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COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, February 26, 1957, Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency,

United States Senate, Washington, D. C. DEAR MR. CHAIRMAN : Reference is made to your letter of February 12, 1957, requesting our views on H. R. 2528, a bill to authorize the sale of the Government-owned alcohol butadiene facility at Louisville, Ky.

This facility, known as Plancor 1207, is the last of the Government-owned synthetic rubber plants. Prior efforts to sell the plant have been unsuccessful principally because of a requirement in the disposal legislation that the sale contract contain a national-security clause binding the purchaser to keep the plant available for the production of butadiene for a 10-year period in the interest of national security. The plant is made for the manufacture of butadiene from alcohol, a process which is not economically competitive with the production of butadiene from petroleum. In hearings on H. R. 2528 before the Committee on Armed Services of the House of Representatives last month it was stated by a representative of the Office of Defense Mobilization that mobilization needs for rubber do not now depend upon butadiene production from the Louisville plant, mainly because of other butadiene facilities which have been built during the past few years.

H. R. 2528 proposes to authorize the sale of the plant without the previous requirement that it be kept available for butadiene production, but with a requirement that it remain available for production of a chemical or chemicals important to our national security. The bill would also clarify another feature of previous disposal legislation, that is, the provision that a proposed disposal be approved by the Attorney General as nonviolative of the antitrust laws. The meaning and effect of this provision was the subject of our letter to you, B-128148, dated June 12, 1956. H. R. 2528 would provide that the Attorney General advise the Congress whether a proposed disposal would tend to a situation inconsistent with the antitrust laws, but his approval is not required.

In view of the position taken by the Office of Defense Mobilization that contiued availability of butadiene production from Plancor 1207 is not necessary for mobilization needs of the country, we believe sale of the plant on the terms provided for by H. R. 2528 is desirable and will result in a better price to the Government. We therefore recommend favorable consideration of the bill by your committee. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

GENERAL SERVICES ADMINISTRATION,

Washington, D. C., March 5, 1957. Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency,

United States Senate, Washington, D. O. DEAR MR. CHAIRMAN: Your letters of February 12 and 22, 1957, request our comments with respect to H. R. 2528, a bill to authorize the sale of the Government-owned alcohol butadiene facility at Louisville, Ky., known as Plancor 1207.

Section 2 of the bill authorizes and directs the prompt sale of the plant by the Federal Facilities Corporation subject to the existing lease and provides that the sale shall not restrict the plant to the manufacture of alcohol butadiene.

Section 3 spells out the disposal pattern which follows, generally, the earlier disposal legislation.

Elsewhere in the bill provision is made for submission of a report of any recommended sale to the Congress, consideration by the Attorney General, and a national-security clause.

It is believed that the method of disposal provided for in the proposed bill will facilitate sale of the plancor.

This agency favors enactment of the proposed bill.

The Bureau of the Budget has advised that there is no objection to the submission of this report to your committee. Sincerely yours,

FRANKLIN G. FLOETE, Administrator.

Senator DOUGLAS. The representatives from the Publicker Industries have been sitting here all day waiting to testify. I do not know who is going to testify for them, but I would appreciate it if they would come forward.

Is this Mr. Brown?

STATEMENT OF LAWRENCE R. BROWN, ASSISTANT TO THE PRESI

DENT, PUBLICKER INDUSTRIES, INC.; ACCOMPANIED BY MORTON
H. WILNER, COUNSEL
Mr. Brown. Yes, sir.
Senator DOUGLAS. Give your name and address, Mr. Brown.

Mr. Brown. My name is Lawrence Brown, 1429 Walnut Street, Philadelphia. With me is Morton H. Wilner, 700 Wyatt Building, Washington.

Mr. WILNER. I am counsel, Mr. Senator.

Mr. Brown. I have a prepared statement, Mr. Chairman. I hesitate to read it, but it is a complicated subject.

Senator DOUGLAS. Go ahead.

Mr. Brown. I would like to identify myself a little bit. During World War II, I was director of the Division of Chemical Coordination of the War Production Board and in that position was involved in almost every stage of the initial development of the alcohol-butadiene program. It was the Chemical Bureau, convinced of the impossibility of both supplying the necessary high-octane gasoline and producing synthetic rubber, which forced the alcohol-butadiene issue resulting in the authorization of this and the other alcohol-butadiene plants.

I am now assistant to the president of Publicker Industries, Inc., of Philadelphia, and appear here today on our company's behalf in opposition to H. R. 2528.

We are opposed to the passage of this bill. We are opposed for reasons of national defense and from considerations of self-interest, entirely proper self-interest we believe.

Publicker has a lease on the Louisville plant which extends until April 1958, and as the tenants in the plant-and, incidentally, the only company that has ever operated Louisville on a commercial basiswe have added greatly to its value. Further, we have a substantial investment in the lease.

There are four major points that should be made in our judgment about the bill.

First, nothing can be done under this bill that cannot be done under existing law. Without any new legislation the plant can be sold by General Services Administration with whatever security clause the Secretary of Defense deems wise. In no event, whether under present law or under this bill, can possession be taken before April 1958, Under either present law or this bill, a sale can be effectually made before that date, if it is desirable to do so. The bill is, therefore, completely unnecessary.

Second, the bill forecloses the possibility of using the Louisville plant to reduce agricultural surpluses. As long as this plant is ready to operate as an alcohol-butadiene producer, the Government can, if it will, convert unmarketable surplus grain, for which it har

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paid, into stockpile rubber for which the Government must otherwise continue to pay out additional money.

Senator DOUGLAS. The testimony, as I remember it, of the representative of ODM was that they had met their stockpile requirements in the field of natural rubber.

Mr. Brown. That is true, sir, I believe. Of course, I am not in on what the stockpile is. But there have been times in the past, Senator, when the stockpile contained synthetic rubber. I do not believe there is any prohibition of law in adding synthetic rubber to this stockpile if it is desirable to do so.

I mean the Government might prefer to own synthetic rubber as a stockpile than to own grain as a stockpile if it desired to do so. I mean I merely point out this as an avenue if it wished to do so.

Senator DOUGLAS. I see.

Mr. BROWN. I should point out also in connection with Senator Capehart's remarks this morning that as this plant stands today, if the Government wished to put grain to Omaha, for example, or to any other alcohol plant, this Louisville plant could start work in a week.

Now, the Koppers plant has been referred to as being available in case of an emergency or in the case of an agricultural desire or something like that. If our experience at Louisville with a standby plant is any example, it will take at least 6 or 8 months to get Kobuta running

We found a plant which was in very poor shape. It was put away as well as could be done

Senator DOUGLAS. Who put it away!

Mr. BROWN. It was put away by Federal Facilities Corporation. They had a contractor in there. I do not mean the work was slovenly done. That is not what I mean. What I mean is any plant that has been many years kept under standby is inevitably in bad shape and takes a great deal of replacement and repair and restoration before you can run it. Senator DOUGLAS. So you are saying that if Kobuta came back into

it would some Mr. BROWN. It would take a great deal of time and a great deal of investment, a great deal of money.

Senator DOUGLAS. Your plant has been lying idle since last October? Mr. Brown. Yes, but that is not enough to make any difference. All we would have to do is call the crews in and we could start right up.

Senator DOUGLAS. The Federal Facilities Corporation testified that you did not intend to produce this year; is that true?

Mr. Brown. We told, I believe it was the Corporation, not the Rubber Commission-I get them a little mixed; it is the same peoplethat we did not see any likelihood of having sufficient molasses supplies available to reopen the plant at least till the very end of 1957.

The molasses crop usually is available—you can see what you going to get-roughly between December and February. Last year we were greatly disappointed. We had a contract that was all ready to be signed in Cuba. We had butadiene contracts all ready to be signed. We had a second line ready to open. We never got the molasses. The crop failed and drought came along. And we like

any

other consumer of agricultural production-you are always either in a surplus or a shortage-were just caught in that jam last year.

But we could run on grain alcohol immediately.
Senator DOUGLAS. On grain?

Mr. BROWN. On alcohol from grain. The plant can run on alcohol from any source; it does not make any difference. My company has facilities at other locations that could make alcohol from grain also.

Senator Douglas. Let me ask you this: Do you intend to make butadiene from alcohol at your Louisville plant this year?

Mr. Brown. We intend to if it is commercially practical. Senator Douglas. Is it commercially practicable at the moment?

Mr. Brown. Not on market grain and not with the failure of the molasses crop.

Senator DOUGLAS. You will not know whether the molasses crop is failing this year or not.

Mr. Brown. Well, this crop will not be available until late next fall.

Senator Douglas. If you should have a good crop in Cuba this year

Mr. Brown. We could presumably be in shape to open up in December maybe. Something like that.

Senator Douglas. I see. In other words, you are low man on the totem pole in the claim for Cuban molasses?

Mr. BROWN. We are indeed. We own the ships that we have to move it in, and we have to pay as little as we can in order to compete with petroleum raw material. We have to pay just the minimum that we possibly can.

Senator Douglas. In other words, the sugar they cannot sell in the world market or to the United States can go into the molasses market?

Mr. BROWN. For other purposes. That is right, sir.

Senator DOUGLAS. And then you will buy it from the molasses market? Am I right on that?

Mr. BROWN. That is correct, sir. Yes, it is a sort of two-price system. The Cubans get all they can for their sugar for other purposes and then they sell to us what they cannot sell otherwise. It is a method, by the way, of removing agricultural surpluses from the market without breaking the world price.

Senator DOUGLAS. Well, I would say that that is a case of Government-fostered monopoly, but

Mr. BROWN. Pardon me?
Senator DOUGLAS. A case of Government-fostered monopoly.

Mr. BROWN. Could I go into that in a little detail, sir? It is today but it did not use to be. Years ago the Cuban mills would make deals with us, businessman to businessman, and we were able to get their surplus mill by mill, and they were very glad to sell it to us. It was money in their pocket. The regular sugar business carried them, made them a profit, and this was sort of you know. It was pin money in a sense. But it was free and they were glad to get it.

Today, of course, it is all handled through the Government's central seller.

Senator DOUGLAS. Go ahead.
Mr. Brown. One other point on this grain business if I might.
Senator DOUGLAS. Go ahead.

Mr. Brown. I think, Senator Capehardt, sir, there is a sharp distinction, at least in our minds, between research and pilot-plant operation, and I am afraid I would have to agree with the Department of

Agriculture experts that as a research establishment Louisville would not be very desirable.

On the other hand, sir, as a large pilot-plant operation it is ideal. And there is one thing I would like to point out in that connection.

At the present time, by reason of the chemical and physical nature of the process and the equipment that was installed in the plant years ago, 40 percent of the alcohol that is fed in is lost. I do not mean it is physically lost but it goes into processes that are—or products that are—degraded and are burned and wasted. Very little recovery.

Now, there is the kind of thing, sir, where research can be actively applied immediately. Because if even half of that 40 percent which is now unmarketable can be turned into a marketable product, you can pay a great deal more for the alcohol and hence you begin to bring your

Senator CAPEHART. You say 40 percent of it is lost?

Mr. Brown. Forty percent of the alcohol that is fed into the plant does not come out as a marketable product.

Senator CAPEHART. Due to the process?

Mr. Brown. Due to the process and due to the lack of recovery equipment. The plant was not built, sir, to be an efficient producer of alcohol butadiene.

Senator CAPEHART. How's that?

Mr. Brown. The plant was not built to be excuse me. Moneywise it was not built to be efficient. Mechanically, yes. It seeks to get the best chemical yield out of the alcohol. It is efficient in that respect. But it was a Government-owned plant, it was a wartime emergency, and nobody gave much of any thought to trying to get the squeal out of the pig—to make it as profitable

as possible. So there is that field there ifSenator CAPEHART. Your company processes a lot of grain alcohol?

Mr. Brown. We have at times, sir. You see, at the moment we do not because the price of grain that we are allowed—I mean the

Senator CAPEHART. You are using molasses. But you have in the past ?

Mr. BROWN. We have in the past.

Senator CAPEHART. What has been your experience with selling the byproduct for feeding to animals?

Mr. Brown. We have never found any difficulty in selling it. Senator CAPEHART. No difficulty in selling it? Mr. Brown. No; but I think I should say in fairness to the previous witnesses that when we were selling large quantities of grain byproducts the whole livestock situation was not the same as it is today. I think that a person would have to face that there might be a problem. in regard to the byproducts.

Senator CAPEHART. The byproduct is a good product?

Mr. Brown. It is a very good product. It is a very valuable product. And I cannot agree with the Agriculture witness

Senator CAPEHART. Is it easily shipped?
Mr. Brown. It ships beautifully.

Senator CAPEHART. Could you ship it from Philadelphia to Indiana?

Mr. BROWN. If the freight rates would let you.
Senator CAPEHART. I mean if the freight rate would let you.

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