Transpn Res.-A, Vol. 32, No. 5, pp.

377±391, 1998
# 1998 Elsevier Science Ltd. All rights reserved
Pergamon Printed in Great Britain
0965-8564/98 $19.00+0.00

PII: S0965-8564(97)00040-2

ECONOMICS OF COAL LOG PIPELINE FOR TRANSPORTING COAL

HENRY LIU,* JAMES S. NOBLE, JIANPING WU and ROBERT ZUNIGA

Capsule Pipeline Research Center, University of Missouri-Columbia, Columbia, MO 65211, U.S.A.

(Received 22 October 1996; in revised form 23 September 1997)

AbstractÐThis economic study was conducted to compare the cost of transporting coal from mines to power
plants by coal log pipeline with other modes of transportation including truck, rail and coal slurry pipeline.
Unit cost is de®ned here as the cost of transporting a metric ton of coal for any prescribed distance in $/T
(dollars per metric ton), and it includes not only capital and operational costs, but also a built-in pro®t for the
investor. The unit cost of coal log pipeline can be compared with the current tari€s for coal transportation
charged by railroads, trucks and other competing modes to determine whether it is economically competitive
in a given situation. The study was conducted for di€erent transportation distances and throughputs. Based
on this comparison, the conditions are established under which coal log pipeline is more economical than
slurry pipeline, truck and train. # 1998 Elsevier Science Ltd. All rights reserved

Keywords: coal log pipeline, coal pipeline, coal transportation, costs, economics.

1. INTRODUCTION

Transportation experts have for years known the great economic advantage of using pipelines to
transport ¯uidsÐboth liquid and gas. Given sucient quantity, the total cost of transporting
¯uids by pipeline over long distance is often much less than transporting the same ¯uids by rail or
truck. While transporting solids by pipeline is more dicult and hence more costly than trans-
porting ¯uids, in many situations the use of pipelines to transport solids still constitutes the most
economic way to transport bulk solids over long as well as relatively short distances. This accounts
for the worldwide use of pneumatic pipelines to transport bulk materials over short distances
(Stoess, 1981), and the use of slurry pipelines to transport coal and many other minerals as
reported in Thompson and Aude (1981). A notable example of a slurry pipeline is the Black Mesa
Pipeline in the United States which transports coal from Arizona to Nevada over a distance of
439 km. This 457 mm-dia. pipeline transports approx. 4.5 million metric tons of coal per year. It
has been operating successfully since 1970 at 98% availability, which means that the pipeline was
shut down for maintenance and repair for no more than a week each year. The use of relatively
short slurry pipelines to transport solids in dredging and to transport mine tailings and wastes for
disposal is even more common.
The coal log pipeline (CLP) is a new technology based on the concept that coal can be com-
pacted into large cylindrical shapes called `coal logs' for pipeline transportation using water or
another liquid as the carrier ¯uid. When transported in pipeline by water at 2.5Ð3.0 m/s, sucient
hydrodynamic lift is generated to levitate the coal logs (Liu, 1982). The coal logs become water-
borne (suspended by water) and they make only light contacts with the pipe. Consequently, the
wear of coal logs and the pipe are both minimal, and the power required for pumping is also at a
minimum.
Liu and Marrero invented the CLP technology and obtained a U.S. patent on it (Liu and
Marrero, 1990). A government±industry consortium (research center) was founded in 1991 to
sponsor a crash program of research and development (R&D) at the University of Missouri-
Columbia, aimed at developing the CLP technology for commercial use in eight years. This tech-
nology has now been suciently tested in the laboratory, and a successful ®eld test was conducted
(Liu, 1996). A pilot plant is planned for construction in Columbia, Missouri, and the pilot plant

*Author for correspondence. Fax: 001 573 884 4888; e-mail: liu@riscl.ecn.missourie.edu

377
378 H. Liu et al.

tests will be carried out in 1998. The pilot plant includes a 1 km length 152 mm dia. steel pipe and
all the key elements of a commercial CLPÐincluding a coal log production machine, coal log
injection and ejection subsystems, a special pumping subsystem that can handle coal logs, and an
e‚uent water treatment facility. Upon completion of the pilot plant test, the CLP technology will
be ready for initial commercial use in 2000. Along with the technical development of CLP is the
assessment of the economic and market potential of CLP. Central to this assessment is the devel-
opment of an engineering cost model to determine the cost e€ectiveness of CLP as compared to
competitive current modes of coal transportation including rail, truck and coal slurry pipeline.
This paper provides a concise description of this cost model and results obtained from it; more
details can be found in Liu et al. (1995).
CLP technology has many potential advantages over a coal slurry pipeline (Liu, 1994). For
example, it uses only one-third to one-fourth of the water to transport the same amount of coal
transported by slurry pipelines, it has twice the throughput of a coal slurry pipeline of the same
diameter, and dewatering cost is much less. Consequently, it is reasonable to expect that the eco-
nomics of CLP may surpass that of the coal slurry pipeline in most situations. As will be shown
later, the economic analysis conducted herein con®rms this anticipation. Main obstacles hindering
immediate implementation (commercial use) of CLP include:
(a) the CLP technology is not yet readyÐneeds at least two more years of testing of a pilot
plant before it can be used reliably;
(b) users being afraid to be the ®rst in using CLP due to higher risk for the ®rst project;
(c) lack of existing laws in many states to grant CLP eminent domain rights and the right to
cross railroads.
All these obstacles can be removed in time through e€orts by the CLP promoters, researchers,
potential users and bene®ciaries.
The cost of transporting each ton of coal from a coal mine to a power plant varies considerably
with the distance between the mine and the plant. Generally, longer distances require higher costs.
For U.S. plants that use coal from a distant source, it is not uncommon for transportation by
truck or train to constitute 1/3 or sometimes over 2/3 of the delivered cost of the coal. For
instance, for transporting low-sulfur coal from Wyoming to Missouri, the transportation cost (by
train) is approx. $16/metric ton(T). This includes not only the direct cost paid to railroads but also
the indirect cost to power plants for constructing and operating a rail terminal at each plant, and
sometimes owning (or renting) and operating the railroad cars for hauling coal. This cost is three
to four times as high as the cost of coal sold at the mine sites in the Powder River Basin in
Wyoming (Liu and Marrero, 1996). Therefore, the minimization of coal transportation costs is of
great interest to coal companies, electric utilities and the general public. As will be shown later,
CLP technology o€ers an opportunity to reduce coal transportation cost substantially in many
situations.
This economic study investigates the life-cycle costs of coal log pipelines of di€erent lengths and
throughputs, so that the economics of CLP can be compared with that of other competing trans-
portation modes including truck, rail, and coal slurry pipeline over di€erent ranges of distance and
throughput. The comparison is based on the unit freight cost (`unit cost' in short) which is the cost
for transporting unit weight of coal from a coal mine to destination (which may be a power plant,
a barge terminal, or a rail station), given in dollars per metric ton ($/T). The result is a set of
curves showing the variation of the unit cost with transportation distance (pipeline length) for
various throughputs (i.e. transportation volumes or capacity). The unit cost is calculated using a
life-cycle cost analysis based on a net cash ¯ow approach commonly used by pipeline companies
for evaluating the economics of ordinary liquid and gas pipelines.
As is the case with all emerging major technologies, the economics of CLP hinges on some
major factors that cannot be predicted with certainty at this stage. Therefore, a meaningful eco-
nomic study of CLP must consider di€erent possibilities or scenarios. In this study (detailed in Liu
et al., 1995), a total of 13 scenarios were investigated to determine the unit cost of CLP under
di€erent conditions, such as, with the use of drag reduction additives to conserve pump power,
fresh water vs treated brackish water, di€erent line®ll rates, di€erent economic lives of the project,
new pipelines vs converted existing pipelines, di€erent coal log compaction times, and two di€er-
ent types of coalÐbituminous and subbituminous.
 Coal log pipeline economics 379

Because CLP is an emerging (not-yet-fully-developed) technology, the actual costs of some

components of the CLP process, such as coal log manufacturing cost, cannot be predicted accu-
rately. Neither can the lifespan and the operation/maintenance costs be predicted accurately.
Therefore, the results of this economic analysis, as it is the case with any other major emerging
technology, should not be taken without reservation. They should be regarded as preliminary, and
should be revised in the future as more is learned from R&D and commercial use of CLP.
Despite the approximation and the uncertainties involved, generic economic analysis of an
emerging major technology such as CLP is highly desirable for the following reasons:
(a) It helps the developer (researchers) and the ®nancier (sponsors) determine whether it is
worthwhile to develop a new technology.
(b) By calculating the approximate cost of each component and of the total system, one can see
which components have the strongest e€ect on the total system cost. This helps the devel-
oper (researchers) determine the priority and the direction of needed R&D.
(c) By varying the parameters used in this cost model, the least-cost alternative of a CLP sys-
tem can be determined. This helps to attain optimum design and to reduce the cost of any
commercial CLP system to be built in the future.
(d) Such an economic analysis forces the researchers to think hard about the details of the
system, thereby bringing progress to technology development and system design.
This explains why a generic economic analysis was conducted prior to the commercial use of the
CLP technology. This economic study should be updated periodically in the future to re¯ect new
discoveries or changes in technology as well as the economy in general. It is believed that the
general approach used herein for assessing the economic viability of CLP transportation of coal
can also be used in the future for assessing other new transportation technologies.

2. METHODOLOGY FOR CALCULATING UNIT COST

The method used in this study for calculating the unit cost is based on the net cash ¯ow
approach that considers all the revenues (incomes) of a project as positive cash ¯ow, and all the
costs (expenditures) as negative cash ¯ow. During the life cycle (economic life) of the project, each
cash ¯ow is treated as a discrete payment (outlay of cash). Costs paid at the beginning of the
project are the initial costs, and those paid subsequently are treated as annual outlays (annual
costs). All initial costs are regarded as being paid on the ®rst day of the project, and all subsequent
costs as being paid at the end of each year. No payment is made in the middle of any year. This
simplifying assumption is commonly used in cost analysis of engineering projects that have a
multi-year life.
The unit cost is calculated with respect to the need to generate a speci®ed after-tax rate of
return. To achieve this, the after-tax cash ¯ow equations for each year of the project are developed
with the unit cost as a variable. The following will develop and present the components of the
after-tax cash ¯ow equations. First, the overall after-tax cash ¯ow (ATCF) equation is presented,
followed by the cost component, then ®nally the revenue component.
The after-tax cash ¯ow (ATCFn) for year n is de®ned as

ATCFn ˆ BTCFn ÿ Tn 1†

The quantity BTCFn in eqn (1) is the before-tax cash ¯ow for year n and is de®ned as

BTCFn ˆ Rn ÿ Cn 2†

where Rn is the revenue for year n, and Cn is the cost for year n. The quantity Tn in eqn (1) is the
corporate income tax rate calculated from

Tn ˆ BTCFn ÿ dn †t 3†

where dn is depreciation and t is the corporate income tax rate.

380 H. Liu et al.

A depreciation schedule based on the Modi®ed Accelerated Cost Recovery System from the Tax
Reform Act of 1986 is used (IRS, 1994). For a CLP a 15-y recovery period is used which requires a
depreciation schedule based on 150% declining balance with a switch-over to straightline and the
half-year convention.
The cash ¯ow pro®le is constructed to allow the ATCFn to generate the speci®ed rate of return.
Figure 1 illustrates a representative cash ¯ow diagram. It is obtained by setting the annual revenue
Rn in such a manner that the sum of the present values of ATCFn over N years equals zero.
The present value of ATCF for year n is calculated from:

ATCFn
PV ATCF†0 ˆ 4†
1 ‡ †n

where PV ATCF†0 is the present value of ATCFn , which in turn is the ATCF value for year n.
The discount rate  used in eqn (4) is the in¯ation adjusted rate of return calculated from:

 ˆ r ‡ I ‡ rI 5†

where r is the after-tax rate of return; and I is the average annual in¯ation rate (Park and Sharp-
Bette, 1990).
The initial costs (capital costs) includes the costs for planning, land and right-of-way acquisi-
tions, permit applications, design and construction. On the other hand, the annual costs cover
operation and maintenance (O/M), taxes and insurance. The O/M costs include energy, materials,
supplies, repair and maintenance, wages and salaries, and all other miscellaneous costs encoun-
tered each year. The capital and the annual costs for CLP are determined from a detailed
engineering cost analysis and are treated as nominal cash ¯ows.
The annual cost for each year n n ˆ 1; 2; . . . ; N†, Cn , includes O/M cost, On , property tax, Tn ,
and insurance, In , namely,

Cn ˆ On ‡ Tn ‡ In 6†

Note that the O/M cost On includes energy, binder, water, salaries, etc. All initial capital costs, are
included in the annual cost for year 0, C0 .
The annual revenue Rn , for year n is

Rn ˆ Un Qn 7†

where Qn is the throughput of coal in tons per year, and Un is the unit cost for transporting coal
through the pipeline for year n, in $/T.

Fig. 1. Cash ¯ow pro®le for representative scenario.

 Coal log pipeline economics 381

Assuming that the unit cost for transporting coal by coal log pipeline at the beginning of the
project is U0 , the unit cost for year n is

Un ˆ U0 1 ‡ "†n 8†

where " is the annual rate of increase in tari€Ðthe tari€ escalation rate.
Substituting eqn (8) into eqn (7) yields

Rn ˆ Un 1 ÿ "†n Qn 9†

The value of Rn for each year is determined by an iterative procedure in which the value " is
assumed. Having chosen the tari€ escalation rate ", the value of U0 is determined so that the sum
of the present values of the ATCFn for N years equals zero. Henceforth, U0 will be referred to as
the `present unit cost,' or simply `unit cost.'
The economics of CLP can be established by comparing the unit cost, U, for CLP with that for
other modes of coal transportation. The comparison is meaningful only if compared with the unit
cost of the competing mode for the same year, using the same escalation rate for both modes.
The foregoing approach will be used to determine the unit cost of transporting coal by pipelines
of di€erent diameters ranging from 102 mm (4 in.) to 508 mm (20 in.), and di€erent pipeline
lengths, from 16 k (10 miles) to 3218 km (2000 miles). The result is a set of curves giving unit cost vs
pipeline length for di€erent values of coal throughput or pipeline diameter.

3. GENERAL (FINANCIAL) ASSUMPTIONS

Meaningful cost comparison between di€erent modes requires that some general (common)
assumptions be made in the cost analyses of all these di€erent modes. The general assumptions
used in this study include:

(a) All present costs are in 1994 U.S. dollars.

(b) The after-tax return rate, r, is assumed to be 15%.
(c) All the items under O/M costs, including fuel and electricity, escalate at the general in¯ation
rate of I ˆ 3%=yr. An exception is made in one scenario which assumes that I ˆ 0 (zero) to
study the e€ect of in¯ation.
(d) The tari€ escalation rates for coal transportation by CLP and other competing modes are
assumed to be the same as the general in¯ation rate, except for one scenario that studies the
e€ect of di€erent escalation rates. This assumption may not be valid because continued
improvement of technologies tends to keep tari€ escalation rates below in¯ation rates.
(e) The corporate income tax rate is t ˆ 0:37 (i.e. 37%), and is constant over the project life-
time.
(f) The property tax rate is equal to 2% of total capital.
(g) The insurance rate is equal to 0.5% of total capital.
(h) The equity rate is 1.0. This means all the money invested (capital cost) comes from the
owner; no money is borrowed.
(i) The pipeline is assumed to have an economic life of 30 yr (N ˆ 30) except in one scenario
where N ˆ 20 yr.

In addition to the foregoing general ®scal assumptions, many important technical assumptions
also must be made which will be discussed next.

4. CLP SYSTEM DESCRIPTION AND ASSUMPTIONS

A coal log pipeline (CLP) system consists of four major subsystems: inlet, outlet, booster pumps
and pipeline.
The inlet subsystem can be further divided into three main parts: coal preparation (including
crushing, conveying, heating and mixing with binder), compaction of coal logs, and injection of
coal logs into the pipeline.
382 H. Liu et al.

Because this economic analysis compares coal transportation cost by CLP with other modes such
as railroad, the CLP inlet system considered starts with crushing coal from the size normally carried
by trains or trucksÐa maximum 50 mm (top size). The crusher reduces the coal to a size suitable for
making coal logs (6.4 mm top size). For best results, crushing should reduce the coal to a top size
about 1/20 of the coal log diameter, and a particle size distribution near that of maximum packing
density. Heating of the crushed coal was assumed to be by steam. When binder is needed for any
coal log compaction process, it will be added to the coal in a mixer. The mixer is not needed unless
binder is used. The binder used in this study is Orimulsion which is a low-cost emulsi®ed asphalt.
Coal log compaction is to be done with a specially designed machine system (Ji, 1995). Coal log
injection into pipelines is accomplished by using an injection system including a network of pipes,
valves and pumps. The detailed injection system and its operations are described by Wu (1994).
The outlet subsystem consists of a reservoir to collect the water e‚uent from the pipe, a
conveyor belt to transport the coal logs out of the water and to a stock pile, and coal log crushers.
Depending on power plant preferences, coal logs may or may not be crushed prior to stockpiling.
The coal particles in the e‚uent water are removed (dewatered) through a process similar to that
used by coal slurry pipelines. The dewatering process includes two stages: the larger particles settle
in the sedimentation tank, and the ®ner particles settle in the ¯occulation tank. The coal particles
are then removed from the bottom of these two tanks as sludge. The sludge from the sedimenta-
tion tank consists of coarse coal particles; they are pumped into a screen-bowl centrifuge for
dewatering. The dewatered coal particles, containing less than 30% water, are burned with the
coal log fuel. The coal sludge from the ¯occulation tank consists of ®ne particles; it must be
dewatered by ®ltration rather than centrifuging. The e‚uent water from the centrifuge is sent back
to the ¯occulation tank for further cleaning. Clean water from the ¯occulation tank is reused at
the power plant for steam cooling and/or other purposes. No value is given to the treated water in
this economic analysis which is conservative.
For long coal log pipelines, booster pumps are needed at intermediate stages so that the max-
imum pressure in the pipe and the pump can be limited to approx. 10.34 MPa (1500 psig). The
most suitable booster pump for CLP is the pump bypass (Wu, 1994). The pump bypass consists of
a set of pipes, a pump and eight valves. The valves must be opened and closed alternately, four at a
time, to make the coal logs bypass the pump. With this system, only water passes through the
pump; the logs bypass the pump. Consequently, ordinary slurry pumps or sludge pumps can be
used for CLP. Automatic computer control of the CLP system is a must. Further speci®c technical
assumptions for the CLP system are given in Appendix.

5. CLP COSTS

Because CLP is an emerging new technology, no cost data exists from actual commercial use.
Cost data were generated from the anticipated capital cost of a CLP system, and the anticipated
O/M costs. The capital cost was found by aggregating the cost of each subsystem. A preliminary
design of a 203.2 mm (8 in.) dia. CLP system was analyzed to determine each of the components
required, their size, and operational properties. The cost of each component of the system and
subsystems was determined from market price, together with estimated construction, operation
and maintenance costs. Using this cost information, appropriate equations were developed to
estimate the cost of each component of a CLP system of any pipe size ranging from 101.6 to
508 mm (4±20 in.), (Liu et al., 1995). The cost in each equation was usually expressed as a function
of pipe diameter or coal throughput and given in 1994 U.S. dollars.
Once the costs of the various components were determined, they were combined to determine
the total initial cost (capital cost) of each subsystem. The O/M cost of each subsystem was eval-
uated in a similar manner. Adding these costs across all subsystems yields the total system capital
and O/M costs. The capital cost includes not only the purchase cost but also installation costs and
the costs of land, buildings, access roads, substations (transformer stations), etc. The O/M costs
include energy, fuel, binder, water, ¯oculant, polymer for drag reduction, salaries and other
ordinary O/M costs. Industrial consultants were retained to determine whether each of the cost
®gures was realistic.
With the total capital and the total annual O/M costs determined, the unit cost of coal transport
by CLP was calculated using the cost model and assumptions described previously. This was done
 Coal log pipeline economics 383

for coal log pipelines of di€erent diameters, and for lengths varying between 16 and 3218 km
(10±2000 miles). An example is now given next to illustrate how the computation was conducted
for each size of coal log pipeline.
Consider a 203 mm (8 in. nominal dia.), 160 km (100 miles) long coal log pipeline using logs of
speci®c gravity equal to 1.3. Schedule 60 steel pipe was selected to withstand high internal pressure
and to provide long-term (> 30 yr) service. The pipeline was assumed to operate at 85% lift-o€
velocity which is equal to 2.67 m/s. At 90% line®ll and 95% system availability, the throughput of
water and the throughput of coal are respectively 0.021 m3/s and 2.34 MT/yr (million metric tons
per year). Without using polymers for drag reduction, the pressure drop and the pumping power
required for each 160 km of the pipeline are 6.32 MPa (916 psi) and 5.80 MW, respectively. The
spacing between pumping stations is 26 km. If polymer is used to cause a drag reduction of 0.70,
the pressure gradient will be reduced to 1.90 MPa for each 160 km, the pump power reduced to
1.74 MW, and the spacing between pumping stations increased to 86 km.
Substituting these numbers into the more than one hundred cost equations given in Liu et al.
(1995) yields the cost for each part and the system and subsystems. The unit cost of coal transport
by CLP is then determined from the equations given in Section 2. Some cost breakdowns, includ-
ing both capital costs and O/M cost, for the 203 mm CLP are shown in Tables 1±9.
Using the aforementioned approach, a computer program was written to calculate the unit cost,
U, of coal transport by CLP, in $/T, for pipelines of di€erent diameters and lengths pertaining to
any given scenario. The results are plotted in the form of Figs 2 and 3.
Figure 2 shows that a 508 mm (20 in.) pipe (CLP) can transport approx. 16.7 MT/yr of coal at
the unit cost of $5.5/ T for a distance of approx. 320 km, and at the unit cost of $11/T for a dis-
tance of approx. 800 km. Figure 2 holds for subbituminous coal and without use of polymers for
drag reduction.
When polymers are used, as shown by Fig. 3, for $5.5/T the transportation distance is increased
to 420 km, and for $11/T increased to approx. 1200 km. This shows the great advantage of using
polymer for drag reduction for long pipelines.
According to Fig. 2, for a 203 mm (8 in.) CLP that can transport approx. 2.3 MT/yr of coal, the
unit costs $5.5/T and $11/T correspond to 65 and 240 km, respectively, when polymer is not used
for drag reduction. When polymer is used (Fig. 3), for $5.5/T the transportation distance with a
203 mm pipe is increased to 98 km, and for $11/T, it is increased to 355 km. This again shows the
great advantage of using polymer even for relatively short pipelines.

Table 1. Capital costs for inlet facilities (203 mm, 160 km pipe)

Item Cost ($1000)

Coal log manufacturing costs

Mixers 107.1093
Compaction machine 8691.467
Binder storage tanks 0

Injection system
Conveyors 627.4035
Crushers and screens 1188.0420
Y-joints and di€users 39.6731
Intake piping 484.6291
Valves 209.8359
Main pumps 264.5443
Auxiliary pumps 104.0729

Common
Intake tanks 40.0000
Buildings 1066.6670
Land 50.0000
Substation 90.0856
Automatic control (entire pipeline) 288.6792
Additional equipment 312.6427
Switchgear 15.5320
Access road 200.0000
Pigs 0.0000

Total inlet capital cost 13,780.38

384 H. Liu et al.

Note that the curves for the unit costs in Figs 2 and 3 approach horizontal lines for distances
less than approx. 30 km. This means that when the distance is short, little savings can be achieved
by using shorter pipes. For instance, whether coal is transported by CLP for a distance of 30 km or
2 km makes little di€erence in cost. This is due to the dominance of cost by the inlet facilities when
the pipeline is short.

Table 2. Capital costs for outlet facilities (203 mm, 160 km pipe)

Item Cost ($1000)

Sedimentation tank 373.1180

Flocculation tank 58.6595
Land 2.1706
Conveyors 49.9336
Crushers 525.2141
Buildings 199.3965
Centrifuges for dewatering 508.6675
Filtering equipment for dewatering 39.0947
Other outlet equipment 250.1142

Total outlet capital cost 2,006.37

Table 3. Capital cost for each booster station (203 mm, 160 km pipe)

Item Cost ($1000)

Y-joints, di€users and divertors 44.0638

Water storage reservoir 59.2447
Substation 35.4816
Pumps 831.5909
Valves 223.5799
Pipe 266.1172
Building 106.6667
Land 10.0000
Access road 200.0000

Total capital cost for each booster station 1,776.75

Table 4. Capital cost for total CLP system (203 mm, 160 km pipe)

Item Cost ($M)

Inlet 13.7804
Outlet 2.0064
Booster stations 1.5756
Pipeline (100 miles) 18.5426

Total capital cost 35.90

Table 5. O/M costs for inlet (203 mm, 160 km pipe)

Item Cost ($1000)

Binder 0
Electricity 2242.6150
Water 108.8128
Salary and wages 1050.0000
Polymer 184.6066
Pigs 0
Communication lines 8.4000
Coal heating 1172.2670
Diesel fuel for operating mixers 50.6990
Other 938.1248

Total O/M cost for inlet 5755.53

 Coal log pipeline economics 385

Table 6. O/M costs for outlet (203 mm, 160 km pipe)

Item Cost ($1000)

Flocculants 51.5833
Centrifuge dewatering 7.5893
Electricity 147.6073
Salary and wages 165.5989
Other 83.3333
Total O/M cost for outlet 455.71

Table 7. O/M costs for each booster station (203 mm, 160 km pipe)

Item Cost ($1000)

Electricity 474.6078
Salary and wages 62.7242
Materials and supplies 66.6667
Polymer 155.6162
Telecomm 8.4000
Total O/M cost for each booster station 768.01

Table 8. O/M cost for total CLP system (203 mm, 160 km pipe)

Item Cost ($1,000,000)

Inlet 5.756
Outlet 0.456
Booster stations 0.681
Pipeline 0.185
Royalty 0
Total O/M cost for CLP system 7.08

Table 9. CLP system cost summary (203 mm, 160 km pipe)

Item Cost

Capital costs 35.90 $M

Annual operation/maintenance costs 7.08 $M/yr.
First year unit cost 6.54 $/T

6. SLURRY PIPELINE COSTS

As previously discussed, a slurry pipeline is a time-honored method for transporting minerals,

including coal, over various distances.. A detailed cost analysis of coal slurry pipelines was pub-
lished in 1978 by the U.S. Congress Oce of Technology Assessment (OTA), (OTA, 1978). This
study constitutes the most rigorous and reliable cost analysis ever performed on coal slurry pipe-
lines. Cost ®gures for coal slurry pipelines needed in the present study were taken from the OTA
report with proper adjustments for in¯ation between 1978 and 1994. According to Engineering
News Records from 1977 to 1994, construction costs over this period increased by a factor of 2.10.
During the same period, equipment cost listed in Chemical Engineering increased by a factor of
1.97, and consumer price listed by the Dow Jones-Irwin (1991) increased by a factor of 2.45. These
factors were used in adjusting the various costs reported in the OTA report to the 1994 costs used
in this report.
The 1994 costs for various components of a typical coal slurry pipeline system were used to
calculate the unit cost of transporting coal by slurry pipeline in the same manner as for a CLP. The
®nal results for slurry pipeline, again in terms of unit cost as a function of distance and through-
put, are plotted in Fig. 4 for the same six throughputs that were shown for a CLP in Figs 2 and 3.
From Fig. 4, the unit cost of transporting coal by slurry increases with increasing distance and
throughput in a manner similar to CLP. Comparison with CLP will be considered later.
386 H. Liu et al.

Fig. 2. Unit cost for transportation of coal by CLP (without drag reducing additive).

Fig. 3. Unit cost for transportation of coal by CLP (with drag reducing additive).

7. TRUCK AND RAIL COSTS

Transportation of coal by truck in the United States is expensive, and it is only done over rela-
tively short distances, usually less than 150 km. The cost for trucking coal varies greatly with
transportation distance and the size of the truck. For mine-to-tipple trucking (up to 16 km dis-
tance), very large tractor-trailers may be used to reduce cost. However, these trucks are allowed
only on private roads owned by coal companies or utilities that own the coal mines; they are not
allowed on public roads. For distances greater than approx. 16 km, public roads are normally
used, and the size and the weight of the coal trucks are limited by state law or county statutes.
Using information contained in Liu et al. (1995), Warner et al. (1976) and Morlok and Warner
(1977), together with cost data for truck supplied by the Missouri Department of Highway and
Transportation, the curves in Fig. 5 were derived to show the variation of the unit cost for
transporting coal by truck.
 Coal log pipeline economics 387

Fig. 4. Unit cost for transportation of coal by slurry pipeline.

Fig. 5. Unit cost for transportation of coal by truck.

Figure 6 gives the costs of transporting coal by unit train. Note that unit train is the most cost-
e€ective way to transport coal by rail. In the United States, each unit train consists of approx.
100±120 cars carrying only coal. The train travels non-stop between power plants and coal
mines. The cost for unit train transport shown in Fig. 6 is based on the use of existing railroads.
The curves for unit train in Fig. 6 were derived from Fig. 17 of OTA (1978), by averaging the
cost of several lines, and then adjusting the average to 1994 costs by using a rail cost escalation
index of 2.60 (from 1977 to 1994) published by the U.S. Bureau of Labor Statistics (1988). The
calculated costs include a 12.5% pro®t. The data points in Fig. 6 were obtained from Coal
Transportation Report (1993 and 1994 issues); they represent actual tari€s charged by di€erent
railroads across the United States. The data spread is due to the variation of tari€s with regions
and routes. Generally, the lower points apply to the western region of the United States. Figure 6
shows that the tari€s charged by most rail companies are signi®cantly below their costs with a
388 H. Liu et al.

Fig. 6. Unit cost for transportation of coal by unit train.

12.5% pro®t. This implies that due to competition, many rail companies may be operating with
less than 12.5% pro®t. Improved eciency by railroads in recent years, such as through the use of
aluminum cars and unit trains with over 100 cars, also may account for the lower tari€s.

8. COMPARISON OF CLP WITH OTHER MODES

8.1. Comparison with slurry pipeline

Comparing CLP (Figs 2 and 3) with coal slurry pipeline (Fig. 4) shows that it is always more
economical to transport coal by CLP than by slurry pipeline, especially when the distance is short.
For instance, to transport 2.34 MT/yr of coal by slurry pipeline will require a 305 mm (12 in.)
pipeline, and the unit cost will be approx. $12/T for a distance of 80 km. In contrast, to transport
the same amount of coal by CLP will require only an 203 mm (8 in.) pipeline, and the unit cost will
be reduced to $6/T which is half of that for slurry pipeline. Even for very long pipeline with large
throughput, signi®cant savings can be accomplished by using CLP. For instance, for transporting
16.7 MT/yr of coal over a distance of 1600 km, a 840 mm (33 in.) slurry pipeline is required and the
unit cost is approx. $26/T. If CLP were used to transport the same amount of coal over the same
distance, the pipe diameter is reduced to 508 mm (20 in.), and the unit transportation cost is
reduced to $17 (if no polymer is used) and to $13 (if polymer is used). The reduction in unit cost
from using CLP is substantial.
The unit cost of CLP is much lower than that of coal slurry pipeline for one main reason: CLP
has approximately twice the throughput of coal slurry pipeline of the same diameter. The fact that
CLP can transport coal more economically than slurry pipeline especially at relatively short
distances is signi®cant. This gives CLP a much larger market than slurry pipeline for coal trans-
portation.

8.2. Comparison with truck

Comparing CLP (Figs 2 and 3) with truck (Fig. 5) shows that for throughputs of the order of
2.34 MT/yr, use of CLP is more economical than use of truck for distances greater than approx.
65 km. For throughputs of the order of 16.7 MT/yr, use of CLP is more economical than using
truck for any distance greater than approx. 25 km. This implies that trucks are more economical
than CLP only if both the throughput and the distance involved are very small. Otherwise, CLP is
more economical.
 Coal log pipeline economics 389

8.3. Comparison with unit train

Comparison of the CLP costs (Figs 2 and 3) with the unit train costs (Fig. 6) calculated from the
cost model reveals the following: For the throughput of 2.34 MT/yr, unit trains are less costly than
CLP for any distance above approx. 160 km. For a throughput of 16.7 MT/yr, the CLP cost is
always less than that determined from the rail cost model.
A more meaningful comparison is to compare CLP costs with the actual coal transportation
costs (tari€s) charged to power plants across the nation, represented by the many data points in
Fig. 6, one point for each case. However, due to great scatter of the data across the graph, caused
by large variation of tari€s across the nation, it is dicult to pinpoint the conditions under which
CLP is always more economical than train. However, the following can be said. For throughputs
of the order of 2.34 MT/yr or smaller, rail is more economical than CLP in most cases. The
opposite holds for throughput of the order of 16.7 MT/yr; only a few power plants in the nation
have rail rates below the CLP rates. For the vast majority of power plants, the rail rates are sig-
ni®cantly higher than that by a large-throughput CLP.
The foregoing comparisons should be kept in perspective. First, the fact that it is dicult for
CLP to compete with rail when the throughput is small holds only for dedicated pipelinesÐi.e. a
small pipeline built solely for a given power plant. In practice, a large pipeline can often be
designed to transport coal logs to several power plants, the same as railroads do. In such a case,
the total tonnage delivered can be increased to 16 MT/yr or even more, to take advantage of the
economy of scale of pipelines. When this is done, CLP becomes very competitive with railroads.
Secondly, the foregoing cost comparisons with trucks and rail are based on equal distances. In
reality, a coal slurry pipeline or a CLP normally follows a straight-line or a quasi-straight-line path
between a coal mine and a power plant, or a series of power plants. The same does not hold for
truck and rail. Generally, highways and railroads follow a much longer path between coal mines
and power plantsÐapprox. 30% longer than pipelines (Aude et al., 1974). Therefore, when com-
paring CLP with train or truck by using the graphs generated in this paper, a 700 km CLP should
be compared with a 1000 km rail and so forth. When this is done, the economic advantage of CLP
will look much better than shown in these graphs.
Thirdly, it should be realized that the foregoing comparison between CLP and rail does not
re¯ect all the costs encumbered by electric utilities in using rail. The cost data shown for unit train
are only the tari€s paid directly to railroads. They don't re¯ect the many million dollars of addi-
tional costs that the electric utility must pay for building a coal unloading terminal at the power
plant, for building a spur to connect to the nearest railroad, for purchasing or leasing hundreds of
rail cars, and for the associated O/M costs of these auxiliary facilities. In contrast, for CLP the
cost ®gures given include not only inlet, pipelines and booster stations, they also include outlet
facilities at the power plant. There are no other transportation-related charges or costs to utilities
that need to be included.
Fourthly, the cost of coal transportation by CLP is based on constructing new pipeline resulting
in high capital cost, whereas the tari€ of railroads is based on use of existing railroads constructed
many years ago with government subsidy and hence has no capital cost. In situations where new
railroads must be built to haul coal, the rail tari€ will be much higher than those reported in this
study, and hence CLP will be far more economical than rail as shown herein.
Finally, it should be realized that the aforementioned comparisons are not based on the optimal
conditions of CLP. Optimization of log velocity, compaction processes, distance between pumping
stations, types of pumps and valves and so on, will undoubtedly result in a reduction in the cost
of CLP. Because CLP is a very new technology, future research in CLP will bring about techn-
ology advancements, such as a better coal log manufacturing machine than the one assumed for
this study. It will also result in further cost reduction. Because trucks and trains are mature
technologies, their ability to be further improved and optimized is far more limited than for
CLP. Therefore, as time progresses, CLP will become even more cost competitive than rail or
truck.

9. CONCLUSIONS

Based on the analyses of various scenarios (Liu et al., 1995), many of which have not been dis-
cussed herein due to page limitations, the following conclusions are reached:
390 H. Liu et al.

(a) Comparison with conventional coal slurry pipelines that transport 50:50 slurry (coal±water
ratio by weight) indicates that CLP is signi®cantly more economical than coal slurry pipe-
line especially when the transportation distance is relatively short, say less than 160 km. This
gives CLP a much larger market (window of opportunity) than that of coal slurry pipeline.
The fact that CLP uses much less water and conveys a more readily-usable form of coal
than slurry pipeline also favors CLP.
(b) Comparison with trucks reveals that it is always more economical to transport coal by CLP
than by trucks except for short distances and at low throughputs. For instance, for
throughputs of 2.3 MT/yr or above, CLP is more economical than trucks whenever the
distance is above approx. 60 km.
(c) Comparison with unit trains that use existing rails reveals that while at low throughputs
(less than 2 MT/yr) it is dicult for CLP to compete, the opposite holds at high through-
puts. To take advantage of the economies of scale, a coal log pipeline should be planned to
serve more than one power plant, if practical, so that tonnage can be combined to reach
10 MT/yr or more.
(d) The use of binder in making coal logs is costly. Even with Orimulsion, which is one of the
least costly binders, each 1% increase in binder content (by weight of coal logs) increases
the cost of coal logs by approx. $1/T. Using more than 3% binder renders the CLP uneco-
nomical when competing with rail in many cases. Fortunately, laboratory tests revealed that
less than 3% binder is required to make good coal logs for long distance transportation by
pipeline (Liu, 1996).
(e) Even though desalinated brackish water is several times more expensive than fresh water,
using the desalinated water instead of fresh water to transport coal logs by CLP only
increases the cost of coal log transport slightlyÐabout 15 cent/ton of coal transported. This
shows the economic feasibility of using desalinated brackish water for CLP in places where
there is a shortage of fresh water, such as Wyoming.
(f) The use of drag reducing additives such as polyethylene oxides and/or ®ber (pulp) may
cause great savings in the energy required for CLP and reduce the number of pumping sta-
tions for a given pipeline. These in turn have a strong impact on the unit cost of CLP when
the pipeline is long. For instance, more than $4.00/T of coal transported by CLP might be
saved from using such additives in a 1600 km pipeline.
(g) Reducing the coal log compaction time reduces the unit cost signi®cantly, especially if the
pipeline is short. For instance, by reducing the compaction time from 30 to 10 s, there is a
14% reduction in the unit cost for an 203 mm (8 in.) CLP 48 km long. In comparison, for a
508 mm (20 in.), 1600 km CLP, the corresponding decrease in unit cost is 2%.
(h) Line®ll rate has a signi®cant impact on cost. For instance, a 10% decrease in line®ll (from
90 to 80%) causes an increase in unit cost by approx. 10%. Therefore, it is important to
keep the line®ll of any CLP as high as feasible.
(i) Use of a 30-yr project life, rather than 20-yr, reduces unit cost by only about 3%. This is
due to the accelerated depreciation allowed by law in the United States.
(j) While increasing the in¯ation rate (cost escalation) will increase the unit costs, increasing
the tari€ escalation rate decreases the unit cost. The two cancel each other when escalated at
the same rate. For instance, using both in¯ation rate and tari€ escalation rate of 3% results
in the same unit cost as using no in¯ation and no tari€ escalation. For fair comparison with
other modes based on unit cost, the pipeline tari€ escalation rate of CLP should be assumed
the same as for the other transportation modes.
(k) The economic advantage of using an existing pipeline instead of constructing a new pipeline
for CLP may be substantial. If renovating the pipeline costs only 70% of the cost of a new
pipeline, the cost savings (reduction of unit cost) can be as much as 20% for very long
pipelines.
(l) The cost of transporting bituminous coal by CLP is about the same as for transporting
subbituminous coal in terms of $/T. However, in terms of $/Btu, the cost for transporting
bituminous coal is signi®cantly lower because it has a higher heating value than the sub-
bituminous coal.
(m) Even though the cost model and analysis presented herein are generic in nature, aimed at
the `average' conditions in the United States, they can be used with minor modi®cations for
 Coal log pipeline economics 391

site speci®c studies. For instance, if 80 km of a pipeline is in mountain areas and/or marsh-
land, the construction cost for that portion of the pipeline can be adjusted. If there is sig-
ni®cant drop or increase in elevation between the pipeline inlet and outlet, the energy cost
and the pumping station intervals can be easily adjusted and so on.
(n) This study shows how major new transportation technologies can be and should be assessed
for economic viability before and during the course of development of the technology.

AcknowledgementsÐThis research was sponsored by the Capsule Pipeline Research Center which in turn was supported
by the National Science Foundation, Missouri Department of Economic Development, U.S. Department of Energy, and
a consortium of 22 companies including electric utilities, coal companies, pipeline companies, a machine company, and
consulting ®rms. The support is much appreciated.

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APPENDIX

Important technical assumptions

A summary of key speci®c assumptions used in this report is given as follows:

. The coal log fabrication machine is specially designed and it uses hydraulic presses (Ji, 1995).
. The binder used for making coal log is Orimulsion which costs $65/T including transportation cost to pipeline inlet.
The Orimulsion contains 70% bitumen (asphalt) and 30% water.
. Pressure drop along CLP is assumed to be 1.4 times that of water ¯ow in the same pipe at the same velocity.
. A 70% drag reduction is assumed by injecting 25 wppm (weight parts per million) of polyethylene oxide (Polyox) at
the pipeline intake, and an additional 10 wppm after each booster pump station.
. The maximum steady-state pressure in the pipe which exists at the discharge side of the main pumps is 10.34 MPa
(1500 psig). The lowest steady-state pressure which exists at the suction side of the main pumps is 0.2 MPa (30 psig).
. Pipes, pump casing, valves and other ®ttings are all rated at 10.34 MPa or above. Valves and other ®ttings or ¯owmeters
must have full bore to pass coal logs uninhibited. The valves used are Class 900 which is rated for 16.13 MPa (2340 psi).
. Heating of coal is by steam using coal as the fuel.
. Coal log pipeline is operated at 85% lift-o€ velocity which is nearly optimum based on current knowledge.
. Coal log speci®c gravity is 1.3; log-to-pipe diameter ratio is between 0.9 and 0.95; and coal log aspect ratio (i.e.
length-to-diameter ratio) is approx. 2.0.
. Steel pipe is used with smooth interior and mild bends. Weld protrusions into pipe are eliminated during construction.
. The coal log injection subsystem has seven parallel locks, one of which is a spare, and it has a duplicate main pump.
Pump bypasses are built with duplicates to insure high system reliability (95% availability).