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1956, and put into the record in the March 9th hearing, which was signed by Mr. Holman D. Pettibone, Chairman. The second question which Senator Fulbright asked was this:
Question. Do you think it would be a good idea to authorize sale or a long-term lease of the Louisville plant?
Answer. This Commission is of the opinion that for both national security and economic reasons it is desirable to have this plant in operation.
That was the position a year ago of the preceding organization. Now, however, you come in and say that it is not necessary, and that the requirement that the plan should be ready to produce butadiene from alcohol can be waived.
I would like to ask what has happened in the intervening year to cause a change in opinion, or do you believe Mr. Pettibone was wrong as of a year ago?
Mr. ROBBINS. There has been quite a change, Mr. Chairman, but Mr. Holland will comment on it.
Mr. HOLLAND. There has ben a big increase in the capacity of butadiene which tended to put pressure on the prices and lower them and made the Louisville plant more economically unsound for the manufacture of alcohol butadiene.
Senator DOUGLAS. In other words, what you are saying is that the oil industry and affiliated industries have expanded their capacity and reduced their costs so that they are now in a better position than they were a year ago
Mr. HOLLAND. And new companies have come into the field.
Senator Douglas. Do you think Mr. Pettibone was correct a year ago? Mr. HOLLAND. Yes.
Senator DOUGLAS. But his opinion of a year ago is not appropriate now?
Mr. HOLLAND. Very definitely the thing has changed.
Senator DOUGLAS. And you base this on the decrease in the price of butadiene?
Mr. HOLLAND. Well, the increased capacity is the fundamental change.
Senator DoUGLAS. The increased capacity; not the reduction in price?
Mr. HOLLAND. That leads into a pressure on prices when you have an oversupply. As Mr. Robbins' report will state there, he will show how much of an excess there is over the potential use, or over the price-over the use now.
Senator DoUGLAS. What was the butadiene capacity which was in existence in February 1956, when Mr. Pettibone sent this letter to Senator Fulbright!
Mr. HOLLAND. Somewhere between 600,000 and 650,000 tons.
Mr. ROBBINS. When I am talking about projected figures, I am including only those that are under construction or committed for.
Senator Douglas. Leave out of the present capacity the projected capacity of plants now under construction.
Mr. HOLLAND. The present capacity is between 750,000 and 800,000, and the projected capacity is over 1 million.
Senator BOUGLAS. Just a minute. I am a very slow-moving man. My mind works very slowly. The capacity last year was how much?
Mr. HOLLAND. In order to get this accurate I think we should furnish the chairman those figures to put in the record. We are talking off the cuff a little bit. (The following was received for the record :)
EXECUTIVE OFFICE OF THE PRESIDENT,
OFFICE OF DEFENSE MOBILIZATION,
Washington, D. C., March 12, 1957. Mr. MATTHEW HALE, Counsel, Senate Banking and Currency Committee,
Washington D. C. DEAR MR. HALE: In response to your telephone request of March 11, I am submitting herewith the additional information to supplement the oral testimony I presented to the Senate Banking and Currency Committee on March 7.
The first point on which you requested information was the composition of the butadiene capacity of the United States. As noted in the attached letter from the Office of Oil and Gas, Department of the Interior, we have recently obtained this information and it is summarized as follows:
1 Based on Department of the Interior survey of March 12, 1957.
The above summary indicates dramatically the decreasing dependence on alcohol-butadiene, as well as butylene capacity. The butane source rises from approximately 10 percent of the total butadiene capacity in January 1956 to about 31 percent.
Your second question was directed to the chemicals which might be covered under subsection 2 of section 7 of H. R. 2528, which reads: "(2) chemicals for the production of which a material has been determined to be strategic and critical under the Strategic and Critical Materials Stockpiling Act of 1947." There is attached the latest copy of the Current List of Strategic and Critical Materials for Stockpiling, dated October 1, 1956. A few examples of the chemicals which are derived from these stockpiled materials are as follows:
(a) Castor oil-needed to make sebacic acid, which, in turn, is used to make special types of nylon, and aircraft lubricants ;
(6) Fluorspar-needed to make hydrofluoric acid and fluorine, which, in turn, are used to make refrigerants, aerosol propellants, etc.;
(c) Chromite-needed to make chrome chemicals, which, in turn, are used for such things as chrome tannage, etc. (See p. 17 with reference to the above.)
I believe the foregoing is sufficient to indicate the kind of things that might conceivably be done under subsection 2 of section 7.
If there is any further information which we can supply, please do not hesitate to call upon us. Sincerely yours,
ARTHUR WOLF, Chief, Chemicals, Rubber, Agriculture, and Forest Products Branch.
DEPARTMENT OF THE INTERIOR,
OFFICE OF OIL AND GAS,
Washington, D. C., March 12, 1957. Mr. ARTHUR WOLF, Chief, Chemical, Rubber, Agricultural, and Forest Products Branch,
Office of Defense Mobilization, Washington, D. O. DEAR MR. WOLF: Recently, you requested that the Office of Oil and Gas resurvey United States butadiene capacity as of January 1957 and obtain estimates for January 1958.
Enclosed is a memorandum from L. G. Rodgers to Carroll D. Fentress, dated March 4, 1957, summarizing this survey. The data on the individual companies' capacities should not be disclosed except to Government officials in connection with mobilization matters. They were obtained on this basis. There would be no objection to summarizing the data or regrouping the data in such a manner that the capacity of an individual company could not be readily derived. Sincerely yours,
H. A. STEWART, Director. Senator DOUGLAS. That is understood, but with the understanding you are not held to the precise figures, could you give me an estimate so that we could go ahead with it?
Mr. SHEEHAN. I have a specific figure for the end of 1956. I do not have it for 1955.
Senator DOUGLAS. But not for February 1956? Mr. SHEEHAN. No, I do not. Senator DOUGLAS. Do you have a figure for December 1955? Mr. SHEEHAN. I do not have it readily available, Senator. I can dig it out. I have the figure of 1956 capacity—621,000 short tons.
Senator DOUGLAS. It is not stated as to what time?
Mr. SHEEHAN. It is not stated whether it is early in the year or what period.
Senator DoUGLAS. And the present capacity is 750,000 tons ?
Senator Douglas. So there was an increase of 125,000 tons. Now you have another figure which shows that by the end of 1958 the projected capacity on the basis of plant now under construction will be how much ?
Mr. SHEEHAN. 416,000 short tons. That would be in addition. The total will be 1,037,000.
Senator DOUGLAS. Or an increase of around 400,000 tons?
Senator DOUGLAS. In comparison with the approximate beginning of 1956.
Mr. SHEEHAN. That is right.
Senator Douglas. It is this increased capacity of the petroleum end of the butadiene industry which makes you believe that you no longer need standby capacity for the production of butadiene from alcohol?
Mr. SHEEHAN. That plus the fact that an emergency source is available for the next 8 years in the Koppers plant at Kobuta, Pa.
Senator CAPEHART. Mr. Chairman, may I say there is a question in my mind on this.
I think your figures are correct and I do not think there is any question but that butadiene can be made cheaper from petroleum than alcohol, but there is just a question in my mind as to whether or not we ought to put all of our eggs in one basket and completely eliminate any capacity or further research or effort to try to make butadiene out of alcohol. That seems to be what we are doing in this case, or possibly what we are doing. I do not say it is entirely.
Mr. ROBBINS. Senator, there is not anything that has been said here that is intended to discourage the continuation of research.
Senator CAPEHART. I understand that.
Mr. ROBBINS. We are only talking about the elimination of a commercial operation and placing it in private hands and getting the Government out of it.
Senator CAPEHART. That is right, and I say some of us, being so much interested in research for the farmers and knowing that the President's Commission is studying the problem at the moment, and knowing about the legislation we have before us, are wondering whether or not this facility might not be a facility that can be used if and when the Congress decides to get into research on agricultural products, as many of us think they should.
Is this a facility we might well retain at the moment and use for that purpose! I do not know whether it can be used or not, but I simply bring up the question.
That is all.
Senator Douglas. There is another point which has occurred to me in this discussion of the increased capacity to produce butadiene from petroleum, namely, whether in the event of a national emergency we would have an adequate amount of petroleum available for conversion into butadiene. It so happens I made a trip to the Middle East in December and went up the length of the Suez Canal. I saw that canal completely closed. We all know that the two pipelines from Iraq through Syria on to the Mediterranean were blown up, and they are now being rehabilitated.
Very frankly, this is what I am afraid of: That in the event of another war-God deliver us from having another war—but in the event of another war that the oil supplies from the Middle East would be cut off, whether by the Arab States blocking passage, or by Russian airplanes coming down and bombing the wells and refineries. The wells are so large and so closely concentrated that it would not seem to me from a study of the geography of the area to be too difficult to do that.
In that event American and Venezuelan oil would have to support both the war effort of the United States and of Western Europe, if they remained on our side as allies, as we fervently hope they would.
The question comes up under that condtion whether there would be enough additional petroleum available for the production of synthetic rubber, and whether it might not be a good thing to have a plan up our sleeve, so that we could get a substitute from alcohol and possibly the conversion of not only molasses and sugarcane, but of corn into alcohol. This is a consideration which has worried me ever since I began to study this problem.
If the Senator from Indiana has any comments, I will be very glad to recognize him.
Senator CAPEHART. I agree with everything you said, and I made a speech on the floor of the Senate on the subject.
Senator DOUGLAS. I am very sorry I did not hear the speech of my colleague, but I assure you I will read it in the Record.
Mr. ROBBINS. The statement you have made along that line is not within the authority of the Federal Facility Corporation. It is the Office of Defense Mobilization which is charged with the responsibility, in consultation with its delegate agencies, of determining what the security requirements of the Government are.
Senator Douglas. I will be very glad to hear the testimony of those gentlemen this afternoon, but forgive me if I say that we on the Hill cannot go on the slogan that papa knows best. We must bear the ultimate responsibility by statute. The fact that advice was given to us which later turns out to be erroneous, does not salve our conscience or discharge our duties.
Senator CAPEHART. And the situation is changing too.
Senator Douglas. Mr. Robbins, we are going to recess the hearing until 2:30, but I think in courtesy to you, because you have been here all this morning, I am going to let you continue, and then we will have the other witnesses this afternoon.
Mr. ROBBINS. There is not very much more to this statement, Mr. Chairman. On page 6 I was at this point near the bottom of the
page: Similarly, Public Law 433 of March 1956 was a special act which authorized sale of the Louisville plant. The sale negotiated thereunder with Union Carbide & Carbon Corp. was disapproved by the Congress, because of an unfavorable opinion by the Attorney General which was based, not upon antitrust grounds, but upon language in the act requiring the Attorney General to find that the sale "would best foster a free competitive synthetic rubber industry," and that the purchaser must intend in good faith to utilize the plant for the production of alcohol butadiene. The power to sell Louisville conferred by Public Law 433 was exhausted in the sales proceedings conducted by the Disposal Commission last year, and H. R. 2528 would grant the necessary new authority to proceed with disposal at this time.
If this bill becomes law in the very near future, the plant can be sold without delay, subject to the existing lease with Publicker, and the purchaser will have time to make engineering and other plans and to put them into effect promptly after taking possession of the plant on April 4, 1958. The Corporation has received a sizable number of expressions of interest from companies other than those which have previously filed bids, and is convinced that a favorable market now exists. If sale of the plant is deferred, such interest can very well diminish. It seems certain that H. R. 2528 will result in a greater number of bids than those submitted under the more rigid act of 1953, and it is logical to believe that the Government can secure a price not only better than the previous bids, but also better now than at some indefinite future date.
If this legislation is not enacted, it is assumed that the plant will be taken over by General Services Administration and that at some time after April 1958 it will be sold in accordance with that agency's