for their erection and operation. It is believed this would be a sounder method for building the proposed synthetic-oil plants if their operation is not competitive under present-day conditions with oil products produced from crude oil. It is suggested that the Reconstruction Finance Corporation in this case be authorized to make arrangements with responsible parties for the erection and operation of such plants. In deciding on various proposals, the Reconstruction Finance Corporation should turn both to industry and to the Bureau of Mines for technical advice. Operation for the account of the Reconstruction Finance Corporation should be for a limited period, say 5 years, and at the end of this period the plants should be sold to the highest bidder. The bill requires all proposals by private industry for erection of a synthetic-fuels plant be made within 120 days from the date of enactment of the bill. If no proposals are submitted within that period then the Reconstruction Finance Corporation should proceed to arrange for such construction. One hundred twenty days is felt to be a very short period for preparation of proposals, considering the large investment in the plants and the fact that these would represent the first commercial plants. Engineering studies to determine plant investments and probable operating costs would require in themselves considerably longer than 120 days. Also, the negotiations on a suitable basis for financing the plants with the Reconstruction Finance Corporation will require considerable time. It is felt that 120 days is far too short a period for private industry to determine whether they wish to erect and operate the plants for their own account. It is strongly urged that this period be extended to a minimum of 1 year. Summarizing, the following is suggested: 1. That the Government sponsor, for production of synthetic fuels, the erection of one plant to process oil shale and one plant to process coal. 2. That the size of the plants not be definitely specified other than that they be plants of such size that commercial type of equipment is utilized. 3. That the time limit after enactment of the bill for proposals by private industry for erection and operation of the plants for their own account be increased from 120 days up to a minimum of 1 year. 4. That in case private industry is not willing to erect and operate the plants for their own account, then the Reconstruction Finance Corporation be authorized to make contracts with responsible parties for their erection and operation along the same general lines that were followed for the synthetic-rubber program. Such operation for the account of the Government should be for a limited period and at the end of this period the plants should be sold to the highest bidder. That completes my testimony, Mr. Chairman. The CHAIRMAN. We appreciate your appearance today, Mr. Murphree, and the making of this statement for the consideration of the committee. I can readily realize that you have given a great deal of serious thought to the preparation and consequently to the recommendations you make. It has been very encouraging indeed in these hearings to have had so many worth-while witnesses to appear before the committee and give the committee the benefit of their thought in the matters. It would seem to me that the importance of the subject is such that it is entitled to have the consideration of our best minds in industry as well as in Government. It at least appears that way to us, as a result of the testimony that has been taken in these hearings. It has indicated an ever-increasing demand for fuel products and limited supplies to meet it. The seriousness of the situation is accentuated by unsettled conditions in those portions of the world where we look for a large portion of our demands to be met, and I hope that the committee may have the benefit of your further thought in this matter, as you give further consideration to the question. I would like to have you submit your answers to these questions, which have been prepared by the committee's staff dealing with this subject and then they likewise will be made a part of your statement. (The questions referred to are as follows :) HOUSE OF REPRESENTATIVES, March 5, 1948. QUESTIONS FOR EACH OF THE WITNESSES TESTIFYING ON H. R. 5475 (1) Do you believe that the United States is in need of liquid energy resources in addition to those now available within our borders and imported from abroad? (2) Does the need exist for our civilian economy as well as our national security? (3) If such need exists, in your opinion, is there merit to the construction or the three plants proposed by H. R. 4575? (4) Are the three processes developed sufficiently to make the construction of these three commercial-size plants desirable? (5) Are there alternatives to the construction of these plants which you would prefer to see adopted? (6) Is there equal merit in the construction of the three plants, or would you give one preference over the others? (7) What would be the amount of steel required for each of the three plants? (8) Do you know what percentage the amount of steel required for the three plants constitutes of the total amount of steel consumed in 1946 and 1947 by the petroleum industry? (9) How do you feel, balancing our immediate and long-range problems with respect to energy resources, about the diversion of a sufficient quantity of steel to build these three plants? (10) Do you feel that one or more of these plants would be constructed by private industry without financial assistance from the Government? (11) What do you have to say with respect to the form of financial assistance provided in the bill-namely, loans by RFC? (12) Is the financial assistance provided for adequate to achieve the objectives of the bill, or do you feel other aid is needed? (13) Would accelerated amortization be a sufficient incentive? (We had it during the war when amortization over a 5-year period was authorized.) (14) Would purchase and resale of the output of the plants by RFC be neces sary in order to protect the operators against losses occasioned by the higher cost of the products in comparison with products made from crude? (This was done with respect to aviation gasoline during the war.) (15) Might there be occasion with respect to one or more of these plants for a joint undertaking by several companies similar to the Hydrocol development or the Natchez group in the case of synthetic rubber? (16) Can you give us an estimate of the comparative investment required for each barrel per day for liquid fuels derived from crude, coal, shale, and natural gas? (17) Can you give us an estimate of the comparative cost of the end-products` derived from crude, coal, oil, and natural gas? 73161-48- -6 (18) How many plants for the production of liquid fuel from naturai gas do you believe it would be practical to build in the United States, bearing in mind the nearby gas reserves required for plant operation over a 25-year period? (19) How high can the price of natural gas go and still make the production of liquid fuels from natural gas economically feasible in comparison with crude, coal, and shale? (20) To what extent do you believe will additional private capital be attracted into construction of plants for the conversion of natural gas into liquid fuel? (21) What loss in thermal value occurs in the conversion of (a) Natural gas into liquid fuel? (b) Long-distance transport of natural gas? (c) Coal into manufactured gas? (d) Coal into liquid fuels? (22) What additional quantities of gasoline and middle-cut products could be obtained by "cracking" to the maximum extent feasible? (23) What would be the economics of such additional "cracking"? (24) Could coal and natural gas be substituted for the residual fuels which would then be cracked? The CHAIRMAN. Any questions? Mr. BECKWORTH. What is the patent situation with reference to the process that you feel is the best? In the Fischer-Tropsch process? Mr. MURPHREE. Well, I think the important patents are recent patents. Mr. BECKWORTH. Sir. Mr. MURPHREE. I think the important patents are probably or will probably be mainly recent patents that have resulted from the work that has been carried out in this country. Mr. BECKWORTH. Does the Government have any patents that your company is seeking, patents that were taken over by the Alien Property Custodian? Mr. MURPHREE. They have a large number; yes, sir; but most of them could not deal with this particular process. Mr. BECKWORTH. Do they have any that your company feels that it can use in carrying forward the development of these processes? Mr. MURPHREE. I do not believe that they have any important ones on the Fischer-Tropsch. Mr. BECKWORTH. I mean any process with reference to making liquid petroleum. Mr. MURPHREE. Well, they have claimed-they have seized a large number of patents on coal hydrogenation. Mr. BECKWORTH. Our Government has seized them? Mr. MURPHREE. Yes; and we have been suing the Alien Property Custodian to get them back. Mr. BECKWORTH. How many are you trying to get back? Mr. MURPHREE. Well, we are trying to get back all dealing with the coal hydrogenation. Mr. BECKWORTH. About how many is that? Mr. MURPHREE. I do not know; probably two or three hundred. Mr. BECKWORTH. When did you sue for them? Mr. MURPHREE. Well, the thing has been in litigation for 2 or 3 years now. Mr. BECKWORTH. As you understand it, why did the Government take them over? Mr. MURPHREE. Why did they? Mr. BECKWORTH. Yes, sir. Mr. MURPHREE. Well, they seized them as being alien property at the time. Mr. BECKWORTH. Do you regard them as having been alien property? Mr. MURPHREE. Well, two courts have reviewed it so far and have directed the Alien Property Custodian to return the patents. Mr. BECKWORTH. So you do not regard them, of course, as having been alien property at the time. Mr. MURPHREE. No; not in our view; no. Mr. BECKWORTH. Did you obtain them from a foreign country? Mr. MURPHREE. We bought them from the I. G. Farben Industry in Germany. We paid $35,000,000 for them. Mr. BECKWORTH. For what number? Mr. MURPHREE. A number of patents. Mr. MURPHREE. All of the patents that they had. Mr. BECKWORTH. How many were there? Mr. MURPHREE. I do not know. Mr. BECKWORTH. Would you make the number a part of the record? Mr. MURPHREE. Yes, sir. Mr. BECKWORTH. When did you buy them? Mr. MURPHREE. Well, the arrangements started. I think in about 1928. Mr. BECKWORTH. 1928? Mr. MURPHREE. Yes, sir. Mr. BECKWORTH. Did they buy any from you? Mr. MURPHREE. No. Mr. BECKWORTH. Was there any consideration other than cash by which you obtained the hydrogenation patents? Mr. MURPHREE. Well, this particular arrangement involved a cash payment for the patent rights for the world outside of Germany and for technical information, and the arrangement was a continuing arrangement, whereby for any patent rights in the field we would continue to get the benefit of them and also any technical information up to 1948, I believe. Of course the war interfered with that and ended the contract. Mr. BECKWORTH. In the event you should not get them back from the Government-the case is still before the court, is it not? What would the situation then be? Mr. MURPHREE. Yes; it is going to the Supreme Court now, to see if they want to hear it. Mr. BECKWORTH. In the event you should not get them back, what effect would that have on your ability to go forward? Mr. MURPHREE. None. Mr. BECKWORTH. Then why do you want them back? Mr. MURPHREE. Well, because we consider them first of all our own property and they may have some future licensing value. Mr. BECKWORTH. You mean in no sense are they advantageous to you in your efforts to pursue the development of liquid fuels? Mr. MURPHREE. Well, we would look at the situation with the view that the Government would give us an operating right the same that they would give anybody else, as to Government property. Mr. BECKWORTH. I do not believe you understand my question. I asked you this: In no sense do you feel the return of the patents would be beneficial to you in pursuing the development of these fuels? Mr. MURPHREE. I do not think from our standpoint of only development work it would make any difference; no sir. Mr. BECKWORTH. Well, of course, we are just talking about your own development work. Mr. MURPHREE. Yes. Mr. BECKWORTH. You think then they are unimportant to you in your development work? Mr. MURPHREE. That is right. Mr. BECKWORTH. And of no significance or consequense? Mr. MURPHREE. That is right. Mr. BECKWORTH. I believe that is all. The CHAIRMAN. I suppose you predicate that statement that they are of no use to you on the fact that you have already utilized them and know the purpose of them? Mr. MURPHREE. Yes, sir; I think the situation is this, that from the standpoint of our own operations we could obtain a license if the Government held the patents, we could obtain a license from the Government.. The CHAIRMAN. But from the standpoint of development you have already utilized the knowledge that would be contained in those patents? Mr. MURPHREE. That is right. The CHAIRMAN. And the value to you would be the same as to any holder of any patent that has paid cash money for the patent, not having developed it originally, from a licensing standpoint. Mr. MURPHREE. That is right. The CHAIRMAN. And of course that is subject to the laws of the country. Mr. MURPHREE. I might say the patents actually are from a licensing standpoint not of very much value because most every important oil producer already has a license. Mr. BECKWORTH. Mr. Chairman, might I observe it is rather unusual, however, for any company, or individual, to carry a case through all of the courts where something is involved that is of no value to the company. Mr. MURPHREE. Well, may I make this statement. I am directing my comments on the hydrogenation processes. There are other patents involved in this whole picture, some of them not dealing with hydrogenation. Mr. BECK WORTH. You and I were not talking about the same thing. Probably you did not understand me when I said, "With reference to all of the processes." I think you will find that the record will show that I was talking about all processes. Mr. MURPHIREE. I am sorry; I just misinterpreted it. But, the statement that I made on development work still applies. It has no bearing on development work. Mr. BECKWORTH. With reference to all processes? Mr. MURPHREE. That is right. Mr. BECKWORTH. Then there is some value and significance to them? |