CLEAN AIR LAW WOULD ALTER COAL TRANSPORTATION

CLEAN AIR LAW WOULD ALTER COAL TRANSPORTATION

The logistics of moving coal from mine to utility generating station will change dramatically if the clean air legislation that recently passed the Senate is enacted into law.

The measure is likely to force a number of utilities to switch from burning high-sulfur coal mined near their power stations to more distant, low- sulfur coal supplies. As a result, coal hauls will lengthen and transportation will become a larger part of the overall fuel cost.Railroads, which now haul the bulk of utility coal, figure to continue to carry the lion's share, but may carry it from different mines than at present.

For barge lines on the Ohio and Mississippi rivers, the prospect is for more business as they participate in transshipment of Western low-sulfur coal to Eastern utilities.

"Our average coal haul could increase up to 200 miles," said Fred Rafkin, executive vice president of Midland Enterprises Inc., a Cincinnati- based barge line. "That will more than offset the business that we will lose in high-sulfur coal."

Similarly, Norfolk Southern Corp., which moves huge coal tonnages from Appalachia to Eastern power plants, anticipates increased traffic if the legislation passes.

"We think it will mean an increase through 1995 if fuel switching is allowed," said William B. Bales, vice president, coal and ore traffic, for the Norfolk, Va.-based railroad, in reference to switching from high to low- sulfur coal.

The Senate legislation requires that the 111 dirtiest coal-fired power plants in the country cut their sulfur dioxide emissions by 5 million tons by 1996. The House is working on a similar bill, and most political observers believe legislation of some kind will be signed into law by President Bush.

The legislation will have its biggest impact in the Midwest where there's the highest concentration of coal-fired plants. Many of these plants receive high-sulfur Appalachian coal from nearby mines.

Although some of these plants may elect to install scrubbers to clean their coal emissions, or switch to natural gas or nuclear power, a large number are expected to begin burning low-sulfur coal.

Norfolk Southern does not believe that switching will necessarily drive utilities to more distant coal sources. Mr. Bales said Norfolk Southern has plenty of low-sulfur coal in its area that it can transport. He points out that "coal tributary to Norfolk Southern is by and large under (the 1.5 percent sulfur standard anticipated.)"

The 1.5 percent sulfur content is the break point that differentiates low-

from high-sulfur coal. What is yet to be determined by Congress is the maximum allowable emissions.

NS has identified 10.1 billion tons of coal reserves that flow naturally to its tracks, 84 percent of which has a sulfur content of 1.5 percent or less. " . . . Norfolk Southern and Eastern coal, in general, can expect growth from fuel switching," Mr. Bales said.

While there is a plentiful supply of low-sulfur coal in the East, future proposed clean air standards may mandate even tighter emission standards. These could require that utilities burn coal with a maximum sulfur content of .75 percent. Coal meeting that more severe standard generally is only available in the Powder River Basin of Montana and Wyoming.

The move away from high-sulfur coal will hurt local trucking companies that carry coal short distances from mines to power plants. But for barge lines capable of long hauls, the switch should be beneficial, at least in the short term.

"Switching to lower-sulfur coals implies switching to more distant coals," said Rafael Villagran, an analyst with Shearson Lehman Hutton. "We expect barges will represent . . . an increasingly larger share of coal's mode of movement."

While the consensus is that barge lines will benefit by the legislation, not everyone agrees.

William Dibert, president of Crounse Corp., a Paducah, Ky.-based barge line, believes the impact of technology on reducing pollutants from high- sulfur is being underestimated.

"At first blush it would appear that the barge industry will get longer hauls," Mr. Dibert said. "But utilities have a lot of options besides switching to low-sulfur coal. They can use fluidized bed combustion. There are too many uncertainties in regard to the technology to make good predictions."

Powder River Basin coal moves by rail over the Burlington Northern Railroad and Chicago and North Western Transportation Co. In some cases, shippers transfer Powder River Basin coal onto barges or ships once it reaches the river system or the Great Lakes.

American Commercial Barge Lines, a subsidiary of CSX Corp., which also is a principal rail hauler of Eastern coal, also expects to pick up longer hauls on Eastern coal and to pick up an increase in volume on Western coal.

ACBL operates a transloading facility in St. Louis that takes Western coal

from Burlington Northern trains for barge movement on the river system.

At this stage, it's difficult to predict the magnitude of the shift to low-sulfur coals, Mr. Hagan said, in large part because no one knows what kind of financial incentives will be made available for investment in clean coal technology.