We just completed the third session dealing with high sulfur coal exports in which we heard testimony from coal producers and Mine Workers and athlete's into the fourth session of this hearing which will deal with Transportation factors. The co-producers did mention several times the problems that they faced with transportation and Railways and also the effectiveness of the naturally occurring Transportation Systems in this area is required in the first amendment that has been worked out carefully with many representatives of the coal mining industry first witness will be mr. Henry Bruce senior vice president for marketing of Illinois Central Gulf Industries, Bruce we welcome you. Thank you.Hunter chairman much has been said of export coal in recent months. But little of this attention has focused on the Illinois Basin and it's Kohl's the subcommittee is to be commended for its recognition of the potential contribution of the Illinois Basin to reducing the u.s. Balance-of-payments deficit and alleviating the world's energy situation as well as the economic prosperity of the area at the Illinois Central Gulf. We believe strongly in the export potential of the Illinois basins enormous coal reserves. Let me say at the outset that the Illinois Central Gulf unlike many Transportation companies owns neither coal mines nor reserves the focus of our export call activity has been and continues to be the land transportation link between my mouth and Shepherds and I would like to underscore that my mouth to ship burst because this is somewhat unique and different. It's a first for a railroad competing with the inland waterways to be able to make that statement.The viability of this length depends upon the export potential of Illinois Basin coal any evaluation of this potential must be viewed from the importers perspective. The icg has expended a great deal of time money and human resources in evaluating the needs and concerns of potential importers. Simply put there are two fundamental questions one through Illinois Basin coal specifications suit, the importers requirements and two is the attendant cost of land in BTUs competitive and acceptable. The icg has determined that the answer to both questions is a resounding. Yes, we believe that our own studies of the situation are sufficiently thorough and the results sufficiently realistic to verify the export opportunity.There is a common belief that Illinois Basin coal will not satisfy European coal by her specification to determine the accuracy of the belief. We collected and analyzed data that would either corroborate or refute this belief in addition to well-known studies such as MIT World toll study icg conducted its own study of the Basin. It's cold and probable International opportunities for these coals some of the Illinois Basin coal that we serve is higher in Sulphur content that is generally accepted under current US Federal Regulations, but that isn't necessarily a major deterrent in dealing with the European market where existing and pending regulations very not only by country and region but even by industryThe term high-sulfur also begs for closer examination High compared to what we would go on it. We could go on a Great Lengths discussing the merits of one nation's or one region steam coal properties that is not the critical issue. What is important are the international market specifications sulfur content is only one of the several specifications in the demand equation. The important point is that there are European markets that Illinois Basin coal can readily satisfy. We're continuing to fine-tune our focus on Europe by commissioning in-depth Market studies on a country-by-country basis. We began with Spain.The results of the study indicate that Illinois Basin calls are both usable an acceptable sulfur notwithstanding. This is particularly true in the Spanish cement industry were up to two and a half percent sulfur is readily acceptable the Spanish study pinpointed specific utilities and cement plants both existing and planned Port facilities Cole import and demand projections call procurement procedures and the national energy plan of Spain. We believe that we have established the existence of an Illinois Basin coal Market in Spain a similar study of the Italian market has just been completed and a study of Grease has been also commissioned icg has made the results of the Spanish study available to interested Illinois Basin coal producers and plans to do so with both of the Italian and Greek studies.The cost competitiveness of Illinois Basin Kohl's in the international market place is also shrouded in myth as you might expect the icg examine this subject very carefully since we hope to be one of the transport links between Illinois and Europe as well as the rest of the world as responsible businessman potential employers. Look at total cost total cost the cost of land to be to use that's with you. Delanoy Basin calls from a similar perspective using the port of New Orleans as the exit port.Preliminary information on other prospective European importing countries has yet to reveal weakness in Illinois Basin Kohl's or cost of distribution. However, there is a problem that must be solved before the Illinois Basin exports begin in conducting our studies of the European markets. We found that only Appalachian coal is thought of when us coal is mentioned European. See the Eastern United States is a coal supplier, but see little Beyond Eastern Kentucky it is if there were others as if the mountains of Eastern Kentucky form a wall or barrier that obstructs the European view of the Illinois Basin, unfortunately this myopia extends even to the Federal Railroad Administration, which for the most part ignored potential, Illinois Basin coal export in its projections of railroad Freight traffic flows 1990.As may be obvious the most pressing need that must be met before Illinois Basin coal exports become a reality is a massive effort to educate and inform and much has already been set on that front this morning and we support that entirely this effort must be coordinated among railroads coal companies and ports for its part. The icg has and will continue to act as a catalyst and strategist in bringing together protential importers and coal producers through a five-point program by one speaking out in behalf of the Illinois Basin as opportunities arise to providing informational material such as the import coal guide now being prepared by icg three circulating the results of our country by country markets that he's too interested, Illinois Basin coal producers for working with ports and coal producers to develop Transportation price packages attractive to potential importers and 5 supporting efforts toModern Eyes as well as develop Port facilities to meet future needs the subcommittee support and any assistance you might render in this educational effort will certainly be welcomed Senator. Thank you very much. Thank you very much indeed Colonel hard as the associate Port director for the port of New Orleans Army Corps of engineer New Orleans as well as in the District of Columbia Thailand, Peru and Nicaragua. He serves his term and also a both the American Association of Port Authorities in the International Association at 4 and Harborside Hawk dredging task force.The Board of Commissioners of the port of New Orleans is a strong advocate for the deepening of the Southwest pass of the Mississippi River and for a 55 foot Channel all the way to Baton Rouge that some 234 miles the total waterborne Commerce foreign and domestic on the Mississippi River below Baton Rouge was 572 million tons in 1978. This is 28% of the nation's total waterborne Commerce, Louisiana deep water ports handled over 20% of all the nation's foreign Commerce in 1979 might also mention that 40% of the nation's grain some 50 million tons was exported from the Lower, Mississippi River in 1980.Additionally if you look at the entire Laurel, Mississippi River the deep water portion from Baton Rouge to the gulf when we talked first of New Orleans being the number one port in the nation in the number to port in the world are we look at that whole complex from the Gulf to Baton Rouge we're looking at a complex that moves a tonnage figure that I just mentioned almost twice that are out of town the biggest port in the world now, I'd like to speak more in detail to that Lord 234 miles of the Mississippi River. That's where all the coal actions taking place today today. There are three existing terminals out of being improved on a massive major bases. Additionally. There are seven new terminals that are on the design and we'll be going online in the next two to three years with further expansion planned in the 1983 to 1990 X rank. These are all being done by the private sector they involve and expenditure byPrivate sector of almost seven hundred million dollars these ten Terminals and I don't have them all here because several of an ounce since I put my data together these 10 terminal will have a throughput capacity of 1983 of 60 million tons. And in 1990 of 144 million times in addition to those figures. We have Midstream loading capability by four major stevedoring firms in the New Orleans area 24 million times will be online capability by the end of next year. Now. If you add this to the previously mentioned 60 million times from a new terminals being developed on the show. You have a 84 million time capability of coal fruit put in the New Orleans area in 1983 and 168 million tonnes throughput just assumedMidstream capability. Increase between 83 and 98 tremendous capability that's going online by the private sector the total private investment by 1990 will be over a billion dollars. Now. I know the interesting thing about these terminals cold terminals going online on the lower Mississippi river is that they have huge amounts of land that go with the existing turn those two of them have 800 acres already on one new terminal that is in the new category and and Jerry Cunningham is going to be on the panel tomorrow. It's going to dress this has just purchased two thousand acres 2000 acres in two and a half miles of Waterfront. And what is the significance of significance of that says ships will not have to wait another words has lots of land area most of these Terminals and Rural settings. They'll be adequate barge Fleet.And I'll be adequate ship first and I'll be deep water available. So they will not be waiting times like you've had on the east coast and I think that's why you see all this traumatic Dynamic action plus set bright Mississippi River system that we have. So I think the tremendous action on that lower river is all indicative of a very optimistic view of what the private sector perceives a future to be for coal exports from the Lower Mississippi River now the only missing link and all of this is a deeper channel for the Lower Mississippi River and I might mention that Lord 234 miles of the Mississippi River is 100 ft deep from Baton Rouge to the gulf. The only place where you have a problem as a last 21 mi from Southwest pie, which forms of adult and the bottle the silk drops at that point requires lots of dredging so you have a 40-foot Chan with that point and it's some 1213 Crossings with a river changes Direction you have dredging so the technical problem of accomplishing the dredging and deepening of that lower Mississippi river is relatively easy. Now the big thing on the fast track legislation, which we're endorsing and we work closely with Senator Johnston and sound Along on this and also Senator Warner Virginia has worked very closely with us in connection with the fast track legislation. The big thing that we must have in the fast-track legislation is is a fast-tracking of the environmental impact statement procedure a litigation process must copy. What was done Alaska pipeline in order to cut down the time that suits can be pursued also on the cost-recovery ass back. We are against it and principal but we recognize Administration the Congress of a mood to go forward with it. Therefore we would recommend 2550% in the cost-recovery, and also in the o&m operation maintenance recovery charges, we would certainly hope that the Congress and its wisdom can see fit to pass an appropriate piece of legislation by the end of this September and with your strong interest Center. I know we can count on your full support in this effort cuz I think that's the only missing part that we have in this whole equation. Thank you very much. Thank you Colonel her very much indeed Final witness channel is dr. John Cena Marlin director the Central States Resource Center a Central States Resource Center is an environmental interest group concerned with water and farmland preservation. He received his PhD in entomology from University of Illinois Champaign-Urbana, Dr. Marlin talk tomorrow, and I'll have to slip out in just a minute for a quick telephone call an emergency and I'll ask.Paul Simon to chair for just a moment and I'll be right back. Thank you. There is no compelling environmental reason why the United States in general and Illinois in particular cannot become a major supplier of the world's coal given the current unstable nature the Free World sources of oil and coal. It is essential for world. Peace to Dependable energy supplies be found at the development of coal export facilities for seeds with sensitivity to social environmental concerns. There is no reason to expect trouble from major environmental organizations by this. I mean, the facilities must be needed economically Justified and located to cause a minimum of environmental damage. The main concern of environmental organizations is the haste with which Regional economic interests are rushing to authorize dredging of their favorite ports to add up to 55 ft. The many bills introduced to speed development and include environmental regulations are ample proof of this. The majority of the nation's major river in estuaries and many coastal wetlands will be lost forever. If all potential ports are developed. There was a need to develop Port capacity. There is no need to develop all ports. The dredging of deep parts will create a number of environmental costs. First of the physical disposal dredge spoil placing it in the wetlands destroys thousands of Acres of Irreplaceable habitat that forms the foundation of a Marine fishing industry and much recreational hunting and fishing disposal in diet areas or at Sea are other Alternatives which requires study to determine their potential impacts spoil often contains toxic chemicals and heavy metals that are reintroduced into the water when stirred by dredging for this reason care must be taken to understand the chemical nature of spoil from Individual sites before it is moved. Changing the hydrologic characteristics of river Outlets by deepening or relocating can cause saltwater intrusion which destroys habitats and food sources of Municipal and surface groundwater altering the Dynamics of sediment transport could have long-term impacts on the stability of the coast and barrier islands where Rosen is already a problem. There's an appalling lack of comprehensive data on the impact of navigation on the Dynamics of aquatic ecosystems. We strongly recommend that studies be undertaken to develop a good database which will take much of the guesswork out of environmental impact statements and help speed things up many potential environmental problems could be eliminated or apparently be eliminated by locating facilities offshore and moving coal to them by small ships are conveyors. If users pay the fees the developments will be promoted because they are needed far too much environmental damage has already occurred because Federal the federal government has paid the cost of river. Projects in the past much attention has been given to improving the Inland Waterway system to move export coal. It should be remembered that the government currently pays more than 40% of the cost of moving Freight by barge on the Inland Waterway system. The greatest beneficiaries of this subsidy are the coal and oil companies, which move over half the tonnage on the Mississippi system. The environmental Community is greatly Disturbed at a temp buy some to blame environmental regulations for project delays and the nation's economic ills if the average Water Project takes 24 years to complete it cannot be due to environmental laws that exist exist in for less than 10 years a study of the various records of the past 50 years will show the primary problem here is the authorizing and funding process in the political games paid played by Regional interests. That's your major source of delay environmental regulations have something to do with a decrease in productivity in the coalfields. However is a general accounting office has pointed out the decisions and desires of management and labor have a lot to do with the industry's woes. I would add to this list a long history of government policies that left oil gas and nuclear energy underpriced in relation to coal. The public interest in rivers and wetlands and clean air and clean water must be protected if industry moves with these values in mind, there will be much less controversy the cost of reclaiming land cleaning the water and keeping the air breathable must be seen as a normal cost of doing business at this point. Let me acknowledge that not all environmental regulations are Justified and I'm sure some can be changed. However attempts to circumvent the intent of environmental laws will be strongly opposed and eventually turned back. I'd like to offer several suggestions to help speed things up and perhaps less than some of the fighting that's going on about developments in the past first, I would suggest that we examine Port development Alternatives in light of Economic and ecological realities and determine if ports should be dredged or if offshore loading facility should be developed second. We should select one project on East Coast on each Coast to develop while additional studies are conducted third. We should begin and complete. Use of the impact of navigation and dredging on environmental resources particularly in the coastal areas 4th. The cost of Environmental Protection should be considered a normal cost of doing business shipper should be required to pay the cost of constructing new facilities. We should eliminate differential subsidies between various modes of transportation. and when the potential problems and benefits are better understood and a firm demand for export calls established. We should then proceed with additional projects as needed. There's a future for for coal exports which can develop rather painlessly if those involved decide to cooperate and atmosphere of give-and-take based upon sound economic and ecological principles. The alternative is Decades of fighting and many losers. Thank you. I'm smiling very much. Bruce Lee in your statement you made that very clear that icg railroad is expecting to play a major role in Coal exports the in the coming years. What has your company done to improve your track and roadbed increase your hauling Carr Supply in preparation for the increase in Coal exports that you expected we expect We've been getting ready for this from a couple of different standpoints. Not only the export coal but also an enlightened self-interest within our own Management Group in the past five years. We've expended over a billion dollars on our right away on the main line and in that same framework, we've also identified on the specifics of coal the need for equipment not only for the domestic Transportation, but also for the coming eventuality of the export program that we put together and we've expended somewhere in the neighborhood of 140 million dollars on 4000 New pieces of equipment more specifically on the immediate situation as a result of our programs and working with the coal producers. We are amassing 400 brand new cars up the line at Centralia right now to move into the mines to be ready to to ship down to the New Orleans port. For export we're ready for the for the export coal movement. Very good kind of how I understand that the port of New Orleans is now the busiest in the country with 167 million tons of cargo passing through a yearly second busiest port. The port of New York is 163 made in the Advent of coal exports from the Illinois Basin, which really haven't really begun yet. May Place considerable strain on your port in the near future. Do you feel at the Port of New Orleans will be able to deliver ample amounts of myself or coal in the short-term, even though it has not yet expanded to an Optimum size. Most of charm and I might mention that the port of New Orleans has been monitoring the coal activities that we probably will have only the one terminal that we have at least two a stevedoring firm that will move some of the icg railroad coal from Illinois. Most of the other terminals projected to be developed outside of the pork limits per say so therefore public Port Authorities on the lower Mississippi River. These are spread primarily in the Loire River and the upper reaches of the river the new terminals projected to go online. Now the Coast Guard in connection with improve vessel Traffic Safety have been conducting a study through the Louisiana State University as as their agent with all parties involved as to how do I Prove that a vessel traffic system to provide for increased safety on the lower River also the Governor and the legislature is in the process of establishing an ad hoc committee at this time. In fact my boss, and I just met with the governor's representative on this last week to discuss what needs to be done and what efforts that we should take to supplement even the work that's going to be accomplished in the safe to be accomplished by The Vessel traffic system in this regard. So I think the the state of Louisiana and the public ports involved all looking forward to taking all measures that will be required to build a adequately and safely handle this increase volume on the lower, Mississippi River. Thank you very much. How many producers look upon environmental this is just a destruction is something to try to sweep away. They wish they go away. But I think also we should give the fact that many environmentalists also are reasonable practical people who recognized you must have balance in life that you can't reach for the you may reach for the oven up with you always have to balance out because you can't grind the economy of this country to a halt and say the environment is going to be very good for us working for the 225 million people in this country. How can you do it always have to balance it out so that I think your comments are valuable today environmental consequences of River Port expansions have to be taken into account of oil changes at same time. We need more coal exports and I'm delighted to hear that you support coal exports and I'm especially glad to hear you say coal exports from the done without endangering the environment you tell us. Do you have any How we can that you can make to Industry and environmental groups to ensure that environmental concerns are built into the process to help increase coal exports and on obstacles are causes a delay in Coal exports. I think the first thing we have to do is start talking to each other most of the industry people. I know who have environmental sensitivity or look upon with suspicion by their colleagues and people like myself who believe in little compromise have certain problems with our own radicals. But then I think we ought to start recognizing that the environmental interest and economic interest have to start talking and finding Solutions. I point out in my opening. I think that the world stability depends very heavily on us getting our act together. I'd much rather spend my time solving problems and fighting with coal companies. I think the biggest obstacle but I can see happening right now. Is it the major National Environmental groups watch the legislation being proposed in Washington. Would you going to open up the door for the development of almost any port the Corps of Engineers think is economically feasible and political terms. That means every Senator and Congressman with a port is going to try and get his own port deepened. And we as I point out we run the risk their of creating a panic situation. Nationally. We're almost every River Estuary in the country comes under tremendous pressure. If we could pick a few ports to start with as say a prototype and work on those in a rational manner. We can eliminate a lot of the panic and fear. It's going to create a big fight very soon as I just think we're moving in time too many ports to quickly will be much better off to take a few and as needs develop go ahead and develop more and solve our problems along the line. Thank you very much indeed on this subcommittee on energy nuclear proliferation and government processes hearing of coal exports. We now pause for station identification. We now begin the fifth session of the day. It will deal with the marketing of Illinois Basin high-sulfur coal session find consists of national specialist testimony. Program so we will have to begin then. With the first witness. Mr. Donald Earnshaw Deputy assistant secretary for export development with the US Department of Commerce, Mr. Earnshaw join the Continental group or Stanford Connecticut in 1949, or that's vice president prior to entering Department of Commerce that he was president of the Continental group of Europe located in Brussels Europe for three years. He assumed the duties of Commerce early in April 1981. Where is responsible for the development and implementation of the Department's program for promotion of US exports and I just want to say secretary are inside you and I are going to be living together and he's next at least 3 and 1/2 years because you are just exactly the person I will be working most closely with together with your distinguished secretary who I see it at least for a meal once a week, but you are the one that has responsibility for the thing I think is one of the most important single things we can do this. United States of America build our exploits you very much I will try to live up to those expectations. As you said, I'm new in the government. I've been here for a couple of months. I am starting to export on coal expert on coal export but I would like to say a few words on behalf of the Department of Commerce this morning if I may Luggage capacity going back. By the way. We will have you take back a lump of coal from Illinois to put on your desk as a daily reminder by George. I'd love to have it. Thank you very much. I am pleased to appear before the subcommittee on energy to present. The Commerce is views on International utilization. If I sell for call we applaud the committee for having his hearing International cold trade in the u.s. Role is clearly an issue which will contribute significantly to the shaping of the international Economic Policy issues of the 1980s with our vast reserves of coal. There's an excellent opportunity for the United States to increase its exports of all types of coal and become a significant and reliable energy supplier to the world. It's especially fitting to be having this hearing on high-sulfur coal in Carbondale a city located in the state with the third largest coal reserves and the largest bituminous coal resources in the nation today. I would like to speak on the importance of coal trade development its implications for international trade policy and the role of high-sulfur coal as you well know the United States has more economically recoverable coal reserves than any other Nation these Reserves at least 475 billion tons, good sustained substantial increases and exports of steam coal without affecting the availability of domestic supplies. United States by expanding as a major International source for steam coal can significantly reduce the world's dependence on petroleum for at energy needs. It would be natural for countries seeking a stable energy source for commercial and political reasons to choose the United States as a major supplier long-term commitments or contract between the United States producer and foreign buyers provide the Assurance each party needs to obtain the capital for and initiate required improvements or investments in new equipment for production handling and movement of call the bar and buy our games additional security against economic fluctuations and an assured source of Supply that makes established quality standards. The United States only needs to reinforce its reputation as a reliable supplier of coal and to establish a definitive policy that the government will not interrupt contractual arrangements and less work. Hard to do. So by a National Emergency the United States has never restricted coal exports even during strikes that have reduced domestic supplies this policy for commercial stability and cold trade also extends to allowing foreign investment. It is cold projects consistent with existing federal and state laws such a policy not only provides needed Capital but further Barnes foreign purchasers to long-term commitments to buy American coal in addition to trade balance benefits of stantial increases and steam coal exports to provide impetus in areas of industrial activity long-neglected. The rebuilding of are deteriorating railroad beds increasing are Rolling Stock and expanding handling capabilities in the efficiencies of our ports, encouraging the repair and Improvement of our Highway systems to serve our ports and fostering improvements to our Inland Waterway system. At present high-sulfur coal finds markets in the industrial use side rather than in power generation significant controls on combustion emissions resulting from coal use are imposed by most important Nations which aim for a sulfur content of one and a half percent there less a major influence on coal quality purchasing decisions at the historic pattern of consumption in your example. Most domestic reserves are good quality low sulfur bituminous Kohl's as use of in Puerto. Rico becomes more prevalent customers are expected to see comfortable Cole properties while near-term us coal exports may be low in Sulfur new technologies are being researched and developed that will enhance the future sale of high-sulfur coal. Such Technologies include flue gas desulfurization fluidized bed coal combustion and synthetics that's long-term prospects appear good for not only the export of us high-sulfur coal, but also, All the Technologies in a company equipment being developed in the United States to utilize all qualities of coal estimates Place us coal exports to be 1/4 bituminous with more than 1% sulfur by mid 1980 bituminous coal with less than 1% sulfur and low sulfur sub-bituminous coal will account for 3/4 of told cold exports. Let me conclude by talking a little bit about the Commerce activities and I'll try to be quick many programs exist within the ITA of the Department of Commerce to promote coal exports. Although they are not presently exclusively devoted to Coal exports. The Department of Commerce is currently examining how these existing programs and planned initiatives can be directed within current resources for special emphasis on coal exports mechanisms for coordinating these activities with those of other organizations who are also being looked at within the department. The current Department of Commerce took an active part in the recent interagency Cole task force, the international trade administration of the Department of Commerce has continued its efforts to assist the US coal industry to improve its export capability to Aid Foreign buyers to locate suitable us producers and US manufacturers of Cole related equipment and technology and to identify potential purchasers for American exporters. And I don't think I'll go on. I have a couple of more things but I think it's a bit redundant. This does conclude by prepared statement. I will only say that in my role as the promoter of X board. There is no question the coal and certainly Cole from this area is a fundamental thrust for us in the Department of Commerce in the 1980s. I can ensure a very much indeed for that insurance our next witness. Mr. William and Mason Cole exporters Association of the u.s. Is parent company. I notice is Occidental Petroleum Corporation and Arm & Hammer of that the company is that I think one of the most resourceful and creative business man I've ever known every place I go in the world lasts in and just tell him that even though oil and fertilizer and other things are important cold is the real product of the future for him a man of the future. Thank you Nathan very much senator. It's particular pleasure for me to be here before your session today on coal exports. It's already been a very impressive session, which I certainly, let you and certain of your state. As I am on the program this afternoon with more details as to my thoughts as to the market and is my statements will be submitted before they record though. I'll make my statement vibrate as you have stated. My name is William W Mason on President Island Creek Coal Sales company a major exporter of us Kohl's and this year president of the cold exporters Association United States. I've been in the market of the business and marketing cold both nationally and internationally for over 30 years Island Creek Coal Sales company markets coal produced by the West Kentucky division of Island Creek Coal Company cold of which is generally known to be shipped from the Illinois Basin. The cool exporters Association is Association consisting of 29 members Association has been in existence for over 35 years and its membership are responsible for the marketing approximately 90% of all the koelschip. Export market today cea is an organization in the United States that represents the American cold export market and works very closely with a mini visitations of foreign Representatives interested in cold both private and governmental and collect and disseminate statistical material on the marketing segment of the coal industry for the internet from an international standpoint only it is not a commercial or sales marketing organization. One of the main objectives of the cold exporters Association is 2% to the foreign buyer or the prospective buyer the true picture of the American coal industry along with the actual conditions that must be faced with regards to exporting coal which includes transportation from the mines. To the port and also conditions that surround the transloading of cold at the Port these latter two points have been crucial in our exports in the last year of Soul. The cold exporters Association is active in All Phases of governmental activities from the national level to the local level and has been most active in Washington lately working with Commerce and energy. The association has also been active and working towards a better utilization of our cold board activities export of coal has long been an important segment of our balance of payments and while the moat While most of our export coal for the last 30 years or so has been predominantly loose Lois offer low Ash high-quality coking coal. Ship from the Apalachee area last year over 26 million tons of steam cold was shipped and total from this Market. This has a combined with a metallurgical Kohl's amounts to for the record over four and a half billion tons in our balance of payment the cost of the Lord be to use a higher sulfur content of the Illinois Basin cold. There is a limited market abroad for this type of coal by itself. However, with the abundance of this fuel source, there is every reason to believe with a transportation system presently available from this area both by river and by rail that this Source can be uniformly improperly Blended at the port or at the loading Port the result would be a consistent product of medium volatile medium sulfur content cold that can be marketed the brought the market for higher sulfur Cold Plus 2% is estimated as possibly 10% of the export Market by 1985. I ever saw for contents in the 1 and 1/2 to 1 and 3/4. Range could fall into the next category that is expected to take 50 to 60% of the market by 1985 using 135 million tons of export coal in 1985 and factoring the blending. It would seem that Illinois Basin Kohl's could Sip and the overseas market for 20 to 30 million toes million tonnes, maybe more cold as our most important energy source. This fact is more clearly recognized by our foreign friends then by our own countrymen, Illinois, Basin Kohl's has its drawbacks. However, there is this is a source of energy that must be utilized. I congratulate the sponsors of this conference for the efforts that you're making and filled it through such a conference. This positive action will be taken to find better ways. Where to buy this energy source can be utilized in the export Market. Thank you. Thank you. Just amazing very much and d and I just witness. Mr. Robert perks present of eei Incorporated. Thank you senator for giving us the opportunity to speak here this morning. The perspective from which I'm speaking is one a little different from most of those you've heard from this morning and that the company I represent is an international code Trader. And in that perspective we deal with most coal producers in this country and communicate directly with many of the European customers. Our perspective is even more important to the Illinois Basin because we are company that is grounded and River Transportation and barging and we have for a year or more done extensive exporting through and they Gulfport. From that perspective. I like to reflect for a few minutes. On the difficulties with which we Face the exporting of Illinois Basin coal. I think sir that one of the major difficulties we have is the commitment to export the export business by the producers of the Illinois Basin call. We have a situation where for years producers of Illinois Basin coal. I've been very successful in the domestic market and the export Market represents quite a change and it is a market which has a great deal of doubts a great deal of uncertainties facing it and it is very difficult in our communication with the Illinois producers to get them to leave the comfort of a of a domestic order or domestic commitment for the possibilities are potential of an export move. We have a situation where we're looking at long contracts. It is that that are that happen very easily that are relatively automatic and we've heard comments this morning if people say people were commenting on on export to take up the slack from a slow domestic economy. I submit to you that we cannot look at the export Market in that vein. It cannot be approached. There's something to take up the slack from a slow slow economy at home. One of the other problems we have in the AutoWay Basin is the individual effort in attempting to Market overseas. We are in fact her house divided against itself. We have very little cooperation from The Producers very little cooperation from from many of the traitors and this creates a great deal of difficulty in getting any kind of message across to our European customers just is just what is Illinois Basin coal all about Obviously, it's difficult to look for a lot of producers long-term at out at XSport when people will predict that have only about 7% of our increase in export will be for the software contents to Andover. The other the other problems that exist have been mentioned. Mr. Lee emphasized that mr. Mason just emphasized in that is the necessity to blend Illinois called its can be done and something that's being done successfully, but it requires cooperation and it requires the ability to work together and it's been mentioned many times this morning and I'll briefly mention it the reliability. Factor of us especially Illinois Basin coal overseas that commitment that I talked about the quality and two for filling a contract that has been made we are we have done great damage in the past to buy a conference overseas, and I don't see it changing very rapidly, unfortunately. I would also like to point out that some of the difficulties in kolin general and and the elevation called deal with. the financial aspects we we have I will OK Financial write the financial aspects and and dealing with support from the US financial institutions Solutions very rapidly. I think we need that commitment that promotion that you talked about sir. We also need I believe to establish the Illinois coal exporters Association that would make Illinois call known throughout throughout the world, and I think we need to go Insurance programs and into need to implement a program to to encourage u.s. Banks to help in the exporting of us call. Thank you for a kind of the next speaker Mr. Rodger Rodger the gas the acting assistant secretary for fossil energy the department of energy you soon this position in January 81 began as Federal service in 1952 with a position with atomic energy Commission in Washington in 1962. Played a role. Development of new energy technology and from 67 to 78 the strand of the working group on research and development strategy for the International Energy agency. Thank you. Mr. Chairman. Let me go again congratulate you and Southern Illinois University on the very fine conference and hearing process that you've established. I'm delighted to be a part of that process. Representing the department of energy would say that we are very strongly and support this arm of the of the federal government for a strong u.s. Entry into World Cole trade. I agree that this should not be seen as a spot Market opportunity or is a come-and-go thing, but that there is a substantial long-term role for the United States in a continuing trading relationship such as you've mentioned, we've established and Agriculture and I think we have to work very hard towards that in the department of energy and myself personally were involved in the establishment of the interagency task force. Another was referred to earlier that the put the first government focus on this question. Although we built on study such as the world coal study that had preceded the governmental activity. The apartment is in close contact with the internet. Energy agency. We do Cooperative research and development in fossil energy activities trying to ensure the usefulness of us coal abroad and new technologies were supporting the economic assessment activities of that agency, which are making independent studies for the Europeans of world Cole trade and the one of the representatives has a paper on the conference later on. We been in direct contact with the coal industrial Advisory Board, which consists of businessman from the United States and from the other countries not government Representatives, but people in the coal producing and buying activity, which have advised the International Energy agency. So we have a substantial supportive role in all of those areas secretary Edwards and his confirmation statement made a strong statement in support of world cult raid, and he has continued from that day to this. To personally be extremely supportive of this activity. In fossil energy. We have established a unit reporting directly to me now, which is trying to coordinate our efforts within the department in support of these activities and work with other agencies such as Commerce and we are very supportive of commerce's lead role in this activity. I would note sir. Since you've asked several witnesses. Do we have enough cold that just last month? The department of energy a revised estimate of us coal reserves upwards to 475 billion tonnes and number that was just quoted that was an increase of 40 billion tons from the previous estimate and between now and the end of the century. We're going to be using less than 40 billion tons. So in the year 2000 is we look backwards. We're going to have more Cole at the end of the century than we thought we had last month so that kind of situation and I don't I haven't heard anybody put in those dramatic a terms yet. But I think you can say that to your foreign visitors. We do have a lot of coal. We are concerns her to strengthen the domestic base for the used within this country of high sulfur mid Western and Eastern coal to give any conomic base that will then allow for an export activity on top of that. Our first priority is in fact to increase coal usage in this country, and then from a strong industrial base to be able to move into World Trade. We're also in the department focusing on new technologies, which will allow worldwide use under easier conditions, whether it be in fluid bad or coal gasification Technologies of this kind of cold, but in the end the government won't do it. The industry has to do with the private sector has to do it. We want to be supportive and working together we can make this happen. Thank you, sir. Thank you, very kindly our next witness. Mr. Arthur and Nicholson commissioner of the bureau production and utilization of the Kentucky Department of energy used to have this opportunity to discuss with you this important topic of marketing mechanisms for the export of high-sulfur coal. And I applaud your concern over these matters and I'm confident these here will result in very useful actions to mitigate the problems of exporting high-sulfur coal many points in my paper have been covered in considerable detail. I would like to summarize some of the Salient points with a little more emphasis maybe in the in the couple of areas, then it's been covered so far except for limited specific situations potential code users in Western Europe are looking for low salt for cold. In the second section of our written statement Western European Air Pollution Control strategies and abatement options are surveyed. It may be seen that technology for burning high-sulfur coal Flags the US experience given the slowness of us utilities installing equipment that will permit the utilization of highest offer call. It seems reasonable that some stimulus must be given to European utilities if they are to design boilers for usurp I saw for coal. This stimulus must be a new type of sales effort one that is long-term and I would like to emphasise long-term and that meets the competition in terms of cost reliability and environmental concerns. It is our opinion that the most critical mechanism needed is demonstration of high-sulfur coal can be burned in accordance with environmental standards at a competitive cost and to ensure that the call will will be produced and shipped when needed this entails a two-part strategy, which I'd like to mention very briefly. We must establish credibility for our product by using more of it. It ourselves instead of high-cost oil from the Arab countries. Second it is crucial that there must be mechanisms for sharing foreign market that the supply of coal is reliable reliability of supplies even more overtones in an export market then in a domestic market for producer Transportation work stoppage of the chief concerns. There are at least two important considerations in an export Market. One of them of course has been covered today. That is the political stability in exporting country and the likelihood of obtaining export permits certainly are significant considerations and reliability is a willingness or capability this seller to fulfil a contract when veteran Market opportunities are unforeseen problems arise this last consideration is especially important when small companies are involved. Do if you allow me I mentioned very briefly are Kentucky experience. Our marketing effort has been to develop essential oil industry in Western Kentucky to provide a market for our high-sulfur coal. And of course, Illinois in Illinois Basin coal and to work for an export Market Far Eastern Kentucky coal Eastern Kentucky is characterized by large number of Independent Producers who individually cannot service the export Market most of these Independent Producers lack the reserve sufficient to fulfil long-term contracts. They also like the financial resources for dealing directly with foreign markets are initial thought was to establish a producer's property that would include enough coal resources to support a long-term contract. However, Cooperative by itself is insufficient there still a problem with the reliability of Supply a carpeted may not be strong enough to ensure that all members meet their contractual obligations we found Necessary to establish an expert resources Authority and nonprofit public corporation to perform certain functions in the Commonwealth's best interest The Authority is able to assure foreign buyers that cold having desired qualities will be produced and shipped according to the buyer schedule to this Mac and mechanism. We believe we can act as a conduit between Independent Producers next Fork Market in brief summary sir. It is our opinion that the most critical mechanisms need to Market high-sulfur coal is to demonstrate that high-sulfur coal can be burned in accordance with environmental standards at a competitive cost and to ensure that the car will be there when needed we do not believe enough is being done to convince overseas markets at this time. Thank you, sir. Thank you very much indeed. Now beginning a panel session 6 marketing of high-sulfur coal with the international aspects of it. Our first witness will be Peter born. Peter boright assistant acting assistant secretary for international Affairs at the US Department of energy been there. I believe since January 1981. He is responsible for the preparation of US Energy positions for high-level International negotiations, as well as having responsibility for the International Energy relations on a bilateral and multilateral basis energy policy planning positions in the government since 1974. Thank you. Mr. Chairman. I'm glad to be here and not coincidentally to be out of Washington briefly. I have a prepared statement that has been delivered for the record and in the brief allotted time. I'd like to highlight some of the features of today's oil and energy markets and the consequent imperative in our judgment for a buildup of future steam called trade I'm going to concentrate on the industrialized world's the realm of International Energy agency. You could put together today and oil markets sketch roughly along the following lines descriptively soft prices in the headlines recently spot Market the Norms of Rotterdam a year ago that we're giving me such pain now the spot Market deflating cutbacks in production particularly among the premium oil producers in north and West Africa. acrimonious OPEC meetings and analyses the show the imminence of perhaps a structural condition of surplus and finally, perhaps the most telling indicator, mr. Chairman free maps and windshield cleaning a gasoline station namely all of the hard and fast evidence of a so-called oil Market glut. This description Mister chairman. I would not describe is applicable today. It was prevalent about 3 years ago in a much more distant time when the average OPEC price was $13. And in fact in the second and third quarters of 1978 flowers seem to be blooming the problem seems to be over. Today we're confronted with some momentary signs of relief in the oil Market, but we're doing it from a plateau of an average OPEC price of $35, which is a virtual trip over a. Of three years with incalculable economic hardship to the United States and our principal friends and allies overseas. There is evidence that some kind of structural adjustment is beginning to take hold particularly in the wake of the oil price explosion of 1979 the recent oil conservation performance in the United States. And in many of the other iea countries is very real and it's not just a recessionary downturn if you consider our economic growth in the first quarter of this year and an additional listen to 30 then shake your money in a recent speech seems to me indicating some concern about the mobilization of energy Supply resources in the industrialized World suggesting that the existing price structure of some $35. Our Associates in OPEC may have overshot the mark. Nonetheless Mister chairman. There is a risk of complacency today and just this morning there indications that all is not well in the Middle East the potential for conflict is always there. It seems to me there for that. We have to maintain a priority objective. It was established political at the Venice economic Summit last year namely to break the lock step relationship between oil and economic vulnerability and more economic activity and more important to reduce our vulnerability to oil supply disruptions. How many speakers have touched on the role that international trade and steam called can play in bringing this about I will not go through a recitation of the Alternative Energy Supply sources Mister chairman, but if you look at nuclear power throughout Western Europe, if you look at the near-term potential to increase oil supply under secure conditions, if you take a careful, look at gas supply that could come into Western Europe over the 1980s from such countries of the Soviet Union, Algeria. And Libya, you must conclude that International steam coal throughout the eighties and particularly the first part of the eighties must play a significant role. Not only in the energy mix of our principal friends and allies overseas, but also in diminishing the energy security concerns that they feel so strongly right now in closing the store chairman. The United States is not just another call supplier with an abundant resource base. We have a proven ability to function as a stable source of Supply. We have an open commercial system for direct foreign participation that puts us in a position to play a leadership role in this activity. Is it in Falls over the years to come and if I met mr. Chairman and perhaps one of your other capacities in Washington, I suspect that you will be increasingly drawn to the energy security aspects of World Trade and will continue to Pradas quite properly when removing the obstacles to the development of this trade. Thank you. Too subjective tremendous interest in which they Foreign Relations Committee go to giving a great deal of attention in and future nuns. Our next witness is mr. George and vice president speaking on behalf of Colonel Wilson Smith. These remarks presented by xender naraz a consulting firm. Holy dedicated Cole are taken from the xender Narrows publication World steam coal service, a definitive study of the international supply-demand balance for coal and from recent conversations with a selected group of our correspondence abroad. The domestic markets were Illinois coal are being developed through technology to reduce the impact of the high sulfur content. This action is necessary to make full use of a vital Regional National resource foreign customers. However, have full freedom of choice and making their decisions and they will buy low sulfur coal as long as it is available at a reasonable price high-sulfur coal. Therefore will find an overseas Market only when the price spread between low and high sulfur coal overcomes a disadvantages of using high-sulfur coal. This spread currently is not sufficient to attract overseas customers increasing demand for the low sulfur Kohl's should cause their prices to rise and this could force users to reassess their use of high-sulfur coal. Foreign demand for Illinois Basin coal does exist but it is a limited at present and markets must be sought assiduously because of restraints of the Panama Canal the Far East Market is quite restricted. The primary overseas Market is in Western Europe. In preparation for this conference center near has pulled some of its representatives and friends in Europe and ask the following questions and we receive answers from Seven Cool importing countries. First of all, what is the acceptable limit of sulfur for Utilities in Denmark? It's 2% in Italy 1% Although legislation has been introduced to increase that sulfur content in Sweden. It is 8/10 of 1% in Germany 1% in Spain 1 and 1/2 in France 1 to 2% and in Belgium 2% Will utilities buy cheaper high-sulfur coal for blending Denmark. Yes, they will but all have all do not have mixing capabilities in Italy only to a limited extent in Germany. Blending is almost unknown in Spain. They will do it if the Scylla teas are available and in France, they will blend if the volatility is roughly equal. What discount is required on high-sulfur coal for blending by Utilities in Denmark? 10% Italy 2% for each one 10% of sulfur over 1% In Germany, the price discount as in material in view of the anti-pollution laws in Spain the discount must be sufficient to offset the extra cost and in France, it must cover all cost to blending. What industries will take high-sulfur coal and how much in Denmark the cement industry a hundred thousand tons annually of two and a half percent sulfur. In Italy the cement industry will take 1 million tons in 1982 and 1/2 million a 1985 5 million in 1990. In Sweden the cement industry now takes 200,000 tons and by 1985 will take 300,000 tons. The pulp industry will take a maximum of 300,000 tons in Germany. Only the cement industry will take high-sulfur coal if it is discounted about $4 per ton. Spain will take coal in the cement industry about 30% of its team requirement will be in cement France. The cement industry will take coal with sulfur content of 2.3 to 2.5% Finally, what are the prospects for scrubbers and fluid bed units in Denmark. It is a limited Prospect in Italy studies are underway, but the results at present are unknown. In Sweden, they will be used but only for coal with maximum 2% sulfur. In Germany technical improvements May encourage future demand, but in the long-term high-sulfur coal will not exceed 5% of total coal used. In Spain utilities will avoid the expense of scrubbers and other high-cost facilities. And in France utilities are not using strawberries and there and have no plans for their use work is going forward in the US has mentioned on fluid gas desulfurization and fluidized bed combustion in order to develop a domestic market for high-sulfur coal. The Europeans are doing similar work, but their primary objective is to control emissions rather than to encourage use of high-sulfur coal never the last as a result of their work. They may be able to take more high-sulfur coal in the future. Another Market is developing for high-sulfur coal, but it is not clearly defined at present. It may be the subject of us of a cinder nearest marketing study. If enough interest is shown this involves processing a fuel that would replace the heavy residual oil used in Texaco and other gasifiers. The gasifier is currently use a high sulfur and then the gasification process. The sulfur is removed work is now underway in Germany and Sweden that may result in replacing the oil with a stabilized cold water slurry. If this process process succeeds high-sulfur coal could be exported from the United States in slurry form representing a high BTU fuel at a reasonable price with no sulfur restriction. Thank you. We now pause for station identification.