The United States has created a modern version of that old cautionary cliche -- "carrying coals to Newcastle."
Corpus Christi's Central Power and Light reacted in earnest to President Carter's repeated urgings that utilities switch from burning foreign oil or natural gas to coal. So last August the investor-owned utility bought and burned 33,000 tons of coal -- imported from South Africa.
"It's crazy, but we did it because its cheaper than shipping coal by rail from Colorado," says Central Power and Light executive Joseph Shafer.
Central Power and Light is not alone.
San Antonio City Public Service, Southwestern Electric and a handful of other Gulf Coast utilities are considering buying South African, Australian and even Chinese coal, instead of low-sulfur coal from Wyoming and Colorado, or even Texas and Louisiana lignite.
Why should anyone import coal when the West has an abundance of it? The reason utilities offer is that domestic railroad shipping rates have more than doubled in the last three years, thanks to decisions by the Interstate Commerce Commission.
This "coals to Newcastle" imbroglio stems from a collision between two of President Carter's most publicized goals: rebuilding America's railroads, while at the same time "mining and burning more coal to cut our dependence on foreign oil."
But 65 percent of the nation's coal production is moved by rail and of that, 85 percent is carried by so-called "captive" lines -- railroads that provide the sole available service to a mining area.
These conditions, along with growing congressional sentiment in favor of railroad deregulation allow the railroads, as Rep. Bob Eckhardt (D-Tex.) puts it, "to gobble up enormous economic advantage afforded by our own abundant domestic coal resources."
West Virginia Gov. John D. Rockefeller IV, chairman of the President's Commission on the Coal Industry, said "the whole situation is crazy."
Eckhardt's oversight and investigations subcommittee yesterday released a report charging the ICC with "failure to protect shippers against railroad abuse of market power."
The subcommittee recommended that the agency change its policies, which at present "would allow the railroads to charge whatever the traffic will bear in most coal markets and. . . would allow them to extract the difference between the lower cost domestic coal and the BTU equivalent of imported oil."
At the same time, Eckhardt charged, ICC policy will not improve the financial health of railroads -- it will only "reward inefficiency."
Carl Bagge, head of the National Coal Association, called the move to imported coal "ludicruous," and Eckhardt remarked earlier last week, "the railroads know they have the only game in town and have not been afraid to exploit their position."
Richard Briggs, of the Association of American Railroads, labels these kinds of suggestions "a gross exaggeration . . . railroad rates have gone up far less than coal prices."
At the Transportation Department, officials say industry-wide the railroads still earn less than 2 percent on their investment, and even then domestic coals moved by rail is cheaper than imported oil.
And a leading railroad executive, who asked not to be identified, says the railroads have been singled out "so the utilities can hold down their rates so they can earn bigger profits for themselves."
Much of the rhetorical crossfire, however, is lost of San Antonio City Public Service's Arthur Von Rosenburg.
Rosenburg says that San Antonio electrical consumers are "being penalized for switching from natural gas to coal 2 1/2 years ago."
In 1977 the public utility began burning Wyoming coal it had purchased under long-term contract from Shun Oil at $7.30 a ton. To handle the coal, San Antonio spent $25 million buying more than 800 hopper cars to carry the coal south from the mine in daily trains.
When the coal started moving in October 1977, City Public Service was paying the Burlington Northern $10.93 a ton to haul it. Since then, however, a series of rate increases has nearly doubled that price to $19.25 -- a level recently approved by the ICC.
Because of the Burlington Northern's price increase, Von Rosenburg said that the utility has concluded that it would be cheaper to buy Australian coal. As for the government's transportation policy, he said, "it looks like the electrical utility rate payers are being forced to pay for rebuilding the railroads."
In a narrow sense, he's right.
Under the ICC's rules, so-called "differential pricing" is permissible. This complex rate-making concept in effect allows the railroads to charge more for shipping some commodities -- such as coal -- than they do for others.
Former ICC chairman Daniel O'Neal explained: "We decided that there should be a profit for that part of the system that moves coal, but also concluded that that system is to make a contribution for the movement of other commodities as well."
Union Pacific Railroad's Barry Schaffer added that "government policies -- subsidies available to waterways and highways -- force the railroads to depress some rates on commodities where we compete with barges and trucks." The railroads, he said, have no choice but to charge more for coal in order to gain the necessary capital to meet the high fixed costs of running rail lines.
Still another factor, Schaffer said, is that if an industry has to subsidize the Carter administration's coal conversion program, the utilities or coal companies, which on average earn 11 percent or more on investment, are in a better position to do it than the railroads.
With this concept in mind the ICC handed down what is known as "the 7 percent solution," allowing Burlington Northern to set a rate 107 percent of the socalled allocated cost. This rate methodology has also been allowed in other BN cases, as is now under challenge in federal court.