80TH CONGRESS 2d Session

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HOUSE OF REPRESENTATIVES

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REPORT No. 1659

PROVIDING FOR MAKING AVAILABLE THE GOVERNMENT-OWNED ALCOHOL PLANTS AT MUSCATINE, IOWA, KANSAS CITY, MO., AND OMAHA, NEBR., FOR THE PRODUCTION OF PRODUCTS FROM AGRICULTURAL COMMODITIES

APRIL 6, 1948.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. HOPE, from the Committee on Agriculture, submitted the following

REPORT

[To accompany H. R. 6096]

The Committee on Agriculture, to whom was referred the bill (H. R. 6096) to provide for making available the Government-owned alcohol plants at Muscatine, Iowa, Kansas City, Mo., and Omaha, Nebr., for the production of products from agricultural commodities in the furtherance of authorized programs of the Department of Agriculture, and for other purposes, having considered the same, report thereon with a recommendation that it do pass with the following amendments:

On page 2, line 25, strike out the following: "disposal to, or". On page 3, line 1, strike out the comma following the words "operation by".

On page 3, line 5, strike out the following: "sale,”.

GENERAL STATEMENT

During the recent war the Government financed the construction of three war plants for the making of grain alcohol, a much-needed war material. These plants were located at Kansas City, Mo.; Omaha, Nebr.; and Muscatine, Iowa. All three plants were operated at a high rate of production during the war and played an important part in providing industrial alcohol for synthetic rubber and other essential war uses.

After the end of hostilities the plants were continued in operation for some time in order to produce industrial alcohol and byproduct feed. Sponsorship of the plants was transferred from the War Production Board to the Department of Agriculture in 1946 and the

wartime leases for production of alcohol and feed were continued in effect at all three plants until mid-1947.

In March 1947, however, the Department of Agriculture notified the Reconstruction Finance Corporation that it had no objection to termination of the alcohol-feed leases of the two largest plantsKansas City and Omaha-but that it wished the lease on the smallest plant-Muscatine-continued.

Accordingly, the wartime leases of the Kansas City and Omaha plants were terminated as of June 1947 and both plants were formally declared surplus in July 1947. The Kansas City plant has been idle. since the termination of its lease; the Omaha plant has been operating under an interim lease to its wartime operator; and the Muscatine plant has continued in production under an extension of its wartime lease.

In October 1947 the War Assets Administration advertised for disposal the plants at Kansas City and Omaha. Bids were received from five different sources for the Kansas City plant and from seven different sources for the Omaha plant. Following a hearing on January 16, 1948, the Committee on Agriculture requested the War Assets Administration to defer disposition of these plants until June 30, 1948, and this request was acceded to. The Muscatine plant remains the property of the Reconstruction Finance Corporation and has not been declared surplus.

Following is a brief description of the three plants:

THE KANSAS CITY PLANT

This plant was constructed during 1943 at a cost to the Government of $4,098,000. During the war it was leased to and operated by the National Distillers Products Corp. It has designed capacity to process 18,500 bushels of grain a day and to produce 15,000,000 gallons of alcohol and 54,000 tons of feed a year. Due to lack of priorities, this plant was constructed partly of used materials and equipment. In 1945 it produced alcohol at a cost of 83.78 cents per gallon. The plant has been idle since June 1947. At least one of the bids received by War Assets Administration for this plant contemplated the dismantling and removal of all or part of its facilities.

In a letter dated April 5, 1946, to the President of the Senate, in response to Senate Resolution No. 176, Seventy-ninth Congress (printed as S. Doc. No. 167, 79th Cong.), the Secretary of Agriculture makes this statement about the Kansas City plant:

It would be in the national interest to have this plant remain as a complete unit. Should it not be possible to arrange satisfactory terms of sale the facility might well be held in stand-by condition by the Government as a national-defense measure or used in experimental or surplus-disposal programs.

THE OMAHA PLANT

This is the largest of the three Government-owned alcohol plants. It has designed capacity to consume about 35,000 bushels of grain a day and to produce 22,750,000 gallons of alcohol and 88,764 tons of feed a year. During the war this capacity was considerably exceeded. The cost to the Government was $6,806,000. This plant also was constructed partly of used and reconditioned materials and equipment, due to lack of priorities, but it is understood that in the past

year the lessees have replaced with new machinery much of the used equipment. Throughout its operation the plant has been leased to and operated by the Farm Crops Processing Corp. of Omaha, Nebr. During the war it was the most efficient of the three plants, producing alcohol in 1945 at a cost of 59.95 cents per gallon.

In his report of April 5, 1946, the Secretary of Agriculture said of this plant:

It would be desirable in the interests of national defense to maintain this plant, one of the largest in the country, as an integral unit either in actual operation or in stand-by condition. It is probable that this plant would play an important part in any program which might be adopted in the future for disposal of surplus

crops.

THE MUSCATINE PLANT

This plant was built at a cost of $2,760,000 and improvements costing about $700,000 have been added by the lessee. It is the smallest of the three Government-owned plants, with designed capacity to use about 13,000 bushels of grain a day and to produce about 10,200,000 gallons of alcohol and 31,000 tons of feed a year. Its production cost in 1945 was 66.22 cents per gallon. The plant is leased to and operated by the Grain Processing Corp. of Muscatine, Iowa. The plant was able to obtain 100-percent priorities for its construction and is the only one of the three plants constructed entirely from new material and equipment.

In his report of April 5, 1946, the Secretary of Agriculture said of this plant:

This facility has an excellent low-cost performance record, and is well located for alcohol production from grain. The plant, as a complete unit, represents an asset to the Nation either as a defense installation and (sic) as an important instrument in a program of disposal of agricultural surpluses, or both, and should be kept by the Government if present lessees do not exercise their option.

(NOTE. The latest available performance record, as disclosed by the hearing before the Committee on Agriculture, shows that the cost of alcohol production at the Omaha plant was more than 6 cents per gallon less than at the Muscatine plant.)

DEPARTMENT PROPOSAL

On January 20, 1948, the Secretary of Agriculture transmitted to the Speaker of the House of Representatives a proposed bill authoriz ing the transfer of the Muscatine plant to the Department of Agriculture, and a letter outlining the reasons for such a transfer. The letter and a supplementary statement transmitted with it are appended hereto and made a part of this report.

COMMITTEE RECOMMENDATIONS

The committee concurs in the request of the Secretary of Agricul ture for transfer of the Muscatine plant to the Department of Agriculture. It believes, however, that the reasons advanced for retaining ownership of that plant in the Department apply with equal validity to the Kansas City and Omaha plants.

In using these plants to aid in the handling and disposal of any surplus agriculture products, the three plants combined will be five times as valuable as the Muscatine plant alone for this purpose-for

they have a combined grain-processing capacity of about 20,000,000 bushels per year, compared to a capacity of about 4,000,000 bushels for the Muscatine plant.

These three plants have been built at a great cost by the Government. The materials they produced were extremely important during the recent war. In view of the present unsettled world conditions, it appears to the committee that it would be action of the most foolish character to dispose of any of these plants at this time. If we did, there is no assurance that we would not be called upon within the next few months to appropriate new money to build new plants of the same kind.

The supply of gasoline for automobiles and tractors, fuel oil for furnaces and motors, and other petroleum products is uncertain. Almost every day we hear reports that rationing of these products is impending. Alcohol from agricultural products is a known and effective supplement to petroleum motor fuel. It may well be that within a short time we will need all the alcohol that can be produced in all three of these plants to supplement our petroleum fuel supplies.

In his letter to the Speaker, the Secretary emphasizes the matter of research in connection with the proposed transfer of the Muscatine plant. In this the committee is in complete agreement. Research and experimentation in developing industrial and other uses for agricultural commodities is urgently needed and many aspects of it can be carried out in a practical manner only in commercial-sized plants.

In connection with both research and the disposal of any surplus agricultural commodities it is worth noting that the only way the Department can be certain of having a plant for this purpose is by transferring at least one plant in addition to that at Muscatine. The lease contracts on all three plants included the option to buy which was usual in wartime leases. That option has expired in the case of the Kansas City and Omaha plants. The option is still in effect in the case of the Muscatine plant and the operator, by exercising that option, could acquire the plant for its own use, and deprive the Department of control of the plant for research and other purposes.

COMMITTEE BILL

In accordance with the foregoing, the committee suspended action on the bill proposed by the Secretary of Agriculture (H. R. 5398) and reports herewith a new bill (H. R. 6096) which is similar to the Department's bill except that it provides for the transfer to the Department of all three of the Government-owned plants.

The SPEAKER OF THE HOUSE OF REPRESENTATIVES.

JANUARY 20, 1948.

DEAR MR. SPEAKER: Enclosed for the consideration of the Congress is a proposed bill relating to the utilization of Plancor 1684, located at Muscatine, Iowa, one of the three plants built by the Government during the war to produce industrial alcohol from grain.

The bill, if enacted, would retain ownership of this plant by the Government and would authorize the Department of Agriculture to use it in the conduct of research aimed at widening market outlets for farm products.

Industrial alcohol is a chemical which has many well-established uses throughout the United States. Prior to World War II the production of industrial alcohol in this country averaged annually around 100,000,000 gallons (190 proof). This was derived principally from blackstrap molasses, a byproduct of sugar processing.