AMC coal convention in Pittsburgh : Attendance up and mood optimistic for growth in US coal industry

The coming years should see moderate growth in the US coal industry. That growth may come at the expense of the oil and natural gas industries. Conoco pegs coal growth at 2% a year, until the year 2000. During that same period, Conoco projects only 0.5% annual oil growth and "a flat or negative trendline" for natural gas. This is compounded by the fact that coal has a delivered cost per Btu that is only half as much as it is for natural gas and only a third as much as it is for oil. So said Ralph Bailey to many of the 2600 attending the opening session of the American Mining Congress Coal Convention, May 12-15, in Pittsburgh, PA. Bailey is chairman of the AMC. He is also chairman of Conoco. While coal's projected growth is not spectacular, "it is in fact almost an assured growth," Bailey said. Weak oil and gas prices will likely prevent faster growth for US coal. Most of coal's increased demand will come from the electric utility industry and expanded steam coal exports. Conoco's study projects that domestic coal demand will be strengthened in the 1990s. By then, the present surge of nuclear power plant constuction will be over. And there will be a lack of acceptably priced, large-scale generation alternatives for utilities. "It is not likely that any electric utility is going to be ordering new nuclear reactors," Bailey said. "And as oil and gas supplies become scarcer and more costly, it is only logical that coal is going to fill the gap." At the same time, Bailey believes the US coal industry must find ways to lower its costs. He said cost excesses can be found in "regulatory overkill, labor, and simply bad habits" hidden by years of high inflation. "Those costs have now been laid bare, because we are going through a pe¬riod of disinflation. We have to put our house in order, particularly if we are going to compete in world markets." Bailey also touched on coal research. "The industry certainly accepts the fact that we must find a way to burn coal as cleanly as possible. A lot of work in that regard is going on. I expect there will be some significant break-throughs." Bailey said the coal industry is being squeezed this year. Last year, coal customers accumulated inventories in anticipation of a major coal strike that never materialized. Now, many utility customers are working down these inventories. So they are not taking deliveries on their coal contracts. But coal use is up in 1985, compared with 1984, Bailey said. So increased coal use, along with supply drawdown, should strengthen the coal market before the year is out, he said. After Bailey's presentation, some 100 speakers addressed policy and technical topics at 15 sessions during the four-day meeting. It was the first time since 1977 that the AMC Coal Convention has been held in Pittsburgh. And this year's attendance was up 40% from the last AMC Coal Convention held two years ago in St. Louis, MO. This year's registrants included 228 companies, 225 manufacturers, and 106 associated members. The only negative was the David Lawrence Convention Center. It was less than ideal. By turns, meeting rooms were too small, too cramped, or too far from one another. The session on longwall mining was so crowded that the doors were propped open so conference delegates could peer in. A concurrent manufacturers' forum session needed 50 more chairs to accommodate those wanting to attend. However, on to summaries of some of the presentations. Coal transportation and export Since Congress approved the 1980 Staggers Rail Act, railroad rates for hauling coal have not been excessive. In fact, rail rates for coal have increased less than 0.5% a year, in real terms, since 1980. Moreover, the market oriented principles written into Staggers are contributing to the improved financial and operational health of the nation's railroads. But no railroad is earning excessive profits. That is the gist of a coal transportation study being completed by the US Department of Energy. William Vaughan is DOE's assistant secretary for fossil energy. He affirmed the thrust of the upcoming report. Vaughan did allow that Interstate Commerce Commission (ICC) regulations on rate reasonableness could permit the railroads to exploit their monopoly power on captive shippers. Luncheon comments later made by Don Hodel confirmed Vaughan's comments on railroad rate justification. Hodel is Secretary of the