Senator CAPEHART. Let me ask you this. His statement is legally correct; is it not?

Mr. SHEEHAN. I do not so consider it, sir.

Senator CAPEHART. You do not?

Mr. SHEEHAN. There is no authority to sell the plant at the time. Senator DOUGLAS. Well, Mr. Robbins, could not GSA make tentative disposal arrangements prior to April 4, 1958? I mean why do you have to hold everything up and start afresh? Why could they not be carrying on parallel negotiations?

Mr. SHEEHAN. I think, Senator, that in order to get the plant into GSA's hands it would require a finding, in the first place, under the Federal Administrative Property Act that the plant was excess to the responsibilities of the Federal Facilities Corporation.

Senator DOUGLAS. That could occur sometime prior to April 4. Why could not GSA and prospective bidders, during that interval, work on the arrangements, the bidding, the engineering plans, and so on? Mr. ROBBINS. Mr. Chairman, I do not think that this can be properly classified as excess property as long as there is a lease on the plant.

Senator DOUGLAS. That was your argument, that it had to be classified as excess property. I was taking up that point. If it does not have to be classified as excess property, why could you not be conducting this in the meantime?

Mr. ROBBINS. We have no authority to negotiate a sale under existing legislation.

Senator DOUGLAS. Which would give you authority but limited to butadiene made from alcohol?

Mr. ROBBINS. Well, that was the situation under Public Law 433. Senator DOUGLAS. As I understand it, you had bids under those conditions from both Union Carbide and from Publicker; is that not true?

Mr. ROBBINS. That is right.

Senator DOUGLAS. What is there on which to assume that you could not get bids again? Publicker is ready to come in. If Union Carbide was willing to bid before, why are they not willing to bid now? Mr. ROBBINS. They were ruled out by the Attorney General under the language of the act, at that time, which left it completely in the hands of one bidder.

Senator DOUGLAS. They were ruled out because the Attorney General thought that it would not be used for butadiene made from alcohol. You did not rule it out under the antitrust laws?

Mr. ROBBINS. No; not under the antitrust laws.

Senator DOUGLAS. You approved it under the antitrust laws; that was the purport of the letter which I put into the record this morning? Mr. ROBBINS. That is right, sir.

Senator CAPEHART. Had it not been for the Attorney General's decision, you would have sold the plant to the Union Carbide; would

you not?

Mr. ROBBINS. Yes; the sales contract had been negotiated.
Senator CAPEHART. But you did not handle that?

Mr. ROBBINS. We did not; the Commission did.
Senator CAPEHART. The Commission?

Mr. SHEEHAN. The Disposal Commission.

Senator CAPEHART. But you were not in charge of it then, you gentlemen?

Mr. SHEEHAN. Mr. Holland and I were with the Commission at the time.

Senator CAPEHART. Well, then, when the Attorney General ruled that you could not sell it to Union Carbide on account of the language in the act, as you state, and Publicker came along and made the same offer, why did you not sell it to them?

Mr. SHEEHAN. The reason for that, sir, is this; that the law under which we operated enjoined us to recommend a sale to the Attorney General.

Senator CAPEHART. Yes.

Mr. SHEEHAN. At the time we had contact with the Attorney General, and he had the proposals of both parties before him from the very day that they had been received by the Commission.

Senator CAPEHART. All right.

Mr. SHEEHAN. We negotiated for a period of time with both parties. We came to the point where there had to be finality in the negotiations. We called them in and said, "at a given day and hour, we want you to give us your last and best figure.' The contract was the very same contract as the previous witness testified to. And they both had signed the contract.

We opened up the final bids as was recited earlier-$3,125,000 versus $2,400,000. In accordance with the chairman's statement, when the meeting opened, negotiations would be concluded; the negotiating period ended at the end of that day. And an agreement-both signed an agreement accepting that condition. That was done. The negotiation period was through. The Commission, under the law, sent the contract to the Attorney General. We had no intimation from the Attorney General whatever that there was anything

Senator DOUGLAS. He turned you down?

Mr. SHEEHAN. He turned us down. We sent it to him on the 16th day of May 1956, and he advised us in the afternoon of May 23, the last day of the 7-day review period, that he was disapproving that sale.

Senator DOUGLAS. Why did you not sell it to Publicker after that if they were willing to come up with $3,150,000, the same figure that Union Carbide was willing to offer?

Mr. SHEEHAN. In our view, sir, we lacked legal authority to sell the facility to Publicker at that time.

Senator DOUGLAS. I am not a lawyer, and I certainly do not presume to pass on the legality of this, but it seems to me when you had closed the bids, and you had submitted a proposed sale to the Attorney General, and he had turned you down, on the sale to Union Carbide & Carbon; that here was a sale on an equal-price basis to an alternative bidder at a higher price than they offered then. Why did you not say, "This is a new proposal"?

Mr. SHEEHAN. We had no authority, sir, to take it up at that time. Senator DOUGLAS. I cannot quite understand that.

Mr. SHEEHAN. Well, pardon me, sir. The statute told us to submit a recommended sale to the Attorney General.

Senator DOUGLAS. But that having failed, why could you not sub

mit another?

Mr. SHEEHAN. We were all through.

Senator DOUGLAS. When did you go out of business?
Mr. SHEEHAN. We were all through on that sale proceeding.
Senator DOUGLAS. When did you go out of business?

Mr. SHEEHAN. In September.

Senator DOUGLAS. You had some months.

Mr. SHEEHAN. But there was no authority under the statute, sir. It is a one-shot proposition, Senator Douglas.

Mr. ROBBINS. There was only a limited time for negotiation. Senator DOUGLAS. If that was thrown out, why not start again? Mr. SHEEHAN. But we cannot under the statute, sir. Public Law 433 gave us a definite period of time to call for the bids, to negotiate, a definite period for the Attorney General to review, and a definite period to come back to you gentlemen with a sale, if we had one. Senator DOUGLAS. Would you permit Mr. Brown

Mr. ROBBINS. Yes, sir.

Senator DOUGLAS. Mr. Brown, would you come up here?

Mr. BROWN. Yes. The point that Mr. Sheehan is making incurred a great difficulty, that after a certain period it was impossible for the Commission to sign contract; its power to sell ran out, as Mr. Sheehan has been testifying. So that our offer was in order, in that we asked that a conditional contract be signed before the expiration of the Commission's negotiating power. Not to alter our bid-we could not-the Commission had signed a contract with Union Carbide.

Mr. HOLLAND. After signing an agreement that you would present your last figure to us at a certain time, and you agreed not to submit a later figure.

Mr. BROWN. That is correct.

Mr. HOLLAND. There was integrity in that proceeding there that was so accepted by everybody.

Senator DOUGLAS. Mr. Wilner.

Mr. WILNER. No; it was not a question of integrity; I beg your pardon. We invited you to ask us-

Mr. BROWN. On a conditional basis.

Mr. WILNER. To let us make a bid at the same price, before the end of the statutory negotiating period.

Senator CAPEHART. You mean you asked them to permit you to do it before they knew you were going to bid $3,150,000?

Mr. WILNER. No; after.

Mr. BROWN. But it was on the condition that if you had made a sale, we were out.

Senator CAPEHART. And they are out, too?

Mr. BROWN. We said to them "But you have not got the approval of the Attorney General; maybe you do not have a sale. While your legal negotiating period is still open, you have set a price; now, we cannot upset the Carbide price, we are not filing a bid contrary, or higher, than Carbide or anything like that. All we suggest is that you sign, if you could, a conditional contract with us to sell us the plant at the same price, if you cannot go through with the Carbide contract."

Now, I do not think that there was any violation of integrity or anything else. There may have been very good reasons why the Commission felt I can see their point of view on not signing a conditional contract. But certainly I think it was legal.

89750-57-pt. 1- -7

Mr. HOLLAND. Mr. Brown, was the negotiating period open then? Mr. BROWN. Yes, sir.

Senator DOUGLAS. I am not a lawyer, and though this is very interesting, I am not going into the question of whether the sale should have been made last year or not. Continue, Mr. Robbins.

Mr. ROBBINS. Mr. Chairman, this was all covered in Mr. Pettibone's testimony-was it before this committee or a subcommittee of the Banking Committee?

Mr. SHEEHAN. No; it was before the House Armed Services Committee last June.

Senator DOUGLAS. Yes.

Mr. ROBBINS. And there is in the record a full explanation of what happened and why it happened.

The second point is that, in section 2 on page 2, Publicker makes the point that they are in position to get into actual production at practically a moment's notice; and they also made the point that Kobuta would take 6 months or more to do the same thing.

I should like to call attention to the fact that, while Publicker was operating the plant, they were operating only 1 line out of 3. That is all they have ever operated. The other two lines have been in standby to the same extent that the entire plant at Kobuta has been in standby. And if it would take Kobuta 6 months to get into operation on their production, there is no reason to think that Publicker would have done it in any shorter time on the two lines, at least, that they had not operated.

Senator DOUGLAS. I am not a chemist, and certainly not an expert in the chemistry of butadiene; but I should think it might make some difference as to the conditions under which the plant was kept in standby. The differences between the standby conditions for the Kobuta plant and the standby conditions for the two lines in the Louisville

Mr. ROBBINS. As far as I know, there is no difference. It is part of our responsibility to inspect the plants from time to time and make sure that the national-security clauses are being complied with and, if there were any important differences, I am sure they would be brought to light in these reports.

In section 3, there is a charge that there was favoritism to a huge chemical combine. I think the history of the bidding by the two bidders on this plant is of some interest, and that also is in the record.

Senator DOUGLAS. Just a minute. I think, in justice to Mr. Brown and Publicker, that they are not charging you with personal favoritism. They say that the bill was such that by the possibility of producing these alternative products it would favor a large chemical combine which could produce these other products, whereas a small company, whose capacities in other lines would be limited, would not have the same advantage.

So I do not think you should take umbrage; I did not interpret this as a charge of gross favoritism but merely that there was a defect in the bill.

Mr. ROBBINS. On the other hand, if the use of the plant were limited to alcohol butadiene, which Publicker recommends, on their own statement, it would pretty well limit the field of bidding to themselves, because they say that they are practically the only source of alcohol in the United States.

On page 4, there is a reference to the stockpile, and Mr. Brown cites his experience in the War Production Board during World War II.

I think that it might be noted that quite a time has elapsed since then. The stockpile situation is quite different now than it was then, and I think it is fair to say that it can be assumed that the Office of Defense Mobilization is at least as well qualified to determine what the stockpile requirements are as anyone who does not have that close contact with them.

Senator DOUGLAS. It sort of puts the Senate out in right field; does it not?

Mr. ROBBINS. No, sir; not at all. There is every reason in the world why the Senate should examine into the position that ODM has

taken.

But a flat statement is made here, and statements have been made in testimony, that there is a question of the competence of ODM, to determine whether the stockpile requirements are proper or not.

On the bottom, or toward the bottom of page 4, there is a statement that the reason the plant could not be sold was the Attorney General's finding that that company could not, and so would not, operate this plant for the production of alcohol butadiene.

That statement is not correct. Carbide did not make any statement that they could not operate the plant or that they would not operate the plant. Their satement was and this was, as I understand it, essentially the same statement that Publicker made that they would operate the plant for the production of alcohol butadiene when it was economically feasible.

I would like to ask Mr. Holland for additional comments, if I may? Senator DOUGLAS. Yes. Mr. Holland.

Mr. HOLLAND. Mr. Chairman, I think that there was introduced testimony this morning or early afternoon on the production of butane-based butadiene and it was about 100,000 tons more than the statement that Mr. Brown made.

Senator DOUGLAS. Let me ask this question. You gave a figure of 1,037,000 tons capacity in 1958. Did that include butane capacity? Mr. HOLLAND. Yes, sir.

Senator DOUGLAS. Or only butadiene capacity?

Mr. SHEEHAN. Butadiene.

Mr. HOLLAND. Butadiene made from butane.
Senator DOUGLAS. I see. And so it included-
Mr. HOLLAND. Butylene.

Senator DOUGLAS. It included not merely butylene but butane? Mr. HOLLAND. That is right. And the Department or the ODM figures are higher than the ones we gave you.

Senator DOUGLAS. Yes.

Mr. HOLLAND. In all categories.

Senator DOUGLAS. But what Mr. Brown was saying, that if butylene is not used for feedstock, then you are left with the 400,000 tons of butane

Mr. HOLLAND. The figures introduced this afternoon were 100,000 more than the figures just introduced.

Senator DOUGLAS. Three or four hundred thousand tons made from butane?

Mr. HOLLAND. The figure given was 400,000; yes.