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. . r-- ~f'" , , . ,..-~ 1...-.-' W. R. Grace & Co. The technology is promising at its current scale. However, a larger demonstration size test loop program is required before that technology can be utilized for a project such as AQUATRAIN. We have been looking for sites to install and operate such a C02 slurry test facility. A site we had identified at a power station in Texas has recently become unavailable and we are now in the process of locating another site. r ",_. One additional technology we believe vital to AQUATRAIN is the ChemCoal technology to make a compliance coal, being developed by a partnership in which the principals in Aquatrain are also involved. This product is now being produced in a continuous pilot plant. Our co-investors in that venture include Burlington Northern Inc. and MidCon Corp. Also, Koppers Company holds an option to join us. This venture has recently exercised an option to acquire a small refinery near Osage, Wyoming in the Powder River Basin to serve as a demonstration plant. Modification of this refinery should be completed in 1985. These steps should bring the ChemCoal technology to a commercial demonstration level in less than three years from now. We would be less than candid if we did not point out that technologies we consider vital to the AQUATRAIN Project remain to be completed on a full-scale basis, and that their progress will affect the timing of the AQUATRAIN Project. Economics Another area remaining to be defined relates to project economics. My former company built the first coal slurry pipeline in the mid-1950's and has remained active in slurry engineering ever since (the Consolidation Coal System in the State of Ohio). Nevertheless, there has not been the proliferation of slurry pipelines we all expected. Also, having been a director of several railroads, I have viewed the slurry pipeline question from more than one side of the question. There is not time to go into all the reasons why slurry pipelines are not more commonplace. However, for a project such as AQUATRAIN to compete with an existing rail system, it must have a tariff less than the marginal cost of operating the in-place rail system. To do this, a very large throughput and long haul is required, usually not less than 30 million TPY or 500 miles in length. The important point is that the role of coal in filling the critical gap created by overdependence upon depleting petroleum will be so demanding that it will tax the railroads to meet the traffic in about 15 years. Slurry pipelines will not be successful if they are planned to take away the cream of the railroad in existing business - the high load, long distance hauls. They will only work if they help bear economical future demand. -2-