LC l 1+ .. f 2': . w» «my» MNGTON 54‘ 9.’: 7": fl kk’ A .u. xx. ../. 44$ ,, 1 3, ,,._.5 ix? if X M *5 .y j .9 , ,3 ‘ Issue Brief W mg 7,: ,, \ ~*’'v ; .1 N - :~ I .3 ‘.~..: ' ".41 5} '3. Le :’~-rem 332!» JR» .: - u 7.‘ ‘w "K go 1 \“~;uv<§ ‘‘ m . » ‘ K ‘ v a , ~ \ . .3 ‘ V , I . i 41,‘ i; 3.3‘ , « v ,1 -; “".“n ~»..' “*:.:~3“{*z»:3§ ‘V4 as i -« . . ;«,=,-g,1,,,\=.. . . -. ' 7 ':.::".,\."' ' ‘ V Y ~ F M;’-’* M» 5. ;.‘.a.:..m!;..aw! 2.:.:..m! RESEARCH SERVICE LIBRARY OF CONGRESS SYNTHETIC FUELS: THE MODEL 0F*SYNTHETIC RUBBER pfibnqcrlon DURING ww II ISSUE BRIEF NUMBER IB79075 AUTHOR: Kramer, Donna S . Office of Senior Specialists THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSU$ SYSTEIQ DATE ORIGINATED 9 DATE UPDATED Q me SE FOR ADDITIONAL INFORMATION CALL 287-5700 0530 CRS- 1 IB79075 UPDATE-05/29/80 During World War II imported supplies of natural rubber were cut off and the government had to produce synthetic rubber for immediate consumption. This issue brief provides background information on the wartime production of rubber. In light of our current energy situation, the wartime synthetic rubber production program may be used as a model for the creation of synthetic fuel plants in the United States. '£1;e.Ea.1;L.2e-§zr.11:hetie-.1:11.b12er.Br.o§.u.<;:i2 2.2229222 In 1941, supplies of some of the most critical and indispensable raw materials were desperately inadequate. Heading the list of indispensable raw materials was rubber. It was needed for ships, tanks, planes, and for every other kind of moving vehicle. Rubber was essential to the war effort. Early in 19u2, the Japanese had captured.the rubber—producing regions of Southeast Asia and had cut off the U.S. from its major source (more than 90%) of natural rubber. The United States had to quickly develop a synthetic substitute to assure an adequate supply of rubber. 9 To provide this adequate supply of both synthetic and natural rubber, the federal government established four ‘wartime programs. They were: (1) procurement of all available natural rubber, (2) the production of synthetic rubber, (3) the procurement and recycling of scrap rubber, and (a) gas and tire rationing. The program that will be discussed here, and that is of most importance in light of our current energy problems, is the production of synthetic rubber. I f.I.<2z.1'hs=-.-Ear:.i.me.§.=§fort Was 0rqan..i_zed The United States was in a state of Limited National Emergency from September 1939 to may 1941. During this time some preparations for war were begun. when analysts saw that a war with Japan could cut the United State's source of more than 90% of her rubber supply, they realized that a synthetic rubber industry had to be created. ' Tbe..!.e1:..5..9.I.1:=1.l-2§s-2.1.1§.e..A.<1z;i.§<.2.1;1-§92mit::e.2.132.491 on May 28, 1940, President Roosevelt formed the National Defense Advisory Committee (NDAC) and charged it with the responsibility of developing a synthetic rubber policy. It was the first full-bodied governmental group - formed to study, consult, and act on defense production. In June 1940, the NDAC's Synthetic Rubber Committee began o investigate the nation's need for 1“ynthetic rubber and the costs of developing such an industry. It could not, owever, make or enforce policy since it was strictly an advisory committee. The NDAC responsibilities were terminated on Dec. 20, 1940, by President Roosevelt. cRs- 2 11379075 upnarrr-o 5/29/30 A Th2_Be<.=211.§.1;ru9’2i2n.1:i..I;-.u2e..2.I;2222122911..1329. - .". H j» The Reconstruction Finance Corporation Act was created by an Act or Congress that was approved by the President on Jan. 22, 1932. The RFC began . operation on Feb. 2, 1932. It was established to aid in financing / maximum employment and production. agriculture, commerce, and industry, to»encourage small business, to help in maintaining the economic stability of the country, and to assist in promoting As the international situation grew more tense the Congress recognized the need for more industrial participation in the synthetic rubber program, and on June 25, 1940, amended section 5 of the Reconstruction Finance Corporation Act of 1932. ~. A!§IlQ;I.§2£.9£-.t1.1<2-B.F.'§-l1.2.t T E This 1940 amendment authorized the RFC to aid the government in its national defense program. The Act authorized the RFC to purchase the capitol stock of any corporation for the purpose of (a) dealing in strategic or critical materials; 2) acquiring real estate and plant facilities; £9E the manufacture of strategic and critical materials, arms ammunition, implements of war, and equipment necessary for their manufacture; 3) leasing,t selling, or disposing of plant facilities; H) engaging in manufacturing operation; 5) acquiring and disposing of railroad equipment, commercial aircraft, and parts and supplies necessary in connection with them. Under the authority the RFC created seven wartime subsidiary corporations, one of which was the: Rubber Reserve Reserve Company (RRC). A C The.§u1.>.129.2..Is.«2§.<-2r.!<2..<;2u12..an141339. \ The RRC was formed as a wartime subsidiary corporation on June 28, 1940; to conduct both the synthetic and natural rubber programs. The newly :formed Rubber Reserve Company was authorized to transact business in connection with the buying, selling, acquiring, storing, carrying, producing, manufacturing, and marketing of natural raw or cured rubber as well as related materials and substances. 041? 0 A §I22..2hs-;l§s=..2a§_ZiI.1au2e<1 ’%‘= To finance its operations, the RRC was authorized to issue capital5dstock to, and borrow funds from, the RFC. During its five-year existence, the- RRC issued $5,000,000 in capitol stock to the RFC and borrowed an additional $1,720,123,fl16. Of this amount the RRC spent about $700,000,000 for construction of the synthetic rubber and feedstock plants. The remainder was :_ for administrative costs and for the operating costs of both the synthetic and natural rubber programs. Orginally, it was intended that the RRC* would sell half of the stock to participating rubber companies to assure" their cooperation with the RRC. However, due to the fact that the industry actively cooperated in the development and operation of the government's synthetic rubber program, this action was never taken. 0 3 .9; E9! the R39 QRGEQEG The RRC was headed by a board of directors that was appointed by the RFC. CRS- 3 A 1379075 UPDATE-05/29/80 “he RFC's directors and other officers also served as directors or officers hi the RF€~ or of its other subsidiaries. The Rubber Reserve Company "hconducted*the natural rubber procurement program until Feb. 23, 19u3. After this date, the natura1.rubber program became the responsibility of the Rubber JgpDevelopment Corporation (RDC). T1.ne..B22he;-22z.l22.12eI;.t..Q_r29ra.ti9n..(B.2Q. The RFC acquired the Rubber Development Corporation (RDC) in 1902, as a private company chartered under the laws of Delaware. The RDC's main function was to buy natural rubber from foreign sources. The RDC bought natural rubber and then sold it to the BBC, which, in turn, resold it to industrial users as directed by the war Production Board. RDC continued to operate as an RFC subsidiary until July 19u3, when it was transferred to the Board of Economic Warfare by Executive Order. Two years after that, the RDC was returned to the RFC. ? T1.1e_1V.:1;.r..;.;P1=.2s1;1a.<.=29.r.1..§<.>aI.=Q The war Production Board (WPB) was established within the Office for Emergency Hanagement of the Executive Ofifioe of the President by Executive Order 9024 on Jan. 16, 1902. The HPB was to oversee and control production of all implements of war and all related activities. President Roosevelt appointed Donald H. Nelson, chief merchandising executive of Sears, Roebuck ampany as head of the Board. Initially, the WPB had six major divisions: Purchases, Production, Materials, Industry, Operation, Labor, and Civilian Supply. other divisions and boards created were the War Production Drive Division, the Rubber Branch, and the Munitions Board. I =The Rubber Branch Arthur Newhall, an experienced rubber manufacturer, was appointed head of the rfibber branch of the WPB. At a meeting on Mar. 9, 1942, Newhall warned that it was imperative that the tires on the then 30, 000,000 passenger cars and 5,000,000 trucks be conserved and used only for the most essential driving. At this same meeting, Leon Hemderson, Administrator of the Office of Price Administration, added that various measures had been studied to achieve the conservation of existing tires. Among those were a nationwide reduction in speed limits to 40 or 35 miles per hour, gasoline rationing, an aggresfiive scrap rubber collection campaign, and the expansion of facilities to recap tires with reclaimed rubber. Gasoline rationing was seen by Henderson as the most effective means of conservation. The»public however, could not be convinced of this matter. The proposal to ration gasoline was met by repeated assertions that except for along the Easterngseaboard there was no shortage of gasoline. Gasoline rationing was not instituted until several months later. becoghgggaggghpggyggtiggtignn-- Byemidt19u2othevrubberpsituation had committee under the leadership of Bernard Baruch to investigate the rubber problem and to recommend what should 2 done. Baruch's report recommended several tactics to conserve rubber: 1) restrictions on the use of the motor vehicle; 2) limitation of the speed limit; and, most important, 3) the immediate construction of plants for the making of synthetic rubber. 0 The issuance of the report was followed by appointment of William Jeffers, CRS- 4 1379075 UPDATE-O5/29/80 president of the Union Pacific Railroad, as a "rubber czar." Jeffers was given the authority to build the synthetic rubber plants. By September 1903!‘ most of-the synthetic rubber plants had been completed. Situated around thx country, a total of 51 plants had been built. The Rubber Reserve Company, ,_with a staff of 300, oversaw the operations of these plants, which employed X 22,000 workers directly and 40,000 indirectly. By the end of 1903, these plants were responsible for the production of synthetic rubber equivalent‘ to one-third of U.S. use of natural rubber before the war. * The structure of the natural rubber industry differs considerably from that of the synthetic rubber industry. Historically, over 90% of the world's 7 rubber supplies have come from Southeast Asia, principally from Indonesia and Malaysia. The Indonesian rubber industry suffered severely during World war II. In contrast, only fl% of the rubber acreage in Malaysia went out of production during the Japanese occupation. In the immediate post—war period, replanting progressed slowly in Southeast Asia. This was due in large part to the rapid development of synthetic rubber production facilities in the U.S. which contributed to an uncertain economic outlook for natural rubber production. Mistakenly, some foreign governments believed that the domestic synthetic rubber industry was being heavily subsidized, and they therefore supported the government's intentions of selling the industry to private enterprise. They believed that such development would result in a price increase for manmade rubber, a situation that would be of direct aid to crude rubber producers. Th; relatively high price at which natural rubber was selling at the time was well understood to follow from its scarcity. * with the rise of the domestic synthetic rubber industry, United States dependence on foreign sources of supply for rubber decreased sharply. kIn the event of global conflict or an internal disturbance in rubber-producing countries, the 0.5. would not face a duplication of the conditions that existed from 1939-1901. The private synthetic rubber industry has stood on its own, evolved technologically, and prospered. Sales of natural rubber, although supplying a declining proportion of 9 domestic and world markets, did not fall off at this time. Natural rubber still had its own market, although the long-run outlook was doubtful. At the time, natural rubber was competitive with synthetic in both quality and price. 2i§29§2.1..2.1:.th2.§1r.r§l1.se;.ti2_.l:9.12.12.c2r.2lag:§ After the war, the synthetic rubber plants were sold. One of the main 0 problems with disposing of them was to make sure that the United States would never be dependent on foreign supplies of rubberi again. Disposal oof the - plants to private industry was generally agreed to. However, many analysts were also concerned that the government should receive an equitable price for the facilities. To solve this problem, an Inter-Agency Policy Committee on - Rubber was established by President Truman. Although this £§roup'r recommendations were not adopted its work did lead to the passage fiéf the Rubber Act of 1908. ; Thg_§gbbgg_Agt_gf Jggg -— The Rubber Act of 1948 charged the Resource CRS- 5 IB79075 UPDATE"05/29/8lh0 5 Finance Cerporation with the responsibility of selling the rubber facilities ) private industry. flme RFC agreed with the Inter-Agency Policy Committee's recommendations, which stated that the facilities should be sold to private industry -— with all prospective buyers having an equal opportunity - and _ that the facilities should be sold to as many different purchasers as ‘V possible while still protecting the interests of small rubber consumers. However, by this time the Korean War had broken out and analysts were concerned about selling the plants. Consequently the Rubber Act was extended for two more years, to continue government operation of the plants. It was extended again in 1952 for 21 months and finally expired on Mar. 31, 1954. In 1953, President Truman also signed the Rubber Producing Facilities Disposal Act (P.L. 83-205). This established a three-person disposal committee whose members were not appointed from the government or fro the rubber industry. The committee invited.bids for these plants and by Dec. 27, 195a, a total of 24 plants had been sold. One plant received no bids and one plant received no acceptable bids. The sales from these plants totaled $285,u65,000. S321.-‘£.e2I.1..’2-A.I22.1.i2e.t.i.<2n of the Mode; on July 15, 1979, President Carter, in a.televised speech, discussed six proposed solutions to the United State's energy problems. Points one and two discussed limits on imports of foreign oil. Point three dealt directly with ‘he creation of an energy security corporation that would lead in the effort 0 replace 2.5 million barrels of imported oil per day by 1990. The corporation would be able to issue up to $5 billion in energy bonds in small denominations so that the average American could invest directly in American energy security. Point four was aimed at a congressional mandate to require our nation°s utilities to cut their use~of oil by 50% within the. decade. Point ,five discussed the prospects for Congress to create an energy mobilization board which would, like the war Production Board during WW II, have the responsibility and authority to cut through red tape - that is, to avoid the delays and endless roadblocks to completing energy projects. Finally, point six was directed at the American public, encouraging conservation and patriotism. A LEEISLAE-'19.! S. 1377 (Domenici)- Establishes the Synthetic Fuels and Alternate Fuels Production Authority, a government corporation with the authcrity to provide financing and economic assistance for those sectors of the national economy that are important to the development of domesticrsources and the conservation of energy and the attainment of energy independence for the United States in a manner consistent with the protection of the environment; improves federal government operations so as to assist in the expediting of regulatory procedures that affect energy development. Introduced June 19, 1979; “eferggd to Committees on Energy and Natural Resources, on Banking, Housing Ad Umhan Affairs, and on Governmental Affairs. s. 1503 (Stafford) Establishes a nonprofit government corporation to be known as the Federal CRS— 6 IB79075 UPDATE-O5/29/80 Energy Authority to construct and operate facilities for the production of synthetic oil and gas from oil shale and coal. Establishes in the Unitefls Treasury the Federal Authority Fund to finance such activities. Directs th Authority to establish at least three demonstration synthetic fuel production facilities for shale oil, coal, oil, and coal gasification. Introduced July 13, 1979; referred to Committee on Energy and Natural Resources. 5. 1509 (Pell) Directs the Secretary of Energy to establish a program to promote the development of a synthetic fuels industry in the United States. Introduced July 13, 1979; referred to Committee on.Energy and Natural Resources. s. 1575 (Levin) Establishes a program of mandatory use requirements to stimulate the production of synthetic fuels from domestic resources. Sets forth minimum goals to be attained for the use of synthetic fuels by specified petroleum and natural gas users. Introduced July 25, 1979; referred to Committee on Energy and Natural Resources. HEARINGS B.§.13QB.'1.'§_.1iE2-SQE§E§§§.I..Qfl. D0CU!§I!1'§ Domenici, Pete. Synthetic and alternate fuels production authority. Congressional record [daily ed.] June 19, 1979: S7938. Domenici, Pete. Synthetic Fuels Production Act. Congressional record [daily ed.] June 27, 1979: 587110. QEQONOLOGY QF EVEflg§ 07/15/79 - President Carter, in a televised speech, discussed six proposals for the solution of the U.S. energy problems. Points 3 and 5 were aimed at production of synthetic oil. O6/19/79 —— Synthetic and Alternate Fuels Production Authority Act (5. 1377) introduced by Senator Domenici. 06/O9/79 - O6/11/79 - Hearings scheduled on the Synthetic and Alternate Fuels Production Authority. 12/27/su —. A total of 24 synthetic rubber plants had been sold to private industry. 08/00/H2 - President Roosevelt appointed a committee under the leadership of Bernard Baruch to investigate the rubber ? supply program and to make recommendations. ‘ O2/00/H2 - The Reconstruction Finance Corporation acquired the Rubber Development Corporation (RDC), a private CRS- 7 IB79075 UPDATE-O5/29/80 company chartered under the laws of Delaware. O1/16/H2 ——-The War Production Board was established by Executive Order 920a. 06/23/no —— The Rubber Reserve Company was formed as a wartime subsidiary corporation to conduct the synthetic and natural rubber programs. 05/25/no -- Congress amended section 5 of the Reconstruction Finance Corporation Act of 1932. 06/00/30 - The Synthetic Rubber Committee was formed under the National Defense Advisory Committee to investigate the extent of the nation's need for synthetic rubber and the costs involved in developing an industry. 05/28/no - The National Defense Advisory Committee was formed and charged with the responsibility of developing a synthetic rubber policy. 01/22/32 —— The Reconstruction Finance Corporation Act of 1932 (P.L. 76-664) was signed into law. 22lIlQ.11AL-§§E.15.1\;.E.'L'.Q§-§._._0UR§1_3§ hAlsop, Ronald. War, rubber and synfuels. Wall Street Journal. July 24, 1979: A-16. ‘ Americans for energy independence calls on President to establish energy mobilization board. Energy Users Report. June 21, 1979: American Petroleum Institute. Environmental Affairs Department. Major legislative and regulatory impediments to conventional and synthetic fuel energy development. Mar. 1, 1980. 64 p. Catton, Bruce. The war lords of Washington. New York: Harcourt, Brace and Company. 1948. 313 p. Hornig, Roberta. Support expected for synfuel project. The Washington Star. July 4, 1979: A-1,8. Ignatius, Paul R., Eugene H. Zuckert and Lloyd N. Cutler. A plan to boost U.S. oil and break OPEC's«grip. Washington Post. June 10, 1979: D-1,3. Morris, Bailey. To many, search for solutions is same old song from WW II. The Washington Star. July 16, 1979: PQO Nelson, Donald. Arsenal.of Democracy: the story of American war production. New York, Harcourt, Brace and Company, 1916. #39 p. Novic, David, uelvin Anshen and W.C. Truppner. Wartime production controls. New York, Columbia University Press, 19u9. uu1p. cRs- 8 1379075 UPDATE-O5/29/80 fuel sources intertwine. A-11. Nation's energy chain: July 16, 1979: Parisi, Anthony. The New York Times. Pear, Robert. Saudi oil production to increase; synthetic fuels j effort planned. The Washington Star. July 2, 1979: A-1,8. The pro's and con's of a crash program to commercialize synfuels. [Report prepared for the Subcommittee on Energy Development and Applications of the Committee on Science and Technology, U.S. House of Representatives.] 96th Congress, 2d session. Washington, 0.5. Govt. Print. Off., 1980. 77 p. (available from committee) MU Libraries University of Missouri——Columbia Digitization Information for Congressional Research Service Digitization Project Local identifier CRSIB Source information Format Book Content type Text Notes Stamped with property stamp for Washington University including deaccession stamp Some have labels on front page Some have black out markings on front page SuDoc numbers handwritten on front page Some items have very light print Some front pages have colored backgrounds Items not added to University of Missouri collection Capture information Date captured 20l7 April Scanner manufacturer Ricoh Scanner model MP C4503 Scanning system software Optical resolution 600 dpi Color settings grayscale File types tiff Derivatives — Access copy Compression Group 4 Editing software Resolution 600 dpi Color bitonal File types tiff Notes