The CHAIRMAN. I think we better call to the attention of the new members, Mr. Morris and Mr. Kitchin, what subcommittees they have been appointed to.

Mr. SMART. Mr. Byrne of Pennsylvania and Mr. Morris are appointed to the Subcommittee No. 1, under the chairmanship of Mr. Brooks of Louisiana.

Mr. Kitchin is appointed to Subcommittee No. 3, under the chairmanship of Mr. Durham of North Carolina.

Mr. ARENDS. Mr. Chairman, I might say

Mr. SMART. Mr. Burns, you are ex officio member of the three subcommittees. You may attend and participate, but do not have the right to vote.

The CHAIRMAN. They can serve on all three of the subcommittees. Mr. SMART. They can serve on any of them.

Mr. ARENDS. Mr. Chairman

(Aside to the chairman.)

The CHAIRMAN. I doubt whether there will be need for a full committee meeting next week.

But we do want a full attendance here on the 28th, when Secretary Wilson and the Joint Chiefs of Staff and all of the Secretaries of the various departments of the Department of Defense will be here to tell us about their particular establishments. It is highly important, and is particularly important for new members. I hope we will have their attendance here on those days.

Mr. ARENDS. There will be no meeting next Tuesday morning, then? The CHAIRMAN. I would say there is no need. Do you know of any need for a meeting next Tuesday, Mr. Smart?

Mr. SMART. No, sir.

The CHAIRMAN. It is understood, then, that the next meeting will be on the 28th, when Secretary Wilson will appear?

Mr. SMART. That is right.

The CHAIRMAN. All right, now.

Who is here to show this picture? [Movie shown.]

[Applause.]

The CHAIRMAN. Thank you very much. That is a very nice educational picture. Probably next it might be a good idea to acquaint our 37 districts with such pictures as this.

Mr. ARENDS. That is right.

The CHAIRMAN. Now members of the committee, we will take a recess until the 28th.

(Whereupon, at 10:50 a. m., the committee recessed to reconvene Monday, January 28, 1957.)

FULL COMMITTEE HEARING ON H. R. 2528, TO AUTHORIZE SALE OF GOVERNMENT-OWNED ALCOHOL BUTADIENE FACILITY AT LOUISVILLE, KY

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, Washington, D. C., Thursday, January 24, 1957.

The committee met at 10 a. m., Hon. Carl Vinson (chairman) presiding.

The CHAIRMAN. Now, members of the committee, I call up H. R. 2528, as follows:

[H. R. 2528, 85th Cong., 1st sess.]

A BILL To authorize the sale of the Government-owned alcohol butadiene facility at Louisville, Kentucky, known as Plancor 1207

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act shall be known as the "Plancor 1207 Disposal Act of 1957".

SEC. 2. The Federal Facilities Corporation (hereinafter referred to as the "Corporation"), successor to the Rubber Producing Facilities Disposal Commission pursuant to Executive Order 10678 of September 20, 1956, is hereby authorized and directed, notwithstanding any other provisions of law, to take steps immediately to sell, as soon as practicable and in accordance with the provisions of this Act, the Government-owned alcohol butadiene facility at Louisville, Kentucky, known as Plancor Numbered 1207 and hereinafter referred to as the "Louisville plant", subject to the existing lease which expires April 4, 1958. The sale thereof shall not limit the use of the plant to the manufacture of alcohol butadiene.

SEC. 3. In carrying out the provisions of this Act, the Corporation shall (1) invite and receive proposals for the purchase of the Louisville plant; negotiate for its sale and make a recommendation therefor to the Congress; enter into an appropriate contract of sale, which contract shall be binding upon the Government and the prospective purchaser upon execution subject only to the further provisions of this Act, and, in the performance of such contract, execute and deliver such deed and other instruments appropriate to transfer title to the purchaser effectively, and (2) take such action and exercise such powers as may be necessary or appropriate to effectuate the purposes of this Act, including specifically the authority to accept a proposal which may not represent the highest price offered.

SEC. 4. (a) The Corporation shall invite, upon adequate notice and advertisement, proposals for the purchase of the Louisville plant. The period for the receipt of proposals shall be determined and publicly announced by the Corporation, and shall terminate not less than thirty days after the first day on which proposals may be received pursuant to the advertisement.

(b) Proposals shall be in writing, and shall contain, among other things-

(1) identification of the person in whose behalf the proposal is submitted, including the business affiliation of such person;

(2) the arrangements or plans, if any, formal or informal, for the supply of feedstock to, and the disposition of the end products of, the Louisville plant;

(3) the amount proposed to be paid, and, if such amount is not to be paid in cash, then the principal terms of the financing arrangement proposed; (4) such other information as the Corporation in its notice and advertisement for proposals shall require be set forth in proposals including the prospective purchaser's acceptance of the terms, conditions, restrictions and reservations contained in section 7 of this Act, and the interest rate to be (17)

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charged on the purchase-money mortgage referred to in subsection (e) of this section.

(c) Should it become necessary to the effective prosecution of its duties under this Act, the Corporation may, after the termination of the period for the submission of proposals provided for in subsection (a) of this section, disclose the contents of the proposals at such time, in such manner, and to such extent as it deems appropriate.

(d) Proposals shall be accompanied by a deposit of cash or United States Government bonds of face amount equal to 21⁄2 per centum of the gross amount proposed to be paid. Except in the case of the purchaser, deposits made hereinunder shall be refunded without interest and not later than upon the termination of the period for congressional review as provided in section 5 of this Act. In the case of the purchaser, the deposit made hereunder shall be applied without interest to the purchase price: Provided, however, That upon the closing of the contract of sale the purchaser shall be required to substitute cash equal to the face amount of any Government bonds then held in connection with such purchaser's proposal.

(e) Payment of the purchase price may be made in part by a first lien purchasemoney mortgage, in an amount not to exceed 75 per centum of the purchase price. The terms of any such mortgage obligation, to be determined by negotiation, shall provide among other things for a maturity of not more than ten years, periodic amortization, and a uniform interest rate of not less than 4 per centum per annum. (f) Promptly after the termination of the period for the receipt of proposals, pursuant to subsection (a) of this section, and for such period thereafter, which shall be not less than thirty days, as may be determined and publicly announced by the Corporation, it shall negotiate with those submitting proposals for the purpose of entering into a definitive contract of sale.

(g) Nothing contained in this Act shall be construed to prevent the Corporation from securing such additional information from those submitting proposals at any time as the Corporation may deem necessary or appropriate to fulfill its responsibilities under this Act.

SEC. 5. Within forty days after the termination of the actual negotiating period referred to in subsection (f) of section 4 of this Act, the Corporation shall prepare and submit to the Congress a report containing, with respect to the disposal under this Act of the Louisville plant, the information described in paragraphs 1, 2, 3, and 8 of section 9 (a) of the Rubber Producing Facilities Disposal Act of 1953, as amended (hereinafter referred to as the "Disposal Act"), together with a statement from the Attorney General approving the proposed disposal as not tending to create or maintain a situation inconsistent with the antitrust laws. The report to the Congress shall be submitted in accordance with section 9 (b) of the Disposal Act, and unless the contract is disapproved by either House of the Congress by a resolution, as defined in section 23 of the Disposal Act, prior to the expiration of thirty days of continuous session (as defined in section 9 (c) of the Disposal Act) of the Congress following the date upon which the report is submitted to it, upon the expiration of such thirty-day period the contract shall become fully effective and the Corporation shall proceed to carry it out, and transfer of title to the Louisville plant shall be made as soon as practicable, but in any event within thirty days after the expiration or termination of the existing lease on the Louisville plant. The failure to complete transfer of title within thirty days after the expiration or termination of the existing lease shall not give rise to or be the basis of rescission of the contract of sale.

SEC. 6. The Corporation, before submission to the Congress of its report relative to the Louisville plant, shall submit it to the Attorney General, who shall, within thirty days after receiving the report, advise the Corporation whether the proposed sale would tend to create or maintain a situation inconsistent with the antitrust laws. Throughout the course of disposal proceedings on the Louisville plant, the Corporation shall consult with the Attorney General in order (1) that the Corporation may secure guidance as to the application of the standard set forth in this section, and (2) that the Corporation may supply the Attorney General with such information as he may deem requisite to enable him to provide the advice contemplated by this section.

SEC. 7. The Contract of sale for the Louisville plant and instruments in execution thereof shall contain a national security clause having terms, conditions, restrictions, and reservations which will assure the prompt availability of the Louisville plant, or facilities of equivalent capacity, for the production of one or more chemical products important to the national security, for a period of ten years from the date of transfer of title of the Louisville plant. As used in this Act, the term "chemical products important to the national security” shall mean

(1) chemicals for which expansion goals have been established under the Defense Production Act of 1950, as amended, during the calendar years 1951 to 1955. inclusive, or (2) chemicals for the production of which a material has been determined to be strategic and critical under the Strategic and Critical Materials Stockpiling Act of 1947, or (3) any other chemical which the President may, upon request from the Corporation, or, during the period of the national security clause, upon request from the purchaser, approve as important to the national

defense.

SEC. 8. Such sums as may be required to finance the Corporation's activities hereunder shall be provided out of the proceeds heretofore realized from disposal of the Government-owned synthetic rubber facilities, and all final net proceeds from sale of the Louisville plant shall be covered into the Treasury as miscellaneous receipts.

SEC. 9. The provisions of section 6 of the Disposal Act are hereby made fully applicable to the activities of the Corporation and its employees in the sale of the Louisville plant under this Act.

SEC. 10. Public Law 433, Eighty-fourth Congress, with the exception of section 6 (a), (b) and (c) thereof, is hereby repealed; and Federal Facilities Corporation shall be substituted for the Rubber Producing Facilities Disposal Commission therein.

SEC. 11. In the event of dissolution of the Federal Facilities Corporation, the powers hereby conferred by this Act shall be exercised by such successor agency of the Government as may be designated by the President.

Now, I trust the committee will bear with me while I make a few observations in regard to this bill. I believe by doing so we will probably expedite consideration and familiarity. If you will just bear with me I will try-my statement is prepared with care and I will try to read it so you can thoroughly understand what the bill seeks to do and what we are trying to accomplish.

Now, let's have order, Members. The purpose of H. R. 2528 is to authorize the Federal Facilities Corporation, the successor to the Rubber Producing Facilities Disposal Commission, to reoffer for sale the alcohol butadiene plant at Louisville, Ky.

The plant is presently under lease to Publicker Industries, Inc., for a period expiring April 4, 1958. Sale would be authorized subject to the existing lease, and would not limit use of the plant to the production of alcohol butadiene.

On May 26, 1956, pursuant to Public Law 433 of the 84th Congress, the Rubber Producing Facilities Disposal Commission reported to the Congress a recommended sale of the plant to Union Carbide & Carbon Corp. for a purchase price of $3,125,000, plus approximately $375,000 for the plant's inventory of materials and spare parts, or a total of $3,500,000.

This proposed sale was disapproved by the Attorney General. His disapproval was based on his opinion that the recommended sale would provide no reasonable assurance that the facility would be utilized for the production of butadiene beyond the period of the existing lease.

Because of the Attorney General's disapproval, the Committee on Armed Services voted to disapprove the sale, and the House of Representatives upheld this committee on June 19, 1956.

Immediately thereafter, I introduced two bills in the House; the first, H. R. 11813, extending the Commission's official life and permitting a reoffering of the Louisville plant as a general chemical plant on terms different, in certain respects, from those which applied to the prior sales of synthetic rubber facilities, and the second, H. R. 11878, providing simply for an extension of the Commission's existence until July 1, 1957.

At its hearing on June 21, 1956, the committee decided to report favorably the extension measure, H. R. 11878, with the Commission to take up the question of leasing the plant for a long term prior to the convening of the incoming 85th Congress.

Any lease recommended would be reported to the Congress for review, and otherwise the Commission would furnish the committee its recommendations with respect to further disposal legislation concerning this plant. This bill passed the House but no action was taken on H. R. 11878 by the Senate.

The Commission ceased to exist on September 23, 1956, being succeeded by the Federal Facilities Corporation. This Corporation, acting under the authority of Public Law 433, 84th Congress, proceeded to negotiate for a long-term lease of the facility.

However, the Federal Facilities Corporation advised the committee on December 12, 1956, that it had rejected the lease bids of Publicker Industries, Inc., Philadelphia, Pa., and of Union Carbide & Carbon Corp., New York, N. Y., the only two bidders, concluding that the interests of the Government, including the financial return which could be realized, would be better served by a prompt sale of the plant under new legislation rather than through a long-term lease. That is why I introduced H. R. 2528 and we are having the hearing this morning.

But I think I should go along a little further to give the committee the background in regard to the reasoning of the Facilities Corporation in making its recommendation.

On January 8, 1957, the Corporation filed a statement with the committee giving the history of the lease negotiations and explaining the reasoning behind its adverse decision on long-term leasing.

In reading the Corporation's report, I noted that the final offer from Publicker, one of the two companies to enter into negotiations for the lease of the Louisville plant, only amounted to a guaranteed rental of $2,000 a month with the Government continuing to pay the maintenance and taxes on the unused portions of the facility.

The annual maintenance costs to the Government for the Louisville facility amount to approximately $342,000 per annum. In view of the fact that the only line that was in operation at the Louisville facility has now been shut down by the present lessor, it is obvious that the Government might well expect to continue to pay either all or a large portion of this maintenance cost should the lease have been extended under the terms offered by Publicker.

The net result to the Government would have been an annual recurring loss unless Publicker resumed operations on a large scale to such an extent that the throughput operation (netting the Government $6 per ton) would have resulted in additional recovery for the Government. In this connection, it is also interesting to note that since Publicker entered into the lease for the Louisville facility, on April 4, 1955, the Government has received a total rental of $137,000, as contrasted with a total cost to the Government for maintenance of $337,000 as of September 30, 1956. A continuation of this type of an arrangement, or any modification thereof, obviously is not to the benefit of the taxpayers.

Carbide's bid for the lease was in general a better offer for the Government with a guaranteed rental of $150,000 and with Carbide paying for all maintenance and taxes. However, even this offer,