Exports of Illinois basin coal, the economic feasibility, environmental and economic impacts of an intermodal coal transfer terminal at Port of Indiana/Burns Waterway Harbor final report

[From the U.S. Government Printing Office, www.gpo.gov]

BURNS WATERWAY HARBOR
EXPO COAL FEAS BIELITY

k.. 411 1

FINAL STUDY REPORT
PREPARED BY
MOSHMAN ASSOCIATES, INC., WASHINGTON, D. C.
AND
PROFESSIONAL STAFF, INDIANA PORT COMMISSION
HD OCTOBER 1981
9547
.16
E97 PROJECT INDIANA CZ086-81-01
1981 Grant No. NA-81-AA-DCZ086

The preparation of this report was financed in part through a comprehensive
planning grant provided by the Coastal Zone Management Act of 1972, as amended,
administered by the Office of Coastal Zone Management, National Oceanic and
Atmospheric Administration.

EXPORTS OF ILLINOIS BASIN COAL

THE ECONOMIC FEASIBILITY,

ENVIRONMENTAL AND ECONOMIC IMPACTS

OF AN

INTERMODAL COAL TRANSFER TERMINAL AT

PORT OF INDIANA/BURNS WATERWAY HARB

FINAL REPORT

SEPTEMBER 30, 1981

PROJECT INDIANA CZ086-81-01

Grant No..NA-81-AA-DCZ086

The preparation of this Report was financed in part through
a comprehensive planning grant provided by the Coastal Zone
Management Act of 1972, as amended, administered by the
Office of Coastal Zone Management, National Oceanic and
Atmospheric Administration.

ACKNOWLEDGEMENTS

This report was prepared in accordance with the tri-party agree-
ment by Moshman Associates, Inc., incorporating text developed
by the professional staff of Indiana Port Commission.

The authors wish to express their appreciation to the State of
Indiana Project Monitor, Ms. Maria Rudzinski, Coordinator of
Coastal Zone Management programs, and the many private sector
and government officials who generously furnished essential in-
formation. In the former group, a special thanks is due to the
members and president of Indiana Coal Council, Inc.

Indiana Port Co mmission Staff contributing to this study included
C. Thomas Bagley and John W. Hughes, port engineers, and Warren P.
Thiede; their activities were coordinated and liaison with State
agencies was provided by Deputy Port Director James D. Pugh.
Port Director Ralph B. Joseph was consulted on policy and opera-
tional aspects.

The study secretariat and report typing were the responsibility
of Elaine Ivascu; the principal investigator and general study
director was David G. Abraham, Vice President and Director of
Economic Research of Moshman Associates, Inc.

The views expressed and conclusions reached are those of the
authors and do not necessarily reflect those of the Federal
and State study sponsors.

ABSTRACT

Based upon critical review of recently completed and published
reports, the history, current status, and future outlook for
world coal trade and U.S. exports of soft coals were examined.

Coal demand in countries susceptible to supply from the Illinois
Basin and to be shipped via the St. Lawrence Seaway system was
identified and quantified with forecasts to the year 2000.
Availability of suitable coal reserves was examined and for the
Illinois and Indiana Counties nearest to Burns Waterway Harbor
suitable recoverable reserves were quantified.

Existing and potential future coal export shipping systems were
reviewed with emphasis on competing Tidewater ports' economies-
of-scale and very large vessel economics, and contrasted with a
multi-component Great Lakes shipping system via Indiana's seaport.

Preliminary siting, design, construction, and operating cost es-
timates for a two to three million annual ton capacity terminal
at Burns Waterway Harbor (BWH) were developed, as were total
transportation cost estimates. These were compared with compet-
ing system costs.

Environmental and economic impacts of the examined coal export
operation at BWH were assessed.

Conclusions as to economic feasibility were reached and poten-
tially rewarding actions were suggested.

TABLE OF CONTENTS

Chapter Page

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . I-1

Ii. SUMMARY OF FINDINGS AND CONCLUSIONS . . . . . . . .

III. COAL IN THE EIGHTIES AND BEYOND . . . . . . . . . .
1. Brief History of U.S. Coal Exports . . . . . . .
2. The Most Recent Past . . . . . * * ' * ' * ' * * 3
3. Long Range Outlook for World Coal Use . . . . . 5
4. Comparative Position of the United
States in the World Coal Market . . . . . . . 9

IV. DEMAND IN COUNTRIES SUSCEPTIBLE TO AND COAL
AVAILABLE FOR SUPPLY VIA BURNS WATERWAY HARBOR . . . IV-1
1. Demand Side of Equation . . . . . . . . . . . . 1
2. Supply Side of Equation . . . . . . . . . . . . 4
3. Competitiveness of Coal at Mines . . . . . . . . 10

V. SHIPPING ILLINOIS BASIN COAL TO EXPORT MARKETS,
PHYSICAL REQUIREMENTS AND CONSTRAINTS,
COMPARATIVE ECONOMICS . . . . . . . . . . . . . . . V-1

1. Fundamentals of U.S. Coal Export
Shipping Systems . . . . . . . . . . . . . . . 2
1.1. The Past . . . . . . . . . . . . . . . . . 2
1.2. Proposals for New Coal Ports . . . . . . . 5
2. Economies-of-Scale in Seaborne Coal
Mrade . . . . . . . . . . . 7
3. Shipping System Requirements for
.y
Illinois/Indiana Coal Exports
Via Burns Waterway Harbor . . . . . . . . . . 9
4. Mine-to-Port Transportation . . . . . . . . . . 12
5. Terminal Transfer . . . . . . . . . . . . . . . 15
6. Waterborne Transport, BWH to St.
Lawrence River Transfer Terminal . . . . . . . 17
7. Intermediate Transfer (from Laker
to Saltie) . . . . . . . . . . . . . . . . . . 22
8. Ocean Transport .. . . . . . . . . . . . . . . . 23
9. Transportation System Costs and
Comparative Analyses . . . . . . . . . . . . . 25
9.1. Transportation System Costs Via BWH . . . 25

TABLE OF CONTENTS
(Continued)

Chapter Page

V. 9.2. Competing Transportation
System Costs . . . . . . . . . . . . . . V-29
9.3. Summation, Transportation
System Costs . . . . . . . . . . . . . . 32

Vi. PHYSICAL FACILITIES REQUIREMENTS AND CAPITAL COSTS. VI-1
1. Design Parameters . . . . . . . . . . . . . . . 2
2. Site Selection . . . . . . . . . . . . . . . . . 2
3. Terminal Composition . . . . . . . . . . . . . . 5
4. Environmental Aspects . . . . . . . . . . . . . 7
5. Operating Equipment and Personnel . . . . . . . 9
6. Capital Improvement Costs . . . . . . . . . . . 11

VII. ENVIRONMENTAL AND ECONOMIC IMPACTS . . . . . . . . . VII-1

1. Environmental Impacts . . . . . . . . . . . . . 2
2. Economic Impacts . . . . . . . . . . . . . . . . 4
2.1. Impacts from Coal Mining and
Preparation . . . . . . . . . . . . . . 5
2.2. Impact from Rail Transportation
and Other Activities Away
from Port . . . . . . . . . . . . . . . 6
2.3. Impacts at the Port . . . . . . . . . . . 8
2.4. Summation, Economic Impacts
and Perspective . . . . . . . . . . . . 9

Viii. CONCLUSIONS . . . . . . . . . . . . . . . . . . . . VIII-1

1. National Port Assessment . . . . . . . . . . . . 2
2. Conclusions and Recommended Action . . . . . . . 4

APPENDICES

A. Importers' Plans and Likely Sources
B. Existing Great Lakes Coal Ports
C. Burns Waterway Harbor Site and Facility
Drawings
D. Abbreviations and Bibliography

LIST OF TABLES

Number Page

III-1. Import Requirements . . . . . . . . . . . . . . . 111-6

2. World Coal Exports and Imports . . . . . . . . . 7

IV-1. Forecasts of United States Exports of
Steam Coal, by Importing Country, for
1985, 1990, and 2000, For Countries
Representing Possible Great Lakes
Trade . . . . . . . . . . . . . . . . . . . . . IV-2

2. Bituminous Coal Reserves by Method of
Mining and Coal Members, and 1980
Production in Illinois Counties with
Greatest Proximity to Burns Waterway
Harbor . . . . . . . . . . . . . . . . . . . . 5&6

3. Bituminous Coal Recoverable Reserves by
Method of Mining, and 1980 Production,
in Indiana Counties with Greatest Prox-
imity to Burns Waterway Harbor . . . . . . . . 7&8

V-1. U.S. Exports of Bituminous Coal by Port
Range . . . . . . . . . . . . . . . . . . . . . V-3

2. Estimate of Operating, Maintenance, and
Replacement Costs Annualized, Two Mil-
lion-Ton Throughput . . . . . . . . . . . . . . . 16
3. Coal Transportation System Costs
Illinois Basin to Rotterdam Via BWH . . . . . . 27

4. Coal Transportation System Costs,
Potentially Competitive Origins and
Port Ranges to.Rotterdam . . . . . . . . . . . 31

VI-1. Estimate of Capital Improvement Cost . . . . . . VI-12

la. Estimate of Environment Equipment
Costs . . . . . . . . . . . . . . . . . . . . . 13

LIST OF TABLES
(Continued)

Number Page

VII-1. Calculation of Rail Transportation
Impact by Component Based on AAR
Index Weights . . . . . . . . . . . . . . . . . VII-6

2. Estimate of Direct, Induced, and
Indirect Annual Economic Impacts,
Millions of 1981 Dollars . . . . . . . . . . . 10

3. Economic Impact Estimates . . . . . . . . . . . . 11

VIII-1. Coal- Terminal Demand-
Capacity Analysis . . . . . . . . . . . . . . . VIII-3

Figure LIST OF FIGURES
Number Page

V-1 Existing and Proposed Coal Piers,
Continental United States . . . . . . . . . . . V-5

V-2 Economies-of-Scale in Seaborne Coal Trade . . . . V-8

v-3 Schematic: Coal Transportation System
Illinois/Indiana Mines to Europe Via
Burns Waterway Harbor . . . . . . . . . . . . . V-11

MAPS

St. Lawrence-Great Lakes Waterway . . . . . . . . 11-5

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I. INTRODUCTION
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EXPORTS OF ILLINOIS BASIN COAL

THE ECONOMIC FEASIBILITY,
ENVIRONMENTAL AND ECONOMIC IMPACTS

OF AN

INTERMODAL COAL TRANSFER TERMINAL AT
PORT OF INDIANA/BURNS WATERWAY HARBOR

I. INTRODUCTION

In accordance with an agreement between the State of Indiana's
State Planning Service Agencyl, Indiana Port Commission (IPC),
and Moshman Associates, Inc. (MAI), a study was undertaken
jointly to assess the economic feasibility of constructing and
operating an intermodal coal transfer facility at Burns Water-
way Harbor (BWH). Additionally, this study was to assess pre-
liminarily the environmental and economic impacts likely to
result from the operations of and related to such a coal trans-
fer operation. The motivating forces for this study are the
well publicized, rapidly growing exports of United States coal,
on the one hand, and the concommitant congestion at U.S. '.ride-
water ports, on the other.

In brief, this study seeks to establish, with a reasonable
level of reliability, answers to the following basic questions:

1. Will export demand for U.S. steam coal from
countries within geographic proximity to the

ITransferred to State Department of Natural Resources.

Great Lakes continue for the foreseeable future?

2. Is there a supply of coal available, for export,
within a reasonable proximity to Burns Waterway
Harbor, and is that coal of suitable quality?

3. Can the suppliers of coalmined within reason-
able proximity to BWH,compete with alternative
U.S. suppliers, and what are the competitive
effects of exporting coal via BWH as distinct
from more easterly located Great Lakes ports
and competing Tidewater ports?

4. What kind of an int.ermodal transfer facility

would have to be constructed at BWH to facili-
tate the exportation of coal; what would be
the capital and operating costs of such an in-

termodal terminal?

5. What will be the economic benefits and the en-

vironmental impacts of coal exports via BWH?

6. In the aggregate, what can be said about the
prospects for, the benefits and disbenefits of
a coal export operation at BWH, and which steps,
if any, should be taken and by whom, to imple-
ment economically desirable actions?

This report contains the findings obtained from the research un-
dertaken during the months of June-September 1981. In addition,

1-2

the first chapter, succeeding the report summary following
this brief introduction, seeks to provide the reader with
a general perspective, some essential background informa-
tion on coal, its supply and demand posture in the world
today and its broadly viewed prospects as one of the criti-
cal twentieth century energy materials.

1-3

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I II. SUMMARY OF FINDINGS AND CONCLUSIONS
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II. SUMMARY OF FINDINGS AND CONCLUSIONS

The objectives for this somewhat resource- and time-constrained
study, as briefly stated in the six questions enumerated in the
preceding introduction, have been achieved.

To place the principal concerns of this study-- the economic fea-
sibility and desirability of a coal export operation via the Port
of Indiana/Burns Waterway Harbor-- in a proper focus, published
data on U.S. coal exports in the past, present, and projectable
future were reviewed and described in some detail. The sharp in-
crease in world coel_l trade projected for the remainder of the
Eighties and beyond will be most profound in steam coal shipments;
the U.S. is looked upon to fill what would otherwise be a large
shortfall in critical energy supplies. The one current problem,
raising doubts on this country's ability to become the prominent,
reliable,.and efficient steam coal supplier, is the apparent
shortfall in export shipping capacity at Tidewater ports. Con-
gestion at these intermodal facilities has resulted in lengthy
delays in loading of colliers, thereby increasing coal shipping
costs to uncompetitive levels. These conditions have given rise
to an unprecedented flurry of new coal terminal projects and ca-
pacity expansion at existing locations, all with emphasis upon
deeper drafts to permit navigation by super-ships in the greater
than 50,000 to 60,000 deadweight ton classes of bulk carriers.

Increased U.S. steam coal export prospects, coupled with the
problems encountered at Tidewater ports, the desire of the most-
ly underutilized Great Lakes maritime facilities, labor pools,
and midwestern coal mining industry interests to seek additional

opportunities have been examined to identify how these interact-
ing phenomena could be positively served.

Eight European countries, so located as to be reasonably, di-
rectly accessible via the St. Lawrence Seaway system, with sub-
stantial growth in steam coal requirements, were identified.
Collectively, these countries' coal requirements to be supplied
from U.S. resources are expected to reach almost 20 million tons
by 1985 and almost 50 million tons by the end of this century.
While most of this demand is for low sulphur, high energy
content coals, Illinois Basin reserves contain huge quantities
of relatively suitable coals which could be shipped either for
direct use in these countries or for blending with coal supplies

from other sources.

Very large coal reserves and some active mining operations are
located within reasonable proximity to BWH; these coals are pro-
duced at competitive prices and some capable producers seem
inclined to apply marginal pricing concepts for long-term con-
tracts. Price advantages of $2 to $4 per ton of prepared coal at
the mine might be obtainable if satisfactory long-term arrange-

ments can be concluded.

To facilitate the conclusion of such arrangements, it is neces-
sary to put in place a reliable and competitive shipping system.
Except for the required intermodal transfer and temporary storage
terminal to be developed at BWH, other necessary logistics system
components are existing and available for long-term arrangements.
Some uncertainty regarding railroad services for BWH exists;
these rail services, presently provided exclusively by Conrail,
are likely to stablize within the foreseeable future. A Laker

11-2

feeder service between BWH and St. Lawrence River ports was
envisaged and found to be more economical than the use of Sea-
way-sized Salties which would proceed directly to foreign

destinations.

Based on an approximate BWH terminal capital cost of about $9.5
million and an annual throughput of two million tons, an inter-
modal transfer cost of $1.30 per net ton, in 1981 dollars, was
projected. Utilizing in the developed cost model a mine-to-port
rail rate of $9 per ton, a feeder vessel rate of $8.50 plus 90@
in Seaway cargo toll, a St. Lawrence River terminal transfer
charge of $3 and an ocean carrier rate of $11 to Rotterdam, a
total transport system cost of $33.70 per net ton was estimated.
That result was found to be lower than transportation cost esti-
mates from relevant export mines to Rotterdam with exception of
the most prominent route from certain Kentucky and other Appala-
chian origins via Hampton Roads, Virginia, terminals. In our
comparisons, including that for the least cost Atlantic Coast
system, no allowance for vessel demurrage costs, at present
known to amount to $10 per ton or more, was included. Hence,
the derived shipping cost estimate via BWH is lower than pres-
ent-day costs via all but one competing shipping route.

The preliminary terminal siting and layout studies undertaken
revealed an opportunity to locate an adequately equipped termin-
al on a 13-acre site, to obtain an annual throughput capacity of
two million tons in a 218-workday shipping season with a possi-
bility of increasing that capacity to as much as three million
annual tons through a somewhat extended winter navigation season
and extended work week. No adverse environmental impacts are
anticipated.

11-3

Significant economic benefits would result from this coal ex-
port operation. Direct and induced economic impacts were esti-
mated to exceed $40.6 million, at 1981 prices, for a two million
annual ton operation; that is as much as 92% of these types of
impacts estimated to have occurred from all cargo-related activi-
ties at BWH in calendar year 1980.

Indirect impacts attributable to coal mining and preparation
were estimated at $162.5 million, just under 70% of such eco-
nomic impacts attributable to the Indiana Port for 1980.

This study has resulted in generally positive conclusions.
Based on presently available information, taking into consider-
ation the Administration's insistence for enactment of legisla-
tion requiring users of Federally maintained deepwater shipping
channels to pay for all or most operating and maintenance expen-
ses, but not counting on an indefinite continuation of costly
congestion at Tidewater ports, the conceptualized transportation
system is capable of being competitive. inevitably, the St.
Lawrence-Great Lakes Waterway has the unavoidable disadvantages
of a 27-foot channel depth limitation and a less than full year
sailing season. While these factors have rendered this vital
transportation link less economical for many types of higher
valued commodities, the Seaway route, as depicted in the map on
the following page, remains a viable bulk cargo shipping system.
Coal exports via BWH, similar to those already occurring from
several Lake Erie ports, should be able to join the recently
initiated successful grain export operation and thereby contri-
bute to the satisfaction of a multi-faceted need, significantly,
the supply of a vital fuel material along with the realization

11-4

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of greatly desired economic opportunities from midwestern coal
mines to an eager maritime industry.

This report's authors, gratified to have had the opportunity
to undertake this study, express the hope for the earliest pos-
sible realization of the opportunities inherent in the develop-
ment of a coal export terminal at the Port of Indiana/Burns
Waterway Harbor.

11-6

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III. COAL IN THE EIGHTIES AND BEYOND
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III. COAL IN THE EIGHTIES AND BEYOND1

Worldwide attention on coal as an attractive energy fuel
reached new dimensions subsequent to the 1973 oil embargo by
certain OPEC members and the incredible increase in world oil

prices during the decade of the seventies. That worldwide
interest in coal has been tempered by two principal factors:
the undesirable environmental effects of coal burning except
for relatively low sulphur content coal, and the increasing
difficulties encountered in moving desirable coal supplies
from mines to overseas points of consumption. Additionally,
the sharp increase in coal's price and the long lead-times
required to obtain new supplies have also placed some damper
on the consumer's enthusiasm for the "brown gold".

III-1. Brief History of U.S. Coal Exports

The United States began exporting coal in the late 1800's. At
first the U.S. shipped very small quantities to Canada and, be-
ginning in 1897 and 1898, to the East Coast of South America.
Shipments to European countries began on a very limited basis

lContents of this chapter have been drawn from various sources
including the author's intimate familiarity with this subject
matter. Among principal sources used are testimony of Carl E.
Bagge, President of the National Coal Association before the
Subcommittee on Water Resources, Committee on Public Works,
U.S. Senate, June 1981, and Coal - Bridge to the Future, Re-
port of the World Coal Study, Ballinger Publishing Company,
Boston, Massachusetts, 1980.

in 1902 and these shipments increased gradually until World
War I when shipments overseas increased from the 8 million
tons per year level to 22 million tons. After the war, exports
dropped as fast as they had increased and, with the exception
of exports to Canada, remained at very low levels until just
after World War II when the United States again emerged as a
major coal exporter. World War II left the coal industries of
Europe in ruin. As the United States was the only country able
to supply the large quantities of coal at the reasonable prices
needed for reconstruction of the European economy, U.S. coal
exports overseas expanded rapidly to 42.5 million tons in 1947.
Additionally, we shipped 26.2 million tons of coal to Canada
in that year for a total export of 68.7 million tons. Unfor-
tunately, Uhat level was not reached again until 1957, when
exports reached an all time high of 76.4 million tons-- a high
that was not again attained until last year when a total of 90
million tons was exported to Canada and to countries overseas.

Traditionally, the United States has exported approximately 9%
to 10% of total domestic production. Until 1979, exports of
coal were primarily metallurgical coal which is used to make
coke to be combined with raw pig iron to make steel. As a re-
sult, the levels of coal exports have fluctuated widely and are
dependent upon worldwide economic conditions and world steel
production levels.

In the 1970's, several factors affecting the demand for U.S.
coals overseas exaggerated the traditional cyclicality of the
market and caused our export levels to go from an almost all
time high of 71 million tons in 1970 to an almost all time low

111-2

of 40 million tons in 1978. These factors included:

e Full scale entry into the world market of sev-
eral competitors including Australia, Canada
and South Africa (all with lower production
cost schedules);

A mid-1970's decline in the demand for metal-
lurgical coal (coupled with new coal supplies,
this meant an oversupply of metallurgical coal
worldwide);

9 Rapidly increasing transportation and produc-
tion costs in the 1970's, due in part to meet-
ing various government regulations, which
caused the United States to become the high-
est cost supplier;

Labor problems primarily in the Appalachian
coal fields, in the mid-70's through 1978;

o The United States'failure to participate in
the new steam coal market which began to de-
velop in the 1974-75 period, due to an ina-
bility to compete in the world steam market
on a cost basis.

During the 1970's the markets for U.S. coal shifted and the
time required to shift marketing strategies and to penetrate
new markets also contributed to the low export levels of 1977

and 1978.

111-2. The Most Recent Past

Forecasts before mid-1979 showed that the United States was not

expected to enter the world steam coal market until 1985 or be-
yond because U.S. coals were not price competitive with those

111-3

coals available in Poland, South Africa and Australia. It was
assumed that supply from these competing countries wouldmore
than meet a steadily increasing world demand for steam coal and
that the U.S. would continue to participate only marginally in
the world market. The year 1980 proved the forecasters wrong
as overseas demand for U.S. steam coals became astounding.

In 1980, the United States exported 90 million tons of coal,
including 17 million tons to Canada and a record 72.8 million
tons to overseas destinations. Shipments overseas included
16 million tons of steam coal (up from zero in 1978 and 2.5
million tons in 1979) and 56.8 million tons of metallurgic al
coal (as opposed to 24.5 million tons in 1978 and 43 million

tons in 1979).

It is important to point out that the 1980 increase in demand
for coal was for both metallurgical coal and for steam coal;
however, the reasons are somewhat different.

Overseas shipments of metallurgical coal increased in 1980
despite an actual decline in world steel production due to
strikes in Australia and the political problems and strikes

in Poland.

Overseas shipments of steam coal increased, especially to Eu-
rope, due to the aforementioned Australian and Polish labor
problems and because:

0 Utilities and industrial plants, especially
in Europe, are converting from oil to coal
as quickly as possible due to the widening

111-4

price differentials between the two fuels
and the continued instability of worldwide
oil supplies.

� European coal production has not kept pace
with demand from the EEC. European produc-
tion costs exceed even delivered costs of
U.S. coals.

0 Marginal supplies of spot coal were unavail-
able from South Africa as the export capacity
of that country was fully committed.

� U.S. coals were more cost competitive and
attractive in Europe due to a sharp increase
in ocean transportation rates from Australia.
More importantly, the United States has a
large amount of coal available at competi-
tive prices as the U.S. coal industry cur-
rently has excess annual production capacity
of over 100 million tons of coal.

111-3. Long Range Outlook for World Coal Use

The increase in coal use worldwide and the resultant increase
in world coal trade are not short-term phenomena. Coal is the
economical fuel choice of the future. It will supply a greater
percentage of world energy requirements in the next decade than
in the last 10 to 15 years. For example, in O.E.C.D. countries,
coal supplied less than 20% of energy used in 1977, but various
forecasts show that coal is expected to supply 22%-24% by 1990,
and could supply as much as 307c by the year 2000. In the Cen-
trally Planned Economies, coal currently supplies some 50% of
energy requirements. Coal is expected to maintain, if not in-
crease, market share in these nations during the next 20 years.

What do these political commitments, coupled with economic
reality, mean for world coal trade?

Two recent reports, Coal -- Bridgeto the Future, produced by
the World Coal Study team, and the draft report of the Inter-
agency Coal Export Task Force, conclude that coal trade could
double by 1990 and triple by the year 2000.

Recently prepared forecasts contain the following import re-
quirements:

TA BLE III-1

IMPORT REQUIREMENTS

(Million Short Tons)

1985 1990

Met Steam lotal Met Steam Total

Europe 39 97-123 136-162 46 146-190 192-236

Pacific Rim 77 43 120 93 90 183

TOTAL 116 140-166 256-282 139 236-280 375-419

The 1985 forecast represents an increase of 115% to 155% for
steam coal but a decline of 20% in world met coal imports.

A detailed world export and import projection is contained in
Table 111-2 on following page.

111-6

TABLE 111-2

WORLD COAL EXPORTS AND IMPORTS

METALLURGICAL
STEAM COAL COAL TOTAL COAL

1977 2000 1977 2000 1977 2000
Country Actual Projected Actual Projected Actual Projected
------------------ (Million Short Tons) ----------------
EXPORTS

United States 1 100 53 75 54 175

Poland 20 35 21 22 41 57

Australia 3 100 37 75 40 175

USSR 25 55 0 0 25 55

West Germany 3 0 12 20 15 20
Republic of
So. Africa 10 67 2 3 12 70

Canada 1 25 10 15 11 40

All Other 2 83 10 0 12 83

TOTALS 65 465 145 210 210 675

IMPORTS

Japan 2 69 65 86 67 155

So. Korea 4 76 4 8 8 84

France 16 62 10 14 26 76

Taiwan 3 60 3 6 6 66

Italy 2 34 12 13 14 47

Netherlands 2 30 3 4 5 34

West Germany 9 32 1 0 10 32

Sweden 0 25 2 3 2 28

Brazil 0 0 3 28 3 28

Mexico 1 0 1 20 2 20

Central Planned
Economies 19 28 19 27 38 55

All Other 7 49 22 1 29 50

TOTALS 63 465 145 210 210 675

Source: World Coal Study, 1980

111-7

From the data in Table III-1, World Coal Exports and Imports,

it can be concluded that:

� International steam coal trade, exports and
imports, are to increase worldwide from 65
million tons in 1977 to 465 million tons by
the year 2000, more than a 7-fold increase;

� Metallurgical coal exports and imports were
projected to reach 210 million tons by the
turn of the century, a 45c/'O' increase from
1977;

� Combined world coal trade would then reach
a total of 675 million annual tons, com-
pared with 210 million in the noted base-
year, a 3.2-fold increase'.

It will be seen on the first data line of Table 111-2, that
the projected participation of the United States at the end
of this century, in this much increased world trade, was es-

timated to consist of 100 million annual tons of steam coal

exports and 75 million tons of metallurgical coal, a total
of 175 million tons, compared with 54 million tons, or 30%
of the projected figure, in 1977.1

'In early September of 1981, the Chairman of the Federal
government's Coal Export Task Force reported that in spite
of the United Mine Worker's strike early in the year, U.S.
coal exports for the first half of 1981 amounted to 14.8
million tons compared with 5.1 million tons exported in
the comparable period of 1980.

In conclusion of this overview, we might note that a relative-
ly large number of private- and public-agency forecasts have
been prepared in the recent past; we have reviewed a number of
these and have noted them in the appended Bibliography. While
inevitably, fairly significant differences in both country and
worldwide projections have been noted, there is a consensus
among the various authors to the effect that significant in-
creases in international coal consumption will take place,
continuing the trend of the last several years.

111-4. Comparative Position of the United States

in the World Coal Market

The United States has comparative advantage over many other
coal producting countries, including those advantages of:

� A coal reserve base large enough to support
substantial increases in domestic coal use
as well as exports without substantially
affecting the price of coal;

� An established, highly competitive coal in-
dustry large enough to assure the continued
availability of coal for long-term, large-
quantity requirements;

� A potential for relative price stability,
depending upon government policies;

0 Long-term national political stability.

111-9

Despite these advantages, the United States has lost market
share over the last decade. Over 39% of all coal in world
trade originated in the United States in 1970. By 1979, U.S.
coal accounted for only 26.2% of world coal trade. During
the same time, sharp gains were made by Australia and South

Africa.

The Interagency Coal Export Task Force (ICE) of the U.S. Gov-

ernment forecasts that the U.S. share of the world steam coal
market could amount to 18% in 1985, 25% in 1990, and 38% in
2000. As seen in Table 111-2 (page 111-7), the World Coal
Study (WOCOL) forecast assigns to the U.S. 26% of total world
coal trade and 21% of steam coal exports.

These market shares could be lower, or higher, depending upon:

� Buying strategies of importing countries;

� Maximization of purchases on a least-cost basis;

� Diversification of supply sources for security,
price a secondary factor;

� Availability and cost of coal from other nations
in relationship to world demand;

� Cost competitiveness of U.S. coals in the Euro-
pean and Far Eastern market;

� Reliability of U.S. supply compared with other
sources; and

III-10

9 Condition of the U.S. logistics systems, with
all relevant components for each of the origin
points to export port routes, importantly but
not limited to congestion at ports and the in-
cidence of ship delays and resulting demurrage
charges.

In respect of the last enumerated problem area, progress has
been slow, largely due to the incredibly long delays in the
Federal permitting process applicable to port and related fa-
cilities. Various, so-called "fast track" legislative propo-
sals now pending before the Congress seek to reduce what can
be delays of up to 20 years to some reasonable time frame.

In sum, we do not subscribe to the optimistic forecasts sug-
gesting that by 1985 the intolerable delays experienced by
colliers at Tidewater ports will be eliminated. We also do
not believe that these problems will continue indefinitely.
In fact, if this were to be the case, U.S. participation in
world coal trade would decline to the pre-1980 levels. Then,
vessels were usually not delayed beyond the free-time allowed
for loading.

A well reasoned stance suggests considerable relief in the
existing intolerable situation will occur within the next
couple of years when several new and expanded terminals, pre-
sently under construction, will become operational. However,
these are not developments which specifically address and
would result in facilities capable of loading the so-called
Very Large Vessels (VLV's), i.e., ships drawing more than 42
feet to 45 feet of water when fully loaded. Put differently,
terminals presently under construction and likely to be

permitted for construction in the foreseeable future, inclu d-
ing expansion of existing coal export facilities, will not
incorporate shipping channels of sufficient depth to permit
navigation of fully loaded VLV's, i.e., vessels with more than
90,000 dead weight tons (dwt). In fact, the Norfolk and West-
ern Railway Company's (N&W) Lamberts Point terminal at Norfolk,
Virginia, possesses that capacity while all other major Tide-
water port facilities are limited to a 42-foot draft.1

The net effects of this critical point are:

Congestion at Tidewater ports is not likely to
"disappear" shortly.

e Deployment of VLV's, with capacities of 100,000
to 150,000 dwt, in the U.S. coal export trade
is not likely to happen soon. Hence, the econo-
mies which would be realized from the deployment
of such vessels, especially in the longest trade
routes, are not likely to be available and pre-
sent an additional competitive element for Great
Lakes export movements in the near future.

e As will be learned from discussion following
later in this report, transfer terminals along
the St. Lawrence River, east of Montreal' do
have an authorized channel depth of 55 feet at
mean low water and are capable of loading ves-
sels in the 140,000 dwt group.

1C&O's Newport News, A.T. Massey's Hampton Roads, and Armco's
Hampton Roads terminals have 45' project depths but are gener-
ally limited to about 42' draft at all times.

111-12

Of course, to be clear, we should re-emphasize that irrespec-
tive of the foregoing discussion of U.S. port facilities and
the prospects for the relief of terminal congestion, there is
every reason to believe in the U.S.'s aggressively increasing
share of a growing world coal market.

The reader is referred to Appendix A which contains descrip-
tions of demand, likely sources, and other relevant information
for the principal import candidate countries of Belgium, Den-
mark, France, Germany, Italy, Netherlands, Spain and Sweden.

111-13

I
I
I
I
I
I
I
I
IV. DEMAND IN COUNTRIES SUSCEPTIBLE TO
I AND COAL AVAILABLE FOR SUPPLY
VIA BURNS WATERWAY HARBOR
I
I
I
I
I
I
I
I
I
I

IV. DEMAND IN COUNTRIES SUSCEPTIBLE TO and COAL

AVAILABLE FOR SUPPLY VIA BURNS WATERWAY HARBOR

Whereas the preceding Chapter III contained, inter alia, a
"global overview", and in Appendix A we have provided demand
data and other relevant information for eight selected coun-
tries, in this Chapter we proceed to zero-in on specific is-
sues which, in the aggregate, will permit the derivation of--
not less than tentative-- answers to this study's focal
questions.

IV-1. Demand Side of Equation

In Table IV-1 (following), we present the ICE estimates for U.S.
coal supply to the fourteen countries most accessible to supply
from the Midwest and which, in total, were projected to have con-
siderable demands for U.S. bituminous coal. The expression of
U.S. demand is meant to include, in a comprehensive sense, eco-
nomic and non-monetary factors such as coal chemistry and polit-
ical factors. These supply-demand data were prepared during
the second half of 1980 (published in January 1981) when Poland
was, in fact, expected to continue exporting substantial quanti-
ties of bituminous coal.1 Since then, this situation has changed

IPoland's exports in 1979 were 15.3 million metric tons (mmt) and
in 1980 were estimated to have totaled 13.7 mmt. The forecast
for 1981 was for 14.4 mmt. Practically nothing but a trickle has
been exported by that country this year.

IV-1

TABLE IV-1

FORECASTS OF UNITED STATES EXPORTS OF STEAM COAL,
BY IMPORTING COUNTRY, FOR 1985, 1990, and 2000

FOR COUNTRIES REPRESENTING POSSIBLE GREAT LAKES TRADE

In Millions of Short Tons

.1985 1990 2000

Country Low Mid High Low Mid High Low Mid High

Austria 0.0 0.7 1.4 0.0 1.0 1.9 - Not Projected -
Belgium/Luxembourg 2.5 3.2 3.8 2.6 3.9 5.2 4.1 5.3 10.0

Denmark 1.3 1.9 2.5 0.8 2.8 4.8 2.2 2.2 2.2

Finland 0.0 3.2 3.2 1.2 1.7 2.4 1.6 3.3 5 5

France 2,3 3@7 5.5 2.1 4.3 7.3 3.8 9.2 16.1

Greece 0.2 0.6 1.0 0.4 1.8 1.4 0.2 1.0 1.8

Ireland 0.2 0.4 o.7 0.4 0.8 1.2 0.4 1.2 2.1
Italy 3.5 4.3 5.2 3.7 5.9 8.3 6.9 8.8 10.8

Netherlands 0.7 1.3 2.0 0.8 1.9 3.0 1.7 4.4 7.5

Norway 0.1 0.2 0.4 0.1 0.3 0.4 0.5 0.9 1.4
Spain 1.7 2.1 2.4 1.8 2.8 3.7 6.1 6.7 7.3

Sweden 0.0 0.0 0.0 0.0 1.7 3.4 0.0 4.0 8.0

United Kingdom 0.0 0.9 2.4 0.0 2.0 2.4 0.0 1.3 3.1
West Germany 1.2 3.2 6.0 o.6 3.1 7.6 4.3 8.8 14.9
- - - - - - I

TOTALS 13.7 25.8 36.5 14.4 33.8 52.9 25.8 57.1 90.7

Note: Columns may not add due to rounding.
Source: Tonnages calculated by Moshman Associates, Inc., using U.S.
Department of Energy, Interim Report of the Interagency Coal
Export Task Force, DOE/FE-0012, Washington, D.C., January
1981, Tables 3-6 and 6-4.

IV-2

drastically and a European supply void of at least 10 million
annual tons prevails; if that situation continues, it would
increase the median projections in Table IV-1 by about 40%
for 1985, and 30% for 1990.

The eight countries of greatest relevance to BWH are discussed
in some detail in Appendix A; these, consisting of Belgium/Lux-
embourg, Denmark, France, Italy, Netherlands ' Spain, Sweden and
West Germany, are expected to receive U.S. coal supplies as sum-
marized below (median projections):

Million Increase
Year Net Tons From 1985

1985 19.7 -

1990 26.4 34.0

2000 49.4 150.8

It follows that if the supply shortfall, caused by the problems
encountered in Poland, were to continue, these substantial fig-
ures could be increased by several million tons right now and
perhaps as much as seven to eight million tons by 1985. With-
out question, a rather substantial market exists in western Eu-
ropean countries. This market could be and in some it is now
reached via a Great Lakes port without causing uneconomic and
detrimental circuity, as compared with such other U.S. gateways
as the Middle Atlantic and Gulf of Mexico ports.

IV-3

We noted in Appendix A that practically all of the Western Euro-
pean countries demand a medium to low sulphur (S) content coal,
i.e., coal which contains no more than 2.0% to 0.57o (by weight)
of sulphur for each pound of 10,000 btu equivalent coal (that
means, if a 1% S is required, a 12,500 btu/Ib coal would be per-
mitted to have 1.257o S).

Coal meeting that specification is not only in relatively
short supply in the "Illinois Basin", but it commands a premium
price. However, as noted in the Appendix A notes, low sulphur
coal is available to these European buyers from the Appalachian
coal suppliers, as well as from Australia and South America.
Because these more expensive coals have lesser sulphur content
than the average maximum permitted, these coals can be used
for blending with a high S content Illinois Basin coal to ob-
tain a suitable, environmentally acceptable blend with an aver-
age sulphur content not in excess of that permitted.1

IV-2. Supply Side of Equation

Of course, Illinois and Indiana are the two States with sub-
stantial coal reserves and production with greatest proximity
to BWH. In Tables IV-2 (pages IV-5 and IV-6) and IV-3 (pages
IV-7 and IV-8), we have provided coal reserves and production
data for each of the two States and their Counties geographi-
cally nearest to BWH, for the most recent years for which re-
liable data, at the county level, are available.

lAll other coal specification requirements,such as ash, vola-
tile matter, hardness and moisture content,are readily met by
the available Illinois Basin coals.

IV-4

Page 1 of 2

TABLE IV-2

BITUMINOUS COAL RESERVES

BY METHOD OF MINING AND COAL MEMBERS, AND 1980 PRODUCTION

IN ILLINOIS COUNTIES WITH GREATEST PROXIMITY

TO BURNS WATERWAY HARBOR

In Millions of Net Tons

1974 RESERVES

LOWER S CONTAINING
ALL COAL MEMBERS COAL MEMBER1
1980
Counties Strippable Total Strippable Total Production

Proximate Counties:
Douglas -0- 719.4 -0- 698.3 2.7
Peoria 642.2 2,946.7 496.2 1,327.0 0.5

Stark 268.0 511.2 268.0 485.4 -0-
Vermilion 146.5 2,420.6 146.5 2,376.0 0.1

Marginal Counties:
Christian -0- 4,914.2 -0- 3,491.4 2.9
Fulton 672.0 2,235.5 134.4 306.6 2.8
Knox 519.8 1,721.4 169.1 216.7 0.3

Total Above Counties 2,248.5 15,469.0 1,214.2 8,901.4 9.3

Total State 1980 Production 62.5

Illinois State Totals:

1974 Reserves 12,223.0 65,665.0

1979 Demonstrated
Reserves n/a 53,128.0

Footnotes on following page.

IV-5

Page 2 of 2

NOTES FOR TABLE IV-2

Note: Columns may not add due to rounding.
lIncludes Danville No. 1, Herrin No. 6, and Summum No. 4 coal
members.

Sources:

Strippable Reserves: Tweworgy, C.G., Bengal, L.E., and Dingwer,
A.G. Reserves and Resources of Surface-Minable Coal in
Illi
L@ols, Illinois State Geological Survey Circular 504,
Table 1. 1978.

Total Reserves: Smith, William H. and Stall, John B.
Coal and Water Resources for Coal Conversion in Illinois.
Illinois State Geological Survey Cooperative Resources
Report No. 4, Table C. 1975.

1980 Production: Illinois Department of Mines and Minerals.
Illinois Coal Production for 1980 All Mines. 1981.

1979 Demonstrated Reserves: U.S. Department of Energy.
Demonstrated Reserve Base of Coal in the United States
on January 1, 1979 (DOE/EIA-0280-79). Washington, DC:
U.S. Government Printing Office. May 1981.

IV-6

Page I of 2

TABLE IV-3

BITUMINOUS COAL RECOVERABLE RESERVES

BY METHOD OF MINING, AND 1980 PRODUCTION,

IN INDIANA COUNTIES WITH GREATEST PROXIMITY

TO BURNS WATERWAY HARBOR

In Millions of Net Tons

-1965 RECOVERABLE RESERVES- 1980
Proximate Counties Strippable Total Production

Clay 323.3 575.7 1.71
Fountain and Warren 32.6 36.2 - 2
Owen 50.8 50.8 - 2
Parke 9.6 39.0 - 2

Vermillion 44.7 340.1 1.5

Vigo 255.6 1,704.9 1.3

Total Above Counties 716.5 2,746.5 4.5

Total State 1980 Production 30.9

Indiana State Totals:

1965 Recoverable Reserves 2,237.3 17,458.0
1979 Demonstrated Reserves 1,682.2 10,621.1

Footnotes on following page.

IV-7

Page 2 of 2

NOTES FOR TABLE IV-3

Note: Columns may not add due to rounding.

'Planned capacity increase over 1980 production for Chinock Mine
in Clay County is 0.6 million net tons by 1981. (Keystone Coal
Industry Manual, p. 700).

2Produced less than 50,000 net tons in 1980.

Sources:

1965 Recoverable Reserves: 1980 Keystone Coal Industry Manual
p. 509.

1979 Demonstrated Reserves: U.S. Department of Energy.
Demonstrated Reserve Base of Coal in the United States on
January 1, 1979 .(DOE/EIA 0280-79), p.44. Washington, DC:
U.S. Government Printing Office. May 1981.

1980 Production: Indiana Coal Association. Tonnage for Mines
Operating in 1980, unpublished data. 1981.

IV-8

It is evident from these data that very considerable reserves
can be tapped if suitable economic conditions would prevail.
In the four nearest Illinois Counties, with an average dis-
tance of about 200 rail-miles, the strippable reserves of
lower S containing coalsi are shown to be 910.7 million tons
while 1980 production in these Counties amounted to a mere

3.3 million tons.

For the six named Indiana Counties, strippable reserves as of
1965 were shown to be 716.5 million tons; present demonstrated
reserves are believed to be about 500 million tons and some 20%
thereof, or somewhere close to 100 million tons of demonstrated
reserves in these Counties, are reported to be of low sulphur
(less than 0.6% sulphur per 10,000 btu/lb) quality. These coals,
however, are in relatively deep seams and their extraction will
require underground mining methods (for which mine development
requires larger capital investment than strip mines require and
development periods of two to three years, as compared with a
year or less for surface and auger mines).

While it is quite evident that production in these Indiana Coun-
ties in 1980 was a mete 4.5 million tons, some expanded produc-
tion was reported for the current year and further capacity
expansion is being planned and should be "in place" shortly.

12% by weight in situ or less, estimated to average at about 1%
sulphur after crushing and washing.

IV-9

IV-3. Competitiveness of Coal at Mines

Having documented the existence of suitable coal reserves
within reasonable proximity of BWH, the question must be
raised: Are these coals competitive at the mine? Before
answering this question, it is imperative to further define

what is meant.

Generally speaking, a coal is understood to be competitive at
the mine if it can be produced at a price which is no greater
than a comparable coal at another location. Thus for example,
if an Illinois medium S coal with an energy content of 11,000
btu/lb is available for, say, $25 per ton at a Douglas County
mine, and a similar quality coal is available at a West Ken-
tucky mine for $22 per ton, the Douglas County coal is not
competitive at the mine. This, however, is not to say that
the more expensive Illinois coal would not be competitive, in
fact, it would enjoy a considerable price advantage in the
Terre 1111aute, Indiana market. Conversely, Vigo County (the
County whose County seat is Terre Haute) is likely to have an
advantage over Douglas County, Illinois coal, assuming the In-
diana coal is of approximately similar quality and price at

the mine.

Our exploratory contacts with specific producers in the named
Counties in both States confirm the competitiveness of these
coals at the mine. If anything, the majority of present and
prospective producers in these Counties who generously fur-
nished information about their operations, present or pros-
pective, indicated their will and ability to produce coals at
competitive or advantageous prices. To be clear, we

IV-10

are persuaded that given appropriate long-term orders (15
years or more), and an acceptable logistics system (from the
consignees' viewpoint), suitable coals in annual quantities
of two million tons or more could be procured f.o.b. mine
loaded in railcars, at prices of $2 to $4 per ton below com-'
peting coal now or prospectively available in other locations
with existing or future locational advantages (proximity to
assured domestic markets).

In sum, the Illinois and Indiana producers referred to seem
willing to employ enlightened marginal pricing concepts.
This is an important, possibly critical point, if economic
realities, specifically transportation and intermediate
handling costs, should be such that some price advantage, at
the mine, is needed to obtain competitive landed costs for
the Illinois/Indiana coals proposed to be shipped to European
markets via BWH.

IV-11

I
I
I
I
i
I
I
I
V. SHIPPING ILLINOIS BASIN COAL TO EXPORT MARKETS,
i PHYSICAL REQUIREMENTS AND CONSTRAINTS,
COMPARATIVE ECONOMICS
I
I
I
I
I
I
I
I
I
I

V. SHIPPING ILLINOIS BASIN COAL TO EXPORT MARKETS, PHYSICAL
REQUIREMENTS AND CONSTRAINTS, COMPARATIVE ECONOMICS

Basic to the resolution whether Illinois Basin coal could reason-

ably compete in European markets, beyond the questions addressed
in preceding Chapters of this report, is a rather complex set of
factors, circumstances, and to some extent a number of uncertain
developments. All these have some common denominator: the di-
rect and embedded cost for achieving place utility, i.e., any
and all costs inherent in moving an acceptable, but not necessar-
ily optimum quality coal from point(s) of production to point(s)

of use.

Direct costs include all rates and charges payable for the phys-
ical services for movement of coal provided by various entities
or vendors; these services encompass intermodal transportation
and intramodal transfer including temporary storage. Embedded
costs are, for the most part, the cost of money invested in the
coal produced and shipped from the time such coal was produced
to the time payment therefor is obtained. Because customarily
such payment is not forthcoming until shipper is able to present
a clean bill of lading, issued by the vessel owner or agent sub-
sequent to completion of loading on the vessel making the final
leg'of the multi-faceted trip, it is possible for these "inven-
tory carrying costs" to be higher for coal shipped via BWH than
for a competing product shipped via other ports.

Our calculations for embedded cost differences show them to be

too small to have any effect on marketability or economic feasi-
bility. At a relatively high cost of money of 187o p.a., the

V-1

incremental inventory carrying cost for the five to ten days
transit time in excess over competing routes would be in the
range of 100 to 200 per ton. As noted, we do not believe that
such difference would affect the competitive posture and we
will henceforth ignore it.

We will focus in this chapter not only on the logistics system
requirements for shipment of Illinois/Indiana (IL/IN) coalvia
BWH but also, to the extent needed for a full understanding, on
the existing and probable future shipping systems via East and
Gulf Coasts ports.

V-1. Fundamentals of U.S. Coal Export Shipping Systems

V-1.1. The Past

Most U.S. coal is exported through just a few large terminals
at major East Coast, Gulf Coast and Great Lakes ports.

The increasing foreign demand for U.S. steam coal has exerted
a numb.er of physical, operational, and administrative burdens
on existing port-handling capacity.

The facilities designed for metallurgical coal, which requires
extensive sorting and blending of coal types, are not as suit-
able for steam coal. The terminals at Baltimore and Hampton
Roads have been operating at near 100% capacity, allowing no
margin for errors or mechanical,failure.

Historically, the ports of Hampton Roads, Baltimore, Philadel-
phia, Mobile, and New Orleans have handled almost all of U.S.

V-2

coal exports destined for overseas markets. In addition, a num-
ber of ports on the Great Lakes have shipped sizable quantities
of coal to Canada. Most notable are the facilities at Ashtabu-
la, Conneaut, Sandusky, and Toledo, Ohio. During 1980, two major
terminals in Hampton Roads handled 51.8 mmt of export coal, one
major terminal in Baltimore handled 12.1 mmt, one in New Orleans
3.8 mmt, and one in Mobile 2.3 mmt. Excluding shipments to Can-
ada, these four ports handled 98% of all export coal as shown in
Table V-1. They each operated at full capacity and continued
to search for various ways to squeeze out more throughput. The
massive 1980 demand for U.S. coal was caused by some unusual fac-
tors in other supplier countries-- most notably the labor dis-
putes in Poland, which took that country out of the present ex-
port business, and strikes in Australia, which disrupted their
production.

Table V-1

U.S. Exports of Bituminous Coal by Port Range

In Thousands of Net Tons

1976 1977 1978 1979 1980

Hampton Roads 32,000 24,244 15,396 33,753 51,773
Baltimore 6,327 7,055 5,887 9,141 12,124
Philadelphia 447 187 90 55 1,522
New Orleans 1,297 1,432 1,388 1,410 3,826
Mobile 2,755 3,611 1,848 1,284 2,447
Great Lakes 16,580 17,158 15,214 19,140 18,189

TOTAL @9,406 53,687 39,833 64,783 89,881

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

V-3

Long lines of ships, some waiting for more than two months, are
now outside of Baltimore and Hampton Roads harbors. These ships
incur demurrage costs of $15,000 to $20,000/day. This situation
will probably not continue, but major new terminal capacity--
even on an emergency basis-- is still many months away.

The five major U.S. (East and Gulf) ports are each in the pro-
cess of expanding existing terminals and constructing new piers,
open storage areas, and handling equipment. The proximity to
the Appalachian mines, along with the existing rail and equip-
ment infrastructure, has supported the investment at these ter-
minals. The substantial activity at the Chesapeake Bay termin-
als will probably ensure that they retain an important future
role in the coal export trade. Gulf Coast exporting facilities
will also be important in the coal export trade, particularly
since both barge and rail networks can be used to deliver coal to
these ports and can assure inland transport-price competition.

Recent private investments within the coal mining and coal trans-
portation industries have followed from the surge in foreign buy-
ing demand. Substantial levels of investments are needed to con-
struct coal-handling terminals, stacker/reclaimer systems, rail-
yard trackage, and support equipment. Few private firms had
sought to construct new export facilities during previous decades.
Following World War II, demand for U.S. mined coal was fairly
stable and the major railroad carriers had met the need for ex-
por.t capacities. Those railroads were the Chessie System, the
Norfolk and Western, and Consolidated Rail Corporation (Conrail).

V-4

V-1.2. Proposals for New Coal Ports

Ports on the Great Lakes, Atlantic, Gulf, and West Coast are in
the process of planning new facilities. In general, proposals
for facilities along the Atlantic and Gulf Coasts appear to be
advancing more rapidly than those on the Great Lakes or West Coast.

Despite the limited shipping season and 27-foot maximum depth
on the Great Lakes, proposals are receiving considerable atten-
tion and several projects are moving ahead, most notably Erie,
Pennsylvania, Buffalo, New York, and Conneaut, Ohio. Indeed, a
major Canadian steamship line will begin to export coal from
U.S. ports on the Great Lakes in self-unloaders for transship-
ment at deeper draft ports on the St. Lawrence River. Figure
V-1 illustrates the location of various proposals for coal de-
velopment around the country and shows major existing terminals.

FIGURE V-1

EXISTING AND PROPOSED COAL PIERS, CONTINENTAL UNITED STATES

BellinghA Canada

Astoria Kaiama. Canada

Portland

reat Lake Port

New York
Philadelphia
wSa-cramento Ballimore
Stockton ampton Roads

.Morehead City
Wilmington
Los Angeles
Charleston
Long Beach avannah
Mobile Brunswick
Mexico'-.7: New rleans Jacksonville
Houston *Galveston
Key
Existing terminals
Proposed terminals

SOURCE: office of Tecnnoiogy Asses3mer".

V-5

Brief descriptions of the existing seven Great Lakes ports capa-
ble of transferring coal for domestic or export shipment in an
orderly and reasonably economical manner are contained in Appen-
dix B. All Great Lakes, East and West Coast coal ports rely
upon the railroads serving them to transport coal from the mines.
Only the Gulf ports also-receive coal by river barges.

In sum, the Nation's export coal shipping systems are intermodal,
and utilize all land- and waterborne modes; relatively ineffi-
cient trucks are fulfilling an increasing need for transportation
of domestic and export coals from mines to intermodal transfer
terminals, for subsequent shipment by rail or by river barges.

As noted before, considerable congestion and costs of delay are
the rule at all major Tidewater coal ports. Hence, almost any
port with excess capacity is able to participate in the export
coal trade, virtually without regard for their geographic prox-
imity and the transportation method employed to transport coal
from mine to port.

Still, there is one characteristic which is always of importance,
even when the port in question is readily available and the cost
of movement of coal to it and the facility's transfer charges
are reasonably competitive. That cardinal characteristic is the
draft available at that port. Obviously, the available draft at
the loading port, and from it to the open waters of the ocean,
constrain the size of ship which can be deployed. Size of ship
is a critical economic factor, in particular for the Great Lakes
maritime industry, for it is limited to the established 27-foot
project depth, contras-ted with the 42-foot and 45-foot depths at
Tidewater ports and which are no longer accepted as sufficient.

V-6

This and other economic factors shall be discussed in the sec-

tion following.

V-2. Economies-of-Scale in Seaborne Coal Trade

The movement to larger (and faster) seagoing vessels is nei-
ther novel nor does that phenomenon differ from the principles

inherent in economies-of-scale for other economic activities

in general, and in transportation in particular. While liquid
bulk carriers employed in world oil trade were and continue to
be the pace-setters, vessels designed for the long distance
carriage of bulk solids, e.g., grain, ores, coal, etc., have
been increased in size such that in 1979 more than one-quarter
of the world coal trade was transported in ships with tonnages
of 100,000 and over. About 32% of shipments in vessels of this
size range originated in the U.S., and more than one-half of
all such sized shipments originated in South Africa with the re-
mainder originating at Australian ports.

Importantly, from this study's perspective, only about one-third
of the coal trade transported in vessels of 60,000 tons capa-
city and more were received at European ports. Numerous Eu-
ropean ports are not capable of accommodating these large ships
so that a market for vessels in the 25,000-ton to 60,000- ton
range will continue to exist indefinitely.

That is not to say that an increasingly larger share of the to-
tal world trade will seek and benefit from the ocean freight
cost reductions achievable with the larger (and faster) vessels.
A benchmark measure of the concrete meaning, the savings poten-
tial discussed,is visible in Figure V-2 on following page.

V-7

FIGURE V-2

ECONOMIES-OF-SCALE IN SEABORNE COAL TRADE

1.0

.8 Constrained
case

.9 Unconstrained
0
= '5 case
CD
>

-6.

0 L
60 80 100 120 140 150
Deadweight (thousands of tons)

SOURCES: Ran Hettena. in Critical issues in Coal Transportation systems,
1979.

H. Mellanby Lee, The Long Run Economics ot the Ocean
Transport of Coal, Oecember 1978.

It is seen that under optimistic assumptions (unconstrained
case) the relative freight rate for a 150,000 dwt vessel would
be about half that for a 60,000 dwt ship. A Hampton Roads-
Rotterdam voyage in a 60,000 dwt vessel was estimated to re-
quire a rate of about $13.50 per ton and about 75% thereof,
@Cnt -ned
r
'as'

n,
tr@ald

V-8

or $10.15 for the same in a 110,000 dwt vessel.1

These comments, if nothing else, raise serious questions on the
economic feasibility of a system which, regardless of the ports
it aims to serve, will have one physical constraint, the St.
Lawrence Seaway locks and channels, restricting waterborne navi-
igation to a 27-foot draft, and thereby, the deployment of ves-
sels in the 25,000-26,000 dwt class.

V-3. Shipping System Requirements for Illinois/Indiana
Coal Exports Via Burns Waterway Harbor

It is correct to think of a system for Illinois or Indiana coals
for shipment to a foreign port via a Great Lakes port as a sys-
tem which parallels an East or West Coast system. Such a system
would consist of a mine-to-port movement by railroad, an inter-
modal transfer, possibly including temporary coal storage, at
that port, and a waterborne shipment to destination.

However, our studies (and those of others, including the recent
U.S. Maritime Administration report2) have revealed that a sys-
tem incorporating another terminal and a large ocean-going ves-
sel results in lower shipping costs. In fact, what these studies

have revealed is that utilization of vessel economies-of-scale

for the longest leg of the journey to Europe, say Rotterdam,

lThese data from ICF, Inc., October 1980

2Great Lakes Ports Coal Handling Capacity and Export Coal Poten-
tial, U.S. Department of Commerce, Maritime Administration, Great
Lakes Region, December 1980, Revised May 1981.

V-9

more than compensates for the cost of an additional intermediate
handling, i.e., the unloading of a Laker, assembly of tonnage
for a large Saltie, and loading of the latter at the intermedi-

ate terminal west of Montreal.

The two systems, with and without an intermediate terminal, for
example, the deepwater St. Lawrence River transfer terminals at
Quebec or Sept Iles, are sketched in Figure V-3. It will be
noted that in addition to the described two alternatives beyond
Rotterdam, a barge or small vessel movement is shown for the
transportation of coal to such final waterside destinations as
Amager and Asneas in Denmark. The point here to remember is
that not all destination ports are able to service the 50,000
dwt to 120,000 dwt vessels which are ideally used for the Atlan-
tic Ocean crossing.

Inherent in the depicted system is yet another alternative, name-
ly, the deployment of regular or self-unloader Lakers. A regular
Laker is one which is not equipped with the mechanical apparatus
for "self-unloading" of the ship's cargo. While practically all
recent construction of Lakers has been in the self-unloader class,
there is a shortage of such vessels suitable for transit of the
entire Seaway. This is distinct from the giant self-unloader ore
carriers which are more than 1,000 feet in overall length (OAL)
and are unsuitable for the coal export trade. Notably, the Mon-
treal-Lake Erie section of the Seaway is limited to ships not ex-
ceeding 730 feet OAL.

Accordingly, it will be seen that we have based our calculations
on the deployment of regular Lakers, Canadian-flag, and the be-
fore noted intermediate terminal scheme which was found to re-
sult in lower delivered costs than applies to the use of Seaway

V-10

FIGURE V-3

SCHEMATIC: COAL TRANSPORTATION SYSTEM

ILLINOIS/INDIANA MINES TO EUROPE VIA BURNS WATERWAY HARBOR

Coal
Origin Mine

Over-
Land Rai.!road
v

Inter- BURNS
Modal WATERWAY
ran HARBOR

Great Lakes
and La er
St. Lawrence 25,000 dwt
Seaway

St Lawrence Quebec or St. Lawrence
Riv. Transf. Seaway-sized
Terminals Sept Iles Ocean-going
Vessel

Saltie
Atlantic
Ocean +50,000 to
120,000 dwt

DestiLiation Rutterdam,
or Transfer
Port etc.

Atlantic Barge or
Ocean or Dmall
Eur. Rv Saltie
k

Final Festinatio lAmager, Denmark,
Waterside Porti Asneas, Denmark,
Destinati@j
Oxelloesund, Sweden,
etc.
V-11

class Salties, topped off at Montreal or east thereof to maxi-
mum load capacity.

V-4. Mine-to-Port Transportation

Several railroads serve the Illinois and Indiana Counties with

substantial coal resources nearest to BWH. Of these, only Con-
rail serves BWH directly. Illinois Central Gulf Railroad (ICG)
is one of the carriers originating substantial quantities of
suitable coal in the Springfield group; ICG has good connec-

tions with Conrail.

Of course, due to the absence of export coal movements via BWH,
none of the relevant railroads have published rates. Some so-
called "paper rates" from points in Indiana.do presently exist.
These, however, do not apply to 100-car unit-trains, the type
of trains which would be used to obtain least cost transporta-
tion from mines to the ports.

Projecting rail rates for future high volume coal movements has
never been more complex and fraught with uncertainty. The Stag-
gers Rail Act of 1980 has created a whole new set of circumstan-
ces which only now are becoming sufficiently understood to con-
clude that, indeed, projections for rail rates and services are,
in this case, subject to considerable imprecision. To be clear,
it is one thing to develop projections for well-established
rates and services, it is another thing to do the same on a
purely synthetic basis. Fundamentally, the difference is that
a carrier presently performing a "custom-tailored" unit-train
operation knows that traffic's detailed characteristics and,

V-12

therefore, the carrier is able to measure costs of service rea-
sonably accurately and, in turn, price that service so that it,
in fact, produces net revenue at the least price.

We are not saying that all railroads would, indeed, price their
service in that manner unless market conditions so dictated.

Absent any specific experience, however, no carrier is likely
to suggest possible rate levels which do not embody a relative-
ly large cushion for error. In Conrail's precarious condition,
it is all the more difficult to project the rates which might
be offered as, if, and when export coal shipments via BWH be-
come a reality, when annual minimum tonnage contracts can be
entered into, and the critical transportation characteristics--
such as origin loading times, routing, source of car supply,
and more-- can be finitely defined.

Nevertheless, it would seem appropriate to suggest that Conrail
or any other railroad assuming the former's common carrier ob-
ligation would be interested in furnishing a new service-- the
large volume coal transportation from its origin points or that
of its connecting carrier(s) to BWH-- at rates which contribute
to the railroad's net revenue, and which are not so high as to
negate the feasibility of the coal movement. Our studies,
though not as detailed and painstaking as one would have to
perform to develop an optimum price from shippers' and carriers'
viewpoints, suggest the feasibility of lawful and desirable
rates ranging from a low of about $8 per net ton to approximate-
ly $14 for joint-line movements from the Springfield-DuQuoin,
Illinois, group. The low end of this rate spectrum would apply
to a single-line move from Conrail's Sullivan and Brazille

V-13

Districts which encompass mines near Terre Haute and as far
away as Harrisburg, Illinois.1

These rates would be for current levels and would again be sub-
ject to increases as of October 1, 1981. However, the same
applies to other rail rates also. In fact, with all rail rates
taking essentially the same percentage increase and rates to
Tidewater ports being as much as $18.75 (Thaker-Phelps, Ken-
tucky to Savannah, Georgia), the periodic rate increases would
have the effect of improving the BWH competitive posture.

To be conservative yet realistic in terms of the likely origin
points for coal exports via BWH, we shall employ a rail rate
of $9 per net ton for this study's purposes.

lMovement from this District would probably require rehabilita-
tion of the presently embargoed Vincennes-Marshall line of Con-
rail or, alternatively, routing via L&N's Lorain-Evansville line.

V-14

V-5. Terminal Transfer

A suitable intermodal transfer terminal, incorporating some tem-
porary storage capability would have to be designed, constructed
and operated at BWH to permit the economical receipt of coal
from railcars and loading thereof in Lake vessels. Chapter VI
contains a detailed description of the preliminarily conceptual-
ized facilities, their location within the Port, the current en-
gineers' capital expenditure estimate and related environmental
aspects.

Based on the detailed research undertaken by the Port management
and engineering staffs, as described in Chapter VI, Table V-2,
following, was developed. This Table reflects current dollar
estimates for operating, maintenance, and replacement costs for
a two million annual tons operation.

It will be noted that in addition to an estimated total $635,000
for labor, utilities, maintenance, and replacements, we have
shown in Line 12 the sum of $1.185 million for depreciation and
cost of capital at a 12% rate. Depreciation is based on the
"straight line" method for 30 years; the cost of money rate is
based on the expected interest rate for a 30-year sinking fund
"tax exempt" bond issued by IPC and debt service guaranteed by
a high rated corporation.

Also shown in Table V-2, on Lines 13 and 14, are the wharfage,
dockage, and harbor charges payable by the terminal operator
to IPC and an estimate for insurance, contingencies and reserves,
respectively. It is seen that an annual grand total of $2.6 mil-
lion or $1.30 per ton was estimated. This conservatively

V-15

TABLE V-2
ESTIMATE OF OPERATING, MAINTENANCE, AND REPLACEMENT' COSTS
ANNUALIZED, TWO MILLION-TON THROUGHPUT

In 1981 Dollars

L A B 0 R

Annual
Cost
Hrly or Incl.
Annual Empl. Fuel,
Facility Component Category Rate Beneft. Util. Maint. Replace. Notes Comments
Management, Administrative Superintendent 43,750 43,750 15,000 Office utilities, stationery, telephone, etc.
Clerical 17,500 17,500 -
2. Rail, Locomotive, Tracks Engineer/Brakemen 18/hr 57,600 12,000 18,000 - Annual operation: 1,600 hrs.
3. Bulldozer, Loader Operator 18/hr 46,080 5,120 32,000 30,000 Useful life 20,000 bra; ann. use 1,280 bra ea.
4. Rail Shed Operator 18/hr 28,800 2,560 1,500 - Annual operation: 1,600 brs.
5. Conveyors Operator 18/hr 28,800 53,000 10,000 28,000 1 Belt replacement after 15 yrs;
Annual operation: 1,600 hrs.
6. Shiploader Operator 18/hr 14,400 10,400 5,000 1,250 800 hrs/yr.
7. Dock Longshoremen 18/hr 57,600 - 5,000 - 800 hrs/yr, 4 men.
8. Maintenance, General Nechanics/Electr. 18/hr 74,880 2,500 - Tools and miscellaneous materials.

9. Subtotals 369,410 98,080 74,000 59,250
10. Contingencies 10,590 11,920 6,000 5,750

It. TOTALS 380,000 110,000 80,000 65,000

Ila. Totals, above four columns combined 635,000
12. Depreciation 1,185,000 30-year life, 12% cost of money.
13. Wharfage, Dockage, Harbor Charge 540,000 2ft, 5c, and 2c per ton, respectively.
14. Insurances, other Contingencies and Reserves 240,000

15. GRAND TOTAL 2,600,000

lReplacement costs provide for replacement of items expected to require same at a date earlier titan the facilities assumed
useful life of 30 years.
NOTE: Considering the substantial revenue accruing to IPC, no rent was included in operating expense; normally, rent for
the land to be encumbered by the proposed terminal would amount to about $60,000 per year, a little more than 10% of
the Line 13 Items.

developed estimate results in a rather reasonably priced trans-
fer facility, considering that it would have to be built at
present-day costs, as distinct from terminals whichwere built
years ago when construction costs were substan tially less. Fur-
ther, as was noted before, with a modest extension of the St.
Lawrence Seaway sailing season and the addition of only one-
half shift each operating day, annual throughput could be in-
creased to about three million tons. At that annual tonnage,
terminal transfer costs would decline'by at least 20@ per ton
and probably by as much as 30@ per ton.

While we shall employ our conservative $1.30 per ton estimate
in our feasibility evaluation, it should be remembered that a
lesser charge would ensue from any increased utilization over
two million tons of this costly facility.

V-6. Waterborne Transport,

BWH to St. Lawrence River Transfer Terminal

In the preceding Section V-3, we discussed, and in Figure V-3
we portrayed, the two types of Lakers and Salties which can be
deployed for waterborne transportation, either to a deep-water
transfer point east of Montreal or to a destination port on the
other side of the Atlantic. While we shall deal with the ocean
voyage in Section V-8, suffice it to repeat here, as stated in
Section V-3 on page V-9, that the use of Salties from BWH di-
rectly to destination does not seem economically desirable.

Even though use of Salties would avoid a costly transfer at a
deep-water port east of Montreal, that is not the most economi-
cal system. The 4,241 nautical miles (nm) long journey from

V-17

BWH to Rotterdam in a vessel with an approximate maximum capa-
city of 22,000 to 25,000 net tons is not nearly as economical
as the use of a Laker with a maximum load capacity of 28,500
tons for the 1,536 nm voyage to Sept Iles or 1,249 nm to Quebec
and a 100,000 grt vessel beyond. The Maritime Administration
studyl showed a difference of $7.05 per net ton for the Con-
neaut, Ohio, to western Europe move. For the same vessel
schemes originating at BWH, the difference in favor of the Lake.
feeder service compared with the use of Salties is bound to be
even greater, possibly as much as $8 per net ton.

The two types of Lakers, also already noted, are the regular bulk

carrier and the self-unloader. The latter is the more desirable

vessel because it is independent of shore installations for car-
go unloading. Hence, a self-unloader can unload its cargo any-
where, so long as it can safely tie-up at that location. Such
locations can and sometimes do include a midstream transfer from

the self-unloader Laker to an ocean-going vessel.

However, for various reasons, at present the economics are in fa-
vor of the regular bulk carrier. The principal reason for this
situation is the shortage of self-unloaders suitable for transit
of the entire Seaway stacked against a high demand for these ves-
sels for the transportation, principally of iron ore from Sept
Iles to Lake Erie (and to a lesser extent, Lake Michigan) ports
and the return haul of bulk grains. The high level of demand
for self-unloaders moves their owners to prefer the shorter voy-
ages to Lake Ontario and Lake Erie ports. Put differently,

lGreat Lakes Ports Coal Handling Capacity and Export Coal Poten-
tial, U.S. Department of Commerce, Maritime Administration, Great
Lakes Region.

V-18

self-unloader rates for an 828-nm Sept Iles to Conneaut run may
be about $11 per net ton while the additional 136 nm to Toledo
could increase the rate by about $1 per net ton and for the ad-
ditional 708 nm (from Conneaut) to BWH, the difference might be
as much as $3 per net ton.

Conversely, for regular Lakers, the rate differences for the ad-
ditional mileage is not that great and the absolute difference
between these vessels' rates plus the cost of transfer at St.
Lawrence River ports, including the unloading of regular bulk
Lakers is not defeating the advantage regular bulk Lakers enjoy
over self-unloaders.

These foregoing statements must be placed in context with two
additional factors. One is inherent in the currently prevailing

conditions which can be characterized as somewhat slack demand

for westbound sailings and a strong demand for eastboung move-
ments of grain, some coke, and coal. The other is the differing
attitudes and ratemaking policies of the various vessel operators.
Unless one were to enter into a charter party now it is infea-
sible to say with a high degree of certainty what might be the
lowest available rate. Our contacts with several managements
have revealed substantial differences in quoted rates for like
vessels and services.

For purposes of our analysis, we have chosen use of the rate quot-
ed by an executive for one of the largest Canadian Lakes vessel
operators. This rate, for the transportation of coal from BWH to
St. Lawrence River ports, is $8.50 per net ton exclusive of the
present or actual Seaway toll on the cargo. It is,a requirement
of this operator to load a full vessel, up to 28,500 net tons, in

V-19

12 hours from time of vessel arrival, to unload within 36 hours
from arrival at the deep-water terminal, and to surcharge if the
average fuel cost at Montreal exceeds $34.82 per bbl.1 Further,
these conditions apply to a consecutive voyage charter for the
entire sailing season.

Other conditions quoted include demurrage of $625 per hour and
dispatch of $312.50 per hour. It is seen that a 24-hour delay
of vessel at BWH or the receiving terminal would cost a whop-
ping $15,000, equal to $0.53 per net ton for a maximum tonnage
load. Also, a shipper or consignee desirous of securing avail-
ability of vessel tonnage for more than one year would have
to accept a multi-year charter contract, with other rate esca-
lators in such a fixture. Finally, we should note the possi-
bility to contract with one operator for the St. Lawrence Sea-
way and Atlantic Ocean transportation services, including the

inevitable intermediate transfer if the more economical Laker-
Saltie combination is used. At this time, one large Canadian
ship operator has offered a single rate contract for coal ex-
ported to the Continent from Conneaut and Ashtabula. This
"through service" was quoted at $23 per net ton which is about
the same as the sum of the components for Lake feeder service,
intermediate terminal services, and the St. Lawrence River to
Northern Europe rate. The considerable advantage of this
11 through service" rate is that it relieves the shipper or con-
signee of a number of potentially costly risks and assures the

lAn interesting sidelight is this operator's determination of
fuel's share of the total rate. Fuel was pegged at 12% of the
total; that means a $1 increase in the price per barrel causes
a 12(,, increase in the quoted freight rate.

V-20

availability of intermediate terminal capacity and free storage
in the event the ocean vessel is delayed.

Though this Canadian innovator has not evidenced any interest
at this time to provide a similarly rated "through service"
from BWH, we see no reason such could not be developed with
this or another vessel operator.

Regrettably, we must add, the U.S.-flag Laker industry has shown
no interest in proposing competitive rate 's. U.S.-flag Lakers
have limited their services to domestic sailings, thus enjoying
the protection of the Jones Act (which limits waterborne commerce
between U.S. ports to U.S.-flag vessels) and precluding competi-
tion from foreign-flag shipping.

As noted above, all rates quoted exclude the St. Lawrence Seaway
cargo toll. In line with existing practice, the shipper or char-
terer will be required to pay actual cargo tolls.

The present cargo toll for a full transit (all Seaway sections)
for bulk cargoes including coal is $0.99 per metric ton or about
90@ per net ton. This rate is presently proposed to increase to
$1.10 in 1982 and $1.16 in 1983 ($1 and $1.05, respectively, per
net ton). We'should emphasize that the present rate for bulk
grain is 72@ per metric ton, about 65.5@ per net ton, and is pro-
posed to be increased to 79@ and 83@ per mt (72@ and 75.50 per
nt). Great Lakes maritime interests have long opposed the high-
er rate for coal which, we concur, is devo id of economic merit.
Assuming the proposed rates were to become effective as indicated,
the rate difference in 1983 would be 29.50 per nt of coal or
almost 40% of the grain toll.

V-21

V-7. Intermediate Transfer (From Laker to Saltie)

In the preceding Section and in V-3, we discussed the economic
advantage of the Laker-Saltie shipping system as compared with
the St. Lawrence Seaway suitable ocean-going vessel. Of course,
the latter would preclude the need for an intermediate transfer
at a deep-water port, or a midstream transfer in deep water.

Midstream transfers are impractical except on those unpredict-
able occasions when a Laker happens to arrive at the intermedi-
ate transfer point and the Saltie coincidentally is also there.
If the Laker is not of the self-unloading type, floating buck-

et cranes would be needed to transfer the coal from Laker to

Saltie.

The intermediate transfer component of the multi-faceted ship-
ping system depicted in Figure V-3 (there noted as St. Lawrence
River Transfer Terminals), can be an inhibiting problem. At
present, there is only a small number of reasonably suitably-
equipped terminals east of Montreal. Several of the existing
terminals, Contrecoeur and Montreal, for example, have virtual-
ly no storage capacity; the best equipped terminals, Quebec and
Sept Iles, may soon become congested or restricted to use by
one vessel operator.

It should be recognized that with the largest Lakers capable of
lifting no more than about 28,500 net tons and the most econom-
ical Salties requiring loads of 60,000 tons and more, it is im-
perative to have terminal facilities available at which suit-
able quantities of coal for ocean transit can be assembled.
Further, if regular, as distinct from self-unloader, Lakers are

V-22

to be utilized., it is essential to employ a terminal equipped
to unload Lakers at a rate of about 800 to 1,000 net tons per
hour and having a 24-hour daily operating practice. Finally,
this facility must be capable of loading Salties at very rapid
rates, generally not less than 4,500 to 5,000 net tons per hour.

The two, well-equipped, above named terminals, Quebec and Sept
Iles, are suitable to provide the necessary intermediate trans-
fer services. Conceivably, soon neither of these will be open
and available to serve these needs for coal being exported via
BWH. One would have to reason, however, that as coal exports
via U.S. Great Lakes ports become a matter of long-term re-
ality-- as we envisage they will-- the Canadian maritime in-
dustry will seize their opportunities and establish additional
suitably equipped terminal facilities, generally in the same
manner as is presently the practice along the U.S. middle and
southern Atlantic, Gulf, and West Coasts.

Presently quoted rates for the needed intermediate terminal serv-
ices, from unload to reload, are in the $3 per net ton area and
we shall employ that figure in our competitive analysis.

V-8. Ocean Transport

In several preceding Sections, we have noted various aspects of
the ocean transport component of the transportation system de-
picted in Figure V-3. Our emphasis has been on the economies-
of-scale as inherent in large vessels. We displayed Figure V-2
on page V-8 showing relative freight rates for vessels of
different size, specifically the 60,000 dwt to 150,000 dwt

V-23

range. We also identified the inevitable economic disadvantage
afflicting St. Lawrence Seaway commerce in general and its bulk
commodities trade in particular because of the Seaway's draft
limitation of 27 feet. Nevertheless, millions of tons of bulk
commodities continue to transit the Seaway in both directions.
The coal shipping system envisaged by us will avail itself of

the economies-of-scale available for the St. Lawrence River

to Continental ports leg of the export journey.

The Quebec terminal dock has a draft of 50 feet and east there-
of, the 864-mile long section of the St. Lawrence River to the
Gulf of St. Lawrence and the Atlantic Ocean channel, depth in-
creases to accommodate the largest ships afloat.

We do not know what the present average freight rate from Sept
Iles for a 100,000- to 150,000-ton fixture would be since such
large coal parcels have never been shipped and ves-sel operators
have not been asked to quote for same. Moreover, it does not
seem really practical that for a two to three million annual
tons operation, the 100,000-ton and larger ocean vessel would
be deployed.

Contrarily, vessels in the 60,000 dwt to 100,000 dwt class are
a distinct possibility for this operation. Their current aver-
age rate from the noted St. Lawrence River ports to the Contin-
ent, say to Rotterdam, is about $111 per net ton, free-in-and-

1The Maritime Administration (MarAd) study used a rate of $12.20
for the Quebec to West Europe voyage in 100,000 dwt ships. Our
$11 figure was furnished by two highly reliable and representa-
tive large-vessel operators.

V-24

out with customary bunker surcharges, if applicable, and usual
free times for loading and unloading.

In our Figure V-3 system graphic, we showed an additional
"leg" for movement beyond the named port of Rotterdam, the
transportation by barge or small Saltie to final waterside des-
tination. Of course, this additional "leg" applies only to
destinations, such as the ports named in the Figure, which are
unable to berth and unload bulk vessels in the 60,000 dwt to
100,000 dwt size. The additional freight for this "leg" need
not be considered here because it would equally apply to coal
shipments originating at any other U.S. port at which large
vessels can be loaded.

V-9. Transportation System Costs and Comparative Analyses

We divide this last Section of Chapter V into two parts.
First, we shall summarize and reflect upon BWH transportation
system costs. We shall also note transportation system costs,
for coal exports to Rotterdam, as the "benchmark" destination,
for shipments of competing coals via other Great Lakes ports,
Tidewater ports in the middle and south Atlantic, and the two
principal U.S. Gulf of Mexico coal ports. A brief summation
of the first two parts of this Section then follows.

V-9.1. Transportation System Costs Via BWH

It would seem appropriate to re-emphasize that all cost or rate
data discussed in preceding Sections and presented there and

V-25

here, are current data essentially as of August-September 1981.
Some of these cost figures are susceptible to "overnite" change,
others do change periodically but less frequently. For example,
on October 1, 1981, all rail rates, excluding only those for
which special exemptions apply, will increase by 1.2%. Cost
changes could ultimately be of real significance in determining
which transport system and route will be most competitive. Ex-
perience has shown that during inflationary periods, prices for
different products and services do not increase identically.
Rail rates, for example, have increased at a substantially
greater rate than rates for water transportation. Accordingly,
the share of each service's costs in the total system costs can
become an important determinant for future competitiveness even
when present-day total costs are similar or identical.

Our review of the cost-rate components in the Great Lakes trans-
port system compared with those for the other port ranges sug-
gests a possibly greater vulnerability for the Lakes' system.
We shall discuss this matter in some depth in the concluding
Chapter.

Table V-3, following, contains a summary of the five cost/rate
components comprising the mine to Rotterdam transportation sys-

tem via BWH. These data are based on utilization of standard

bulk Lakers and a St. Lawrence River intermediate terminal for
transfer of coal from Lakers to temporary storage, assembly of
tonnage required for and loading in large ocean-going vessels.
As was noted before, the possible alternative system, employing
Seaway-size Salties for the BWH to foreign destination trans-
portation, would result in substantially higher tota@ costs
even though the estimated $3 per net ton intermediate terminal

V-26

TABLE V-3

COAL TRANSPORTATION SYSTEM COSTS

ILLINOIS BASIN TO ROTTERDAM VIA BWH

cost/
Sect. Rate,
Ref. US $ Per
From/To or At Provider (Source) Net Ton

1. Mine to BWH Class I Railroad V-4 9.00

2. Rail to Vessel at BWH
Incl. Intermediate
Storage BWH Terminal Operator v-5 1.30

3. BWH to St. Lawrence Canadian-flag Laker v-6 8.50
River Terminal .90,

4. Laker to Saltie,
Incl. Intermediate Canadian Terminal
Storage Operator V-7 3.00

5. St. Lawrence River to Foreign-flag Vessel
Rotterdam Operator V-8 11.00

6. Total Cost/Rates,
Mine to Rotterdam The above V-4/8 $33.70

1Seaway toll for full transit.

V-27

charge would be avoided. Put simply, due to the substantially
higher ocean freight rate for small vessels, the feeder system
postulated is the economical shipping method.

Total transportation costs were estimated at $33.70 per net ton.
There should be no doubt that this is indeed a realistic esti-
mate at present-day levels of rates and prices. While the $9
rail rate estimate, one of the three larger components, is not
likely to be less, the two vessel rates could be somewhat lower.
As previously alluded to, ship charters generally are subject to
incorporation of a multitude of complex terms and conditions.
Length of charters and ship operators' actual commitments or
their perception of future demand for their tonnage can have a
major bearing on rates ultimately negotiated between the parties.

A somewhat pessimistic scenario of future foreign traffic pros-
pects for the U.S. Great Lakes ports system would tend to sug-
gest lower potential rates for standard Lakers. Similarly,
forecasts of economic activity in EEC countries, in particular
the principal coal importers such as France and Italy, do not
seem to project great prosperity for bulk ocean-going vessels;
hence, the quoted $11 per net ton rate from St. Lawrence River
terminals to Europe may also be susceptible to some decrease.

Most importantly, we must examine, at least tentatively, the
competitiveness of the Table V-3 total of $33.70 per net ton
as compared with the transportation costs from and via compet-
ing domestic origins and ports.

V-28

V-9.2. Competing Transportation Systems Costs

Lake Erie ports have a distance advantage over BWH; the journey
from BWH to Toledo, for example, is 572 nautical miles long and
requires an average vessel transit time, under optimum sailing
conditions, of about 48 hours. At an indicated hourly vessel
cost of $625 the additional sailing time entails an increased
cost, over Toledo, of $30,000 or about $1.05 per ton, Can this
cost disadvantage be offset by a saving in any other cost com-
ponent, importantly the mine-to-port rail rate?

The MarAd study previously referred to and containing rates
which were effective as of April 30, 1981, indicates a Pennsyl-
vania mine to Conneaut rate of $8.58 per net ton and a Pennsyl-
vania mine to Ashtabula rate of $12.50 per ton; an Ohio mine to
Toledo rate of $11.03 per ton is also noted as is a West Virgin-
ia mine to Sandusky rate of $13.15 per ton.

These rates cover a range which is from 95% to 146% the $9 per

ton rate to BWH which we have used in our model. All that can
be said at this juncture is that the rates quoted in the MarAd
report would by now have increased by 3.93%, and by 5.-'j,% after
October 1, 1981, so that the lowest of these rates would pres-
ently be about the same as the projected BWH rate. On average,
it is likely that BWH will not enjoy a rail rate advantage over
Lake Erie ports of sufficient magnitude to offset fully the
Laker freight disadvantage of about $1 per ton. This net differ-
ence, however, between a BWH and a Lake Erie transportation
system is not believed to be such as to materially affect BWH's
competitiveness.

V-29

Examination of transportation costs from principal eastern (Appa-
lachian) and midwestern origin points for shipment via Tidewater
ports reveals a rather large "spread" with the lowest system
costs being several dollars below the Great Lakes estimate and
others showing substantially higher costs. In Table V-4 we have
documented transportation costs for five representative systems.

It is readily evident that the largest of all coal export facil-
ities, the Norfolk & Western Railway's Lamberts Point (Norfolk,
Virginia) terminal, predicated on a 430-mile single line rail
haul, shows the lowest system cost. The indicated $31.35 per
net ton could be reduced to $30.35 if the approach channel were
deepened to accommodate 140,000 dwt vessels. The included port
charge of $3.50 per ton is expected to also cover any user fees

likely to be legislated in the near future.'

Estimated costs at the other end of the spectrum, for shipments
via New Orleans and Charleston, may be higher than what they are
likely to be for coal originating at mines more suitably located
for export via these ports. In any event, it is unlikely that
these systems could ever be competitive with transportation
costs via BWH or other Great Lakes ports. Of course, that is
not to say that these higher cost transportation routes are
without merit or economic feasibility. Indeed, these are or
will be very successful routes for certain types of coal which
have ex-mine price advantages and can, therefore, absorb higher
transportation cost without rendering such coal uncompetitive

at destination.

At this point we should emphasize that the figures in Table V-4
exclude any "premium" for the cost of congestion at the most pop-
ular ports such as the terminals of Hampton Roads. Vessel

V-30

TABLE V-4

COAL TRANSPORTATION SYSTEM COSTS, POTENTIALLY

COMPETITIVE ORIGINS AND PORT RANGES TO ROTTERDAM

In Dollars per Net Ton

Port
Charges
Rail (Private Ocean Total
RR-Origin to Port Rate Facil.) Frt Charges

NW-Thacker-Phelps, KT
Lamberts Point 13.85 3.50 14.003 31.353

CO-Logan, WV
Baltimore 15.55 3.50 15.004 34.054

CO-Big Sandy, VA
Charleston 14.67 3.50 24.005 42.175
LN-Scotia, KY Mobile 16.79 2.05 18.004 36.844

LN-Harlan, KY
New Orleans 21.632 3.00 18.004 42.634

lMid-1981 single car export rates.
2joint rail-barge movement via Ghent or Louisville, KY.
3Estimated to be $1 less if cha nnel dredged to accommodate 140,000
dwt vessels.
4Estimated to be $2 less if channel dredged to accommodate 110,000
dwt vessels.
5Estimated to be $7 less if channel dredged to accommodate 60,000
dwt vessels.

V-31

demurrage at these ports has been as much as $10 and more per
ton. It is this congestion, and its cost in terms of vessel
and sometimes railcar demurrage, which are the principal moti-
vators for the movement to (i) deepen shipping channels (so
that larger colliers can be accommodated, thereby increasing
ports' throughput capacity), (ii) construct new and expand
shore-side facilities of existing terminals, and (iii) develop
entirely new coal export routes and facilities for these, such
as the contemplated Great Lakes terminals including BWH.

V-9.3. Summation, Transportation System Costs

It was seen that BWH compared with other Great Lakes facilities,
located on Lake Erie, is likely to be at some, albeit small trans-
portation cost disadvantage. The same is seemingly the case when
compared with non-congested Hampton Roads and possibly Baltimore
terminals. To these determinations it is appropriate to add that
for the foreseeable future these Middle Atlantic ports are not
likely to become uncongested; more likely, for years to come,heavy
demurrage penalties will continue to be seen at these and other
Tidewater ports.

As already noted, the geographic and resulting transportation cost
advantage of such Great Lakes ports as Toledo and Conneaut are
surely not sufficient in size to negate the economic feasibility
of the postulated BWH system. The cost difference seen, generally
about $1 per net ton in 1981 dollars, might not only be pared but
may be compensated for by advantageous ex-mine prices for coal.

In sum, we conclude that based on our herein reflected research
the coal export transportation system via BWH gives every appear-
ance of a feasible and competitive system. A note of caution
will be expressed, however, in the last Chapter of this report.

V-32

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VI. PHYSICAL FACILITIES REQUIREMENTS
I AND CAPITAL COSTS
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VI. PHYSICAL FACILITIES REQUIREMENTS AND CAPITAL COSTS

This Chapter reflects the research undertaken principally by
the study team engineers. Contained in this Chapter are brief
descriptions of the underlying assumptions affecting design
parameters, the selected site within the Port complex, the com-
position of the storage and transfer terminal, dust suppression,
and, finally, operating equipment, personnel and capital im-
provement cost estimates.

It would seem imperative to emphasize that all discussions of an-
nual quantities reflect the brevity of the St. Lawrence Seaway
shipping season as, at present, approximately 250 sailing days
and 218 workdays, based on a 6-day week. Further, capacity cal-
culations reflect single-shift workdays. What all this means is
that expanded throughput capacity would be available as, if, and
when the generally much-needed winter navigationl is implemented,
adding about 30 sailing days or about 12% of present-day capacity.
Similarly, throughput capacity could be expanded by adding a sec-
ond shift on some of the available workdays. Hence, whereas the
design discussed in this Chapter and our calculations refer to
an annual throughput of two million tons, it follows that if de-
mand justified it, and the additional sailing days became avail-
able, it would be quite possible to obtain as much as 50% greater
throughput capacity without additional capital investment. if
that condition were to ensue, unit depreciation and return-on-

'Winter navigation, as thought of here, is an extension of the
traditional sailing season by about 30 days, and not the year-
round navigation promoted by some Great Lakes interests. Year-
round St. Lawrence River transit has been vigorously opposed by
New York State interests on environmental grounds.

VI-1

investment requirements would decline to two-thirds of the fig-
ures reflected in our analyses.

VI-I. Design Parameters

A. All of the coal will be transported to the transfer facil-
ity by 100-car unit trains.

B. -One unit-train will be delivered each working day and will
be unloaded in eight hours.

C. All coal delivered to the facility will have been processed
at the mine; no provisions have been made for washing,
grading, or crushing coal at the terminal.

D. This transfer facility will have an annual practical through-
put of about two million tons and will have a storage capa-
city of approximately 200,000 tons.

E. Coal will be loaded into Lake vessels, each having a capa-
city of about 20,000 net tons. A vessel will be loaded in
eight hours and a ship will be available every other day.
Based on a 250-day shipping season (218 workdays), theoret-
ically it is feasible to obtain up to 2.2 million tons
throughput, and at 90% of capacity a throughput of two mil-

lion tons would ensue.

VI-2. Site Selection

Several areas within the Port were studied as the possible loca-
tion of this facility. After consideration of all factors, it

VI-2

was determined that the best location for the terminal would be

on the eastern half of the riparian fill area of the Port, in
an area bounded on the west by the Cargill Grain Terminal, on
the north by the Port railroad, on the east by existing open
storage areas, and on the south by an existing access road.
Drawing SK-1 (which is to be found in Appendix C) shows this
location in relation to the entire Port facility. This parti-
cular area was selected for the following reasons:

A. In all locations considered, a rail loop capable of accom-
modating an entire 100-car train was not feasible. The
rail layout indicated does not consume large quantities of
valuable real estate; this permits the terminal to be lo-
cated on approximately 13 acres. At all other locations
where a rail loop would be necessary and was evaluated, at
least 26 acres would be required, of which several acres
could not be constructively utilized. By using a switch
engine and an automatic car progressioner at the site
selected, unit-trains can be handled in 10-car cuts as
efficiently at this site as unit-trains could be handled
at any other available site. Storage for an entire unit-
train will be provided within the Port, at a location ap-
proximately 1600 L.F. from the coal terminal.

B. The parcel of land selected for the terminal is well suited
for this type of activity. It is long and narrow which is
ideal for the straight stretches of rail track required and
for constructing a long-storage pile. This parcel is some-
what removed from any dock frontage which would limit its
use for the handling of general cargo; however, its loca-
tion is ideal for handling and storing large quantities of

VI-3

bulk cargo which lend themselves to mechanical conveying
for ship-loading.

C. No existing dock frontage would be required. For this fa-
cility to function, only several cells would have to be
constructed along the bulkhead line of the Outer Harbor;
that "stretch" of the bulkhead line is presently an un-
developed section of the Port waterfront. Construction
of cells would cost approximately $500,000; this however,
is a very modest cost compared with construction costs for
an equivalent bulkhead dockwall. Tied-back bulkhead dock-
wall costs approximately $4,500/L.F., or about $2.7 mil-
lion for a 600 L.F. berth. All of the other available lo-

cations would have required that the ship-loading berth
be located at some point along the existing dockwall in
the East Harbor Arm. Depending on the type and location
of the shiploader, one or two expensive berths would have
to be entirely dedicated to-the loading of coal. One
berth would have been required if a traveling shiploader
were to be used and two berths if a stationary loader were
to be employed. At the present time, only two full ship
berths exist in the East Harbor.. These docks are heavily
used and equivalent facilities would have to be provided
at an estimated cost of $3.2 million to $6.4 million.
These figures include provision of lighting, paved apron
areas, utilities, and other required services. The cost
of providing two additional berths dedicated to coal load-
ing is far greater than the cost of cells and conveying
equipment even though the conveying equipment would be of
greater length and therefore more costly.

VI-4

D. The selected location is within an area used almost en-

tirely for the handling of bulk materials; coal in this
area will not have any adverse effects on any general
cargo handled elsewhere at the Port.

VI-3. Terminal Composition

As previously stated, the coal will be brought to the facility
by 100-car unit-trains. The unit-train will be stored on two
sidings totaling approximately 5,000 L.F. of track located near
the coal terminal. A switch engine, permanently stationed at
the terminal, will bring "cuts" of 10 cars each to the rail
unloading shed. The engine will leave the 10 loaded cars at
this point and continue on to remove the empties of the previ-
ous cut to the storage tracks and return with 10 more loaded
cars. Cars will be advanced through the rail unloading facil-
ity by means of an automatic car progressioner.

The rail unloading shed is of sufficient length to allow con-
tinuous movements of cars while being unloaded. Coal falls
into hoppers that direct it onto a 72-inch flat belt which
delivers the coal to a bin with a flop-gate. The bin can di-
rect the coal to a conveyor that will take it directly to a
ship or another conveyor that will take the coal to a storage
pile. The equipment in the rail shed is capable of handling
coal at the rate of 1,800 tons/hour (tph). Coal designated to
be placed directly aboard ship from railcars will be carried
from the rail shed to a reclaim conveyor by means of a 48-inch,
1,800 tph underground conveyor. Coal to be stockpiled will be
taken by a 48-inch, 1,800 tph conveyor from the rail shed to a

VI-5

transfer point on an overhead stacking conveyor. The stacking
conveyor, the same-size and capacity of the previous conveyor,
carries the coal to seven stacking tubes. At each tube, a de-
vice for taking the coal from the belt will be provided. With
the exception of the first tube, all stacking-tubes will be
90 feet in height. A bulldozer will be "spreading" the coal
coming out of the stacking tubes so that a continuous stockpile
will be attained. Use of the ' dozer will also provide compac-
tion of the coal which will lower the risk of spontaneous com-
bustion. Coal will be moved from the stockpile to the ship by
means of an underground reclaim conveyor. This reclaim convey-
or is a 72-inch, 3,500 tph unit which will be fed by several
reclaim hoppers located along the tunnel. These hoppers will
be equipped with vibrators to help ensure a continuous flow
of coal onto the belt. The bulldozer will also be working the
stockpile during ship-loading to ensure that coal is continu-
ously supplied to the reclaim hoppers. The reclaim conveyor
will discharge onto a shipping conveyor of the same capacity.
That shipping conveyor will transport the coal to a ship-load-
ing device while also weighing the coal so transported. This
shiploader will be mounted on the mooring cells; it will be
stationary. The shuttle conveyor on the shiploader will have
the ability to move in and out horizontally, so that the ship
can be properly trimmed; it will also be able to move vertical-
ly to accommodate different heights of vessels.

It should be emphasized at this point that the conveying sys-
tem outlined in this study will allow coal to be stacked in
the stockpile at the same time coal is being reclaimed for
ship-loading. This feature lends a great deal of flexibility

VI-6

to the facility. The cost to provide this degree of flexibil-
ity with other types of stacker/reclaimer methods, such as
bucket/wheel reclaimer/stackers and crawler mounted stacker/
reclaimers, would be prohibitive compared with the described
system. To be able to stack and reclaim simultaneously is a
desirable feature. For example, it may be necessary to load
out coal from the stockpile, to avoid a spontaneous combustion
problem, and simultaneously continue unloading unit-trains.
Also, if the in-coming coal in a unit-train-were of a different
grade than that being loaded on a ship, either train unloading
or ship-loading would have to stop to prevent the coals from be-
ing mixed. A simultaneous stacker/reclaim operation will per-
mit continuous loading of ships and unloading of unit-trains,
no matter what circumstances arise (excluding only breakdowns).

VI-4. Environmental Aspects

The places where the most significant quantities of coal dust
will be generated are the transfer points, such as the rail
shed, where coal is transferred from one conveyor to another,
where coal is being placed on the stockpile, and the shipload-
er during ship-loading.

Dust within the rail shed could be handled with a vacuum system
that would collect the dust and deposit it back on the belt for
stockpiling.

Modest dust collection systems could be provided at each trans-
fer point or the coal could be sprayed with water to reduce the

VI-7

incidence of dust. The reclaim tunnel is one area that must

have a dust collection system. Workme'n must be in the tunnel
to maintain equipment and to operate the grates on the reclaim
hoppers feeding the conveyor. Dust generated during ship-load-
ing can be controlled with a dust collection system on the ship-
loader. This dust, once collected, could also be loaded onto
the ship. Dust generated during the stockpiling of coal will
be controlled to a great extent by the stacking tubes. The
stacking tubes provide a significant level of dust control; how-
ever, if further control is required, telescoping loading spouts
could be provided. Dust produced from the stockpile itself can
be controlled by periodically spraying the pile with water or
other dust control agents.

The stockpile will be located in an area where the soil contains
a large percentage of clay. No special treatment of this soil
is necessary to prevent leaching into groundwater. In the event
there are not adequate quantities of clay in certain areas with-
in the stockpile, clay is available on-site for proper treatment
of the area. Runoff from the stockpile will be directed into
ditches which will carry such runoff to a collection pond. Suf-
ficient space is available to provide for two ponds, each ca-
pable of containing the waters from a 2-inch rainfall on the
stockpile area. One pond can be used for primary settling and
the second for final settling. As water passes from the first
to the second pond, a feeder can inject lime into the water
which will flocculate out the remaining impurities. The water
will be carried from the last pond by a storm sewer into the
harbor. Each pond will also be equipped with a series of baf-
fles which will accelerate the settling of suspended solids.

VI-8

VI-5. Operating Equipment and Personnel

Drawing SK-2 (found in Appendix C), entitled Site Plan.
reflects the before described terminal facilities; following
is an enumeration of the major equipment components and per-
sonnel requirements for their operation.

A. Rail: This facility will require that a locomotive be
present at all times to move the 10-car cuts back and
forth from the storage tracks to the rail shed. A 100-
ton locomotive will be required for this operation. A
two-man crew will suffice to handle this type of
operation.

B. Rail Shed: One man will be required in the rail shed
to operate the car progressioner and observe proper
operation of the rail cars' hopper doors.

C. Stockpile: It is planned that at least one bulldozer
and one front-end loader will be working in the stock-
pile at all times. When coal is being stacked, the
machines must continually work the coal to form the
pile. If coal is being loaded on a ship, one or both

of the machines must move coal from the outer reaches

of the pile to the reclaim hoppers. Two equipment
operators would be required for this phase of the
operation.

D. Conveyors: One man would be required to operate the
conveyors, stacking trippers, and reclaim hoppers.

VI-9

E. Shiploader: One man is required to operate the ship-

loader.

F. Maintenance: A minimum of two maintenance personnel will
be required for this facility. Regular maintenance is an
absolute necessity on the bulldozer and front loader if
the facility is to operate efficiently. The locomotive
will require attention as well as the conveying systems
and shiploader.

G. Office: Only a small office and staff would be required
for such a facility. A superintendent or manager is nec-
essary to oversee the entire operation and schedule load-
ing and receiving operations, and one clerk/typist/recep-
tionist. The latter's duties will include record-keeping
and collection of weight data from the automated belt-

scales.

H. Dockworkers: The longshoremen will probably require a
minimum crew of four stevedores to be employed while a
ship is docked at the facility. Two linesmen and two
trimmers are required for an 8-hour minimum shift.

We estimate that eleven persons will be employed full-time.
In addition, allowance must be made for the four stevedores
to be employed during ship tie-up, loading, and release

from berth.

VI-10

VI-6. Capital Improvement Costs

The foregoing physical facility description, including all re-
quisite fixed and mobile equipment, has been "translated" to
appropriate cost estimates. Inevitably, these estimates are
in the category of preliminary engineers' estimates. They do
reflect current costs for each of the major items and, in the
aggregate, these estimates are believed to be conservative and
to contain sufficient reserves for costs of unexpected items
or difficulties which might be encountered when detailed engin-
eering, soil borings, and the like, are undertaken.

Table VI-1 contains the capital cost estimate including require-

ments for the control of dust and contaminated water run-offs.

It is seen that a total of $9.57 million was projected; this
equals less than $5 per ton of annual capacity and as such is
a relatively low figure for this type and quality of coal trans-
fer facility (about $3.20 per annual ton if this facility were
to be used at a 3 million annual tons rate, as noted in the in-
troductory comments to this Chapter).

VI-11

TABLE VI-1

ESTIMATE OF

CAPITAL IMPROVEMENTS COST

1. Rail Trackage (does not include storage tracks) 208,000

2. Automatic Car Progressioner 200,000

3. Rail Receiving Structure 2,170,000

4. Tunnel & Conveyor to Reclaim Conveyor 194,000

5. Tunnel & Conveyor to Stacking Conveyor 225,000

6. Stacking Tubes 983,000

7. Stacking Conveyor 450,000

S. Reclaim Tunnel & Conveyor 1,770,000

9. Shipping Conveyor to Shiploader 7217,000

10. Shiploader 850,000

11. Office & Maintenance Structure 140,000

12. Site Grading 100,000

13. Roads & Utilities 50,000

14. Locomotive, 100-ton size 250,000

15. Bulldozer and Front-end Loader 450,000

16. Engineering, contingency 433,000

Subtotal $9,200,000

17. Measures to Control Air and Water Pollution 370,000
TOTAL (See Detail in Table VI-1a) $9,570,000

Source: IPC Engineering Department.

VI-12

TABLE VI-la

ESTIMATE OF

ENVIRONMENT EQUIPMENT COSTS

1. Dust Collection - Rail Receiving Shed $ 75,000

2. Dust Collection at Shiploader 40,000

3. Dust Collection in Reclaim Tunnel 75,000

4. Dust Control at 3 Transfer Points 5,000

5. Construction of Retention Ponds with Baffles 165,000

6. Chemical Treatment of Runoff 10,000

TOTAL $370,000

VI-13

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VII. ENVIRONMENTAL AND ECONOMIC IMPACTS
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VII. ENVIRONMENTAL AND ECONOMIC IMPACTS

This Chapter should be recognized as preliminary findings based
on the specific research undertaken in this study and reported
in preceding Chapters, and a cursory review of relevant litera-
ture and previous specific studies, in particular previous eco-
nomic impact studies for BWH. Exp-anded, greater in-depth
efforts which could have resulted in more definitive findings
were not only precluded at this time by budgetary and time con-
straints but also no need for such is presently evident.

As will be seen, the environmental aspect is believed to be
straight-forward; more work on this subject would be required
when a final facility design is developed and the necessary lo-
cal, State, and Federal permits would be applied for. Economic
impacts will be influenced by numerous factors including the
ul-timate configuration of the terminal, the number of people
required to operate it, the cost of capital invested, and a myr-

iad of "external" factors.

Knowledge about a public facility's economic impact is crucial
for enlightened public policy-making. It is an especially im-
portant matter when larger amounts of public funds are proposed
to be committed to or for a public facility, the purpose for

which is to facilitate satisfaction of a need which cannot be

met by the private sector and where such public facility may be
unable to pay for itself. This situation always exists when
free roads (as distinct from toll facilities) are proposed to
be constructed. When investments in public ports are promoted,
economists will properly differentiate between such as are needed

VTI_J

to serve the entire user universe, such as port roads and rail
tracks, and those which facilitate use of the facilities by one
or more special user, such as a coal or grain shipper. In the
latter cases, productive public policy will require the pros-
pective operation to pay for the specific public investments
required, just as would be required if a private investment
decision were to be made, and, in addition, a contribution to a
return on the general-use investments would be sought. It could
be said, a priori, that unless a BWH coal terminal could assure
the public agency that it would produce both types of economic
results, it would never become a reality. Put simply, agreements
with financially responsible entitites would have to assure the
repayment of any special public investment such as the estimated
terminal construction.costs, and a reasonable contribution to the
general facility costs, such as is obtained by the public agency
from collection of wharfage, dockage, and harbor service fees.
Finally, the public agency also should measure the effects of its
facilitating activities in terms of direct and indirect economic
impacts. Such measures can be developed prospectively as well as
retrospectively. Inevitably, only the latter can provide factual
information while estimates from the former are usefui, as before
noted, for general guidance.

In the context of the above introductory discussion, our prelim-
inary findings are presented.

VII-1. Environmental Impacts

Unless spcifically prevented, intermodal transfer of coal screen-
ings results in considerable undesirable and potentially ha=ful

VII-2

environmental impacts. Undesirable environmental effects would
be caused by coal dust escaping into the atmosphere thereby caus-
ing particle emissions and pollution of waters due to runoffs
caused principally by rainwaters washed off coal stored in open
piles while awaiting loading for export shipment. A similar
effluent problem can be caused by rainwaters running off loaded
railroad cars and conveyors transporting coal among the various
places depicted in Appendix C maps.

As to the coal dust problem, it is important to point out that
it is of lesser severity here than in some other transfer ter-
minals because coal arriving at BWH will have a relatively high

surface moisture. That surface moisture will be a residual from

the coal preparation at or near the mine which will have consis-
ted of a crushing and washing operation.

Both the residual coal dust and the polluted effluent problems
were addressed in Chapter VI, Section VI-4, and, specifically,
Table VI-1a. It is suggested that upon the expenditure of ap-
proximately $370,000 for environmental control equipment, its
incorporation in the terminal facilities, and the proper oper-
ation of such equipment with necessary neutralizing materials,
i.e., lime for runoff waters, etc., no adverse environmental
effects will result. As mentioned before, the multi-faceted
permitting process aims at assuring ultimate compliance with
standards developed mostly by the Federal Environmental Protec-
tion Agency (EPA), in particular, New Source Performance Stand-
ards (NSPS). These contain stringent specifications for sus-
pended solids in the air and dissolved and suspended pollutants
in drainage waters.

VII-3

Our preliminary research results support the expectation that
all applicable environmental protection rules can be,complied
with fully.

VII-2. Economic Impacts

We shall divide our discussions and quantification in three
parts, the impacts which would occur at or near the coal mine(s)

and those which would occur at the Port. That leaves for the

third area the impact caused by rail transportation; obviously,
these impacts would occur wherever railroad personnel spend the
money they earn from providing a mine-to-port rail service,
wherever the railroad makes related expenditures for materials,
such as fuel, for services, such as car and engine repair, and
for other overheads, such as operations management, billing and
collecting, and corporate purchases, such as purchase of equip-
ment, track and track materials, and the like. Also in that
third category of impacts away from the Port are indirect expen-
ditures required for insurance, banking services, and expendi-
tures by vessel crews or for their welfare, such as purchase of
provisions.

Ultimately, we shall display estimated economic impacts in three
economic categories: (i) direct, (ii) induced, and (iii) indi-
rect; the latter will apply exclusively to the commodity-related
impact of coal production and preparation.

VII-4

VII-2.1. Impacts from Coal Mining and Preparation

The minimum value per ton of coal suitable for export shipment
via BWH is in the $30 to $35 range (September 1981 prices).
Hence, exports of two million annual tons would result in off-
site economic impacts of $60 to $70 million.

Most of this coal is likely to be mined in underground mines which
have an average labor productivity of 1.3 tons per work hour or
0.7691 work hours underground per net ton of coal. Above ground
services, including coal preparation, is estimated to require an
additional 0.699 man-hours per ton of coal suitable for shipment.
At a combined labor input of 1.468 work hours per ton at an aver-
age labor cost of $11.55 per work hour2, it is seen that direct
earnings impact can be estimated in the range of $17 per ton, or
$34 million for the minimum annual volume.

BEA's average multiplier for Illinois Coal Basin is in the 2.5
area, such that total impacts, direct and induced, can be estimat-
ed in a range of $150-$175 million. The labor component, as not-
ed, can be estimated to amount to about $85 million or about one-
half the total direct and induced impacts- At an average hourly
wage cost of $11.55, this labor impact translates to approximate-
ly 7.36 million annual work hours, or about 3,540 worker years.
Due to the explained locational factor, henceforth these impacts
will be noted as "indirect", leaving the distinction of direct
and induced impacts for the items following.

'Mine Safety & Health Administration, Information Reports 1976-
1978, and National Coal Association.
2U.S. Department of Labor, Bureau of Labor Statistics, Employment
and Earnings August 1981, Table C-2, SIC-12, for May 1981, p.72.

VII-5

VII-2.2. Impact from Rail Transportation and Other
Activities Away from Port

It will be recalled (see Table V-3, page V-27) that in our trans-
portation cost model, we utilized an average rail rate of $9 per
nt. Multiplied by the two million annual tons minimum, a direct
economic impact of $18 million is evident; applying the BEA's
surface transportation multiplier of 1.78 results in an estimate
of direct and induced economic impacts from rail transportation
in the total sum of $32.04 million.

Application of the Association of American Railroads' cost index
weights to the above mentioned data, to obtain an approximation
of the component division of the estimated impact, the following

distribution is derived.

TABLE VII-1

CALCULATION OF RAIL TRANSPORTATION IMPACT BY COMPONENT
BASED ON AAR INDEX WEIGHTS1

Index Weights Applied
AAR Index to 2 Mil. Annual Tons
Index Weights Direct
Weights Applied Plus
Item % To Rate Direct Induced
mill ion-s
1. Salaries, Wages &
Supplements 49.9 $4.491 $8.982 $15.988
2. Fuel 9.6 0.864 1.728 3.076
3. Other Materials & Supplies 12.5 1.125 2.250 4.005
4. Other Expenses 28.0 2.520 5.040 8.971

5. Total 100.0 $9.000 $18.000 $32.040

lRailroad cost index computed and published by Association of
American Railroads; also see ICC proceeding Ex Parte No. 290
(Sub. No. 2), Railroad Cost Recovery.

VII-6

Other impacts away from the Port consist of those before men-
tioned, namely crew expenditures, insurance, cargo inspection,
and documentation services. Typically, these types of impacts
are measured by application of proxies, such as cargo transfer
costs and cargo values. Estimates were developed on the basis
of considerable research undertaken in prior studies, including
economic impact studies for BWH for the calendar years 1977 and
1980. In the absence of more reliable estimates and proxies on
which these impacts might be based, we shall calculate as shown

below:

Total Impact

Direct
Plus
Item Basis Direct Inducedl

Crew Expenditures 6% of cargo transfer costs $156,000 $390,000

Insurance,
Banking, etc. 0.8% of cargo value, fob BWH2 684,800 1,712,000

TOTAL $840,800 $2,102,000

Total Per Ton $0.4204 $1.051

1Multiplier of 2.5.
2Based on average ex-mine cost of coal @ $32.50/ton plus rail freight $9/ton
and rail to vessel transfer cost at BWH of $1.30/ton for a total of $42.80.

Accordingly, the total impacts for economic activities away from
the Port and attributable to the export coal movement of two mil-
lion annual tons, were estimated to be about $18.8 million,
$15.3 million, and $34.1 million in direct, induced and combined
economic impacts, respectively.

VII-7

VII-2.3. Impacts at the Port

Total direct impacts at the Port are approximately those which
were detailed in Table V-2 on page V-16. The costs shown in
that Table at an annual sum of $2.6 million, or $1.30 per ton,
do include a number of "external" items such as replacements of
equipment or major components, insurance premia, and the like.
These types of costs are, for the most part, payable to third
parties located away from the Port.

Conversely, in order for the terminal operator to have a finan-
cially viable operation, such operator would have to levy a coal
transfer fee of not less than $2.06 million for the annual base
volume of 2 million tons, equal to $1.03 per net ton plus collec-
tion of wharfage and other Port Commission fees (Line 13 of Table
V-2) in the amount of $540,000, or 27@ per ton. Thus, it can be
said that the receipt, temporary storage as needed, and loading
of coal in vessels are expected to generate economic effects
whereby the above noted annual sum of $2.6 million will be
"earned" by and from this operation.

On the other hand, the study of economic phenomena, and in parti-
cular input-output analysis, has shown that for each dollar local-
ly generated, a larger sum is spent in the community. It could
be reasoned that if all the direct impacts generated at the pro-
posed coal terminal were purely local, such as payment of wages
and salaries to local labor, the induced impact multiplier would
be correspondingly larger.

The BEA's wage multiplier for the South Bend, IN and Chicago, IL
areas, weighed at a ratio of 2 to 1, is 2.4825 or rounded to 2.5

VII-8

times. There being no multiplier available specifically for the
area of Portage or Porter County, IN, we apply this weighted av-
erage for the two nearest influence areas to obtain the estimate
for induced impacts in the amount of $3.9 million ($2.6 mil-
lion x 1.5) and total direct and induced impacts combined in
the amount of $6.5 million.

Recalling once more the data in Table V-2, it can be seen that
only about $380,000 in direct wages and benefits will represent
new employment income opportunities. That sum equals salaries,
wages, and employee benefits for a little more than ten person-
years. Besides four year-round employees, another 12 persons,
on a seasonal basis, each working about 1,470 hours annually,
would find employment opportunities at the coal terminal, albeit
the length of employment for these 12 would be less than a full
work year.

VII-2.4. Summation, Economic Impacts and Perspective

The economic impacts noted on the following page in Table VII-2
have been identified and explained.

It is seen that as much as $20.32 per ton in direct and induced
impacts would be generated from throughput of two million annual
tons, or an annual total of $40.6 million in these two impact
categories. The direct labor component in this sum was estimated
to be $9.4 million plus some portion of direct impacts amounting
to an additional $840,000.

Not surprising, the largest impact figure results from coal mining
and preparation. This indirect impact estimate of $162.5 million

VII-9

TABLE VII-2

ESTIMATE OF DIRECT, INDUCED AND INDIRECT

ANNUAL ECONOMIC IMPACTS,
MILLIONS OF 1981 DOLLARS'

Total
Direct
and Grand
Item Direct Induced Induced Indirect Total

Coal Mining and
Preparation 162.502 162.50

Rail Transportation
and Other Activities
Away from BWH 18.84 15.30 34.14 34.14

Intermodal Transfer
at BWH 2.60 3.90 6.50 - 6.50

TOTALS 21.44 19.20 40.64 162.50 203.14

Totals per Net Ton $10.72 $9.60 $20.32 $81.25 $101.57

Source: Preceding sections of this Report Chapter.

lBased on minimum annual volume of 2 million net tons.

2Based on fob mine average commodity value,times 2.5 multiplier.

VII-10

reflects use of the well-established BEA Output Multipliers ap-
plied to the value of commodities exported; a somewhat smaller
or even larger estimate could result, depending on the specific
BEA areas, and their multipliers, in which this coal would be
mined. The 2.5 times multiplier we used is believed to be ap-
propriate for a mixed urban-rural setting as is typical for
the Illinois Basin coal mining areas.

Following is a comparison of these impact estimates with those
for all activities at BWH for 1980:

TABLE VII-3

ECONOMIC IMPACT ESTIMATES

Coal
BWH1 Coal Terminal
1980 Terminal Percent
Impact Impact of 1980
$ Mil $ Mil Impact

Direct and Induced 44.1 40.64 92.2

Indirect 235.1 162.50 69.1

Totals 279.1 203.1 72.8

Impacts Per Ton of Traffic $231.6 $101.6 43.9

1See Port of Indiana/Burns Waterway Harbor, Economic Impact 1980,
Final Report prepared for Indiana Port Commission by Moshman As-
sociation, Inc., Washington, D.C., May 1981.

VII-11

It is seen that the addition of a two million ton annual movem-
ment would contribute to BWH total impacts of as much as 72.8%
of the impacts from all tonnages moving through BWH in 1980.
In that year, total tonnage at BWH was 1.205 million, about 60%
of the base coal volume. However, of that 1980 tonnage, almost
10% was general cargo with a significantly higher unit impact
than bulk commodities. That reality is observed in the impact
per ton noted above, showing less than 40% for coal compared
with the average 1980 BWH traffic.

Regardless of these discerned differences, it is clear: the
addition of some $203 million in economic impacts attributable
to BWH would be a very substantial positive development.

VII-12

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I VIII. CONCLUSIONS
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t
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VIII. CONCLUSIONS

Fundamental economic and environmental factors investigated have
revealed generally positive conclusions. As this study report
is being completed, the National Coal Association projected that
overseas exports of coal this year would reach 79 million tons,
up from last year's whopping 72 million tons. Significantly,

the seven million tons increase for 1981 includes 30 million

tons of steam coal compared with 16 million tons last year, a
net increase of 21 million tons in that coal category.1

In his National Port Week Proclamation2, President Reagan de-

clared:

... Today, our ports are an important resource in
the Nation's economy. In 1980, the port industry
handled almost two billion short tons of waterborne
commerce in foreign and domestic trade. This com-
merce contributed over $35 billion to the gross
national product and generated an additional $1.5
billion in services sold to users.

Recognizing their vital importance to America's
economic health, State and local port authorities
and private industry have continued to invest fi-
nancial resources to improve port facilities to
meet ever-increasing needs.

The growing demand for coal and other energy sources
to fuel the economic growth of the United States and
the rest of the industrialized world has presented
the ports of this Nation with a unique challenge..."
(emphasis added).

lAs reported by the American Association of Port Authorities in
AAPA Advisory, Vol. XV, No. 40, of October 5, 1981.

2The White House, October 2, 1981.

VIII-1

Of course, the focus of this study was BWH's possible future
participation in facilitating the growing volume of internation-
al coal trade. Before we recap our conclusions, it is useful to
take yet another look at the present and future port facilities
supply/demand equation.

VIII-1. National Port Assessment

The most comprehensive analysis of future U.S. port requirements
ever undertaken was a project completed about a year ago by the
Federal Maritime Administration. As stated in this study's re-
port Foreward, the purpose of the effort was "... to assess the
capability of the Nation's ports and marine terminal facilities
to meet the requirements of U.S. foreign and domestic waterborne
commerce foreseen over the next ten years.111

It is evident from the data contained in the report's Table 27
reproduced herein as Table VIII-1, that the greatest shortfall
of terminal supply is forecast for the Great Lakes. Out of a
national berths deficiency, by 1990 of 15, the MarAd study con-
cluded that the Great Lakes would be short eight berths. These,
the report's authors projected, would be needed to accommodate
the difference between the coal trade projected for the 1990
time frame, 85 million long tons, and the practical capacity in
existence in 1975 of 66 million long tons. The forecast for

1National Port Assessment 1980/1990, U.S. Department of Commerce,
Maritime Administration, Office of Port and Intermodal Develop-
ment, June 1980.

VIII-2

WLI@m MMM

TABLE VIII-1

COAL

TERMINAL DEMAND-CAPACITY ANALYSIS
1000 LONG TONS PER YEARI

Est. Avg. Foreign and Domestic -@/Cargo Trade Movements Est. Shortfalls
Practical in Capacity in
Coastal Region Throughput Actual Forecast Terms of No. of
Capacity - - Berth Equivalents
(1975) 1975 3/ 1980 4/ 1985 4/ 1990 4/ (1980-1990)

North Atlantic 5/ 63,000 41,706 18 44,676 18 53,888 18 67,079 19 1

South Atlantic
(incl. Puerto Rico
& Virgin Islands) - 73 - 102 - 130 - 157 - -

Gulf 10,136 9,987 14 8,773 14 10,629 15 14,611 20 6

South Pacific
(incl. Hawaii) 3,000 35 6 168 6 207 6 253 6

North Pacific
(incl. Alaska) - 103 - 103 - 121 - 144 - -

Great Lakes 65,975 54,768 29 61,065 29 68,641 30 84,748 37 8

Total 114,887 67 133,616 69 15

All trade and throughput capacity tonnage figures are aggregated by coastal region.
21 Domestic cargo trade volumes include only oceanborne coastwise, Lakewise, non-contiguous and intra-territory
receipts and shipments. Intra-port cargo movements as well as inland waterway traffic are not included.
3/ Number of berthing facilities existing in 1975-1977 with depths of 26 feet and over.
4/ Estimated number of berth equivalents required to meet the 1980, 1985, and 1990 trade forecasts.
Whereas the need for the equivalent of only one additional coal-handling facility in the North Atlantic by
1990 was based on demand/supply conditions and data accumulated from prior years, the recent push to convert
oil-burning plants in the U.S. Northeast and Western Europe is expected to translate into a pressing demand
R
r a0ditional coal-handling capability in the U.S. North Atlantic region by the early 1980's, thus surpassing
e single-facility requirement predicted for 1990.

1985 indicates that in the Great Lakes, a shortfall, consisting
of one berth, will first be felt by 1985 and building up to the
stated eight berths by 1990.

Considering the fact that MarAd's National Port Assessment study
did not have the benefit of the more recently completed WOCOL
and the Interagency Coal Export Task Force's efforts, we can sug-
gest that the MarAd data are likely to be understated. Now,
whether the intermodal facility shortfall in the Great Lakes re-
gion will suitably be cured by the addition of a two to three
million annual ton capacity at BWH is not answered by the MarAd
or any other prior study.

VIII-2. Conclusions and Recommended Action

In this Chapter's introduction we stated that generally positive
conclusions were reached. Surely, an accessible market of large
proportions was identified and quantified; a suitable, albeit
not an ideal coal supply was also documented. The transporta-
tion system "developed" is practical; except for the BTVH
terminal facilities, all required components are in place. Trans-
port system costs were conservatively found to be competitive
with all but one existing competitor system; the BWH-Rotterdam
route would, it was shown, incur substantially lower transporta-
tion costs than some of the presently popular routes for coal
exports from midwestern origins.

Construction of a suitable intermodal facility would not pose any
particularly difficult problems; economical utilization of scarce
acreage at BWH is feasible and the very costly construction of a
dedicated ship berth can be avoided. No environmental problems

VIII-4

are anticipated. Economic impacts would be of very considerable
proportions.

In sum, then, both from National and parochial viewpoints, an
export coal terminal at BWH would be a very positive development
and, at minimum, the actions briefly delineated should be given
appropriate attention in the near future.

The concluding cautionary remarks, without which the reader and
the potential user of this report could be misled, must deal with
two essential components of almost all coal transportation sys-
tems, the railroads' services and the ocean-going vessel industry.

In the context of BWH,which obtains railroad services exclusively
from Conrail, the railroad problem has two dimensions. One is the
uncertain future of that Federally-chartered and taxpayer-subsi-
dized carrier; the other is the railroad industry's general state
of flux in ratemaking and transportation contracts, on the one
hand, and the increasingly declining regulatory over-sight and
consumer protection. What is clear is that rates are bound to
rise for some time, proportionately more than rates for other
modes' services. Considering that rail rates from origin points
to BWH for suitable coals would be relatively less than the
rates applicable for other, competing export routes, it follows
that the BWH system would obtain additional advantages vis-a-vis
these other long rail haul routes. Of course, inordinate rate
increases,unchecked by waning regulatory over-sight, can have the
effect of rendering the delivered price of U.S. coals uncompeti-
tive in foreign markets.

It is quite beyond us, and probably any analyst, to project

VIII-5

Conrail's future in general and specifically its effects on coal
movements to BWH. However, with at least two viable railroad
systems available in the area, both of which could be made acces-
sible to the Port, it is quite infeasible that BWH would be left

without suitable railroad services.

The ocean-going vessel aspect is, indeed, troublesome. For sev-
eral years, the overwhelming trend has been to construct increas-
ingly larger, more economical ships, the VLV's which, for the
most part, cannot be accommodated at U.S. ports. To "feed" these
large ships, a new universe of intermodal transport services was
born, largely for general commodities but also for bulk cargoes.
These new transport services are chiefly responsible for the de-
cline in Great Lakes tonnage and traffic. One must express some
caution for the survivability of all but the most entrenched and
irreplaceable Great Lakes waterborne movements. Both a purely
economic and a physical problem are of concern. The former is
the growing disparity in waterborne shipping costs for VLV's
and Seaway-sized vessels; the latter is the future availability
of suitable Laker tonnage for the several decades during which a
new intermodal coal export facility would have to be amortized.

While this brief study cannot develop quietening answers to the
concerns expressed, the overall conclusions must be reached to
move forward with actions which will establish the practicability
and thereby reconfirm the economic feasibility of the terminal
project.

Among these actions one must include the identification of spe-
cific foreign customers, specific domestic producers capable of
and interested in producing the required coal tonnage at a
competitive price; also needed is that "sparkplug" which will

VIII-6

initiate and follow through with the establishment of a multi-
modal, multi-component transportation system, consisting of a
number of providers who are interested in cooperating with each
other so that a coordinated system, capable of fulfilling the
multi-faceted requirements can be "shown" to the prospective
system users. Last, but not least, it is essential to place
responsibility for terminal development in the hands of a quali-
fied party so that future users could be assured that no void
in this regard will ensue.

While we are keenly mindful of innumerable pitfalls likely to be
discovered-- and overcome-- during the course of an action-orien-
ted project pursuit, the many positive factors identified herein
and permeating the broad environment suggest a high probability
for a successful result. Most importantly, the incontestible
need by Western European democracies for greatly increased, se-
cure coal supplies is a powerful motivation to expend the efforts
necessary to realize an export coal operation at Burns Waterway

Harbor.

VIII-7

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I APPENDICES
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APPENDIX A

IMPORTERS' PLANS and LIKELY SOURCES

COUNTRIES INCLUDED:

Belgium

Denmark

France

Germany
Italy

Netherlands

Spain

Sweden

The information in this Appendix has been distilled from
various published sources and compiled by the principal author.

APPENDIX A

IMPORTERS' PLANS AND LIKELY SOURCES

In this Appendix, we have summarized import plans, current
sources of supply, and infrastructure constraints for the
major European coal import countries of specific interest here.
A brief narrative description is followed by tabular summary
of information on current and planned sources and related data.
It will be noted, all tonnages are expressed in STCE.1 Also,
it should be explained that Panamax refers to ships of size
suitable to transit the Panama Canal with its 42-foot depth

limitation.

Some general comments on the transportation infrastructure in
Europe may be helpful. First, a number of excellent deepwater
port facilities are available in Denmark, Netherlands, Belgium,
France, and Italy, and could be developed in Spain. The coun-
tries on the Baltic have ports for relatively shallow-dra-."t
vessels (40 feet or less), since the limiting depth at the en-
trance to the Baltic is 45 feet. Many of the existing coal-
fired plants are located on the coasts, e.g., the north German

1STCE: Standard Ton of Coal Equivalent is a metric ton (2,205
lbs.) with a specific heating value of 7,000 Kcal/Kg or 12,600
btu/lb or the equivalent thereof. For example, a TCE for an
11,000 btu/lb coal would be 2,526 lbs. of such coal or 1.263
net tons of such coal.

A-2

coast, at Le Havre, on the northeast and northwest coasts of
Italy; however, sites for new coastal plants are generally li-
mited. Inland transport has been mainly by barge. An exten-
sive network of barge canals links North Sea ports with the in-
terior of Germany (extending through the Rhine River system to
Switzerland), Belgium, Netherlands, and portions of France.
Ship-to-barge transfer facilities (some with storage) exist at
Hamburg, Amsterdam, Rotterdam, Antwerp, and Ghent, among other
ports. Self-propelled canal barges with 1,000-2,000-ton capa-
city are used in groups of four, except on the Rhine. There
are a few inland redistribution centers, mainly along the Ger-
man Rhine, which have storage capabilities.

Railroad transportation from ports to inland destinations is
not practical except in Germany (and perhaps to some extent in
Spain), since railroads are usually limited to 30-ton capacity
cars and are congested. The Bundesbahn (the German railroad)

has been able to establish unit-trains and rates which are com-
petitive with barge traffic.

Of particular importance is the general lack of blending facil-
ities either at ports or at the final destinations. The only
probable blending facilities will be at Massvlake (Rotterdam),
Hansaport (Hamburg), and perhaps at new facilities planned in
Italy and at Gijon (Spain). Blending is important because most
importers want coal which contains no more than 1% to 1.6% sul-
phur. Since much of the South African and Australian coal is
substantially below 1%, 2% sulphur coal from the U,S. could
conceivably be blended to make up an acceptable mix, e.g.,
half .5% sulphur plus half 2% sulphur = 1.25% sulphur blend.

A-3

(A United States producer of medium-sulphur coal would have to
find a consumer with blending facilities or, perhaps, cooperate
with a shipper of South African or Australian coal. It might
be possible for a U.S. producer to secure a site which could be
used for blending and transshipment, e.g., at Algeceras, Tar-
anto, or in the ARA region. Given the cost of blending (,@,$1.50
per ton or so), the U.S. coal would have to be priced at $3
under the lower sulphur portion of the mix, on a btu equivalent
basis.)

A-4

BELGIUM

Belgium will become a major importer of coal for utility and
industrial use. Coal will be purchased primarily by coopera-
tive purchasing associations established by the utilities and
through brokers such as the major German and Dutch brokerage
companies. Transportation access is very good via ports at
Antwerp and Ghent, and in the Netherlands. Since quality re-
quirements are not rigid, this should be a fairly good market
for U.S. coal, especially if medium sulphur coal can be deliv-
ered less expensively than low sulphur. Belgium's potential
sources of supply are diversified because large ships can be
handled at these port facilities.

Country Name: BELGIUM (including Luxembourg)
Major Purchasers: Calorie Pool (cooperative of major
utilities)

Major Brokers: Various German and Dutch trading
companies
Import Requirements: 1985 1990 2000
Projected Demand 16.5 24.7 41.1
Projected Domestic Production 6.5 6. 5.5
Net Import Requirements 10.0 18.7 35.6
Current Sources: Poland, others
Desired Future Sources: Poland, S.A., U.S. Strong ties to
Poland and USSR with barter-type
agreements
Committed Supplies: Unknown
Terms of Purchase: Long-term contract, some spot
Means of Access: Ports of Antwerp (90,000 dwt) and
Ghent; also by barge or rail from
Rotterdam

A-5

Proportion of Receipts: 1985 1990 2000

< Panamax 80 70 70
> Panamax 20 30 30

Special Quality Requirements: Substantial stoker coal market.
Notes: Prefers supplier who controls infrastructure; would like to
buy on CIF basis

A-6

DENMARK

Denmark has been almost totally dependent on Polish coal and is
now desperately seeking to fill the shortfall in deliveries from
Poland. Overall demand will rise fairly rapidly. The government
will not play a heavy role in determining sources of imports.
There is good transportation access through new ports which will
serve the powerplants directly, and quality specifications are
relatively easy. Denmark should be a fairly good market for the

United States.

Country Name: DENMARK

Major Purchaser: ELSAM and ELKRAFT--c.ooperatives of
electric utilities

Major Brokers: None, prefer to deal direct. Some
purchases through German and Dutch
firms.

Import Requirements: 1985 1990 2000
Projected Demand 9.7 12.9 18.5
Projected Domestic Production 0 0 0
Net Import Requirements 9.7 12.9 18.5
Current Sources: Poland, South Africa

Desired Future Sources: S.A., Poland, U.S., Colombia. Disagree-
ment with Poland over Poland's desire
for up-front investment in new mines.
Committed Supplies: Colombia: 2 mt/y, increasing to 3-4;
U.S.: two 10-year contracts, 1.2-1.5
mt/Y
Terms of Purchase: Long-term contract, direct negotiation,
FOB basis

Means of Access: Various ports at powerplants. New
facilities at Aabearaa and S. Jutland
to accept 120,000 dwt vessels. Perhaps
lighter to smaller ports.

A-7

Proportion of Receipts: 1985 1990 .2000

< Panamax 70 50 50
> Panamax 30 50 50

Special Quality Requirements: None
Notes: ELSAM is a knowledgeable buyer; EIKRAFT is new and less experienced

A-8

FRANCE

France is now and will continue to be a very large importer.
The government dominates coal import and uses policy through
control of the State utility (EdF) and a State-monopoly coal
purchasing agency (ATIC). France has ties to the coal indus-
tries in South Africa and Poland: in South Africa through
investments of the French oil company Total, and in Poland
through a variety of trade ties. Port facilities are gener-
ally good but the major growth area for coal is in industrial
use, usually in inland locations where rail or barge access
may be somewhat difficult and coal unloading and storage fa-
cilities are constrained by lack of space. ATIC is not too
enthusiastic about supplies from the U.S. but has been seri-
ously considering opportunities for participation in coal
mines for export to France. For this reason, the U.S. may be
somewhat attractive.

Country Name: FRANCE
Major Purchasers: ATIC (monopoly of imports)
Major Brokers: ATIC has dealt with all major brokers
but usually directly with producer
Import Requirements: 1985 1990 2000
Projected Demand 32.6 35.5 42.7
Projected Domestic Production 16.5 13. 11.
Net Import Requirements 16.1 22.5 31.71
Current Sources: S.A., Poland, Australia, U.S.
Desired Future Sources: S.A., Poland, Australia, U.S. French
oil company Total (35% government own-
ership) heavily involved in S.A. Has
bilateral "barter" relationship with
Poland. Starting in 1980, 1.43 million
tons from Australia on 5-year contracts.*

IWOCOL projects 76 million short tons, equal to 60.1 million STCE.

A-9

Committed Supplies: Probable 5 mt/y S.A. coal from Total
for 1985, 10 mt/y for 1990. Probable
some share of Poland's starting in 1980,
1,430,000 tons from Australia on 5-year
contracts.

Terms of Purchase: 3-5 year contracts. Expressed desire
for participation via Charbonnages de
France but only Total so far. Serious
question of financing investment in
United States or Australia.

Means of Access: Ports at Dunkirk, Montoire (50 feet),
Bordeaux, Marseille (55 feet), Le Havre
(54 feet); also via canals from Antwerp,
Ghent, or Rotterdam
Proportion of Receipts: 1985 1990 2000

< Panamax 75 60 50
> Panamax 25 40 50
Special Quality Requirements: Substantial stoker coal market. S02
requirements for industrial plants
uncertain. Probably shift to high
quality away from lowest CIF cost
buying.

Notes: Possible that new Mitterand government will force reduction in
plans for purchase of S.A. coal. ATIC a highly knowledgeable
buyer.

A-10

WEST GERMANY

Government influence in the West German coal industry is omni-
present. Imports are limited by the Fifteen Year Law and until
1983 will be controlled through licenses granted to brokers.
Historically, German coal imports have been controlled by rela-
tively few brokers with four companies accounting for most of
the imports. Even once the licensing system is abolished, the
role of these brokers is likely to continue. Poland has a very
large debt to Germany and is a very attractive supplier for
coal because of access. Hence, Germany is likely to have first
call on Polish exports. The difference in Germany's require-
ments and available coal from Poland will be made up by imports
from the U.S. and South Africa. Port access is fairly good
through the North Sea ports (at Rotterdam, etc.) for transship-
ment to coastal vessels or to barges serving plants on the
Rhine River systems. There has been some discussion by Ruhr-
kohle and others of participation in U.S. mines for-export to
Germany. A recent announcement of the acquisition of 25% of
Ashland Coal Company by Saarbergwerke is the first step in
this direction.

Country Name: WEST GERMANY
Major Purchasers: Various utilities, industries,
district heating
'Major Brokers: Until 1986 (phased out starting 1983),
established brokers control all im-
ports through licenses. Majors are
Stinnes, Klockner & Co., Haniel Trad-
ing, and Ruhrkohlen Handel. There are
seven other significant brokers.
After 1986, consumers may import
directly.

A-11

Import Requirements: 1985 1990 .2000
Projected Demand 66.3 85.3, 117.6
Projected Domestic Production 44 44 44
Net Import Requirements 22.3 41.3 73.6
Current Sources: Domestic production, Poland
Desired Future Sources: Poland, S.A. West Germany probably
has first call on Polish exports
since Poland is easiest and flexible.
Weglokoks and several German brokers
have a joint-venture company to handle
German-Poland trade.
Committed Supplies: Perhaps I mt/y of Polish coal is
committed through up-front payments.
Saarbergwerke has bought 25-percent
interest in Ashland, yielding perhaps
1-2 mt/y. Thyssen plans a joint venture
with Shell in Australia for 5 mt/y.
Terms of Purchase: Historically spot. Probably switch to
medium-term contract. Some partici-
pation. Ruhrkohlen has announced its
desire to establish participation.
Brokers probably will continue to
handle 75 percent + of imports.

Means of Access: Rail or coastal vessel from Poland.
Hansaport at Hamburg for transfer to
barge (110,000 dwt); Wilhelmshaven
transfer to rail (125,000 dwt); Rotter-
dam transfer to Rhine River barge
(eventually 150,000 dwt).
Proportion of Receipts: 1985 1990 2000

< Panamax 80 70 70
> Panamax 20 30 30

Special Quality Requirements: Substantial market for stoker coal.
Notes: Ruhrkohlen and others which may want to develop U.S., Australian,
or S.A. properties/investments may have difficulty since their
mandate, as state-owned companies, is controversial

A-12

ITALY

Government policies and politics dominate the coal situation in
Italy. Coal purchases will be made through the government-owned
utility, ENEL, and the government oil company, ENI. Quality re-
quirements are very rigid at 1% sulphur. The Italians have a
strong interest in South Africa and Australia. Although they
have not participated very substantially, AGIP has one invest-
ment in Australia and has just announced a joint-venture agree-
ment with Occidental Petroleum. This agreement will give AGIP
a participation in Island Creek Coal Company in the U.S. Over-
all, there is strong interest in participation in production.-
Port facilities are being developed which will al low Italy to
receive coal in large vessels and hence to diversify the supply.

Country Name: ITALY
Major Purchasers: ENEL (national utility),
ENI (national oil producer)
Major Brokers: Some U.S. Brokers have long history
of met coal trade, e.g., Island
Creek Coal sales, but ENEL is likely
to buy direct
Import Requirements: .1985 1990 2000
Projected Demand 19.5 42.6 61.4
Projected Domestic Production 0 0 0
Net Import Requirements 19.5 42.6 61.41
Current Sources: Poland, S.A., U.S., U.S.S.R

Desired Future Sources: Poland, S.A., U.S. Strong interest
in S.A.
Committed Supplies: joint venture of AGIP (partly State-
owned oil company) and Occidental
Petroleum includes four Island Creek
coal properties. Has bilateral trade
agreements with Poland and U.S.S.R.

1This forecast is 44% higher than WOCOL's (See Table 111-2, page
111-7).

A-13

Terms of Purchase: Participations via AGIP in U.S.,
Australia, possibly S.A. Long-term
contracts.

Means of Access: Existing and new plants to be on
coast. Inland transportation poor.
Ports now only Panamax. After 1985,
one or two major deepwater ports for
transshipment to barge or coastal
vessel.

Proportion of Receipts: 1985 1990 .2000

< Panamax 100 60 50
> Panamax 40 50

Special Quality Requirements: 1 percent sulphur maximum is rigid.
New ports will have blending facilities.
Ash disposal is likely to be a signif-
icant problem. There is also a strong
need to maximize plant utilization.
Coal use expertise is shallow.

A-14

NETHERLANDS

The Netherlands situation is strongly affected by the presence
of Royal Dutch Shell and two long-established coal brokers,
which will probably account for most of the imports. Very low
sulphur content will be a desirable quality and ash content a
substantial problem because ash disposal is difficult. Austral-
ian and U.S. coal is likely to find some market, as well as
coal from South Africa where Shell participates very heavily
in mine and port facilities. Transportation facilities in Rot-
terdam will allow receipt of coal from large vessels not only
for use in the Netherlands 'but also for transshipment to Ger-
many, Belgium, and France.

Country Name: NETHERLANDS
Major Purchasers: Power companies will set up a cooper-
ative purchasing agency
Major Brokers: Royal Dutch Shell, Anker, SHV will
control most imports
Import Requirements: 1985 1990 2000
Projected Demand 6.5 14.0 34.5
Projected Domestic Production 0 0 0
Net Import Requirements 6.5 14.0 34.5
Current Sources: Poland, S.A., Australia, U.S.
Desired Future Sources: Probably will complete up-front pay-
ment to Poland to secure 600,000 t/y.
Shell's heavy involvement in S.A.
will lead to substantial imports,
despite political aversion to S.A.
Committed Supplied: Poland 600,000 t/y.
Terms of Purchase: Prefer to buy CIF basis, long-term
contracts. Probably substantial Shell
S.A. and Australian coal, and U.S.
coal from A.T. Massey.

A-15

Means of Access: Maasvlake (eventually 200,000 dwt
25 mt/y), Amsterdam, other shallower
ports. Powerplants all new, probably
locate in or near ports. Dutch ports
also serve other European countries.
Proportion of Receipts: 1985 1990 2000

< Panamax 50 30 25
> Panamax 50 70 75
Special Quality Requirements: Very lowest sulphur available. Ash
disposal very difficult; will probably
prefer low ash coal.
Notes: Current coal use very low. Market must develop from scratch.
Participation in the Maasvlake coal port in Rotterdam is as
follows: Shell 25%, BP 25%, Frans Swarttonee/SHV 20%, Ruhrkohlen/
Stinnes 30%.

A-16

SPAIN

Government influence in the development of coal use in Spain is
very heavy (as it is everywhere in the Spanish economy), but the
effort to use more coal is well organized and aggressive. A
government purchasing agency, Carboex, has been set up and a
parallel private group, Aprocar, was established 'Last year.
There is a strong interest in supplies from Colombia (with some
commitments near) and from the United States. Several Spanish
companies have expressed a desire for financial participation in
mine ventures in the United States. Port facilities are being
built which will allow economical imports of Australian and South

African coal as well.

Country Name: SPAIN
Major Purchasers: Carboex (monopoly for State enterprises),
Aprocar (for private consumers). Each
controls about 50% of imports.
Major Brokers: See above.
Import Requirements: 1985 1990 2000
Projected Demand 19.3 25.4 64.2
Projected Domestic Production 14.0 7.5 7.5
Net Import Requirements 5.3 17.9 56.7 1
Current Sources: U.S., S.A., Australia
Desired Future Sources: S.A., Colombia, U.S., Australia
Committed Supplies: Possibly close to commitment with Colom-
bia; probably some commitments. to S.A.
(seen as low risk).
Terms of Purchase: Carboex plans 40% long-term contract,
30% participations, 30% short-term.

Omitted in Table 111-2, the WOCOL projection; U.S. participation,
mid-level projection, is 2.1 million, 2.8 million, and 6.7 million
net tons for 1985, 1990, and 2000, respectively.

A-17

Means of Access: Gijon (new 200,000 dwt, 2-3 mt/y; trans-
ship to rail), Algecira (150,000 dwt,
4-6 mt/y; transship to coastal vessel),
Almeria (150,000 dwt, 2-3 mt/y; trans-
ship to coastal vessel)
Proportion of Receipts: 1985 1990 2000

< Panamax 70 50 30
> Panamax 30 50 70

Special Quality Requirements: Possible that new powerplants may have
scrubbers

Notes: Very interested in participations. Both Carboex and Aprocar are
new organizations just finding their way along.

A-18

SWEDEN

Sweden is and will remain a small market, probably with very
tight quality specifications, since sulphur emissions are a
major concern. Since port facilities are very poor and re-
strict transportation to small vessels, Sweden must rely on
Poland as a major supplier and perhaps get some coal from

the United States.

Country Name: SWEDEN
Major Purchasers: LKAB (subsidiary of State Electri-
city Board), Sydkraft A.V., and
district heating.
Major Brokers: None.
Import Requirements: 1985 1990 2000
Projected Demand 4.0 11.2 26.9
Projected Domestic Production 0 0 0
Net Import Requirements 4.0 11.2 26.9

Current Sources: Poland

Desired Future Sources: Poland, U.S., Australia (S.A. is
politically unacceptable).
Committed Supplies: Unknown. Exploration program now
underway in Mozambique as alterna-
tive to S.A.

Terms of Purchase: Unknown. Interest in participation
in mines now being studied.
Means of Access: Shallow Baltic ports (e.g., Oxelsund,
the largest, 70-90,000 dwt), good in-
land rail. Cement plants have own
ports. Long-term slight possibility
of deepwater port on west coast
after 1990.

Proportion of Receipts: 1985 1990 2000

< Panamax
> Panamax
Special Quality Requirements: Very low sulphur desirable since S02
emissions and acid rain are major
political issues.

A-19

I
I
I
I
I
I APPENDIX B
I
I
I EXISTING GREAT LAKES COAL PORTS
I
I
I
I
I
I
I

APPENDIX B

EXISTING GREAT LAKES COAL PORTS

U.S. Great Lakes ports capable of serving intermodal coal move-
ments are generally railroad owned. In 1979, these ports have
transferred a total of 41.5 million metric tons; of these, 23.5

million metric tons were domestic movements and 18.0 mmt were
exported to Canada. These existing seven ports are briefly des-
cribed below. It is noteworthy that the ports of Erie and Con-
neaut began shipping domestic steam coal for overseas exports in
1980. Since then, their export shipments have increased and To-
ledo has joined them with initial export tonnage.

ASHTABULA, OHIO

Currently handles both steam and metallurgical coal for export
to Canada and domestic use. Approximately 75% to 80% is steam
coal for Canadian markets. The facility is being modernized and
utilizes a 7,000-ton/hr conveyor system for loading vessels.
Ground storage is 1.5 mmt and approximately 500 railcars can be
stored on site. There is no blending capability and there are
no plans for expansion at the present time. A new stacker/re-
claimer is planned for 1981.

B-2

CONNEAUT, OHIO

This is a modern facility that also was the first to ship coal
for export to Europe through a Canadian transshipment facility
(Quebec City). An estimated 150,000 tons of steam coal has
moved from Conneaut during 1980. The facility does provide a
blending service. A conveyor system capable of 7,700 tons/hr
loads coal into vessels from a 6-mmt ground storage area. The
facility has the capability to increase shipment tonnage with-
out any improvements. There are no plans for expansion in the

near future.

ERIE, PENNSYLVANIA

Presently a temporary facility is being used at the port to ship
steam coal for domestic use., These coal shipments were initi-
ated in 1980 on a trial basis and 1981 plans indicate an increase
in tonnage shipped. The temporary facility is receiving coal by
truck from western Pennsylvania mines and has a ground storage
capacity of 20,000 tons. Vessels are loaded by conveyor and
there is no blending capability. The Erie-Western Pennsylvania
Port Authority has received $95,000 from the Commonwealth of
Pennsylvania to perform a marketing feasibility and land-use
study for a permanent coal-loading facility. This study will
be completed in 1981. Additionally, Pennsylvania has passed
legislation to secure bonding power for up to $10 million for
development of a permanent facility. The results of the study
will determine when this development will commence and to what
degree.

B-3

SANDUSKY, OHIO

Coal shipments consist of 55% for export to Canada and 45% for
U.S. domestic users. Approximately 65% to 70% is metallurgical
coal with the balance being steam coal. The facility uses a
3,500-ton/hr car dumper for vessel loading and can stage approx-
imately 2,800 railcars. Blending can be accomplished through
mixing of railcars. A ground storage capacity of 950,000 tons
is also available. This facility is presently dedicated to con-
J
tract customers. Future expansion is not planned at the present

time.

SOUTH CHICAGO, ILLINOIS

This facility has only handled shipments of coke to both Canadi-
an and U.S. domestic customers, although the capability and capa-
city to ship coal is present. A 5,000-ton/hr-loading rate by
two traveling towers provides rapid offloading of railcars. A
1,500-car capacity is available on the site. Barges can also
be loaded. Through the mixing of railcars, blending could be
accomplished. Expansion for coal handling can be accomplished
on the present 40-acre site with little capital cost.

SUPERIOR, WISCONSIN

Currently, Western steam coal for the U.S. domestic market is
handled at this facility, which is less than five years old.
Railcars are immediately dumped and material is placed into
either ground storage or loaded directly onto vessels via an
extensive conveyor system. Ground storage capacity is currently

B-4

7 mmt and initial design plans allowed for 12 mmt. However, ex-
pansion to this capacity will require additional capital invest-
ment and is not planned in the near future. The loading rate of
8,500 tons/hr by conveyor is the fastest on the Great Lakes.
Blending can be accomplished by controlling the underground re-
claimer plow feeders if required. Vessel size is limited to
seaway-size vessels.

TOLEDO, OHIO

There are four separate loading berths at the facility. Coal
shipments are 60% steam and 40% metallurgical coal and are pri-
marily destined for the U.S. domestic market with only some ship-
ments to Canada. One berth (east pier No. 4), uses a 4,500-ton/
hr conveyor for vessel loading. The other three berths use an
1,800-ton/hr car dumper. Berth east side No. 1 has not been
used for the past eight years although it can be operated if
needed. These three berths are limited to seaway-size vessels.
The facility does not have any ground storage capacity but can
accommodate approximately 5,000 railcars. Blending can be ac-
complished through mixing of railears. Currently, there are no
plans for future expansion. If demand requires, the inactive
berth can be operational with little, if any, capital investment.
In 1965 and 1966, Toledo moved 34.8 mmt and 34.3 mmt.

As noted on page B-2, Toledo recently began coal shipments to
overseas-markets with transshipment at Canadian St. Lawrence
River facilities.

B-5

I
I
I
I
I
I
I APPENDIX C
I
I

BURNS WATERWAY HARBOR
I SITE AND FACILITY DRAWINGS
I
I
I
I
I
I
I
I
I

DRAWING SK-1
COAL HANDLING FACILITV, SITE LAVOUT

MINEST STEEL DNL%loN

INC.

**EST HARBOR ARM

CERES TERMK4"
CID"FIED
CONCRETE 4"m INC,
WALSH
LEVY. INC.1
!Zl
a CEFIES TEMANALS.

CENTER

JACK GRAY, INC.
L PC- OFFICES
TRANSL^IjHC,
:0 . . . . .... ....
mo-a3NToww OCIAL& COW F-r'
0
FRICK 0
SE INC.

COAX-
EAST HARBOR ARM

BETHLEHEM STEEL CORP

349 Im rwlr
1000

BURNS WATERWAY HARBOR

C-2

DRAWING SK-2

COAL HANDLING FACILITY, DFrAEL

@-A "Ita vow

cpfv-r- MAIWT. VA-M.

VUIAF' W-P&-

lr-qmlQAj-
WORKIkYO 17.64@S

440 kxwmW@O..&V

4w ftw-"@@ lomlwoft 'Lit
'14W v -W-O&W Com%al(OK

J-?c.
L =--rn
ft ROAO

C-3

I
I
I
I
I
I
I APPENDIX D
I
I
I ABBREVIATIONS AND BIBLIOGRAPHY
I
I
I
I
I
I
I
I
I

ABBREVIATIONS

The following abbreviations and nomenclature have been used
throughout this Report.

AAR Association of American Railroads

ann Annual

BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics

btu British thermal unit
btu/lb British thermal unit per pound
BWH Burns Waterway Harbor
cif Cost, insurance and freight
C&O Chesapeake & Ohio Railway (part of Chessie
System, CSX Corp.)
Conrail Consolidated Rail Corp.
dwt Deadweight tons
EEC European Economic Community
EPA Environmental Protection Agency
fob Free on board

ICC Interstate Commerce Commission
ICE Interagency Coal Export Task Force
ICG Illinois Central Gulf Railroad

IL Illinois

IN Indiana

IPC Indiana Port Commission
Kcal/kg Kilocalories per kilogram
L&N Louisville & Nashville Railroad
lb(s) Pound(s)
MAI Moshman Associates, Inc.
MarAd Maritime Administration (U.S.)

D-2

met Metallurgical

mil. Million
mmt Million metric ton(s)
mt/Y Million ton(s) per year

nm Nautical mile

NSPS New Source Performance Standard

nt Net ton (same as short ton or 2,000 lbs)
N&W Norfolk & Western Railway Company
OECD Organisation for Economic Cooperation
& Development-
OPEC Organization of Petroleum Exporting Countries

RR Railroad

S Sulphur
STCE Standard Ton of Coal Equivalent
tph Tons per hour
t/Y Tons per year
U.S. United States
VLV Very large vessel
WOCOL World Coal Study

D-3

BIBLIOGRAPHY

American Association of Port Authorities. AAPA Advisory,
Vol. XV, No. 40. Washington, DC: The American Associ-
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Association of German Coal Importers. Annual Reports 1979,
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Bhagwat, Subhash. International Coal Trade: Trends and
Practices. Illinois State Geological Survey. Champaign,
IL: Illinois Institute of Natural Resources. 1981.

Market Potential for Illinois Basin Coal: An
Update. Reprint 1980 from Proceedings of the Illinois
Mining Institute, 87th Annual Meeting, Springfield, IL.
October 18-19, 1979.

and Collias, Theodore J. The Future Competitive
Position of Coal from the Illinois Basin. Illinois State
Geological Survey -Mineral Notes 81. Champaign, IL: il-
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Coal Transportation Conference. Coal Exports and Transpor-
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Illinois, Department of Mines and Minerals. Illinois Coal
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. NinetV-eighth Coal Report of Illinois 1979. Dir.
Brad Evilsizer. Springfield, IL: State of Illinois. 1980.

Indiana Coal Association. Tonnage for Mines Operating in
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Indiana Geological Survey. Coal and Industrial Minerals Sec-
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Walter A. Hasenmueller. Bloomington, IN: Indiana Geo-
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D-4

Keystone Coal Industry Manual 1980. New York, NY: McGraw-
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Moshman Associates, Inc. Port of Indiana/Burns Waterway
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National Coal Association. Coal Facts. Washington, DC:
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A Forecast for U.S. Coal in The 1980's. Washing-
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Organisation for Economic Co-operation and Development.
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President's Commission on Coal. Coal Data Book. Washington,
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The Acceptable Replacement of Imported Oil With
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Smith, William H., and Stall, John B. Coal and Water Resources
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U.S. Army Corps of Engineers. Institute for Water Resources.
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U.S. Congressional Board of 97th Congress. Office of Technol-
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D-6

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