SYNTHETIC LIQUID FUELS FRIDAY, MARCH 5, 1948 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The committee met at 10 a. m., pursuant to adjournment, in Room 1334, New House Office Building, Hon. Harris Ellworth, presiding. Mr. ELLSWORTH. The committee will come to order. We will continue with the hearings on H. R. 5475, the synthetic fuels bill, and I will ask Congressman Bishop of Illinois to appear first. STATEMENT OF HON. C. W. BISHOP, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS Mr. BISHOP. Thank you, Mr. Chairman. All I want to do is to say to you that I endorse this program, due to the fact that it is a very highly constructive program as I see it. I come from a very highly productive bituminous coal field. The largest bituminous coal mine in the world is located in my district, and both the operators and the miners are very much interested in this program. I feel about this synthetic program as I do about synthetic rubber. It can be established to the great advantage of our needs in the future and I am very, very much interested that private industry be given the first opportunity to operate these plants. Of course I feel under private operation there will be more and faster production than by the Government. So I earnestly urge and support the bill, for private industry. Mr. ELLSWORTH. Thank you very much, Mr. Bishop. Now, before we proceed with the next witness, I would like to ask the committee if there are any further questions they would like to ask of Dr. Schroeder, who was on the stand yesterday? Are there any further questions? Mr. PRIEST. I would just like to ask one question of Dr. Schroeder, Mr. Chairman. STATEMENT OF DR. C. W. SCHROEDER-Resumed Mr. ELLSWORTH. Dr. Schroeder, will you take the stand, please. Mr. PRIEST. Under section 2 of the bill the RFC is authorized and directed to make any person or persons to construct one or more of these plants certain advances and there is a time limit. If no one accepts that sort of a proposal within, I believe it is 90 days, is it not 21 Dr. SCHROEDER. 120 days, I believe. Mr. PRIEST. 120 days? Dr. SCHROEDER. Yes, sir. Mr. PRIEST. My question simply is this: In the exploratory phase of the program, have you had any private company or individuals who indicated that if this legislation were adopted they would be interested in accepting that sort of an arrangement with the RFC making the advances? Dr. SCHROEDER. I do not believe that we have had any private company who has indicated willingness to accept the conditions outlined in the bill; but we have had one or two private companies who have indicated that they are very much interested and very anxious to go ahead with certain work on synthetic fuels; but they have suggested somewhat different arrangements. Mr. PRIEST. But they are interested, if suitable arrangements can be approved? Dr. SCHROEDER. That is right. Mr. PRIEST. That is all, Mr. Chairman. Mr. BECKWORTH. Mr. Chairman. Mr. ELLSWORTH. Mr. Beckworth. Mr. BECKWORTH. Would it be permissible for me to read about five short paragraphs from a clipping which appeared in the Washington Post yesterday morning and then ask a question? Mr. ELLSWORTH. I think that would be quite proper. Mr. BECKWORTH. The title of this is "Standard Oil's Hands Unclean in Patent Suit, Says Perlman." [Reading:] The Justice Department contended yesterday that four Standard Oil companies have turned to the Supreme Court with "unclean hands" in an attempt to recover title to valuable patents of German origin now held by the United States Government. Opposing Standard's appeal to the Court, Solicitor General Philip B. Perlman asserted that the companies engaged in "sham transactions" to conceal and to prevent the wartime seizure of assets in this country allegedly owned by Germany's I. G. Farben industries. This he told the Court in a brief, raises a question "whether the plaintiffs' cloaking of enemy assets and other actions for the benefit and on behalf of an enemy made the plaintiffs themselves 'enemies' within the meaning of that term as it is used in the Trading With the Enemy Act." "Plaintiffs who do not come into Court with clean hands are disqualified from recovering any of the property in suit," Perlman said. This is probably the most pertinent part: The case involves the seizure by the United States Alien Property Custodian early in the war of several hundred oil and chemical patents and various blocks of stock in American corporations which the Custodian declared to be Farbenowned. I know that you probably are not a patent expert so far as the legal phases are concerned, and you may not be familiar with the patent situation to a great degree otherwise. In your opinion, does the patent situation have much to do with. the ultimate cost of what it would be to produce these various kinds of liquid fuels? Dr. SCHROEDER. Since the Bureau started its synthetic-fuel work, I have devoted quite a bit of time to studying the work of the Alien Property Custodian in this patent situation. Instead of that study helping me to straighten out my mind, I have become steadily more confused as to just what the situation is on this patent suit, between the Standard Oil Co. and several other oil companies, and the Alien Property Custodian. As a result of that confusion and as a result in part of your interest and other people's interest in these patents, we now have a man devoting essentially full time to his study. My feeling now is that regarding the coal hydrogenation process, a large share of the patents involved are old and either have run out or will run out in a short time and I do not think that the patent question is going to be very serious. Now, with the respect to the Fischer Tropsch Mr. BECKWORTH. Which Fischer Tropsch? Dr. SCHROEDER. That is the coal gasification process. Mr. BECKWORTH. And that concerns in the main, which fuels; solid fuels, lignite, coal, or shale? Dr. SCHRODER. It will concern all types of coal. Mr. BECKWORTH. I see; all types of coal. Dr. SCHRODER. But not shale. Mr. BECKWITH. That is what I wanted to get straight. Dr. SCHROEDER. The Fischer Tropsch patents, since this is a somewhat never process, have been developed approximately 10 or 15 years later than the hydrogenation patents and a number of those patents have quite a period to run and, therefore, are more valuable patents. You asked me whether that is going to influence the price of the product and I can only say that that will depend upon the licensing arrangement. If the licensing arrangements are made on a reasonable basis-and I think that they will be the past history indicates that they have been made on reasonable basis-I do not think that it will have any serious affect in upping the price of synthetic gasoline. Mr. BECKWITH. You think then that if we-the United States Government, or the companies in this country can maintain our control of these patents, that they likely would not be a serious element in the price structure of the completed products. Dr. SCHROEDER. Well, I think that is true, even if the Government does not have complete control of it. Mr. BECKWORTH. That is what I just said, either our Government or companies in this country. Dr. SCHROEDER. That is right; yes, sir; that is correct. Mr. BECKWORTH. That was my question. Would you think there would be likely any damaging effect if in one way or the other this country's companies or the Government itself should lose control of the patents in the main? Dr. SCHROEDER. I think if there was a damaging effect it might not be so much from the standpoint of price as perhaps the standpoint of interference with the development of the synthetic industry in this country. Mr. BECKWORTH. Like, for example, may have taken place with reference to the development of synthetic rubber? Dr. SCHROEDER. That is what I am thinking of; yes, sir. Mr. BECKWORTH. You do think it is very, very vital that either companies in this country or the Government itself remain in control of these patents? Dr. SCHROEDER. I would like to see that; yes, sir. Mr. BECKWORTH. You would like to see that? Dr. SCHROEDER. Yes, sir. Mr. BECKWORTH. In your opinion, whose responsibility is it in the main to watch carefully the price structure situation as it might relate to patents? Dr. SCHROEDER. Well, with respect to the control and relationship of the domestic patents versus foreign patents, I think that would be within the jurisdiction of the Alien Property Custodian. With respect to domestic patents I should think that would be within the jurisdiction of the Department of Justice. Mr. BECKWORTH. You concieve it to be, of course, as you have indicated by your statement, the responsibility of your Division of our Government to also be mighty interested with what takes place with reference to patents? Dr. SCHROEDER. We consider our responsibility to know and understand the patent situation and to see how it will influence the course of the commercial synthetic fuel industry. Mr. BECKWORTH. I trust that your Department and you, if you continue to be there-and I know of no reason why you should notwould keep the Congress informed, if you will, as to any changes which might be in prospect with reference to the patent situation that might have considerable influence on the price of these various liquid fuels. Dr. SCHROEDER. We certainly will be glad to do that. As you can understand, we have to straighten ourselves out first on some of these matters before we are in a position to report on them. Mr. BECKWORTH. I am mighty glad at this very timely moment that we are mutually interested. Thank you very much. Mr. ELLSWORTH. Any further questions? Mr. HARRIS. Mr. Chairman, I would like to ask one or two questions. Mr. ELLSWORTH. Mr. Harris. Mr. HARRIS. This is not related to the synthetic program, but to the supply of petroleum of this country, and that is with reference to secondary recovery methods. Has your Office given any attention to secondary recovery methods? Dr. SCHROEDER. The Office of Synthetic Fuels has not given any attention to secondary recovery, because that is not within the jurisdiction of our legislation; but in the Bureau of Mines we do have a Petroleum and Natural Gas Branch which has devoted quite a lot of effort and time and money to that problem over a period of about 10 or 15 years. Mr. HARRIS. Are you familiar with the progress that has been made? Dr. SCHROEDER. I am not familiar with the progress except in a very general way. Mr. HARRIS. As long as we are striving to provide ways and means of preventing a shortage of petroleum and petroleum products by promoting production, and since, therefore, throughout the country there are many pools and millions of barrels of oil that cannot be recovered, do you not feel such a program would be very helpful in augmenting our reserves? Dr. SCHROEDER. I do. Mr. HARRIS. Would there be any conflict in the program proposed here for synthetic liquid fuel production to include secondary recovery of petroleum with a view of ultimately recovering a lot of oil that thus far cannot be recovered? Dr. SCHROEDER. I would say that there is no objection to that, so long as the two programs do not conflict with each other in the way of utilization of the funds; that is correct. By that I mean I do not think we should stop the synthetic program for secondary recovery work. Mr. HARRIS. I am not asking whether that should be done or not and, of course, I know that it should not. Dr. SCHROEDER. Yes. Mr. HARRIS. If you have a program that is needed on synthetic fuel production, then, of course, it should be provided for. On the other hand if more petroleum is what we are after, it seems to me the best ways to get it should be pursued. Dr. SCHROEDER. That is correct. You know, there was an amendment to the bill as it went through the House. Mr. HARRIS. Yes, I had something to do with it too. I was interested in Mr. Gavin's amendment, and it provided a million dollars for this purpose. Dr. SCHROEDER. Yes. Mr. HARRIS. Do you feel that is sufficient to carry out a secondary recovery program when you have many pools in east Texas, Arkansas, Pennsylania, and Illinois, and perhaps other places throughout the country where such methods should be promoted? Dr. SCHROEDER. I think that a million dollars will go a very long ways toward developing the methods, and shall we say, the know-how for securing adequate secondary recovery. Mr. HARRIS. I happen to know that my own State of Arkansas, in cooperation with the industry, has spent a lot of money in one field, the old Smackover Field, trying to recover a lot of oil and so far they have not been successful. As I understand the industry feels that they should have probably 4 or 5 million dollars for this program. Do you have any information on that? Dr. SCHROEDER. I have not. The Bureau has proposed several programs of considerable size for secondary recovery work over the period of the past several years and some funds have been provided for that work, but I do not know the magnitude of those programs in dollars and cents. Mr. HARRIS. Could you get that information and suply it for the record? Dr. SCHROEDER. Yes, we can. Mr. HARRIS. I would appreciate it if you would. Thank you. (The information requested is as follows:) ESTIMATES AND ALLOCATIONS FOR SECONDARY RECOVERY RESEARCH UNDER THE APPROPRIATION OIL AND GAS INVESTIGATIONS, BUREAU OF MINES The 1945 base for the 1946 budget request under the oil and gas investigations appropriation was $657,640, of which $116,900 was estimated for secondary recovery research and related work. The Department requested increases in this appropriation, including $539,000 for secondary recovery. The Bureau of the Budget recommended an appropriation of $583,000 ($77,340 below the 1945 |