Senator BYRD. What is the ash content of this coal we are talking about?

Mr. MATHESON. Twelve percent.

Senator BYRD. How does it compare with West Virginia coal? Mr. CORYELL. You want to get a plug, I see.

[Laughter.]

Mr. CORYELL. It could be very well three times the figure, and

more.

Senator BYRD. So that is relatively high ash content?

Mr. CORYELL. Yes.

Senator BYRD. Now, Mr. Snell, with regard to operating labor costs, how do you arrive at the savings of something like $50,000, roughly?

Mr. SNELL. I can go into detailed figures on the exact personnel, hours expended by each person.

Senator BYRD. Mr. Shell, just state how you arrived at this. We did this in regard to another base some time ago and it didn't take long and it was easily understood by those of us who were present.

Mr. SNELL. The way this was determined, we took the actual numbers of operating personnel operating in each of these two plants and then estimated what the requirements would be with a gas operation. The reduction in personnel, as I indicated a few minutes ago was relatively small, $50,000 out of $457,000.

I have a complete detailed breakdown of the personnel used in operation of each of these plants. If you would care to go into that detail.

Senator BYRD. $50,000 represents how many persons?

Mr. SNELL. Roughly 5 people.

Senator BYRD. Does this mean four or five persons are going to be eliminated from the Air Force operation?

Mr. SNELL. Yes, sir, these are both bases.

Senator BYRD. These are people in the service?

Mr. SNELL. These are civilians. In the operating labor or reduction at Fort Richardson will be from, we will round this figure out, 20 to 18 or, rather, I had better make it exact, it will be from 18.75 to 17.25 or a reduction of 2.5 persons. At Elmendorf from 18.75 to 16.25, also a reduction of 22 persons. Or a total of 5 persons per year. Senator BYRD. These are civilian personnel?

Mr. SNELL. These are civilian personnel.

Senator BYRD. Why do you have to have civilian personnel to do this work?

Mr. SNELL. These are the operators in the plant, speaking for the Army-I am not sure of the Air Force-we do not permit military personnel as operators in boiler plants of this size. These are more— they have to be highly qualified persons.

General SHULER. This is normal, sir.

Mr. SNELL. We are not talking about small warm-air furnaces where we do use military personnel in barracks operation.

Senator BYRD. I think you have a lot of statistics and I know you are attempting conscientiously to bring to the attention of the committee the basis upon which you have arrived at your conclusions, and I am sure it isn't easy. It is easier for me to ask questions; it is not so easy to come up with what is wanted.

sir.

General, do you have anything further?

General SHULER. No, sir, I do not, sir.

Senator BYRD. Anyone else representing the military?

General SHULER. No, sir, I think we have covered the Air Force, too,

Senator BYRD. May I ask Mr. Sheridan, if he is here?

General SHULER. Šir, he had to go back to the Pentagon and he spoke to the committee's counsel before he left, sir.

Senator BYRD. Does anyone else wish to make a contribution before we close the hearing?

I indicated earlier that I believed Mr. Matheson and Mr. LaZelle, perhaps, might wish to respond to some of the testimony that was submitted by Mr. Teel, and if either of those gentlemen, or both, wishes to do so he might have the privilege if he will do so promptly.

And let me express appreciation to all who have appeared and all who have contributed. All of the testimony has been presented in a very fine manner. Excellent work has gone into the preparation of statements. The Defense Department is to be congratulated, for its efforts to live up to its responsibilities, among which is the responsibility of seeking to find the method of operation which is most economical. I have no quarrel with that, and I am sure no member of the committee seeks to question this fact.

As Senator Bartlett has indicated the matter does go a little beyond that, and whether or not the committee will want to proceed to make further inquiries is a matter which I cannot determine at the moment. I want to express appreciation to those people from Alaska who have traveled a long way, at some inconvenience to themselves, to appear before the subcommittee. The testimony is appreciated.

General, again I thank you and your people and, Mr. Snell, may I say I have the utmost respect for your conscientious efforts to do a good job.

Do you have a question, sir, or a comment ?

Mr. LAZELLE. Mr. Chairman, my name is LaZelle, and I wish to take the opportunity to submit a statement in answer to Mr. Teel. Senator BYRD. You may submit it for the record.

Mr.LAZELLE. Thank you.

(The information referred to follows:)

MATANUSKA ELECTRIC ASSOCIATION, INC.,

Palmer, Alaska, May 24, 1965.

To: Mr. H. S. Atkinson, Senate Armed Services Committee, Senate Office, Washington, D.C.

From: Mason LaZelle, general manager, Matanuska Electric Association, Inc. Subject: Supplementary statement of Mason LaZelle.

This supplementary statement will answer remarks addressed to the committee by Mr. Dale Teel, general manager of Alaska Pipeline Co. Mr. Teel's statement indicates that coal is not competitive in the Anchorage area, since neither Chugach Electric Association, the largest electric cooperate in Alaska, nor the city of Anchorage have installed any coal-burning facilities, but instead have installed gas turbines.

An effort has been underway for some 5 years to establish a cooperative approach to new generation among the power-producing and distributing agencies in the area. Matanuska Electric Association has been in the forefront of that effort. Unfortunately, it has to date foundered upon the basic differences between Chugach Electric Association and the city of Anchorage. CEA serves an area contiguous to the city of Anchorage, and also serves a large part of the area within the limits of the city. A basic inability to solve the attendant

problems has doomed every effort to date to develop generation with base loading type of equipment. Instead, within the last several years the city of Anchorage has installed two gas turbines of approximately 16,000-kilowatt capacity each, and CEA has installed one of the same size. It might be of interest that although the turbines owned by the city of Anchorage do use natural gas for fuel, to date the CEA turbine does not. The reason is that Mr. Teel's firm will not supply gas, although the plant is in the service area of the gas company, until CEA agrees to pay the $100,000 cost of the gas line.

Gas turbines are not intended for anything but peaking service, as opposed to hydroelectric and steam turbines, which are classed as base loading equipment, able to give long, continued service, and to carry system fluctuations with safety. An illustration of this fact is that since the three gas turbines have been connected to the area transmission system, the military has refused to honor its agreement with the Bureau of Reclamation Eklutna hydroelectric plant to provide standby capacity. The reason is that gas turbines are small and sophisticated equipment. They have very low mass, as related to capacity, and do not have the ability to absorb load surges on the system without equipment damage. Therefore, they are protected by various controls which are quite sensitive. These controls take the turbine off the line instantaneously whenever slight fluctuations in frequent or voltage occur.

As regards power cost, MEA has established by exhaustive engineering study over a 5-year period that a mine-mouth, coal-fired, steam powerplant located at Sutton, in the Matanuska coalfield, will produce power and transmit it to Anchorage at highly competitive figures. MEA power costs from the Eklunta hydro project average slightly less than 11 mills per kilowatt-hour. parison, power costs delivered in Anchorage from a mine-mouth plant of 22,000kilowatts would be about 9 mills, from a 33,000-kilowatt plant about 7.5 to 8 mills, and from a 66,000-kilowatt plant would be as low as 6.7 mills, if REA financing for such plant could be obtained. Unfortunately, the basic problems of Chugach Electric Association have made it impossible to date to obtain area agreement among the three cooperatives in the general area, and therefore to obtain REA financing for a major plant. With private financing, the above costs would be about 1 mill per kilowatt-hour higher. This type of financing would be contingent upon the participation of the city of Anchorage, and eventual ownership by the city of the facility. Such an approach is now being developed.

None of the gas turbines in the area have to date shown operating ability to better the above costs, and of course they have the additional problem of being basically peaking units, not adapted to continuous carrying of base load. In essence, basic disagreement among the larger generation and distribution agencies in the area have dictated the installation of gas turbines, not engineering feasibility.

Mr. Teel also inferred that if the coal mines were lost to the economy, that no appreciable effect would be felt, and cited the past situation in which underground operation resulted in a drop of the numer of miners employed. In the 1940's the cessation of gold mining in the area resulted in some 900 miners becoming unemployed. This was during the war years, when the economy was overly stimulated by defense spending, and certainly this had a great deal to do with the resulting impact on the economy. During the 1950's the shift in the coal mines from underground to strip operation resulted in a drop of perhaps 150 in employment in coal mining. Now the area is faced with losing the rest of the industry. The point is not that the economy continues to exist, but that it has in each case been set back. Growth rates have slumped, confidence in the basic health of the economy has suffered. The Matanuska Valley area is primarily a natural resource producing area, not a service area, as is Anchorage. Therefore growth s slow, and any development requires a relatively large infusion of capital. of a major industry is disastrous, and will set the area back 10 years or more. The loss of the gold mining industry has never yet been overcome. The economy s not at this time as robust as it was in the 1950's. This is the fact, not whether ›r not people still live in the area.

MASON LA ZELLE, General Manager.

47-232-65-51

EVAN JONES COAL Co., Anchorage, Alaska, May 28, 1965.

Hon. ROBERT C. BYRD,

Committee on Armed Services,

U.S. Senate, Washington, D.C.

DEAR SENATOR BYRD: This is submitted pursuant to your indication at the recent hearings on the Alaska fuel conversions that I might respond to some of Mr. Teel's testimony on behalf of the gas interests.

One item by Mr. Teel is his suggestion that coal made excessive profits prior All to the arrival of gas as a competitive force. This is completely incorrect. during this period we were investing in strip equipment and developing procedures to remain competitive. Mr. Teel failed to mention this keen competition between coal producers before gas came into the picture. Thus we not only did not have the "captive" market he talks about, but were hardly in the excess profit picture he painted. It was instead a struggle to hold sufficient coal business to keep our mine, which has been the largest and strongest, in business. The further sharpening of competition through gas brought on more investments and changes in order to further reduce costs. One coal operator went bankrupt 6 months ago, in the process.

Mr. Teel made mention of this bankrupt, but in the totally different and irrelevant context of an antitrust suit, recently filed. Our company is incidentally named in this suit, the general thrust of which is that there was a conspiracy, in which we were dupes, to drive coal out of business entirely. We categorically deny the charges, of course, but even the reference to antitrust by Mr. Teel was about as apropos to your committee's inquiry as would be our reference to litigation in which Mr. Teel's company is defendant on the charge that leakage of gas from his lines caused an apartment house explosion in which substantial personal and property damage was suffered.

A number of other inaccuracies by Mr. Teel include his frequent statement that the gross loss of the railroad would be only $500,000. The general manager of the railroad, in testifying before the Appropriations Subcommittees on Interior Department appropriations, both House and Senate, made it clear that his gross annual loss in revenues because of conversion would be $750,000. We felt it not only appropriate but correct to use the railroad's own figure.

I would also like to comment on Mr. Teel's use of a 20-cent wellhead price as though this is in fact what they are paying. He termed it "unfortunate" that Congressman Rivers did not take this into account. The fact is that under the present wellhead contract the price is 25 cents, which escalates to 272 cents in December 1966, and escalates even further in 1971. No one had ever heard of the 20-cent price until these hearings, at which time it was first announced. Also, although Mr. Teel did mention that his pipeline buys its gas at the wellhead from the Union and Marathon Oil Cos., he did not mention that these companies own one-half of the pipeline's capital stock. The reduction in the wellhead price was apparently deemed necessary in order to offset the protest to the Comptroller that, at 25 and 272 cents, the price of 29 cents to the military could never recover costs and thus was obviously not a price which a regulatory agency could approve. In any event, the fact remains that the current price is 25 cents and even Mr. Teel concedes that it will not be less than this unless and until they start making deliveries to the military.

But even at a 20-cent wellhead price, under the Van Scoyoc study of March 1, which is part of this record and which remains totally unanswered through any facts offered by Mr. Teel, the 29-cent price to the military will still be below cost. It is thus wide open to adjustment by regulation. It is no answer for either the military or the pipeline to say that they have agreed in their contract not to raise the price. They cannot agree among themselves so as to foreclose the general public interest which would be represented by a regulatory agency. There will be such regulation of this pipeline when the bill, which has passed the Alaska House and which is pending in the Alaska Senate, becomes law. The price to the military must then go up. Clearly, the military should at the least evaluate gas on what a regulated price would be. Instead, they say that oil would then be cheaper, ignoring the fact that the so-called saving with oil is entirely offset by the loss to the Alaska Railroad.

You will recall that Mr. Teel testified that gas should not be "deprived" of this opportunity to more than double its existing market, by killing off coal, because they had sized the pipeline to carry the military load. This is a bootstrap argu

ment at best. It should also be considered, however, in the light of the fact that the feasibility report on which the capacity of the pipeline was based made it clear that a good profit would be made on the civilian business alone. It would just be a much better profit if the military business could be added. Mr. Teel admitted, in response to your questions, that gas is making money now, without the military, and that their present 6,000 gas customers are expected to grow soon to 12,000.

Mr. Teel also suggests that the staggering economic consequences of conversion which have been testified to are untrue. This self-serving declaration is flatly contradicted by the manager of the Alaska Railroad, the mayor of Palmer, the manager of the Matanuska Electric Association, as well as the Alaska delegation which is on record as opposed to conversion primarily on economic grounds. The U.S. Department of Labor's figures showing the labor surplus of the Matanuska Valley rebut the assertion that the men displaced will be quickly absorbed into the labor market.

I appreciate this opportunity for a brief response to Mr. Teel. A careful examination of the savings estimated by the military from this conversion in the light of the totality of Federal interests involved will show them to be nonexistent. We are confident that the committee will base its decision on such an examination.

Respectfully submitted.

HUGH J. MATHESON, General Manager.

Senator BYRD. At this point in the record, I would like to insert a statement from Senator Gruening of Alaska.

STATEMENT OF SENATOR ERNEST GRUENING BEFORE THE COMMITTEE ON ARMED SERVICES, U.S. SENATE, ON H.R. 5885, THE MILITARY CONSTRUCTION BILL

Mr. Chairman and members of the committee, the problem you are considering in connection with the proposal to appropriate $1,560,000 to convert powerplants at Fort Richardson and Elmendorf Air Force Base, Alaska, from coal to natural gas is one which has been before the people of Alaska for 3 years. During this time I have been able to consider it carefully, to look at all aspects of it, and I have had to come to the conclusion that to convert these Anchorage area military bases from burning coal to burning natural gas would constitute a tragic error. Alaska has all too few basic industries. Those upon which we relied most heavily in times past are now less secure than they were. Gold mining has practically disappeared because of Federal Government policies relative to the price of newly mined gold which I can only consider shortsighted and erroneous. Salmon fishing has declined materially, again through the application of mistaken Federal policies during the period when Alaska was a territory and therefore did not have control of the management of the commercial fishery. Painfully, since statehood arrived, the State of Alaska through the application of long overdue sound conservation policies has been slowly rebuilding the salmon runs, but we will have a long way to go before the salmon fishing and canning industry will return to its position as a main prop of the Alaska economy.

One industry which has been relatively healthy in my State is the coal mining industry. Most of the coal mining activity and employment is centered in two major fields-the Healy River field, just north of Mt. McKinley National Park and the Alaska Range, and the Matanuska field, near Palmer about 50 miles northeast of Alaska's largest city, Anchorage.

Coal from the Healy River field goes principally to Fairbanks and the Defense Department bases adjacent to that interior Alaska city-Fort Wainwright, Eielson Air Force Base and the Clear Ballistic Missile Early Warning Site.

The proposal you have before you today would at a stroke wipe out the coal mining industry in the Matanuska Valley field, which is the more productive of the two I have mentioned. A sufficiently large percentage of the total output of the mines in the Matanuska Valley goes to Anchorage area military bases that the removal of this market through conversion of burners on these bases to natural gas would clearly make it uneconomic for the mines to continue to operate.

Officials of the Department of Defense have studied this conversion proposal carefully and single mindedly. In fact, it is precisely because the consideration has been so single minded that greater and more important considerations than the estimated $1 million per year saving which would ostensibly be realized