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STATEMENT OF JOSEPH G. JOHNSON, ENGINEER AND OWNER

OPERATOR OF THE PLANT UNDER CONSIDERATION, ACCOMPANIED BY LEROY WELSH, CHAIRMAN OF THE COMMISSION ON INCREASED INDUSTRIAL USE OF ALCOHOL, LEWIS SMITHBERGER, GRAIN DEALER AND ELEVATOR OPERATOR, STANTON, NEBR. ; AND SIDNEY CAUGHEY, UNITED STATES DEPARTMENT OF AGRICULTURE

Mr. JOHNSON. Mr. Chairman, I will try to make this statement as brief as possible. I realize that you people are all very busy here.

At the time that this plant was constructed it was necessary for us to work here for some time and we worked on it over a year with the Senate Committee on Agriculture, when we had the allotment and finally it was released, the money, and we started building the plant.

Prior to that our group had developed many methods, new methods of economically converting grain into alcohol primarily for the purpose of using the alcohol and other products for industrial purposes.

These different programs were built into this plant so that there are a great many things that you can do there with the grain besides making alcohol out of it. So we began working there.

It was released in 1943, January 1943 and we went into production in about 12 months and we processed about 60 million gallons of alcohol-no, about $33 million worth of alcohol during the period that it was operated for the Government.

The cost of producing alcohol in that plant is based or was based on operating it on the cost of the grain per gallon of 190-proof alcohol, and we were getting about 234 gallons to the bushel of grain.

The residue that we sold for cattle feed was paying all of the operating costs, so that I would say that as a rough figure that the cost of the alcohol produced at that plant would be the cost of the grain per bushel divided by about 2.75 for the alcohol.

Now, as to the question of the time for getting that plant into operation. I would say that it would take from 60 to 90 days for 2 lines of production and we probably could get the first line of production in operation in about 60 days and the second line in about 30 days later.

There would be a considerable amount of work to do after you get into production because I assume that in making these statements that the plant has been taken care of according to the general regulations of the General Services Administration when it closed down. If it was not, why then it might cost a little more money, it might take a little more time; but I believe that was done, from all of the information I have, that it was done.

As far as the steam supply of the plant goes, that does not belong to the Government; it belongs to the Omaha Power District; their plant is across the street from the alcohol plant.

I inquired before I came down here and that steam can be made available in 3 days time; and also the gas can be made almost immediately available for use for drying the feed and for other purposes.

So, from the standpoint of getting the plant in condition and getting it into service, I believe that the best estimate would be something between 60 and 90 days.

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Now, the ultimate cost, if the plant is going to run any length of time—a great many things would have to be renewed as we go along and that would cost some place between $600,000 and $1 million, in my opinion, if it is going to be placed in permanent operation.

Mr. Poage. Well now, if that is true then, your estimate as to the cost of this alcohol is going to be wrong; if you are going to have to spend $600,000 or $1 million, you have got to add that to the cost of the alcohol, in addition to the cost of the corn; isn't that right?

Mr. JOHNSON. That would depend, if you were just going to start the plant up, for taking care of this particular corn; but you have an agricultural program where you are spending billions of dollars and we worked out several programs and I am satisfied that if that continued a short time that you could entirely eliminate all of the money you are putting out now in your agricultural program for crops that contain starch and sugar, and that was our program that we started with and I am satisfied that can be done if there is an honest effort made to do it.

Mr. HARRISON. That would be a longtime program. At the present time, as I say, it is an emergency program, to open that plant to take care of the corn going out this year.

Mr. Poage. Yes, I understand that is the purpose of the bill.

Now, in order to get through with the testimony that is to be presented, it might be better to have no questions asked until all of the statements have been received, and perhaps more of the committee members wil be here by that time.

Mr. HARRISON. Very well, Mr. Poage.
Mr. Poage. Could we hear your next witness now!

Mr. HARRISON. Well, I would like to have Mr. Welsh say a few words.

Mr. Poage. All right. Mr. Johnson, you may just remain seated there. We will hear you now, Mr. Welsh.

Mr. HARRISON. Mr. Welsh is one of the original owners and operators of this plant and he knows the figures.

Mr. WELSH. Mr. Chairman, as I think most of you know, my name is Leroy Welsh and I am Chairman of the Commission on Increased Industrial Use of Alcohol and I was a partner of Senator Butler of Nebraska and I spent my lifetime in the grain business and in cooperation with Mr. Johnson we built and operated this alcohol plant now in question.

During the past year you fellows here in Congress have had the bill that required the President to appoint a commission to study the industrial uses of farm surpluses, and I was chosen by President Eisenhower to be Chairman of that Commission.

I spent last year, most of my time, commuting back and forth from Omaha to here and I had under my supervision some 200 of the top research scientists of America studying the problem of industrial uses of farm surpluses and I made the report to Congress on the 15th of June this past year on these industrial uses.

In the beginning I want to make it perfectly clear I have no personal interest in operating an alcohol plant for the Government for profit, now or in the future. That seems to have been misunderstood sometimes. But I am willing to donate my services or my counsel at any time I can to this committee or to this Congress or to the Government.

I would like to make one statement. After this year of study with some of the finest research men in the country, I am completely convinced that there is no other solution to the farm surplus problem other than the industrial uses of the farm crops of America.

Now I would like to back up for just a few years. You are talking about an emergency now. When Senator Butler was alive I came down here and with him when to the Secretary of Agriculture and proposed almost the identical thing that is in this bill here today. I would like to leave this statement for the record, but would you

like for me to read it, it is rather short, or would you rather have me just give a synopsis of it and then I would be glad to have you enter it into the record ? Mr. PoAGE. As

you

wish. Mr. WELSH. The title of this is "Profitable Use for Deteriorating Government Surplus Grains," and it was presented on June 24, 1954:

During the past war, the writer, along with a small group of Nebraska businessmen, formed a private corporation called the Farm Crops Processing Corp. and with RFC funds built and very successfully operated at Omaha, Nebr., one of the world's largest alcohol plants-producing some 70,000 gallons of 190-proof industrial alcohol per day from grain.

The alcohol produced proved to be a very valuable aid in producting butadiene (from which synthetic rubber was produced) to keep our army on wheels.

Besides being successfully operated as a private enterprise, we returned to the Government, in fees and taxes during the period of operation, all of the funds used in construction.

Bear in mind that this was built in wartime at very expensive cost.

Now this plant is idle—and I understand is ordered sold.

Certainly, it seems to me we should explore the possibilities of using some of our tremendous surpluses of grain (many millions of bushels of which are spoiling in the temporary storage facilities provided by the CCC) in this plant before disposing of it.

My 40 years of experience in the grain business, along with the operation of this plan for several years, has given me the opportunity to acquire knowledge that I feel sure can be of value in the solution of our national problems that are the direct result of surpluses of grain.

I do not propose to go into detail in this article but all statements made are based upon experience and have been verified by research and actual plant operations.

1. The starch in deteriorated grains is still suitable for conversion to alcohol. Only the starch is used for alcohol.

2. From each 56-pound bushel of grain (wheat, corn, sorghum grains, etc.) can be produced 234 gallons of 190-proof alcohol.

3. From the residue (after the starch is removed in the form of alcohol) can be recovered 16 to 20 pounds of high protein feed concentrates running 32 to 34 percent protein that is very valuable for animal feed and is in short supply at present.

1. The present value of these distillers' dried grains would be about $65 to $70 per ton or 3 cents plus per pound so the value of feed recovered is sufficient to pay the cost of conversion and show a very profitable operation of the plant. Cost of conversion is about as follows: $1.50 per bushel corn will produce about 60 cents per gallon alcohol; $1 per bushel corn will produce about 40 cents per gallon alcohol : 30 cents per bushel corn will produce about 10 cents per gallon alcohol.

FREE CORN--ALCOHOL FOR NOTHING 5. Delivering deteriorated grains to this Government plant at no cost would enable the recovery of practically the full value of the original bushel of grain before deterioration, and in addition, the Government would receive 242 plus gallons of 190-proof alcohol free.

6. Our Government is presently buying large quantities of alcohol as fuel for jet planes, rockets, guided missiles, turbojets, and reciprocating engines. Most of this alcohol is now made from imported blackstrap molasses or from petroleum fractions. Government purchases are probably many times the capacity of this plant.

7. If there were no immediate use for alcohol, it could be stored without substantial loss and much cheaper than the present cost of storing our surplus grains.

8. There are hundreds of uses for alcohol but, of course, it can be made cheaper from blackstrap molasses and petroleum than from high-priced grains.

ALCOHOL FOR RUBBER 9. The alcohol from 1 bushel of grain will produce about 6 pounds of butadiene and this in turn will produce about 6 pounds of synthetic rubber. Should all the synthetic rubber used in America be made from grain alcohol, it would consume some 200 million bushels of grain yearly.

ALCOHOL FOR FUEL 10. Research has been carried on in the Government laboratory at Peoria, III., on alcohol for fuel, for automobiles, trucks, tractors, and planes.

11. Automobiles in the United States of America consume some 36 billion gallons of gasoline per year. If they were required to use only 5 percent of alcohol blended in gasoline, it would consume some 700 million bushels of grain yearly. Ten percent would consume some 1,400 million bushels. That's far inore than our burdensome yearly grain surplus.

12. Of course, the Omaha plant alone could not solve the agricultural problem but it could demonstrate the feasibility of such uses. This plant was originally built for research on farm crops and there are three other such alcohol plants not now in use.

13. The Omaha plant alone could consume some 10 million bushels of grain yearly and produce some 25 million gallons of alcohol that would replace purchases now being made for Government agencies. At the same time, it would produce some 150 million pounds of badly needed, high protein feed that could be consumed immediately in the territory where it is produced.

There are two ways the foregoing results could be accomplished.

1. The plant could be operated by the Department of Agriculture or the Commodity Credit Corporation. The entrance of our Government in this field might cause considerable opposition and I believe it is the policy of the present administration to avoid competition with private industry. I do not favor this procedure. However, if the decision is made to carry out this demonstration by Government operation, I would gladly donate any assistance I might be able to give to the successful completion of such a program.

2. A private corporation could be formed (such as the Farm Crops Processing Corp. which operated the plant during the last war) and with the complete cooperation of the Department of Agriculture and the Commodity Credit Corporation, the plant could be operated without Government finances. Arrangement can be made with the General Services to acquire this plant either by lease, with option to buy, or outright purchase.

The operation of this plant would be a demonstration of our ability to profitably consume our burdensome surpluses of grains for industrial uses here at home. At the same time, it would recover practically the entire value of the original bushel of grain before deterioration had taken place and return to our Government more than 244 gallons of alcohol for each bushel of grain processed and replace purchases that are now being made of alcohol from other sources. It would enable the General Services to lease the idle plant at a satisfactory rental, and result in the final sale of the property to private enterprise. The additional cost to the taxpayer would be nothing.

The paragraph quoted below is a recent appraisal by a present Assistant Secretary of Agriculture of the possibilities of alcohol for fuel.

The proposed alcohol fuel idea eventually could eliminate existing or future corn or wheat surpluses, and also reduce parity costs if adequate legislation were to be effected. The major fuel use is the only known outlet that is large enough to absorb the quantities of grain that might be available. Also, it would serve to assist the fermentation alcohol industry which now is in a critical position. Such a scheme might be temporarily economic if the savings on parity, crop storage, and losses by spoilage are taken into consideration, as well as the inroads on petroleum resources. From present indications, storage, deterioration and spoilage of grain stocks represent a high annual cost, and if the present situation is continued indefinitely-much or all of the stored grain may ultimately be a total loss, in the absence of a use outlet. But the program could not be put into immediate operation.

The alcohol could be sold to another department of the Government, to the Defense Department. I was advised last year that it was some place in the vicinity of 50 million gallons of alcohol and I think that the price today is 47 cents a gallon.

I suggested in this that the plant could be transferred to the Department of Agriculture and could be operated by a private foundation.

I want to tell you gentlemen that I think that the operation of this plant should be in the hands of the cooperatives, and that it should be operated by the cooperatives or by some nonprofit organization and under the complete direction of the Department of Agriculture and the grain should be put in there for free and the corporation or whoever takes the plant should put up the $1 million that Mr. Johnson said was necessary not only to condition the plant and put it in working order but to build a laboratory satisfactory for research, they should be repaid on an amortized basis of 20 percent a year and if they were given a contract for 5 years, then that organization or the cooperative or the company that operates this on a nonprofit basis could have all of their money back that they put in there in a matter of 5 years, and it would not require the funds being approved at this time.

Now, in the study of the commission on industrial uses of farm surpluses last year, of that I would like to read a report on the industrial uses of alcohol from grain by one of the task groups—by the way, I had 18 of these task groups studying the different problems of agriculture and this committee on alcohol said:

Steps should be taken promptly to provide for activation and long-range operation of present Government-owned plants and facilities capable of converting Government-owned suprplus grains into alcohol. Likewise, a sufficient number of butadiene units should be activated to use the alcohol so produced, since it appears that such production can be undertaken without seriously interfering with present synthetic rubber production and with the prospect of finding improved methods that will increase financial returns. Some of the products can probably be absorbed through Government activities. Operation of these plants and facilities would provide the opportunity to initiate many techniques and to develop many applications necessary for the beginning of an agrochemical industry.

The long-range cost of the program that is suggested here would be modest in contrast with the present cost of the governmental program for agriculture and the disposal of surplus agricultural products in international trade. Furthermore, it is anticipated that the long-range economic benefits to be derived from this proposal would repay many times the cost to the Government, just as was true in the development of the Nation's general chemical industry.

Mr. Chairman, I would like that to be in the record, if you don't mind.

Mr. Poage. Without objection.

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