diverting 1.3 million tons of business per year away from several coal operators to the Consolidation Coal Co. It has succeeded in taking away from the railroads 1.3 million tons of freight per year which it has given to Consolidation Coal Co. which has no business being in the transportation field at all. If this is the pattern that will be followed in future coal pipeline operations, I cannot believe that either the Congress or the administration could seriously advocate it. I would like to say, Senator, that I believe Mr. Love was questioned on this matter of this particular pipeline into this Eastlake plant, and I got the impression that he implied that there had been an increased consumption of coal in that area as a result of this pipeline. I happen to be somewhat familiar with that market up there, and that market is not readily accessible to either residual oil or natural gas. And to my own personal knowledge, I don't very seriously think that pipeline has done anything except capture that entire tonnage for Consolidation Coal Co. If there has been an increase, it has been only the natural increase, brought about by the economic advances of the users, generated by the power company. If An important thing to remember when considering the impact of even such a small pipeline as one carrying 1.3 million tons is that the coal market is all interrelated. It is like a bin of sand. If you take handful out of one corner, the rest moves in from every other corner. you add a handful it distributes itself throughout, so that even though I was not one of the suppliers for the Eastlake, Ohio, plant, indirectly I felt the result of Consolidation's increasing its production by 1.3 million tons per year because the 1.3 million tons, or some part of it, produced by the displaced operators are still being produced and that coal is marketed to consumers that would normally buy some of my product. Now imagine the impact of adding 8 million tons of coal to Consolidation's present level so that it may serve by pipeline electrical generating plants in the East. Then multiply this situation by as many pipelines as may be built under this proposed legislation. Obviously, this is not going to solve West Virginia's problems or the problems of any other coal-producing State. The point I am trying to get across is this: Making it easier and even cheaper to transport coal from the mines to the consumer is not going to solve any problem unless you also see to it that more total fuel is consumed in this country. That means greater demand for electricity and other products made from the energy produced by burning coal. I have seen no evidence anywhere that this part of the problem is being taken care of by Consolidation, by the Government, or by anyone else. If that problem is not solved first, all that a coal pipeline will do is disrupt the existing pattern and create more unemployment. Bringing the delivered cost of coal down might make it more competitive with fuel oil or natural gas on the east coast, but if it does, then oil and gas will bring their prices down to meet the competition. The result might well be a disastrous rate war. Many fuel oil contracts with utility companies contain price clauses linked directly to the delivered price of coal. If the price of coal is reduced, the price of fuel oil is automatically reduced to meet this price reduction. Before this committee considers authorizing a step which would bring 8 million tons of coal per year into the eastern market by pipeline, it should make sure that the overall demand of the entire country for fuel consumption of all kinds has been increased at least to the extent of the British thermal unit content of 8 million tons of coal per year. As we see it, if this line is built we will see a trend toward other lines to other plants and a general grab of those markets by the few very large coal companies. We can envision a network of coal pipelines running north, south, east, and west but we cannot see them owned or operated as common carriers because they cannot be so run. We cannot see how the coal of independent coal producers can ever be handled in these lines. The end result of a network of coal-carrying pipelines would be: 1) The elimination of small coal producers; (2) The unemployment of thousands of miners and other employees of these operators; (3) The loss of thousands of railroad jobs and the possible bankruptcy of railroads that must depend on coal for their revenues; (4) A general rise in coal freight rates to enable the remaining coal-carrying lines to stay in business; (5) Because of higher freight rates, plants and factories not served by pipeline would be forced to switch to other fuels such as oil or gas; (6) More widespread unemployment and misery in the coal fields than we have ever known before. In other words, this thing has the appearance of just another attempt to give a few large companies a complete monopoly on all coal production and to force thousands of small producers and their employees out of business and jobs. Every phase of a coal pipeline was developed by Consolidation Coal Co., and Consolidation owns the patents on every phase of it. We do not feel that a company which has such a tight control over this whole process should be given the powerful right of condemnation by Congress. We feel that we have no real complaint about the Ohio pipeline. True, it has hurt the small operator. It has also increased the competitive strength of the already huge Consolidation Coal Co. But that pipeline was built in the normal course of business with private money and without any government help, either State or Federal. For the Federal Government to add this new right of condemnation to the patent rights it has already given this company would be giving Consolidation the power to destroy the competition of small operators. We are not afraid to compete with the very best in the coal industry, including Consolidation, on a fair basis, but to expect us to compete with a combination of Consolidation and the U.S. Government with its tremendous powers, is asking too much. Congress can more effectively and fairly help the coal industry as a whole by restricting the importation of cheap, foreign residual oil; allowing coal depletion allowances equal to oil and gas; and by appropriating adequate funds for high-priority coal research programs by the Bureau of Mines and the Office of Coal Research of the Department of the Interior. These steps would inure to the benefit of all coal producers and our entire economy. If the Congress were to regulate the operations of Consolidation so closely that they could not possibly take advantage of their position to hurt the public or the small operator, or passed legislation to extend grants or loans so that groups of small operators could lawfully combine to build their own pipelines to compete with Consolidation, we might see the situation differently. But given this bill in its present form, we can do nothing else but protest in the strongest terms possible and urge that the Congress not enact it. Senator MCGEE. Thank you very much. I will ask you only one or two questions. The testimony of the Secretary of the Interior this morning made reference to the staff study on energy prepared for the Senate Committee on Interior and Insular Affairs, and in that report the estimate was made of the consumption levels for energy forces in the country, doubling that of the present time, within the next 15 or 20 years. And in the realm of coal, the estimate was that the consumption of coal would roughly double between 1960 and 1980. Now when you tell us in your testimony, as you just have, that you don't foresee any new coal markets of any measurable proportions, do you mean to question the validity of this estimate? Mr. RATLIFF. No, sir; I accept that. What I intended to say here, maybe I misstated it, was the fact that coal had lost most of the markets it had to lose; as an example, home heating, the railroads, and such markets as that. Other markets are pretty well static, such as the steelmaking byproduct market for coal, metallurgical coal, it has not changed a great deal, perhaps it is at a standstill, perhaps it will increase some. But the big increase, and that I think is the essence of this thing, this big anticipated increase is in this matter of energy, of this great utility market, as has been brought out in other testimony here, hydroelectric power is almost at a maximum. I think the Senator from New Hampshire revealed his interest in this as being based on the fact that in New Hampshire, a State which traditionally depended upon hydroelectric power, they had exhausted the availability of hydropower there. So therefore coal must turn to the utilities. Therein lies the future, the great tonnage that will be burned in the future. After all, it is just another form of home heating. That has been responsible, and cooling. It is merely converted and taken by wire to the consumer rather than hauled in a truck to different homes for heating, and so forth. So I would agree with that, in my limited knowledge. I would say that those figures are perhaps correct. The only point I make is that is the essence of this thing here, we have no argument with providence, what helps the coal industry as a whole helps the large and small, so long as you give the little fellow a chance to stay in business, and we don't believe this bill as it is is going to allow us to stay in business, because of the reasons I tried to give here. Senator MCGEE. It is your position then that even with a doubling of the needs for coal in the next 20 years, that in that doubling there would not be enough left over to keep you going, that this would all be preempted? Mr. RATLIFF. Sir, I can envision this on these pipelines: We look at who has testified here during these hearings. Mr. Love, of Consolidation, the chairman of the board of Peabody Coal Co., a representative of the Island Creek Coal Co. I can easily envision where those people are going to build a pipeline and who they will sell it to. I happen to be selling coal to some of those very same people. Senator MCGEE. Do you believe, in your advocacy of stepped-up research, in the coal business, which I totally subscribe to, new uses, new techniques, for coal, that it is conceivable that the pipeline slurry operation may ultimately be expanded upon, improved upon, in ways that would also include the small producers? Mr. RATLIFF. It is entirely possible. I would say, in my limited knowledge, scientific knowledge, of the processes of conversion of solid fuels to gases or liquid form, that the greatest promise would lie in the conversion of coal at the mine mouth or nearby, to gases or liquid form, rather than this rather complicated form here of and I might add, it would seem to me that the addition of water to this thing is a drawback to some extent. But if it could be converted at the mine mouth, at its origin, then the pipeline thing would almost automatically become less complicated. But as it is now, the thing that scares me is that one company builds this pipeline and I don't see how they could even raise the money or spend the money, unless the capacity of that line was committed over a period of time sufficient to amortize the original cost of that line. It could not be a common carrier. I think Mr. Singman covered that phase of it. I just don't see how that any company, consolidation, Island Creek, Peabody, or anybody else could justify this cost, if they intended to take the gamble of my company or any other small company, piping coal to that line or bringing coal to this company. I don't think that is within the realm of possibility. I don't think they would risk that kind of money. This is monopolistic per se. I don't see how it could be anything else in the very operation of the thing. Their intentions may be as pure as the driven snow, but as a practical matter, it won't work that way. Senator MCGEE. Thank you very much. I have a 12:30 luncheon pending. Is Mr. Gainer here? (No response.) Senator MCGEE. Mr. William Hogg? Mr. HOGG. Yes, sir; I am here, Senator. It would be satisfactory with me, Senator, since you have an engagement at 12:30, to come back any time that is convenient. Senator MCGEE. Would you be willing to come back tomorrow morning? Mr. HOGG. Yes, sir. Senator MCGEE. Either that or-again we are ready and willing to accept your statement and put it in the record as though read, if that offers any convenience to you. Mr. HOGG. Why, Senator, I have traveled quite a distance to get here, and it is all right with me to wait until the convenience of the committee. Senator MCGEE. That is very fine. I only wanted you to know the alternatives, so you could make your decision. Mr. HOGG. It would be satisfactory to me to come back in the morning. Senator MCGEE. All right, the committee will adjourn until 10 o'clock tomorrow morning. (Whereupon, at 12:30 p.m., the committee was adjourned, to reconvene at 10 a.m., Thursday, May 3, 1962.) COAL SLURRY PIPELINE THURSDAY, MAY 3, 1962 U.S. SENATE, COMMITTEE ON COMMERCE, The committee was called to order, pursuant to recess, at 10 a.m., in room 5110, New Senate Office Building, Hon. Frank J. Lausche presiding. Senator LAUSCHE. The session will come to order. The first witness this morning will be Mr. William B. Hogg, of Williamson, W. Va., representing the West Virginia Independent Coal Operators Association. STATEMENT OF WILLIAM B. HOGG, WILLIAMSON, W. VA., REPRESENTING THE WEST VIRGINIA INDEPENDENT COAL OPERATORS ASSOCIATION Mr. HOGG. My name is William B. Hogg. I have practiced law in southern West Virginia for 38 years, and am a native of that State. I appear in behalf of several small coal producers and small coal land owners, in opposition to the proposed Federal grant of the right of eminent domain for the construction of coal-carrying pipelines. At the outset, let me say that the question of granting the right of eminent domain for construction of coal pipelines was recently before the West Virginia Legislature. The proponents in West Virginia desire to construct a pipeline from northern West Virginia to the eastern seaboard in order to furnish coal to several electric utility plants. And while some of my remarks may deal specifically with that particular pipeline, yet the principles involved there clearly apply to the small coal producers and small coal land owners generally throughout the entire State, because the large companies have indicated their probable intention to build such lines in other parts of the State. To demonstrate the effect of proposed pipelines on the small producers in the southern coalfields, I desire to submit certain production figures for the month of February 1962, in one of our coal areas, as reflected by the coal-loading reports of the railway carrier. The total production in the Thacker district for that month, closely figured, was 814,000 tons. One captive operation and five of the large operations accounted for 239,000 tons. The remaining 575,000 tons were produced by the medium size and very small companies. Thus, we have, indeed, much at stake. According to the annual report of the West Virginia Department of Mines for the year 1960, there were 86 small coal operations in Mingo County alone. |