lower, but at least comparable to pipeline rates; and, that railroads are at least as energy efficient, if not more energy efficient, than pipelines. However, if pipelines are afforded federal eminent domain authority, railroads will be placed at a disadvantage that seriously will handicap their ability to compete. The only way to avoid the destructive competition which would result from private coal slurry pipeline companies' use of eminent domain authority is to recognize now that pipelines do not offer needed or improved coal transportation, while at the same time, they would undermine the financial stability and service availability of the nation's railroads. We respectfully submit that that is too high a price to pay for an alternative system of transportation that can produce no measurable improvement over what can be provided by the existing railroad system. In closing, I would like to refer this Committee to the detailed report issued in 1978 by the Subcommittee on Transportation and Commerce of the Committee on Interstate and Foreign Commerce following extensive hearings on H.R. 1609, a bill virtually identical to S. 1844 in its basic purpose and effect. That report concluded: "Federal promotion of coal slurry pipelines in the manner contemplated in H.R. 1609 would undermine the national transportation policy and, with it, the system of common carriage." Thank you for this opportunity to present to you the views of the RLEA on this important subject. The CHAIRMAN. Thank you very much. STATEMENT OF PHILIP S. BROWN, VICE PRESIDENT, CORPORATE Mr. BROWN. Thank you, Mr. Chairman. I am Philip S. Brown, vice president for corporate affairs for the Kansas City Southern Railway Co. I am accompanied by Washington counsel, Mr. Jon T. Brown of Brown & Roady, whose firm has primary responsibility for advising my company on land, water and commerce law related to the development of coal slurry pipelines. And I'm also accompanied by our New York financial consultant, Mr. Thomas E. Dewey, Jr. These gentlemen are sitting behind me. At my request, Mr. Dewey has prepared a written statement discussing the difficulties of financing large scale projects like coal slurry pipelines. It points out the impact that these financial arrangements might be expected to have upon the credit of participating utilities, and the rate that passes through to their electrical consumers. I would ask that both my written statement and Mr. Dewey's written statement together with some supporting materials be accepted for insertion in the hearing record. The CHAIRMAN. Without objection, so ordered. Mr. BROWN. The Kansas City Southern provides regional rail service over a 1,500-mile system, beginning at Kansas City on the north and connecting the Midwest to several major Gulf ports in Louisiana and Texas. We currently handle unit coal trains which originate in Wyoming, delivering that coal to a number of destinations along the system. Market studies indicate good potential for growth in those coal movements, both attributable to economic development and to conversion from natural gas to coal. That prospect led us to make a nearly $100 million investment over the last decade and improvements to our rail system related to coal traffic capacity. The proposed ETSI pipeline would serve those same markets so we've been forced to examine carefully what slurry transportation means to our future. That future depends at least as much on agriculture as it does on coal. For that reason the impact of this legislation on farmland and natural resources is vitally important to the railroad. It caused us to look carefully at two aspects of the legislation. Federal eminent domain across private lands, and the effect of this legislation on water. Our greatest concern about the Federal eminent domain power in S. 1844 is the extent to which the special privilege can be used to preempt State water rights and State and local laws. Congress is able to grant Federal eminent domain rights to these pipeline companies pursuant to its authority under the Interstate Commerce Clause of the Constitution. From court interpretation of this constitutional power has developed a presumption familiar to this committee that Federal law preempts State laws where conflicts occur in cases of this type. It is inevitable that the use of this power by pipeline companies will result in conflicts between various State laws and the Federal eminent domain law enacted by Congress. My full testimony discusses at some length the cases which provide a precedent against which these conflicts will be judged. Our analysis resulted in two basic conclusions. That the bill as drafted omits several important safeguards against these kinds of preemptions and second, that even with the addition of extensive safeguards against preemption congressional intent will not be suffi cient to protect State and local laws in litigation. One specific problem occurs in section 4(c) of S. 1844 which provides that the use of eminent domain should "conform as nearly as may be practicable" with the practices and procedures in the State where the property is situated. That language cannot be stretched to suggest that State and local laws must be recognized. Various court decisions suggest in fact that it offers very little protection at all. The kinds of loss which would be susceptible to preemption are sweetened. These are land management, water allocation, end-use, pollution state, safety laws, and regulations covering such areas as design, installation, inspection, emergency plans, testing, construction, operation and maintenance of projects. Looking at the local laws under which we operate in Louisiana, the following list consists of just a few of that State's statutes which would be susceptible to preemption. Louisiana Environmental Affairs Act; Louisiana Solid Water Management and Resource Recovery Law; Louisiana Hazardous Waste Control Law; Louisiana Resources Recovery and Development Act; Louisiana Water Control Law; Louisiana Natural and Scenic River System; Louisiana Threatened and Endangered Species Conservation Law. We also operate in Arkansas and can provide Senator Bumpers with a partial listing of his State and local laws which would be susceptible to preemption. It is ironic that one set of State statutes which will become the most likely candidate for preemption are the State eminent domain laws provided to the coal slurry industry by over half the country's State legislatures. In most cases those legislatures condition those powers of eminent domain with provisions that reflect local situations and problems. These conditions will be undone by Federal action. There is another fundamental problem with S. 1844, the bill's attempt to limit Federal authority over State water regulation may achieve the opposite result. The language in S. 1844 assumes for the Federal Government the power to delineate the extent of State control over water. Any Federal powers not specifically limited by the language of the bill could therefore be construed to remain available for Federal exercise. By appearing to create lucrative restrictions the legislation might actually be establishing precedent for Federal involvement in numerous State water issues. The legislation also fails to make explicit whether it will apply to and protect State water statutes enacted in the future. Nor is it clear which State water or land statutes are to be recognized in those in stances where the conflicts arise between States and are inconsistent with the Federal intent. And finally, I would briefly mention the Sporhase v. Nebraska case currently before the Supreme Court. This puts in jeopardy the laws of 14 western States which limit the export of groundwater outside of State boundaries. It is discussed at length in my testimony and supporting documents. Its outcome could render moot whatever steps might be taken by this commit.ee to protect State water laws. KCS does not think S. 1844 should be enacted under any circumstances, but particularly with the Sporhase decision. There is reason to put aside the coal slurry debate until this Nation has a better grip on the management of its water resources. Thank you for allowing me to appear before this committee. [The prepared statements of Mr. Brown and Mr. Dewey follow:] 97-082 0-82--34 PHILLIPS BROWN The Kansas City Southern Railway Company 301 West 11th Street, Kansas City, Missouri 64105 STATEMENT BEFORE THE SENATE COMMITTEE ON ENERGY Mr. Chairman, I am Phillip S. Brown, vice president for corporate affairs of the Kansas City Southern Railway Company. I'm accompanied by Washington counsel, Mr. Jon T. Brown of Brown & Roady; and by our New York financial consultant, Mr. Thomas E. Dewey, Jr. The Kansas City Southern is a small, 1,500-mile rail system serving Kansas City on the north and the ports of New Orleans, Baton Rouge, and Lake Charles, in Louisiana, along with the Texas markets of Beaumont, Port Arthur, and Dallas on the south. The railroad terminates unit coal shipments at Kansas City and Amsterdam, Missouri; Flint Creek, Arkansas; and Welsh, Texas. carriers in the far West and received by KCS at Kansas City. Because of our geographical location, the proposed pipeline of Energy Transportation Systems, Inc., (ETSI) is particularly threatening to our future market position. That concern has led us to look carefully at the legislative process which may award special advantage to the coal slurry industry and to pursue specific problems related to the ETSI project through These unit trains are originated by other |