Coal Exports and Port Development

April 1981

NTIS order #PB81-203358
Library of Congress Catalog Card Number 81-600050

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402
Preface

The Office of Technology Assessment has previously published reports on the

subject of domestic coal production and use; it has prepared other assessments on

marine transportation issues. Recognizing this background and the urgency of coal export issues now before Congress, Sen. Charles McC. Mathias, Jr., a member of the

Technology Assessment Board, asked OTA to prepare an analysis of Federal policies

affecting coal exports and port development. He asked that this analysis be a shortterm effort of limited scope, focusing on major current issues of congressional concern

since new legislation had been introduced and several hearings on the topic are

pending.

The technical memorandum, prepared in response to that request, addresses four

major issues which are important to Federal policy debates now before Congress:

● estimating the potential U.S. coal export market;

● development of foreign trade policy;

● the Federal role in dredging harbors; and

● the outlook for alternative technologies.

This analysis indicates that sizable increases in future U.S. coal exports are

achievable if the Federal Government and the private sector complement the efforts of

each in encouraging these exports and if present trends are not drastically altered by

developments in other exporting and importing countries. Without a coherent,

positive policy, the United States could lose a substantial share of the future coal export market.

In part, the development of adequate and efficient U.S. port capabilities to handle

future exports depends on Federal dredging policies. OTA’s analysis suggests general

agreement about the case for some changes in current Federal dredging practices, particularly as they relate to allocating some of the costs to the beneficiaries of dredging.

Although the outlook for alternative or new technologies to transport export coal

is promising, it does not appear that there is a direct role for the Federal Government

in the development of these technologies. However, it is important that an understanding and analysis of the various alternative and new technologies should be a basic element of Federal policy consideration on future coal exports.

Director
Acknowledgments

OTA is indebted to the following people who provided information, views, and advice during

the course of preparing this technical memorandum:

Brent Blackwelder, Environmental Policy Center

William Boucher, Alan Capute, David Gillece,

Greater Baltimore Committee, Inc.

Jay Brandes, U.S. Department of Commerce

Donald Cluff, Office of Management and Budget

R. L. Counselman, Virginia Pilot Association

Daan Everts, Embassy of the Netherlands

Xavier Fels, Embassy of France

Michael Gaffen, U.S. Department of Energy

Herbert Haar, The Port of New Orleans

Douglas Hailer, Jack Starr, Frank Wooton, U.S.

Army Corps of Engineers—Norfolk District

Ran Hettena, OSG Bulk Ships, Inc.

Robert Hope, Alabama State Docks

Arthur Ingberman, formerly of the ICE Task Force

Royal Kastens, Rex Sherman, American Association of Port Authorities

E. R. Lichty, R. Jackson, Chessie Systems, Inc.

Richard Lidinski, Maryland Port Administration

Jim Lisnyk, John Neidlinger, Maritime

Administration

Jack Mace, T. Parker Host, Frank O’Keefe, Glen

King, Gerald Parks, Hampton Roads Maritime

Association

James Maddox, Norfolk & Western Railroad

Hans Mayer, Maryland Coal Export Task Force

William Murden, Howard Olson, Neil Samuels,

U.S. Army Corps of Engineers—Dredging

Division

Harry Perry, Resources For The Future

Dwane Thompson, Congressional Research Service

Johannes P. Van Rij, European Economic

Community

William Witting, Department of State

iv
Coal Exports and Port Development Staff

John Andelin, Assistant Director, OTA

Science, Information, and Natural Resources Division

Robert Niblock, Oceans and Environment Program Manager

Peter Johnson, Project Director

Daniel Kevin, Analyst

Kathleen Beil, Administrative Assistant

Linda Wade, Secretary

Consultant s

Denzil Pauli William Howard

Mark Tomassoni (Simat, Helliesen & Eichner, Inc. )

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling* Kathie S. Boss Debra M. Datcher

Patricia A. Dyson* Mary Harvey* Joe Henson

● OTA contract personnel
Contents

Chapter Page

1.

2.

3.

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Estimating the Potential U. S. Export Market . . . . . . 5

Foreign Trade Policy Considerations . . . . . . . . . . . . 7

Dredging: the Federal Role . . . . . . . . . . . . . . . . . . . . 8

Alternative Technologies—the Outlook . . . . . . . . . 10

Discussion of Issues... . . . . . . . . . . . . . . . . . . . . . . 13

Issue I: U. S. Coal Export Potential . . . . . . . . . . . . . 13

Issue II: Federal Policy.. . . . . . . . . . . . . . . . . . . . . . 16

Issue III: Dredging. . . . . . . . . . . . . . . . . . . . . . . . . . 18

Port and Shipping Technologies for Exporting

Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Inland Networks and Systems . . . . . . . . . . . . . . . . . 37

Major Coal Ports and Terminals . . . . . . . . . . . . . . . 40

Coal Projects at Other Ports . . . . . . . . . . . . . . . . . . 48

Summary of Coal Port Projects.. . . . . . . . . . . . . . . 52

Ships in the Coal Export Trade . . . . . . . . . . . . . . . . 52

Proposed New Terminal and Shipping Systems. . . . 58

Appendixes

A. Status of Dredging Projects . . . . . . . . . . . . . . . . . 69

B. Legislation in the 97th Congress . . . . . . . . . . . . . . 75

List of Tables

Table No. Page

1.

2 .

3.

4 .

5 .

6 .

7.

8 .

Selected Current International Steam Coal and

Shipping Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

History of U.S. Coal Exports . . . . . . . . . . . . . . . . . 34

U.S. Exports of Bituminous Coal . . . . . . . . . . . . . . 35

Summary of Existing and Proposed Facilities at

Five Major Coal Handling Ports. . . . . . . . . . . . . . . 36

Rail-Carried Coal Tonnage for 1978. . . . . . . . . . . . 39

Size Distribution of World Coal Fleet . . . . . . . . . . . 54

Dimensions of Selected Ships by Coal-Carrying

Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Coal-Loading Facilities for Large Bulk Carriers

Analyzed by Area and Capacity. . . . . . . . . . . . . . . 5 5

Table No. Page

9. Coal-Discharging Facilities for Large Bulk Carriers

Analyzed by Area and Capacity. . . . . . . . . . . . . . . 55

10. The World Coal Trade by Vessel Size, 1979 . . . . . . 56

II. Shipments of Dry Bulk Commodities by Bulk and

Combined Carriers . . . . . . . . . . . . . . . . . . . . . . . . 56

12. The Existing Fleet and Tonnage on Order by Size

Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

13. Coal Shipping Costs for Round Trips From Selected

U.S. Ports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

A-1. Corps of Engineers Cubic Yard Dredging. . . . . . . 70

A-2. Corps of Engineers for Dredging . . . . . . . . . . . . . 70

A-3. How Corps Projects are Conceived, Authorized,

Funded, and Implemented . . . . . . . . . . . . . . . . . . . 72

A-4. Proposed Improvements to Existing Coal Harbor

Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

A-5. Coal Ports Reports Schedule . . . . . . . . . . . . . . . . 74

List of Figures

Figure No. Page

1. History and Projection of U.S. Coal Exports . . . . . 6

2.

33

3.

4 .

5 .

6 .

7.

8.

9.

10.

Major U.S. Coal Deposits, Transportation

Systems, and Coal Ports . . . . . . . . . . . . . . . . . . . .

Existing and Proposed Coal Piers, Continental

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Principal U.S. Coal Basins and Rail Transportation

Routes to the Export Market . . . . . . . . . . . . . . . . .

Existing and Proposed Coal Piers, Port of Hampton

Roads. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Existing and Proposed Coal Piers, Port of

Baltimore. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Physical Layout, McDuffie Island . . . . . . . . . . . . .

Existing Coal Terminals, Port of New Orleans . . . .

Approximate Implementation Schedule of New

Coal-Export Terminals. . . . . . . . . . . . . . . . . . . . . .

Economies of Scale in Seaborne Coal Trade . . . . . .

37

39

41

43

46

47

53

5 7

vii
Chapter 1

Summary
.
Chapter 1

Summary

Long lines of foreign-flag colliers congregating in Chesapeake Bay to await their turn at

overtaxed loading facilities in the Ports of Baltimore and Hampton Roads are dramatic evidence of the current boom in U.S. coal exports.

Since early 1980, the number of ships queued up

at each of these two major coal terminals has

reached 100 or more, with a waiting time of up

to 2 months before loading.

.,

. .- , “

- + “ “ ,-

The recent surge in U.S. exports is due primarily to disruptions in production experienced

by two of the other primary suppliers of coal

to Europe and Japan—Poland and Australia.

Mines in both countries have been shut down by

extended strikes, forcing coal-consuming nations to obtain supplies elsewhere, principally in

the United States.

- .— —. . -— — — . —

>- ~“--~=’ — -— .

.-.— - - -

Photo Credit: Office of Technology Assessment.

Ships lined up below the Chesapeake Bay Bridge waiting to enter the Port of Baltimore, Md.

Photo Credit U S. Army Corps of Engineers.

Ship traffic backed up at Hampton Roads, Va.

3
The new demand for U.S. coal helped push

total exports to a record 90 million tonnes

(mmt) in 1980–a 39-percent leap over 1979. It

also has touched off a major expansion of U.S.

coal port facilities to reduce the present congestion and to handle anticipated growth, which

some project to be as high as 255 mmt by the

year 2000.

One factor contributing to expectations of a

large future demand abroad is the recent increase in the number of utilities which are converting electric generating plants from oil to

lower cost steam coal. This conversion is occurring among industrial nations, seeking to reduce their dependence on oil supplies from the

politically unstable Middle East, and their exposure to spiraling oil prices.

A higher demand for metallurgical coal,

which is used in the steelmaking process, also

contributed to the 1980 U.S. export total. However, demand for this commodity is expected to

remain relatively constant over the next several

years.

Over the next two decades, it is widely anticipated that the foreign and domestic shift to

steam coal will accelerate because recoverable

coal reserves are many times greater than oil

and gas and able to meet increasing energy demands far into the future. At present, coal is

supplying approximately 25 percent of the

world’s energy needs. The Massachusetts Institute of Technology’s (MIT) World Coal Study

estimates coal will have to supply one-half to

two-thirds of the additional energy required by

the world over the next 20 years,

The United States and other nations have

been encouraging both industrialized and less

developed countries to put greater reliance on

coal for their energy requirements. This stems in

part from a 1978 International Energy Agency

review recommending the wholesale substitution of coal for oil. The Agency’s report concluded that in order to bring this about through

immensely expanded world trade in coal, it

would be necessary for coal-producing and importing nations to adopt policies facilitating

coal development and usage.

Following up on this recommendation, the

heads of state of the United States, Canada, Federal Republic of Germany, France, Italy, Japan,

and the United Kingdom conferred at their economic summit meeting in Tokyo in June 1979.

They pledged to increase as far as possible coal

use, production, and trade without damage to

the environment.

A year later, this pledge was strengthened

at the Venice economic summit meeting. The

seven nations pledged to double coal production

and use by 1990 and take other steps to increase

coal trade and utilization.

During the spring of 1980, the previous administration formed the Interagency Coal Export (ICE) Task Force to study world coal supply and demand projections and make recommendations to guide U.S. export policy and

overall international efforts.

This technical memorandum relates to policy

issues confronting the Federal Government that

relate to the expansion of U.S. coal exports in

the near term and the prospects for continued

growth over the coming decades. This OTA

analysis explores four major issues which may

be summarized as follows:

●

●

●

●

How realistic are projections that world demand for coal can induce U.S. exports to

grow from the present 90 mmt level to 255

mmt annually by 2000? What are the constraints on growth?

Is there a requirement for Federal involvement at the foreign policy level to promote

long-term commitments from purchaser

nations, and to provide assurance of stability of price and supply, to attain coal export goals?

What are the alternatives to the traditional

Federal role in dredging harbors so they

may be deepened to accommodate larger

coal-carrying ships?

What alternative technologies for coal handling and transport may-be available to

enhance the capabilities and efficiency of

future exports?

The analysis of these issues has drawn on a

number of recent studies. A discussion of the

first three issues is found in chapter 2 and a discussion of the fourth is in chapter 3.
5

ESTIMATING THE POTENTIAL U.S. EXPORT MARKET

In a report issued January 20, 1981, the ICE

Task Force projected world trade by 2000 of

some 500 mmt of steam coal. The ICE estimated

the U.S. share of the steam coal total would be

about 200 mmt, or 40 percent, assuming that

U.S. suppliers would be able to keep their prices

in a competitive range with other exporters and

that foreign buyers would find the United States

a dependable source of coal. Several experts

have told OTA that world trade of 174 mmt of

metallurgical coal will remain roughly constant

through 2000. The U.S. share of the export metallurgical coal market should remain near 55

mmt annually.

The National Coal Association estimates

roughly parallel those of ICE. It expects total

coal export volume to grow to 142 mmt by

1990, as compared to the ICE estimate (with

metallurgical coal added), of 120 mmt. The

combination of the switch to coal by industrial

nations and new demand for U.S. coal are real.

U.S. coal export forecast of 255 mmt, * by 2000

is achievable (see figure 1)—but probably only

if both the Federal Government and private industry work closely together to encourage these

exports, and if present trends are not drastically

altered by developments in other exporting and

importing countries.

Two dominant factors will affect growth in

U.S. coal exports: price and security of supply.

Currently, U.S. prices for coal delivered in

Europe and Japan are 20- to 30-percent higher

than Australian and South African coal. (See

table 1.) Some of this differential is likely to remain as a result of such factors as higher labor

costs, longer distances from mines to ports, and

longer transportation routes from the United

States to some overseas markets. The differential could be reduced if the United States de-

● This figure is based on the ICE estimated of 200 mmt of steam

coal and adding 55 mmt of metallurgical coal.

veloped more modern and efficient ports, harbors, and shipping systems.

There is a possibility of more competition.

Canadian exports, not presently a significant

factor, could grow in the future. Other countries

that could enter the field and perhaps widen the

present U.S. price differential, include Colombia, Indonesia, and the People’s Republic of

China.

European nations and Japan are concerned

about maintaining the reliability of their supplies as they become more dependent on coal.

One of their criteria for making purchases on a

long-term basis is the susceptibility to interruption of exports from a given country. Importers

also are interested in fostering a diversity of suppliers in order to cope with interruptions and to

stimulate competition.

The U.S. share of the world market depends

partly on the potential or real difficulties being

experienced by competitor nations. South Africa is subject to boycotts by some importing nations because of its racial policies. Australia

could experience a recurrence of the 1980 labor

difficulties which reduced production. Poland,

even if its labor unrest is quieted, still must cope

with the fact that its coal reserves are not as

abundant or easily mined as those of other

countries. Polish exports to Western Europe

may be further restricted by the need to meet

domestic requirements and demand for coal

from other Soviet bloc nations.

In sum, there are many uncertainties in estimating the potential U.S. share of the world

steam-coal market over the next 20 years. However, one thing does become evident from this

OTA analysis. If the United States does not develop and pursue a coherent, positive policy on

coal exports, it runs the risk of losing a large

share of the market to other coal-producing nations.
6

Figure 1 .—History and Projection of U.S. Coal Exports

2601

250 -

240 –

230 —

220 —

210 —

200 —

190 —

180 —

170 —

160 —

150 “

tn 140t

30

20

10

[

(255

I

I I

/

I

I

I

I

I

I

I

I

Year

Note: Steam coal at 30 percent of total in 1980 is expected to grow to 78 percent by 2000.

SOURCES: History-Coal data book. Projection-ICE Task Force with constant 1960 metallurgical coal added.
7

Table 1 .—Selected Current International Steam Coal and Shipping Prices (averaged, U.S. 1981 dollars/tonne)

Price FOB port Ocean freighta Delivered price $/MBtu

U.S. east coast to NW Europe . $50 $18 $68 $2.60

Poland to West Europe. . . . . . . 54 8 62 2.45

South Africa to Europe. . . . . . . 43 13 56 2.05

Australia to Europe. . . . . . . . . . 44 26 70 2.66

U.S. east coast to Japan. . . . . . 50 28 78 2.95

South Africa to Japan . . . . . . . . 43 22 68 2.49

Australia to Japan . . . . . . . . . . . 44 16 60 2.28

a

This freight cost does not include additions of $6 to $10/tonne now charged as demurrage for those ships waiting to load at Baltlmore and Hampton Roads

SOURCE: Coal Week International, Mar 18 and 25, 1981

FOREIGN TRADE POLICY CONSIDERATIONS

Principally because of its abundant coal supplies and overall political stability, the United

States is viewed as an attractive trading partner

by many coal-importing nations. However, it

does not appear that these factors alone will

assure that the United States will capture a major share of the world steam coal market in the

years ahead. Coal trading partners are concerned about a number of factors in dealing

with the United States including:

●

●

●

●

The absence of an articulated coal export

policy by the new administration. (It is not

yet clear whether coal export initiatives

started and/or suggested during the previous administration will be carried forward

by the present one. )

The possibility of future coal industry

strikes. A major strike by the United Mine

Workers would have a serious impact on

potential coal export contracts.

Lack of east coast deep-draft harbors to

accommodate larger and more competitive

coal carriers. Because larger vessels are expected to take over much of the world coal

trade in this decade, U.S. exports will be at

a disadvantage if these ships cannot be accommodated in U.S. harbors.

Limitations on present U.S. port and shiphandling capacity, loading facilities, and

high costs of mine-to-port transportation.

The coal-importing nations are sensitive to

official U.S. policies which affect priorities for

exports. E.g., a law passed by the 96th Congress

allows domestic coal ships supplying New England and other sections of the country to be

loaded at U.S. terminals ahead of foreign ships.

So far the effect of the law appears to be slight

but it has great symbolic importance to foreign

buyers.

Foreign buyers also are mindful of how the

Federal Government has occasionally intervened in the sale of various commodities to

other countries—notably grain to the Soviet

Union and soybeans to Japan. They want guarantees of noninterference with coal exports.

Recent U.S. statements on coal guarantees have

been general in nature and contain language

stating the United States will honor commitments except in cases of national emergency—

exactly when foreign buyers might need coal the

most.

No explicit Government-backed guarantees

for coal exports are now in effect. Coal sales are

conducted by private corporations; the Federal

Government cannot enforce contract compliance.

The ICE Task Force and others have suggested a number of specific mechanisms to enhance trade with other nations. These include:

●

●

●

creation of a special Federal office to monitor the development of the U.S. coal trade;

establishment of bilateral and multilateral

consultations with major coal trade partners to exchange technical and other information and improve contacts with the U.S.

coal industry;

establishment of a permanent U.S. inter-
8

●

national coal trade delegation to act as a be pursued. However, if the administration and

catalyst in the completion of new coal Congress wish to promote U.S. exports of coal,

transactions and aid the implementation of an important step would be to reaffirm the U.S.

existing ones; and commitment to increase domestic coal producformation of a U.S. Coal Export Trade As- tion, improve the necessary infrastructure, and

sociation, which would include producers increase-exports. This would establish a political

and other elements of the domestic indus- climate that would be reassuring to importing

try, to represent their international interest. nations in assessing the reliability of the United

These proposals are only initial examples of a States as a future coal trade partner.

range of Federal policy initiatives which could

DREDGING: THE FEDERAL ROLE

Within the coal industry there is widespread

agreement that the United States export market

will not expand to its full potential unless harbors are deepened to permit the entry of the new

generation of very large colliers now coming

into service. The reason: much of the flexibility

in steam coal prices lies in ocean transportation

costs. Dredging proponents claim that the costs

could be significantly reduced by deepening

channels to handle larger ships, however, they

do not include the cost of dredging in many of

their arguments.

New colliers of 150,000 tonnes are expected to

offer a 30- to 50-percent transportation cost advantage over older 60,000-tonne ships now

transporting U.S. coal to Europe. None of the

major U.S. coal ports can now fully load ships

over 80,000 tonnes, and larger ships now entering these ports must depart with a partial load.

Newer ships are tending toward the larger sizes

because most of the rest of the world’s major

coal ports are deep-draft. Coal now represents

about 10 percent of the total import and export

tonnage through all U.S. ports. Therefore,

while modern deep harbors would assist the

coal trade at selected ports, it would also assist

future trade in numerous other commodities

carried on deep-draft ships.

Under an arrangement dating from the early

1800’s, the U.S. Army Corps of Engineers has

responsibility for maintaining the Nations’s

waterways and harbors, including dredging. In

a lengthy, multistage process, dredging projects

are studied by the Corps and authorized and

funded by Congress on a case-by-case basis.

Many parties have urged that a reexamination

be made of the Federal role in dredging harbors

and the process by which dredging projects are

initiated and carried out.

Federal spending for dredging projects is

under scrutiny by the administration and Congress, and several proposals have been put forward for sharing dredging costs with local and

private entities benefiting from deepened harbors. The sums involved in dredging are substantial: the cost of current dredging operations

at seaports average about $200 million per year,

and numerous proposals have been made to

deepen ports that, if implemented, would greatly increase this cost. At four major coal ports

alone—Hampton Roads, Baltimore, Mobile,

and New Orleans/Baton Rouge—the capital

costs of deepening channels for large ships is

estimated to be $1.5 billion in 1980 dollars. Annual operation and maintenance (O&M) costs

for these four ports currently range from $4

million for Baltimore to $19.5 million for New

Orleans. Projected additional annual O&M

costs resulting from the proposed channeldeepening projects range from $800,000 for Baltimore to $75 million for New Orleans.

Funds for dredging have not been appropriated by Congress for any of the major coal-port

dredging projects. Authorization of channel

deepening has been approved for Baltimore. In

addition, Corps studies have been completed

and approved for the Hampton Roads harbors

of Norfolk and Newport News. Studies of the
9

1980 U.S. Coal Export Trade

HarnotonRoad ~

Baltlmore

New Orleans

Mobile

Philadelphia

Great Lakes I I

I 1 1 I I I

o 10 20 30 40 50

Millions of tonnes by port

Europe

Japan

Canada

South America

Other

I I

L I

I

1 J

I

I I 1 1 I o 10 20 30 40 50

Millions of tonnes by destination

SOURCE Off Ice of Technology Assessment.

Mobile harbor have been completed by the Mobile district and are under review by the Corps.

A draft report has been prepared for New

Orleans that has yet to be reviewed. The Corps

of Engineers has estimated that, if new, expedited procedures are adopted, all of these

projects could be completed by the mid to late1980’s (see appendix A).

Major new dredging projects presently take

an average of over two decades to progress

through the various stages from project proposal to completion. This lengthy time period

has tended to discourage the promotion of bulk

trades such as coal which are switching to large,

deep-draft ships. A variety of legislative proposals have been made to expedite dredging

projects at U.S. coal ports. Because of budget

limitations and a long-standing need to select

among a multitude of proposals, it may well be

necessary to establish priorities among ports for

Federal funding. Although addressed by several

congressional bills, there is currently no mechanism in place for establishing priorities for harbor dredging on a national level.

OTA analysis suggests there is general agreement among the private and public sector that

some changes in current practices are needed.

The notion of sharing Federal dredging costs in

some form of user fees for those who directly

benefit is gaining acceptance partly because of

concerns that principal beneficiaries do not pay

their share of the cost. Selecting certain ports for

dredging first may be the only way to initiate

some dredging for any ports. Lastly, streamlining the process, so long as environmental

safeguards are maintained, may be necessary to

assure timely attention to developing the U.S.

coal export trade.

Due to the limited scope of this study, this

technical memorandum has not addressed certain other issues relating to the dredging question:

Opponents of dredging argue that the environmental costs of dredging could be substantial, while proponents of dredging contend that environmental damage will be

minimal, given proper safeguards. No analysis was done during this study on this

issue.

Benefit-to-cost ratios ascertained in studies

by the Corps of Engineers for major coal

ports have ranged from 2:1 to 9:1. If these

ratios are correct, the cost of dredging

would be small compared to savings resulting from dredging. The savings that are

considered are for reduced transportation

costs for all deep-draft ships (of which coal

colliers are only one group) that would use

the port after it is dredged. However, past

Corps’ analyses have been criticized by

some as biased in favor of water development projects. This study has not attempted to investigate the Corps’ process or

studies of specific ports.

-11 --- ,j:, - ~

- 2
10

ALTERNATIVE TECHNOLOGIES–THE OUTLOOK

The need for new technologies to handle coal

for export will depend, in the long run, on the

volume of exports and the efficiency of existing

systems. Industrial developers may be forced to

introduce new systems if expansion of existing

facilities and transportation networks are unable to cope with the demand. There are a number of options including coal slurry pipelines,

midstream transfer of barges or ships, bargecarrying ships, pneumatic pipelines, and shallow-draft, wide-beam ships.

During the preparation of this technical

memorandum, OTA identified the most important of these alternative technologies, but has

not analyzed or compared them. It is possible

that one or more new approaches to transporting coal overseas could offer economic benefits

that might outweigh those of more conventional

systems now in use. However, economic comparisons have not been made and it is premature

to judge their relative worth.

The Federal Government is not in a good

position, compared with the private sector, to

either evaluate or promote new technologies,

Those that have been proposed are in the private sector and information about them is only

partially available to the public. The coal

transport business includes an enormous variety

of private and public organizations that are not

always motivated by the same concerns.

Some brief comments about future possibilities for coal transport may be useful. E.g., if

new mines are opened in the Western United

States strictly for export, some may find it efficient to create a complete mine-to-ship system

dedicated to this purpose. Or, if large volume,

long-term export contracts are negotiated for

Eastern U.S. mines, it may make sense for

others to build offshore, deep-water, coal-loading terminals. The Federal role in such cases

might be to encourage development when the

timing appears appropriate, but not necessarily

to become directly involved.

While most of the research to develop alternative systems is being conducted by the private

sector, certain Federal actions could help or

hinder a decision to proceed to actual development. E.g., some have stated that if harbors

are not dredged, it could force the development

of alternative systems for offshore loading.

Alternative technologies will probably be approached with caution by established industries

because they are perceived as long-term options. Many of the technologies still have to be

developed. Moreover, foreign buyers, terminal

operators, and shippers will have to agree

when—and how—they should be adopted.
Chapter 2

Discussion of Issues
Chapter 2

Discussion of Issues

ISSUE 1: U.S. COAL EXPORT POTENTIAL

A series of comprehensive studies of the

world coal situation have predicted massive increases in coal trade over the next two decades

and a large U.S. share of that future market.1 It

is likely that goals of doubling or tripling coal

usage for energy production in Europe and Japan will be achieved by the year 2000 because

those countries have aggressive policies to reduce their dependence on OPEC oil.

Since most of the coal to satisfy the new demand in Europe and Japan will be imported, total world trade in steam coal could expand by 5

to 10 times and reach about 500 million tonnes

per year (mmt/yr) in 2000. (World trade in metallurgical coal of 175 mmt/yr is expected to remain constant. )

The U.S. share of this new steam coal trade

will depend on how well this country prepares

for the export market in comparison with other

major suppliers. This preparation includes providing ample and efficient facilities to handle the

transportation and assuring foreign buyers of

both U.S. competitive prices and a secure supply. The United States must maintain reliability

of supply and price that compares favorably

with Poland, South Africa, Australia, and

maybe other supplier countries as well.

Under the previous administration, the Interagency Coal Export (ICE) Task Force prepared

an analysis of future U.S. coal export potential

drawing on previous studies such as the World

Coal Study and International Energy Agency

studies and using some newly available data on

growing coal demand worldwide. A draft report

was issued January 20, 1981. It predicted U.S.

steam coal exports to grow to 200 mmt/yr by

2000. That figure did not include metallurgical

coal and was based on assumptions of demand

only in Europe and the Far East. It assumed U.S.

prices would be only slightly higher than other

suppliers and that foreign buyers would view

the United States as a reliable source of Supply. z

Adding a level of 55 mmt/yr of metallurgical

coal to the ICE projections would bring total

U.S. exports to 255 mmt/yr by 2000. The projection appears achievable given aggressive efforts to promote these exports by both the Government and private industry and if developments in other countries do not drastically alter

present trends.

Federal actions in dredging coal port harbors

could have a substantial impact on U.S. price

competitiveness. Federal actions in foreign trade

policy development could have a sizable impact

on foreign buyer’s views of the relative security

of U.S. coal supply in the future. Private industry in the United States appears to be making

substantial investments to improve the coal export system, which should help to provide reliable supplies at competitive prices. 3

Whether the goals of U.S. exporters will be

achieved depends on a host of interrelated decisions by utilities, transporters, producers, and

governments, but there are clear incentives to

move toward U.S. coal usage by other countries

and recent trends are supporting that movement.

International Trends and Actions

In the early effort to bring greater focus to the

coal trade issue, the International Energy Agency (IEA) reviewed the prospects for steam coal

to 2000 and published a report in 1978 examining this topic.4 While some of the quantitative

estimates are conservative in light of the more

recent large increases in prices of alternative

fossil fuels, the conclusions of the report advocate a massive substitution of coal for oil by

both industrial societies and developing countries.

IEA also concluded that the creation of an immensely expanded world trade in coal is in part

dependent on the adoption and execution of co13
14

ordinated Government policies to facilitate coal

development and usage. Goals to increase coal

use among the industrialized countries are

stated in the studies referenced above and in the

Tokyo economic summit communique of June

1979 and the Venice economic summit communique of June 1980.5

At the conclusion of the seven-nation economic summit meeting in Tokyo on June 29,

1979, the heads of state of Canada, the Federal

Republic of Germany, France, Italy, Japan, the

United Kingdom, and the United States focused

on the issue of coal and agreed to increase as far

as possible coal use, production, and trade,

without damage to the environment,

In an effort to build on and strengthen the

Tokyo coal pledge as well as to take a long-term

view of coal production, utilization, and trade,

the heads of state of the seven summit countries

in their June 1980 Venice summit communique6

indicated agreement on several points.

●

●

●

●

●

They intend to double coal production and

use by 2990..

They will encourage long-term commitments by coal producers and consumers.

It will be necessary to improve infrastructure in both exporting and importing countries, as far as is economically justified, to

ensure the required supply and use of coal.

They will consider promptly the recommendations of the report of the IEA Coal

Industry Advisory Board.

They will do everything within their power

to ensure that increased use of fossil-fuels,

especially coal, does not damage the environment.

The IEA Governing Board in July 1979 approved the formation of the Coal Industry Advisory Board. It was created as a means to assist

the industrialized countries in identifying and

removing barriers to increased coal production,

use, and trade, A report by that board submitted to IEA in December 1980 recommended

specific government and industry actions to

meet the goals of doubling coal use by 1990 and

tripling it by 2000.

7

World Coal Study

In June 1980, an analysis of the world’s energy and coal prospects to 2000 was prepared

by the Massachusetts Institute of Technology’s

World Coal Study,8 an international project involving 80 people from 16 major coal-producing

and consuming countries. Among the conclusions of the World Coal Study are:

●

●

●

Coal is capable of supplying a high proportion of future energy needs. It now supplies

more than 25 percent of the world’s energy.

Economically recoverable reserves are very

large—many times those of oil and gas—

and capable of meeting increasing demands

well into the future.

Coal will have to supply between one-half

and two-thirds of the additional energy

needed by the world during the next 20

years, even under the moderate energy

growth assumptions of the study. To

achieve this goal, world coal production

will have to increase 21⁄2 to 3 times.

Many individual decisions must be made .

along the chain from coal producer to consumer to ensure that the required amounts

are available when needed. Delays at any

point affect the entire chain. This emphasizes the need for prompt and related actions by consumers, producers, governments, and other public authorities.

The ICE Task Force

Formed in the spring of 1980, the ICE Task

Force considered the evidence of world coal supply and demand projections from previous studies and prepared some independent analyses.

The ICE report, completed January 20, 1981,

concludes that the United States will export 200

million tonnes of steam coal by 2000 or 40 percent of the total world trade in steam coal.9

The major uncertainties in this projection relate to comparative actions on price and reliability of supply among the present four major coal

exporting countries: the United States, Poland,

Australia, and South Africa.
15

The ICE Task Force concluded that the United

States could obtain a stable share of the market

as long as U.S. prices do not exceed a range of

approximately 10 percent above other countries’

delivered prices. If U.S. prices exceed this range,

purchases would drop correspondingly. OTA

believes that this conclusion is reasonable but it

is difficult to tell how tradeoffs between price

and other motivations will be calculated. The

Task Force also stated that “if U.S. coal were

generally priced at $6 to $8/tonne above others’

prices, the result would be to reduce the U.S.

share of the European market from 30 to 25 percent. ”

Despite the conditions that tend to keep U.S.

prices relatively higher, the Task Force contended that the United States will “generally be

able to maintain reasonable delivered prices for

its coal. ”

A component of U.S. attractiveness, as analyzed by ICE, is the expected high demand in

consumer countries. “Demand for steam coal in

the next 5 to 10 years is expected to exceed the

production from non-United States sources, ” it

said, citing problems in building up nuclear

power, coal’s main competitor, as an alternative

to oil.

Very few doubt that there will be a strong

future coal demand. However, there are those

who believe that the United States may not develop the required capabilities, policies, and

price competitiveness to capture such a large

share of the steam coal market as projected by

ICE. Among the skeptics are some of the foreign

buyers of U.S. coal.

Foreign Trade Factors

European and Japanese buyers of coal have

been urging attention to the long-range capabilities of the United States to export coal. Some are

skeptical that the Federal Government will take

expeditious action or that the myriad of local

and private interests can agree on a unified approach that some major expansions would require .

Since security of supply and price of U.S. coal

in the future are interrelated factors affecting

growth in U.S. exports, careful planning of all

aspects of foreign coal trade appear to be essential to meet export goals. Private and Government decisions will be clearer if they are closely

coordinated and based on information about

Government and private actions together.

Harbor dredging, new terminal development,

long-term contractual arrangements, total

transportation network planning, and total

public and private costs are all related. It appears that effective U.S. policy to encourage the

coal export potential will require careful analysis and cooperation on many levels of government and industry.

Besides the four principal export nations, exporters such as Canada could also grow substantially in the future. Other countries that

may become exporters in the future include Colombia, Indonesia, Mozambique, the People’s

Republic of China, and the Soviet Union. ”

The U.S. share of the world market is dependent on interrelated considerations, such as

the extent and rate of steam coal demand—how

steam coal fits into the overall picture of the

consuming country’s energy supply, both in

terms of aggregate energy demand, and in terms

which energy resources are to be utilized to meet

demand; the motivations and buying strategies

of consumers; pricing and other policies of coal

exporters competing with the United States; and

actions taken by U.S. firms and the Federal

Government affecting the attractiveness of the

United States as an exporter.

Competitive Factors

U.S. attractiveness is in part affected by difficulties or potential difficulties competitors

may experience:

South Africa may be boycotted by several

nations because of its racial policies. In addition, some foreign buyers are concerned

that South Africa may experience future

political instability.

Australia had major strikes in 1980, which

may recur in the future.

Poland is severely curtailing exports of

coal, and is not meeting previous commit-
16

ments. Coal reserves are not as abundant

or as easily exploited as in other countries,

and exports to other Soviet bloc countries,

as well as domestic needs, may conflict

with exports to Western Europe.

Aside from the United States and the other

three major exporters, other coal-producing

countries do not currently have sufficient mine

capacity and infrastructure to export large

quantities, New developments of mines and

transport systems could change this outlook in

the next decade.

The price of U.S. coal is now higher than that

of its competitors, due in part to factors that

cannot or are unlikely to be changed, such as

higher labor costs and longer distances from

mines to ports. Certain resulting price differentials, to the disfavor of the United States, are

likely to continue even with actions such as harISSUE 11: FEDERAL POLICY

Four departments—State, Commerce, Energy, and Defense’s Corps of Engineers—each

have specific responsibilities in coal exports, but

their present activities are limited and not closely coordinated. The previous administration’s

efforts at coordination took the form of an interagency task force charged with preparing a report. It is not yet clear what form of Federal policy on coal exports will be adopted within the

present administration. However, there are

some indications that private industry is expected to take the necessary actions with very

little Government involvement.

The previous administration’s ICE Task Force

report contains some Federal policy recommendations. It may be useful to consider them,

among other ideas, in the formulation of future

policy. During the coming months some level of

Federal activities could, in cooperation with private initiatives, help achieve national goals for

exporting coal.

While it is difficult to quantify benefits from

Federal actions on foreign trade policy it is clear

that much of the impression that foreign buyers

have of the United States as a reliable coal tradbor dredging to improve the U.S. competitive

position. Thus, if buyers emphasize price, the

U.S. share would tend to be residual–sold only

if lower cost competitors were unable to offer

sufficient quantities to meet demand.

On the other hand, the United States has potential advantages over one or more competitors in many other criteria. To the extent that

buyers seek such goals as diversity and reliability of supply, and perceive that the United

States provides these qualities, U.S. price disadvantages become less important. The more

steam coal demand rises and the more impediments to sales experienced by U.S. competitors,

the more U.S. exports should rise. The more efforts are made by both the Federal Government

and U.S. industry to assure foreign buyers of

meeting future commitments, the more U.S. exports should rise.

ing partner comes from the real and perceived

actions of the Federal Government.

This OTA analysis suggests that among the

most important coal export initiatives by the

Federal Government are decisions on harbor

dredging proposals and on international trade

policies. The dredging issue is discussed in issue

III. Foreign trade policy development is discussed below.

Benefits of Coal Exports

In addition to the obvious benefits to industry, jobs, and the economy, the promotion of

U.S. coal exports is viewed as providing some

significant overall benefits to the Nation. During this study, OTA has not been able to quantify these benefits but only to identify some that

appear important.

An often discussed national benefit is the improved balance of trade that coal exports bring.

During 1980, the total value of U.S. coal exports

was about $4.5 billion. This compares to a total

balance-of-trade deficit for the same year of $24

billion. Therefore, one might expect future
17

growth in coal exports to significantly affect

future balance of trade.

Another important national benefit is that of

improving energy security for U.S. allies. To the

extent that U.S. coal can provide them with a

significant portion of their future energy needs,

Western European countries will be less dependent on OPEC oil or even the proposed gas pipeline from the Soviet Union.

Finally, it has been noted by those in the port

and shipping industry, that the viability of U.S.

ports is vital to an overall healthy economy.

Coal is an important foreign trade commodity,

but only one of hundreds handled through major seaports. Coal represents about 10 percent of

foreign import and export tonnage at present,

although in some ports such as Hampton Roads,

it is one of the major products handled. Given

plausible growth rates, coal exports could account for a much larger fraction of exports over

the next two decades.

Concerns of Foreign Buyers

In the development of U.S. foreign trade policies, it is important to understand some of the

concerns of foreign buyers that could be addressed by those policies.

One major concern is that of U.S. labor disputes. In the past, the U.S. coal industry has experienced periodic strikes severely curtailing

output. The last such strike lasted 110 days in

1977-78. The United Mine Workers voted to

strike against the Appalachian coaI industry in

March 1981, and coal colliers began leaving the

lines at Baltimore and Hampton Roads. Labor

disputes affecting railroads and ports are also

possible .

Another concern is the possibility that future

domestic and political problems would be used

as a reason to curtail or disrupt exports. Some

foreign buyers would like to see a more clearly

stated commitment to maintain export levels as

part of U.S. coal export policy.

Past statements have included assurances that

the Federal Government will not interfere with

coal exports except in the case of national emergencies. However, Public Law 96-387, passed

last year, gave concern to some foreign buyers

that coal exports may suffer because of domestic

problems, 13

This law provides that, until June 30, 1987,

domestic ships for which coal is readily available for loading may move ahead of other ships

waiting to receive export coal. This puts domestic coal use into direct competition with export

trade for available U.S. port and terminal

facilities .14

The practical effort of this law has so far been

slight. Available information indicates that no

foreign ship has thus far been delayed in taking

on coal at any U.S. port because of a demand by

a domestic vessel. However, this law is of great

symbolic importance, and is indicative of potential future problems in U.S. export reliability

under conditions where domestic demand for

coal may be sharply increased, such as an embargo of oil, or future changes in domestic policy on fuel use. Moreover, shifts in New England to coal, as planned, could lead to increased

coastal shipping, preempting loading facilities.

In addition to security of supply, foreign buyers are also concerned about future U.S. prices.

Some foreign countries such as the Netherlands,

France, and Japan have very modern, deep-draft

harbors in which they can unload the largest,

and most economical, coal ships. They are concerned principally that the United States will not

take firm action to deveIop harbors capable of

handling large ships and, therefore, U.S. prices

will always be much higher than those of other

suppliers. Another factor affecting price of U.S.

coal is high U.S. railroad freight rates and the

lack of alternative systems to move coal from

the mines to many of the major coal terminals. 15

Views of Exporters and Administrators

U.S. exporters have many of the same concerns as foreign buyers. Private industry appears to be resolving some issues such as expanding dockside facilities and negotiating longterm contracts. However, foreign policy pronouncements and high-level Federal attention to

supporting coal export trade is viewed as important to reaching the future potential.

- 
18

The ICE Task Force report contained several

specific suggestions for improving Federal policy in coal exports and these have some support

from private and public groups who were involved with the Task Force efforts. lb

One suggestion is to designate a single point

of contact for coal trade. Presumably one lead

Federal agency could administer a special office.

Many foreign governments as well as private

companies are involved in coal trade negotiations. U.S. agencies such as the departments of

State, Commerce, and Energy each have small

activities in either promoting trade or facilitating international contacts—e.g., the Department of Commerce has trade attaches in U.S.

Embassies abroad. The Department of Energy

maintains contact with international organizations such as IEA. The nature of these agency

functions at present seems to preclude either

close cooperation or high-level policy attention.

A possible private-sector activity suggested

by the ICE Task Force is to develop a U.S. Coal

Export Trade Association. A number of coal

producers (particularly with Western U.S. coal

reserves) and coal transportation organizations

have recommended the establishment of an International Coal Trade Organization or Association to act as a forum for the interests of the

U.S. coal export industry. Similar organizations

exist to represent the international coal interests

of Australia and South Africa. In addition,

there are government coal trade organizations

in Poland and the Soviet Union.

The members of the existing U.S. Coal Exporters Association are coal brokers or are actively involved in coal export transactions. The

recommended new organization would include

a larger group of those potentially involved in

coal exports and the associated infrastructure.

Other suggestions included in the ICE Task

Force report include:

ISSUE Ill: DREDGING

Increasingly, oceanborne trade in bulk commodities such as coal is being conducted via

deep-draft vessels, which over many trade

●

●

●

●

●

encourage foreign investment in U.S. mines

and facilities;

expand marketing aid programs;

initiate bilateral conferences with major

coal trade partners;

establish an office to monitor U.S. coal export development (i.e., continue the Task

Force work); and

establish an international coal trade delegation.

Each of these suggestions and others will need

careful scrutiny if they are considered for adoption. However, a well-coordinated and focused

Federal role in coal export policy could be important to meeting coal export goals.

The principal categories of Federal Government actions that could increase the ability of

U.S. firms to export coal and help alleviate

some of the more obvious foreign concerns are:

●

●

●

political pronouncements creating a climate

conducive to foreign coal use, U.S. coal

production, and U.S. exports;

actions to increase U.S. physical capacity

to export coal; and

marketing activities to increase the actual

sale of coal.

Within each sphere is a range of possible actions, which can be listed by degree of Federal

involvement. Certain political pronouncements

can be among the most productive Federal actions. The administration and Congress could

reaffirm the U.S. commitment to increase domestic coal production, improve necessary infrastructure, and increase exports. The United

States could also encourage other nations to increase coal use. This can be done both in domestic and international forums. International

forums include economic summit conferences.

Statements of Federal Government support for

increasing coal exports will be important if a

major U.S. share of this trade is to be attained.

routes offer substantial savings to shippers and

their customers. Many parties believe that if the

United States is to remain competitive in the
19

world coal market, it is essential that at least

some U.S. harbors serving coal export facilities

be deepened in order to accommodate deepdraft bulk carriers. A major avenue by which

the Federal Government may assist coal exports

is the dredging of access channels for ports with

existing or projected coal export facilities. Two

areas of debate that have surfaced in relation to

the Federal role in dredging are:

1. Sharing of costs between Federal and nonFederal parties. Proposed channel improvements at four major coal ports alone

would cost about $1.5 billion, Federal

budget constraints and changing perceptions concerning the desirable scope of

Federal responsibilities have been reflected

in suggestions to shift part of the cost burden of dredging away from the Federal

Government, the party currently accepting financial responsibility for channeldeepening projects. The Reagan administration and some members of Congress

have proposed changes in current practices towards recovery of an increased

proportion of Federal costs through user

fees imposed on perceived beneficiaries of

dredging. However, there is debate over

who the principal beneficiaries are, and

the effect of user charges on U.S. exports.

Also, specific user-fee mechanisms remain

to be worked out.

2. Expediting dredging. Dredging projects

presently take decades to progress

through the various stages from project

proposal to completion. This system is

seen by many authorities as seriously impeding the growth of U.S. bulk-cargo capabilities. Proposals have been made to

streamline the process by which dredging

projects are approved and funded. Also,

there is currently no national mechanism

in place for establishing priorities among

various proposed dredging projects. It

may be necessary to create such a mechanism in order for decisions on individual

projects to be made expeditiously.

Cost Sharing

Introduction

Since 1824, the Corps of Engineers has had

Federal responsibility for improvement and

maintenance dredging of channels of the Nation’s ports and inland waterways. For all U.S.

inland waterway and seaport projects, the

Corps spent more than $1 billion on dredging

during 3 years from 1978 through 1980 (see app.

A). About two-thirds of this amount was spent

for maintenance dredging. ’7

Proposals have been made for new dredging

at many ports, partially or primarily justified

by coal export considerations. According to

the ICE Task Force, 34 ports have been identified as having a potential for serving increased steam coal exports. Nine of these are

already engaged in coal export. 18 At four existing coal ports alone—Hampton Roads,

Baltimore, Mobile, and New Orleans/Baton

Rouge—the capital cost of proposed channel

improvements would total almost $1.5 billion

in 1980 dollars . Annual operation and

maintenance costs for existing channels at

these four ports range from $4 million for

Baltimore to $19.5 million for New Orleans.

The channel improvements proposed would

create additional operation and maintenance

costs, ranging from $800,000 for Baltimore to

$75 million for New Orleans. ”

In company with many other Federal programs, the current extent of Federal involvement in dredging is the subject of increasing

debate. With administration budget cutbacks,

the question of how to divide the limited funds

to be allocated among dredging projects has

gained importance. Sharing of costs is one way

of dealing with these new constraints. Full

Government responsibility for dredging is considered by some to be an unnecessary subsidy

to private industry and other non-Federal interests.

Cost-Sharing Mechanisms.

Although private-sector responsibility for

dredging is a policy alternative, debates over
20

the Federal role in dredging have generally envisioned retention of overall Federal responsibility, while shifting varying proportions of

dredging costs to non-Federal parties. Cost

sharing can be geared towards recovery of all

costs, or of some percentage of the expenses

of Federal dredging operations. Mechanisms

can be tailored to specific harbors, or

generalized to all harbors. Two basic varieties

of cost-sharing mechanisms exist: user charges

and direct contributions.

User charges.—User-related fees are assessed by port authorities on vessels for such

things as pilotage, dockage, wharfage, lading,

and stevedoring. Historically, user charges

have received more attention as an option for

recovering inland waterway expenditures than

for maritime- related expenditures such as port

dredging. Cost-sharing mechanisms suggested

for inland waterways include user charges,

some of which are potentially relevant to seaports. Some sources have looked specifically

at user fees in connection with deep-draft

dredging. zo Examples of fees include:

● License fees imposed on operators of vessels. Fees can be uniform, or can vary according to draft, weight, capacity, or

other physical dimension of a vessel.

● Taxes. Taxes could be levied on cargos,

based on such criteria as commodity,

weight, or value. Fuel taxes have been proposed by several sources to help pay for

inland waterway construction and maintenance projects. Under the Inland Waterways Revenue Act of 1978, a fuel tax will

be levied starting at 4 cents/gal in 1981

and progressively rising to 10 cents/gal in

1986. The Reagan administration has proposed that this tax be increased to cover a

greater proportion of inland waterway

costs. However, the utility of a fuel tax to

cover seaport dredging costs is doubtful.

The Congressional Budget Office judged

that such taxes could easily be avoided by

those engaged in international shipping .21

● Harbor and channel use fees. A fee could

be levied each time a ship uses a dredged

channel. This could be at a flat rate for all

ships or a graduated rate based on draft.

Alternatively, the fee could be based on

deadweight tonnage (roughly the weight

of cargo) or on net registered tonnage

(roughly the volume available for cargo).

Harbor and channel use fees based on net

registered tonnage are used by many foreign ports and for determining canal tolls.

Direct contributions. —Direct contributions

could be assessed on non-Federal sources such

as States or port authorities to help finance port

developments. Potential sources also include

foreign companies and countries, who are

among the chief potential beneficiaries of dredging projects .22 The methods by which targeted

parties could raise funds to share costs vary—

e.g., States and port authorities could float

bonds.

Combinations.—Combinations of cost-sharing mechanisms are possible. Several proposals

have suggested that agencies responsible for

ports, such as port authorities, reimburse the

Federal Government for channel deepening, collecting necessary funds by adding on de facto

user charges to those they already assess, such

as dockage, or by charging a separate harbor

use tax to deep-draft vessels taking advantage of

added depths.23 State or local responsibility has

been opposed by most States and port authorities, who have argued that the Federal Government has jurisdiction over navigable waterways

and has sole authority to collect user fees.24 One

possible alternative to local collection of fees

would be direct collection by the Federal Government —e.g., employing the U.S. Customs

Service or Coast Guard.

Observations. Problems in estimating user

charge fees and the effect of such fees on U.S.

exports will be addressed at the end of this section. Though a detailed description or comparison of cost-sharing mechanisms is beyond the

scope of this memorandum, a few observations

may be made.

User charges appear to be the cost-sharing

mode with the most precedent and support. Out

of the welter of potential beneficiaries of dredging for coal exports, many believe that shipping

companies and their customers should be the
21

parties who bear some portion of dredging costs

in company with the Federal Government .25

If this argument is accepted, the main question is what sort of user charges should be

employed. The U.S. Customs Service collects a

small tonnage tax on international shipping

which totaled $14 million in 1980.2

6 There could

be advantages to broadening this tax to recover

dredging expenses, as the administrative machinery for collection is already in place. In addition, because it is imposed on a systemwide

basis for all international vessels using U.S.

ports, dredging costs would be spread widely,

and therefore would be less burdensome on individual ships. However, an important drawback of such a tax is that precisely because it is

spread so widely, beneficiaries would not pay

what many would consider an equitable share

of costs, and nonbeneficiaries—in this case,

shallow-draft ships—would end up helping to

subsidize dredging projects. If a tonnage tax

were imposed on a port-by-port rather than

uniform basis, this inequity would be reduced .27

A potentially more equitable alternative is a

harbor- and channel-use fee based on ship draft,

with a sliding scale in which the deepest draft

ships pay the greatest charge. Relatively shallow-draft but large volume or value-cargo

vessels, such as container ships, would be

penalized under user charges based on tonnage,

volume, or value, as would proposed new

technology bulk carriers with large volumes but

shallow-drafts. A user charge based on ship

draft would link dredging project benefits and

beneficiaries together in a more direct way.

OTA contacts with interested groups indicate

that this option has attracted relatively greater

support than other forms of cost sharing. However, no study or legislative proposal appears to

have considered this option in detail.

Cost-Sharing Proposals

The Reagan administration has proposed that

user fees be applied to a variety of Government

services, including certain Coast Guard activities, and aspects of the aviation system .2* Although not specifying a collection mechanism,

deep-draft dredging has recently been included

in administration user-fee proposals. Beginning

in 1983, user charges “will recover, through proprietary receipts, the [full] cost of dredging and

maintaining deep-water channels leading to our

seaports, except for that portion allocated to

Government [e.g., Navy use]. Together [with

inland waterway user charges], these proposals

will increase revenues by $2.1 billion over the

1983 to 1986 period, offsetting costs otherwise

borne by the general taxpayer. ”29’

Legislation has been submitted to implement

the administration proposals, which would

have “appropriate non-Federal public bodies”

become responsible for reimbursing the Federal

Government for certain dredging expenditures,

and which would give such bodies the authority

to collect user fees .30

Current congressional bills that would make

non-Federal parties partners in deep-draft

dredging cost sharing include S. 57 6

(Moynihan, Randolph) and S. 621 (Domenici,

Moynihan).3

’ This approach was also present in

the water policy initiatives proposed by the

Carter administration in 1978. 32 These proposals do not specify how such parties would

raise funds.

Despite this interest in cost sharing, there

have been few in-depth studies of mechanisms

that apply specifically to seaports. The Corps of

Engineers is looking at the issue of cost sharing,

but no formal study is being made. The Department of Transportation is preparing a study on

waterway user taxes and charges for navigation

projects including deep-draft channels and

coastal ports, as mandated by the Inland Waterways Revenue Act of 1978. This study should be

completed by October of this year.

Arguments For and Against Cost Sharing

In addition to reducing Federal expenditures,

proponents advance two major types of justifications for cost sharing: efficiency and equity. 33

Efficiency .—Critics of the present system

argue that when taxpayers pay the bulk of the

cost of a project, inefficiencies result: interested

parties are likely to promote projects that may

not be cost effective.

This problem, it is contended, occurs despite

the nominal role of the Army Corps of Engi-
22

neers in conducting benefit-cost analysis of projects. Critics of the Corps argue that Corps district offices tend to become the allies of local interests in promoting projects. In addition, it is

argued, benefit-cost analysis is an inexact discipline, heavily dependent on value judgments of

what constitute the benefits and costs to be included in the analysis, and subject to manipulation.

Cost sharing establishes a crude but potentially effective market-like mechanism to encourage

closer scrutiny of projects. As noted by one environmentalist, “The willingness of beneficiaries

to cover costs is perhaps the best test of the economic merits of a water project. ”34

These arguments have been countered in several ways. Opponents of cost sharing as a means

to increase efficiency argue that deep-draft improvements are economically justified, as

proved not only by favorable Corps of Engineers benefit-cost analyses (the objectivity and

rigor of which are defended), but also by the

financial commitments made by private industry, port authorities, and governmental units to

improvements at ports targeted for dredging.

Without hard financial judgments about the

likelihood of increased business brought about

by the combination of dredging and shoreside

port improvements, it is argued, these improvements would not be made.

It is also argued that if dredging projects were

prevented because of refusal by targeted parties

to share costs, national benefits (described below) could be lost, resulting in greater net

inefficiencies than are present in the current arrangement of Federal financial responsibility .35

Equity .—Perhaps more important than efficiency arguments are arguments related to the

equity of cost sharing. Advocates of cost sharing contend that it is inequitable for the Federal

Government to bear the entire responsibility for

deep-draft dredging operations.

Though definitions of equity vary greatly,

one principle is commonly held: to the extent

easible, beneficiaries of actions should bear the

costs generated by those actions. Cost-sharing

proponents contend that although some benefits

accrue on a national scale, the primary beneficiaries of dredging projects are specific private or

geographic entities, rather than the Nation as a

whole. Federal dredging is thus viewed as a subsidy to these entities, and cost sharing is viewed

as a means to increase equity.

User charges are levied on other transportation-related items, such as highway use (e.g.,

through gasoline taxes) and airports (e.g.,

through aviation fuel taxes and ticket surcharges). All transportation sectors can claim

similar national benefits; it is seen as unfair that

dredging be completely a Federal responsibility.

Opponents of cost sharing also argue their

positions on a basis of equity. Arguments have

usually focused on perceived inequities of requiring port operators to contribute to dredging

costs. 36

Contributions by non-Federal parties. Cos t

sharing, it is argued, should be viewed in the

context of ports and harbors as a whole, rather

than in regard to dredging alone. If ports rather

than dredging are taken as the unit of analysis,

non-Federal contributions become substantial

and constitute adequate sharing of costs.

There have been billions of dollars in privatesector investment for port facilities and other infrastructure necessary to export coal and other

commodities —e. g., most coal-loading dock facilities are owned by railroads or other private

companies, Private firms have indicated willingness to spend additional hundreds of millions of

dollars to increase U.S. coal export capacity at

ports. Investment by port authorities in port facilities is similarly large, almost equalling the

Federal investment in navigation works.

Local governments are required to undertake

what are called conditions of local cooperation

in partnership with the Corps of Engineers to facilitate dredging operations. These often entail

such things as “procurement of property or

property rights, relocation of pipelines and aerial cables, deepening of terminal areas, bridge

improvements or modifications, third party liability, business and residential relocations, and

the provision of spoil disposal and containment

facilities.”3 7

If further cost sharing is required, it
2 3

is argued, the Federal Government should in

turn share the revenues gained from such

sources as import duties and tonnage taxes, with

port authorities, States, and/or other involved

parties.

Analysis of these arguments depends on judgment of whether or not dredging should be

viewed as a separate item, or in the context of

port development as a whole. Some of the arguments against cost sharing become moot if port

authorities are given the power to charge user

fees by legislation, and such legislation is found

to be constitutional in the event of court challenge. Arguments are also inapplicable to direct

Federal collection of fees.

The national interest in deep-draft dredging.

Opponents of cost sharing argue that seaports

and actions that enhance their capacity, such

as dredging, should be viewed in terms of national rather than local interests. Some of the

benefits of dredging do not accrue to specific

parties, but to broad regions of the country, to

the United States as a whole, and even on an

international scale, to U.S. allies and foreign

policy interests. Federal responsibility is thus

seen as appropriate.

As stated by a spokesman for the American

Association of Port Authorities (AAPA), “Seaports are unique among water resource projects. Seaports are essentially transportation

facilities. They are an integral part of a vast

global ocean transportation structure that

fosters the exchange of peoples, cultures,

ideas, technologies and goods. Seaports are

also a part of United States maritime and trade

policy, and in time of national emergency, the

nation’s defense logistical system .“38

Benefits of seaports are widely distributed:

● More than a million jobs are created, and

billions of dollars worth of trade is conducted every year, with billions contributed to Federal, State, and local taxes.

● Ports serve large interstate regions. Inland

States have a direct stake in the ability of

ports to move their products overseas,

and to take in needed raw materials and

finished goods.

●

●

The United States is the world’s largest importer and exporter, and it depends on international waterborne trade to reduce its

balance-of-payments deficit.

Trade in specific commodities can be tied

to foreign policy actions, e.g., as demonstrated in both the sale and embargo of

grain to the Soviet Union.

Federal investment in ports is considered by

the industry as cost effective. They argue that

ports contribute billions of dollars annually to

customs revenues which are taken in by the

Federal Government .39

It is also argued that dredging is a necessary

part of port capability. If U.S. ports lag in modernization and expansion, the alternative, as

stated by AAPA, is “to fall behind the world in

ocean transportation technology and become

a nation of obsolete ports able only to serve

obsolete ships, with the price of resultant inefficiency ultimately passed on to the U.S. consumer. “4°

The benefits of dredging for coal export purposes can be national in scope, e.g.:

●

●

Increases in coal exports will improve the

U.S balance of trade with other countries.

Last year, saIes of U.S. coal of all types

totaled approximately $4.5 billion. Exports have the potential to grow to levels

significantly above this by the end of the

century. (Dredging, would help the movement of other commodities using deepdraft vessels, such as grain, oil, and ores).

U.S. coal exports provide an alternative

for U.S. allies to dependence upon OPEC

or the Soviet bloc for energy resources.

It is argued that the national and international

aspects of these benefits make Federal responsibility equitable.

As with arguments based on efficiency

grounds, some of the equity arguments are not

directly relevant to a situation in which user fees

are assessed on shippers. A more specific

counter argument to the ones expressed immediately above would be that seaports are not

intrinsically different from other transportation-
24

related facilities in terms of the extent to which

they serve both local and national interests. If

cost sharing is appropriate for airports, highways, and inland waterways, there is no apriori

reason that it should not be applied to seaports

as well .42

Impediments to national interests entailed by

cost sharing. Opponents of cost sharing argue

that cost sharing will injure national interests

either by preventing dredging projects from going forward, and/or by discouraging foreign

shippers from calling at dredged ports.

It is argued that State and local governments

or authorities, especially in poorer States, will

be unable to pay even a low percentage of costs,

let alone be responsible for full-cost reimbursement. Many port authorities are municipal or

county agencies, special districts, or private

concerns without powers to tax, and with no

way to pass along assessments or costs .43 States

feel that they would need a Federal mandate to

charge user fees. If States could not charge such

fees they may forego dredging projects. One potential problem would arise if a State in which a

project was located were to have sole costsharing responsibility, despite the likelihood

that other States would also benefit from the

project .44

A second argument is that even if States could

pass user charges on, the effect could be to discourage deep-draft vessels from calling at dredged ports. To the extent such charges add on to

the costs of doing business, it is argued, the

United States would suffer in competition with

other suppliers of coal, such as Australia and

South Africa, which already sell at lower prices

than the United States.

Perhaps more pressing questions are raised by

the second argument, as user charges are a more

likely mode of cost sharing than direct contributions by States or other non-Federal units. Unfortunately, information is insufficient to make

conclusions as to the potential effects of cost

sharing on U.S. exports.

By enabling deeper draft vessel trade, dredging could result in savings from $3 to $6/tonne

of coal on voyages from U.S. east coast ports to

Western Europe. 45 presumably, so long as user

charges were beneath savings, foreign buyers

would not be discouraged from purchasing U.S.

coal solely on this basis. However, while it appears plausible that the user charges envisioned

in some scenarios would not impose a sufficiently great burden to discourage foreign coal buyers, no detailed analysis is available.

A major problem in determining the effect of

user charges is the difficulty in arriving at valid

estimates of user charge amounts. Estimates depend on assumptions about a great number of

variables: the type of user charge decided on

(e.g., tonnage tax or ship draft), the costs which

the charge is supposed to defray (e.g., new construction, operation and maintenance, or both,

for projects at all ports or port-specific), the size

of the population paying charges (e. g., the number of ship calls or amount of tonnage), the

number of years to payback, and rate of interest.

Few analyses have been published containing

estimates of possible user charges. Those estimates that have appeared vary from below

that $0.20 to $1.70/tonne of cargo. The disincentives these charges would pose is dependent on such factors as the perceived equity of

charges, their effect on delivered U.S. coal

prices vis-a-vis those of competitors, and

motivations behind foreign purchases of U.S.

coal (e. g., the extent to which price considerations outweigh benefits of diversification and reliability of supply potentially offered by the

United States). Another possible comparison is

between economic gains to shippers resulting

from dredging v. amount of user fees imposed.

The type of user charge decided on is an important variable in calculating fees. E.g., if it is

based on total tonnage carried by international

shipping into and out of U.S. ports, the amount

of charge added would probably be minimal. As

calculated by the Congressional Budget Office

(CBO), the corps of Engineers and the Coast

Guard spend about $560 million per year improving and maintaining ports and channels to

accommodate oceangoing vessels and Great

Lakes shipping. According to CBO, “If the

Federal Government recovered all deep-draft

expenditures from international shipping alone,

shipping costs would increase by 30 cents/
25

tonne, or less than 0.2 percent. Such a level

seems unlikely to harm the general economy or

divert significant traffic to other ports or transportation modes.”4’ A 30-cents tonne charge

would be only 5 percent of a $6 tonne savings

from dredging.

However, it is hard to tell how applicable a 30

cents/tonne figure would be for coal export

dredging projects. CBO calculations were based

on tonnage figures encompassing all imports

and exports from all seaports and Great Lakes

ports, and include domestic traffic as well .47 The

number of users and the amount of tonnage

across which charges would be spread is thus

much larger in the CBO assessment than would

be the case for user fees based on shipping at

coal export ports alone.

Two other ways of considering the disincentives a user charge would pose are to compare

user charges with other expenses shippers pay,

and with the total value of cargo. One source

estimated a charge of $20,000 per use of a

dredged harbor by a 125,000-tonne vessel .48

This fee is less than the daily expense of

operating a ship of this size, and is about the

same as daily demurrage fees charged to vessels

that must wait to load or unload.

In comparison with the total value of a cargo

of coal, $20,000 is quite small. In 1980, the

average cost of all coal at the port before shipping was $50/tonne. 49 For a 125,0()()-deadweight tonne (dwt) fully loaded vessel, the cargo

would thus on average be worth $6.25 million;

$20,000 in user fees would represent 0.32 percent of value of the cargo.

Higher fees would change the above comparisons. Depending on the assumptions made, fees

could be many times the figures mentioned immediately above. One source mentioned a possible charge of $1.70/tonne on export trade at

four major coal ports. ’” For a 125,000 dwt fully

loaded vessel, this would result in a charge of

$212,500, or 3.4 percent of cargo value.

Another possible disincentive of a user charge

applied to exports alone is that it may be seen as

inequitable by foreign buyers.

Lastly, foreign motivations are important. As

discussed earlier, the United States is not competing entirely on the basis of price with foreign

competitors. To the extent that buyers choose

U.S. coal for reasons of national security (e.g.,

diversity of supply, perceived reliability of U.S.

source), user charges at moderate levels should

not discourage purchases.

Problems in Implementing Cost Sharing

Much work remains to be done in conceptualizing the specific mechanisms by which user

charges may be calculated and collected. No

cost-sharing scheme will be able to avoid perceived inequities—e.g., if user charges are

tailored to specific projects at specific ports,

those ports that require more expensive projects

to achieve comparable harbor depths would

have to impose greater fees, potentially driving

shippers to use other ports. On the other hand,

systemwide charges could subsidize expensive

and potentially inefficient projects. Another

problem is establishing equitable fees for all

ports, some of which may have been dredged

before the fees were implemented.

Expediting Dredging

A major concern of both foreign and domestic parties seeking increased U.S. coal exports is

the length of time currently required to deepen

harbors. From the time of issuance of a congressional resolution directing the Corps of Engineers to conduct a study to the time the Corps’

report clears the necessary levels of administrative review has averaged 9 to 10 years. Awaiting

congressional authorization and funding has

averaged another 6 to 7 years. The execution of

a project, including advanced planning, design,

and construction has averaged an additional 8

years .51

According to a different source, on average, it

takes more than 20 years, from the initiation of

planning up to the beginning of construction, to

proceed through the various stages required in

the Corps’ process, with construction taking up

to an additional 10 years.sz Another source gave

an average of over 24 years from authorization

of a study to completion of construction .53
26

Some of the reasons for this time lag involve

the procedures required for Corps’ projects.

Once a congressional committee authorizes a

project study, the proposal must wend its way

through multiple stages of review before work

actually begins. 54 (See app. A for a description

of the 19 major steps in the Corps process, the

status of each major port-dredging project

under study, and the internal Corps’ proposals

for expediting the work under their control. )

Funds for dredging have not been appropriated by Congress for any of the major coal port

dredging projects. Authorization of channel

deepening has been approved for Baltimore.

Completion of the Corps’ studies has, in addition to the one for Baltimore, been completed

and approved by the Corps for the Hampton

Roads harbors of Norfolk and Newport News.

Studies of Mobile harbor have been completed

by the Mobile district and are under review by

the Corps. A draft report has been prepared for

New Orleans which has yet to undergo review.

Several proposals that would expedite aspects

of Corps’ procedures, or related actions by

other parties have been made. Their rationale is

that if the benefits of coal exports are to materialize, quick action on dredging is essential.

With present depths, the United States will not

be able to export as much coal as it could otherwise, and indeed may lose some market share if

deepened facilities are not available in the near

future.

Measures to accelerate project implementation at the major coal harbors will require wide

departure from normal authorization and funding procedures for planning and construction.

Several categories of action were listed by an

ICE subgroup paper:ss

● Expedite the review of harbor improvement

reports by all Federal and State agencies by

directing concurrent reviews and urging the

various reviewing agencies (both Federal

and State) to use less than statutory time

allowance where possible.

● Authorize funds and initiate project advance engineering and design studies before

congressional authorization of construction. Because much of the delay in imple-

●

menting projects is associated with waiting

for funds after the project is authorized,

this would cut 3 to 4 years from the normal

planning cycle.

Phase construction to accelerate specific

channel segment improvement and incremental deepening to achieve maximum

benefits from the use of larger ships.

Another category of action is to establish

priorities among dredging projects, concentrating at least initial resources on one or more

selected sites.

Proposals from several sources are summarized below:

●

●

●

In October 1980, President Carter announced support of legislation that would

provide blanket congressional authorization for those harbor improvement projects

approved in the administrative review

process, thereby allowing the projects to

qualify for appropriation of funds and the

immediate commencement of projects for

which funds were otherwise available. ‘b

In September 1980, the Corps of Engineers

released a proposal for the purpose of

speeding up the review process needed to

obtain Federal permits:

“Responding to a Presidential request in

August 1980, the Secretary of the Army, acting through the Corps of Engineers and i n

consultation with the ICE Task Force, implemented steps to shave several months from

the “preauthorization” review process, and

for approved projects, to compress the advanced engineering and construction activities so as to accelerate the benefits of

dredging by making a deepened outbound

channel operational at the earliest possible

time.57

At least one congressional bill would set a

time limit on the process of studying the

feasibility of harbor projects, reducing the

study period to 2 years from the current

average of 9 to 10 years to 2 years .58

Another approach is to establish an explicit

procedure to decide priorities among alternative

navigation improvement projects, rather than

simply establishing through case-by-case legislation which improvements are to be funded.
27

One congressional proposal would establish an

interagency task force to act as a planning and

coordinating body for proposed coal port projects, reviewing Corps feasibility studies, developing long-range harbor development plans,

and advising the President on which projects are

in the highest national interest. 59

A number of bills have had the following features: bo

● Bills provide for “fast-track” procedures for

specific navigation improvement projects

at specifically named ports, although projects at other ports may also be able to

qualify for the expedited handling procedures proposed.

● Eligibility for expedited handling is based

on congressional judgment that the navigation improvements involved are economically justified, feasible from an engineering

standpoint, and essential to the interests of

the United States and its allies.

● The Corps is to submit to Congress a final

environmental impact statement (EIS) demonstrating compliance with the National

Environmental Policy Act of 1969, the

Clean Water Act, and other environmental

statutes. Unless Congress disapproves of

such an EIS by concurrent resolution within 60 days of receipt, the project may go

forward without any further actions under

the environmental statutes mentioned

above. A lack of disapproval constitutes a

finding and determination by Congress that

the requirements of such statutes have been

Footnotes

I Some of the major comprehensive studies are:

a ) Interim Report of the Interagency Coal Export Task Force,

Jan. 20, 1981, with 14 volumes of working documents.

b) “Coal: Bridge to the Future, ” by Carol Wilson, Massachusetts Institute of Technology, 1980 (sponsored by DOE), World

Coal Study.

c) Steam Coal: Prospects to 2000, International Energy Agency (Paris, Organization for Economic Cooperation and Development, 1978).

d) Report of the IEA Coal Industry Advisory Board, I EA

(Paris, OECD, December 1980).

e) A Forecast for U.S. Coal in the 1980’s, National Coal Association, January 1981,

●

●

satisfied in connection with the project concerned.

A congressional finding as defined above,

and actions to carry out projects themselves, shall not be subject to judicial review unless claims are brought against

them within 60 days of the finding or action

concerned. Claims are to be given expedited hearing by the court in which they are

filed.

EISs are to be prepared by the Corps on an

expedited basis.

ICE supported legislation with provisions for

congressional review of EISs, “with the provision that through congressional hearings or

otherwise, a fair opportunity be provided for

the presentation of objections to any such project on environmental grounds because of particular concerns over dredge disposal."6l

Some environmentalists have raised objections to the expediting procedures proposed

above. There is fear that compression of environmental review and curtailment of legal appeals will mean inadequate scrutiny of projects,

possibly leading to unwarranted and environmentally damaging activities. By giving Congress a limited amount of time to act in reviewing EISs, and by requiring a high threshold

of action in order to reject an EIS, such proposals, it is feared, would lead to a situation in

which Congress will be unable to review EISs indepth and unlikely to act to reject them. The

limitations upon legal challenges are similarly

seen as threatening. 62

f) Outlook for The Lon,g-Term Coal Supply and Demand

Trend in the Community, Commission of the European Communities, Brussels, March 1980.

2

Interim Report of the ICE Task Force.

3

See ch. 3 for a compilation of coal port developments

now underway.

4

Steam Coal: Prospects to 2000.

‘Interagency Coal Export Task Force International

Cooperation–Subgroup Report, January 1981.

b

Ibid.

‘Report of the IEA Coal industry Advisory Board.

8 World Coal Study.

‘Interim Report of the ICE Task Force.
28

10Interviews with representatives of the Commission of

the European Communities and other buyers of U.S. coal.

1‘Ibid.

12lnterim Report of the ICE Task Force.

131bid,

14U.S. Congress, Senate, An Act to Amend the Merchant Marine Act of 1936, Public Law 96-387, 96th Cong.,

2d sess., 1980, S. 1442.

15Interviews with some representatives of buyers of U.S.

coal.

16lnterim Report of the ICE Task Force.

“Status and Trends of U.S. Port Developments and

Coal Exports, Simat, Helliesen & Eichner, Inc., Mar. 3,

1980 (OTA contractor paper), pp. 96-97 (hereinafter called

SH&E).

18Report of the Interagency Coal Export Task Force,

DOE/FE-0012, January 1981, p. 5-45 (hereinafter called

ICE Report).

19U.S. Army Corps of Engineers, DAEN-CWP-P, Oct.

2, 1980.

20Inland waterway user charge mechanisms are listed in

Waterway User Charges, American Enterprise Institute,

Sept. 30, 1977, p. 21-30. David L. Anderson, Robert W.

Schuessler, Peter A. Cardellichio, Deep-Draft Navigation

User Charges: Recovery Options and Impacts, U.S. Department of Transportation, Transportation Systems Center, August 1977, has the most comprehensive discussion

of deep-draft oriented user fees.

21 Reducing the Federal Budget: Strategies and Examples,

Fiscal Years 1982-1986, Congressional Budget Office, February 1981, pp. 96-97.

22Precedents for foreign cost sharing include improvements to a port in British Columbia partially underwritten

by the Japanese. There is a similar offer relating to the port

of Astoria, Oreg.

2 3SH&E, op. cit., p. 9 3 .

“E.g., statement by representative of the American

Association of Port Authorities, Hearing Record, Subcommittee on Water Resources of the Committee on Public

Works and Transportation, House of Representatives,

March and April 1979, pp. 1210-6 generally.

25Panel discussion, Mar. 5, 1981 at OTA.

26CB0, op. cit., p. 96.

27See discussion in Anderson, et. al., ch. 3.

28The rationale for user fees was stated in equity terms:

“Most Government programs are designed to benefit the

Nation as a whole, or provide special assistance to needy

or vulnerable groups. Some activities, however, provide

direct economic benefits to a specific and known group of

individuals or enterprises. While it is often necessary or

desirable for these activities to be conducted by the Federal

Government, it is clearly inequitable for the general taxpayer to bear the burden of services that provide special

benefits for specific users. The budget reform plan provides

for shifting the cost of some such activities to those who

directly benefit. ” America’s New Beginning: A Program

for Economic Recovery, Office of Management and

Budget, February 1981, p. 19.

29Fiscal year 1982 Budget Revisions, Office of Management and Budget, March 1981, p. 103, SO.

30Introduced as S. 809 by Sen. Stafford, Mar. 26, 1981.

31 The applicable part of S. 576 reads:

Projects may proceed under two methods of financing, depending on the desirability of the project from the national perspective.

For the best projects, the first method of financing provides for the

initial payment of all construction cost by the Federal Government

and the repayment of 23 percent of such costs within 20 years of

the completion of the project. The rate of interest on repayment

will be set by the Secretary of the Treasury. For projects financed

in this way, the Federal Government will assume the full cost of

operation and maintenance for the first 3 years after the completion of the project. In each year thereafter, the Federal share of

such costs will be reduced by 5 percent until the Federal share

represents 50 percent of annual operation and maintenance costs.

For the projects of lower national priority, the Federal share of

the construction cost will be set as a proportion commensurate

with the proportion of the most cost-effective dredging depth in

the depth preferred by the non-Federal interests. The non-Federal

interests shall repay the Federal Government for the portion of

Federal construction costs greater than 50 percent. Under this

method of financing the Federal share of the operation and maintenance costs will be the same percentage as the Federal share of construction costs for the first 5 years following construction. Thereafter, the Federal share will be reduced by 5 percent each year until

the Federal share represents 25 percent of operation and maintenance costs.” Congressional Record, Feb. 26, 1981.

S. 621 would establish “a system of grants to the States

for their use in priority projects to be built by Federal agencies, using Federal designs, with 75 percent Federal money,

25 percent non-Federal.” At the same time there would be a

special national category of interstate projects numbering

10 at any one time that would continue to be built at Federal cost. Congressional Record, Mar. 5, 1981.

3 2To Summarize the relevant aspects of the Carter proposals (introduced with some modifications as S. 1599 in

July 1979 by Senator Gravel), a State in which a new water

resource project was to be constructed would assume a

share of costs over and above previously existing costsharing arrangements. For projects having “vendible outputs’’—where revenue is received from users of such projects—the State share was to be 10 percent. For projects

with nonvendible outputs, the share would be 5 percent.

State contributions would be paid concurrently and proportionately with the Federal contracted obligation for

program construction, with a cap of one-fourth of 1 percent of the State’s general revenues for each project.

Navigation projects, including dredging, were originally

classed as having vendible outputs, but were later reclassified as nonvendible. The manner in which States would

collect funds towards their contributions, e.g., from other

States which would benefit from a project, was left

unspecified. For already approved projects, the costsharing requirement would not apply, However, such projects would be expedited if the States concerned were to

voluntarily enter into a cost- sharing agreement over and

above previously existing ones.

33These categories are suggested by American Enterprise

Institute, op. cit., p. 13-20. The Carter administration

argued a third reason for cost sharing: involvement.

“States seldom participate in project funding, and thus do

not have a major role in determining project priorities”

(Hearing Record, op. cit., 1187). Cost sharing would give
29

States “a greater stake in the outcome of water project

authorization and budgeting decisions” (p. 5). However,

States and State organizations which submitted comments

on the Carter initiatives almost unanimously rejected this

position, arguing that the Carter initiatives were not

desired by States, and did not translate into meaningful

decisionmaking power.

“Statement, Brent Blackwelder, Environmental Policy

Center, Hearing Record, p. 276.

‘

5 Supra note 24.

36These arguments have been drawn primarily from discussions of the Carter water initiatives.

37 Hearing Record, p. 1212.

“Ibid., p. 1210. See also, e.g., ]ournal of Commerce,

Oct. 17, 1980, article, “Cost Sharing: A Port Dilemma. ”

39The Federal Government collects more than $5 billion

annually in customs revenues from seaports. Ibid.

40 Hearing Record, p. 1214

“Senator Johnston, in introducing a bill in the 96th Congress which would have expedited dredging at several harbors for coal export purposes, gave another national

security rationale for increasing coal exports: “Mr. President, it is important for everyone to realize that the burning of coal anywhere in the world, insofar as it displaces

oil, is just as good for the local energy crisis, as the burning

of that coal in this country because, to the extent that a ton

of coal is burned in Amsterdam it displaces a number of

barrels of oil used there, and frees up oil for use in this and

other countries around the world. ” Congressional Record,

Dec. 5, 1980.

It may be noted that if present trends continue, benefits

will not include greater opportunities for U.S. shipping, as

deep-draft colliers are almost entirely foreign flag.

42Another set of arguments may be directed at the national benefits of dredging for coal exports.

●

●

●

The necessity of dredging to realize the benefits of coal

exports is not given. As analyzed elsewhere in this

report, several considerations may reduce the relative

importance of dredging.

—current bottlenecks at coal export facilities are less

the result of shallow-harbor bottoms than problems

in shoreside handling, e.g., caused by slowdowns

due to frozen coal, inefficiencies in handling metallurgical coal.

—different technologies than those used at present

could reduce dredging requirements (e. g., coal

slurry loading, shallow-draft ships with increased

capacity).

The U.S. coal export market may not be large enough

to justify dredging at every port which seeks it.

Dredging entails environmental costs, the extent of

which depend on such things as the presence of toxic

chemicals in dredged material, type and density of

marine and freshwater life in the areas in which dredging and spoil disposal take place, and the method of

disposal used. To some parties, the costs involved in

dredging projects at particular harbors would exceed

the benefits gained.

“Hearing Record, pp. 1166, 1217.

‘“Ibid. p. 54-56.

“See, e.g., James A. Lisnyk, “The Ocean Shipping of

Coal,” presented at Coal and Ports Seminar, AAPA, New

Orleans, Feb. 1981, p. 10.

Variables affecting savings include mode of propulsion,

flag of vessel, and length of voyage. Deep-draft vessels

would not result in savings in two cases, east coast port

coal exports to Japan, and west coast export to Western

Europe. The Panama Canal cannot accommodate vessels

over approximately 70,000 dwt, and savings from deep

draft do not equal savings from using the Canal.

4 6BO, op. cit.

CBO estimates were extrapolated from table 1151, Statistical Abstract of The United States, 100th ed., U.S. Department of Commerce, September 1979. Telephone conversation, CBO, Mar. 17, 1981.

48The charge, a flat fee assessed on all deep-draft ships

using a hypothetical deepened channel, was calculated by

dividing annual payments by a local agency to defray costs

of a loan financing a project, by number of deep- draft

vessel calls. SH&E, op. cit., p. 94.

*’Figure obtained by dividing total value of coal exports

by total export tonnage (both metallurgical and steam

coal ).

50 Wall Street journal, Mar. 30, 1981.

51CE Report, p. 1-18.

52 Moving U.S. Coal to Export Markets, Army Corps of

Engineers, Department of Commerce, Department of

Energy, Department of Transportation. Draft dated June

10, 1980, p. 5-15.

531nteragency Coal Export Task Force Report on Ports

and Ocean Transportation, draft dated Dec. 1, 1980, p.

V-51.

54Ibid. note 2, 5-16-5-17.

55Interagency Coal Export Task Force Report on ports

on Ocean Transportation, ibid, p. V-60.

“ICE Report, p. 1-19.

57Ibid. See Federal Register, part VI, Department of Defense, Corps of Engineers, Department of the Army, “Proposal to Amend Permit Regulations for Controlling Certain Activities in Waters of the United States, ” Sept. 19,

1980, p. 62732.

58S. 576 (Moynihan, Randolph), Congressional Record,

Feb. 26, 1981.

591bid.

60E.g. S. 3247 (Warner, et. al.), S. 68 (Randolph), S. 202

(Hollings), H.R. 55 (Boggs).

61CE Report, ibid.

62Letter, Brent Blackwelder, Environmental Policy Center, to Senator Warner, Jan. 27, 1981.
Chapter 3

Port and Shipping Technologies

for Exporting Coal

’
Chapter 3

Port and Shipping Technologies

for Exporting Coal

BACKGROUND

Most U.S. coal is exported through just a few

large terminals at major east coast, gulf coast,

and Great Lakes ports.

U.S. coal deposits are found in 31 of the 50

States (see fig. 2). Appalachian coal deposits are

predominantly deep and have thin seams. Presently mined Western coal is extracted in strip

and surface mines. The Powder River region in

northwest Wyoming and southeast Montana

contains about 40 percent of the U.S. surface

coal reserves. Low-sulfur coal is found in the

West and in central Appalachian mines. Highsulfur coal is predominantly located in the

Midwest and in northern Appalachian mines.

At present almost all export coal is high-Btu

bituminous coal from Appalachian mines. Exports of Western coal to the Far East may become important in the future if Pacific Coast

transportation and terminals are developed.

Brief History of U.S. Coal Exports

The history of U.S. coal exports begins in the

late 1800’s when small quantities were shipped

Figure 2.— Major U.S. Coal Deposits, Transportation Systems, and Coal Ports

SOURCE Dravo Corp

33
34

to Canada and the east coast of South America.

European demand for U.S. coal began by the

turn of the century and increased steadily up to

World War I. In 1917, approximately 24 million

tonnes (mmt) were exported to foreign buyers.

By 1920, 38 mmt left U.S. ports, with 22 mmt

bound for non-Canadian points.

Exports dropped to a low of 9 mmt in 1932,

and remained below the 20-mmt level through

most of the 1940’s. Immediately following

World War II, the United States emerged as a

major coal supplier with levels reaching 69 mmt

in 1947—used primarily by European nations

seeking to rebuild industrial activity. The level

achieved in 1947 was not reached again until

1957 when total exports exceeded 76.4 mmt.

Following that year, coal leaving U.S. ports was

always less than the 1957 totals, until 1980,

when almost 90 mmt were exported. (See table

2.)

Metallurgical grade coal dominated U.S. exports in the past. This coal is converted into

coke in large heating ovens and eventually used

for processing iron ore into steel.

All existing major east coast coal export terminals were developed by railroad companies.

Their primary purpose is to handle metallurgical coal which requires complicated blending,

and hence, massive rail-classification yard

setups. Up to recently, steam coal was exported

only through Great Lakes ports to Canada.

The Situation in Existing Coal Ports

The increasing foreign demand for U.S. steam

coal has exerted a number of physical, operational, and administrative burdens on existing

port-handling capacity.

The facilities designed for metallurgical coal,

which requires extensive sorting and blending of

coal types, are not as suitable for steam coal.

The terminals at Baltimore and Hampton Roads

have been operating at near 100-percent capacity, allowing no margin for errors or mechanical

failure.

Historically, the ports of Hampton Roads,

Baltimore, Philadelphia, Mobile, and New

Orleans have handled almost all of U.S. coal exTable 2.—History of U.S. Coai Exports

(thousands of short tons)

Export as a percent of

Year Production Exports product ion

1945 . . . . . .

1946 . . . . . .

1947 . . . . . .

1948 . . . . . .

1949 . . . . . .

1950 . . . . . .

1951 . . . . . .

1952 . . . . . .

1953 . . . . . .

1954 . . . . . .

1955 . . . . . .

1956 . . . . . .

1957 . . . . . .

1958 . . . . . .

1959 . . . . . .

1960 . . . . . .

1961 . . . . . .

1962 . . . . . .

19(13 . . . . . .

1964 . . . . . .

1965 . . . . . .

1966 . . . . . .

1967 . . . . . .

1968 . . . . . .

1969 . . . . . .

1970 . . . . . .

1971 . . . . . .

1972 . . . . . .

1973 . . . . . .

1974 . . . . . .

1975 . . . . . .

1976 . . . . . .

1977 . . . . . .

1978 . . . . . .

1979 . . . . . .

1980 . . . . . .

577,617

533,922

630,624

599,518

437,868

516,311

533,665

466,841

457,290

391,706

464,633

500,874

492,704

410,446

412,028

415,512

402,977

422,149

458,928

486,998

512,088

533,881

552,626

545,245

560,505

602,932

552,192

595,386

591,738

603,406

648,438

678,685

691,344

665,127

776,299

830,000

27,956

41,197

68,667

45,930

27,842

25,468

56,722

47,643

33,760

31,041

51,277

68,553

76,446

50,293

37,253

36,541

34,970

38,413

47,078

47,969

50,181

49,302

49,528

50,637

56,234

70,944

56,633

55,997

52,870

59,926

65,669

59,406

53,687

39,825

64,783

89,882

4.8

7.7

10.9

7.7

6.4

4.9

10.6

10.2

7.4

7.9

11.0

13.7

15.5

12.3

9.0

8.8

8.7

9.1

10.3

9.9

9.8

9.2

9.0

9.3

10.0

11.8

10.3

9.4

8.9

9.9

10.1

8.8

7.8

6.0

8.3

10.8

SOURCE: National Coal Association, International Coa/: 1979 (Washington,

D. C., 1980).

ports desined for overseas markets. In addition,

a number of ports on the Great Lakes have shipped sizable quantities of coal to Canada. Most

notable are the facilities at Ashtabula, Conneaut, Sandusky, and Toledo, Ohio. During

1980, two major terminals in Hampton Roads

handled 51.8 mmt of export coal, one major terminal in Baltimore handled 12.1 mmt, one in

New Orleans 3.8 mmt, and one in Mobile 2.4

mmt. Excluding shipments to Canada, these

four ports handled 98 percent of all export coal.

(See table 3.) They each operated at full capacity

and continued to search for various ways to
3 5

Table 3.—U.S. Exports of Bituminous Coal (thousands of short tons)

Seaport 1974 1975 1976 1977 1978 1979 1980

Hampton Roads. . 35,745 36,952 32,000 24,244 15,396 33,753 51,773

Baltimore . . . . . . . 5,949 6,769 6,327 7,055 5,887 9,141 12,124

Philadelphia . . . . . 1,431 802 447 187 90 55 1,522

New Orleans. . . . . 992 1,292 1,297 1,432 1,388 1,410 3,826

Mobile. . . . . . . . . . 1,746 2,745 2,755 3,611 1,848 1,284 2,447

Great Lakes . . . . . 14,063 17,108 16,580 17,158 15,214 19,140 18,189

Total . . . . . . . . . 59,926 65,669 59,406 53,687 39,825 64,783 89,882

SOURCE U.S. Department of Commerce, as reported in National Coal Association, International Coal: 1979.

squeeze out more capacity. The massive 1980

demand for U.S. coal was caused by some

unusual factors in other supplier countries—

most notably the labor disputes in Poland,

which took that country out of the present export business, and strikes in Australia, which

disrupted their production.

Long lines of ships, some waiting for more

than 2 months, are now outside of Baltimore

and Hampton Roads harbors. These ships incur

demurrage costs of $15,000 to $20,00()/day.

This situation will probably not continue but

major new terminal capacity—even on an emergency basis—is still many months away.

The five major U.S. (east and gulf) ports are

each in the process of expanding existing terminals, and constructing new piers, open storage areas, and handling equipment. The proximity to the Appalachian mines, along with the

existing rail and equipment infrastructure, has

supported the investment at these terminals.

The substantial activity at the Chesapeake Bay

terminals will probably ensure that they retain

an important future role in the coal export

trade. Gulf coast exporting facilities will also be

important in the coal export trade, particularly

since both barge and rail networks can be used

to deliver coal to the ports and can assure inland

transport-price competition.

Recent private investments within the coal

mining and coal transportation industries have

followed from the surge in foreign buying demand. Substantial levels of investment are

needed to construct coal-handling terminals,

stacker/reclaimer systems, rail-yard trackage,

and support equipment. Few private firms had

sought to construct new export facilities during

previous decades. Following World War II, demand for U.S. mined coal was fairly stable and

the major railroad carriers had met the need for

export capacities. Those railroads were the

Chessie System (Baltimore and Ohio, Chesapeake and Ohio, and Western Maryland; now

part of the CSX System following merger with

Seaboard Coast Lines), Norfolk and Western

(merger negotiations in final stages with

Southern Railroad), and Conrail (formerly

Pennsylvania Railroad and New York Central

Railroad).

Proposals for New Coal Ports

Ports on the Great Lakes, Atlantic, gulf, and

west coasts are in the process of planning new

facilities. In general, proposals for facilities

along the Atlantic and gulf coasts appear to be

advancing more rapidly than those on the Great

Lakes or west coast.

Three new terminals are planned for Baltimore, one of which is under construction, which

should increase the export capacity by about 40

mmt. Two or three new terminals planned for

the Hampton Roads area, one starting construction soon, would also add about 40-mmt capacity there. Mobile is now adding 5-mmt capacity

to its terminal. Plans for Philadelphia and New

Orleans will add to the above, thus providing

strong evidence that the total capacity of these

five traditional ports could double within the

next 5 years. (See table 4.) Despite the limited

shipping season and 27-ft maximum depth on

the Great Lakes, proposals are receiving considerable attention and several projects are

moving ahead, most notably Erie, Pa., Buffalo,

N. Y., and Conneaut, Ohio, Indeed, a major

Canadian steamship line will begin to export

coal from U.S. ports on the Great Lakes in self-
36

Table 4.—Summary of Existing and Proposed Facilities at Five Major Coal-Handling Ports (short tons)

Current capacity Proposed capacity

estimates expansion Cost (millions of Completion

Port owner Location (millions of tons~ (millions of tons)a dollars) date

Hampton Roads

Norfolk & Western

Railroadb . . . . . . . . . . . . . .

Chessie Railroadb

(Chesapeake & Ohio) . . . . .

A. T. Massey Coal Co. . . . . . .

Cox Enterprises. . . . . . . . . . .

Baltimore

Chessie Railroadb

(Baltimore & Ohio). . . . . . .

Chessie Railroadb (Western

Maryland) . . . . . . . . . . . . . .

Consolidation Coal . . . . . . . .

Soros Association. . . . . . . . .

Phiiadelphia

Norfolk: Pier 5

Norfolk: Pier 6

Newport News: Pier 14

Newport News: Pier 15

Newport News: Pier 9

and adjacent areas

Craney Island

Curtis Bay

Port Covington

Canton

Marley Neck

16.5

5.3

16.6

3.0

1.0

7.3

11.0

15.0

15.0

$ 6 0

100

20

110

270

—

—

—

—

1983

—

1981

—

1984

1985

Conrailb . . . . . . . . . . . . . . . . . Greenwich: Pier 124 2.5 10.0 — 1984

Mobiie

Alabama State Docksb

Department . . . . . . . . . . . . McDuffie Island 5.5 5.0 55 1986

New Orleans

international Marineb

Terminals. . . . . . . . . . . . . . Davant, LA 7.0 3.0

Electro-Coal. . . . . . . . . . . . . . Burnside

— —

— — 200 —

aTaken from U.S. Department of Energy, Interim Report of the Interagency Coa/ Export Task Force (January 1981, P. 1-13).

‘Existing facility.

SOURCE: Office of Technology Assessment,

unloaders for transshipment at deeper draft

ports on the St. Lawrence River. At Pacific

Northwest and California ports, a series of proposals are also advancing rapidly. Figure 3 illustrates the location of various proposals for

coal port development around the country.

Transportation Networks

The coal export industry has traditionally

relied on rail-to-port or barge-to-port transportation. The existing networks of rail trackage

and inland waterways have required regular

upgrading and improvement, and several significant modifications have occurred or are in

the process of being developed. Perhaps most

notable in the rail industry are the spate of

mergers which will allow for easy switching of

coal flow from mine to export point. The mergers also have disadvantages because they may

reduce price competition in this sector of coal

transportation.

In addition to the existing networks, new

technologies are evolving for moving coal for

export. Coal slurry systems have received considerable attention and have demonstrated their

feasibility on specific inland routes, although

some problems remain in developing systems

for overseas exports. Large steam-coal handling

terminals, such as at McDuffie Island in Mobile,

combine high-capacity handling and open storage for efficient coal export. Other new techniques are evolving for ship-to-ship transfer of

coal. This would allow shallow-draft ships

loading coal at Great Lakes ports to traverse the

narrow locks of the Welland Canal, and St.

Lawrence River, and then load onto large deepdraft vessels close to the mouth of the St.

Lawrence Seaway.
37

ads

ity

Key

* Existing terminals

. Proposed terminals

SOURCE Office of Technology Assessment

INLAND NETWORKS AND SYSTEMS

The movement of coal over existing networks

can be classified into long- and short-distance

transport (gathering and distribution systems).l

Long-distance transport primarily involves unit

trains and barge.

Railroads to Ports

The primary form of coal movement in the

United States is by rail, and more specifically,

by unit trains. A unit train is a single-purpose

dedicated train used for hauling a single com-

‘This categorical breakdown is discussed in Bureau of Mines,

Department of Interior, Comparative Coal Transportation Costs:

An Economic and Engineering Analysis of Truck, Belt, Rail,

Barge, Coal Slurry, and Pneumatic Pipelines (prepared by Center

for Advanced Computation, University of Illinois at Urbana,

Champaign, 1977).

modity. It is composed of special-purpose cars

which haul continuously between a mine and

the consumer. The trains may move over 800-

miles/day instead of the 60-miles/day associated with general freight schedules. For the

railroad companies, unit trains provide better

equipment and plant utilization than do other

rail modes.

In some instances, the cars employed in unit

train service are owned or leased by either the

shipper (coal mining company) or consignee

(domestic utility company), although, railroadowned equipment is used more often on a leaseout basis,

Historically, the unit train evolved in competitive response to the many coal slurry pipe-
38

Photo credit: Ortner Freight Car Co.

Typical 100-car unit coal train

lines which were being proposed in the 1950’s.

The first operational slurry line connected a

southern Ohio coal field with a major Cleveland, Ohio utility. 2 The railroads argued that

unit trains were the only means available to

compete effectively. The resulting reduced rates

eliminated most slurry proposals. From the mid1960’s to the present, unit train use has been

growing.

Given the forecast levels of future domestic

and foreign coal demand, and the possible

future shift from Appalachian mined coal to

Rocky Mountain supplies, extensive railroad

equipment expansion is anticipated. The emphasis will be on more powerful locomotives

and larger hopper cars. However, increasing rail

capacity involves a wide variety of problems.

Railroad track beds must be upgraded to a level

at which they can endure the anticipated heavier

usage.

The adequacy of rolling stock and existing

lines have a significant and directly measurable

impact on unit train costing, system capacity,

and hence, rates charged to foreign buyers. Inadequate equipment limits the number of trains

available, leading to increased prices and

limited throughput. Inadequate tracks and

‘This line has since been closed. It and the Black Mesa line were

the only two used to transfer coal in the United States.

roadbeds reduce train speed and also contribute

to escalated costs.

To remain competitive, the major coalcarrying railroads are upgrading their systems.

One of the major constraints is the need for additional steel for trackage. While U.S. steel production capacity is more than adequate, shortages are known to occur. Some researchers have

proposed that the U.S. Corps of Engineers could

be a central organization for the rebuilding and

extension of rail systems. 3 The Corps has

already been involved in the relocation of rail

lines in connection with dams and waterway

projects.

The United States has 41 class 1 railroads.’ Of

these, 10 account for 88 percent of total coal

traffic, and 4 are currently handling the

predominant share of coal for export. The four

are: CSX (Baltimore & Ohio for the Port of Baltimore and Chesapeake and Ohio for the Port of

Hampton Roads), Conrail (Port of Philadelphia), and Norfolk & Western (Port of Hampton Roads) (see table 5).

The rail lines to be used to haul the projected

increases in coal export traffic through 1990 are

shown in figure 3.5

Barges to Ports

Commodity transportation by barge is possible on about 25,000 miles of navigable inland

waterways in the contiguous 48 States. Even

though the railroads have carried the major portion of the coal produced in this country, the inland waterways handled 14 percent of the total

in 1975.

The location of the major river systems make

waterways an attractive means by which to

move the projected volumes of coal from central

Appalachia and the northern Great Plains to the

gulf. Until the recent steam coal export boom,

very little attention had been paid to shipping

3B. Hannor and R. Findley, “Railroading the Army Engineers: A

Proposal for a National Transportation Engineering Agency,” National Resources Journal, spring, 1977.

4

A class 1 railroad is one with annual operating revenue of over

$50 million in 1978.

‘Taken from Corps of Engineers, Moving U.S. Coal to Export

Markets, June 1980.
39

Table 5.—Rail-Carried Coal Tonnage for 1978 (short tons)

Railroad Tonnagea (millions of tons) Percent Port used for export tonnage in 1980

Baltimore & Ohiob (CSX System) . . . . 21.5 5.8 Baltimore

Burlington Northern. . . . . . . . . . . . . . . 63.0 17.0

Chesapeake & Ohiob (CSX System). .

—

43.6 11.8 Hampton Roads

Conrail b

. . . . . . . . . . . . . . . . . . . . . . . . . 31.6 8.5 Philadelphia

Denver & Rio Grande Western . . . . . . 13.2 3.6 —

Illinois Central Gulf . . . . . . . . . . . . . . . 15.0 4.0 —

Louisville & Nashville (CSX System) . 53.7 14.5

Norfolk & Westernb. . . . . . . . . . . . . . .

—

47.3 12.8 Hampton Roads

Southern . . . . . . . . . . . . . . . . . . . . . . . . 28.3 7.6 —

Union Pacific . . . . . . . . . . . . . . . . . . . . 17.3 4.7 —

Others . . . . . . . . . . . . . . . . . . . . . . . . . . 36.3 9.8 —

Total. . . . . . . . . . . . . . . . . . . . . . . . . . 370.8 100.070

a

These tonnage figures are for all coal movements, of which exports constitute only a portion.

bExlstlng major coal export railroad

SOURCE National Coal Association, Coal Traffic Annual, 1979 edition (Washington, D.C. , 1980), p II-8.

Figure 4.— Principal U.S. Coal Basins and Rail Transportation Routes to the Export Market

N&W — Norfolk & Western

SOURCE Interagency Coal Export Task Force

on

coal by river for export transshipment at gulf The inland waterway systems in mid-America

coast ports. The ports of Mobile and New Or- are improved by 265 locks, channel alinements,

leans have a number of terminal facilities to ac- bank stabilizations, modifications, and cutoffs.

commodate future export levels, and several ad- They are maintained by the Corps of Engineers

ditional projects are either in the design or by periodic dredging, cleaning, and snagging of

development stage. the channels. The Corps operates most of the
40

Photo Credit: Dravo Corp.

Typical unit tow operating on the Lower Mississippi River,

showing in excess of 30 barges being moved by a single

towboat

locks and maintains most of the improved

waterways and harbors.

Several constraints hinder the movement of

coal for export through the mid-America inland

waterway system. The current drought plaguing

many portions of the United States has reduced

the navigable channel areas dramatically. The

low-water levels along the inland river systems

are a source of major concern and have led to

safety and navigation difficulties, and reduced

traffic flows.

A second constraint is the passage of coalbarge tows through locks particularly above St.

Louis, Mo. Frequently, more than one tow will

arrive at a lock at the same time. The result is

congestion and waiting lines of up to several

hours or even days to pass through locks.

Scheduling of traffic to stagger arrivals could

reduce some delays and the resulting costs of

waiting.

MAJOR COAL PORTS AND TERMINALS

Historically, the Port of Hampton Roads has

handled approximately 75 percent of U.S. overseas coal exports. The Port of Baltimore has

been secondmost in the 20-percent range, and

the ports of Mobile, New Orleans, and Philadelphia have followed. Each of these facilities

will be discussed in turn, with emphasis in the

discussion given to new proposals for development.

Several major firm proposals have been made

for upgrading existing terminals, constructing

terminals at ports currently exporting coal, and

for developing entirely new projects at ports

which have not historically handled coal.

Whether schemes for dramatic expansion or the

provision of entirely new facilities elsewhere,

such as those proposed for the New York/New

Jersey area, will be adopted is more questionable. But short leadtimes are required for

some midstream transfer operations on the

Great Lakes and the Mississippi River Delta at

New Orleans, which are now being pursued.

Port of Hampton Roads

In 1979 the Port of Hampton Roads exported

33.8 mmt of coal and during 1980, this total increased to 51.8 mmt. According to the Virginia

Ports Authority (VPA), the Port of Hampton

Roads will export 75 mmt/yr by 1985—more

than the entire United States for 1979. Besides

the easy waterway access for vessels to reach

Hampton Roads, the major factor leading to the

predominance of Hampton Roads as a coal export site is its proximity to Appalachian

coalfields.

The Port of Hampton Roads is currently serviced by two major coal-loading terminals, each

owned by railroad companies (figure 5). The

Norfolk & Western (N&W) Railroad own and

operate piers 5 and 6 at Lambert Point on the

Norfolk side of the Hampton Roads area. Pier 6

is the larger of the two facilities and acts as the

terminus of coal originating from more than 200

producers on the N&W rail system. Channel
41

Figure 5.— Existing and Proposed Coal Piers, Port of Hampton Roads

rfolk

Key

A Norfolk & Western, piers 5 and 6

B Craney Island disposal area

(Cox Enterprises)

C Chesapeake & Ohio, piers 14 and 15

D A. T. Massey, pier 9 and associated parcels

SOURCE Office of Technology Assessment

depths are 46.5 ft, and the two tandem dumpers

are capable of dumping four hopper cars,

feeding loaders at a rate of 8,000 tonnes/hr.

Pier 5 is the smaller facility, consisting of one

fixed electric car dumper with a capacity to handle fifty 70-tonne cars per hour. Pier 5 is used

less regularly than pier 6 due in part to the

limiting 35-ft alongside depths.

The Chesapeake & Ohio Railroad (C&O) facilities are located in Newport News at piers 14

and 15. Pier 14 supports two electric-traveling

loading towers with stated capacity of 6,000

tonnes/hr. Pier 15 reopened on August 1, 1980,

after 4 years of dormancy due to the surge in export steam coal demand. Channel depths are 45

ft for pier 14 and 38 ft for pier 15. Demonstrating the unprecedented demand in steam coal exports, the C&O’s export level increased dramatically from 400,000 tonnes in 1979 to 4.5-

mmt in the first 6 months of 1980 alone.

A number of new projects have been proposed for increasing the capacity of Hampton

Roads to handle export requirements. One proposal calls for a 300-acre” coal facility operated

jointly by several coal companies led by Cox

Enterprises and including A. T. Massey, Pitt-
42

ston Coal Export Co., Island Creek Coal Sales

Consolidation Coal Co., Westmoreland Coal

Co., and United Coal Co.

The facility would be designed to have a 20-

mmt/yr capacity and cost between $60 million

to $100 million. This project has run into legal

trouble with N&W, claiming it is still the

rightful owner of the land. The land had been

sold by N&W to Trailsend Land Co., and

Hampton Roads Energy Co., a subsidiary of

Cox Enterprises with a proviso that an oil

refinery would be built on the site. Six years

have elapsed since the 1974 sale, and according

to N&W attorneys, the property should revert

back to them. This issue has not been resolved.

The Commonwealth of Virginia has also proposed to purchase this land and construct a

State owned and operated coal terminal. However, the City of Portsmouth is opposed to such

State ownership because it would reduce their

tax base.

A second proposal involves pier 9 at Newport

News which was sold by Chessie Railroad to A.

T. Massey Coal Co. Massey plans to build a $60

million coal storage and shipment terminal. Pier

9 is adjacent to the pier 14 and 15 facilities

owned and operated by C&O. The sale included

an adjacent 60-acre parcel of land where a rail

and conveyor system, plus ground storage area

capable of holding 1.5 mmt of coal will be

located.

The final development at the Port of Hampton Roads was the sale of 72 acres of land to

four coal-producing firms. The land is located

between C&O’s pier 14 and Massey’s pier 9 at

Newport News. Though no confirmation has

been received, Sprague Coal International, a

division of Westmoreland Coal, is believed to

be involved. No details of project scale, cost, or

scheduling have been released.

Port of Baltimore

At the Port of Baltimore, two of three former

coal piers are currently in operation loading

vessels for export, and several major development projects are underway. The port’s largest

coal export facility is located in the Curtis Bay

area of the harbor, and is owned and operated

by the Baltimore & Ohio (B&O) Railroad

(figure 6). Since Baltimore is equipped with only

one major facility, many vessels are known to

remain anchored for up to 1 month and more.

And though the vessel waiting lines for the

port’s coal piers are not as long as that of Hampton Roads, the waiting time can be longer. It is

believed that the shortage of close-in anchorage

areas, and constricted approach to Curtis Bay

has additionally led to increased delays.

The B&O railroad has begun to reduce the 40-

to-45-day wait by barging coal to waiting vessels at its Port Covington ore pier from Curtis

Bay.

The procedure involves a grab-bucket operation that is capable of loading an average

50,000-tonne coal ship in about 3 days. Coal is

initially loaded onto barges at the underutilized

barge side of the Curtis Bay terminal. The

barges are then towed north to Port Covington.

From a physical facility standpoint, several

specific proposals have been made for the Port

of Baltimore. First, the Island Creek Coal Co.,

a subsidiary of Occidental Petroleum Corp.,

and the leading coal exporter from the Curtis

Bay pier, has committed $40 million to develop

a 25-acre coal-stocking yard adjacent to the existing coal pier. The development of the yard,

and the installation of coal-dumping machinery

is scheduled to be completed by September

1981.

The yard will have a storage capacity of between 300,000 to 500,000 tonnes, depending on

the mixing requirements for different grades of

coal. New equipment will include rail tracks,

scales, reclaimers, conveyor equipment, and

dumping machinery. All construction will control dust movement through several spray systems. The Baltimore City Council has been presented with a proposal to help finance the Island

Creek project by issuing industrial development

bonds.

A second major terminal improvement has

been advanced by Consolidation Coal Co.(ConSol), a subsidiary of Continental Oil Co., to

buy the old Canton Marine Terminal for $ 3 0

million, including the local switching railroad

owned by the Canton Co. A low-interest rate
43

Figure 6.— Existing and Proposed Coal Piers, Port of Baltimore

SOURCE Office of Technology Assessment

Baltimore City bond has been approved to assist load ships on one side and barges on the other.

the Consolidation effort.

The facility will have an on-the-ground storage capacity of 750,000 tonnes and will be able

to accommodate 100,000 car arrivals annually.

It has an open conveyor system, thawing sheds,

a dual-car rotary dumper, and an extensive antidust spraying system.

Initially, the ConSol pier will load 10 mmt

and service 175 to 200 ships annually. An existing pier now used to discharge ore will be extensively redeveloped and transformed into a

coal-loading facility. Plans call for the pier to

Total investment for the first phase is $110 million, including the land purchase.

ConSol is leaving the option open of expanding the pier’s loading capacity to 20 mmt/yr.

Whether or not this second phase of development takes place will largely depend on the future coal market and the dredging of the channel.

ConSol has set a target date of the first

quarter of 1983 for completion of the storage

and pier facility. Advanced engineering draw-
44

ings have been completed and ConSol is moving

in the permit process.

A third and largest project involves a 500-acre

tract sold by CSX Resources, Inc., to Soros

Associates. The site is located in the Marley

Neck area of northern Anne Arundel County,

not far from the Curtis Bay facility. A consortium of five major coal producers have

pooled financial resources to develop the 15

mmt/yr capacity for $270 million. The coal producers are Pittston Co.; Mapco Co.; Elk River

Resources, a subsidiary of Sunoco; Old Ben

Coal Co., a subsidiary of Sohio; and Utah International, Inc., a subsidiary of General Electric.

The design of this facility is unique in the

sense that a 6,000-ft trestle will be constructed

over the shallow areas of the Patapsco River.

Cost considerations and potential problems

with dredge-spoil disposal areas prompted

Soros to select the offshore loading procedures

rather than pier-side operation. Operational

startup is scheduled for early 1985.

Port of Philadelphia

The Port of Philadelphia is currently served

by one active coal terminal. Pier 124 is located

on Greenwich Point on the Delaware River near

the Philadelphia naval yards. The pier is owned

and operated by Conrail, and can accommodate

vessels on the south side of the pier. It is

equipped with two rotary car dumpers and

mechanical conveyors, telescopic chutes, and

trimmers. Barges can be loaded on the north

side of the pier. It is serviced by a 40-ft channel.

Development plans are underway to upgrade

the pier so that two vessels can be loaded simultaneously. Capacity has been stated as reaching

3 mmt/yr after phase I development, and potentially 10 mmt/yr if all development plans are

completed. This project will help to increase the

pier’s handling capacity of vessels from 40,000

to 80,000 deadweight tonnes.

In addition to the Greenwich Pier, Conrail

has recently completed the rehabilitation of 230

miles of rail trackage between Philadelphia and

the Clearfield, Pa. coalyards. A total of $60 million is being spent for 1,550 open-hopper cars,

and the refurbishment of 17,000 older vehicles.

An unused facility is located at Port Richmond’s pier 18. Should interest be sufficient to

reactivate it, complete renovation including a

new pier, dredging, and all required equipment

would be needed.

The Delaware & Hudson Railroad serves the

Port Richmond area and has reportedly been

pursuing trackage rights for access to the terminal from the Southeastern Pennsylvania

Transportation Authority.

A third development site under consideration

is located at the site of the Northern Shipping

Co. marine terminal north of downtown. The

162-acre tract is presently used for general- purpose stevedoring activity, but could be reconfigured for coal export. Preliminary data indicates that the new terminal could handle up to

6,000 tonne/hr., employing unit trains. If the

new terminal is developed at Northern Shipping, the existing stevedoring activity would be

relocated to an adjacent site.

Port of Mobile

The Port of Mobile is located in the southwestern part of Alabama, at the junction of the

Mobile River and the head of Mobile Bay. The

port is about 28 nautical miles north of the bay

entrance from the Gulf of Mexico, and 1 7 0

nautical miles west of New Orleans. The port’s

principal waterfront facilities are located along

the lower 5 miles of the Mobile River.

The outer harbor of Mobile consists of the

deepwater channel extending from the mouth of

the Mobile River. From the upper reach of the

Mobile Bay channel, the Arlington channel

leads northwestward to a turning basin at the

southwest end of Garrows Bend. Garrows Bend

channel leads northeastward from the turning

basin, and terminates south of the causeway

connecting McDuffie Island with the the mainland. McDuffie Island is just west of the Mobile

Bay channel at the mouth of the Mobile River,

and is the location of all coal exporting activities.
45

McDuffie Terminal is recognized as one of the

most modern coal-handling facility in the

world. At the present time, most of the coal is

being mined in the north Alabama fields and

shipped by barge to McDuffie for export. A

small amount is being transported by rail for export. It is owned and operated by the Alabama

State Docks Department, the only domestic

coal-handling facility involving direct public interest. It was placed into operation in January

1975, incorporating the newest and most innovative approaches to material handling and

automatic barge unloading in the United States.

McDuffie Island is accessible from the mainland by a causeway and is served by the Terminal Railway of the Alabama State Docks

Department. The island is adjoined on three

sides by dedicated channels. The Mobile River

channel on the east side is presently authorized

and maintained to a depth of 40 ft. The Arlington channel on the south side is authorized

and maintained to a depth of 27 ft, and the Garrows Bend channel is authorized to a depth of 27

ft, but has not been maintained since the construction of the causeway at the north end of the

island.

The fact that McDuffie Island is south of the

44-ft-deep channel crossings of Interstate Highway 10 and Bankhead Tunnels, places the facility in the advantageous position for the future

handling of much larger bulk carriers if a plan

for deepening the Mobile ship channel to the

gulf is approved to increase the present authorized depth of 40 ft to a depth of 55 ft.

The initial facilities constructed on McDuffie

Island included an automatic barge unloader,

railcar dump, truck dump, two storage pads, a

stacker/reclaimer and material handling conveyor system, ship dock, ship loader, offices

and control tower as well as backup maintenance buildings, and receiving tracks for railcars. Expansion facilities will include an additional barge unloader, additional stacker/-

reclaimer, two additional storage pads, the construction of a loop track for handling of unit

trains of coal, and an integrated conveyor

system.

The barges are brought into the fleeting area

and moored by various towing companies that

also remove the empty barges from the fleeting

area (fig. 7). Movement of the barges within the

fleeting area is accomplished by a workboat

under contract to the various shipppers. The

barges are presently unloaded by a high-capacity ladder-type bucket-elevator unloader. The

bucket elevator remains stationary while the

barge is moved back and forth beneath it to

allow the unloader to remove the coal and place

it on the conveyor system. The new barge unloader will be of similar design.

The open-storage area has a capacity of

430,000 tonnes. The electric-traveling stackerreclaimer has a 180-ft boom equipped with a

reversible 72-inch belt conveyor and a continuous bucket wheel. It has a stacking rate of

4,000 tonne/hr, and a reclaiming rate of 5,000

tonne/ hr.

By May 1981, the second phase of development should be complete, adding a second

stacker/reclaimer, two additional storage pads,

one more barge unloader, and a rail facility

which will accommodate unit trains in a looptrack setup. Total price of $20 million is

estimated to complete this work.

Phase III development will include a new

dock, shiploaders, and a third stacker/reclaimer

for approximately $30 million to $35 million.

To allow for the second and third phases of

development, a 143-acre site was recently acquired by the State, immediately adjacent to the

existing complex. The new area includes 2,800 ft

of riverfront berthing space.

Port of New Orleans

The Port of New Orleans currently handles

coal for export at two terminals located in Plaquemines Parish’ (fig. 8), Coal exports were first

handled in 1978 at the International Marine Terminals, Inc. (IMT) facility, located 50-miles

b

Based in part on comments provided by Colonel Herbert R.

Harr, Jr., Associate Port Director, Board of Commissioners of the

Port of New Orleans, before the Energy Bureau, Inc. ’s, “Coal Export Conference, ” Washington, D. C., Dec. 15 and 16, 1980.
-

46

Figure 7.—Physical Layout, McDuffie Island

SOURCE: Off Ice of Technology Assessment

below New Orleans. Expansion to 12 mmt/yr

by 1985, and up to 25 mmt/yr by 1990 has been

proposed. The terminal currently accommodates shallow draft, open-hopper river barges

unloaded by a continuous unloader with a

capacity of 5,500 tonne/ hr. A 270,0()()-tonne

ground storage area is available. Reclaiming of

coal occurs via dozer at an average rate of 1,000

tonne/ hr.

Phase II calls for the addition of a new dock

and installation of a traveling ship unloader

having an ultimate capacity of 7,000 tonne/hr.

In phase III a stacker/reclaimer is scheduled to

be used at full development and nearly 1 mmt of

active storage area will be available. The IMT

officials have indicated that it is their hope that

5 or 6 large-volume customers will require the

greatest share of coal.

The second

New Orleans

—

I

I

I

basin

I I

I I

I I

I I

export facility in operation in the

area is the Electro-Coal Transfer

Terminal. Electro-Coal is expanding its capacity

with a $200 million, two-phase program. The

expansion will allow them to handle 25 mmt/yr

by 1990.

In addition to the existing facilities, several

other proposals have been made for new export

terminals. Near Baton Rouge, the River & Gulf

Transportation Co. has acquired almost 6 0 0

acres of land for an export terminal capable of

handling 11 mmt/yr of coal and 5 mmt/yr of

iron ore by 1985. A subsequent phase calls for a

15-mmt/yr-coal exporting capacity by 1990.

The ability of the Mississippi River to transport large volumes of coal has been the direct

stimulus of the interest in gulf coast ports.
47

Figure 8.— Existing Coal Terminals, Port of New Orleans

{

.

Miss —. —

La

. — . — .

g’

I \

N Baton Rouge

~ 1-1o ~

Gulf of Mexico

International

martne terminals

Gulf of Mexico

SOURCE Off Ice of Technology Assessment

Several major inland waterway barge carriers

have recognized this by investing $55 million in

modern rail-to-water transfer facilities capable

of handling 30 mmt/yr. The American Commercial Barge Line and Federal Barge are currently transporting large volumes of coal along

the Mississippi River coming from States

bordering on the upper Mississippi and its

tributaries.

The influence of the French Government is

strongly felt in the New Orleans area for coal

export. The Association Technique de L’Importation Charbonnierc (ATIC) is sole agency in

France responsible for importing the large quantities of foreign coal needed to replace oil.

ATIC is currently acting as agent for the Spanish and Netherlands Governments, as well as

coordinating efforts for West Germany. The

aim of ATIC is to negotiate long-term contracts

with coal suppliers in nations with stable governments. Their interest does not stop at the

purchase of coal but extends to the transportation and shipment. To be assured of a smooth

flow, ATIC will obtain a participating interest

in barge companies and in coal export terminals.

Terminals on the lower Mississippi River are

capable of being served by both barge and rail.

The Illinois Central Gulf Railroad is investing

heavily in improvement of their trackage to

New Orleans in anticipation of unit train movements of coal to and from the Illinois coalfields.

This competition with the barge lines should

limit increases in transportation costs such as

have occurred in Western areas where only one

mode of transportation is available.
48

COAL PROJECTS AT OTHER PORTS

A number of significant proposals have been

made for constructing, or at least investigating

the feasibility of constructing new terminals at

ports which have not historically exported coal.

Virtually all possible locations have been considered, ranging geographically from ports on

the Great Lakes, to New York, Jacksonville,

Long Beach, and Puget Sound. The following

text is based on accounts provided in reports,

newspaper articles, magazines, etc. Due to the

confidential nature of new projects, many details never are presented publicly and analysis

must remain somewhat superficial. Nonetheless, by assembling information from a number

of sources, a reasonable description can often be

made of likely coal export terminal development patterns.

The likelihood is remote that all of the proposed projects will be developed. Many industry observers have voiced the concern of overdevelopment of capacity and unwarranted expenditure. As the export situation continues to

evolve, the feasibility of new proposals will

become more evident and coal companies and

railroad executives will be better able to

evaluate the risk and return on investments.

Many experts seem to agree that free marketplace demands will dictate the suitability of one

proposal v. another, and that the Federal Government should not try to outguess business

decisions.

Great Lakes Ports

The U.S. Great Lakes coal-loading port facilities are generally railroad-owned and have

historically served the U.S. domestic and

American-Canadian coal trade’. In 1979, total

annual tonnage amounted to about $41.5 mmt,

of which 23.5 mmt were domestic movements

(e.g., Duluth-Superior to Detroit), and 18. 0

mmt were exported to Canada. The domestic

trade is served by U.S.-flag bulk vessels. Canadian bulk vessels generally handle the export

tonnage.

‘Department of Commerce, Maritime Administration, Great

Lakes Region, Great Lakes Ports Coal Handling Capacity and Export Coal Potential, December 1980.

A recent U.S. Maritime Administration study

analyzed a four-ship feeder service from Conneaut, Ohio to Quebec. This system would deliver coal to Quebec at a price of approximately

$56.65/tonne. This price was believed reasonably competitive with $51.00 to $55.00/ton

price at Hampton Roads, Baltimore, or Philadelphia, which are served by rail.

There are currently seven U.S. ports on the

Great Lakes that have the capability to handle

shipments of coal for either export or domestic —. use. They are:

●

●

●

●

●

●

●

Ashtabula, Ohio,

Conneaut, Ohio,

Erie, Pa.,

Sandusky, Ohio,

South Chicago, Ill.,

Superior, Wis., and

Toledo, Ohio.

The ports of Erie and Conneaut both began

shipping domestic steam coal for overseas exports in 1980 and their activity is expected to

continue.

Ashtabula, Ohio.—Currently handles both

steam and metallurgical coal for export to

Canada and domestic use. Approximately 75 to

80 percent is steam coal for Canadian markets.

The facility is being modernized and utilizes a

7,000-tonne/hr conveyor system for loading

vessels. Ground storage is 1.5 mmt and approximately 500 railcars can be stored onsite. There

is no blending capability and there are no plans

for expansion at the present time. A new

stacker/reclaimer is planned for 1981.

Conneaut, Ohio.—This is a modern facility

that also was the first to ship coal for export to

Europe through a Canadian transshipment facility (Quebec City). An estimated 150,000 tonnes

of steam coal has moved from Conneaut during

1980. The facility does provide a blending service. A conveyor system capable of 7,700 tonne/

hr loads coal into vessels from a 6-mmt ground

storage area. The facility has the capability to

increase shipment tonnage without any improvements. There are no plans for expansion in

the near future.
49

Erie, Pa.—Presently a temporary facility is

being used at the port to ship steam coal for domestic use. These coal shipments were initiated

in 1980 on a trial basis and 1981 plans indicate

an increase in tonnage shipped. The temporary

facility is receiving coal by truck from western

Pennsylvania mines and has a ground storage

capacity of 20,000 tonnes. Vessels are loaded by

conveyor and there is no blending capability.

The Erie-Western Pennsylvania Port Authority

has received $95,000 from the Commonwealth

of Pennsylvania to perform a marketing feasibility and land-use study for a permanent coalloading facility. This study will be completed in

1981. Additionally, Pennsylvania has passed

legislation to secure bonding power for up to

$10 million for development of a permanent facility. The results of the study will determine

when this development will commence and to

what degree.

Sandusky, Ohio.—Coal shipments consist of

S55 percent for export to Canada and 45 percent

for U.S. domestic users, Approximately 65 to 70

percent is metallurgical coal with the balance

being steam coal. The facility uses a 3,500-

tonne/hr car dumper for vessel loading and can

stage approximately 2,800 railcars. Blending

can be accomplished through mixing of railcars.

A ground storage capacity of $950,000 tonnes is

also available. This facility is presently

dedicated to contract customers. Future expansion is not planned at the present time.

South Chicago, Ill.—This facility has only

handled shipments of coke to both Canadian

and U.S. domestic customers, although the capability and capacity to ship coal is present. A

5,00@ tonne/hr-loading rate by two traveling

towers provides rapid offloading of railcars. A

1,500-car capacity is available on the site.

Barges can also be loaded. Through the mixing

of railcars, blending could be accomplished.

Expansion for coal handling can be accomplished on the present 40-acre site with little

capital cost.

Superior, Wis.—Currently, Western steam

coal for the U.S. domestic market is handled at

this facility, which is less than 5 years old. Railcars are immediately dumped and material is

placed into either ground storage or loaded directly onto vessels via an extensive conveyor

system. Ground storage capacity is currently 7

mmt and initial design plans allowed for 12

mmt. However, expansion to this capacity will

require additional capital investment and is not

planned in the near future. The loading rate of

8,500 tonne/hr by conveyor is the fastest on the

Great Lakes. Blending can be accomplished by

controlling the underground reclaimer plow

feeders if required. Vessel size is limited to

seaway-size vessels.

Toledo, Ohio. —There are four separate

loading berths at the facility. Coal shipments

are 60-percent-steam and 40-percent-metallurgical coal and are primarily destined for the

U.S. domestic market with only some shipments

to Canada. One berth (east pier No. 4), uses a

4,500-tonne/hr” conveyor for vessel loading.

The other three berths use an 1,800-tonne/hr

car dumper. Berth east side No. 1 has not been

used for the past 8 years although it can be operated if needed. These three berths are limited

to seaway-size vessels. The facility does not

have any ground storage capacity but can

accommodate approximately 5,000 railcars.

Blending can be accomplished through mixing

of railcars. Currently, there are no plans for

future expansion. If demand requires, the inactive berth can be operational with little, if any,

capital investment. In 1965 and 1966, Toledo

moved 34.8 mmt and 34.3 mmt.

Port of New York

Several proposals have been presented for

developing coal-export handling facilities at the

Port of New York. The two major proposals

center on Arthur Kill and the Ambrose Channel

of the lower Hudson River. The Arthur Kill

project is a short-term solution designed to divert some of the coal activity to New York from

Hampton Roads and Baltimore. The plan calls

for transporting coal to Conrail’s Port Reading

coal pier and loading it on barges. The barges

would then be moved to a deepwater pier where

the coal would be transshipped to ocean vessels.

Port Reading is located on Arthur Kill, the

narrow body of water between New Jersey and

Staten Island. The channel depths at that point
50

are too limiting to allow large-draft vessels to

enter, and therefore the barges must be used.

To accommodate demand by the mid-1980’s

the Port Authority of New York and New Jersey

has been considering a number of sites including

a point near Stapleton, which is south of St.

George on Staten Island, Greenville in Jersey

City, or along the Ambrose Channel.

Ports of North Carolina and

South Carolina

The North Carolina State Ports Authority has

advanced discussions and plans for one export

terminal at one of several locations including

Morehead City or Wilmington. Discussions

have been held with several coal companies investigating the feasibility of a 3-mmt to 8-mmt

tonne/yr terminal. The Seaboard Coast Line

Railroad (now part of the CSX system) serves

the Port of Wilmington, and has expressed its

willingness to haul coal. Southern Railroad

(soon to merge with Norfolk& Western), which

serves Morehead City, has not actively pursued

coal terminal development, although they

would be willing to haul it.

The South Carolina State Ports Authority has

pursued the development of a coal-exporting

facility, with the most probable location being

Charleston. Southern Railway serves Charleston and is considering the merits of possible investment. A. T. Massey has expressed firm

plans to begin construction on a $75 million terminal at Charleston, capable of handling 12

mmt/yr. Massey has arranged for the purchase

of a 55-acre site from Burris Chemical Co.,

located between North Charleston and Columbus Street Terminals of the South Carolina State

Ports Authority. To assist in the finance, the

Charleston County Council has expressed a

willingness to release a $75-million industrial

revenue bond issue.

Rail service to the Charleston site would be

provided by a combination of Southern, Seaboard Coast Lines, and Louisville and Nashville

railroads. Approval has already been obtained

for channel-deepening from 35 to 40 ft. Yet,

since the Corps of Engineers is completing a

study to redivert silt buildup in a feeder river,

dredging must wait. When the rediversion project is completed, dredging could follow with

completion expected in the 1985-86 time frame.

Ports in Georgia

The earliest commitment for a new export facility at U.S. South Atlantic ports came from

the Port of Savannah. A 12-mmt to 15-mmt/yr

terminal was announced on September 22,

1980, with an attached price of $50 to $60 million on the 250-acre Hutchinson Island site.

Coal is scheduled to be transported over Louisville and Nashville, and Clinchfield Railroads

from mines in Kentucky and southwest Virginia. The coal will also move over Seaboard

Coast Line trackage beginning at Spartanburg,

S.C. Savannah has channel depths of 38 ft, plus

a 7-ft tide, considered adequate for coal vessels.

In addition, the Corps of Engineers is now

evaluating the deepening of the channel to 42 ft.

In addition to Savannah, preliminary plans

have been developed calling for a 15-mmt/yr

capacity (2.3 mmt/yr initially) terminal in

Brunswick, Ga. to be constructed as soon as the

channel leading to the site can be dredged

beyond its current 30-ft depth to 36 ft. In light of

the Savannah commitment, the potential

development for this terminal seems less likely.

The 1985 time frame has been identified as a

target date for full operations. The terminal

would be located on 100 acres of Colonel’s

Island and be equipped with a full stacker/

reclaimer system. The island is connected to

branch lines of Seaboard Coast Line Railroad

and Southern Railroad by a 21.7-mile hookup.

Port of Jacksonville

Consideration is being given to utilizing the

regional coal transshipment facilities being

studied for Blount Island as a coal-export terminal. The Jacksonville Electric Authority (JEA)

and other Florida-based utility companies are

evaluating the feasibility of a coal-unloading

terminal for regional electricity production. Individuals familiar with the project indicate that

the utility companies do not want to eliminate

the possibilities of using the new receiving terminal as an export point as well.
Ports in Texas

In the State of Texas, primary attention is

focused at Galveston and Houston for coalexport facilities. The Pelican Island Terminal at

Galveston is being coordinated by Orba Corp.,

which leased needed land from the port approximately 5 years ago. Ninety-six acres are proposed for near-term development with 76 acres

as backup expansion area. A 15-mmt/yr terminal is planned under full development

schemes, to be equipped with 2,600 ft of berthing space, and a 56-ft channel. The final approval for channel-deepening is expected this

summer. The 56-ft channel depth is believed to

support the sailing fees of up to an additional 2

days as compared to the use of east coast ports.

Excellent rail service is provided by the Burlington Northern, Missouri Pacific, Southern Pacific, and Santa Fe railroads.

The neighboring Port of Houston has advanced development plans for an export terminal on the Houston ship channel, adjacent to the

port’s Green Bayou bulk-material handling

plant. Thirty-two acres have been leased to

Soros Associates for development of the facility.

California Coast Ports

Port officials at California cities are optimistic over the prospects for exporting

Western States mined coal through their facilities. Most notably, the Ports of Los Angeles,

Long Beach, Sacramento, and Stockton have

presented the strongest arguments for using

their facilities. Currently, only limited coal is

being shipped to California ports for export on

experimental runs. In general, the costs of using

rail transportation to move coal across the

Rocky Mountains from the mines requires considerably higher rates than the use of Eastern

coal terminals, despite the waiting lines and

demurrage fees. Also, environmental opposition to increased unit train movement is expected to delay rapid project implementation.

The Port of Sacramento is being given consideration as a result of it being the closest port

in railroad mileage from major Western coalfields. Sacramento additionall y offers large

areas for open storage and its rail-yard system is

known to be considerably less congested than

other California ports. Sacramento suffers from

having only limited 30-ft-deep approach channels, but port officials maintain that the shorter

rail distance counterbalances the need to use

small draft vessels.

The Port of Stockton has handled coal in the

past and is evaluating interest in constructing a

major export terminal. Located 75 miles east of

San Francisco, possessing channel depths of 35

ft, rail access, and required land area. Port officials in Stockton believe they have a very likely site. Plans call for developing a storage area

capable of holding 100,000 tonnes. This area

would be combined with an existing 40-car-per8-hour shift dump facility, conveyor belt system, and potential for a circular unit train track.

At the Ports of Long Beach and Los Angeles,

some limited rail deliveries have been made for

final delivery to Japan, Taiwan, and South

Korea. Mines located in Utah and Colorado

have provided the coal.

The Port of Los Angeles has capacity for up

to 1.5 mmt/yr as currently configured. The 51-

ft channel depth, and storage area capable of

holding 100,000 tonnes, stand ready for increased service. Long Beach also has a deep channel

at 40 to 48 ft, and could handle up to 2.0

mmt/yr. Both Long Beach and Los Angeles

have announced plans to expand coal-export

capabilities there. Long Beach plans to modernize its existing terminal and build a new one

which would have a 30-mmt/yr capacity by

1985. Los Angeles has announced approval of

planning for a 20-mmt terminal.

Pacific Northwest Ports

Ports in the Pacific Northwest States appear

to be advancing more rapidly than California

ports in developing coal-export facilities. Interest is highest at Portland, Oreg., and Kalama, Wash. Officials at Portland are in the process of seeking bids to begin work on a multiphased export terminal with proposed final design capacity of 10 mmt to 12 mmt/yr. A $30-

million first stage is contemplated with startup

by late 1982 or early 1983 expected. The 100-
52

acre site is to be located on the Willamette

River, approximately 100 miles upstream from

the Pacific Ocean on a 40-ft deep channel. Rail

service provided by three carriers will allow for

dramatic expansion beyond the 200,000 tonnes

handled in 1980.

The Port of Kalama, Wash. has unveiled

plans to build a $50 million to $60 million coal

port on a 200-acre site of the Columbia River.

The Honolulu-based firm of Pacific Resources,

Inc. (PRI) is to lease the land from the port

following completion of the sale from Burlington Northern. Coal will be brought to

Kalama on Burlington Northern and Union Pacific main rail lines from Rocky Mountain

States.

Pacific Resource is expected to design the terminal to handle 15 mmt/yr, but initial development will be on a smaller scale. The facility

will be able to accommodate mile-long unit

trains in two circular rail tracks to be emptied

into a hopper below the tracks.

Port officials at Bellingham, Wash., announced plans in November of 1980 to develop

a $50-million bulk terminal designed to handle

coal and other commodities. The proposed site

is located on land previously dedicated to an oil

terminal. However, there is community opposition to this proposal, and final designs have not

been made.

A $50 million, 215-acre site is being evaluated

on the Skipanun River at the Port of Astoria,

Oreg. Preliminary design plans call for a 5-

mmt/yr capacity but upgrading of Burlington

Northern rail trackage to the site is a must.

A final major prospect comes from the Port of

Bellingham, Wash., approximately 100 miles

north of Seattle. Port officials are quick to point

out that only Bellingham can accommodate

250,000-tonne tankers due to its deep-draft harbor.

SUMMARY OF COAL PORT PROJECTS

Figure 9 summarizes the approximate sched- by six seaboard port areas, as well as from

uling of new projects as discussed above. As in- Great Lake ports. The longest buildout periods

dicated, and as experience would dictate, the are projected for ports which do not currently

proposed projects possessing the shortest start- export coal, and which do not have firm comup times are located at ports already handling mitments from coal companies, railroads, and

coal. Definite commitments have been obtained investment houses.

SHIPS IN THE COAL EXPORT TRADE

Coal is transported from U.S. ports and terminals to Europe, Japan, and other countries

aboard large bulk ships ranging in carrying

capacity from 10,000 to over 100,000 tonnes.

There is considerable changing character to

the ships in the coal export trade. Prior to 1965,

the conventional ship with a deadweight tonnage (dwt) of 15,000 tonnes tended to dominate

the trade, This domination disappeared with the

advent of the large bulk carriers and the combination, oil-bulk-ore, carriers. The bulk carriers are suitable for carrrying a number of dry

bulk cargoes such as grain, coal, phosphate,

bauxite, and other ores. Thus, there are many

ships that can move into and out of the coal

trade. This versatility with respect to all commodities is necessary where there are surges and

changes in the trade. In the past two decades the

dry-bulk fleet has increased from 10-milliondwt to over 150-million-dwt capacity. In recent

years the greater use of larger ships in the World

and North American coal trades is summarized

in table 6.

The ships available to trade between specific

ports, are dependent on three factors: the exporting port’s channel depths, the importing
53

Figure 9.—Approximate Implementation Schedule of New Coal-Export Terminals

TIME

PORT 1981 1983 1984 1985 1986 1987 1989 I

1982 1988 1990

,**

I* ***l

Philadelphia

Pier 124

t

● ☛☛☛☛ ☛☛☛☛☛ **

Mobile

McDuffie : Phase I

Phase 11

Phase LIl

New Orleans

International Marine Terminals ***

- —

Great Lakes No projects scheduled since sufficient capacity exists

Charleston

Savannah

Galveston

Long Beach

**~******t******~******~*.*..~ ; I I I

Ift, llll l

● * ****** ● ***** **********

***** ****** ****** 44111111 1

Portland

Kalama, WA

New York

Wilmington, NC

Morehead City, NC

Brunswick, GA

,

*“**i******t******t*****”t I

I 1 1 I 1 1 \ I 1 —

I I I 1 I

1

1

lltt ,

● ****** ****** ****** s**** *i***** I I I

I

I

I , , I

I I I

I

I ● ** ****** ******i******i******’***

I

I I I I 1

I

I I******i******+******L************** , I

******4 ● ****W* *************’******** I

I *************q********************* I Jacksonville, FL

Houston

Sacramento

Stockton

Los Angeles

Bellingham, WA

—

I 18***********41F*****91******$*****+**** I I

._L__ _

d..-.. q..... +..... q...... +,....+ . . . : I

Note: Time periods are estimated for the “Definite Commitments.V and ‘Strong Interest” sections.

SOURCE Office of Technology Assessment
54

Table 6.—Size Distribution of World Coal Fleet (deadweight tons)

Less than 40,000 40,000-59,999 60,000-79,999 80,000-99,999 100,000 & over

World Coa/ trade by

vessel size

1974 . . . . . . . . . . . . . . 45% 28% 19% 2% 6%

1979 . . . . . . . . . . . . . . 35% 15% 20% 4% 260/o

North American coal exports

by vessel size

1974 . . . . . . . . . . . . . . 26% 30% 3 0 % 5% 9%

1979 . . . . . . . . . . . . . . 19% 16% 27%. 6% 32%

SOURCE: OSG Bulk Ships Inc., New York, February 1981.

port’s channel depths, and the depths of canals

traversed between the ports. The present U.S.

major coal-loading ports and their present controlling channel depths are:

Hampton Roads . . . . . . . . . . . . . . . . . . . . . . .......45 ft

Baltimore . . . . . . . . . . . . . . . . . . . . . . . . . . . .......42 ft

Philadelphia . . . . . . . . . . . . . . . . . . . . . . . . . .......40 ft

Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......40 ft

New Orleans. . . . . . . . . . . . . . . . . . . . . . . . . .......40 ft

The relationship between a ship’s deadweight

tonnage and draft, which relate to the channel

depth restrictions, is approximate because of

differences in hull form and length-to-beam

ratios. However, a useful approximate relationship is given in table 7 along with limiting ship

dimensions for traversing the Panama Canal.

Present worldwide coal exporting and importing facilities as related to deadweight tonnage is presented in tables 8 and 9. The present

world coal trade is transported in a fairly wide

range of ship tonnages as a result of the various

restraints and economic factors. Table 10 summarizes the range for 1979. The utilization of

bulk and combined carriers by coal as compared

to other cargoes is shown in table 11, indicating

that coal accounts for approximately 18 percent

of the tonnage carried. The makeup of the existing world fleet carrying these cargoes is

shown in table 12 along with the present orders

for new ships. New orders for bulk carriers indicates a continuing shift to larger ships.

Economics of Coal Ships

The selection of ships and routes is largely

dependent on the economics of the transport

and the availability of ships. Economies-of-scale

are an important determinant of unit costs of

coal transportation, these costs increase with

distance and decrease with ship size. Three

general sizes of coal carriers are noted below.

●

●

●

60,000 dwt.—This is roughly the median

size for present coal shipments; it is also the

maximum size which can pass fully loaded

through both the Panama and Suez Canals

at present. U.S. Flag cost per ton per day

= $0.53. ’

100,000 dwt.—This is roughly the average

size of the largest long-distance coal

shipments at present; it is also the maximum size for a number of coal ports now

and in the future. U.S. Flag cost per ton per

day = $0.40. *

150,000 dwt.—There are very few coal

shipments of this size at present but it is

estimated that it will be a common size on

some journeys by 2000, many iron ore

shipments are already of this size. U.S. Flag

cost per ton per day = $0.32. *

Coal ships operate worldwide with complete

mobility between trades. They can shift easily

and rapidly from one dry-bulk commodity to

another. Entry into and exit from the bulk- shipping business is completely unrestricted. The industry is unregulated, and the market where

bulk-shipping services are bought and sold is

large and well-developed. There is no significant

differentiation in the provision of shipping services, and considerable price competition exists

in bulk shipping. Therefore, the above costs are

often quite different from actual prices of freight

rates charged.

The overall trend in oceanborne coal transportation cost, as a function of ship size, is

shown in figure 10. The unconstrained (op-

*Source: Maritime Administration, December 1980.
55

Table 7.—Dimensions of Selected Ships by Coal-Carrying Capacity

Coal-carrying capacity (dwt) Overall length (ft) Beam (ft) Draft (ft)

40,000 . . . . . . . . . . . . . . . . . . . . 630 105 35

60,000 . . . . . . . . . . . . . . . . . . . . 760 105 40

100,000 . . . . . . . . . . . . . . . . . . . . 910 116 48

150,000 . . . . . . . . . . . . . . . . . . . . 980 133 56

200,000 . . . . . . . . . . . . . . . . . . . . 1,020 150 62

Panama Canal limiting

dimensions for transiting

commercial ships . . . . . . . . . . 900 107 35'6"

SOURCE. Maritime Administration and Panama Canal Co.

Table 8.—Coal-Loading Facilities for Large Bulk Carriers Analyzed by Area and Capacity (number of facilities)

Vessel classes by dwt

35,000- 40,000- 50,000- 60,000- 70,000- 80,000- over

Area 39,999 49,999 59,999 69,999 79,999 99,999 100,000 Total

United States . . . . . . . . . 2 3 1 2 2 1 — 11

Canada. . . . . . . . . . . . . . . — — 1 — — 1 1 3

Australia . . . . . . . . . . . . . 1 1 — 2 1 1 1 7

Poland . . . . . . . . . . . . . . . 1 — — — — — 1 2

U.S.S.R. . . . . . . . . . . . . . . 1 — — — — — — 1

South Africa . . . . . . . . . . 2 — — — — — 1 3

Other . . . . . . . . . . . . . . . . — — 1 1 — — — 2

Total world . . . . . . . . . 7 4 3 5 3 3 4 29

SOURCE: H P Drewry (Shipping Consultants Ltd ), Ports and Terminals for Large Bulk Careers.

Table 9.—Coal-Discharging Facilities for Large Bulk Carriers Analyzed by Area and Capacity

(number of facilities)

Vessel classes by dwt

35,000- 40,000- 50,000- 60,000 - 70,000- 80,000- over

Area 39,999 49,999 59,999 69,999 79,999 99,999 100,000 Total

Scandinavia. . . . . . . . . . . — 2 – — — — — 2

EEC . . . . . . . . . . . . . . . . . 2 5 7 2 7 3 3 29

Other Europe. . . . . . . . . . 1 1 — — 1 1 1 5

Japan . . . . . . . . . . . . . . . . 2 6 2 2 2 2 10 26

South America . . . . . . . . 1 1 1 — — — 3

Other . . . . . . . . . . . . . . . .

—

2 3 1 — — — — 6

Total world . . . . . . . . . 8 18 11 4 10 6 14 71

SOURCE” H P Drewry (Shipping Consultants Ltd.), Ports and Terminals for Large Bulk Carriers.

timistic) case assumes no constraint on ship

draft, i.e., that ships can be as deep as is required to minimize transportation costs. The

constrained (realistic) case recognizes the

realities of draft limitations in harbors.

As coal is a low-value commodity, savings in

transportation costs are significant in the course

of choosing between alternative sources of supply. Even though the ocean transportation cost

of coal is very low when compared with that of

other modes, it still adds between 20 and 35 perthe export port. Accordingly, both coal importers and exporters strive to control ocean

transport costs.

Although prevailing spot-voyage freight rates

are highly variable and receive considerable

market attention, long-term vessel charter rates

are established on the basis of full recovery of

ship costs to the vessel owner. These costs include capital outlays, financing costs, etc. When

operating costs (crew wages, insurance), fuel,

and other costs (canal costs, port charges) are

cent to the cost of U.S. coal based on its value at added to vessel capital costs; one obtains the
56

Table 10.—The World Coal Trade by Vessel Size, 1979

Less than 40,000 40,000-59,999 60,000-79,999 80,000-99,999 100,000 & over

Exporting areas

Eastern Europe . . . . .

Other Europe. . . . . . .

North America. . . . . .

Australia. . . . . . . . . . .

South Africa. . . . . . . .

Others. . . . . . . . . . . . .

Importing areas

United Kingdom

Continental . . . . . . .

Mediterranean. . . . . .

Other Europe. . . . . . .

South America. . . . . .

Japan . . . . . . . . . . . . .

Other. . . . . . . . . . . . . .

700/0

62

19

16

26

100

30

43

58

27

24

49

160/0

8

16

23

7

0

9

16

16

33

16

16

7 %

15

27

31

9

0

20

16

13

24

23

19

30/o

11

6

2

5

0

5

10

4

1

3

1

4%

4

32

28

53

0

36

15

9

15

34

15

Totals . . . . . . . . . 350/0 15% 20% 4 % 2 6 %

SOURCE: OSG Bulk Ships Inc , New York, February 1981

Table 11 .—Shipments of Dry Bulk Commodities by Bulk and Combined Carriersa

1974 1976 1978 1980 est. 1981 est.

Volume Percent Volume Percent Volume Percent Volume Percent Volume Percent

Millions of tons

Iron ore. . . . . . . . . . . . . . . . . . . . 301 44.3% 276 37.8% 256 31.5% 290 31.7% 275 29.30/o

Grain. . . . . . . . . . . . . . . . . . . . . . 88 12.9 125 17.1 151 18.6 165 18.0 170 18.1

Other. . . . . . . . . . . . . . . . . . . . . . 200 29.4 227 31.1 300 36.9 305 33.3 320 34.0

Subtotal . . . . . . . . . . . . . . . . . 589 86.6 628 86.0 707 87.0 760 83.0 765 81.4

Coal. . . . . . . . . . . . . . . . . . . . . . . 91 13.4 102 14.0 105 13.0 155 17.0 175 18.6

Total . . . . . . . . . . . . . . . . . . 680 730 812 915 940

Billions of ton-miles

Iron ore. . . . . . . . . . . . . . . . . . . . 1,483 42.8 1,389 37.6 1,284 31.4 1,460 30.7 1,400 28.3

Grain. . . . . . . . . . . . . . . . . . . . . . 529 15.2 696 18.8 865 21.1 1,010 21.2 1,070 21.7

Other. . . . . . . . . . . . . . . . . . . . . . 956 27.6 1,076 29.1 1,446 35.4 1,475 31.1 1.550 31.4

Subtotal . . . . . . . . . . . . . . . . . 2,968 85.6 3,161 85. 3,595 87.9 5 3,945 83.0 4,020 81.4

Coal. . . . . . . . . . . . . . . . . . . . . . . 501 14.4 538 14.5 494 12.1 810 17.0 920 18.6

Total . . . . . . . . . . . . . . . . . . 3,469 3,699 4,089 4,755 4,940

aOnly includes shipments on vessels greater than 18,000 dwt. Capacity of the fleet between 10,000 and 18,000 totaled about 115 million dwt In 1980.

SOURCE OSG Bulk Ships, Inc , New York, February 1981.

total cost of ocean shipping. These long-term

“equilibrium” costs, for various voyages and

two ship sizes, are shown on table 13.

The economies of scale that are achievable

with larger ships have become more important

in affecting the future size distribution of the

world shipping fleet because of the growth in

trade between distant ports. The ocean transportation cost component is a significant portion of the total delivered cost of the coal in the

trade between Europe and the United States and

even greater when the exports are from Australia. The increasing cost of petroleum bunker fuel

also makes shipping economies more important.

The increases in ship size would not have

been practical without parallel development of

port facilities capable of handling large vessels.

The limits on ship size at U.S. ports, are about

80,000 dwt at Hampton Roads; smaller limits

prevail elsewhere. Coal-loading facilities for

ships of 100,000 dwt and over are located in

Western Canada, Australia, and South Africa.

Discharging terminals accessible to carriers in
57

Figure 10.— Economies of Scale in Seaborne

Coal Trade

Table 12.—The Existing Fleet and Tonnage on

Order by Size Class (millions of dwt)

On order

Existing On order as percent

Size classes in dwt 1/81 1/81 of existing

Bulk carriers:

10,000-39,999 . . . . . . . 76.0 6.3 8.30/0

40,000-59,999 . . . . . . . 24.7 3.4 13.8

60,000-79,999 . . . . . . . 19.5 6.5 33.3

80,000-99,999 . . . . . . . 3.0 0.5 16.7

100,000 & over . . . . . . . 18.2 9.2 50.5

Total . . . . . . . . . . . . . 141.4 26.0 18.40/0

Combination carriers:

10,000 -59,999 . . . . . . . 1.8 0.2 11.1 0/0

60,000-79,999 . . . . . . . 5.2 1.1 21.2

80,000-99,999 . . . . . . . 4.8 0.3 6.3

100,000 & over . . . . . . . 35.8 1.4 3.9

Total . . . . . . . . . . . . . 47.6 3.1 6.5%

SOURCE OSG Bulk Ships, Inc , New York, February 1981

.1

0

60

.

Constrained .

.

Unconstrained

.

case

80 100 120 140 150

Deadweight (thousands of tons)

Ran Hettena, In Critical Issues in Coal Transportation Sysftems,

1979

H Mellanby Lee, The Long Run Economics of the Ocean

Transport of Coal, December 1978

SOURCES: I

Table 13.—Coal Shipping Costs for Round Trips From Selected U.S. Ports

(assumes no demurrage charges)a

Cost per tonne Cost per tonne

Coal loading port Coal discharge port 60,000 dwt 110,000 dwt

Hampton Roads, Va. . . . . . . Rotterdam, Netherlands 13.49 10.15

Taranto, Italy 16.15 11.96

Yokohama, Japan 31 .95b

34.57C

Mobile, Ala.. . . . . . . . . . . . . . Rotterdam, Netherlands 16.70 12.32

Taranto, Italy 19.36 14.13

Yokohama, Japan 30.79b

35.35C

Portland, Oreg.. . . . . . . . . . . Yokahama, Japan 15.39 11.43

aThe above table of equilibrium coal shipping costs does not include the effect of demurrage (delay) charges AS of this

writing (February 1981), large numbers of ships are waiting to load coal at the U.S. east coast ports of Hampton Roads

and Baltimore The delays associated with this average $600 per ton which is added to the cost of shipping U.S. coal

overseas

b

vla Panama Canal.

C

via Strait of Magellan (South America)

SOURCE. ICF, Inc., October 1980
58

excess of 100,000 dwt exist in Western Europe

and Japan, and more are planned.

Important constraints on ship size are imposed by the Panama Canal and, to a far lesser

extent, by the Suez Canal. The draft and beam

restrictions of the Panama Canal limit passage

to ships of up to about 50,000- to 80,000 dwt;

for this reason, ships in this dwt-range are commonly referred to as “Panamax” vessels. There

are no plans at present for enlarging the Panama

Canal.

Ships that are too large to pass through the

canals must use the longer routes around the

southern capes of South America and South

Africa. Because of the greater voyage costs

thereby incurred, it may be cheaper on particular routes to use a smaller vessel that can pass

through the canal, in spite of the higher daily

cost per tonne transported (including “canal

dues” of about $2/tonne).

The expected growth in coal movements and

achievable economies of scale will make large

ships more common. It is expected that the number of ships exceeding 100,000 dwt will increase

substantially, leaving a smaller portion of the

coal fleet at 50,000 to 80,000 dwt for primary

transit through the Panama Canal.

PROPOSED NEW TERMINAL AND SHIPPING SYSTEMS

Several types of new systems have been proposed for moving coal. Foremost are high-capacity terminals, slurry pipelines, and midstream transfer. Other proposals such as pneumatic-tubes, conveyor belts, barge-carrying

ships, and shallow draft ships have received

some attention as well.

In the long run, economics and large volume

exports may force the introduction of new technologies to transport coal for export. Expansion

of existing facilities and transportation networks will not always be the most effective approach. If new mines for export are developed in

the West, it may make sense to develop a total

system for mine to-terminal-to-ship transportation. If large volume, long-term export contracts are negotiated in the East, and harbors are

not dredged, it may make sense to develop an

offshore, deep-water, coal-loading terminal.

The technologies to transport coal for export

with dedicated systems outside of existing networks can be available without excessive

development. While most of the efforts to

develop new systems are in the private sector,

certain Federal actions could help or hinder

development—e.g., if some harbors are not

dredged, alternative systems for offshore loading could be more attractive. However, one

should consider these alternatives with caution

because most are not short-term options, the

technologies are not yet in place and foreign

buyers, shippers, and terminals will need to

agree and adapt to any major changes.

High-Capacity Terminals

To a large extent, high-capacity export terminals are being developed because of the increased demand for steam coal. The new terminals typically occupy 100 acres or more, and

ideally up to 600 acres. This allows for the arrangement of a series of open-storage stacking

areas, and the use of stacker/reclaimer mechanical equipment.

Almost all new proposals for developing

high-capacity export terminals involve the use

of stacker/reclaimers. Historically, coal export

terminals were designed to service up to 200 different blends of high-grade metallurgical coal.

Consequently, the coal is stored in railcars until

blended and loaded. Steam coal does not require

as much care in loading and ideally is groundstored, allowing for the use of high-speed equipment.

Beyond these recognitions, the most concrete

way of defining a high-capacity terminal is by

way of the example offered by McDuffie Terminal in Mobile, Ala. Designed in the early

1970’s, McDuffie became operational in 1975,
59

and incorporated the newest and most innovative approaches available to material handling,

automatic barge unloading, and unit train

movement. A three-phase design concept was

developed. Phase I is entirely developed. Phase

II is more than 75-percent complete. Phase III

will be finalized by 1983-84.

Coal arrives by both barge and railroad at the

terminal. Barges are unloaded by a high-capacity ladder-type bucket elevator unloader capable of moving 1,500 tonne/ hr. The bucket

elevator remains stationary while the barge is

moved back and forth beneath it to allow the

unloader to remove coal and place it on the conveyor system. From here the coal can be stored

in large piles, known as open storage, or go

directly to a waiting vessel.

The same conveyor system serves the rotary

car dumper for unloading rail cars rapidly.

Standard coupled cars are unloaded at a rate of

25 cars/hr. It is projected that swivel coupled

cars in unit train lots can be unloaded at 30

cars/ hr.

Once the coal is unloaded from barges or railcars, it can be loaded directly onto a ship or put

into stacking yards for later loading. The

mechanism used to take the coal from the conveyor system, or return it to the conveyor

system from the storage piles is known as a

“stacker/reclaimer ,“ The stacker/reclaimer is an

enormous piece of mechanical equipment capable of moving up to 4,000 tonne/hr of coal. It is

equipped with one long outreach boom, usually

measuring more than 150 ft, numerous internal

conveyor systems, operator cabin, etc. The

stacker-reclaimer is the heart of the new highcapacity coal-handling terminals. Two stacker/

reclaimers are currently located at McDuffie,

and a third is scheduled for delivery once the

third phase of development is underway.

Coal Slurry Systems

Thus far, no coal slurry system is in operation

designed to move coal for export. The only

operational line in the United States, the Black

Mesa line serving Las Vegas, has been used successfully since 1970. It carries more than 5.5

mmt/yr through some 270 miles of 18-inch pipe

serving the Southern California Edison Co. Proponents of the slurry systems cite the Black

Mesa line as proof that larger and more lengthy

systems can be replicated. Opponents of the

systems maintain that until a more substantial

effort is constructed, the successful implementation of slurry pipelines must remain in question.

A number of companies specializing in pipeline technology have developed complete engineering design plans for exporting coal. Recently, a project manager with Wheelabrator-Frye

described the mechanics and economies of an

offshore export buoy. a

The coal slurry export terminal would operate something like the deepwater crude oil import systems, only in reverse. Proponents suggest slurry export terminals as a rapid means for

short-circuiting the port bottleneck, claiming

them to require no piers or deep-draft harbors,

and to be environmentally acceptable.

The basic concept requires either a slurry

pipeline from the mine or a slurry terminal several miles inland with adequate rail and/or

barge connection. The terminal would be similar to any other open-storage coal stacking yard

such as at Mobile, or Superior, Wis.

The coal would be ground into the slurry mixture and piped to an offshore, single point,

mooring buoy, for loading vessels up to 200,000

dwt.

Two types of system movements are contemplated:

● slurry load—slurry unload, and

● slurry load — dry (conventional) unload.

The need to consider the dry unload capability is obvious. Without a slurry unload system

on the receiving end, the coal would have to be

unloaded using conventional techniques. One

major obstacle in implementing the slurry export process is, in the event of a dry unload requirement, the coal must not be more than 12

percent liquid content. Thus, once the coal is delivered to the vessel in slurry form it must be

‘American Association of Port Authorities, “Coal and Ports

Symposium, ” Feb. 16-19, 1981, Mobile, Ala.
60

dried to 12 percent to avoid damage to the dry

unload equipment and procedures.

This problem has not been solved completely

according to the official of Wheelabrator-Frye.

However, if a slurry unload system were developed somewhere in Northern Europe, only 27 to

36 months would be needed for construction of

the terminal in the United States. Favorable sites

have been identified in Alabama and North

Carolina.

Several major domestic coal slurry pipelines

are under consideration. They are being designed primarily to serve domestic utility and

manufacturing consumption. In addition, the

slurry design engineers are quick to point out

that little extra effort is required to extend the

pipelines to offshore buoys.

Studies have been conducted of the use of coal

slurry pipelines both to transport coal from the

mines to the port and from the port to a collier

anchored at an offshore terminal. While experience is being gained in the West for transporting

coal by means of a slurry pipeline from a mine

to a powerplant, it is not clear whether widescale use is practical over longer distances for

long periods of time. Water requirements are a

major factor. Saltwater cannot be used in coal

slurry operations because of absorption of the

salts into the coal. Consequently, nonsalty

water must be used and recycled through the

system, including shore-to-ship and ship-toshore. In some locations, competing use for the

available freshwater will hinder the development of slurry pipelines for coal export.

The issue of eminent domain continues to

plague the slurry advocates. In order to transfer

coal by slurry from interior points, the slurry

lines must cross or run parallel to property

owned by railroad companies, the slurry lines’

major competitors. Thus far, the railroad lobby

groups have been able to block attempts to

grant permission to slurry interests to cross

railroad property. Unless the right of eminent

domain is granted, it is unlikely that interior

slurry lines will be constructed. This is why the

proposals for exporting coal by slurry rely on

rail and/or barge for delivery to the slurry

plant.

Midstream Transfer

Though not commonly utilized, several existing instances of direct barge-to-ship, or “midstream” transfer can be identified. At the Port of

New Orleans, coal-handling stevedoring firms

are providing midstream transfer by placing a

grab-bucket crane-barge between an oceangoing vessel and a coal barge, and simply moving coal from barge to vessel.

An improved version of this concept is scheduled to be implemented in the Great Lakes this

spring. Canadian steamship owners and operators have indicated that they intend to use selfunloading dry-bulk colliers to ship coal from the

Great Lakes, through the St. Lawrence Seaway

lock system, to the deep-draft port of Quebec

City on the St. Lawrence River. The selfunloaders would then transfer coal to larger,

ocean-going vessels for the international journey. The midstream transfer is less costly than

double handling at a transshipping port site.

Port officials at New Orleans cite that very

large tonnages could be loaded by midstream

transfer techniques and several companies have

stated they intend to pursue this approach.

There are very few technical and/or equipment limitations to this approach, and appears

more and more to be a highly acceptable formula which can be immediately implemented.

The one major obstacle to this approach is guaranteeing that a sufficient number of coalcarrying barges are in place to meet foreign

steamship vessels when they arrive. But this

should not present extreme difficulties. Of

course, it would be necessary to provide a deepdraft sheltered area to load very large colliers.

Pneumatic Pipelines

Pneumatic transport is no

has been used commercially

of ores and other materials

a new concept. It

for the movement

Basically, it is a

pressurized pipeline into which coal is fed and

conveyed in a suspended state by compressed

air. There are a number of advantages to this

mode. Among them are ease of automation, no

need for water, and flexibility.
61

Air is used as the carrier and is thoroughly

cleaned before vending. Unlike coal slurry lines,

it is easily started after stopping, avoids the expense and disposal problems of dewatering,

avoids the cost expenditure of crushing coal to a

fine powder, and does not present the same

problems as slurry lines in the event of line

breaks.

The most immediate application appears to

be as an adjunct to rail or barge transport. In

this role a pneumatic pipeline may operate as a

loader/unloader and gathering/feeder systems.

It could possibly compete with short-haul unit

trains, conveyor belts, and truck transport.

Pneumatic pipelines have not been used for

coal transport and the most recent uses have

been for much different products over short

distances. This system will require testing before

a determination of economic or technical feasibility.

Conveyor Belts

Conveyor belts are an old, established method for the movement of bulk materials. Most

applications are short-distance oriented such as

may be seen at coal mines or handling terminals. Yet, long-haul movements of coal in

enclosed conveyor belt systems are entirely

feasible.

Conveyor systems, like slurry lines and pneumatic lines, are capital-intensive, requiring little

staffing with respect to distance. Costs decrease

with both distance and throughput. However,

previous research has indicated that system

economics are best where throughput is neither

variable nor intermittent.

As an operation, belts are relatively noisy and

can create spillage and dusting problems. Belt

width can minimize spillage, and a covered system reduces both noise and dust.

For practical purposes, the system should be

above ground. But this creates land-use and

right-of-way problems. Also, ambient temperatures affect the operation and may limit usefulness in areas of extreme cold or heat.

Once in place, the conveyor belt is not very

flexible. Like pipeline operations, failure at any

point can jeopardize the entire system.

Extra Wide-Beam Ships

A design for ships of wider beam hull forms

has been considered for coal carriers for restricted draft service. For draft restrictions characteristic of U.S. ports, about 30 to 50 percent

increase in deadweight tonnage can be obtained

by accepting reasonable departures from conventional ship proportions. Transport costs are

significantly reduced by using ships of greater

capacity. However, the construction costs for

wider, shallow-draft ships would be higher than

for conventional ships for a given tonnage. A

modification to loading facilities may also be required to accommodate the increased beam of

the shallow-draft collier,

Navigation in shallow water will be different

for the wide-beam ship, manueverability characteristics in restricted waters will probably be

significantly different and may require more

channel width than normal ships. However, if

found suitable for bulk cargo transport from restricted channel depths of U.S. ports, these ships

may provide important side benefits. They, as a

class, could be useful for noncoal bulk cargo

shipments from many ports. They have not thus

far been mass produced in foreign shipyards;

and if constructed using advanced technology,

U.S. shipyards could possibly build them competitively for the international trade.

Barge Carrying Ships

Barge carrying ships also present an alternative to deepening shipping channels and may

be particularly pertinent to coal users who are

located on the inland water routes of Europe.

The concept is an extention of present barge carrying ships used in the general cargo trade. Coal

barges would be towed a deep part of the harbor

for loading aboard oversized ships,

In one design, the barge size visualized for

these systems is the standard 1,500-tonne Mississippi barge—195 ft long, 35 ft wide, and 12 ft
62

deep with a draft of 9 ft. Up to 80 of these would

be loaded onto five decks of the carrier ship

which is estimated to be approximately 1,257 ft

in length, 213 ft in beam, and 38.7 ft in draft.

The barges would be offloaded at the ship’s

destination and then towed to a location nearest

the coal user plant. While an outer part of the

United States and destination ports would have

to be dredged deep enough to accommodate the

barge loading and unloading operations, dredging might be minimized.

There are inefficiencies associated with this

concept that must be considered in practice.

There are nonpayload void spaces between

barges and between decks. In addition, the added weight of the barge structure must be transported, and demurrage costs of at least one extra set of barges per ship would be involved.

However, the system could be used for other

bulk cargoes and U.S. shipyards might participate in both ship and barge construction.
63

Schematic of the Norfolk& Western System, Norfolk, Va.

Rotary dumpers at Custom Blending Station empty four coal cars into transfer bins.

1

. .

Coal, regulated by feeder mechanism, is placed on variable-speed shuttle conveyors.

“! :

Coal is mixed for a third time at the loading towers, and is deposited aboard ship.

SOURCE Norfolk & Western Railway
64

Mobile, Ala.

Schematic of level luffing crane 7,000 tonne/hr t raveling ship loader

75,000 dwt bulk carrier

Photo Credits” Dravo Corp.

High capacity stacker/eclaimer system
65

Rotterdam, Netherlands

Aerial view of Ekom Terminal, Rotterdam, Netherlands

Typical Rhine River self-propelled barge

. .

a

Four-barge unit push tow

Photo Cred/ts’ Dravo Corp

Unloading terminal for super-colliers at Rotterdam
—

66

Proposed Coal Slurry System From Utah to Oxnard, Calif.

SOURCE Boeing Co
Appendixes
APPENDIX A

Status of

Harbor Dredging Projects

Costs and Benefits of Dredging

Cost-benefit analyses are used by the Corps of Engineers to assess the value of channel deepening projects. Most studies consider the type of vessel traffic

to use the port, the drafts of vessels, forecasts of commodity flows, and other variables to compare benefits with costs.

The cost side of the analysis involves determining

the costs necessary to establish and operate the project, interest charges, amortization of investments

during the specified period, salvage value, and

similar factors. The estimated economic cost is expressed in equivalent average annual terms to permit

direct comparison with estimated benefits. It is the

Corps’ policy to assume a useful life of 50 years for

port improvements.

After the monetary cost estimates are computed,

then the benefits of the projects are measured. This is

done by first determining the physical output of the

projects. The objective of such measurement is to determine increases, net of associated or indirect cost,

in the value of goods and services which result from

conditions with the project as compared with conditions without the project. The value of the outputs

is either the market value (demand price) or, in the

absence thereof, the expected costs of production by

the most likely alternative sources that would be

utilized in the absence of the project.

The ratio benefit to cost is used as an indicator of

the project’s worth. Tangible benefits, as they are expected to occur, then are brought back to present

worth by a given interest rate and then amortized to

obtain average annual benefits. The ratio derived

from dividing the average annual benefits by average

annual costs is referred to as the “benefit-cost” ratio.

Projects are seldom authorized unless the benefit-cost

ratio exceeds one.

Federal Funding of Dredging

Although estimates are available for approximating the cost of dredging a certain number of

cubic yards of material from a harbor bottom, a wide

range of variables can impact the cost. Some of these

are:

● cost of local labor;

● geological composition of material;

● distance the material needs to be transported for

disposal; and

● cost of disposal area (ocean dumping, port development fill project, creating new disposal

area).

Research conducted by the Corps of Engineers,

Water Resources Center indicates that between 1963

and 1979, annual expenditures for improvement

dredging actually decreased 22 percent from $107

million to $83 million. Moreover, the unit costs for

improvement dredging were $0.41/cubic yard (yd3

)

in 1963 and increased to $1.73/yd3 in 1979. Maintenance dredging over the same period saw unit

prices increase from $0.27/yd3 to $1.03/yd3

. Total

annual expenditures in this area increased by a factor

of four from $59 million to $241 million. Figures prepared by the Corps of Engineers indicates that 289

million yds were dredged in the United States in

1980, and an estimated 320 million will be made in

1981 (see table A-1). Of the 1981 totals, the Corps

would be expected to handle 95 million, and private

industry contracts with the Corps for the remaining

225 million for 1981. On the cost side, the Corps

itself is expected to directly assume $115 million and

Corps contracts to private industry $337 million in

1981 (see table A-2).

The numbers presented in tables A-1 and A-2 must

be viewed in the context of estimates for new channel

deepening projects. Assuming a reasonably high

$2.00/yd 3 dredging costs, and a 200-million-yd3 project, a total bill of $400 million results. This level of

dredging for new construction is a reasonable estimate for a major new project at one port.

Channel Improvement Process

There are both private and Federal public sector efforts involved in channel maintenance, improvement, and new dredging activities. Non-Federal efforts, both private and local governmental, are primarily directed to dredging of channels to and

around private docks from main channels. There

have also been limited non-Federal efforts in the

dredging of short main channels. However, these

cases are rare and more often than not pertain either

to artificial ports or for channels that are used primarily by a single industry. The Federal efforts are

conducted by the Corps of Engineers.

69
70

Table A-l.—Corps of Engineers Cubic Yard Dredging (millions)

With Corps equipment

Maintenance New work Total

1978 . . . . . . . . . . . . 92 2 94

1979 . . . . . . . . . . . . 87 3 90

1980 . . . . . . . . . . . . 81 1 82

1981 (est.) . . . . . . . 95 0 95

SOURCE: Corps of Engineers.

Table A-2.—Corps

1978 . . . . . . . . . . . .

1979. . . . . . . . . . . .

1980. . . . . . . . . . . .

1981 (est) . . . . . . .

WithCornsequipment

- I -

With private

industry equipment

Maintenance Newwork Total

118 68 186

147 45 192

154 53 207

153 72 225

of Engineers for Dredging ($ millions)

SOURCE’ Corps of Engineers

The two dredging activities—the non-Federal

dredging and the Federal dredging—necessarily go

through two different Federal Government administrative processes. The non-Federal Government

dredging requires a permit from the Corps of Engineers. The Federal dredging requires the Congress

to enact legislation to request the Corps to conduct a

feasibility study followed by an act to provide authorization for construction and then by appropriations acts to provide funding. During the Corps

study environmental considerations and other public

concerns are taken into account and public hearings

are held similar to those required for non- Federal

efforts.

Permit Process for Non-Federal Dredging

A Corps of Engineers permit is required whenever

a project is considered which would affect the waters

of the United States by:

● locating a new structure;

● excavating, or discharging dredge or fill material; or

● involve transporting dredged material for the

purpose of dumping it into ocean waters.1

However, not every activity requires a separate permit application. Certain activities and work have

been authorized by nationwide permits and general

permits. z

1

See Corps of Engineers, Permit Program A Guide for Applicants, EP

1145-2-1, NO V. 1, 1977).

2A nationwide permit is a form of general permit which authorizes a category of activities throughout the Nation. Nationwide permits are designed

to allow work to occur with little, if any, delay or paperwork.

Prior to actually submitting an application to obtain a permit, applicants are encouraged to contact

the District Engineers Office having jurisdiction over

specific geographic location of the structure or

activity.

Each application is evaluated to determine the

probable impact the structure or activity will have on

public interest. This is where many delays can occur.

The Corps is responsible for coordinating the responses to the project of numerous State and local

governmental bodies and civic groups. If any one organization objects to the project, then additional consideration must be given to overcoming the difficulties the objecting organization sees. In some

cases, an environmental impact statement (EIS) may

be required and simply developing the background

data for the EIS can take 2 years or more. In other

cases, less stringent environmental impact assessments or environmental reviews maybe needed.

Once all data have been submitted, the District Engineer will issue a public notice seeking comments on

the proposed action. A normal 30-day comment period is given to responding agencies, but this period is

usually exceeded, contributing to additional delays.

A public hearing may then be held if the District

Engineers believe there to be sufficient reason to

allow an additional forum for public comment. Once

all public comment is obtained, the District Engineer

takes all information and based on a series of evaluation factors will make a final decision to approve or

disapprove the application. In the event that a permit

is denied, a complete procedure is available for

appeal.
71

Recently, the Corps released a proposal for the

purpose of speeding up the review process needed to

obtain Federal permits. 3 There are several specific

procedures recommended for shortening the leadtime

required, but, in short, the proposed regulations are

designed to impose time limits on the accomplishment of goals, and require reviews of contested applications to be “pulled” from high levels of decisionmaking, rather than “pushed” from lower levels. This

forces decisions to be made by the lowest possible

level, where most attention to detail can be devoted

and decisions can be more timely. In the event that

the Corps does not grant a permit, or a granted permit is contested by a local public agency or civic organization, a ranking official representing the contesting group must request that the application be reconsidered at the next highest level. Such a procedure

is designed to limit permit reviews at the highest

levels of the Corps of Engineers.

Also, memoranda of agreement were established

between the Corps and five involved Federal agencies

requiring that to the maximum extent practicable, a

decision should be made on individual applications

within 90 days of the issuance of the pubic notice.

Federal Process for Port and Channel

Improvement Projects

The Corps of Engineers has a rather strict set of

procedures through which it must operate in the

process of developing channels and other public

works. There are four basic controls which Congress

has on the selection and timely development of the

public works. First, Congress must request the Corps

of Engineers to conduct a feasibility study of the improvement which local groups perceive to have

merit. Such a feasibility study includes engineering

considerations, cost factors, environmental concerns, and perceived benefits. After the completed feasibility study is forwarded to Congress, further

studies or engineering of that particular improvement

are undertaken as project funds are “extinguished” on

the submittal of the feasibility report to Congress.

The next action that Congress takes is to authorize

the, project; however, further work by the Corps

must await congressional appropriations actions.

However, the appropriations are generally only yearly. Thus, each year Congress must reconsider the individual project as it progresses and appropriate

funds for the next year.

‘Federal Register part VI, Department of Defense, Crops of Engineers,

Department of the Army, “Proposal to Amend Permit Regulations for Controlling Certain Activities in Waters of the United States, ” Sept. 19, 1980, p.

62732.

Besides Congress and the Corps of Engineers, other

agencies, the State governments, and the interested

public become involved in the review process of public works projects. These often become quite controversial when environmental issues become of great

concern and do cause delays and modifications in the

program. In dredging, the site selected for depositing

the dredged materials often becomes particularly

controversial.

The 19 steps of establishing and constructing new

projects is given in table A-3. Maintenance dredging,

a 20th step is not listed, but does occur and requires

annual funding for larger projects and occasional,

but predicable funding for smaller projects.

Status of Present and Proposed Coal Port

Projects

There have been many proposals to improve various ports to increase export capabilities. Some of

these are just conceptual, others are in some stage of

the Corps of Engineers 19 steps, previously discussed. The four predominant coal ports, have major

improvement projects in planning or design. Table

A-4 lists the proposed improvements to these ports.

The status of the projects, as of April 1, 1981, to improve these four channels is as follows:

Baltimore.—Feasibility complete, approved by the

Corps of Engineers and Secretary of the Army and

deepening of the channels authorized by Congress.

Step 26 is underway: The Secretary of the Army is

entering into formal agreements with non-Federal interests to fulfill their obligations. Appropriations action would have to follow for the actual construction

to be initiated.

Hampton Roads.—The District report has been reviewed by the Board of Harbors and Rivers and has

issued its recommendations. Step 10 is underway:

The Chief of Engineers is coordinating the report and

the EIS with the Governor of the affected States and

with the Federal Department heads. After this step,

the Secretary of the Army will review the report and

submit it and the EIS to Congress for authorization.

Mobile—The feasibility report has been completed

by the District. Step 9 is underway: The Board of

Rivers and Harbors is reviewing the report.

New Orleans—A reconnaissance phase has been

completed and the results found favorable. Preliminary alternatives have been selected by the Corps

District Office and public involvement initiated. Step

6 is underway: The preparation and circulation of the

preliminary draft report and the preliminary EIS.
72

Table A-3.—How Corps Projects Are Conceived,

Authorized, Funded, and Implemented

(preauthorization)

1. Public requests assistance from congressional delega2.

3.

4.

5.

6.

7.

8.

tion to solve water resources problems

Committee on Public Works of House or Senate authorizes study

Initial funds for study enacted into law

Corps district conducts reconnaissance (Stage 1 Planning)—includes public meeting and other forms of public involvement

If results of reconnaissance favorable, Corps district

continues study and develops preliminary alternatives

(Stage 2 Planning) –includes public meeting and other

public involvement

Corps district selects several alternatives to develop in

detail and on the basis of further evaluation tentatively

selects plan, which best achieves the objectives of the

study (Stage 3 Planning) —includes public meeting and

the preparation and circulation of draft report and draft

environmental impact statement (EIS)

District engineer submits report and EIS to division

engineer

Division engineer submits report and results of division

review to Board of Engineers for Rivers and Harbors

fBERH)—includes includes public notice

9. BERH ‘reviews district and division recommendations

and issues its findings and recommendations—includes public notice of recommendations

10. Chief of Engineers coordinates proposed report and EIS

with Governors of affected States and Federal department heads

11. Chief of Engineers report reviewed by Secretary of the

Army and the Office of Management and Budget and

submitted to Congress—final EIS filed with EPA

12. Committees on Public Works hold hearings and include

project in authorization bill or authorize by joint resolutions

13. Initial funds for Advance Engineering and Design

(AE&D) for project enacted into law–usually several

years after authorization

14. Corps reaffirms plan based on current conditions and

any new planning criteria applicable to project—includes a public meeting and other forms of public

involvement

15. If plan reaffirmed, or satisfactorily modified to accommodate new conditions or criteria, Corps continues

with sufficient engineering and design to award initial

construction contracts

16. Non-Federal interests required to enter into formal

agreement with Secretary of the Army to fulfill their obIigations, as authorized by Congress

17. Initial funds for construction of project enacted into

law—requires specific decision by President and Congress to initiate construction of project

18. Continuation of engineering and design and project construction—may include adjustments based on results of

detailed engineering design

19. Completion of project construction

SOURCE: Corps of Engineers

A summary listing of project status of the major

coal exporting ports and other coal exporting, or potential coal ports, is as follows:

Present project step

Project port underway

Principal coal ports

Baltimore . . . . . . . . . . . . 16

Hampton Roads ., . . . . . 10

Mobile . . . . . . . . . . . . . . 9

New Orleans. . . . . . . . . . 6

Additional coal ports (or potential)

East coast:

New York City .

Charleston, S.C.

Savannah, Ga. .

Brunswick, Ga. .

Gulf coast:

Galveston, Tex.

(Texas City) . . .

(Pelican Island) .

Sabine, Tex. . . .

. . . . . . . 2

. . . . . . . 10

. . . . . . . 7

. . . . . . . 10 (unfavorable)

. . . . . . . 6

. . . . . . . Permit granted to

private organization.

. . . . . . . 6

Corpus Christi, Tex. . . . . 6

West coast:

Columbia River, Wash,

(Astoria) . . . . . . . . . . . . . 6

Kalamia, Wash. . . . . . . . Permit requested for

private dredging

Bellingham, Wash. . . . . . Deepening not required,

step not applicable

Gray Harbor, Wash. . . . . 6

Long Beach/Los Angeles. 18

Sacramento, Calif. . . . . . 9

Acceleration of Corps Process

There have been numerous suggestions for fast

tracking the Corps 19-step process, Most of these involve the accelerating or avoiding of three delays.

These are: 1) delays caused by serially conducted

reviews within the Corps of Engineers as well as by

other agencies and outside interested States and

organizations; 2) delays in design and engineering

due to lack of funding while project authorization

and appropriation bills on favorable projects are

acted upon in Congress; and 3) delays caused by

yearly resubmission of project funding request and

appropriation thereof by Congress.

The Corps is in the process of implementing the

concurrent reviews of key projects. The Corps schedule under their revised report system for Norfolk,

Mobile, and New Orleans is shown on table A-s.

Concurrent review outside the Corps, over which it
73

Table A-4.—Proposed Improvements to Existing Coal Harbor Channels

Annual operating

Vessel size and maintenance

Channel depth (ft) capacity (dwt) Capital cost (10 $) costs (lo $)

Current Proposed Current Proposed Existing Increased

Hampton Roadsa. 

. . . . . . . . . . . 45 55 80,000 100,000 + 372 6.2 2.5

(April 1980)

Baltimore . . . . . . . . . . . . . . . . . . 42 50 70,000 100,000 + 278 4.0 0.8

(October 1980)

Philadelphia. . . . . . . . . . . . . . . . 40 — 60,000 — — 8.2 –

Mobile a

. . . . . . . . . . . . . . . . . . . . 40 55 60,000 100,000 + 392 8.7 2.4

(August 1980)

New Orleansb

. . . . . . . . . . . . . . . 40 55 60,000 100,000+ 440 19.5 75.0

(May 1980)

aFeasibility studies completed and report now under review at levels of the Chief of Engineers and the Secretary of the Army

bFeasibility study in final stages of completion by the District Engineer.

SOURCE: Corps of Engineers.

has no control, has not been initiated. This will re- Office of Management and Budget requested $2 milquire action by the other Federal Agencies involved lion for continuing studies in fiscal year 1982, which

in the review and approval process. was reduced to $1 million before submission to ConTo avoid the delays in design and engineering in- gress.

curred while awaiting authorization and appropria- te avoid the hiatus that

tion by Congress, the Corps in its fiscal year 1982 years, it has been suggested

budget has submitted a request for funds and author- gressional alternatives exist:

ization to conduct continuing studies for those proj- for the full project, or 2)

ects found favorable. The budget submitted to the funding.

occurs between fiscal

that two possible con1) appropriate funding

provide multiple-year
Table A-5.—Coal Ports Reports Schedule (for planning)

Milestone Norfolk (Hampton Roads) Mobile Harbor New Orleans (M R-GO)

Maxi- Pres- lncre- Maxi- Pres- lncre- Maxi- Pres- lncremum idental mental mum idental mental mum idental mental

Best acceler- initi- contruc- Best acceler- initi- construe- Best acceler- initi- contrucestimate ationa

ative tion estimate ationaative tion estimate ationaative tion

Report forwarded to

BERH . . . . . . . . . . . . . . .

Chief of Engineers’ proposed report (and FEIS)

to ASA(CW), OMB, and

to States and agencies

for review. . . . . . . . . . . .

Statutory review periods

end. . . . . . . . . . . . . . . . .

Chief’s final report to

ASA(CW) . . . . . . . . . . . .

Report to WRC . . . . . . . .

Report to CongressC

. . . .

Congress authorizes . . .

AE&D completef

. . . . . . .

Aug 80 same same same NOV 80 same same same Jun 81 same same same

Mar 81 same same same Apr 81 same same same Oct 81 same same same

Jun 81 same same same Jul 81 same same same Jan 82 same NOV 81 NOV 81

Aug 81

Aug 81

NOV 8 1

1981

1984

Jul 81

Jul 81

Oct 81

1981

1984

Jul 81

N A

b

Aug 81

1981

1984

Jul 81

N A

b

Aug 81

Sept 81d

Mar 82g

Sept 81

Sept 81

Dec 81

1982e

1985

Aug 81

Aug 81

NOV 8 1

1981

1984

Aug 81

N A

b

Sept 81

1981

1984

Aug 81

N A

b

Sept 81

Oct 81d

1982h

Mar 82

Mar 82

Jun 82

1982

1985

Feb 82

Feb 82

May 82

1982

1985

Dec 81

NA

Jan 82

1982

1985

Dec 81

NA

Jan 82

Feb 82d

Jul 83

aAssumes ASA/CW will expedite to extent possible. Potential expenditing within the President's purview (items 3 and 5) were not assumed,

blnvolves directives to agencies to accelerate 90 review to 30 days, and to waive independent project review.

CASSumes 2 months to process report through WRC and 1 month to process through OMB. We estimate that this IS the fastest possible progress for Complex projects

and assumes we have taken all “assurance” steps to maintain progress.

dAssumes Congress authorizes within 1 month of receipt.

eDepending on congressional session dates in relation to report submissions, a 1981 authorization could be possible.

fAssumes efforts to compress from the expected 4 t. 5 years required are successful assumes concurrent funding of AE&D and authorization; and assumes a 3 year

AE&D effort (18 to 24 months for Phase I and 12 to 18 months for P&S) AE&D IS considered complete when plans and specifications for the first major contract are approved

gconstructlon begins for 50-ft stage. No environmental Issues or factors have been raised concerning this stage.

hMobile cannot accelerate unless disposal issue is resolved: disposal is controversial, First increment is widening and turning basin.

‘One preliminary plan involves an initial construction phase of 55ft from the Gulf to River Mile 60 above Head of Passes.

SOURCE: Corps of Engineers, Mar. 16, 1981
Appendix B

Legislation

Development I

Congress

Relevant to Coal

ntroduced in the

Through April 1,

Port

97th

1981

House

HR-55 —Ports and Navigation Improvement Act

of 1981

Sponsor: Boggs, 1/5/81

Specifies selected ports for dredging

Expedites process for project implementation

FIR-2249 —Ports and Navigation Improvement Act

of 1981

Sponsor: Breaux, 3/3/81

Identical to HR-55

Senate

s-68

S-202

–Ports Improvement Act of 1981

Sponsor: Randolph, 1/6/81

Specifies ports for dredging

Requires expedited procedure for Corps

—Ports and Navigation Improvement Act

of 1981

Sponsor: Hollings, 1/22/81

Specifies expedited process for harbor

dredging projects, esp. Charleston,

S.c.

S-576 —National Harbor Improvement Act of

1981

Sponsor: Moynihan, 2/26/81

Establishes a task force and national

planning process

Specifies a schedule for projects

Specifies a cost-sharing procedure

S-621 —National Water Resources Policy and

Development Act of 1981

Sponsor: Domenici, 3/5/81

Establishes a planning procedure and

schedule with Water Resources

Council as coordinating body

Specifies cost-sharing procedures

S-809 —Recovery of Certain Costs Associated

with Construction of Deep-Draft

Channels and Certain Ports

(Administration request)

Sponsor: Stafford, 3/26/81

Specifies cost sharing through user fees

S-828 —Ports and Navigation Improvement Act

of 1981

Sponsor: Johnston, 3/30/81

Expedites harbor-dredging projects for

selected coal ports

o

75