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RAIL COSTS HURT TAE COAL BUSINESS AWAY FROM FEDfiRAL COAL, T00 Lest year, about the time the antitrust legislation was being considered by House committees, one of the problems caused by the excessive freight rates charged by railroads enjoying monopoly situations was highlighted by a Virginia research organization. The story, reported in COAL WEEK, July 14, 1986: TAANSPOFITATION VIRGINIA RESEARCH GROUP SAYS RAIL RATES HURTING USE OF IN-STATE COAL Although Virginia coal produan have made somc progress in increasing salts in the utility market, utilities in that sure arc wntinuing to buy much of their coal from West Virginia and astern Kentucky, primarily because those states offer more favorable nil ores, according to a study compiled by the Virgi- nu Center for Cwl R Energy Rescarch in Blacksburg VA. The ttudy, which was written by Walter Hibbard Jr., dirtxtor of the center, uys that the Virginu coal industry, which was hurt by the decline in the meullurginl coal market, lus increased asks in the utility and industrial markett. Between 1980 and 1984, the study lutes, met coal ales dropped from 6796 of all Virginu coal sales to 5795: during the came period, utility cwt ales increased from 3096 to 1096. However, continued effons to increase coal sales to utilities love been limited by the high toss of tnnsponing cwt from Virginia's mines, the study says. Norfolk Sounc~rn, which urns many of the state's cwt fields, does not have rocks connetting it to five of Virginia Power's plants; conuquently, it must kale tnckage from CSX to deliver coal to thou units. The high toss of leasing the tnckage is passed on to customers, the study says, and as • result, utilities find that in some instances, the delivered cost of awl from West Virginia and eastern Kentucky is lower than the delivered price of coal from nearby Virginu mines. There's "no question about it-nil rates are limiting the market availability of Virginis coal," Hibbard says. 'That's how Virginia Power can afford to bring in coal from South America cheaper than cwt from their own state." Appalachian Power, one of the three major utilities with twl- burning plants in Virginia, buys virtually all of its Coal from Virginia sources, primarily bccause of the proximity of Virginia mines to its plants. However, Virginia Power ^nd Potomac Electric Power Co. continue to Duy a substantial percentage of their coal requirements from outof-state sources, the study uys. Virginia Power, for example, purchased S.S-million tons of coal last year, but only 3.3-million tons, or 5796, came from Virginu mines. In conclusion, the study maintains that the future of Virginia coal will remain uncertain unless: A) there is a sudden need for highyuality coal dtspite high delivered costs; B) there is a sim- ilar need for high~uality coal waste from Virginia's preparation plants; C) nil rates to state utilities become more competitive with those from West Virginia and astern Kentucky mines; or D) new coal-burning technologies that favor Virginu cwt come into wide use. COAL WEEK • July 14,1986