Two major railroads yesterday won a contract to deliver coal from Wyoming to Arkansas power plants, outbidding a coal slurry pipeline consortium, in an apparent setback for coal slurry promoters.
The Arkansas Power & Light Co. announced a 20-year contract with the Chicago North Western Transportation Co. and the Union Pacific System, which includes the Union Pacific and Missouri Pacific railroads, to move low-sulphur coal from the Powder River Basin in Wyoming to its White Bluff and Independence power plants.
Chicago North Western and Union Pacific had underbid the ETSI (Energy Transportation Systems Inc.) Pipeline Project for the transportation contract. The two railroads and ETSI, along with Burlington Northern Inc., submitted bids to Arkansas Power & Light April 15.
Coal slurry is coal crushed and mixed with water and then transported along a pipeline system. Proponents of slurry pipelines claim that these systems present a low-cost alternative to the railroad's virtual monopoly on transporting coal.
Railroads have opposed the pipelines, saying that they will suffer greatly and that the cost of shipping other commodities will go up if pipeline transport comes into being.
In the intense political debate over the two competing systems, Congress is considering legislation that would give pipeline operators eminent domain, the power to acquire rights of way despite railroad protestations. A spokesman for the Slurry Transport Association said legislation probably will be voted on in September.
Previously, pipelines have been blocked either by states worried about whether their water resources should be used to make slurry, or, pipeline supporters claim, by railroads which will not let pipelines acquire the right-of-way beneath the tracks.
A staff member of the House water and power subcommittee said even though ETSI had been underbid, that still does not mean that the slurry-pipeline measures will fail in Congress.
The issue for proponents of the measures, he said, is whether maximum competition will hold in the coal-transportation field. What is important is giving pipeline operators the chance to compete, he said, adding it is less important whether railroads underbid pipeline operators as long as competition exists.
"We personally don't know how they could do it and make money," said Stuart Serkin, of the Slurry Transport Association, about the railroads' bid. "It makes you think if they're doing this to put ETSI out of business," he added.
A spokesman for Union Pacific, however, said his company will fully recover costs and make money from the bid it submitted to Arkansas Power & Light. He also denied a conscious attempt by Union Pacific to put ETSI out of business.
Jerry L. Maulden, president of Arkansas Power & Light, said his company has been a supporter of the slurry pipelines in the past and still believes they are a viable alternative.
Charles Steel, senior vice president of Arkansas Power & Light, said competition has increased for pipeline proponents since passage of the Staggers Act in 1980, the major rail deregulation legislation that permits many railroads to conclude specific-commodity contracts with utilities, at lower rates than before deregulation.
In addition, the projected costs of the slurry pipeline system have jumped three to four times from original estimations, he said.
The White Bluff and Independence power plants in Arkansas will require between 10 and 11 million tons of coal a year at full operation. At currently regulated coal transportation, that would represent a shipping bill of between $230 million and $250 million a year.