coal slurry pipelines. Thus, the AFL-CIO neither supports nor op-
poses S. 318.
Various claims have been made by the proponents of coal slurry
pipeline legislation that it would produce variously between
500,000 and 375,000 new jobs, including some 150,000 construction
and manufacturing jobs and that therefore S. 318 is basically a jobs
bill. We strongly disagree. Senate 318, if passed, would cost many
more jobs than it would create.
There is no question that enactment and successful implementa-
tion of S. 318 will affect jobs. It will create no more than 100,000
temporary — and I underscore temporary — construction jobs at any
one time, unless all pipelines are constructed simultaneously and
51
that we know is not likely to occur. Even then, the jobs created will
last only until the pipelines were completed.
If coal slurry pipelines transport, as it has been claimed, some
250 million tons of coal annually, most of which would be diverted
from the rails, there will be a devastating affect upon railroad em-
ployment. The railroad industry could lose as many as 100,000 per-
manent — and I underscore the word permanent — railroad jobs
through the loss of coal traffic and the cancellation of what the
railroad industry has said would otherwise be a $6.9 billion invest-
ment in hopper car and locomotive construction.
Railroad employment in this country has plummeted from
514,000 employees in July of 1981 to 308,000 in January of 1987.
Railroad employment for 1988 is not available, but it is estimated
to be around 307,000. The ultimate loss of anything like 100,000 ad-
ditional railroad jobs would imperil, if not outright destroy, the
railroad retirement system which today provides pension benefits
for more than 1 million retired railroad employees and other de-
pendents.
This Committee need not be reminded of the delicate balance
which maintains the Railroad Retirement Trust Fund. Coal trans-
port is today the primary source of railroad operating revenue. If
that source of revenue is depleted it will force the railroads to in-
crease price in other commodities, but primarily the railroads will
cut back on their costs to lessen the adverse impact on the bottom
lines of their profit and loss statements.
We know only too well that the first, second, third and last
places that railroads look to cut costs is their work forces— the jobs
of their employees, but there are other risks. The effect of this leg-
islation on individual paralleling railroads to coal slurry pipelines
could even be more severe if railroads are driven into bankruptcy
or reorganization. Congress would then be faced with future Rock
Island, Milwaukee and Penn Central situations.
Based upon evidence presented to Congress over the years, we
are convinced that the granting of Federal eminent domain author-
ity to private parties to construct coal slurry pipelines for private
profit will result in devastating permanent losses to railroad work-
ers, their pensions, their families and their communities. For that
reason and many others discussed in our statement, the RLEA op-
poses enactment of S. 318.
If the Committee determines to act favorably on S.318, Mr.
Chairman, we then ask that it provide for the railroad employees
who may be adversely affected the same protections provided rail-
road employees in merger, consolidation and abandonment cases on
the Interstate Commerce Act. We have attached to our statement a
suggested amendment to S.318 which would accomplish that result.
I thank you for the opportunity to express our views, and for
your kind attention to my remarks.
[The prepared statement of Mr. Otero follows:]
52
BEFORE THE
UNITED STATES SENATE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
STATEMENT OF JACK F. OTERO
ON BEHALF OF
RAILWAY LABOR EXECUTIVES' ASSOCIATION
ON
S. 318
APRIL 20, 1989
My name is Jack F. Otero. I am an International Vice
President and Political Director of the Transportation*
Communications International Union. I appear here today on
behalf of the Railway Labor Executives' Association in opposition
to the enactment of S. 318. Accompanying me is Mr. K. 0.
Richardson, Chairman of the RLEA Task Force on Coal Slurry
Legislation.
The membership of the Railway Labor Executives' Association
consists of the chief executive officers of nineteen standard
national and international railway labor organizations. They
are:
American Railway & Airway Supervisors
Association (Division of TCU);
American Train Dispatchers Association;
Brotherhood of Locomotive Engineers;
Brotherhood of Maintenance of Way Employes;
Brotherhood of Railroad Signalmen;
Brotherhood of Railway Carmen (Division of
TCU);
Hotel Employees and Restaurant Employees
International Union;
International Association of Machinists
and Aerospace Workers;
International Brotherhood of Boilermakers,
and Blacksmiths;
International Brotherhood of Electrical
Workers;
53
-2-
International Brotherhood of Firemen and
Oilers;
International Longshoremen's Association;
National Marine Engineers' Beneficial
Association;
Railroad Yardmasters of America (Division
of UTU);
Seafarers International Union of North
Ame r i ca ;
Sheet Metal Workers' International
Association;
Transport Workers Union of America;
Transportation •Communications International
Union (TCU); and
United Transportation Union
All but one of these unions are members of the AFL-CIO. The AFL-
CIO has consistently maintained a policy of strict neutrality on
this type of legislation.
I appear before you today in opposition to legislation which
seeks to extend the power of federal eminent domain authority to
privately owned coal slurry pipeline companies. A most
pernicious aspect of this proposal from the point of view of
railroad employees is that it masquerades as a jobs bill.
Nothing could be further from the truth. This Act, if passed,
will cost many more jobs than it will create.
The private carriers advantaged by this grant of federal
eminent domain authority would direct their efforts at capturing
the most profitable long-haul, high-volume coal traffic; traffic
traditionally transported by this nation's railroads.
It is our conviction that the passage of such legislation
would not be in the public interest generally, and would, in
fact, result in a net loss of jobs nationwide.
The RLEA has testified many times before on the subject of
coal slurry pipeline legislation. S. 318 is very similar to
54
-3-
those earlier legislative proposals which have consistently
failed of enactment. The record already made on this subject is
just about the most complete record available on any piece of
legislation ever presented to the Congress. The detailed
substantiated evidence supporting rejection of S. 318 as unneeded
by and, indeed harmful to, the public interest we believe to be
overwhelming .
The impact upon railroad industry employment caused by the
existence of coal slurry pipelines must be considered from two
aspects: first, the direct impact occasioned by the diversion of
coal transport from trains to pipelines resulting in fewer coal
positions (including car and engine construction lost as a result
of the diversion); and, second, the effect of loss of revenue
upon a railroad's financial health and the efforts which must be
made by that railroad to bring its costs in line with its reduced
income. In the railroad industry this situation has historically
resulted in severe maintenance reductions by the furloughing of
maintenance of way and equipment employees.
To our knowledge, the only objective study of coal pipelines
ever presented to the Congress is the 1978 Report by the
Congress' Office of Technology Assessment. The 1978 OTA Report
has been extensively quoted and relied upon by opponents of coal
slurry pipelines since its issuance. While it is now eleven
years old and its statistics should be updated, we know of no
evidence which would justify modification of its basic
conclusions. The OTA Report concluded that the five pipelines
then being considered for construction would by the year 2000
55
-4-
result in the loss of some 16,000 railroad jobs at a time when
employment in the industry would be about 365,660. But
employment in the railroad industry is today much lower than that
predicted by OTA for the year 2000, having plummetted from
514,000 in July 1981 to 388,000 in January 1983 (a drop of 25% in
18 months) and to 320,000 in 1987, and an estimated 307,000 in
1988. Some 60,000 to 70,000 railroad employees are now on
furlough. The Railroad Retirement Board has estimated that 1992
employment may be between 265,000 and 239,000 and in the year
2000 between 199,000 and 152,000. Consequently, in the year 2000
from about 8% to 10.5% of the work force would lose their jobs
because of the construction of only 5 coal slurry pipelines.
Because of the adverse impact the construction of slurry
pipelines would have on railroad employment, at a minimum an
amendment to S. 318 is necessary to protect the employees
affected by this Act of Congress. Such an amendment is attached
to this statement. The proposed amendment would require as a
condition of certification by the Secretary of the Energy under
Section 4 of the Act, that the applicant provide protection to
affected rail employees at least as protective of their interests
as the protection afforded in rail consolidation and merger cases
under the Interstate Commerce Act.
It is contended by sponsors of coal pipeline legislation
that it is jobs legislation. It has been claimed that
construction of planned slurry lines would produce variously
500,000 or 375,000 new jobs, including 50,000 direct construction
jobs and 100,000 jobs in manufacturing; the "manufacturing jobs".
56
-5-
o£ course, would be in foreign countries unless the bill contains
a "Buy America" provision. Quite aside from the fact that these
types of jobs would be temporary in nature, unlike the permanent
railroad jobs which would be lost, the figure itself does not
bear analysis when netted against the loss of railroad equipment
manufacturing jobs because of diversion of coal traffic to
pipelines.
The figure of 500,000 jobs was arrived at by using the
Bureau of Labor Statistics input-output methodology. Sponsors
and proponents took an estimate that $12 billion would be spent
on pipeline construction, determined from Department of Commerce
statistics what amount would be attributable to labor costs, and
divided that figure by the BLS' average wage data in the heavy
construction segment of the economy.
However, it is intuitively obvious that the $12 billion
would not be spent all at once. It is most likely that such a
sum would be spent over, at least, a five-year period, and the
jobs created by the construction would not cumulate. Therefore,
even viewed most optimistically, all that the expenditures on
pipeline construction could realistically promise would be
100,000 jobs annually for five years. No money related to the
construction of slurry lines would exist after that.
The proponents of pipelines have argued that permanent jobs
will be created by continuous movement through pipelines of 250
million tons of coal annually. However, to obtain the real jobs
effects of such transport, the pipeline jobs created must be
netted against the attendant contraction of coal movements by
57
-6-
rail and its adverse effect on rail employment. The rail
industry has estimated that diversion to pipelines will mean that
39,000 rail equipment manufacturing jobs per year for five years
will not be created. Absent pipeline construction, the railroads
would invest $6,895 billion in hopper car and locomotive
construction, and track improvements. This investment would
yield 197,000 jobs over five years (using the BLS methodology),
or 39,000 jobs annually for five years. This figure must be
netted against the overall pipeline construction job figure of
100,000 annually.
In addition, the rail industry analysis based upon the BLS
methodology shows that only 22,000 operating jobs will exist on
the pipelines over a 30-year period, while 93,000 rail operating
jobs over 30 years would be created annually but for the
pipelines because rail operations are inherently more labor
intensive. These figures are derived by applying the BLS
methodology to projected revenues for the movement of 250 million
tons of coal annually, which is the amount of coal it has been
claimed the pipelines would move annually. Unit train
transportation of 250 million tons of coal would yield $3.5
billion of rail revenue, while slurry pipelines would yield $3.4
billion. When the BLS methodology is applied to these revenue
figures, the result is that 22,000 annual operating jobs would
exist if pipelines moved the coal, while 93,000 annual operating
jobs would exist if the movement was by unit trains.
58
-7-
It is clear that even assuming immediate construction of all
slurry pipelines, which is most unlikely, the net effect of job
creation would be definitely on the minus side.
The effects of individual coal slurry pipelines on
employment on individual paralleling railroads could be even more
severe if such pipelines were to drive such railroads into
reorganization and bankruptcy. In such cases, the employees and
this Congress would be faced with future Rock Island, Milwaukee
and Penn Central situations.
This Committee need not be reminded of the delicate balance
which maintains in the Railroad Retirement Trust Fund. In 1983
the Congress undertook the repair of the damage done to the
Railroad Retirement System by sharply declining railroad
employment with the coope:<^cion and sacrifice of the rail
industry — management, employees and retirees. Last year it
created the Railroad Retirement Reform Commission in an effort to
secure a permanent solution to that problem. Further erosion of
rail employment occasioned by diversion to pipelines could doom
these congressional efforts to failure. A general revenue bail-
out of the Trust Fund cannot be ruled out as a possibility should
that occur.
Quite aside from the adverse effect on employment, rail
labor is concerned that S. 318 contemplates bypassing the
Interstate Commerce Commission in the proposed certification
process. We respectfully submit that the Secretary of Energy is
ill equipped to deal with the weighty common carriage
transportation considerations which should be part of this bill
59
-8-
procedurally. The Secretary simply has no experience or
expertise in determining a future economic impact upon rail
transport and the effects of that impact upon our rail system and
the shippers of coal and non-coal commidities.
The testimony and documentary evidence which have been
presented to the Congress over the past ten years demonstrate
conclusively that coal slurry pipelines are not needed; they
cannot be made environmentally sound; they deplete already
overburdened water resources; they represent a specialized,
inflexible use of energy; their construction would contradict
established Congressional policy of revitalizing the nation's
railroads; and, would provide private carriers the combined
advantages provided private and common carriers without the
attendant disadvantages of either. That testimony and evidence
also demonstrate that railroads can meet the increase in demand
for coal transportation at rates probably lower, but at least
comparable to pipeline rates; and, that railroads are at least as
energy efficient, it not more energy efficient, than pipelines.
If pipelines are afforded federal eminent domain authority,
railroads will be placed at a disadvantage that seriously will
handicap their ability to compete. The only way to avoid the
destructive competition which would result from private coal
slurry pipeline companies' use of eminent domain authority is to
recognize now that pipelines do not offer needed or improved coal
transportation, while at the same time, they would undermine the
financial stability and service availability of the nation's
railroads. We respectfully submit that that is too high a price
60
-9-
to pay for an alternative system of transportation that can
produce no measurable improvement over what can be provided by
the existing railroad system.
In closing, I would like to refer to the detailed report
issued in 1978 by the Subcommittee on Transportation and Commerce
of the House Committee on Interstate and Foreign Commerce
following extensive hearings on H.R. 1609, one of the many
predecessors of S. 318 and its counterpart in the House, H.R.
402. That report concluded: "Federal promotion of coal slurry
pipelines in the manner contemplated in H.R. 1609 would undermine
the national transportation policy and, with it, the system of
common carriage."
Thank you for this opportunity to present to you the views
of the RLEA on this important subject.
61
AMEMDM£NT TO S. 318
subsecttSn U,:'' '"''°" '' '"^"^ '""^ ^^^^ - ^ - a separate
If the application is approved, the Secretary
shall require as a condition of the
certification that the applicant provide a
fair arrangement for the protection of
employees of rail carriers affected as a
result of the issuance of such certification,
including terras at least as protective of the
interests of such employees as the terms
required under section 11347 of Title 49.
62
The Chairman. Thank you very much, Mr. Otero. Mr. Otero,
what is the cheapest — the cheaper way to transport coal between
railroads and coal slurry pipelines?
Mr. Otero. Mr. Chairman, I am not an expert on this matter, as
I am here today representing the interest of my employees and the
more than 1,300,000 railroad retirees who would be adversely af-
fected by this legislation.
Perhaps you could ask that question to Mr. Dempsey of the AAR
who is a witness behind me.
The Chairman. You have certainly done a good job of testifying
today. And you can report back that you are a very good spokes-
man for your people.
Maybe Mr. Boede would have a view on that.
Mr. Boede. Yes, sir, I certainly would.
First of all, I think that just the matter of competition is the
healthy thing. I feel, at this particular point in time, that we can
transport that coal a lot cheaper through slurry lines than they
can by railroad.
We are willing to gamble in that regard. I understand there is
nothing mandatory about building these slurry pipelines. If, in fact,
they are not profitable, and there is not a dollar to be made, these
slurry lines are not going to go ahead.
It is private enterprise, it is competition. It has to reduce the
price of transporting coal.
The Chairman. Otherwise they could not build them?
Mr. Boede. That is exactly right.
The Chairman. Senator McClure?
Senator McClure. Mr. Chairman, first, I have a very brief open-
ing statement I would like to have included in the record at an ap-
propriate place.
The Chairman. Without objection.
Senator McClure. Just a couple of points that I made in that
statement. One is that I have long supported coal slurry pipeline
legislation as being necessary. And that is particularly true with
respect to the provisions that have been added to the bill in our
past markups that protected the states 'water rights, with respect
to the water issue.
And the other is, on the latter point that you make on competi-
tion. Frankly, while I support coal slurry legislation, I also want to
enhance competition in other ways as well.
And I make reference to the 2(c) provision, because I think that
is anti-competitive, and clearly so. And therefore, I would hope
that the committee will once again do what it has done in the past,
and that is include a repeal of 2(c) in the legislation when it is
passed.
Mr. Otero, while I understand that you did not feel qualified to
answer the question with respect whether pipeline transportation
is cheaper for coal, I have to assume that you have made the as-
sumption that it would be cheaper or there would be no job loss?
Mr. Otero. Well, I would say to you that the railroads are doing
a very good job today of transporting the coal all over the country.
And the concern that we have, Mr. Chairman, is if the railroads
lose a significant amount of that revenue, which, in my opinion, I
hear is more than 40 percent of their total revenue in the transpor-
63
tation of coal, they would have to look elsewhere to reduce their
costs in order to remain operational. And that, as a result of that,
we, the workers, would be adversely affected by the loss of employ-
ment.
Senator McClure. I understand that. And I think that you are
entitled to try to protect the members of your union, the workers
for the railroad. You are entitled to do exactly what you are doing.
I understand that.
But I would also say, it is almost a given, if you do not believe
that coal slurry is cheaper transportation, they would not be suc-
cessful; there would be no competitors; they would cost no jobs.
I think that is inherent in your testimony, although certainly I
understand the reason why you do not want to enhance the posi-
tion of your competitor. And I do not blame you for that. I under-
stand that. You have to be concerned about your own membership.
You have both been very good spokesman for your points of view.
And thank you very much for your testimony.
The Chairman. Senator Rockefeller?
Senator Rockefeller. Thank you, Mr. Chairman.
Mr. Otero, I might just ask this. We have heard it argued that
slurry pipelines will bring Western coal into the East, which, in
turn would further raise already high mining and rail unemploy-
ment rates.
Now, you have just indicated that you are not an expert on coal.
Slurry advocates say that such pipelines will be uneconomic. Do
you have any knowledge at all about pipeline proposals for trans-
porting Western coal East?
Mr. Otero. Mr. Chairman, to the best of my knowledge, no pipe-
lines have been constructed since 1978.
Senator Rockefeller. I understand that. But, in terms, have you
heard?
Mr. Otero. And there are no other, to my knowledge, there are
no other plans presently in effect to build a pipeline.
Senator Rockefeller. Thank you, Mr. Chairman.
The Chairman. Senator Burns?
Senator Burns. Thank you, Mr. Chairman.
I have a little opening statement that I would include in the
record. And I would like to say at this time, I am new in this com-
mittee and I appreciate holding these hearings because I under-
stand it has been hashed and rehashed, and I appreciate it, because
I realize that there are probably other places that you would like
to be today. But I certainly appreciate this.
I think as this debate goes on, that the question from the Senator
from West Virginia will probably — he is a coal state and so am I,
but I had some questions about the legislation in regard to water
rights and this type thing, and do we have enough water to move.
We know we have got enough coal to move. And my question was
along the line of Senator McClure's, and I think you answered that
very ably. So I have no questions for this panel.
But I do want to express my appreciation to the chairman and
the ranking member for having these hearings so that I can hear
the story, too.
And thank you very much, Mr. Chairman.
[The prepared statement of Senator Burns follows:]
64
Statement of Hon. Conrad Burns, U.S. Senator From Montana
Mr. Chairman, I would like to thank you and Senator McClure for scheduling this
hearing on Coal Slurry legislation. I am aware this issue has been discussed for
many years and I appreciate your allowing members new to the Committee the op-
portunity to study its merits.
Mr. Chairman, Montana has the largest coal reserves in the United States. Coal
production in the United States is expected to inciease 16.5 percent during the next
eight years, reaching 1.068 billion short tons in 1995. This nation's use of coal to
meet its energy demands has increased significantly and is expected to continue.
Although we are producing more coal, U.S. exports have fallen as a percentage of
the world market. Furthermore, U.S. utilities use imported coal because of its cost-
effectiveness. It is generally agreed that Coal Slurry legislation would substantially
lower our transportation cost making our coal more attractive to domestic utilities
and foreign markets.
We must however, take into full consideration the implications of a pipeline on
rail rates for commodities such as grain, which have no alternative mean of ship-
ment. Further discussion must center upon the issue of water, a very valuable com-