Advancement of fundamental research We consider it of utmost importance that industry promote in every way possible the continued advancement of fundamental research in coal at colleges and universities. In this connection we have established Pittsburgh Consolidation Coal Co., graduate research fellowship at six educational institutions. These include: Carnegie Institute of Technology Cornell University Institute of Gas Technology (affiliated with the Illinois Institute of Technology) Massachusetts Institute of Technology Pennsylvania State College University of Illinois Under these graduate fellowships, each man will work on coal research problems for a year in the process of writing his doctor's thesis. In conclusion The coal gasification project now in the process of development by this company and Standard Oil Development Co. involves many problems which will have to be solved before a commercial size plant can be built. However, the joint research and development work being carried out by our engineers and those of Standard, and the studies being conducted on the broad subject by other companies and institutions offer encouraging promise that the program can be matured by advancing from work in the laboratory to pilot plant operation and then through the completion of economic studies to commercial plant construction and operation.. STATEMENT OF E. V. MURPHREE, PRESIDENT OF THE STANDARD OIL DEVELOPMENT CO., NEW YORK, N. Y. The CHAIRMAN. Mr. Murphree. Mr. MURPHREE. Mr. Chairman, my name is E. V. Murphree, president of the Standard Oil Development Co. The Standard Oil Development Co. is the central research, development, and engineering group from the companies affiliated with the Standard Oil Co. of New Jersey. Mr. Chairman, in some testimony before the House Armed Services Committee on February 25 I gave some comments and suggestions in regard to the military aspect of this oil problem. I am not going to repeat those today and I am going to confine my comments to this specific bill. The bill H. R. 5475 proposes the erection of three synthetic-oil plants, each to have a capacity not less than 10,000 barrels per day. One of these plants is to process oil shale and the other two to process coal. One of the coal plants is to produce oil by the hydrogenation process and the other by the Fischer-Tropsch process or modifications thereof. The bill proposes that the Reconstruction Finance Corporation advance money for financing these plants upon terms and conditions they deem appropriate with the thought that the plants will be built and operated by private parties for their account. However, if private parties are not willing to build and operate the plants for their own account, then the Reconstruction Finance Corporation would arrange for having them built based upon the technical advice of the Bureau of Mines, and would arrange to have private concerns operate these plants for the account of the Reconstruction Finance Corporation. As the bill now stands, if the preparation of synthetic fuels from oil shale and coal cannot be carried out on a basis competitive with production of similar products from crude oil, then undoubtedly private parties would not be interested since no provision is made in the bill for any subsidy for the operation of such plants. This would then leave the plants to be constructed and operated for the account of the Reconstruction Finance Corporation. The CHAIRMAN. Pardon me for interrupting you there. I suppose I should know, but I do not. What method was used with respect to the synthetic rubber plants that were constructed by the Government during the war? Mr. MURPHREE. They were built-the Rubber Reserve Corporation made contracts with private parties for the erection of plants and for the operation of the plants, both for the account of the Rubber Reserve Corporation. The CHAIRMAN. So the question of subsidy was not involved? The CHAIRMAN. Thank you. Mr. MURPHREE. Before commenting on the bill, it is felt desirable to review the technical and economic status of synthetic fuel production as it is known to the writer today. The production of synthetic fuels from natural gas is not proposed in the bill since plants for this purpose are being built by private industry. The conversion of natural gas into synthetic fuels by modifications of the Fischer-Tropsch process involves first the preparation of a synthesis gas consisting of a mixture of carbon monoxide and hydrogen from the natural gas. This can be considered the first step in the process. The second main step in the process involves the reaction of the synthesis gas over a catalyst to produce oil products which are then recovered and fractionated and given whatever treatment may be required. The production of oil from coal by a modification of the Fischer-Tropsch process is quite similar to the production of oil products from natural gas. The first step in the operation involves the preparation of a synthesis gas consisting of hydrogen and carbon monoxide and the second step involves the reaction of this synthesis gas over a catalyst to give oil products. The second step involved in the production of oil products from either natural gas or coal by the modified Fischer-Tropsch process is essentially the same for natural gas and coal and since this step has been developed for the natural gas process it has also been developed for the coal process. The main step which needs further development in the coal process following the Fischer-Tropsch route is an improved method of production of synthesis gas from coal. A considerable amount of research is going forward at the present time on this step and there undoubtedly will be substantial improvements over what has been carried out on the Fischer-Tropsch process and on gasification of coal have largely been by private industry. Hydrogenation of coal to produce oil products has been widely applied in Germany, and one large plant has been operated in England. Information on the operation of these plants is available in the United States. In addition, the Bureau of Mines is erecting a demonstration plant to carry out further work on this process. Oil shale is processed by heating it to a temperature in the range of 800° to 1,000° F., at which temperature level organic matter in the shale decomposes, with the result that an oil-like material is distilled from the shale. This oil-like material is in unfinished form and needs further treatment in order to bring it up to the quality level of normal petroleum products. In particular, the material has an offensive odor. It is believed this material can, however, be readily refined, perhaps employing hydrogenation to bring it up to the equivalent of normal crude oil, and from there on can be processed in essentially the way crude oil is now processed. Technically, further work is required fully to demonstrate improved methods of retorting the shale to produce the initial raw product, and also further work is required on how to refine this product. It is believed that this work can be rather readily carried out, and no inherent difficulties are foreseen. The work of the Bureau of Mines on mining of oil shale has been most helpful in determining the cost of this operation. Some information on the economic status of the different syntheticfuel processes as they appear to the writer were presented in testimony given before the Oil Subcommittee of the House Armed Services Committee. In this testimony a table was given indicating investments, steel requirements, and production cost for gasoline from crude oil, natural gas, coal by the Fischer-Tropsch process based on a location in the eastern United States, and also on oil shale. It was pointed out that the figures given were quite approximate and were based on particular size plants at particular locations. The figures presented on both investment and operating cost included transportation to main consuming points. In the case of crude oil and natural gas, 15 percent was included for amortization and other capital charges for the manufacturing or refining investment, as well as transportation investments peculiar to the plant. In the case of oil shale and coal, 15 percent for capital charges was allowed on the mining and manufacturing investments as well as transportation investments peculiar to the plant. The costs of gasoline from crude oil and natural gas were based essentially on the going price of these materials. The figures on coal reflect improvements in coal gasification that have not yet been thoroughly demonstrated. An indication was given for investment for housing that may be required. And then there is a table given in this testimony that is the same as that given in the testimony before the other committee. I would just like to call your attention to the investments in the table. You will notice the investments per barrel per day for gasoline begins at $6,500 for crude oil, $8,200 for natural gas, $8,500 for coal for eastern locations, and $8,400 for oil shale. And the figures given as the cost of gasoline for cost plus some return on capital was 14.1 cents per gallon for gasoline from crude oil, 12.8 cents per gallon for gasoline from natural gas, 16.6 cents per gallon for gasoline from coal in the East, and 16 cents per gallon from oil shale. (The table referred to is as follows:) Summary of approximate estimates on production of fuels Raw material Investments: For maximum distillate yield, barrels per day of oil products. Steel requirements: For maximum distillate yield, tons, barrels per day of oil products.. Effect of 10 percent on investment in manufacturing or manufacturing plus mining (cents per gallon). 1 These figures are based on crude oil and natural gas prices and not on costs. 2 Per barrel. It will be noted from the table that production of gasoline from natural gas compares favorably with its production from crude oil. Production of gasoline from coal or oil shale, however, is indicated to be more expensive than from crude oil, and for today's conditions it is questionable if manufacture of oil products from coal or shale can be carried out on a competitive basis with production of such products from crude oil. The figures therefore indicate that the production of oil products from coal and oil shale may require a subsidy of some kind. Detailed figures are not presented in the table for coal hydrogenation, but figures which have recently become available indicate that both the investment and production cost will be from 25 to 50 percent higher when using the hydrogenation process on coal as compared to a modified Fischer-Tropsch process. The writer feels that Government sponsorship of the erection of a commercial-size plant for producing oil products from oil shale may be a sound step in providing this country with adequate information on what can be expected from commercial scale operation. The writer also feels that Government sponsorship of the erection of one plan to produce oil products from coal may be a sound step for the same reason. The desirability of Government sponsorship for erecting two plants to produce oil products from coal, using different processes, is open to considerable question. The writer feels it would be better for the Government to sponsor the erection of only one oilfrom-coal plant at this time, this plant to be based on the process that now seems soundest and, meanwhile, carry out smaller scale experimental work on the alternate process. If it can be rather clearly indicated from engineering studies that one process for producing oil products from coal is superior to the other, based on present developments, then it is hard to see where anything is gained by erecting a large commercial plant for the less favorable process. It would seem far sounder to carry out smallerscale development work on the less favorable process to determine to what extent it can be improved. It should be realized that a large commercial plant is a very poor instrument for developing process improvements which may be of a rather radical nature. Smallerscale operations involving pilot-plant type of equipment are much better for this purpose since the pilot plant can readily be changed with much less loss in time and at much less expense. Based on the information now available, it would appear that the coal plant should involve a modified Fischer-Tropsch operation rather than hydrogenation. One point that may be raised in regard to a hydrogenation plant is that it is better adapted for production of 100-octane aviation gasoline. This is in part true, but the large demand for aviation fuel for the next war will probably not be aviation gasoline, and in any case the 100-octane aviation gasoline required can be made by crude oil processing as in the last war. The proposal that I wish to make is that the erection of only one coal plant be sponsored by the Government and the choice of the type of plant be determined from the most favorable proposal that is made by private parties. If no proposals are made by private parties, then the type of plant to be installed should be determined by the Reconstruction Finance Corporation based on the best technical advice they can obtain from all sources. In sponsoring the erection of synthetic fuel plants at the present time, it should be recognized that considerable research is going forward that may result in the plants becoming rapidly obsolete. This is particularly true in the case of the oil-from-coal plant since work now being carried out which should be completed in 2 to 3 years on ccal gasification may result in very substantial process improvements. The committee may wish to consider this factor in determining the period which should be allowed, after the enactment of the bill, for private parties to submit proposals. The proposal to build a plant of at least 10,000 barrels per day capacity for each process represents a rather arbitrary choice of plant size. It is believed that the interest of the country will be adequately served through erection of commercial-size plants which might be either of higher or lower than 10,000 barrels per day capacity. The important thing is that the plant be large enough to utilize commercialtype equipment. It is therefore proposed that there be no limit set on the size of the plant other than it be large enough to use commercialtype equipment. The bill as presented makes no provision for any subsidy for the operation of the plants, providing they cannot be operated on a competitive basis. In case they cannot be operated on a competitive basis, the result of the bill as now drawn is that the plants would be erected by the Reconstruction Finance Corporation based on the technical advice of the Bureau of Mines. In the case of the establishment of a synthetic-rubber industry, which was very successful, the plants were built by the Government, who made contracts with responsible parties |