SYNTHETIC LIQUID FUELS THURSDAY, MARCH 4, 1948 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The committee met, pursuant to call, at 10 a. m., in room 1334, New House Office Building, Hon. Charles A. Wolverton (chairman) presiding. The CHAIRMAN. Gentlemen, the committee will come to order. We have before us this morning the taking of testimony on H. R. 5475, "A bill to aid in preventing shortages of petroleum and petroleum products in the United States by promoting the production of synthetic liquid fuels. (H. R. 5475 is as follows:) [H. R. 5475, 80th Cong., 2d sess.] A BILL To aid in preventing shortages of petroleum and petroleum products in the United States by promoting the production of synthetic liquid fuels Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it is the policy of the United States, in order to supplement supplies of petroleum and petroleum products produced in the United States and imported from foreign countries, to promote the production of synthetic liquid fuels, and to that end to facilitate the construction and operation by private industry of synthetic liquid fuel plants. SEC. 2. The Reconstruction Finance Corporation is hereby authorized and directed to make, to any person proposing to construct one or more synthetic liquid fuel plants, each with a capacity of not less than ten thousand barrels per day, such advances, upon such terms and conditions, as it deems appropriate to carry out the policy declared in section 1. SEC. 3. If, upon the expiration of one hundred and twenty days from the date of the enactment of this Act, the Reconstruction Finance Corporation finds that no person or persons have contracted to undertake, with or without advances authorized by section 2, to construct one or more each of plant types A, B, or C, as defined in section 4, the Reconstruction Finance Corporation shall proceed immediately to construct one plant of each type the construction of which has not been so contracted for. Each such plant, upon completion of construction, shall be leased for operation by private industry upon such terms and conditions as the Reconstruction Finance Corporation deems appropriate for carrying out the policy declared in section 1. Such plants shall be constructed with the technical advice of the Bureau of Mines of the Department of the Interior. SEC. 4. For the purposes of this Act (a) "Plant type A" means a plant for the hydrogenation of coal, having a capacity of not less than ten thousand barrels of liquid fuels per day. (b) "Plant type B" means a plant for the synthesis of liquid hydrocarbons from gases produced from coal, having a capacity of not less than ten thousand barrels of liquid fuels per day. (c) "Plant type C" means a plant for the production of shale oil from oil shale, having a capacity of not less than ten thousand barrels of liquid fuels per day. SEC. 5. As used in this Act, the term "person" includes an individual, firm, copartnership, corporation, company, or association, and any trustee, receiver, assignee, or personal representative thereof. 1 SEC. 6. There is hereby authorized to be appropriated not to exceed $400,000,000 to carry out the provisions of this Act. The CHAIRMAN. I have a letter here from the Department of State dated March 2, 1948, giving the opinions of that Department with respect to the bill. I will make it a part of the record at this point, but for the benefit of the committee I will read it at this time [reading]: The Honorable CHARLES A. WOLVERTON, DEPARTMENT OF STATE, Washington, March 2, 1948. House of Representatives. MY DEAR MR. WOLVERTON: Reference is made to your letter of February 20, 1948, transmitting for the comment of the Department of State a copy of H. R. 5475, a bill to aid in preventing shortages of petroleum and petroleum products in the United States by promoting the production of synthetic liquid fuels and facilitating the construction and operation by private industry, or the Government, of synthetic liquid fuel plants. In the Department's reply of February 24 it was stated that the requested report would be forwarded as soon as possible. The Department considers that action at this time to promote the development of a synthetic-liquid fuels industry is desirable and should be given the support of the Congress. It is believed, however, that development of a syntheticliquid fuels industry should not be permitted to lessen the efforts of the industry and the Government to maintain and increase the high rate of activity in the production, refining, and transportation of natural petroleum which must continue to be relied upon primarily for relief of the shortage of liquid fuels. With respect to the technical aspects of the proposal and whether H. R. 5475 provides a sound basis for promoting the development of a synthetic-liquid-fuels industry, the Department feels that other agencies of the Government and the industry are better qualified to advise the committee. For this reason it is not believed that a representative of the Department would be able to add anything further in testimony before the committee on H. R. 5475. However, the Department wishes to have a representative attend the hearings as an observer and will be glad to supply the committee with any information which it desires to have from the Department on this matter. Because of the urgency of the matter this letter is not being cleared through the Bureau of the Budget to which copies are being sent. Sincerely yours, CHARLES E. BOHLEN, Counselor (The following letters were submitted for the record :) Hon. CHARLES A. WOLVERTON, TREASURY DEPARTMENT, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: Reference is made to your letter of February 20, requesting a statement of this Department's views on H. R. 5475, a bill to aid in preventing shortages of petroleum and petroleum products in the United States by promoting the production of synthetic liquid fuels. The bill authorizes and directs the Reconstruction Finance Corporation to make, to any person proposing to construct one or more synthetic-fuel plants meeting certain requirements set forth in the bill, such advances, upon such terms and conditions as it deems appropriate, to carry out the policy of promoting the production of synthetic liquid fuels. If no person or persons, within 120 days from the enactment of the proposed legislation, have contracted to undertake, with or without advances from the Reconstruction Finance Corporation to construct one or more of each type of plant specified in the bill, the Reconstruction Finance Corporation is directed to construct one of each specified type of plant, which shall be leased for operation by private industry upon such terms and conditions as the Reconstruction Finance Corporation deems appropriate. There is authorized to be appropriated not to exceed $400,000,000 to carry out the provisions of the bill. The subject matter of the bill, in its purpose to promote the production of synthetic liquid fuels, is not of primary interest to the Treasury Department, and this Department has no statement to make in connection with the merits of this proposal. It should be noted, however, that the authorization to appropriate not to exceed $400,000,000 to carry out the provisions of the bill is inapplicable to the Reconstruction Finance Corporation, inasmuch as that Corporation has power to conduct its operations from funds obtained by issuing notes or other obligations to the Secretary of the Treasury, and does not operate upon appropriations made from the Treasury in the customary manner. It would thus appear that under the terms of the bill as now written there would be no specific limitation as to obligations incurred or expenditures made by the Reconstruction Finance Corporation. In view of the fact that hearings are being held on the bill at the present time, it has not been possible to obtain the customary Bureau of the Budget clearance prior to the submission of this report. Very truly yours, A. L. M. WIGGINS, Acting Secretary of the Treasury. Hon. CHARLES A. WOLVERTON, UNITED STATES ATOMIC ENERGY COMMISSION, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR CONGRESSMAN WOLVERTON: This is in reply to your letter of February 20 requesting comments on H. R. 5475, a bill to promote the production of synthetic liquid fuels. It is the view of the Atomic Energy Commission that while it would have no objection to the enactment of this bill, it is not possible at this time to ascertain the extent of the Commission's affirmative interest in the proposed legislation. H. R. 5475 is concerned with the production of synthetic fuels to supplement present supplies of petroleum, and it does not seem appropriate for the Commission to comment on this aspect of the bill. Section 4 of the bill indicates, however, that one type of plant (plant type C) which is proposed to be developed, involves the use of oil shale, and suggests that mining of shale may be undertaken pursuant to this legislation. It is common knowledge that small quantities of uranium are present in various kinds of shale, as is true of many other kinds of materials. It is possible that some quantities of uranium might be obtained as a byproduct of the petroleum-extraction operation. In that case the Commission may, if it then seems desirable, make appropriate arrangements to utilize this material pursuant to the provisions of the Atomic Energy Act of 1946. In summary, at the present time, it is the view of the Commission that H. R. 5475 should be evaluated on the basis of its stated purpose to supplement supplies of petroleum, and that it is premature to conclude that this legislation will result in obtaining materials useful in the atomic-energy program. The Atomic Energy Commission has not been advised by the Bureau of the Budget as to the relationship of this bill to the program of the President. Sincerely yours, DAVID E. LILIENTHAL, Chairman. NATIONAL SECURITY RESOURCES BOARD, The Honorable CHARLES A. WOLVERTON, House of Representatives, Washington, D. C. DEAR MR. WOLVERTON: Reference is made to your notice, dated February 25, 1948, of hearings on H. R. 5475, a bill to aid in preventing shortages of petroleum and petroleum products in the United States by promoting the production of synthetic liquid fuels. I am in favor of legislation to accomplish the purposes of the bill. The proposed enactment would authorize and direct the Reconstruction Finance Corporation to make advances to persons proposing to construct synthetic-liquidfuel plants of commercial capacity and to construct such plants itself if within 120 days from enactment of the legislation the construction of any of the types of plants described has not been undertaken. Any plants constructed by the Reconstruction Finance Corporation would be leased for operation by private industry. Three types of plants are required to be contracted for or constructed, those designed to produce fuels from gas, coal, and oil shale. As you know, the Secretary of the Interior is carrying forward experimental work under the authority of the Synthetic Liquid Fuels Act of 1944, and other agencies of the Government, including branches of the Military Establishment, are engaged in activities looking to the determination of the country's need and the enhancement and conservation of its supplies of petroleum and petroleum substitutes. Private industry is already active in the development of new sources of supply, including synthetics. The progress of these studies and efforts is currently being assessed by my staff for submission to the National Security Resources Board to enable it to perform its statutory function of advising the President as to the relationship between potential supplies and potential requirements in time of war. Meanwhile, it is the opinion of the Board's staff and the writer that this Congress should act to encourage the construction of these plants by private industry and to authorize their construction by the Government in default thereof. Construction and operation of the plants may establish the economic practicability of synthetic production for peacetime use and in any event will arm us with know-how as to cost and time factors and other production problems against the eventuality of forced reliance upon synthetics or substitutes in a time of emergency. The bill as presently written would require the undertaking of Government construction of a full-sized fuel plant of any of the three types not contracted for by industry. This requirement might conceivably be at variance with the course indicated on the grounds of efficiency or economy or both by experimentation and pilot-plant operation conducted under the Synthetic Liquid Fuels Act or otherwise. I am sure that your committee is aware of the fact that at the present time the petroleum industry has under construction two plants for the synthetic production of oil from natural gas and that pilot plants for the production of oil from coal are under construction. You will, of course, have the advice of the Secretary of the Interior on this and other relatively technical aspects of the bill. 'It is my purpose by this letter to express an accord with the results sought to be achieved by the bill rather than its provisions as presently written. Since hearings on the bill are to commence on March 4, there has not been time to secure from the Bureau of the Budget advice as to whether or not this letter is in accordance with the legislative program of the President. MY DEAR MR. WOLVERTON: Reference is made to your request dated February 20 for a report on H. R. 5475, a bill to aid in preventing shortages of petroleum and petroleum products in the United States by promoting the production of synthetic liquid fuels. I am much in favor of suitable legislation by the Government to promote the production by industry of synthetic liquid fuels. I believe, however, that some revision of H. R. 5475 is desirable for the accomplishment of this purpose. I notice that in introducing the bill it was described as a "skeleton bill" and I presume that it was intended that those called upon for reports should feel free to hang flesh upon the skeleton. With this in view I take the liberty of submitting herewith a revised draft of H. R. 5475 which I believe covers more fully the necessities for its successful administration. Even this revised draft cannot be considered as a finished product as there has not been time for it to receive the detailed consideration of the Reconstruction Finance Corporation to make it conform to that agency's particular requirements. Furthermore, there remains to be added a provision for the reservation of resources on the public domain so as to assure adequate supplies of raw materials for the plants contemplated by the bill. Rather than to delay the submission of the revised draft, I shall forward this addition when work on it has been completed. This revised draft, I believe, makes clearer the intent to promote the production of synthetic liquid fuels by industry rather than by the Government, and provides more explicit and in some respects somewhat broader methods of administration. Although it contemplates the immediate construction of a limited number of plants, it would also permit an expansion of synthetic liquid-fuel production at any time that conditions warranted. The necessity and urgency for the production of synthetic liquid fuels in the United States has been pretty well established, but is reviewed therewith for your convenience in an annex attached to this report under the title "The Necessity and Urgency for the Production of Synthetic Liquid Fuels in the United States." In view of the imminent consideration of this bill by your committee and my understanding that you desire an immediate report upon it, this letter has not been submitted to the Bureau of the Budget for consideration. Therefore, no commitment can be made concerning the relationship of the views expressed herein to the program of the President. Sincerely yours, J. A. KRUG, Secretary of the Interior. AN ACT To promote the production in the United States of synthetic liquid fuels from coal, oil shale, and other substances to meet actual and anticipated shortages in the supply of petroleum and petroleum products in the United States, to supply the requirements of the Armed Forces and the civilian population in times of emergency, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the production in the United States of synthetic liquid fuels from coal, oil shale, and other substances is necessary to meet actual and anticipated shortages in the supply of petroleum and petroleum products in the United States, to conserve the petroleum resources of the Nation, and to supply the requirements of the Armed Forces and the civilian population in times of emergency; and that it is therefore declared to be the policy of the United States to foster and encourage the production in the United States of synthetic liquid fuels from coal, oil shale, and other substances by private industry, as far as practicable, and by the Government itself as far as may be necessary to lead the way for industry. SEC. 2. As a guide to industry for further expansion and greater ultimate production, the Reconstruction Finance Corporation is authorized and directed to provide for the construction and operation, as soon as practicable, of at least three synthetic liquid fuels plants in the United States, each of sufficient size for operation on an industrial scale, and having a combined capacity of at least 30,000 barrels of liquid products per day. The words "plant" and "plants" as used in this Act include all mines, and other sources of materials, and transportation and other facilities for operations and the disposal of products. SEC. 3. (a) The Reconstruction Finance Corporation may offer such inducements as it deems necesary and proper, by way of long-term financing, low interest rates, low plant rental, transfer of plant ownership, and subsidies to procure private construction, ownership, and operation of the plants. Construction, ownership, and operation of plants shall be by private rather than by governmental agencies, in so far as the Reconstruction Finance Corporation is able to make arrangements satisfactory to it for private construction, ownership, or operation. To the extent that such arrangements cannot be made by the Reconstruction Finance Corporation, it shall construct, own, and operate all or any of the plants itself. (b) Plants constructed, financed, or subsidized under this Act shall be subject to the approval of the Secretary of the Interior as to (1) substances to be utilized, (2) processes to be used, and (3) plant-site locations. Where the Secretary of the Interior deems it necessary to effectuate the national policy declared in section 1 of this Act, he may instruct the Reconstruction Finance Corporation to provide for the construction and operation of a plant or plants for the utilization of substances, by processes, and at plant-site locations specified by him. SEC. 4. In performing its duties and functions under this Act the Reconstruction Finance Corporation shall use the Bureau of Mines as its engineering and technical consultant with respect to all matters of technology pertaining to the production of synthetic liquid fuels, including plant-site locations and plant designs and flow-sheets, and the Bureau of Mines, under the direction of the Secretary of the Interior, is authorized and directed to act and serve as the |