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Senator Douglas. You know, conference committees move with greater speed than people sometimes believe.
Mr. ROBBINS. But the fact that it has already been incorporated in all the contracts for sale
Senator DOUGLAS. Mr. Robbins, I am not trying to turn the thumb screws on you, or exact a definite statement, but it would help very much if you would be responsive to the query as to whether you would be favorable to the inclusion of the phrase "new and separate facilities of equivalent capacity”?
Mr. ROBBINS. As I said before, Senator, I would have no objection to it except for that one reservation. If it will not delay the passage of the act we have no objection whatever.
Senator Douglas. We will have to take care of the question as to whether it will materially delay the passage. I take it, then—and I do not want to coach you that you would
really have no substantive objection to the substitution of the language of the memorandum for the present language of the proposed statute?
Mr. ROBBINS No, sir; none.
Mr. ROBBINS. The statement, the part which I have not yet reached, is very specific on that point.
Senator DOUGLAS. I know we have kept you unduly. We have been going for over an hour, and you have reached the middle of page 2, I believe.
Mr. ROBBINS. Page 3.
Mr. ROBBINS. Following what has been said before, it follows otherwise the general pattern of earlier disposal legislation, and, in our opinion, provides a workable sales vehicle. I should like to make clear that the national security clause requirement of H. R. 2528 will be handled in a manner identical with that employed by the Disposal Commission in the 26 sales previously approved by the Congress. The purchaser will be bound to maintain the facility purchased for a term of 10 years from the date he acquires title, with a proviso that during that period he can, with the Government's consent, substitute new, separate facilities of equivalent capacity.
He will not be allowed to substitute existing facilities owned at the time of acquisition of the Louisville plant.
Senator DOUGLAS. That is, he will not, with the amendment that the committee now proposed.
Mr. ROBBINS. Any purchaser-regardless of size-must accept the same clause.
The very recent history of the 2 alcohol butadiene plants included in the disposal program has fully confirmed the congressional view of 1953 that the possibility that the alcohol butadiene plants could afford continuous effective competition to petroleum butadiene producers were extremely remote. The Congress at that time wrote into the Disposal Act language permitting the alcohol butadiene plants, if they could not be sold, to be leased not only for the manufacture of alcohol butadiene, but for any product.
The Kobuta, Pa., alcohol butadiene plant was sold to Koppers Co., Inc., in 1955, pursuant to a proposal from Koppers stating that its prime interest was to acquire ownership of the utilities and certain facilities located at this plant, which, under a lease between Koppers
and the Government, then served adjacent plants owned by Koppers. The contract of sale, as reported to the Congress by the Disposal Commission, made clear that Koppers would operate the plant for the manufacture of alcohol butadiene only if future demand for butadiene and prevailing economic factors warranted such action. There has been no production of alcohol butadiene at this facility since its transfer to Koppers in April 1955. However, under the contract of sale the Koppers plant must stand ready until April 1965 to produce 80,000 short tons of alcohol butadiene annually, so that an emergency source is thus available if needed for the next 8 years.
The Commission leased the Louisville plant to Publicker, which took possession on April 4, 1955. Publicker commenced production on one of the three lines in October 1955, but practically closed down at the end of August 1956 and ceased operations completely in October 1956, after producing a total of approximately 21,480 short tons of alcohol butadiene during the whole period. From April 5, 1955, through cember 31, 1956, the Government received in rental $140,702.45 and paid out over the same period $462,524.60 for maintenance and taxes. In the recent lease negotiations Publicker stated that because of the molasses supply situation it foresai no possibility of any operation in 1957. The entire Cuban 1957 molasses crop went to the feeder trade, according to recent press reports. Therefore, during calendar 1957, the Government can expect to pay out about $342,000 for maintenance and taxes, and to receive only the guaranteed rental of $12,000.
Senator DOUGLAS. Then do I understand that the Publicker Co. has at no time used alcohol at the Louisville plant made out of corn or grain, but instead has used alcohol made from molasses or cane sugar?
Mr. ROBBINS. Molasses.
Senator Douglas. In the Louisville plant the process starts with alcohol.
Mr. ROBBINS. With alcohol. Yes, sir.
Senator CAPEHART. Which can be made out of molasses, or wheat, or corn, or anything.
Mr. ROBBINS. Yes, sir.
Mr. ROBBINS. The Disposal Commission had stated to the Congress last June that even short-range hopes for a successful Louisville operation should be measured against the large expansions of petroleum butadiene capacity then under way. Since June 1956 further expansion has been announced by industry. Both the Commission, during its existence, and this Corporation, as the Commission's successor, have studied this expansion program to aid in evaluating the economics of pending proposals for disposal of the plant.
Any question with respect to this matter would seem to have been answered by the information furnished this Corporation indicating that the projected total capacity for petroleum butadiene, which is expected to be completed in 1957 and early 1958, will exceed estimated 1959 annual requirements of butadiene for synthetic rubber and all other purposes with a substantial margin to spare.
Senator Douglas. Then I take it that what you are saying is that with present production costs you can get more and cheaper butadiene
from the petroleum industry than from the possibility of getting butadiene made from alcohol?
Mr. ROBBINS. I think the evidence is in the fact that the plant has been closed down except for 11 months in the last two years and there seems to be no prospect for operation during this year.
Senator DouGLAS. Have you made any estimates as to what the price of corn would have to be per bushel under certain processes?
Mr. ROBBINS. I hesitate to offer them until the Department of Agriculture has testified.
Senator DOUGLAS. You want to save that for rebuttal?
Mr. ROBBINS. No. The figures we have been furnished would indicate that to get alcohol at a price which would make the manufacture of alcohol butadiene competitive in this market would mean somewhere between 30 and 50 cents a bushel of grain, depending on the processing costs and the sale of byproducts.
Senator DOUGLAS. Without regard to the accuracy of your figures, may I say we certainly hope that 1933 will never come again.
Mr. ROBBINS. That is right. I think we can share that.
Senator DOUGLAS. In which I am sure I am joined by the Senator from Indiana.
Senator CAPEHART. No question about that. On the other hand, if a farmer could grow three times as much corn as he does at the moment and can have a market for it, he can sell it for much less money than he is selling it for today and make more money than he does now. Also, we have to remember when the farmer is handling 3 times as much corn, railroads and truckers will haul 3 times as much, using 3 times as much gasoline and fuel, and the farmer will use more farm implements, so we would raise the general economy of the Nation because we would be creating business rather than as we are doing now, trying to solve the farm problem by reducing production and permitting acres to lie idle, which, of course, reduces the demand for and sale of tractors, and gasoline and oil, and all of those other things.
Let me say this to you: As far as I know nobody has made a real effort to find ways and means of making alcohol butadiene from farm products competitive with petroleum butadiene. No real effort has ever been made yet.
Mr. ROBBINS. I cannot comment on that, Senator. There is no evidence that has come to me.
Senator CAPEHART. Furthermore, I am not speaking of this plant in Louisville, particularly, which makes butadiene out of alcohol, but what I am thinking of is in terms of converting it into a pilot plant to prove the practicability of one thousand and one uses we may find through research, for farm products. Under my bill we are going to need some facilities. My question is, Is this a facility that the Government already owns that might well be used without having to build new facilities? Because I think just as certainly as we sit here, when the President's Commission gets through we are going to have a tremendously expanded expenditure on the part of the Federal Government toward finding new uses for farm products in industry. I do not think there is any question about it. I know there is none in the mind of the Senator from Illinois.
Senator Douglas. Has the price of petroleum butadiene gone up with increases in the cost and price of gasoline and petroleum?
Mr. ROBBINS. I think not, Mr. Chairman. May I ask Mr. Irwin, who has been in charge of the operation of the synthetic rubber plants, if he can answer that question?
Senator Douglas. Mr. Irwin, we will be very glad to have you come forward.
Mr. IRWIN. What was the question?
Senator CAPEHART. The question is, Has the price of butadiene made out of petroleum gone up in the last 6 months ?
Mr. Irwin. It has gone down since the plants were purchased.
Senator CAPEHART. Since the Government got out of the operation of them?
Mr. IRWIN. Yes, sir.
Senator Douglas. Despite the increase in the cost of petroleum and gasoline?
Mr. IRWIN. Yes.
Senator Douglas. I remember the figures in that connection. I believe there was a sale price of 23 cents a pound, with an operating profit of 5 cents a pound, indicating direct operating costs of 18 cents a pound. Do you mean to say that the costs are now less than 18 cents a pound?
Mr. ROBBINS. Twenty-three cents is the price of synthetic rubber.
Senator Douglas. But at that price the testimony was on the disposal bill that the profits were approximately 5 cents a pound, indicating the production cost is about 18 cents a pound.
Mr. ROBBINS. May I ask Mr. Holland to comment!
Mr. HOLLAND. Mr. Chairman, when the sales were negotiated on the butadiene plants, the figure that the Government had been paying for butadiene to run the plants—the figure that was commonly used in the negotiations in the industry and in Government circles, is between 14 and 16 cents for butadiene.
Senator DOUGLAS. That is just the butadiene?
Mr. HOLLAND. Yes. I have not seen any recent contracts but it is pretty common knowledge that butadiene is being purchased for 12, 13, and 14 cents.
Senator DOUGLAS. I am right, however, on the figure of synthetic rubber, am I not?
Mr. HOLLAND. I think some people would question the profit of 5 cents that you give it. That gets back to what I consider as profit and someone else considers profit.
Senator Douglas. I mean, it did not include the return on capital investment, but consisted of direct production costs as distinguished from indirect costs?
Mr. HOLLAND. That might be.
Senator DOUGLAS. Does my statement sound reasonable on that basis?
Mr. HOLLAND. Yes, sir. I think so. And 23 cents as I understand it is still the going price in spite of the fact that labor costs and some other items have gone up. The competition butadiene is pretty severe.
Senator DOUGLAS. I was thinking of the rubber.
Mr. HOLLAND. It has been constantly under pressure. That is, the price has.
Senator DOUGLAS. You may proceed, Mr. Robbins.
Mr. ROBBINS. The relation of butadiene capacity to the national defense is, of course, the responsibility of the Office of Defense Mobilization. This agency testified before the House Armed Service Committee in June of 1956 that retention of the Louisville plant was not necessary for the fulfillment of national mobilization requirements for butadiene for synthetic rubber. In the course of the recent lease negotiations, the Corporation inquired of the Office of Defense Mobilization if its views on the Louisville plant had changed, and the Office of Defense Mobilization on December 10, 1956, over the signature of the Director, advised that it affirmed its June 1956 position. The Office of Defense Mobilization testified before the House Armed Service Committee on January 24, 1957, in answer to a question, that if it knew of a certainty that the Nation would reach all-out mobilization within 6 months, 12 months, or 2 years, it would still endorse H. R. 2528. This position was adopted on the advice of the Office of Defense Mobilization's delegate agencies, including the Department of Defense. In brief, the Office of Defense Mobilization said that the Nation had adequate capacity, without the Louisville plant, to supply future war or emergency needs for rubber.
The following then is the situation confronting the Government with respect to the Louisville plant. The plant is in standby with the Government paying the total cost of maintaining it (less the guaranteed monthly rental of $1,000), and there appears to be no reasonable likelihood that it will be operated before the existing lease expires in April 1958. The Office of Defense Mobilization states that the plant is no longer neded for synthetic rubber. The 1953 Disposal Act prohibits the sale of the Louisville plant until after April 1958. Legislation is necessary to remove this prohibition and permit a prompt sale. Such special legislation has heretofore been passed by the Congress in respect to the copolymer plants at Baytown, Tex., and Institute, W. Va., each of which was sold pursuant to new legislation after no bids had been received under the original Disposal Act.
Senator Douglas. Would you forgive another interruption, because this is a very complicated issue and we are trying to see all sides of it?
Mr. ROBBINS. Yes, sir.
Senator DOUGLAS. Am I correct that in its recommendation of February 2, 1956, the Rubber Producing Facilities Disposal Commission advised the chairman of the committee that the Commission was of the opinion that both for national security reasons and economic reasons it would be desirable to have this plant in operation as a producer of alcohol butadiene. Am I correct on that?
Mr. ROBBINS. Mr. Holland was the Executive Director of the Commission, and if you do not mind I will ask him to answer it.
Mr. HOLLAND. I did not quite understand that or get the import of it.
Senator Douglas. Let me read from the hearings on the disposal of the Louisville, Ky., rubber plant, before this same subcommittee on March 9, 1956, almost precisely a year ago. I read from page 6.
Senator Fulbright, then as now the chairman of this committee, addressed a series of questions to the Rubber Producing Facilities Disposal Commission which were answered under date of February 2,