Hydrogenation of coal is an expensive process. Without tyring to anticipate the conclusions of the Synthetic Fuels Committee of MPAC I am sure that investment, material, and manpower requirements will be so high as to make construction of such plants prohibitive even in a national emergency. On this basis there would be no incentive for building a prototype plant for hydrogenation of coal. Summing up, the objective of prototype plants should be clearly defined. It would appear preferable that the act provide that the prototype plants should be of such type and capacity as to serve as a reliable basis for design of large plants, especially plants required in a national emergency when speedy construction and reliable performance of plants will be of greatest importance. With proper integration of projects with activities of the industry, the main objective, that is advance of technology, could be accomplished-I am sure-with an appropriation much less than $400,000,000. I shall be happy to be of further assistance to you, especially a few weeks hence when more facts and figures will be at my disposal. Yours very truly, ALOIS KREMSER. STANDARD OIL DEVELOPMENT COMPANY, Hon. JULIUS A. KRUG, Secretary of the Interior, Washington, D. C. MY DEAR MR. SECRETARY: At the suggestion of Mr. Max W. Ball, I am writing to give my comments on the draft of an act involving synthetic fuels that was forwarded to me by Mr. Ball's letter of February 26. I have presented testimony on the Wolverton bill, a copy of which I am attaching. The suggestions I have in regard to the Wolverton bill are summarized on the last page of my testimony and are as follows: (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 is 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. The proposed act is of somewhat different form than the Wolverton bill, and I have certain comments. First, the bill is directed toward meeting actual and anticipated shortages of petroleum and petroleum products in the United States, and to supply the requirements of the armed forces and the civilian population in times of emergency, and for other purposes. I think it is clear to everyone the small amount of capacity that is going to be gained from two or three plants is not going to affect the future supply situation greatly, and, considering the time it would require to erect these plants, they would certainly have no bearing on the short-range picture. I do not believe the industry is clear that there will be a shortage of oil products in the near future, that is, say, looking 10 years ahead. Taking into consideration the Middle East, I do not believe there is basically any over-all world shortage. From the standpoint of Western Hemisphere requirements, it is not clear that these requirements can be met from Western Hemisphere sources. The feeling seems to be somewhat divided on this question. Our own people feel there is an excellent possibility that increasing demands can be met from Western Hemisphere sources for many years-at least 10. No one, of course, can be positive on such a long-term projection. Since it is not a certainty that Western Hemisphere demands can be met from Western Hemisphere sources, I believe that it would be desirable for the Government to sponsor the erection of a plant to produce oil from oil shale and also a plant to produce oil from coal. As brought out in my testimony before the Wolverton committee, I can see no reason for the Government sponsoring erection of two plants to produce oil from coal, using different processes. I would think it would be better to build a plant for the more favorable process, as the situation stands today, and possibly carry out further small-scale experimental work on the less favorable process. I think it should be recognized that a large commercial plant is a very poor tool for making process improvements, particularly those that may be of a radical nature. Section 5, paragraph (a) covers a large amount of work involving surveys, research, development work, and engineering studies on synthetic oil plants. I have some question in my mind as to how far the Bureau of Mines should go in the direction of process development. A great deal of work of this kind is being carried out by the industry and I feel that the work proposed by the Bureau of Mines may represent an unnecessary and expensive duplication. I believe that the different companies working on synthetic fuels will freely license the processes they develop at reasonable royalty rates. There will very likely be a number of competitive processes developed. I do feel it would be helpful to industry for the Bureau of Mines or other Government agencies to make careful surveys of coal and oil shale resources, and the availability of water supplies for plants that might be erected to use those resources. I also think it would be helpful for the industry if the Bureau of Mines continued to carry out basic research on various synthetic-fuel processes, with the idea that such research would point the way toward major improvements in future years. Section 5, paragraph (c), of the proposed act has a provision that the Secretary of the Interior is authorized to enter any plant financed by the Government under the proposed act and to study the operations thereof and obtain technologic data therefrom. If the synthetic fuel plant is erected only in part by money borrowed from the Reconstruction Finance Corporation and is operated at the risk of a private party, I feel that such a provision would have the effect of making private parties reluctant to put any money in a synthetic-fuels plant and take the risks that may be involved in its operation. The knowledge that is gained by a private party from the plant operation is of value from the standpoint of licensing the process to other units in the industry. If the information obtained from the plant is to be made available to everyone, whether he is a licensee or not, there would be considerably less incentive for the person who risks his own money. If the plant is built entirely through Government financing and is operated for the Government's account, then I think this provision is reasonable and fair. I have no further comments at this time on the proposed act. Very truly yours, Hon. JULIUS A. KRUG, Secretary of the Interior, Washington, D. C. E. V. MURPHREE. STANOLIND OIL & GAS Co., MY DEAR MR. KRUG: Under date of February 26, 1948, Mr. Max W. Ball requested that I furnish you my comments on a draft act to promote the production in the United States of synthetic liquid fuels from coal, oil shale, and other substances. This draft act provides in part that the Reconstruction Finance Corporation may offer such inducements as it deems necessary and proper by way of long-term financing, low interest rates, low plant rental, and transfer of plant ownership, to procure private construction, ownership, and operation of plants to produce liquid hydrocarbons from coal and to produce shale oil from oil shale. I am in full agreement with the act in its purpose of fostering and encouraging the production of synthetic liquid fuels from coal, oil shale, and other substances; but I am completely opposed to the Government, directly or indirectly, entering this or any other activity in direct competition with private industry. The employment of public funds for construction of synthetic fuel plants, with the special inducements which the Reconstruction Finance Corporation would be authorized to make, would obviously be of great benefit to the favored unit of industry entering the field of synthetic fuels under the provisions of the proposed act. Such a company would enjoy a distinct and unfair competitive advantage, paid for by public funds, over other units of industry entering the synthetic fuels field and erecting similar plants with their own funds. Stanolind Oil & Gas Co. is constructing a plant in western Kansas to manufacture 6,000 barrels per day of synthetic liquid fuels from natural gas. It is also constructing two plants for the recovery of chemicals produced in the gasoline synthesis process. One of these chemical recovery plants will be located in western Kansas and operated in conjunction with Stanolind's own synthesis plant, and the second chemical plant will be located in Texas to recover the chemicals from a synthesis plant being constructed by Carthage Hydrocol, Inc. 73161-48-8 Stanolind is also considering the construction of other plants for the synthesis of liquid hydrocarbons from natural gas and for the recovery of chemicals produced in the synthesis process. Under present-day conditions, the recovery of the chemical products inherently produced in the gas-synthesis process is necessary to the commercial economic feasibility of a synthesis plant based on natural gas. In my opinion, construction of an oil-from-coal plant is less feasible economically than construction of an oil-from-gas plant. A subsidized oil-from-coal plant, using public funds as provided in the proposed bill, would have an unfair advantage in the chemical market over the two plants which Stanolind is constructing with its own funds. It is my thought that the declared policy of the act to foster and encourage the production of synthetic fuels from coal and oil shale by private industry will be retarded rather than advanced by the proposed act. I am of this opinion for the following reasons: 1. Private capital will hesitate to enter such ventures when it must do so against the competition of other plants financed by public funds and operated either by private industry or by the Government itself. 2. Private industry, employing its own funds, will display greater initiative and develop the necessary processes to an economic conclusion far more rapidly alone than if the plants are financed by Government funds and the profit motive is submerged or lacking. The history generally of Government ventures into the field of industry certainly substantiates this position. Further evidence is the case at hand, where private industry is already constructing two synthetic fuel plants (Stanolind's plant in western Kansas and Carthage Hydrocol's plant in Texas), and the Government is only now proposing an act which might provide for the construction of similar plants 2 or 3 years later. Three types of plants are proposed by the act: (1) Hydrogenation of coal, (2) shale oil from oil shale, and (3) synthesis of liquid hydrocarbons from gases produced from coal. The process for hydrogenation of coal, which I assume means high-pressure hydrogenation, is generally conceded to be impractical commercially by the competent industry personnel familiar with this development. The construction of any plant using this process on any other than a pilot-plant scale I should consider to be a complete misapplication of effort and waste of public funds. A plant for the production of shale oil from oil shale would be warranted only if a practical method is devised for industry to develop and operate the plant. Neither of these two plants would have features competitive with the plants of Stanolind or Carthage Hydrocol which synthesize liquid fuels from natural gas. The third plant, however, involving the synthesis of liquid hydrocarbons from gas produced from coal, would be highly competitive with the ventures of Stanolind and Carthage Hydrocal. A Government-financed plant of this type would produce essentially the same chemical products as are obtained in the synthesis of liquid hydrocarbons from natural gas. Such chemicals would obviously be produced more cheaply by the plant enjoying the benefit of public funds. This is unfair to those companies which, to the country's advantage as well as their own, have displayed the foresight and initiative to develop the gassynthesis process to the stage where it is now commercially feasible. The synthesis of liquid fuels from coal would utilize practically the same process as the synthesis of liquid fuels from natural gas. It would differ only in the preparation of synthesis feed gas by gasification of coal rather than oxidation of natural gas. The synthesis of liquid fuel from natural gas is already under development by industry (Kansas and Texas plants are now under construction), and for Government to enter this field at this late stage would be simply a waste of money. Development of coal gasification, however, to provide feed stock for future synthesis plants, appears to be desirable at this time. The gas produced could be consumed as fuel directly if the plant is suitably located. The secondary step of converting the coal gas to liquid fuel could well await the improvements to be expected from the two gas-synthesis plants now under construction. In regard to the entire program for erection of demonstration plants, I should like to point out that there are many processes and many forms of equipment which can be used for the manufacture of synthetic liquid fuels from coal and shale. It is my opinion that if sufficient knowledge is available to choose the best among the many possible procedures variable in each proposed operation. there is already at hand sufficient information to design and erect a feasible and workable plant without the construction of a demonstration unit. Any demonstration plant will demonstrate only the process selected and will not provide any information on alternate and possibly superior means of attaining the same objective. I should like also to call to your attention that American chemical engineering practice has advanced many fold in the last 10 to 15 years. The first 13,00 barrels per day fluid catalytic cracking uint was designed from information obtained on a 100-barrel-per-day pilot plant. The first hydro-forming and toluene extraction unit was designed from information obtained on a one-barrelper-day pilot plant. Stanolind's 6,000-barrel-per-day gas-synthesis plant for western Kansas is being designed and constructed from information obtained on a five-barrel-per-day pilot plant. All of the synthetic rubber plants and the Oak Ridge atomic bomb plant were constructed from pilot-plant information without erection of a demonstration plant. It should be obvious that no more information can be obtained from 10 identical shale retorts than from 1, or from 10 identical coal gasification units than from 1. The complete demonstration plant today is an out-moded experimental instrument and should have no place in the synthetic liquid fuels program. In summary I should like to repeat that I am in favor of a Government sponsored program on synthetic fuels as long as, and only as long as, it does not interfere or conflict with industry's program. A Government sponsored largescale experimental program on manufacture of shale oil from oil shale or manufacture of synthetic gas from coal would appear to be reasonable but construction of large complete demonstration plants to synthesize liquid fuels from coal or shale I consider wasteful. Yours truly, J. E. ROUSE. THE GLOBE OIL & REFINING CO., Mr. MAX BALL, Director, Oil and Gas Division, Department of Interior, Washington, D. C. DEAR MR. BALL: I am in receipt of letter from Mr. Walter S. Hallanan, Chairman of the National Petroleum Council, under date of February 24, with which he enclosed copy of House bill H. R. 5475 introduced in the House of Representatives February 19, 1948, by Congressman Wolverton; also proposed bill drafted by the Department of Interior which it is proposed to have introduced in the immediate future. I don't think any responsible person in the petroleum industry would disagree with the fact that production of synthetic liquid fuel by one or more of the various means outlined will be necessary sometime in the not too-distant future but I believe sincerely that it would be a mistake to undertake the construction of plants proposed in either of these two bills in the immediate future. I make this statement because it is my sincere belief that the present critical shortage of steel for the petroleum industry will be made infinitely worse if the necessary steel required for the construction of one or all of the proposed plants is set aside for that purpose. I believe that an infinitely smaller increase in the amount of steel available to the petroleum industry and available for necessary pipe line and refinery construction would bring about a much greater increase in the availability of petroleum and its products in the near future than would be brought about by the immediate construction of the plants in question. I have spent considerable time and effort in recent months contacting various producers, both large and small, in my efforts to secure additional crude for our company and I would find it very simple to get all the crude we need if we could furnish to any one of the several hundred producers the necessary steel which they need and which they have not yet been able to get. We know that the pipe line situation in district II could be eased very materially if the necessary steel was available for immediate delivery for projects that are under way today. It seems to me that the proposed construction will certainly not guarantee any immediate relief of the current shortage of petroleum products and that the channeling of steel necessary for the proposed construction under existing conditions will automatically make it impossible for the oil industry to get additional steel which it needs and with which it could increase the production of crude and refined products within a very short time after the necessary steel was available. Very truly yours, BROWN L. MEECE, Vice President. Hon. J. A. KRUG, THE TEXAS Co., Secretary of the Interior, Washington, D. C. DEAR SIR: I am in receipt of letter, dated February 24, from Mr. Walter S. Hallanan, chairman of the National Petroleum Council, with which was forwarded a copy of a letter, dated February 20, from Mr. Max W. Ball to Mr. Hallanan, a copy of Interior's proposed bill relating to the production of synthetic fuel, and a copy of H. R. 5475. Mr. Ball suggested to Mr. Hallanan that the members of the National Petroleum Council forward their comments to you in connection with this proposed legislation. We are definitely in favor of a sound synthetic program and we are in sympathy with any reasonable proposal which will expedite developments in this field. We believe, however, that private industry alone will better accomplish the desired results and that governmental assistance is needed only in the form of adequate financing by RFC, both as to construction and disposition of products, along with tax benefits and accelerated depreciation. Such assistance would be only fair in view of the risks involved in such new ventures. Our interest in this field is evidenced by our participation in the Brownsville, Tex., project which will be devoted to the production of synthetic fuel from natural gas. We have devoted much of our technical skill and a considerable amount of money toward this phase of synthetic fuel production. Other members of the industry are also working toward the production of synthetic fuel from natural gas. Several companies, including the Texas Co., are working on the production of synthetic fuel from coal. Were the Government to attempt to undertake either of these projects, the same research and skill would be required that are now being expended, and I submit that the industrial groups now engaged in such development work are much better equipped to continue these activities. Directing my subsequent remarks to H. R. 5475, I feel that 10,000-barrels-perday plants are entire too large; the same information and know-how can be obtained from smaller and less expensive plants. It should be specified only that the plants be of sufficient size to utilize commercial-scale equipment. As I recall, this has been the position taken by the Bureau in connection with their demonstration plants. The Texas Co. is definitely opposed to the construction of a commercial-scale coal-hydrogeneration plan (type A in H. R. 5475). This process is not commercially competitive with other processes to produce gasoline from coal and does not show as much promise as other methods of producing liquids from coal. Even assuming that subsequent development of a high-pressure hydrogenation operation on coal is desirable, it seems to me that since the Bureau of Mines is about to place in operation a demonstration plant at Louisiana, Mo., capable of producing approximately 200 barrels per day of gasoline, there is no need for larger units at this time. It has been stated by the Bureau in a number of instances that the size of this plant was selected so as to provide adequate engineering information for design of commercial units. The basis on which the Bureau is erecting this demonstration plant is to provide advances over the wellestablished German art and it may be assumed that there is no point in considering large-scale installations of this type until the demonstration plant has established that something better than German practice will result. The type B plant proposal involves the provision of a 10,000 barrels per day unit for production of synthetic fuel from coal by preparation of synthesis gas and subsequent conversion of this gas by catalytic hydrogenation of carbon monoxide to synthetic fuel. The procedures involved in the gasification of coal to produce the carbon monoxide-hydrogen mixtures are now under investigation by both the Bureau of Mines and a number of industrial laboratories. As yet it does not appear that a completely satisfactory procedure has been developed although a number of workable schemes are at hand. The second step in the synthesis of fuels from coal, that of the catalytic reaction of the carbon monoxide and hydrogen, is of course identical with the similar step involved in the large installations now being erected at Brownsville, Tex., and Hugoton, Kans., for production of synthetic fuel from natural gas. This phase of the operation has been fully explored on a number of pilot plants and the commercial units will provide complete full scale operating data in the near future of the various procedures suggested, we believe that the preparation of synthetic fuels by this route is the most suitable for study. |