Senator DOUGLAS. Let me ask you this, Mr. Bates: If we do not pass this bill, as I understand it, upon the termination of the lease the plant will pass into the protective custody of the General Services Administration? Is that not correct? Mr. BATES. As I understand it, sir. Senator DOUGLAS. And if sold by them it would be subject to approval by the Department of Defense? Is that correct? Mr. BATES. We would then review the necessity for imposing a national security clause. Senator DOUGLAS. Right; and at present what you are saying is you would not impose such a clause? Mr. BATES. That is my opinion. Our usual procedure in this type of plant Senator DOUGLAS. That is the letter of the Secretary, is it not, that you have just read? Mr. BATES. Oh, I read a personal statement, sir. Senator DOUGLAS. Oh. Were you speaking for the Secretary? Senator DOUGLAS. Is this the statement of the Secretary of the Army? Mr. BATES. No. I am appearing as a witness for the Office of the Secretary of Defense, with whom this testimony was cleared. The Army has submitted a separate report in behalf Senator DOUGLAS. This is a statement of the Department of Defense, then? Mr. BATES. It is, sir; yes. Senator DOUGLAS. Well, then, my query was correct. The Department of Defense as of this moment does not regard it as essential? Mr. BATES. That is correct. And in further explanation, in plants of this kind, which produce an industrial material rather than a military material, it is our practice to refer to the Office of Defense Mobilization as to the necessity of imposing a national-security clause, so that we would take the advice of the Office of Defense Mobilization in this case. Senator DOUGLAS. Are you leaning on the Office of Defense Mobilization in this case, or is this an independent judgment of your own? Mr. BATES. I would say both. I participated with the ODM-the Department of Defense participated with the ODM-in the formulation of this finding that ODM has come up with, and we agreed with everything that went into that finding. Senator DOUGLAS. You heard my qualms about transferring this plant from the production of butadiene made from alcohol to some other purpose apparently not necessary for the national defense and depending entirely upon petroleum and natural gas. Mr. BATES. Yes. Senator DOUGLAS. Do you think my fears about the shutting off of Middle Eastern oil and southern Asian rubber and a great demand therefore for synthetic rubber and the possible difficulty in meeting this demand with the available supply of petroleum-do you think these qualms of mine are ill founded? Mr. BATES. I would not like to accuse the Senator of having illfounded qualms. 89750-57-pt. 1- -5 Senator DOUGLAS. You should not be afraid of that. If you believe them to be ill founded you should say so and I will respect you all the more for it. Mr. BATES. The natural-rubber situation is taken care of by our stockpile of natural rubber, which is very adequate at this time, or which is adequate. With respect to supplies of butadiene for GR-S, as has been stated, we have a large increase in capacity based on butane which is aside from petroleum. Then for the remainder needed from petroleum we feel that the requirement is such a small proportion of the total crude oil production that there is little likelihood of any shortage of butylenes to make the required butadiene. And further, as an added safeguard, if there is a shortage, we have the one good-sized plant at Kobuta which is in standby. And there is also the further fact that if our petroleum supplies were very severely restricted--let's say we might even lose Western Hemisphere supplies under those conditions the whole economy would be reduced to such a level that you would not have any automobiles going around needing rubber I would imagine. Certainly Senator DOUGLAS. We would be in such a bad strait that butadiene made from alcohol would not help us? Mr. BATES. Yes, sir. Senator DOUGLAS. We would be so flat on the floor that we should not try to lift ourselves up? Mr. BATES. Well, if you Senator DOUGLAS. I never thought a prone position on the floor was necessarily the most effective. Mr. BATES. The problems would be much greater under such a set of circumstances. Senator DOUGLAS. It would simply be an added straw? Mr. BATES. I believe, sir Senator DOUGLAS. I have, however, heard it is the last straw that troubles the camel. Mr. BATES. We think this Kobuta plant will supply any last straw that is needed here, sir. Senator DOUGLAS. Senator Capehart? Senator CAPEHART. I have no further questions. Senator DOUGLAS. Thank you very much, Mr. Bates. Wait a minute. Does the Defense Department agree with the Office of Defense Mobilization in believing that subsections 1 and 2 in sec tion 7 are of little or no help to national security? Mr. BATES. We agree that they are not essential. We would also agree that it is more desirable to have this plant producing some thing like say phenol or glycerine than it would be in making, oh, shaving lotion or cosmetics or something of that sort. Senator DOUGLAS. It is somewhat difficult for me to believe there would be 60,000 tons of cosmetics used in wartime but Mr. BATES. Well, I am thinking of peacetime. Senator DOUGLAS. National defense is a strange and wonderful thing. Do you have questions? Senator CAPEHART. No. No questions. Senator DOUGLAS. Thank you very much, Mr. Bates. The letter from the Secretary of the Army on behalf of the Secretary of Defense will be inserted at this point. (The letter referred to follows:) DEPARTMENT OF THE ARMY, Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency, United States Senate. DEAR MR. CHAIRMAN: Reference is made to your letter to the Secretary of Defense for the views of the Department of Defense with respect to H. R. 2528, 85th Congress, an act to authorize the sale of Government-owned alcohol butadiene facilities, at Louisville, Ky., known as Plancor 1207. The Secretary of Defense has delegated to the Department of the Army the responsibility for expressing the views of the Department of Defense thereon. The Department of the Army on behalf of the Department of Defense interposes no objection to the enactment of H. R. 2528 the purpose of which is stated in its title. The enactment of this legislation will cause no apparent increase in the budgetary requirements for the Department of Defense. This report has been coordinated within the Department of Defense in accordance with procedures prescribed by the Secretary of Defense. The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours, WILBER M. BRUCKER, Senator DOUGLAS. The next witness is Dr. George Irving, Agricultural Research Service, Department of Agriculture. Doctor, we expect you to help solve this mystery as to the other possibilities in using grains to make alcohol which in turn can be used to make butadiene. Can you throw any light on that? Dr. IRVING. We will be glad to try to, Mr. Chairman. I should like to introduce myself. Senator DOUGLAS. And your associate. STATEMENT OF GEORGE W. IRVING, JR., DEPUTY ADMINISTRATOR, AGRICULTURAL RESEARCH SERVICE; ACCOMPANIED BY WALTER C. BERGER, ADMINISTRATOR, COMMODITY STABILIZATION SERVICE, DEPARTMENT OF AGRICULTURE Dr. IRVING. I am George W. Irving, Jr., Deputy Administrator, Agricultural Research Service, in the Department of Agriculture. With me is Mr. Walter C. Berger, Administrator of the Commodity Stabilization Service of the Department. The Department's position with respect to H. R. 2528, authorizing the sale of the Government-owned alcohol butadiene facility at Louisville, Ky., is that we have no objection to its enactment. This position was communicated to the committee by Mr. Morse, Under Secretary of Agriculture, in his letter of February 28, 1957. Senator DOUGLAS. That will be made a part of the record. (The letter referred to follows:) Hon. J. W. FULBRIGHT, DEPARTMENT OF AGRICULTURE, Washington, D. C., February 28, 1957. Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SENATOR FULBRIGHT: This is in reply to your request of February 12, 1957, for a report on H. R. 2528, a bill to authorize the sale of the Governmentowned alcohol butadiene facility at Louisville, Ky., known as Plancor 1207. The Department has no objection to the enactment of H. R. 2528. The bill would direct the Federal Facilities Corporation to sell the Government-owned alcohol butadiene facility at Louisville, Ky., known as Plancor No. 1207, subject to the existing lease which expires April 4, 1958. The sale would not limit the use of this facility to the manufacture of alcohol butadiene. In carrying out the provisions of the bill the Federal Facilities Corporation would (1) invite and receive proposals for the purchase of the facility; (2) negotiate for its sale; and (3) make a report to the Congress. The bill would also authorize the Federal Facilities Corporation to accept a proposal which may not represent the highest price offered. In addition the bill would provide for the financing of the Corporation's activities out of the funds realized from the sale of the Louisville facility and the net proceeds from such sale would be deposited into the Treasury as miscellaneous receipts. The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours, TRUE D. MORSE, Acting Secretary. Dr. IRVING. The reasons for the Department's position are two. First, the Department feels that it is not needed-that the Louisville plant is not needed as a research facility. The plant is a production facility. As such, it is too large and not suited to effective use as a research facility. We further feel on consideration of the nature of the facility that it would cost fully as much to convert it to a research facility as it would be to start afresh and construct facilities where we need them and the type of facilities we need. Senator DOUGLAS. Would you not be able to use the powerplant and the associated facilities of this plant for any research facility whereas otherwise you would have to develop a new power system? Dr. IRVING. That is certainly true, Mr. Chairman. But the total conversion cost to produce the type of facility that we would prefer would equal or exceed, we feel, the cost of constructing new facilities of the nature, specific nature Senator DOUGLAS. Have you made cost calculations on this subject or just Ďr. IRVING. We have not made detailed cost calculations; no, sir. Senator DOUGLAS. This is just general opinion? Dr. IRVING. This is based on experience in similar considerations in the past. Senator DOUGLAS. I know everybody wants a new plant, just as everybody wants a new suit of clothes, but I sometimes think it is a good thing to have things cut down rather than start fresh. But go ahead. Dr. IRVING. We are convinced that the cost would be as much if not more to convert this plant. Senator DOUGLAS. Can you submit figures on this? Dr. IRVING. We could, sir. I do not have them with me. Senator DOUGLAS. I would be very glad to have you do so far the record. Dr. IRVING. All right, sir. (The information requested follows:) The Department has examined the Government-owned facility for the production of butadiene from alcohol at Louisville, Ky., and believes that it does not lend itself to conversion to an effective research facility. There is, however, a small fraction of the plant, consisting of 4 structures, which could conceivably be converted for research use at an estimated cost of $1,170,000. The facilities thus made available could not be, because of existing conditions. as adequate for research purposes as a newly constructed facility of equivalent size in a single structure which we estimate would cost $1,030,000. We wish to emphasize these are estimated figures and do not reflect a detailed cost study. Dr. IRVING. The Department feels further that if we should be required to do research in this field, an area which we are not now exploring researchwise, namely, conversion of alcohol to butadiene, we could as effectively do this under contract with private enterprise. Senator DOUGLAS. Well, with whom? Koppers? Dr. IRVING. Koppers, for example. Senator CAPEHART. What is another example? Senator CAPEHART. What is another example? Senator CAPEHART. No. You said if Congress wanted you to do research experiments in this you could do it through private enterprise. You gave Koppers as an example. I say what would be another example? Dr. IRVING. I do not know of one offhand that is specifically geared now to produce butadiene from alcohol. There may be some. I had in mind Senator DOUGLAS. The testimony has been there have been only three such plants. Is that not true? Dr. IRVING. That is what I heard this morning. Senator DOUGLAS. There is the Kobuta plant, in the hands of Koppers, to which the Senator from Indiana and I referred. There is the Institute plant purchased by Union Carbide 10 years ago. Do you know if that can now produce butadiene from alcohol? Could we get testimony on that? Mr. Holland? Mr. HOLLAND. It would take enormous reconversion back again. Senator DOUGLAS. In the meantime it has been converted to something else? Mr. HOLLAND. That is right. Senator DOUGLAS. So when you say if we sold this plant you could get it from other sources and from the Kobuta plant of Koppers for example, you would have to strike out "for example," would you not, and say that we could get it from Kobuta, period? Dr. IRVING. I Would be willing to make that strikeout in the testimony, Mr. Chairman. Senator DOUGLAS. All right. Good. Dr. IRVING. The second of the two reasons is that we feel the Department does not need this facility is for production purposes. The plant is not needed in view of the demand for production of butadiene from alcohol, and the Department feels in this regard that should production need to be stimulated in this respect it should be undertaken by private enterprise rather than in a Government-owned facility. Senator DOUGLAS. I do not think that is quite the alternative, if I may say so. I do not think the question is whether you should sell the plant under the conditions specified in this bill or keep it as a Government-operated enterprise. You could have a sale under different conditions, restricting it to butadiene, or you could have a leasing to private individuals, or you could have a stronger security clause. In other words, I do not want for 1 minute to be manipulated, either consciously or unconsciously, into the position that if we are critical of the present form of the bill that that necessarily means we are for Government ownership and operation of this plant at Louisville. And |