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help the depressed areas of West Virginia. However, the area that would be served by the contemplated pipeline is now adequately served by railroads and the pipeline would not extend into the really depressed areas. It is also quite apparent that this bill would not help Ohio coal producers at all and would not do anything to alleviate the depressed conditions in the eastern Ohio coalfields. A pipeline would, in fact, unduly favor a very few large producers of coal in West Virginia and benefit a few large consumers of coal. The proposed legislation, therefore, tends to foster domination of the market by a few companies. Furthermore, it is obvious that if a substantial amount of coal were to move by pipeline this tonnage would be lost to the railroads and thereby increase their financial difficulties with the ultimate result of higher rates to smaller producers of coal.
The right of eminent domain when granted to private citizens is a delegation of governmental power and subjects the right of private property to great necessities of the whole community. It should be granted to individuals and private corporations with extreme caution and only in cases where the best interests of a very large segment of the public will best be served. The right of eminent domain for the transportation of coal slurry, which would be granted by S. 3044, will not serve the best interests of a large segment of the public. We therefore urge you to oppose and vote against S. 3044. Very truly yours,
E. W. SLOAN, President.
STATEMENT ON BEHALF OF NIAGARA MOHAWK POWER CORP., IN SUPPORT OF S. 3044
My name is Leland D. McCormac. I am vice president, purchasing, of Niagara Mohawk Power Corp., an electric and gas utility company serving an extensive area in upstate New York. The cost of producing electricity and the price we must charge our customers is an important consideration in attracting industry to our area and in maintaining the standard of living of the people we serve.
Niagara Mohawk in 1961 sold over 18 billion kilowatt-hours to its more than 1 million customers. Of its sales, more than 11.3 billion kilowatt-hours were sold for commercial and industrial use.
Niagara Mohawk has about 2,600,000 kilowatts of thermal generating capacity, approximately 710,000 kilowatts of hydroelectric generating capacity and is presently committed to purchase more than 1,250,000 kilowatts of electric capacity from the two large hydro electric projects of the Power Authority of the State of New York, namely, the St. Lawrence and Niagara projects.
We want to render the best of electric service at the lowest reasonable cost.
The cost of coal for steam electric generation is a significant element in Niagara Mohawk's cost to render electric service.
The thermal generating facilities of Niagara Mohawk have to date been fueled by coal. Niagara Mohawk, in 1961, purchased about 2,520,000 tons of coal for its electric generating requirements. It has consumed as much as 3,925,000 tons in a single year (1956) prior to the recent required absorption of purchased hydroelectric power. We anticipate that by 1971 Niagara Mohawk's annual purchase of coal for thermal-electric generation will approximate almost 5 million tons.
New York State has no bituminous coal resources and the coal requirements of Niagara Mohawk are met through purchases chiefly of central Pennsylvania and northern West Virginia coals.
Niagara Mohawk's average delivered coal cost in 1961 was $8.83 per ton of which $3.77 per ton represented the cost of transportation of coal. Transportation of coal is 42.7 percent of total delivered cost.
In 1961 the average cost of coal for electric generation was 32.9 cents per million B.t.u. It hurts competitively to realize other utility companies favorably situated near mine mouth get coal for 20 cents per million B.t.u. and in some cases noticeably less.
Niagara Mohawk wants to have the ability to avail itself of any prospective reduction in the cost of transportation of coal. One very distinct possibility is the delivery of coal for the requirements of its generating plants by pipeline. Coal for Niagara Mohawk's plants delivered by a pipeline, should that be the most economic form of transportation, will necessarily be delivered in interstate commerce. If railroad transportation can effectively match anticipated economies of a coal pipeline to us, we would naturally stay with the railroads since they are our traditional supplier and competitive railroad rates would eliminate necessity of new investment in coal pipeline transportation facilities.
We do believe that the grant to a proposed coal pipeline carrier of the right of eminent domain is absolutely a necessary prerequisite to the possible construction of such a pipeline to serve any of our steam-electric generating plants on a competitive transportation cost basis. Our plants are located at Dunkirk on Lake Erie, Huntley on the Niagara River, Oswego on Lake Ontario, and Albany on the Hudson River.
Niagara Mohawk's electric rates carry a coal surcharge for all kilowatt-hours sold to commercial and industrial users of electricity but not to residence and farm users. Under its coal surcharge Niagara Mohawk recovers approximately 70 percent of the excess cost of coal over a present delivered base cost of $7.45 per ton. If the transportation cost in coal is reduced, it follows that there is automatically a reduction to the commercial and industrial users of electricity supplied by Niagara Mohawk and Niagara Mohawk's overall cost of doing an electric business is likewise reduced.
In our present highly competitive economy, we at Niagara Mohawk are attempting to secure exery efficiency and economy which may permit reduction in our cost of electric service to our customers. The coal pipeline proposal presents such a possible avenue. If the transportation cost of coal to Niagara Mohawk is reduced, the economy of the area it serves will be immediately and directly improved and Niagara Mohawk's customers will be directly benefited.
We therefore urge that a necessary tool, namely, the right of eminent doman, be provided for prospective interstate carriers of coal by pipeline.
U.S. DEPARTMENT OF JUSTICE,
Washington, D.C., May 7, 1962.
DEAR SENATOR: This is in response to your request for the views of the Department of Justice on S. 3044, a bill to amend the Interstate Commerce Act to grant to any carrier of coal by pipeline, subject to any of the provisions of part 1 of the act, the right of eminent domain, and for other purposes.
The bill would add a new section 27 to part 1 of the Interstate Commerce Act as amended, which would authorize carriers of coal by pipeline to acquire rightsof-way, land, and other property by the exercise of the power of eminent doman in the Federal district courts or the State courts, the former, however, to have jurisdiction of cases only when the amount claimed exceeds $10,000. Subsection (a) specifies that the bill applies only to carriers of coal by pipeline subject to part 1 of the basic act, whose operations the Secretary of the Interior finds "to be required by the public convenience and necessity."
This bill was introduced at the request of the President “to facilitate the construction of pipelines to transport coal slurry in interstate commerce." (Message of Mar. 1, 1962 on conservation.) Experimental use of this form of transport for coal indicates the possibility of considerable transportation savings. This opportunity for lower delivered costs could achieve an improved competitive status for coal as an energy source and, with that, an increase in economic activity in depressed coal mining areas.
The Department of Justice recommends enactment of the bill.
The Bureau of the Budget has advised that enactment of this legislation would be in accord with the program of the President. Sincerely yours,
NICHOLAS DEB. KATZENBACH,
Deputy Attorney General.
THE SECRETARY OF COMMERCE,
Washington, D.C., April 19, 1962. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.
DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Department with respect to S. 3044, a bill to amend the Interstate Commerce Act to grant to any carrier of coal by pipeline, subject to any of the provisions of part 1 of the act, the right of eminent domain, and for other purposes.
S. 3044 grants the right of eminent domain to any carrier of coal by pipeline which is subject to any of the provisions of part 1 of the Interstate Commerce Act and the operations of which are found by the Secretary of the Interior to be required by public convenience and necessity.
This bill represents legislation transmitted to the Congress by the President in his letter of March 20, 1962.
As the President pointed out in his letter, this new method of transportation offers possibilities for renewed vigor and hope for increased economic strength for the coal industry. This should result in fuller employment in the coalproducing communities, many of which have been designated by the Secretary of Commerce as redevelopment areas under the Area Redevelopment Act.
There is no doubt that other modes of transportation will be subjected to additional competition by the advent of coal-slurry pipelines. Full consideration of all such matters would, of course, be given by the Secretary of the Interior before finding an application to be required by the public convenience and necessity.
The Department of Commerce recommends, therefore, the enactment of S. 3044.
The Bureau of the Budget advised there would be no objection to the submission of this report from the standpoint of the administration's program, and further that enactment of this legislation would be in accord with the program of the President. Sincerely yours,
EDWARD GUDEMAN, Under Secretary of Commerce.
U.S. DEPARTMENT OF THE INTERIOR,
OFFICE OF THE SECRETARY,
Washington, D.C., April 17, 1962. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.
DEAR SENATOR MAGNUSON : Your committee has requested the views of the Department of the Interior on S. 3044, a bill to amend the Interstate Commerce Act to grant to any carrier of coal by pipeline, subject to any of the provisions of part 1 of the act, the right of eminent domain, and for other purposes.
We recommend enactment of the bill.
The Department is acutely aware of the many complicated problems in the energy field. The problems are complex and long standing. The answers are not easy. We believe, however, that one solution is to permit a more economic distribution of our total energy reserves and this can be accomplished by placing all of our energy resources in a position to compete on relatively equal terms. Coal encounters marked transportation disadvantages in attempting to reach the energy markets. Permitted coal to reach the energy markets by pipeline on a competing basis with other fuels would assist in the accomplishment of this goal. One of the
concerns in constructing an interstate pipeline is acquiring rights-of-way at a reasonable expense and in the shortest period of time possible. The right of eminent domain assists in overcoming the difficulties encountered in problems concerning time, expense, and obstruction. Without the right of eminent domain it would be extremely difficult, virtually impossible, to acquire the many miles of rights-of-way needed for such a line.
It is our understanding that a proposed pipeline would run from West Virginia to some point in New Jersey. Some of the States through which the pipeline would have to run do not have State laws granting the right of eminent domain to coal pipelines, and their legislatures do not meet until January 1963. If the constructors of a pipeline from West Virginia to a point in New Jersey seek to acquire rights-of-way under State laws they will run into great difficulty.
There is now no Federal law that grants the right of eminent domain to coal pipelines. Since most of the coal pipelines which are likely to be constructed will operate in interstate commerce, it would be reasonable and appropriate that Federal authority for the exercise of eminent domain be enacted. It would go a long way toward solving this difficult problem. Natural gas pipelines have the right of eminent domain under provisions of the Natural Gas Act (15 U.S.C. 717f (h)).
The bill provides that the Secretary of the Interior must find that the proposed lines are required by the public convenience and necessity; only pipelines which are to be operated in the public interest will be accorded the right of eminent domain. In making such a finding the Secretary will be guided by the multitude of interests which cumulatively constitute the national interest, and will be bound by the usual rule of law that he may not act arbitrarily or capriciously. It should be pointed out, however, that we would not regard it as arbitrary or capricious to make an affirmative finding of public convenience and necessity for a proposed coal pipeline even though an alternative method of transportation might be available.
Pipeline transportation would involve long-term contracts between coal producers and consumers, which would enable producers to plan their operations more efficiently and at the same time give them continuity of operations that would result in still lower producing costs. The latter, in turn, would have a significant impact in holding down the competitive prices of other forms of energy. The resulting availability of an abundance of low-cost energy could be a strong incentive to increased economic activity throughout the Nation.
In addition to increasing competition in the fuel energy market, the advent of coal pipelines would accelerate competition among other forms of energy transportation, in keeping with the fundamentals of our free enterprise system. The continued use for commercial purposes of oil pipelines built during past emergencies, together with the extension of oil and natural gas pipelines across the Nation and the resultant economic benefits that have accrued therefrom, are practical demonstrations of the importance of the availability of low-cost energy to the national economic growth.
Among other benefits from the establishment of coal pipelines would be substantial improvement of economic conditions not only in the coal industry but in many coal-mining communities that presently are in a seriously depressed condition because of the generally unfavorable competitive position of coal vis-a-vis consumer prices of other fuel energy sources that move by pipeline. Also, there would be new employment in the construction, operation, and maintenance of the pipelines; heavy capital investment in the pipelines themselves and in related slurry preparation and combustion facilities; stability of supply as related to transportation availabilities; technological research and development for extending the use of coal slurry to a broader range of industrial applications than initially contemplated; and numerous other contributions to the public interest.
We believe that enactment of this bill is highly important to the effective utilization of an important natural resource.
The Bureau of the Budget has advised that enactment of S. 3044 would be in accord with the program of the President. Sincerely yours,
JOHN M. KELLY, Assistant Secretary of the Interior.
FEDERAL POWER COMMISSION,
Washington, D.C., April 17, 1962. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.
DEAR SENATOR MAGNUSON: This letter is in response to your request of March 23, 1962, for our comments on S. 3044, a bill to amend the Interstate Commerce Act to grant to any carrier of coal by pipeline, subject to any of the provisions of part 1 of the act, the right of eminent domain, and for other purposes.
The bill would grant the right of eminent domain to the constructors of any common carrier of coal by pipeline that is subject to part I of the Interstate Commerce Act, the operations of which have been found by the Secretary of the Interior to be required by the public convenience and necessity.
The Commission is currently developing a long-range program to encourage the electric power industry to meet the Nation's rapidly expanding requirements for electricity at the lowest possible cost. The transportation of coal by pipeline shows promise of reducing the cost of delivering coal for power production and thereby the cost of producing power.
We therefore favor the bill which would facilitate the use of this new method of transportation. Sincerely yours,
JOSEPH C. SWIDLER, Chairman.
COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., April 13, 1962. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate.
DEAR MR. CHAIRMAN: We again refer to your letter of March 23, 1962, in which you asked for our comments on S. 3044.
This bill, which you introduced at the request of the President of the United States, proposes to add to part I of the Interstate Commerce Act paragraphs (a) and (b) of section 27 granting the right of eminent domain to carriers of coal in interstate commerce by pipeline.
We note that similar specific rights are possessed by pipeline carriers of natural and artificial gas under the Natural Gas Act, 15 U.S.C. 717f (h), and by licensees under the Federal Power Act, 16 U.S.C. 814.
This proposal, if enacted, would not affect the functions and operations of our office and we have no objections to its favorable consideration by your committee. However, unless the proposed paragraphs contained in S. 3044 are redesignated, it may be appropriate to change the numbers of the present section 27, the short-title provision, to section 28.
Also, it would seem desirable to reserve the authority to determine whether public convenience and necessity exist to the Interstate Commerce Commission, rather than the Secretary of the Interior, in order to associate such authority with that which the Commission already possesses concerning other carriers of coal and to maintain uniformity in regulatory procedures. Sincerely yours,
DEPARTMENT OF THE INTERIOR,
OFFICE OF THE SECRETARY,
Washington, D.C. May 21, 1962. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.
DEAR SENATOR MAGNUSON: As a result of the hearings on S. 3044, a bill to amend the Interstate Commerce Act to grant to any carrier of coal by pipeline, subject to any of the provisions of part 1 of the act, the right of eminent domain, and for other purposes, we suggest the following technical amendment to the bill :