domain

powers under Federal as opposed to

State law?

Congress has four basic options with regard

to eminent domain for coal slurry pipelines.

The first is to avoid granting authority and

leave the matter to the States. A number of

States have already enacted legislation granting slurry pipelines the power of eminent domain. In order to qualify for this benefit, most

States require that the prospective pipeline

operator obtain a Iicense or certificate of

public convenience and necessity, be designated a common carrier or public utility serving a beneficial public purpose, and accept

State regulation regarding rates and access to

State water.

From the perspective of the pipelin e

operator, this first option presents several difficulties. Under the best of circumstances it

will require negotiations with several State

governments, each with somewhat different requirements. More seriously, a slurry pipeline

may have difficulty meeting the beneficial

public purpose test in the State in which it

originates and in those through which it passes

since the coal is not made available to markets

in those States. Consequently, the pipeline

may not qualify for a grant of eminent domain

authority under State law even if such legislation is on the books. Finally, there is no

guarantee that every State on the route of a

planned pipeline will enact the desired legislation. If a pipeline must be constructed without

the benefit of eminent domain authority, it will

be much more difficult if not impossible to acquire the needed right-of-way. Some landowners may resist any passage or demand exorbitant prices. The result will probably b e

delays, increased costs, and less efficient

routing.

The second option is to provide eminent domain authority under Federal law. Such a grant

of Federal authority would be valid in al l

States and would exempt slurry pipelines from

State licensing or certification requirements.

In their place would be one certificate of

public convenience and necessity issued by a

Federal agency. At the same time State regulations not in conflict with constitutional provisions or Federal statutes could still be applied

to the pipeline. Compared to the first option,

this approach should facilitate the construction of slurry pipelines by reducing both delays

and costs.

The third option involves a conditional grant

of Federal eminent domain power. Such authority would be granted to a pipeline only if

State eminent domain authority were no t

available. The States would be allowed a

period of time in which to grant eminent domain authority to slurry pipelines on such conditions as might be deemed necessary to protect the interests of the State. Only if a State

failed to act, or if State legislation proved

inapplicable to a particular pipeline, would

Federal eminent domain authority be pro -

vided.

The fourth option would be to grant the

power of Federal eminent domain for in -

dividual pipeline projects through specifi c

legislation. This approach would be cumbersome, but it would allow Congress to deter-
24 ● Coal Slurry Pipelines

mine, in each case, the degree to which the na- development, Federal legislation has some

tional interest is served. clear advantages. However, if the intent is to

If it is determined that coal slurry pipelines reserve for the States the power to protect

their interests as they perceive them, then pre should be built, either Federal or State eminent

domain authority would appear to be a neces- emption by a Federal statute would b e

sity. If the objective is to encourage their rapid undesirable.
IV. Coal Slurry Pipeline and

Unit Train Systems
IV. Coal Slurry Pipeline and

Unit Train Systems

Assessing the costs and benefits of rail and pipeline alternatives required first,

the establishment of coal transportation market projections and second, th e

development of cost relationships and traffic scenarios for the two modes. Since

the extent and pattern of transportation activity depend on the cost and con -

figuration of the system, these two steps cannot be separated entirely, and the

market projections were later tested for sensitivity to transportation costs. This

chapter contains a brief description of the competing technologies followed b y

the results of the two analyses just mentioned.

TECHNOLOGY

Pipelines

Slurry pipelines have been proposed as a

method for moving large volumes of coal over

great distances. Two such pipelines have been

built in this country, one is in operation, and

several are in different stages of planning (see

figure 1), The economic and environmental

advantages and limitations are a matter of

considerable dispute. In the absence of waterways, however, pipelines are claimed to be

potential competitors for coal traffic i n

volumes of more than approximately 5 million

tons per year over distances greater than about

200 miles, particularly where rail facilities are

circuitous or in poor condition.

The process involves three major stages: 1)

grinding the coal and mixing it with a liquid

(generally water) to form the slurry, 2) transmission through the pipeline, and 3) dewatering

the coal for use as a boiler fuel, for storage, or

for transloading to another mode of transportation. These steps are diagramed in figure 2,

and some characteristics of selected coal and

other mineral slurry pipeline systems ar e

presented in table 1.

Slurry Preparation

Coal is assembled from a mine or group of

mines at a single point where mixing, cleaning,

DESCRIPTION

or other beneficiation may take place, and

where the slurry is prepared. Preparatio n

begins with impact crushing followed by the

addition of water and further grinding to a

maximum particle size of one-eighth inch.

More water is then added to form a mixture

that is about 50 percent dry coal by weight,

and the resulting slurry is stored in a tank with

mechanical agitators to prevent settling.

The optimum size distribution of the coal

and proportion of water is dependent o n

design tradeoffs that are peculiar to th e

specific application, and water requirements

are reduced to the extent of the initia l

moisture content of the coal. Water is also not

necessarily the only slurry medium, and oil as

well as methanol derived from the coal itself

have been proposed.

Transmission

The slurry from the agitated storage tanks is

introduced into a buried steel pipe and propelled by reciprocating positive displacement

pumps located at intervals of approximately

50 to 150 miles, depending upon terrain, pipe

size, and other design considerations. The

slurry travels at a velocity just under 6 feet per

second, but the precise speed also depends on

the coal particle size distribution, pip e

diameter, and economic factors. Ideally, the

27
28 ● Coal Slurry Pipelines

Figure 1—Present and Proposed Coal Slurry Pipelines

GULF INTERSTATE

NORTHWEST PIPELINE

● ● ● . . . ● In Progress

Source: Slurry Transport Association.

● ☛✎

● White Bluff

(

‘ \ \

Power Plant

flow is maintained at a rate which minimizes

power requirements while maintaining th e

coal in suspension. Once started, the flow

must continue uninterrupted, or the coal will

gradually settle and possibly plug the pipe.

Considerable technical controversy surrounds

the likelihood of this event and the possibility

that the pipeline can be restarted after given

periods of time. To prevent this type of settling, the operating pipeline at Black Mesa has

ponds into which to empty the pipe in the

event of a break or other interruption.

The potential economic advantage of this

technology lies in the fact that the volume of

coal that can pass through a pipeline increases

approximately as the square of the pipeline

diameter, while construction, power, and other

operating costs do not rise in as high a proportion. Therefore, if throughput volumes are high

enough to take advantage of this economy of

scale, and if the pipeline is long enough to

recover the cost of gathering, preparing, dewatering, and delivering the coal at the termini, the pipeline can compete with uni t

trains.

Dewatering and Delivery

At the downstream end of the pipeline, the

slurry is again introduced into agitated tank

storage, from which it is fed into a dewatering

facility. Dewatering is accomplished b y

natural settling, vacuum filtration, or by centrifuge, and then the finely ground coal still

suspended in the water can be separated by

chemical flocculation. After additional drying

by the application of heat, the coal can then

be stored, transported further by other modes,

or introduced directly into grinding equipment

at a powerplant and injected into the boilers.

The reclaimed water can be used in an electric
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 2 9

generating station’s cooling system to condense steam, or it could theoretically b e

recycled in a return pipeline.

Possible variations on this stage, which are

not covered by this assessment, include introduction of coal slurry as a feedstock for

gasification or liquefaction facilities designed

to take into account the fact that the coal is

already ground and mixed with water, or the

use of a combustible slurry medium Iike oil or

methanol so that dewatering would not be

necessary and the slurry could be used as a

boiler fuel directly.

Unit Trains

The principal economic competitors with

coal pipelines are unit trains. This type of train,

also designed to take advantage of scale

economies, generally carries a single commodity in dedicated service between two

points in sufficient volume to achieve cost savings. The cars are designed for automated

loading and unloading, and the train i s

operated according to procedures which avoid

switching and time-consuming delays in freight

yards.

A typical coal unit train consists of six 3,000

horsepower locomotives and 100 hopper cars

with carrying capacitates of 100 tons each.

Roughly two such trains per week are therefore

required to deliver 1 million tons of coal per

year. Speeds vary considerably depending on

track conditions, but 20 to 50 miles per hour is

a common range. Trains generalIy travel more

slowly loaded than empty.

Figure 2–Schematic of Slurry Pipeline System

Coal Supplier Pipeline System

Powerplant

Dewatering

Plant

Source John M Huneke, Teafmcmy Wore the Houaa Commttae on Intemr and Inaular Affaita

on Cud Slurry PIpelIne Laglalatkm, WaalwI@on, D C S@. 12, 1975
30 . Coal Slurry Pipelines

Photo: Courtesy of Southern California Edison Company

CENTRIFUGES. – Southern California Edison Company

employee in foreground holds lump of coal which is finely

ground at Black Mesa, Ariz., before it goes through

273-mile slurry pipeline mixed with water (50-50%) and

slurried to huge circulating facilities — holding tanks — at

Mohave Generating Station. From holding tanks the coal/

water solution is sent into one of 40 centrifuges (20 for

each generating unit) where the coal is dewatered before

it goes into boiler furnaces.

4

GIANT MIXERS. – Inside one of the huge mixing tanks,

personnel at the Mohave Power Project display a kitchensize electric mixer to give some comparison with the

world’s largest mixing blades — used to keep powder-fine

coal in water solution (slurry). A battery of smaller centrifuges later expel the water from the coal before the fuel is

used to create electricity for three Southwest States,

Nevada, Arizona, and California.
Ch. IV Coal Slurry Pipeline and Unit Train Systems Ž31

Photo. Burlington-Northerrn, Inc.

COAL. – Sub-bituminous coal underlies some

25,000 square miles of Montana and Wyoming.
32 ● Coal Slurry Pipelines

Table 1. Summary of Selected Worldwide Commercial Slurry Pipelines

Annual

throughput

System or Length Diameter (million Initial

Slurry material location (miles) (inches) tons/year) operation

Existing

Coal. . . . . . . . . . . . . . . . . . . . Consolidation 108

Black Mesa 273

Limestone . . . . . . . . . . . . . . Calaveras 17

Rugby 57

Trinidad 6

Colombia 17

Copper Concentrate. . . . . . Bougainvillea

West Irian 69

KBI Turkey 38

Pinto Valley 11

Magnetite Concentrate . . . Tasmania 53

Waipipi (land) 4

Waipipi (offshore) 1.8

Pena Colorada 30

Gilsonite. ... , . . . . . . . . . . . Am. Gilsonite 72

Tails . . . . . . . . . . . . . . . . . . . Japan 44

Nickel refinery tailings. . . . West. Mining 4.3

In Progress

Coal. . . . . . . . . . . . . . . . . . . . Nevada Power

Utah/Nev. 180

Energy Trans. Systems, Inc.

Wyo./Ark. 1,036

Magnite and Hematite . . . . Sierra Grande 20

Brazil 250

Mexico 17

Planned

Coal. . . . . . . . . . . . . . . . . . . . Houston Nat. Gas

Colo. to Tex. 750

Gulf Interstate N.W.

Pipeline 800

Phosphate . . . . . . . . . . . . . . Australia 200

Sulfur/hydrocarbon. . . . . . . Canada 800

Magnetite and hematite. . . Africa 350

Brazil 240

India 36

Mexico 17

Australia 44

10

18

7

10

8

6

4

5

4

8

12

8

6

12

4

24

38

8

20

10

22

30

16-22

12-16

18

20

20-22

10

8

1.3

4.8

1.5

1.7

0.6

0.4

1.0

0.3

1.0

0.4

2.3

1.0

1.0

1.8

0.4

0.6

0.1

10.0

25.0

2.1

12.0

1.5

9.0

16.0

4.0-6.0

—

6.6

12.0

10.0

1.5

0.9

1957

1970

1971

1964

1959

1944

1972

1972

——

1974

1967

971

971

974

957

968

970

aNo longer in operation.

Source: John M. Huneke, Testimony before the House Committee on Interior and Insular Affairs on Coal Slurry Pipeline

Legislation, Washington, D. C., Sept. 12,1975.

Since these trains are frequently more rive frequently and travel slowly. Also, trains

than 1 mile in length, one of the problems of all kinds produce substantial amounts of

associated with their use is the interruption of noise, and they contribute to community and

traffic at crossings, especially where they ar- Iand-use disruption as well as to a component
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 33

of highway traffic accidents. However, com- justify economically a dedicated train and

pared to pipelines, railroads offer advantages often must invest in rapid loading an d

in terms of flexibility of operation and absence unloading facilities to meet turnaround time

of water requirements at the coal source. requirements. Also, it is sometimes to the

To benefit from this improved service, a customer’s advantage to own the railroad cars

customer must ship quantities sufficient to as welI.

COAL TRANSPORTATION MARKET

As the use of coal for powerplant fuel accounts for approximately 65 percent of al l

domestic coal use, changes in demand for utility coal will have major ramifications for the

coal industry as a whole and the industries involved in its transport. The complexity of the

problem is increased by the uncertainties

faced by electric utilities. In addition to questions of economic viability, expansion potential, and electrical demand, the utilities must

also consider future pollution-control re -

quirements that are directly relevant to their

selection of fuel type for new plant construction. As nuclear and coal-fired powerplants are

approaching equivalence in life cycle costs,

stringent pollution-control requirements can

play a significant role in the nuclear/coal

tradeoff. Pollutant-emission limitations also

affect the type of coal to be burned once the

decision to build a coal-fired plant is made. As

coal types are geographically localized, intentions to burn specific coals add a spatial

dimension to the utility demand for coal.

To determine what patterns of coal use

utilities are Iikely to pursue under various

scenarios o f electrical demand growth ,

generating plant configuration, and en -

vironmental regulation, this study employed a

utility simulation model developed under the

sponsorship of the Environmental Protection

Agency (EPA). The model simulates th e

behavior of the electric utility industry on a

State-by-State basis when economic, technical,

and environmental parameters are specified.

For this analysis, several scenarios have been

employed to bound the range of likely utility

response to various levels of electrical demand

and pollution-control requirements. Detailed

tables and maps have been prepared that

specify the type, amount, origin, destination,

and year of coal demand for the utilities in

response to each scenario.

Significant variations in production at the

regional level can be attributed to anticipated

changes in pollution-control requirements as

well as to overall demand growth rates. Under

current regulations, States must have plans to

improve and maintain ambient air quality to

levels specified by National Ambient Air

Quality Standards (NAAQS). In addition, emission limitations are expressly provided for the

construction of new sources in operation after

1977. Utility response to these requirements

have been, up to now, a process of deciding

whether to use Iow-suIfur coals or flue-gas

desulfurization equipment. This strategy encourages the use of low-sulfur western coals

able to meet the emission limitations established by the New Source Performance Standards (NSPS). However, changes in the application of New Source Performance Standards

that would mandate the use of flue-ga s

desulfurization equipment capable of removing 90 percent of released sulfur dioxide (SO2

)

on all new plants regardless of the sulfur content of the burned coal would sharply curtail

the demand for western coals as higher sulfur

“local” coals would not have to be transported

as far to the powerplant site. This effect is

most dramatic in the case of midwestern coals.

A partial list of factors influencing coal usage

appears below.
34 . Coal Slurry Pipelines

Major Factors Influencing Coal Usage

Factors affecting the level of usage:

Ž

●

●

●

Rate of growth of national energy consumption (especialIy electricity).

Costs of competing fuels (especially imported oil and uranium).

Distribution of electricity demand over

time (peak vs. average power demand).

Availability of capital, equipment, and

mining manpower for expansion of mining

capacity.

Factors affecting the distribution of usage:

●

●

●

●

●

●

●

●

Regional differences in energy demand

growth.

Emission I imitations on sulfur oxides.

Regional differences in costs of competing fuels.

Rate of retirement of oil- and gas-fired

powerplants.

Relative costs of surface and deep mining.

Availability and costs of transportation.

Innovations in combustion and pollutioncontrol technologies.

Federal and State policies toward further

development of coal reserves in the West.

Coal Sources

The model recognizes nine coal suppl y

regions, listed in table 2, and three types of

coal: bituminous, sub-bituminous, and lignite.

Figure 3 is a map displaying the areas within

the regions which are currently being mined or

which are likely to be mined in the foreseeable

future.

Utility Simulation Model

This model simulates the response of the

electric utility industry to postulated energy

demands, economic conditions, and en -

vironmental regulations— the complete set of

which specify a “scenario’’ -on a national

scale. Eight scenarios were executed to provide insights into the sensitivity of the model

Table 2. Coal Supply Regions

States

Supply region Code encompassed

1.

2.

3.

4.

5.

6.

8.

9.

Northern Appalachia . . NA PA, MD, OH

Central Appalachia . . . CA WV, VA, KY (east)

Southern Appalachia. . SA TN, AL

Interior Eastern. . . . . . . IE IN, IL, KY(west)

Interior Western . . . . . . IW IA, KS, MO, OK,AR

Northwestern . . . . . . . . NW MT, ND

Central Western . . . . . . CW WY, UT, CO

Southwestern. . . . . . . . SW AZ, NM

Texas. . . . . . . . . . . . . . . TX TX

Source: Teknekron, Inc., Projection of Ufi/ify Coa/

Movement Patterns: 1980-2000, 1977.

to changes in variables and to reflect improvements brought about during the course

of the assessment. One was selected as the

basis for market assumptions in the subsequent economic analysis. Details of the model

and the results of all of the scenarios are

presented in Volume II, and what follows are

the salient features and assumptions along

with the selected set of results.

Coal Assignments

Coal is assigned to each generating unit on

the basis of least cost to the utility, taking into

account applicable sulfur-emission standards,

coal heating and sulfur content, and mining

and transportation costs. Four categories of

available coals are assigned to each State.

Three of the categories are the least expensive

coals available to the State that can meet applicable sulfur-emission requirements without

the use of flue-gas desulfurization. The emission Iimitations are specified for these three

categories according to: 1) applicable State

Implementation Plan (SIP) limitations for

nonmetropolitan areas, 2) applicable State Implementation Plan Iimitations for metropolitan

areas, and 3) emission Iimitations for new units

under New Source Performance Standards

(NSPS). The fourth category of coal is simply

the least expensive coal available to the State

without regard to its sulfur content. The actual

assignment is made in a two-step procedure.
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 3 5

Figure 3–Coal Supply Regions

NORTHWESTERN

(NW)

CENTRAL WESTERN

(CW)

INTERIOR

WESTERN

(IW)

SOUTHWESTERN

(SW)

TEXAS

(TX)

Source Tekoekron Inc

First, the sulfur-emission limitation in effect is

determined for each unit depending on its

location and the year that it went into service,

Secondly, costs are compared to determine if

it is more economical to burn the appropriate

low sulfur coal without additional cleanup or

to use fIue-gas desulfurization equipment with

the cheapest coal avaiIable. AlI coal-fired units

within a given State that are subject to the

same suIfur-emission Iimitations burn the same

kind of coal, Neither blending of coals from

different supply regions nor cleaning of significant amounts of coal are considered. Table 3

identifies the assigned coals in each of the four

categories for each State by class, sulfur content, and delivered price, The class of the

assigned coals are identified by the two letter

code for the region of origin (see table 2 for

codes), rank (bituminous (B), sub-bituminous

(S B), or lignite (L)), and whether they are

cleaned (C) or uncleaned (UC). Thus for example, the concatenated designation “SA/B/UC”

for the nonmetropolitan SIP complying coal

for Alabam a specifies a Southern Ap -

NORTHERN

APPALACHIA

(NA)

INTERIOR

EASTERN

(IE) CENTRAL

APPALACHIA

(CA)

SOUTHERN

APPALACHIA

(SA)

palachian, bituminous, uncleaned coal. This

assignment procedure, which identifies only

one coal source for a given State and set of environmental restrictions, represents an important limitation. It causes the model to predict

large concentrated flows of coal from single

producing areas to consuming States, so individual results at the State level are not as

reliable as

regions,

Coal Prices

hose corresponding to large r

The prices developed in table 3 are expressed in 1975 dollars and are composed of

three major elements. These include an f.o.b.

mine raw coal price, a transportation cost from

the region of origin to the State of consumption, and an additional component representing localized severance taxes or marke t

premiums. The f.o.b. mine prices used as a

base are calculated from National Economic

Research Associates (N ERA)’ data and con-

‘ National Economic Research A550clate$, Inc , Costs of SOX

Control for the $t.’am F/t=ctr/c Power /ndustry, June 1975
36 • Coal Slurry Pipelines

Table 3. Assigned Coals, by State, “No Cleaning” Scenarios (1975)

Non metropolitan SIP Metropolitan SIP NSPS Cheapest

complying coal complying coal complying coal available coal

Price Price Price Price

Sulfur (cents/ Sulfur (cents/

State Class

Sulfur (cents/ Sulfur (cents/

(percent) 10° Btu) Class (percent) 10OBtu) Class (percent) 10° Btu Class (percent) 10° Btu

Alabama. ., SA/B/UC 1.7 51.3 CA/B/UC 1.2 93.7 CW/SB/UC 0.64

Arizona. ., . . . . SW/SB/UC 0.6

Arkansas . . . . ., SA/B/UC 1.3

California. . . . . CW/SB/UC 0.95

Colorado . . . . . CW/SB/UC 0.85

Connecticut ., None

Delaware . . . ., NA/B/UC 3.0

Florida ... ., ., ., None

Georgia . . . ., ., IE/B/UC 3.0

Idaho . . . . ... CW/SB/UC 1.0

Illinois . . . . ., IE/B/UC 3.6

Indiana. . . . ., . CW/SB/UC 0.64

Iowa ., ., . . . . . . . . IE/B/UC 3.0

Kansas, . . . CW/SB/UC 0.95

Kentucky. ., CA/B/UC 2.2

Louisiana. ., . . . . SA/B/UC 1.7

Maine. ., . . . NA/B/UC 2.5

Maryland . . . . . CA/B/UC 1.0

Massachusetts. . . . . . None

Michigan . . . . NW/SB/UC 0.73

Minnesota. . NW/SB/UC 0.73

Mississippi SA/B/UC 1.7

Missouri, ., . . . . CW/SB/UC 1.2

Montana . . ., NW/SB/UC 0.73

Nebraska. ... . . . . CW/SB/UC 0.95

Nevada. ., ., ., . . None

New Hampshire . . NA/B/UC 1.8

New Jersey . . . . . . CA/B/UC 10

New Mexico . . . SW/SB/UC 0.87

New York. . . . CA/B/UC 1.6

North Carolina . . CA/B/UC 1,0

North Dakota. NW/L/UC 1,0

Ohio : : : : : NA/B/UC 2.6

Oklahoma . . . . . . CW/SB/UC 1.1

Oregon. ., ., NW/SB/UC 0.73

Pennsylvania, ., NA/B/UC 2.4

Rhode Islan d None

South Carolina ., SA/B/UC 1.7

South Dakota CW/SB/UC 0.95

Tennessee. .. .. .SA/B/UC 1.7

Texas , TX/L/UC 1.2

Utah. . .. ... CB/SB/UC 0.95

Vermont. None

VlrgInia .. . . . . . . . .. . . CA /B/UC 17

Washington. .NW/SB/U C 073

W. Virginia CA/B/UC 14

Wisconsin . . . . . . IE/B/U C 3.6

Wyoming, . . . None

27.2

65.0

63.0 CW/SB/UC

42.8

65.5 CA/B/UC

62.6 IE/B/UC

36.2

541 CW/SB

69.5

59.8

51.8

51.3 CA/B

65.0 SA/B/UC

80.2 NA/B/UC

58.5 CA/B/UC

78.5

56.3 NW/SB/UC

59.5 SA/B/UC

63.0

31.7

40.8

68.5 NA/B/UC

77,0

32.6

80.0

72.5 CA/B/UC

30.9

54.1 CW/SB/UC

58.3

65.3 NW/SB/UC

54.1

621 SA/B/UC

33.1

53.9 CW/SB/UC

43.3

38.7

51.1

59.0 NW/SB/UC

51.3 CA/B/UC

63.0

0.5

SW/SB/UC

CW/SB/UC

63,0 CW/SB/UC

CW/SB/UC

None

1.0

None

3.0

0.96

0.77

1.7

2.5

1.0

None

0.73

1.7

18

None

None

10

0.64

0,73

None

1.5

0.64

None

073

1.0

61.1

62.6

CW/SB/UC

63.0 CW/SB/UC

CW/SB/UC

CW/SB/UC

CW/SB/UC

65.8 CA/B/UC

65.0 CW/SB/UC

80.2

58.8

NW/SB/UC

56.3 NW/SB/UC

59.5 CW/SB/UC

CW/SB/UC

NW/SB/UC

CW/SB/UC

CW/SB/UC

68.5

SW/B/UC

72. CA/B/UC

NW/SB/UC

78.3 CW/SB/UC

CW/SB/UC

65.3 NW/SB/UC

62.1

CW/SB/UC

77.2 CW/SB/UC

CW/SB/UC

CW/SB/UC

60.0 NW/SB/UC

51.3 CA/B/UC

NW/SB/UC

CW/SB/UC

0.73

0.64

0.64

0.64

None

None

None

None

0.64

0.64

0.64

0.64

0.64

0.77

0.64

None

None

None

0.64

0.64

0.64

0.64

0.64

0.64

0.64

None

None

0.77

None

0.64

0.64

0.64

0.64

0.64

None

None

None

0.64

0.64

0.64

0.64

None

None

0.64

077

064

064

80.7 SA/B/UC

27.2 SW/SB/UC

65.1 IE/B/UC

63.0 CW/SB/UC

42.8 CW/SB/UC

NA/B/UC

NA/B/UC

SA/B/UC

IE/B/UC

36.2 CW/SB/UC

63.0 IE/B/UC

69.5 IE/B/UC

56.3 IW/B/UC

51.8 CW/SB/UC

65.8 IE/B/UC

78.3 SA/B/UC

NA/B/UC

NA/B/UC

NA/B/UC

78.5 IE/B/UC

56.3 NW/SB/UC

78.3 SA/B/UC

63.0 IW/B/UC

31.7 NW/SB/UC

40.8 CW/SB/UC

49.8 CW/SB/UC

NA/B/UC

NA/B/UC

50.8 SW/SB/UC

NA/B/UC

89.5 CA/B/UC

44.6 NW/L/UC

78.3 NA/B/UC

58.3 IW/B/UC

65.3 NW/SB/UC

NA/SB/UC

NA/B/UC

SA/B/UC

33.1 CW/SB/UC

77.2 SA/BUC

74.0 TX/L/UC

38.7 CW/SB/UC

NA/B/UC

CA/B/UC

59.0 NW/SB/UC

66.0 CA/B/UC

65.3 IE/B/UC

25.1 CW/SB/UC

1.7

0.87

0.95

0.95

2.5

3.0

1.7

3.6

1,0

3.6

3.6

3.7

0.95

3.6

1.7

2.5

2.5

2.5

3.7

0.73

1.7

37

0.73

0.95

0.95

2.5

5.6

0.87

2.5

2.1

1.1

3.7

3.7

0.73

2.5

2.5

1.7

0.95

1.7

1.2

0.95

2.5

0.73

2.1

3.6

0.95

51.3

27.2

63.0

63.0

42.8

68.5

68.0

75,8

62.6

36.3

54.1

54.1

52.6

51.8

54.3

65.0

80,2

53.9

71.3

66.5

56.3

59.5

36.1

31,7

40.8

49.8

68.5

62.6

31.2

62.6

72.5

0.9

54.1

57.0

65.3

54.1

68.5

62.1

33.1

539

43.3

38.7

68.5

51.1

59.0

51.3

25.1

25.1

Notes: No entries under “Complylng Met SIP” means there IS only one is available, Sulfur content “as fired”. Prices In 1975 dollars,

SIP In that State, arbftrarlly considered to be non.met “NONE” means Sources: Teknekron, Inc. Pro/ecflorrs of UtI/I?y Coa/ Movement f’afterrrs

the Ilmltatlon IS so stringent that no coal which can meet It without FGD 1980-2000.

verted to 1975 dollars. The transportation cost

is based on an assumed straight-line distance

and a transportation rate as described below.

A severance tax of 30 percent of f.o.b. mine

price is added to the price of Montana coals

(NW/SB class). A premium (“economic rent” of

$0.15/106 Btu) is added to the delivered price

of Appalachian coals complying with emission

limitations equivalent to, or more stringent

than, the New Source Performance Standards.

Time-dependent feedback relationships between the prices of coal and oil and rates at

which the utilities use these fuels are not included in the analysis. Regional difference in

coal prices, heating value, and sulfur content

are accounted for in all the scenarios but an

unlimited supply of coal at current (real) prices

is assumed.

Coal Transportation

The model entails no constraints on the

transport of coal. Transport costs wer e
Ch. IV Coal Slurry Pipeline and Unit Train Systems • 37

calculated by multiplying the straight-lin e

distance from the center of the relevant supply

region to the center of the consuming State by

generalized transportation tariffs developed

by NER A

2 (0.8 cents per ton-mile for coal

originating in the West, 1.2 cents for coal

originating in the Midwest and East).

Generating Mix

All existing generating units of investorowned utilities, including nuclear, hydro, and

fossil-fuel fired units are included in the data

base, as are plants of the Tennessee Valley

Authority (TVA) and municipal systems i n

Nebraska. Excluded utilities owned by public

agencies amount to 15 percent of tota l

generating capacity. New units currentl y

planned by the industry for the period 1975-85

are also included, except that they are not

brought “online” untiI the model determines

that they are needed. If assumed electricity demand growth rates are lower than those implied by the utilties’ plans filed with the

Federal Power Commission (FPC), the model

defers the startup date for an announced plant

by one or more years beyond that indicated by

the utility. The model sites new plants beyond

1985 (or later in the cases where new announced plants have been deferred), with the

mix between coal and nuclear specified exogenously.

Demand for Electricity

Starting with actual electricity sales in 1973,

a national average growth in peak and average

power demand is specified exogenously to the

model. This average rate is made to vary by

region of the country to reflect normalized

variations in population growth rates. Average

power-demand growth is 5.4 percent per year

in the selected scenario, while growth in peak

demand is 5.9 percent per year.

Scenario Description

Energy Alternatives

Each energy alternative specifies bot h

Government energy policy and the utilities’

2

Ibid

response to that policy by expressing the

following factors quantitatively:

● Energy Policy

— Influence of Government management

of supply and demand.

–Availability and price of fuels.

– Regulations for powerplant fuel conversions.

— Effect of natural gas curtailment.

● Utility Response

–Schedule for additions to capacity by

fuel type and State.

–Schedule for conversions of gas- and

oil-fired plants to coal.

The principal elements combined to specify a

given alternative are the effect of Government

demand-management policies on the rate of

growth in demand for electricity, the additions

to capacity by fuel type to meet demand and

the oil-to-coal, gas-to-coal, and gas-to-oil conversions to be carried out. Under the selected

scenario, the growth rates of 5.4 and 5.9 percent for average and peak demand reflect no

Government policy for demand management. 3

Fuel mixes for capacity additions are those

forecast by the nine regional reliability counciIs.

Coal prices have been discussed earlier, but

the model includes other fuels as well. Oi l

prices are assumed to remain constant in real

terms, while natural gas prices rise from current values to the Btu-equivalent price of oil in

1981, as reflected by current trends. Uranium

prices are formed from a complex projection

of utilities’ current contracts and the estimates

of future uranium prices, resulting in a significant rise in (real) price into the 1990’s.

The curtailment of natural gas, in both the

interstate and intrastate markets, significantly

affects the future of the electric utility industry in the primary gas-burning States. ’ The industry must replace the curtailed capacity by

‘Fed era I E nergy Adm I n lstratlon, Nat Iona I E nergy Outlook,

February 1976

4Texas, Ok Iahoma, Lou IS Iana, K a nsas, F Iorlda, and C a I Iforn la

(Texas alone burned 45 percent of all 1975 gas deliveries to

steam-e lectrtc plants Louls}ana was second with 11 percent )
38 ● Coal Slurry Pipelines

utiIizing existing alternative fuel-burning

capability, by rebuilding boilers to burn oil or

coal, or by building additional new capacity

over that which would be built without natural

gas curtailments. All the energy alternatives incorporate the following set of plausible conditions:

1.

2.

3.

4.

The

All gas plants with only coal as a n

alternative capabiIity burn coal.

Al gas plants with only oil as an

alternative capability burn oil.

Gas plants that can burn either coal or oil

switch to these fuels in proportion to current consumption of coal and oil b y

powerplants in the affected State.

All gas plants with no alternative firing

capability burn gas until 985 and then

are gradualIy phased out over the 10-year

period from 985 to 1995.

last category includes 32 percent of the

Nation’s gas plants and 40 percent of the

Texas, Louisiana, Oklahoma, and California

gas capacity. This degree of curtailment agrees

closely with utility plans filed with the FPC.

Additions to generating capacity in th e

selected scenario are an extension of currently

scheduled additions to generating capacity as

shown in table 4, disaggregated by Electric

Reliability Council region. The regions are illustrated in figure 4. A more detailed examination of the schedule for fossil-fueled steam

capacity shows a breakdown into 80.9 percent

coal-fired, 17.5 percent oil-fired, and 1.6 percent gas-fired, with all the gas-fired capacity

scheduled to come online by the end of 1978.

For simplicity in scheduling out to later years,

the apportionment of new fossil steam capacity is 81 percent coal and 19 percent oil.

The utilities have also reported their intentions to add capacity in the decade from 1986

through 1995. These data, also obtained from

the nine National EIectric Reliability Councils,

are summarized in table 5. Since the data were

not further broken down, the same 81 percent

coal/19 percent oil split in these fossil-fueled

steam generation units is assumed.

Considering only the steam capacit y

planned after 1985, the division between coal,

oil, and nuclear in capacity additions is approximately as follows:

● Coal . . . 33 percent

Fossil = 41 percent

● Oil . . . . . 8 percent

● Nuclear. . 59 percent

Table 4. Scheduled Additions to Capacity, for the Decade 1976-85, as of April 1,1976,

as Reported by Nine Regional Reliability Councils

Council

Nuclear

Total

additions MW %

(MW)

Fossil

MW %

Hydro, other

MW %

NPCC. . .

MAAC . .

ECAR. . .

SERC . . .

MAIN . . .

SWPP. . .

ERCOT. .

MARCA .

WSSC . .

Totals

26,137

21,863

42,461

72,021

22,987

34,752

17,739

13,968

53,918

20,043

16,755

19,743

49,997

13,266

12,255

4,945

2,396

23,330

76.7

76.7

46.5

69.4

57.7

35.3

27.9

17.1

43.3

4,175

5,079

22,582

18,761

8,386

20,851

12,433

11,316

18,738

16.0

23.2

53.2

26.0

36.5

60.0

70.1

81.0

34.7

1,917

28

136

3,262

1,335

1,644

360

254

11,849

7.3

0.1

0.3

4.5

5.8

4.7

2.0

1.8

22.0

305,846 162,730 53.2 122,321 40.0 20,785 6.8

Source: National Electric Reliability Council.
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 3 9

I

I

Source Teknekron Inc

SPP

SERC

ERCOT

Table 5. Planned Additions to Capacity for the Decade 1986-95, as of April 1,1976,

as Reported by Nine Regional Reliability Councils

Total Nuclear

Council additions MW 0/0

Fossil

MW %

Hydro, other

MW 0/0

(MW)

NPCC. . .

MAAC . .

ECAR . . .

SERC . . .

MAIN . . .

SWPP. . .

ERCOT. .

MARCA .

WSCC . .

Totals

37,710 28,954 76.8 3,175

31,545 16,173 51.3 14,299

86,500 44,115 51.0 39,790

35,021 19,927 56.9 11,172

51,570 28,234 55.0 23,336

75,844 40,752 53.7 35,090

44,000 23,900 54.3 19,220

18,591 8,180 44.0 9,760

85,000 50,065 58.9 24,055

465,781 260,300 55.6 179,897

8.4 5,581 14.8

45.3 1,073 3.4

46.0 2,595 3.0

31.9 3,922 11.2

45.0 0 0

46.3 0 0

43.7 880 2.0

52.5 651 3.5

28.3 10,880 12.8

38.6 25,582 5.5

Source: National Electric Reliability Council.
40 . Coal Slurry Pipelines

All post-1985 steam capacity is assigned in the

above proportion and the mix of capacit y

planned to 1985 remains unaltered.

A coal conversion pIan for existing and announced fossil steam units embodied in the

selected scenario is as follows:

●

●

●

●

Federal Energy Administration (FEA) conversion orders under the Energy Supply

and Environmental Coordination Ac t

(ESECA), for the conversion of oil and gas

plants to coal plants, are not approved by

E PA, and no such conversions take place.

Gas plants that can convert only to coal

do SO.

All new oil-fired fossil steam units coming

online after 1980 burn oil.

Gas plants that can burn either coal or oil

switch to these fuels in proportion to the

consumption o f coaI and oil by

powerplants in the affected State.

In summary, the energy alternativ e

represented by the selected scenario is a relatively high demand, high nuclear one, particularly in the years beyond 1985. The high

rate of demand growth and the low proportion

of coal to nuclear plants tend to balance each

other to produce an intermediate projection of

coal use. A recapitulation of the main energy

features of the scenario follows.

●

●

●

●

Growth in demand for electric energy

— 5.4 percent per year

Growth in peak power demand

— 5.9 percent per year

Additions of new steam capacity after

1985

–33 percent coal

–8 percent oil

—59 percent nuclear

Conversion policy

– FEA conversion orders under ESECA,

for the conversion of oil and gas plants

to coal plants, are not approved by EPA

and no such conversions take place.

–Gas plants that can convert only to coal

do SO.

—All new oil-fired fossil steam units coming online after 1980 burn oil.

—Gas plants that can burn either coal or

oiI switch to these fuels in proportion to

the consumption of coal and oil b y

powerplants in the affected State.

Environmental Alternatives

When incorporated into a scenario, each of

several environmental policy alternatives will

elicit a different response from the utilities,

because of the intimate relationship between

regulation and the behavior of the industry.

The alternatives considered emphasize limitations on emissions from coal-fired plants as

well as plant-siting restrictions . UtiIit y

response concerns the type of coal used, the

pollution-control strategy employed, and the

location of the post-1985 plants.

The chosen scenario illustrates the impact

of a Non-Significan t Deterioration (NSD)

policy reflecting recent amendments to the

Clean Air Act. This alternative is characterized

by a restrictive siting policy and by one interpretation of what constitutes Best Available

Control Technology (BACT). Siting is prohibited in areas where deterioration of air

quality cannot be tolerated (for example, national parks and other Federal lands) and in

nonattainment areas. Flue gas desulfurization

(FGD) is required for all new coal units online

after 1981. Assumed policy instruments include:

Current State implementation plans.

Current New Source Performance Standards.

Siting prohibited in Class I and nonattainment areas. Since siting is not allowed in

any county that contains any part of a

Class I area, a significant land area is proscribed for development.

For new sources online after 1981, BACT

is required for S02

. This is interpreted to

mean mandatory FGD with 90-percent

removal efficiency.

The policy of nonsignificant deterioration is

designed to prevent the deterioration of air

quality in those regions now cleaner than re-
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 4 1

quired by the National Ambient Air Quality

Standards. The recent Clean Air Act amendments have the same goal. Area descriptions

relating to NSD requirements considered in

this analysis are as follows:

• Mandatory Class I if area exceeds 5,000

acres

— national and international parks

— national wilderness areas and wildlife

refuges

Ž Class I with provision for redesignation as

Class I I

— national monuments , recreationaI

areas, wiId and scenic rivers

● Class I I with provision for redesignation to

Class I

— national preserves, forests, reservations, and other Federal lands

All mandatory or discretionary Class I areas

are considered Class I in the Utility Simulation

Model. The model’s smallest resolution is at

the county level; hence, any county containing

any Class I area is designated a Class I county.

In this scenario, the siting of fossil-fuel

powerplants in Class I counties is prohibited,

even though a small plant might be permitted

by the increment of deterioration allowed.

In selecting a site for a new plant a utility

makes a difficult decision, taking into account

the distance to load center, costs of fuel and

electricity transmission, availability of water

and labor, and siting restrictions for en -

vironmental reasons, There are conflicting

criteria for siting. Remote siting may be required to remove the source from a polluted

area with a high population density, while

reguIations to preven t the significan t

deterioration of air quality exert pressure for

siting away from clean areas toward areas having greater popuIation density.

Remote siting has been an important alternative for coal. Typically, transportation accounts for a very significant fraction of the

cost of coal delivered to the utility. Location

near the mine, with long transmission lines, has

proved cost effective in some cases. Projections of future costs of transport indicate an increased tendency toward remote siting. On the

other hand, nonsignificant deterioration proposals would constrain both the number of

available sites and the maximum size of a

fossil-fueled plant. Taking all considerations

into account leads to two different siting constraints:

●

●

Siting of new (post-1985) fossil-fueled

plants conform s to NSD regulations .

Transmission costs, transportation costs,

avaiIabiIity of water, and suitabiIity of terrain are taken into account only in Class II

areas. No siting is allowed in Class I counties, because the allowed air quality increments are too smalI to support an economically sized generation faciIity. A

Class I county is a county having anywhere within its boundaries a Class I area

as specified by the proposed amend -

ments,

Siting of new (post-1 985) plants is prohibited in areas where primary NAAQS for

sulfur oxides, nitrogen oxides, or total

suspended particulate are currently exceeded.

Results

The projections generated by the model

under the selected scenario approximate an

average annual compound growth rate for

utility steam coal consumption of 4.2 percent.

The total volume is projected to be 942 million

tons in the year 2000 compared with actual

deliveries to electric utilities of 429 million

tons in 1975. Before 1985, the projection is

consistently lower than those of several other

studies, due to three major causes. One is the

exclusion of some noninvestor-owned utilities,

which accounted for 27 million tons of coal in

1974. Another is the use in this study of electric

power demand growth instead of announced

additions to generating capacity as a realistic

determinant of future fuel use. The last causes

a reduced rate of assumed growth based on recent experience as opposed to historica l

averages.
42 . Coal Slurry Pipelines

Levels of projected coal production b y

region appear in table 6, and patterns of

distribution from producing region to consuming States are detailed in table 7. Figures 5

through 9 are maps indicating those flows of

more than 5 million tons per year whic h

traverse distances over 200 miles. Pipeline

transportation is unlikely to be economically

competitive at lesser distances and volumes.

The results corresponding to the seven additional scenarios indicate that the magnitudes

of the flows are quite dependent on assumed

demand growth rates, and that the spatial

distribution of the coal movements are highly

sensitive to environmental regulation an d

transportation cost assumptions. Penetration

of western coal into eastern markets, for example, is highly dependent on transportation

costs and on BACT requirements. High transportation costs and BACT tend to reduce the

use of western coal east of the Mississippi.

Also, the fact that the model chooses only one

source of coal for a State, given a set of environmental requirements and embodies no

market price-adjustment mechanism, tends to

reduce the realism of results at the individual

State level. The coal flows presented are

therefore only illustrative of a plausibl e

overall national pattern, and embody a high

degree of uncertainty.

Table 6. Projected Regional Utility Coal Production

(Millions of tons per year)

Appalachian Interior Western Total

(Northern, Central, (Eastern and (North, Central, (Including

Year and Southern) Western) and South) Texas)

1975a. . . . . . . . . . . . . . . . . . . . . . . . 208 “ 134 73 ‘ 429

1980 . . . . . . . . . . . . . . . . . . . . . . . . 111 31 163 399

1985 . . . . . . . . . . . . . . . . . . . . . . . . 224 64 223 523

1990 . . . . . . . . . . . . . . . . . . . . . . . . 259 101 260 632

1995 . . . . . . . . . . . . . . . . . . . . . . . . 297 133 324 772

2000 . . . . . . . . . . . . . . . . , . . . . . . . 352 211 364 942

a 1975 figures are actual. Differences in the distribution of production between 1975 and 1980 are due Primarilyto the

assumption underlying the model that specified environmental regulations will be complied with by 1980.

Source: Derived from data in Teknekron, Inc.
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 4 3

Table 7. Projected Utility Coal Distribution From Region of Origin to State of End Use

(Millions of tons per year)

Year

State 1980 1985 1990 1995 2000

Alabama (total). . . . . . . . . . . . . . . . . . . . . . .

S. Appalachian. . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Arizona (total). . . . . . . . . . . . . . . . . . . . . . . .

S. Western . . . . . . . . . . . . . . . . . . . . . . . .

Arkansas (total) . . . . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

California (total). . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

S. Western . . . . . . . . . . . . . . . . . . . . . . . .

Colorado (total) . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Connecticut (total) . . . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

Delaware (total). . . . . . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Florida (total) . . . . . . . . . . . . . . . . . . . . . . . .

S. Appalachian. . . . . . . . . . . . . . . . . . . . .

Georgia (total) . . . . . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

Idaho (total) . . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Illinois (total) . . . . . . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Indiana (total). . . . . . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Iowa (total) . . . . . . . . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

I. Western . . . . . . . . . . . . . . . . . . . . . . . . .

Kansas (total). . . . . . . . . . . . . . . . . . . . . . . .

l. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

l. Western.. . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Kentucky (total). . . . . . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

Louisiana (total). . . . . . . . . . . . . . . . . . . . . .

S. Appalachian.. . . . . . . . . . . . . . . . . . . .

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

12 12 15 18 21

12 12 15 18 21

0.20 0.10 0.03 –– ——

2.7 0.44 0.34 0 0

2.7 0.44 0.34 –– ——

0 1.6 3.4 7.0 8.4

— . 1.6 1.8 7.0 8.4

1.6

0.91 9.2 14 31 39

0.64 8.9 14 31 38

0.27 0.27 –– —— 0.95

4.4 6.3 8.8 12 16

4.4 6.3 8.8 12 16

0 1.1 0 0 0

—— 1.1 — — — — — —

1.2 1.0 1.2 1.1 0.96

1.2 1.0 1.2 1.1 0.96

—— 0.03 –– —— ——

8.8 16 21 22 32

8.8 16 21 22 32

1.6 19 23 28 39

1.6 19 23 28 39

— 1.5 3.0 3,0 2.9 3.0

1.5 3.0 3.0 2.9 3.0

30 35 38 47 74

10 16 22 31 58

20 19 16 16 16

30 30 43 47 59

—— 5.3 18 28 42

30 25 25 19 17

5.9 8.7 9.0 7.4 10

5.9 4.7 4.1 3.3 2.7

—— 3.8 4.9 4.1 7.3

5.7 4.8 8.1 23 19

5.7 1.8 —— —— ——

—— 3.0 3.6 —— ——

—— —— 4.5 23 19

23 23 25 29 34

23 19 5 13

—— 3.6 9.8 16 23

0 8.5 9.4 14 16

—— 1.5 8.3 11 16

—— 1.5 1.1 —— ——

—— 5.5 —— 3.5 ——
44 ● Coal Slurry Pipelines

Table 7. Projected Utility Coal Distribution From Region of Origin to State of End Use—Continued

(Millions of tons per year)

Year

State 1980 1985 1990 1995 2000

Maine (total). . . . . . . . . . . . . . . . . . . . . . . . .

Maryland and D.C. (total) . . . . . . . . . . . . . .

N. Appalachian . . . . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

S. Appalachian. . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Massachusetts (total). . . . . . . . . . . . . . . . .

Michigan (total) . . . . . . . . . . . . . . . . . . . . . .

l. Eastern . . . . . . . . . . . . . . . . . . . . . . . . .

N. Western . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Minnesota (total) . . . . . . . . . . . . . . . . . . . . .

N. Western . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Mississippi (total

S. Appalachian

Missouri (total)..

I. Western. . . .

C. Western . . .

. . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . .

Montana (total) . . . . . . . . . . . . . . . . . . . . . .

N. Western . . . . . . . . . . . . . . . . . . . . . . . .

Nebraska (total) . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

Nevada (total). . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

New Hampshire (total) . . . . . . . . . . . . . . . .

N. Appalachian . . . . . . . . . . . . . . . . . . . .

New Jersey (total). . . . . . . . . . . . . . . . . . . .

N. Appalachian . . . . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

New Mexico (total) . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

S. Western . . . . . . . . . . . . . . . . . . . . . . . .

New York (total). . . . . . . . . . . . . . . . . . . . . .

N. Appalachian . . . . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

North Carolina (total) . . . . . . . . . . . . . . . . .

C. Appalachian . . . . . . . . . . . . . . . . . . . .

S. Appalachian. . . . . . . . . . . . . . . . . . . . .

North Dakota (total). . . . . . . . . . . . . . . . . . .

N. Western . . . . . . . . . . . . . . . . . . . . . . . .

C. Western . . . . . . . . . . . . . . . . . . . . . . . .

0 0 0 0 0

3.6 6.2 5.6 12 14

3.4 5.8 5.1 12 14

0.13 0.30 0.40 ––

—— —— 0.10 0.10

0.10 0.10 0.10 0.03 0.03

0 0 0 0 0

25 29 26 26 30

—— 5.8 8.2 7.6 13

25 23 18 17 17

0.06 –– —— 1.8 ——

5.4 11 14 16 17

5.4 9.7 13 15 16

—— 1.2 1.1 1.1 1.0

3.8 4.9 6.1 10 13

3.8 4.9 6.1 10 13

25 27 29 35 41

—— 1.6 6,0 17 27

25 25 23 18 14

7.4 7.4 7.3 7.3 7.3

7.4 7.4 7.3 7.3 7.3

5.2 5.2 5.2 5.2 5.2

5.2 5.2 5.2 5.2 5.2

6.5 7.4 9.8 7.5 3.9

6.5 7.4 9.8 7.5 3.9

0.10 0.60 0.04 0.50 0.30

0.10 0.60 0.04 0.50 0.30

1.5 1.3 1.0 1.0 2.5

0.52 0.32 –– —— 1.5

1.0 1.0 1.0 1.0 1.0

7.3 8.1 9.3 12 10

—— —— —— —— 2.4

7.3 8.1 9.3 12 7.9

3.8 3.5 8.8 8.8 11

1.9 1.8 7.2 7.6 8.3

1.9 1.7 1.6 1.2 2.6

18 18 15 15 16

18 18 15 15 16

0.31 –– 0.10 0.01 0.07

0.29 0.77 3.9 6.6 12

0.26 0.76 3.9 6.6 12

0.03 0.01 0.01 0.01 0.02
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 4 5

Table 7. Projected Utility Coal Distribution From Region of Origin to State of End Use—Continued

(Millions of tons per year)

Year

State 1980 1985 1990 1995 2000

Ohio (total). . . . . . . . . . . . . . . . . . . . . . . . . . 45 48 43 48 48

N. Appalachian . . . . . . . . . . . . . . . . . . . . 43 47 42 47 47

C. Western . . . . . . . . . . . . . . . . . . . . . . . . 1.6 1.3 1.1 1.1 0.92

Oklahoma (total) . . . . . . . . . . . . . . . . . . . . . 0.02 9.2 14 17 25

I. Western . . . . . . . . . . . . . . . . . . . . . . . . . —— 9.2 14 17 25

C. Western . . . . . . . . . . . . . . . . . . . . . . . . 0.02 –– —— —— ——

Oregon (total). ...... . . . . . . . . . . . . . . . . 1.5 3.1 0.06 5.1 1.0

N. Western . . . . . . . . . . . . . . . . . . . . . . . . —— —— — 0.9 1.0

C. Western . . . . . . . . . . . . . . . . . . . . . . . . 1.5 3.1 0.06 4.2 —

Pennsylvania (total). . . . . . . . . . . . . . . . . . . 37 36 55 59 67

N. Appalachian . . . . . . . . . . . . . . . . . . . . 33 32 50 57 67

C. Appalachian . . . . . . . . . . . . . . . . . . . . 4.0 3.6 4.9 1.9 ——

Rhode island (total). .., . . . . . . . . . . . . . . . 0 0 0 0 0

South Carolina (total) . . . . . . . . . . . . . . . . . 1.9 2.0 1.7 1.2 1.2

S. Appalachian. . . . . . . . . . . . . . . . . . . . . 1.9 2.0 1.7 1.2 1.2

South Dakota (total) . . . . . . . . . . . . . . . . . . 1.4 2.1 2.2 2.4 2.7

N. Western . . . . . . . . . . . . . . . . . . . . . . . . 1.4 1.4 1.4

C. Western . . . . . . . . . . . . . . . . . . . . . . . . ——

——

0.70 0.80 1.0 2.7

Tennessee (total). . . . . . . . . . . . . . . . . . . . . 19 8.8 7.0 2.8 0.96

S. Appalachian . . . . . . . . . . . . . . . . . . . . . 19 8.8 7.0 2.8 0.96

Texas (total) . . . . . . . . . . . . . . . . . . . . . . . . . 15 48 84 112 141

S. Appalachian. . . . . . . . . . . . . . . . . . . . . —— 1.5 1.1 1.0 ——

C. Western . . . . . . . . . . . . . . . . . . . . . . . . 1.3 35 72 93 125

S. Western . . . . . . . . . . . . . . . . . . . . . . . . —— — —— 0.20 0.20

Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 12 12 18 16

Utah (total) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 4.0 2.0 8.0 18

C. Western. . . . . . . . . . . . . . . . . . . . . . . . 3.2 4.0 2.0 8.0 18

Vermont (total). . . . . . . . . . . . . . . . . . . . . . . o 0 0 0 0

Virginia (total) . . . . . . . . . . . . . . . . . . . . . . . 6.2 3.4 5.2 5.3 9.2

C. Applalachian . . . . . . . . . . . . . . . . . . . . 3.4 1.5 4.4 4.5 8.9

S. Applachian. . . . . . . . . . . . . . . . . . . . . . 2.8 1.90 0.80 0.80 0.30

Washington (total). . . . . . . . . . . . . . . . . . . . 2.9 2.9 2.9 2.9 2.9

N. Western . . . . . . . . . . . . . . . . . . . . . . . . 2.9 2.9 2.9 2.9 2.9

West Virginia (total) . . . . . . . . . . . . . . . . . . 24 23 30 44 52

N. Appalachian . . . . . . . . . . . . . . . . . . . . 1.2 1.1 0.97 0.54

C. Appalachian . . . . . . . . . . . . . . . . . . . . 23

——

22 29 43 52

Wisconsin (total). . . . . . . . . . . . . . . . . . . . . 12 13 9.2 10 6.5

I. Eastern . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 9.3 5.9 6.9 3.5

N. Western. . . . . . . . . . . . . . . . . . . . . . . . 4,4 3.9 3.3 3.3 3.0

Wyoming (total). . . . . . . . . . . . . . . . . . . . . . 4.4 10 12 9.8 12

C .Western . . . . . . . . . . . . . . . . . . . . . . . . 4.4 10 12 9.8 12 –

Source: Data from Teknekron, Inc.

NOTE: These projections are intended to illustrate a plausible overall national pattern and do not represent predictions

that the coal volumes will be transported between the listed origins and destinations.
46 ● Coal Slurry Pipelines

Figure 5–Year 1980 Potential Utility Coal Movements of More Than

5 Million Tons per Year over Distances Greater Than 200 Miles

(Millions of Tons per Year)*

40 NORTHERN

1

. . . ,

ESTERN

● Volumes are cumulative

on colinear movements

Source Teknekron Inc

TEXAS

Figure 6–Year 1965 Potential Utility Coal Movements of More Than

5 Million Tons per Year over Distances Greater Than 200 Miles

(Millions of Tons per Year)*

.

CENTRAL WESTERN .

“Volumes are cumulative

on colinear movements

Source Teknekron Inc
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 4 7

Figure 7–Year 1990 Potential Utility Coal Movements of More Than

5 Million Tons per Year over Distances Greater Than 200 Miles

(Millions of Tons per Year)*

NOR N

(NW)

CENTRAL WESTERN

. (cw)

SOUTHWESTERN \ SOUTHERN

(SW)

“Volumes are cumulative

on colinear movements

Source Teknekron Inc

Figure 8– Year 1995 Potential Utilitv Coal Movements of More Than

5 Million Tons per Year over Distances Greater Than 200 Miles

(Millions of Tons per Year)*

NORTHWESTERN

(NW)

CENTRAL WESTERN 17

(CW)

SOUTHWESTERN \ . / SOUTHERN

(SW)

“Volumes are cumulative

on colinear movements

Source Teknekron Inc
48 Ž Coal Slurry Pipelines

Figure 9–Year 2000 Potential Utility Coal Movements of More Than

5 Million Tons per Year over Distances Greater Than 200 Miles

(Millions of Tons per Year)*

NORT

“Volumes are cumulative

on colinear movements

Surce Teknekron Inc

COST COMPARISONS AND

TRAFFIC ASSUMPTIONS

Comparison of the economic and environmental features of a world with slurry pipelines

to another without them requires the establishment of plausible scenarios describing the

nature of the transportation system in each

case. The critical characteristics to b e

specified for each mode are cost and extent of

operations. The world without pipelines involves a rail system which, with other present

modes, would meet the hypothetical demand

for utility coal transportation outlined in the

last section. Under the other scenario, one envisions a hybrid rail and pipeline system which

would carry projected traffic by the cheaper

mode from the shipper’s standpoint.

The second scenario is necessarily highly

conjectural, depending not only on th e

simplified projections of the coal transportation market, but also on crude cost estimates

and uncertain predictions of the behavior of

transportation firms, their customers, and

government regulatory bodies. However, the

purpose of this section is to derive a plausible

if arbitrary set of market share and cos t

assumptions that are sufficiently favorable to

pipelines to provide a basis for comparison

with a “no pipeline” alternative.

costs

Four hypothetical case studies, described in

Volume 11, provide the focus for both the cost

and environmental analyses of the assessment.

Four coal flows from among those identified in
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 4 9

the last section were chosen and arbitrarily

assigned specific States of origin as follows:

1.

2.

3.

4.

Central Western coal from Wyoming to

Texas,

Northwestern coal from Montana t o

Minnesota and Wisconsin,

Central Western coal from Utah t o

California.

Souther n AppaIachia n coal fro m

Tennessee to Florida

These four origin and destination pairs exhibit

differences in a) region of the country, b) condition and circuity of the rail system, c) type of

terrain, d) access to water, e) type and concentration of mining activity, and f) volumes of

coal to be transported.

The costs considered here are incremental

ones from the viewpoint of a railroad o r

pipeline enterprise, and they therefore represent the rates that a firm providing th e

transportation would have to charge its shippers in order not to lose money on the traffic in

question They do not necessarily represent the

rates that wouId be charged in the current

regulatory environment, and they includ e

neither profit beyond a minimum cost o f

capital for direct investment nor any contribution to the fixed costs of a larger railroad or

pipeline system. The estimates presented also

provide for no change in technology or productivity with time for either mode, and they

reflect present, and therefore not necessariIy

ideal, conditions in the railroad industry. Finally, the costs derived for specific individual

movements from engineering considerations

as discussed below should not be confused

with overall system costs, which includ e

economies of scale and are covered in a later

section on economic impacts.

Pipeline Estimating Procedure

To be comparable with rail costs, pipeline

estimates here include the entire process of

transporting coal from individual mines to

powerplants, including collection and distribution by branch feeder Iines, Requirements imposed upon a given pipeline by the nature of

the application can be expressed in terms of

the following factors:

1 .

2.

3.

4.

5.

6.

7.

8.

Distance the coal must be carried.

Volume of coal to be carried,

Moisture content of the coal.

Difference between elevations of termini.

Terrain characteristics.

Distance to and elevation of the water

Supply.

Size and spacing of mines.

Size and spacing of powerplants.

engineering design considerations, industrial

experience, and data from equipmen t

manufacturers form the basis for identifying

and quantifying individua l resource requirements as follows:

Initial construction :

1, Slurr y preparatio n and dewaterin g

equipment and faciIities .

2. Pump stations, including pumps and lined

ponds .

3. Steel pipe, including freight,

4. Right-of-way and pipe laying.

5. Engineering, supervision, inspection, an d

contingency .

Continuing Operation :

1. Direct Labor.

2. Power.

3. Maintenance, materials, and supplies.

4. Water .

5. Administration .

Cost estimates are derived by applyin g

prices to the above elements, providing for infIation in the continuing operating costs, amortizing the required initial investment, and

postulating a tax rate. The details of th e

methodology and the values used in the

analysis are set forth in detail in Volume II,

and figures 10 through 14 illustrate how the

cost elements that are not site-dependent are

related to the volume of coal to be carried, the

distance to be covered, and the require d

number of pumping stations. One should note

in interpreting the cost relationships, that the

pump stations are assumed to operate against

a given pressure difference of 1,000 pounds per
50 ● Coal Slurry Pipelines

square inch. Fewer stations are therefore required as the diameter of the pipe increases.

These costs have been adjusted in the case

studies to account for acquisition of water and

for nonideal construction conditions based on

the particular characteristics of a pipeline application. Areas of particular uncertainty include future construction costs and the appropriate price for water.

Rail Estimating Procedure

Although operating experience for railroads

is more extensive than for pipelines due to the

longer history of the industry and its more

established technologies, establishing the

marginal, or out-of-pocket costs for a given

element of hypothetical traffic is no more

.straightforward. The factors determining rail

costs for coal unit trains include the following:

1.

2.

3.

4.

5.

6.

Distance the coal must be carried.

Volume of the coal to be carried.

Unused capacity and condition of tracks

along the route.

Length and speed of trains.

Terrain and circuity of the route.

Administration.

The cost elements that do not depend on

site-specific conditions appear below:

1.

2.

3.

4.

5.

Acquisition of rolling stock —

$550,000 per locomotive

$30,000 per 100 net-ton hopper car

$43,000 per caboose

Track improvement —

$500,000 per mile of new track

$200,000 per mile of upgraded track

Train crews (including dead heading)

$550 per 100 train miles

Diesel fuel –

$0.35 per gallon

Operation and maintenance of rolling

stock —

$0.44 per mile per year per locomotive

$0.03 per mile per year per hopper car

$002 per mile per year per caboose

6. Track maintenance per mile per year—

$5,300 plus $342 per million tons of traffic

7. Administration —

$0.30 per thousand ton-miles

Acquisition and operating costs of loading

and unloading faciIities depend on sitespecific conditions as do the amount of fuel

and track upgrading required. The amount of

track investment required for a particular traffic element is particularly uncertain, as is the

degree to which other traffic should properly

be charged for some of the cost of a given improvement. Also, railroad ownership of rolling

stock has been assumed. If customers owned

the hopper cars, they would pay a reduced

transportation rate and would have to finance

the acquisition and maintenance of the cars.

Utilities often find this arrangement advantageous. Initial investment financing, inflation,

and taxes are all treated in the same fashion as

for pipelines, and the details of the

methodology are also described more fulIy in

Volume II.

Figure 10–Slurry Facility First Costs

(Including an 18 percent provision for

engineering, inspection, and contingencies)

110

100

Dewatering Facility

50 -

20

10

5

Slurry Preparation

-o 5 10 15 20 25 30 35

Million Tons Per Year, Dry Coal

Source General Research Corp
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 5 1

Figure 11– Pipeline First Costs

(Including an 18 percent provision for

engineering, inspection, and contingencies)

Pipe Steel Only

Excavation, Welding,

Installation, and Backfill

(Ideal Terrain)

Coating, Wrapping, Valves,

and Right of Way

I I I I I I I

o 5 10 15 20 25 30 35

Million Tons Per Year, Dry Coal

Source General Research Corp

Figure 13–Annual Operation and Maintenance

Costs, Slurry Dewatering Facility

9

Flocculants

8

—

7 —

6 —

5 ‘

4 —

3 —

2 —

General Administration 1 —

o I I I I I I

o 5 10 15 20 25 30 35

Million Tons Per Year, Dry Coal

Figure 12–Annual Operation and Maintenance

Costs, Slurry Preparation Facility

(Excluding water)

7 –

6 –

5 –

4

3 “

2

Power (based on rate

of $0.026 per kW hr.)

Maintenance Materials

1

and Supplies

o

o 5 10 15 20 25 30 35

Million Tons Per Year, Dry Coal

Source General Research Corp.

Figure 14–Annual Operation and Maintenance

Costs per Pumping Station

4

3

2

1

0

Power (based on rate

of $0.026 per kW hr.)

Maintenance Materials

General

0 5 10 15 20 25 30 35

Million Tons Per Year, Dry Coal

Source General Research Corp Source General Research Corp
52 . Coal Slurry Pipelines

Selected Case Results and Discussion

Table 8 illustrate s the comparativ e

characteristics and costs of four specific coal

flows by rail and pipeline. Pipeline transportation appears more economical in the Wyoming

to Texas and Tennessee to Florida cases, and

rail is less costly for both Montana to Minnesota and Wisconsin, and for Utah to California.

The Wyoming to Texas case illustrates the

advantages of carrying a large volume of coal

in a single pipeline over a great distance. The

pipeline would be over 1,000 miles long and

carry 35 milIion tons per year over most of its

length. To achieve this scale requires that eight

powerplants in two regions of Texas be served

by the same pipeline, and the fact that only

four mines near Gillette, Wyo., could produce

the require d volume contributes to th e

economy of operation.

Between Montana and the destinations in

Minnesota and Wisconsin, the rail route is

direct and in good physical condition. Train

lengths of 105 cars and average speeds of 22

miles per hour, including stops for loading and

unloading, also play a role in the rail cost advantage in this case, as does the railroad’s flexibility to serve economicalIy a relatively larger

number of mines and powerplants for a given

volume of coal.

The Utah to California case represents the

least annual volume, the shortest distance, and

the smallest mines served. It also represents

the most difficult terrain for both pipeline construction and rail operation, and the ad -

vantage of trains is offset partially by their

roughly 30-percent greater route circuity and

the need to replace 25 percent of the present

raiI.

The only case east of the Mississippi, from

Tennessee to Florida, illustrates that even

though several mines and powerplants would

have to be served and the rail route is not particularly circuitous, pipelines may be ad -

vantageous if raiI operating conditions are

significantly less than ideal. On this route,

which is not necessarily typical of coalproducing areas, 35 percent of the track would

have to be replaced or upgraded, and trains

would be substantially shorter and slower than

i n the other cases.

Other factors not mentioned above which

influence the relative costs of unit trains and

slurry pipeIines include the expected rate of inflation in labor and operating costs of electricity and diesel fuel, and the cost of water delivered at the pipeline source. To oversimplify

somewhat, the cost of unit train transportation

of coal is roughly one-third amortization of investment in faciIities and equipment and twothirds operating expense, including labor. Pipeline costs, on the other hand represent nearly

two-thirds initial investment and just over onethird continuing operation. Therefore, high

rates of anticipated inflation favor pipelines

over rail, while high real interest rates and

labor productivity improvements have the opposite effect. The cost figures derived here are

based on a 6-percent annual rate of inflation

and a 61A-percent real interest rate, which added together, amount to a nominal discount

rate of 1 21/2 percent.

Energy resource costs also influence the

relative advantages of each mode. If one considers the fuel required to generate electricity,

raiIroads and pipelines use roughly comparable amounts of energy directly to provide

power for equipment. However at $0.35 per

gal Ion, diesel fuel represents typically about

one-eighth of the cost of operating a coal unit

train, while electricity at $0.026 per kilowatt

hour amounts to approximately one-fifth of

the cost of carrying the same coal by an

equivalent-sized pipeline. Since the energy

portion of the cost is substantial, increases in

the cost of diesel fuel relative to that of electricity will improve the competitive position of

pipelines, at least untiI electrification becomes

advantageous to the raiIroads.

High water costs, on the other hand, can

substantially weaken the competitive position

of pipelines. Carrying 18 million tons of coal

from Gillette, Wyo., to Dallas, Tex., for example, would require 8,554 acre-feet of water per

year. If this amount were purchased for $20
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 5 3

Table 8. Sample Hypothetical Case Results

Characteristics

General

Volume (millions of tons

per year) ., . . . . . . .

Origin Vicinity .

Destination vicinit y

Number of mines ., ., .

Number of powerplants . . . . . .

Pipeline

Trunkline lengt h

Average distance from mine

to trunkline .

Percentage moisture of coal

by weigh t

Water requirement in acrefeet per year .

Water source .

Length of water Iine

Total cost of water delivered

per acre-foot .

Number of pump station s

Outside pipe diamete r

Present worth of 30-year

Iife cycle cost ( 1977 dollars)

Annual cost per ton (1977

dollars at a 6.5-percent

real cost of money) .

Simulated rate per ton (1977

dollars with a 12.5-percent

nominal return on Investment)

Wyoming to

Texas

35

Gillette

Dallas

(18 million tons)

Houston

(17 million tons)

4

5 (Dallas)

3 (Houston)

Gillette-Dallas,

936 miles

Dallas-Houston,

234 miles

12,5 miIes

21 percent

16,640

Big Horn River

205 miles

$922

Gillette-Dallas 4

Dallas-Houston 3

Gillette-Dallas 42”

Montana to

Minnesota & Utah to

Wisconsin California

13.5

Colstrip

Becker, M inn.

(10 million tons)

Portage, Wise.

(3.5 million tons)

3

3 (Becker)

2 (Portage)

Colstrlp-Becker,

661 miles

Becker-Portage,

260 miles

10 miles

17 percent

7,250

Big Horn River

80 miles

$513

Colstrip-Becker 8

Becker-Portage 8

Colstrip-Becker 27”

Dallas-Houston 29” Becker-Portage 14”

$2,502 million $1,156 million

$5.50 $6.60

To Dallas $5.90 To Becker $6.00

To Houston $6,50 To Portage $10.80

10

Price

Barstow

7

3

522 miles

12.4 miles

6.6 percent

6,961

Green River

42 miles

$469

7

24”

$996 million

$7.60

$9.90

Tennessee

to Florida

16

Tracy City

Tampa

(8 millions tons)

Miami

(8 million tons)

8

3 (Tampa)

4 (Miami)

Tracy City-Tampa

556 miles

Tampa-Miami

247 miles

20 miles (Tampa)

22 miles (Miami)

4.8 percent

11,580

Lake Nickajack

20 miles

$184

Tracy City-Tampa 6

Tampa-Miami 4

Tracy City-Tampa 31”

Tampa-Miami 22”

$1,626 million

$7.80

To Tampa $7.30

To Miami $9,70
54 ● Coal Slurry Pipelines

Table 8. Sample Hypothetical Case Results—Continued

Characteristics Wyoming to

Rail

Average route length . .

Number of cars per train . .

Average number of locomotives

per train . . . . . . . . . . . . . . . . . . .

Average round-trip speed

(including time loading and

unloading) . . . . .

Average Iocomotive miles per

gallon of fuel . . . . . . . . . . . .

Percentage of new track

required . .

Percentage of track to

be upgraded . . . . .

Investment in loading and

unloading facilities. . . . .

Annual operation of loading and

unloading facilities. . .

Present worth of 30-year life

cycle cost (1977 dollars).

Annual cost per ton

(1977 dollars at a 6.5-percent

real cost of money) . . .

Simulated rate per ton

(1977 dollars with a 12.5-

percent nominal return on

investment) . . .

Texas

Gillette-Dallas,

1,264 miles

Gillette-Houston,

1,584 miles

105

6

22 mph

0.4

Gillette-Dallas,

5 percent

Gillette-Houston,

O percent

Gillette-Dallas

30 percent

Gillette-Houston

20 percent

$174 million

$14 million

$3,939 million

$8.60

To Dallas, $8.70

To Houston, $9.10

Montana to

Minnesota & Utah to Tennessee

Wisconsin California to Florida

Colstrip-Becker, 684 miles Tracy City-Tampa

757 miles 776 miles

Colstrip-Portage, Tracy City-M i am i

1,055 miles 938 miles

105

Colstrip-Becker,

4.27

Colstrip-Portage,

4.19

22 mph

0.29

0 percent

5 percent

$88 million

$7.0 million

$1,059 million

$6.00

100

6.2

14.2mph

0.38

25 percent

60

3.9

13mph

0.33

5 percent

10 percent 30 percent

$64 million $150 million

$5.3 million $9.3 million

$893 million $1,930 million

$6.80 $9.20

To Becker, $5.40 $7.30 To Tampa, $9.00

To Portage, $8.40 To Miami, $10.50

—

Note: The ranges of uncertainty associated with these specific rail and pipeline cost estimates may be as large as the differences between

them. For underlying simplifications and assumptions, see text at the end of this chapter. Also, the coal tonnages are for illustrative purposes

only and do not represent predictions that the coal volumes will be transported by pipeline or any other mode between the listed origins and

destinations.

Source. Data from General Research Corp.
Ch. IV Coa/ Slurry Pipeline and Unit Train Systems . 55

per acre-foot at Big Horn River and transported by pipe to Gillette, the total cost would

be $922 per acre-foot, or $0.47 per ton of coal

shipped. Of the totaI amount of water used,

about 4,905 acre-feet couId be extracted and

recycled by return pipeline, raising the total

water cost to $1 75 per ton of coal, Increases

of this magnitude, whether due to economic

competition for Iimited supplies of western

water or to institutional requirements that

water be recycled or obtained from distant or

costly sources, will diminish the amount of

coaI traffic for which pipelines can compete

effectively

The following list IS a recapitulation of the

principal factors infIuencing the relative costs

of unit trains and slurry pipelines for coal

transportation

1.

2

‘.3

4

5

6

7

8

9

‘10

11.

Annual volume of coal

Distance to be traversed

Expec-ted rate of infIation

Real interest rate

Size and spacing of mines,

Presence of generaI large customers to

receive coaI

Terra in and excavation difficulty

Water availability and cost

Relative costs of diesel fuel and

electricity.

RaiIroad track circuity and condition

Length and speed of trains.

The principal lessons from the foregoing

analysis are that a) Slurry pipelines are more

economical than unit trains some specific

types of individual movements, and b) the

comparative costs of the two modes do not

lend themselves to easy generalization based

on simple criteria The latter observation is illustrated by figure 15, which shows ranges of

rail and pipeline costs for a given volume o f

coal as they vary typicalIy with distance. The

precise cost within the range is determined by

the several factors other than volume and

distance discussed above Note that the cost

ranges overlap between distances A and B, and

that one can onIy concude with confidence

that rail will be least costly at distances less

than A, and that a pipeline will be more

economical at distances greater than B.

Figure 15– Form of Typical Rail and Pipeline

Cost Ranges for a Given Annual Tonnage

cos t

A Distance B

Source Office of Technology Assessment

Some generalization is required to compare

the case resuIts with previous studies Figure

16 iIIustrates the resuIts of an assortment of

other coal SIurry pipeline cost calcuIations,

and figure 17 shows the resuIts of two other

coaI unit train studies for comparison. In interpreting the latter, one Should note that

reguIated tariffs are not aIways the same as

costs, and that individual tariffs vary

significantly from the vaIues represented by

the ICF regression Iines

The results of the case analyses developed

here appear in figure 18 Although the differences between any two sets of cos t

estimates are due in part to dissimilar underlying assumptions and procedures, the results of

the studies taken together serve as additlonal

evidence of the wide range of unncertainty

associated with global generalizations about

the relative costs of slurry pipelines and unit

trains in specific applications.

Traffic Assumptions

Painting a plausible scenario for the purpose

of evaluating the global economic effects, as

opposed to the locaIized costs, of the development of a coaI sIurry pipeline industry required

Ignoring one of the Iessons of the cost analysis
56 . Coal Slurry Pipelines

Figure 16– Results of Previous Coal Slurry Pipeline Cost Studies

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(lo)

(11)

ETSI (Bechtel) 1975

Bureau of Mines (75 % debt, 25 % equity) 1975

/

(11)

Soo and Ballard 1975

Shell Oil (undated) ● (7)

Soo and Ballard 1975

(9) 15 MMTPY ●

(11)

Bureau of Mines (lOOO/. equity) 1975 / /

(10) 10 MMTPY

Shaded areas represent ranges

All volumes are 25 million tons

per year (MMTPY) unless

otherwise noted

(

2

0

— Illustration by Off Ice of Technology Assessment from the following sources

Oata for (1)-(9) from Alec Sargent Western Coa/ Trarmportat/on, Urut Trams or S/urry P/pehres, 1976

Data for (10) from Wasp et al So/Id-LKWId F/ow S/urry F’/pe/me Transpodaf/err, Trans Tech 1977

Data for (11 ) from Rleber and Soo Cornparatwe Coal Transportation Costs An Econornm and Engmeermg

Ana/ys/s of Truck Be/t, Ra//, Barge, and Coa/ S/urry and Pr?eumat/c P;pe/me, August 1977

I I I 1 I I 1

0 200 400 600 800 1000 1200 1400 1600 1800

Distance (Miles)

and attempting to deduce, by some general

criteria, which of the coal flows identified

earlier in table 7 might be carried by pipeline.

To accomplish this purpose, with as little

violence to the conclusions of the cost analysis

as possible, assumed distances and coa l

volumes were varied artificially and calculations repeated to determine those combinations of values for which rail and pipeline costs

are equal under the conditions governing each

of the four cases. For simplicity, the computation included only a single destination region

for each movement, and the resulting “indifference curves” appear in figure 19.

For each set of conditions, traffic volumes

and distances above and to the right of the

curve would be carried more economically by

pipeline, while rail would be more ad -

vantageous otherwise. The conditions most advantageous to rail are therefore represented by

the characteristics of the Montana to Becker,

Minn., corridor, while those features most

favorable to pipelines exist between Tennessee

and Tampa, Fla., provided that one does not

consider volume and distance.

The flows of coal from producing regions to

consuming States in the transportation demand scenario could be compared to the indifference curves and assigned to pipeline s

whenever the combinations of distance and
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 5 7

Figure 17– Results of Previous Coal Unit Train Cost Studies

14

0 200 400 600 800 1000 1200 1400 1600 1800

Shaded area labeled Riber & Soo represents data developed

I n a study for the Federal Energy Administration and B urea u

of Mines Source Rieber & Soo, Comparative Coal Transport(on

Costs An Economic and Engineering Analysis of Truck Be/t

Rail Barge and Coal Slurry and Pneumatic Pipelines. August 1977

Illustration by Office of Technology IAssessment

Route Distance (Miles I (No Circuity}

sustained volume felI in the region favorable

to pipelines under all four sets ‘of case condition, and barge transportation was not an obvious competitor. Only Central Western coal

destined for Indiana and Texas falls in this

category. Five other flows fall in a region of

uncertainty between the two extreme indifference curves: Central Western to Missouri,

Kansas, and IIlinois; Interior Eastern to

Georgia; and Southern Appalachian to Florida.

Of these, the Florida traffic was assigned to

pipeline because of the results of examining

that specific case, Missouri and Kansas traffic

was assigned to pipeline because of similarity

to the Texas case and the possibility of sharing

a common pipeline, IIlinois was assumed to be

served by raiI because of the simiIarity of conditions to the Montana to Minnesota an d

Wisconsin case, and finally, the Georgia coal

was considered unlikely to justify pipeline construction because of the terrain along the

route,

A highly speculative but plausible traffic

scenario derived in this necessarily somewhat

arbitrary manner is illustrated in table 9. All

other coal is assumed to travel by another

mode, probably rail or barge, These postulated

volumes are in no way intended as a projection

of pipeline market penetration. They only provide a starting point for an analysis of what

might happen if the equivalent of approx-
58 . Coal Slurry Pipelines

Figure 18– Results of Case Studies Comparing Coal Slurry Pipeline and Unit Train Costs

3.5

● RR17

●

RC35

10

PR designates simulated pipeline rate

PC designates pipeline cost

RR designates simulated railroad rate

RC designates railroad cost

Numbers represent millions of tons per year —

of coal traffic volume.

Source Office of Technology Assessment from data

supplied by General Research Corp

Rates for two destinations on the same route

are connected by a Iine.

o I I I I I I I I

o 200 400 600 800 1000 1200 1400 1600 1800

Distance (Miles) (No Clrcuity)

Figure 19– Rail Versus Pipeline Cost

Indifference Curves Based Upon

Site-Specific Case Study Conditions

Source General Research Corp

Table 9. Pipeline Traffic Scenario

(Millions of tons per year)

Origin Year

Destination 1985 1990 1995 2000

Central Western

Indiana. . . . . . . . 17 17 17 17

Kansas. . . . . . . . — — 19 19

Missouri. . . . . . . 14 14 14 14

Texas . . . . . . . . . 35 72 93 125

Southern Appalachian

Florida . . . . . . . . 16 16 16 32

Total . . . . . . 82 119 159 207

Note: This scenario has been developed for Illustrative purposes

and does not represent a prediction that the coal volumes will be

transported by pipeline or any other mode between the listed

origins and destinations.
Ch. IV Coal Slurry Pipeline and Unit Train Systems ● 5 9

imately eight pipelines averaging 25 milIion

tons per year were to be built between now

and the year 2000.

Deriving hypothetical transportation costs

for all of the listed coal flows required extending the results of the case studies, also on the

basis of general and not perfectly applicable

relationships. The assumed pipeline costs as

derived by regression from case estimates are

$272 per ton plus $0.028 per ton-mile for

surface-mined coal at the approximat e

distances and volumes contemplated Corresponding rail costs, also generalized from

the cases, are $0.82 per ton plus $0.064 per tonmile, including a route distance circuity factor

of 1.3, operating expenses, and investment in

rolIing stock and way and structures The

methods for extending costs for both modes

are elaborated in Volume I I.

A number of important simplifying assumptions underlie the scenario and should be

reviewed at this point to place it in perspective. Some weigh in favor of greater apparent

pipeline markets and some against.

Assumptions favorable to pipelines —

1.

2.

3

4

The demand scenario calls for a high rate

of growth in power consumption after

1985

The demand scenario ‘predicts that al l

coal of a given category will be purchased

by all powerplants in a State from a single

source. The result is a pattern of coal

flows fro m artificialIy concentrated

origins

The cost analysis assumes that mining

and power generation activity is concentrated in circumscribed locations.

pipelines are assumed to operate in a

stable environment at full capacity. No

cutover or startup costs beyond 3-year

construction financing has been con -

sidered.

5. No possible additional coal tonnag e

required by powerplants receiving slurry

coal due to water content has been accounted for.

6. No substantial increase in the present rate

of railroad labor productivity improvement has been allowed for.

Assumptions favorable to railroads –

I

2

3

4

5.

6.

The demand scenario calIs for a relatively

high proportion of nuclear powerplant

construction after 1985.

The possibility of serving more than one

State with a single pipeline has not been

considered in the market scenario, except

in the case of Kansas and Missouri, and it

is not reflected in the demand projections.

The possibility of serving industria l

customers or coal conversion facilities by

slurry pipelines has been ignored.

The possibility of distributing dewatered

coal slurry by barge is not contemplated

in the cost or market analyses.

The cost estimates give no credit for the

fact that cleaning and grinding coal is

more economical in conjunction wit h

slurry pipeline operation.

No significant future improvement i n

pipeline technology has been allowed for.

Additional uncertainties of undeterminable

influence involve principalIy railroad way and

structures, investment requirements, future

pipeline construction costs, and the appropriate prices to assign to water
V. Economic Impacts
V. Economic Impacts

INTRODUCTION

Objectives

The economic impact analysis section of

this report examines the effect that development of coal slurry pipelines could have upon

related areas of the economy. The most direct

effect wouId be upon the raiIroad industry, its

employees, suppliers, and customers. Many

segments of the raiIroad industry have encountered financial difficulties in recent

decades. The industry has tended to view the

current emphasis on coal to be the Nation’s

primary fuel as an opportunity to regain a

measure of financial stability, Coal’s physical

properties, the large quantities involved, and

the long transportation distances withou t

significant waterways for western coal favor

raiIroads against their traditional competitors — barge and truck transportation. However, the primary railroad beneficiaries of the

projected increase in coal transportation are

certain western railroads that have on the

average achieved better financial performance

than most of the industry. Railroad industry

employees will be directly affected by any

development that reduces the industry’s volume of business or forces it to modify its

methods of operation. The principal supplier

industries that would be affected are those

that manufacture locomotives, freight cars,

and track. Indirect effects would then be felt

in the industries supplying the suppliers, principalIy steel manufacturers.

The railroad customers most likely to switch

to pipeline are the large electric utilities that,

by themselves or with a few others, ca n

generate sufficient coal demand to achieve

pipeline economies of scale. Some othe r

shipments, including those of smalIer utilities,

farm products, stone and minerals, etc., will

tend to encounter higher costs if their shipping

charges must cover a larger fraction of the

rail road’s fixed costs as a result of a reduced

rail business volume and downward pressure

on some coal rates. Determination of th e

magnitude of the coal-related fixed cost was

one of the principal goals of this study because

its al location largely determines where the important economi c impacts fall –regionally

and by type of consumer— and the size of

these impacts.

A second set of economic impacts can be

grouped within the category of regional effects. Slurry pipelines consume large quantities of water, and, owing to the geographic

location of coal , most of the pipeline s

originate in somewhat arid regions. Othe r

water users in thes e regions, primaril y

agriculture, may be directly affected through

any future water scarcity, The environmental

implications of pipeline-related water shortages are discussed in chapter VI This chapter

examines the economic implications of potential water shortages, Such shortages could affect not only the agricultural sector, but other

sectors of regional economies as well, since

water availability is an important factor in the

location of some industrial activities. A second

aspect of regional development to be examined is the payment of State and local taxes.

Railroads have been a significant source of

revenues in some States, and it is therefore important to appraise the net effect upo n

regional tax revenues of shifting some coal

traffic from railroads to pipelines. A third

regional aspect is that the benefits of pipelines

may accrue to one area of the country, while

the costs are borne in another region. A simple

illustration of this possibility is as follows:

1, the projection of future coal movements

in chapter IV identified Texas as the

recipient of large volumes of coal;

63
64 ● Coal Slurry Pipelines

2.

3.

4.

5.

if pipelines are more economic for the

Texas coal shipments, the consuming

public in Texas could receive lower rates

for their electricity if pipelines ar e

employed;

the railroads tha t

shipments may need

their fixed costs onto

other major shippers

lose these coa l

to transfer some of

other shippers;

include those shipping grain and beef to the Midwest; thus

consumers in the Midwest (and East) may

have to pay somewhat higher prices for

food products.

It should be noted that this type of regional

tradeoff occurs i n nearly every regiona l

transfer, e.g., oil and natural gas pipelines going from Texas to other parts of the country,

This section attempts to quantify th e

magnitude of pipeline-related transfers.

The discussion thus far has focused upon the

generally adverse impacts pipeline development will have upon the railroads and related

industries. Pipelines are obviously a source of

economic stimuIus, and as such wilI generate

their own set of economic benefits. It was the

goal of this study to analyze the net economic

impact of pipeline development (benefit s

minus costs), and to indicate where, and to

what extent, each benefit and cost occurs. The

principal economic benefit offered by pipelines is that they may more cheaply transport

some large volume movements of coal from,

for example, origins in the sparsely populated

and Iightly industrialized West to centers of

population and industry in the Midwest, South,

and Far West. Our Nation’s fuel supply will be

increasingly composed of coal, and a significant reduction in the cost of transport would

therefore reduce the economic dislocations of

a forced switching from oil and gas to coal, In

addition, since pipelines are highly capital intensive, the investments associated with them

couId provide an important near-term economic stimulus to the economy in the form of

materials purchases and construction labor

employment in some localities.

The following discussion should be read

with an understandi ng of the uncertaint y

associated with projecting present economic

trends into the distant future. Major events

could substantially violate the assumptions on

which the analysis is based. One example

would be a change in the railroad regulatory

environment, resulting from the Rail Revitalization and Regulatory Reform Act or related

future legislation. Another example would be

any form of substantial public investment to

aid the railroad industry.

Another significan t uncertainty involves

economies of scale associated with the extent

of railroad service. Past experience is not a particularly useful guide for predicting railroad

capital and operating cost relationships if the

size of the industry is to be radically different

from what it has been in recent history, The

analysis presented here suggests that marginal

costs decline as service expands. If marginal

costs increase with expansion of coal unit train

operation, the impacts of coal slurry pipeline

development would probably be favorabl e

both to the railroad industry and to the shippers of commodities other than coal by rail.

Methodology

The primary focus of the study was the

rail road industry because, other than water

resources and their allocation, nearly all other

economic impacts have their origin within that

industry. The central question is: “If railroads

lose the revenues associated with a significant

number of large-volume coal movements, how

wilI they reallocate their fixed costs among the

remaining shippers?” In order to address this

question, it was necessary to project both

future revenues to the railroads from all commodities they transport, and the costs of

transport as a function of traffic volume. It is

not possible to evaluate the implications of

railroads losing a large fraction of their coal

revenues without knowing the nature of their

remaining business volume. Projections of

revenues were made for 10 major railroad shipment categories and for an all other category

over the 25-year period from 1975 to 2000.
Ch. V Economic Impacts Ž65

Likewise, cost projections were made for the

same period for three operating expenditure

categories, for capital investment in rolling

stock and way and structures, and for payroll,

State, and local taxes. All projections were

broken out into the three railroad regions (or

districts)–Eastern, Southern, and Western –

because the impacts of coal slurry pipeline s

are centered in the Western and Souther n

regions, even though the vast majority of

rail road coal transportation is current I y

located in the Eastern region.

The entire study was carried out in constant

1971 dollars. This is the base year for the inputoutput model employed to project national

railroad revenues by commodity category between 1975 and 2000. Though 1971 dolIars are

used, a number of adjustments have been

made to reflect real changes in the structure of

prices since 1971, such as changing real wage

rates and energy prices. As a result, though the

study is in 1971 dollars, percentage relationships between major variables are those expected to pertain in the future.

A no-pipeline baseline and two pipelinedevelopment scenarios were evaluated i n

order to assess the economi c i m pacts

associated with varying levels of marke t

penetration by the coal slurry pipelines. The

baseline, which served as a point of departure,

assumes that n o additional coal slurr y

pipelines will be built. The first pipeline

seen a riot

termed the Lost Rail Tonnag e

scenario, assumes that pipelines wilI take over

the coal-traffic Identified in table 9 of chapter

IV. The second scenario, termed the Competitive Rate scenario, postulates that not only

r-nay pipelines take over on certain routes, but

also that the competitive market pressure of

pipelines may force railroads to lower their

rates on a set of additional routes. The latter

scenario yields qualitatively similar results to

the former and is therefore presented i n

Volume I I

Five cost/price alternatives were evaluated

‘A 48 mlllton ton per Vear c o~l slurrv plpellne IS currentl y

op(>rat Ion,] I I n Arl ~on a, and ,] im,] I lt~r pI pel I no I i on ~t a nd b} In

Ohi o

for the baseline and the two pipeline scenarios.

These five alternatives reflect differen t

assumption s regardin g the ratesetting

behavior of railroads and the Interstate Commerce Commission (ICC) as well as the relative

fuel costs over the forecast periods. Alternative I assumes that the unit charges for

railroad service in each region and commodity

category wiII remain at their 1971 levels, and

that the cost structure will basically retain its

1971 form, with adjustments for labor real

wage and productivity changes. Alternative I I

seeks to embody the effect of recent increases

in the relative costs of fuel by introducing a

one-time approximate doubling of relative fuel

costs to simulate the effect of the 1973-74

energy crisis, and by increasing the relative

price of fuel 1.5 percent more rapidly than

general inflation for the years 1985 to 2000.

Alternative III retains the fuel adjustment on

the cost side, and assumes that rail revenues

per ton-mile will continue to be reduced at

their historic rate as a result of railroads passing forward productivity gains for competitive

reasons. Alternative IV also retains the fuel

cost adjustment, but assumes that revenues

wilI bear a constant relationship to operating

expenditures, determined by setting th e

operating expenditures-to-revenue ratio at 0.8.

(A review of historical data indicated that the

operating ratio has held reasonably constant

near this value over the period 1969 -75.) Alternative V was developed only for the West. It

retains the fuel cost adjustment, and changes

revenues to satisfy the “Minimum Necessary

Net Income” (MNNI) for railroad solvency and

investment requirements.

The methodology employed is explained in

detail in Volume I I of this report. Briefly, pro -

jections for national rail revenues were obtained

by aggregating into 10 major categories and

an “all other” group the more detailed output

and transport by modal share forecasts from

an input-output based transportation model.

Regional shares of rail revenues from each

commodity were projected by using equations

obtained by regression analysis of historical

data. The coal revenue forecasts were made

separately in view of their importance to this
66 ● Coal Slurry Pipelines

study. (For coal, the latest Department of

Energy (DOE) forecasts of coal production

were allocated to the railroad regions, the

railroad shares of coal transport in each region

were projected on the basis of historical trends

and regional analyses, and the associated

revenues were projected taking into account

the ongoing shift to the more economic unit

train coal shipments. ) Operating cost expenditures in each region were projected for three

expenditure categories by identifying, through

regression analyses, the dependence of costs

upon key operating variables, including miles

operated, ton-miles, tons-per-car, and freight

car miIes. Investment requirements were projected by translating the commodity shipment

projections into rolling stock and way and

structures capital requirements, taking into account the productivity improvements now being made through substantial increases in tonsper-car loadings.

The five cost/price alternatives adapt the

railroad revenue and cost projections t o

reflect different cost and pricing behavior by

the railroads. The direct economic impact of

coal slurry pipelines upon the railroad industry

was established by determining, for each alternative, the differences in the railroad revenue

and cost variables between the no-pipeline

baseline and the two pipeline scenarios. The

impact upon railroad employment was determined by translating the reduction i n

operating cost expenditures into equivalent

hours of employment. The impact upon supplier industries was evaluated by determining

the reductions in capital stock requirements

associated with loss of the coal traffic. The impact upon payroll, State, and local taxes was

determined by calculating the reduction in

wages and in the tax base. Potential savings

were determined by assessing the residual

costs that would have been covered by coal

revenues, and now must be allocated to other

shippers. The transportation savings resulting

from shippers switching to pipelines wer e

determined by calculating the differential in

the hypothetical costs established in the last

chapter between the two modes and multiplying them by the shipment volumes. Othe r

beneficial aspects of pipeline development

were estimated by determining the employment and economic stimuIus it could provide.

RAIL COST AND PRICE ALTERNATIVES

In order to assess the economic impact of

coal-slurry pipeline development upon railroads, other shippers, other industrial sectors,

and the public, it was necessary first to project

what the future wouId be Iike in the absence of

pipelines. Prediction of future railroad economic performance over the 25-year period in

this study is an ambitious undertaking in itself.

Nevertheless, since it is the difference in

economic performance with and without pipelines that must be evaluated, the projection of

a No-Pipelin e Baseline was an essentia l

analytic component of the present study. By

constructing the baseline scenario and two

pipeline scenarios within the same internally

consistent analytic framework, potential bias

associated with necessary analytic assumptions, such as assumed gross national product

(GNP) growth rate, should be minimized.

Two other caveats must be borne in mind

when reviewing the results of this study. First,

as stated previously, the study was conducted

using constant 1971 dolIars. Thus, the revenue

growth projections represent real growth ,

based upon estimated increases in product

output by the railroad sector, e.g., ton-miles of

commodities transported. Three alternative

case studies were conducted regarding

railroad pricing behavior. I n each, real rates

were maintained at their 1971 level or reduced.

However, reduction of real rates does not

mean that raiIroads wiII be able to reduce their

actual nominal or current dollar rates. The
Ch. V Economic Impacts • 67

rates charged wilI be the real rates adjusted for

the effect of inflation. The latter will probably

be sufficiently large to result in an overall increase in railroad rates, expressed in current

dollars. The second caveat is that analysis indicates that railroad economic performance

will benefit from increases in coal and other

commodity transportation revenues even in

the presence of pipelines. Thus, the railroad

revenue losses identified in the study as resulting from pipeline development are losse s

. relative to the No-Pipeline Baseline. In other

words, the raiIroads wilI not be able to achieve

as high a level of coal transportation-related

revenue gains if coal slurry pipelines ar e

developed, but the railroads will probabl y

nevertheless achieve a substantial revenue increase from overall traffic volume growth, In

arriving at these resuIts, this study assumes

that real GNP wiII increase at 2.90 percent per

year before 1985 and 2.95 percent from then

untiI 2000, and it projects that raiI revenue

traffic will expand SIightly more slowly than

GNP before 1985 and SIightly faster thereafter

Baseline revenue and cost projections for

railroads, presented in the appendix to this

volume, form the frame of reference for

assessing the impact on the railroads, their

shippers, and the consuming public of coal

slurry pipeline development Five variations in

the form of cost/price alternatives wer e

evaluated in order to test the sensitivity of impact results to the underlying financia l

assumptions.

Alternative l—Constant Rate and

Cost Structure

The study results presented in the appendix

constitute Alternative I, This alternativ e

postuIate s constan t cents- per-ton-miIe

revenues (in 1971 dolIars) over the forecast

period, and operating costs that embody productivity and real wage changes only for labor.

Projections for aggregate Class I railroad

revenues under these conditions for the years

1980 to 2000 are presented in table A-2. The

corresponding operating expenditure projections are presented in table A-4. (See appendix.) These revenue and expenditure projections are now shown together in table 10. Their

differences, defined as Net Railway Operating

Revenues (NET), are also identified in this

table. The Net Railway Operating Revenues

should not be considered a proxy for profits. I n

order to arrive at the Net Income for raiIroads,

as reported to the Interstate Commerce Commission, it is necessary to subtract additional

costs, such as taxes , interest payments,

dividends, amortization and other fixe d

charges, net hire of equipment, and net jointfaciIity rents.

The ratio of operating costs to revenues,

termed the operating ratio (OR), is frequently

employed as a n approximate measure o f

railroad financial performance. The operating

ratios calculated from the data in table 10 are

highest in the East, ranging from 0.69 in 1980

down to 0.56 in 2000, and lowest in the South,

ranging from 0.65 in 1980 to 0.53 in 2000. These

projected operating ratios are considerably

lower than historical values for railroads in this

class, which averaged 0.806 over the period

1969-75. That is also true for the regional

values, which over the 7-year historical period

averaged 0.822 in the East, 0.755 in the South,

and 0.783 in the West.

Several factors contribute to the low values

projected for the rail road operating ratios. The

revenue forecasts assumed that, except for

coal, real revenues per ton-mile for each commodity wiII remain constant at the 197 1

values .

2 In fact, historical data indicate that

real revenues per ton-mile have been declining

for railroads as operational economies are

achieved and passed on to the shippers, A second factor affecting the OR results is that

relative fuel prices have been held essentially

constant over the forecast period, whereas

they can be expected to increase faster than

general inflation.

3 A third factor affecting the

OR results is the selection of a logarithmic

‘ I n the case of coa 1, real revenue per ton-m I Ie decl Ines ai

s h I pm e nts s h I t t to the more cost ef f PC t I ~ e u n I t t ra I ns

‘The ~tudy IS done In constant 1971 dol Iari Thus, hold I ng

re I a t I vc f u e I p r I c ei ‘‘con $t a n t ena ble~ t ht~m to [nc rea~e at the

SCI m e rate a i gene r<] I I n t I at I on
68 . Coal Slurry Pipelines

Table 10. Comparative Railroad Revenue and Operating Costs Projections-Alternative i

(Billions of 1971 dollars)

1980 1985 1990 1995 2000

East

Revenues. . . . . . . . . . . . . . . . . . . . . . . . . 4.4 4.8 5.0 5.2 5.6

Operating costs . . . . . . . . . . . . . . . . . . . . 3.2 3.0 3.1 3.2 3.3

Net revenue . . . . . . . . . . . . . . . . . . . . . 1.2 1.8 1.9 2.0 2.3

South

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 3.8 4.5 5.8

Operating costs . . . . . . . . . . . . . . . . . . . . 1.9 2.1 2.5 3.0 3.6

Net revenue . . . . . . . . . . . . . . . . . . . . . 0.9 1.7 2.0 2.8 3.6

west

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 8.8 10.4 12.4 15.0

Operating costs . . . . . . . . . . . . . . . . . . . . 4.9 5.4 6.3 7.3 8.6

Net revenue . . . . . . . . . . . . . . . . . . . . . 2.2 3.4 4.1 5.1 6.4

U.S.A.b

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 14.4 17.3 19.9 23.4 27.8

Operating costs. . . . . . . . . . . . . . . . . . . . 10.1 10.5 11.9 13.5 15.5

Net revenue . . . . . . . . . . . . . . . . . . . . . 4.3 6.8 8.0 9.9 12.3

aNOttOta[cOStSoSee textfOrdefinitiOn- bTOta[SrnaynOtaddduetO rounding.

equation form to project operating expenditures. This functional form reflects achievement of constant economies of scale

throughout the forecast period.

ing rapidly to 2000, these ratios suggest that

the economies of scale enjoyed because of increasing traffic volumes, assumed productivity

gains, and constant cents-per-ton-mile

revenues outweigh the impact of fuel cost adjustment.

Alternative ll—Fuel Cost Adjustment

Alternative lll—Historical Rate Decline

The revenue projections for AIternative ll remain the same as for Alternative 1. However,

the operating expenditures were increased by

an upward adjustment of relative fuel costs at

a rate exceeding general inflation. The same

fuel cost adjustment was made of Alternatives

I I to V. This was the only change made to the

costing calculation for each of these alternatives. The comparison between railroa d

revenues and costs for Alternative I I i s

presented in table 11. Even with the increase in

fuel prices, the operating ratios in Alternative

11, that is, 0.68 to 0.72, are significantly lower in

1980 than those prevailing historically. DeclinThe fuel cost adjustment is retained for this

alternative and the revenues in each region are

reduced at their historical rates of decline. The

latter assumption reflects the apparent tendency of the rate structure to respond to productivity gains. Historically, the annual rates of

tariff decline in each region have been: East,

0.02 percent; South, 1.0 percent; and West,

1.55 percent. The revenues projected on this

basis, together with the fuel-adjusted costs, are

presented in table 12 for Class I railroads. The

revenue adjustment, combined with the fuel
Ch. V Economic Impacts ● 6 9

Table 11. Comparative Railroad Revenue and Operating Costa Projections—Alternative II

(Billions of 1971 dollars)

1980 1985 1990 1995 2000

East

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 4.8 5.0 5.2 5.6

Operating costs . . . . . . . . . . . . . . . . . . . . 3.4 3.1 3.2 3.4 3.5

Net revenue . . . . . . . . . . . . . . . . . . . . . 1.0 1.7 1.8 1.8 2.1

South

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 3.8 4.5 5,8 7.2

Operating costs . . . . . . . . . . . . . . . . . . . . 2.0 2.2 2.6 3.2 3.8

Net revenue . . . . . . . . . . . . . . . . . . . . . 0.8 1.6 1.9 2.6 3.4

West

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 8.8 10.4 12.4 15.0

Operating costs . . . . . . . . . . . . . . . . . . . . 5.2 5.6 6.6 7.7 9.0

Net revenue . . . . . . . . . . . . . . . . . . . . . 1.9 3.1 3.8 4.7 6.0

U.S.A. b

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 14.4 17.3 19.9 23.4 27.8

Operating costs.. . . . . . . . . . . . . . . . . . . 10.5 10.9 12.5 14.3 16.4

Net revenue . . . . . . . . . . . . . . . . . . . . . 3.9 6.4 7.4 9.1 11.4

aNot total costs. See text for definition. bTOtalSrnaYnOt add dueto rounding.

Table 12. Comparative Raiload Revenue and Operating Costa Projections—Alternative Ill

(Billions of 1971 dollars)

1980 1985 1990 1995 2000

East

Revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs. . . . . . . . . . . . . . . . . . . .

Net revenue . . . . . . . . . . . . . . . . . . . . .

South

Revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs. . . . . . . . . . . . . . . . . . . .

Net revenue . . . . . . . . . . . . . . . . . . . . .

west

Revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs. . . . . . . . . . . . . . . . . . . .

Net revenue . . . . . . . . . . . . . . . . . . . . .

U.S.A. b

Revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs. . . . . . . . . . . . . . . . . . . .

Net revenue . . . . . . . . . . . . . . . . . . . . .

4.2 4.5 4.7 4.9 5.3

3.4 3.1 3.2 3.4 3.5

0.8 1.4 1.5 1.5 1.8

2.5 3.2 3.7 4.5 5.4

2.0 2.2 2.6 3.2 3.8

0.5 1.0 1.1 1.3 1.6

6.1 7.0 7.7 8.6 9.8

5.2 5.6 6.6 7.7 9.0

0.9 1.4 1.1 0.9 0.8

12.8 14.6 16.1 18.0 20.4

10.5 10.9 12.5 14.3 16.4

2.3 3.7 3.6 3.7 4.0

aNottotalcosts. See text for definition. Wotalsrnay not add due to rounding.
70 . Coal Slurry Pipelines

cost adjustment , substantially raises the

operating ratios to between 0.76 and 0.82 in

1980, but they again decline below the historic

values in the outer years, implying that historic

rates of revenue decline are not financially

achievable for the remainder of the century.

Alternative IV—Constant

Operating Ratio

In Alternative IV, revenues are calculated

directly from the cost estimates by assuming

that the operating ratio remains constant at

0.8. The operating cost estimates, which embody the fuel cost adjustment, are the same as

for Alternatives II and II 1. These costs, the

revenues calculated from them, and their NET

are presented in table 13 for the Class I

raiIroads over the period 1980 to 2000.

Alternative IV is conservative and will result

in the lowest NET and railroad income projections among the first four alternatives except

in the West. It implies an even faster decline

nationally i n cents-per-ton-mile than has

prevailed historically. However regional differences emerge. The East and South can

decline faster than historical trends, but the

West will be unable to maintain its historic

rate of decline under this alternative.

Alternative V—Minimum Necessary

Net Income

By subtracting payroll, State, and local taxes

from the Net Railway Operating Revenues

identified in tables 10-13 for Alternatives I

through IV, a better approximation was obtained for the income remaining to railroads. The

resulting variable, termed Operating Income,

is a pre-Federal-tax version of the Net Railway

Operating Income reported to the ICC.

4 T h e

‘Federal taxes were not expl IC Itly estimated In this report

because of their complexities with regard to deferments, credits,

etc Federal taxes Imposed upon railroads appear to be approximately 25 percent at the margin, and to average somewhat less

Table 13. Comparative Railroad Revenue and Operating Costa Projections-Alternative IV

(Billions of 1971 dollars)

1980 1985 1990 1995 2000

East

Revenues. . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs . . . . . . . . . . . . . . . . . . . .

Net revenue. . . . . . . . . . . . . . . . . . . . .

South

Revenues. . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs. . . . . . . . . . . . . . . . . . . .

Net revenue. . . . . . . . . . . . . . . . . . . . .

West

Revenues. . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs. . . . . . . . . . . . . . . . . . . .

Net revenue. . . . . . . . . . . . . . . . . . . . .

U.S.A. b

Revenues. . . . . . . . . . . . . . . . . . . . . . . . .

Operating costs . . . . . . . . . . . . . . . . . . . .

Net revenue. . . . . . . . . . . . . . . . . . . . .

3.9 4.0 4.4

3.4 3.1 3.2 3.4 3.5

0.8 0.8 0.8 0.8 0.9

2.5 2.7 3.3 4.0 4.8

2.0 2.2 2.6 3.2 3.8

0.5 0.5 0.7 0.8 1.0

6.4 7.0 8.2 9.6 11.3

5.2 5.6 6.6 7.7 9.0

1.2 1.4 1.6 1.9 2.3

13.1 13.6 15.6 17.8 20.5

10.5 10.9 12.5 14.3 16.4

2.6 2.7 3.1 3.5 4.1

aNot total costs. See text for def inition. bTotals may not add due to rounding.
Ch. V Economic Impacts “ 71

actual railroad discretionary income, Net Income, is less than Operating Income by the

amount of Federal taxes, interest payments,

dividends, amortization charges, other fixed

charges, and other miscellaneous incom e

deductions. Nevertheless, Operating Income

values provide a useful first indication of the

conditions under which railroads will en -

counter a cash-flow problem, The Operating

Income results for Alternatives I through IV

are given in table 14 for the southern and western raiIroad regions, between 1980 and 2000.

The Operating Income results shown i n

table 14 indicate marked differences between

the four cost/price alternatives. The results

suggest that the most Iikely cost/price behavior

lies between the specified alternatives, which

fall into two groups. Alternatives I and II lead

to increasing prosperous railroad economic

performance over the forecast period, while

Alternatives I I I and IV lead to clearly unacceptable economic results. In Alternatives I and 11,

Operating Incomes (in constant 1971 dollars)

more than triple between 1980 and 2000 for

both southern and western railroads. The fuel

cost adjustment in Alternative I I slightl y

reduces the rate of Operating Income growth,

but the maintenance of constant real rates per

ton-mile in the face of the projected increases

in commodity ton-miIes provides an overwhelming upward thrust to revenues,

Viewed fro m another perspective, the

favorable Operating Income results for Alternatives I and I I suggest that railroads will be

able competitively to reduce their rates when

necessary As discussed previously, rate reductions (in constant dollars) have been th e

historical pattern. Alternative III w a s

evaluated to see whether these historica l

trends in rate reductions could be maintained.

Clearly they cannot be, at least in the West.

The western Operating Incomes decline sharply

after 1985 and actually become negative i n

2000. These results are based upon a continuation of the historical 1.55 percent annua l

decline in western rail tariffs. Thus, comparison of Alternatives I I and I I I indicates that

in the absence of pipeline competition western

rail tariffs (in constant dolIars) couId be reduced, but at a lesser rate than achieved historically. Alternative I I I also indicates that in

the absence of pipelines the historical 1.0 percent annual decline in southern rail tariffs

could be maintained

Alternative IV presents another view of the

potential for reduction of railroad tariffs in

response to the favorable Operating Income

results for Alternatives I and 11. Alternative IV

reduces tariffs in such a manner as to maintain

the operating ratio at 0.8. The Operating Income results for the South hold constant under

these conditions, but the values for western

railroads decline continuously throughout the

forecast period.

Since none of the first four cost/price alternatives seem to represent a Iikely behavior

mode for railroads, a fifth alternative was

evaluated. This alternativ e employed a

bottom-up approach. Instead of determining

the Operating Income results of a particular

rate-setting approach. as in Alternatives IIV, Alternative V determined a “Minimum

Necessary Net Income” (MNNI) that th e

railroads must obtain in order to fulfill the

minimal requisites of satisfactory financial

performance. That is, if railroads are to maintain their functional capability, they mus t

generate sufficien t capital t o financ e

necessary rolling stock and way and structures

investments.

Computation of the MNNI to satisfy solvency

and investment requirements is detailed in

table 15. The minimum pretax railroa d

operating income average for the perio d

1969-72, converted into 1971 dollars, wa s

employed as the Return-On-Capital BaseIine, 5

The 1969-72 period was chosen because it was

a time of reasonable, if not robust, health for

the railroad industry. Hence, that period furnishes a more realistic goal for railroad operations than the more difficult recent years. Funding for new capital stock must be added t o

‘The Rasel Ine IJ assumed to Inc I ude tund~ for Federa I taxes at

the ,~pproxlrnate average rate of the 1969-72 period, I e , 20 per

cent Fu nd~ tor net lea SI ng over and a bo~ e tho~e tor change~ I n

c a p I t a I ~t O( k are a I >0 c on ta I ned I n the R a ~e I I ne
72 . Coal Slurry Pipelines

Table 14. Operating Income Projections for Southern and Western Railroads-Alternatives I to IV

(Millions of 1971 dollars)

1980 1985 1990 1995 2000

Alternative I

South

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

$ 917 $1,652 $2,013 $2,746 $3,641

(183) (267) (256) (491) (669)

(57) (67) (88) (103)

Operating income. . . . . . . . . . . . . . . . 676 1,318 1,582 2,167 2,869

West

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

2,209 3,330 4,100 5,044 6,416

(477) (689) (895) (1,198) (1,588)

(192) (208) (225)

Operating income. . . . . . . . . . . . . . . . 1,540 2,433 2,981 3,600 4,555

Alternatively

South

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

Operating income. . . . . . . . . . . . . . . .

1,568 1,900 2,593 3,437

(183) (267) (356) (491) (669)

(57) (75) (88) (103)

598 1,234 1,469 2,014 2,665

west

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

1,998 3,147 3,814 4,665 5,92 8

(477) (689) (895) (1,198) (1,588)

(192) (208) (225) (246) (273)

Operating income. . . . . . . . . . . . . . . . 1,329 2,250 2,694 3,221 4,067

Alternative lll

South

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

522 997 1,047 1,313 1,586

(183) (267) (356) (491) (669)

(54) (61) (66) (75) (84)

Operating income. . . . . . . . . . . . . . . . 285 669 625 747 833

West

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

995 1,356 1,148 909 739

(477) (689) (895) (1,198) (1,588)

(181) (190) (198) (207) (219 )

Operating income. . . . . . . . . . . . . . . . 337 477 55 -496 -1,068

Alternatively

South

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

Operating income. . . . . . . . . . . . . . . .

495 547 657 790 952

(183) (267) (356) (491) (669)

(54) (57) (69) (78)

258 223 239 230 205

West

Net railway operating revenues. . . . . . .

Payroll taxes . . . . . . . . . . . . . . . . . . . . . .

State and local taxes. . . . . . . . . . . . . . . .

1,288 1,401 1,649 1,929 2,260

(477) (689) (895) (1,198) (1,588)

(184) (190) (203) (217) (235)

Operating income. . . . . . . . . . . . . . . . 627 522 551 514 437

Source: lR&T.
Ch. V Economic Impacts ● 7 3

Table 15. Minimum Necessary Net Income for Southern and Western Railroads

(Millions of 1971 dollars)

1985 1990 1995 2000

South

Return-on-capital baseline. . . . . . . . . . . . . . . . . . . . . . . . . 355 355 355 355

Required changes in rate of return owing to:

Coal-car rolling stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 8 11

Noncoal-car rolling stock. . . . . . . . . . . . . . . . . . . . . . . . 8 59 89

Locomotive rolling stock . . . . . . . . . . . . . . . . . . . . . . . . 22 22 47

Way and structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 45 58 73

Minimum necessary net income . . . . . . . . . . . . . . . . . . . . 409 462 516 578

West

Return-on-capital baseline. . . . . . . . . . . . . . . . . . . . . . . . . 689 689 689 689

Required changes in rate of return owing to

Coal-car rolling stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 31 49 70

Noncoal-car rolling stock. . . . . . . . . . . . . . . . . . . . . . . . -50 “19 2 25

Locomotive rolling stock . . . . . . . . . . . . . . . . . . . . . . . . -22 -12 -2 9

Way and structures.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 155 198 246

Minimum necessary net income . . . . . . . . . . . . . . . . . . . . 738 844 936 1,039

Source: lR&T.

the minimum required to cover taxes an d

return on capital investment A 3 5 percent real

return was assumed for new investment and

existing capital stock Then, the minimu m

acceptable return given in table 15 was obtained by multiplying .035 times the change in

capital stock calculated in the appendix. It

must be emphasized that a real return of 3.5

percent is conservatively based on bond -

market yields, and represents the absolute

minimum required to stay afloat This level of

net income may not be sufficient to cover adequate way and structures investments. Comparing the MNNI estimates in table 15 with the

Operating Income projections for Alternatives

I and IV confirms that the western railroads

would be in serious trouble if the historical

trends in either cents-per-ton-mile or operating

ratio behaviors were to continue.

The necessary railroad revenues implied by

the estimated MNNIs are identified in table 16

for western railroads in 1985 and 2000 The

operating costs shown were previously given in

table 11 and the payroll taxes were given in an

earlier section on tax forecasts The State and

local taxes were recomputed for table 16, to

take into account changes in projecte d

revenues. Comparing these minimum revenue

requirements with the revenues projected for

Alternatives I through IV again reveals that

western railroads cannot maintain their historical rate of revenue decilnes, even in the

absence of pipeline competition. I n fact, in

seems likely that the traditional 80 percent

operating ratio may be too high to sustain the

railroads in the future.

Table 16. Rail Revenues Necessary To

Maintain Minimum Necessary Net Income

on Western Railroads

(Millions of 1971 dollars)

1985 2000

Operating costs . . . . . . . . . . . . $5,641 $9,040

Payroll taxes. . . . . . . . . . . . . . . 688 1,587

State and local taxes. . . . . . . . 179 226

Minimum necessary net

income . . . . . . . . . . . . ... . 738 1,039

Revenues . . . . . . . . . . . . . $7,246 $11,892

Source: IR&T.
74 . Coal Slurry Pipelines

PIPELINE IMPACT ANALYSIS

The results presented in the preceding section were for a baseline situation that assumes

no pipelin e development. Two pipelin e

scenarios were postuIated in order to provide a

context within which to evaluate the potential

economic impacts of coal slurry pipelin e

development. The first scenario, termed the

Lost Rail Tonnage scenario and presented

here, assumed that railroads would lose five

long-haul coal movements to pipelines. The

five hypothetical markets of destination where

pipelines may take over from railroads were

discussed in chapter IV. They are Florida, lndiana, Kansas, Missouri, and Texas. A second

scenario, termed the Competitiv e Rate

scenario, assumed that not only would the

coal movements of the first scenario be lost by

railroads, but also that the threat of pipeline

competition would force a reduction in rai l

rates along a number of additional routes. b T h e

latter routes are assumed to be those over

which coal flows identified in chapter IV

amount to more than 5 million tons annually

over distances greater than 500 miIes. The

results of the second scenario are qualitatively

similar to the first and are presented in Volume

Il.

Lost Rail Tonnage

The hypothetical tonnages employed in this

scenario are those identified in table 9 of

chapter IV. The quantities are significant. The

total tonnage associated with the five coal

movements amounts to 11 percent of all tons

originated in 1985 (including nonutility coal),

and 17 percent of all tons originated by the

year 2000. The effect is most striking in the

‘According to the D//emma of Fre/ght Transport Regu/at/on,

Ann F Frledlander, Brook lngs Institution, 1969, p 62, In situations where barge competition has posed a potential threat to

ral I roads, the rate-per-ton charges for va rlous ra I I moves, lncludlng coal, have been substantially reduced In two Instances,

the rail rates per ton In the presence of barge competition were

on Iy .I bout 60 percent of the rate~ preta I I Ing I n the ab$ence of

v I a b I e c om pet I t Ion U n I t t ra I n rates, however, con ta I n le55 room

for th15 ~ort ot reduction than do those of other types of rail shipment

West, where the selected movements represent

18 percent of western railroad shipment projections for 1985, and over 25 percent for 2000.

Because the designated coal movements are

long-haul shipments, their share of total tonmiles of coal is even larger than of ton s

originated. NationalIy, the five movements

represent 30 percent of alI railroad coal tonmiles projected for 1985, and 38 percent for

2000, Again, the effect is greatest in the West

because this region is characterized by an

unusual number of long-haul, large-volume

shipments that are susceptible to pipeline

movement. The designated movements in the

West account for 45 percent of the ton-miles

of coal projected for railroads in the year 2000

under the No-Pipeline Baseline.

Operating Cost and Revenue Impacts

Railroad revenue losses associated with the

Lost Tonnage coal movements were determined with help of the forecasting formula: 7

Revenues/Ton = 113,7 + 0.382 (Distance)

where Revenues/Ton is in cents per ton, and

Distance is in miles. Using this formula, the

revenue loss for each route was computed as

revenues/ton times total tons, It may be noted

that this revenue-loss formula yields results

comparable to published rate data. However,

there is as yet IittIe actual experience with unit

trains for the volumes and distances considered in this study.

The operating costs for the Florida and

Texas coal movements were obtained from the

case study analysis, as described in chapter IV.

The other three movements were judged to be

between the cost of the Minnesota and Texas

coal movements, for which case studies had

been conducted. On this basis, the operating

costs for these three shipments were estimated

by a tonnage and mileage adjustment of a

level of costs between those for Minnesota and

Texas. The reduction in railroad operating

costs as a result of the shipments lost to

‘Derlvatlon ot the formula IS decrlbed In Volume I I
Ch. V Economic Impacts ● 7 5

Table 17. Lost Tonnage Impacts Upon Railroad Operating Costs

cost

reduction

Rail from lost

operating tonnage

Coal supply Tonnage Distancea

Ton-miles Costs b(millions of

Destination region (millions) (miles) (millions) ($/ton) 1971 dollars)

1985

Florida So. Appalachian 16 857 13,712 3.98 63.7

Indiana Central Western 27 1,430 24,310 3.36 57.1

Kansas Central Western. . . . . . . . . . . . . . . . . . . No transfer in 1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Missour i Central Western 14 1,235 17,290 2.90 52.2

Texas Central Western 35 1,400 49,014 4.04 141.4

314.4

2000

Florida So. Appalachian 32 857 27,424 3.49 111.7

Indiana Central Western 17 1,430 24,310 3.16 53.7

Kansas Central Western 19 910 17,290 2.01 38.2

Missouri Central Western 14 1,235 17,290 2.33 41.9

Texas Central Western 125 1,400 174,795 3.75 465.0

710.5

aFlorida and Texas are based upon case study data, the other States calculate the distance at 1.3 times the straight line

distance. bNot total costs. See text for definition.

Source: IR&T estimates based upon Teknekron and GRC data.

pipelines is given in table 17 for each route in

the years 1985 and 2000. The largest effect occurs in the West in 2000, where a 6 5-percent

reduction in operating cost is achieved ,

primarily due to the postulated loss of the

Texas coal movement.

Having estimated the railroad revenue and

operating cost reductions because of lost coal

shipments, the changes in NET were determined The resuIts are shown in table 18. These

values indicate that the revenues lost b y

railroads for the selected routes substantially

exceed the operating cost reductions that can

be achieved. The results are the same for all

the cost) price alternatives since the revenue

and cost differentials between the scenario

and baseline are exogenously determined for

the specific routes involved.

Investment Impacts

Reductions in coal car and locomotive requirements are identified in table 1 9 for the

tonnage losses to pipelines postulated i n

the Lost Rail Tonnage scenario. The rolling

stock requirements for the Florida and Texas

shipments were obtained from the case studies

described in chapter IV. For the other three

moves, it was assumed that coal cars would

have a utilization rate of 75,000 miles per car

per year and that 5 locomotives would be required for every 100 coal cars. As discussed in

the appendix for the No-Pipeline Baseline, hopTable 18. Lost Tonnage Impacts Upon

Net Railway Operating Revenuesa

(Millions of 1971 dollars)

1980 1985 1990 1995 2000

East. . . 0 -5.94 -5.97 -6.14 -6.25

South. . 0 -19.68 -32.76 -33.81 -53.32

West . . 0 -123.85 -352.58 -503.61 -628.30

U.S.A. . 0 -149.47 -391.31 -543.56 -687.87

a

These values represent the difference between the Net

Railway Operating Revenues for the Lost Rail Tonnage

scenario and those for the No-Pipeline Baseline. There is no

difference between the results for the five cost/price alternatives.
76 . Coal Slurry Pipelines

per cars and locomotive suppliers should have

no difficulty in furnishing the necessary rolling

stock in the absence of pipelines. Since the

reduction in equipment requirements identified in table 19 would be only about 5 percent of the Baseline total, pipeline development should have little effect upon the supply

situation for railroad rolIing stock.

The investment reductions for rolling stock

and way and structures associated with the

scenario on railroad coal-tonnage losses are

shown in table 20. The way and structures investment reductions for the Texas and Florida

moves were derived from data presented in

table A-6. (See appendix. ) The values for the

other three moves were obtained by a ton-mile

adjustment of long-haul shipments total given

in that same table. The Baseline way and structures investment requirements are shown in

parentheses for purposes of comparison.

Table 19. Lost Tonnage Impact Upon Railroad Rolling Stock Requirements

(Reduction in vehicle requirements by route)

Category Destination 1985 1990 1995 2000

Coal hopper cars. . . . . . . . . . . . . . Florida

Indiana

Kansas

Missouri

Texas

Totals

Locomotives . . . . . . . . . . . . . . . . . Florida

Indiana

Kansas

Missouri

Texas

2,975 3,958 3,958 5,846

3,137 3,137 3,137 3,137

0 0 2,305 2,305

2,964 2,964 2,964 2,964

6,383 12,855 16,954 22,768

15,549 22,914 29,318 37,038

196 257 257 379

157. 157 157 157

0 0 115 115

148 148 148 148

315 629 839 1.126

Totals 816 1,191 1,516 1,925

Source: IR&T.

Table 20. Lost Tonnage Impact Upon Railroad Investment Requirements

(Reduction in requirements for the Lost Rail Tonnage scenario relative to No-Pipeline Baseline)

(Millions of 1971 Dollars)

1980-1985 1985-1990 1990-1995 1995-2000

Coal hopper cars per year (number) . . . . . . . . . . . . . . . . . 3,110 4,583 5,864 4,230

Annual coal car investment . . . . . . . . . . . . . . . . . . . . . . . . 40.4 59.6 76.2 55.0

Locomotives per year (number). . . . . . . . . . . . . . . . . . . . . 163 238 304 222

Annual locomotive investment . . . . . . . . . . . . . . . . . . . . . 40.1 58.5 74.8 54.6

Annual way and structures investment . . . . . . . . . . . . . . 0/38a

(Baseline annual way and structures investment). . . . . (501) (470) (453) (456)

Total annual investment reduction. . . . . . . . . . . . . . . . . . 80.5/1 18.5 151.1 162.0 128.6

a If ~ipei ines are brought Onstream along each route in 1985, the railroads may be unable to achieve anY reduction ‘n Way

and structures investment over the 1980-85 period. The possibility is indicated by the zero value shown in the table. If the

pipelines come onstream in 1980, it was estimated that an average annual reduction of $19 million in way and structures investment could be achieved over the 1980-85 period.

b Baseline annual way and structures investment is provided for comparison.

Source: IR&T.
Ch. V Economic Impacts ● 7 7

The ability of railroads to obtain th e

necessary financing for coal-related transportation investment has been occasionally questioned. Referring to the Baseline investment requirements discussed in the appendix and the

reductions shown in table 20, a number of conclusions can be drawn regarding the critical

1975-85 time period. First, the identified

raiIroad capital requirements are smalI compared to the demand for capital in the U.S.

economy. Second, the investments are required of financially sound western an d

southern railroads that enjoy fairly easy access

to capital markets. Third, the increase in i n -

vestment for shipments that might go to pipelines is only 4 percent of overall railroad investment. FinalIy, at least the portion of the investment associated with hopper cars could be

shifted to the shippers through leasing arrangements or shipper ownership of cars if the

raiIroad should encounter difficulties in

financing investments.

Another investment-related question regards

the possibility o f “ u necessary” capital

expenditures. If the bulk of the pipelines were

not to come online before 1985, railroads

might be forced to make substantial in -

vestments in order to provide unit train coal

shipments prior to that date. It is unlikely they

could recoup these investments. The problem

is relatively minor for rolling stock investment,

since most of this could be readily shifted to

other uses. Track improvements and new track

emplacements, however, are less Iikely to have

alternative uses. If the strong assumption is

made that raiI roads provide fuII unit train service through 1985, then lose the Lost Rail Tonnage scenario shipments at that time, $270

miIIion of sunk capital in way and structures

would be lost. There are three possibilities as

to how this problem would be handled in practice:

1.

2.

The railroads would simply not make

these investments, and hence wouId provide only slower and more expensive

service;

The railroads would make these in -

vestments but would be forced to charge

very high rates to ensure their adequate

amortization, or;

3. The railroads would have to absorb very

high and unrecoverable capital costs to

provide unit train service over the period

in question.

The option that would be adopted is, in large

part, a matter of regulatory policy.

Employment Impacts

The reductions in railroad employment in

response to pipeline development along the

five scenario routes are shown in table 21,

These reductions correspond to 4.4 percent of

the railroad employment that would exist in

2000 in the absence of pipelines. The railroad

employment losses (relative to the Baseline)

are greatest in the West, representing more

than 6 percent of the potential railroad labor

force for that region in 1995 and 2000. These

raiIroad employment reductions are only partially offset by the direct employment in -

creases associated with pipeline construction

and operation, estimated at between 300 and

500 workers along each route,

The employment requirements identifie d

above are for direct transportation operating

employment by the railroads and pipelines. In

addition, each transportation mode stimulates

employment in equipment supplier and construction industries. These employment requirements vary with regard to the time period

considered and the employment measur e

used. Because pipelines require greater construction expenditures, the total number of job

position requirements (operating and other) of

the two transport modes were found to shift

over time. For the period 1980–90 job position

requirements are greater for pipelines than for

raiIroads. After 1990 railroads wiII generate

more jobs than pipelines, but raiIroad requirements do not exceed the cumulative total

for pipeline job requirements until 2000. In the

long run, however, both direct and multiplier

effects indicated that railroads would provide

more jobs than pipelines because the former

generate more spending and, in terms o f
78 . Coal Slurry Pipelines

Table 21. Lost Tonnage Impact Upon Railroad Employment and Compensation by Routea

Destination 1985 1990 1995 2000

Employment . . . . . . . . . . . . . . . . . Florida 1,770 1,951 1,645 2,005

Indiana 3,073 2,612 2,209 1,876

Kansas o 0 1,568 1,334

Missouri 2,810 2,390 2,018 1,716

Texas 4.369 7.127 8.092 9.012

Total

Baseline employment. . . . . . . . .

Compensation (millions of

1971 dollars) . . . . . . . . . . . . . . . Florida

Indiana

Kansas

Missouri

Texas

Total

12,022 14,080 13,958 15,943

(362,520) (361,950) (362,660) (365,660)

$29.68 $38.00 $ 37.23 $52.70

51.52 50.87 49.91 49.30

0 0 35.50 35.06

47.11 46,53 45.63 45.09

73.23 138.78 183.12 236.76

$201.54 $274.18 $351.39 $418.91

.3The employment and compensation numbers given in the table reflect the reduction in each variable for the Lost Rail

Tonnage scenario relative to the No-Pipeline Baseline.

bThe total No-pipeline Baseline employment estimates for each year are provided in parentheses for PUrllOSeS of comparison.

Source: IR&T.

operating requirements, are more labor intensive.

As with investment needs, transition impacts

are also an important consideration regarding

employment requirements. The raiIroads might

find themselves with a significant number of

surplus employees if pipelines do not come

online until 1985. It would be difficult to

transfer these employees to other railroad

jobs, since aggregate railroad employment was

predicted to remain relatively constant in the

post-1985 period. Pipeline implementatio n

could therefore lead to layoffs and at least

temporary unemployment of a maximu m

12,800 railroad employees. The decreases in

rail road wage compensation corresponding to

the Lost Rail Tonnage employment reductions

are also shown in table 21. The effect upon

regional economics would be quite small. In

fact, in line with the preceding discussion,

pipeline labor compensation increases should

offset the effect of the railroad compensation

decreases up through the year 2000.

Operating Income Impacts

The reduction in railroad employee compensation given in table 21 was translated into a

reduction in payroll taxes, in the manne r

described in the appendix. A similar computation was made for the State and local tax

reductions resulting from the lost railroad coal

shipments. These changes in railroad ta x

payments were then employed to evaluate the

Operating Income for railroads under the conditions of the Lost Rail Tonnage scenario. The

Operating Income results are presented in

table 22 for the southern and western railroad

regions over the period 1980 to 2000. The

values become negative in the western region

for Alternative Ill (historical rate decline) in

1990 through 2000, and decline steadily from

an unacceptably low level to negative values

for Alternative IV (constant operating ratio).

Thus, neither of these rate behaviors could be

sustained in the presence of the postulated

level of pipeline market competition.

The railroads must at least obtain sufficient

revenues to satisfy their MNNI requirements.

This corresponds to Alternative V, as discussed

for the Baseline. The MNNI revenues fo r

western railroads in the case of the Lost Rail

Tonnage scenario are shown in table 23. Comparing these results with those given in table 16
Ch. V Economic Impacts ● 7 9

Table 22. Railroad Operating Income 1980-2000—Lost Tonnage Scenario

(Millions of 1971 dollars)

1980 1985 1990 1995 2000

Alternative I

South

Net railway operating revenues. . . . . . . $ 917 $1,632 $1,980 $2,713 $3,588

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (183) (261) (347) (478) (653)

State and local taxes. . . . . . . . . . . . . . . . (57) (66) (74) (87) (101)

Operating income . . . . . . . . . . . . . . . . 677 1,305 1,560 2,148 2,834

West

Net railway operating revenues. . . . . . . 2,209 3,207 3,748 4,540 5,788

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (477) (652) (839) (1,1 14) (1 ,479)

State and local taxes. . . . . . . . . . . . . . . . (192) (204) (217) (234) (258)

Operating income. . . . . . . . . . . . . . . . 1,540 2,351 2,692 3,192 4,051

Alternative!

South

Net railway operating revenues. . . . . . . 838 1,548 1,867 2,559 3,384

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (183) (261) (347) (478) (653)

State and local taxes. . . . . . . . . . . . . . . . (57) (66) (74) (87) (101)

Operating income.. . . . . . . . . . . . . . . 598 1,221 1,446 1,994 2,630

West

Net railway operating revenues . . . . . . . 1,998 3,023 3,462 4,162 5,300)

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (477) (652) (839) (1,114) (1,479)

State and local taxes. . . . . . . . . . . . . . . . (192) (204) (217) (234) (258)

Operating income . . . . . . . . . . . . . . . . 1,329 2,167 2,406 2,814 3,563

Alternative Ill

South

Net railway operating revenues. . . . . . . 522 977 1,015 1,279 1,533

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (183) (261) (347) (478) (653)

State and local taxes. . . . . . . . . . . . . . . . (54) (60) (65) (73) (82)

Operating income. . . . . . . . . . . . . . . . 285 656 603 728 798

West

Net railway operating revenues. . . . . . . 995 1,232 795 406 111

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (477) (652) (839) (1,114) (1,479)

State and local taxes. . . . . . . . . . . . . . . . (181) (185) (189) (195) (204)

Operating income. . . . . . . . . . . . . . . . 337 395 –233 –903 –1,572

Alternatively

South

Net railway operating revenues. . . . . . . 495 528 624 757 899

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (183) (261) (347) (478) (653)

State and local taxes taxes . . . . . . . . . . (54) (56) (61) (68) (76)

Operating income . . . . . . . . . . . . . . . . 258 211 216 211 170

West

Net railway operating revenues. . . . . . . 1,288 1,277 1,297 1,386 1,632

Payroll taxes . . . . . . . . . . . . . . . . . . . . . . (477) (652) (839) (1,114) (7,479)

State and local taxes. . . . . . . . . . . . . . . . (184) (186) (194) (205) (219)

Operating income. . . . . . . . . . . . . . . . $ 627 $ 439 $ 264 $ 67 –$ 66

Source: lR&T,
80 . Coal Slurry Pipelines

for the Baseline indicates that the expenditure

reductions related to tonnage losses permit a

maximum reduction in MNNI of 4.1 percent in

1985 and 6.4 percent in 2000.

Table 23. Rail Revenues To Maintain

Minimum Necessary Net Income on Western

Railroads— Lost Tonnage Scenario

(Millions of 1971 dollars)

1985 2000

Operating costs . . . . . . . . . . . . $5,407 $8,452

Payroll taxes. . . . . . . . . . . . . . . 652 1,479

State and local taxes. . . . . . . . 175 214

Minimum necessary net

income . . . . . . . . . . . . . . . . . 715 985

Revenues . . . . . . . . . . . . . . . . . $6,949 $11,130

Source: IR&T.

System Costs

Two effects must be distinguished in assessing the net economic impact of coal slurry

pipeline development. These two effects are:

1 ) changes that result in net savings or costs to

the overall economy, and 2) changes that affect prices or incomes by transferring money

from one group to another without a ne t

change in output of the overall economy. I n

the case of coal slurry pipelines, the potential

net savings to the economy stem primarily

from the labor, capital, and other resources

that are released to uses other than coal

transportation as a result of the shift from

railroad shipments to pipelines. The relative

transportation costs for the two alternative

systems, with and without pipelines, con -

stituted the basic measure of net savings.

Three additional considerations must be addressed in translating the transportation savings of pipelines into net savings to th e

economy. First, the total amount of coa l

transported may increase in response to the

reduced transportation charges, and if rai l

rates charged other shippers increase as a

result of the lost coal shipments, transportation of other commodities may correspondingly decrease. These potential shifts in commodity transport couId add to, or detract from,

the direct pipeline savings. Second, the full

amount of the transportation savings are only

applicable if resources can be successfully

reallocated to other uses in the economy. For

example, contained unemployment amon g

railroad workers would imply that the labor

resources could not be fully redirected .

However, as noted earlier, pipelines offer

greater near-term and lesser long-term employment than railroads. Third, the opportunity

costs of water in alternative uses may have to

be deducted. As discussed further on, these opportunity costs are relatively small if the

pipeline water is drawn from what are currently the lowest value uses in the originating

basins.

The reader should recall at this point that

the pipeline markets and cost advantages on

which this analysis is based are hypothetical.

The purpose of this section is to illustrate how

positive and negative impacts would be distributed if a pipeline industry as described in

chapter IV were to develop.

Potential Savings

Utilities stand to benefit from reduced coal

transportation charges, the extent of th e

benefit depending upon the rate differential

achieved. Pipeline rates will be criticall y

dependent upon three factors: regulatin g

policy with respect to coal slurry pipelines; 8

competition between pipeline companies; and

the relative bargaining power of the pipeline

company and electric utility. Since there are

several companies capable of building and

operating coal slurry pipelines, and electric

utilities themselves can invest in pipeline ventures, the ability of pipelines initially to charge

rates significantly in excess of costs may be

somewhat Iimited. In addition, the large shipment sizes necessary to achieve favorable

pipeline economics mean that the electric

utilities involved will tend to be quite large.

‘Regulatory considerations are discussed in chapter VI 1 of this

report
Ch V Economic Impacts ● 8 7

Customer size and financial leverage could

further serve to restrict the possibilities for excessive pipeline rates. Reduced transportation

rates couId also increase the demand for coal

in some areas, thereby benefiting the mining

industry

The rate situation for railroads is more complicated than for pipelines. This study found,

as others have, that railroads have historically

been able to achieve significant economies of

scale. These economies of scale have occasionally led to difficulties in setting railroad

rates, This is true because as long as incremental, or marginal, costs’ are declining, rates

must exceed the incremental costs of each

shipment if railroads are to cover effectively

their total costs. The proper method o f

allocating these additional charges to specific

rates has been the subject of reguIatory debate

for decades,

The actual savings to utilities as a result of a

shift to pipelines therefore depend not upon

differences in costs for the two modes, but

upon differences in rates. The railroad rate and

incremental railroad cost assumptions used

embodied a significant difference between rail

rate and incremental rail costs. The maximum

savings to utilities would occur if pipeline

rates equal led pipeline costs, due either to

market or to regulatory forces. The maximum

savings wouId then equaI the difference between rail rates and pipeline cost. In the Lost

Rail Tonnage scenario this would result in savings of $273 million a year in 1985, rising to

$710 million a year by 2000. On the other hand,

as noted above , pipeline rates may b e

significantly higher than pipeline costs. The

minimum estimate of utility savings would

therefore be calculated as the difference between rail rates and incremental rail costs. The

estimated savings then wouId be $49 miIlion a

year in 1985, and rising to $416 million a year

by 2000. The difference between these two

utility savings estimates represent potential

monopoly profit to pipelines,

The precedent-based nature of man y

“Inc rementdl, or margln~l, costs dre the c hange In total cost

resu I t I ng t rom a n a cj d I t Ion d I u n I t ot output or serv I c e

railroad rates may not permit railroad rate

reduction. The Interstate Commerce Commission [ICC) regulation of railroad rates becomes

a factor at this point. The ICC attempts to approve rail rates in an internalIy consistent manner in part so that a customer making a shipment in one region of the country will be

charged the same amount as a customer making a comparable shipment in the same region.

As a result, the ICC may not approve lower

rates where pipeline competition is arising. If

the rate reduction were not allowed and the

pipelines were able to capture that set of coal

shipments, the effect upon the economy as a

whole would be a transportation loss since a

more expensive transportation mode wouId be

employed along those routes.

Impact Upon Other Shippers

The transportation savings to utilities are

directly related to downward adjustments in

the rates charged for the coal shipments,

whether the adjustment in rates are achieved

by transferring shipments to pipelines or as the

result of a competitive adjustment in railroad

rates. Both adjustments cause a comparable

reduction in railroad revenues. To the extent

that the revenue losses exceed the corresponding reductions in railroad costs (including tax

expenditures, etc.), railroads will suffer a net

reduction in coal-transportation-related income. This income reduction can either be absorbed by the railroads, thereby adversely affecting their financial performance, or it can

be passed on, in whole or in part, to other shippers. The amounts by which charges to other

shippers must be increased in order to attain

desired levels of railroad financial per -

formance were determined for two situations.

For Alternatives I-IV, revenues were increased

by that amount necessary to restore the profits

lost (calculated as the difference between

railroad rates for coal and the costs of these

shipments). In Alternatives I and II no rate

change was required as the profit from coal

shipments was not necessary to the financial

health of the railroads. For Alternatives III and

IV, rate changes would be required in the West

to restore an already precarious financial

-1 -
82 . Coal Slurry Pipelines

status. For Alternative V, the rate increase required to maintain the MNNI was determined.

In 1985, the rate increases required to restore

pre-pipeline financial positions (for the Lost

Rail Tonnage scenario) are from 0.7 to 0.9 percent by 1985 rising from 4 to 4.7 percent by

2000. If western railroads must also lower rates

on some coal shipments to meet pipeline competition, the required rate increase for other

shippers were estimated to be somewha t

higher.

In order to put these potential rate increases

into context, it should be noted that they do

not represent increases over present rates.

Rather they imply that rates would decline less

than would occur in the absence of pipeline

competition.

Net Savings

The preceding two subsections addressed

the manner in which revenue losses and gains

may be allocated among raiIroads, utilities,

and other shippers. These allocations fall into

the category of revenue transfers. The net savings to the economy are related to the difference in costs (not revenues) between the

two shipment modes. Thus, the Lost Rail Tonnage scenario achieves net savings, since the

pipelines are assumed to cost less along those

routes for which shipment adjustments are

made. Competitive pressures on rail rates, on

the other hand, merely reallocate revenues

without bringing about a net savings to the

economy. The potential net savings associated

with the pipeline costs and market shares

assumed in chapter IV are given in table 24.

The values shown are the cumulative savings

for the periods 1985-2000, and 1985-2015

assuming that shipment levels remain at their

2000 level from 2000-2015. The aggregate net

savings are in excess of $2.5 biIlion over the 30-

year period. These figures are subject to the

limitations and simplifying assumptions explained at the end of chapter IV.

Table 24 also shows the sensitivity of the net

saving estimates to certain key economi c

assumptions. A significant fraction of the savings were attributable to assumed larg e

shipments to Texas. In order to gain insight into the significance of the other four shipments,

Table 24. Sensitivity of Potential Net Savings From Hypothetical Coal Slurry Pipeline Development

(Discounted present value in billions of 1971 dollarsa

)

Sensitivity y Analysis

Significant

Lost rail No way and raiIroad

Time tonnage structures economies

period scenario b Low TexasC

invest mental of scalee

1985-2000 . . . . . . . . . . . . . . . . . 1.6 1.2 1.2 0.63 –

1985-2015f . . . . . . . . . . . . . . . . . 2.5 1.6 1.9 0.95

alg71 dollars can be converted into 1977 dollars by multiplying by 1.42. Future dollars are discounted to 1977 at 7.15 percent per year.

bThe Lost Rai Tonnage scenario assumes that significant potential net savings can be achieved by substituting pipel lneS

for railroads on selected routes. This sensitivity analysis was designed to evaluate the effect upon potential net savings of

various economic assumptions favorable to railroads. As a result, these sensitivity analyses yield lower potential net savings

than for the original scenario. This does not mean that the scenario represents the highest possible estimate. Additional

pipeline construction would increase those savings as long as they were implemented in response to real cost advantages.

CThe Low Texas case assumes no growth in Texas shipments after 1985.

dThe No way and structures investment Case assumes that new track and upgrading expenditures attributable to those

unit trains affected by pipeline competition are zero because of benefits elsewhere i n the rai I road system.

eThe Significant Railroad Economies of Scale case assumes a scale factor of .87 for all operating expenditures and way

and structures investment.

fThe Ig85-2000 alternative assumes that shipments Cent inue at the year 2000 IWK?IS f rOITl 2000 tO 2015.
Ch. V Economic Impacts Ž 83

the net savings were calculated assuming no

growth beyond 1985 for the Texas pipelines.

The net savings remain substantial, being approximately 70 percent of the results with the

full Texas shipments.

A more important economic assumptio n

underlying the net savings estimates was the

assumption that no changes occur with regard

to systemwide costs. Two systemwide changes

were examined through sensitivity analyses.

First, the possibility was considered that way

and structures investments for new track and

track upgrading may either attract additional

traffic or reduce costs for other shipments. A

sensitivity analysis was conducted in order to

test the potential importance of this issue. The

extreme assumption was posed that all of the

way and structures investment attributed to

unit trains could, in fact, be assigned to other

traffic requirements. On this basis, the way

and structures investments for the coal unit

train shipments of the Lost Rail Tonnag e

scenario were set to zero, Even with this extreme assumption, the net savings remain

substantial Only one route (Kansas) actually

changes sufficiently to return from pipeline to

raiI.

The analysis of the sensitivity of net savings

to way and structures also has another implication which should be noted. In the section on

Investment Impacts, a potential problem was

raised that railroads might have to make way

and structures investments which would then

be worthless when pipelines came online. T h e

fact that net savings are still high even in the

absence of way and structures investments by

railroads also implies that deductions of these

transition costs would still leave substantial

net savings.

A second way in which the incremental cost

analysis may err is by failing to take into account systemwide economies of scale not

readily apparent when analyzing a specific

route These are in part dependent upon the

systemwide total size. Economies of scale

have two possible origins: large fixed costs accompanied by relatively constant costs for

each additional shipment, or declining incremental costs for each additional shipment.

The case of large fixed costs and constant incremental costs presents difficulties in cost

allocation and ratesetting, but does not require a correction to the incremental costbased net savings estimates given in table 24.

The case of declining incremental costs does,

however, require an adjustment to the incremental cost-based net savings estimates.

Unfortunately, prior statistical cost studies,

while strongly suggesting the presence of

railroad economies of scale, do not permit differentiation between the two cases. For the

purposes of a sensitivity test, it was assumed

that declining incremental costs hold for all

operating cost categories and for way and

structures investments. The scale factor of 0.87

was used, i.e., cost increases 0,87 percent for

every 1-percent increase in ton-miIes. This extreme assumption considerably reduced the

size of the net savings, but some net savings remain, as shown in table 24.

The net savings in table 24 were computed

assuming that the total transportation system

size does not change. That is, neither the total

amount of coal transported nor the amount of

other goods transported by both rail an d

pipeline change as a result of the implied

changes in rates. In fact, total goods

transported does change with transportation

rates. To the extent that utilities use more coal

with lower transportation rates, the resulting

benefit to the mining industry from using coal

rather than other fuels will increase the net

savings attributable to pipelines. To the extent

that railroads lose shipments when they attempt to increase rates to maintain necessary

income, net savings will decrease. Whether net

savings increase or decrease as a result of

these two types of offsetting effects depends

upon the relative responsiveness to rat e

changes of the different types of shipments.

Current data does not permit a clear judgment

as to the direction of this effect, but it would

be unlikely to offset the total potential net savings identified in table 24.
84 . Coal Slurry Pipelines

Economic Impacts of

Water Resource Allocation

The cost analysis described in chapter IV included the costs that pipelines will have to pay

for water usage, such as pumping, transportation, and purchase price. These costs are part

of the pipeline’s operational expenditures.

However, they may not reflect the full value of

that water in alternative uses. This could happen because, unlike most other resources,

water resources are not allocated through

markets. Though details vary, water tends to

be allocated in the form of water rights. These

rights are frequently nontransferable, i.e., one

must use the right or lose it, rather than being

able to sell it. The problem in establishing

water value in alternative uses is further complicated by the substantial subsidies often provided if the water source is a Federal resource

project. As a result, the true societal value of

water cannot be directly determined from the

prices paid, but must be assessed through a

comparative evaluation of the water’s value in

alternative uses. A variety of studies suggest

the following ordering of water values in use:

municipal water supply tends to have the

highest value, industrial use varies by industry

but tends to be lower in value than municipal

use, and agricultural uses, with the exception

of certain high value per-acre crops, such as

fruits or vegetables, tend to have the lowest

vaIues.

The two principal potential industrial uses in

the western coal region are coal gasification

and coal mining. In order to appraise the value

of water used for coal gasification, the net

profits and flexibility of water used for such

plants must be estimated. Since the feasibility

of these plants in the West is somewhat uncertain, and the engineering details necessary for

an analysis of flexibility in water use have not

yet been developed, the value of water in this

case cannot be quantified at this time .

However, a maximum value can be estimated

for water if it would otherwise be used for

coal mining in the West. The environmental

analysis described in chapter VI indicated that

up to 331 million tons of coal would be

foregone in 2000 if alI the case study pipelinerelated water were obtained from coal production. On the basis of the 1971 value of Wyoming coal, $4.I4 per ton, the resulting coal production loss would exceed $1.3 billion per

year. Of course, only a small fraction of this

value represents the opportunit y costs

associated with water usage. It also includes

values for capital, labor, and other inputs that

wouId be redirected into other uses. Nevertheless, the magnitude of the economic loss if

coal production were affected by water withdrawals is such that even a small fraction of it

would represent a major offset to the savings

associated with coal slurry pipelines.

An estimate can also be made for the maximum possible value of water in the largest

agricultural application, hay and alfalfa growing. The environmental analysis (see chapter

Vl) indicated that transporting 125 mill ion tons

per year from eastern Wyoming by pipeline

wouId require 69,500 acre-feet of water. If this

water were otherwise to be used for hay and

alfalfa acreage, 300,000 tons of potential annual hay production would be foregone. At a

1971 value of $26.00 per ton, the annual value

of foregone hay production would be $7.8

million. This value includes the value of labor

and other inputs. The actual value of the water

is probably less than 20 percent of the total.

The quantities of production in question are

sufficiently small that they should not affect

national food prices.

The estimated value of water in coal mining

was found to be many times as great as in hay

growing. The water would therefore be obtained from the latter usage if it were allocated by

economic market conditions. However, water

resources are allocated by nonmarket mechanisms in many regions, as discussed in chapter

VII. As a result, the economic impact of water

diversions by pipelines will be critically dependent upon the water resources policy in each

region, and the economic impact will disappear if there is sufficient water to satisfy the

needs of all potential users. The availability of

water in the pipeline-origin region is discussed

in chapter VI.
VI. Environmental and Social Impacts
VI. Environmental and Social Impacts

INTRODUCTION

The following discussion of the environmental and natural resource impacts of transportation of coal, by railroad unit trains or coal

slurry pipelines, recognizes the inherent differences between the two modes of transportation The form of the product transported differs, the physical environment under which the

products are transported differs and therefore,

the environmental impacts differ. Coal slurry

pipelines use substantial amounts of water,

whereas railroads require essentially no water

for the transportation of coal. The major environmental impacts of railroads are the delay,

no i se, and inconvenience caused by trains

traversing populated communities. Both

modes of transportation wilI cause some environmental impacts from construction and

facility improvement. Slurry pipelines and increased unit train operations are directly comparable only in the areas of air pollution, safety and health, noise, and energy and materials

resource depletion Even these areas present

analytical problems: diesel locomotives emit

pollutants along a linear path, while the emissions due to power generation for coal slurry

pipelines would be concentrated at several

point sources. A large percentage of the occupational accidents due to pipelines would

occur during construction, but the present

study anticipates only a nominal amount of

new rail construction. Additionally, many if

not al I the impacts are interrelated For example, noise pollution has an effect upon land

use, as does the diversion of water to a slurry

pipeline from an existing or projected future

alternative use

The discussion is limited to the incremental

impacts of moving the estimated amounts of

coal. That is, analysis of alI railroad impacts is

not attempted, but rather those impacts attributable to the estimated increased coal

transportation. The incremental impacts due

to moving comparable amounts of coal by

coal slurry pipeline are analyzed, but because

of the necessary pipeline construction and the

fixed origin, destination, and volume o f

pipelines, the incremental and total impacts

are nearly the same.

The discussion is also Iimited to the differential impacts of coal slurry pipelines an d

railroads. It is assumed that the coal will be

transported and not, for example, burned at

the mine site. Other modes of transmission,

while admittedly possible, are not analyzed

here.

The people adversely impacted by coa l

transportation are not necessarily the same

people who will benefit from the powe r

generated by the coal. The study is concerned

with the nature, extent, and duration of the examined impacts. Railroads and oil and gas

pipelines have been on the American scene for

many years. Many of their environmental i m -

pacts are welI known and it is relatively easy to

compare them with other aspects of human experience.

Three kinds of impacts were selected for

study:

1.

2.

3.

Those which have bee n historically

significant, such as air pollution,

Those which, from a scientific standpoint,

appeared to have the potential fo r

significance; e.g., the interactions between coal and water in the slurr y

pipeline, and

Those which initially appeared to b e

insignificant but which, due to their frequent appearance in the public debate,

required an objective, thorough examination; e.g., the potential for coal dust being

blown off of coal hopper cars.

87
88 Ž Coal Slurry Pipelines

The following section discusses the most important environmental issue associated with

coal slurry pipelines — the availability of water.

The major environmental impacts associated

with increased railroad unit train operation —

noise, traffic, delay, and inconvenience — are

discussed in the next section. Longer term impacts, chiefly those resulting from pipeline

operations, and shorter term impacts, chiefly

associated with construction, are reported in

later sections. Some of the construction and

operation impacts have actually been ob -

served, while other impacts may not have yet

been observed but were either deemed likely

to occur or subject to enough public debate to

be included.

WATER USE BY PIPELINES

As illustrated in figure 20, water re -

quirements for transmission of coal as a slurry

are substantial and dependent upon coalmoisture content. The four hypothetica l

pipelines discussed earlier in this report would

Figure 20–Transmission Water Requirements

as a Function of Coal Throughput Moisture Content

Coal moisture percent O

0 10 20 30 40 50

Throughput, contract tons/year

Source Science Applications, Inc

require a total of from 35,000 to 47,000 acrefeet per year (AF/yr) of water. These aggregate

figures, which are presented by hypothetical

pipeline route in table 25, do not reveal much

about either the impacts of such water use

upon the areas which would supply the water,

or the source of the necessary water. To place

the consumptive use of water in perspective,

the water supply potential of four hypothetical

pipeline origins was evaluated. In two source

locations, Wyoming and Montana, the Bighorn

River would supply water by aqueducts to the

slurry pipeline origin. Ground water from the

Madison Limestone Formation was also considered as a water source for the pipeline from

Wyoming. The Tennessee River would supply

the pipeline from Tennessee and the Green

Rive

pipe

would be the water source for th e

ine from Utah.

Table 25. Water Requirements for

Hypothetical Coal Slurry Pipelines

Range of

Million tons annual

of coal requirements

Route per year AF/yr

Wyoming-Texas . . . . . . . 35.0 13,000-20,000

Montana-Minnesota/

Wisconsin . . . . . . . . . . 13.5 6,000-8,000

Tennessee-Florida. . . . . 16.0 10,000-12,000

Utah-California. . . . . . . . 10.0 6,000-7,000

a Includes water for transmission and emergency

flushing reservoir replenishment. Minimum is for highmoisture coal and no spills. Maximum is for low-moisture

coal and a worst case of one spill per year.
Ch. VI Environmental and Social impacts ● 8 9

Although the four pipieline routes an d

destinations are hypothetical, the general location of the source of the routes is plausible

because of the abundance of coal at th e

selected locations. Most of the water required

for a given pipeline must be available near the

pipeline origin. The generalizations from the

four specific cases are therefore of widespread

importance with respect to water usage and

avaiIabiIity.

Two types of potential impacts from the

water use were investigated: those upon the

immediate, surrounding environment, i.e.,

streams and aquifers, and those upon alternative water uses, The first category, environmental impacts, are minor for the following reasons:

●

●

Withdrawals of surface water for coal

slurry pipeline use wouId constitute a very

small fraction of the physically available

flows in supply source streams or rivers. If

one ignores other uses of water as a

resource, effects upon flow rate, dissolved

oxygen concentration, salinity, waste

assimilative capacity, and other water

quality parameters would probably not be

measurable. For example, a group o f

pipelines moving 125 million tons of coal

per year from Wyoming would use a maximum of 3 percent of the Bighorn River’s

average depleted flow at the WyomingMontana State line. Agricultural use s

downstream from the nearby Boyse n

Reservoir are more likely to deplete flows

to a point where water quality seriously

declines. Pipelines from Tennessee carrying 31 million tons per year would remove

at most O 1 percent of the flow of the Tennessee River. I n both cases flows are

reguIated by reservoirs.

Although increased pumping of ground

water from the Madison Formation i n

Wyoming could result in declines i n

potentiometric head at some distance

from well fields, there is no evidence that

local or regional subsidence or reduced

surface streamflow wouId occur.

The other category of environmentall y

related impacts from water use by coal slurry

pipelines is a reduction in some present or

future alternative water uses. In each of the

four hypothetical cases studied, the physical

supply of water is sufficient to transport the

coal even with substantial future expansion of

pipeline volumes. However, three legal factors

limit the actual water available:

1.

2,

3.

Interstate compacts, State legislativ e

restrictions on use, Indian rights, and the

possible exercise of Federal reserve rights

all place a practical limit upon quantity

of water that may be used in a given river

basin or State. Ironically, the greater the

hydrologic area considered, the more

restricted the water supply.

The prior appropriation doctrine, based

upon the concept of earliest beneficial

use of water, dominates the water rights

system in the coal-producing areas of the

West. In most Western States, including

Wyoming and Colorado, the user who is

“first in time is first in right. ” The holder

of a relatively recent right which is subordinate to older claims may be allowed to

appropriate or divert little or no water in

times of drought.

Water rights systems in the West are

administered by the States, usualIy

through the State engineer. Obtaining

water rights is often a time-consuming,

complicated affair, and the wouId-be appropriator must often “stand in Iine

behind a series of prior applications.” 1

The current drought is dramatizing the scarcity of water in the West at the same time that

plans for increased energy development, including mining, electric power generation,

coal gasification and liquefaction, and shale

oil exploitation, all would require relatively

large increases in consumption of the region’s

1 W Certsch, “Utah Water SupplV, ” study of Al?ernat)ve LocatIOnS of C oa/-F/red E/ectr/c Cenerat/ng Plants to Supp/y Energy

From We$tern Coal to the Department of Water l?esource~,,

Unlverslty of California at Los Angeles, Institute of Ceophyslcs

and Planetary Phvslc~ and Off Ice of E nvlronmenta I Science and

Englneerlng, pp 645 to 6-53, March 1977
90 • Coal Slurry Pipelines

water. 2 3 In each of the potential coal slurry

pipeline origin areas except Tennessee, demand projected for the 1985-2000 period exceeds the legally available supply. In the case

of the Bighorn River in Montana, for example,

the combination of present uses, signed contracts for U.S. Bureau of Reclamation water,

and applications for future appropriations exceeds the State’s compact share of the river’s

flow by over 450,000 AF/yr. Demands in the entire Montana portion of the Yellowstone River

Basin (to which the Bighorn is tributary) will

reach the legally available supply by the year

2 0 0 0.

4 Similarly, according to some projec -

tions, the area around Gillette would have

(without a slurry pipeline) a deficit of over

100,000 AF/yr by 2000, unless water were imported. 5

The significance of these deficits is that a

coal slurry pipeline could use surface water

only at the expense of growth in the existing

and new uses. Ground water could in some

cases reduce the deficit, but not the competi2 R Neh r t ng, B Zyc her, and J Wharton, Coa I Development in

the Northern Great P/ains A f%e//m/nary Report, R-1 981 -N SF/RC,

prepared by Rand Corp , for National Science Foundation,

August 1976

‘ Report on Water for Energy in the Northern Great P/a/ns Area

W/th Emphas/s on the Ye//owstone R/ver E?as/n, U S Department

of the Interior, Water for Energy Management Team, january

1975

‘ Ibid

5 The Wyoming Framework Water P/an, State of Wyoming,

State Engineer’s Office, Laramie, Wyo , May 1973

tion. For example, water from parts of the

Madison Formation is chemically suitable for

most municipal, industrial, and agricultural

uses, in addition to coal transportation. Furthermore, assuming it were physically possible

and economical to withdraw enough water to

overcome the projected deficit, withdrawals

wouId exceed the presen t estimate of

recharge, so that the consequences of groundwater mining would have to be considered.

It is impossible to predict which specific

future water uses would be precluded by coal

slurry pipeIines. The major types of competing

uses would be energy-related industry and

agricuIture. Rather than speculate upon the

myriad o f possible futures, “water-u se

equivalents” of a given slurry pipeline demand

were estimated. Table 26 Iists the total wateruse equivalents for the four pipelines examined in the case studies. For example, the

pipeline from Tennessee would consum e

about the same amount of water as one to

three coal gasification plants using the Lurgi

process. Similarly, the Montana pipeline would

take enough water to revegetate about 3,000

acres of surface-mined land in the Colstrip

area in 1985. If all the water for the four

pipelines carrying 74.5 mill ion tons of coal per

year were redirected, it could be used to mine

160 to 220 million tons of coal, reclaim 16,000

to 21,000 acres of surface-mined land, serve up

to 10 coal gasification plants or up to 5 coal

Table 26. Water-Usea Equivalents for Hypothetical Pipelines

MontanaWyoming- Minnesota/ Tennessee- UtahAlternative use Texas Wisconsin Florida California

Coal mining (106 tons/yr). . . . . . . . . . . . . . . . . 60-90 30-40 50-60 30-40

Mine reclamation (103 acres). . . . . . . . . . . . . 6-9 3 5 3

Coal gasification’ (plants)

—Lurgi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4 0-2 1-3 0-2

—C0 2 Acceptor . . . . . . . . . . . . . . . . . . . . . . 1-4 1-2 1-3 1-2

Coal Liquefaction (plants). . . . . . . . . . . . . . . 1-2 0-1 1 0-1

Electric power generation (plants). . . . . . . . 1-2 0-1 0-1 0-1

Municipal (103 people) . . . . . . . . . . . . . . . . . . 65-130 50-60 100-120 20-25

a Net consumptive use for all categories except municipal. b For 2 years. c 250 million scf/day. d 100,000 bbl/day.

e 1,OOO-MWe plant at 35-percent efficiency, 70-percent load factor, wet cooling tower. f Based upon projected withdrawal

rates for 1990. Also based on total withdrawal and not net consumptive use.
Ch. VI Environmental and Social Impacts ● 9 1

liquefaction facilties, or provide cooling for 2

to 4 powerplants. To process 1 ton of coal, an

electric powerplant requires roughly seven

times as much water as a slurry pipeline does,

and about twice as much water is needed to

gasify the same amount of coal, Mining, on the

other hand requires approximately half as

much water per ton of coal as slurry transportation.

The nature, magnitude, and probability of

impacts upon agricultural alternative uses depend entirely upon local conditions. In Tennessee, where only 65 acres are irrigated in the

coal source area, the impacts upon agricuIture

would be minimal, Farming is reportedl y

marginal in parts of Carbon and Emery counties in Utah, so that some farmers may be willing to selI their water rights and thus eliminate

some agricultural uses. Alfalfa, hay, and corn

are the main irrigated crops in the Wyoming,

Montana, and Utah source areas. Sugar beets

are fairly important in Montana, as is irrigated

pasture in Utah. Vegetable and fruit crops are

not irrigated to as significant an extent as

grains. Because of the large present use of irrigation water (about 200,000 AF/yr) and the

projected demand for Bighorn River water,

agriculture in the Bighorn River Basin is, of all

the cases studied here, most likely to face a

conflict with other uses, including coal slurry

pipelines,

The remainder of this section discusses in

more detail water availability and the impact

upon future water uses for each of the

pipelines.

Water for the Wyoming Pipeline

The hypothetica l 35 million-ton-per-year

pipeline from Wyoming would require 12,640

to 19,300 AF/yr of water in Wyoming. Additional water for emergency replenishmen t

could be obtained along the pipeline route in

the States of Nebraska, Colorado, Kansas, and

Texas, and local sources would be sufficient.

Flows in surface streams in the Powder Rive r

Basin area are low and irregular and therefore

are not a reliable water source for coal slurry

pipelines. Additionally, the water demands of

the pipeline would exceed the available water

by 1985 if the Little Missouri , Belle

Fourche, and Cheyenne Rivers were relied

upon. The Bighorn River Basin in northcentral

Wyoming is a reasonable source of water supply for a coal slurry pipeline originating near

Gillette. It is estimated that 1.8 million AF/yr

are now available to Wyoming from th e

Bighorn River Basin for new beneficial uses. ’

The Madison Formation was analyzed as a

potential water source because of the projected future” competition for surface water

and the controversy associated with ground

water sources in Wyoming. The Madiso n

aquifer consists principally of carbonate rocks

of Mississippian age (about 310- to 345-miIlion

years old) underlying northeastern Wyoming,

southeaster n Montana , northwester n

Nebraska, and western North and Sout h

Dakota. Figure 21 shows the outcrops and subsurface extent of these rocks. The Madison is

composed chiefly of limestone (CaCO3

) and

dolomite (CaMg(C0,)2

). Because these carbonate rocks are relatively soluble in water,

the development of karst, or solution-cavity

features, is common. 7

The water-bearing and transmitting capability of the Madison is highly variable because

of its primary structure, the karst features, and

the filling of the latter. As the Wyoming State

Engineer notes, “No rock differs more radically with respect to water yield than Iimestone. Limestone can rank among the most

productive aquifers, or can be as unproductive

as shale.” 8 The Madison’s primary porosity,

i.e., that due to open spaces between carbonate grains, appears to be low and to vary

spatially. Dolomite beds seem to be more

s Ibid

7 L F Konlkow, l%elfrnjr?ar~ D/g/ta/ Model of Ground Wate r

Flows In the Mad/son Group, Powder River Basin and Adjacent

Area~, Wyom/ng Montana, 5outlI Dakota, North LMo&, arrd

Nebraska, U S Ceologlcal Survey Water Resource Investigations

63-75, j anuary 1976

n /nvest/gat/on of Recharge to Ground Water Reservoirs of

Northeastern W yomlng ( The Powder River Bas/n), State of

Wyoming, State E nglneer’$ Off Ice, June 1976
92 . Coal Slurry Pipelines

Figure 21 –Outcrops and Subsurface Extent of Madison Limestone and Major Tectonic Features

115° 110 105 100°

Base U S Geological Survey o 100 300 MILES 1 7500,000 1970

Source U S Geological Survey, 1975 ,

0 100 200 300 KILOMETRES

porous than limestone beds in this aquifer. ’

water is stored mainly in and transmitted

through secondary openings such as fractures,

joints, and solution cavities. The occurrence of

these secondary openings is quite variable and

difficult to predict, which may explain the

wide range in yields of water wells drilled into

the Madison. 0

Certain structural features greatly influence

the hydrologic characteristics of the Madison.

Several areas of folding and faulting have been

‘ Leonard Konikow, U S Geological Survey, Lakewood, Colo ,

per;onal communlcatlon, Sept 14, 1977

‘

0 L F Konlkow, Pre//rn/nary DIgIta/ Mode/ of Ground Water

flows In the Mad/son Croup, Powder R/ver Bas/n and Ad/acent

Areas, ~% yomlng, Montana, South Dahota, North Dakota, and

Nebrasha, U S Geological Survey Water Re$ource Invest lgatlons

63-75, j anuary 1976

identified, while others have been inferred.

Folding and faulting probably have fractured

the rocks and increased their permeability. 11

Faults often also act either as barriers to

lateral movement of ground water or as conduits, although the role of faults in th e

Madison has not been conclusively determined. The U.S. Geological Survey is testing a

hypothesis that the Madison is actually several

discontinuous hydrologically isolated aquifers

rather than a single continuous one. 2

Figure 22 shows the configuration of the top

‘ ‘Plan of Study on the Hydrology of the Mad/son L/mestone

and Associated Rocks In Parts of Montana, Nebraska, North

DaAota, South Dakota, and Wyom/ng, U S Ceologlcal Survey,

Open File Report 75-631, Denver, Colo , December 1975

“ E Illot Cushlng, U S Geological Survey, Lakewood, Colo ,

personal communlcatlon, Aug 22, 1977
Ch. VI Environmental and Social impacts ● 9 3

Figure 22-Configuration of the Top of the Madison Group

●

u

D

DATA SITE

FAULT– U upthrown side D downthrown side

.

Contours by F A Swenson W R Miller

Source U S Geological Survey 1976 W G Hodson and F N Visher 1975
94 . Coal Slurry Pipelines

of the Madison Group in northeastern Wyo- are shown in figure 23. At its deepest portion,

ming and southeastern Montana; contour Iines which appears to be in Converse County, Wyo.,

show the elevation above mean sea level. it is about 10,000 feet below sea level and

Depths to the Madison from the land surface 16,000 feet below the land surface. In the

Figure 23–Depth From Land Surface to the Madison Limestone and

Equivalent Rocks in the Powder River Basin and Adjacent Areas

Interval 2000 feet

Datum & land surface

U S G S – 1974

(in cooperation with the

Wyo State Engineer)

I

I

I

I

I

I

I

I

I

I

I

I

I

I

Source State of Wyoming, State Engineer’s Off Ice, 1976
Ch. VI Environmental and Social Impacts ● 9 5

Table 27. Selected Data From Madison Formation Wells and Springs, Powder River Basin, Wyo.

Well Penetrated Specific

Location depth Test Discharge Drawdown thickness capacity

No

a

T R Useb

(feet) date(s) (9pm) (feet) (feetC

) (gpm/ft)

1 . . . . . . . . 33N

2 . . . . . . . . 33N

3 . . . . . . . . 33N

4 . . . . . . . . 33N

5 . . . . . . . . 33N

6 . . . . . . . . 36N

7 . . . . . . . . 39N

8 . . . . . . . . 40N

9 40N

10: : : : : : : : 40N

11 . . . . . . . . 40N

12. . . . . . . . 40N

13........41 N

14. . . . . . . . 42N

15. . . . . . . . 43N

16. . . . . . . . 44N

17. . . . . . . . 45N

18. . . . . . . . 45N

19. ... ....45N

20. ... ....45N

21. ... ....45N

22. ... ....45N

23. ... ....45N

24. ... ....46N

25. ... ....46N

26. ... ....46N

27. ... ....46N

28. ... ....46N

29. ... ....46N

30. ... ....46N

31. ... ....46N

32. ... ....46N

33. ... ....47N

34. ... ....48N

35. ... ....48N

36. ... ....49N

37. ... ....52N

38. ... ....52N

39. ... ....53N

75W

75W

76W

76W

77W

62W

61W

61N

61N

61N

61N

61N

84W

81W

80W

63W

61W

61W

61W

61W

61W

61W

61W

60W

62W

63W

64W

64W

64W

65W

65W

66W

60W

65W

65W

83W

61W

63W

65W

OFW

OFW

In

In

T

T

OFW

OFW

OFW

OFW

OFW

s

OFW

u

M

M

c

s

In

OFW

S.I

s

In

A

u

OFW

OFW

OFW

OFW

P

M

M

ND

ND

M

P

8,591

9,337

8,770

6,954

7,615

3,116

2,889

7,467

5,049

4,889

4,975

4,968

424

4,246

9,300

6,881

2,638

2,872

2,738

2,728

3,073

3,028

3,596

1,178

2,677

2,592

7,542

5,125

4,522

8,109

7,737

8,780

380

3,161

3,191

1963

1951

1962

1964

1966

1974

1962

1971-2

1971-2

1971-2

1971-2

1971-2

1963

ND

1973

1967

ND

1966

1965

ND

ND

1960

1960

ND

ND

ND

1956(?)

1965,1972

ND

1960

1972

1972

ND

1972

1972

Spring 1973

Spring 1969

1,123 1972

1,341 1962

510

N D

d

75-320

195

65

104,180

30

297-359

491-726

4,121-5,599

1,700-7,200

482-650

15

1,080

170,315

250

600-1,500

460

176

1,200

117

650

290

35

30

580

280

70,308

30

425

225

360

8

210

155

200

300

200

15-55

800

ND

16-92

ND

ND

217-386

36

274-298

100-133

152-202

35-418

11-25

60

ND

139,219

175

173-462

200

18

ND

ND

ND

ND

ND

ND

ND

80

65,293

ND

295

76

211

ND

110

101

N A

d

NA

74

1-19

235/250

ND

240/250

ND

ND

250/250

81/300

350/350

350/350

214/350

281/310

291/310

200/200

ND

340/340

400/400

26/400

400/400

43/400

ND

ND

ND

ND

ND

ND

ND

428/450

450/450

ND

369/450

400/450

390/450

ND

261/500

464/500

NA

NA

23/550

42/600

0.64

ND

3.5-4.7

ND

ND

0.47,0.48

0.83

1.0-1.2

4.4-7.1

25-31

17-49

26-44

0.25

ND

1.2,1.4

1.4

3.2-3.6

1.4

15

ND

ND

ND

ND

ND

ND

ND

3.5

1.1

ND

1.4

3.0

1.7

ND

1.9

1.5

NA

NA

2.7

2.9-1.5

a Nos. 1-5: Glenrock,6-12: Northeast NiobraraCounty, 13: Big Horn Mountains, 14-15: Kaycee, 16-24: Newcastle, 5-32: Osage,

33: Black Hills, 34-35: Upton, 36:Johnson County, 37-39: Crook County.

bOFW = oil field waterflood, S = stock watering, U = unused, M = municipal, C = commercial, A = abandoned,

P = public,T = Test, In = industrial, I = irrigation.

C Thickness penetrated by wel I/estimated total thickness of formation.

d ND = no data, NA = not applicable.

Source: U.S. Geological Survey, 1976.

southeastern Powder River Basin, the Madison vary widely in physical and geological characis about 3,000 to 4,000 feet below the Iand surface. ’3 In this area the aquifer is roughly 100- 1‘ P W Huntoon and T Womack, “Technical Feaslblllty of the

to 500-feet thick (table 27). Proposed Energy Transportation Systems Incorporated Well

Field, Nlobrara County, Wyo ,“ Contr/but/ons to Geo/ogy,

The Madison Limestone and related aquifers Unlverslty of Wyoming, Vol 14, No 1, pp 11-25, 1975
96 . Coal Slurry Pipelines

teristics, and, as a consequence, so does their

ability to store and transmit water. This complexity precludes simple basinwide generalizations from individual well tests, and also make

it difficult to establish conclusively that a

given observed effect is due to any specific

cause.

The potentiometric surface of an aquifer at

a given location is the level to which nonflowing water would rise in a well at that location.

It is significant because the difference between the levels of the land and the potentiometric surface is the height to which water

must be pumped to reach the land surface. If

the potentiometric surface is above the land

surface, a welI will be free flowing and the rate

of flow proportional to the difference in the

levels. Pumping is necessary when the potentiometric surface is below the land surface and

the amount of pumping power required i s

dependent upon the magnitude of the difference in levels. Figure 24 shows the most recent estimate of the configuration of th e

potentiometric surface of the Madison i n

northeast Wyoming and southwest Montana.

These data are important in predicting aquifer

activity because the ground water will tend to

flow from areas of higher to areas of lower

potentiometric surface.

Recharge is the process of water addition to

the aquifer. The configuration of the potentiometric surface of the Madison aquifer indicates that the major areas of recharge would

be the Bighorn and Laramie Mountains on the

west and southwest and the Black Hills on the

east. Where exposed, the Madison often contains numerous fractures, joints, and cavities

which may capture percolating water an d

thereby localize the recharge effects. The actual recharge to the Madison in Wyoming has

been estimated at about 75,000 AF/yr. 14

In order to estimate future impacts of increased withdrawal of water from the Madison

aquifer, those areas which are presentl y

withdrawing water from the aquifer have been

14 /nvest/gat/on of Recharge to Ground Water Reservoirs of

Northeastern Wyom/ng [ The Powder R/ver Basin), State of

Wyoming, State E nglneer’s Off Ice, June 1976

analyzed. In several eastern Wyoming locations (Midwest, Newcastle, and Osage) and a

western South Dakota location (Edgemont),

decreases in the potentiometric surface due to

pumping have been observed. 15 16

Several models are available for interpreting

test-well data and predicting the effects, over

time and over a given area, of pumping water

from the Madison. The predictions of these

models can and have been used to support differing points of view on the effects o f

withdrawals for slurry pipelines. However, all

the models are substantially limited by the

lack of data on the Madison Formation and by

debatable simplifying assumptions. Figures 25

and 26 show the predicted results of th e

various models for potentiometric levels at the

four locations for which data is available. (The

specific predictions in the figures are for the

withdrawal of 15,000 AF/yr from the Madison

by a well field in Niobrara County.) The important conclusion is that the models probably

represent the range of possibilities and the

actual impac t of increased pumpin g is

somewhere within this range.

It is clear that increased pumping in a concentrated area on or near the periphery of the

Powder River Basin is likely to have a

measurable effect upon the potentiometric

surface at distances up to 10 or 20 miles. The

decrease will cause some wells to flow at lower

pressures while greater pumping will be needed to maintain flows in other welIs.

Water quality in the Madison varies from

place to place. Some wells yield water which

exceeds U.S. Public Health Service drinking

water standards, and for example, Edgemont,

S. Dak. uses the aquifer as a municipal water

supply. In eastern Wyoming and southwestern

Nebraska water from some other wells ,

‘

5 P/an of Study on the Hydro/ogy of the Madison L/mestone

and Associated Rocks in Parts of Montana, Nebraska, North

Dakota, South Dakota, and Wyom/ng, U S Ceologlcal Survey,

Open File Report 75-631, Denver, Colo , December 1975

“ F A Swenson, W R Mlllerr et al , Maps Showing Conf/guratjon and Th/ckness and Potent/ometr/c Surface and Water Qua//ty

in the Madison Group, Powder River Bas/n, Wyoming and Montana, U S Geological Survey, Miscellaneous Invest lgatlons

Series, Map 1-847-C (1 1,000,000), Reston, Va , 1976
Ch. VI Environmental and Social Impacts ● 9 7

Figure 24– Potentiometric Surface of the Madison in Eastern Wyoming,

Southeastern Montana, and Western South Dakota

1 .’ ‘1 ‘\

. .

.,

Source Konikow L F U S Geological Survey Water Resource Investigations 63-75 (January 1976) Contour shown In teet a~ove mean sea level.
98 ● coal Slurry Pipelines

Figure 25—Potential Drawdown of Potentiometric Surface Near Edgemont

and Provo, S. Dak., Due to 15.000 Acre-Feet per Year Withdrawal From the Madison Formation

“in Niobrara County, Wyo., According to Different Models

Edgemont Provo

- - ——- -- -

Source Science Applications Inc.

although not always suitable for drinking, can

be used for stock watering and irrigation.

Present Wyoming uses of Madison aquifer

water amount to about 25,400 AF/yr, approximately 80 percent of which is for industrial

uses such as secondary oil recovery, oil refining, and electric powerplant cooling (see tables

28 and 29). About 3,600 to 3,800 AF/yr are used

in Montana for secondary oil recovery and

coal mining operations. 7 Annual discharge s

are about 1,800 AF/yr each for municipal sup-

‘ 7 Ibid

Land Surface

Present

Potentiometric

Surface

USGS (leaky)

USGS (non-leaky)

Huntoon and Womack

(recharge)

Huntoon and Womack

(no effect from

fault)

ply at Rapid City and Edgemont, S. Dak. 18 T h e

total present withdrawal-from the Madison is

about 32,000 AF/yr.

Positing present levels for existing uses of

the water in the Bighorn River Basin and the

Madison Formation, there is sufficien t

unallocated water to supply the maximu m

levels of the hypothesized coal slurry pipeline.

“ L F Konlkow, Prel/m)nary Digital Model of Ground Water

F/ows in the Madison Group, Powder River Basin and Ad/acen?

Areas, Wyoming, Montana, south Dakota, North Dakota, and

Nebraska, U S Ceologlcal Survey Water Resource Investigations

62-75, January 1976
Ch. VI Environmental and Social Impacts ● 9 9

Figure 26—Potential Drawdown of Potentiometric Surface Near Newcastle

and Osage, Wyo., Due to 15,000 Acre. Feet per Year Withdrawal From the Madison Formation

in Niobrara County, Wyo, According to Different Models

Newcastle Osage

Source Science Applications Inc

The uncertainty arises

pipeline water use is

Land Surface

Potentiometric Surface

USGS (leaky)

USGS (non-leaky)

Huntoon and Womack

(recharge)

Top of Madison

when future coal slurry

contrasted with future

alternative water uses. Future alternative

energy uses include present municipal and

agricultural uses plus projected increased

municipal, agricultural, industrial, and energyrelated uses.

If all projected future alternative uses

materialize, a water deficit would require importation of surface water before 2000, probably through aqueducts or increased ground

water supply as through pumping the Madison

aquifer. If water is imported by aqueducts

from the Bighorn River Basin to the Powder

River Basin: the surplus from the Bighorn

would be sufficient to permit all projected

growth to 2000. By 2000, however, Bighorn

River surplus would be inadequate. An increase in ground water withdrawals could offset, to an unknown extent, the projecte d

deficits.

It is impossible to identify the specifi c

beneficial uses which would compete with

coal slurry pipelines in the face of future

deficits.
100 ● Coal Slurry Pipelines

Table 28. Estimated Water Obtained

From Madison Wells

1973 Maximum Minimum

withdrawal (year) (year)

acre-feet acre-feet acre-feet

Wyoming

Converse County.

Crook County. . . .

Johnson County. .

Natrona County . .

Niobrara County. .

Sheridan County .

Weston County . . —

Total Wyoming

(1973). . . . . . . . .

540 1,651(1970) 410(1962

187 187(1973) 5(1963)

2,116 4,345(1968) 2,100(1961)

15,542 20,103(1971) 100(1954)

o 7(1964) 4(1966)

152 300(1933) 125(1967)

6,904 6,904(1973) 1,290(1942)

25,441

Montanaa . . . . . . . 3,620

South Dakotaa . . . 3,620

Total (1973). . . . 32,681

aKonikow, L. F., Preliminary Digital Model of Ground Water

Flows in the Madison Group, Powder River Basin and Adjacent

Areas, Wyom/ng, Montana, South Dakota, North Dakota, and

Nebraska, U.S. Geological Survey Water Resource Investigations

63-75, January 1976,

Source: State of Wyoming, State Engineer’s Office, /investigation of Recharge to Ground Water Reservoirs of Northeastern

Wyom/ng (The Powder River Basin) (June 1976), unless otherwise

noted.

Table 29. Uses of Madison Ground Water

in Wyoming, 1973

Acre-feet

Use withdrawn

Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,258

Domestic, commercial, stock, fish,

and irrigation . . . . . . . . . . . . . . . . . . . . . . 1,558

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,595

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,441

Source: State of Wyoming, State Engineer’s Office,

1976.

Water for the Montana Pipeline

The coal source for the pipeline from Montana would be Colstrip, Mont. Flows in the surface streams in the immediate area are too

unreliable to supply water for coal slurr y

pipelines, which will require 6,300 to 7,600

AF/yr. The U.S. Bureau of Reclamation has suggested the use of an aqueduct to divert water

from the Bighorn River. ” Such a diversion

could provide about 209,000 AF/yr (see figure

27). However, Montana law may preclude use

of such water for coal slurry pipelines ,

however, inasmuch as such use to transport

coal out of State has been deemed by statute

not to be a beneficial use.

By the terms of the Yellowstone River Compact, Montana’s share of the Bighorn River’s

flow averages about 400,000 AF/yr. Although

present uses of this water account for only

about half this amount, projected futur e

demands exceed supply by the year 2000.

Table 30 shows that present unexercised industrial options (rights to purchase water,

usualIy from existing or proposed storage

facilities, for a given time) and applications exceed Montana’s share of the Bighorn River.

Pipelines will have to compete with alternative

water uses for water.

Table 30. Water Supply and Demand,

Bighorn River Basin, Mont.

Water

quantity

Use category AF/yr

Present agriculture . . . . . . . . . . . . . . . . 200,700

Industrial optionsa. . . . . . . . . . . . . . . . . 228,000

Additional applications. . . . . . . . . . . . . 422,000

Total projected demandb. . . . . . . . 850,700

Montana’s share of Bighorn . . . . . . . . . 400,000

Projected deficit. . . . . . . . . . . . . . . 450,700

a Not exercised as of January 1975.

b Does not include municipal use or reservoir evaporation.

Source: U.S. Department of the Interior, Water for

Energy Management Team (January 1975).

Water for the Tennessee Pipeline

The hypothetical coal slurry pipeline has its

source near Tracy City, Term. The pipeline

wouId require 10,300 to 12,100 AF/yr. The location of this pipeline source is on a divide straddling three drainage systems. To supply a coal

slurry pipeline, water must either be brought

“ Appraisal Report on Montana-Wyoming Aqueducts, U S

Bureau of Reclamation, Denver, Colo , April 1972
Ch. VI Environmental and Social Impacts ● 101

Figure 27– Proposed Aqueducts, Bighorn River to Colstrip

I

/

Source U S
102 ● Coal Slurry Pipelines

uphill to the coal or the coal must be conveyed

to a reliable water source. Ample water is

available in the Tennessee River and could be

withdrawn downstream from Nickajack Lake,

a nearby reservoir, and pumped about 1,300

feet up to Tracy City. Ground water supply is

not a feasible alternative in southeast Tennessee.

Given the large flows in the Tennessee River

(average 2.56 x 107 AF/yr) withdrawal of up to

12,000 AF/yr by several coal slurry pipelines

would not be expected to have any significant

impact upon stream water quality. Th e

primary current consumptive uses of water in

the Tracy City area are municipal and do not

present apparent conflict with future alternative water uses, including pipelines.

Water for the Utah Pipeline

The hypothetical coal slurry pipeline from

Utah would transport coal from any of the

seams in the Book Cliffs or Wasatch Plateau in

east-central Utah. Water requirements for the

hypothetical route would be 6,390 to 7,150

AF/yr. In addition to the water necessary for

the slurry, water may be required for revegetation of the pipeline right-of-way. Water for

revegetation, however, must be supplied at

locations along the route, not just at th e

pipeline source,

Coal in this area is mined in rugged terrain

characterized by high escarpments and narrow

ravines. If the slurry preparation pIant were at

a mine site, water would have to be pumped

through elevation gains of up to 1,000 feet.

The alternative would be to deliver coal by

train, truck, or conveyor to the base of the

cliffs. The Green River at Green River City has

an average discharge of 4.614 million AF/yr,

and the minimum flow between 1894 and 1970

was 184.6 thousand AF/yr. 20 The Price River at

Woodside, Utah (22 miles upstream from the

confluence with the Green) has an average

discharge of 74,620 AF/yr.

21 Physical supply of

‘“ Surface kt ater .supplv of the United States, ~ 966-1970, Part 9,

Co/orado Ri\er Ba~/n, L’ol ,?, Co/orado Rl\er Basin from Gree n

R/ver to Compact Po/nt, U S Geological Survey, Water-Supply

Paper 2125, 1971

~’ Iblcf

water for use in a slurry pipeline is ample. The

Green River, because of its greater flow, is the

most likely water source for this route. The

Navajo sandstone aquifer underlies this area,

but local data on yields are very limited, and it

is not considered here as an alternative source.

The chief limitation upon water use for coal

slurry pipelines in Utah appears to be institutional. The Green River joins the Colorado

River about 50 air miles south of the town of

Green River, and the Price is a tributary of the

Green River. Any use of surface water (and certain ground water sources) in eastern Utah

must be considered in the context of Utah’s

participation in the Colorado River Compact,

whereunder the Lower Colorado River Basin

must receive 75 million acrefeet of Colorado

River water over any 10-year period; the Upper

Basin’s annual share is thus the total flow

minus 7.5 miIIion acre-feet. By further agreement among the Upper Basin States, Utah is

entitled to 23 percent of whatever the Upper

Basin has left after deliveries to the Lower

Basin .22 The State’s annual allotment is about

1.2 to 1.4 million AF/yr.

Additionally, in Utah, all water belongs to

the public and may be appropriated fo r

beneficial use. 23 For an application to be approved there must be unappropriated water,

the diversion plan must be physically and

financially feasible, and the appropriatio n

must not be speculative. Whether water use

for a coal slurry pipeline meets these requirements must be determined by the State

engineer, under guidelines from the Uta h

Board of Water Resources.

It is questionable whether the transfer of

12 G D Weatherford, “Legal Institutional Assessment of the

Water Allocation Prlorltles In the Colorado River Basin, ” Utah

Coal for Southern California Energy Consumption, P C Grew, M

Simmons, and B Sokolow (Eds ), Unlverslty of California at Los

Angeles, Department of E nvlronmental Science and E nglneerlng,

Report 76-19, pp 3-1 to 3-23, 1976

1 ~ R pu rtl ch, ) Wegner, et al , ‘‘Utah Water Law, ” Study of

A /ternat/ve Locat/ons of Coa/-F/red E/ectr/c Generating P/ants to

Supply Energy From Western Coal to the Department of Water

Resources, Unlverslty of California at Los Angeles, Institute of

Geophysics and Planetary Physics and Off Ice of Environmental

Science and Engineering, pp 6-109 to 6-120, March 1977
Ch. VI Environmental and Social Impacts ● 103

Utah water to another State is legal. 24 25 Such

a transfer may be possible if the receiving

State reciprocates. Transport of water from

Utah to California would constitute transfer

from the Upper Colorado River Basin to the

Lower Basin and must be compatible with the

Colorado River Compact. In the final analysis,

the hypothetical coal slurry pipeline would

compete with other future alternative water

uses, many of them energy related, for a

limited water supply.

Alternative Water Supply Sources

Given the relative scarcity of water in some

potential coal slurry pipeline origins, it has

been suggested that pipelines use water less

suitable for other beneficial uses. 26 27 Salin e

water is defined as water having a TDS (total

dissoIved solids) concentration exceedin g

1,000 miligrams per liter (mg/1).A number of

saline western ground water sources, including

parts of the Madison Limestone, have been

identified 28 For example, water with a TDS

concentration exceeding about 1,300 (mg/I is

not useful for crop irrigation, Although water

with high concentrations of TDS or other constituents may require treatment by the user, it

can Iiberate fresh water at the pipeline source

for other uses, In addition, diversion of highly

saline waters from tributary streams coul d

help meet downstream salinity reductio n

goals. It has also been suggested that primary

sewage treatment effluent be used as the coal

slurry carrier medium. 29 30 Irrigation return

“ W Cert$ch, LJ S Energy Research and Development Admln l\trat Ion Idaho Operations off Ice, Idaho Fa I Is, Idaho, personal { ommunlcation, July 19, 1977

~ ~ D d ~, Id F \,erett, U S B urea u of Land M a n a gem e n t, C da r c I tV

Dlstrlc t ott I( e, Cedar Citv, Utah, personal communlcatlon, j uly

11, 1977

“ J K Rice, J M Evan$, and M Warner, fn~ Ironrnental Con-

>~ciera tjonf ot the Ufe of $a Ilne it ater In Cod I \ Iufrv P/pe//nes

“ J a me\ Lam bert, U S Bureau ot Land Management,

Cheyenne, W(

YO , personal communlcatlon, Aug 21, 1977

‘a h+at~onal Energ] Tran>portat/on, Vol 1, ( urfent Svsterns and

Mo\emt?nt$, Congre$stonal Research Serv ice, May 1977

“ A C f3uc k, “~egllgtble[ nvlronmental Irnpac t of Coal Slurry

Plpel lnt~s ‘ Proceec//ngf ot the .2nd /nternat/ond/ Techn/ca/ Con

fer[>nce on $ ~urrp Tran $portat Ion I a \ L’ega ~ N ev , pp 81-87, ,Ma r

24, 1977

“) J W Moore, Statement before U S ti(~use ot Rt=pre\entat tves Comm !tt~e on I nterlor and I n~u I a r Aft a I rj, S LI bcom -

m I t tee on I nd I a n A f t a t r5 a n d PU b I I c Land 5 — IM I ne~ and h! i n I n g

Chwenne wvo , June 9, 1977

flows are another possible water source. Finally, recovered slurry water could be recycled in

the coal slurry pipeline.

End uses of the recovered slurry water may

affect the feasiblity of using saline water or

water with high TDS. Use as evaporative cooling tower makeup or direct discharge t o

streams would require treatment of th e

recovered slurry water, although conventional

lime and soda ash softening followed by ion

exchange resin treatment may suffice. 31

Primary sewage treatment effluent also has

high TDS, as well as considerable organic

material, bacteria, and other contaminants.

Secondary treatment effluent, which is considerably more amenable to reuse, was used in

1973 in nine powerplant cooling systems, 32 and

has been proposed for at least one more, and

has been suggested for use in pipelines. An important question is whether local communities

in coal-producing areas can generate enough

sewage effluent to supply a coal slurry pipeline. For example, all the community domestic

wastewater treatment faciIities in the two

counties near the origin of the hypothetical

Utah slurry pipeline, produce a combined total

of 3.4 million gallons per day of effluent, or

about 3,850 AF/yr. 34 If this could all be collected, it would still be insufficient except as a

supplementary supply. Advantages of using

sewage effluent are that a reliable minimum

daily flow is obtainable in areas of water shortage, and such use decreases the need for construct ion of sewage treatment faciIities.

“ G K Mal Ik, Associate Pl~nt E nglneer, Mohave Generating

Station, Nev , personal communication, J UIV 12, 1977

“ E Goldman and P j Kelleher, ‘Water ReuJ[L I n FO$SI I Fueled

Power Stations, ” Complete L$ ater Reuw lncf~istrv f (lpportunlt},,

L K Cecil (Ed ), American Institute of Chemical E nglneerf, pp

240-249, 1973

i J C L Weddle and A C Rogers, k$ ater R~c/arna(/on Proce~s

E;~/uat/on for the Ar/zona Nuc/ear Power Project prejented At

the American Institute of Chemical E nglneer$ Water Reuse C-on

feren( t’, Chl( ago, Ill , May 4-8, 1975

‘4 L J Nleyers, R D M I I Iar, and R E T urlev ‘‘Water Cha I Ienges

I n C a rbon and ~ rner} Count Ies, Impact of fner~v De~ e/opment

on Utah kt ater Resources, Proced/ng~or the ]rd ,4 nnua 1 Conference ot the Utah ~ectlon of the 4mer/can kt ater Re>ource\

As soc /,] ?/on, pp 97-1 11, F eb 20, 1975
104 ● Coal Slurry Pipelines

A final alternative water source is recycling

and reuse of the recovered coal slurry pipeline

wastewater. The major disadvantage of this

alternative is the added cost of a retur n

pipeline. The advantage is that water re -

quirements would be substantially decreased.

The extent of water savings is dependent upon

the moisture content of the coal, as well as the

efficiency of the dewatering process, an d

typically about two-thirds of the water could

be recycled.

If saline water were to be used in a coal

slurry pipeline, the main problem for th e

system itself would be increased corrosivity in

the presence of high-dissolved solids concentrations. Increased use of corrosion inhibitors

may be required. Suspension of finely divided

coal in water with high sodium concentrations

may cause, through an ion exchange, an increase in sodium bound to the coal surface,

resulting in fouling problems when the coal is

burned .35 A mitigating measure could be to

wash the coal with Iow-TDS or acidified water.

Coal-Water Interactions and Corrosion

Possible chemical interactions between coal

and the carrier medium are important because

of possible adverse environmental impacts

from: 1) a slurry spill or pipeline rupture; 2)

slurry dewatering process and water reuse or

waste water disposal; and 3) alteration of combustion characteristics of the end-produc t

coal. Nonetheless, very little is known about

coal-water interactions.

Coal, a combustible solid formed fro m

decomposed vegetation, has a wide variety of

physical and chemical properties. The chief

elements in coal are carbon, hydrogen, and oxygen, with smaller amounts of nitrogen, sulfur,

and a large number of trace elements. Oxygen

content ranges from about 1.5 percent by

weight in anthracite to about 30 percent in

lignite, The higher the oxygen content the

more chemicalIy reactive the coal.

‘

5 j K Rice, J M Evans, and M Warner, Env/ronrnenta/ Consfdera tjons of the Use of Sa /)ne Water (n Coa / .S/urry Pfpe//nes

Coal in slurry form has a large surface area

in contact with the water. For example, if each

coal particle is assumed to be spherical and

completely surrounded by water, then given

the particle size distribution of the existing

Black Mesa pipelin e

36 the contact area, or

possible reactive surface, for one contract ton

of coal is about 220,000 square meters, or

about 55 acres. Thus, because of the variety of

reactive compounds in coal, the large reactive

surface, and the long residence time (about 13

days for a 1,1 70-mile pipeline), coal-water interactions could be substantial.

Although considerable evidence is available

concerning what materials will be leached

from coal by water in the presence of air,

almost none exists for the anaerobic conditions that will be encountered in a pipeline.

The reactions involved in the well-known acidmine drainage phenomenon, for example, require oxygen. Oxygen will be present in a slurry

pipeline system only where the slurry i s

prepared and first introduced into the pipe.

In summary, as long as the slurry water is oxygenated for at least the initial part of the

journey, it is likely that some constituents will

be transferred from the solid to the liquid

phase. The extent of leaching will depend

upon the initial pH, the presence of potentially

leachable species in the feed water, and the

tendency of dissolved ions to precipitate at

slurry temperature and pH. Coal composition

is also critical. Before firm conclusions on

chemical reactions in a real slurry may be

drawn, information o n leaching unde r

anaerobic conditions is necessary.

Corrosion and corrosion inhibitors may affect slurry wastewater quality. In general, corrosivity (the corrosion rate) increases with increasing temperature, dissolved ionic strength,

and decreasing pH. These factors can be

directly affected by coal surface interactions.

Chemical additives are known to be effective in minimizing corrosion. If corrosion inhibitors are not used, an appreciable amount

16 M L DI nd, C)peratlng Experience a t the ? 580-M w COal SlurrY

F/red Generating StatIon, presented at the International Conference on Slurry Transportation at Battelle Memorial Institute,

Columbus, Ohio, Feb 3, 1976
Ch. VI Environmental and Social Impacts ● 105

of iron will enter the slurry, but apparently

only a small amount of iron will remain in solution. One corrosion inhibitor, hexavalen t

chromium, could pose environmental problems in the event of a spill. Wildlife drinking

the spilled slurry wastewater with the corrosion inhibitor could be poisoned. 37

Slurry Water Reuse and Impacts

At the receiving end of a coal slurry pipeline,

the slurry may be dewatered by several means

(either alone or in combination): centrifugation, chemical flocculation, 38 vacuum filtration, 39 or heating. Slurry dewatering yields are

variable, but calcuIations based on figures

reported by one plant

40 indicate that 64 percent of the slurry carrier medium is available

for reuse.

The ultimate use of the recovered water

depends upon its chemical quality at the point

where it leaves the slurry system and the

technical and economic feasibility of treating

it to permit alternative reuses. The three major

potential reuses are: makeup water for a

powerplant cooling system, discharge to surface waters, and agricultural irrigation.

Table 31 lists the effluent requirements

which recycled coal slurry water must meet in

order to be discharged into a water of the

United States from a steam powerplant, the

most Iikely end point of slurry pipeline. The effect of contaminants in recovered slurry water

upon compliance with water quality standards

is difficult to assess, because in most cases the

recovered slurry water will be given more treatment or mixed with other water streams within

the plant. Prior to discharge, the powerplant or

other coal slurry pipeline terminus would be

required to obtain a discharge permit under

the National Pollution Discharge EIimination

System of the Federal Water Pollution Control

Act of 1972, administered by the Environmental Protection Agency (EPA). Also, some of the

65 priority pollutants identified under the settlement agreement in National Resource s

Defense Council v s Train include trac e

materials present in coal.

Table 31. EPA Discharge Standards for New Sources,

Steam Electric Power Generating Point Source Category

Maximum average

Maximum for for 30 consecutive

EffIuence characteristic Source any one day days

pH . . . . . . . . . . . . . . . . . . . . . . . . . . . . All except once-through cooling 6.0-9.0

Total suspended solids. . . . . . . . . . . Low-volume wastesa 100 mg/I 30 mg/l

Bottom ash transport 100 mg/I 30 mg/l

BoiIer blowdown 100 mg/I 30 mg/l

Fly ash transport Zero discharge

Total copper. . . . . . . . . . . . . . . . . . . . Boiler blowdown 1.0 mg/l 1.0mg/l

Total iron . . . . . . . . . . . . . . . . . . . . . . Boiler blowdown 1.0 mg/l 1.0 mg/I

Corrosion inhibitors . . . . . . . . . . . . Cooling tower blowdown No detectable amount

a Wastewaters from wet scrubbers, ion exchange water treatment, blowdown from recirculating house service water

system, etc.

b Mass discharge Iimit is 0.05 x flow x values in table.

c Include, but are not Iimited to, zinc, chromium, and phosphorus.

Source: 39 C.F.R. 36186,40 C.F.R. 7095,23987, and 42 C.F.R. 15690.
106 ● Coal Slurry Pipelines

The second alternative end use—direc t as to best available technology would apply.

discharge to surface streams–might be considered if the water from the slurry were not The only significant problem with the third

used after dewatering at the destinatio n alternative sIurry end use — agricuItural

powerplant, or if the plant used once-through irrigation — is the high levels of TDS (400 to

cooling. A discharge permit would be required 1,100 mg/1 ) in slurry water. Dilution with better

in this case as well. No standards currently ex- quality local water could reduce the TDS

ist for slurry discharge so “engineering judg- Ievels sufficiently to permit agricultural uses.

ment” as to best available technology would

apply.

COMMUNITY DISRUPTION BY RAILROADS

The major environmental impact of in -

creased unit train operation will be the impact

upon the daily lives of the people of the communities through which the unit trains wil l

pass. Many towns, especially in the West, have

been built around and because of the railroads. Railroad rights-of-way often divide major portions of towns. The impact of increased

unit train operations will be to increase the

volume of traffic on certain routes, an d

perhaps this increase will reach a point where

it disrupts the transportation, land use, and

social patterns of the residents. The impacts

are not environmental in the strict, traditional

sense. They are instead social impacts — affecting the Iifestyles of people.

Virtually all the train-related environmental

impacts discussed elsewhere in this chapter

have a social and psychological component.

Social components of the impacts cannot be

readily quantified largely because of th e

variability of human response. Nonetheless,

the possibility and variability of human reactions must be noted. For example, 26,000 additional people living between Gillette, Wyo.,

and Houston, Tex., would be exposed to noise

levels exceeding EPA recommended standards

as a result of 17 million tons per year of increased coal traffic along the hypothetical

route. If train noise makes an impacted area

less desirable, then the people affected will

either move or adjust their Iives to the noise.

Increased train traffic could alter commuting

patterns. People may have to leave home

earlier every day to compensate for possible

delays caused by trains on their trip to work.

The main point here is that thousands of people will each be affected in a relatively small

way.

One immediate measurable aspect of the

disruption is rail-highway grade crossing accidents. In the period 1965-74, an annual U.S.

average of 21,000 rail-related accidents occurred, of which 5,000, or 24 percent, occurred

at rail-highway grade crossings. In attempting

to determine whether such accidents will increase with an increased volume of unit train

operations, simple assumptions are inapplicable. Accident rates are a function of type

of crossing protection, numbers of tracks,

numbers of trains and vehicles per day, urban

or rural setting, and time of day. It is clear

from analysis of 3,870 grade crossings in 2 1

States that increased unit train operation

would result in increased accidents. The increase is not in direct proportion to the increase in train volume. A 74.5 million tons per

year increase in coal traffic could result in 8

deaths and 30 injuries above present levels if

the case assumptions are correct (see table 32).

For example, in one hypothetical case, a 90-

percent increase in train traffic will yield a 21-

percent increase in deaths and injuries. These

accident rates would be reduced by the installation of any traffic protectio n improvements.

The frustration or inconvenience to the local

community and accidents indirectly related to

increased train volume are not readily quan-
Ch. VI Environmental and Social Impacts ● 107

Table 32. Predicted Annual Injuries and Deaths Based on Present

and Hypothetical Train Traffic Levels

Rail traffic Incremental

Present with hypothetical impact of

raiI traffic added tonnage added tonnage No. of Coal tonnage

Route Deaths Injuries Deaths Injuries Deaths Injuries crossings (106

tons/Yr)

Gillette-Dal lab. . . . . . . . . . . . . . 6.0 23.1 8.1 31.1 2.1 8.0 659 18

Gillette-Houston . . . . . . . . . . . 10.9 42.8 13.2 51.9 2.3 9.1 1,393 17

Colstrip-Becker/Portage . . . . . 8.6 33.1 9.4 36.6 0.8 3.5 695 13.5

Tracy City-Waycross . . . . . . . . 6.0 23.6 6.5 25.2 0.5 1.6 480 16

Waycross-Tampa . . . . . . . . . . . 1.3 5.1 1.6 6.4 0.3 1.3 190 8

Waycross-Ft. Lauderdale . . . . 4.1 15.9 5.4 20.9 1.3 5.0 281 8

Price-Barstow . . . . . . . . . . . . . . 1.5 5.7 1.8 7.1 0.5 2.3 172 10

Total . . . . . . . . . . . . . . . . . 38.0 149.0 46.0 179.0 8.0 31.0 3,870 74.5

Source: Science Applications, Inc.

Table 33. Annual Added Vehicle Operation Costs (1974 Dollars) and Travel Time

Due To Increased Coal Train Traffic

Vehicle oper- Traveler

at ion costs ($) time costs ($) Total ($) Time stopped (hrs.)

Movement T1 T2 T1 T 2 T 1 T2 T 2 -T 1 T 1 T2 T2-T1

Gillette to Dallas . . . . . . . . . 3,160 3,532 2,184 4,489 5,344 8,021 2,677 347 1,366 1,019

Gillette to Houston . . . . . . . 3,639 4,023 3,024 5,288 6,663 9,311 2,648 647 1,693 1,046

Colstrip to Becker. . . . . . . . 1,879 2,028 2,112 3,013 3,991 5,041 1,050 602 983 381

Colstrip to Portage. . . . . . . . . Cannot distinguish between T1 and T2. . . . . . . . .

Tracy City to Waycross. . . . 2,707 2,832 3,108 3,589 5,815 6,458 643 898 1,225 327

Waycross to Tampa . . . . . . 526 542 423 467 949 1,009 60 86 104 18

Waycross to Ft. Lauderdale 4,169 4,297 5,078 5,440 9,247 9,737 490 1,456 1,820 364

Price to Barstow . . . . . . . . . 650, 691 583 800 1,233 1,491 258 137 225 88

Totals . . . . . . . . . . . . . . 7,826 3,243

T1 — Present rail traffic In trains per day. T2— Rail traffic with hypothetical added tonnage in trains per day.

Source: Science Applications, Inc.

tifiable. Stopping and waiting for trains to pass

through railroad crossings results in additional

vehicIe operation and travel-time costs.

Assuming present train and highway traffic

plus the added coal trains considered in the

four case studies, the estimated added costs

were calculated. As shown in table 33, the coal

unit trains would impose estimated added annual delays of 3,243 vehicle hours if no new

grade crossings are built. The precise amount

of time and cost borne by any one person or

community cannot be accurately calculated,

but spread across miles of track individual

delays and costs should be relatively minor.

Mitigation of increased railroad-highway accidents and traffic delays requires costly grade

separations. Cost aside, grade separations are

an important alternative for vehicular traffic

at railroad crossings, although other types of

disruption may not be easily mitigated.

Increased train traffic in communities that

are divided by railroad tracks without grade

separations could yield unquantifiable problems. For example, emergency fire, medical, or

police vehicles may occasionally be temporarily delayed in reaching emergency situations. Grade separations should therefore be
108 ● Coal Slurry Pipelines

considered where this type of problem i s

sign if i cant.

Increased rail traffic could cause problems

in rural areas where the land is primarily used

in ranching and farming. Either “sheep-tight”

fences, designed to reduce hazards to freeranging animals, or frequent train traffic will

prevent ranchers from crossing railroad tracks

with their herds. Increased unit train traffic,

additional fencing, or new rail construction

could make this problem worse. On the other

hand, cattle passes are built in new rail lines,

and old lines often parallel highways, which

block the passage of cattle independently of

raiI activity.

Another impact of increased train traffic

with social and psychological implications for

the affected community is noise. The main

noise sources in unit train operations are the

locomotives’ diesel-electric motors, the interaction between wheels and rails, and the

vibrations of hopper cars.

41 Maximum trai n

sound levels range between 80 and 10 0

decibels (dBA) at a distance of 50 feet, 42 b u t

the perception of sound is very subjective and

subject to reduction by land forms, thic k

4’ J M Fath, D S Blomqulst, et al , Measurement of i7a//road

No/se – Line Operat/on and Retarder~, National Bureau of Standards (NT I S COM-75-l 0088), 1974

4’ Ibid

vegetation, and densely packed housing or

buildings. The day-night average sound level

( Ld n

), which is a noise exposure measur e

weighted more heavily for nighttime than for

daytime, increases with increasing numbers of

rail line haul operations. Table 34 identifies the

human effects of various EPA recommended

noise levels outdoors in residential areas and

on farms. The Environmental Protection Agency has judged the level of 55 dBA to be the

maximum allowable Ldn which protects public

health and welfare, with an adequate margin

of safety.

Guidelines for community noise exposure,

based on the Ld n

, were available, so th e

population potentially exposed to noise levels

exceeding the standard was estimated a s

shown in table 35. In short, the noise impact

for each hypothetical railroad route depended

upon two factors: 1 ) the predicted increase in

the number of railroad Iine-haul operations

due to heavier coal traffic, and 2) the population densities along the proposed routes .

Although the increased number of peopl e

likely to be subjected to levels above 55 dBA

can only be roughly estimated, it is clear that

the number will increase.

The impact upon the lives of the affected

people of the increased exposure is impossible

to assess because noise impacts depend heavTable 34. Summary of Noise Levels Identified by EPA as Requisite to Protect

Public Health and Welfare with an Adequate Margin of Safety

Effect protected Recommended

against noise level Area

Hearing loss Leq(24) a 70 dBA All areas

Outdoor activity L d n 55 dBA Outdoors in residential areas and farms and other

interference and outdoor areas where people spend widely varying

annoyance amounts of time and other places in which quiet is a

basis for use.

Leg(24) 55 dBA Outdoor areas where people spend limited amounts of

time, such as schoolyards, playgrounds, etc.

Indoor activity L d n 45 dBA Indoor residential areas

interference and Leg(24) 45 dBA Other indoor areas with human activities

annoyance such as schools, etc.

aLe~ is the constant A-weighted sound level which conveys an equivalent amount of sound energy as does an A-weighted

time-varying sound over a given time period. Le 24) is the L~~ of a 24-hour period.

Source: Adapted from U.S. Environmental 1rotection Agency, NTIS:PB 239429(1974).
Ch. VI Environmental and Social Impacts ● 109

Table 35. Population Exposed to Noise Levels Exceeding EPA

Community Noise Guidelines Along Case Study Routes

Total trains per day

Percent

Route 10 25 50 90 T1a T2a increase

Gillette-Dallas b . . . . . . . . . . . . . . . 67,800 111,000 164,900 220,600 58,000 88,000 52

Gillette-Houston C . . . . . . . . . . . . . 70,300 115,000 170,800 228,600 78,000 104,000 33

Colstrip-Becker d. . . . . . . . . . . . . . 30,900 50,500 75,000 100,300 45,000 53,000 18

Becker-Portage e . . . . . . . . . . . . . . 21,300 34,900 51,800 69,400 32,500 34,000 5

Tracy City-Waycrossf . . . . . . . . . . 29,700 48,600 72,200 96,600 50,000 63,000 26

Waycross-Tampa g . . . . . . . . . . . . 11,100 18,200 27,100 36,200 10,500 14,500 38

Waycross-Ft. Lauderdaleh. . . . . . 28,300 46,300 68,700 92,000 44,000 51,000 16

Price- Barstool. . . . . . . . . . . . . . . . 16,800 27,400 40,700 54,500 19,000 22,500 18

aT1 is the current number of trains per day as it appears in grade-crossing inventory data. TZ = Tl plus the projected increase in coal trains per day. bAverage T, and T, are 7.2 and 16.6, respectively. CAverage T, and T, are 11.4 and 20.8,

respect ivel y. dAverage T, and T, are 19.6 and 26.6, respectively. eAverage T, and T, are 21.6 and 23.4, respectively.

fAverage T, and T, are 20.7 and 35.3, respectively. 9Average T, and T, are 9.1 and 16.4, respectively. ‘Average T,

and Tz are 22.4 and 29.7, respectively. IAveraqe TI and TZ are 12.6 and 15.9, respectively.

Source: Science Applications, Inc.

iIy upon subjective factors which vary from i n -

dividual to individual. Among the factor s

which will influence individual perception of

impact are:

●

●

●

•

●

●

●

For

Length and speed of the train;

Time of day noise occurs (this is taken

into account in estimating the Ldn value);

Whether windows are opened or closed;

Background noise level when trains are

not present;

Presence of particularly disturbing o r

pleasing sound frequencies, i.e., some

people may enjoy the sound of a train

horn in the night, while others may dislike

it;

History of prior exposure to train noise;

and

History of

example,

With th e

noise exposure in general.

n terms of total number of people impacted by train noise, the effect would

be greatest in urban areas. Background nois e

and noise tolerance may well be highest in

these areas however, thereby minimizing the

subjective response to the increased train

noise,

Careful planning now can help to avoid

some of the serious negative impacts of increased traffic. Rapidly developing com -

munities should plan urban growth to avoid

community division by railroad tracks. Rai l

traffic should be routed around densel y

populated areas, and where new tracks are

being laid, they should whenever possible bypass extant communities. Areas along railroad

rights-of-way can be zoned nonresidential so

as to minimize the noise impact of increased

rail traffic, Where warranted, grade separations can be built

relocated.

CONSTRUCTION IMPACTS

or tracks otherwis e

exception of the previousl y are comparable in many respects. Most of the

enumerated water requirements for coal slurry railroad lines which will be utilized by coal

pipelines and the peculiar community impacts unit trains are already in existence, and imof raiIroad unit train operations, the en- pacts from new track construction wil l

vironmental impact s of construction an d therefore not be as extensive as impacts from

operation of coal slurry pipelines and railroads coal slurry pipeline construction. This section
110 ● Coal Slurry Pipelines

discusses the environmenta l impacts o f

pipeline and new railroad construction activities. Some impacts, noise from construction

equipment, for example, will occur only during

actual construction, whereas other impacts,

like destruction of vegetation, will require a

few years to rectify. In most locations, construction impacts for coal slurry pipelines and

new railroad construction are relatively minor.

In arid and biologically sensitive areas ,

however, construction impacts are magnified.

Fortunately, by careful advance planning ,

most particularl y sensitive locations –

marshes, ponds, refuge areas, etc., can be

avoided by route alterations. When these locations cannot be bypassed, adverse biological

impacts can be mitigated by performing construction activities during the biologicall y

least sensitive time of the year. The adverse

impacts of construction on rare, threatened, or

endangered species must be minimized, if not

avoided entirely. 43

The same type of short- and long-term impacts that are discussed for pipelines will be

experienced in railroad construction. However,

the mitigating measures available after completion of a pipeline, i.e., revegetation, recontouring and eventual return to original land

uses, are not entirely applicable to railroad

4] Threatened W//d///e of the United States, U S Department of

the Interior, Fish and Wildlife Service, U S Government Printing

Off Ice, Washington, D C , March 1973

rights-of-way because of the continued above-

-ground surface existence of the rail lines,

The most obvious environmental impact of

pipeline construct ion is the clearing of

vegetation —trees, shrubs, and grasses—from

the pipeline route and right-of-way (see figure

28) .

44 45 Construction of the pipeline also requires trenching by blasting and excavation

with backhoes, stockpiling of the soil, installation of the pipe, and back-filling. Since 100

foot rights-of-way are required, as much as 12

acres per mile of pipeline could be impacted.

The loss of vegetation will, in turn, temporarily disrupt, on a local scale, primary

biological productivity, which provides energy

for higher organisms. Additionally, som e

animal communities will be affected by increased human activity (e. g., hunting and

vehicular accidents). In some cases the

animals will be destroyed; in other cases, they

will be forced to relocate until the construction activity subsides or the habitat returns to

its original or a comparable condition. Forced

relocation of wildlife during reproductive or

breeding seasons may magnify the adverse impact on wildlife.

44 F C Vasek, H B Johnson, and D H Esllnger, “Effects of

Plpellne ConstructIon on Creosote Bush Scrub Vegetation of the

Mojave Desert, ” Madrono, Vol 23, No 1, pp 1-13, 1975

4’ F/na/ Environmental Impact Statement, Alaska Natural Gas

Transportation 5ystem, O;erv/ew Vo/ume, U S Bureau of Land

Management

Figure 28–Typical Pipeline Construction Spread

Clearing and

Grading

Clean-Up and

Restoration Source Bureau of Land Management
Ch. VI Environmental and Social Impacts Ž 111

Construction of pipeline and railroa d

facilities for coal handling will require permanent use of land for spurs and sidings, bridges,

loading and unloading facilities, and maintenance stations. During the constructio n

phase, vegetation will be destroyed and local

fauna will be forced to relocate. The effects of

floral and faunal disruption from rail construction will be similar to the effects from coal

slurry pipeline construction, however, they wilI

generally not be reversible as they are for

pipelines. Disruption of biological com -

munities is discussed in this chapter as an impact of raiIroad operation.

Increase d presence o f people an d

machinery during construction increases the

fire hazard for both railroad and pipeline construction. Fire would result in further loss of

vegetative cover, wiIdlife habitats, and disruption of biologic communities.

The duration of coal slurry pipeline construction impacts may be governed by the extent of compaction, mixture of soil layers, and

alteration of drainage patterns, all of which affect the potential for revegetation. Erosion by

both wind and water of lands left without

vegetative cover couId be substantial, particularly on steep slopes in arid climates. 46 Soi l

particles may be blown or carried away by surface runoff, resulting in loss of topsoil, unsightly and potentially hazardous alterations of the

ground surface, and pollution of rivers and

streams. 47 Rapid establishment of a ne w

vegetative cover wiII help minimize thes e

problems.

Pipeline construct ion wilI temporarily

disrupt soils and destroy vegetation along the

right-of-way, creating an undesirable visual effect and exposing bare soil to chemical change

and erosion. Experience has shown that most

areas affected by pipeline construction can be

successfully revegetated. Revegetation is a

natural process which occurs after a major

“ D G A Whltten and J R V Brooks, The Pengu/n D/ct/onary

ot Geology, PenKu!n Book$, Baltlmore, Md , 1972

4

‘ FIna / [nk /ronrnentd/ /rnpdcf Stafernenf, A Iask.a Natural Gas

Tran$porta//on $}~tern, O\erk ~ew L’o/ume, U S Bureau of Lan d

Managemen t

disturbance of the vegetative cover, whether

by fire, erosion, or human activity. Natural

revegetation is a relatively slow process and

may require a number of years 48 49 depending

on various geographic , geological, and

climatic factors. Rapid revegetation to reduce

erosion and restore biological productivity by

deliberate planting of desirable plant species is

necessary in some areas. In Wyoming, crested

wheat grass (Agropyron desertorum) has been

used to establish a quick grass cover. It does

not spread, but it is not invaded by native

species and leaves an area usually discordant

wit h the surroundin g region. Potential

revegetation problems in the West include:

prevention of mixing the top soil with the

“hardpan” or “caliche” (a layer of in -

penetrable carbonate soils); inadequacy of

water supply for plant growth; 50 51 and difficulty of quickly establishing ground covers

which will be easily invaded by the surroundi n g native species. Revegetation can also

minimize the impact of construction activities

related to railroad construction. The track and

immediate right-of-way may not be revegetated but the wider area affected by heavy

construction activity can be.

The aesthetic and productive value of land

may be temporarily decreased by pipeline construction. Most of the pipeline right-of-way in

the hypothetical routes examined in this report

cuts through agricultural land, and disruption

of agriculture therefore could be a significant

environmental impact. The production of at

least one full growing season would be lost for

croplands, possibly more for natural grazing

lands. For example, as much as 7,600 acres of

pastureland and 3,500 acres of harvested cropIand would be lost for the single hypothetical

‘a F C Vasek, H B Johnson, and D H E ~llnger, “Eftects of

Plpellne Construct Ion on Creojote Bush Sc rub \’egetatlon ot the

Mojave De$ert, ” Macfrono, Vol 2 J, No 1, pp 1-11 197 5

49 W T Pla$s, “ Revegetatlng Surface-Mined 1 and, ” Mlnlng

Congress lourna/, Vol 60, No 4, pp 53-59, 1974

‘0 A R Verma and j L Thames, ‘Rehabllttatlon ot Lan d

Disturbed by Surtace Mlnlng Coal In Arizona, ” journal of SOII

and L+ ater Con>er\at/on, pp 129-131, Malt-l une 1975

“ F C Vasek, H B Johnson, and D H Esllnger, “Effect$ of

Plpellne ConstructIon on Creosote Bush Scrub Vegetation of the

Mojave Desert, ” Madrono, k’ol 23, No 1, pp 1-13, 1975
112 ● Coal Slurry Pipelines

Wyoming to Texas pipeline (table 36). Note

that the lost acreages represent very small

percentages of the county totals. Loss of

agricultural productivity will probably be a

negligible impact of railroad construction activity because so little new construction will be

necessary, and the smalI amounts of new construction will most likely be as spurs and

therefore not transect agricultural lands.

Pipeline construction may disrupt recreational activities and aesthetic values in certain

areas. This constructio n impact can b e

minimized by careful route planning to avoid

recreational areas, and to time construction

with seasons of low use . Disruption o f

streambeds and flows can also be minimized

by scheduling construction during low-flow

periods, so as to avoid temporary impacts such

as sediment loading, reduced visibility ,

photosynthesis, and resultant altered productivity.

Pipeline grades must be below 16 percent.

Notching or sidehill cuttings to achieve these

gradients may create sharp topographic

features and surface runoff. 5253 Careful recontouring of the lands to the original contours

wilI minimize long-term adverse impacts on

slopes and streams. Railroads require a 1-

percent grade, so greater amounts of grading,

cutting, and filling may be required for the

limited amounts of new track construction.

Wherever possible, steep slopes should be

stabilized to acceptable angles and physically

covered to prevent erosion until vegetation is

established.

Dust-particle emissions from Iand clearing,

blasting, excavation, grading, cut and fil l

operation, and operation of vehicles on unpaved roads is another impact of pipeline construction. Estimates of the precise amount of

dust emissions are site-specific in that they depend upon soil moisture, soil particle size and

“ B W Slndelar, R L Hodder, and M E Ma}erus, 5urfaceM/ned land Reclamation Research In Montana, Montana State

Unwerslty, Montana Agricultural Experiment StatIon, Research

Report 40, April 1973

“ W C Bramble and R H Ashley, “Natural Revegetatlon of

Spoils Banks In Central Pennsylvania, ” Ecology, Vol 36, No 3,

Pp 417-423, 1955

distribution, and local meteorological conditions such as wind and humidity. Dust emissions can be reduced by about 50 percent by

wetting down the construction area twic e

daily. 54

Dust-particle emissions during railroad construction are of the same character as air emissions from coal slurry pipeline construction. A

quantitative comparison is not attempted ,

however, because of the site specificity of

such factors.

Noise emissions are another impact o f

pipeline and railroad construction . Mos t

pipeline construction will avoid heavil y

populated areas, noise is a relatively minor impact, and the magnitude of pipeline construction noise is no different from other construction noise.

The impacts of construction of coal slurry

pipelines and new railroad trackage ar e

qualitatively similar. It is expected that new

track construction wilI require greater circuitry, grading, and cut and fill activities

because of the lesser-required grade fo r

railroads (1 percent) as compared to pipelines

(16 percent). However, the total amount of

new track construction will be very small compared to pipeline construction, because the

railroad network necessary for coal unit train

operation is largely extant. Finally, because

pipelines will be buried beneath the Earth’s

surface there is greater opportunity to mitigate

adverse construction impacts by recontouring

and revegetation of the pipeline right-of-way.

Pipeline routes can also now be planned to

avoid especially sensitive areas of biological,

agricultural, or other important human activity. This rerouting to mitigate environmental

impacts must be balanced with the costs of

various routes.

The geographical area of construction affects the significance of these impacts .

Although extensive pipeline construction is anticipated, the narrowness of the rights-of-way

54 G A Jutze, K Axetell, jr , and W Parker, /nvestigat/on of

Fugit/ve Dust Sources Em/ss/ons and Contro/, U S Environmental

ProtectIon Agency, Research Triangle Park, N C , EPA-45013 -74-

036a, j une 1974
Ch. VI Environmental and Social impacts ● 113

Table 36. Agricultural Land Use Along Hypothetical

Wyoming-Texas Pipeline Route

Total acreage Acreage Total county

7% of county land Harvested Miles Acres

State/County County Farmland i n farms Pastureland crop land Woodland traversed disturbed

WYOMING

Campbell

Weston

Converse

Niobrara

Goshen

95.5

98.3

89.0

95.3

91.2

93.6

76.9

93.4

87.3

86.7

101 .2a

2,650,848

1,269,502

2,332,325

1,499,910

1,014,638

6,116,375

918,495

225,015

220,069

566,863

218,688

1,231,553

579,793

99,194

819,067

66,637

16,424

41,427

50,309

166,666

5,821

96,974

17,178

11,946

14,962

46 552

17 204

3 36

69 828

21 252

3,043,520

1,540,416

2,740,224

1,672,960

1,425,984

2,905,296

1,514,920

2,439,713

1,593,748

1,299,978

10,423,104 9,753,655 341,463 146,881 156 1,872

NEBRASKA

Sioux

Scotts Bluff

Banner

Merrill

Cheyenne

360

288

228

36

528

56,064

165,723

99,571

142,092

276,944

740,394

29,448

3,594

767

5,640

836

40,285

30

24

19

3

44

1,320,192

464,448

472,320

897,408

758,912

3,913,280

1,014,620

434,023

412,126

778,422

767,591

3,406,782 120 1,440

1,149,769

467,309

1,433,473 — .

3,050,551

87.1

98.6

107.4a

94.1

COLORADO

Logan

Phillips

Yuma

6,866

739

6,217

40

4

65

480

48

780

1.308

284,267

217,896

365,958

868,121

1,166,272

435,200

1,522,816

3,124,288 97.6 13,822 109

91.4

87.0

85.9

90.7

90.6

80.3

98.6

93.2

107.8a

91.0

95.7

88.7

94.0

85.9

96.6

96,7

91.0

57.6

76.7

1,497,454

178,537

229,010

266,836

87,719

174,168

197,759

48,892

97,831

332,409

KANSAS

Sherman

Wallace

Logan

Wichita

Kearny

Finney

Haskell

Gray

Meade

675,200

583,040

686,720

463,360

547,264

832,896

371,200

557,952

626,368

617,347

507,271

589,876

420,293

495,951

669,155

365,903

519,931

674,923

4,860,650

263,277

150,332

161,968

205,131

181,435

315,943

237,692

279,155

213,988

2,008,921

1,833

417

4,605

233

344

962

206

1,220

3,619

13,439

36

35

9

36

4

39

17

6

38

432

420

108

432

48

468

204

72

456

220 2,640 – 5,344,000 1,613,161

652,135

503,162

495,104

304,389

243,708

277,243

170,952

264,683

179,688

OKLAHOMA

Beaver

Ellis

Roger Mills

Beckham

Washita

Kiowa

Tillman

Comanche

Cotton

1,145,344

794,880

729,600

580,480

645,696

657,216

576,832

693,760

416,320

1,096,044

705,121

686,026

498,778

623,462

635,696

525,189

399,659

365,037

334,576

146,756

106,372

153,787

335,668

311,083

312,392

94,666

163,172

8,905

13,387

6,388

6,221

7,133

3,605

3,579

9,545

3,348

38

54

27

4

28

43

29

3

4

456

648

324

48

336

516

348

36

48

6,240,128 5,535,023 88.7 2,760

78.2

89.8

80.2

74.3

81.1

66.4

69.5

81.4

81.1

72.4

67.8

69.7

66.2

24.8

3,091,064

184,627

524,734

417,9343

337,041

180,252

174,185

195,644

285,137

238,310

328,869

281,047

190,820

269,090

130,727

1,958,472 62,111 230

TEXAS

Wichita

Clay

Jack

Parker

Hood

Johnson

HiII

McLennan

Falls

Limestone

Robertson

Brozos

Grimes

Montgomery

390,912

705,344

604,928

577,664

272,640

473,472

646,400

640,000

488,960

595,520

561,216

374,720

512.704

305,699

633,564

485,116

429,407

221,006

314,219

449,540

521,270

521,270

431,771

380,628

261,086

339.505

96,151

72,875

12,208

33,825

20,142

86,124

200,984

161,548

116,653

47,176

47,176

32,098

23,460

6,679

9,326

33,659

28,139

8,254

6,171

8,106

17,048

18,831

31,216

52,967

36,640

29.305

19

34

36

37

5

25

32

28

(b)

28

19

39

228

408

432

444

60

300

384

336

312

(b)

336

228

468

697,408 171,985 5,717 44,716

331,057

7 84

7,541,888 5,341,483 70.8 3,738,421 956,583 335 4,020

—..—

aThe acreages of farms which are in more than one county are credited to one county sometimes making the farmland averages fOr that

county greater than the total acreage for that county.

bThe Pipeline route runs along the approximate boundaw between these two counties.

Source: Science Applications, Inc.

.,], . -1 -
114 ● Coal Slurry Pipelines

limits the regional environmental significance. habitats of rare or endangered species, these

The impacts discussed here are geographically impacts assume greater significance than they

very narrow, but in certain very sensitive would elsewhere.

ecosystems, such as deserts, wetlands, and

OPERATIONAL IMPACTS

This section discusses the impacts of operation, as opposed to construction, of coal slurry

pipelines and coal unit trains. The major impacts for each mode of transportation, water

requirement for pipelines, and communit y

disruption including railroad highway ac -

cidents and delays and noise by unit trains,

have been discussed earlier.

Air

Pipeline operations will have an indirect and

relatively minor impact upon air quality if the

electricity required to run pumps, slurr y

preparation equipment, and dewaterin g

facilities is generated by combustion of fossil

fuels. If it is assumed that the electricity would

be provide d by coal-fired powerplant s

operating at 35 percent efficiency and meeting

EPA new source performance standards for

nitrogen oxides (NOX

), sulfur dioxide (SOX), and

particulate emissions, then emissions of these

pollutants for all of the four pipeline cases

would be 12,000, 21,000, and 1,700 tons per

year of NO., S0x , and particulate, respectively.

The environmental impact of the tota l

number of emissions is difficult to assess. In

most cases, power will be required at various

points along the pipeline route, thus, the impact of the air emissions would therefore be

widely distributed. I n reality, these emissions

would increase local levels by less than a few

percent and probably not have a significant

impact on local ambient air quality.

Diesel-electric locomotives emit carbo n

monoxide (CO), hydrocarbons (HCs), nitrogen

oxides (chiefly nitric oxide (NO)), particulate,

and other polIutants during line-haul operations. The amount of each pollutant emitted

depends upon several factors, including fuel

composition and heating value, load, grade

and use or lack of abatement equipment. In

table 37, emission factors, in terms of pounds

of pollutants emitted per 1,000 gallons of

diesel fuel consumed, are listed. To put these

emissions into perspective, consider the emissions for a unit train coal movement from

Wyoming, of about four times the volume of

the hypothetical pipeline to Dallas, Tex. Such

a movement of 65 million tons of coal would

require 228 million gallons of diesel fuel per

year.

Table 38 shows the emissions expected

therefrom and compares the train emissions to

the emissions from highway vehicle traffic.

Another useful way of examining air -

pollution impacts would be to determine the

impact on ambient air quality. Table 39 shows

the locomotive emissions and resultant ambient concentrations for the very unlikel y

worst case situation in Wyoming. Wyoming

State ambient air quality standards are shown

for comparison. Ambient concentration of CO,

S OX and particulate would be at least two

orders of magnitude below Wyoming standards. Hydrocarbon emissions approach the

standard. Nitrogen oxide emissions appear to

exceed the standards, although, the standards

are for nitrogen dioxide while emissions are

predominantly nitric oxide. Thus, even the

worst case analysis of locomotive emissions

would not, in and of itself, violate ambient air

quality standards.

The environmenta l impac t of thes e

pollutants is difficult to assess. They clearly

represent a source of increased air emissions,
Ch. VI Environmental and Social Impacts ● 115

Table 37. Diesel Locomotive Emission Factors

Emissions, lb/1 ,000 gal. fuel consumed

Engine type

2-Stroke 2-Stroke Composite

supercharged turbocharged 4-Stroke average

Pollutant road road road used

Carbon monoxide. . . . . . . . . . . . . 66 160 180 174C 160d

Hydrocarbons. . . . . . . . . . . . . . . . 148 28 99 78c 28d

Nitrogen oxides (NOX as NO2)... 350 330 470 430C330d

Particulates a. . . . . . . . . . . . . . . . . 25b

25

Sulfur oxides . . . . . . . . . . . . . . . . . 57b57

Aldehydes (as HCHO) . . . . . . . . . 5.5b5.5

Organic acids . . . . . . . . . . . . . . . . 7

b

7

aBased upon highway diesel emissions; no actual Locomotive particulate emission test data available.

bBased upon national distribution of engine typeS.

CFor all case studies except Utah-California.

dFor Utah-California case study.

Source: U.S. Environmental Protection Agency, Cornpi/ation o/Air F’o//ufant Emission Factors, 2nd Ed. (Feb. 1976).

Table 38. Estimation of Vehicle Equivalent of Diesel Locomotive

Air-Pollutant Emissions for 65 Million Tons of Coal

per Year Between Wyoming and Texas

1977 Highway vehicle equivalents

Locomotive All

emissions Automobiles vehicle types

Pollutant lb/h r-mile vehicles/hour vehicles/hour

Carbon monoxide. . . . . . . . . . . . . 3.7 39-92 29

Hydrocarbons. . . . . . . . . . . . . . . . 1.7 190-530 100

Nitrogen oxides . . . . . . . . . . . . . . 9.1 700-1,100 910

Sulfur oxides. . . . . . . . . . . . . . . . . 1.2 N D

c

2,500d

Particulate. . . . . . . . . . . . . . . . . . 0.53 N D

c

450d

aAssumes consumption of 228 million gallons/year of diesel fuel, 1,227-mile one-way

haulage distance.

bHighway vehicle equivalents were defined as the number of highway vehicles which

would emit the same amount of the specified pollutant as would the train movement of

specified dimensions.

CNO data for comparison.

dNatiOnal average emissions are 4.9 x 10-4 lb/mi Ie SOX and 1.2 x 10-3 lb/mile of particu IateS.

Source: Science Applications, Inc.

yet they are neither from an easily controlled pared to air emissions associated with coal

stationary source nor a continuous mobile slurry pipeline operation in any meaningful

source, Iike, for example, continuous passage manner. Pipeline- related emissions are from

of automobiles. Rather, train passage is a powerplants which produce the energy f or

relatively isolated event, with opportunity for pipeline uses, whereas railroad unit train emispollutant dispersal during intervals between sions are dispersed over the length of the rail

train passages. The impact of air emissions route.

from unit train operations cannot be com-
116 ● Coal Slurry Pipelines

Table 39. Worst Case Ambient Air-Pollutant Concentrations

for Unit Trains Transporting 65 Million Tons of Coal

per Year From Wyoming to Texasa

Locomotive Worst case Wyoming standard

emissions concentrate ion

Pollutant lb/h r-mile μglm3

μflg/m3Time period

Carbon

monoxide 2.92 210 10,000 8-hr maximum, not to be exceeded more

than once/year

Hydrocarbons 1.31 95 160 3-hr maximum, not to be exceeded more

than once/year

Nitrogen

oxides 7.20 520 1 00b Annual arithmetic mean

Sulfur oxides 0.95 2.9 260 24-hr maximum, not to be exceeded more

than once/year

Particulate 0.42 1.3 150 24-hr maximum, not to be exceeded more

than once/year

aAssumes shipment of 65 x loo tons/year over 1,227 miles, with diesel fuel consumption of 227,871,000 gallons/year.

bstandard is for NC)2, whereas emissions are mostly NO.

Source: Science Applications, Inc.

Dust Emissions

It has been suggested that unit coal train

operations, including loading and unloading of

hopper cars, occasionally result in the emission of coal fines and other fugitive dust particles to the atmosphere. Fugitive dust emissions may occur (1) during loading of hopper

cars, (2) during unloading, (3) as blowoff from

hopper cars in transit, or (4) through entrainment of dust accumulated alongside th e

tracks.

Modern train loading facilities consist of

10,000-ton-capacity temporary storage silos

equipped with chutes for depositing the coal

directly into the hopper cars, with water jets to

spray the falling coal to suppress coal dust. For

all practical purposes, dust emissions are confined to an area extending a few feet from the

silo exit and entrance, and do not pose a community air-pollution problem. (Workers control the loading from within sealed enclosures

and are thus not exposed to the coal dust.)

Coal losses appear to be negligible compared

to the volume loaded.

The main types of unloading are bottom

dumping and rotary dumping. 55 Rotary dumping facilities are entirely enclosed and would

present about the same minimal degree of

pollution hazard as would the loading silos.

Emissions from any type of loading facility

would remain within the boundaries of the

receiving facility, except for occasional entrainment by gusts of wind.

Although blowoff from coal trains has been

raised as an environmental issue, supporting

scientific data are lacking. Predictions of increased emissions due to expanded coa l

transportation appear to be extrapolations of

historical experience in the East, wher e

relatively dry coal was more Iikely to leak from

poorly sealed hopper cars. 56 Western coal, having a relatively high moisture content, tends

not to be dusty. An increasing number of hop55 R, G. S., “Decide Between Rotary and Bottom-Dump Coal

Unloading,” Power, Vol. 119, No. 8, p 47,1975,

56 F E Arm brusterand B,J Candela, Research A na/YS;S of Factors Affecting Transportation of Coal by Rai/ and Slurry Pipe/ines,

Final Report, Vol. 1, prepared by Hudson Institute, Inc , N Y , for

Burlington Northern Inc , April 1976
Ch. VI Environmental and Social Impacts ● 117

per cars, notably those unloaded by rotary

dumping, have permanently sealed bottoms. It

is believed that most fine particles are either

lost during the first few miles of haulage or settle to the bottom of the hoppers very early. 57

The Western Weighing and Inspectio n

Bureau, which performs weighing services for

western railroads, reports that it has received

no claims of coal lost in transit. 58 Any difference between the weights of the coal cars at

origin and destination, which would reflect the

amount of coal lost, are not detectable. 5 9

Local officials in Wyoming, Colorado, and IIIinois, all of which have appreciable coal train

traffic, report that they have received no complaints of fugitive coal dust emissions. 60 61 62 63

Finally, it has been observed that a moving

train may stir up dust accumulated alongside

the right-of-way. The extent and effects of this

entrainment depend upon local conditions,

such as recency of precipitation and wind

speed and direction. In a strong wind, the impacts of the train could probably not b e

distinguished from those of general airborne

particulate pollution.

In summary, western experience and limited

scientific evidence indicate that fugitive dust

emissions from unit train operations are likely

to have negligible impact on air quality.

‘

7 Thomas Healey, Environmental Division, Peabody Coal

Company, St Louis, Mo , personal communication, Sept 16,

1977

58 D T homa son Western Weigh Ing and Inspect Ion Bureau,

Denver, Colo , personal communlcatlon, Sept 19, 1977

“ Gary Root, General Manager of Transportation and

Distrlbutton, Amax Coal Company, personal communlcatlon,

Sept 19,1977

‘

0 Bernard Dailey, Wyoming Department of Environmental

Quality, Air Quality Dlvislon, personal communlcatlon, Sept 9,

1977

61 Wllllam Reese, Colorado Department of Public Health, Alr

Pollutlon Control Dlvislon, personal communlcatlon, Sept 15,

1977

‘2 Anthony Tel ford, I Il}nols Environmental Protect Ion Agency,

Dlvlslon of Alr Pollution Control, Analysis SectIon, personal

communlcatlon, Sept 15, 1977

6] Edward Crooke, Director of Environmental Studtes, Argonne

National Laboratory, Argonne, III , personal communlcatlon,

Sept 15,1977

Disruption of Biological Communities

Railroad lines generally constitute a visible

linear strip of artificial texture, color, and landform across the landscape. The cleared break

in the vegetational community divides the

natural territory and provides room for the

establishment of a new transitional community along the edge of the permanently cleared

roadbed shoulder. This transitional community

is characteristically an area of open low-herbaceous vegetation maintained in an im -

mature stage of succession by maintenance of

the railroad right-of-way and occasional fires.

Transition zones often exhibit high plant diversity and greate r biological productivity. b

’

Habitats associated with railroad lines often

support different flora and fauna than the surrounding region. 65 66 67 Increased rail opera -

tions will perpetuat e this man-created

ecotone.

While division of natural territories may

enhance development of transitional com -

munities, its effects are not all beneficial.

Creation of a visible discordant strip may affect wildlife behavior patterns, as som e

species are hesitant to enter a region which has

been disturbed. In addition, wildlif e

movements may further be affected by the additional noise and activity of passing trains,

and the establishment of fences to protect

livestock from accidental collision.

The question of the effect of railroad fencing and operation upon wildlife migration is

controversial. Arguments supporting and opposing the contention that railroads constitute

barriers are each handicapped by a lack of

64 R L Sm Ith,Ecology and Field B io/og y, 2nd E d I t Ion, H a rPer

and Row Publishers, San Francisco, Cal If , 1974

‘S j C, Kelcey, “lndustrlal Development and Wildlife Conservation, ” Environmental Conservation, Vol 2, No 2, pp 99-108,

1975

“ B Lejmbach, “The Flora of Railway Tracks of Eastern

Pomerania Coast, ” Fragrn F/orist Cebot, Vol 21, No. 1, pp 53-66,

1975, cited In Bio/ogica/ Abstracts, No 47275, November 1976.

‘7 V V Sentemov, “Adventltlous Species of Conspermum L In

the Flora of the Udmurtian ASSR, ” Bot Zlf, Vol 54, No 6, p. 934,

1969, cited In Biological Abstracts, No 59045, June 1971.
118 ● Coal Slurry Pipelines

hard data.” Theoretically, a fence designed to

be sheep- and antelope-tight will present a

physical barrier and alter established animal

predation patterns, isolate communities, and

thereby prevent cross-breeding, and disrupt

seasonal migration. The effect of such a barrier is of particular concern if migration to

traditional breeding or nesting areas is inhibited and reproduction is reduced. ” It is

believed by some that antelope movement

(especially the longer range migration o f

antelope during severe storms) may b e

restricted. On the other hand, in many instances the railroad right-of-way parallels a

major highway which might, in itself, act as a

barrier anyway.

If it is assumed that livestock protection

fences will present a barrier to wildlife migration, provision for crossing should be required.

However, wildlife behavior response is difficult to predict. Even if crossings of adequate

size and distribution are provided, wildlife

may not use them, especially if the animals are

frightened by trains, storms, or predators.

Wildfires also disrupt biological com -

munities. Railroads are reportedly a significant

cause of vegetation wildfires. For example,

tables 40 and 41 show wildfire occurrences in

Nebraska and Wyoming. Although the precise

number may under-report the number of fires’”

and may in some cases (about 15 percent 7 1

)

misidentify the source, it is clear that railroads

do cause a number of fires. The railroad fires

burn substantial acreage, as shown in table 42.

Fires can be started by sparks fro m

locomotive exhaust and steel brakeshoes or by

operating and maintenance crews. To reduce

the fire hazard, nonsparking brakeshoes are

generally used for coal unit trains, fireguards

are created alon g the right-of-way b y

mechanical or chemical clearing, and other

spark-arresting equipment and fuel additives

are employed. Turbochargers, with which most

unit-train locomotives are expected to b e

equipped in the future, also act as spark arresters. 72

Careless use of flares by maintenance-ofway crews has been identified as a cause of.

fires, but its significance is uncertain. According to a. Wyoming State fire official,

railroads seem receptive to suggested fire

prevention programs directed toward railroad

personnel.

73 Other measures to reduce fire

hazards include ontrack fire patrols by the

railroad companies ” and nonsparking composition brakeshoes on new hopper cars. 75

With improved fire prevention techniques,

increased use of the trackage (which may

result in greater reporting, awareness, and

prevention of fires), and the increased exposure of wildlands to sparks, the incremental

change in wildfires due to unit train operation

is difficuIt to determine.

The major operational impact of coal slurry

pipelines with disruptive effects on biological

communities is accidental spills of slurry.

There are three principal ways by which a

slurry spill could occur along the transmisison

route: 1) pipeline rupture due to excessive

pressure; 2) breakage resulting when th e

pipeline is accidentally struck by diggin g

equipment; and 3) washout of the pipeline during a flood. Under the relatively high pressures

of coal slurry in portions of the pipe, small

leaks will normally develop quickly into major

“ James Lambert, U S Bureau of Land Management,

Cheyenne, Wyo , personal communication, Aug. 23,1977

69 Final [environmental Impact Statement, A Iaska ~atural Gas

Transportation System, Overview Volume, U S. Bureau of Land

Management.

70 U S Department of the Interior, Fina/ Environment/ State

ment, Proposed L)eve/opment 0/ Coa/ Resources in the Eastern

Powder River Coa/ Basin of Wyoming, Vol. I I 1, U.S. Department

of Agriculture, Interstate Commerce Commission, 1974.

7’ Michael Gagin, Wyoming State Forestry Division, Cheyenne,

Wyo , personal communication, Aug. 26,1977

7’ U S Department of the Interior, Final Environment/ State

ment, Proposed lleve/oprnent of Coa/ Resource in the Eastern

Powder River Coa/ Basin of Wyoming, Vol 111, U S Department

of Agriculture, Interstate Commerce Commission, 1974.

73 Michael Gagin, Wyoming State Forestry Division, Cheyenne,

Wyo , personal communication, Aug. 26,1977

74 Allan R. Boyce, Burlington Northern, St. Paul, Minn , personal communication, Sept. 6, 1977,

7’ Al Ian R Boyce, Burlington Northern, St Paul, Minn., personal communication, Aug 15, 1977.
Ch. VI Environmental and Social Impacts ● 119

Table 40. Wildfire Occurrence in Nebraska, 1971-76

Year 6-yr

Cause 1971 1972 1973 1974 1975 1976 avg.

Railroad. . . . . . . . . . . . . .

Debris burning . . . . . . . .

Equipment use . . . . . . . .

Lightning . . . . . . . . . . . . .

Smoking . . . . . . . . . . . . .

Electric fences.. . . . . . .

Children . . . . . . . . . . . . . .

Incendiary . . . . . . . . . . . .

Campfires . . . . . . . . . . . .

Miscellaneous . . . . . . . .

274 373 387 723 535 763 509

413 593 208 426 420 798 476

211 113 123 244 185 278 192

102 73 99 311 107 173 144

51 79 51 150 108 170 102

33 41 16 37 28 23 30

24 29 6 34 27 50 28

13 5 4 43 33 34 22

4 2 1 11 3 9 6

127 209 121 322 313 389 247

TOTAL . . . . . . . . . . . 1,252 1,517 1,016 2,301 1,759 2,687 1,755

Source: Westover D.E., Nebraska Wildfires, State of Nebraska, Department of Forestry

(1977)

Table 41. Wildfire Occurrence in Campbell and Converse

Counties, Wyo., 1971-73

Number of fires Acres burned

Cause 1971 1972 1973 1971-19731971 1972 1973 1971-1973

Railroads. 43 28 32 34 1,163 2,762 242 1,389

Lightning. 21 40 30 30 21,981 8,170 3,025 11,052

Other . . . . 13 34 21 23 2,066 1,020 184 1,090

TOTAL. . 77 102 83 87 25,190 11,952 3,451 13,531

Source: U.S. Department of the Interior, Final E/S, Proposed Deveopment of Coal

Resources in the Eastern Powder River Coal Basin of Wyoming (1974).

Table 42. Acreage Burned by Wildfires in Nebraska, 1971-76

Year 6-year

Cause 1971 1972 1973 1974 1975 1976 average

Debris burning. . . . . . . . . . . 13,647

Railroad . . . . . . . . . . . . . . . . 4,652

Lightning . . . . . . . . . . . . . . . 7,224

Equipment use . . . . . . . . . . 1,740

Miscellaneous. . . . . . . . . . . 5,151

Smoking. . . . . . . . . . . . . . . . 555

Children . . . . . . . . . . . . . . . . 71

Incendiary . . . . . . . . . . . . . . 18

Electric fence . . . . . . . . . . . --

Campfire. . . . . . . . . . . . . . . . 30

12,975

13,183

2,249

4,489

3,788

2,021a

69

27

11

1,467

2,080

8,467

4,465

980

608

3,662

0

5

10

3,655

7,197

7,309

5,307

6,105

3,147

177

2,410

298

86

30,272

6,752

4,402

8,822

1,800

399

27

262

799

30

4,315

2,424

5,095

4,850

3,567

1,222

56

50

99

16

11,055

6,048

5,791

4,945

3,565

1,325

677

461

300

31

TOTAL . . . . . . . . . . . . . 33,088 158,812 21,744 35,691 53,565 21,694 34,198

a

This figure does not include the Mullen Fire of March 1972, which burned 120,000 acres.

Source: Westover, D. E., Nebraska Wildfires, State of Nebraska, Department of Forestry (1977).
120 ● Coal Slurry Pipelines

ruptures. 76 The quantity of slurry released to

the environment will depend upon the flow

rate, pressure, burial depth, overburden density, time for detection and pipeline shutdown,

and proximity of holding ponds. Pipelines have

been constructed with reserve holding ponds

along the way. Using this approach, the slurry

flow would be arrested in event of spill and the

offending section of pipeline evacuated into

the pond.

Only one coal slurry pipeline spill has been

recorded, ” and the environmental impacts,

primaril y land and wate r impacts, are

therefore only speculative. Presumably, the

coal particles will be filtered from the water by

the top few feet of soil. The effect of the coal

in the soil upon plant growth is unknown. The

impact of a spill into streams depends upon

the relative flows of the stream and the spill.

Coal sludge could temporarily harm aerobic

benthic organisms, hamper fish feeding ,

smother eggs and larvae, and adversely affect

spawning. Temperature changes and coa l

sludge could result in fish kills as well. These

impacts, however, are not likely to be severe.

7’ Edward j Wasp, Vice President, Energy Transportation

Systems, Inc , San Francisco, Calif , personal communication,

)UIY 8,1977.

77 John Montfort, Black Mesa Pipeline Company, Flagstaff,

Arlz , personal communication, Sept 21,1977

Energy/Materials Requirements

An environmental impact of pipeline construction and operation and railroad expansion

and operation is the consumption of energy

and materials made from natural resources.

Steel and energy requirements for the four

hypothetical pipeline routes are shown in table

43, and steel for hopper cars, locomotives, and

rails (for new construction and replacement)

and energy to produce the steel and fo r

transportation of coal are shown in table 44.

The direct steel requirements for pipelines and

railroads to transport 74.5 million tons of coal

over a 35-year period are 1.3 million tons for

pipelines and 3.5 million tons for railroads.

Although pipelines require less steel, recycling

is less costly for railroads. Similarly, the energy

directly required to produce the steel and for

coal transportation is greater for pipelines

than for rail, averaging for the cases 610 Btu

per net ton-mile for pipelines and 390 Btu per

net ton-mile for railroads. Greater rail circuity diminishes this relative advantage somewhat. Averages are frequently misleading,

however, and energy requirements can differ

quite widely in a given case. The results presented here include pipelines which fo r

economic reasons would probably not be constructed. In addition, railroad locomotives use

diesel fuel derived from petroleum, while pipeTable 43. Steel and Energy Requirements for the Case Study Pipelines

(35-year life cycle)

Wyoming Montana Utah Tennessee

to to to to Grand

Texas Wisconsin California Florida totals

Coal transport (10° tons/year). . . . . . . . . . . 35 13.5 10 16 74.5

Steel requirement (103 tons). . . . . . . . . . . . 733 216 133 245 1,327

Energy for making steel (1012 Btu). . . . . . . 17 5 3 6 31

Energy for construction (1012 Btu). . . . . . . 3 2 1 2 8

Energy for operation (1012 Btu/year) . . . . . 14 7 6 10 37

Total energy (1012 Btu/year) . . . . . . . . . . . . 15 7 6 10 38

Total energy per 10° tons of coal transported (1012 Btu). . . . . . . . . . . . . . . . . . . . 0.4 0.5 0.6 0.6 0.5

Operation energy per net ton-mile (Btu)a . 410 710 1,150 920 610

Percentage of energy content of the coal

required to transport it 1.000 miles . . . . 2.3 3.9 6.4 3.8 3.2

aRoljnded to nearest 1() Btu.

Source: Data from Science Applications, Inc.
Ch. VI Environmental and Social impacts ● 121

Table 44. Steel and Energy Requirements of the Railroad Case Studies

(35-year life cycle)

Wyoming Montana Utah Tennessee

to to to to Grand

Texas Wisconsin California Florida totals

Coal transport (10’ tons/year). . . . . . . . . . . 35 13.5 10 16 74.5

Steel for hopper cars(103 tons) . . . . . . . . . 461 110 102 218 891

Steel for locomotives (103 tons). . . . . . . . . 110 22 30 58 220

Steel for rails (103 tons). . . . . . . . . . . . . . . . 1,446 319 201 398 2,364

Total steel requirement (103 tons) . . . . . . . 2,017 451 333 674 3,475

Energy for making steel (1012 Btu). . . . . . . 12 3 2 4 21

Energy for transportation (1012Btu/year) . 17 4 2 8 32

Total energy (1012 Btu/year) . . . . . . . . . . . . 17 4 3 8 32

Total energy per 106 tons of coal transported (1012Btu) . . . . . . . . . . . . . . . . . . . 0.5 0.3 0.3 0.5 0.4

Transportation energy per net ton-mile

(Btu) a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 360 440 580 390

Percentage of the energy content of the

coal required to transport it 1,000 miles 1.9 2.0 2.4 2.4 2.0

aRoundedtO nearest 10Btu. Mileages arelargerthan forpipelines duetogreater circuitY.

Source: Data from Science Applications, inc.

Iine pumps operate on electricity often derived

from other fuels.

Occupational Health and Safety

Occupational injuries and disability days for

pipeIine construction and operatio n and

railroad operation are shown in tables 45 and

46, respectively. Historical data on accidents

on coal slurry pipelines are limited, an d

pipeline accident rates were estimated from

oil pipeline data. The last column of table 45

shows the number of injuries and disability

days for construction for 3,146 miles o f

pipeline (the total length of the fou r

hypothetical routes) and transport of 74.5

million tons of coal annually. On the average,

one disability day would result from each 45

million ton-miles of coal transported, about

half of which are due to construction, if one

assumes that the pipeline will be in operation

for 35 years. Data were not available fo r

estimating deaths due to pipeline construction

or operations.

Deaths, injuries, and disability days fo r

railroad employees were estimated from accident rates on general freight train operations

excluding labor categories not applicable to

unit trains. As shown in table 46, in carrying the

same 74.5 mill ion tons of coal per year as

pipelines, railroads would, according to the

estimate, experience 1.9 deaths, 304 lost workday injuries, and 14,000 disability days annualIy. One disability day occurs per 6 million tonmiles of coal transported and one death per 43

bill ion ton-miles.

Employees will be exposed to noise from

several operations in coal slurry pipelin e

systems, including water pumping, coal slurry

preparation, slurry pumping, and dewatering. 78

Coal slurry preparation involves crushing and

grinding operations which generat e considerable noise. PipeIine employees are

reportedly exposed to noise levels in the range

of 90 to 95 dBA by these processes 79 but the

plants are sufficiently few and remote to avoid

significant community noise impacts. Deepwell submersible pumps are used to draw

water from wells, and because of the depth at

which the pumps are located, no noise is

7’ W S Gray and P F Mason, “Slurry Pipelines What the Coal

Man Should Know In the Planning Stage, ” Coal Age, Vol 80, No

9, pp 5a-62, 1975

7’ John Montfort, Black Mesa Pipeline Company, Flagstaff,

Arlz , personal communication, June 30, 1977
122 ● Coal Slurry Pipelines

Table 45. Predicted Occupational Injuries and Lost Workdays

From Case Study Pipeline Construction and Operation

Wyoming Montana to Utah Tennessee

to Minnesota to to

Texas & Wisconsin California Florida Total

Construction

Injuries . . . . . . . . . . . . . . . . . . . . . . 281 221 125 193 820

Lost workdays . . . . . . . . . . . . . . . . 5,228 4,112 2,326 3,591 15,257

Operation

Injuries per year. . . . . . . . . . . . . . . 31 8 4 9

Lost workdays per year. . . . . . . . . 577 149 74 167 967

Million net ton-miIesa

Per injury . . . . . . . . . . . . . . . . . . . . 942 702 653 724 831

Per lost workday . . . . . . . . . . . . . . 51 38 35 39 45

alncludingconstruction assuming a35-year pipeline life.

Source: Science Applications, Inc.

Table 46. Predicted Occupational injuries, Lost Workdays,

and Deaths From Case Study Unit Train Service Expansion

Wyoming Montant to Utah Tennessee

to Minnesota to to

Texas &Wisconsin California Florida Total

injuries

Number per year . . . . . . . . . . . . . . 140 48 38 78 304

Lost workdays per year. . . . . . . . . 6,300 2,160 1,710 3,510 13,680

Deaths per year . . . . . . . . . . . . . . . . . 0.98 0.27 0.12 0.51 1.9

Million net ton-milesa

Per injury . . . . . . . . . . . . . . . . . . . . 355 235 180 176 268

Per lost workday . . . . . . . . . . . . . . 7.9 5.2 4.0 3.9 6.0

Million net ton-milesa

Per death . . . . . . . . . . . . . . . . . . . . 51,000 41,000 35,000 27,000 43,000

aMileage is larger than for pipelines due to greater circuity.

Source: Science Applications, Inc.

reported at ground level. The mainline pumps

of pipelines can be quite noisy, like any unshielded 5,000 horsepower pump emitting 82

dBA at 50 feet. 80 However, built-in shielding

and enclosure in a pumphouse reduce the

sound level significantly .8’ Railroad noise w a s

discussed in the section of this chapter on

community disruption, and railroad employees

OO Draft EnVjro~~e~~a/ /rnpact Statement, Crude 0;/ ~fafWortation system: Va/dez, Alaska to Midland, Tex., U.S. Bureau of

Land Management, November 1976

SI Nick Tuttle Wll[lams Brothers Process $2 WlCf?S, Tulsa,

Okla , personal communication, June 28,1977.

are exposed to the same sources at closer proximity.

The above figures should be regarded as

estimates because of the type of dat a

available and the assumptions made in extrapolating disability days from these data.

Nonetheless, the figures provide a useful indication of total and relative employee health

and safety for railroads and coal slurr y

pipelines. Even including the accident s

associated with construction of pipelines, as

well as operation, railroads experience

significantly more disability days tha n

pipelines.
VIl. Legal and Regulatory Analysis
VIl. Legal and Regulatory Analysis

INTRODUCTION

This chapter discusses the four major areas

of law which affect coal slurry pipelin e

development. The sections on environmental

and water law are relevant independently of

Federal coal slurry pipeline legislation, in that

if pipelines are built, even without Federal

legislation, the pipelines will require acquisition of water and water rights and compliance

with Federal environmental protectio n

statutes. Allocation of water and protection of

water rights has traditionally been a matter of

State law. It is possible, but unlikely, that

pending Federal legislation will greatly alter

the legal framework of water allocation, Compliance with the National Environmenta l

Policy Act (N EPA) will be triggered if pipeline

construction involves any major Federal action

which significantly affects the environment.

The Federal Water Pollution Control Ac t

(FWPCA) must be complied with if pollutants

or hazardous substances are discharged into

the waters of the United States.

The other two sections—transportatio n

reguIation and eminent domain law — are

directly applicable to pending legislation. The

kind of eminent domain– Federal or State–

employed in acquisition of pipeline rights-ofway is dependent upon the specific language

of the legislation enacted. Similarly, the kind

of regulation imposed on coal slurry pipelines

is dependent upon whether legislation i s

passed and what provisions are contained in

that legislation. For example, as a condition of

receipt of a grant of Federal eminent domain,

coal slurry pipelines may be subjected to Interstate Commerce Commission (ICC) regulation

as common carriers.

Eight major legal provisions, within the four

areas of legal specialty, have recurred in the

assessment of coal transportation by coal

slurry pipelines and railroad unit trains. our

analysis reveals that four of these provisions

tend to promote pipeline development, while

the other four tend to favor raiI transportation.

These eight major legal provisions ar e

enumerated below.

Legal Provisions

Which Favor Pipelines

1. Stringent common carrier obligations.–

By virtue of ICC regulation as a common

carrier, railroads are required to provide

some unprofitable service on low-volume

branch lines, for example, and to provide

equal service to small as well as large

shippers. Pipelines, even if deemed common carriers, will probably not be subject

to such stringent requirements if the regulatory structure for pipelines carrying

other commodities is a guide.

2. Rate of return.–Although the situation may change with the implementation

of the Railroad Revitalization and Regulatory Reform Act, the allowed rates of return on rail investment have historically

been considerably less than those allowed

in the present pipeline industry. Railroads

therefore will probably find capital improvements to provide improved or less

costly service more difficult to bring

about than will pipelines, unless parity in

ratesetting is required by legislation.

3. Railroads must negotiate rate increases.–RaiIroad regulation provides that

tariffs can be appealed at any time, and

increases must be negotiated annually.

There is one minor exception in the Rail725
126 • Coal Slurry Pipelines

road Revitalization and Regulatory Reform Act of 1976 which permits a rate to

stand for 5 years, if more than $1 million is

invested in related faciIity improvements.

Pipelines, on the other hand, typically

contain cost escalation clauses within the

long-term delivery contracts.

4. No long-term contracts for rail.-Under

ICC regulation, railroads are prohibited

from entering into long-term shipping contracts. Pipelines are not presently or

foreseeably so restrained, Long-term shipping contracts enable the carrier to protect investments in equipment and facility

improvements.

Legal Provisions

Which Favor Railroads

5. State eminent domain. -Since new

railroad trackage will rarely be required,

railroads have little need for further

powers of eminent domain to gain rightsof-way. Pipelines, however, require rightsof-way through numerous States for longdistance construction. Presently, nine

States have granted State power of eminent domain specifically to coal slurry

pipelines, Other States have no statutes

granting such power. Thus, an obstacle to

pipeline construction is acquisition o f

rights-of-way.

6. Water rights.-Railroads do not require

more than minimal quantities of water for

coal transportation. Pipelines, on th e

other hand, require great quantities of

water, generally in Western States where

water is relatively scarce and competition

therefore great. Acquisition of water

rights is dependent upon the laws and administrative regulations of the particular

jurisdiction.

7. Commodities clause.–The commodities clause of the Interstate Commerce

Act (l CA) presently forbids railroads from

carrying commodities owned or manufactured by the railroad. Railroads can, in

some cases, circumvent this provision

through holding companies and other arrangements. The commodities clauses in

proposed legislation for coal slurry pipelines would be much more stringent, Pipeline operators would be forbidden from

any ownership interest in the end Iine activity (e. g., utility powerplant) or any

source activity (e. g., coal mining or coalIand ownership rights). Under this provision utilities and mining companies or

their contractors would have more difficulty in building and operating a pipeline.

8. EIS requirement.–If Federal eminent domain legislation is enacted, or other major

Federal action is invoked, such as granting

of rights-of-way across Federal lands, or

granting a certificate of public convenience and necessity, NE PA requires that

the Federal agency file an environmental

impact statement (E IS) if the action will

have a significant effect on the environment. Although an impact statement is

prepared only once, one will generally be

required for coal slurry pipeline construction, and it will demand substantial resources of the pipeline operator. Because

the tracks are already in existence, and

new trains and rate changes are not usually considered major Federal actions

with significant effects on the environment, railroads will be much less likely to

trigger the E I S process. And even where an

E I S is required it will rarely be as extensive

as that required for a coal slurry pipeline.

Coal slurry pipelines are a technological and

legal innovation, and much of the following

discussion therefore relies on legal precedent

applicable to other types of pipelines. Other

types of pipelines differ in some ways, and the

present comparison at least highlights areas

where distinctions indicate a need for specific

legislation or regulation,
Ch VII Legal and Regulatory Analysis • 127

TRANSPORTATION REGULATION

Regulation of coal slurry pipelines in i n -

terstate commerce turns initially upon whether

or not pipelines qualify as common carriers.

Under the property clause of the Constitution,

the Federal Government has the constitutional

power to require pipelines to operate as common carriers as a condition of the grant of

Federal eminent domain or the grant of rightof-way across Federal lands.

Two major types of regulation are imposed

upon pipelines , Pipelines carrying com -

modities in interstate commerce are subject to

ICC reporting, valuation, and accounting requirements designed to keep ICC abreast of all

current financial and physical condition s

within the pipeline industry which may trigger

the need for regulatory changes. Secondly,

pipelines which assum e commo n carrier

characteristics are required to serve, on an

equal basis, alI simiIarly situated persons requesting pipeline transportation and to charge

rates within the ICC reasonableness requirement.

The chief characteristics of common carriers

is that they transport, indiscriminately for consideration, all of the freight of the type they

purport to carry which is tendered to them.

Common carrier regulation has been imposed

even on pipeline carriers that held title to al I

the property they transported Analysis of case

law reveals that the term“ common carrier” as

defined in the ICA includes all pipelines ,

whether they are in fact private, contract, or

common carriers. Commodities are in in -

terstate commerce: 1 ) when they are transferred by purchase to pipelines prior to shipment to another State, or 2) when they are

transported across State borders for sale or for

use by someone other than the pipeline company; but not when they are transported for

the pipelines own use to or from its own

facilities. Further, the various carrier regulation provisions of ICA can be imposed on

pipelines independently of one another. The

reporting-type requirements may be imposed

upon every pipeline carrying coal in interstate

commerce, whether the carrier is actuall y

private, contract, or common. The Interstate

Commerce Commission may impose additional ICA common carrier-for-hire-duties on

pipelines within its jurisdiction which acquire

ownership to commodities and transport them

across State borders, and which operate in

such a manner as to create competitive imbalances within the industry which produces,

processes, or markets the commoditie s

transported.

The following three possible types of coal

slurry pipelines could be regulated as common

carriers in substance:

1. a coal slurry pipeline which transports all

coal slurry tendered to it;

2. a pipeline that purchases coal from all

mines in the area from which it operates;

and

3. a pipeline that provides essentially the

only efficient means of transportation for

the coal mined in its source area.

A final possible type of carrie may welI include currentIy contemplated coaI sIurry

pipelines. Private carriers, which are commo n

carriers only in the terminology of ICA, and

whose services are not needed by others to

cure competitive imbalances within the relevant industry, cannot be converted to common

carriers-for-hire by ICC. It may be argued that

pipelines which in fact operate to serve exclusively a few selected shippers pursuant to a

private contract were not intended to b e

within the reach of ICC regulation as common

carriers-for-hire. Assumption of common carrier duties by such coal slurry pipelines may

disrupt exclusive shipping agreements, require

that lines be rebuilt to accommodate added

Volumes, or reduce overalI efficiencies by requiring construction of higher volume Iines initially and operation at less than design capacit y.

States also impose common carrier duties

on some pipelines. Generally a pipeline must

be devoted to public service, that is, operated
128 ● Coal Slurry Pipelines

as a common carrier-for-hire, to acquire State

governmental privileges, such as eminent domain power.

The traditional duties of common carriers

are:

1.

2.

3.

4.

5.

to furnish the transportation services they

offer to the public to al I who seek them;

to furnish services and facilities adequate

for satisfactorily fulfilling their transportation obligations;

to establish reasonabl e ruIes and

regulations governing how they fulfil l

their transportation obligations;

to establish reasonable rates and charges

for their transportation services; and

to treat equally all shippers, freight, and

locations served which share simila r

characteristics.

These duties were established to ensure that

all persons engaged in providing transportation services for the public operate in ways

that best serve the public interest consistent

with achieving a reasonable return on their investments in transportation facilities.

A number of factors can preclude pipelines

from operation as common carriers. Lack of

shipper connections and lack of connecting,

receiving, or delivery facilities are frequent

problems limiting access to pipelines. Some

States require pipelines to furnish connections

for shipper facilities, but Federal activity in

this area is minimal. For such facilities to be required of coal slurry pipelines, the re -

quirements should be imposed prior to construction so as to properly measure, in advance, the volume of throughput a pipeline

wiII handle. If a pipeline must contain excess

capacity for the benefit of future shippers, its

present efficiency will be diminished since a

coal slurry pipeline operates more efficiently

at the throughput for which it is designed.

Common carriers faced with transportation

demands exceeding the capacity of their

transportation system must attempt to serve

alI shippers without discrimination. This service is usualIy accomplished one of two ways: 1)

by serving shippers on a first-come, firstserved basis; or 2) by prorating the pipeline

shipping capacity among the shippers on the

basis of the amount of throughput each shipper represents to the total throughput tendered. For coal slurry pipelines shipping to

coal-fired eletric powerplants, either method

of nondiscriminatory service could result in a

decrease of power availability in the area of

service of the power company.

Minimum tender requirements are rule s

specifying the minimum quantity of a particular commodity that a carrier will accept for

shipment from a specified origin point to a

specified destination point. Large minimum

tender requirements tend to disfavor smal l

shippers whereas low minimum tender requirements tend to prejudice the ability of a

pipeline to function at maximum capacity in a

stable environment.

A 1976 ICC ruling on pipeline ratemaking uncovered so many significant challenges to the

rationality of the ICC ratemaking practices

that a comprehensive evaluation was undertaken to determine future ratemaking policy.

The reevaluation was still in progress in 1977

when the Department of Energy Organization

Act (P. L. 95-91) transferred regulation of

petroleum pipelines from ICC to the Department of Energy (DOE). Whether the current, or

even revised methods of calculating fair rates

of return for pipelines will apply to coal slurry

pipelines is unknown. Case law illustrates the

desirability of adopting fair rates of return

more tailored to the needs of pipelines as a

separate class.

The present ICC ratemaking practices for

pipeline employ a public utility approach. This

approach is considered reasonable since there

is little pipeline-to-pipeline competition.

Public utility ratemaking entitles the regulated

company to set rates calculated to cover its

costs of providing public services plus a fair

return on fair value of the property the company dedicates to public service. Rate-ofreturn percentages are established fo r

categories of pipelines rather than for each individual pipeline based on its own individual

needs. The Interstate Commerce Commission

employs 8 and 10 percent as reasonable rates
Ch. Vll Legal and Regulatory Analysis ● 129

of return for crude oil and petroleum product

pipelines respectively. No reasonable rate of

return has been established for coal slurry

pipelines. The Interstate Commerce Commission uses the method for valuation of carrier

property prescribed by section 19a of ICA as a

basis for pipeline rate determinations. This annual calculation takes into account th e

original cost of all lands and rights-of-way used

by the carrier in delivering its services, and the

original cost, cost of replacement both new,

and less depreciation of all other property the

carrier dedicates to public service. The method

also includes ICC’S consideration of working

capital and going-concern value.

The relevant rail rates for comparisons with

coal slurry pipeline rates are those on the unit

train concept. Unit train rates are lower than

other types of rates (e. g., carload, multicar,

train load) because they include volume discounts, and discounts for other cost-reduction

factors such as eliminatio n of loading ,

unloading, and car-switching operations. The

major difference between ICC’S railroa d

ratemaking and its pipeline ratemaking is that

the reasonableness of railroad rates is judged

without reference to a fair rate of return. A

value-of-service consideration is applied to

railroads, under which the rate is determined

by consideration of

1

2.

3.

4

The:

the level of the proposed rate compared

wit h established rates for simila r

shipments in the territory,

the economic effect of the proposed rate

on the shippers and their customers,

the relationship of the proposed rate and

the cost of providing service, and

the likelihood that the rate will b e

compensatory.

Interstate Commerce Commission has not

given any consideration historically to the

railroad’s cost of equity capital in making

railroad rate decisions. As long as the railroad

rate covers its variable cost it is not unlawfully

low. Under the Railroad Revitalization and

Regulatory Reform Act (the 4R Act), ICC is not

to determine the reasonableness of railroad

rates by comparison to rate structures of competing modes. This means that in rate competition betwee n railroads and coal slurr y

pipelines, the railroads will be allowed to go

below their fully allocated costs to undercut

the fully allocated costs of competin g

pipelines, even though the coal slurry pipeline

may have the lowest overalI cost structure.

The Interstate Commerce Commission influences competition among distinct modes of

transportation through policies focusin g

directly on competitive relationships and by

regulating each mode differently from the way

other modes are regulated. Competition between railroads and slurry pipelines is affected

by ICA, subjecting only the railroads to a commodities clause and to entry, extension, and

abandonment regulation. Unique features of

ICC regulation of railroad rates also produce

competitive impacts.

The commodities clause applies only to

railroads and prohibits every raiIroad from

transporting any commodity in interstate commerce which is manufactured, mined, or produced by it, or which it may own, in whole or in

part. The commodities clause was enacted

mainly to prevent railroads from achieving unfair competitive advantages in an unrelated industry by shipping commodities they owned at

rates lower than they shipped commodities

owned by their competitors It does not directly prevent railroads from being commonly

owned with, or being owned by, companies

which engage in unrelated industries and then

serving them as customers.

The proposed legislation would include a

coal slurry pipeline commodities clause that

would prevent anyone from having a direct or

indirect ownership interest in a coal slurry

pipeline who also has a direct or indirect interest in coal or would be a user of coal. This

legislation would impose much greater investment Iimitations on any coal-related firm contemplating ownership of coal slurry pipeline

enterprises than does the commodities clause

on railroads.

Railroads must acquire certificates of public

convenience and necessity before they can

enter new markets, or extend or abandon cur-
130 ● Coal Slurry Pipelines

rent markets. Coal pipelines are not now subject to any certification requirement, and are

therefore free to enter or abandon any market.

Entry and extension regulation is designed to

promote the most

possible in each area

rier.

efficient carrier service

served by a common carCoal slurry pipelines will make ar -

rangements with shippers by throughput and

deficiency agreements or ship-or-pay contracts. Although these arrangements can serve

valid business purposes, they also impose a

restraint on trade. If a restraint on trade is

unreasonable, it is subject to antitrust action.

Throughout and deficiency agreements are

essentially financing agreements designed to

provide lenders to pipeline companies greater

security in return for the best possible financing terms. The parties to the agreements are

the pipeline company and the shippers, of

which the latter agrees to guarantee the debt

service obligations of the pipeline.

Ship-or-pay contracts are analogous to requirements contracts in the sense that they

bind shippers to transporting a specifie d

volume of traffic through a pipeline for a fixed

period of time. The valid business purposes of

ship-or-pay contracts are:

1.

2.

3.

to guarantee the debt service of th e

pipeline by securing a fixed level o f

revenue in order to procure favorable

financing,

to guarantee that the pipeline operates at

its design capacity so as to achieve fulI efficiency, and

to provide a stable source of transportation in a predictable volume at a reasonably stable price.

Balanced against these valid purposes are the

restraints of trade which include:

1. foreclosure of the traffic of

pating shippers from use of

modes of transportation, and

the particicompeting

2. foreclosure of committed pipeline capacity from use by other, nonparticipating

shippers.

The extent, duration, and cost of reduced competition, relative strengths of the parties, structure of the relevant industry, and other factors

will determine whether the restraint of trade is

reasonable.

WATER LAW

From a survey of the water aspects of coal

slurry pipeline development, several important

considerations emerge. This section will briefly

summarize the most important of them.

Most of the significant issues of State law influencing coal slurry pipeline development are

related to prior appropriation jurisdictions in

the western part of the country. However, the

riparian system and the principal of reasonable

use characteristic of Eastern States present

two significant problems to a pipelin e

operator. First, under the riparian system, the

use of water for a coal slurry pipeline may not

be permitted, because the riparian system

traditionally limits the use of water to the land

adjoining the stream or body from which it is

taken. Second, even if use for a coal slurry

pipeline is considered a riparian use, the

riparian system is characterized by a sharing of

water with all other riparian users from the

same source. Thus, under conditions of heavy

demand relative to supply ,

operator may not be able to

water for the pipeline. Since

jurisdictions are characterized

of water and infrequency of

the pipelin e

obtain enough

most riparian

by abundance

litigation over

water matters, the use of water for a coal

slurry pipeline may not raise significant problems for any pipeline in the East.

In a prior appropriation jurisdiction the

threshold consideration is the availability of

water not already in beneficial use, assuming
Ch. VII Legal and Regulatory Analysis • 131

that the use of water for a coal slurry pipeline

is otherwise permissible. There are some inherent limitations on the sovereign right of a

State to make water available for a coal slurry

pipeline. Some of the limitations arise because

a particular wate r source is shared wit h

another State, and some arise because of the

constitutional allocation of power between

the States and the Federal Government.

Within the Iimits of its own sovereign power,

a State may influence the availability of water

in a number of significant ways, First, the

policy adopted by some States for wate r

resource management, in particular wit h

respect to ground water resources, allows the

State to permit ground water mining or permit

water to be withdrawn only to the extent the

water supply in the aquifer from which the

water is withdrawn is replenished from natural

sources. A second way in which some States influence the availability of water is by withdrawing water from present, private use to accomplish conservation, planning, and future

development objectives,

Once it is determined that water is available,

the next consideration is whether State water

policy permits the use of water for a coal slurry

pipeline, which depends upon whether the use

of water for a coal slurry pipeline is a

beneficial use, one which would be found to

be in the public interest, under applicable

State law. Guidelines under case law and

under most State statutes are insufficient to

resolve this question, although the legislatures

of those States which have focused on the

issue have generalIy taken a negative attitude

toward water for coal slurry pipelines.

If the use of water for coal slurry is permitted, then State administrators may impose

conditions on the use. Any State prohibition or

unusual restriction on the use of water for coal

slurry may be attacked as an unconstitutional

discrimination against interstate commerce in

coal. However, unless the restrictions were

severely discriminatory against the transportation of coal out of State, the constitutional

issue wouId probably be resolved by the courts

in favor of the State determination.

Two specific State restrictions merit special

mention. First, the application of the us e

preference policy of a State may make a water

right for coal slurry somewhat uncertain. A use

preference policy, either through the use of

conditions in the operator’s water permit or by

force of statute, can invert normal priorities

and require the pipeline use of water to yield

to uses initiated after the pipeline was operational. In most States, a statutory us e

preference, as opposed to one imposed administratively, can be enforced only through

the exercise of the power of eminent domain

to condemn the water by a preferred user.

The secon d restriction o f speciaI

significance is the restriction or prohibition

against the exportation of water out of State.

Although the movement of coal slurry out of

State might be treated as the exportation of

coal slurry, a manufactured product, as opposed to the exportation of water, State I imitations on the exportation of water may be applicable. Serious constitutional objections to

such State I imitations exist, however,

In addition to the preceding issues of State

law, some less-significant issues which may

become significant in certain situations should

be examined. Attention must be given to the

effect on other users of water from the same

water source if existing water rights are obtained and their use changed to a use for coal

slurry. Another issue is the uncertainty of the

water supply if the source chosen is byproduct

water. Whether byproduct water sources wiII

be used depends upon whether existing demands, or rights to make demands on natural

water sources, will preclude the use of natural

water sources without the acquisition of existing rights.

The important issues of Federal law do not

relate to the constitutional power of Congress

to make water available for use in a coal slurry

pipeline. Constitutional power is adequate to

do that, whether the source of the power is the

inability of a State to thwart Federal policy

through inconsistent enactments, or the power

of Congress over certain water resources,

notably navigable waters and water fro m
132 ● Coal Slurry Pipelines

Federal water projects. Under the reserved

rights doctrine, water under Federal control

also includes unappropriated water appurtenant to lands reserved by the Federal Government to the extent necessary to accomplish the

purpose of the reservation. The most significant limitation o n Federal constitutional

power requires that the Federal authorit y

respect private rights, but this I imitation does

not apply to Federal allocation of navigable

waters. The ability of the Federal Government

to make reserved water appurtenant to Federal

lands available for a coal slurry pipeline may

be limited if the pipeline does not contribute

to the purpose for which the land has been

reserved.

The significant policy issues of Federal law

concern the extent to which Congress wiII exercise its constitutional powers over commerce,

property, and the general welfare. First, Congress must decide the extent, if any, to which

water under Federal control should be made

available for coal slurry pipelines. If Congress

wishes to make Federal water available, then,

at the very least, legislation should make it

clear that use of water in a coal slurry pipeline

is a use for which administrators of Federal

projects may allocate Federal water.

The second issue facing Congress is the extent to which State control of water resources

for a pipeline survives the enactment o f

legislation authorizing Federal certification

and regulation of pipelines. Federal judicial

treatment of Federal statutes (specifically,

Federal Power Act, § 9(b), and Reclamation

Act, § 8), whose design was on its face to maintain State control over water, suggests that the

pending Federal legislation, in its present form,

may leave little scope for State regulation of

water for a coal slurry pipeline. If the intent is

to preserv e meaningfuI State regulation

beyond the mere determination of the existence of vested rights in a water source, then

legislation should express in specific terms exactly what State administrators may do to control water for the pipeline.

The third issue facing Congress is closely

related to the second, and affects the extent to

which the Federal Government must respect

State law in distributing water from sources

under Federal control, such as Army Corps of

Engineers and Bureau of Reclamation projects.

The legislative measures necessary to confer

upon the States a meaningful voice in the

distribution of Federal water are the same

measures as those which permit State regulation to survive Federal certification and regulation of a pipeline, namely, specific expression

of State authority.

An additional issue must be faced wit h

respect to navigable waters. Congress must

decide the extent to which a coal slurr y

pipeline operator must compensate, if at all,

other private users of water from a source

which is also a source for water for use in the

pipeline.

In conclusion, although traditionally, water

allocation is primarily a matter of State law, increasing competitive water needs and responsive Federal and State legislation create some

uncertainty as to present law affecting water.

Resolution of the uncertainty as to the present

law affecting water sources for coal slurry

pipelines may cost the pipeline operators in

time and money. Some of this uncertainty

could be resolved by a policy decision that

water is to be made available for coal slurry.

However, if a decision is made on the Federal

level, then the long-standing integrity of State

control of State water resources and the ability

of State water administrators to implement

State evaluations of regional water priorities

would be compromised,

ENVIRONMENTAL LAW

The major Federal environmental legislation pipelines and railroads are the National Enaffecting coal transportation by coal slurry vironmental Policy Act (NE PA), and th e
Ch. VIl Legal and Regulatory Analysis Ž 133

Federal Water Pollution Control Act of 1972

(FWPCA). Additionally, the Safe Drinking

Water Act of 1974 (SDWA) and Resource Conservation and Recovery Act of 1976 (RCRA) apply to prevent contamination of many ground

water sources, Federal laws also protec t

members of the public and workers from other

possible health and safety impacts of construction and operation of railroads and pipelines.

The National Environmental Policy Act applies to some activities in the construction and

operation of both coal slurry pipelines and

coal unit trains which involve Federal action

and requires at least an environmental evaluation to determine whether an environmental

impact statement is necessary. Activities common to both coal slurry pipelines and unit

trains which involve Federal action and may

require an E I S include: 1 ) crossing Federal

lands, 2) crossing ‘(navigable waters of the

United States” o r ‘(waters of the United

States, ” 3) discharging pollutants into “waters

of the United States, ” and 4) being a part of the

transportation element of a Mine Plan for

development of a coal lease.

Under ICC regulation, rail line construction

may have a significant impact on the environment, and in application to ICC the railroad

must include a detailed environmental impact

report, which may be incorporated into an E IS.

Actions which affect the operation of a

railroad line or general rate increases may also

require EISs.

The exercise of regulatory power attendant

to the grant of eminent domain in some of the

presently pending legislation, may constitute

sufficient Federal action to require an assessment of whether an E I S is necessary. Even

where major Federal action is absent, State environmental regulations may require an E I S for

State action or regulation.

Under various provisions of the FWPCA,

“waters of the United States” are protected

from pollutant discharges. jurisdiction of the

FWPCA includes essentially all surface waters

of the United States. Two provisions ar e

especially applicable to coal slurry pipelines:

1 ) issuance of discharge permits under the national pollution discharge elimination system

and, 2) control of point source accidental

polIution discharges.

The national pollution discharge elimination

system, in FWPCA, requires that a discharge

permit which regulates the amount of pollutant in the discharged water be obtained. Coal

preparation plants at coal slurry pipelin e

sources and slurry recycle and reuse plants at

pipeline termini are subject to permit requirements. Accidental spills from, for example, a ruptured pipeline would subject the

pipeline operator to potential liability for a

discharge of toxic pollutants or hazardous

substances without a permit if the discharge

entered a water of the United States.

Underground waters are protected by the

SDWA and RCRA. The SDWA regulates injections of fluids underground as well as the use

of holding ponds, thereby limiting disposal of

slurry waste water by either of these methods.

The objectives of RCRA are to encourage

development of solid waste managemen t

plans, prohibit open dumps, regulate handling

and disposal of hazardous waste, and develop

guidelines for solid waste disposal protection.

Other than unusable sludge, for example, the

dewatered slurry from an accidental spill, coal

slurry pipelines wiII produc e very littl e

disposable sol id waste.

EMINENT DOMAIN

The power of eminent domain is an inherent public purposes upon payment of just compower of a sovereign. The Federal and State pensation to the owner of the property. The

constitutions do not grant the power but rather sovereign may delegate the power to nonIimit its exercise to a taking of property for governmental entities. The power is limited to
134 ● Coal Slurry Pipelines

the territorial jurisdiction of the sovereign and

may be subject to statutory I imitations in connection with a particular grant of the power.

The power is exercised through condemnation

proceedings which award the landowner just

compensation and put the condemnor i n

possession of the property. A prerequisite to

condemnations for a pipeline may be a determination of an acceptable pipeline route after

public hearings.

The coal slurry pipeline bills presentl y

before Congress take one of two approaches.

One approach is to grant Federal eminent domain authority to coal slurry pipelines upon

the attainment of a certificate of public convenience and necessity from a Federal agency

and to regulate them as common carriers. The

other approach is to leave the matter of eminent domain to the States and to regulate coal

slurry pipelines as common carriers under ICA.

Under this approach right-of-way conflicts

would be resolved by ICC, which could order

another regulated carrier to grant an easement

to a coal slurry pipeline.

Six Wester n States (Louisiana, Texas,

Oklahoma, Montana, Utah, and North Dakota)

have specifically granted eminent domain to

coal slurry pipelines, and five States have no

statutes which could be interpreted to include

such a grant. In eight more States through

which pipeIines may pass, a coal slurry

pipeline is not assured of the power of eminent

domain because of ambiquity in the statutes.

Some recent State legislation granting eminent

domain to coal slurry pipelines limits the use

of State water and subjects the pipelines to

State regulation as common carrier.

For the valid exercise of State eminent domain by an interstate coal slurry pipeline

within the State granting such power, the activities of the pipeline must constitute a public

purpose in the State. In a “State of origin,”

where the pipeline picks up coal for transportation, and an “intermediate State, ” where a

pipeline passes through the State without picking up or delivering coal, it is arguable that the

pipeline may not be performing a public purpose. In a “State of destination” where a

delivery of coal is made by the pipeline, the

pipeline would be serving a public purpose

under most circumstances.

In order to place the need or lack of need for

a grant of the power of eminent domain in

legal perspective, the acquisition of lega l

rights-of-way without the power of eminent domain is relevant. Except for certain protected

lands, rights-of-way may be granted without

the exercise of eminent domain to coal slurry

pipelines over Federal public lands, national

forest lands, and Indian lands; however, on lndian lands, the written permission of the lndian owners must be obtained. The acquisition

of rights-of-way for a pipeline across a State

without either Federal or State eminent domain authority will be more expensive i f

recalcitrant landowners refuse to gran t

easements or if opportunist landowners ask

hold-up prices.

In the absence of State or Federal eminent

domain, an organized opposition to a coal

slurry pipeline might prevent the construction

of the pipeline across areas of land owned in

fee by that opposition. A landowner with a fee

title may prevent the pipeline from crossing

under the land by refusing to grant a right-ofway. If, however, the member of the organized

opposition possesses only an easement interest

in the land, that person cannot prevent the

pipeline from obtaining a right-of-way .

Whether the present Iandowner has acquired

fee title or an easement is dependent upon the

specific language of their deed to the land.

In the Western States many of the early

railroad rights-of-way were acquired under the

Pacific Railroad Acts of 1862 and 1864, and the

type of ownership, either in fee or as an easement, established thereunder is in dispute.

Although it has been heId that a railroad

received only a limited fee, which would not

enable it to prevent granting an easement to a

slurry pipeline, further Iitigation may be required before a definitive conclusion i s

reached.

The treatment of other pipelines provide no

general conclusion as to whether coal slurry
Ch. VII Legal and Regulatory Analysis ● 135

pipelines require the grant of eminent domain.

The extensive network of interstate o i l

pipelines, ammonia fertilizer pipelines, and

raiIroads have been built with only State eminent domain authority. Federal eminent domain authority was granted to interstat e

natural gas pipelines by the 1947 Amendment

to the Natural Gas Act because

1.

2.

3.

The

it was believed that crossing a State

without distribution of gas therein would

not be a public benefit to that State,

some desired to protect the exclusive

jurisdiction of the Federal Power Commission (F PC) over such pipelines, and

it was believed that these pipelines were

different from other modes of transportation because their movement of natural

gas from fields to distant markets did not

require them to be common carriers.

grant of Federal eminent domain came 9

years-after interstate natural gas pipelines had

come under the jurisdiction of FPC, which

regulated the transportation, supply, and some

elements of the price of natural gas dedicated

to interstate commerce.

The Cole Pipe Line Act granted Federal eminent domai n authority to interstate oi l

pipelines for 2 years as a part of emergency

legislation aimed at overcoming delays in construction of oil pipelines caused by railroad

opposition and refusal o f the Georgi a

legislature to grant them eminent domain.

The comparison of interstate coal slurry

pipelines with interstate natural gas pipelines

indicates that although the granting of Federal

eminent domain to gas pipelines does not mandate such a grant to coal slurry pipelines, it

does furnish a possible legal precedent if Congress finds such grant to coal slurry pipelines

to be in the national interest.

A compariso n of interstate coal slurr y

pipelines with interstate natural gas pipelines

yields the following similarities:

1, Each usually operates pursuant t o

long-term supply and or transportation

contracts.

2. Each will often transport its commodity

from field or mine to a distant market or

user and in the process may traverse one

or more States in which it neither picks up

nor delivers any portion of the commodity transported.

3. Each has limitations on its ability to act as

a commo n carrier in the States it

traverses.

Coal slurry and natural gas pipelines ,

however, have the following dissimilarities:

●

●

Gas pipelines own most of the gas

transported while coal pipelines apparently will not own the coal transporte d

although it appears there is nothing in the

existing laws which would prohibit such

ownership.

Gas pipelines are subject to FPC regulation which extends to the price and supply

of natural gas dedicated to interstat e

commerce and requires insuIation from

State regulation. Interstate coal pipelines

are presently subject to minimal ICC

reguIation, and regulation under proposed

legislation will not extend to the price and

supply of coal transported.

A compariso n of interstate coal slurr y

pipelines with interstat e crude oi l and

petroleum products pipelines illustrates their

dissimilarity as to:

1.

2.

3.

The

Ownership of commodity shipped.

Length of term of supply contracts and

transportation contracts.

Physical capabilities to act as a common

carrier or common purchaser in States

traversed.

comparison of interstate coal pipelines

with interstate crude oil and petroleum products pipelines does not establish that State

eminent domain authority for coal slurr y

pipelines will be insufficient but does indicate

that it may not be as effective in meeting

needs of coal slurry pipelines as it has been for

oil pipelines.

The basic option to Federal policy makers is

whether or not to grant Federal eminent domain authority to coal slurry pipelines. If Con-
136 ● Coal Slurry Pipelines

gress elects not to grant eminent domain authority to coal slurry pipelines, such pipelines

must rely on eminent domain authority from

those States which have granted or will grant

in the future such authority to the pipelines. In

order to exercise eminent domain authority

granted to it, a coal slurry pipeline, in most

States, will:

1.

2.

3.

be required to obtain a license o r

certificate of public convenience an d

necessity from a State agency,

be designated as common carrier o r

public utility, and

be subject to State regulations which do

not unduly burden interstate commerce

or interfere with Federal regulation of

such pipeline.

Under the “public purposes” requirement, circumstances in a “State of origin” and in an

“intermediate State” may preclude a pipeline

from being considered as serving a public purpose within the State or being a common carrier in fact, and thereby prevent the valid exercise of State eminent domain authority by

such pipeline.

A further consequence of not grantin g

Federal eminent domain authority to coa l

slurry pipelines is the possibility that one or

more States traversed by the pipeline might

not grant eminent domain authority to the

pipeline. This could lead to costly and inefficient routing of the pipeline to avoid recalcitrant or opportunist landowners, costly delay

in negotiations, increased cost of rights-ofway, and possible inability to construct a

pipeline across a State due to organized opposition.

If Federal eminent domain authority i s

granted to coal slurry pipelines, the pipelines

may rely on that authority to obtain necessary

rights-of-way in each State traversed by the

pipeline. Construction of the pipeline will have

been deemed to constitute a national public

purpose justifying the exercise of Federal eminent domain authority. The pipeline wilI not be

required to obtain a license or certificate from

the State agency in order to construct its

pipeIine or to exercise Federal eminent domain

authority. If the grant of Federal eminent domain authority requires that the practice and

procedure of State courts be followed, as is required by the Natural Gas Act, then it would

seem that landowners within a particular State

wouId be protected by the same due process

requirements for determining “just compensation” as are applicable to a taking of their

property under State eminent domain authority.

A possible alternative to simply granting or

withholding Federal eminent domain authority

for coal slurry pipelines would be a conditional grant of such authority. Such a grant

would be conditioned upon a showing that a

particular State to be traversed by the pipeline

had not granted eminent domain authority to

coal slurry pipelines or that the State authority, though granted, could not be validly exercised in such State because of a lack of public

purpose within the State. Federal legislation

granting a conditional eminent domain power

would allow each State the opportunity to

grant eminent domain authority to coal slurry

pipelines on conditions which the Stat e

deemed necessary to the protection of State

interests. Such State legislation and the regulations thereunder could not unduly burden interstate commerce or interfere with Federal

reguIation of the pipeline.

In drafting a conditional grant of Federal

eminent domain authority, a period of time

should be allowed for States to grant eminent

domain authority to coal slurry pipelines. The

circumstances which would constitute a lack

of public purpose within a State and thereby

entitle a pipeline to exercise the Federal eminent domain authority should also be set forth.

A potential problem with such legislation is

that it might subject coal slurry pipelines to

duplicative Federal and State legislation .

Careful drafting of legislation could minimize

this problem.

Also, Congress could elect to grant the

power of eminen t domain for individua l

pipeline projects through specific legislation.

This approach would be cumbersome, but it

would allow Congress to determine in each
Ch. Vll Legal and Regulatory Analysis • 137

case the degree to which the national interest coal slurry pipelines are desirable or not, in the

is served. light of all of the considerations discussed in

this assessment. The second is the extent to

In conclusion, the decision among th e which national or local priorities should be

foregoing alternatives depends on two prin- reflected in the conditions under which the

cipal factors. The first is the degree to which power of eminent domain can be exercised.
APPENDIX:

Baseline Rail Revenue

and Cost Projections
APPENDIX:

Baseline Rail Revenue

and Cost Projections

RAIL REVENUE PROJECTIONS

Regional revenue shares were projected for

10 commodity groups, at the two-digit standard industrial classification (SIC) level. Interviews and a literature search established the

necessary data base. A series of correlations

and regressions were then run using Class I aggregate and individual railroad data in order to

find the most effective explanatory variable

for use in the forecasts. Data were available in

adequate detaiI for the period 1964-74 to permit testing a number of relationships at the

regional commodity level.

The best statistical fits (R2

) and highest T

values were provided by time-trending via the

logarithmic equation:

Forecasting of revenues was considerably

more complicate d than that of shares .

Revenue calculation requires that actua l

shipments o f specific commodities b e

forecast, including their production quantities

and the allocation of shipments among rai l

and other transport modes, such as truck,

barge, pipeline, or air After carefully examining a number of forecasting methods an d

models, the TECNET2 model was employed to

predict national commodity output s and

transportation modal shares. I n simplest terms,

TECNET is a computerized input-output model

designed to disaggregate transportation -

related data and forecasts into a level of detail

considerably greater than that provided by a

model of the overall economy—INFORUM .

Starting from a base year of 1971, TECNET projects national transportation requirements by

where Nijk is the share of national railroad

revenues earned by region j through transport

of commodity i in year k. The coefficients a

and b were determined through regression

analysis of historical data. Equation 1 was then

employed to project regional revenue shares in

future years, e.g., 1985 and 2000. Table A-1

presents historical regional shares data, and

the projected regional commodity shares for

1985 and 2000 based on the regressio n
142 ● Coal Slurry Pipelines

Table A-1. Historical and Projected Regional Revenue Share by Commodity

(Percent of national commodity revenues)

SIC Historical Projected

code Title and region 1966 1970 1974 1985 2000

01

11

14

20

24

26

28

32

33

37

— A

● *

Farm Products

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West. ........... . . . . . . . . .

Coal

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Stone and Minerals

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West. . . . . . . . . . . . . . . . . . . . . .

Food

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Lumber and Wood

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Pulp and paper

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Chemicals and plastics

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Cement and glass

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Primary metals

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West. . . . . . . . . . . . . . . . . . . . . .

Transportation equipment

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . .

Another

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West. ........ . . . . . . . . . . . .

All commoditiesa

East . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . .

West. . . . . . . . . . . . . . . . . . . . . .

16.7

10.2

73.1

74.9

17.0

8.1

32.4

25.8

41.8

32.0

14.6

52.9

15.0

16.0

69.0

36.9

22.7

40.4

31.6

20.4

48.0

35.9

23.6

40.4

49.2

10.3

40.5

48.9

10.2

40.9

36.9

12.9

50.2

38.1

15.4

46.5

14.0

9.9

76.1

70.9

19.2

9.9

32.0

26.6

41.4

30.3

15.1

54.6

14.0

17.8

68.2

34.1

24.9

41.0

29.0

22.1

48.9

33.9

25.0

41.1

50.0

11.6

38.4

48.6

11.2

40.2

35.1

15.4

49.5

36.5

17.1

46,5

13.4

9.3

77.3

62.5

19.8

17.7

28.5

27.5

44.0

27.5

15.5

56.9

13.6

19,6

66.8

32.4

25.4

42.2

25.0

23.1

51.9

31.0

25.5

43.5

45.8

11.3

42.9

46.5

12.3

41.2

35.5

15.1

49.4

33.9

17.4

48.7

8.5

8.2

83.3

36.5

19.8

43.8

24.5

31.6

44.5

21.3

16.8

61.9

12.0

23.2

64.8

26.6

29.7

43.7

18,3

26.9

54.8

25.5

29.7

44.8

41.5

14.7

43.8

44.2

16.4

39.4

30.3

24.6

45.1

27.5

21.1

51.4

4.7

5.6

89.7

25.2

22.9

52.0

18.4

31.4

50.2

16.5

17.7

65.8

10.2

30.0

59.8

19.8

34.8

45.4

10.8

31.5

57.7

18.9

34.5

46.6

34.6

18.5

46.9

40.0

23.1

36.9

18.8

29.9

51.2

20.2

25.5

54.4

aAll commodities total may not add due to rounding.

Source: Historical data obtained from Moody’s 1976 Transportation Manual. Projections made by IR&T.
Appendix • 143

mode and economic sector through the year

2025 based on an assumed rate of GNP growth

of 2.90 percent before 1985 and 2.95 percent

afterward. The national raiIroad revenues obtained from TECNET were allocated t o

raiIroad regions using the share projections

presented in table A-1, The resulting regional

revenue projections are given in table A-2. The

rate of overalI traffic growth represents a

departure from long-term trends in that it approximately equals the expected rate of increase in gross national product. On the other

hand the projected growth is considerably

lower than that forecast by the U.S. Department of Transportation and endorsed by the

Association of American Railroads. 3

The coal railroad revenue forecast s

presented in table A-2 were developed exogenous y from TECNET. This was don e

because appraisal of two coal transportation

alternatives is the central focus of this study,

hence this commodity merits more detailed

consideration than achievable through use of

the general model. In order to establish the

coal-related revenu e projections, it wa s

necessary to undertake three steps:

1. Project coal production by railroad region

between 1980-2000.

2. Estimate the railroad share of coa l

shipments in the three regions over the

same time period.

3. Convert the originating tonnage estimates

in each region into ton-miles and raiIroad

revenues.

Coal supply projections for the years 1985

and 2000 were obtained for the three railroad

regions by grouping data provided in th e

Department of Energy’s (DOE) Annual Environmental Assessment Report (AEAR). 4 T h e

AEAR projections identify the energy content

of future coal supply from 10 Federal regions.

The currently mandated environmenta l

‘A$soc iatlon of Amerlc an Ra I I roads, Yearhook of Ra//road

Fact~, 1977

‘Annual Env/ronmer-rta/ A rM/ysIs Report, prepared tor the

Assistant Admlnlstrator of Environment and Safety, DC)F, by

MITRE Corporation, Consdd Research Corporation, Control Data

Corporation, and International Research and Technology Corporation, September 1977

regulatory situation, following passage of the

Clean Air Act (CAA) Amendments of 1977, was

assumed in forecasting as the coal supply

baseline. The DOE coal supply figures were

converted into tons of coal, using the average

energy content of coal i n each Federal region.

The resulting coal supply projections for the

years 1985 and 2000 are presented in the

following table:

COAL SUPPLY PROJECTIONS By

RAILROAD REGION –1985 and 2000

(Milliions of short tons)

Region 1975 1985 2000

East –

344 5 398 3 494 2

Sout h 168 6 180 6 328 2

Wes t 103 2 443 5 808 4

Total U S 616 3 1,0224 1,6308

There are a number of interesting aspects o f

the coal production projections. By the yea r

2000, national coal production is estimated t o

increase by a factor of 2.6 relative to its 1975

level. Western coal production, however, is

projected to increase nearly eightfold, so that

by 2000 it will account for approximately half

of the national total. Eastern coal output is

projected to increase much more slowly, rising

by 43.5 percent relative to its 1975 value. As a

result, eastern coal’s participation in the national total will decline from 55.9 percent in

1975 to 30.3 percent in 2000. The production of

southern coal wilI follow a middle course,

nearly doubling between 1975-2000, and it will

continue to produce the least of the three

regions.

Projections of railroad shares of regional

coal shipments were based on analysis of

historical trends, adjusted by anticipated shifts

in regional coal production. The historical

data indicate that railroads’ share of eastern

and western coal movements (incIuding minemouth usage) steadily declined over th e

1964-74 period, while southern railroad s

gained an increasing share of coal movements

in that region. 5

The reasons underlying the

‘Analysl~ of L S Bureau of Mlne$ data provided In The

M/nera/s Yearbook for the years 1969 to 1974
144 ● Coal Slurry Pipelines

Table A-2. Baseline Regional Railroad Revenue Projections

(Millions of 1971 dollars)

SIC

code Commodity 1980 1985 1990 1995 2000

01

11

14

20

24

26

28

32

33

37

Farm Products

East . . . . . . . . . . . . . . . . . . . . . . $ 107.83 $ 89.20 $ 80.37 $ 70.41 $ 64.70

South . . . . . . . . . . . . . . . . . . . . . 92.13 86.10 86.11 89.27 77.00

West. . . . . . . . . . . . . . . . . . . . . . 846.99 874.30 981.76 1,097.12 1,233.80

Total . . . . . . . . . . . . . . . . . . . . 1,046.95 1,049.60 1,148.24 1,257.40 1,375.50

Coal

East . . . . . . . . . . . . . . . . . . . . . . 887.94 1,009.30 1,034.30 1,060.02 1,086.33

South . . . . . . . . . . . . . . . . . . . . . 392.39 550.99 668.84 811.90 985.57

West. . . . . . . . . . . . . . . . . . . . . . 549.53 1,218.22 1,492.06 1,821.27 2,241.04

Total . . . . . . . . . . . . . . . . . . . . 1,829.86 2,778.51 3,195.20 3,696.19 4,312.94

Stone and minerals

East . . . . . . . . . . . . . . . . . . . . . . 109.76 133.70 132.71 150.84 184.90

South . . . . . . . . . . . . . . . . . . . . . 125.30 169.20 185.80 233.64 315.50

West . . . . . . . . . . . . . . . . . . . . . . 266.13 242.90 362.08 435.30 504.40

Total ......., . . . . . . . . . . . . 501.19 545.80 680.59 819.78 1,004.80

Food

East . . . . . . . . . . . . . . . . . . . . . . 417.03 380.90 405.45 402.75 465.60

South . . . . . . . . . . . . . . . . . . . . . 265.23 300.40 334.25 378.67 499.50

West . . . . . . . . . . . . . . . . . . . . . . 985.85 1,107.00 1,238.13 1,407.44 1,856.70

Total . . . . . . . . . . . . . . . . . . . . 1,668.11 1,788.30 1,977.83 2,188.86 2,821.80

Lumber and wood

East . . . . . . . . . . . . . . . . . . . . . . 144.81 148.30 153.94 156.45 160.00

South . . . . . . . . . . . . . . . . . . . . . 239.46 286.80 338.68 399.84 470.50

West . . . . . . . . . . . . . . . . . . . . . . 756.01 801.00 846.05 892.39 937.80

Total . . . . . . . . . . . . . . . . . . . . 1,140.28 1,236.10 1,338.67 1,448.68 1,568.30

Pulp and paper

East . . . . . . . . . . . . . . . . . . . . . . 267.18 264.70 280.60 295.78 311.40

South . . . . . . . . . . . . . . . . . . . . . 257.08 295.60 265.24 448,40 547.20

West . . . . . . . . . . . . . . . . . . . . . . 393.89 435.00 513.66 606.42 714.00

Total . . . . . . . . . . . . . . . . . . . . 918.15 995.30 1,059.50 1,350.60 1,572.60

Chemicals and plastics

East . . . . . . . . . . . . . . . . . . . . . . 260.79 282.50 287.82 290.16 290.10

South . . . . . . . . . . . . . . . . . . . . . 308.32 415.30 529.23 669.61 846.00

West . . . . . . . . . . . . . . . . . . . . . . 649.55 845.80 1,039.89 1,272.26 1,549.70

Total . . . . . . . . . . . . . . . . . . . . 1,218.66 1,543.60 1,856.94 2,232.03 2,685.80

Cement and glass

East . . . . . . . . . . . . . . . . . . . . . . 268.13 275.40 306.43 338.61 368.70

South . . . . . . . . . . . . . . . . . . . . . 269.09 320.80 414.74 530,49 695.90

West. . . . . . . . . . . . . . . . . . . . . . 420.39 483.80 599.66 743.33 906.90

Total . . . . . . . . . . . . . . . . . . . . 957.61 1,080.00 1,320.83 1,612.43 1,971.50

Primary metals

East . . . . . . . . . . . . . . . . . . . . . . 482.37 476.00 496.47 556.36 600.50

South . . . . . . . . . . . . . . . . . . . . . 149.70 168.70 202.40 260.04 321.10

West . . . . . . . . . . . . . . . . . . . . . . 476.82 502.40 574.12 695.46 813.90

Total . . . . . . . . . . . . . . . . . . . . 1,108.89 1,147.10 1,272.99 1,511.86 1,735.50

Transportation equipment

East . . . . . . . . . . . . . . . . . . . . . . 434.08 500.30 577.89 668.37 768.70

South . . . . . . . . . . . . . . . . . . . . . 139.59 185.60 251.14 333.38 443.90

West . . . . . . . . . . . . . . . . . . . . . . 382.45 445.90 521.18 608.78 709.10

Total . . . . . . . . . . . . . . . . . . . . 956.12 1,131.80 1,350.21 1,610.53 1,921.70
Appendix ● 145

Table A-2. Baseline Regional Railroad Revenue Projections—Continued

SlC

code Commodity 1980 1985 1990 1995 2000

All other

East . . . . . . . . . . . . . . . . . . . . . . 1,068.70 1,208.00 1,233.50 1,259.50 1,286.10

South . . . . . . . . . . . . . . . . . . . . . 580.90 978.10 1,250.50 1,599.00 2,044.40

West.. . . . . . . . . . . . . . . . . . . . . 1,421.90 1,795.20 2,242.60 2,801.80 3,500.80

Total . . . . . . . . . . . . . . . . . . . . 3,071.50 3,981.30 4,726.60 5,660.30 6,831.30

● * Commodities

East . . . . . . . . . . . . . . . . . . . . . . 4,448.62 4,768.30 4,989.47 5,249.25 5,587.03

South . . . . . . . . . . . . . . . . . . . . . 2,819.19 3,757.59 4,526.93 5,754.24 7,246.57

West . . . . . . . . . . . . . . . . . . . . . . 7,149.51 8,751.52 10,411.19 12,382.17 14,968.14

Total . . . . . . . . . . . . . . . . . . . . 14,417.32 17,277.41 19,927.59 23,385.66 27,801.74

Source: lR&T estimates.

declines in the East and West differ markedIy.

In the East, the decline–from 71.6 percent to

63.1 percent—was due to modest increases in

market penetration by barges, trucks, and

mine-mouth generation. There is essentially no

barge transport in the West, and truck

transport of coal feIl from 13.9 percent in 1969

to 4.0 percent in 1974. Furthermore, recent indications are that for both environmental an d

economic reasons mine-mouth generation wil l

expand only sIightly in the future. 6 Therefore ,

it is anticipated that coal supply growth in the

West will be transported primarily by the

raiIroads. On the basis of historical trends, it is

estimated that raiIroads wiII capture 86.0 percent of western coal shipments (originating

tons) in 1985 and 90.4 percent in 2000. The

comparable estimates for the East are 59.8 and

53.7 percent, respectively and 80.8 and 84.7

percent for the South.

participation of unit trains in coal shipments

is also of interest I n the East, unit train participation was nearly constant betwee n

1969-74 at about 36 percent, while in the

South and West unit train participation ap-

‘on~~ potf~nt Ia I Ii ott iett ing tac tor wou Id be the ( onstru( tlon

ot a \ I g n I t I { a n t n LJ nl be r ot [ oa I ( () n \ e r~ 10 n t a ( I I I t I es near t h c

m I n[~ mouth I t I \ a n t I( I pated that ( oa I ( {)n~ (’r~lc)n t ‘I ( I I I t i~I\ w I I I

(> n [ () u n te r iom~’ t}t t hc \ a mt’ o b 1 t} ( t I o n \ a > m I nt~ mouth g~’ne ra

t ion 1 n t h I\ \t LJd}, the a i~u m ;)t Ion w a $ made that t hre~’ .? 7( j

m I I I I() n it a nfj a rd ( u h I { t [>[,t ~)er (] a } s~ n t h[’t I ( n a t LI ra I ga \ p I a n t \

w I I I be brought on \t re a m I n the W e$ t bv 1985 By .2000, s I x more

w I I I b~> d(jdt>d I n t h~’ W e~t and t~t o (’a c h I n the I a $t and South

proximately doubled –from 16.1 to 29,3 percent in the South and from 28.2 to 578 percent

in the West. I t is projected that unit train participation will continue to increase in these

two regions — to 40 percent by 1985 and 45 percent by 2000 in the South, and to 75 and 80 percent in those 2 years in the West. It is assumed

that economic pressures will motivate some

growth in eastern unit train participation. The

estimates are that participation will rise to 40

percent in 1985 and 45 percent in 2000.

Coal shipment revenue projections were

made by translating the originating tonnage

forecasts into ton-miles, then multiplying by

estimated revenues per ton-miIe for reguIar

and unit trains. The average hauI distances in

each region were estimated to be 650 miIes in

the West, 235 miles in the East, and 300 miIes

in the South. 7 Revenues per ton-miIe were

estimated from historical data, assuming that

regular train rates are double unit train rates,

on the average. 8 The railroad coal-transpor-

‘Review ot coal orlgln and usage reglonf In th(’ $out h In -

d I ( a tm that present ha u I ~ tend t o be ~ hort a \ t’ ra g I n g .!( )() m I I ef

How ever, national god Is for future c oa I (ilit rtbut ion w OU Id (IX

tend u~age rnto the more Southern State$ On thl$ b~ \I~, It w a 5

est I m a ted that by 1985 the average sou t ht=r n h a u I w I I I h ,i \ e In-

( rt’a ~ed t o 300 m I I es

‘ ~ ,i t /on<]/ Po\* er ~uri c’; Report a \ rt~t ert~n~ e(l I n [.3 c~or~ 4 t

icIct InK C (M/ ‘$uh$ tl fution tor ( )th(]r F ()\)// Fue/~ In f /ectrfc Pow t’r

Proc~u( (Ion and lndu~trla / ~l$t’~, (-ongrei~ion~ I Re~ear( h $t’r~ IC e

report t () t h~’ $en a t e ( o m m I t t t~(’ on I n t t’ r I() r and I n $U I a r At t,1 I r$,

1075
146 ● Coal Slurry Pipelines

tation revenue projections given in table A-2

were then obtained for each region b y

multiplying the coal production in that region

by the railroad share of originating tonnages,

the average haul distance, and by the revenues

per ton-mile, weighted by regular and unit

train participation. The results indicate that

western railroads, although accounting for

76.5 percent of the ton-miles, will receive only

52.0 percent of the revenues in 2000. This is

because unit trains are employed on a larger

fraction of the western shipments than in other

regions, and because the basic rail rate is lower

in the West, averaging only 35 percent of that

charged in the East. The regional difference in

rates is primarily related to:

1. the short-haul distances in the East and

South which means that turnaround times

are a larger fraction of the total shipment

period,

2. the greater market value of underground

mined eastern and southern coal, and

3. logistical advantages for the less heavily

traveled western rail system.

RAIL OPERATING EXPENDITURE FORECASTS

Three major operating cost categories were

studied in depth: maintenance of way and

structures, maintenance of equipment, and

nonmaintenanc e operatin g expenditures.

Twenty-five railroads were selected for crosssectional statistical evaluation on the basis of

operating size (more than 1,000 miles of track)

and data availability. One thousand miles of

track operation was the minimum size in -

cluded because larger railroads are expected

to account for most of the coal shipments, and

these large railraods experience different

operating economies than the smaller railroads. The inability of cross-sectional analysis

to capture time trends was countered by running the regressions for a series of years,

1970-75. This permitted an evaluation of how

the regression coefficients change over time.

Maintenance of Way and Structures

The variables tested to explain historical

variation in maintenance of way and structures operating expenditures included: miles

operated, ton-miles, average haul, freight car

miles, tons per car, and commodity mix, the

latter to see if cost patterns could be related to

changes in relative importance of commodities hauled. The best explanatory variables, in

terms of statistical meaning and reliability,

were found to be combinations of ton-miles

and miles of track operated. The regression

equation selected was the logarithmic form:

in MWS = a + b In (

ton-miles

)

+ c in (miles of road)

miles of road

(2)
Appendix ● 147

where MWS is maintenance of way and structures, and miles of road refers to track miles

operated. This equation assumes an interaction between intensity of use, as reflected in

ton-miles per miIe of road, and cost per mile of

road. It suggests that economies of scale persist over broad ranges of ton-miles per mile of

road operated, with the coefficient b acting as

the elasticity of supply for ton-mile services.

The coefficient c acts as the elasticity of supply for miles of road operated.

Mean values for the coefficients b and c

over the period 1970-75 were 0.74 and 0.94

respectively. The resulting maintenance of

way and structure costs is:

rate. An empirical expression was developed

for k: k = 0.5 + 0.5(1 .0012 )T-1971 The first

parameter, 0.5, is the nonlabor share o f

maintenance of way and structures costs in

1971. The non labor share was assumed to vary

directly with ton-miles and miles operated as

indicated by the overalI regression equation.

The labor share, in contrast, is multiplied by

(1.0012) T-l971 to account for changes in real

wages and productivity over time. The factor

(1 .0012) was determined by dividing the rate of

real wage changes for railroad employees with

respect to the GNP deflator by the rate of

productivity changes for maintenance of way

and structures, as reflected in reductions in

0.94

where k is a wage and productivity factor,

MWS is maintenance of way and structures

operating expenditures, and T is the year to be

computed. Since b is less than 1, economies of

scale are present, i.e., for every l-percent increase in traffic or ton-miles, costs will go up

by 0,74 percent. The ton-mile forecasts used to

project maintenance of way and structures expenditures for the years 1980-2000 were obtained from the revenue forecasts given in

table A-2 by use of regional commodit y

revenues per ton-miIe coefficients.

Miles of road operated was assumed constant over the forecast period, hence the final

term drops out of the equation. The results obtained using this form of the equation should

be interpreted as reflecting the cost to the

railroads of maintaining current levels of road

operated. The k factor adjusts for changes in

the productivity of labor and the real wage

MWS labor-hours per unit railroad output, i.e.,

ton-miles.

Maintenance of Equipment

A number of relationships were tested to explain maintenance of equipment operatin g

costs. The variables employed included: tonmiles, tons per freight car, and freight car

miles. The most effective equation was found

to be:

In ME = a + B In (freight car miles)

where ME is maintenance of equipment costs.

Regression analysis using this equatio n

resulted in the folIowing expression for projecting maintenance of equipment operating

expenditures:

(4)
148 ● Coal Slurry Pipelines

where k is a wage and productivity factor, and

T is the year for which data are to be computed. The scale factor 0.96 is the meanregression coefficient over the 6-year period,

1970-75. It indicates that an 0.96-percent increase in cost will result from a l-percent increase in freight car miIes relative to their 1971

level. The wage and productivity factor, k, is

k = 0.45 + 0.55(1.0061) T-1961

where 0.45 is the non labor fraction o f

maintenance of equipment expenditures in

1971, and the second term defines the variation of the labor share over time. Freight car

miles were calculated from tons per ca r

estimates for each region, and the revenue tonmile projections employed in the maintenance

of way and structures analysis . Ton-mile

weighted averages for tons per freight car for

the Nation and for each railroad region were

calculated by aggregating estimates of tons

per freight car for individual commodities. Projections for freight-car loadings by commodity

in 1985 and 2000 were made on the basis of

past trends and extensive interviews wit h

raiIroads, their customers, and their suppliers

as to maximum practicable weight, height, and

length (to clear overpasses and negotiate

curves) per car. The resulting tons per car projections for the Nation in 1985 and 2000 are

presented, with comparative historical data, in

table A-3. Loadings are projected to grow 23.1

percent from 1974 to 1985, and 10.7 percent

more by 2000. The increase in coal traffic is an

important factor in this growth, since this commodity makes the single largest contribution

to the commodity-weighted averages.

A major change now underway that affects

freight car and train capacities is the growth of

intermodal service, i.e., mixing such transportation modes as truck and rail via use of flatcars and piggybacked trailers. This approach

offers a number of advantages traditional boxcars cannot. For example, the time usage rate

of many old freight boxcars is 10 percent,

whiIe that for a piggyback or flatcar is 80 percent. Also, pickup and delivery by th e

customer with a truck cab at the terminal is

usually more cost effective and convenient

than the traditional switching of individual rail

cars onto customer’s tracks. The full implications of this new-style intermodal railroadtruck service are not yet clear, but certainly it

wilI tend to reduce the number of cars needed,

and probably reduce the value of the cars to

be bought.

Nonmaintenance Operatin g

Expenditure s

Nonmaintenance operating expenditures include traffic, transportation, miscellaneous,

Table A-3. Historical and Projected Freight Car Loadings by Commodity

(Tons per car)

SlC Historical Projected

code Commodity 1968 1970 1972 1974 1985 2000

01 Farm Products. . . . . . . . . . . . . . . . . . 51.2 56.5 62.0 66.9 85.0 93.0

11 Coal. . . . . . . . . . . . . . . . . . . . . . . . . . . 72.4 76.4 80.2 83.3 90.0 95.0

14 Stone and minerals . . . . . . . . . . . . . . 73.1 74.1 75.1 77.6 90.0 93.0

20 Food . . . . . . . . . . . . . . . . . . . . . . . . . . 38.0 40.7 42.9 44.9 60.0 80.0

24 Lumber and wood . . . . . . . . . . . . . . . 46.4 49.8 50.9 53.5 57.0 62.0

26 Pulp and paper. . . . . . . . . . . . . . . . . . 33.9 35.5 37.6 39.4 55.0 70.0

28 Chemicals and plastics. . . . . . . . . . . 53.3 58.2 63.0 66.7 75.0 80.0

32 Cement and glass . . . . . . . . . . . . . . . 56.4 57.7 60.0 60.3 85.0 90.0

33 Primary metals. . . . . . . . . . . . . . . . . . 54.5 55.3 62.7 63.6 77.0 85.0

37 Transportation equipment . . . . . . . . -–2.22 - .- 22.8 — — 23.3 ----- 23.6 28.0 32. 0

● * All commodities, total. . . . . . . . . . . . 51.8 54.9 56.3 58.4 71.9 79.6

Source: Projections made by IR&T. Historical data obtained from Moody’s Transportation Manual, 1977, p. a18.
Appendix ● 149

and general categories. The equation used to iture categories and their totals are presented

forecast nonmaintenance expenditures was: for the period 1980-2000, by region, in table

where NME is nonmaintenance expenditures, T

is the year to be computed, and the wage and

productivity factor, k, is:

k = 0.44 + 0,56 (1.0068) T-1971

The scale factor 0.87 is the mean-regression

coefficient over the 6-year period, 1970-75.

Total Operating Expenditures

Projections for the three operating expendA-4. The productivity improvements, achieved

primarily throug h increasing tons-per-car

loadings, tend to outweigh the effects of increasing traffic volumes for maintenance of

equipment and nonmaintenance expenditures.

The effect of these reductions can be directly

oberved in the East, but they are obscured in

the South and West. The rate of productivity

improvements slows after 1985, since most of

the gains will have been achieved by that time.

Table A-4. Projections of Class I Railroad Operating Expenditures

(Millions of 1971 dollars)

1980 1985 1990 1995 2000

EAST

Maintenance of way and structures . . .

Maintenance of equipment . . . . . . . . . .

Nonmaintenance expenditures. . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

SOUTH

Maintenance of way and structures . . .

Maintenance of equipment . . . . . . . . . .

Nonmaintenance expenditures. . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

WEST

Maintenance of way and structures . . .

Maintenance of equipment . . . . . . . . . .

Nonmaintenance expenditures. . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S.A.

Maintenance of way and structures . . .

Maintenance of equipment . . . . . . . . . .

Nonmaintenance expenditures. . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 601.45

679.18

1,947.93

3,228.56

427.23

452.33

1,022.44

1,902.00

1,054.85

1,139.43

2,745.86

4,940.14

2,083.53

2,270.94

5,716.22

$ 628.01 $ 651.10 $ 675.68 $ 710.10

595.07 609.55 624.37 638.91

1,754.90 1,820.93 1,891.09 1,961.52

2,977.98 3,081.58 3,191.14 3,310.53

511.44 597.98 703.58 837.63

486.10 585.15 704.37 847.00

1,107.91 1,330.76 1,599.85 1,920.89

2,105.45 2,513.89 3,007.80 3,605.52

1,347.59 1,553.55 1,780.35 2,065.55

1,184.93 1,383.09 1,614.36 1,882.37

2,888.62 3,373.66 3,943.60 4,604.00

5,421.14 6,310.30 7,338.31 8,551.92

2,487.04 2,802.62 3,159.62 3,613.28

2,266.10 2,577.79 2,943.10 3,368.29

5,751.44 6,525.35 7,434.54 8,486.42

10,070.69 10,504.58 11,905.76 13,537.26 15,467.99

Source: IR&T.
1.50 . Coal Slurry Pipelines

CAPITAL INVESTMENT REQUIREMENTS

Rolling Stock

Investment requirement s ove r t h e

1975-2000 period were determined for three

classes of rolling stock: coal hopper cars, noncoal freight cars, and locomotives. These investment requirements are the capital expenditures necessary to expand the equipment

stock in response to increased business volume

and to replace retired equipment. The growth

in equipment requirements was determined

from the revenue projections of table A-2. As

described previously, the revenue projections

were converted into freight car miIeage projections by use of the estimates for revenues per

ton-mile and tons per car, The freight car

mileage projections were then converted into

freight car requirements in each year by use of

an estimate for car utilization rate, that is,

miles per car per year. Locomotive requirements were then estimated as a function of

total freight car requirements, Freight car and

locomotive investment requirements wer e

determined for the new vehicle requirements

in each category , taking into account

estimated vehicle retirement rates.

It was estimated from carloadings of coal

relative to loading of mineral ores and of stone

and gravel that in 1973, coal cars represented

62.2 percent of the total U.S. open-top hopper

car fleet. On this basis, there were 207,682 coal

hopper cars in 1973, Since there were 1,460

mill ion coal-related freight car miles in that

year, the average utilization rate was 7,030

miIes. Regression analysis of historica l

utilization-rate data over the period 1962-769

revealed that a 1.13 percent compound annual

growth in utilization rate had been achieved. It

was assumed that the historical trend in car

utilization rates will continue over the period

of this study, except in the case of long-haul

unit train shipments. For the latter shipments,

the analysis described in chapter IV indicated

that 50,000 loaded miles per year per car can

be reasonably expected. Since long-haul unit

trains are anticipated to account for 50.6 percent of coal shipments in 2000, improved

utilization of such cars has a significant effect

upon coal-related car requirements. For example, in 2000 the nonlong-haul coal car utilization rate was projected to be 9,521 miles per

year per car, and coal shipments to amount to

620.9 billion ton-miles. At an estimated 95 tons

per car, these shipments correspond to 6,535

million freight car miles, 50.6 percent of which

are via Iong-hauI unit trains. Using the car

utilization rates established for each type of

shipment, a total coal hopper car requirement

of 405,000 in 2000 was determined. This result

is 41 percent less than the number of cars that

would have been required to ship the same

amount of coal without the utilization rate

gains achieved in the long-haul shipments.

Annual retirements of coal hopper cars were

calculated assuming a 15-year average lifetime. This is a shorter lifetime than for noncoal

cars because of the higher utilization rate in

unit train service. Coal car investment requirements were determined as that necessary to

accommodate growth in total requirements

and replacement of retired cars, at an average

cost of $13,000 per car (1971 dollars). The

estimated coal car requirements for the period

1975-2000 are presented in table A-5.

Noncoal car requirements were calculated

in a similar manner to that employed for coal

cars. Mean noncoal car utilization over the

1973-75 time period was 10,877 miles, and the

historical 1.13 percent annual growth rate was

assumed to hold over future years for all cars.

Retirement of noncoal cars was estimated with

the help of the following age distribution and

retirement rate data, based on a 22-yea r

average car Iife: 10

NONCOAL FREIGHT CAR AGE CHARACTERISTICS

Car age Retirement

Age distribution rate

(years) (in 1975) (per year)

0-10 40% 2.5%

11-20 30% 15 %

21 + .30% 70 o%

‘Assoc I a t Ion of Amer I c a n R a I I roads, Yearbook 01 Ra //road

Fact~, 1977

‘“Long Term Freight Car Forecasts, American Freight Car lnstltute, 1975
Appendix ● 1 5 1

The new car requirements were then deter- locomotives to freight cars than prevailed in

mined, with the corresponding investmen t the past because of the increasing ca r

costed at $16,000 per car. The resuIts for non- Ioadings. On the basis of historical trends, an

coal freight car requirements are presented in annual increase in locomotive hauling capactable A-5 The requirements decline between ity, approximately 1,65 percent, was taken into

1975 and 1985 as a result of the fairly rapid in- account in estimating the overall dependence

crease assumed for tons per freight ca r of locomotives upon freight car requirements.

loadings Beyond 1985, the effect of increasing Locomotive retirements were assumed t o

traffic volume predominates. The number of follow the noncoal car schedule. The resulting

locomotives required in each yea r was locomotive capital investment requirements,

estimated to be 1.8 percent of the total freight based upon $246,000 per car [1971 dollars), is

car requirement s This is a higher ratio of given in table A-5.

Table A-5. Rolling Stock Investment Requirements, 1975-2000

—

5-year

Annual investments

Required Annual new car requirements

stock retirements requirements (thousands of

Category — Year— (# cars) (#cars ) (# cars) 1971 dollars)

Coal hopper cars. . . .

Non coal freight cars.

Locomotives . . . . . . .

 . . . .

. . . . . . . .

. . . . . . . .

1975

1980

1985

1990

1995

2000

1975

1980

1985

1990

1995

2000

1975

1980

1985

1990

1995

2000

15,000

15,000

15,000

19,400

20,000

68,800

54,400

45,200

48,800

45,600

1,459

1,157

1,091

1,070

1,070

19,400

20,000

22,800

28,000

30,000

40,600

29,400

60,400

61,400

63,200

1,023

797

1,556

1,595

1,686

$ 252,200

260,000

296,400

364,000

390,000

649,600

470,400

966,400

982,400

1,011,200

215,658

196,062

382,776

392,370

414,756

Source: IR&T.

Way and Structures

long-haul coal movements considered within

Way and structures investment projections four case studies, other long-haul coa l

were made by evaluating the requirements movements, and al l othe r commodit y

associated with three shipment categories: movements.
152 ● Coa/Slurry Pipelines

Four in-depth case studies were conducted

for unit train movement of western an d

southern coal to five States: California, Texas,

Minnesota, Wisconsin, and Florida. These case

studies are described in chapter IV. Th e

cumulative investment requirements for the

case study coal movements for intervals between 1975 and 2000 are presented in table

A-6. The set of “other specific long-haul” coal

shipments are those described in chapter I V

amounting to more than 5 milIion tons per year

over distances greater than 500 miles. The investment requirements for these other specific

long-haul shipments were estimated by applying a ton-miIe adjustment to the investment requirement identified in the case studies. The

other specific long haul and the total specific

long-haul coal investment requirements are

shown in table A-6.

A review of historical trends in “all other”

way and structures investment indicated that

these have remained relatively constant at approximately $431 million per year (197 1

dollars). Other studies such as Cloppe r

Almon’s 1985 Interindustry Forecasts of the

American Economy have produced regression

equations that suggest way and structures investments are more strongly influenced by real

interest rates than traffic volumes. 11 Since real

interest rates are not varied within this study,

the “all other” way and structures investment

was held constant at its recent historical value.

On the foregoing basis, the following results

are obtained for total Class I railroad way and

structures investment over the 1975-200 0

period:

ANNUAL WAY AND STRUCTURES

INVESTMENT REQUIREMENTS

(Millions of 1971 dollars)

Shipment 1975- 1985- 1990- 1995-

categories 1985 1990 1995 2000

Specific longhaul coal * 70 39 22 25

Other

commodIties 431 431 431 431

Total 501 470 453 456

* See table V-6

‘‘Almon’s equation, p 92, for railroad Investment IS

t = 331 7 + () OO068Q -23 18R

T = (~ 4) (O 06) (5 1 )

R) = O 51, A W = () 85

where I IS Investment, Q IS rail traffic, R IS the real rate of interest, and the numbers In parentheses are the T scores This

equat Ion Indicates that Q has very I Ittle I m pact on 1, while /?

impact IS slgnlflcant

Table A-6. Cumulative Way and Structures/Investment Requirements for Specific Long-Haul Coal Shipments

(Millions of 1971 dollars)

1975-1985 1975-1990 1975-1995 1975-2000

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44 $ 64 $117 $144

Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 116 116 166

Minnesota. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 5 5

Texas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 260 316 361

Wisconsin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7 7 7

Subtotal a. . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 452 561 683

Other specific long-haul coal shipments . . 435 435 435 435

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $694 $887 $996 $1,118

a

These shipments pertain to the case studies described in chapter IV.

bOther specific long-haul coal shipments are those identified in chapter IV amounting to more than 5 m i I lion tOn S per Year

over distances greater than 500 miles. They represent a portion of all utility steam coal, and they tend to come onstream by

1985 and not increase much beyond that time.

Source: IR&T.
Appendix • 153

Leasing

For tax and accounting purposes, there are

obvious differences between direct investment, e.g., purchases of cars and locomotives,

compared with I ease/rental arrangements.

Direct investment purchases are finance d

through either debt or equity. Debt service

charges, i.e., interest and amortization, come

out of net railway operating income. Equitybased purchases, on the other hand, ar e

financed out of retained earnings or stock

issues on which dividends are paid, with both

retained earnings and dividends coming out of

after-tax net income. If equipment and track

are leased or rented, the expenditures come

from net railway operating revenue. The actual

choice between direct purchase versus rental/

leasing is complicated by tax, risk, return on

investment, and capital market considerations.

Since the investment and capital issues addressed in this study mainly concern the need

and ability to generate sufficient funds to

maintain and expand rolling stock and way

and structures, it was assumed that the annual

cost to the railroads of providing appropriate

capital stock via leasing is roughly equivalent

to the cost of direct purchase.

The capital requirements determinations

have not included investments in loading and

unloading facilities. These are usualIy shipperand receiver-owned. Shipper-leased equipment

is also excluded. These both represent a transportation-related cost to society in that they

absorb real resources, even if not directly paid

for by the railroads Financing ownership of

unloading facilities may be easier for public

utilities than for railroads. The former often

have more favorable access to capital markets, and are guaranteed a specific rate of

return on investments by public utiIity commissions. Likewise, major shippers that provide

their own loading facilities may be able to obtain capital at a more attractive rate than the

railroads. The growth in ownership or leasing

of rolling stock by the shippers, and in the case

of utilities by the receivers, has reduce d

capital requirements for the railroads. This has

also lowered the rate railroads can charge per

ton-mile. The advantages to the lessees of such

arrangements are greater certainty in availability of equipment. Full-service leases relieve

the lessees of the logistics of maintenance.

EMPLOYMENT AND COMPENSATION

Labor compensation was estimated during

specification of the operating expenditure projections, as discussed previously. The k factor

for each expenditure category allocated the

costs between labor and nonlabor shares. The

resulting labor compensation projections for

1980-2000 (in 1971 dollars) are given by region

in table A-7. Compensation in the East declines

between 1980 and 1985 because of the equipment productivity gains projected, but after

that, traffic-volume increases lead to higher

levels of compensation. Compensation in the

South and West increases throughout th e

period.

The compensatio n projections wer e

employe d to estimat e employmen t requirements. Compensation was divided by the

average wage rate in each year to determine

total employee hours, the total hours were

divided by the average annual hours pe r

employee to determine the number o f

employees. The average wage rate in future

years wa s estimated by the expression :

4.52(1 .0304)T-1971

, where 4.52 was the 197 1

average railroad employee compensation in

dollars per hour, and real wages were assumed

to increase annually by 3.04 percent. The

average annual hours per employee in recent

years has been 2,440 hours, which includes the

effect of overtime. Using these two factors and

the compensation estimates of table A-7 ,

regional estimates for Class I railroad employment were obtained for the period 1980-2000.

These employment estimates are presented in

table A-8.

A decline in employment is observe d
154 ● Coal Slurry Pipelines

Table A-7. Class I Railroad Labor Compensation Projections, 1980-2000

(Millions of 1971 dollars)

1980 1985 1990 1995 2000

EAST

Maintenance of way and structures . . . $ 303.99 $ 319.32 $ 333.05 $ 347.71 $ 367.62

Maintenance of equipment . . . . . . . . . . 378.96 334.70 345.59 356.84 368.08

Nonmaintenance expenditures. . . . . . . 1,159.45 1,080.55 1,159.85 1,246.05 1,337.01

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,842.40 1,734.57 1,838.49 1,950.60 2,072.71

SOUTH

Maintenance of way and structures . . . 215.93 260.05 305.88 362.06 433.64

Maintenance of equipment . . . . . . . . . . 252.93 273.41 331.76 402.56 487.96

Nonmaintenance expenditures. . . . . . . 608.58 682.18 847.63 1,054.15 1,309.31

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076.90 1,215.64 1,485.27 1,818.77 2,230.91

WEST

Maintenance of way and structures . . . 533.15 685.20 794.68 916,17 1,069.33

Maintenance of equipment . . . . . . . . . . 635.77 666.46 784.11 922.63 1,084.43

Nonmaintenance expenditures. . . . . . . 1,634.39 1,778.62 2,148.87 2,598.47 3,138.17

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,803.31 3,130.28 3,727.66 4,437.27 5,291.93

NATION

Maintenance of way and structures . . . 1,053.07 1,264.57 1,433.61 1,625.94 1,870.58

Maintenance of equipment . . . . . . . . . . 1,267.12 1,274.57 1,461.51 1,682.02 1,940.47

Nonmaintenance expenditures. . . . . . . 3,402.40 3,541.36 4,156.36 4,898.68 5,784.50

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,722.59 $6,080.50 $7,051.48 $8,206.64 $9,595.55

Source: IR&T.

Table A-8. Class I Railroad Employment Projections, 1980-2000

(Thousands of people)

——

1980 1985 1990 1995 2000

EAST

Maintenance of way and structures . . . 21.05 19.04 17.09 15.36 13.99

Maintenance of equipment . . . . . . . . . . 26.24 19.95 17.74 15.77 14.00

Nonmaintenance expenditures. . . . . . . 80.29 64.42 59.53 55.07 50.87

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 127.58 103.41 94.36 86.20 78.86

SOUTH

Maintenance of way and structures . . . 14.95 15.50 15.70 16.00 16.50

Maintenance of equipment . . . . . . . . . . 17.48 16.30 17.03 17.79 18.57

Nonmaintenance expenditures . . . . . . . 42.14 40.67 43.51 46.58 49.81

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.57 72.47 76.24 80.37 84.88

WEST

Maintenance of way and structures . . . 36.92 40.85 40.79 40.48 40.68

Maintenance of equipment . . . . . . . . . . 44.03 39.73 40.25 40.77 41.26

Nonmaintenance expenditures . . . . . . . 113.18 106.04 110.30 114.83 119.39

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 194.13 186.62 191.34 196.08 201.33

NATION

Maintenance of wayand structures . . . 72.93 75.39 73.59 71.85 71.17

Maintenance of equipment . . . . . . . . . . 87.75 75.99 75.02 74.33 73.83

Nonmaintenance expenditures. . . . . . . 235.61 211.14 213.34 216.48 220.07

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 396.29 362.52 361.95 362.66 365.07

Source: lR&T.
Appendix ● 1.5 5

throughout the forecast years in the East, and

between 1980-90 in the South and West. This

phenomenon is directly traceable to the carIoading assumptions used to derive the freight

car miles. Car productivity was projected to

grow quite rapidly through 1985, then to

slacken off between 1985 and 2000 as physical

limits to car and track capacities are encountered. Thereafter, even though labor pro -

ductivit y assumptions are positive , i.e.,

assumed to grow at 2.91 percent compounded

annually for maintenance of way and structures, at 2.88 percent for maintenance of

equipment, and at 2.34 percent for non -

maintenance expenditures, an overalI increase

in railroad employment is projected in each

region.

TAX FORECASTS

Projections were made for payroll, State,

local, and Federal taxes. The payroll tax projections were obtained from the labor compensation projections, assuming an increase in effective tax rate from 15 percent in 1976 to 17

perc

resu

ent in 1980 and 0.30 percent in 2000. The

lts are given in the following table:

PAYROLL TAX PROJECTIONS

(Millions of 1971 dollars]

———

1980 1985 1990 1995 2000

East 31321- 381. 61 44124 52666 6218 1

South 183.07 267.44 356.46 491.07 66927

West 476. 56 68866 894641,198061,58758

USA 97284 1,33771 1,692.36 2,’215 791,87866

The Railroad Revitalization and Regulatory

Reform Act of 1976 specifically prohibits the

continuation of discriminatory tax practices

against the railroads, which have often bee n

taxed more heavily than other taxpayers in

equivalent legal circumstances. Balanced

against this presumed downward pressure on

State and local taxes, especialIy property, franchise, and public utility taxes, is the weight of

history during which taxes have been growing

as a percent of assets, income, and revenues.

State and local taxes are, on balance, not expected to change very much from their present

relationships with operating income. Regressions testing several potential explanatory

variables for State and local taxes on Class I

railroads resulted in the hypothesis that only

about 40 percent of these taxes were operating

revenue-dependent For lack of better information, State and local income taxes were projected to be about 1 percent of net operating

revenue (the difference between operating

revenue and operating cost) while other State

and IocaI taxes were projected to remain constant in real terms over time. The composite

result is shown in the following table for State

and local taxes, by region, over the 1980-2000

time period,

RECIONAl STATE AND LOCAL

RAILROAD TAX PROJECTIONS

(Millions of 1971 dollars)

1980 1985 1990 - 1995 2000

East 12318 126.50 12880 131.51 135.02

South 5740 67.16 75.17 87.93 10345

Wes t 191 52 20818 225.44 145.94 272.83

U S A 372.10 401.84 429.41 405.38 511.30 -

The marginal effective Federal tax rate actualIy applied to railroads seems to be approximately 25 percent, and the 1969-72 average effective rate was considerably lower, ranging

between 13 and 20 percent. Federal taxes were

calcuIated on the basis of a tax rate of approximately 20 percent for the scenarios employed

in the present study.