From the foregoing it seems that the only step to be promoted is that involving the gasification of coal. This is now being studied by various laboratories, not only for the purpose of producing synthesis gas but also to produce a heating gas which if it proves economical can be used as fuel for domestic heating and in stationary plants thereby releasing fuel oil and fuel distillates which can be converted to gasoline by more conventional methods. Work on coal gasification will be accelerated if it is known that suitable financing is readily available. In connection with the erection of a plant capable of producing 10,000 barrels per day of oil from shale (type C), it is well known that the Bureau is now carrying on extensive operations at Rifle, Colo., covering both mining of shale and retorting of the material to produce shale oil. On page 10 of your annual report for 1947 on the Synthetic Liquid Fuels Act, it is stated that complete data on commercial mining operations will be developed as a result of the work now being conducted at Rifle. The Bureau is also operating retorts on which they state they will obtain information necessary for commercial-retort design. It is our opinion that the scale of retorting operations being conducted by the Bureau at Rifle and in cooperation with private industry will be adequate to establish the best possible retorting practices. The most serious problem in connection with shale oil is that of economically converting the shale oil into products comparable to those obtainable from petroleum and as yet no satisfactory method of utilizing shale oil other than as boiler fuel has been devised. We see no immediate hope for the commercialization of shale-oil production on a competitive basis. In H. R. 5475, section 3, it is specified that industry will have only 120 days to declare its intention regarding the construction of the plants specified after which RFC shall proceed to build them on its own account. This period of 120 days is entirely too short in view of the large amount of technical study required before an intelligent proposal can be submitted. It should be increased to a period of at least 6 months. The Military Petroleum Advisory Committee and the National Petroleum Council are interested in the matter of synthetic-fuel production. Their work should be of great value to the ultimate determination of the problem. I strongly believe that the present activities in connection with coal and gas being undertaken by the industry, and the present work of the Bureau of Mines on coal and shale, should lead to a thorough knowledge for design of equipment for the production of synthetic fuels from these sources. The above remarks have been directed to H. R. 5475. They are also pertinent to the principles of the Interior's proposal. Very truly yours, JULIUS A. KRUG, W. S. S. RODGERS. HOUSTON, TEX., March 4, 1948. Secretary of the Interior, Washington, D. C.: Your request for the views of the members of the Petroleum Council on the synthetic-petroleum program received. It is my understanding that members of the Council do not have authority to advise you on any matter until same has been considered and approved for discussion by the agenda committee. Therefore, the opinion expressed below is personal, and as president of the Texas Independent Producers and Royalty Owners Association. I am opposed to both H. R. 5475 and the tentative draft of an act which was enclosed in Mr. Ball's letter because they both contemplate utilization of large quantities of steel in the near future and operation by the Government if private industry does not meet Government requirements for the operation. I believe plants constructed under either bill would inevitably be Government operated for the reason that Government departments would want to operate them and would make the requirements unattractive to private industry. The steel at the present time can be better used to build up domestic production. More barrels of oil per ton of steel can be obtained from natural crude-oil sources. The synthetic program should be started gradually by private industry and the Congress through some special legislation concerning these plants and authorizing the RFC to make loans to individuals or corporations on a business basis for the construction of these plants will, in my opinion, be sufficient action for the Government to take in order to get the synthetic industry under way and it will expand as the economics of the situation justify. H. J. PORTER, President. THE UNION PACIFIC COAL Co., Mr. MAX W. BALL, Director, Oil and Gas Division, Omaha 2, Nebr., March 17, 1948. Department of the Interior, Washington 25, D. C. DEAR MR. BALL: Your letter of February 26: After reading the testimony of representatives of the oil industry, and members of the Military Petroleum Advisory Committee, I have decided that any statement that I might make to the Secretary at this time would not add to the information now available to him. Dr. Schroeder, of the Bureau of Mines, and Dr. Wrather, Director of the United States Geological Survey, have no doubt furnished the Secretary with sufficient information on reserves. I received a letter dated February 26 from Congressman Charles A. Wolverton, chairman of the Committee on Interstate and Foreign Commerce, inviting me to appear before this committee at a hearing on March 4 and 5 on H. R. 5475. Having previously made arrangements to be in Rock Springs, Wyo., on March 5 and 6, I wrote Chairman Wolverton, requesting that I be excused. The testimony of high officials of the oil industry, while somewhat conflicting, clearly expresses the desire to be allotted sufficient steel and other equipment and be given an opportunity to demonstrate their ability to produce sufficient oil for the immediate need. While the information developed before the congressional committee reflects a personal view, no doubt influenced by personal, financial, and geographical interests, it does, however, represent a sufficient cross-section of the oil industry to be helpful. The information furnished by Messrs. Murphree and Pursglove, members of the Military Petroleum Advisory Committee, reflects their thought and their interests. There seems to be a wide difference in opinion as expressed by the military and by representatives of the oil industry. I realize that members of the oil industry have been under tremendous pressure the past year and their wish to be allowed to further develop the industry is readily understandable. For the long pull, and in the absence of a national emergency, it would be far better to allow private industry to make the development. This line of thinking is unpopular with a great many people. If it is finally decided that the immediate development of synthetic fuel is necessary, and authority is given by Congress, then the natural resources and their location should be given serious consideration. While there is coal in the eastern part of the United States which at this time does not lend itself to the present coal market on account of certain inherent characteristics or impurities in the coal, the overwhelming reserves of coal and oil shale are in the Western or Rocky Mountain States. This, together with the agreed need of industrial plants being located away from congested areas, should influence a detailed study of synthetic fuel plants to be located in proximity to large reserves of coal and oil shale. In any event, an attempt should be made to guide the action of industry into an orderly development of synthetic fuels near large reserves and which would allow for quick expansion in case of national emergency. Sincerely yours, Hon. J. A. KRUG, I. N. BAYLESS. WOODLEY PETROLEUM Co. Houston 1, Tex., March 4, 1948. Secretary of the Interior, Washington 25, D. C. DEAR MR. SECRETARY: This will acknowledge receipt of your letter of February 26 relating to the proposed bill to promote the production of synthetic liquid fuels from coal, oil shale, and other substances to supply the requirements of the armed forces and the civilian population. You have asked my views, which I shall be glad to give you. The proposed bill provides for the construction of three plants with a combined capacity of at least 30,000 barrels of liquid products per day. It would seem to me that at this time Government spending should be limited to pilot plants designed and operated to cultivate and perfect the art of making liquid fuels synthetically. I believe that this is not the time to undertake large-scale construction of synthetic plants, particularly for the reason that I believe that the oil shortage with which we are so much concerned is primarily due to the lack of steel. So long as steel is short in supply, it would seem imprudent to attempt to replace any appreciable part of liquid fuel supply synthetically, where the cost in terms of steel is admittedly much greater than through the drilling of additional wells to create the same new supply. Certainly we should develop the art of the making of synthetic fuels fully. Only small pilot plants are required for this purpose, and the steel requirements are small. Accordingly, it is my recommendation that the objective of the proposed bill be changed. With my personal good wishes, I am Mr. W. M. STRATFORD, The Texas Co., New York 17, N. Y. J. H. PARTEN. STANDARD OIL CO. (INDIANA), DEAR MR. STRATFORD: You asked for my personal comments on the two bills currently in circulation relative to the construction of synthetic fuel plants, by private industry if it will construct them, or by the RFC if industry does not step forward. One of these is the Wolverton bill already introduced in the Congress, and the other is a Bureau of Mines version of the same bill which I do not believe has yet been introduced. It is my understanding also that the Wolverton committee is calling a number of witnesses to express their opinions about the bills on March 4 and 5. While in Washington last week I discussed this matter with Mr. Kurt Borchardt of the Wolverton committee staff, and later with Mr. Max Ball of the OGD and Mr. James Boyd, Director of the Bureau of Mines. I will repeat below the gist of my comments to them: First, I made it clear that I was not expressing any opinion pro or con as to the desirabality of the introduction of such a bill. I stated that my comments would be confined to criticizing the deficiencies of the bill from the standpoint of the intentions of those introducing the bill; namely, to interest private industry. As a first point I expressed the opinion that the Wolverton bill was deficient in merely providing that the RFC could "make advances" to an industrial firm who was willing to build a plant. I stated that no loan would interest private industry, no matter how favorable its terms might be as to repayment, unless the company involved was convinced that it could sell the synthetic fuel at a profit. Since the best data would indicate that liquid fuel made from coal or shale would be more expensive than the Government price of liquid fuel from petroleum, any company undertaking to build such a plant and sell the products competitively would have to anticipate a loss and for that reason it would be unwise to start on such a proposition. I stated that the way to cure that deficiency was to provide that the RFC should make a contract to purchase the synthetic fuel at cost plus a reasonable profit. Having done this the RFC would have to dispose of the product for what it could get for it. For example, it might have to buy shale oil at $4 a barrel and sell it at $2. I expressed the opinion that this would be the less injurious type of subsidy, and pointed out the parallelism between that plan and the plan used for the production of aviation gas during the war. As a second point I urged most strongly that there be deleted from any bill a specific requirement that a plant had to be built to produce liquid fuel from coal by hydrogenation. I pointed out that even the Bureau of Mines felt that this was a more costly method and that the only justification advanced for the large-scale pilot plant was to get an accurate cost comparison between coalhydrogenation and coal-Fischer synthesis. I stated that the overwhelming opinion of industry technologists was that the hydrogenation of coal was relatively uneconomic. I stated that if the proponents of the bill insisted on leaving this requirement in the bill it would provoke all sorts of side issues and discussions that were not pertinent to the main topic. I suggested that any bill that was drafted should merely provide for manufacturing synthetic liquid fuel from coal without requiring any particular method to be used. Incidentally, I think that I convinced Mr. Boyd of the Bureau of Mines of the merit of this viewpoint. As a third point, not of criticism but of general comment, I spent some time discussing the genesis of the Neches Butane Products Co. This was essentially a "syndicate" of oil companies grouped together to produce butadiene for the Government. Special clearance had to be obtained from the Department of Justice for this type of organization. Taking the case of oil from shale specifically, I pointed out that it might be possible to organize a special corporation, the stock of which would be held by petroleum refining companies interested in the general area where the shale was located. Each company would subscribe something to the working capital of the corporation and each would provide a director; the board of directors would select a president and staff the company with technologists by calling on the stockholder companies to give some of their technologists leaves of absence for 2 or 3 years to work for the shale-oil company. The company once organized could then negotiate a loan from the RFC and engineer, construct, and operate the shale-oil plant. They could also plan to dispose of the shale oil, probably by building a pipe line connecting it with some existing system. Having accepted some responsibility for the shale-oil project, such individual companies probably would not be unwilling to buy the shale oil at a reasonable price to be mixed in with other crudes and handled at their refineries. I observed that, while the real problem would probably be to get rid of the shale oil, it would be politically expedient to include in the contract between the shale-oil company and the RFC a specific provision under which the RFC would have the right to allot parts of the shale-oil production to any refiner who wanted to use it, regardless of whether or not he had been a member of the shale-oil company. I pointed out that one advantage of this scheme would be that interest in shale oil and technological development of shale oil would thus not be vested in any one company, 'but would be fairly widely disseminated. In my opinion it is improbable that Congress will pass any bill relative to synthetic fuel manufacture at this session. However, I also feel that in view of the continuing shortage of natural petroleum, Congress will be bound to do something some time soon, either with the support of the industry, or without it. Very sincerely, BRUCE K. BROWN. APRIL 15, 1948. RESPONSE TO THE QUESTIONNAIRE ON H. R. 5475 (By P. C. Keith) FOREWORD I should like to preface my answers to the questionnaire on H. R. 5475 with a statement in my own words of the spirit, intent, and scope of H. R. 5475 as envisaged by myself. The proposed bill should have two avowed purposes: Of foremost importance, the rapid creation of a large production capacity of synthetic fuels to augment our currently insufficient deliverable supplies of petroleum and, as insurance for the attainment of this first objective, the development and testing of unproved processes for the production of synthetic fuels. In harmony with the first objective, the proposed bill should institute the Government machinery for assisting and protecting private industry in building the new synthetice fuels plants by way of Reconstruction Finance Corporation loans and other incentives like tax inducements. Government aid should be made available to all types of synthetic fuels plants including specifically plants for synthesizing liquid fuels from natural gas of which this country has a large and growing reserve. Additional potent reasons for specifically mentioning the conversion of natural gas into liquid fuels are the technically advanced status of this process and its low-steel requirements as compared with known alternative processes for producing synthetice fuels. To the extent that private industry is unable to venture the construction of commercial-size plants for the production of synthetic fuels by unproved processes (such as coal hydrogenation, shale oil production, and liquid fuels synthesis via coal gasification), the Reconstruction Finance Corporation should be empowered to have private industry build and operate for the Government's account trial plants to secure data on the unproved processes because such data will be of great value in the long-range planning and development of the synthetic fuels industry. My answers to the questionnaire on H. R. 5475 have been predicated on the foregoing understanding of the proposed bill and should be read in the light thereof. ANSWERS 1. Strictly speaking the question as framed should be answered in the negative. The United States has abundant resources which can be made to satisfy our liquid energy requirements for a long time to come. However, I believe the question was intended to determine whether or not our petroleum resources and importations can meet our rapidly growing consumption of and reliance on liquid fuels. In my opinion, the answer to this critical question is definitely no. Because of our abundant resources in coal, oil shale, natural gas, and like fuels and because of the accelerating pace of technological achievements in the transmutation of fuels, our country can look with assurance to solving the petroleum shortage with supplementary production of synthetic fluid fuels. The broad term, fluid, rather than liquid is used advisedly. If the problem confronting our country today is that of finding ways and means of providing sufficient liquid fuels to keep our planes, automobiles, and other essential fuel consumers in operation both in peace and in war, it seems to me we must seriously consider the possibilities of producing synthetic gaseous fuels as well as synthetic liquid fuels since a substantial proportion of our current national requirements of liquid energy can just as well, if not better, be satisfied by gas-I have domestic heating particularly in mind. In my testimony on H. R. 5475, I have discussed in some detail how the production of synthetice fuel gas could free substantial quantities of liquid fuels for more critical uses than house heating and thus, in effect, alleviate the petroleum shortage which threatens most vitally our mechanized transportation especially in time of war. Asscordingly, I believe that petroleum resources can no longer be reled on to provide all our liquid energy demands, that the time to supplement our petroleum resources with synthetic fluid fuels produced from our other more abundant resources has arrived and that the Government should, in the national interest, take positive steps to encourage, assist, and protect the newborn synthetic fuels industry. 2. Every statistical report which I have studied clearly indicates the need of synthetic fluid fuels to supplement our petroleum products for our civilian economy and much more so for our national security. 3. In my opinion as a chemical engineer, there is considerable merit in the construction of some of the plants proposed by H. R. 5475. Specifically, I am in favor of constructing plants to produce shale oil from oil shale and to synthesize liquid fuels by the coal-gasification route. 4. To my mind, the processes of the two types of plants which I favor under question (3) are sufficiently developed to make the immediate construction of these plants desirable. A commercial-size plant to produce synthetic liquid fuels by the hydrogenation of coal does not appear justified in the light of the extensive efforts and results with this type of process in Germany, England, and this country. Until further laboratory and pilot-plant studies reveal some new possibilities for this approach to the production of synthetic fuels, technical manpower, materials, and money should not be diverted to a commercial-scale operation; on the other hand, more intensive basic research might well be directed to this process of hydrogenating coal. 5. In addition to the plants for recovering shale oil and synthesizing liquid fuels by the coal-gasification route, I recommend the construction of at least one plant |