Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 21, 1993 TAG: 9302210097
SECTION: BUSINESS PAGE: D1 EDITION: METRO
SOURCE: Daniel Howes
DATELINE: LENGTH: Long
ENERGY TAX WORRIES RAIL BOSSES
King Coal is taking a few lumps these days - and that should matter to folks around Roanoke:President Clinton, eager to pull more dollars into the treasury, Wednesday called for an energy tax that would whack utility bills across the country. That means fuel oil would cost more, natural gas would cost more and electricity - generated primarily by burning coal - would cost more.
Long before it was officially proposed last week, railroads - including Norfolk Southern Corp. and CSX Transportation Inc. - joined the chorus against any levy that smacks coal too hard. Indeed, Clinton said Wednesday, the proposed tax was crafted with the hope of averting pain for any single energy source - for example, avoiding a carbon tax that would have slammed coal, rail and electricity interests.
Striking miners have closed Peabody Coal Co. operations, idling three mines served by Norfolk Southern lines and more than a dozen mines served by CSX. For now, Norfolk Southern coal officials are hoping the three-week stoppage won't spread, and instead are looking to pick up business from customers dependent on CSX service.
Recession in Europe continues to dampen coal exports to steel mills and utilities abroad. At the same time, German and British moves to phase out government subsidies for their coal producers still are shaking out, leaving new market opportunities uncertain.
Yet another warmer-than-normal winter continues to keep utility company stockpiles high and rail deliveries off. Increased consumption last year and fears of a work stoppage this month helped Norfolk Southern's coal-hauling business post a strong fourth quarter; railway operating revenues were up 6 percent over 1991's final quarter.
So there's some pressures these days on the coal industry and folks who move it around the country. Why should Western Virginians care?
Because coal and its transportation mean jobs and income to thousands from Bedford to Radford to Norton. Last year, Norfolk Southern moved all of its export coal - 36 million tons - through Roanoke on its way to colliers waiting in Norfolk.
All told, the railroad figured, nearly 65 million of the 117 million tons Norfolk Southern hauled last year trundled through downtown en route to utilities and steel mills in the United States and abroad. That's about 6,500 trains a year, or nearly 18 trains every day.
It should be no surprise, then, that Norfolk Southern Chairman David Goode urged Roanoke business leaders last month to caution their congressmen against levying energy taxes. "Reduced coal consumption would hit especially hard in Western Virginia," he warned.
"That's why you and the political and educational leadership here and in Western Virginia need to understand that regulatory and trade barriers against coal will do more than anything else to damage the economic future of the Roanoke Valley."
Big business - the railroad, chemical, auto, coal and utility industries - steadfastly opposes energy taxes. They contend the increases would cost jobs, the economic recovery and perhaps market share for some fuel producers.
Thursday, the chairman of Ohio-based American Electric Power, parent of Roanoke's Appalachian Power Co., issued a statement recognizing "the need to raise revenues. But it would be unfortunate to make our fragile economic recovery suffer in the process."
Then came the hammer:
"We are just beginning to feel the added costs of complying with acid rain legislation," Richard Disbrow said. "Injecting energy taxes into the mix, together with a possible increase in the corporate tax rate [as proposed by Clinton], could damage our industrial customers' efforts to meet world-class competition."
The Association of American Railroads and the National Coal Association, Washington-based trade and lobbying groups that count Norfolk Southern among their membership, have expressed opposition to energy-based taxes in general.
Norfolk Southern's post-speech corporate line applauded Clinton's deficit-reduction efforts and recognized the need to spread the "pain" across the economy. Predictably, though, talk of raising corporate tax rates and levying an energy tax has railroad bosses worried.
An energy tax pegged to the consumption of BTUs - British thermal units - "could place an unfair burden . . . on coal in relation to other energy sources," a company spokesman said. And coal consumption is vital to a company that pulls a third of its revenue from what Goode has called "a river of black prosperity."
"Let's face it," said Donald Seale, Norfolk Southern's assistant vice president for domestic coal and ore traffic, "an energy tax at all will be hard on the economy. It's hidden but it's still going to hit everyone in the pocket."
For now, no one really knows what the taxes will cost consumers. Estimates abound in news accounts (by 1996, up to $150 annually per household); folks like AEP's Disbrow say the proposed tax - 25.7 cents on a million BTUs - "could mean approximately $250 million in new taxes" for AEP customers.
The devil is in the details. One Washington source familiar with the proposed energy tax put it this way: "Two sentences in a [presidential] speech could end up to be a 150-page bill." Stay tuned.
\ Daniel Howes writes about business and political issues for the Roanoke Times & World-News.