We continue with our fifth session of six at this hearing before the subcommittee on energy nuclear proliferation and government processes on coal exports. The chairmanship has been taken over by Illinois representative Paul. Simon offers, not only position Prestige for the state of Illinois, but offer some very practical benefits as we're seeing here today in this in this conference. Next witness isMr. John Berger who is with the US State Department? macroeconomy I am of course pleased to join you today to discuss the factors affecting the international utilization of high self a cold Administration strongly supports expanded coal exports and is committed to a course of action to facilitate Coal Sales abroad as has been pointed out earlier today increased coal exports will contribute to our national interest in a number of way in particular. They enhance our national security by reducing our allies dependence on unreliable sources of energy and it's this thing that I would like to develop in the time allotted to me and I think one which recent events have indicated is of critical importance for our nation. We and our allies have been debited to improve our national or energy security to ensure that precipitous oil supply interruptions. Do not cause an energy emergency. We have made steady progress toward reducing these dangerous but a great deal remains to be accomplished most countries. Do not yet have sufficient strategic energy reserves to cope with a supply Interruption and interruptions of even a small portion of oil imports and have very serious consequences for the economies of all oil consuming Nations. He used to call must grow dramatically as our economies continue to shift from oil to other energy resources coal provides an economical alternative. But in addition to German coal is particularly. Well suited to enhance a country's energy security. Use of coal as a substitute for oil will contribute to the diversity and reduce concentration of national energy mixes the country is from which energy resources are purchased and the types of fuels important. Kohl's potential contribution to energy security particularly in the case of European countries is even more impressive if we have compared to Natural Gas. You're already Imports Boyle from the most likely perspective suppliers of natural gas the Soviet Union Nigeria Libya and Algeria. Proposed gas imports from these countries could more than offset reduced oil purchases from the same countries there for increased European gas in Port might reinforce rather than reduce European dependence on specific petroleum suppliers. This development would be of most concern with respect to potential European energy dependence on the Soviet Union. 6 key European countries are currently negotiating a massive natural gas deal with the Soviet Union if they agree upon a long-term Supply relationship the Soviet Union by 1990 could provide as much as 20% of Western European gas Imports. If the Europeans decide to import such large amounts of Soviet gas, they will have to take precautions to ensure that this commercial Ty does not Foster unacceptable economic or political vulnerability in particular European might seek to increase their use of coal from the United States as a means to counterbalance partially their increased use of Soviet gas. Over the next decade International demand for coal based on Commercial and security considerations could grow significantly. There are a number of problems yet to be resolved. There has been considerable discussion of this to this morning the key issue in a word is reliability. Chairman the government is committed to doing. Whatever it can in order to improve the atmosphere for expanded cold exports nonetheless. The government efforts are just to start the task of selling US Pool abroad must be and I'm sure will be taken up by the private sector so that we can meet our energy security and National interest concerns. Thank you. Thank you mister forever. Our next witness is mr. Zachariah Allen the Senior Vice-President of FR Schwab & Associates. Thank you. Mr. Chairman. I filed a text him of my testimony which incidentally I have a corrected copy of here, which I would like to offer into for the record. And therefore I will simply embellisher or highlight my comments from the prepared text. I think it's important to note that here and in the Illinois Basin in the midwest, but you have a very important reserve of coal and in spite of the fact that the reserve base of the United States has been written up recently is Rodger Lagasse referred to a few minutes ago. We can't afford to squander anyting and we've got 45 billion tons of coal, which is 85% of the total call in this area which have sulfur content greater than roughly 1.9% That that the reserve has been dealt really a double-whammy over the last few years first by the us when we went to a compliance call strategy that situation has been somewhat corrected, but it'll be some time before that correction Works its way through the system and then secondly on a larger scale most of the European countries have used compliance call strategy and their approach to the control of sulfur emissions. However, I'd like to point out that there are there are changes occurring in the thinking in Europe. We are not only exporters of coal, but we're also in exporters of environmental ideas and the tall stack philosophy being practiced in many of the European countries, and they low sulfur emissions. Have really not solve the problem and there is a great deal of talk and present about issues such as acid rain which are getting more and more attention and wildly the the cause of acid rain and the solutions to acid rain are by no means understood yet. These these concerns I believe are going to cause people to go towards more in the way of Direct Control of sulfur missions other than simply relying on the use of low sulfur coal. However, in the meantime that it does make a difficult to sell low sulfur coal Excuse me. I self a call. The cement industry has been pointed out as one place where high-sulfur coal can be used and that's a niche that the producers in this area certainly should pursue. However, I think it's also important to note that there is work going on now, which I think has substantial promise for enabling the use of higher self or calls in the future. All right here in Illinois. You have the Wood River demonstration project you have here present in the audience today. Dr. Jerry Peterson from Allis Chalmers and sits on top of their research program The Killing cast program. This is one of many kinds of projects that I think do have great promise for the future and I think I would ask that the suggested one place that the government can really fill a vital role in working with industry is in providing the proper kinds of incentives and encouragement for research and development to enable us to get the maximum benefit from these energy reserves that we have in the ground and that we cannot afford to squander. I think it would be a mistake to try to guess which Energy Technologies will be successful in the future. It's going to be a competitive race and I think we should encourage all competition in in this research and development effort. But I think it does have great promise for the future and I would ask that the government cooperate with industry that has appropriate in the future. Thank you. Thank you. Mr. Allen. Our next witness is mr. Thomas trumpy the European director of project assistance International myself to those issues would seem most relevant after that discussion. preliminary points In Europe, the definitions are low sulfur coal under 1.2% sulfur sulfur 1.2 to 1.8 High sold for over 2% sulfur coal is considered almost like mining sulfur it is not yet considered cold in the general sense of the word. Disadvantages of Illinois Basin coal for export there a lot of them. It's not easy. It's going to be like pulling teeth and teeth is spelled transport environment experience and Henley transport. These calls are far inland and for some exploitation. There is a short-season in mining and a short-season in shipping. Environment pollution control equipment costs and any economics which may be practiced as the coal price and operational savings experience. The Europeans do not know high-sulfur coal, particularly High volatile high-sulfur coal treasury the cash flows on domestic sales of smaller shipments are more favorable than on many export sales. We're full that's a loads have to be accumulated and payment terms can be extended in certain cases as it's been case recently protected metallurgical coal handling. I have submitted a note already on the handling of high volatile Kohl's at the use your preparation level where they are considered to be more dangerous because of explosion risk than another Kohl's. A General survey the world wants us coal. Almost regardless of price to a certain extent perhaps 20 to 40% of need. See my previous outline action part A the u.s. Is considered a reliable supplier reliable in the sense that interruptions of Supply are expected to be less than 6 months which will probably be the storage. Which the users will count upon second the world expects low low sulfur coal polish Australian South African. Most coal is well under 1% This cold will probably be available in sufficient quantities until after 1985, but will then become in shorter Supply there is limited blending capability knowledge and very limited blending facilities despite future hopes of countries. There is therefore at present little or no motivation to buy collab of Louis Sulphur level available. Even if there is the self-realization equipment available. The Limited the self-realization equipment is further fostered by a bubble or umbrella concept of sharing limits. The processing economics of the self-realization should be checked as should the economics for cementitious use of flue gas desulfurization sludge. Higher sulfur coal is not their self disadvantage in some of your relations such as cement special stoker Kohl's and gasifiers. But low sulfur coal demand depends on the u.s. Ports available for low stall for exports where we agree with the ice Fort and transport section. I reviewed these questions with other experts in Europe and they see a limited availability of increased exports to the US East Coast ports, which will give the greater advantage to the u.s. Golf. U.s. Price advantage of any of high sulfur Kohl's and strip Kohl's will be diluted as a percentage of the total costs by the time the transport on using costs are included at the ultimate users place of use. I asked a question can hydrate sulfur cold be cheap enough to incite users to make the capital investment for the Youth be at the self-realization equipment fluidized bed underfed Stoker's and preparation. Knowledge of high volatile Kohl's is quite limited except in North European users of Polish gold. Knowledge of high Sulphur High volatile Kohl's is practically non-existent and low Fusion High Sulphur High volatile calls are a very rare product in the World Market although much of the local production here. the US must therefore provide experiencing the use of high Sulphur High volatile Kohl's through a search technical assistance and support to exports The US must provide Aid in developing export Commerce infrastructure for larger and smaller suppliers. So that the United States not be Corp as the swing supplier in an accordion of world coal purchasing where longer-term contracts will continue to be taken with South Africa and Australia and the US will meet needs that rise above those. The US must provide finally the export transport infrastructure and should consider to what extent the market rather than the suppliers should pay for that ultimately. There will be a future for higher self for Kohl's but increasingly in a time frame starting in the late 80s or early 90s with more gasification and other to self-realization equipment available in Europe. Thank you. Thank you. Mr. Trump be our Final witness for this morning sessions. Mr. Edward J. Bentz jr. The president of the J Benson Associates company. First I'd like to thank the hospitality of the coal utilization Center and fine staff service of the committee very much. Welcome and Hospitality being an Anchorman on this panel. I'd like to very briefly. I depart from my remarks and testimony and briefly recapture two things capture. The the testimony of my previous Witnesses of all four panels and to focus my brief remarks on what I appear to be an agenda for Action For What the government can do today to get the markets of tomorrow. Briefly are appears to be existing domestic and international markets for high sulfur coal. These include the blending opportunities limited. They are as of today as well as the growing markets for that coal to be used domestically and internationally needed synfuels the dramatic elements in the Mideast of today and yesterday underscore those need for liquid fuels of which Cole is a dramatic sauce II the growing industrial conversions cement Industries in the United States as well as cement Industries in our neighbors and trade countries highlight this neat. We must remember that in order to develop these markets markets piggyback on other markets and the development of the export Market must not be a separate element but indeed a part and parcel of the development of cold domestically and internationally sharing the same Transportation infrastructure and the same benefits. I think the comments of the panel on Transportation highlight the need to develop this infrastructure. Essential to the realization of all the markets is predominantly the ability to deliver coal in a price competitive and reliable fashion. Price is the final surrogate of choice. and we can deliver coal in a price competitive fashion that will create the incentive for productivity gains and new technologies to come in and join with that the two key determinants of price competition and Supply security won the development of a competitively priced well-developed Transportation infrastructure to capture the benefits particularly in this region and second the removal of regulatory bottlenecks that have inhibited the production extraction movement and usage of coal is coal and cold as a feedstock for other fuels briefly in my remarks The barriers that can be removed the barriers that are agenda for action for the Reagan Administration zero budget items. I might add zero budget items are first the removal of the Regulatory bottlenecks and the provision of clear-cut And Timely guidance on fuels derived from fuel from coal and fuel using coal. We have an opportunity with the Clean Air Act Up This Summer to look into that second the development and spurring of the marketplace development of trade standards standards that have work so well for a very successful export trade that I've given by his certainty and what they were buying certainty that was translated into jobs certainty that was translated to trade. And as in the grain trade, we certainly have an historical precedent to work them. Finally. We have to develop and maintain and enhance a strong Transportation structure that can service those needs now and tomorrow and in line with that to develop an emergency capability that can utilize that infrastructure which is a National Heritage in times of embargo in times of emergency and to get on with that structure so that we can indeed make Illinois call as well as all us coal competitive useful and timely in the markets. Thank you. Thank you add the members of panel in addition to questions. I'm I will be asking her mr11 will be asking Senator Percy has a series of questions. He would like to be directing to all of you for insertion in the record. Dr. Bentz. You talk about infrastructure Mister Parks. You talked about blending. We've heard a great deal about blending this morning. Do we have? DNR real or water situation the kind of Transportation facilities that we can move into blending in a major way to help high-sulfur coal. We certainly have the desire. We certainly have the capability as mr. Bruce pointed out and is Herb very well pointed out in the transportation not panel that in order for that infrastructure to be placed. There has to be commitment in order for us to be competitive in the World Market our Harbors Imports must be developed. I think the answer is yes, but the government will have to leave the role in providing a commitment both in terms of removal of a regulatory bottlenecks as well as in fostering the environment where the private sector International and domestic can invest in that infrastructure. And I think when they see the clear-cut guidance, they will invest as demonstrated in the many announcements of herb spoke about another man who spoke about that have occurred in the last 3 months. This marks the answers definitely definitely yes, but more importantly I think we have to first get the commitment the willingness to blend. We're not looking at two physical restrictions so much are as we are looking at at the reluctance to to blend because if you do that, that means that you're you're taking a quantity of someone else's call in order to blend down to two a product. It'll be serviceable and acceptable to it to an export client. So there is a reluctance to do that and that's where the restriction, and that's that's what we have to overcome. 1 comments and one of the question and I'll ask mr. 11 for any questions. He may have mr. Lagasse and I'm not picking on you here now but as you know was a member of the House budget committee, I have had some concerns about our failure to move on cool research. Concerns that affect gasification liquefaction but also and the previous administration I regret to say had the same foot dragging in this area in combustion and pre combustion in post-combustion. If you look at the budget for FY 82, we are down in a significant way in all three while in nuclear research we expand the budget and I know from my conversations with Senator Percy, he shares my concerns here. I don't like you care to comment you may but I think there is a growing body of concern in the House and Senate. Why are foot dragging in the area of research and we heard it we've heard at least two members of this panel talk about the importance of research is to cope earlier talked about the importance of it. It's an area where clearly what are utilized high-sulfur coal. We got to be doing a lot more research. I don't know if you care to comment. Mr. Lagasse. Well certainly were trying to reduce Lilo that the government puts on the economy as a whole by looking at all budget items. I think we are trying to be selective in what we support now and selective in what we do not support so I certainly wood would say that the primary focus of the research and development program that we plan to go forward with is first in the area of making liquids available because it is a liquid energy problem. We have more than any other kind of problem, but the actor that first start at the next Target is in fact To expand the utilization of of all kinds of culpa. Tickly high-sulfur coal available in the East Midwest. We are having good success in that programs are for example, a potted plants that are now running off of the Exxon daughter solvent and the H cold process which are both coal liquefaction prophecies are based upon the use of Illinois and Kentucky coal. We just gone by a major Milestone there and we're seeing Exxon put a lot of private money in a coal gasification plant in the Netherlands, which will be able to utilize us Kohl's as a as a new source of gas supply for Europe through the coal route that will not depend upon Russian gas coming across the borders. So there are some very significant development activities that are ongoing although we are trying to reduce level in in this is a difficult task to decide how to cut Back, but maintain the most important things in place. So I think we will share the objective of being sure that our R&D program is as an attractive one is got as I in the right targets and if we work together, maybe we can ensure that we accomplish both objectives maintaining a program at 11 we could afford but also making sure that attacks those things that need to be attacked. I just hope you will take the message back that there is concern that when we cut for example, one of those three back 54% some of us find a hard time defending those kind of reductions Mr. Earnshaw. And anyone else who would want to comment on this bowling move from a position of being in the doldrums economically to the number one exporter for the nation in large part because of aggressive use of the export-import bank. We have traditionally not use the export-import bank for consumable items that you can't take back. Is there any possibility? Let the coal industry could do what bowling is done and in some way receive financial assurances from the countries that are the recipients and in that way increase coal exports significantly. Congressman I really can't answer that one specifically I get asked to repeatedly as I go around the country about XM financing per say it strikes me and this is a generalization to a specific question that wild things have been going on and while our export drive has been moving along in the new Administration the XM Bank really has been in a process of change. It's really only now that Bill Draper and Charlie Lord and the new board are beginning to come to grips with the the problems of the XM bank. I personally believe that the the objectives of the bank the funding of the bank what it's there to do need to be reviewed. I think the objectives that it is pursuing very successfully historically may not be the same objectives that it needs to pursue in the future. Both in terms of the impact on our export activities. We must export more we all know that and specifically the Target store in which the funding has has gone. And I should think that in the area not only evolve coal exports but perhaps in the area of services rather than Goods the policies of Axiom need to be reviewed to be sure that it's activities are focused on the needs of the 80s and not the needs of the 60s. That's a gentle answer but tub, I hear what you're saying and I personally will take the thought back with me. If you could I have notice in checking in other countries in part some of their patterns develop because they initially started purchasing from one country Egypt as an example goes back to the era when the Soviet Union was Dominic there and they set up requirements for cool with only polish cool meat. Well, we could just as well be in that situation and it seems to me that the export-import bank might be one of the tools any of the rest of you wish to comment on. That aspect of it. Is your weapon? Thank you. Thank you Congressman. I'm very honored to be taking the place of my employer Sandra Percy one question. I'd like to ask mr. Ferriter of the Department of State. We've been looking at the Pacific Rim and Europe today. We haven't had an opportunity to discuss other third world Nations to discuss the existence or lack of environmental standards, which might preclude the immediate direct use of high-sulfur coal. And I wonder whether Mr. Ferriter could describe briefly whether markets in Africa or elsewhere on the world South America may offer more promise in the short-term then Then I'll swing around the world. You're right that I don't think a great deal of consideration has been given to the development of four cool in developing countries. However, I would doubt it in the short-term. We will find that there is much in the way of a market in those countries. Most of them just do not have the facilities is necessary to utilize cold. They are in Africa for example, heavily engaged in development of hydroelectric potential. They use oil-fired electrical generation as well as cold as something which just has not yet entered into their energy equation it is however, it's something which we should look into carefully because it could well be that in the medium-to-long-term considerable development of coal exports to third world might be developed and as the congressman has pointed out to he who gets there first tens day have a potential lock on the market because of the configuration of the colon question. This concludes the field hearing subcommittee. This concludes this special United States Senate subcommittee hearing on the exportation of high-sulfur coal. It's been Hell by the subcommittee on energy nuclear proliferation and government processes. Our producer was add Sunkist engineer was Jimmy McEwan production assistants were Ed done and Dan Grimm and we extend special. Thanks to Dwayne Thompson for his commentary. My name is Gail Simpson. This program was made possible in part with funds provided by The Corporation for Public Broadcasting through national public radio satellite program Development Fund.