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Publicker took possession. That company had never atempted to lease the plant or take any steps to reduce the Government's cost of maintenance. After Publicker put the plant into operation and was competing in the butadiene field, that company became interested in purchasing the plant.
The first reduction in the Government's cost in 10 years was Publicker's lease payment. Naturally, in addition, the first private employment offered in the plant in 10 years also resulted from Publicker's start of production in the summer of 1955. Publicker produced butadiene at the plant from October 1955 to September 1956. This was also the first private production of butadiene from agricultural raw materials. Because of partial failure from drought of the Cuban molasses crop and the resulting inability to manufacture sufficient alcohol, a temporary suspension of production was forced in the fall of 1956.
In the meantime, the plant had been reoffered for sale in the spring of 1956 under the terms of Public Law 433, 84th Congress. Publicker's offer to purchase was not accepted by the Rubber Producing Facilities Disposal Commission, while the disposal of the plant desired by the Commission was disapproved by the Atorney General and rejected by the House of Representatives in House Resolution 524, adopted June 12, 1956. Publicker's offer to purchase at the identical price accepted by the Commission from that company was refused by the Commission and hence never came before Congress.
In the hearings of House Resolution 524, the resolution disapproving the sale recommended by the Rubber Commission's proponents of the sale argued that the Attorney General could approve such sale if the security clause were weakened so the plant no longer had to be considered as part of the synthetic rubber industry. A bill to this effect, H. R. 11813, endorsed by the Commission, was not acted upon in the 84th Congress.
After adjournment of the 84th Congress and the legal extinction of the Commission, the Federal Facilities Corporation, as successor to the Commission, then considered two lease offers. The negotiators for the FFC, the same negotiators as the ones representing the Rubber Commission, rejected both lease offers and requested Chairman Vinson of the Armed Services Committee of the House to present new legislation in accordance with the wording of H. R. 11813. The bill here under discussion, H. R. 2528, is the bill in question.
SIGNIFICANT PROVISIONS OF H. R. 2528 IN CONTRAST WITH EXISTING LEGISLATION
H. R. 2528 proposes to authorize the Federal Facilities Corporation to sell the Louisville plant as a general chemical facility. However, the wording is such that any buyer possessing similar capacity at an existing plant elsewhere, could cannibalize Lousiville for scrap (sec. 7, lines 7 and 8). The House committee record and the House report (No. 4) do not bring out this point.
By removing the one restriction that gives the plant any defense importance whatever-namely, the ability to produce butadiene from alcohol-H. R. 2528 destroys the national-defense value of the security clause, even for less favored buyer who would be required to observe it. Removal of this restriction would leave no national-defense interest in the plant. The diluted security clause permitted under H. R. 2528 really is meaningless to the Government, although it would be expensive to any company but a large chemical organization already owning equivalent facilities. How meaningless is shown by the fact that not one of the chemicals that would be covered by this clause is today vital except liquid oxygen and nitrogen, which this plant could not make. For none of the rest could you get even tax amortization on plant expansion. The stockpile provision borders the absurd. These are all tropical oils and botanicals which no chemical plant anywhere can make.
Mr. BROWN. All right, on page 8, then.
ESSENTIAL POINT OF DEFENSE IMPORTANCE OF PLANT
The defense importance of this plant often is overlooked, even by some Government agencies, because such importance cannot be judged solely on the basis of total national capacity of petroleum-butadiene. The whole purpose of the construction and preservation of the Louisville plant was to have available to the country a source of rubber raw material independent of petroleum. This was because most petroleumbutadiene and high-octane gasoline compete for the same limited raw
material—butylene. Even during the height of World War II there was enough petroleum-butadiene capacity. But this capacity could not be operated because butylene was required for other purposes. As a result, the essential raw material for synthetic rubber came from Louisville and the other two alcohol-butadiene plants.
As an indispensable raw material for high-octane gasoline, in times of war or crises of national defense, butylene always has been and, in all likelihood, again will be taken away from butadiene production and assigned to military gasoline, both air and ground. This fact, not the total butadiene capacity of the petroleum industry, reveals the defense importance of the Louisville plant and the reason why the present type of security clause should not be weakened.
I might add there, sir, if I may, that in view of the testimony before, I feel more strongly about that, because the so-called security clause in this act has been testified about by the defense agencies and admitted to have no significance whatever; whereas, in the case of butadiene, it may be that the country will not need to have butadiene again, but certainly the plant does not hurt the defense requirements of the country.
No testimony on this point was presented before the House Armed Services Committee. The House report mentions the names of companies expanding butadiene production from butane (rather than butylene) but does not give any quantities. The most recent quantitative figures, according to Government sources, show that upon completion of all scheduled expansion of butadiene at the end of 1958, there will be 636,000 tons of butadiene capacity still dependent upon butylene and only 302,000 tons available from butane. Roughly, two-thirds of the Nation's synthetic rubber still will be competing for raw materials with high-octane gasoline.
In contrast, Louisville operates on alcohol, which can be made from constantly replenished agricultural raw materials. It is thus a secure base for wartime industrial requirement, being always available as needed. In time of national emergency, including World War II and Korea, alcohol-butadiene was an essential factor. The Government has invested $40 million in the plant because of that essential defense importance. This investment should not be scrapped.
Now, our conclusions are that the legislation proposed by H. R. 2528 is ill advised and unnecessary. Existing law handles the disposition of this facility on a reasonable and flexible basis which protects the total interest of the Government, including its defense interest.
Senator CAPEHART. In other words, your argument is that while we may have sufficient physical capacity to make petroleum and gas synthetic rubber, in case of war or emergency we might not have the raw materials?
Mr. Brown. Yes, sir.
Senator CAPEHART. And in case of emergency the thing to be considered here is the raw material, rather than the physical properties? Mr. BROWN. That is correct, sir.
I would hate for us to get along on 300,000 tons of butane-butadiene if that was all we could get. There always would be some butylenebutadiene available, of course.
Senator DougLAS. One thing that interests me, your company made a bid for this plant last year, did you not?
Mr. BROWN. Yes, sir. We did, sir.
Senator DOUGLAS. Then you are ready to go ahead and produce butadiene from alcohol at this plant?
Mr. BROWN. Yes, sir.
Senator Douglas. And you do not ask for the alternative chemical products, or to produce the alternative chemical products?
Mr. Brown. No, we would have no interest in attempting to in this plant—I would not say that, sir, but we think this should be kept as an alcohol-butadiene plant. We would like to acquire the plant for use as an alcohol-butadiene plant.
Senator DOUGLAS. You would like to do that, using molasses, if that was cheaper, or grain, if that was cheaper?
Mr. Brown. Or grain on a toll basis. If the Government just wanted to give us some grain that they own and say, “Make rubber out of that for us on a toll basis."
Senator DOUGLAS. At Omaha.
Mr. Brown. Or we would be glad to lease Omaha and process the grain at Omaha, and we could
turn the alcohol into butadiene at Louisville.
And in regard to turning the butadiene into rubber, our neighbor perhaps has idle rubber capacity, and they would probably be glad to make the butadiene into rubber.
Senator DOUGLAS. I understand.
Mr. Brown. I think a feasible program could be developed in very short order and get this plant running and solve Senator Morton's problems down there. I think we could get it running on a grain program.
Senator CAPEHART. You say you have offered to buy this plant for production of butadiene?
Mr. Brown. We did offer to buy it under Public Law 433, yes, sir.
Mr. Brown. Yes, sir. Then what happened was this, sir: We pointed out to the Commission that the sale to Union Carbide had not been approved by the Attorney General and that it was our judgment that it would not be approved. We could not see how the Attorney General could approve that sale. So we went to the Commission, and we said, “We cannot submit to you another bid because we have agreed, under your regulations, not to. But we would like you to ask us if we would sign a conditional contract to buy the plant. You have now found, for the first time, that $3,125,000 is full fair value. That finding had never been found before. You have now found that $3,125,000 is full fair value
Senator DOUGLAS. Who found that?
Mr. Brown. Yes. We said, “This is the first time we knew about it. We are not quite as well off as Union Carbide and $2,400,000 means a lot more to us than $3,125,000 does to them.”
“But,” we said, "if you will invite us to sign a conditional contract with you for $3,125,000, conditioned on your inability to get the sale
to Carbide approved, we will do it and you will get the money for the Government that you say you should have for the plant, and the negotiating period is legally open, so how about doing it?"
Well, they did not think they should. Senator DOUGLAS. Now, let me see if I understand you. Is this what you said to them: “Go ahead and try to get your sale to Union Carbide through, but, if it is turned down by the Attorney General, we will offer the same amount of money that Union Carbide did and guarantee to produce or have the plant ready to produce butadiene”?
Mr. Brown. Yes, because we would buy it under exactly the same contract as Carbide's, with the butadiene security clause in it.
But it has been pointed out, sir, that nobody has “guaranteed” to run any of these plants and no one will ever “guarantee” to run this one.
Senator CAPEHART. Would the Attorney General approve a sale to you?
Mr. Brown. We thought they would, because the Attorney General approved a lease to us, and we did not see how, having got the Attorney General's approval on the lease, he would be likely to turn us down on the purchase.
Senator CAPEHART. Why did they not sell you the plant, then, for $3,125,000?
Mr. BROWN. You would have to ask them about that. The Commission no longer exists.
Senator CAPEHART. That is right.
Senator CAPEHART. It was not the gentleman who testified here this morning that handled that?
Mr. BROWN. No, sir.
Senator DougųAS. When we had some rubber plants out in California, I engaged in informal negotiation in committee to see if we could get the price up, and I think perhaps I added one or two million dollars to the governmental revenues by informal bidding which I promoted in the committee room.
Are you authorized to make any offer at the present time?
Senator Douglas. Suppose we were to make it for sale; would you people come in again?
Mr. BROWN. Under an alcohol- butadiene clause?
Senator DOUGLAS. With the alcohol-butadiene clause and with an antitrust clause.
Mr. Brown. We would be bidders; yes sir. I would not be authorized to say what we would bid. Bidding rates change, interest charges change, conditions change; but we would be an active bidder for the plant, sir.
Senator DOUGLAS. You mean business?
You see, sir, we are large manufacturers of alcohol from agricultural raw materials. We are, in fact, the only one left. There are some small plants left that belong to companies, but they rarely run them. Years ago, in fact, at one time all the alcohol of this country was made
from agricultural raw materials. Today, we are the only such producer left. The oil-based alcohol has, one by one, driven them out.
Senator DOUGLAS. I hope this is not used for drinking.
Mr. Brown. No, sir. This is not drinking alcohol. The amount of drinking alcohol would not keep an industrial alcohol company in business for a week.
Senator CAPEHART. It is not a rubbing alcohol either?
Mr. Brown. Sir, to an industrial alcohol manufacturer it is solely a matter of cost. He can make alcohol out of wheat, out of corn, out of rye, out of anything—sorghum molasses
Senator CAPEHART. All grains?
Mr. BROWN. Yes, sir. We have made alcohol out of potatoes. We used up the main surplus of the Department of Agriculture one year. A messier job I never saw, either, but we did it. In potatoes there is so much water.
Senator CAPEHART. Even those that are colored, painted on the outside ?
Mr. BROWN. That is right.
Senator Douglas. Your testimony has been very interesting. I think that we should give Mr. Robbins and his associates a chance to reply in rebuttal, if they wish to take the opportunity, and if they make rebuttal, then you should have the opportunity for a brief surrebuttal. I do not want to go into a long surrebuttal.
Mr. Robbins, do you have any comments that you would like to make?
Mr. ROBBINS. I should like to make 2 or 3 comments, Mr. Chairman, and then ask Mr. Holland and Mr. Sheehan to supplement them.
Senator DOUGLAS. Very well, sir.
STATEMENT OF LAWRENCE B. ROBBINS, ASSISTANT SECRETARY
OF THE TREASURY AND ADMINISTRATOR OF THE FEDERAL FACILITIES CORPORATION; ACCOMPANIED BY HAROLD W. SHEEHAN, SPECIAL ASSISTANT TO THE ADMINISTRATOR; AND EUGENE HOLLAND, CONSULTANT—Resumed
Mr. ROBBINS. On the statement of Mr. Brown's, there are several points that I should like to particularly answer,
On his page 2, the paragraph No. 1, he makes the point that the plant can be sold just as effectively under existing law, which means that the lease would have to run out and then GSA take over and go through its usual procedures as it can under this proposed legislation.
That we covered pretty thoroughly this morning, and it is not really the fact, because it will undoubtedly mean a delay of at least several months, and probably as much as a year, perhaps much longer than that, before any purchaser can take over the plant and put it into operation.