FOUNDATIONS FOR GROWTH ANftoSf CURITY N'VFBHWiE^jiiffiM LIBRARIES * m FIVE VOLUMES Volume I—Foundations for Growth and Security Volume II—The Outlook for Key Commodities Volume HI—The Outlook for Energy Sources Volume IV—The Promise of Technology Volume V—Selected Reports to the Commission * UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1952 RESOURCES for FREEDOM Volume I Foundations for Growth and Security A Report to the President by THE PRESIDENT'S MATERIALS POLICY COMMISSION June 1952 The Commission William S. Paley, Chairman George R. Brown Arthur H. Bunker Eric Hodgins Edward S. Mason The Executive Staff Philip H. Coombs Director Max Isenbergh General Counsel William C. Ackerman Executive Secretary Norvell W. Page Editor The Staff Domestic Resources Wilbert G. Fritz, Allen F. Matthews Howard E. Ball Jack R. Barnes Harold Barnett* Robert B. Black* James T. Bonnen* John M. Carmody* Charles R. Cherington* J. Harold DeVeau* Harry M. Edelstein* Orris C. Herfindahl* Harold D. Kube Arthur A. Maass* Bayley F. Mason* James R. Nelson* John H. Nixon* Eugene E. Oakes James C. Rettie Sam Schurr* Foreign Resources Raymond F. Mikesell, Isaiah Frank Marjorie Belcher* Kingman Brewster, Jr.* Herbert Feis* Harry Kahn, Jr.* Alexis B. Samuel Lipkowitz* Calvin J. Nichols* Wallace J. Parks* Henry W. Spiegel* Tatistcheff Energy Resources Robert Blum E. Wayles Browne, Jr. Cornelius J. Dwyer John G. Godaire Dorothy E. Guyol* Herschel F. Jones* Mary E. McDermott William J. McMaster* Palmer Putnam* Fred H. Sanderson* Rolande C. Widgery* Commodity Studies Sidney S. Alexander, David W. Lusher, Alfred S. Cleveland Albert Abrahamson* Cornelius Cosman* Frank L. Fisher Edwin Kuh* Glenn A. Lehmann* Donor M. Lion Paul W. McGann* Samuel Moment* Bruce C. Netschert* William N. Parker W. Scott Payne Clair Wilcox* Staff Consultants Samuel G. Lasky, John Croston, Arnold C. Harberger* John D. Black* Alan M. Bateman* Fred M. Chace* Thomas S. Lovering* Editorial Edgar D. Brooke, Philippe G. Jacques, Henry Jarrett, Antonio Petruccelli, Charles Schwarz, Connie Burwell White, T. Osburn Zuber Elizabeth J. Beachy Hymen E. Cohen Elizabeth Farrar Margaret McConnell Marietta Schirf Jane A. Woods Legal Abram Chayes* James L. Morrisson* Clyde O. Martz* Richard Schifter* Howard R. Williams* Technology Ruth Miller, Nathaniel M. Elias Yale Brozen* Robert M. Cabot Frances H. Clark* Leon Kelston* Eleanor H. Stoddard Peter A. Stone Chaplin Tyler* Roger Williams, Jr.* Statistics Vivian Eberle Spencer, Charles A. R. Wardwell Newton S. Andrews Mary B. Craig* Jerry G. Foreman* Jason Horn* Roy Moon Elaine R. Schaperow Wilhelmina F. Whiting Jack I. Zucker Security and Market Policy William T. Phillips, Warren S. Hunsberger Edward Ames* Max Gideonse* Klaus E. Knorr* William J. Mazzocco* Horst Mendershausen* Harry Teets Administrative Harry T. Bredenberg, Harry E. Pontius Mary M. Carter Eleanor M. Mills Helen L. O'Neill ♦Part-time or limited period. D£P^SIT-D BY THE UfMITED STATES OF AMERICA Letter of Transmittal June 2, 1952. Dear Mr. President: On January 22, 1951, you constituted the President's Materials Policy Com- mission and instructed us to study the materials problem of the United States and its relation to the free and friendly nations of the world. We take pleasure in sub- mitting to you this Report on the results of our studies: our findings and our recom- mendations for policies and programs which we believe will help the United States and the free world toward greater economic and industrial strength and reinforce our joint security against aggression. In this, the first volume of the Report which we have entitled "Resources for Freedom," we present the summary and broader analysis of the Materials Problem and our recommendations for its solution. In two subsequent volumes, we present studies on specific materials and energy resources. A fourth volume re- views the opportunities for technology to help resolve some of the more troublesome problems; the fifth presents a few of the basic studies prepared to assist your Commission in its deliberations. In our work we have been ably supported by a conscientious and hard work- ing staff, recruited from industry, the universities, and Government. The de- partments and agencies of Government and the industries upon whom we called for help invariably gave generously of their time or thought or manpower, and without them we could not have completed our task. We are grateful to you, Mr. President, for the rewarding opportunity you gave us to explore an area in our economy which will in the future demand much more thought and effort than we as a Nation have seen fit to give it in the past. Respectfully, The President, The White House. The President's Letter January 22, 1951. Dear Mr. Paley: I am very pleased that you have agreed to serve as the Chairman of the President's Materials Policy Commission. As you and I have discussed, this Commission within the Executive Office of the President is to study the broader and longer range aspects of the nation's ma- terials problem as distinct from the immediate defense needs. I hope the Com- mission can report to me within the next six to nine months. This is one of the crucial problems facing the nation. By wise planning and determined action we can meet our essential needs for military security, civilian welfare, and the continued economic growth of the United States. We cannot allow shortages of materials to jeopardize our national security nor to become a bottleneck to our economic expansion. The task of the Commission, therefore, will be to make an objective inquiry into all major aspects of the problem of assur- ing an adequate supply of production materials for our long-range needs and to make recommendations which will assist me in formulating a comprehensive policy on such materials. I believe the Commission should study, together with any other aspects deemed by it to be pertinent, such questions relating to production materials as: (1) The long-range requirements outlook. (2) The long-range supply outlook. (3) The prospect and estimated extent of shortages. (4) The consistency and adequacy of existing Government policies, plans and programs. (5) The consistency and adequacy of private industry practices. In analyzing these items consideration should be given to the needs and resources of the nations with which the United States is cooperating closely on military security and economic matters. In formulating final recommendations, your Commission should take into account all possible methods of bringing supplies and requirements of essential materials into balance. The Commission will enjoy the cooperation of all agencies of Government whose functions and interests relate to your assignment. And of course you will want to solicit the cooperation of private industry. Although the Commission will organize its own regular staff and secretariat, it may call upon other agencies for any special staff assistance which may be needed. The direct expenses of the Commission and its immediate staff will be defrayed from the appropriation Emergencies (National Defense) 1951. * Very sincerely yours, Contents Page Letter of Transmittal The President's Letter Commission's History and Acknowl- edgment 175 FOUNDATIONS FOR GROWTH Chapter 1 Materials and Freedom, page 1 The Converging Forces The Task of the Commission Piercing the Fog of the Future The Fundamental Concepts Chapter 2 Dimensions: Past and Future, page 4 The Road We Have Traveled The Road Ahead Chapter 3 The Opportunities, page 8 More Materials From Domestic Re- sources Shifting Use of Materials Opportunities in Foreign Trade Chapter 4 The Difficulties, page 13 The Problem of Rising Costs A Note on Costs The Problem of Energy and Tech- nology The Problem of Developing Re- sources Abroad The Problem of Security Chapter 5 Steps Toward Policy, page 17 The Working of the Price System The Part Government Plays The Least Cost Principle Conserving for the Future Prudence in the Face of Uncer- tainty STRENGTHENING DOMESTIC RESOURCES Chapter 6 The Changing Pattern of Growth, page 23 Chapter 7 Developing Minerals Reserves, page 25 More Facts and Better Analysis Needed 26 The Prospects of Discovery 27 The Role of Government in Ex- ploration 27 8 10 11 13 13 14 16 17 17 18 20 21 21 Page 30 30 33 33 36 37 38 39 40 40 41 44 45 Managing Resources on Federal Land The Mining Laws and How They Work Financial Incentives in Minerals Some Questions of Minerals Tax Policy Encouraging Small-Scale Mining Chapter 8 Making the Most of Timber Resources, page 36 Consumption and Growth: 1950-75 Meeting 1975 Requirements Two Keys: Technology and Man- agement Recommendations General Recommendations Recommendations to Benefit Small Owners Recommendations on Federal For- ests Prospective Costs and Returns Chapter 9 Improving Agricultural Re- sources, page 45 How Production Can Be Increased Per-Unit Increases Changes in Land Use Facilitating Production Gains Individual Farm Plans Types of Farm Credit A Responsive Price Structure Care in Bringing in New Land Balanced Research Soil Conservation The Commission's Views Chapter 10 Supplying Industry with Water, page 50 Measuring Industry's Problem Supply Problem Varies by Areas Ways of Increasing Supply Guides to Federal Action Five Principles to Follow Areas for Federal Action Pollution Control Act PROMOTING FREE WORLD EXPANSION Chapter 11 The Opportunity and the Problems, page 59 The Basic Problem 59 Foreign Sources of Supply 60 Sources of Capital 61 Obstacles to Materials Development The Role of the United States Chapter 12 Page 62 62 46 46 47 48 48 49 49 49 50 50 50 50 52 53 55 55 55 56 U. S. Private Investment in Resources, page 63 Patterns in Investment 63 Investment Goals and Obstacles 64 The Views of Investors 64 Obstacles Cited by Private In- vestors 64 Limitations on Ownership 65 Restrictions on Management 65 Taxation and Other Exactions 65 Convertibility and Exchange Rates 65 Import and Export Controls 66 Fear of Expropriation 66 Opportunities for Solutions 67 Three Moves by Investors 67 Economic Statesmanship 67 How U. S. Government Can Help 68 Steps to Remove Barriers 63 Investment Treaties 68 Special Resource Agreements 68 Investment Guaranties 69 'Tax Changes to Spur Investment 69 Removal of Tax Handicaps 69 Other Limitations 70 Tax Treaties Give Incentives 71 Unilateral Tax Exemption 71 Broadening the Base of Investment 72 Chapter 13 Direct Assistance by Public Agencies, page 73 Technical and Financial Assistance 73 United States Technical Assistance 73 Financial Assistance 74 The Role of International Agencies 74 Special Measures for Security Needs 75 Security Devices 75 Functions of Permanent Agency: Summary 77 Chapter 14 Removing Barriers to Trade, page 77 Relieving Tariff Restrictions 78 Other United States Restrictions 79 International Action 82 Chapter 15 Reducing Market Instability, page 83 Effects of Market Instability 83 Approaches to Solution 84 National Efforts at Control 86 International Efforts at Control 86 Page v Page Toward Better Controls 87 The Multilateral Contract 87 International Buffer Stocks 88 General Problems of Commodity Agreements 88 Special Problems of Proposals 89 Impending Review of Chapter VI 90 Free World Resource Tables 91 SUPPLYING ENERGY FOR ECONOMIC GROWTH Chapter 16 The Energy Problem, page 103 The Rising Demand 103 The Limited Supply 104 Opportunities for Improvement 104 Realizing the Opportunities 106 Chapter 17 Oil-—How Much? How Long? page 107 The Problem of Security and Costs 108 Opportunities for Solutions 108 Tasks for Oil Policy 109 Obstacles to Security 109 Chapter 18 Natural Gas—Boom Fuel, page 111 The Problems of Gas Approaches to Solutions Prices and Policy Goals Government Actions Preparing for Eventual Transition Chapter 19 Coal—Can Costs Be Cut? page 115 112 113 113 113 114 Opportunities for Coal Pursuing Opportunities 115 117 Chapter 20 Electricity—How Much at What Cost? page 117 A Joint Public-Private Responsi- bility The Joint Opportunities Hydropower Opportunities Thermal Power—and Coal Tying Systems Together Opportunities to Strengthen Se curity Page Changing Opportunities to Realities 121 Chapter 21 Energy for Other Free Nations, page 122 Pathways to Free World Progress 124 Chapter 22 Energy for the Nation: A Summary, page 125 - Changes in the Energy Pattern 125 End-Use: Rise of Secondary Forms 126 Conversion: Losses Will Rise 126 Resource Level: Mix Will Change 126 Developing Unconventional Sources of Energy 129 Needed: A Comprehensive Energy Policy 129 TECHNOLOGY: RESOURCE FOR THE FUTURE Chapter 23 The Scope of Technology, page 131 Time Is the Essence 131 What Technology Works With 132 Six Tasks for Technology 132 Chapter 24 The Tasks for Technology, page 133 New Techniques for Discovery 133 Enlarging the Stream of Materials 134 Broader Recycling 135 Dealing with Low Concentrations 137 More Use of Renewable Resources 137 Substitution 138 Chapter 25 Government and Materials Re- search, page 140 Page Chapter 26 Technology and Building—A Case Study, page 146 Promise Versus Prospect 146 The Job Ahead 146 Some Expected Changes 147 The Obstacles 148 The Nature of the Building In- dustry 143 Restraints of Trade 148 Building Codes 149 Inadequacy of Research 149 Help Through Government 150 Federal Housing Programs 151 FOUNDATIONS FOR SECURITY Chapter 27 Materials Policy and National Security, page 153 Demand and Supply in War 154 The Pattern of Demand 154 The Problems of Supply 155 Matching Demand and Supply 156 Chapter 28 Stretching Supply by Effective Use, page 159 Objectives of Materials Economy 159 Four Economy Devices 160 Chapter 29 Building and Maintaining Stockpiles, page 162 Crisis and Preparation 162 Opportunity to improve stock- piling 163 Findings and Recommendations 163 Commission Findings on Manage- ment 164 Chapter 30 Preparing for Emergency Pro- duction, page 165 Stand-by Facilities 165 Research Dollars 140 Stand-by Technology 166 118 Research Personnel 142 PREPARING FOR FUTURE POLICY 113 Technical Manpower in the Future 142 118 The Heart of the Problem 144 Chapter 31 120 120 Directors of Research Policy Whose Responsibility? 144 145 The Continuing Task, page 169 Better Coordination: The Pressing Better Fact-Finding and Analysis 170 121 Need 145 Steps Toward Correlating Policy 170 Page vi RESOURCES for FREEDOM Volume I—Foundations for Growth and Security U.S. IS FREE WORLD'S BIGGEST MATERIALS CONSUMER WITH 9.5% OF POPULATION AND 8% OF LAND AREA. . . . . THE UNITED STATES IN 1950 CONSUMED THESE MATERIALS: WITH 90.5% OF POPULATION AND 92% OF LAND AREA . . . OTHER FREE COUNTRIES IN 1950 CONSUMED THESE MATERIALS: 2,350,000,000 BARRELS , 1,320,000 LONG TONS 1,800,000 SHORT TONS . 130,000,000 S. T. . . . 1,081,000 SHORT TONS . 1,255,000 SHORT TONS . 784,000 SHORT TONS . Illliilii . 1,274,000,000 BARRELS . . 825,000 LONG TONS . 1,400,000 SHORT TONS 105,000,000 SHORT TONS . 1,061,000 SHORT TONS . 1,343,000 SHORT TONS . 844,000 SHORT TONS .AND U.S. IS USING UP RESERVES FASTER THAN OTHER COUNTRIES (1950 PRODUCTION AS PERCENTAGE OF KNOWN RESERVES) 8.0% 3.2% IRON ORE (50% FE) 3.8% 3.6% 3-7* COPPER Source: Commodity Studies; PMPC Projection Foundations for Growth Chapter 1 Materials and Freedom The question, "Has the United States of America the material means to sustain its civilization?" would never have occurred to the men who brought this Nation into greatness as the twentieth century dawned. But with the twentieth century now half gone by, the question presses and the honest answers are not glib. The United States, once criticized as the creator of a crassly materialistic order of things, is today throwing its might into the task of keeping alive the spirit of Man and helping beat back from the frontiers of the free world everywhere the threats of force and of a new Dark Age which rise from the Com-: munist nations. In defeating this barbarian violence moral val- ues will count most, but they must be supported by an ample materials base. Indeed, the interdependence of moral and ma- terial values has never been so completely demonstrated as today, when all the world has seen the narrowness of its escape from the now dead Nazi tyranny and has yet to know the breadth by which it will escape the live Communist one—both materialistic threats aimed to destroy moral and spiritual man. The use of materials to destroy or to preserve is the very choice over which the world struggle today rages. This Report, Resources for Freedom, has as its central task an examination of the adequacy of materials, chiefly industrial materials, to meet the needs of the free world in the years ahead. Even a casual assessment of these years would show many causes for concern. In area after area the same pattern seems discern- ible: soaring demands, shrinking resources, the consequent pres- sure toward rising real costs, the risk of wartime shortages, the ultimate threat of an arrest or decline in the standard of living we cherish and hope to help others to attain. If such a threat is to be averted, it will not be by inaction. After successive years of thinking about unemployment, reemployment, full employ- ment, about factory production, inflation and deflation, and hundreds of other matters in the structure of economic life, the United States must now give new and deep considerations to the fundamental upon which all employment, all daily activity, eventually rests: the contents of the earth and its physical environment. None of us in the United States, whether in civilian or mili- tary life, whether banker or economist, production man or technologist, worker or farmer, is easily accustomed to the idea that raw materials can be a problem. Indeed, the United States problem today is precisely the reverse of the problem to which all our tradition has accustomed us. A hundred years ago re- sources seemed limitless and the struggle upward from meager conditions of life was the struggle to create the means and methods of getting these materials into use. In this struggle we have succeeded so well that today, in thinking of expansion programs, full employment, new plants, or the design of a radical new turbine blade, too many of us blankly forget to look back to the mine, the land, the forest: the sources upon which we absolutely depend. So well have we built our high- output factories, so efficiently have we opened the lines of dis- tribution to our remotest consumers that our sources are weak- ening under the constantly increasing strain of demand. As a Nation, we have always been more interested in sawmills than seedlings. We have put much more engineering thought into the layout of factories to cut up metals than into mining proc- esses to produce them. We think about materials resources last, not first. The Converging Forces Today, throughout the industrial world, but centering in- evitably in the heavily industrialized United States, the result- ing Materials Problem bears down with considerable severity. The nature of the problem can perhaps be successfully over- simplified by saying that the consumption of almost all ma- terials is expanding at compound rates and is thus pressing harder and harder against resources which, whatever else they may be doing, are not similarly expanding. This materials problem is thus not the kind of "shortage" problem, local and transient, which in the past has found its solution in price changes which have brought supply and demand back into bal- ance. The terms of the materials problem we face today are larger and more pervasive. The intensity of the problem arises from the convergence of powerful historical forces which need to be examined. The first lies in the profound shift in the basic materials position of the United States—the worsening relationship between our re- quirements and our means of satisfying them. A second is to be found in the difficulties encountered by other high-consuming nations, primarily in Western Europe, which stem from the serious depletion of their own resources coupled with the weak- ening or severing of ties with their colonies. A third lies in the rising ambitions of the resource-rich but less developed nations, especially of former colonial status, which focus on 999050—52 2 Page J THE U. S. OUTGROWS ITS RESOURCE BASE (PRODUCTION AND CONSUMPTION OF MATERIALS OTHER THAN FOOD AND GOLD IN 1935-39 DOLLARS) PRODUCTION CONSUMPTION $3,795,000,000 $3,309,200,000 r -20% f ;v POSSIBLE '. PRODUCTION DEFICIT POSSIBLE PRODUCTION PROJECTED DEMAND $12,600,000,000 $15,600,000,000 Source: PMPC Slaff industrialization rather than materials export. A fourth is the great schism between totalitarian and democratic nations which has disrupted normal trade patterns and made necessary costly measures of armed preparedness. Finally, there lingers from the Great Depression a world-wade fear of future market instability and possible collapse, which dampens the willingness of private investors and resource-rich countries to develop resources. The Task of the Commission The task assigned this Commission by the President was to explore the nature and dimensions of the Materials Problem and to suggest ways by which private actions and public policies in the years ahead can be directed toward meeting it; toward averting or overcoming materials shortages which would otherwise threaten to impair the long-run economic grow th and security of the United States and other free nations. This is an undertaking of staggering proportions. It implies a survey of the multitude of materials, from asbestos to zirconium, which feed and fuel our thousands of industrial plants and otherw ise satisfy our innumerable needs. It implies a study of the resources from which all these materials are de- rived. It implies consideration of the productive forces of tech- nology and energy that can be brought to bear upon such proc- esses as those by which iron ore becomes an automobile, or air an explosive—and the obstacles that tend to hold these forces back. It implies thought directed at political and eco- nomic instruments—by no means confined to tariffs and taxes— which bear upon materials in domestic and world trade. The study necessarily focuses on the needs and problems of the United States, but it would be meaningless if it left out of con- sideration the needs and problems of other free nations. Clearly, a task of such scope and complexity cannot be com- pleted in one attempt. Nor can it ever be safely regarded as complete. The five volumes of this Commission's Report are offered only as a beginning. The most important conclusion this Commission presents is thus that the job must be carried on cooperatively by Government and private citizens, not period- ically at wide-spaced intervals, but day by day and year by year. Piercing the Fog of the Future The actions we as a Nation take or fail to take in meeting our materials problems in the period immediately ahead will affect profoundly the state of affairs many years hence. Upon our own generation lies the responsibility for passing on to the next gen- eration the prospects of continued well-being. The first requisite for this is that we successfully meet the requirements that can now be foreseen. It is this consideration which has caused the Commission to choose for the period under its review the quar- ter century which stretches from the present to the year 1975—a date which seems sufficiently distant as not to be strongly affected by our current (1952) defense production problems yet not so far off as to be dominated by technological and other developments now wholly unforeseeable.* A prudent man must base his actions on the best estimates he can make; commissions weighing policy must similarly attempt to gauge the future. This Report attempts no prophe- * Projections ascribed to the "year 1975" throughout this volume should not be regarded as applying to that literal point in time, but rather con- sidered as a plausible shape of things in the decade 1970-1980. Page 2 cies; in making its necessary estimates it assumes no more than that the Nation's economy will continue to grow at about the rate it has grown during the most recent hundred years of our economic activity. But even this modest assumption, as we shall see, raises questions which still lie far from solution. The greatest uncertainty that confronts us all as we attempt to pierce the fog of the next quarter century lies in the un- answerable question, will there be war? We may, and do, pray that war will not come, but we cannot know. This Report cannot attempt to project the effects of war on our long-run materials position; at most it can attempt to explore some of the preparatory actions that can be taken now to put us in the best economic and military position if war should come. At the other extreme we cannot with prudence assume any sudden end to the tensions between the free world and the Soviet bloc; nor can we assume any specific changes in the present world political alignment. These uncertainties may have less effect upon the materials problem than might at first be supposed. If complete world peace, confidence, and prosperity were to bless the world tomorrow, the materials problem would surely not vanish nor necessarily become less severe—for if all the nations of the world should achieve the same standard of living as our own, the resulting world need for materials would increase to six times the present already massive consumption. On the other hand, if today's cold war should erupt into a hot war tomorrow, the pattern of materials demand, and the adequacy of our supplies, would alter in much swifter and more drastic ways. Today's rearmament emergency may thus serve us as a set of binoculars which brings apparently closer to us circum- stances which would in any event confront us were we to take no action to avert them; in this sense it can be of the greatest usefulness to us in emphasizing the problem we shall face and the actions we must pursue, war or no war. The Fundamental Concepts This Report can have significance only as the convictions held by the members of the President's Materials Policy Com- mission are clearly stated: First, we share the belief of the American people in the principle of Growth. Granting that we cannot find any absolute reason for this belief we admit that to our Western minds it seems preferable to any opposite, which to us implies stagnation and decay. Where there may be any unbreakable upper limits to the continuing growth of our economy we do not pretend to know, but it must be part of our task to examine such apparent limits as present themselves. Second, we believe in private enterprise as the most effica- cious way of performing industrial tasks in the United States. With this belief, a belief in the spur of the profit motive and what is called "the price system" obviously goes hand in hand. This method, motive, and system have served uniquely well in America. They have brought us to a commanding industrial position, promoting growth and keeping the basic costs of pro- duction low so that the standard of living could reach its present high levels. We believe in a minimum of interference with these patterns of private enterprise. But to believe in a minimum of interference is not to believe that this minimum must be set at zero. Private enterprise itself has from time to time asked for helps, or restraints, or counterpoises from Government to keep the system working at its best; for this reason, among others, we have experienced for a long time a mixture of private and public influences on the functioning of our economy. The Commission sees no reason either to blink this fact or to decry it; as we see the future, the co- existence of great private and public strength is not only desirable but essential to our preservation. Third, we believe that the destinies of the United States and the rest of the free non-Communist world are inextricably bound together. This belief we hope will color everything we have to say about the Materials Problem. It implies, for ex- ample, that if the United States is to increase its imports of materials it must return in other forms strength for strength to match what it receives. It is this Commission's belief that if we fail to work for a rise in the standard of living of the rest of the free world, we thereby hamper and impede the further rise of our own, and equally lessen the chances of democracy to prosper and peace to reign the world over. Security and economic growth for the United States and the rest of the free world must be the essential aim of any policy worth the name. Materials strength is a prime ingredient of general economic strength and growth, which in turn is the foundation of rising living standards in peace and of military strength in war. This Commission is convinced that if the United States and other free nations are to have such strength they must coordinate their resources to the ends of common growth, common safety, and common welfare. In turn, this means that the United States must reject self-sufficiency as a policy and instead adopt the policy of the lowest cost acquisi- tion of materials wherever secure supplies may be found: self- sufficiently, when closely viewed, amounts to a self-imposed blockade and nothing more. It is by these avenues of thought that the Commission arrives at the formulation of the major premise upon which all the rest of its report is based: The over-all objective of a national materials policy for the United States should be to insure an adequate and dependable flow of materials at the lowest cost consistent with national security and with the welfare of friendly nations. Page 3 Chapter 2 Dimensions: Past and Future The United States appetite for materials is Gargantuan— and so far, insatiable. At mid-century, over 2l/o billion tons of materials are being used up each year to keep the country going and support its high standard of living. With a popula- tion of 151 million, each person uses up, on an average, some 18 tons a year. He uses about 14,000 pounds of fuel for heat and energy—warming houses and offices, running automobiles and Diesel trains, firing factory boilers, and hundreds of other tasks. He uses 10,000 pounds of building materials—lumber, stone, sand and gravel, etc.—plus 800 pounds of metals winnowed from 5,000 pounds of ores. He eats nearly 1,600 pounds of food; this together with cotton and other fibers for clothing, pulpwood for paper and other miscellaneous products mounts up to 5,700 pounds of agricul- tural materials. In addition, he uses 800 pounds of nonmetal- lics, such as lime, fertilizer, and chemical raw materials. rising demand; dwindling resources Such a level of consumption, climaxing 50 years of phenom- enal economic progress, has levied a severe drain upon the United States endowment of natural resources. Minerals, forest, soil, and water—all have felt it. A few comparisons between 1950 and 1900 are instructive. In the first 50 years of the twentieth century, United States population doubled. National output in this same time reached five times the 1900 level. The per capita national income for Americans rose from roughly $325 in 1900, to $530 in 1925 and $864 in 1950 (in 1939 dollars). It took a considerably expanding flow of raw materials to support this growth, but not in the same high proportion. The value of the materials stream* (in constant dollars) rose only half as much as the national output; services were beginning to become a larger proportion of the goods and services that made up this output, and more value was being added to materials by successively higher fabrication as time went on. It was for such reasons as these that relatively smaller materials values could sustain the more rapidly growing total output. Even more striking than the increase in the total size of this stream were the shifts in its composition. Our total consumption of agricultural products of all sorts, including food, increased 2J/4 times; fishery and wildlife products rose little more, and our *Here defined to include all mineral products except gold, plus agri- cultural, forest, fishery, and wildlife products consumed in the United States. All statistical statements in these chapters exclude gold. See vol. II, Production and Consumption Measures. IN 1950 THE U. S. CONSUMED 2. 7 BILLION TONS OF MATERIALS 450,000,000 TONS OF AGRICULTURAL MATERIALS 390,000,000 TONS OF METALLIC ORES 14,400 POUNDS OF FUELS AVERAGING 36,000..: ..--••*"""" / •-"/ / 10,000 POUNDS OF CONSTRUCTION MATERIALS 60,000,000 TONS OF MISC. N0N-METALLICS 750,000,000 TONS OF CONSTRUCTION MATERIALS 1,100,000,000 TONS OF FUELS 800 POUNDS OF MISC. N0N-METALLICS POUNDS PER CITIZEN 5,100 POUNDS OF METALLIC ORES 5,700 POUNDS OF AGRICULTURAL MATERIALS Source: PMPC S/off Page 4 total use of forest products actually declined 1 percent. But our consumption of minerals, including fuels, rose to six times 1900 totals. By 1950—in comparison with the year 1900—we were taking from the earth: Two and one-half times more bituminous coal. Three times more copper. Three and one-half times more iron ore. Four times more zinc. Twenty-six times more natural gas. Thirty times more crude oil. Indeed, there is scarcely a metal or a mineral fuel of which the quantity used in the United States since the outbreak of the First World War did not exceed the total used throughout the world in all the centuries preceding. The minerals increase is compounded partly out of the needs that rise with growing populations, partly out ot a per capita consumption which has increased threefold in the same time, and is still growing. Fundamentally it reflects the increas- ing mechanization of modern society. As a result of the turret lathe and tractor, the automobile and airplane, the submarine and tank, the electric washing machine and vacuum cleaner, we have been drawing down our most exhaustible resources even faster than the resources that can, in theory at any rate, be renewed. A ton of ore removed from the earth is a ton gone forever; each barrel of oil used up means one less remaining. This mounting strain upon resources that cannot be replaced has become the most challenging aspect of our present-day economy. But "renewable" resources have also felt the strain. Ninety percent of our virgin timber stand in the commercial forest area has been cut, and thus far we have done a poor job of growing replacement crops. At present we are using up our inventory of saw-timber at a rate 40 percent faster than its annual growth rate. Millions of acres have been taken out of forest growth; other millions have gone to brush and inferior trees. Upon our agricultural land we have imposed a heavy burden of deple- tion; we have opened it, exploited it heavily, abandoned much of it after its fertility had been drained, and moved on to repeat the process elsewhere. Partly because of soil erosion, even water, once regarded as a "free commodity'' of virtually unlimited supply, has become a problem in areas where once it was plentiful. As a Nation we have long lived and prospered mightily with- out serious concern for our material resources. Our sensational progress in production and consumption has been attributable not only to the freedom of our institutions and the enterprise of our people, but also to our spendthrift use of our rich heritage of natural resources. We have become the supreme advocates of the idea that man and his labor are the most valuable of all, and that inanimate materials are to be used as fully as possible to give men the greatest amount of return for the effort they put forth. This still is and should be our goal, but the time has clearly passed when we can afford the luxury of viewing our resources as unlimited and hence taking them for granted. In the United States the supplies of the evident, the cheap, and the accessible (chemically and geologically) are running out. The plain fact seems to be that we have skimmed the cream of our resources USE OF MINERALS RISES TWICE AS FAST AS TOTAL OF ALL OTHER MATERIALS (IN TEN YEAR AVERAGES . . . 1900-1950) Source: PMPC Staff as we now understand them; there must not be, at this decisive point in history, too long a pause before our understanding catches up with our needs. We are much more supple today in our uses of materials than our ancestors were in the past; but when we consider the number of materials our ancestors did not use, it will become us to remember that frequently they left much unused not because it was undiscovered, but because they did not know what to do with what they knew to exist. Long after petroleum was discovered, refiners threw away what would today be described as gasoline, because it presented to them only the aspect of a dangerously volatile and inflammable liquid; its energy content was known, but not appreciated. Growth of demand is at the core of the materials problem we face; it is the probability of continued growth, even more than the incursions of past growth and two worid wars, that present us now with our long-range problem. It is mainly our unwillingness to stand still, to accept the status of a "mature economy," that challenges the adequacy of our resources. Page 5 In contrast to other industrial nations, we have been able in the past to satisfy the bulk of our materials demand from our own domestic resources, with much to spare for export. Accord- ingly the United States has used up its resources considerably faster than the rest of the free world. With less than 10 percent of the free, world's population and 8 percent of its land area, the United States consumes close to half the free world volume of materials. Facts of this sort about our past and present raise serious questions about the future. How long can this go on? How adequate are our remaining resources to support future de- mands against them? What alternatives are available to us for meeting our future needs? We who view the Materials Problem from the vantage point of the United States in 1952 can best prepare ourselves for discerning the future by a brief tracing of the path which has led to the present. The Road We Have Traveled The decade of the 1940\s marked a crucial turning point in the long-range materials position of the United States. Histori- cal trends long in the making finally came to a climax when the national economy moved just prior to the war from a long- period of depression into a period, still continuing, of high em- ployment and production. By the midpoint of the twentieth century we had entered an era of new relationships between our needs and resources; our national economy had not merely grown up to its resource base, but in many important respects had outgrown it. We had completed our slow transition from a raw materials surplus Nation to a raw materials deficit Nation. The symptoms of this changed materials position are today numerous; we have become the world's largest importers of copper, lead, and zinc, whereas once we were huge exporters. We have begun to meet from foreign sources a sizable and growing portion of our needs for petroleum and iron ore, which long were hallmarks of United States self-sufficiency. We have shifted from net exporter to net importer of lumber. There are today only two metals (magnesium and molybdenum) for which we are not partially dependent on foreign supplies. The United States has never been completely self-sufficient in raw materials; had we insisted on being so, our economic output and living standards today would be considerably lower than they are. We began as an ''underdeveloped" Nation FIFTY YEARS OF GROWTH IN POPULATION 151 Million r 99%' INCREASE < 1900 BASE (76 MILLION) 1900 195° Source.- U. S. Dept. of Commerce with rich resources but a shortage of manpower and capital, and little industry. For a long time we were predominantly agrarian; as late as 1870, we had three farmers for every manu- facturing worker. It made good sense for us then, as it does for many less developed countries today, to concentrate on the export of raw materials and agricultural products as the best means of acquiring purchasing power abroad with which to support better living standards and economic growth. With the growth of manufacturing, United States foreign trade burgeoned, and its composition underwent drastic change. As a seller in world markets, we shifted emphasis from raw materials to manufactured goods; as a buyer, we shifted em- phasis from finished goods to raw materials. As a result of these shifts, crude materials fell from over 60 percent of our merchandise exports in 1820 to less than 15 percent by 1946-50; conversely, finished manufactured goods rose from less than 6 percent of our exports in 1820 to 52 percent by 1946-50. Opposite changes occurred in our pattern of imports. The inevitable has now come to pass. Whereas for many decades the United States economy produced more raw ma- terials than it consumed and thus had a net outflow of materials to the rest of the world, we seem now to have settled solidly into the position of consuming more materials than we produce. The Road Ahead The size of future materials demand, and the adequacy of supplies, will depend upon the rate at which the United States economy and that of the whole free world expands. If we as- sume for the moment a favorable set of materials supply condi- tions, the size of our national output by 1975 will depend FIFTY YEARS OF GROWTH IN PER CAPITA INCOME $86' i f 7 939 CONSTANT DOLLARS 166% < INCREASE 1900 BASE ($325) 1900 1950 Source; PMPC Staff mainly upon the size of total population and working force, the number of hours worked per week, the accumulation of capital that has by then occurred, and upon the rise in man- hour productivity. Taking these various factors into account, this Commission believes it is reasonable to anticipate a rate of growth for the United States economy in the future roughly equal to the past rate of growth, or about 3 percent a year. This means that by 1975 total national output (the total of all our goods and services, known as gross national product, or GNP) would be approximately double that of 1950. Estimates of population range between 180 and 220 million; the Commis- Page 6 sion has assumed, after consultation with the Bureau of the Census, a population of 193 million by 1975 and a working force of 82 million, with a work-week perhaps 15 percent shorter than in 1950. These factors imply an annual rise of 2]/o percent in production per man-hour against a somewhat smaller past rate of 2.1 percent because it seems reasonable to expect con- siderably steadier levels of employment and economic activity in the future, in line with the avowed national objective of making major depressions a relic of the past.* This does not preclude, however, the possibility of milder fluctuations. Based upon the foregoing, the Commission has projected the general magnitude of demand by 1970-80 for various major materials. These projections do not predict how much of each material will actually be available and consumed. Instead they are an estimate of what might be demanded if relative prices of various materials remained the same as in early 1950, which they are most unlikely to do. Moreover these projections FIFTY YEARS OF GROWTH IN MATERIALS CONSUMPTION /935-39 DOLLARS' $19.8 Billion 153% 1 increase! 1 1900 BASE ($7.8 BILLION) 1900 1950 Source; PMPC Staff assume no unforeseeable new uses, substitutions, or techno- logical improvements. They are intended solely as a starting point in the analyses of prospective supply-demand conditions and give only a rough measure of magnitudes. The demand for various materials under these circumstances is expected to rise quite unevenly, in some cases going up as little as one-quarter, in others rising fourfold or more (see chart, p. 9). Demands are expected to vary according to main uses with which the materials are associated and to reflect the extent to which large substitution trends of one material for another are already clearly in motion. Although these projections may look high by today's stand- ards they may well prove too low by tomorrow's; for they reflect in some cases a somewhat smaller annual rate of increase of demand for the future than has characterized the past. Based on past experience, it can be expected that considerably less than a doubling of total materials "input" will be required to achieve a doubling of national output. In 1900, for example, each dollar of raw materials cost supported only $4.20 worth of finished goods and services; by 1950 the raw materials dollar was supporting $7.80 worth (after discounting for changes in the general price level). Reasoning from this trend it seems probable that somewhere between a 50 and 60 percent increase in the total materials stream will be needed to achieve a dou- *A fuller explanation of the Commission's projections is provided in vol. II, Projection of 1975 Materials Demand. FIFTY YEARS OF GROWTH IN GROSS NATIONAL PRODUCT J 939 CONSTANT DOLLARS 372% J INCREASE! 1900 BASE ($32.7 BILLION) 1900 1950 Source.- PMPC .Staff bling of total national production in the 1970's, with demand for metals and mineral fuels rising more than this average, agricultural demand somewhat less, and forest products de- mand considerably less. What happens to United States demand and supply will have a strong influence on the materials situation of other nations since many of these materials have international mar- kets, and developments abroad will similarly have their impact in this country. For these reasons the Commission in its esti- mate of the future has made allowance for other free world demand although projections of foreign demand trend are necessarily even less definite than those made for the United States. These estimates suggest that total free world demand for materials will expand considerably in the next generation and that the United States, although its total consumption of materials will increase greatly, will probably consume a some- what smaller share of the total supply. There is room for wide differences of judgment in this diffi- cult area of demand projections, but one point of overriding significance stands out. Whether it is estimated that the de- mand for a particular material will rise 50 percent, 100 percent, or 200 percent, the central point is that demand can be expected to rise substantially. This is not always a popular view to es- pouse. No one feels quite so crestfallen as the host who prepares for a celebration which then fails to occur, and businessmen the world over are certainly more fearful of producing too much of their product than of having a certain amount of unsatisfied demand. Yet economic history certainly records more under- estimates of the future than overestimates. Depressions and re- cessions, historically viewed, become smaller episodes in a longer and more heroic tale. There is no reason to assume that a world which has been growing economically by leaps and bounds for many generations will suddenly become static in this generation. It is this certainty of greatly increased demand for materials in the future that underscores the importance of the fundamental shift in the basic materials position of the United States during the past decade. Page 7 Chapter 3 The Opportunities If the United States were forced to live within the rigid struc- ture of its present materials position, its future outlook would be bleak indeed. We would have to meet all future needs from the domestic resources we now have and know how to use. Our technique of using materials would be frozen in its present mold. Each successive year would further deplete reserves, materials costs would rise geometrically, production would shrink and the clock of economic progress would run down. Fortunately the outlook, although serious, is not as bleak as that. Our materials position is flexible and we have opportuni- ties to improve it along three main lines: We can get more materials and more energy from our domestic resources by pushing back the technological, physical, and economic boundaries that presently limit the supply. We can alter our patterns of using materials by more efficient designs and processes—and by shifting the bur- den of use away from scarcer materials, toward more abundant ones. We can get more materials from abroad, on terms bene- ficial to ourselves and other free nations. These opportunities are both real and promising, but their full benefits will never be realized except by earnest and unre- mitting effort. More Materials From Domestic Resources The United States even today makes practical use of only a small fraction of its total resources. Our total resource base, broadly conceived, includes all components of the earth's crust within our borders, together with the atmosphere, water, cli- mate, and the energy forces of nature, but the usable sector of that base is limited by the combination of physical, tech- nological, and economic conditions prevailing at any one time. As conditions change, the base of usable resources also changes. Past depletion notwithstanding, this Nation today has a far broader and stronger usable resource base than ever be- fore, mainly because over the years we have discovered resources and uses unsuspected by our ancestors. The bayberries of Cape Cod and the sperm whales off Nantucket were vital resources to the early inhabitants of Massachusetts, as was the buffalo to the plainsmen. It was irrelevant to them that nature had created huge pools of petroleum under the topsoil of Texas, great bodies of iron ore in Minnesota, waterfalls in Washington, and phosphates in Florida. It is equally irrelevant to us today that the candles, the whale, and the buffalo have all but van- ished from the scene; but it is of high importance that the resources of the West have been opened up, that the invention of the internal combustion engine has made petroleum a valu- able resource, that technology has taught us how to make aluminum from bauxite, and plastics from such abundant re- sources as coal, water, and air. By discovery, development, and technology, the materials stream which flows from our resources has been tremendously enlarged and its composition vastly altered, while the cost of materials measured in human effort has, until recently at any rate, steadily declined. The big question now is whether such progress in resource use can continue, both here and abroad, at a rapid enough pace and at a low enough cost to provide us with an expanding flow of materials in a "mix" to fit our needs. No one can be sure, but we do know that we can attack the question from both sides—that of supply, and that of use. In expanding our mix, we can work on supply by finding more of our familiar mate- rials; by using our known resources more fully; by using re- sources of lower quality; by really renewing our "renewables"; by finding uses for unemployed materials and by synthesizing new substances. No one of these supply possibilities excludes any other; indeed, combinations of these efforts are essential. Exploration and Discovery. Most major metal discoveries have been made by following surface ore exposures in the moun- tain regions. By now few of these exposures remain undiscov- ered in the United States, so diligent has been the search. How- ever, geologists infer that, hidden under a mantle of younger rocks, ore deposits exist as large and as rich as have previously been found in the exposed areas. How soon there would be eco- nomical methods and equipment to explore and mine the basement rocks is another matter. Meanwhile, we must improve geophysical and geochemical prospecting methods that are at present in slow development before we can hope to make sig- nificant new discoveries of hidden ore bodies.* Fuller Use of Known Resources. In mining minerals we still leave an astounding fraction in the ground and in using mined or harvested materials we frequently throw away large quantities. About 50 percent of the commercial grades of coal, and more than 50 percent of the petroleum in an average pool are left behind in the process of production. Roughly one out of every 10 pounds of copper in ores is thrown on the tailings heap; more sulfur is blown from the smokestacks of industry than is consumed; enough natural gas was wasted in 1950 to supply the gas needs of 11 million of the Nation's homes. A con- siderable fraction of "harvested" resources also goes unused: only 65 percent of the average tree that is cut ends up as useful material; millions of tons of agricultural growth—stalks, for ex- ample—are lost every year because there is no economical way to use them. These physical wastes are not necessarily economic wastes, for it frequently costs more to eliminate them than the savings would be worth. But technical advances that will make it profit- able to reduce these physical wastes will enormously benefit the Nation's materials supply. At present, many profitable oppor- *See chapter 24, this volume: also vol. IV, Improved Exploration for Minerals. Page 8 MATERIALS DEMAND WILL RISE UNEVENLY PROJECTED INCREASE IN DEMAND BY 1970-1980 PERIOD \ \ 1950 CONSUMPTION BASE PROJECTED INCREASE IN DEMAND BY 1970-1980 PERIOD 1950 CONSUMPTION BASE UNITED STATES (NEW MATERIALS, EXCLUSIVE OF SCRAP) Sou/re: PMPC Staff Page 9 tunities to cut physical wastes are being neglected by industrial companies whose equipment and production methods are outmoded and wasteful, or who have not explored carefully enough the potential profit in waste reduction. Another type of neglected opportunity is exemplified by hydropower sites which remain undeveloped even though they would pay dividends, or by the virgin timber stands in the national forests of the West which have reached maximum growth but come to no use because roads have not been built to reach them. Full utilization of such resources does not await improved technology; here the missing ingredient is capital to build dams, and access roads. Using Lower Quality Resources. The richest grade re- sources, if not too inconveniently located, are always the cheapest to use. For this reason civilization has always first skimmed the cream of its resources. Yet when forced, we have frequently found that today's use of the second best has ad- vantages over yesterday's use of the best. The newsprint in- dustry, once confined to using northern spruce, can today use a faster growing southern pine which once it could not use at all; the plywood industry, faced with a declining supply of high- grade peeler logs, is learning to use grades which not long ago were culls. As the rich iron ores of the Mesabi approach ex- haustion, we are learning to use lower grade taconites. Bauxite reserves need not limit our future aluminum output, for we already know how to make aluminum from clays of which this Nation has a fabulous supply. Renewing Renewables. The United States for generations has been "mining out" its potentially renewable resources—its forests, soil, and underground water. Restoration of severely depleted resources is a slow and costly business, if possible at all. We are learning only slowly that it pays to use such resources on a "sustained yield" basis. Maintaining productivity as a regular adjunct of planting and harvesting, or restraining withdrawals to match replacement, is far less costly in the long run than the alternative, so long practiced, of getting out the best, and moving on. Finding Work for Presently Unemployable Resources. Perhaps the greatest increases in our usable resource base could be achieved by learning to tap fruitfully certain abundant com- ponents of our total resource base which up to now we have not known how to use. The mix of materials we use today corresponds very little to the abundance with which these materials occur in nature. Among the ninety-odd known chemical elements only a third enter strongly into modern industry. Another third enters weakly if at all; the final third is just now beginning to step out of the textbook pages as a result of such wholly new activities as those which center in atomic energy. There is much more aluminum in the earth's crust than there is iron—yet we use 60 times as much iron as aluminum. Copper is next highest to iron in use yet as a metal it ranks in seventeenth place in abundance in the earth. And the most abundant metal in the earth's crust, silicon, finds as a metal almost no use at all. This is not to suggest that we can conform our pattern of materials use to the table of their abundance in the earth; the fact nevertheless remains that in many respects major materials research has yet to begin. If, for example, we can solve the technical problems of producing titanium metal in quantity, and of making magnesium a more acceptable metal of indus- try, we will have greatly strengthened our materials position. Our twentieth century industrial successes in extracting nitrogen from the air and magnesium from seawater suggest that we should seek out further ways of exploiting the ocean and atmosphere as abundant sources of materials. The heart of this problem, like so many others, is costs. A satisfactory method of producing pure oxygen from the atmosphere has existed for a long time—but the product is still too expensive for the massive industrial use to which oxygen could be put. Synthesizing New Materials. The most notable supplements to our materials stream in recent years have been an array of new synthetics—various highly versatile plastics, artificial fibers and pharmaceuticals, synthetic rubber, and the like. These synthetic materials may, in many cases, be superior to the article replaced, and cheaper as well. Some offer qualities un- known in older, natural materials. Synthetics can be expected to play an expanding role in our materials stream and hopefully can relieve some of our most serious difficulties. The prospects for relief from materials shortages in the near future through the route of synthetic ma- terials can be exaggerated, but modern science and technology, which have helped create materials shortages by expanding demand, are challenged now to help solve the materials prob- lem in a host of ways, not least of which is by synthesizing new substances from abundant or renewable resources. Shifting Use of Materials So far, the opportunities discussed all aim at expanding the supply of materials. Similarly important opportunities exist through reducing demand and changing use. In the last analysis it is really not the individual material with which we are concerned but rather the function it performs. The essen- tial aim is to have enough materials to perform all necessary functions at the lowest possible cost. We can shift from scarce to abundant resources; make more efficient use of materials; and recycle more as scrap. Shifting the Load From Scarce to Abundant. As copper became scarcer in supply relative to aluminum, aluminum moved in to perform certain functions previously performed by copper. As lead became scarcer and higher priced, plastics began to supplant lead for such functions as cable covering. The relative shift that has occurred in the United States ma- terial mix as between copper and lead on the one hand and aluminum and plastics on the other hand is shown in the chart, Technology Brings New Materials to the Fore. These examples make it clear that our attention should be focused just as much on expanding the output and use of the abundant materials as upon enlarging the supply of scarce materials; for some purposes an extra pound of aluminum or plastics may ease the situation as much as another pound of copper or lead. Making Materials Work Harder and Longer. The United States has been lavish in its use of materials, because of their comparative abundance in the past. We have often used two pounds of a material where one would do. Vast quantities of material have been wasted both physically and economically by "over-designing" and "over-specification." Similarly we have Page 10 TECHNOLOGY BRINGS NEW MATERIALS TO THE FORE Percent BY VOLUME 1921 1930 1940 1949 Source.- Bureau of Mines; Stanford Institute of Research. frequently designed products with little concern for giving them a long life or getting maximum service from the materials and labor embodied in them. Such free-handedness with materials has not been a waste so long as it satisfied various tastes for which we were willing and able to pay. We drive heavier auto- mobiles than is necessary for mere transportation, and we adorn them with chromium because we like them that way. We blow thousands of tons of lead into the atmosphere each year from the high octane gas burned in our cars because we like quick pick-up on the road and enjoy beating the other driver at the stop light. These lavish uses of materials stem from the choices we make when we spend our time and our money. They are valid choices in a society which places a high premium on freedom of choice. But we must become more aware that many of our production and consumption habits are extremely expensive in terms of scarce materials and that often a trivial change of taste or slight reduction in personal satisfaction can bring about tremendous savings of materials. Rising cost is probably the only factor that can cause us to reduce our use of materials in these categories. Many articles wear out for lack of sufficient care. The atmos- phere takes a terrific toll of metals inadequately protected. Estimates of losses through corrosion run as high as 5.5 billion dollars a year in the United States—in protective coverings such as paints, lacquers, and varnishes, we probably spend another 1.2 billion dollars. A great deal of scientific and engineering thought goes into the problem of corrosion prevention, and with much success here and there; yet the annual loss remains ex- tremely high. Giving Materials a Second Life. The more materials we embody in goods and structures the larger becomes our stock- pile of potential scrap. Frequently the man-hour cost of re- claiming this material is so great that recovery does not pay, but better techniques and better organization for collecting, sorting, identifying, and reclaiming scrap can add large ton- nages to our total supply of metals and other materials, and reduce the drain against primary resources. For so highly in- dustrialized a Nation, our facilities for the collection, recovery, and reclamation of once-used materials is haphazard in the extreme. Two world wars have offered us sharp lessons in the importance of scrap materials in recharging our economic ma- chine but we have not yet learned them to the degree that is likely to be necessary as time goes on. Although most of our losses here occur after materials have left the mills and factories and warehouses, there are also ways in which industrial prac- tices can be improved—-as, for example, the stamping of symbols on metals to show their alloying constituents, to make later identification easy and thus prevent loss of anonymous material. Opportunities in Foreign Trade This Commission believes that the United States will find it increasingly worthwhile to turn abroad for more supplies of many basic materials, particularly minerals. Although for many huge bulk materials like coal, sand and gravel, and fertilizers we can expect indefinitely to have enough and to spare, by 1975 we will probably need to import several times as great a value of various metals as at present. Usually we have al- ternatives to importing particular materials. Where import conditions are unattractive, we can increase higher cost domes- tic output, develop substitutes, or if need be, use less. On occasion, lower cost domestic alternates to customary foreign supplies have emerged. For example, of the two industrial raw materials—silk and rubber—which stood first on our imports between the two wars, the first has fallen victim to the technol- ogist, and the second is heavily under his spell. Other materials will certainly follow the same path. We could conceivably meet our expanding needs for liquid fuels entirely from domestic resources, in part by hastening the growth of synthetic oil pro- duction from shale and coal; but this would cost more and is therefore less desirable from the standpoint of the total economy than importing part of our needs. The cost of available imports sets a ceiling on how far it is economically worthwhile to push domestic production of the same material or of substitutes, but conversely the costs of do- mestic production set a ceiling on how much it is worthwhile to Page 11 FROM EXPORTER TO IMPORTER: U.S. SHIFTS IN FOUR KEY MATERIALS (IN MILLIONS OF CONSTANT 1935-39 DOLLARS) 2400 P ETROLEU 2000 r~i u.s . EXPORTS . IMPORTS ft 1600 ? /' ft ft \/t ft t ft 1200 lllliilliiilii?m ft / * ft PROD JCTiON y Illtliiir /ililil lillilii/ *illllf 800 r /* ■llillplilllli ■■■■■■■I '/* _// y con: iiiiiiiiiiiiiii SUMPTION 400 // ft 1900 1910 Source: PMPC Staff 1920 1930 1940 (IN TEN YEAR AVERAGES) import. It will pay the United States to import much more raw material in the future than in the past. The supplying countries would benefit as well since sales would provide them with foreign exchange to expand their own economies and thus help raise their peoples' standard of living. There is today extreme variation among the free nations not only in their current living standards but in the way their sup- plies of raw materials measure up to their needs. The industrial nations of Western Europe and Japan, on the one hand, have strong industrial capacity and labor skills but severe resource limitations. They can prosper in the future only on the basis of heavy imports. At the other extreme are numerous nations of South America, Africa, South Asia, and the Middle East whose average living standards are low but who possess rich and rela- tively undeveloped natural resources often far in excess of their own prospective needs. These countries need heavy imports of capital, technology, and trained management abilities from other areas. In between these two groups are such nations as the United States, Canada, Australia, and New Zealand whose resources are relatively strong, whose industry is advanced, and whose living standards are high. 60 xrNt 40 mm>~ ^ :". „ JT^T.. I*........ .1 "o 1 2oo 1 iCOPPER i« ■ . L ^ 600 LUMBER / // ■ r-= \\ \\ \\ v\ \\ 400 \ / V 300 ! 200 1950 1900 1910 1920 1930 (IN TEN YEAR AVERAGES) 1940 195CP These three groups of nations could cooperate economically over the next 25 years to the tremendous advantage of each. The more advanced nations could export the tools of growth to the less developed areas. The less developed nations could ex- pand their exports of materials as a rich source of foreign exchange, and by attracting capital and management skills,, could accelerate their economic growth and improve their living standards. The facts of geology and geography—the fact that nature distributed resources very unevenly over the face of the earth— argue in favor of increasing integration of the various national economies of the world. The hard political facts of the mid-twentieth century add further great weight to the proposition that it will be to the mutual advantage of all freedom-loving peoples of the earth to work toward a great economic and political cooperation founded on the principles of mutual help and respect. Such cooperation can succeed only if it is based on a clear under- standing of the varying needs and resources of all the nations concerned, and of the opportunities which lie in mobilizing the strength of all to meet the particular weakness of each. Page 12 Chapter 4 The Difficulties The essence of all aspects of the Materials Problem is costs. The quantity of materials we can have in the future will be determined in great measure by what we can afford to pay for them, not simply in money but even more importantly in human effort, capital outlay, and other productive energies. The real costs of materials lie in the hours of human work and the amounts of capital required to bring a pound of industrial material or a unit of energy into useful form. These real costs have for some years been declining, and this decline has helped •our living standards to rise. In this Commission's view, today's threat in the materials problem is that this downward trend in real costs may be stopped or reversed tomorrow—if, indeed, this has not already occurred. The problem is not that we will suddenly wake up to find the last barrel of oil exhausted or the last pound of lead gone, and that economic activity has suddenly collapsed. We face instead the threat of having to devote con- stantly increasing efforts to win each pound of materials from resources which are dwindling both in quantity and quality. The Problem of Rising Costs The problem of costs stems from the physical characteristics of natural resources. Nature stacked the cards heavily in favor of rising costs by imposing strict limits on the amounts of highest grade resources easily available. As the best and most accessible resources are used up, it becomes necessary to work harder and harder to produce more supplies from less accessible and lower quality resources. In the face of rising demand the problem becomes one of running faster and faster in order even to stand still. The cost problem has always been with us. What concerns us about it today is that we have reached a point in the relationship of our demands to our resources where the upward cost pressures are likely to be far stronger and more difficult to overcome than in the past. No longer can we find relief by blazing trails beyond the Mississippi; no longer can we expect to stumble on great ore bodies waiting only for picks and shovels to scoop them up. As our needs force us, we can scratch harder and harder for materials, but if we fail to obtain a steadily ex- panding flow at no higher real cost per unit, we will have imposed a severe handicap on the growth of our economy and living standards. Rising costs mean the diversion of more and more manpower and capital from other productive efforts to extract required materials, and total national output of goods and services will be smaller by the amount that this diverted manpower and capital might otherwise have produced. De- clining or even lagging productivity in the resource industries will rob the gains made elsewhere in the economy and thereby impair the very dynamic which has given the United States its growth. This is not the sort of economic ailment that gives dramatic warning of its onset; it creeps upon its victim with insidious slowness. There is no completely satisfactory way to measure exactly what has happened to the real costs of materials over the long sweep of our history. But clearly the man-hours required per unit of output declined heavily from 1900 to 1940, thanks A Note on Costs The individual businessman or consumer thinks of costs in terms of the dollars he must pay, under existing levels of prices and wages, to secure a given amount of labor effort, materials, energy, or the like. In an inflation his costs "rise," in a depression they "fall." These movements have a very real importance to businessmen and consumer. But in this Report the focus is on the basic productive potential of the whole economy, which is determined fundamentally by the physical supply and quality of resources, labor, capital facilities, management skills, and productive methods (technology), and by the manner in which all of these are combined and used. Whatever happens to the levels of wages, prices, and profits measured in current dollar values, these basic factors of production are the fundamental determinants of what our Nation can produce. If, for example, the supply and quality of copper reserves declines, more labor and capital are required to secure a pound of copper unless we turn abroad to better and lower cost sources or unless countervailing improvements occur in methods of extracting copper from lower grade ores. In the absence of such actions, the "real cost" of copper would rise, measured in terms of man-hours and equipment-hours required to produce it. When, therefore, this Report speaks of costs, it is usually focusing upon the "real costs" of materials or energy as thus defined. The inadequacy of statistical data usually makes it im- possible to establish a trend of real costs under this definition. Ordinarily, therefore, when the term "real costs" is used in the text what is meant is the price of the materials in question in relation to the general level of prices. Thus^ a fall in real costs for a material would be reflected in a decline in the price of that material relative to a general price index. Page 13 U. S. LABOR TIME TO PRODUCE MATERIALS HAS DECLINED TO PRODUCE ONE TON OF BITUMINOUS COAL AVERAGE MINER REQUIRED . . . . 3.3 HOURS 1.3 HOURS IN 1903 IN 1950 TO PRODUCE ONE TON OF IRON ORE, AVERAGE MINER REQUIRED . . . . 12 - 12 1.9 HOURS 3 6 MINUTES IN 1915 IN 1950 TO PRODUCE ONE BUSHEL OF WHEAT AVERAGE FARMER REQUIRED . . . . 12 12 1.6 HOURS 19 MINUTES IN 1910-14 IN 1949-1950 Source; National Coal Association U. S. Dept. of Agriculture J 950 Figures, Bureau of Mines, U. S. Dept. of the Interior especially to improvements in production technology and the heavier use of energy and capital equipment per worker. This long-term decline in real costs is reflected in the downward drift of prices of various groups of materials in relation to the general level of prices in the economy. Since 1940, however, this down- ward trend has been reversed. Only in chemicals have real costs apparently declined faster in the past decade than in the previous four. W hereas wholesale prices of commodities in general advanced an average of 105 percent from 1940 to 1950, in that decade—- Zinc rose 119 percent. Petroleum rose 149 percent. Farm products rose 152 percent. Lead rose 157 percent. Lumber rose 218 percent. Other materials including aluminum, iron ore, nickel, sulfur, and even copper moved up less than the general level of whole- sale prices, although some of them might have moved farther in the absence of price ceilings. This upward thrust of materials prices since 1940 is ac- counted for in part by the failure of supply to adjust rapidly enough to sharp increases in demand. To this extent market prices can be expected to settle back as supply catches up with demand. But in many cases there is cause to suspect that pres- ent high prices show that the pressure against limited resources is boosting real costs. It would be wishful to expect lumber prices, for example, to settle back to their pre-1940 relation to the general price level; we are running up against a physical limit in the supply of lumber, set by the size and growth rates of our forests, and cost relief through easy expansion is not to be expected. Present high prices of certain metals such as lead and zinc undoubtedly result in part from temporary- shortages, but here again there is strong reason to doubt that they will return to earlier price relationships. In the United States discovery of these metals is falling in relation to demand; only the fact that we have been able to turn abroad for supplies from richer ores has helped prevent a much greater increase in prices. Even for industrial water we are encountering higher costs because supply is increasingly inadequate against rising de- mand. Industries today are spending millions—where they once spent little or nothing—treating intake water to bring it up to adequate quality standards, and treating outgoing wastes so as not to destroy the water's usefulness to the next down- stream consumer. Having reached the point where we can no longer enjoy the economies of using our streams and rivers as open sewers, we must expect to pay more for water supplies and waste disposal. The Problem of Energy and Technology Although our strongest weapons for fighting the threat of rising real costs in the past have been energy and technology, supported by capital investment, the task of keeping these weapons bright and strong for the future raises serious problems. Energy does work. Technology is a technique of getting work done. Although the two are thus in different orders of being, they interact and can properly be said to be common denomi- nators of economic progress; between them are to be found the Page 14 MANY REAL PRICES TURNED UPWARD AFTER 1940 INDEX NUMBERS (1926=100) ALL RAW MATERIALS FELL . . . THEN ROSE 88.9 1900-04 1940 AVERAGE 108.7 1946-50 1950 AVERAGE 1924 FELL FUELS THEN ROSE 102.9 86.6 1900-04 1940 AVERAGE 1946-50 1950 AVERAGE 1926 ALL FARM PRODUCTS FELL . . . THEN ROSE 105.5 86.1 1900-04 1940 1946-50 1950 AVERAGE AVERAGE METALS FELL . . . THEN TURNED UPWARD 119.4 97.8 104.6 1900-04 1940 1946-50 1950 AVERAGE AVERAGE 1926 FOREST PRODUCTS ROSE . . . THEN ROSE FASTER 174.4- 114.9 1900-04 1940 AVERAGE 1946-50 1950 AVERAGE 1926 CHEMICALS FELL . . . THEN FELL FASTER 107.7 71.4 1900-04 1940 1946-50 19,50 AVERAGE AVERAGE Source: PMPC Staff main long-term opportunities for overcoming nature's reluc- tance to let mankind have an ever-expanding supply of mate- rials with no greater human effort per unit. In the past, we have increased the output of each United States worker, while reducing his hours drastically, by giving him more and better equipment to work with and by steadily increasing the energy at his command. By such means, we created new materials, like plastics; we opened up new sources of materials, such as sea water for the production of magnesium and bromine; we learned to use lower quality resources with equal efficiency, as with the ores of copper. How well supplied are we with energy and technology, as resources, to support the burdens of the future? As of today, the simple answer is: not well enough. To double our national Page 15 output of all goods and services we must be able to double the supply of energy—of fuels and electricity—at real costs we can afford to pay. Our petroleum and natural gas industries have grown with remarkable vigor and are still growing, but they are working against a resource which is exhaustible, and there will be a strong upward pressure on their costs. Our coal re- serves are much more abundant, but economically coal is far from being an all-purpose source of energy as things stand to- day, and for many purposes and in many places it is not sufficiently cheap to buck the rising tide of energy costs. Favor- able hydroelectric sites are limited in number, and although we have not yet used them to the full, the opportunities they pro- vide for enlarging our supply of low-cost energy fall far short of matching our expanding electric needs (chapters 16-22 discuss energy problems in detail). Technology similarly presents a problem of far-reaching im- portance. The previous contributions of technology to materials supply have been great, but the future contributions must be greater still. Most Americans have been nurtured on the ro- mantic notion that technology will always come to the rescue with a new7 miracle whenever the need arises; after all, it gave us synthetic rubber and the atomic bomb in a hurry when the need was urgent. But isolated solutions of problems relating to individual materials no matter how dramatic, are no substitute for the broad frontal attack which technology needs to make on the materials problem as a whole. The criticism here is not of our technologists but of our past and present lack of concern, as a Nation, for the materials problem. Nor is having the technological answers enough; the new technology must be put to work. At best there is almost always a long time lag between the development of new techniques and the full reaping of their advantages. Large capital outlays com- mitted to older techniques, ignorance of the existence of the new techniques or of how to apply them, plain inertia and resistance to new ways of doing things, all impose a heavy drag on the practical rate of improvement. There are even more formidable blocks to progress, such as monopolistic restraints by industry and labor which on occasion check the wider use of cheaper methods of production. The construction industry il- lustrates very well the manner in which artificial restraints like building codes discourage the application of advancing technol- ogy. Chapter 26, this volume, presents a case study of this field. The rate of technological progress depends heavily upon the supply of scientifically trained personnel and upon the expan- sion of basic scientific knowledge on which applied technology is founded. The available evidence shows, however, that the prospective flow of new scientific and engineering personnel from the universities is alarmingly below apparent needs. Men far wiser than this Commission in the affairs of science warn us that, particularly since 1940, we have been far more industrious in putting our scientific facts to work than in increasing the store of fundamental knowledge, and that we need to take vigorous steps to bring the effort we devote to the search for more knowledge into better balance with the manpower and treasure we apply to making use of what we already know. The advance of science and technology in this country and century can be measured in the tremendous increase in ex- penditures for scientific and technical research since the First World War. For the current year the national research "out- put" is reckoned at close to 3 billion dollars. The role of the Federal Government as a factor in total re- search expenditures has grown dramatically since 1940. During the thirties the Government's share of the total United States research bill was around 20 percent, but during the Second World War it shot up as high as 65 percent, and in our current mobilization it is over 50 percent. About half the money the Government is spending on research goes into its own labora- tories; the rest is contracted out to academic and industrial re- search groups. Government's predominant role in paying foi research gives it a heavy responsibility in allocating where re- search should be carried out. Has the Government an adequate philosophy for this task? The answer is clearly that it has not. There is no place in Government where a comprehensive pic- ture can be found of the pattern of technological activity financed by Government, much less a careful appraisal of whether this is the "right" pattern. There are many individual agencies earnestly devoting their best efforts to do a good job in their own fields, but each makes up its mind with little ref- erence to the others. The size of this problem alone is staggering (chapter 23-25 discuss Technology in detail). OUR EXPORTS OF 1820 ARE OUR IMPORTS NOW % OF MERCHANDISE EXPORTS % OF MERCHANDISE IMPORTS 90 70 50 30 10 10 30 50 70 90 I I I I I I 1 I 1 ~ ~ I I 1820 1946-50 CRUDE MATERIALS (INCLUDING SEMI-PROCESSED) MANUFACTURED GOODS The Problem of Developing Resources Abroad On paper, the economic opportunities in free world coopera- tion to produce materials are tremendous. The less developed nations have the materials; the industrial nations have the capi- tal and the technical and management skills. These facts suggest the possibility of a new era of advancement for the world which is dazzling in its promise. A great many problems, mostly- man-made, lie in the path of this progress. Less developed countries, which have the resources, resent the stigma of "colonialism" which, to their way of thinking, attaches to economies heavily dependent on raw materials ex- ports. Highly conscious of the disparity between their own standards of living and those of more highly developed coun- tries, they are often more intent on industrialization than mate- rials development. They still remember the Great Depression when falling prices for their big material exports wiped out their ability to buy the goods they needed. The individuals and corporations with capital to invest in foreign raw materials production hold back for fear of legal un- certainties, fear of expropriation and the possible impermanence of governments with whom they might make contracts. They fear arbitrary administration of import and export controls and limitations on the convertibility of their earnings into American dollars. At home, tariffs, "Buy American" legislation, and cer- tain aspects of our tax laws add their bulk to the obstacles that clog the channels of free world trade. Investors and resource nations alike are uncertain what will happen to today's ready markets for such materials as man- ganese and tungsten if low-cost Russian and Chinese supplies Page 16 flood into the international market a few years hence. There is a world-wide shortage of sulfur and nickel today which should make investment in higher cost production attractive, yet what chance would newcomers, operating high-cost businesses, have in competition with the small number of large-scale competi- tors, operating from low-cost reserves, if markets should soften later on? Thus new capital is frequently fearful of developing high-cost reserves of such materials without some sort of guaranty. It would be folly for policymakers in this or any other nation to assume that the present turmoil of the world will work itself out in ideal fashion. The violent political upheavals of this century clearly have not yet spent their force. What happens internally in the less developed nations, and to their economic and political relations with the industrially advanced nations of the free world, will largely determine whether materials development can be used to fuel world progress. The Problem of Security Special problems surround the effort to make sure that the United States and its allies have enough of all essential mate- rials to guarantee strong production in event of war. In actual war, the question of what the supplies cost becomes subordinate to making sure we have the supplies, but in a period of prepara- tion against the threat of war, costs are a major concern. Every war consumes more and more massive amounts of materials. The United States is becoming increasingly vulner- able through the growing military importance of metals and mineral fuels and our shrinking resources for supplying them. Since reliance on foreign supplies means increased risks, it becomes imperative to provide sufficient insurance against them. And insurance adds to costs. Of more than 100 mineral materials we use, about one- third—such things as sulfur, coal, phosphates, but including only two metals—are fully supplied from our resources. An- other third of the list we get almost entirely from other lands, and this fraction has assumed greater importance as advances in the technology of high-temperature alloys and electronics have brought into greater prominence such items as colum- bium, cobalt, high-grade quartz crystals, and others we do not possess. The final third of the list we obtain partly from abroad and partly from domestic output—materials like iron ore, petroleum, copper, lead, zinc, and bauxite. Of 72 "strategic and critical" materials listed by the Munitions Board, the United States imports all of its supplies in more than 40, and part of its supplies in all the rest. To meet or anticipate our needs from the supply side, we stockpile, and we seek reserve materials capacity in safe areas, domestic and foreign. On the supply side, civilian authority remains more or less in control. But on the demand side, the military, particularly in wartime, reigns supreme. With each successive war, and now with preparation against the contingency of another, the military has become a greater and greater claimant against the material of the whole econ- omy. There were numerous cases in the last war where the mili- tary asked for much more than total available supply could provide, even after civilian uses had been cut to the bone or altogether eliminated. The old notion that the military can always get everything it needs simply by digging deeper into the cushion of civilian consumption must be increasingly replaced by a recognition that the military, too, faces the existence of the materials problem, and must deal with it. It would be im- possible to fix a maximum percentage of military claims to the total economy and say "beyond this point you may not go." But even though the point cannot be fixed it is known to exist— and to push military consumption beyond it is to collapse the civilian economy and hence, per se, to lose the war. We have devices planned to deal with these problems of security—they are discussed in chapters 27-30—but in this as in all other aspects of the materials problem, there are serious difficulties in seizing the opportunities that exist. The manner in which opportunity and difficulty can be reconciled con- stitutes policy—and to the first outlines of policy the next chap- ter is devoted. Chapter 5 The task of overcoming the materials problem is far greater than merely locating enough physical resources. The task is to overcome the multitudinous barriers described in the last chapter but, more than that, to offer positive spurs and encouragements for developing and applying energy and tech- nology to the materials field, for insuring a sufficient flow of capital into it, for guarding our security, and concerning our- selves at every point with insurance against rising costs. Such a set of accomplishments will never be achieved at random: only a consistent policy toward materials can hope to bring them about. Policy means here intelligently directed action toward consciously determined goals—as distinct from aimless drift and blind faith. It is not enough to solve the problem "eventually"; while the Nation waits it can encounter such a succession of individual shortages as to disrupt the cost pattern and defeat an "eventual" solution altogether. Steps Toward Policy A materials policy, broadly conceived, must provide a frame- work for public programs, and for private policies and actions, all moving harmoniously toward the same national objectives. It is the Commission's belief that the bulk of the task of insuring adequate future materials supply can best be carried out by private business under the competitive market structure, oper- ating within broad policy outlines which it is the responsibility of Government to provide. The Working of the Price System In the United States, the free price system has always been the great "allocator" of resources and materials. It provides a combination of incentives and discouragements to which pri- vate business and consumers variously respond in making invest- ments, raising or lowering production, directing technological Page 17 HOW RISING COSTS CAN BE AVERTED 1. FORCED TO LOW-GRADE, HIGH COST COPPER ORE 40 r- 2. U. S. USED TECHNOLOGY TO UP OUTPUT PER MAN-HOUR . 19QQ 1910 1920 1950 efforts, substituting materials, and so on. This system in effect spreads decision making over millions of people and provides a strong incentive to efficiency. On the whole, it produces good results when judged by its service to the public interests—but not always perfect results. A brief hypothetical case may serve to illustrate the system's relationship to the domain of materials, and to distinguish the roles of private enterprise and Government. As production of a material, say copper, begins to press on its resource base—that is, as demand for it grows while further expansion is no longer profitable at current prices from known resources—its price rises. This rise of price is the signal to pro- ducers to turn out more, to consumers to look for substitutes. Both signals are heeded. The first stimulates production at home, and imports from abroad. If the price continues high, there is encouragement to new discoveries and for better tech- nology to bring lower grade materials into production. The second signal makes it profitable now to use other materials where copper was used before. Engineers ponder how to achieve the performance they want using something cheaper than cop- per. If, meanwhile, some improvements are made in the tech- nique of producing such a substitute as aluminum, further sub- stitutions may lessen demand for copper and take some pres- sure off the price. Thus copper may end up only moderately higher in price, but used only for those particular needs that make a higher price acceptable. In a growing economy, the absolute amount of copper used may not decline under these hypothetical circumstances, but its percentage of the expanding total materials stream will shrink. For many reasons the actual course of events is unlikely to be so smooth. Increasing prices may fail to bring out as much production as would be profitable at that price. Mine operators may not expect the price to stay high; investment conditions, or attitudes of this or foreign governments, may impede production or slow export expansion. Inventors may turn too late to devising better methods, or long years may elapse be- tween the development of better techniques and their actual adoption, Research that would benefit all may not repay any 2400 1800 1200 3. KEPT TOTAL PRODUCTION HIGH woo 1910 1920 1930 1940 1950 one enterprise. And depressions, in the past, have demonstrated that the price system cannot handle all problems. There is accordingly room for an economic materials policy. The guide to public action must therefore be a study of where the private market works so imperfectly that something must be done about it. The Part Government Plays The Federal Government carries out many materials pro- grams costing hundreds of millions of dollars and involving dozens of agencies. The Federal Government has six major roles: As conditioner of the economic environment, the Govern- ment, through tax policies, fiscal, monetary, and credit policies, labor policies, and the enforcement of the antitrust laws, affects private costs, prices and profits, and hence in many cases in- fluences materials production and use. Page 18 As regulator of private industry, in the protection of the public interest, the Government affects the rates and markets of "natural monopolies'5 in the fields of electric power and natural gas. The allocation of scarce materials and the cur- tailment of their use under emergency conditions provide other examples of regulation. As guardian of foreign relations and national security, the Government has in recent years greatly expanded its activities in the materials field. Where security needs require developing resources more swiftly and producing materials in greater vol- ume than provided by ordinary market incentives, Government uses such devices as market guaranties, development grants and loans, long-term purchase contracts, and rapid tax amorti- zation. With friendly nations abroad it participates in emer- gency international materials allocation programs. It plays a large role in establishing the framework within which private companies of the United States do business abroad. Through the Export-Import Bank, Point IV, the use of foreign aid counterpart funds, and as a member of the International Bank for Reconstruction and Development, the Government pro- 4. BEGAN TO IMPORT COPPER . . . ^ \ v,,,, ^ » j-3: . i 1900 1910 1920 1930 1940 1950 5. SUBSTITUTED MORE ABUNDANT MATERIALS ... 1000 . , 00 1910 1920 1930 1940 1950 Source: Bureau of Mines, U. S. Dept. of the Interior vides encouragement to foreign resource development. The general import and export of materials is subject to direct Government regulation by tariffs and export controls. As owner and custodian of resources, the Government is the landlord of vast areas of mineral lands, proved and potential; of forest and grazing lands, and supervisor of all navigable rivers and streams and coastal waters. Its rules governing the use of publicly owned resources vary in the extreme. As supplier of services to private industry, the Government supports the mapping work of the U. S. Geological Survey and many activities of the Bureau of Mines, including its technical research and development work on such problems as man- ganese and shale oil, and its statistical publications, designed to help private industry. In the Department of Agriculture, programs of technical research and educational service, soil conservation, and pest control are designed to strengthen the economic position of producers and the resources with which they work. Programs to curb forest fires, diseases, and pests, are calculated to strengthen the long-range supply of forest products to private producers. As buyer and user of materials, the Federal Government is a major purchaser and user of materials in the United States economy, its military, foreign aid, and construction programs accounting for the bulk of what it buys. It thus exerts strong influence on market conditions, as in stockpile buying. Through its research and testing activities it greatly affects product de- velopment, design, standards, and specifications. The efficiency with which Government itself uses materials has a heavy bearing upon the whole materials situation. Local governments and especially State governments are also deeply involved in the resource and materials field: the control of utility rates and of water pollution; the regulation of oil and gas production in the name of conservation; the regula- tion of timber cutting practices; the ownership of forest and other resource-bearing lands; the taxing of resources, and the large-scale purchase and use of materials are examples. These various activities of the Federal, State, and local Governments form an extensive and complex pattern. It is not surprising that the elements of the pattern are sometimes incon- 6. . AND HELD DOWN REAL COPPER PRICE. 1900 1910 1920 1930 1940 1950 Page 19 sistent and badly out of balance when measured against the ideal of a comprehensive and unified national materials policy. In a strict sense, this pattern of governmental materials policies and programs is not a pattern at all, but a loose array of meas- ures which influence the Nation's present and prospective ma- terials position. It has been beyond the resources of this Commission to make an exhaustive inventory and appraisal of all such policies and programs, although close attention has been given many of the more important ones. But concerted effort should be given to a continuing appraisal of materials policy and programs by appropriate Government officials, with a view to achieving a deliberate pattern commensurate with the need. The tests to be applied in Government policy making are even more complex than those entailed in private business decisions. How will a particular policy or program affect national secu- rity, short run and long run? What weight should be given the claims of the future against the present? How will a certain measure affect the legitimate interests of friendly nations whose security and growth are important to us? Will the na- tional benefits of a particular program outweigh its costs, and how soon? Who will bear these costs, and who will enjoy the benefits? How will this policy affect the general public interest as against various private groups; is it unfairly discriminator)- against particular private interests, or does it give them special advantages? Does it provide adequate insurance against con- tingencies which might impair national well-being, whether in peace or war? Will an expenditure of funds in one direction ad- vance the public interest more than the same expenditure in some other direction? These questions represent some of the tests that should be applied to virtually every Government policy or program ques- tion that arises in the materials field. Though they may often seem unanswerable, the fact is that they do get answered— rightly or wrongly, consciously or unconsciously—every time a policy or program decision is made anywhere in the materials field. There is no magic formula which will yield the right answers; each problem must be judged on its merits and in its context. Yet there is one basic economic principle which, if applied to the limit of available facts and injected consciously into each judgment, can provide a basic thread of consistency. The Least Cost Principle With the economy facing stronger and stronger pressures towrard rising real costs of materials it seems to this Commission that nothing should be permitted to interfere with the principle that materials should be obtained at the least cost possible for equivalent values. The Nation cannot afford to legislate against this principle for the benefit of particular producer groups at the expense of consumers and foreign neighbors, and ultimately of our own economic growth and security. ■■ ESTIMATED FUTURE U. S. NEEDS COPPER LEAD ZINC This cardinal principle of least cost has application to all major sectors of national materials policy. It is most often challenged, however, with respect to security and imports by those whose costs are higher than their foreign competitors5. It is they who ask for restriction of imports on the grounds of "protecting the American standard of living from the competi- tion of lower paid foreign labor." This argument is often but- tressed with the assertion that we should strive to be as self- sufficient as possible in view of the war risks we face. The Commission feels strongly that this line of argument is fallacious and dangerous. The idea that the American standard of living must be protected from lowT-cost foreign supplies based upon "cheap labor" is an idea based on unemployment psy- chology. In a full employment situation the supply of any material from abroad at a price below that of our domestic costs (provided it does not represent a temporary dumping), does not lower the standard of living but actually helps push it higher. In the United States it enables us to use manpower and equipment to better advantage in making something that is worth more than the lower cost material that can be obtained from abroad. Abroad, our purchases will contribute to a strengthening of economic life and improvement of living conditions in the nations from whom we import. It is true that where our domestic industries face a consider- able reduction in output, with employees and capital unable to transfer quickly to more remunerative activities, the Govern- ment has the responsibility of easing the transition to the new situation. This, however, is hardly likely to be an important problem in the materials field, where even the declining indus- tries are likely to be faced with a shortage of manpower rather than a labor surplus problem. But what of security? As, in one material after another, we reach the stage at which we must turn abroad for additional supplies, the point may be raised that we are endangering our security by dependence on foreign sources; on nations whose supplies in time of war might not be available to us. This point is substantial enough for serious consideration. In the first place, self-sufficiency for many items is physically im- possible; for many others it is economic nonsense. Sometimes the cheapest route to security is to give special aid to domestic industry, sometimes it is not. When aid is indicated, it is always best to tailor the action taken to the specific situation. In any case the principle must be to gain the greatest security at lowest cost. It is certainly not true that for all materials an unqualified dependence on domestic supplies is the best re- course, even if physically possible. With some materials, peace- time dependence on domestic supplies may mean that they will be so depleted that a reserve that might otherwise have served as a wartime cushion will have been used up. With some ma- terials, it is much more economical to depend on expanded out- put in safe areas abroad and on stockpiles built in whole or in part from foreign supplies than to maintain a domestic industry behind elaborate and expensive protection. With some ma- terials it may be advisable to maintain a domestic industry which normally supplies only part of our requirements, but is capable of a rapid expansion. It is far from obvious that because we need a material desperately in wartime, the one best solution is to maintain a high-cost domestic industry in peacetime. That may sometimes be proper, but it is not generally so, and our Page 20 policy must be to make separate decisions based on examina- tion of the particular merits of each case. The fallacy of self-sufficiency as a basic guide to a sound ma- terials policy is, in short, that it costs too much. A 2-cent increase in the average price per pound of basic metals, or a 50-cent increase per barrel of petroleum, would add to our annual bill for these materials about 2.5 billion dollars and 1 billion dollars respectively. Yet it is not only in dollars that the increased costs of self-sufficiency would be measured. Other countries in the free world find markets for their exports in the United States and we, to our profit, are a principal supplier of industrial prod- ucts for them. Interference with these normal channels of trade would inevitably check economic growth both at home and abroad. The political consequences of self-sufficiency, with its accompanying damage to carefully established security arrange- ments, would prove even more serious. Conserving for the Future Closely linked with the least cost principle is the principle of conservation of resources and materials. It is also tied with the question of this generation's responsibility to help provide for the next. Most thoughtful persons agree that conservation is a good idea, but there are wide differences as to how best— and how much—to protect the future claimants against the Nation's treasure of resources. The Nation faces a very real and growing conservation prob- lem, but many of our difficulties in agreeing on what to do about it arise from a failure to recognize the economic dimen- sions of the problem. One popular fallacy is to regard our resource base as a fixed inventory which, when used up, will leave society with no means of survival. A related fallacy is that physical waste equals economic waste: the feeling that it is wasteful to use materials in ways that make them disappear. This attitude can lead to devoting a dollar's worth of work to "saving" a few cents worth of waste paper and old string. These fallacies together lead to a hairshirt concept of con- servation which makes it synonymous with hoarding. A sound concept of conservation, in the view of this Commission, is one which equates it with efficient management—efficient use of resources and of manpower and materials: a positive con- cept compatible with growth and high consumption in place of abstinence and retrenchment. In developing America our forebears consumed resources ex- travagantly, but we are certainly better off in materials supply than they were. It would be unreasonable for us, their posterity, to suggest that they should have consumed less so that we might consume more. If then through developing the opportunities inherent in the flexibility of our resource base, we can provide our posterity with a better return of goods and services for their labor than we get for ours, we need not feel compelled to restrain specific consumptions of materials to make theirs even larger—any more than our New England forebears needed to conserve bayberries for candles to light a generation that lives by kilowatts. We can, if our basic materials policy is sound, provide for posterity the prospect of increasing consump- tion without stinting ourselves by restricting the rates of effi- cient withdrawals of our resources. Conservation is something very different from simply leav- ing oil in the ground or trees in the forests on the theory that by sacrificing lower value uses today we will leave something for the higher value uses of tomorrow when supplies will be scarcer. Using resources today is an essential part of making our economy grow; materials which become embodied in to- day's capital goods, for example, are put to work and help make tomorrow's production higher. Hoarding resources in the expectation of more important uses later involves a sacrifice that may never be recouped; technological changes and new resource discoveries may alter a situation completely. It may not be wise to refrain from using zinc today if our grand- children will not know what to do with it tomorrow. But follow- ing a course of conservation which, as here suggested, weighs economic factors carefully, is very different from the eat, drink, and be merry philosophy which sees no point in judicious self- restraint and no cause to worry over posterity's welfare. Prudence in the Face of Uncertainty Uncertainty over the future is the source of greatest difficulty in formulating national materials policy, yet it is basically be- cause of this uncertainty that public policy has such an im- portant role to play. The uncertainties with which policy must concern itself are legion. Will the rate of oil discoveries in this Nation reach a peak in 1952, 1965 or 1975? How fast, consequently, should adjustment be made to provide supplemental sources of liquid fuels? Will the United States in fact be able to expand imports of materials, or will world political conditions deteriorate so that we will be forced back more and more upon our own re- sources? How much should the technological search for sub- stitute materials be accelerated? If war were to come, when would this be, and by how much would enemy action curtail our materials supply? On most such questions as these, expert opinion is sharply divided. Predictions have a useful role to play, but the Nation cannot risk its future welfare by placing heavy bets on extremely optimistic assumptions. Neither can public policy be guided by the extreme of pessimism, lest we pay so much for insurance that we have little left for anything else. Developing a comprehensive materials policy calls for a careful resolution of an extraordinarily wide and complex range of considerations: the costs and benefits of domestic expansion versus expanded imports; the lesser vulnerability but perhaps greater cost of domestic or nearby sources of supply versus the greater vulnerability but lesser costs of distant ones; greater production now from domestic sources versus, in some cases, reduced ability to produce from these sources at some time in the future. An adequate over-all materials policy for the United States must balance these considerations. It must take account not only of our own materials requirements, but requirements else- where in the free world. It must be concerned not only with our own economic growth but with the growth possibilities of the whole complex of nations of which we are inevitably the center. To such considerations, the balance of this Report is addressed. Page 21 U. S. PRODUCTION AND CONSUMPTION OF SELECTED MATERIALS, PAST AND PROJECTED (1900-1975) 3600 1200 1900 10 '20 '30 '40 '50 1975 1900 '10 '20 '30 '40 '50 1975 1900 '10 '20 '30 '40 '50 1975 Source; Bureau of Mines, U. S. Dept. of Interior; projections. PMPC Sfaff Page 22 Strengthening Domestic Resources Chapter 6 The Changing Pattern of Growth If we find it hard to realize there are limits to our Nation's material resources, and that for some materials we are ap- proaching those limits, the cause lies in the lavish past. When the first explorers reached a mountain crest in Pennsylvania and looked westward, they were, said current accounts, staggered to discover that the continent did not stop short just beyond the Alleghenies. America has been staggered by its riches and extent ever since. With 3 million square miles in the United States proper and another half million in Alaska, great stretches of productive farm and timberlands underlain by thick deposits of metals and the fuels to smelt them, the United States has had such resources as no industrial nation has ever been able to draw upon. We are still so rich that with 9.5 percent of free world population we produce almost half its output of industrial materials. This Report has already emphasized that within the period from now to 1975 we shall more and more be follow- ing a trend that Europe knows well, and that began for us in earnest a decade ago, of importing large quantities of materials which, in total, may reach from a sixth to a quarter of all we use. But even if the higher figure should turn out to be the right one, the United States will still be drawing from the resources within its borders a staggering 3 billion tons of materials a year. As prudent householders our first necessity is to use the remaining resources with the highest efficiency we can achieve, but only as fully as is permitted by the principle of buying ma- terials at the least cost consistent with assuring supplies required by the national security. The Nation's economic life calls for a vast and delicate bal- ancing of multitudinous resources against continually changing needs and demands. The American pioneers had first to destroy trees so that they could plant corn. In our more complex world, minerals, fuels, forest, and agricultural products, the land on which these grow and the water that nourishes the land must be variously dug, burned, felled, cropped, and constrained in inter- actions that reach further than we can reckon when we induce them. We grow and we destroy. We concentrate and we dis- perse. We nurture and we abandon. A chemist makes a crucial discovery, and the resource base for the production of women's stockings shifts from mulberry leaves in Japan to bituminous coal underlying West Virginia. A war occurs, and the material for tires and teething rings no longer comes from Hevea bra- siliensis in Malaya but from Texas petroleum, natural gas or ethyl alcohol made from molasses. But these colossal interplays between resources more often take place in less dramatic ways; more often entirely within our own domestic economy and so slowly that we may be unaware of their significance for a decade. Energy for farming operations, once supplied almost entirely by draft animals, now comes chiefly from tractors, stationary gasoline engines, and electric motors. This is a considerable fact in itself; still more consider- able, however, is the additional fact that in this process the fuel industries thus release for other use no less than 60 million acres that would be necessary to feed draft horses to do the same work. (The nitrogen cycle is upset in the same process, and the loss of manure fertilizer must be compensated.) On the other hand, farmland can be made to return the compli- ment by growing sugar to supply molasses to produce alcohol as a raw material for rubber—or for solvents having so many industrial uses that they cannot be listed. Or it may be asked to supply corn products which may be turned into glycerin for lacquers or explosives, or into fibers which bypass the sheep as a producer of wool. Farm and forest residues may combine into plastics, which petroleum products will also supply, and these plastics may supplant metals drawn from mineral deposits. The land itself may balance off in its uses in a variety of ways: the same acres can produce timber, a wide variety of crops, or pasture; decisions are made every day which affect the land and these decisions can affect the supplies of water available for industry. As prices rise and fall, the resultant of thousands of forces, steel replaces wood in housing construction, or vice versa, or concrete replaces both. Glass increases while brass diminishes; plastics from coke ovens supersede porcelain en- amels; paint pigments begin to come from titanium sands in Florida instead of from galena deposits in Missouri. The rise and fall of materials streams constitute the great fugue of our industrial times. To anticipate such moves in detail is beyond the capacity of even the most electronic intelligence; to attempt to plan them in detail would be like planning the fingerprints of one's great- grandchildren, and would fail for the same reason: too many accidents and unforeseeable forces would intervene. But because we cannot plan fingerprints we do not discredit the laws of genetics; and our inability to plan in detail does not mean that we can withdraw our intelligence from contemplating the Page 23 HOW U. S. CONSUMPTION OF MATERIALS MIGHT RISE BY 1975 (ASSUMING NO RELATIVE CHANGE IN PRICES) 1950 (100%) | 1975 ESTIMATED PERCENT INCREASE OVER 1950 ALL RAW MATERIALS . . . TOTAL Except Gold ALL RAW MATERIALS Except Agr. Foods & Gold, -" AGRICULTURAL MATERIALS . . . TOTAL FOODS NONFOODS FISHERY AND WILDLIFE PRODUCTS . . . TOTAL FOREST PRODUCTS . . . TOTAL SAW LOGS PULPWOOD FUEL WOOD OTHER FOREST PRODUCTS MINERALS . . .TOTAL Except Gold IRON AND FERRO-ALLOYS IRON CHROMIUM COBALT . _ MANGANESE . MOLYBDENUM _ . - NICKEL TUNGSTEN .. . _ NON-FERROUS METALS . . . TOTAl Fxcept Ferro-Alloy and Gold . . — COPPER - LEAD ZINC - ANTIMONY BAUXITE MAGNESIUM - MERCURY PLATINUM TIN . TITANIUM AND CADMIUM MINERAL FUELS . . . TOTAL COAL PETROLEUM AND NATURAL GASOLINE NATURAL GAS CONSTRUCTION MATERIALS . . .TOTAL OTHER NON-METALLIC MINERALS . . . TOTAL. FLUORSPAR PHOSPHATE ROCK AND POTASH. _ _ SULFUR AND PYRITES OTHER mm 1845 Source: PMPC Staff Page 24 future. If we are to have increasing material needs in the future we cannot escape the burden of contriving how to satisfy them. Thus, in the search for minerals in which we are growing deficient we need new methods of exploration. We need to map our country more completely so that better than the merely 11 percent which is now geologically described can become more familiar to us. We need to know much more about the nature of the "probable" and "possible" ore bodies that geol- ogists infer from such data as they have. Geological accounting may never be a matter of adding and subtracting figures and striking a balance to say what we possess, but it can be greatly improved. We need to know more and more about the prop- erties of mineral substances and how we may chemically and physically alter them over a wider and wider range of char- acteristics, as we are beginning, for example, to alter solid fuels into liquid and gaseous states. For our renewable resources we need to take pains, first of all, that they shall be really renewed. The productivity of farm and timber lands lies in our hands as much as in Na- ture's—and in the past we have been less wise than Nature. In our increasing knowledge of the principles of organic growth, the effects of fertilizers and mineral elements, the nature of the soil, irrigation, planting, and cropping, possibly even the pro- duction of rain more or less on demand, we are gathering to ourselves opportunities of true and wise husbanding of renew- able resources such as no previous generations have had. The more we learn of these things the more fully we are compelled to apply this knowledge. Throughout all the problems of husbanding Nature runs the thread of man's social institutions: Government, industrial ag- gregations, labor, management. We need incentives to pro- duce; checks and balances on the evils of waste and overcon- sumption. We must have fairer weather for trade; questions of tariffs and taxes must be answered by wiser and more effec- tive legislation than much that is the law of the land today. And in today's troubled world many of the problems of de- veloping a domestic policy toward materials are heavily con- ditioned by thoughts of national security which seldom bothered the century that preceded our own. For there is no such thing as a purely domestic policy toward materials that all the world must have; whether we discuss minerals, energy resources, timber, land, or water, we face only world policies which have domestic aspects. Chapter 7 Developing Minerals Reserves The changing pattern of the materials we use has thrown the minerals, particularly our mineral deficits, into sharp focus. Year after year, the industry of the United States has consumed more and more mineral stuffs, chiefly as fuels to provide energy and as raw materials to shape into the manifold products that our expanding economy demands. The quantities used in 1950, huge in comparison with those of 1925, are small when set against the probable requirements of 1975. In the past, by mining within its own borders, the United States has produced most of the minerals it needed. Despite progressive increases in imports, the Nation still will look to its own reserves for most of its minerals supply. In this chapter the Commission considers problems of strengthening the domestic resource base for minerals to meet the demands of the future. Its review is limited to questions of supply and, although deriving its analyses largely from a series of detailed studies of some 30 different commodities,* it deals more with general situations and problems than with the ques- tions raised by the supply and demand position of specific materials. The United States has used its mineral resources with a lavish hand, approximating between 1900 and 1950 such drains as 26 million tons of coal, 40 billion barrels of petroleum, 3 billion tons of iron ore, and of the base metals such totals as 22 million tons of lead, 26 million tons of zinc, and 33 million :ons of copper. For copper, lead, zinc, and oil, domestic takings of the oast 50 years were considerably larger than present known re- *See vols. II and III. serves. Even the larger domestic production of those four minerals, and of others as well has not kept pace with domestic consumption. In 1950 the United States imported about 10 percent of its petroleum requirements, more than a third of its copper and zinc, and more than half its lead—all of which the Nation formerly exported. The Commission's estimates of possible future need indicate that whereas by 1975 the United States requirements for all materials will be from 50 to 60 percent higher than in 1950, requirements for all minerals (except gold) will be 90 percent higher. For many individual mineral commodities the increase may be far greater. Thus while demand for iron, copper, lead, and zinc are estimated in or near the 40 to 50 percent range, the projected increase in demand for petroleum is more than 100 percent, for fluorspar nearly 190 percent, for bauxite nearly 300 percent, and for magnesium more than 1,800 per- cent. Whatever progress is made in developing greater imports of minerals and in reducing requirements for some through ad- vances in technology—and great progress is possible along both lines—large increases in supplies from domestic sources will still be needed. The Commission is convinced that domestic production of materials can be increased through strong and studied efforts. Some minerals still are abundant in the United States; some, though still produced in large quantities, look scarce beside expected demands; and some are nonexistent in this country, or nearly so. Table I divides most of the industrially important minerals into three groups according to apparent adequacy of known reserves. Those not classified as abundant have been 999959—52 3 Page 25 divided further according to prospects for improving their situation through discoveries of new deposits, beneficiation of grades of ore that now are subcommercial, and replacement by synthetics or substitutes. (Aluminum, rather than bauxite, has been listed because of the possibilities of beneficiating high-grade clays.) Table I—Domestic supply position of selected mineral materials KNOWN ECONOMIC RESERVES ADEQUATE FOR WELL OVER 2 5 YEARS magnesium molybdenum coal phosphate potash lime salt sand clay gypsum borax barite feldspar KNOWN ECONOMIC RESERVES INADEQUATE Discoveries geologically likely—though not necessarily adequate copper lead zinc uranium vanadium tungsten antimony Beneficiation progress expected iron beryllium aluminum thorium titanium oil from shale petroleum natural gas sulfur fluorine graphite Synthesis progress expected oil from coal gas from coal LITTLE OR NO KNOWN ECONOMIC RESERVES, SIGNIFICANT DISCOVERIES NOT EXPECTED Beneficiation progress expected manganese Synthesis progress expected industrial diamonds quartz crystals sheet mica asbestos Significant beneficiation or synthesis not expected chromium nickel tin cobalt platinum mercury There is urgent need for finding and developing new domes- tic reserves of critical minerals. Generally speaking, although there are exceptions, the free play of market forces will bring about development of new reserves once they have been located. In the field of public policy the greatest emphasis should be placed upon encouraging exploration for minerals. Among the ways of stimulating exploration are (a) better collection and analysis of basic facts of the minerals situation and outlook (an enterprise that will be useful in all phases of minerals policy), (b) promotion of improved techniques of exploration, (c) modernization of the rules governing exploration on federally owned land, and (d) provision for financial incentives. MORE FACTS AND BETTER ANALYSIS NEEDED There are still far too many gaps in the fund of basic infor- mation needed to give direction to exploration as well as to other phases of national minerals policy. There is no comprehensive program, Government or private, for collecting and analyzing the facts on reserves, costs and rates of exploration and development and other facts pertinent to showing the situation in reasonable detail and outlining the prospects for different minerals. The Commission's inquiries revealed at first hand that national estimates of reserves proved particularly meager and hard to come by. Machinery for collecting and studying the facts must be established on a continuing basis. Widely spaced surveys, no matter how detailed, will not suffice; they develop neither the constant flow of basic information that is required, nor the number of experts equipped to make seasoned judgments. The Bureau of Mines and the Geological Survey are the logical agencies to undertake the expanded assignment. The factual and analytical basis for development of sound policy in the minerals field and guidance of Government and industry in specific programs and projects must be developed. The Commission therefore recommends: 1) That the Department of the Interior, particularly in the Bureau of Mines, the Geological Survey, and the Office of Assistant Secretary for Mineral Resources, strengthen its program analysis staffs and intensify its fact-gathering and analytical activities in order to develop and maintain a comprehensive appraisal of the minerals and energy position and prospects of the United States and the free world. Particular attention should be given to minerals reserves and resources and to trends in explo- ration costs, technology, and patterns of use. Heavy em- phasis should be placed upon analysis by professionally trained economists; and the study of geologic, technologi- cal and other scientific developments and prospects should be related more than it has been in the past to economic consequences and opportunities. Special consideration should be given to the economics of small mine operations. These enlarged activities should require only moderate increases in annual appropriations. 2) That a complementary program of fact-gathering and analysis be undertaken by industry groups in the min- erals field with special emphasis on collection and analysis of data on reserves, costs of exploration, and rates, trends, and prospects of discovery. Such a program calls for ex- pansion of the statistical and analytical work now being carried out by trade associations and professional, scien- tific, and technical societies; consolidation of related activities in order to achieve comprehensive coverage of the industry by a small number of organizations; and the cooperation and financial support of the industry. Specifi- cally, the American Institute of Mining and Metallurgical Engineers might take the initiative in working out organi- zation and procedures by which the mineral industries could gather, collate, and pass along to appropriate agencies of Government estimates of reserves and related information, much in the manner that the American Petroleum Institute performs that function for the oil in- dustry. To safeguard the interests of reporting companies, prohibitions against publishing information disclosing the extent of individual holdings, and against use of such data other than for technical and economic analysis by the Federal Government, should be continued. 3) That a complete census of mineral industries, already authorized by law, definitely be taken in 1954 and every 5 years thereafter. Sufficient funds for a comprehensive 1954 census should be appropriated. Page 26 There has been no such census since 1939. Although the Act of June 19, 1948 (62 Stat. 479) authorized the taking of a census of mineral industries every 5 years beginning with 1949, no appropriation was made for the 1949 census. Un- availability of current, comprehensive information that a min- erals census would provide—data on the number and classifi- cation of mines by areas, on the value of their product, on man-hours worked in various departments, on costs of materials and fuels consumed—would handicap progress of the basic studies and analyses proposed in the previous recommendations. It is unfortunate that a mineral industries census has been postponed so long. Hardly any question of policy, no matter how limited, can be answered properly without careful appraisal of many facts. Yet policy decisions, large and small, are being made—have to be made—by hard-pressed legislators and administrators, no matter how scanty the data or hasty the analysis. THE PROSPECTS OF DISCOVERY Geologists agree that the United States still possesses vast hidden mineral resources, but they cannot tell how great these undiscovered resources may be, indicate where individual de- posits lie, or guess how many could be worked at a profit. They also agree that extensive new discoveries of traditional materials will call for new methods. Prospectors already have combed nearly every square mile of the continental United States and large areas of Alaska. Not much more can be ex- pected from the search for out-croppings of minerals that have long been commercially important. From now on, the search for these minerals must be directed toward deposits hidden in the earth. For a few minerals that people began hunting more recently—tungsten, uranium, fluorspar, the rare earths, and molybdenum, for example—surface prospecting still offers some opportunities, but even for these the search eventually will turn underground. Practical methods of finding concealed deposits of manv mineral raw materials still are to be perfected. Results in the oil industry, which has put much time and money into the tech- niques of subsurface exploration, confirm the possibilities. (The problems of petroleum and other sources of energy are dis- cussed in chapters 16-22.) Even with improvements in tech- nique, subsurface prospecting for nonfuel minerals will remain difficult and costly. The Commission believes that national policy for minerals should provide for large-scale but selective exploration centered on critically needed materials known to occur plentifully in the United States. Such an effort will call for better equipment and methods than prospectors now have, and for changes in Gov- ernment policies and programs that will stimulate the efforts to make new discoveries, and promote the effective develop- ment of the deposits that are found. The Role of Government in Exploration Over the years, private industry in the United States has taken the lead in finding minerals deposits. This approach has worked well in the past and the Commission believes it will be best in the future. The Federal Government for many decades also has had an important, though less apparent, hand in minerals exploration. As custodian of the vast public domain, the Federal Govern- ment has set up the rules under which private parties have dis- covered and exploited mineral resources in this territory. It has made most of the topographical and geological maps for the whole Nation and conducted fundamental geological studies. It has conducted basic research on techniques of exploration, and, under special circumstances, has done some direct pros- pecting. It has set up special tax provisions for many mineral industries, aimed at least partially at encouraging exploration. During and after the Second World War it undertook a variety of emergency measures to stimulate private exploration for stra- tegic and critical materials through the employment of such devices as premium payments, exploration loans, and long- term contracts. These Federal efforts have been effective in the past but the Commission is convinced that the pressing needs of the future call for a considerable strengthening of some Government poli- cies and programs, for eliminating inconsistencies and for cor- recting certain deficiencies. Maps are indispensable tools of exploration for ore bodies. Without geologic maps and without topographic maps, the search for mineral resources becomes more a matter of luck than of judgment and technique. By providing information about rock formations, based on observation of surface ex- posures and subsurface samples, geologic maps enable the geologist to predict what probably lies below the surface. On this basis the geologist can advise where to sink exploratory holes with the best chances of success, or judge whether a promising outcrop or drill core is evidence of a substantial deposit. To make good maps, the geologist must be backed up by a vast amount of basic geologic research, both in the laboratory and in the field. Measured against the need ahead, there has not been enough research or surveying, and there are not now enough geologists to advance this important work as rapidly as would be desirable. Although topographic mapping has been carried on in the United States for 100 years, only 25 percent of the United States and Alaska are covered by topographic maps good enough for today's needs. Only 11 percent of the United States is covered by geologic maps of sufficient scale. Recent improvements in techniques of mapping make pos- sible more rapid progress at lower cost. Aerial photography speeds up the making of topographic maps and permits a geologist to note features not otherwise observable. Further improvements are possible in aerial photography, in geologic interpretation from photographs, and making maps from them. (See vol. v, Improved Exploration for Minerals.) The Commission sees an impelling need to accelerate the topographic and geologic mapping of the United States and Alaska. At the rate at which new maps are being prepared, between 150 and 200 years would be needed to complete the job of mapping the United States alone. From the standpoint of minerals discoveries, certainly not all sections need be map- ped, but the rate of current progress—one-half of 1 percent of the total land area mapped in a year—is pitifully inadequate to the Nation's needs. The cost of mapping is modest compared with the prospec- tive gains and the sums spent by Government on other types Page 27 GEOLOGICAL MAPPING-A BIG JOB REMAINS TO BE DONE (July 1951) | | UNMAPPED of research. In the fiscal year 1951 the Geological Survey spent just short of 5 million dollars on direct geologic mapping. Its staff, allowing for the services of temporary employees from university staffs, was equivalent to about 675 full-time geol- ogists. The shortage of trained geologists and other skilled per- sonnel required for map making imposes practical limits on the pace that the Government's mapping program could maintain. With some shifts of present personnel and the recruitment of new personnel from the limited number of new geologists that can be trained in the immediate future, it may be possible to increase the rate of geologic map making by 50 percent in 5 years, and to double it in perhaps 5 years more. Similar increases could be made in topographic mapping. Some States or parts of States hold far greater promise than others of undiscovered reserves of mineral raw materials that the Nation needs. These should be mapped first. In Utah, for example, the regions adjacent to Bingham Canyon and Tintic surely should be studied before the benches that were cut by the waters of ancient Lake Bonneville. Science and Technology. Besides maps, discovering new reserves of minerals will require not only new field equipment but also extension of basic scientific knowledge by chemists, Source: Geological Surrey, U. S. Dept. of Interior physicists, and botanists as well as geologists. In hunting for de- posits that cannot be seen, it is necessary to improve under- standing of the process by which they were formed. Then sur- face evidence will take on more meaning, and fragmentary knowledge of what lies beneath the surface in a few spots will give a better key to surmising what lies elsewhere. Widespread development and application are needed of the techniques of geophysics. This method uses such properties as contrasts in density, electrical conductivity, state of mag- netism, porosity, elastic behavior, and others, singly or in com- bination. The techniques of geophysics need to be made less costly and usable by semiskilled people. Usually a combination of methods can be used with profit. For example, employment of the airborne magnetometer and other instruments in conjunction with aerial photography led to discovery of the Gerro Bolivar iron deposit in Venezuela.* Little progress has been made during the past 50 years in diamond drilling which is used in exploring for metallic ores. Some techniques used successfully in drilling for oil could be adapted. Particularly valuable would be improvements in core *Techniques of subsurface exploration are discussed in more detail in chapter 24, this volume, and in vol. IV, Improved Exploration for Minerals. Page 28 recovery from soft ground, improvements in cements and cementing techniques, directional drilling, and surveying. Some of the most valuable evidence of subsurface geologic formations—but the most costly to obtain—comes from drill cores. In the petroleum industry a beginning has been made toward systematic compilation of core data through coopera- tion among private concerns and the Government. It is com- mon practice for the Government to require submission of core samples from private prospectors who explore on federally owned lands for minerals subject to the Mineral Leasing Acts. In exploration for metallic minerals, little has been done along these lines. There is need for a comprehensive national library of core samples, log data, and other geologic evidence derived from public and private surveys and explorations. Although the samples could best be held in the various States, the system should have central direction, which could best be provided jointly by the Geological Survey and the Bureau of Mines. The Commission recommends: 1) That Congress direct the United States Geological Survey to accelerate the topographic and geologic map- ping of the United States and Alaska, and that appropria- tions for this purpose be increased sufficiently to permit an expansion of the program by 50 percent within 5 years and 100 percent as soon thereafter as sufficient trained personnel is available. Priority should be given to mapping areas of most probable mineralization, and among those areas priority should be established so far as practicable in accordance with their likelihood of containing strategic minerals of which known domestic reserves are inadequate. 2) That the United States Geological Survey and the Bureau of Mines work out and submit to Congress a de- tailed program under which a coordinated national sys- tem of libraries of core samples, log data, and other geo- logic evidence can be established and maintained in coop- eration with State mining agencies and the mining industry. 3) That an intensive program of basic scientific research and technical development be undertaken on techniques and instruments of exploration for minerals. The first step should be the appointment of a special committee under the National Science Foundation, made up of outstanding experts from Government, private industry, and universi- ties, to make a full inventory of existing scientific and tech- nical knowledge and research projects in the field, to determine the areas of greatest need for further research and development, to devise a coordinated program to be carried out by private groups and such Federal agencies as the Bureau of Mines, Geological Survey, Bureau of Standards, and Office of Naval Research, and to estimate the cost of the program and the extent to which it will require supporting funds from the Government. The Na- tional Science Foundation could call upon the National Academy of Sciences (National Research Council) for assistance in laying the groundwork of a program. Preliminary consultations with experts in minerals explora- tion indicate that an adequate program along the lines sug- gested might require annual expenditures of between 20 and 30 million dollars, but that within a decade the program could result in discoveries worth many times this cost. EXPLORATION BY GOVERNMENT The direct role of Government in exploration for minerals, either with its own personnel and equipment or under contract arrangements, has been comparatively small. Government par- ticipation through exploration loans and other indirect devices is not considered here. The traditional division of responsibility between private industry and Government still appears best, although private search for many metals needs to be stimulated; discoveries by metals industries have been meager in comparison with petro- leum finds. Government has felt an increasing need to engage in direct exploration when the national interest appears to require it, and the promise of reward is too slight to induce private action. For the most part, Government has explored for (a) highly strategic minerals occurring in relatively small amounts and used in relatively small volume, and (b) deposits of minerals below current commercial grade which would be- come important only with development of new technology and exhaustion of higher grades. Before the 1930's the principal object of Government ex- ploration was potash. Since 1939 the Bureau of Mines and the Geological Survey have been authorized under stockpiling legislation to explore for minerals of significance to national security. During the Second World War, several hundred de- posits were tested for a variety of minerals, largely on private lands under contract with the owners. A tungsten deposit discovered in Idaho became the Nation's major source during the war. A large, low-grade copper deposit discovered in Arizona is now being developed by a private company for commercial production. In addition to specific discoveries, the wartime Government exploration led to the extension of some known deposits and to greater certainty of the size of known reserves and provided much new information on the geology of mineral resources. Since the war, direct Government ex- ploration, aside from the search for uranium deposits, has been aimed principally toward expanding general geologic knowl- edge of long-range importance. (For details see vol. V, Govern- ment Exploration for Minerals.) The Commission believes that a certain amount of direct exploration by Government will continue to be needed. In general, Government exploration should be selective and should be carried only to the point where private business is willing to pick up and carry on. The Commission recommends: That direct exploration activities by Government be limited to those situations in which the national interest requires enlargement of reserves or knowledge about re- serves but in which the risks are so great or the promise of reward in a reasonable period so small that private industry cannot be expected to undertake the work. Government exploration within these limits should an- ticipate and seek to avert emergencies rather than respond to them after they have developed. Hence such explora- tion should be part of the continuing activities of the Geological Survey and Bureau of Mines. Page 29 MANAGING RESOURCES ON FEDERAL LAND Most minerals production in the United States has come from land which once was part of the public domain but was transferred to private ownership as a reward for discovery. From all geologic indications, a large portion of the mineral deposits yet to be discovered in this country are located in lands in the Western States still belonging to the Federal Govern- ment. It is therefore pertinent to inquire whether existing laws governing the search for minerals on these lands and their ade- quate development are best designed to serve the public inter- est in the years ahead. The Mining Laws and How They Work Two widely different systems govern disposition of publicly owned mineral resources in the United States. Under the loca- tion system, which applies to metallic ores and a few nonmetallic minerals, relatively small tracts are transferred with few limita- tions to people who discover mineral deposits upon them. Under the leasing system, which applies to oil, natural gas, coal, oil shale, phosphates, sodium, potassium and (in New Mexico and Louisiana) sulfur, the Government continues to act as landlord of the public estate, establishing the general rules under which private business may use the mineral resources. Exploration, development, and extraction are carried out under both the leasing and the location systems.* Less than 100 years ago the Government, to encourage development in the West, was giving away millions of acres of land rich in mineral, soil, and water resources. The general policy was ownership as a reward for discovery. Later, Congress enacted laws providing for continued public ownership of forest, grazing land, and water resources, and for their private development and use under management conditions established by public authority. This general policy was extended to the mineral fuels and a few other nonmetallic minerals. The mining laws, applying primarily to metalliferous deposits, are a survivor of the frontier days of land gifts. Under the mining laws the discoverer of a mineral deposit on public land can establish a legal claim to it simply by mark- ing out the boundaries of his claim (approximately 20 acres) and, if State law requires it, recording the location. He does not have to advise the Federal Government when he stakes a claim, nor when he begins to exploit the mineral or other resources on it. Having staked his claim, he may continue indefinitely to enjoy what amounts to almost complete domination over the property, mining it or not as he wishes. He is required by the mining laws to spend $ 100 a year on labor or improvements, or risk being dispossessed by another claimant. The only basis on which the Government can recover the claim is a showing that the prospector has not in fact made a discovery offering reasonable expectation of finding ore in paying quantities. There have been few invalidations on this ground and appropriations never have been made to estab- lish administrative machinery able to exercise the power systematically. If a person wants an unqualified title to his 20-acre claim, he must apply to the Department of the Interior for *For a more detailed discussion of the background and the functioning of the location and leasing systems, see vol. V, Mining Laws and Minerals Leasing Acts. a "patent." He must show that he has actually made a dis- covery of a mineral deposit and has spent $500 in improving the property; he must comply with certain survey and notice provisions, pay a nominal acreage fee, and fulfill other formali- ties. He then obtains a patent to 20 acres or less of public do- main giving him complete rights to all surface and subsurface features. In frontier times this simple procedure was a strong incentive to minerals discovery and therefore in the national interest, whatever its shortcomings from the standpoint of efficient use of all national resources. Today the mining laws in their present form not only directly impair the public interest, but often obstruct private mineral exploration and development. The privilege of staking a mining claim on public land has often been abused. Much public property has been taken over by people seeking timber and water rights, fishing and hunting facilities, and sites for hotels, tourist cabins, and filling stations. The United States Forest Service reports that at the start of 1950 less than 3 percent of nearly 74,000 unpatented mining claims on the National Forests were producing minerals in commercial quantities, and that of the almost 34,000 claims patented since establishment of National Forests, fewer than 15 percent ever were developed as commercially successful mines. In 1950 the standing timber on 23,000 mineral claims in Cali- fornia, Oregon, and Washington was worth about 50 million dollars. Moreover, the mining laws provide almost no basis for public participation in managing the mineral resources to which they apply, even before a claim is patented. The holder of a mining claim can sit tight on a potentially important mineral deposit so long as he spends $100 a year on improvements. Even this requirement frequently has been waived by acts of Congress. Adverse effects of the mining laws upon private exploration also are detrimental to the public interest. If a person seeking a claim wishes to avoid risking consider- able trouble and expense later, he must make a long and often difficult title search—otherwise he may find that someone else has previously staked a claim. Mining laws also give a claim- ant extralateral rights to deposits in all veins reaching an apex within his 20-acre location, no matter how far they extend beyond the sidelines (although not beyond continuation of his end lines). Hence, a new prospector runs the further risk that a deposit in his claim may be shown to ascend to an apex on other property and therefore belong to someone else. Even aside from the difficulties of making sure he can estab- lish his rights to a claim, each prospector must cope with the risks of the race for discovery. Most advanced techniques of exploration are prohibitively costly unless applied over large areas. Under the mining laws it is impossible to obtain tempo- rary exclusive rights to explore an area large enough to justify the investment in modern exploration equipment. A prospector may find that a competitor has staked a claim on part of the area he has prepared to explore. Increasingly, the modern prospector must undertake sub- surface operations. If he finds a deep deposit, the costs of trac- ing its approximate location, direction, and locating its apex will be extremely high. Unless he incurs this expense, he has no assurance that the claim he stakes will comprehend more than an insignificant corner of a deposit and that the apex is not out- side his boundaries. These uncertainties discourage the great Page 30 MUCH OF PUBLIC DOMAIN STILL OPEN FOR EXPLORATION IN METAL-PRODUCING STATES ELEVEN WESTERN STATES . . . . . AND THEIR PRODUCTION PERCENT OF STATE AREAS FEDERALLY OWNED -1950 35 to 45% 45 to 55% 65 to 75% 85% Source Mmerol Figs Bureou of Minej, U. S. Dept. of interior federal Land: Bureou of Land ManagttMnl, U. S. D«pr. of Interior TOTAL U.S. TOTAL VALUE FOR FOUR METALS— 11 STATES (Millions of Dollars) TOTAL VALUE OF FOUR METALS PRODUCED BY STATES—1950 (Millions of Dollars) TOTAL TONNAGE FOR FOUR METALS —11 STATES (Thousands of Short Tons) outlays required for subsurface prospecting—precisely the kind on which many significant future discoveries depend. The Commission has sampled the opinions of industry lead- ers and Government officials on whether the mining laws should be modernized, and if so, how. There seems to be agreement that the present laws cause many difficulties for industry and Government alike. Some members of the mining industry would prefer to leave well enough alone through fear that changes might open the door to excessive Government interference. The Commission believes that the risks of making a change are much smaller than the risks of standing pat. Most persons consulted agreed that the rules governing dis- position of federally owned minerals should be changed, either by revising the mining laws or by extending the principle of the Mineral Leasing Acts to all deposits on the public domain. The Commission has concluded that for mineral deposits with no surface manifestation, a concession-leasing sys- tem will produce a higher rate of discovery; for deposits discoverable by surface outcroppings, it believes that an amended claim system can be a strong stimulus. A concession-leasing system can provide for exclusive ex- ploration rights over areas large enough to make advanced techniques of exploration practicable. It also can provide for exploitation rights, in the event of discovery, extensive enough to be an effective inducement. A location system is not readily adaptable to such arrangements. A concession-leasing system can be used with great flexi- bility. If it covered metallic minerals it could enable a private company to obtain, along with an exploration concession, the right of first opportunity to lease on generous terms a fair portion of the public land embodying any ore discovered. This is essentially what is now done under the leasing laws in the case of petroleum. Renewal provisions could give the initial lessee first option to renew if he had carried out satisfactorily the terms of the initial lease. Great flexibility would be possible in establishing royalties for extraction of minerals not heretofore covered by leasing laws. The Commission believes that it would be desirable to require merely a nominal royalty for nonbedded minerals not covered by the present Minerals Leasing Acts if the private Page 31 prospector had undertaken virtually all the work of discovery and development. This would give maximum incentive to pri- vate exploration. Only where discovery and development have been carried to the point of establishing significant market value by someone other than the lessee would a more substantial royalty be appropriate. In such cases, awarding leases on a competitive-bid basis would be the best means of avoiding dis- crimination. The purpose of a concession-leasing system should not be to earn revenue, but to encourage exploration and exploitation of resources on federally owned land. USING MINING LAW PRIVILEGES Claim System. Though the chief long-term promise lies in subsurface exploration, sufficient opportunity appears to re- main in surface prospecting to warrant continued vigorous search for outcrops by large numbers of small prospectors, especially for minerals that have only recently come into prominence. The surface prospector does not need exclusive exploration rights over large areas for long periods. Also, much surface ex- ploration will continue to be done by small-scale prospectors using simple equipment and accustomed to dealing with the Government under the location system. They are familiar with this procedure, and the possibility of establishing a claim and eventually obtaining a patent may be their strongest incentive. Consequently the Commission is reluctant to propose action that would remove this incentive of the small-scale prospector. It believes that an outright choice now between the concession- leasing and claim systems is neither inevitable nor desirable. Both systems have a contribution to make in meeting the Na- tion's needs between now and 1975. There is an immediate need, however, to improve and strengthen the location system as it operates under the present mining laws. The Commission recommends: 1) That legislation be enacted making the alternative of leasing available for all federally owned mineral deposits to which only the system of appropriation by claims and patents is now applicable, i. e., all mineral deposits now subject to disposition under the mining laws. The deter- mination of which system should apply in individual cases should be left to the initiative and preference of private prospectors. 2) That, in general, only tracts with respect to which exploration permits or leases have been granted {and hence a decision made on private initiative to proceed via leasing rather than appropriation) should be closed to general prospecting and the establishment of claims. For the guidance of prospectors, tracts leased or under permit or otherwise closed to appropriation by claims, should be marked and recorded. 3) That the leasing system {as an alternative for min- eral lands to which only the system of appropriation is now applicable) should include the following features: (a) Provision for granting exclusive prospecting per- mits of reasonable duration, terminable for failure to carry out a prescribed measure of exploration activity. (b) Unless previous commitments prevent it, pros- pecting permits for whatever size tract the applicant requests, up to a prescribed maximum. The maximum should be large enough to permit use of advanced ex- ploration techniques. (c) A prospecting permit carrying with it a preferential right, in the case of discovery, to lease an agreed part of the area on terms and conditions established before exploration is begun and not subject to changes dis- advantageous to the lessee. (d) Only nominal royalties on leases granted under dis- coverers3 preferential rights, so as to provide an incen- tive to exploration. Leases for tracts on which deposits already are proved or partially proved should, so far as practicable, be awarded by competitive bidding. (e) Option for any prospector who has made a dis- covery sufficient to support the establishment of a min- ing claim to take a lease at nominal royalties in lieu of a claim, and for any holder of an existing valid claim to surrender his claim in return for such a lease. 4) That the system of appropriation by claims and pat- ents should be modified to include the following features: (a) All nonpatented claims, adequately described, should be recorded in the Department of the Interior and that Department should prepare and make avail- able accurate plats for the guidance of prospectors. Failure to record an existing claim within 3 years of enactment of the amendment should constitute aban- donment. New claims should be deemed invalid until recorded. (b) Future claims and patents should be limited to the mineral deposits thereon and to only such surface rights as are needed for mining purposes. (c) No extralateral rights should be acquired with future claims and patents. (d) The annual requirement for improvement of un- patented claims should be increased to $250. A 3-year carryover for any excess should be permitted, as should the crediting of any excess spent on one of a group of contiguous claims to any of the others. (e) The improvement requirement for granting a patent should be increased to $1,250. (/) In addition to its present authority to invalidate claims on the ground that there has been no discovery, the Department of the Interior should be authorized to invalidate claims upon a showing (i) that the deposits discovered are insufficient to justify further develop- ment of the claim as a mining property, or (ii) that assessment requirements have not been met. (g) If within 10 years after a claim is established, no application to patent it is made, the claim should be- come invalid automatically. Page 32 FINANCIAL INCENTIVES IN MINERALS Governments the world over have made it a common prac- tice to offer financial incentives to call forth greater supplies of materials they especially want. Resort to special incentives is a recognition that price re- lationships generated by the free play of market forces will not bring about as prompt and as large an increase in pro- duction of certain materials as the Nation needs. The incentive device seems particularly adapted to the mineral industries. In most of these industries the waiting time between the start of exploration and the flow of marketable ores from the mine is long—sometimes as much as 15 or 20 years—and the re- quired capital investment heavy. There is no certainty that a workable deposit will be found, or if it is, that price levels will not change markedly by the time production starts. If prices of minerals become more stable in the future, there ultimately will be less need for supplementing the price mecha- nism by special arrangements. Meanwhile, incentives have an important place in national minerals policy. The principal incentive devices used in the mineral indus- tries are tariff protection, long-term purchase contracts, con- tinuing offers to purchase at a stated price, loans and guaran- tees, premium payments, and special tax consideration.* In chapter 14 of this volume, the Commission emphasizes the desirability of eliminating obsolete tariff barriers to the entry of materials into the United States. Particularly in the case of minerals, since in general United States dependence on imports is expected to increase, the Commission believes that devices other than tariff protection should be used. Long-term contracts and standing purchase offers for do- mestic production are well suited for use with certain minerals which are either chronically scarce or expected to be so during the period of the contract or offer. For such minerals, these devices are effective when substantial amounts of marginal production will be undertaken only if otherwise prohibitive market risks are eliminated by an assurance of sale at a price high enough to return investment. The contracts and standing offers are particularly adapted to preserving an active domestic production nucleus for certain minerals of which a quickly- expansible domestic source is needed as a security measure. The standing offer to purchase is administratively more practicable than the long-term contract if the mineral is one produced by a large number of producers each operating on a small scale. Either device should be used with great caution, and only where it promises a substantial amount of needed domestic production or productive capacity not otherwise ob- tainable at lower cost. The power currently vested in the Federal Government to make and guaranty loans to the domestic minerals industries are fairly comprehensive. "Grubstake" loans for exploration and development, loans and guaranties of loans for working capital, and loans and guaranties of loans for development and extension of facilities are all available under the Defense Pro- duction Act or pursuant to the ordinary lending authority of the Reconstruction Finance Corp. Minerals industries have made almost no use of the loan guaranty during the present emergency and relatively little use during the Second World *For more detailed mention of incentive devices listed here see vol. V, Incentives for the Mineral Industries. War, when it was also available. Loans for development and extension of facilities have been used somewhat more, but the instances in which they have been the decisive factor in under- taking a particular project appear to be few. The main areas in which governmental credit appears to be needed as an incen- tive to undertakings for which private financing cannot be readily obtained are development of marginal deposits and exploration by small-scale prospectors. Under emergency conditions premium payments by Gov- ernment to producers of scarce minerals may be quite effective in encouraging production without inducing inflation. During the Second World War the premium price plan was used to bring out copper, lead, and zinc, and oil from stripper wells. In general, premiums above the ceiling prices were paid for output in excess of quotas based on "normal" production. The program succeeded in expanding production or, in other instances, in maintaining production against restrictive pres- sures. During the life of the program premiums were paid on 20 percent of the copper produced domestically, 40 percent of the lead, 70 percent of the zinc, and about 10 percent of the petroleum. Premium payments totalled about 350 million dol- lars for copper, lead, and zinc combined, and about 120 mil- lion for petroleum. Administrative expenses were well under 1 percent of total payments. The costs in higher prices sufficient to induce this production probably would have been greater. In an emergency period when price controls are in effect the premium price plan can be a valuable device for stimulating production without undercutting a stabilization program or creating windfalls for low-cost producers. Applied over long periods, however, it entails increasing administrative expenses, particularly in revising cost analyses and adjusting quotas. Moreover, since premium price plans primarily stimulate pro- duction from known reserves, their use might tend in the long run to divert energies from discovering and developing new sources of supply. In addition, they may set up a heavy drain on small reserves of scarce materials. Although recognizing the utility of premium price plans under special emergency circumstances, the Commission regards them as ill-fitted for use as part of a long-range price policy. Some Questions of Minerals Tax Policy A broad examination of the Federal tax system, or even of its general application to minerals, is beyond the province of this Commission. In reviewing the fundamental tax structure as it. existed in 1951 the Commission's concern has been only with its effectiveness in improving supplies of scarce materials. The questions to which it sought answers were: Do present tax arrangements affecting minerals encourage private business to explore, develop, and produce in response to the Nation's needs? What changes in the tax structure, if any, would make it more effective? The Federal' income tax law contains two devices which provide important special incentives for the mineral industries: (a) percentage depletion, and (b) the privilege of "expensing" certain costs of exploration, discovery, and development.f flbid. 999959—52 4 Page 33 U. S. PRODUCTION USE EQUALS 100% VS. USE 98% Annual depletion allowances are deductions from taxable income permitted in recognition of the gradual exhaustion of a depletable property. They are analogous to the depreciation charges by which a business recovers the cost of its plant and equipment tax-free. In the case of most mineral industries, the taxpayer has an annual choice under the Internal Revenue Code between (a) deducting an allowance based upon cost depletion which will permit recovery, over the useful life of the property, of its actual cost and no more, and (b) computing his deduction on the basis of percentage depletion, a formula related to his gross income and entirely independent of capital investment. Over the life of a property, it is possible for the tax-free recovery permitted by percentage depletion to reach a total greatly in excess of the taxpayer's investment in the property. The percentage depletion deduction allowed by the Internal Revenue Code is a stated percentage of gross annual income, ranging from 5 percent for certain common minerals like sand and gravel to 27j/2 percent for oil and gas, but it may not exceed 50 percent of the net income from the property. Table II shows the rates as established by law. In many instances the choice of percentage depletion over the cost depletion method results in tax savings. For an indi- vidual company, the benefits of percentage depletion depend on the relationships among its capital investment, its gross in- come, and its net income. Thus the percentage depletion rates as established for industries are not an index of the tax-saving possibilities they offer to particular companies or industries. Expensing. The second special tax incentive provided for the mineral industries is the privilege of deducting as a current expense certain outlays for exploration and development which would otherwise have to be treated as a capital outlay recover- able over a period of years. In oil and gas, all "intangible drilling and development costs" are expensible. These include the bulk of outlays for ex- ploration and development. In the mining industries, on the other hand; exploration costs may be treated as current expense only up to $75,000 a year, with a cumulative limit of $300,000 per taxpayer. The costs of developing a mine once a discover}' has been made may be expensed without limit. RECOMMENDATIONS CONCERNING TAXES Special tax arrangements in the minerals field serve two principal ends: (a) they stimulate discovery and development of additional reserves of scarce critical minerals for which ex- ploration entails considerable uncertainty and capital risk; and (b) they permit recover)7 of investment in a wasting asset. Because of the past erratic price behavior of minerals and the long interval between initial investment and yield from production, the Commission concludes that incentives provided through the price structure are unlikely to bring about enough Table II.—Existing rates of percentage depletion established by sec. 114 (b) of the Internal Revenue Code as amended by sec. 319 of the Revenue Act of 1951 Oil and s^as wells Sulfur 27l/2 percent 23 percent 15 percent China clay Phosphate rock Rock asphalt Trona Bentonite Gilsonite Thenardite Borax* Fuller's earth* Tripoli* Refractory and fire clay* Quartzite* Diatomaceous earth* Metallurgical grade limestone* Chemical grade limestone* Potash 10 percent Peiiite* Wollastonite* Calcium carbonates 1 * Magnesium carbonates* 5 percent Clam shell* Granite* Marble* Metal mines Aplite* Bauxite Fluorspar Flake graphite Vermiculite Beryl Garnet* Feldspar Mica Talc (including pyrophyllite) Lepidolite Spodumene Barite Ball clay Sagger clay Coalf Asbestos* Brucite* Dolomite* Magnesite* Sand* Gravel* Slate* Stone (including pumice and scoria) Sodium chloride* Brick and tile Calcium chloride 2 * Clay* Magnesium chloride 2 * Shale* Bromine ~ * Oyster shell* * Added by Revenue Act of 1951. tRaised from 5 percent by Revenue Act of 1951. 1 Other than marble and oyster and clam shell. 2 If from brine wells. exploration and development to meet national needs for domestic production of scarce minerals. The Commission believes further that special provision must be made in the Federal corporate income tax structure to meet the unusual problem which confronts many private companies in the minerals field. It is customary under United States tax laws to permit a business to recover tax-free its investment in physical assets as they wear out or become obsolete. Ordinarily the recovered investment can be applied toward replacing physical assets. But for many minerals there is considerable un- certainty as to whether reserves can be replaced, and con- siderable risk is entailed in attempting to replace them. More- over, for some major minerals the real cost of replacement keeps mm u. s. production vs. USE USE EQUALS 100% 1900 1950 100% Page 34 rising because of the progressive depletion of natural resources. Percentage depletion is an effective means of meeting this prob- lem, apart from its efficacy as an incentive. The present structure of minerals taxes includes strong and desirable incentives to explore for, develop, and produce min- erals of importance to the Nation's growth and security. First, the device of percentage depletion is a powerful induce- ment to capital to enter the relatively risky business of searching for mineral deposits of uncertain location, quality, and extent. Where the national need is great, there is justification for using a higher percentage depletion rate than might be appropriate if recovery of capital investment were the sole objective. This implies a need for being highly selective in the application of percentage depletion to various minerals. Second, the privilege of expensing exploration and develop- ment costs for minerals is a further inducement to risk capital to enter fields where a broadening of national reserves is needed. The expensing privilege in conjunction with percentage deple- tion makes a strong incentive combination. While the Commission is persuaded that percentage deple- tion is an effective means for recovery of private capital from wasting mineral assets and a forceful incentive for exploration and development of minerals which the Nation needs, it is also impressed with the extreme difficulties of adjusting this tax de- vice with appropriate precision to individual mineral situations. The general principles to be followed in applying percentage depletion as an incentive device are obvious: the incentive rate for any mineral should be so set in relation to other minerals and to nonmineral industries as to bring about the desired balance between investment in that domestic industry and others, along with the desired balance between domestic output and the imports of this mineral. The difficulties arise in applying the general principle. Ex- actly how can the "desired balances" be determined and, assum- ing they can be, what is the right set of percentage depletion rates to achieve these balances? The Commission has concluded that it is virtually impossible to arrive at economically well- founded criteria for adjusting present depletion rates up or down to improve upon the present balances. It is axiomatic that increases in the level of corporate and individual income taxes tend to deter the flow of risk capital. It is also true that, as the level of corporate taxes increases, percentage depletion, if rates are held constant, automatically provides a greater incentive, relative to industries to which the device does not apply. An increase in corporate tax rate is equivalent to an increase in percentage depletion rates as far as relative earning position of mineral and nonmineral indus- tries is concerned. Such complex interrelationships aggravate the difficulties of adjusting tax incentives to achieve an ap- propriate degree of stimulation to mineral exploration and production. Finally the Commission is impressed by the strong tendency of special tax incentive devices to spread far beyond the area of original intent and justification, particularly where there is difficulty in assessing the precise economic needs and conse- quences. Application of the percentage depletion device should be confined to those minerals for which the hazards of explora- tion are great, a principle that apparently did not govern selection of most of the minerals added to the percentage depletion list by the Revenue Act of 1951. Indiscriminate and excessive application of an incentive tax device not only jeopardizes the integrity of the whole Federal tax structure but results eventually in diluting or even discrediting the par- ticular tax device, whereas its cautious use would be effective and well warranted in meeting national needs. There is a real danger in perennial tampering with these percentage depletion rates. In short, the device of percentage depletion as an incentive to minerals exploration is not without its limitations. But no alternative method of taxation has come to the Commission's attention or could be devised by the Commission which, in its judment, promises to overcome these limitations and still achieve the desired results, particularly not without seriously dislocating well established capital values and other arrange- ments in the industries concerned, with highly adverse effects on supply. Taking the practical situation as it finds it, the Com- mission believes that any radical alteration of the existing tax arrangements would be undesirable. The Commission therefore recommends: That percentage depletion be retained because of its strong inducement to risk capital to enter the mineral industries but that the rates now provided in the Internal Revenue Code be raised no further. That Congress reconsider recent additions to the list of materials now subject to percentage depletion in the light of the principles stated above. There is, however, one notable exception to the recom- mendation that present tax incentives not be enlarged. The Commission believes strongly that exploration and development costs for minerals should be fully expensible for tax purposes because of the direct incentive this arrangement gives for capital to take risks in highly uncertain fields. The Commission therefore recommends: That the present limitations applicable to minerals other than oil and gas on the amount of permitted expensing of exploration costs be removed. The advantages of such a change will be limited largely to those particular mineral industries where there is inadequacy of national reserves, for without such a shortage there would be no inducement for private industry to use its own funds on exploration regardless of tax incentives. The Commission has noted proposals for various other tax- incentive arrangements, including a limited moratorium on taxes upon income from new mines. Such a moratorium may well be an effective device within the tax structures of some countries (Canada, for example), but the Commission does not believe it will be needed in the United States if present per- centage depletion provisions are retained and, as recommended, broader expensing of exploration and development costs is permitted. Moreover, the Commission is convinced that a tax moratorium provision would be particularly difficult to admin- ister in the United States.* *See vol. V, Taxation of Canadian Mineral Industries. Page 35 The Commission has not examined the State and local tax situation for minerals sufficiently to justify a formal recommen- dation. It wishes, however, to invite attention to the adverse effect of State and local ad valorem taxes on the extension of mineral reserves by private companies. The evidence is con- flicting as to just how serious an obstacle to exploration and development of reserves these property taxes are, but unques- tionably there is substance to the widespread complaints on this score. Whenever State and local governments can substi- tute severance taxes, or taxes on gross or net proceeds for ad valorem taxes on mineral reserves, they will make a contribu- tion toward improving the Nation's minerals position. ENCOURAGING SMALL-SCALE MINING Although the larger companies today account for most pro- duction of major minerals and can best afford the costly new techniques of subsurface prospecting, an important role re- mains for the small prospector and mining concern. Among other contributions, they perform a function of importance to the Nation in undertaking operations on small deposits of im- portant ores, many of which occur in no other way and which would otherwise be passed by. It is also important to en- courage the continued operation of small prospectors and mining concerns because they provide an important pool of trained manpower available for expansion of minerals output in the event of emergency. Many small mining concerns today operate under economic handicaps. Their margin, if any, above operating costs tends to be too small to give them the opportunity of exercising the privilege of treating outlays for exploration and development as Chapter 8 Wood is one of the Nation's basic industrial materials. Despite increasing use of many competing materials, lumber remains indispensable in building construction, shipbuilding, furniture manufacture, and dozens of other enterprises. Nearly all paper and paperboard comes from woodpulp, and much of the fuel supply of rural areas comes from the woodlot. In 1950, the total value of the timber cut, as it stood in the forest, was about 1 billion dollars. Production of timber-based industries turn- ing out lumber and other wood products, paper and allied products, and furniture, totaled about 15 billion dollars. Timber used to be even more important in the national econ- omy. Total consumption of forest products was actually some- what smaller in 1950 than in 1900, although during that period domestic consumption of farm products more than doubled and consumption of minerals reached six times the 1900 level. Part of tke decline of timber was inevitable. The continued development of domestic metals industries and the general advance in technology have greatly reduced the country's early heavy dependence on timber as a raw material, only partly counteracted by such mounting demand as that for wood- current expenses, or to benefit from the alternative of percent- age depletion. Other incentives, designed for their needs, should be provided. Some encouragement to small-scale mining al- ready is being given through loans under the program of the Defense Minerals Exploration Administration. The Commis- sion believes that encouragement on a broader base would benefit the Nation. The Commission recommends: That legislation be enacted establishing a system of finan- cial assistance to small mining operations. The Federal agency {presumably the Bureau of Mines) charged with responsibility for the program should be empowered to make advances, up to $100,000 to any single applicant, to support prospecting for new deposits of minerals of strategic importance for which domestic reserves are in- adequate or for the exploration and development of known deposits of such minerals. Interest charges should be moderate, but a payback of 120 percent of the capital sum advanced should be required if the financial success of the venture permits. Advances for prospecting should be granted only on the condition that at least 25 percent of the costs of the venture are supplied by the applicant, and upon a finding by the administering agency that the applicant is well qualified to carry out the project and that the measure of risk is not exceptionally large for the type of prospecting contemplated. Advances for develop- ment should be granted only upon a finding that the proj- ect has reasonable prospect of success. The total amount of advances authorized should be on the order of 15 million dollars over a period of 5 years. pulp to make paper products. Another reason for smaller use of timber has been dwindling domestic supplies. Most of the country's virgin timber has been felled. New growth on the cutover areas is running far behind the annual cut of saw timber. The consequent higher costs, reflecting both market scarcity and costs of replacement, have edged timber out of uses to which it is well adapted; and exhaustible materials have taken the place of renewable timber because they are cheaper. And the United States has moved from export to import basis. Altogether forest products present a classic example of how depletion leads to higher costs and changes in resource use. If, far beyond 1975, timber were to become more plentiful it might recapture some of its traditional outlets and take over some tasks customarily performed by exhaustible materials. The possibilities of dozens of new timber products already have been demonstrated in the laboratory and pilot plant. Although in 1975 timber will still be a major industrial material it is likely that requirements for some forms of wood will be reduced, especially in view of the relatively high prices. The general prospect for the 1970's is of high demand and tight supply. Making the Most of Timber Resources Page 36 USE OF U. S. SAW TIMBER OUTSTRIPS GROWTH (Billions of Board Feet) 20 40 60 81 100 H DRAIN [_] ANNUAL GROWTH Source: Forest Service, U. S. Dept. of Agriculture □ ADDITIONAL GROWTH NEEDED Timber supplies can be expanded by increasing domestic growth, but it takes 50 to 80 years to grow a tree suitable for lumber, and about 15 to 40 years to grow pulpwood. Thus, in terms of timber policy, 1975 is a way station. Sinee domestic conditions for timber production are relatively favorable, the ultimate goal is to produce at home enough timber to meet most current domestic needs on a sustained-yield basis, includ- ing new uses that will be developed and, in addition, to supply some exports. Allowing for imports of teak, balsa, and other woods that the United States can obtain at lowest cost from abroad, a small net export balance would benefit the free world as a whole. In the meantime, the problem is how to produce each year as much as possible of the timbers most needed with- out impeding progress toward the ultimate goal.* The extent to which new growth of timber can be brought into balance with consumption will depend importantly on how well forest land is managed and how efficiently its products are used. There is plenty of land for trees to grow on. About 460 million acres—roughly one-quarter of continental United States—are suitable and available for producing commercially valuable crops of timber. Alaska also has many million acres of forest land that will contribute to the domestic timber supply. Within the next 25 years the areas that are economically ac- cessible may be producing close to their sustained-yield capac- ity and add about 2 percent to the United States total supply. Only in the last 50 years has the United States begun to treat forests as renewable. Annual growth of saw timber still is less than half enough to meet current requirements and future demand on a sustained-yield basis. Until quite recently the whole price structure reflected, and consequently reinforced, the attitude that the Nation's timber could be treated more as a mine product than a crop. Price of products was determined mainly by costs of logging, milling, and transportation. Standing timber was procurable at prices that did not allow for the costs of regenerating the timber crop. Since 1940, however, the relative rise of timber prices has stim- ulated sustained-yield production, and prices now seem to re- flect the costs of protecting standing timber and of regeneration. *See vol. V, The Free World's Timber Resources. CONSUMPTION AND GROWTH: 1950-75 The United States used 12.9 billion cubic feet of primary timber products in 1950, and about 45 percent of this repre- sented saw logs for lumber. Roughly one-quarter of all timber consumed was used as fuelwood, about one-fifth as pulpwood. The small remaining fraction was divided among a wide va- riety of uses, including mine timbers, piling, and fence posts. The Commission's projections, assuming price relationships among timber and competing materials similar to those prevail- ing during the first half of 1950, indicate an increase of more than 10 percent in total timber requirements by 1975, but with marked changes among some of the principal uses (table I) Meeting the Nation's timber requirements is largely a domes- tic problem. Imports in 1950 (mostly from Canada) con- tributed about 1.4 billion cubic feet to our supply. Less than a third of the imports were in the form of lumber. The estimates for 1975 indicate that imports of pulpwood or its equivalent in pulp and paper may total around 1 billion cubic feet, about the same as they were in 1950, but no allowance is made for net lumber imports in estimating the situation in 1975. SAW TIMBER CRITICAL RESOURCE The Nation's timber supply situation is critical chiefly because of the scarcity of saw timber. Annual growth of timber of all kinds already is almost in balance with drain from cutting and from losses caused by fire and epidemics, and it seems likely that before 1975 total growth will be running somewhat ahead of total drain. But for saw timber—that is, wood suitable for manufacture into lumber, **See vol. V, Domestic Timber Resources. Table I.—Distribution of timber products consumed in the United States, 1950, and estimated requirements, 1975 1 Product Commercial unit of Sawlogs for lumber 2.. Pulpwood 3 Fuel wood Veneer logs 4 Mine timbers Fence posts Cooperage bolts 5. . . . Hewn railroad ties. .. Poles Piling All other Total. Board feet.. Cords Cords Board feet.. Cubic feet.. Pieces Board feet.. Pieces Pieces Linear feet. Cubic feet.. Volume 1950 1975 Million 40, 850 34 49 2, 730 100 230 690 12 7 32 250 Million 44, 950 51 40 3, 900 110 250 650 8 6 30 280 Equivalent cubic feet of round wood 1950 1975 Million 5, 719 2, 652 3, 332 355 100 161 104 72 89 22 250 12, 856 Million 6, 293 978 720 507 110 175 98 48 76 21 280 14, 306 1 The comparison of 1950 and projected 1975 requirements indicated in this table differs from that indicated for all forest products (chart, p. 25) for two reasons: (1) this table, dealing only with timber products, excludes naval stores; (2) the chart, which reduces many kinds of products to a common denominator, is weighted by constant-value prices, unlike this table, which is based on physical volume alone. 2 More than half used in construction in 1950. Other important uses: factory products (chiefly furniture, but including a wide variety of other products), boxes, crates, pallets, and other articles used in shipping and railroad ties other than the hewn ties listed separately. 3 Includes, as pulpwood equivalent, net imports of wood pulp and paper. 4 Chiefly used in making plywood. 5 Used for making barrel staves. Page 37 MUCH SAW TIMBER NEVER BECOMES LUMBER (Billions of Cubic Feet) SAW TIMBER MATERIAL 11.6 (TOTAL DRAIN. ALL GROWING STOCK) 13.5 FUEL WOOD PULPWOOD FENCE POSTS, MINE TIMBERS, ETC. FIRE, INSECTS, DISEASE LOGGING WASTES Source: Forest Service, U. S. Dept. of Agricultvre SAWLOGS FOR LUMBER, COOPERAGE BOLTS, VENEER LOGS, ETC. plywood, and other products requiring sound logs of consider- able size—the rate of drain in nonvirgin stands exceeds the growth rate by about 40 percent. When the remaining virgin forests are also considered, the discrepancy is even greater, for these forests put on no substan- tial net growth. In 1950 the total drain on saw timber in domes- tic forests amounted to 56 billion board feet, an excess of more than 50 percent over that year's growth rate of about 36 billion board feet. Needs for lumber and other products which can come only from trees of saw timber size were not the only cause of the deficit. Much saw timber goes into requirements that could be satisfied with wood from smaller logs. About 70 percent of the pulp wood, for example, is cut from trees of saw timber size, 35 percent of the mine timbers, 20 percent of the fence posts, and even about 15 percent of the fuel wood. In 1975, if present trends in forestry continue, annual growth of saw timber may average between 40 and 42 billion board feet. Projected timber requirements, plus losses of 2.1 billion board feet a year through fire and epidemics (half the present annual losses from those causes), would result in a total drain of more than 66 billion board feet a year. Thus, unless current trends can be modified, sawr timber drain in 1975 might exceed the domestic growth of trees capable of being used for saw tim- ber by more than 50 percent. MEETING 1975 REQUIREMENTS Present rates of improvement in forest management and timber utilization have been taken into consideration in esti- mating approximate levels of growth and drain in 1975. These trends, although in the right direction, are weak. They point toward a wider rather than a narrower gap between require- ments and annual supplies. Unless vigorous action is taken the Nation will either encounter a serious shortage of wood prod- ucts in the next few years or be forced to mine its standing timber to an extent that will create an even more critical shortage later on. The Commission believes that the difficulties can be surmounted but only through Nation-wide effort on a broad scale. The task of bringing about a balance between demand and annual supply is tremendous. There is much room for improvement in rates of timber growth and efficiency of utilization. Under present practices, for example, about one-quarter of the total wood content of a tree is left in the forest and another quarter is lost during mill- ing. About two-thirds of the milling offal but only a little of the logging offal is salvaged as fuel. There are many oppor- tunities for routing a larger proportion of felled trees into salable end products and for using a larger volume of low- quality trees. The gains that can improve the timber supply situation most directly are those that channel wood products Page 38 into their highest uses. When more logging offal and milling slabs, chips, and sawdust can be made into products for which lumber is now required, and when more of the inferior hard- woods can be used for pulp, the pressure on the critically short saw timber will be reduced correspondingly. At the same time, the value of stumpage will be increased without necessarily raising prices of finished lumber. The present trend toward greater net growth can be ac- celerated. In recent years fire has destroyed an annual average of 500 million cubic feet of growing stock, and disease and insect epidemics perhaps a billion cubic feet more. These annual losses have included about 4.2 billion board feet of saw timber. If programs of protection continue at their present level, losses from fire and epidemics might be cut in half by 1975, thus increasing net growth. Losses could be reduced much further through wider use of techniques that are already known, but in projections for 1975 the Commission assumes only the gain of one-half. On the more positive side, timber growth itself can be in- creased through new plantings, careful thinning, selective cutting, and other silvicultural practices. Federal foresters be- lieve that a doubling of the present growth rate of saw timber is an attainable, though distant, goal and that an even greater gain is theoretically possible. There would be a time lag before the effects of better silviculture would increase timber supplies, although the volume of timber ready for cutting in 1975 should to some extent reflect work of the next 10 or 15 years. Despite the great possibilities of improving timber utilization and forest growth, nobody expects progress along those lines to be sufficiently fast to bring the Nation's saw timber budget into balance by 1975. Fortunately, there still arc some reserves to draw upon. If cut skillfully, the remaining virgin timber may be enough to see the country through the interim period while the growth on other forest land is being built up. About 44 million acres remain in virgin forest and on this land, less than 10 percent of total acreage in commercial woodland, stands about half of the total volume of saw timber (see table II). Two Keys : Technology and Management . Making better use of each year's timber harvest is for the most part a job for technology.* Increasing annual supplies is largely a question of forest management. The Nation's com- mercial forest areas are large and diverse; there is no chance of finding a panacea. There is no uniform Nation-wide forest management problem. The general type of problem and the nature of the programs likely to be effective are determined largely by the way in which forest land is held—the type of ownership and the size of the tract. About three-quarters (344 million acres) of the country's commercial forest land is privately owned. Lumber companies and pulp companies hold about 12 percent of this private land—mostly in large tracts. About 40 percent consists of wooded tracts in farms. The other 48 percent is in nonfarm holdings, and few of the owners are in the business of harvesting or processing timber products. About 400 of the private forest ownerships contain 50,000 acres or more. About 3,000 are of medium size, between 5,000 *See vol. IV, The Technology of Forest Products. Table II.— Volume of saw timber on commercial forest lands in the United States, 1945 Commercial forest area Volume of saw timber Section Average per acre Total Thousand M illion board feet 234, 075 340, 091 Board acres i 167, 140 i 184, 944 feet 1, 400 1, 839 North South West: Second-growth area 66, 101 41, 356 235, 475 807, 081 3, 562 19, 515 Virgin area Total 107, 457 1, 042, 556 All sections: Second-growth area 415, 234 44, 307 778, 897 837, 825 1, 876 18, 910 Virgin area Total 459, 541 1, 616, 722 1 The remaining virgin area in both the North and in the South amounts to less than 1 percent of the commercial forest land. and 50,000 acres. Holdings of less than 5,000 acres are classi- fied as small; most of them are of less than 100 acres, many only a few acres. About 3.2 million small forest holdings are owned by farmers; a million by nonfarm owners. The publicly owned commercial forest land (116 million acres) is distributed as follows: National forests, &3 percent; other federally owned land, 14 percent; owned by State and local governments, 23 percent. Growth rates and the quality of timber stands reflect the treatment given to the land. Forest management is a combina- tion of interdependent practices. The first measure of manage- ment is protecting forests from fire, insects, and disease epi- demics. The individual owner can reduce fire hazard by proper disposal of logging slash, dead trees left standing, and other highly inflammable material; and can reduce vulnerability to pests by keeping stands in a thriving condition. But effective control of fire and pest outbreaks is possible only through State-wide and Nation-wide programs. The second measure of forest management is the quality of cutting practices. These range all the way from leaving a few seed trees per acre to intensive silviculture which may involve frequent partial cuttings of merchantable trees, thinning of nonmerchantable material, planting of areas not fully stocked by natural regeneration, and other operations. While there are other elements in forest management, levels of protection and cutting practices provide a good general index of the quality of management. The levels of management have been defined by the U. S. Forest Service as: intensive, good extensive, and fair extensive.f If cutting practices, or fire pro- tection, or both rate poor or below, the land is regarded as "without management." Areas not being operated for timber products cannot be rated and are, therefore, classed as "non- operating areas.55 f Intensive management implies high-order cutting practices and good fire protection. Good extensive management requires good cutting practices and at least fair fire protection. Fair extensive management requires fair cutting practices and at least fair fire protection. Page 39 A Nation-wide study conducted in 1945 by the Forest Serv- ice, with the cooperation of the State foresters and others, indi- cated that not much more than one-third of the Nation's com- mercial forest land was under management and that about one-eighth was not being operated. Most of the commercial forest land received some degree of fire protection. On half of the seven-eights of forest land that was in operation, cutting practices were unsatisfactory. The situation was best for land held publicly or by large private owners. Considerable progress has been made since then, but the situation remains unsatisfactory; the poor management of most small privately owned holdings is the most critical area. More recent figures are not available on a national basis, but a study by the American Forestry Association covering privately owned commercial forest lands in 25 States for the 1944-49 period indicates what has been happening. (See table III.) The 25 States covered by the Association's survey contain the bulk of the land held by large timber-operating companies. Consequently the survey is not entirely comparable with the earlier Nation-wide study of the Forest Service. For the large commercial ownerships, progress from 1944 to 1949 was remarkable. Considerable progress was also made by the nonindustrial private owners, almost all of them small holders, but they had farther to go in the first place to reach a satisfactory level of management. The time element appears to be the chief reason for the wide differences. Commercial forest land in public ownership and that owned by large and medium-sized holders is relatively well managed because the owners think in long-range terms. Small holders of forest land often have very different attitudes. For a farmer the woodlot is a minor source of income and he usually thinks of it in terms of selling off all the timber at once. Small nonfarm woodland owners generally think even less than farmers of managed, sustained-yield timber production. The idea of timber as a continuing crop has spread slowly: it in- volves plans that stretch over one or two generations. Thus ordinary principles of financial accounting have only limited appeal to the owners of more than half the Nation's commercial forest area. Frequently the immediate inducement to make money out of timber as a crop is small, even though Table III.—Management status of privately owned commercial forest lands in 25 States, 1944 and 1949 Acreage held Percent of acreage held: Ownership class Under intensive manage- ment Under extensive manage- ment Without manage- ment Not oper- ating Thousand Industrial: acres Percent Percent Percent Percent In 1944 55, 783 11 32 51 6 In 1949 58, 164 22 40 33 5 Other nonfarm: In 1944 80, 967 2 16 65 17 In 1949 78, 617 3 22 58 17 Farm: In 1944 96, Oil 2 16 71 11 In 1949 98, 053 5 22 62 11 All classes: In 1944 232, 761 4 20 64 12 In 1949 234, 834 9 27 53 11 over the years the possibilities may be great. Many individual owners may not lose seriously by failing to manage their timber holdings on a sustained-yield basis, but industries based on timber, and the Nation as a whole, do lose heavily. RECOMMENDATIONS The Commission has concentrated its attention upon strengthening weak spots in programs that can be dealt with by national action rather than upon the other fundamental efforts that will be carried on by State and local governments, private forest owners, and logging and lumber milling indus- tries without any special assistance. The Commission does not, for example, undertake to review private industrial research which is of dominant importance in forestry and in the utilization of forest products. Large forest owners and logging and milling operators already are in a position to contribute to, as well as take full advantage of, gains in technology. Few appear to need either further en- couragement or assistance. The forest land held in large tracts by industrial interests is comparatively well managed, and most of the present holders can be expected to raise their level of management without large-scale help from Government. The principal contribution of the Federal Government should be leadership in Nation- wide programs of protection against fire, insects, and diseases. Public forest land also is relatively well managed. But there is much room for more active management. Almost all of the remaining virgin timber is either publicly owned or held by large industrial interests. Most of it already is relatively well managed. The greatest need is for action to facilitate cuttings from areas now difficult of access. The greatest opportunities for increasing timber growth are on the small tracts of farm and nonfarm private owners, who among them hold more than half of the commercial forest area. Most of them need to be persuaded of the benefits of developing sustained-yield timber production, acquainted with the man- agement practices applicable to their tracts of woodland, and assisted technically, and sometimes financially, in carrying out those practices. General Recommendations protection against fire Some 66 million acres of private and State forest land are still without organized fire protection. Fire damage to standing timber on this unprotected area averaged 26 million dollars per year during the 1944-49 period. On the protected area of more than 400 million acres it averaged 12 million dollars. These estimates do not include the great, though immeasurable, losses caused by fire in destroying new growth and impairing watershed protection. Legislation enacted in 1949 authorized a step-up of Federal financial assistance for protection of private and State lands from an annual maximum of 9 million to 20 million dollars, provided States match Federal payments on a 50-50 basis. Federal appropriations for the authorized cooperative program never have exceeded 10 million dollars. State expenditures dur- ing the fiscal year 1951 totaled more than 23 million dollars. Page 40 ESTIMATED FUTURE U. S. NEEDS 1950 EQUALS 100% NON- FOODS FOREST PRODUCTS MINERALS (EXC. GOLD) State foresters have estimated that the cost in terms of 1949 prices of a program that would include the presently unpro- tected area and bring all protection up to desirable standard would be about 48 million dollars a year. The Commission recommends: That annual Federal appropriations for the cooperative Federal-State fire protection program be increased up to the authorized level of 20 million dollars annually, on condition that matching State funds are contributed. PROTECTION AGAINST INSECTS AND DISEASE Epidemics of forest insects and tree diseases make tremen- dous periodic inroads on the supply of commercial timber. The combined loss is hard to estimate in dollar values but is far greater than the loss from fire. Gaging the level of future losses is even more difficult because no one can tell what pest will strike next. Some epidemics can be suppressed, or at least held in check, if enough resources are thrown into the battle. The spruce budworm outbreak in the Pacific Northwest, for ex- ample, has apparently been controlled with DDT. But there are other diseases such as the chestnut blight and the pine little- leaf disease for which no control measures yet devised have proved effective. Among current threats to the timber supply are oak wilt, which is spreading in the Central States; pole blight, which is endangering young stands of white pine in the West; little-leaf disease, which is killing shortleaf pine in the South; and the Engleman spruce beetle, which already has killed 4 billion board feet of timber in Colorado. The enormous task of checking these and other insect and disease epidemics calls for cooperation among the Federal Gov- ernment, the States, private organizations, and individual for- est owners. In nearly every effective campaign there are three phases: research, detection, and suppression. In 1950 combined Federal, State, and private expenditures for combating epi- demics totaled about 8 million dollars. The program on that scale did not bring adequate protection. The Commission recommends: That the Bureau of Entomology and Plant Quarantine, in consultation with the Forest Service and other inter- ested Federal and State agencies and industry groups, de- velop as a basis for action by Congress a comprehensive program of forest pest control, including research on for- est insects and tree diseases and measures for their detec- tion and suppression. RESEARCH ON MANAGEMENT AND UTILIZATION Total Federal and non-Federal expenditures for forestry and wood utilization research in 1949 amounted to almost 17 mil- lion dollars. About 32 percent of this total was spent by indus- trial corporations, 29 percent by the Federal Government, 24 percent by the States, and 15 percent by private institutions and colleges. The combined expenditures in 1949 were nearly three times the level of 1940. But the expansion of forest research has not been large enough. Some critical problems of regeneration, protection, and uti- lization still are not getting enough attention. Most of the East- ern forests contain a large surplus of unused and unwanted hardwoods. There is a need to develop profitable outlets for such material in order to get these woods removed from the stands and thereby make room for more desirable species. Current expenditure for research into methods and equipment for control of fire is at a level of $125,000 per year, an inconsid- erable figure in comparison with the millions of dollars lost in forest fires or spent in combating them. Tree breeding offers great possibilities. Hybridization of pines and poplars has produced progeny that grow far more rapidly than either parent. Further development of rapid-growing and disease-resistant forest trees is needed. Much remains to be done to determine possible uses of timber that might be ob- tained from other countries, particularly that grown in tropical forests. The Forest Resource Survey, one of the long-range programs of the Forest Service, should be completed and kept reason- ably up to date. New legislation authorizing its continuance on an adequate scale has been passed, but the necessary funds have not been appropriated. There is need for more complete knowledge of the chemical conversion of wood into new or improved products. Lignin, for example, constitutes about one-fourth of the weight of wood. It is the principal residue of pulping operations. Its exact chemi- cal structure is still imperfectly known, and it is little utilized. Methods of pulping hardwood should be improved so that species now of little value can be used more widely. The ad- vance toward more complete utilization should be on a broad front with emphasis on use of inferior wood or byproducts to fill requirements that now call for saw timber. The Commission recommends: That the forest research programs of all agencies, Federal, State, and private, be further strengthened, especially those relating to woodland management and wood utilization. That Federal forest research expenditures by the De- partment of Agriculture should be doubled, through use of an additional 5 million dollars annually. The Commission hopes that State and private research ef- forts will be augmented by at least an equal increase in spending. Recommendations To Benefit Small Owners education and technical assistance Almost 60 percent of all commercial forest land is in farms and other small nonindustrial holdings. About a quarter of this land is under management. Generally, the small holdings are the most accessible and are potentially productive. Progress Page 41 toward better management is much too slow to provide the quantity and quality of timber this source should provide. Extension work in forestry w:as authorized in the Smith- Lever Act of 1914 and the Clarke-McNary Act of 1924 as part of the general Federal-State extension program for farmers. Sixty-five foresters were employed in this program at the begin- ning of 1952. Their work of mass education has been well done, but they are spread thinly. Except for occasional demonstra- tions, personal attention to small owners is not possible. The Norris-Doxey Act of 1937 set up on a cooperative Federal-State basis the first technical service for farm forest owners. This program was expanded by the Forest Manage- ment Act of 1950 to include technical service to all owners of small forest holdings and to operators of small timber-processing enterprises. About 230 publicly employed foresters now pro- vide this kind of service. Each can give technical assistance to about 100 persons per year, and most small forest properties would require such services about once every 10 years. A force of about 2,000 men could service 2 million owners once every 10 years. Such a program could be developed over a period of 5 to 10 years at an annual cost, full-scale, of about 15 million dollars. Under present arrangements the Federal Gov- ernment would bear half the costs. The Commission recommends: That the Department of Agriculture's present program of technical assistance to small woodland owners and small timber processors be expanded as rapidly as practicable, with the ultimate aim of providing the staff of 2,000 field men that a comprehensive advisory service would require. The expense should be shared equally by the Federal Gov- ernment and the participating State governments. These education and technical service programs should pro- vide a powerful stimulus for parallel private effort. PLANTINGS ON PRIVATE LAND About 75 million acres of commercial forest land are poorly stocked or deforested. Forest planting in the period since the Second World War has been substantial: about 500,000 acres were planted in fiscal year 1950, four-fifths on private lands. The bulk of the planting stock is being produced in State- owned nurseries, and there are also a few industry-financed nurseries. The Commission believes that encouragement of plantings on private land should continue to be primarily a pro- gram for the States. Prior to 1949, the Federal authorization for assisting State nursery programs was $100,000 per year, but the ceiling now has been raised to 2.5 million dollars: Annual appropriations, however, have not gone much above $100,000. The Commission recommends: That the Federal Government's financial aid to the States for the production of planting stock be raised to the full 2.5 million dollars annual contribution authorized by existing law as soon as a tapering off of the need for im- mediate defense appropriations eases the Federal budget situation. FOREST CREDIT AND FOREST INSURANCE Existing credit facilities are not well adapted to the needs of owners of small forest holdings. The owner who wants a loan to build up the value of his property for sustained-yield timber harvesting in the future encounters great difficulty. A long-standing ruling of the Comptroller of the Currency prevents national banks from making such loans on the ground that forest land is not improved property. As a rule the Federal land banks make loans on forest lands only as part of loans keyed to the value and operating pattern of an entire farm. In the past few years there have been some instances of land bank loans on nonfarm forest lands, partic- ularly those producing relatively short cycle pulp woods. With revision of their charters, it would be possible for the land banks to assume a broader function in the field of forest credit. In general; however, the differences in duration, nature, and the terms between forest and farm loans, and the differences in organizational arrangements needed for administering them, suggest many more disadvantages than advantages in attempt- ing to add the responsibilities of a comprehensive system of for- est credit to the Land Banks' present functions. In most instances the existing credit system puts pressure on small forest tract owners to cut all their timber at once. The basic need is for long-term loans at low interest, with payments of interest and principal geared to a forest management plan of periodic cuttings. The Commission recommends: That a national system of forest credit be set up within the framework of the Farm Credit Administration with loan funds initially provided by the Federal Government. The loans should be on a self-liquidating basis and the system should be organized with a view toward encourag- ing the participation of private banking institutions and eventual transfer of the lending function to private hands. The Commission believes that the administration of such a system of forest credit should be related as closely as possible to the expanded program of technical assistance recommended above. Borrowers should be expected to follow management plans approved by the lending agency. The credit system should be used deliberately to encourage the consolidation of smallest holdings into manageable units. Related to the need for credit is the need for forest insur- ance—particularly for the small nonindustrial forest property. The Commission has not been able to assess the extent of this need or to estimate the capital and running expenses that might be required at the start, but recognizes its urgency. The Commission recommends: That the forest credit system, recommended above, should be authorized to develop an insurance service ancillary to its credit functions. As with forest credit, the objective should be to develop and prove feasibility of the service with a view of transferring it to private insurance enter- prises as soon as these institutions are willing to enter the field. Page 42 POOR CUTTING PRACTICES WASTE FOREST RESOURCES GOOD AND HIGH ORDER CUTTING U. S. COMMERCIAL FOREST ACREAGE - 1945 (In Millions of Acres) FAIR CUTTING POOR AND DESTRUCTIVE CUTTING TOTAL PUBLIC LAND LARGE PRIVATE OWNERS MEDIUM PRIVATE OWNERS SMALL PRIVATE OWNERS Source: Forest Service, U. S. Dept. of Agriculture FOREST TAXATION The ad valorem property tax, as normally applied to forests, has to be paid annually. But income from timber property— especially from a small property—usually can be obtained only at fairly long intervals. Furthermore, as the timber crop ap- proaches maturity, its value, and hence the tax, increases. This has a tendency to force the owner to cut before the timber has reached optimum size. A number of States have enacted laws placing forest property in a special class for taxation purposes. In most instances these laws apply only to forest land in need of rehabilitation, but in a few States they apply to all forest land. The usual procedure is to separate bare land value from timber values. The land continues to be subject to a nominal annual tax. The timber, on the other hand, is relieved of the property tax and bears a "yield tax" amounting to a specified percentage of the value of the timber at the time it is harvested. This device removes most of the tax pressure toward premature cutting. The State of New 'Hampshire has a yield tax law that goes a step farther by offering a partial rebate of tax to those owners who manage their timber according to approved practices. The Commission believes that the yield tax, with or without rebate for good management, is a sound device. The Commission recommends: That the States, as rapidly as practicable, substitute yield taxes for ad valorem taxes on timber. In States where there is small prospect of replacing the ad valorem tax promptly, procedures for assessing timber property can be improved considerably. The main requirement is a recognition on the part of the assessor that the bulk of the standing timber will be marketed in the future and has, there- fore, a current discounted value which is substantially smaller than its sales price at the time the cutting occurs. Federal income tax laws have, for some time, recognized the proceeds from timber property, held over a period of time, as capital gain rather than annual income. This has encouraged investment and reinvestment in timber property. The Com- mission believes that this feature of the Federal income tax laws should be retained. REGULATION OF PRIVATE CUTTING The Commission believes that the great majority of forest owners, if encouraged by informational and technical services, will voluntarily adopt good practices of timber management. But a minority of forest owners and timber operators may not respond to persuasion even though they continue to receive the benefits of organized fire protection and other publicly financed programs in behalf of forestry. There should be some assurance that forest lands will not be reduced to an entirely unproduc- tive condition through destructive cutting. Four or five States have enacted laws designed to put a floor under cutting prac- tices. Compulsory laws of this character have been tested and upheld in the courts. The Commission believes that universal adoption by the States of laws prohibiting destructive cutting would be in the national interest. The Commission recommends: That the chief role of the Federal Government during the next 5 years in prohibiting destructive cutting should be to lend whatever assistance it can to the States in setting up systems of compulsory regulation. This would include careful appraisal of experience gained thus far in States that have undertaken the regulatory job, drafting of a model law for consideration by State legislatures, and devising procedures for necessary local adaptation of cutting-practice rules. U. S. PRODUCTION VS. USE USE EQUALS 100% 1900 1950 102% 93% Page 43 The Commission further recommends: That the Federal Government should provide financial assistance, perhaps up to 3 million dollars a year on a 50—50 matching basis, to the States for administration of their laws regulating cutting. That, if after 5 years there still remain important gaps in the State system of compulsory regulation, Federal legis- lation should be enacted authorizing the Federal Govern- ment to establish minimum cutting practice regulations. Cutting practices that can practicably be enforced by law will necessarily be rather mild. These can be expected to re- strain the owner or operator from taking all the timber that he can cut and thus prevent complete liquidation and extreme deterioration of stands. However, such practices cannot assure the needed growth. Recommendations on Federal Forests The volume of timber cut from federally owned forests has been increasing. In 1950 it represented about 9 percent of the national output of timber products. This volume is consider- ably short of the allowable annual sustained-yield cut that could and should be taken off. The chief impediment is lack of neces- sary access roads in fairly large areas of the West. The ultimate sustained-yield capacity of the national forests alone, according to Forest Service estimates, is 10 billion board feet, nearly three times the cut in 1950. The Commission believes that the time has come for more active management of the Federal forests. This implies intensified protection against fire, and a greater protection against insects and disease. There is also a need for cultural work to improve the growth and the quality of young stands. ACCESS ROADS The Forest Service and other agencies administering Federal forest lands in the West have estimated that allowable annual sustained-yield cut could be increased by 2 or 2.5 billion board feet by the construction of about 6,000 miles of main tap roads. The 1950 cut from all federally owned commercial forest land was 4.7 billion board feet. The Commission recommends: That tap roads be built to give access to federally owned commercial timber lands in the West, administered by the Department of Agriculture and the Department of the Interior. Some 6,000 miles of such roads could be com- pleted in about 5 years at a cost of about 30 million dollars per year. The chief advantage in having the main roads constructed by the Government is that each project can be designed to facili- tate efficient cutting of a large block of land over a long period, rather than to give access only to timber that a particular com- pany wanted to cut during a relatively short period. This makes for fairer competition among the bidders for Government tim- ber, raises the price that they are willing and able to pay, and permits the more rapid salvage of dead and over-mature trees that would otherwise be lost. Spur roads and other short and temporary roads can best be built by the timber purchasers as they carry out their logging operations. Receipts from sales of national forest timber in fiscal year 1951 averaged $12.30 per thousand board feet. At such an average price, the Federal Government would continuously recover from 25 to 30 million dollars a year from the 2 to 2.5 billion board feet increase of timber sales made possible by the new road construction. Expenditures for fire protection on the federally owned forest lands in 1950 were 15 million dollars. The objective has been to hold the average annual acreage burned to one-tenth of 1 percent for commercial forest and important watershed lands and to one-fifth of 1 percent for all other lands. Present programs have not achieved these objectives. The Federal fire protection program should be strengthened in order to achieve an adequate measure of protection for federally owned forests. PLANTINGS Because of fire and other calamities, several million acres of federally owned forest land are now idle or nearly so. An act of October 11, 1949, authorized the appropriation of funds for planting 4 million acres of denuded and partially stocked national forest land in a 15-year period. Some 315,000 acres of forest land held in trust for Indians, and 500,000 acres of other federally owned forest land are also in need of planting. For a comprehensive program of replanting on federally owned forests, an annual expenditure would be required of about 10 million dollars over a 15-year period. If this expendi- ture were regarded as an advance of capital rather than a recur- ring current expense, such outlays would be a sufficiently sound investment to justify initiation of a full-scale program as soon as the need for defense appropriations levels off. The Commission recommends: That the legislation authorizing planting of Federal forest lands be amended to extend to all denuded or partially stocked Federal forest lands capable of yielding sufficient timber to provide a good return on the funds invested. That appropriations be made for initiating a compre- hensive planting program and carrying it forward to com- pletion as soon as practicable in view of urgent needs for defense appropriations. TIMBER-STAND IMPROVEMENTS Cultural work required on Federal forest land would include thinning, pruning, and the removal of unmerchantable cull trees. A limited amount of such work, under authority of the act of June 9, 1930, is now being done on national forest sale areas. This is financed by receipts from sales of Federal timber. The Commission recommends: That the Federal Government raise the level of silvicul- tural work on its commercial timber land at least to the level maintained on intensively managed private forest lands of comparable value. Page 44 PROSPECTIVE COSTS AND RETURNS Combined Federal-State expenditures in connection with forestry programs and utilization of forest products have been running at an annual level of about 100 million dollars in recent years. If all of the Commission's proposals for stronger programs for timber were carried out fully and without delay (in some instances earlier than present priorities for defense spending will actually permit) annually recurring Federal and State expenditures would be increased by about 77 million dollars a year. Of this sum 20 million would go into fire protection, 20 million into insect and disease control, 15 million into technical assistance to woodland owners and timber processors, 5 million into aid in tree planting and 6 million into administra- tion of State cutting regulations. All five of these increases in spending would be shared equally by the Federal Government and the States. The rest of the 77 million dollar increase would be borne entirely by the Federal Government—6 million dollars a year for added fire protection on Federal land and 5 million an- nually for additional research. Other Commission recommendations have called for new capital investment on federally owned timber land, totaling 360 million dollars. Of these, the building of access roads would cost 150 million dollars—30 million a year for 5 years. A 15-year planting program would cost 150 million at the rate of 10 million annually, and a 15-year program for improve- ment of timber stands would cost a total of some 60 million dollars at a rate of 4 million a year. No estimates have been made for costs of forest credit and insurance programs, which ultimately would be self-sustaining. What would the country be getting for its money? Federal receipts from the sale of timber could be expected to increase by 25 to 30 million dollars a year as a result of the access roads program. These added annual receipts would con- tinue indefinitely after completion of the roads, because with well regulated cutting, areas now in virgin forest would begin to put on net growth, instead of remaining stabilized or perhaps actually losing in timber values. Maintenance of the roads would be the only offsetting expense that would continue. It is impossible to estimate the return from the other separate recommended improvements. Their effects would be cumu- lative, with considerable interaction among them. Taken all together the intensified programs would gradually increase annual timber growth. Within the next 25 to 50 years this increase should add 10 to 15 billion board feet a year to the supply of harvestable saw timber. At 1950 prices this would add 120 to 170 million dollars a year to stumpage values. Thus it appears that by spending 77 million dollars a year more, and making capital investment of 360 million dollars, the Nation could add at least 120 million dollars and perhaps as much as 170 million to the annual timber harvest. Finan- cially, the recommendations seem justified. At the same time they would assure continuing supplies of an indispensible raw material for industry. Chapter 9 Improving Agricultural Resources The farms of the United States supply many raw materials important in industry—cotton, wool, and other fibers; hides and skins; fats and oils for paints and soaps; tobacco; industrial alcohol; and others. In addition, a number of the crops grown primarily for food or feed have secondary uses as sources of such industrial materials as plastics and starch. Farm-based in- dustrial products may become even more important in the future as demand provides the incentive, and technology the means, of substituting renewable products of the soil for ex- haustible materials. Agriculture exerts a strong influence on the whole economy of the Nation. In the United States, in contrast to many other highly developed industrial nations, farming has remained a dynamic enterprise. Productivity per man as well as per acre has consistently increased. Rising efficiency on the farm has released many rural people for other lines of work. The output of commercial farms is able to compete in world markets. The general pattern of trade with other nations reflects the fact that the United States has not had to look abroad for large imports of staple foods and safe sources of food supply. Growing needs of farmers for machinery, fertilizer, and other equipment and materials have influenced the requirements and markets of manufacturing industries. The food supply and details of farm policy and programs are beyond the scope of the Commission's assignment. Any broad study of raw materials, however, must touch on agricultural land, the ultimate source of many nonfood raw materials. Moreover capacity to produce foods as well as materials for industry must be considered together, for if demand for food should strain resources, production of agricultural nonfoods would suffer. Decisions on land use may affect future re- sources of timber or supplies of industrial water. The two great agricultural questions confronting the Com- mission are: Can the farmland of the United States provide the food and industrial raw materials needed in 1975? and, Is any major change likely in the relation of agriculture to the economy as a whole? The demand for farm products, including those required as raw materials by industry, is expected to rise steadily over the next 25 years. Within the Commission's basic assumptions, including a doubling of the gross national product by 1975, an increase of 40 percent in the demand for all products of the land except timber seems reasonable. This 40 percent figure is derived from estimates that a 1975 population of 193 million (28 percent larger than that of 1950) will require production of 42 percent more food, on a constant value basis, and produc- tion of 25 percent more nonfoods. Page 45 The projected increase is necessarily conjectural. What hap- pens will depend on the economic trends that actually evolve, on rates of technological development and population growth, as well as on the even greater imponderables of domestic and international political developments. Nevertheless, the Com- mission believes that the estimate of a 40 percent increase in demands, resting as it does upon detailed analysis of present and past evidence,* affords the best available working hypothesis. Imports are not expected to take up an appreciable part of the required increase. Although imports and exports of many agricultural products will continue to be important, the net has never been large in relation to United States production or requirements. (See table I.) Basically, meeting estimated requirements will be a domestic responsibility in 1975 as it is today. Table I.—Production, imports and exports of agricultural raw materials, for selected years: 7920-50 [Millions of 1935-39 dollars *] Net imports or exports as % of produc- tion Year Production Gross imports Gross exports Net trade position 1950 12, 439. 1 1, 089. 0 1, 038. 5 -50. 5 -0. 4 1945 12, 070. 5 865. 7 1, 145. 3 + 279. 6 + 2. 3 1940 9, 920. 1 965. 6 455. 8 -509. 8 -5. 1 1935 8, 285. 1 881. 4 563. 9 -317. 5 -3. 8 1930 8, 824. 4 900. 1 847. 6 -52. 5 -. 6 1925 8, 770. 8 943. 8 985. 1 + 41. 3 -. 5 1920 8, 278. 0 791. 7 1, 074. 0 + 282. 3 + 3.4 1 Import and export estimates adjusted downward to approximate value at the point of primary production. The Nation's farmers must not only increase total produc- tion, but also provide the right proportions of a variety of prod- ucts. The price structure is the main device of the economy for adjusting the "mix" so as to provide supplies adequate to the demand for each farm-produced commodity. Although there is need for special measures to minimize short-range fluctua- tions in farm prices, a price structure pinned legislatively to an anachronistic base could prevent the price incentive from calling forth efficient, balanced use of land and production. HOW PRODUCTION CAN BE INCREASED Most of the desired 40-percent increase in agricultural pro- duction can come from wider application of technology to in- crease crop and live-stock yields per acre. The rest of the gain in production can come from shifting the use of land already in farms so as further to increase the productivity of present agricultural acreage. As an additional safety factor, there are well over 100 million acres of grass and woodland not now in farms which could be used in crop rotations. Whether or not any large additional amounts of new land will be brought into agriculture is not predictable, but it seems unlikely that the Nation will need to expand to any large extent the total acreage now in farms.** *Details of the estimates of requirements for agricultural products are given in vol. V: Future Demands on Land Productivity. **The exception: About 15 million additional acres probably will be needed to replace farmland swallowed up during the next 25 years by the growth of cities and building of roads and airports. Per-Unit Increases In considering increases in per-unit productivity of present farm land as it is now used, the Commission has first examined those that are possible through improved technology as con- trasted with those that are probable. The prospects—possible and probable—are very different, THE THEORETICALLY POSSIBLE Enormous increases in productivity are theoretically possible through adoption of available technology, even if farmers un- dertake nothing that does not promise profit under price rela- tionships like those of the present. And the Commission's defini- tion of available technology excludes such revolutionary devel- opments as artificial inducement of rainfall on a broad scale or wide application of the principles of photosynthesis, the process by which plants use solar energy to build chemicals into food- stuffs. Advances of this kind could bring about further great increases in agricultural production. A fertilizer study prepared for the Commission concludes that production from present acreage might be increased 200 percent by 1975 if every farmer used fertilizer up to the eco- nomic limit (assuming demand kept up with the increased output) and employed every other known good farming prac- tice, and that a 75 percent increase in productivity could be expected through a more moderate increase in use of fertilizer alone*** Another study prepared for the Commission concludes, on the basis of a poll of experts in agricultural production and agricultural economics, that an increase in productivity of around 85 percent in the next-25 years is technically possible and economically feasible, again assuming that demand would keep pace with output.f The two independent studies leave no doubt that modern agricultural technology, if widely applied, can increase production to a point well above the probable levels of demand. Some Examples of What Can Be Done. Included in one Commission study are records of actual experiments in yields of major agricultural products.f A few examples follow: Yields of corn could rise from the 1950 national average of about 40 bushels per acre to around 80 if liberal use of fertilizer were combined with more widespread planting of high-yielding adapted hybrids, with closer and more uniform spacing, and with adequate pest control. Yields at this level have been demonstrated in thousands of test fields. Much of the farm pasture land that has been allowed to de- teriorate could support two or three times the number of dairy or beef animals now sustained if it were improved by liming, fertilizing, and reseeding with improved types of grasses and legumes. Similarly, the carrying capacity of the more than 300 million acres of publicly owned or managed grazing lands could be in- creased 30 percent or more by various types of range improve- ments and pest control, both at relatively low cost. Milk production per dairy cow could be increased from the 1950 annual average of 5,290 pounds to 8,000 pounds by a ***See vol. V, United States Fertilizer Resources. tSee vol. V, Future Demands on Land Productivity. Page 46 MORE AGRICULTURAL PRODUCTION NEEDED BY 1975 1910 1920 290 180 160 HO Willi 120 - s "^ PER ACRE 60 20 PER FARM WORKER Source: U. S. Depf. of Agriculture combination of improved feeding and improved breeding, in- cluding artificial insemination and the development of breeds for the South that will produce milk in hot weather. The use of antibiotics in feeding of hogs and chickens could raise production significantly. A variety of improvements in feeding and breeding technology could raise production per hen from the present 167 eggs a year to 200 or more by 1975, and reduce the feed required to produce a pound of broiler meat from 3/2 pounds to perhaps 2J/2 pounds. THE PRACTICABLY ATTAINABLE Estimates of possible gains in farm productivity, whether of 200 or 85 percent, tell little about what really will be done in the next 25 years. Such large gains by 1975 would call for prompt, efficient, and very widespread adoption of available technology by the Nation's 5 million and more farmers—a most improbable development. Farmers, like other businessmen, have a normal reluctance to invest in new methods and techniques. Even when farmers became convinced, full adoption could not take place unless the necessary materials and equipment were uniformly available and farmers had the means of paying. BAE INDEX: — 7 935-39 Average = 700—output of crops and livestock Specialists in the United States Department of Agriculture and in the land grant colleges were asked to forecast how great a rise in agricultural production could actually be expected on the basis of present Government agricultural programs and a projection of early 1950 relations between farm and non- farm prices. The consensus was that an increase of nearly one-third in crop and livestock production per acre can be expected from present farm acreage as it is used today. This increase of slightly more than 1 percent a year on a compound basis, although greater than the 0.75 percent a year achieved from 1919 to 1939, is considerably lower than the 2.75 percent annual increase averaged during the decade 1939 to 1949 which includes the war years. Changes in Land Use A rise of around 33 percent in farm productivity per acre would fall short of the required 40 percent increase in total out- put if there were no change in the current pattern of use of farmland. But that pattern can be changed enough to meet 1975 requirements without net addition to total land now included in farm acreage. Much of the land now in farms can Page 47 be put to more productive use, and improvements in technology applied. Three-fifths of the Nation's land is in farms (table II) but considerably less than half of this portion is now used for crops, or rotated between crops and pasture. Shifts are desirable: About 40 million acres of present cropland are subject to such serious erosion hazards that they should be con- verted to grassland (or in a few instances to woodland). Once converted to grass, much of this land could be im- proved to a point where it would contribute greatly to farm productivity as permanent pasture. About 10 million acres of woodland pasture should be cleared. This shift would not impair the effort to increase timber production. Most of the cleared land would be suitable for a rotation of crops and pasture. About 80 million acres of the open permanent pasture should be improved to a point at which the land could be rotated between pasture and crops, and be much more productive than it now is. The new land needed to replace the 15 million acres lost to agriculture through the growth of roads, airports, and cities, probably will come mostly from farm forest land. Some will come from grazing land, and this includes whatever new irri- gated acres are brought in by Federal reclamation projects. Much of the woodland was once in farms. FACILITATING PRODUCTION GAINS The Commission believes that the agricultural increase needed to meet the Nation's 1975 requirements is practicably attainable without great changes in the present economic pat- tern. Assuming continued growth of the national economy, the increase will be brought about inevitably by the play of market forces. The chief problems concern whether the expansion will take place smoothly. An increase of 40 percent in total agricultural production will call for a greater than 40 percent increase in production per agricultural worker. Between 1939 and 1949 the number of persons employed in agriculture dropped nearly 10 percent, to 10,756,000 in the latter year. In 1950 alone, 400,000 people left the farms. A further drop of at least 10 percent in the next 25 years appears likely. Such a decline would be in line not only with past trends, but with the general economic pattern that seems most likely for 1975. One of the general assumptions made by the Commis- sion in looking ahead is that the $1,300 average disposable income (1950) of all citizens, farm and nonfarm alike, will increase about 55 percent by 1975. Assuming no striking change in the relationship of farm and nonfarm prices, a 40-percent increase in farm production would mean only a 40-percent increase in per capita farm income—if farm population re- mained at present levels. This would mean much smaller gains in average income per person for farm people than for nonfarm people—and farm income per person already is below the national average. But with fewer people on farms, gains in production would mean a greater than 40 percent rise in indi- vidual income and approach the Nation-wide trend. The question remains as to whether or not the reduction in farm population will occur smoothly. As long as there are more Table II.—Land in continental United States by uses* [Millions of acres] Land in Land not farms in farms Cropland harvested Cropland used only for pastures Cropland not harvested and not pastured. Open pasture and grazing lands Woodland pasture and forest land grazed. Woodland and forests not grazed Other uses Total 1, 159 *Source: U.S. Bureau of the Census. 7950 Census of Agriculture; prelimi- nary figures. attractive employment opportunities in cities, more workers will leave farms. If the number of farm workers should fall so fast that levels of agricultural production could not be main- tained by compensating gains in technology and increases in capital investment, farm output would fall and prices rise. Under some circumstances there might be a succession of dis- orderly fluctuations in farm production and prices and short- term movement of workers on and off farms. The problem is to facilitate an orderly transition and to help the people who remain in agriculture to increase per capita production. The chief need here, as with the longer range objective of increasing production, is to quicken the spread of technology and investment throughout agriculture. The task concerns con- servation as well as annual production, for if the land base is permitted to waste away, other efforts to increase agricultural production are foredoomed. It calls for basic and applied re- search and for widespread educational programs to keep 5 million independent farmers abreast of scientific developments. It calls for credit that will enable farmers to buy equipment and materials and to use practices that require cash. Great increases in use of fertilizer will be required. There are ample domestic reserves of the necessary raw materials; produc- tion capacity is large and can be expanded. The task of increas- ing fertilizer production rests mainly with private industry and is not likely to present serious problems. So long as farm in- comes hold up, farmers will buy more and more fertilizer. Public agencies have a responsibility for continuing to educate farmers in its selection and use. In general, present farm policies and programs point in the right direction, but there is room for improvement. Some of the points that should be considered in shaping future agricultural policy and programs concern: (a) wider use of individual farm plans, (b) agricultural credit, (c) farm price policy, (d) bringing in of new land, (e) physical and economic research, and (/) soil conservation. Individual Farm Plans The desired increase in agricultural production will require higher output per acre and per farm worker. Better manage- ment of the resources of individual farms will be required to bring about such gains. Every commercial farmer will profit most, and at the same time contribute most toward meeting national needs, if he follows a comprehensive plan for efficient management of his own farm. Relatively few farmers have such Page 48 plans today: here is a key point at which Government can help. National programs and policies will be effective to the extent that they help farmers increase production efficiency and assist them in directing production into lines for which there is greater need. The largest possibilities for increase in output lie with the more than 2 million operators of moderate-size commercial, family farms. These are the farms on which pro- duction and incomes can be raised farthest and fastest through credit and technical assistance and other keys to the benefits of modern technology. An adequate management plan for an individual farm takes into account the farm's present land base and soil and climate conditions, needs for enlarging acreage, the crops and livestock that can be raised most successfully and sold to greatest advan- tage, the effect of farming patterns on soil fertility, the materials and capital equipment that will be required, the prospects of obtaining credit—in fact all points pertinent to current and long-range management. Only large-scale farmers have the means to make such plans unassisted. A number of current farm programs offer farmers some help in making plans. The Farmers Home Administration (U. S. D. A.) requires comprehensive farm plans in connection with tenant-purchase and farm-enlargement loans but reaches only a small fraction of the Nation's farmers. The farm plans required as part of the Tennessee Valley Authority's test demon- stration program also are comprehensive, but again the number of farmers affected is small. The plans worked out by Soil Conservation Service (U. S. D. A.) technicians for farms in organized soil conservation districts are much more widely used, but their emphasis is primarily physical and lacks economic detail. The maps and statements required by the Produc- tion and Marketing Administration (U. S. D. A.) in con- nection with Agricultural Conservation Program payments are in wide use, but since they are not intended as physical and financial analyses of farms as operating units, they are not true farm plans. The Commission estimates that not one farm in 50 now is covered by the type of complete plan required for consistent, long-range operation. It has not attempted to suggest the kind of Government organization that would be needed to offer as- sistance to all farmers in making comprehensive farm plans, nor to estimate how great a net addition, if any, this would require in the total volume of Government services. The Commission is convinced, however, that much progress would be made with- out any additional cost or personnel if the present diverse efforts of a number of agencies to assist farmers with individual plans were coordinated and focused. Types of Farm Credit In order to increase agricultural production, farmers will need to make large initial investments in land improvements, equipment and buildings, and livestock. Improvement pro- grams worked out recently with 240 New England dairy farmers called for additional investments averaging $4,300 for farms with 15 to 25 cows. Many farmers would need more credit than they have been using in recent decades. Despite large-scale public programs to improve farm credit, and recent expansion of the farm-financing operations of some commercial banks, most farmers cannot now obtain specialized credit. First, there is need for a new type of farm mortgage—one that can be enlarged in the years after it is first written if a comprehensive farm plan should call for land or building im- provements and purchase of equipment and livestock, and one that permits a more flexible schedule of repayments. Although commercial banks today make real estate mortgage loans on farms, these usually cannot be enlarged as desired and do not provide for flexibility in repayment. Government agricultural credit agencies do not provide credit of this type. Second, there is need for production loans for periods of from 3 to 5 years. Some commercial banks write farm pro- duction loans, but almost always they are short-term. Produc- tion credit available through the lending institutions of the Farm Credit Administration (U. S. D. A.) is likewise short- term. The Farmers Home Administration does make long-term production loans but these are restricted by legislation and therefore not widely available. A Responsive Price Structure A 40 percent increase in total agricultural production can meet the specific needs of 1975 only if it is made up of the right quantities of individual commodities. The gain in output must be not only large, but well selected. The chief reliance to ac- complish right selection should be on the free play of market forces. It is important to have a price system in agriculture that will respond to the Nation's changing needs and call forth approximately the required production of each commodity. But it is also important to protect farm incomes against sudden price fluctuations. The problem is how to employ the price system as an effective regulator of production without subject- ing farm incomes to undesirable and unnecessary fluctuations. Present national programs of price support are frequently related to a set of price relationships that date mostly from a period before the First World War. These relationships do not necessarily reflect the current relative production costs and market demands for different farm products. A more flexible method of determining relative floor prices for farm products so as to allow demand to affect price and hence supply could contribute substantially to more efficient use of land. Care in Bringing in New Land Much of the new land added to the agricultural base in the next 25 years will be brought in by private owners. It will be for each of them to decide whether the investment, which often will be sizable, is justified in his particular case. Other lands will be brought in wholly or in part with Federal funds, especially by drainage and irrigation projects. Difficult questions of policy will arise: Is improvement of farmland through reclamation justified as an investment, or would other methods be more profitable? If drainage or irrigation seems desirable, should it be used to improve farms, or to bring in new land? Would proposed new supplies of water be best used foi agriculture or for industrial or other purposes? In recent years considerable progress has been made toward recognizing the problems of bringing in new land. Largely be- cause different phases of the public interest are shared among several agencies, the machinery for deciding issues raised by Federal projects is still inadequate. Methods of giving balanced Page 49 economic consideration to the various local, regional, and na- tional problems should be improved, partly through better coordination. Balanced Research Technical research in agriculture, which has been the basis of past progress, will be of continuing importance. The work of finding better ways to produce, utilize, and market products should go forward on at least the present scale. The Commission believes that long-range economic research in agriculture should be expanded. Work in this field can guide technical research along the lines indicated by analysis of long- range trends, and inform national programs affecting land use, and farm price or income support. Soil Conservation Nearly all the foregoing conclusions bear directly or indirectly on conservation. It is a fundamental need. Great strides have been made in recent years, but unless the drain on topsoil is further reduced there will be limits on the renewability of farm-produced materials, and prospects for meeting 1975 re- quirements will become less favorable. The Commission be- lieves that action along the lines it has already suggested will do much to promote soil conservation. In addition it is important that the efforts of Federal agencies (flood control, credit, pro- duction, and price and income support, as well as soil conserva- tion) be coordinated to the fullest practicable extent. THE COMMISSION'S VIEWS Because a comprehensive examination of problems of agri- cultural land-use in the United States is outside the Commis- sion's assignment, no recommendations concerning agricul- turally produced materials are made is this Report. The Commission wishes to emphasize, however, that agri- cultural land is an extremely important material resource of the United States. While current agricultural policies looking to preservation of this resource have in general been well devised, there are points at which public policies and programs can be improved. The Commission urges that these points should be borne in mind in reshaping public policy concerning land use. Chapter 10 Supplying Industry with Water Modern industry needs water in vast quantities. It uses water for steam generation, for washing, cooling and convey- ing, and as an actual ingredient of manufactured products. Not counting the stream flow used mechanically to generate hydroelectric power, industries in the United States in 1950 used about 120 billion tons of water—almost 50 times the weight of all other industrial materials. This took a flow of about 80 billion gallons a day—8 times as much as in 1900. The expectation is that by 1975, industry may require 2l/o times as much—200 billion gallons a day. Until recently, water for industry was taken for granted in most parts of the country except for the arid West. Such com- placency can prevail no longer. Water requirements are rising steadily, for industrial use and other purposes. In many areas supplies of suitable water are diminishing. The Nation already has a serious industrial water problem and belatedly is coming to recognize it as such. During the Second World War, plans for building at least 300 industrial or military estab- lishments had to be abandoned or modified because of in- adequate water supply. Many areas of the country are feeling the pinch either because ground water reserves are being ex- hausted, or because surface and ground waters are polluted. There can be no question that more will feel the pinch in the next 25 years, and that it will grow sharper. By 1975, access to good water may become the most important factor in de- ciding where to locate industries. A considerable body of general water policy has been built up, but the problems of industrial water have been neglected, and until recently have received little attention even from in- dustrial organizations. Federal interest in water has encom- passed progressively navigation, flood control, irrigation, hydro- electric power, soil conservation, and pollution abatement. Except for the latter, none of the policy bears directly on the use of water as an industrial material; and even pollution has rarely been approached from the standpoint of industry. This Commission is encouraged by the constructive work done recently by the President's Water Resources Policy Com- mission in analyzing the whole question of water and in point- ing ways toward more effective programs. Members of that body have urged that the present Commission examine further the subject of water as a material of industry. This Report seeks to supplement, rather than parallel, the Report of the Water Resources Policy Commission. It accepts the main lines of that Commission's analysis and findings, does not discuss navigation, flood control, or water used for hydro- electric power, and considers domestic and irrigation uses of water only in relation to the total water problem. The findings of this Report are confined to general conclusions designed to help identify and attack the practical difficulties of increasing the supply of water for industry. MEASURING INDUSTRY'S PROBLEM There is no such thing as a problem of industrial water separate from other water problems. All water comes from the same natural sources; industrial and nonindustrial uses usually are competitive. The size of industry's water problem in the future will depend on the demands of other users as well as on Page 50 the needs for industrial purposes alone. Nearly always, funda- mental solution of an industrial problem, or any other water problem, hinges on development and allocation of total supplies. For all uses in 1950 about 170 billion gallons per day of fresh water and 15 billion gallons of salt water were withdrawn in the United States. By 1975, 350 billion gallons, predominantly fresh water, may be required daily. More than 80 percent of the increase will be for the estimated rise in industrial activity. A study of industrial water problems prepared for the Commis- sion estimated existing and future water requirements, as given in table I.* Table I.—Estimated total withdrawals and requirements for water, 7950 and 7975 ! Estimated with- |Estimated require-! T incn ^c 'men 1 m-7c I Increase 1950-/5 Billion gallons Percent of total Billion gallons Percent of total Billion gallons Percent increase per day per day per day Municipal and rural 1 17 9 25 7 8 50 Direct indus- trial 2 80 88 43 2,5 62 135 170 48 110 31 22 25 Total 185 100 350 100 165 90 1 Roughly half of total municipal supplies are used industrially. 2 Includes an estimated 15 billion gallons per day of salt water used in industry for cooling. About 40 percent of present water withdrawals are evapo- rated, transpired, or consumed in their use—over three-quarters of this reduction occurring in Western irrigation. But estimates of water withdrawals include a large amount of reuse. Most of the water withdrawn by cities and industries is returned to streams or ground, and if not too polluted or heated can be reused. Reliable estimates of howr much water actually is reused are not available. Neither are data on recirculation of water *Sce vol. V, Water for United States Industry. INDUSTRIAL WATER 18.33 BARRELS OF WATER TO MAKE 1 BARREL OF OIL Source: Sheppard T. Powell and Hilary E. Bacon, Journal of the American Waterworks Association, August, 1950 by industrial plants, although a survey of more than 3,000 plants indicated that more than half did not recirculate any water and another quarter recirculated less than half the water they withdrew. Industries could meet a large part of 1975 requirements through recirculation, and those along the sea- coast could use sea water for some purposes. But even if all these possibilities of more efficient utilization are realized, sup- plying industrial water in 1975 still will constitute a major problem. Rough estimates of the total use of industrial water in 1950 show that: About 44 percent was taken by steam-electric generating plants, primarily for condensor cooling. Withdrawals for this purpose are expected to more than triple in 25 years. About 16 percent by the steel industry which probably will show a slower growth in water use. About 9 percent for petroleum refining which is expected to increase rapidly. Five percent for production of wood pulp and paper, expected to increase rapidly. Water use by other industries is likely to follow approximately the general trend of industrial growth. Probably three-fourths of all industrial water is used for cooling. In most instances, quality requirements for this pur- pose are relatively low. The next largest volume of water used by industry is for washing, grading, and waste disposal. Much of this water can be of medium or low quality. On the other hand, a proportionately small but rapidly grow- ing requirement is for water having almost no contained organic matter, minerals, acids, or gases. The trend toward synthetic materials and the growth of chemical industries is expanding the requirements for such pure water. Ground water in many instances can meet this demand in its natural state, but surface water nearly always must be treated. In 1950 about 80 percent of all water withdrawals, and 90 percent of industrial withdrawals, were from surface water. But the use of groundwater tripled between 1935 and 1950, a rise that Page 51 greatly exceeded the rate of increase in total use and fore- shadowed future difficulties in obtaining sufficient water of high purity. Not many years ago when water of suitable quality was easy to obtain in most parts of the country costs of collecting and transporting water were usually small. Often it could be drawn from a nearby stream or river. Purification was seldom thought of. So long as supplies were large the amounts of water used were a negligible item in costs of plant operation. Nowadays in many areas water must be brought from considerable dis- tances, or pumped from deep wells. When nearby supplies are used, extensive purification treatment often is necessary. Water costs are becoming a more important item in industrial production costs. Precise figures still are lacking on any broad basis, but it has been estimated that for the Nation as a whole, costs of indus- trial water may average between 4 and 5 cents per 1,000 gal- lons. Variations in cost among industries and localities are wide. In Baltimore water for steelmaking is reclaimed at about 2 cents a 1,000 gallons. Costs of a proposed program reclaiming waste municipal water in Los Angeles to make it fit for irriga- tion or industrial use have been estimated at between 5 and 10 cents per 1,000 gallons. SUPPLY PROBLEM VARIES BY AREAS Although current and 1975 requirements for industrial water can be estimated for the country as a whole, the practical prob- lems of supplying the required quantity and quality are regional rather than national. An excess of water in one region rarely can help make up a deficit in another. Most areas in the arid West and some in the humid East, especially in the manufacturing belt, are reaching the limit of pure water supplies. Probably none of the 10 largest water- using States,* with the possible exception of Texas, could double the withdrawal of good quality water without heavy ^California, New York, Idaho, Illinois, Ohio, Colorado, Pennsylvania, Texas, Michigan, and Montana. INDUSTRIAL WATER 64,000 GALLONS OF WATER TO MAKE 1 TON OF SULFATE PAPER Source: Sheppard T. Powell and Hilary E. Bacon, Journal of the American Waterworks Association, August, 1950 cost. A few States already are hard-pressed: Arizona, an ex- treme example, gets 60 percent of its water supply from over- pumped wells. On the other hand, probably half the States could at least double present withdrawals at relatively low cost, and a few States could increase them 10 or 20 times. The most promising- areas are upper New England, the Southeast, and the Colum- bia River Valley. Probably two-thirds of the potential supply that can be cheaply developed is in the area south of the Ohio and Potomac River Basins and east of southeastern Kansas and eastern Texas. VARIATIONS IN SUPPLY Precipitation varies from 1 20 inches annually along the Pa- cific Northwest coast, and 60 inches in southeastern areas, to less than 5 inches in parts of the arid Southwest. Annual run- off—a better measure of the water really available—varies even more widely. It is more than half the precipitation in some humid areas but less than 5 percent of the scanty rainfall of some arid areas. From the Great Plains to the Pacific Coast, and in some smaller areas, consistent scantiness of precipitation sharply limits the total supply. Even if the greater part of the available water could be earmarked for industrial use, few large plants could locate in the areas without using far less water than now. Irregularity of rainfall is another limiting factor. The annual cycle in some localities causes swings pronounced enough to affect industrial operations. Even more troublesome to industry are the longer range fluctuations in rainfall that have affected some water supplies. Persistent lowering of water tables in nearly all populous areas and even in sparsely settled areas of low rainfall has ag- gravated problems of both total supply and quality. In the Chicago area where water once gushed from artesian wells, heavy pumping has lowered the water table to as much as 500 feet below the surface only short distances from Lake Michi- gan. In the High Plains of west Texas, an average of 1.4 billion gallons a day was pumped from wells during 1950—a drain on ground water about 30 times the estimated rate of re- plenishment. Depletion of ground water makes stream flow smaller in dry seasons and adds to the cost of pumping ground water. It in- vites inflow of pollution from both natural and man-made sources. Salt water is encroaching on ground water supplies along the Atlantic, Gulf and Pacific coasts as well as in some inland areas. Southwest of Los Angeles salt water is moving inland at rates up to 300 feet per year. Once the fresh water supply is contaminated, many decades may be required to restore it. Even where water is plentiful, some serious shortages have developed because the supply is not fit to use. Gross uncleanli- ness and saltiness are chief reasons, but not the only ones. Each industry has its own list of requirements in quality. Paper manu- facturers need water that is clear and low in manganese and iron. Water containing aluminum tends to lower the quality of photographic film. Iron-bearing water is not adapted for dyeing and bleaching. "Hard" water leaves heavy scale de- posits and necessitates excessive use of detergents. Considerable natural pollution occurs when surface or Page 52 WATER SUPPLY AND USE IN MAJOR REGIONS OF U.S. PERCENT OF ACTUAL WITHDRAWAL COMPARED WITH REGIONAL RUNOFF NORTHEAST SOUTH WEST NORTHWEST Source: U. S. Geological Survey underground fresh water comes in contact with minerals that are easily dissolved or suspended. But man-made pollution causes much of the extreme degradation of supply: sewage and food processing wastes, for example, and concentrations of acids or alkalies from mines or industrial plants. Pollution of water supplies is characteristic of nearly all heavily inhabited watersheds, but is most serious in the manu- facturing belt from Chicago and St. Louis and eastward to the Atlantic Coast. Pollution of the Ohio River became so objec- tionable that Congress, by special resolution, gave the affected States authority in 1936 to form an interstate compact to deal with the problem. Withdrawals of water for cooling purposes are so heavy in some areas that river water sometimes becomes too hot to act as an effective cooling agent and increases pollution because some forms of waste matter dissolve more readily in warm water. The United States has reached the point where the costs imposed on its economy by using streams and rivers as open sewers may exceed the apparent savings. Many down-stream communities are forced to pay large sums to purify water or to develop alternative supplies, some- times from distant sources. Valuable wildlife and recreational assets are destroyed, public health is menaced. Industries that require relatively clean water are discouraged from locating along heavily polluted rivers even though good plant sites, labor supply, and other attractions exist. Some plants whose water supplies have deteriorated have moved to other localities rather than incur the high costs of purification. WAYS OF INCREASING SUPPLY There are four general ways of overcoming scarcities of suitable industrial water. Total usable supply in an area may be increased. This can be done mainly by levelling out supplies throughout the year so that great volumes of destructive flood water do not rush unused Page 53 HOW MANY CITIES AND INDUSTRIES POLLUTE WATER 5:''- * ♦ ■ !> USPEIERMIMD TREATED SEWAGE UNTREATED SEWAGE I 1 TPtATFD SEWAGE UNTREATED SEWAGE : Federal Secunfy Agency, Public Health Serv/'ce, Water Pollution in fh« U. S. to the sea during some seasons, while in others the stream flow drops below requirements. These wide swings in supply can be reduced by such water-retarding devices as storage reservoirs and vegetative cover on watersheds. Recently interest has grown in increasing supplies of water by artificially induced rain. Ultimately, this could be significant although considerable time would be required for further research on results and de- velopment of economically feasible techniques. Purely local shortages may be relieved by piping water from elsewhere; although this usually is a high-cost operation, it already has had considerable application. Quality of a water may be improved through treating water just before use, or by removing or reducing sources of con- tamination. Some progress has been made recently tow7ard economical methods of removing minerals from sea water. This approach holds promise, but development of large-scale, low-cost methods will, at best, take time. Industrial users of water may cut consumption or modify requirements. Many plants can change production techniques so as to use less water or lower grade w ater, can install recircula- tion facilities, or install corrosion-resistant equipment to permit use of contaminated water for some operations. In many areas available water can be better apportioned among different types of users. When total supply is low, the quantity available can be assigned on a priority basis to those uses that promote the greatest economic returns. In some sit- uations, for example, it may be more advantageous to the area and to the Nation to provide less water for irrigation and more for industry. When the main problem concerns quality, scarce higher grades of water can be channelled only to those who need them, and more abundant lower grades to consumers with less exact- ing requirements. Municipalities, and most industries with their own water systems, do not ordinarily separate water according to quality. The advantages would have to be weighed against the capital costs of multiple distribution. In Chicago, for ex- ample, many plants could forego the cheaper but high-quality ground water they now use in tremendous amounts and shift to Lake Michigan water. In some areas, notably Baltimore and Los Angeles, even treated sewage water has been used profitably for some industrial purposes. Page 54 GUIDES TO FEDERAL ACTION The decentralized problem of industrial water supplies calls for decentralized measures. Most of the responsibility rests with industry itself, and with local and State governments and interstate agencies. The Federal Government, however, can make a considerable contribution, principally through support- ing others' efforts, but also through better management of its own projects. Five Principles To Follow The Commission believes that the following basic principles should be followed in shaping national policies and executing national programs for use of water resources: Planning and developing water resources must comprehend all aspects of the collection, conservation, and use. The grow- ing needs of industry can be met best if its requirements are treated as one of the major objectives of water policy, in each area and for the whole Nation, together with flood control, navigation, generation of power, land reclamation, and other essential lines of activity. Each major project, whatever its primary function, should be a truly multipurpose installation designed with an eye to present and prospective needs for water for all competing uses. The varied and complex problems of water can be attacked best by integrated action in each major drainage basin, under a general national policy for use of water resources. This Com- mission agrees with the President's Water Resources Policy Commission that "Congress should direct the responsible Federal agencies to submit new proposals for water resources development to Congress only in the form of basin programs which deal with entire basins as units and which take into ac- count all relevant purposes in water and land development." In carrying out these proposals, it is most important that ade- quate consideration be given to industry's needs for water. Highest economic use must be made of scarce supplies. Most Federal water development projects, except those of the Tennessee Valley Authority, are in the West. Much of that region is arid, and inadequacy of total supplies is a pressing problem. Once provision has been made for household water, the question often arises of whether to use water for irrigation or industry. Irrigation, given high priority in the past, has con- tributed to the economic development of the Western States, but the need is increasing for weighing the economic justifica- tion for irrigation against that of industrial use of the same water, and to compare the alternate public and private costs with public and private benefits for a given outlay. Benefits must exceed costs. In general, public assistance in making water available is justified only if the benefits are widely dispersed and give promise of being greater than public and private costs. It is difficult to make dollar estimates for some benefits of water development—for example, improved health conditions, and the gains in forestalling long-range ten- dencies toward soil erosion and deterioration of the water supply. Yet account should be taken of these benefits as well as those to which money values can be ascribed more easily. Known beneficiaries should help pay for improvements. The identifiable direct beneficiaries should contribute to the costs of a public water project in accordance with the benefits they receive. Assume that a Federal project undertaken pri- marily for flood control provides reservoir storage capacity for municipal and industrial water: supplies from the reservoir should be sold to cities and industries at rates that cover the cost. The Commission believes that such payments by users in each region will help bring about maximum gains from water programs. Areas for Federal Action The Federal Government can contribute to improving and increasing water supplies in three main areas: through research, tighter planning of programs, and cooperation in efforts to control and reduce pollution. Basic Studies and Technological Research. Several Federal agencies study such basic components of the water supply as rainfall, run-off, percolation, infiltration, stream flow, ground water supplies, flood levels, and quality. These studies are of great value to industry as well as to public projects. They should be continued on a scale commensurate with growing requirements for data. Without sufficient information there will be no adequate basis for judgments on the highest uses of water resources or on the relationship of estimated costs to benefits. The basic data should be made available to business con- cerns on a wide scale, and could be particularly useful in help- ing industries determine where new plants should be located, or in developing new sources of water. Integration of Federal Programs. Although much respon- sibility lies with local authorities of the various river basins, national coordination is also necessary. Federal agencies working on segments of water problems need to make sure that the work of each is consistent with long- range national and regional interests. Duplication of effort, variation in emphasis and bureaucratic competition among Federal water resource agencies have resulted in programs that are in some aspects unbalanced and wasteful. Programs that emphasize a single phase of water development can prove costly in the long run by overlooking the other needs and oppor- tunities. The sound development of water resources calls for a multiple-purpose program of each river basin development along lines that will best promote economic development and best meet the essential needs—both current and potential—of various types of water users in each basin. This Commission finds merit in the majority recommenda- tion of the Commission on Organization of the Executive Branch of the Government (Hoover Commission), endorsed by the President's Water Resources Policy Commission, for a Fed- eral board of review that can appraise the costs and benefits of proposed Federal development projects from a comprehensive national viewpoint. Abatement of Pollution. Activities of the Federal Govern- ment in holding down water pollution, although secondary to local efforts, have become increasingly important. Even more important, industry has begun to see the need for pollution control in its own interest as well as for public welfare. Page 55 The Commission recognizes that complete abatement of pol- lution is not an attainable goal. Little can be done to reduce natural pollution from minerals and underground sources, or from the run-off of city streets, barnyards, pastures, fields, and other areas. Moreover, there are practical economic and tech- nical limits to reduction of pollution from industrial and do- mestic wastes. Complete treatment of all wastes would require so tremendous an investment that it never has been seriously proposed. Even the more modest objectives of keeping up with the rising pollution load from growing cities and expanding indus- tries, and of somewhat reducing the present level of water pol- lution, would call for private and public investments running into billions of dollars. In 1951 the Public Health Service esti- mated that over a 10-year period a moderate abatement pro- gram designed to keep the situation from growing worse and to achieve some improvement in average quality of water would require investment of between 9 and 12 billion dollars (at 1950 price levels) in construction and modernization of municipal and industrial treatment plants. The actual cost of any pro- gram decided upon would, of course, depend on how clean the Nation wanted its streams and rivers to be—what kinds of uses it wanted the water fit for. Clearly it will pay the Nation to do more than it is now doing. This Commission is convinced that industrial pollution can be significantly reduced only by the cooperation of industry and Government; it also believes that to the greatest practica- ble extent, private sources of pollution should be eliminated at private expense. Industry already has made a beginning. Costs of treating wastes often can be partly, sometimes wholly, offset by recovery of salable wastes. One steel company built a plant to recover ore from blast-furnace flue dust that was being dumped into the river. The treatment plant cost $516,000; in its first year it returned the cost of its operation, plus $581,000. However, the practice of recovering byproducts from waste still is not widespread in many industries. Recovery of wastes is still rarer among cities, although an increasing number sell sewage sludge as fertilizer.* Returns from sal- vaged waste are usually moderate, but they reduce costs. The Commission is impressed by the progress made, but it is convinced that ordinary market incentives will not accom- plish enough pollution abatement fast enough. It believes there is need for a general strengthening of antipollution measures, including State controls, but also a need for flexibility. Situa- tions differ not only among industries and among river basins, but also among different points along a single river. Nearly every State has some legislation for regulating stream pollution, but standards and enforcement range from good to inadequate. Some streams have been cleaned up, but for the country as a whole pollution worsens each year. Pollution Control Act The Water Pollution Control Act of 1948 (62 Stat. 1155, 63 Stat. 380) has provided the beginnings of a program of Federal cooperation with States and interstate bodies. It au- thorizes the Surgeon General of the Public Health Service, in *For these and other examples see: The President's Water Resources Policy Commission. A Water Policy for the American People, vol. I. cooperation with other interested agencies and bodies, to pre- pare comprehensive progiams for interstate streams and under- ground waters; and at the request of State or interstate agencies to research specific problems. It declares to be a public nuisance any pollution of interstate waters which endangers health or welfare of persons in a State other than the one in which the discharge originates. In such cases, it provides for administra- tive hearings and court action if the State in which the pollution originates gives consent. It grants congressional sanction to interstate compacts on pollution abatement, and provides loans and grants to State, interstate, and city antipollution agencies. In general, the act embodies the principle that the main role of the Federal Government is to stimulate, suggest, and assist. Even in the limited area in which the National Government is authorized to compel abatement, Federal enforcement is de- signed as a supplement to local enforcement. The act prescribes time-consuming preliminaries to Federal court action, apparently to encourage local agencies either to seek enforcement in local tribunals or to cooperate with Fed- eral authorities in working out administrative solutions. The Commission believes this is a sound approach. Readier access to Federal courts might bring quicker results but might dis- courage initiative and responsibility of affected localities. FOR POSSIBLE FUTURE ACTION It is still too early to appraise the effectiveness of the enforce- ment provisions of the Water Pollution Control Act; thus it would be premature to consider major changes. But it is by no means certain that the present enforcement provisions will work well enough to bring the pollution situation under control. This Commission believes that alternative measures must be taken if at the end of a sufficient testing period—say 5 years—progress in pollution abatement has been clearly inadequate. One possible device is a Federal tax on indus- trial operations that result in pollution of navigable waters and interstate streams. Such a tax could be designed to fortify local enforcement efforts and still leave develop- ment and execution of abatement programs in the hands of local authorities. It would give industry a dollar-and- cents incentive to undertake antipollution measures. Seri- ous thought should be given now to this and other possibilities for future action. In the interest of industry, and indeed of the whole Nation, surface water must be- come cleaner and not more contaminated. One minor, but troublesome, aspect of industrial pollution calls for immediate action. There are some sources of indus- trial pollution that have no owners upon whom responsibility may be fastened—abandoned mines, for example. Inquiry into the extent and seriousness of pollution from abandoned mines and other industrial sources without responsible owners is a suitable subject for joint investigation by Federal and local agencies as authorized by the Water Pollution Act. Abatement measures could be recommended and carried out by the ap- propriate agency or agencies, and if authority for taking ade- quate steps is found to be lacking, State and Federal legislative authorization could be sought. The role of the Federal Government in supplementing local enforcement of antipollution measures is not only small, but Page 56 limited in practice to industrial pollution. Under the terms of the Water Pollution Control Act, Federal participation in the campaign against municipal pollution consists of (a) its own surveys, studies, and research; (b) support of similar work through grants to States and interstate agencies; and (c) financial assistance in constructing certain abatement projects through loans and through grants for engineering studies. LEGISLATIVE CHOICES The present act authorizes maximum annual appropriations of 2 million dollars for carrying out all other provisions of the act except loans and grants. During the past 3 years actual ap- propriations have ranged between 60 and 70 percent of authori- zation, although all could have been used. The annual maximum authorization for Federal grants to States and interstate agencies to support their own surveys, studies and research is 1 million dollars. During the past 3 years appropriations have about equalled full authorization. Two other annual authorizations relate to construction of antipollution projects by States, municipalities, and interstate agencies—22.5 million dollars for construction loans and 1 million dollars for grants in support of engineering studies and plans for construction. No appropriations for loans have been made. Appropriations totalling $950,000 have been made for grants, but nondefense cutbacks withheld funds. All authorizations for appropriations to carry out provisions of the Water Pollution Control Act expire on June 30, 1953. This Commission is convinced that Federal assistance in the campaign against water pollution should be continued and should be carried on within the present framework. As to the provisions of the present act, the Commission has no doubts of the effectiveness of Federal research, surveys, and studies, and of grants to assist State and interstate agencies. These authorizations should be continued. The Commis- sion hopes that the greatest practicable emphasis will be given to research into recovery of salable materials from waste—a line of work that could substantially reduce the net cost of operating antipollution installations. As to loans for construction and grants for construction plans, the Commission recognizes the need for more construction of pollution abatement projects, but it notes that these provisions of the act have not been applied. Not only has Congress failed to appropriate funds, but there is a question whether municipal governments would have found them of much practical use since the act limits each loan to one-third of cost with a ceiling of $250,000. These provisions should be thoroughly reexamined by Congress, and its consideration should include inquiry into the desirability of extending construction loans and grants to private industries as well as municipalities. Page 57 099959—52 5 FREE WORLD PRODUCTION MUST RISE TO MEET HIGHER MATERIALS DEMANDS 1900 1925 1950 1975 1950 1975 1900 1925 1950 1975 1950 1975 Sources: Commodity Reports; Bureau of Mines, Statistical Abstracts, 1946, 1925/ Metal Statistics, 1947. Page 58 Promoting Free World Expansion Chapter 11 The Opportunity and the Problems The industrially advanced countries of the world are look- ing increasingly to the less developed countries to help meet their expanding requirements for materials. Western Europe has been in this situation for some time, but the need for heavy imports has emerged clearly for the United States only during the last decade. On the other hand, the less developed countries, with vast materials resources to develop, are bent upon a diversified development which will advance their economies and improve the conditions of life for their people. Development of their materials resources can contribute to their general economic growth. This set of circumstances could, if approached with states- manship, lead to great benefits to the underdeveloped countries and to the entire free world. On the other hand, if short-run and narrow self-interest become dominant, it could mean lost opportunities and self-defeating policies. The Basic Problem The basic problem of materials policy in the field of foreign resources is to determine the methods the United States should adopt to promote the production of materials abroad and, at the same time, to help fulfill the aspirations toward general economic development of the countries which possess rich resources. Successful solution of the problems will by its very nature require action by more than one country, but the United States must assume major responsibilities both of co- operation and initiative for three major reasons: First, this country consumes about half the materials of the free world and is the major single importer of most ma- terials. Whatever materials policies we adopt or fail to adopt, therefore, cannot but have major repercussions in other producing and consuming countries. Second, the United States is the world's major source of capital, equipment, technology, and management skills, all essential to promote materials production and general eco- nomic advancement in less developed areas. Third, this Nation believes that the economic welfare of the free world and its ability to resist totalitarian aggression 50 hand in hand. The Commission's studies indicate that a doubling of United States total output of goods and services over the next 25 years would require about a 50 to 60 percent increase in supplies of materials. For the free world as a whole, the Commission be- lieves that demand for materials may increase in the same period by two-thirds to three-quarters their present volume. Details of these expanding needs are given in volume II; briefly, Western Europe's demand is expected to increase by less than half; that of Canada, Australia, New Zealand, and Japan rather more than half. Demand of the less-developed countries would increase most in percentage, but since their present consumption is not large even the increased volume required would be small compared to the totals used by industrial countries. The implication of these projections of demand is that the percentage of total world supply consumed by the United States and Western Europe will decline somewhat, while the per- centage required for other free countries will be greater. The United States would continue to supply by far the greater part of its own needs—hopefully somewhere between 75 and 85 percent—and would continue to export some materials which it has in abundance. For Western Europe and Japan, the per- centage of imports would be much higher; for Canada, Aus- tralia, and New Zealand, which have considerable resources, something in between these extremes. Costs, of course, will strongly affect the volume of imports. For the United States, with its emphasis on lowest costs to in- crease productivity and to raise the standard of living, the price of imports will largely determine how much material is brought in from abroad, how much produced at home. Within its own borders, the United States possesses many low-grade ores that would come into the market at costs moderately above present levels: high-grade aluminum clays, taconite iron ores, and oil shales, for example. Synthetic textiles, rubber, plastics, and a number of materials already have reduced dependence upon some imports, and other synthetics may be expected to enter the competition if costs rise too high. Even with all that the United States resource base, and its technology, can supply, however, there will remain an increas- ing demand for materials. The requirements pose a formidable question: Can this demand be satisfied and without a sub- stantial increase in real costs? Page 59 U. S. DIRECT PRIVATE INVESTMENT ABROAD TOTALS $13.5 BILLION (MILLIONS OF DOLLARS NET-AS OF 1950) 8000 6000 TOTAL U. S. INVEST- MENT ABROAD Source: Office of Business Economics, U. S. Dept. of Commerce LATIN AMERICA OTHER FREE COUNTRIES Foreign Sources of Supply The areas to which the United States must principally look for expansion of its minerals imports are Canada, Latin America and Africa, the Near East, and South and Southeast Asia. Canada's rich resources already are undergoing rapid de- velopment. As potential producers and exporters of minerals, excluding oil, Africa and Latin America stand first. A major share of the free world's present and potential sources of copper and cobalt lies in the Congo and in Northern Rhodesia. The Union of South Africa and Southern Rhodesia are the world's largest sources of long-fiber asbestos. South Africa is also the largest single source of chemical grade chrome and, with the Congo, British West Africa, French Equatorial Africa, and Angola, supplies the bulk of the free world's industrial dia- monds. Among other key minerals for which the free world looks to Africa are iron ore, tin, lead, zinc, manganese, metal- lurgical chrome, columbite, tantalite, and cadmium. In addition to Venezuelan oil, Latin America is or is likely to become increasingly a major source of copper (Chile and Peru), iron ore (Venezuela and Brazil), manganese (Brazil), lead and zinc (Mexico), tin (Bolivia), and bauxite (Surinam, British Guiana, Haiti, Jamaica). The Near East is, of course, the prospective supplier of nearly the whole of Western Europe's oil requirements and may well become an important exporter to the United States. South and Southeast Asia are the world's largest producers of tin and natural rubber and a major source of other vital materials including tungsten, manganese, and mica (see Free World Resources Tables, pp. 91-101, for details on production potentials of various countries for 22 key materials). How do these present and potential supplies of materials measure up to the increase in demand expected over the next quarter of a century? Will economic growth in the free world be handicapped over the next few decades by rising real costs of materials? In the high tonnage materials, such as oil, iron ore, zinc, manganese, bauxite, and possibly copper, there is little doubt that the less developed areas have high-grade reserves which, after satisfying their own expanding requirements, are able to supply the import needs of the rest of the free world for the next quarter century and beyond. The same is true for a wide range of other essential materials. The real question, therefore, is whether capital, equipment, technology, and management skills will flow into the expansion of lowest cost sources of supply in the less developed countries at a rate sufficient to yield the necessary production. Page 60 Sources of Capital Historically, private capital from Western Europe and the United States has been chiefly responsible for minerals develop- ment in less developed countries. In the Commission's view private enterprise can and should continue to carry the major burden. Both public and private interests in less developed coun- tries will increasingly become an important source of capital for materials development. In recent years, in fact, local in- terests have joined with foreign capital in numbers of materials projects. But expansion of materials development is only one of the pressing needs of these countries. They need power, transporta- tion, and other basic services, and investment for increasing productivity in agriculture—fields in which outside private capital takes little or no interest. The total need of capital is so great that less developed countries may find it wise to apply their own capital, at least for a while, to development which cannot be financed by foreign private investment, or adequately met by public loans from other nations. To the extent that they succeed in attracting foreign private capital into materials de- velopment, they will free funds for other uses contributing to their economic advancement. American private capital now has about 6 billion dollars in- vested in materials development abroad, of which oil company investment accounts for over two-thirds. If future petroleum requirements are to be met primarily by private enterprise as in the past, investment for oil field expansion in the Middle East, Venezuela, and elsewhere will continue very large. Since the war United States private investment in foreign mining and smelting enterprises has averaged only about 50 million dollars a year, although the rate has been increasing steadily since 1948. If rapidly expanding minerals requirements are to be met from abroad, it is clear that investment well in excess of previous levels will be necessary. In copper alone, for example, it is estimated that for the next 25 years an average annual investment of 100 million dollars will be needed in the less developed countries. BENEFITS TO RESOURCE COUNTRIES Minerals development and expanded production for export offer great opportunities to the less developed countries. The yield to the source country in government revenues and foreign exchange earnings is usually a substantial percentage of the value of mineral output and can provide the financial basis for a domestic development program. Public loans from indus- trial nations or international agencies are frequently available, in connection with minerals development programs, for the expansion of auxiliary facilities—railroads, roads, port develop- ment, electric power, and the like—which will increase the general productivity of the country. Mineral production, more- over, requires the development of technical skills on the part of local employees of foreign companies that are thereafter readily- usable in other types of industrial development. If financed from abroad, minerals development diverts a relatively small portion of local capital and manpower away from other domestic activities and therefore interferes very little with other development programs in industry and agriculture. USING RAW MATERIALS Source: National Income Figures: International Monetary Fund Petroleum Production: Petroleum Facts and Figures, 1935-1949 OIL AND VENEZUELA'S GROWTH Venezuela is a particularly striking example of this process. The government's foreign exchange earnings from oil amount to about 500 million dollars annually, providing over 90 per- cent of the country's exchange earnings, and 60 percent of gov- ernment revenue is derived from oil. Yet only 5 percent of the labor force is employed by the oil industry. Venezuela has the means to finance a broad program of general economic de- velopment and has already undertaken major steps in improv- ing agriculture, health, education, communications, transport facilities, and other services. Productivity is on the rise in Venezuela, providing the basis for increased domestic savings and rapid economic growth. Since the oil industry can look forward confidently to a very large expansion, and since there is now the additional prospect of substantial royalties from iron ore, the potentialities of general economic development in Venezuela seem most promising.* The degree of improvement which materials development will bring in the economies of less developed countries de- pends, of course, partly on the volume of materials production and partly also on the bargains struck between foreign investors and the governments. But equally important is the use which the producing country makes of the earnings. Little perceptible progress has occurred in some countries with very large receipts in proportion to population from the exports of minerals, but in others the opportunities for economic growth have been made the most of. All resource countries with vision and determina- tion can progress by adopting policies and programs aimed at making the best use of the opportunities for capital expansion which resource development makes possible. *See vol. V, Venezuela "Sows the Petroleum." Page 61 OBSTACLES TO MATERIALS DEVELOPMENT Granted that minerals production can assist the general de- velopment of underdeveloped areas, and that physical reserves and world markets will support a great expansion, will events take this course? If so, will the expansion occur through the medium of foreign private investment? These questions cannot be answered with certainty. Many less developed countries seem to have a chronic distrust of relying on materials development, and also to associate raw materials production with foreign economic domination and economic instability. In South and Southeast Asia, many im- portant materials countries have recently thrown off colonial status and have taken their economic development in their own hands. In the Near East, a fanatical nationalism has cast its shadow over the future expansion of foreign investment. In Latin America, independent and sensitive governments increas- ingly resent the stigma of economic colonialism that they often attach to the idea of heavily orienting their economies toward materials exports. All these countries appear to believe that if they want economic advancement, they should shift away from materials production and attempt rapid and diversified industrialization. The depression of the 1930's is in the background of this dis- trust of materials development as a basis of economic progress. That experience of the sharp fall of incomes, foreign exchange earnings and Government revenues left in them a sense of the vulnerability of an economic position heavily dependent on export of a few price-sensitive materials. They are concerned about their ability to pursue continuous economic develop- ment programs in the face of violent short-term fluctuations of demand and price. And they are further concerned with the long-term possibility that world prices of primary commod- ities will fall relative to the prices of manufactured goods so that equipment and supplies will require them to export more and more materials in return. These fears and attitudes are understandable. The United States and other industrial countries themselves have not fully recovered from the psychological effects of the depression. Yet, much has happened since the 1930's to alter the picture. There is every indication that the terms for trading raw materials for manufactured goods will improve over the long run. And there are sound reasons for believing that severe and prolonged de- pressions of the 1930 variety can be prevented. Milder reces- sions such as occurred in 1949 undoubtedly can and will recur. And in the absence of special stabilizing measures, the income of materials-exporting countries would decline more than that of the industrial countries importing the materials. This is a serious problem which must be met through national and inter- national action to lessen instability. The problem to be attacked appears to be one, henceforth, of evening out relatively small variations from a pronounced upward trend of materials re- quirements. The Commission believes this problem, though difficult, is manageable. Even in countries most aware of the advantages of materials expansion and most desirous of expanding output, obstacles to development may arise out of their policies and attitude toward investment which may take the form of demands for national- ization of industry that could rule out private investment indefinitely. Financial arrangements are always bargaining points between investors and governments of resource countries and agreement can usually be reached. A principal deterrent in some countries is the investor's doubts about whether or not bargains once made will be kept. Oil companies, for example, can live with a 50-50 division of earnings; it is questionable whether they can live—and certainly whether they can ex- pand—under a threat of outright or "creeping" expropriation. There is much evidence that investors also are deterred by legal uncertainties concerning their status as alien owners, by requirements for extensive local participation in management, and by limitations on the scope and direction of operations. Arbitrary administration of import and export controls and limitations on the convertibility of capital and earnings are re- garded as other serious risks. More important, perhaps, than any of these specific risks and deterrents is the investor's grow- ing loss of confidence in the governments of some source coun- tries and the uncertainty whether or not the conditions of operation may be changed for the worse. The obstacles to materials development abroad by no means arise only out of the policies and administration of the under- developed countries. Private investors themselves have some- times created difficulties by failing to take full account of the legitimate interests of countries in which they were operating. United States tariffs, "Buy American" laws, and certain tax laws also have their deterrent effects. The entire situation pro- vides no basis for a complacent assumption that free world countries will automatically produce enough to meet their increasing materials needs. THE ROLE OF THE UNITED STATES If economic growth in both the industrial and the less developed areas of the free world is not to be hampered, both groups of countries will have to make the most of the oppor- tunities which exist in free world resources. The United States can encourage the expansion of materials production abroad both directly and in company with other nations. One route lies in attempting to improve the conditions under which private investors can operate abroad through direct negotiation with the governments of producing coun- tries, through United States tax concessions, and through guar- anties against abnormal nonmarket risks. Much can be achieved through loans and technical assistance for geological surveying and other activities preliminary to development, which set the stage for a flow of investment capital into new mining enter- prises. Loans and technical assistance for the improvement of agriculture, power, transportation, ports, and other basic serv- ices can make a great contribution toward general economic advances and reduce the costs of materials development. Where the security interests of the free world requires rapid expansion of materials output, more direct assistance may be given through long-term contracts, price guaranties, and Gov- ernment loans specifically for materials development. Other lines of attack are to reduce United States tariffs and other impediments to trade and to join in international action to reduce the instability of world materials markets. Page 62 Chapter 12 U. S. Private Investment in Resources The emphasis which free countries place on developing their materials resources is profoundly influenced by their desire for broad economic and social advancement. As this ambition has clarified and strengthened, the resource countries have ex- tended control over their resources. But to the private investor, whose technical knowledge, managerial skill, and capital are frequently indispensable, this extension of control threatens to interfere with his operations. A major problem in expanding materials production is that of reconciling the interests and rights of governments of the resource countries and private investors. Investors are losing confidence in many foreign governments and this weakens and sometimes destroys their interest in undertaking materials investments abroad. In this chapter, the Commission will discuss the more serious points at issue, primarily as seen by the private investor and the resource country governments, as well as other impediments to foreign investment for resource development, and will recom- mend what may be done to help solve the problems and promote expansion of free world materials development. Patterns of Investment Total United States private direct investment abroad at the end of 1950 amounted to 13.5 billion dollars of which 4 billion was in petroleum, and 1.3 billion in mining and smelting. More than 65 percent of this total investment was in Canada and Latin America.* Investment in petroleum operations abroad (including in- vestments in marketing) has increased rapidly during the past two decades—it was only 1.2 billion dollars at the end of 1929. Fifty-four percent of the 4 billion total investment at the end of 1950 was in Canada and the American republics; the rest was distributed over the Middle East, Western Europe, and its overseas dependencies. The great bulk has been invested by half a dozen major oil companies either directly or through subsidiaries and affiliates. In contrast to petroleum, investment in mining and smelting abroad has been relatively stationary for two decades. The total investment of 1.3 billion dollars at the end of 1950—of which 83 percent was in Canada and the American republics—was only 100 million higher than 20 years earlier. Investment in mining and smelting has begun to rise since the war, however. The figure for 1949 was 78 million dollars and for 1950, 106 million. The risk, size, and length of term of investment tend to con- centrate United States investment in petroleum and minerals development abroad in relatively few corporate hands. Nearly all United States private investment in resource development *The figures in this section are from the U. S. Department of Com- merce, Office of Business Economics, Balance of Payments Division. Figures through 1950 are from Survey of Current Business, December 1951. See also vol. V, United States Private Investment Abroad. abroad has been made by a few large companies, which have been in operation for many years and have large property hold- ings and ample resources. As a rule, they operate both in the United States and in several countries abroad, and market their output all over the world. In a few industries, notably steel and aluminum, the product mined is for the company's own use. Few companies are interested exclusively in mining; most engage also in processing, or have investments in more than one material and in related fields. As a result there is consider- able variety in the pressures and motivations for foreign de- velopment. Steel companies will invest in iron ore and manga- nese for their own use under circumstances which might not be attractive or feasible for an independent producer and are more interested in continuing supply than in a quick return. Often companies undertake foreign ventures jointly, either to share the risk or because their special competence or market arrangements are complementary. They may affiliate with for- eign companies for a particular project as in the Iraq Petroleum Co. which is jointly owned by British, Dutch, French, and United States interests. A very few small independent companies have geographically far-flung activities in mining and petroleum. The smaller petroleum companies lean toward marketing abroad, and few are engaged in extraction. Only isolated instances exist of capital syndicates formed for mining abroad. Except for buying Canadian stocks, the United States public invests in foreign mining or petroleum enterprise almost exclusively through the large corporations. Not many new concerns have started min- erals enterprises abroad in recent years, and none on a scale comparable to that of established companies. The "inherent speculation" so much talked of in mining circles practically precludes the single-shot investor. Where losses can be deducted from current taxable income, those companies with current high profits have an advantage. The capital and competence required for exploration, development, and production are not easily assembled and retained without continuity of operations. The long time between initial invest- ment and recoupment of capital requires staying power. In the case of one concession in Colombia, the first investment was made in 1916, the first discovery in 1933, and the first oil marketed in 1939 by which time over 60 million dollars had been invested. In another instance in Venezuela, the first invest- ment was in 1934 and the first discovery in 1940, with almost 27 million invested before the first actual sales in 1944. ESTIMATED FUTURE U. S. NEEDS OIL I GAS j COAL Page 63 Investment Goals and Obstacles The pressures of increasing costs arising from the disparity between demand and supply for many materials in the United States undoubtedly are generating increased investment in re- source development in other free countries. The Commission has no doubt that, through the decades ahead, these same eco- nomic forces will promote increased investment. But the Com- mission is by no means convinced that the new investment will take place with sufficient speed and in adequate volume to provide for free world needs, or to help build the economic strength of the less developed nations to desirable levels in the next few decades. Commission studies have clearly delineated considerable obstacles to the necessary flow of capital—ob- stacles that chiefly involve the attitudes and fears of investors and resource countries, the occasional conflicts between their interests, and the political and economic factors which both cause and augment these difficulties. In isolating and clarifying the problems of private invest- ment abroad, this Commission obtained the views of officers of some 50 companies with foreign materials business, and of selected banks, underwriters, brokers, management engineers, and law firms with experience in the foreign field. It believes that the attitudes of investors which it reviews here are repre- sentative. The survey further provided the Commission with a valuable cross-check against studies carried out by agencies of the United Nations, the Organization for European Eco- nomic Cooperation, the International Development Advisory Board, and the National Industrial Conference Board. THE VIEWS OF INVESTORS When mining or petroleum companies undertake to do busi- ness in a foreign country, they do so basically because they want reserve supplies to feed their own refining and fabricating capacity, or because they find a good opportunity for a maxi- mum return on retained earnings and a profitable way to employ their expensive technical personnel. Many investors have emphasized that the crucial investment is not capital but trained talent, which is hard to acquire and organize. Whatever the motivation of any particular investor, all of them share certain basic demands which must be satisfied to some degree before they will feel justified in placing capital in a foreign country: First, the investor wants to be sure that he can mine a par- ticular property within the economic limits of its potential, under exclusive development rights in sufficient territory for a long enough time. Second, he wants to have the decisive direction and control of the development and management of the property. Third, he wants the full return on the output of the property subject only to normal contributions to government. Fourth, and most important, he wants to be sure that the terms and conditions under which he undertakes to develop the property will not be subject to arbitrary, unexpected change. Given a reasonable measure of these assurances, mining companies will invest their earnings, their trained personnel and make costly installations of equipment in a promising loca- tion when they believe that market prospects justify its develop- ment, and have reasonable assurance of converting earnings into their own currency. But the governments of resource countries and private in- vestors sometimes have different ideas about what is a "reason- able'' assurance to the investor. Impediments and uncertainties are often so great an obstacle that potential investors will not undertake a development which, under more favorable cir- cumstances, they would have welcomed. Obstacles Cited by Private Investors The average private investor feels he is at a disadvantage in all his dealings with the governments of resource countries simply because he is an alien. He must adjust to a different tempo of labor, both manual and executive, unfamiliar business and accounting practices, and unfamiliar customs and laws. He finds it difficult, time-consuming, and expensive to deal with strange governments and unfamiliar business groups, and to do business "their way." Private investors with long experi- ence in foreign operations more or less take these matters for granted, but the difficulties sometimes appear so great to in- dividuals or corporations new to the field that they hesitate to make investments no matter how attractive the prospects. The investor in materials development is more dependent upon the country's government than are commercial and in- dustrial firms. In almost all foreign countries minerals can be extracted only after obtaining government permission. In coun- tries where the subsoil is owned by the state, the government concedes the privilege of working government property. In other countries, although the owner of the surface enjoys some rights in the subsoil, the privilege of mining or drilling depends upon contractual permission from the state as well as an agree- ment with the surface owner. The investor has "title," there- fore, only to a privilege granted by the state under general law. Typically h?s rights will be defined in a concession contract negotiated with the country's government. Even if the concession itself is governed by general law, the chances of developing it will often depend upon specific ar- rangements with the authorities as to terms and conditions of investments in transportation, housing, the erection of town- sites, and other facilities necessary to make modern and efficient operation feasible where no facilities existed before. Thus, the assurance of a fair chance for profitable operation depend in- itially upon the terms of a concession and other agreements bargained for with officials of the source country. Through legislation, conditions imposed in concession con- tracts, and administrative actions, some source countries are im- posing restrictions and demands which, from the private in- vestors point of view, make investment opportunities less and less attractive. The most important restrictions relate to: (a) ownership of the corporation; (b) management of the conces- sion; (c) taxation and other exactions; and (d) convertibility of currency and other regulations affecting foreign exchange and trade. Page 64 Over and above these areas of limitation, investors report an increasing uncertainty about the political conditions under which they will operate: a fear that the ground rules will be changed after they invest their money, that they will be denied a fair profit, and that, either directly or on pretext, their property or investment will be expropriated without fair return. Limitations on Ownership Some countries impose a legal requirement that companies engaged in extraction shall be incorporated and owned locally. In French overseas territories, insistence on majority French ownership is known to have caused recent refusals to proceed with development of attractive properties. The extent of ownership permissible in Brazil is not clear. The 1946 constitution appears to assure no discrimination between resident foreigners and Brazilians, but prior legislation conflicts. Many United States investors will not consider min- erals development in Brazil until the right to majority owner- ship has been assured them. Investors putting up a majority of the capital have sometimes accepted minority participation, in return for compensation in materials, price concessions, or special fees for technical and management services. Some investors have accepted a minority interest and a minor share of earnings. Others, however, are stopped by the denial of legal protection and the economic rewards of majority ownership. Restrictions on Management Local participation in the management and direction of cor- porations is often required by law, and sometimes sought where the law does not require it. Insistence on a French majority of directors was a major reason for abandoning the development of an African property. Some investors fear that local minority owners will demand too great a voice in management, or insist on uneconomic use of local supplies and personnel. On the other hand, many investors increasingly recognize that local participation is a healthy and stabilizing development which will increase gov- ernment interest in the welfare of the enterprise. Most serious are the public pressures which limit manage- ment's freedom to determine the scope and direction of operations. The desire of source countries to build up process- ing and developing facilities increasingly makes such auxiliary investment necessary in order to obtain favorable concession arrangements. The desire for a local steel mill is apparent in negotiations for further development of iron ore in some coun- tries. In others, permission to construct necessary facilities may depend upon the investor's willingness to undertake projects not connected with his operations. Government attitudes may limit management decisions once operations are under way. Maximizing company profits may, for example, indicate closing down a high-cost mine in one country and increasing output of a low-cost mine in another. Changes in market demand may suggest a cut-back, but ex- cessive requirements for severance pay may prevent a pro- portionate lay off in labor force. Company executives and government officials may differ widely in their judgment of what constitutes an economic rate of output, especially during a depressed market. The investor thinks of the particular prop- erty in relation to costs and output of properties located else- where, but the government thinks of its resources, leased to the investor, in terms of local employment, dollar exchange, and revenues. To some extent, any company anywhere is subject to such pressures, but most greatly when the main source of revenue for a country, and perhaps a main source of employ- ment, is a single petroleum or mining operation. Other limitations on management decisions, reported by investors, are fixed requirements for the employment of local labor and technical personnel; training to qualify citizens for skilled positions; high severance pay and retirement benefits; and large payments in the event of shut-down. These require- ments add costs which have sometimes discouraged investment. Taxation and Other Exactions Concessions for oil production in both South America and the Middle East have generally required payment of royalties. When a sharp rise in the price of oil increased profits, some source countries imposed taxes in addition to the fixed royalties in order to increase their net revenues. Negotiations have finally resulted, in several countries, in the "50-50 formula" whereby royalties plus taxes never yield the government of the source country less than 50 percent of the net revenues. Metals mining is often subject to gross production or sales taxes which make no distinction between high- and low-cost properties. The tax imposed without regard to the investor's costs magnifies the inherent risks of minerals development. The investor's troubles may be further compounded since such taxes will probably not be allowed as a credit against his United States income tax liability. How the tax is determined is of just as much concern to investors as the rate. Before 1950, investors were deterred by Peru's high tax based on value of exports. But since Peru's passage of a new mining code in 1950, computing the tax on the basis of net income, investors have renewed expansion and development plans. The investor is also concerned about when the tax is im- posed. Canada and Australia have stimulated new mining activity by allowing deduction of exploration expenses and postponement of taxes. South Africa has promoted development by permitting rapid amortization of original and subsequently invested capital in the computing of taxable income. Some in- vestors point to this tax pattern as a primary reason for their de- cision to invest in South Africa. The new Peruvian code ofTers the possibility of negotiating partial tax postponement. Some investors have called attention to specific prospects elsewhere, whose development waits upon similar tax benefits. Convertibility and Exchange Rates The cost of doing business in a particular country may often be increased by multiple exchange rates. By requiring an un- favorable rate for converting profits to dollars, or by requiring conversion of dollars to local currency below the rate in eflfect for other purposes, the government may exact funds from the investor. For example, United States copper companies in Chile were required in 1951 to purchase pesos for operating ex- penses at a rate of 19.37 to the dollar as compared to rates 999959—52 f> Page 65 ranging from 31 to 94 pesos in other transactions. The un- favorable rate is an acknowledged device for taxing the copper companies. A new arrangement providing alternative forms of taxation has been negotiated and is awaiting ratification by the Chilean Congress. The more common exchange problem mentioned by in- vestors is the difficulty of converting earnings into dollars. Some local governments permit companies to retain the foreign exchange proceeds of sales except for enough to finance local costs. The United Kingdom, South Africa, and France have worked out special arrangements for convertibility of earnings for particular materials projects which are predictable dollar earners. The investor's ability to negotiate such a special ar- rangement may well determine whether or not he undertakes a project. Since the materials in which United States industry is most interested are marketable for dollars, mining investment may be less impeded by exchange restrictions than investments de- pendent on local or other soft currency markets. However, obtaining advantage of the dollar-earning powers of minerals depends upon the administrative favor of the resource country's government. United States corporations state that their doubt whether they can convert local currency to dollars is a major deterrent to investment in some countries. Brazil limits conversion of earnings for remittance to the United States in any one year to 8 percent of the investment. This limitation may become more serious. A recent Brazilian ruling excludes earnings reinvested in development in computing the 8 percent for transfer to the United States and requires retroactive recalculation of the capital base to eliminate such reinvested earnings. Import and Export Controls In many areas allocation of sales between local and foreign markets is restricted by export controls. Many investors regard export regulations as a major block to efficient operations, par- ticularly when the indirect object is to enforce local processing and fabrication or to enable the government to control a portion of sales in world markets. Many countries give mining companies preferential treat- ment for imports of equipment and supplies, but some impose restrictions. As a rule, investors regard import restrictions as a nuisance rather than an obstacle. However, small investors have abandoned concessions because of being forced to use inferior, costly local supplies and equipment. Fear of Expropriation Beyond the obstacles so far cited lies a more general and perhaps more important deterrent—the investor's fear that he will be dispossessed of his property by arbitrary action of the resource country or his interests so encroached upon as to destroy his investment. No matter how satisfactory the terms and conditions of agreements, most investors have a very real concern lest source countries violate the initial agreement and take away a conces- sion and the equipment invested in it. Governments have rarely enforced forfeiture without cause, as a "sovereign right." But some have done so with the allega- tion that the investor had failed to abide by the terms of the agreement. The opportunities for governments to make such allegations are as many and as broad as the terms and condi- tions imposed upon the investor. Mining concessions commonly stipulate that investors shall maintain a prescribed rate of development and extraction with the reasonable object of pro- tecting the country's interest in having its resources developed rather than hoarded. Hence, forfeiture enforced because of failure to work the concession at an adequate rate would be in accordance with the terms of agreement. But if shutdown of a property can entail forfeiture, then any action by the government making the property unworkable or unprofitable over a period of time carries with it a threat of such "creeping expropriation." The interruption of publicly owned services—transportation or power—on which an enter- prise depends may halt operations or even make the property- untenable. Radical increases in labor costs and taxes imposed by new laws may change a profitable operation into a losing one. And no matter how great his difficulties the investor fears that by discontinuing production so as to ride out a bad period, he may lose his concession and the bulk of his investment. The threat of this type of squeeze, and the knowledge that any alleged violation of contract will be reviewed, if at all, in the courts of the complaining country, haunts the investor more than the danger of outright nationalization. officials' attitude Any investor finds that the requirements and risks of opera- tion involve a far greater dependence on the favor of the coun- try's government than he is accustomed to in the United States. U. S. PRODUCTION VS. USE USE EQUALS 100% The terms of ownership, management, taxation, and currency convertibility may be differently interpreted under different administrations and may be radically altered during the long course of development and production. This places the invest- ment literally at the whim of the state. In Latin America, Africa, and Asia, the state means individual officers who exercise a far more personalized control than in this country. The high degree of dependence upon the attitude, actions, and discretion of these officials is a crucial distinction between foreign and domestic mining investment and operation. The United States investor often lacks confidence in the government of the resource country. If this obstacle could be overcome, most of the specific deterrents to investment would vanish. The difficulty of remedying this lack of confidence explains the difficulty of encouraging greater United States private investment in materials development abroad. Investors point explicitly to hostile statements by heads of certain countries as reason enough for staying out of those areas, and cite similar official statements and policies in others. Almost all United States investors interpret present Argentine policies as consciously inhospitable. Past actions of some coun- tries, hostile to foreign investment, discourage new investment. Chile recalls earlier memories of the nationalization of all nitrate Page 66 marketing, and Mexico and Iran symbolize oil "expropriation." Misgivings are aroused by nationalization of domestic industries in some source countries. Even when the investor has confidence in the good intentions of incumbent government officials, he still must be concerned with the unknown attitude of govern- ments yet to come. PENALIZING SUCCESS Quite apart from whether governments prove hospitable and reliable, the interests of the investors may diverge from those of the source countries. A bargain favorable to exploration and initial development may seem unreasonable or unfair to a later government when resources are paying off. To the in- vestor a 4'fair" return on many long-shot failures requires a full return on the one brought home. The country, however, sees only a resource proved and developed, sometimes beyond wildest expectations, and may insist on the equivalent of a management fee—fair in its judgment—as the only reward the company "deserves." Thus, an oil concession renegotiated after reserves have been proved may be far less favorable than an earlier one. This fundamental conflict is always latent, however disclaimed or concealed. OPPORTUNITIES FOR SOLUTIONS Despite the requirements, risks, and conflicts, materials in- vestment has been made and will continue to be made. The mining industry is attuned to risks, and more often than not the "nonbusiness risks" are over-balanced by the high grade of the ore and the estimate of the market. Nevertheless, the policies of resource countries could prevent or slow down an increase of United States private investment. Only by permitting investors a fair return, with assurance against arbitrary action, can resource countries expect private capital and technical knowledge to assist their economic de- velopment. On the other hand, private firms cannot disregard the interests of the source country. The problem is to reconcile countries' social and economic aspirations with investors' interest in earnings and security of capital. Three Moves by Investors In recent concession arrangements, investing companies have attempted in three ways to meet the reasonable demands of foreign governments. First, investors are making a conscious and marked effort to encourage local participation in management and operations. In the case of Venezuelan oil, absentee control has been mini- mized by giving the local manager or subsidiary president more authority. Local professional and technical services have been used as much as possible, local engineers have been trained and employed, and local personnel have been taken on as trainees for top management positions. Second, investors have improved relations with governments through local equity participation. Recently one large United States oil company reached an agreement with the Government of India for establishing in Bombay an oil refinery, under which the oil concern will form an Indian company which will own and operate the refinery. The cumulative preferred stock of the company, amounting to 25 percent of the issued capital, will be offered to Indian investors, while the ordinary shares will be owned by the United States company. The Indian Government has given assurance that the refinery will not be nationalized during the next 25 years, and that it will be al- lowed to remit profits and to meet its capital costs. The parent oil company has given assurance that an adequate number of Indian personnel will be trained in refinery operations, and that byproducts will be made available to subsidiary Indian industries. Some governments insist on local equities, and many com- panies recognize that a strong local interest has advantages for them. One company executive reported that he would not go into a new enterprise unless he could obtain local partici- pation. Most investors appeared now to accept the necessity for some local participation in South America, and in colonial areas partnership with nationals of the home country. While certainly not typical, some investors have recently indicated a positive preference for restricting themselves to a minority position in foreign enterprises when local capital and competent executives are readily available. Third, investors have attempted to forestall conflicts of interest which have arisen in the past. In the petroleum indus- try the 50-50 formula has been developed. There is no industry- wide formula for other mineral operations, but three recent attempts to reconcile the interests of country and company offer some promise of healthy experimentation: One is a concession agreement which terminates at the end of a period of years, after which the investor has the option to continue operation on a management-contract basis on terms no less favorable to the source country than those offered by alternative bona fide bidders. Another arrangement gives the investor the right to renew the concession at 20-year intervals after production be- gins, but only upon payment of increasing royalties and upon an undertaking to reserve for the source country increased shares of production. A third arrangement, aimed explicitly at reconciling the investor's economic interest with the source country's in- terest in the political symbol of local "ownership," is embodied in a law which governs the extractive indus- tries in the Portuguese overseas territories. This law waives all royalties, taxes, and charges upon the investor. After a return of capital invested in exploration, one-third of the shares in the producing company go to the Portu- guese Government. So far, no significant mineral produc- tion has been undertaken under this law, but at least one large company has started exploration under it. Economic Statesmanship None of these efforts toward more reliable and more pre- dictable arrangements will succeed so long as a basic lack of mutual confidence exists, but economic statesmanship will help. Companies cannot treat foreign concessions as reserves to be brought into production only when it suits the narrow objective of maximizing profits for the company. Operations must con- tribute to the economic and social well-being of the country. A concession country has a right to the efficient development of its resources at a rate commensurate with its national interest as well as with the reasonable interests of concessionaires. Page 67 How C. §. Government Can Help The United States Government can encourage increased investment in materials development abroad by using its powers and influence to promote more amicable relationships between private investors and the governments and peoples of resource nations. The Government can increase the attractive- ness of private investment abroad by helping to overcome un- reasonable legal and administrative restrictions which now deter many investors. The Government further can stimulate private investment abroad by using its tax structure to promote a flow of new capi- tal, and by removing tax inequities which now hamper certain types of foreign investment. STEPS TO REMOVE BARRIERS The principal device now available for diplomacy and inter- national law to assist in long-run solutions is the investment treaty with its right of appeal to international institutions for adjusting private and public conflicts. Two other governmental devices for assisting more rapid materials investment are forms of executive agreement—the Special Resource Agreements— aimed at specific projects, and guaranties offering protection to investors. Investment Treaties The investment treaties of today are modern versions of the "Treaties of Friendship, Commerce and Navigation" (FCN treaties) with strengthened provisions covering the rights of investors and security of investments. The treaties bring eco- nomic relations between nations within a framework of law and, since they are long range, are particularly appropriate for the problems of materials development. their assets and limitations The United States is now negotiating FCN treaties with a large number of countries. In general, the treaties seek treat- ment of United States investors no less favorable than that accorded to the nationals of the resource country (national treatment) or other countries (most-favored-nation treat- ment) . Typical provisions are assurance of freedom to operate, control, and manage enterprises; assurance of prompt, ade- quate, and effective compensation in event of expropriation; assurances regarding withdrawal of earnings and reasonable amounts of the capital invested; and assurances against discriminatory taxation. A number of treaties signed since the end of the Second World War include provisions which in effect grant national treatment to United States investors in resource development abroad (e. g., the treaties with Colombia, Uruguay, and Israel). Others (with Denmark and Ireland) set natural re- sources aside as a reserved sphere in which national treatment is not accorded to investors in materials enterprises. In such cases, however, the treaty typically protects the investor against the risk that newr discriminatory measures will be applied after he has made his investment, and to this extent provides re- assurance and encouragement. Even if all treaties provided unqualified national treatment for United States investors abroad, they would still leave the investor subject to a variety of restrictions and impositions. In many foreign countries, particularly in less developed areas, governments recognize the key role which materials develop- ment and production play in their economies and therefore subject such activity, whether conducted by foreigners or their own nationals, to close and direct government supervision. In other countries, restrictions on private investment in such fields as petroleum have been adopted because these activities are regarded as "sensitive" from the security standpoint. Even where the general mining law under which concessions are granted does not discriminate against investors from the United States or other countries, it often permits considerable admin- istrative latitude in granting a concession, or on a concession's terms. LONG-TERM VALUE OF TREATIES Despite its shortcomings, the investment treaty does offer the promise of protection against expropriation without prompt and just compensation—a protection supported by provisions that unresolved disputes over interpretation of the treaty "shall be submitted to the International Court of Justice, unless the parties agree to settlement by some other pacific means.55 The treaties are not likely to free investors of their concern about "creeping expropriation.5' A mining concession nationalized without allegation that the investor violated his contract could be placed before an international tribunal. But if breach of contract were alleged, there would certainly be doubt that the treaty's machinery could be effective against expropriation. The Commission is aware that investment treaties will not in themselves induce materials development. Nevertheless, it supports the program as helping to give investors confidence in the intentions and policies of other governments. Special raw materials agreements with particular countries should be under- taken in addition to efforts to negotiate comprehensive instru- ments like investment treaties. Special Resource Agreements Government-to-government Special Resource Agreements would be much less comprehensive than a treaty, would cover a period of perhaps only 5 to 10 years, and would deal with specific resource developments of mutual interest. Concessions under such special agreements would still be negotiated directly between private investors and foreign gov- ernments. The object of the agreement would be to establish a more favorable basis for negotiations and for the subsequent operations. Investors have indicated in discussions that they prefer not to have the United States Government participate directly in initial negotiations, because they believe bargaining would be complicated and unduly slowed down. In the contemplated Special Resource Agreements, the re- source country's government would pledge its cooperation in removing the uncertainties which chiefly deter investors, in Page 68 return for guarantied prices or purchase commitments by the United States Government, plus an assurance that the United States would facilitate investment in both resource and general economic development. The agreement could cover tax laws, regulations applying to foreign ownership and management, administration of the labor code, export regulations, exchange restrictions, import permits, the right to bring in foreign tech- nicians, transportation facilities, compensation in the event of expropriation, and other matters of concern to investors. Agreements of this general character were negotiated with a number of Latin American countries during the last war, after European markets were cut off. Guarantied purchase of minerals at stated prices was a strong inducement. Under pres- ent market conditions, producing countries might find it less persuasive. Other attractions can be added—the promise to encourage private investment, and to facilitate loan assistance for developments not directly connected with materials proj- ects, such as power, transportation, and agriculture. The Special Resource Agreements would be Executive agree- ments rather than treaties. Granted on the basis of existing law, they would be subject to the risk that the law might change. The private investor would have the pledge of the resource country's government that, within the limits of its Executive authority, onerous features of existing regulations would be mitigated, and would not be changed during the life of the agreement in ways adversely affecting his operations. The Commission recommends: That executive resource agreements with other govern- ments should be negotiated when there are clear indica- tions that new investment in minerals enterprises would take place in a particular country if legal and administra- tive deterrents were lifted. When the country and types of enterprises in prospect are known, the concessions to be stipulated on each side should be sharpened so that general pledges of mutual cooperation are supplemented by specific undertakings. Investment Guaranties In its programs of financial aid to other nations since the last war, the Government has tried to encourage private dollar investments also by insuring investors against certain nonmarket risks. Experience with the guaranties is limited to the program of the Economic Cooperation Administration and its successor, the Mutual Security Agency. Until 1951, guaranties applied only to the convertibility of original investment and earnings. Within the past year, a program of guaranties against expro- priation has been formulated but it is too new for its effective- ness to be judged."* Convertibility guaranties have been subject to two major limitations. First, they are restricted to a return of principal and earnings, over a period of 14 years, equalling only 175 percent of the original investment. Second, they applied until recently only to Western European countries and their dependencies. The Mutual Security Act of 1951 authorized extending the program to other areas covered by the Act. *See vol. V, Guaranties for Foreign Investment. Although by the end of 1951 the program had been author- ized for nearly 4 years, only 34 convertibility guaranties total- ling about 32 million dollars had been issued, and only 2 guar- anties against expropriation totalling about 1.3 million—a small fraction of the funds authorized for these purposes. None of the guaranties involved investments in extraction or smelting and although applications have been made on behalf of a few min- ing enterprises, at the end of 195*1 none had resulted in a guaranty contract. On the record the effect of convertibility guaranties in in- ducing investment is open to question. In conjunction with an adequate guaranty against expropriation a guaranty against inconvertibility might well be more effective, but this type of underwriting has not yet been applied to minerals production. A major stumbling block is finding a satisfactory definition of expropriation. If any withdrawal of a minerals concession on any basis were interpreted as expropriation, the investor would be entitled to compensation even if he had violated his contract and forfeiture were warranted. If the guaranty applied only to "unreasonable" forfeiture the right to compensation would hinge on the interpretation which an agency of the United States Government placed on the guaranty contract and also on the terms of a concession drawn up under foreign law. An effective guaranty can be defined in general terms. It would give enough assurance to encourage the investor to make new investments despite his fears of foreign government action, but at the same time, it would not protect investors against the consequences of actual breach of contract. But spelling out such a guaranty and executing it, will be, at best, a compli- cated problem. The Commission believes that the present guaranties against inconvertibility and expropriation should be viewed as experimental pending longer and geographi- cally more extended experience. As experience is gained in the present program, ways may be devised to increase the effectiveness of the guaranty for mate- rials enterprises. TAX CHANGES TO SPUR INVESTMENT Changes in United States tax laws might serve in two ways to stimulate investment abroad: by removing penalties on in- vestment that result from double taxation of income earned abroad, or by providing special inducements. In this section, the Commission takes up the foreign tax credit granted to United States investors, expensing of exploration and develop- ment activities, the use of bilateral tax treaties, and the pro- posal for unilateral forgiveness of taxes on income from foreign sources. Removal of Tax Handicaps The United States attempts to avoid double taxation on the foreign income of its taxpayers through the foreign tax credit— the basic provision applicable to income earned abroad. If a United States citizen, domestic corporation, or resident alien pays certain types of taxes to another government, he may elect to reduce his individual or corporate income tax bill by the amount of those taxes. The taxes which can be credited in this Page 69 way are income taxes, war-profits taxes, excess profits taxes (or taxes imposed in lieu of such taxes) paid or accrued to another government during a taxable year. On total income received from abroad in 1950 amounting to an estimated 1,743 million dollars, the Government collected approximately 395 millions in net revenue. The value of credits for foreign taxes paid amqunted to approximately 370 millions. Thus, the credit system reduced by half what otherwise would have been the tax paid on income earned abroad. The Revenue Act of 1951 made a major stride in liberalizing and making more equitable the United States foreign tax credit system, and the Commission heartily endorses the changes. Credits are now available to a United States corporate taxpayer who owns as little as 10 percent of the stock of a foreign corpo- ration instead of 50 percent as formerly. In the case of a sub- sidiary of the foreign corporation, 50 percent ownership of the voting stock instead of 100 percent as formerly required is sufficient to permit a credit to be taken by the United States corporate taxpayer to whom the dividends ultimately flow. These changes removed provisions that formerly militated against entry into the United States capital market of offerings of foreign corporations which might stimulate minority invest- ment and joint ventures in foreign mining. The changes also made it easier for United States investors to operate in foreign countries which require that local investors hold a majority of voting stock, since under the previous law the United States investor in such a case was not eligible for tax credit at home. Other Limitations A number of technical limitations still remain in the tax credit system and result in arbitrary discrimination against various classes of United States foreign investors. Whatever can be done to eliminate these inequities and make the credit system more effective should be done promptly. CREDIT FOR FOREIGN TAXES a) The credit which a taxpayer is allowed to claim for taxes paid to another country is not necessarily the full amount he paid. If he receives, for example, a fifth cf his income from investment in a foreign country, he may claim credit for the tax he paid up to the level of one-fifth of the com- puted tax he owes to the United States. This may amount to a credit for the full tax paid abroad, or it may not. The effect of this "per country limitation" is to prevent total taxes paid abroad from being offset against United States taxes wherever the foreign country's tax rate is the higher. More- over, total credit is similarly limited to a proportion of the com- puted tax equal to the fraction of net income derived from all foreign countries. This "over-all limitation" affects only tax- payers with operations in more than one country and operates so as to reduce the allowable credit in cases where a taxpayer earns profits in one country but suffers a loss in another. Elimination of both limitations would permit credits for all foreign income taxes paid, even when they exceeded the tax obligation based on the United States rate. Elimination thus would permit a portion of foreign taxes to be offset against taxes due on income earned in the United States. This appears clearly objectionable from a fiscal standpoint. In 1950 the Treasury proposed eliminating the over-all limitation but retaining the per-country limitation. The Commission recommends: That the taxpayer be permitted to elect annually whether the "per country" or "over-all limitation'3 will apply in computing credits for taxes paid abroad. BRANCH AND SUBSIDIARY POSITIONS b) Taxpayers operating abroad through subsidiaries have no income tax liability at all until earnings from abroad are received as dividends. In contrast the total foreign income from business conducted through branches or divisions, rather than through subsidiaries, must be reported and taxes paid on income, when it is earned. The Commission recommends: That deferral of reporting income from overseas branches until the income is remitted to this country be permitted, as is the case with subsidiaries. CONSOLIDATION OF RETURNS c) A domestic corporation and its wholly owned foreign sub- sidiary may not file a consolidated income or excess profits tax return (thus offsetting the gains of one against the losses of another) unless the foreign subsidiary is in Mexico or Canada, and certain additional conditions specified in the Internal Revenue Code are met. The privilege of filing a consolidated return is given to affiliated domestic corporations under certain conditions; and, of course, the offsetting of gains and losses occurs automatically if a foreign operation is conducted through a branch office. In the latter case, moreover, percentage depletion may be de- ducted from the income earned abroad in computing taxable income, a privilege not available where a domestic corporation operates through a foreign subsidiary, except for the Mexican and Canadian cases mentioned above. The Commission recommends: That domestic corporations with foreign subsidiaries be given the same rights to file and obtain the benefits of consolidated returns as affiliated domestic corporations have. EXEMPTION TO ATTRACT KEY PERSONNEL d) Exemption from tax of income earned abroad by United States citizens is an important means of encouraging par- ticipation of technical and managerial personnel in foreign development. The Revenue Act of 1951, liberalizing previous provisions, exempts income earned abroad by United States citizens if they are bona fide foreign residents for at least an entire tax- able year, or if without establishing a foreign residence they are physically present in a foreign country or countries for 17 Page 70 or 18 consecutive months. Consideration should be given to further liberalization of these provisions by shortening the minimum period prerequisite for exemption in both cases. The Treasury at various times has supported a number of changes along these general lines. In view of our increasing dependence on foreign sources for essential materials and the importance to the free world of a more rapid economic develop- ment of underdeveloped areas, it is indeed shortsighted to retain tax provisions which create handicaps to United States private investment abroad. EXPENSING CAPITAL COSTS e) Elsewhere in this Report, the Commission has endorsed the principle that mineral producers should be permitted to deduct certain outlays incurred in exploration and de- velopment activities from current gross receipts in com- puting taxable income. It is the Commission's belief that this privilege will be a real incentive for additional exploration for needed mineral reserves. Corporate taxpayers developing resources abroad will auto- matically get the same benefits as a domestic producer if foreign operation is carried out through a branch or subsidiary with which the United States parent can file a consolidated return. If operation is carried out through an unconsolidated sub- sidiary, however, returns to the United States taxpayer come in the form of remitted dividends. Since the taxpayer has not itself incurred the outlays, it cannot "expense" them against its dividend receipts. Thus, without some special arrangement, this type of United States investment abroad will not get the stimulus that expensing affords. Such a distinction in treatment would be especially unfor- tunate, since foreign resource investment is carried out increas- ingly through subsidiaries organized in the other country, and providing for substantial local ownership. These subsidiaries will not, as a rule, qualify for the consolidation privilege. Thus, if no adjustment is made, the inequality of tax treatment may serve to divert funds from investment in foreign resources. This inequality of treatment can and should be mitigated. The Commission recommends: That taxpayers be permitted in computing the portion of their dividends that represents taxable earnings to make a deduction corresponding to their share in the foreign cor- poration of the same outlays of the corporation for ex- ploration and development as domestic producers are permitted to make and to treat that deduction as a return of capital rather than as taxable earnings. Under this recommendation, the benefits of the accelerated return of capital that expensing makes possible would be avail- able to investors in foreign minerals enterprises, in cases where the privilege is not directly available to the foreign corporation itself. Administrative difficulties would be involved in this proce- dure, but these can be minimized if the burden is put on the taxpayer to prove to the satisfaction of the Commissioner of Internal Revenue that his accounting is accurate. Tax Treaties Give Incentives Bilateral tax treaties offer an additional means of eliminat- ing double taxation, and of promoting foreign investment through selective offering of special favors. As presently drawn, the treaties are designed to eliminate taxation of the same income by more than one country. They reconcile the legal and administrative concepts of the contract- ing countries and establish a mechanism to which the taxpayer can turn in case of dispute. Since the mid-1930's, the United States has negotiated conventions for exchange of benefits, mostly with industrial nations. Some treaties provide that dividend and interest income going to certain foreign nationals from investments in this country shall be taxed by the United States at reduced rates. Reciprocal benefits are provided for United States taxpayers. In this type of treaty, each of the signatories makes a concession in taxing income earned within its territory by nationals of the other; no concession is made by either country with respect to its taxation of income earned by its nationals within the territory of the other. Materials producing coun- tries, particularly in Latin America, have indicated their prefer- ence for treaties embodying the second type of concession, i. e., exemption from taxation by the investor's country of income received from the producing country. They argue that the country in which the income is earned should have the exclusive right to tax, especially if the income is derived from that country's resources. The Commission believes that exemptions of income earned abroad from United States taxes through bilateral convention is an appropriate device for stimulating United States invest- ment in countries where the potentiality of materials develop- ment is high. The exemptions granted through bilateral conventions by the United States should be confined to new investment whether in the form of new enterprises or the expansion of existing ones. Countries can be selected where these criteria are met: where the output potential is high for materials which the free world lacks; where the political context is such as to induce new investment through tax advantages; and where the other coun- try pledges itself to establish tax and other arrangements favorable to United States investors. Tax legislation in the United States is the concern of the entire Congress and in particular of the House of Representa- tives. Treaties need the approval only of the Senate but the Commission feels that any substantial changes such as proposed here in the content of the tax treaty program should secure legislative authorization from both Houses of Congress before being undertaken. Unilateral Tax Exemption The main issue concerning the taxation of income from for- eign sources is between the tax-credit principle and across-the- board exemption under which the United States would uni- laterally refrain from taxing income from foreign sources. Support for devices designed to exempt from United States tax either all income earned abroad, or certain broad categories such as income from new investments, has been expressed by Page 71 the International Chamber of Commerce, the Foreign Trade Council, and the International Development Advisory Board. Pro. Arguments in favor of tax exemption are: a) Many countries adhere to this principle either as a general rule or in specific reciprocal treaties or conventions. b) Since under any kind of tax-credit system United States investment is taxed at the full Federal rate, United States firms in foreign countries which have a lower tax rate operate at a competitive disadvantage compared with local concerns from other countries which are not taxed at home on income earned abroad. c) Exemption would eliminate an undesirable feature of the credit system: nullification of the effect of any tax incentive that a foreign country is willing to offer since any reduction simply reduces the tax credit allowed on the United States tax. Con. The main arguments against tax exemption are: a) While many foreign countries allow exemption, most of them are capital-importing countries. b) The competitive disadvantage suffered by United States firms in foreign countries with lower tax rates is largely hypothetical, since in resource development the companies compete in a world market against companies paying all sorts of tax rates. c) Under the present credit system, the total current income tax bill of United States investors on earnings abroad returned to this country is not affected by foreign income taxes as long as the foreign tax rates are no higher than United States rates. In these situations, the credit system permits the investor to concern himself chiefly with the usual economic considerations in deciding where to invest. d) In neutralizing the effect of foreign income taxes, the credit system permits the foreign country to work out its own fiscal problems without being subject to special pres- sures toward regressive tax systems. e) Blanket exemption even if confined to new investment is a relatively expensive device, and is not adapted to the selective promotion of particular national policies. Pro- posals for limiting exemption on the basis of grants issued on the discretion of an administrative body have been criticized as being discriminator)7 or as placing too broad powers in the hands of an administrative agency. In the opinion of the Commission, the weight of the argu- ment is clearly against unilateral tax exemption by the United States for income received from abroad. Government action to improve the climate for investors abroad, and to provide special inducements such as tax con- cessions, is intended not only to encourage new investment by the relatively few established companies but also to attract new investors. It is often the new investors who provide the major stimulus to growth and innovation in an industry, and it is pertinent therefore to inquire whether anything might be done in the foreign materials field specifically to strengthen this force. World production and marketing of some minerals has from time to time been rigidly cartelized. For minerals for which progressive shortages are predictable, however, the explicit cartel agreement can be expected to interfere less with produc- tion and marketing than it does in times of depression. The restriction of output and the pegging of price is traditionally a depression phenomenon. If the Commission's projections are correct, and if optimism about the ability of industrialized na- tions of the world to prevent a major depression is justified, then the explicit cartel should become decreasingly serious. In keeping with its confidence in competition as the best regulator of economic activity, however, the Commission urges continuation of the traditional policy of this Government in opposing restrictive practices at home and abroad. This policy has been manifested in the bilateral agreements governing Economic Cooperation Administration assistance to Europe and in the positions taken by United States representatives on the Economic and Social Council of the United Nations. BROADENING THE BASE OF INVESTMENT Although development of mineral resources abroad is in rela- tively few corporate hands, to a very considerable extent the fewness, size, and power of foreign minerals producers and processors appears to lie in the nature of the business. Insofar as compatible with efficiency and continuity of operations, how- ever, it is desirable that more investors as well as more invest- ment be attracted into the foreign field. The Commission be- lieves that its proposals concerning investment treaties, special resources agreements and, in particular, tax reform may pro- vide a substantial inducement to new as wrell as present investors. In addition to these measures, opportunities for encouraging new investors should be offered in connection with various types of Government assistance to foreign resource development proposed in the next chapter. The steps which the Commission has recommended can accomplish much to promote private investment in materials production abroad. But there are strict limits to what the United States Government can do. In the last analysis it is the private investor himself and the government of the source country who are the principal parties of direct interest. Much will depend on the understanding and sense of public responsibility displayed by private investors toward producing countries. And, on their part, the producing countries will have to demonstrate in specific and practical terms that they are aware of the great contribution which materials development can make to their general welfare. The removal of unreasonable impediments to the flow of private capital to these areas rests chiefly in their hands. Page 72 Chapter 13 Direct Assistance by Public Agencies While the Commission believes that private investment must be the major instrument for increasing production of materials abroad, it also believes there is immediate and continuing need for public action beyond efforts to assist and encourage private investment. Private enterprise cannot be expected to undertake many types of activity and investment which must accompany or precede the establishment of new materials projects in the less developed areas of the free world. The technical and financial aid which is needed can and should be given by the United States Government and international organizations. Security needs of the free world require public action in addi- tion to private action to assure that essential materials will be produced at the right time and in the right quantity. In this chapter the Commission discusses two major types of direct public assistance abroad for this purpose. TECHNICAL AND FINANCIAL ASSISTANCE In nearly all underdeveloped countries, productive activity is hindered by factors not directly connected with materials problems. Many workers have only primitive techniques and tools, productivity is low, and ill health and poverty are wide- spread. Although 70 to 80 percent of the labor force work at farming, most countries do not produce enough food to meet their needs. They lack transportation, sanitation, power, edu- cation, adequate governmental organization—the general foundation of economic growth. The people and spokesmen of the underdeveloped countries have a common aspiration to cease to be underdeveloped. The byword of the present-day social revolution—which has set a ferment to work throughout these vast areas—is economic de- velopment. To the people of these areas, this means a balanced growth of agriculture, manufacturing, and other industries directed toward maximizing real income and improving stand- ards of living. This Commission believes that the habit of regarding diversified economic growth for the underdeveloped countries as an alternative to materials development is erroneous. Many facilities needed for the production of materials are also basic to the expansion of industry, agriculture, and public services— in short, basic to a balanced growth of real income and rising standards of living. The encouragement of materials produc- tion must be concerned with railways and highways and harbor facilities; with fuel and power and other public services; with education and the training of workers and with the provision of food and clothing and decent housing for the people who work in the mines and the fields. Directly or indirectly the expansion of materials production in a country depends upon the realiza- tion of all the conditions which make for a more efficient use of its human and material resources. Widening use of modern technology and skills in materials production and processing provides technical training and experience essential to progress in other areas of the economy. Not only is general economic development an important factor in expanding materials production and export, but ma- terials production for world markets makes possible a more rapid expansion of industry, agriculture, and public utilities by providing foreign exchange that can be used to buy equip- ment for industries and farms, and to construct irrigation, hydroelectric, and transportation systems. Foreign exchange also establishes a country's credit for obtaining international loans for development. The Commission believes that programs of technical and financial assistance to the underdeveloped areas for a balanced growth of their economies and increased productive capacity are an essential element in expanding raw materials production. General measures for promoting foreign economic development have been the subject of other recent reports to the President.* Hence, although such measures as improved educational, agricultural, and governmental facilities make a basic contri- bution to increased productivity and can be justified on the ground of furthering materials development alone, the Commis- sion will confine the remainder of this chapter to certain aspects of technical and financial assistance more immediately and directly related to the production of materials needed in other countries. United States Technical Assistance Topographic and geologic mapping are indispensable first steps in minerals development. In the United States, geologic surveys together with a limited measure of preliminary explora- tion are performed by the Federal Government to lay the groundwork for private operations. Underdeveloped countries, on the other hand, typically lack the skilled manpower, the equipment, the facilities, and even governmental agencies, for appraising their mineral resources. Yet without this preliminary work, neither substantial private investment nor comprehensive governmental development programs can be expected to get started. The current United States programs of technical aid give assistance to some resource countries in all these respects, through geological and exploratory work by United States ex- perts, through help in organizing local minerals and geologic bureaus, and through training local experts. The amount of such activity is limited. The United States has had separate programs under way by the Technical Co- operation Administration and the Mutual Security Administra- *Report to the President on Foreign Economic Policy, November 1950, and Partners in Progress, A Report to the President by the International Development Advisory Board, March 1951. Page 73 tion (formerly Economic Cooperation Administration) but both provided only a little over a million dollars (fiscal year 1952) for assistance directly related to minerals production. The Commission recommends: That increasing emphasis be given under the United States programs of technical assistance for underdeveloped areas to geological surveys, preliminary exploration, and advice on mining technology. That support for these programs should be increased per- haps to as much as 4 million dollars a year. That, wherever technical assistance is extended in these fields, the United States should seek assurances that the recipient country will promote conditions favorable to developing such resources as may be discovered. Financial Assistance Later in this chapter, the Commission discusses United States Government financing of some foreign materials production as a security measure. At this point, the Commission is concerned with the important contribution which the Export-Import Bank and the International Bank for Reconstruction and Develop- ment can make to foreign materials expansion for meeting normal market needs.* The Commission believes that public development loans can increase foreign materials production best by financing such public improvements as transportation, power, and port facilities. Without these, expansion of materials output is often impossible. The following are examples of such loans for public facilities directly and immediately related to developing mate- rials supplies. In South Africa chrome and manganese production has been held up by a shortage of transportation facilities. The South African Railways and Harbor Administration is now improving existing railway lines, constructing new lines, and expanding and modernizing harbors and airports. Financial assistance is being provided partly by the International Bank for Recon- struction and Development, partly by United States banks. In India the Damodar Valley area accounts for 75 percent of Indian's coal production, most of its manganese, copper, lime- stone, and bauxite, all its mica. To expand production, addi- tional electric power is required. The International Bank is lending 18.5 million dollars to finance the Bokaro-Konar project which will provide 150,000 kilowatts of thermal electric power together with the necessary transmission lines. Brazil received loans from the Export-Import Bank to re- habilitate the railway running through the Rio Doce Valley from the port of Victoria to the Itabira Iron Mines. Although the sole immediate purpose was to move ore, significant de- velopment of other production followed in the valley. In most cases, loans for constructing or improving trans- portation, power, and similar facilities have been made in area-wide support of greater productivity and economic im- *See vol. V, The I. B. R. D. in Materials Development: and Export- Import Loans for Development. provement instead of service of a specific materials project. These loans have resulted in increased production of essential materials. The Export-Import Bank financed electric power projects in Chile which made possible development of the Chilean Steel Mill, a ferro-manganese plant, a wire mill, and a cement plant, all at Concepcion. An Export-Import Bank credit made possible construction of a hydroelectric power plant in Peru, and the Peruvian Government is now developing plans for producing steel and refining zinc at Chimbote. The Commission believes it is proper for the United States to encourage countries of high resource potential to facilitate materials production as an integral part of any economic pro- gram requiring United States assistance. United States interest in the development of friendly coun- tries is by no means limited to their materials production, but since materials can yield foreign exchange income, a country's willingness to support effective resource development might be an important factor in assessing the country's ability to service additional loans for economic development. THE ROLE OF INTERNATIONAL AGENCIES The Commission is convinced that international agencies should take a major part in providing technical and financial assistance for economic development. It has some important advantages over direct aid from the United States. Inter- national action may frequently be more effective than that of a single nation in inducing the less developed countries to adopt necessary, but politically difficult, domestic measures. When one nation furnishes assistance to another, there is a possibility of hostile propaganda alleging invasion of sovereignty, eco- nomic exploitation, or discrimination between different under- developed countries. Moreover, assistance through internationr . agencies makes clear the world interest in the objectives of the assistance. It is beyond the competence of this Report to recommend in detail the amounts of grant or loan assistance needed for eco- nomic development or the specifics for rendering such aid, but the Commission calls attention to the fact that the United Nations Technical Assistance Board thus far has spent only about $100,000 on direct assistance for minerals develop- ment—in part a reflection of lack of interest among under- developed countries. It is the Commission's view that the United States representatives should encourage a wider use of United Nations technical assistance in geological surveying and minerals exploration in the underdeveloped countries. The International Bank for Reconstruction and Develop- ment should be the principal source of public loan funds for general development, such as for transportation, power, port facilities, and agriculture. The effect of loans in expanding ma- terials output should be considered by the economic and tech- nical missions which the International Bank sends to member countries to assist in planning balanced programs of economic development. The Commission feels it is especially important, both from the standpoint of the earning capacity and economic welfare of the borrowing country and of the international interest in Page 74 an abundant supply of raw materials, that proper attention be paid to materials production in the economic programs of the countries seeking loans from the International Bank. SPECIAL MEASURES FOR SECURITY NEEDS The full bearing of security on the free world materials prob- lem is discussed in chapters 26-29 of this Report. In this chapter the Commission wishes to take up certain direct activities which the United States Government must undertake abroad for security purposes. Private capital responding to normal market incentives may not bring about materials development and production fast enough or large enough to meet security needs. No matter how successful governments may be in improving the situation for private investment, continuing risks and uncertainties may prevent the necessary volume of investment, But to the Nation, these risks are outweighed by the compelling need for defense production, for stockpiling, and for maintaining an economy capable of rapid expansion for wartime production should this become necessary. Private enterprise cannot be expected to meet all these re- quirements without direct Government help. Market risks, for example, may be too great. An existing high level of defense demand might not be maintained long enough to warrant addi- tional investment. An abundance of low-cost supplies in hostile hands, as in the case of Chinese tungsten or Soviet manganese, might be used to flood markets and choke off sales from new capacity. For security reasons the Government may want to promote development of standby capacity, or to encourage production in a relatively high-cost area judged safe from aggression— neither economical by private market standards. In other cases the prospects and costs may be too conjectural to be wrorth a private gamble on the political and strategic hazards in a foreign area. Before the Government steps in with direct assistance in any of these cases, it is important to be sure that the public interest is clear and compelling and that private action alone could not be relied on. In some materials industries, such as the petroleum industry, private enterprise largely unaided finan- cially by Government has been successful in expanding foreign production to meet free world requirements, even in the face of substantial obstacles. Widespread assumption of market risks or of financing by the Government might reduce private initia- tive until private capital would not venture abroad without special Government inducement or favor. Officials operating Government programs of direct assistance must, therefore, satisfy themselves in each case that the necessary increase in production cannot be achieved without special Government action. Security Devices The Government can use a number of techniques in pro- moting the expansion of foreign materials production. Under long-term contracts, the Government can assume all or a part of the market risks. Other devices are development loans, Gov- ernment ownership with operations under management con- tracts, and Government ownership and operation of foreign properties. Different conditions for expanding output require different techniques, but ali involve a shift of market or produc- tion risks from the investor's pocketbook to the Treasury of the United States. PURCHASE ARRANGEMENTS The Government is a substantial purchaser of many raw materials, mostly for the strategic stockpile although some for resale to private industry. Usually, the Government makes spot purchases or employs some form of straight procurement con- tract. This type of purchase does not provide special induce- ments for additional output or productive capacity as would long-term contracts with producers. The long-term contract usually provides a minimum price guaranty, enabling the pro- ducer to amortize expansion costs over the life of the contract, and may also provide for adjustments should operating costs change. In many cases the Government need not actually pur- chase material, only agree to buy if the market price falls below a certain level. From the producer's viewpoint this allows him all the advantages of market price and protects him against declines. Cancellation clauses include reimbursement of the producer for an agreed portion of unamortized capital. When a large number of small producers must be dealt with, the same objective can be accomplished by the Government's announcing a floor price at which it agrees for a given time to buy all output not taken by the private market. Both the Economic Cooperation Administration and the General Services Administration have employed the long-term contract to encourage production for stockpile purposes. The new Defense Materials Procurement Agency has authority to enter into long-term contracts either for stockpile or for resale to private industry. The Economic Cooperation Act permitted contracting up to 20 years; the Defense Production Act sets a limit of June 30, 1962, while the General Services Administra- tion has authority to contract for stockpile materials without time limitation. Contracting activities by the G. S. A. are, of course, limited by current stockpile goals. The authority of the Defense Materials Procurement Agency and its funds are established strictly on an emergency basis; that of the General Services Administration is limited to stockpile operations against limited objectives. The task of in- creasing production of materials for security purposes—both to provide for stockpiling and, of equal importance, to provide a continuing and expansible flow of scarce materials—does not, in the Commission's view, have a foreseeable end. The Commission therefore recommends: That a successor agency should be established whenever the Defense Materials Procurement Agency is dissolved, and that it should be empowered to make long-term con- tracts for periods up to 10 years for foreign-produced materials, including standby contracts and price-floor arrangements. GOVERNMENT LOANS Long-term purchase arrangements will suffice when market risk is the chief deterrent to be overcome, and may also enable the producer to arrange financing with private capital. How- Page 75 ever, when private capital is not willing to underwrite the level of output deemed essential by governmental authorities, Government loans may be necessary. A foreign property operated by an American producer may be unable to raise enough private capital because of political or war risks abroad, or a mining property may be operated by a competent foreign producer who, although possessing ample funds in local cur- rency, may need dollars to finance equipment and other ex- pansion needs. In many instances a materials development loan may be sufficient to bring about a desired expansion without a long-term purchase contract. Until the latter part of 1950 the E. C. A. and the Export- Import Bank were the principal United States governmental agencies with authority and funds to make such loans. At present the Defense Production Administration is authorized to make funds available (by certification to the Export-Import Bank) for materials development loans, advances, and loan guaranties to producers abroad, but up to April 15, 1952, had used its authority in only one case—a sisal development in Haiti—though others were pending. E. C. A. made long-term loans both with counterpart funds and with dollars, repayable in materials which go into the United States stockpile.* Examples are the Zellidja lead-zinc development in French Morocco and chrome in Turkey. Loans may now be extended to any area covered by the Mutual Secu- rity Act of 1951. At present all foreign materials development and procurement activities financed either with counterpart funds or with dollars appropriated under the Mutual Security Act are being carried out by D. M. P. A. whenever any of the material is intended to be shipped to the United States. The Export-Import Bank, in addition to its loans for general development, has made a number of loans for the expansion of materials production—manganese in Mexico and Brazil, sulfur in Mexico, iron ore in Liberia, zinc in Peru, and tungsten in Bolivia and Peru, the producer usually agreeing to sell his output to the G. S. A. or other approved purchasers. The Export-Import Bank, however, can use its funds only for loans meeting certain banking standards and cannot provide capital when the risks are very great. The new Defense Materials Procurement Agency is not so restricted. Under the Executive order of August 28, 1951 establishing this new agency, the Export-Import Bank is authorized to make foreign materials development loans from funds made available under the De- fense Production Act, provided that private funds are not available and the bank decides the loan should not be made from its own funds. The essentiality of the materials loan must be certified by the D. M. P. A., the D. P. A., or the Department of Agriculture. The Commission recommends: That a successor agency should be established whenever the present emergency agencies are dissolved, and that it should be provided with funds for financing foreign ma- terials production in cases where special United States security interests justify assumption by the Government of greater risks than would be assumed by the Export-Import Bank in its normal operations. It is the view of this Com- mission that the Export-Import Bank should not lower its normal standards in making such loans out of its funds. *See vol. V, Counterpart Funds for Raw Materials. When development loans supply the bulk of the capital in- vested in a materials project, the risks of the private investor are largely shifted to the Government while the investor stands to gain large profits if the venture is successful. Clearly if Govern- ment loans were to become generally available for financing private ventures in foreign materials production, enthusiasm for doing business in any other way would be undermined. The Commission recommends: That in general Government loans for materials produc- tion be limited approximately to not more than 50 percent of the total investment required for the desired expansion of output. In exceptional cases, where it is impossible to attract private capital for 50 percent of required invest- ment, public lending agencies might provide perhaps as much as 75 percent of the total capital. DIRECT GOVERNMENT PARTICIPATION The investor sometimes considers that the risk of a foreign undertaking essential to the public interest is too great to war- rant venturing his own capital even to the extent of 25 percent of the total. The location may be in an area of high war risk, or the physical difficulties and elements of costs may be too problematical. The Commission thinks the Government should not supply the bulk of the risk capital for a development which may bring the owners large profits with relatively little risk to themselves. Profits made without risk at the taxpayers' expense are contrary to the public interest; moreover, subsidized investment should not be made more attractive than unassisted investment. There- fore, where there is an urgent need for materials which can be obtained only by Government providing the bulk of necessary capital, administrative devices other than those discussed earlier should be employed. The Commission has considered three alternative devices for dealing with this problem: (a) outright Government owner- ship and management; (b) a form of Government financial assistance which shares earnings as well as risks; and (c) the management contract.* Government ownership and management. Outright Gov- ernment ownership and management appears to be the least desirable of the three. Not only does the Government lack the staff and experience for conducting mining ventures, but such operations on foreign soil are not likely to be regarded favorably by the host governments. Government loans and profit sharing. Although there are few precedents in United States governmental experience for the second device, it has advantages over both direct Govern- ment operation and the management contract. It would utilize *See vol. V, Government and Management Contracts. ■1 U. S. PRODUCTION VS. USE Page 76 the experience and management ability of private enterprise, retain the profit incentive, and assure the Government, in re- turn for providing the bulk of the risk capital, a share in potential profits. The borrower might issue special income de- bentures entitling the Government lending agency to a share of the profits above a certain percentage, in addition to pay- ment of interest and principal on the loan. The Commission recommends: That profit-sharing debentures be obtained by the Gov- ernment when government loans for materials develop- ment exceed 75 percent of the total investment. Management Contracts. The third alternative, the man- agement contract, was used extensively within the United States during the Second World War and to some extent abroad. In foreign development, it was resorted to chiefly when private capital was unwilling or unable to undertake a project because resources were low grade, the processing methods un- proved, or the post-emergency market prospects too uncertain. A management contract was used for the development of Nicaro Nickel project in Cuba where the Government undertook the cost of the construction and operation because additional nickel supplies were badly needed. Since 1942 the Government has also engaged in production of abaca fiber in Central America under a management contract between the Reconstruction Finance Corp. and the United Fruit Co. The Government usually held title to the facilities and either leased them at a substantial rental to a private company which operated them for its own account, or paid a private company a fee for operating the project. The management contract can provide certain of the advan- tages of private ownership by making the return to the man- aging firm dependent in part upon efficiency. In the United Fruit Co. contract the company receives a management fee equal to 15 percent of annual net earnings with a minimum fee of $1 per month per acre of land under cultivation. Another incentive device that might be introduced would be for the management firm to supply some capital. The Commission believes that the management contract is a useful device for achieving expansion of foreign materials pro- duction where the national interest justifies the Government's supplying more than 75 percent of the required capital. During the last war, the Government had broad authority to enter into management contracts under the Act of June 25, 1940, creating the Defense Plants Corporation. Since the Act's repeal in 1947, the Government's powers have been limited to special statutes on specific commodities (e. g. tin and abaca) and to residual powers to continue operation of plants constructed during the war (e. g. six magnesium plants in the United States and the Nicaro Nickel plant in Cuba). The Commission recommends: That legislation explicitly authorizing the Government to enter into management contracts for foreign materials expansion be enacted by the Congress. Functions of Permanent Agency: Summary In sum the Commission has recommended that after the current emergency agencies are disbanded, a permanent agency, or agencies, be established whose powers would include the following: (a) to make long-term purchase arrangements in- cluding price guaranties; (b) to provide funds for foreign production loan assistance in situations where the risks to the lender are such that loans could not be made with Export- Import Bank funds under its normal standards; (c) to enter into management contracts, or to make loans which provide for a sharing of profits in cases where the proportion of the total capital represented by government financing exceeds approximately 75 percent. It is again emphasized, however, that these operations should be confined to situations in which the material or the productive capacity is required for reasons of compelling national interest and cannot be obtained without special governmental action of the type discussed in this chapter. Chapter 14 Removing Barriers to Trade Tariffs and other barriers to international trade in materials are adding to the free world's materials problems. They not only increase the difficulty of obtaining needed supplies from abroad, but discourage producers in exporting countries from making the expansion in output which rising world consump- tion will require. Moreover, by interfering with market pres- sures of supply and demand, they prevent normal development of the tendency to move toward lowest cost sources of mate- rials—a movement which, as the Commission has pointed out, is essential in promoting the most rapid economic growth of both the United States and the less developed countries. As the world's largest single importer and exporter of many materials and products, the United States is in a particularly effective position to lead in the removal of barriers and to stimulate the flow of raw materials. The United States can— Remove restrictions on the entry into this country of materials from abroad. Govern export controls and allocations so that supplies and equipment move to primary resource countries which wish to increase their production of needed materials. Join with other producing and consuming nations in inter- national actions to reduce such impediments to trade as tariffs, export and import quotas, currency restrictions, and cartel agreements. Page 77 Relieving Tariff Restrictions With its tariffs and with excise taxes levied against imports alone, the United States sets up direct barriers against an im- portant part of its materials supply. These duties operate in a number of harmful ways: they increase costs to consumers, tend to limit the inflow of materials and hence impede development abroad, and discriminate particularly against processed as com- pared with raw or crude materials. Table I, Selected Examples of Ad Valorem Equivalents in 1950 Tariffs (pp. 80-81), shows that the duties vary between 1.6 and 68 percent of the value of imports. For some critical materials, duties are high: tungsten, fluorspar, aluminum, and magnesium. On other materials, the duties are low and some may be imported free of duty: ores of antimony, chrome, iron, nickel, and titanium; ores and more refined forms of cobalt and tin; industrial diamonds, rubber, and sulfur. The duty levied bears no consistent relation to the crucial United States need for a particular material. The reciprocal Trade Agreements Act of 1934 and the modified extension of the Act in 1945 have resulted in many reductions of 50 percent and a few of 75 percent below those specified in the Tariff Act of 1930. The rates on bauxite, nickel metal, and alloys, and excise taxes on copper and petroleum products, have all been reduced by half, while the duties on manganese ore and some types of crystalline graphite have been reduced by three-quarters. In addition, the general rise in raw materials prices over the last 20 years has had the effect of reducing levies for many items on which duties are stated ex- clusively in terms of so many cents per unit: the tariff of 1 ]/o cents a pound on lead, for example, was 27 percent of the average price in 1930, but only 11 percent in 1950. These reductions undoubtedly help to lower the barriers to trade, but the size of duty on a particular material does not necessarily suggest its full influence in restricting imports. The degree of effect would vary with other economic conditions. In slack times, even a very low duty might strongly discourage imports. On the other hand if the United States did away with price controls, and industry's demand kept growing, import duties might have only small effect in restricting the flow of materials, although they might still discourage new develop- ment abroad. At present, when prices are controlled, even a low duty makes the prices offered in the United States less attractive to foreign producers than those of competitive world markets with uncontrolled prices. Admittedly, there are other special cases in which reduction or elimination of tariffs might have little immediate effect in increasing the flow of materials, or in lowering the price. This might be true whenever, as in the case of mercury, domestic production was small and foreign production was controlled by a monopoly. The supplier could, if he found it to his advan- tage, merely raise his price by the amount saved on lowered duty. Such cases are not frequent, however, and even in mo- nopoly situations, the probability is that higher profit might eventually encourage expansion of total world output. The typically higher duty on processed materials, as con- trasted with ores or crude materials, presents another case in which the tariff schedule does not necessarily serve the best interests of the Nation. The ores of such minerals as antimony and chrome may be imported duty free, but the metal is subject U.S. TARIFFS ARE HIGH ON SOME CRITICAL MATERIALS v NET IMPORTS (Crude to semi-fabricated) AS PERCENT OF CONSUMPTION ■■■ DUTY COLLECTED, AS PERCENT OF IMPORT VALUE BEFORE TARIFF TOTAL U. S. CONSUMPTION, PRIMARY MATERIALS 0 20 40 60 60 100 hyl^&ARITES^ETC. HHHHHHi 25.0% Page 78 'Lead and Zinc free as of Feb. 1952 Source: U. S. Tariff Commissiom to tariff; the same discrimination is applied to lead, manganese, petroleum, and aluminum. Yet, unless the country in which processing would take place is judged too vulnerable from a security standpoint, the processing of ores abroad could be to our national advantage. This would be true whenever foreign processing costs, in conjunction with the lesser charges for shipping more concentrated processed materials rather than bulky ores, would actually deliver lower cost materials. To encourage imports of processed materials would be espe- cially desirable when labor, transportation, and power continue short in the United States. The production of aluminum abroad, for example, could use the ample hydropower available near bauxite deposits at a time when costs of producing ample elec- tricity for the United States rapidly expanding aluminum in- dustry are threatening to rise. Moreover, many resource coun- tries are interested in developing their own refineries and ^ processing facilities, and may insist on private investors erecting and operating them as a condition for granting the right to develop raw materials resources. In such cases, the operation of the United States tariff schedule may impose a barrier to resource expansion which our own interest, and that of the free world, dictates should be encouraged. SECURITY AND TARIFFS One of the pleas offered for continuation of tariffs is based on security: the argument advanced is that tariffs will assure continued operation of domestic mines or plants needed in war- time but too high cost to compete in a peacetime market. In the Commission's judgment, there would be few cases where a protective tariff would be the best device for satisfying security needs. For security, as for economic growth, the prin- ciple which the Commission advocates is to find the lowest cost way of meeting a need. Lower cost ways of accomplishing the same end are suggested elsewhere: stockpiling in chapter 28; expansible capacity in chapter 29; long-term contracts and similar devices in chapter 13. CONCLUSIONS AND RECOMMENDATIONS The overriding national interest points clearly to the desir- ability of eliminating the obsolete tariff barriers to the entry of materials into the United States. The Commission believes that the reciprocal trade program should be carried forward and its authority expanded. Under this time-tested system the Government should continue to reduce duties on raw materials in which the United States is deficient. However, there are limits to the technique of recip- rocal trading. It is bound by the very principle of reciprocity: the United States can make a tariff concession only in exchange for a tariff concession by another country. Morover, the au- thority is restricted to reduction of tariffs and does not permit their complete elimination on any commodity. The Commission believes that elimination of the tariff on HU. S. PRODUCTION VS. USE USE EQUALS 100% n many industrial materials would be of benefit to the United States, quite apart from reciprocal action by other countries. The Commission therefore recommends: That permanent legislation entirely independent of the Reciprocal Trade Agreements Act be enacted authorizing unilateral elimination of import duty on any industrial material in either crude or refined form whenever it is determined that the United States is, or is expected to become, substantially dependent on imports of the mate- rial, and that such action is in accord with the national interest. Procedures for making such determinations should be specified in the legislation. Other United States Restrictions Among other restrictions w7hich may limit imports of mate- rials into the United States or deter development of new sources abroad, are the Buy American Act, and the export controls and allocations which the Government uses to regulate access to key products. BUY AMERICAN ACT The Buy American Act of 1933 and similar provisions of State and Federal laws is a relic of depression years and de- pression psychology. Born in a period when production was slack and millions were unemployed, the Buy American Act requires the Government to purchase domestically produced materials unless the head of a purchasing agency or depart- ment determines that such purchases are inconsistent with the public interest, or the cost unreasonable, or the material un- obtainable in the United States in adequate quantity and quality. The act also requires that contractors, materials men, or sup- pliers for Government construction use only domestically produced unmanufactured materials, and only such manu- factured articles as have been manufactured in the United States substantially from domestic materials. Exceptions similar to those applicable to materials purchases may be made. A Buy American provision also applies to purchases of materials for the strategic materials stockpile. This provision has been interpreted as permitting purchases from domestic producers if the price is up to 25 percent above the price at which foreign supplies are offered. In special cases where domestic production will be stimulated, even more than 25 percent above the world market price may be paid to domestic producers. Application of the Buy American principle ignores the Na- tion's growing need for imported raw materials, is inconsistent with the rapid and most economic acquisition of a stockpile, and works against national security in encouraging a more rapid depletion of United States resources than the market would justify. It serves no useful purpose, but the reverse, in a time of high production and full employment. The Commission therefore recommends: That the Buy American Act and similar provisions of State and other Federal laws and regulations be repealed. Page 79 EXPORT CONTROLS AND ALLOCATIONS Export controls and allocations can become another block to foreign materials development. This kind of Government interference with the market is used primarily under emergency conditions, like that of today. Export controls are designed to prevent exports which would be against the national security (mainly restrictions on destinations of goods), and to protect the domestic economy from an excessive drain of scarce ma- terials and finished products. Exports of scarce commodities are usually restricted by quotas. United States exporters apply for licenses to export, describing the quantity of material, its destination, and intended use. In determining the quantity of a material to be exported, the United States authorities con- sider the need to maintain the civilian economy of this country, and those friendly to it, the need for the production of scarce Table I.—Selected examples of ad valorem equivalents of 1950 tariffs Antimony: Ore Metal Oxide • Asbestos (unmanufactured, all grades and types) Bauxite, crude Aluminum: Metal and alloys, crude Plates, sheets, bars, rods, etc Scrap Chrome: Ore Alloys, ferro-chrome-chromium: Containing 3% or more chromium Containing under 3% chromium Chrome or chromium metal Cobalt: Ores and concentrates Metal Copper / Ore Concentrates LJnrefined; pigs, etc Refined; ingots, plates, etc Scrap Fluorspar: Containing above 97% calcium fluoride Containing not over 97% calcium fluoride Graphite: Amorphous: natural and artificial Crystalline: crucible lump, chip Crystalline: flake Industrial diamonds h Iron Ore Pig Iron Lead: Ore, dust, mattes Pigs, bars Scrap Magnesium: Metal and scrap Alloys Sheet, tubing, wire, etc Manganese: Ore: 10-35% manganese Over 35% manganese: Battery grade Other Ferromanganese (30% or more manganese): Containing less than 1 % carbon Containing 1-4% carbon Containing 4% or more carbon Mercury Value of 1950 imports for consumption a 1, 850, 162 2, 204, 091 428, 386 27, 239, 391 15, 729, 855 48, 366, 733 5, 016, 561 14, 149, 860 23, 298, 841 4, 167, 546 362, 701 88, 057 2, 239, 750 10, 952, 759 127, 597 29. 261, 962 41, 485, 101 130, 318, 207 11, 109, 722 1, 050, 305 1, 529, 362 1, 347, 660 2, 181 725, 172 35, 637, 064 43, 872, 682 26, 237, 334 21, 039, 227 104, 340, 645 3, 876, 999 218, 129 5, 056 38, 280 758,521 2, 107, 229 39, 007, 494 109, 466 5, 059, 189 11,069, 120 2, 694, 272 Rate of dutv in 1950 Free 20 lb 10 lb Free 50c L. T 26 lb 30 lb ib.d Free %i lb. c \2y2% ad val. >> c 25% ad val Free Free 20 lb. c* 20 lb. cg 2c" lb. c* 20 lb. cg 20 lb. cd* $5. 60 L. T $8. 40 L. T 5% ad val 7i/,% ad val 15% (0.41250 lb. min- 0.8250 lb. max.) Free Free 750 L. T V'4 lb. ce 2^ lb. - 2}.& lb. cde 200 lb. k 200 lb. c plus 10% ad val 200 lb. c plus 10% ad val Yd lb. c Yd ib-c >401b.c i^60 lb.c plus 10% ad val 15/i60 lb-c 'Yid lb-c 250 lb 15.2 7. 2 8.5 39. 5 a Includes value of materials imported free of duty for Gcverrment use or as a product of the Philippine Republic except where otherwise indicated. The value of these imports was, of course, eliminated in calculating ad valorem equivalents. Does not include value of materials imported for manufacture in bond and reexport or for supplies for certain foreign vessels and aircraft. 6 The rates of duty shown in the table are actually those which were in effect on Jan. 1, 1951. During varying portions of the year 1950 the effective rates for some of the materials differed from those shown in the table because of changes made in the course of the year. During 1950 the reductions in duties made in the Annecy Protocol to the General Agreement on Tariffs and Trade became effective, but relatively few of the materials included in this table were affected by this. In addition duties were increased as a result of: (1) The withdrawal of certain concessions in the trade agreement with China on Dec. 11, 1950, which affected the duty on antimony metal and tungsten. (2) The termination of the trade agreement with Mexico on Dec. 31, 1950, which affected the duties on fluorspar, lead, molybdenum, and zinc and the tax on petroleum products. Since Jan. 1, 1951, some duties have been reduced as various schedules of the Torquay Protocol of the General Agreement have been put into effect. The duties on aluminum, chrome, fluorspar, pig iron, lead, man- ganese, nickel, tungsten, and zinc have been reduced by these schedules. c Of metal content. Page 80 materials, and the requirements of defense and economic development programs of other countries. Under the pressures of administering an allocation and ex- port control program, the importance of projects abroad which produce materials needed during the emergency is apt to be more clearly recognized than that of long-range development. The Commission wishes to emphasize that if allocation and export controls are not to limit foreign materials and general economic development, the present policy of providing ade- quate allowance for supplies and equipment not only for exist- ing producers abroad, but also for materials and general economic development which is for the future, must be vigor- ously carried out. Under the Defense Production Act the Government has au- thority to control distribution of materials by giving priority to essential uses at home or abroad. Steel can be sold only to Table I.—Selected examples of ad valorem equivalents of 1950 tariffs—Continued Value of 1950 imports for consumption a Rate of duty in 1950 Mica: Unmanufactured, other than waste, scrap, or untrimmed phlogophite: Value not over 15^* a lb Value above 150 a lb Manufactured: Films and splittings: Not above 12/10. 000-inch thickness Above 12/10,000-inch thickness Molybdenum: Ore or concentrates Ingots, shots, bars or scrap Sheets, wire or other forms • Nickel: Ore and matte Oxide Metal and alloys: Pigs and ingots, etc Bars and rods, etc Cold rolled, etc Tubes and tubing Cold rolled, etc Petroleum: Crude Refined naphtha Kerosene Gasoline: 100 octane and over Under 100 octane Gas oil including diesel oil Residual fuel oil Unfinished oils for further processing Topped crude Lubricating oils Quartz crystals (Brazilian pebble, unmanufactured) Rubber, natural (including latex) Sulfur' 41,384 3, 031, 477 18, 387, 967 1, 505, 827 1, 033 11, 656 7, 610, 011 10, 477, 405 58, 960, 350 45, 485 10, 111 2, 854 945 369, 760, 778 215, 821 739, 828 Tin: Ore and oxide Bars, blocks, pigs, etc Metallic scrap Alloys Titanium ore (ilmenite) Barium, boron, strontium, thorium, titanium, uranium, and vanadium . Tungsten: Ore and concentrates Metal Ferro tungsten Ingots, shot, bars, or scrap Zinc: Ores Scrap Dross and skimmings Blocks, pigs, slabs Dust 879, 4, 678, 160, 525, 8, 226, 4, 114, K 791, 456, 907, 110 125 793 355 416 012 276 412 137 172 47, 163, 305 152, 690, 398 146, 396 1, 993, 377 1, 198, 545 54, 420 15, 309, 400 322, 131 1, 078, 760 169, +82 24, 313, 625 501, 428 186, 748 38, 759, 435 80, 564 4c lb 20 lb. plus 15% ad val. 12^ ad val. 20% ad val. . Ad valorem equivalent of 1950 rate of duty (percent) 41. 5 17. 8 12. 5 20. 0 35^ lb.c 30% ad valA 40% ad val. . Free. Free. l Mi lb 12U% ad val. 17^% ad val. 12>2% ad val. 17^% ad val. 10^c bbl.* 10i/;p. bbl.«. lOUc bbl.«. 52>^ bbl.«... 52y2e bbU... 10^0 bbl.« 10V>c bbl.* m. 10^c bbl.s... 10i/^ bbl.s «. 840 obi.*. . . . Free Free Free Free Free Free Free Free 25% ad val. 50*: lb.c 42c* lb.c plus 25% ad val. 42c lb.c plus 25% ad val. 30% ad val.fc %e lb.ce %IUU \ ^--11 The speculative operations of middlemen reinforce these movements. The factors that make for a sluggish response to market con- ditions by materials producers are implicit in the discussion of how price swings affect their operations: the time lag in open- ing new deposits and bringing them into production; the prob- lems of resuming operations after a shut-down has dissipated labor forces and deteriorated workings. The disparity between the speed with which the materials-consuming industries reduce their purchases and the rate at which materials producers con- tract their output generates surpluses in a period of decline to force prices down further; in a period of upswing it augments shortages to increase the inflationary pressure upon rising markets. Extractive industries and governments of the producing na- tions attempted in the period between the two world wars to Page 85 regulate the materials markets through production quotas and restrictions which, in effect, created artificial shortages and at- tempted to peg prices at profitable levels. Cartels and agree- ments of this sort often victimized consumer nations, throttled competition, and subsidized high-cost producers. Since the last war, new approaches have been made to solutions: allocation of supplies, guarantied purchases and sales of specific commodi- ties within defined price ranges through multilateral contracts or, in the case of the United States, unilateral guaranties of floor prices in certain materials. Some of the devices have not yet been in operation under enough conditions that would test them thoroughly. The evils and disadvantages of the cartel and restrictive agreement systems of limitation are well known and the Commission is in hearty accord with the efforts of the United States to prevent their revival. In the belief of the Commission, international action can be effective in reducing instability in the materials markets within such milder cyclical swings of general business as occurred in 1936-38 and 1949-51, and this action is im- perative if the world is to forestall a return to the evils and disadvantages of cartel rule in the market place. Solutions should be sought in the interest of the greatest good of the greatest number and of a kind which will pro- vide the greatest benefits for the growth of the free world economy. The Commission is convinced that the right solutions lie in the direction of expansion and growth, not in the direction of quotas, narrow national action, and restrictions on production and trade. National Efforts at Control The United States has resorted to two different types of action in response to the instability of commodity markets. The object of one kind of action has been to obtain critical materials which normal market operations could not be relied upon to provide; the other action has been designed to stabilize com- modity prices on a domestic basis. In a sense, both represent efforts to reduce the effects of instability, but both are subject to great limitations as methods of stabilizing world prices. LONG-TERM PURCHASE ARRANGEMENTS The fear of market instability is one reason why United States long-term purchase arrangements are necessary. They are selectively designed to stimulate individual producers to supply certain critical materials in necessary volume. These long-term purchase commitments with minimum price guaran- ties relieve individual producers of a part or all of the market risk of increasing production. The Commission recommends in Chapter 13 that authority be granted to continue these operations after the current emergency ends. But the overriding purpose of these purchases, mainly for the stockpile, is to in- crease materials security, not to stabilize markets. In fact, stockpile purchase policies have had destabilizing effects on world markets. It should be possible to reduce disruptive effects of such by better programing of purchases. However, the long-term materials purchase program of the Government falls far short of the objectives of a materials stabilization program directed to the continuing and growing needs of the free world. Unilateral action is hardly likely to allay the fears of other producing or consuming countries and the program, by providing assurances only to a portion of the market, may generate even greater instability among producers with whom long-term agreements are not made. Moreover, since the commitments are typically floor price guaranties, they offer no assurance of restraints on price increases. United States consumers are, of course, temporarily protected by price controls. DOMESTIC STABILIZATION MEASURES Attempts to stabilize materials prices and trade within sepa- rate countries unilaterally would in all likelihood only aggra- vate instability in world markets. Such has often been the result of the various United States agricultural support programs which originated in the thirties and employed production con- trols and Government buying in an effort to stabilize prices of the protected commodities relative to other commodity prices. National stabilization devices for industrial raw materials are clearly unsatisfactory for two reasons: First, to insulate domestic prices against fluctuations of world prices would lead to a variety of restrictions on trade—export subsidies to enable domestic producers to sell abroad, import quotas to protect them against lower priced materials from abroad, and sometimes outright embargoes, such as that im- posed by the United States on imported butter. Restrictions of this type would conflict with the Nation's growing need to import industrial materials at the lowest price. Second, devices of this nature conflict with the principles of commercial policy which the United States has been advocat- ing to the world. To extend stabilization measures to markets for industrial materials such as metals would compound the difficulties to which our agricultural policy has already given rise, and would make it impossible for the United States to fulfill its commitments under the General Agreement on Tariffs and Trade in which we have taken the leadership. (Covering four-fifths of the world's trade, this agreement has led to three conferences which, since 1947, have lowered tariff barricades.) The Commission views a strictly national stabilization policy in industrial materials as impracticable and highly undesirable. International Efforts at Control The Commission is convinced that the solutions to the prob- lem of materials market instability must be sought through international agreements in which the United States will have to take a leading part, PRESENT ACTIONS The United States Government already is cooperating with other nations in efforts to solve various problems of the ma- terials market. There is no doubt that the allocation recom- mendations of the International Materials Conference, which the United States helped to establish, are having some stabiliz- ing effect on the prices and markets for materials during the present emergency. The United States Government is participating in pre- liminary work for possible establishment of an International Cotton Agreement and an International Sugar Agreement. Page 86 It is a party to the International Wheat Agreement and is participating in a discussion of its renewal. All these develop- ments reflect not only a growing awareness of the need to con- sider international stabilizing action in particular materials but also a recognition of the need to avoid the more restrictive production-limiting features of prewar international stabiliza- tion devices. The inadequacies and evils of the prewar devices for con- trolling materials markets led the United States to oppose them in the postwar period. International cartels have existed in a wide variety of materials, including steel, copper, lead, and zinc, and have affected particularly such specialized fields as industrial diamonds and mercury. International commodity agreements have been employed in tin and rubber, and in these the governments of producing countries took an active role. Both cartels and commodity agreements were designed basically to adjust supply to variable demand by restricting output and exports of individual producers or producing coun- tries. These restrictions often prevented sharp price falls and, by establishing higher prices than would have prevailed under competition, increased the profit of producers and mitigated the hardships of producing countries. By enforcing rigid pro- duction quotas they assured high-cost producers an "equi- table" share of the market and obstructed expansion of more efficient enterprises. By sharpening restrictions whenever markets were soft, they made for a much smaller output over the years than would otherwise have taken place. They bene- fited producers and producer countries at the expense of consumers. Scarcity rather than abundance is most likely to be the problem ahead, in the Commission's view, and a method of price stabilization that relies almost exclusively on restriction is patently unacceptable. After the war, extensive and difficult international nego- tiations on this subject culminated early in 1948 in drawing up chapters V and VI of the Havana Charter for an Inter- national Trade Organization. Chapter V relates to cartels and chapter VI to international commodity agreements. In essence, the charter laid down the principle of non- discrimination in international trade and called for reducing tariffs and eliminating tariff preferences. It set forth the gen- eral rule that quantitative restrictions or quotas should not be used to regulate the import or export of any product, save under exceptional circumstances. The chapter on cartels recognizes the futility of removing discriminations and re- ducing trade barriers imposed by governments if business enterprises are free to create them. It requires prevention of restrictive or discriminatory practices by private firms. Chapter VI on international commodity agreements may be viewed basically as a qualification of the charter's provision against export and import quotas. It recognizes that exagger- ated materials price declines may cause severe distress to pro- ducers, and permits multilateral agreements regulating the prices, production, or the volume of imports and exports of such commodities. It gives this permission only when burden- some surpluses are expected which threaten severe unemploy- ment or hardship to numerous small producers (in article 62). Such agreements, although renewable, are to be limited to 5 years or less and are to be accompanied by a program of eco- nomic adjustment designed to remedy the underlying difficul- ties. Full publicity is provided for all such agreements and an equal voice in their operation is to be given producing coun- tries and principal consuming countries. The United States has not ratified the treaty, but under a resolution of the United Nations Economic and Social Council is bound with other nations to recognize chapter VI as a gen- eral guide. The further steps which, in the Commission's view, the United States should take on chapter VI of the Havana Charter are discussed later in relation to the Commission's conclusions about the types of agreements which may help to stabilize materials markets—agreements upon which chapter VI would have definite bearing. TOWARD BETTER CONTROLS Difficult though international agreements are to achieve on materials problems, the path to stability of markets clearly lies in this direction. Two principles, in the Commission's view, are of prime importance from the standpoint of promoting economic growth: First, arrangements should be sought which minimize re- strictions on materials production. Second, commodity agreements should interfere as little as possible with normal market processes. These general principles cannot, of course, be translated into a blueprint for action; moreover, the problems of each com- modity must be approached on a case-by-case basis. Neverthe- less, the Commission believes special consideration should be given to three types of arrangements which can go far toward meeting the above criteria: (a) the multilateral contract; (b) international buffer stocks; and (c) international buffer stocks combined with limited quota arrangements. The Multilateral Contract The multilateral contract form of agreement is typified by the International Wheat Agreement of 1949, which is the only international commodity agreement to have been established since the Second World War. Scheduled to run until 1953, it guaranties importing countries that they can purchase certain tonnages at stated maximum prices, and guaranties exporting countries that they can sell certain tonnages at stated minimum prices. Beyond these guarantied amounts the wheat trade is free to respond to market forces. No buyer is tied to any particular seller and no limitations are imposed on any country's total wheat exports or production. The International Wheat Agree- ment is, therefore, a nonrestrictive arrangement. Because it establishes a limited price range for as much as two-thirds of the wheat and flour moving in world trade, the contract has helped prevent pronounced fluctuations in the average price. Although, even in theory, it is only a partial approach to the problem of commodity market stabilization, the multilateral contract constitutes a substantial improvement over prewar restrictive types of agreements, and holds considerable promise for other commodities. Page 87 International Buffer Stocks The Commission is primarily concerned with two types of international buffer stock arrangements—those with quota provisions and those without. BUFFER STOCKS WITHOUT QUOTA PROVISIONS International buffer stocks without quota provisions should be considered for materials such as copper, lead, and zinc which are easily storable and are expected to remain scarce. Industrial slumps in the United States and elsewhere and abrupt cutbacks in purchases for defense purposes may lead to a temporary softening of the market and sharp price falls, though in the long run, demand for these materials is expected to outstrip supply and, therefore, to push prices up. A buffer stock is a stabilizing inventory—like a compensating reservoir. It acts as residual buyer when demand falls off and prices drop, and as residual seller when demand increases and prices start upward. The buffer stock authorities—established and controlled by importing and exporting countries as parties to the agreement—would announce a price floor and price ceil- ing for a predetermined period, perhaps a year. By buying when prices approach the floor and by selling stocks when prices approach the ceiling, buffer stocks operations would help to confine price fluctuations to a moderate range. Within that range the market price mechanism could operate normally and without interference. Successfully operated, such buffer stocks would curb the excesses of short-run instability and eliminate their injurious repercussions. The buffer stock authority would not attempt to oppose long-term trends. Its objective would be to anticipate long-term trends and help them evolve more smoothly by moderating short-term variations. Such operations could reduce the gross and harmful insta- bility of materials markets without suspending the play of market forces: governments would not interfere in the details of business decisions or limit production and trade. The par- ticipation of governments in the market, through the interna- tional buffer stock, would be analogous to the open market operations of the Federal Reserve System. The machinery required for this purpose would be simple and small, and such buffer stocks would not restrict produc- tion. On the contrary, by preventing cuts in output induced by extreme price slumps and by reducing investment risks, buffer stocks should help increase materials production through the years. BUFFER STOCKS WITH QUOTA PROVISIONS International commodity agreements which combine buffer stocks and quotas on production and exports are suggested for materials such as tin and natural rubber for which the long- term trends are more uncertain. In principle these agree- ments would be similar to the proposals offered by the United States at the United Nations Conference on Tin in 1950. They would provide for restriction of output and exports if prolonged downward pressure on prices occurred, and a gradual lifting of restrictions as the market recovered. In this feature they would resemble the control mechanisms of the prewar quota agreements. The prewar commodity agreements, however, often failed to achieve a reasonable degree of stability because there was an unavoidable lag between changes in prices movements and de- cisions to alter the quotas, and between making the decision and achieving actual changes in output and exports. Materials prices rose steeply but it often took a considerable period for market supplies to increase appreciably, and meantime prices continued to rise. Such transitions could be shortened and made smoother if a buffer stock organization were ready to sell when prices rose and to buy when prices declined. Furthermore, buffer stock inventories would constitute a valuable reserve supply whenever a sharp and sudden increase of demand ex- ceeded existing production capacity. Under the arrangement here contemplated restriction would be a last resort, applied only in the event of a heavy and fairly prolonged contraction of demand. Not until a certain minimum tonnage of the material was purchased by the buffer stock au- thorities would reduction in the quotas come into effect. Unlike the prewar devices, this type of agreement as well as the others proposed by the Commission would be subject to the require- ments of publicity, and equal representation of importing and exporting countries and other procedural protections. General Problems of Commodity Agreements Negotiation of commodity agreements has proved most dif- ficult because when basic materials markets are booming, pro- ducing countries are hesitant about taking steps directed at modifying price swings, and, when markets are depressed, con- suming countries are equally reluctant. Although it may be understood that moderated market fluctuations can in the long run substantially benefit both producing and consuming coun- tries, this consideration is commonly subordinated to the nar- rower and more immediate interests of the individual countries concerned. There has also been a tendency, especially in the period im- mediately following the Second World War, to distrust com- modity agreements because of the restrictions and other evils which characterized such agreements between the wars. It is beginning to be recognized now that the ill-effects of the earlier agreements resulted from the form they took and were not necessarily characteristic of all international commod- ity arrangements. A further obstacle to commodity arrangements is inherent in the very nature of the undertaking. Successful negotiation for a particular material requires agreement on a great many com- plex and detailed issues—prices, quantities, duration, the'con- ditions under which changes in these and other terms can be made, and the degree of discretion to be permitted to a man- aging body. As was demonstrated in the unsuccessful United Nations Conference on Tin in 1950, it is on issues of this sort that efforts to work out commodity agreements are most likely to break down. The Commission is aware of the extreme difficulties of estab- lishing and operating satisfactory international materials agree- ments, but it believes that if countries approach this task with broad conceptions of their long-run interest and work togethei to overcome the obstacles, the problems can be solved. The alternative to agreement is not likely to be a "free market" but rather a revival of restrictive agreements by private cartels anc1 producer governments. Page 88 The Commission believes that the United States must exercise leadership not only in preventing the revival of restrictive agreements but also in promoting positive and constructive action to deal with international commodity market instability. Special Problems of Proposals A comprehensive list of vexing problems that would be involved in negotiating commodity agreements of the particular types proposed by the Commission would probably be im- possible to compile. Some of the most difficult problems, for example, would not be economic but political and administra- tive—and practically impossible to forecast in all their shades and complexities. They would arise not only from the type of agreement, but also from the nature of the commodities and the particular countries in question. Certain major problems, however, can be anticipated. MULTILATERAL CONTRACT PROBLEMS Many problems that can be expected to arise under multi- lateral contracts have already been faced under the Wheat Agreement. The fact that the latter has worked is the best evidence that those problems can be solved. One major reser- vation must be made concerning experience with the Wheat Agreement. Since the world price has been above the maximum agreement price for the entire life of the agreement, the export- ing countries have borne the full costs of stabilization. Since the major exporters (the United States and Canada) enjoy a strong balance of payments position, these sales below world market prices have not given rise to serious problems for Canada and the United States. The real test would come if importing coun- tries, many of whom are in weak international financial posi- tions, were faced with the obligation to purchase at agreement prices above the world price. BUFFER STOCK PROBLEMS There is no international experience with buffer stocks ex- :ept for the prewar Tin Agreement. The Tin Agreement can hardly be viewed as a precedent for the type of agreements suggested here since it was operated exclusively by producers ind was aimed at realizing maximum immediate profits -ather than at long-run market stabilization. Among the major problems which would be encountered in establishing and operating buffer stocks are the following: ;he fixing of ceiling and floor prices; the provision of adequate inances; the setting and enforcing of quotas; the relation to nilitary stockpiles; and the special responsibilities that would levolve on the United States. Price Determination. It would be imperative that ceiling md floor prices be based on reasonable anticipations of the ong-run price trend of the material under control. If prices vere set too high, the buffer stock authority would accumulate :xcessive inventories and eventually exhaust its financial re- ources. With ceiling and floor prices set too low, the organiza- ion would fail to acquire the materials needed for counteracting xcessive price rises. By basing its ceiling and floor prices on the >est estimates of future production and consumption and by periodically modifying these prices in the light of actual market behavior and revised forecasts, the buffer stock authorities could hope to avoid these difficulties. Nevertheless, it is the experience of national price stabilization schemes that support prices are usually set too high in response to the pressure of producer groups. Would the price policy of international buf- fer stock managers suffer from the same difficulty? There are several circumstances which go far toward dis- pelling this fear: First, the experience of national stabilization schemes is not applicable to international buffer stocks. In the administration of national price support devices the same government repre- sents both producers and consumers. Producers' groups, which are usually strongly organized, are in a position to exercise greater political pressure than consumers, who are rarely or- ganized at all. In the case of international buffer stocks, how- ever, importing countries representing the consumers' interests would have a voice in price determination equal to that of the exporting countries. Moreover, as demonstrated by the history of the International Wheat Agreement and more recently by the deliberations concerning tungsten in the International Ma- terials Conference, importing countries are now far more con- scious than they were before the war of changes in their terms of trade and the impact of higher materials prices on their real incomes and balance of payments position. They can be counted upon to oppose attempts of exporting countries to set floor and ceiling prices at too high a level. Second, the purpose of buffer stocks would be to moderate, not to eliminate, price fluctuations. This purpose is compatible with a considerable range between ceiling and floor price. A fairly wide range of permissible fluctuations would give ample scope for testing and correcting the ceiling and floor prices periodically announced by the buffer stock authority. If extra precautions were deemed desirable, it might be possible to work out appropriate formulas. For example, buffer stock agreements might provide that during any single year releases from and additions to the stock should not exceed a prescribed percentage, and that certain changes in floor and ceiling prices would come into effect automatically once these limits to stock purchases and sales were reached. Finance. Unlike prewar commodity agreements, buffer stocks require working capital for their operation. Since both importing and exporting countries would benefit from a relative stabilization of materials markets, it would be reasonable for all participating countries to contribute to the requisite financ- ing. Each country's contribution might be determined by its relative share in world exports and imports. The aggregate finance required would not be so great as to overtax the resources of participating countries. It would, more- over, constitute a good investment since independent buffer stocks are proposed only for materials expected to have a long- OUR EXPORTS OF 1820 ARE OUR IMPORTS NOW % OF MERCHANDISE EXPORTS 90 70 50 30 10 % OF MERCHANDISE IMPORTS 10 30 50 70 90 1820 1946-50 CRUDE MATERIALS ^^^0, MANUFACTURED GOODS 999959—52 7 Page 89 term, upward price trend. Under these conditions the spread between buying and selling prices not only should cover ad- ministrative expenses but also should generally allow opera- tional profits as well. Quota Difficulties. Agreements which include quota pro- visions involve special problems which arise mainly out of the need for enforcing quota decisions and for revising quotas with changes in production capacity and cost conditions. However, the history of previous quota agreements shows that they can be resolved. While quota operations involve administrative expense, they do not require capital. Military Stockpiles. Military stockpile operations might conceivably jeopardize proper functioning of international buffer stocks, because large-scale sudden purchases might pre- vent buffer stocks from limiting extreme price rises, from ac- quiring stocks of their own, or might cause a premature and risky depletion of buffer inventories. Sales from military stock- piles might be on a scale sufficiently large to overtake the stabilizing capacity of buffer stocks. Elsewhere the Commission has expressed its view that, con- sistent with the overriding security purpose of military stock- piles, better programing would reduce the disruptive effects of stockpile purchases. Buffer stock authorities could then take stockpile demand into account as one element in the basic market picture for the commodity. For certain commodities the stockpile might take up slack in demand, postponing the need for buffer stock action to absorb surpluses and steady threat- ened price declines. As for the danger of sudden stockpile liquidation, this would be minimized under the policy (recommended in ch. 29) that withdrawals be authorized only when clearly required for rea- sons of national security. There is a strong presumption that, at such times, the market would be tight and stockpile releases would supplement the price moderating activities of the buffer stock. THE COMMISSION'S CONCLUSIONS The Commission believes that, on balance, the interna- tional arrangements that hold the greatest promise for stabilizing materials markets and, at the same time, for promoting the increased production of materials that the future will demand are the multilateral contract type of agreement and buffer stock agreements either without or with quota provisions on exports or production. The ap- propriate mechanism for particular problems must be decided case by case. The Commission believes further that, despite the clear difficulties of negotiation and the fact that the United States would be called upon to finance a considerable share of the costs, commodity agreements of the type in- dorsed hold sufficient promise of reducing materials mar- ket instability and its harmful consequences to free nations to merit serious consideration and efforts to work out, as tests, stabilization agreements with other countries for a few materials. Greater stability would mean enlarged pro- duction of scarce materials. Failure to work toward sta- bility would continue a major source of economic strain in the free world, and would leave the door open for reappearance of the prewar cartels and restrictive agree- ments with consequent limitations on production, con- sumption, and trade. Impending Review of Chapter VI By resolution of the United Nations Economic and Social Council, a review of chapter VI of the Havana Charter is called for sometime in 1952. This code serves as a general guide for efforts of the free nations to stabilize materials markets. The chapter as it now stands certainly does not provide the ideal framework for the proposals and actions which this Com- mission has suggested for promoting market stability. In article 62, it attempts to lay down generally applicable economic standards as a basis for testing the desirability and legitimacy of future agreements on specific materials. Though open to varying interpretations, the chapter is predominantly oriented to the problem of materials surpluses rather than to meeting the expected long-run increase in demand. The Commission has viewed the question of revising chapter VI primarily from the standpoint of whether or not the sug- gested types of agreements could be negotiated under its code. The practical choices facing the United States, in the Commis- sion's opinion, are either (a) to advocate retaining chapter VI substantially in its present form, or (b) to advocate replacing it by a simple and more flexible set of procedures, for consider- ing and establishing international commodity agreements. Trying to reformulate, in the light of present long-run com- modity projections, the highly subjective and admittedly inade- quate standards of article 62 would invite a repetition of the difficulties which the present version presents. Whether the United States supports retention of chapter VI in its present form or its replacement should depend, in the Commission's judgment, on a determination as to which course would make possible the more rapid and con- structive international action toward stabilizing materials markets. Page 90 Free World Resource Tables (Production and reserves of 22 materials) The following tables show the production potentials for 22 key materials (metals, minerals, and natural rubber) in areas of the free world rich in resources. Areas of the free world means simply areas outside the Iron Curtain. The reliance of the United States on foreign production of these 22 materials is already substantial or is likely to increase. The tables indicate what percentage of free world supply is now being produced by each area and what is presently known about each area's reserves, both in quantity and quality. "What is known" consti- tutes geologists' approximations as to the extent of reserves and their metal or mineral content and is the best measure obtain- able until further mapping and exploration has been done. Unless otherwise indicated, all tonnage figures refer to metric tons of 2,204.6 pounds. Table A.—Canada Percent of total output in free Percent of total output in the free world Commodity Amount produced in 1950 Presently estimated reserves world areas out- side the U. S. Nickel (metal) 111,600 tons 94 94 Measured and indicated reserves are 4 million tons of nickel in nickel-copper sulfide ores averaging 1.5% nickel and 2% copper. Virtually all deposits are located in the Sudbury district of Ontario and constitute by far the largest concentration of nickel in sulfide ores known in the world. Copper (metal) 237,600 tons 16 10 Measured and indicated reserves total about 6 million tons of con- tained metal. Most of it is in the nickel-copper sulfide deposits of Sudbury where copper is mined as a coproduct with nickel. Other important deposits are in the Flin Flon district of Manitoba and the Noranda and Gaspe districts deposits are in Quebec. There are also some fairly large presently submarginal reserves. Lead (metal) 154,100 tons 14 20 10 15 Measured reserves are about 9 million tons zinc metal and 4.5 million tons lead metal in presently commercial and near commer- cial ores. Second only to Australia. The Sullivan mine in British Columbia—the world's largest lead-zinc mine contains reserves of at least 6 million tons combined lead and zinc metal. and Zinc (metal) 283,600 tons Asbestos (all asbestos fiber). . 794,000 tons 68 66 Deposits lie in a belt about 70 miles long and 6 miles wide in Quebec and project into Vermont. They are the largest in the world but contain relatively little spinnable fiber suitable for strategic uses due to excessively high iron content. Iron (ore) 3.3 million tons m Total measured, indicated and inferred reserves as follows: 4 billion tons of ore of 50% and over iron content, 200 million tons of ore containing 35 to 50% iron, 100 million tons of ore containing 25 to 35% iron. Sulfur (native sulfur and sulfur content of pyrites). 107,000 long tons from pyrites. 3 1 Currently commercial reserves (measured, indicated, and inferred) are estimated at 35 million tons of sulfur, of which 25 million tons represent the sulfur content of pyrites deposits and 10 million tons are in pyrites in other sulfide ores. In addition 15 million tons are estimated to be recoverable from smelter fumes. Titanium (concentrates— ilmenite and rutile). 91,000 tons Less than 1 Less than 1 Reserves are mostly in the Allard Lake region in Quebec. Total measured, indicated and inferred reserves are estimated at 300 million tons of ore containing 35 to 40% titanium oxide and 37% iron. Cobalt (metal) 284 tons 4 4 Measured and indicated reserves are about 135,000 tons of metal, virtually all of which are contained in the nickel-copper ores of Sudbury. The cobalt bearing portions of these ores contain 0.6% cobalt metal. In addition, there is cobalt in the silver-cobalt ores of Cobalt, Ontario—formerly an important source of silver. Petroleum (crude oil) 29.1 million barrels. . 2 1 Proved reserves are 1.2 billion barrels. Ultimate reserves are not estimated. Canada and Mexico together are thought to have a total of 40 billion barrels or some 8.8% of the free world total. Page 91 Table B.—Mexico Percent of total output in free Commodity Amount produced in 1950 Percent of total output in the free world Presently estimated reserves world areas out- side the U. S. Copper (metal) 61,700 tons 4 3 Total measured, indicated and inferred reserves are 600,000 tons of metal, about one-half of which are estimated to constitute re- coverable metal in presently commercial ores in operating prop- erties owned by U. S. companies. Lead (metal) 238,000 tons 22 16 Reserve estimates in general are poor. There are at least 750,000 tons of metal contained in presently commercial and near com- mercial ores. Additional potential and submarginal sources are thought to be large. Zinc (metal) 223,500 tons 16 11 Measured and indicated reserves are estimated at about 1 million tons contained metal in presently commercial sulfide ores as well as in lower grade carbonate ores. There are no estimates on inferred reserves. Antimony (metal) 5,900 tons 15 14 Measured, indicated and inferred reserves are estimated at about 500,000 tons of antimony metal or more than one-third of the free world total. Deposits are widely scattered in south and central portions of the country. 420,000 tons Less than 1 Less than 1 No estimates of reserves are available. There are a number of small deposits. Manganese (ore) 32,400 tons 1 1 Measured, indicated and inferred reserves are 750,000 tons of ferro- grade ore averaging 45% manganese metal or better and an equal tonnage of ore averaging 25% manganese metal. There are many deposits. Mercury (flasks containing 76 lbs). 3,700 flasks 3 4 Measured reserves are estimated at 85,000 flasks in presently com- mercial ores. It is estimated that another 100,000 flasks are con- tained in dumps averaging 1 pound of mercury per ton. 290 long tons 1 1 There are no reliable estimates. Deposits are in placers and lodes, none of which are large. Sulfur (native sulfur and sulfur content of pyrites) 4,800 long tons Less than 1 Less than 1 Measured reserves are 77 million tons of ore containing 12% sulfur. There is no information on indicated or inferred reserves. Other potential sources are petroleum refining, smelter fumes, pyrites discarded in milling base metal ores and as yet unknown but suspected pyrites deposits. Petroleum (crude oil) 72 million barrels. . . . 5 2 Proved reserves are estimated at 1.3 billion barrels. Ultimate reserves are not separately estimated. Canada and Mexico together are thought to have 40 billion barrels or some 8.8% of the free world total. Table C.—Central America and Caribbean [Cuba, Haiti, Dominican Republic, Puerto Rico, Jamaica, Guatemala, British Honduras, Honduras, El Salvador, Costa Rica, Panama] Cuba Copper (metal) 18,600 tons m 1 Complete figures are not available. The deposit at Matahambre formerly operated by the American Metal Co. has been acquired by Cuban interests who have found important extensions of ore bodies previously worked. Christina and Mercedes properties are reported to have "substantial" reserves. Manganese (ore) 79,000 tons 2 2 A large body of metallurgical grade ore was exhausted during the Second World War. Many small scattered deposits remain. Total reserves are estimated at 400,000 tons of ferro-grade ore or equiva- lent (45% metal content and over) and some 800,000 tons of presently submarginal material averaging about 25% metal content. T Page 92 Table C.—Central America and Caribbean—Continued Percent of total output in free 1 Commodity Amount produced in 1950 Percent of total output in the free world Presently estimated reserves world areas out- side the U. S. Chrome (ore) 65,800 tons 7 7 Total reserves of refractory grade ore are estimated at 1 million tons. In addition some 50 million tons of chromium oxide are estimated to be present (together with nickel and cobalt) in lateritic iron ores. 1 Iron (ore) Insignificant Less than 1 % Less than 1 % Measured, indicated and inferred reserves of direct smelting ore (50% or more iron) are estimated at 10 million tons. Additional resources consisting of lateritic material are estimated at 2}/2 billion tons; this material contains an average of about 35% iron, as well as nickel, chrome, and cobalt. Nickel (metal) and cobalt (metal). Nil Nil. Nil. 25 million tons or more of nickel metal and 2 million tons of cobalt are estimated to be present in the lateritic iron ores. Jamaica Bauxite (ore) Nil Nil. Nil. Total estimated reserves are the largest in the world amounting to 325 million tons of bauxite containing 50% aluminum oxide. Reserves for the Caribbean area as a whole are about 550 million tons. Brazil Table D.—South America Iron (ore) 1.9 million tons 1 0. 5 Brazil is a major iron resource area. Total reserves are estimated as high as several tens of billions of tons of hematite ore containing as much as 60% iron and low in phosphorus. Deposits are located in Minas Gerais and at Urucum in the Matto Grosso. Bauxite (ore) 20,000 tons (1949). . . Less than 1 Less than 1 Total reserves presently estimated at 65 million tons of ore containing 60% aluminum oxide. Most of this material appears to be in- ferred ore. Tungsten (concentrates of 60% W03). 700 tons 6 5 Total reserves estimated at from 40 to 100 million pounds of tungsten oxide in ore averaging 0.5% tungsten oxide content. Mica 1,898 tons 5 15 One of the best free world sources of strategic mica. Chief produc- tion center is in the state of Minas Gerais. Quartz crystals Virtually 100 Virtually 100 Reserves are widely scattered and abundant in the states of Minas Gerais, Goiaz, and Bahia. Deposits are worked by hand and 90% of production is by small unorganized operators. Rubber (natural) 9,000 long tons (1947) Less than 1 Less than 1 Reserves are in the form of rubber contained in trees growing both in the wild state in the jungle and on rubber plantations. Manganese (ore) 148,300 tons 4 4 Total reserves are estimated at close to 50 million tons of ferro-grade ore (35 to 53% manganese content). Only about 10 million tons of reserves have been measured. Current production is limited to one deposit of some 5 million tons of ore averaging 35% manganese content. Nickel (metal) Insignificant Less than 1 Less than 1 Indicated reserves estimated at from 15 to 25 million tons of ore containing about 5% nickel. State of Minas Gerais has about 10 million tons of the total in what constitutes the largest single de- posit. Other deposits are in the State of Goiaz. Venezuela Iron (ore) 190,000 tons Less than 1 Less than 1 Total reserves are estimated at 1.5 to 1.8 billion tons. Ore is high grade, averaging 65% iron. Petroleum (crude oil) 546.8 million barrels. 36 16 Proved reserves are estimated at 9.5 billion barrels. Ultimate reserves are not separately estimated, but the total for the Western Hemisphere outside of United States, Canada and Mexico is thought to be about 80 billion barrels or 17.7% of the free world total. 1 U. S. scrap mica omitted. Page 93 Table E.—South America Percent of total output in free Percent of total output in the free world Commodity Amount produced in 1950 Presently estimated reserves Bolivia world areas out- side the U. S. Copper (metal) 5,240 tons Less than 1 Less than 1 In January 1949, workable deposits on equipped properties were estimated at 50,000 short tons metal. Reserves are now believed to be small. Lead (metal) 13,200 tons 3 1 2 1 Measured and indicated reserves are estimated at 100,000 tons of lead metal and 1 million tons of zinc metal in presently commercial and noncommercial ores. Deposits are widely scattered in remote areas. and Zinc (metal) 19,600 tons Tin (metal) 31,200 long tons 19 19 Total reserves including tailings from old mines are roughly estimated at 500,000 long tons of tin metal. Ores are of 2 classes; straight, thin ores of the Llallagua-Uncia district exploited by the Patino interests; and the "complex" ores of Oruro and Potosi mined by the Hochschild and Aramayo groups. Some placer deposits exist also in Bolivia. No figures are available, but some geologists believe that they contain considerable amounts of tin. On the whole the presently known rich tin ores are being depleted because of many decades of intensive mining. Tungsten (concentrates of 60% W03). 2,500 tons 23 16 Measured reserves are estimated to contain 50 million pounds of tungsten oxide. The ores are wolframite and scheelite containing 1.3 to 3.6% tungsten oxide. There are over 100 known deposits. Antimony (metal) 10,300 tons 26 25 Potentialities are probably largest in the free world. Total measured, indicated and inferred reserves are estimated at 500,000 tons of antimony metal. Production at present is intermittent from numer- ous small mines. About 60% of the output comes from Potosi. British Guiana Bauxite (ore) 1.6 million tons 26 21 Total reserves are about 150 million tons of bauxite, averaging 60% aluminum oxide. Surinam Bauxite (ore) 2 million tons 34 27 Total reserves are estimated at 50 million tons or more of bauxite averaging 54% aluminum oxide. Argentina Lead (metal) 20,000 tons 2 1 1H 1 In 1949 total reserves of three principal producers were estimated at 175,000 short tons of zinc metal and 125,000 short tons of lead metal. and Zinc (metal) 12,700 tons Tungsten (concentrates of 60% W03). Insignificant Less than 1 Less than 1 Total reserves are estimated at 10 million pounds of tungsten oxide in many small deposits. Colombia Petroleum (crude oil) 34.1 million barrels. . 2 1 Proved reserves are estimated at 375 million barrels. Chile Table F.—South America 363,000 tons 25 16 Reserves are the largest in the free world. Measured reserves are estimated at 25 to 35 million short tons of contained metal. Indi- cated and inferred reserves extend the total to 75 million short tons. and 2,900 tons (1949). . . . Less than 1 Less than 1 Less than 1 Less than 1 Present output is a byproduct of the mining of gold and silver. Recently high-grade deposits are reported as having been dis- covered in remote areas of Aysen province and are said to contain as much as 30% lead metal and 20% zinc metal. The extent of these reserves is as yet unknown. 2 1 Total reserves are estimated at 100 million tons of ore containing 60 to 65% iron and low in phosphorous. Deposits are numerous and are confined to a well defined belt. Manganese (ore) 27,000 tons 1 1 Total reserves are estimated at 1.5 million tons of ore containing 30 to 35% manganese. Sulfur (native sulfur and sulfur content of pyrites). 15,200 long tons Less than 1 Less than 1 No figures are available although deposits are reported as "huge." The ores require concentration and are presently submarginal. Page 94 Percent of total output in free Table F.—South America—Continued Commodity Amount produced in 1950 Percent of total output in the free world Presently estimated reserves Peru world areas out- side the U. S. and 57,300 tons 5 5 4 4 Total reserves are estimated at 1.5 million tons of contained lead and 3.7 million tons of contained zinc. About three-quarters of the zinc and one-half of the lead are in the Cerro de Pasco and Santander deposits alone. 74,000 tons Copper (metal) 28,000 tons 2 1 Reserves in workable deposits are estimated at some 3 million short tons of metal. Tungsten (concentrates of 60% W03). 390 tons 4 2 Total reserves are estimated at 10 million pounds of tungsten oxide in wolframite ore averaging 1.8% tungsten oxide. Deposits are numerous, small and scattered with additional prospects reported in many parts of the country. Antimony (metal) 1,000 tons 2 2 No figures are available, but reserves are not thought to be large. The mines are small and scattered. Sulfur (native sulfur and sulfur content of pyrites) 271 lor.g tons (1949) . Less than 1 Less than 1 No figures are available. Ore bodies of the Cerro de Pasco Mines contain sizable quantities of pyrites that are presently submarginal. Algeria, Morocco, and Tunisia 2.6 million tons Table G.—North Africa 1 Reserves are as follows: Algeria.—Total estimated at 160 million tons of ore containing 50 to 60% iron. French Morocco.—Measured reserves estimated at 6 million tons of ore averaging 48% iron content plus additional amounts of lower grade ore. Spanish Morocco.-—No figures available. There is only one large mine with ore averaging over 52% iron content. Tunisia.—Measured reserves estimated at 90 million tons of ore averaging 52% iron content. Indicated reserves are reported large, averaging 59% iron content. Lead (metal) 68,000 tons 2 2 Total ore reserves are estimated to contain 1 }i million tons of lead metal and as much zinc metal. Biggest deposit is at Zellidja in French Morocco where the metal content of the ore averages 7.7% of both metals combined. and Zinc (metal) 22,600 tons % 1 French Morocco Manganese (ore) 287,000 tons 9 8 Total reserves are estimated at 30 million tons of ferro-grade ore averaging 45% and over manganese content. Morocco Copper (metal) Insignificant Less than 1 Less than 1 No figures are available, but the reserves are not thought to be ex- tensive. Presently known deposits are located high in the Atlas Mountains. Morocco and Algeria Antimony (metal) 2,100 tons 5 5 No figures are available, but the reserves are not thought to be extensive. Morocco Cobalt (metal) 400 tons 6 5 Measured reserves are estimated at 8 to 10 million pounds of con- tained cobalt in two classes of ore: high grade ores containing 10 to 12% cobalt and low grade ores containing 0.75 to 1.25% cobalt. The nickel content of these ores usually runs about one-fifth of that of cobalt. and Nickel (metal) Insignificant Less than 1 Less than 1 Table H.— West Africa [Nigeria, Sierra Leone, the Gold Coast, Angola, French Equatorial Africa, French West Africa, and Liberia] Gold Coast Bauxite (ore) 117,000 tons 2 1 Reserves appear to be extensive and ores are high grade. Total reserves are estimated at 330 million tons of ore of which 225 million tons are said to average better than 53% aluminum oxide. (Additional substantial unexplored deposits are thought to exist in Sierra Leone.) Page 95 Table H.— West Africa—Continued Percent of total output in free Percent of total output in the free world Commodity Amount produced in 1950 Presently estimated reserves Gold Coast—Continued Manganese (ore) world areas out- side the U. S. 722,800 tons 22 21 Total reserves consist of 10 million tons of ferro-grade ore averaging 45% and more of manganese metal content. Large additional tonnages of lower grade concentrating ores are known to exist, but no figures are available. Nigeria ; Tin (metal) 8,300 long tons 5 5 Most deposits are alluvial. Main tin fields cover about 20,000 square miles. There are many additional smaller fields as well as alluvial and lode deposits. No figures are available. (Columbite is mined with tin and Nigeria produces the bulk of the free world's supply of columbite concentrates.) Sierra Leone Iron (ore) 1.2 million tons 1 0. 5 Reserves are estimated at 100 million tons of direct smelting ore con- taining over 50% iron, 250 million tons of ore containing 35% to 50% iron and 1 billion tons of ore containing 25% to 35% iron. Ores are low in silica, phosphorus, and sulfur. Liberia Insignificant Less than 1 Less than 1 Reserves are estimated at 50 million tons of direct smelting ore con- taining over 50% iron, 250 million tons of ore containing 35% to 50% iron and 1 billion tons of ore containing 25% to 35% iron. Nigeria Tungsten (concentrates of 60% W03). Insignificant Less than 1 Less than 1 No figures are available. There are small sporadic deposits of rela- tively rich ore. French Equatorial Africa, Gold Coast, Angola, and Sierra Leone 1 i Industrial diamonds 1.8 million metric car- ats. 17 17 Reserves are estimated to total at least 200 million metric carats. Table I.—Central and East Africa [Ethiopia, Kenya, Tanganyika, Uganda, Northern and Southern Rhodesia, Mozambique, Nyasaland] Northern Rhodesia Copper (metal) 297.500 tons 21 13 Measured reserves are estimated at 18 million tons of contained copper. An additional 50 million tons are inferred. Ores average up to 4% copper. Northern Rhodesia and Tan- ganyika Lead (metal) 14,000 tons 1 In 1949 Northern Rhodesia's reserves were estimated at 500,000 tons of lead metal and 1 million tons of zinc metal. and Zinc (metal) 38,300 tons 3 2 Deposits in Tanganyika have been incompletely explored. In 1949 they were estimated to contain 600,000 tons of lead. Northern Rhodesia and Uganda Cobalt (metal) 670 tons 10 9 Cobalt in Northern Rhodesia and Uganda is a byproduct of copper production. The cobalt content of the ores is estimated at 130,000 tons metal, only 45,000 tons of which would be recoverable. The cobalt content of crude ore ranges from a trace to 3%, averaging 0.13%. Uganda reserves at present are estimated at 20,000 tons of contained cobalt. Southern Rhodesia Chrome (ore) 291,500 tons 17 17 Total reserves of metallurgical grade ore are estimated at 6 million tons. In addition there are quantities of submarginal material. For chemical grade chrome, commercial and submarginal depos- its together are estimated at 80 million tons. Madagascar and Kenya Graphite 12,700 tons 11 10 Madagascar reserves are large. They are the only good source of crucible grade flake graphite. Page 96 Table I.—Central and East Africa—Continued Commodity Amount produced in 1950 Percent of total output in free Percent of total output in the free world Presently estimated reserves Southern Rhodesia and Tan- ganyika world areas out- side the U. S. Southern Rhodesia and Uganda 400 long tons Less than 1... . Less than 1... . Deposits have been, incompletely explored. They contain beryl, columbium, tantalum and tin. Tungsten (concentrates of 60% W03). 300 tons 4 3 Not much is known about reserves. Undeveloped deposits in Uganda appear to be important. Southern Rhodesia Asbestos (all asbestos fiber). . 64,900 tons 5 5 Southern Rhodesia is the free world's chief source of long fiber asbestos. No figures on the reserves are available. Ny as aland Bauxite (ore) Nil 0 0 Reserves are reported at some 20 million tons of bauxite containing 42% aluminum oxide. Madagascar Mica 507 tons IK 1 1>72 Madagascar is the free world's chief producer of strategic phlogopite mica. Deposits are reported to be extensive. 1 U. S. scrap mica omitted. Table J.—Belgian Congo and Ruanda Urundi 9.6 million metric carats. 70 70 Reserves are the largest in the world, presently estimated at 100 mil- lion carats measured and an additional 200 million indicated and inferred. Cobalt (metal) 5,250 tons 76 73 Occurs with copper. Reserves are the most extensive in the world and are on the order of 200,000 tons of recoverable cobalt. 1 Tin (metal) 13,700 long tons . 8 8 Measured reserves are estimated at 200,000 long tons of contained tin. Indicated and inferred reserves are estimated at 300,000 tons. Of the total, 400,000 tons are in placer deposits and 100,000 tons are in lodes. Copper (metal) 176,000 tons 12 8 This is one of the world's major sources of copper. Indicated reserves are estimated at 10 million tons of contained metal and inferred reserves at 30 million tons, in ores containing 4% to 6% copper. Manganese (ore) 17,000 tons Less than 1 Less than 1 In the last 2 years large deposits have been discovered. Measured reserves are estimated at 1 million tons of ore containing 50% to 55% manganese. Additional indicated and inferred reserves are estimated at 10 to 15 million tons of ore of about the same grade. Tungsten (concentrates of 60% W03). 164 tons Less than 1 Less than 1 Zinc (metal) 76,000 tons 5 4 Incomplete figures for measured and indicated reserves give 11/2 mil- lion tons of contained zinc. In recent months large new deposits of copper, lead, and zinc are reported to have been discovered in the Madimba area south of Leopoldville. Union of South Africa Asbestos (all asbestos fiber). . Table K.—Union of South Africa and South West Africa 79,300 tons 7 No figures are available. Reserves of spinnable grades of amosite and crocidolite are considered largest in the free world. The Union is the world's only source of amosite. Manganese (ore) 791,000 tons ! 25 i 24 Total reserves are estimated to be on the order of 50 million tons of ore averaging 45% manganese. The bulk of these reserves is located in the Black Rock deposit 100 miles north of Postmasburg. No campaign to determine the extent of the reserves in advance of mining has ever been undertaken. i 999959—52 8 Page 97 Table K.—Union of South Africa and South West Africa—Continued Percent of total output in free Percent of total output in the' free world Commodity Amount produced in 1950 Presently estimated reserves world areas out- side the U. S. Chrome (ore) 496,000 tons 28 28 The Union is the largest free world source of chemical grade chrome. Total reserves are estimated at 100 million tons of chemical grade ore plus about 2 million tons of low-grade metallurgical ore suitable for blending. Iron (ore) 1.2 million tons 1 0 0.5 Total reserves of iron ore are estimated at 8 billion tons containing 35% to 50% iron. In addition, there are an estimated 3 billion tons of titaniferous iron ore. and Titanium (concentrates— ilmenite and rutile). nil 0 Copper (metal) 34, 000 tons! 2 IK Total reserves are estimated at about 600, 000 tons of contained metal. In addition there are unestimated reserves of nickel-copper ores thought to be extensive but which are presently submarginal. Tungsten (concentrates of 60% W03) 96 tons 1 1 No figures are available. A new deposit is being developed at O'okiep. Tin (metal) 720 long tons Less than 1 Less than 1 Antimony (metal) 8,300 tons 21 20 Total reserves are estimated at 150,000 tons of contained metal. South West Africa Lead (metal) 34,000 tons 3 2 Measured reserves at the Tsumeb mine are estimated at 900,000 tons of contained lead and 500,000 tons each of zinc and copper. 10,500 tons Less than 1 Less than 1 Less than 1 Less than 1 Japan 11,000 tons Table L.—Asia Copper (metal) 39,300 tons 3 2 Measured reserves are about 750,000 tons of contained metal Additional indicated and inferred reserves are estimated at about 250,000 tons of contained metal. Lead (metal) 11,000 tons 1 0.5 Measured and indicated reserves are estimated at 300,000 tons of contained metal. Zinc (metal) 52,000 tons 4 3 Measured and indicated reserves are estimated at 1,250,000 tons of contained metal. Sulfur (native sulfur and sulfur content of py- rites) 876, 000 long tons. . . 18 8 Pyrites reserves are estimated at 20 million tons of contained sulfur and native sulfur reserves at 7 million tons. Smelter fumes could provide an additional 1 million tons of sulfur. Philippines 250,500 tons 14 14 Total reserves are estimated at 4 million tons of refractory grade ore and 500,000 tons of metallurgical grade ore. Large presently submarginal metallurgical ore reserves are thought to exist on which there are only meager details. About one-third of known reserves are not developed. Japanese data place Acoje Mine re- serves of metallurgical chrome at 164,000 tons of ore containing 46% chromium oxide and 336,000 tons containing 35% to 45% chromium oxide. 30,000 tons 1 1 Reasonably acceptable estimates give a total of 3 million tons of ferro-grade ore averaging 45 % manganese. 10,400 tons 1 Less than 1 The Lepanto Mine has measured reserves of 90,000 tons of contained copper. It is one of the largest copper mines in the Far East. Indicated reserves are termed large. South Korea 600,000 tons Less than 1 Less than 1 Reserves of "high-grade" ores are estimated to total somewhat less than 20 million tons. There are also large undeveloped deposits of lateritic iron ore containing chrome and nickel located in north- east Mindanao. Tungsten (concentrates of 60%WO3). 400 tons 4 3 The Sang Dong tungsten deposit is considered to be one of the world's greatest. Total South Korean reserves are estimated at 140 million pounds of tungsten oxide in scheelite ores averaging about 1.7 % tungsten oxide. Page 98 Table L.—Asia—Continued Percent of total output in free Percent of total output in the free world Commodity Amount produced in 1950 Presently estimated reserves India and Pakistan world areas out- side the U. S. 18,384 tons 46 146 No figures are available. There are a large number of small mines that are the free world's largest source of strategic grades of mica. Manganese (ore) 916,080 tons 26 25 Reserves in India are by far the largest in the free world. Ferro- grade ore reserves are twice those presently known in South Africa which is the free world's next largest source. Reserves are ill explored. The total is estimated at 100 million tons of ferro-grade ore and 200 million tons of ore of lower quality. Iron (ore) 3 million tons 2 1 Vast new reserves totaling perhaps 20 billion tons of ore have recently been discovered. The Central Province and Bihar-Orissa are the most important iron ore bearing areas in India. 32,800 tons 2 2 Reserves are not thought to be large. Titanium (concentrates— ilmenite and rutile). 227,000 tons 60 30 No figures are available but reserves are thought to be large. 1 U. S. scrap mica omitted. Table M.—Asia Ceylon Graphite 13,000 tons 12 11 No figures are available, though reserves are said to be very exten- sive. Ceylon is the world's largest source of amorphous lump (strategic) graphite. Rubber (natural) 113,500 long tons... . 6 6 Reserves are in the form of rubber in trees with a present capacity of perhaps 120,000 long tons of rubber per year. Burma Tin (metal) 1 1 Total reserves are estimated at 300,000 long tons of tin metal. Tungsten (concentrates of 60% W03). 600 tons 6 4 Total reserves are the third largest in the free world and are esti- mated at 100 million pounds of tungsten oxide in wolframite ore averaging 1.5% tungsten oxide. Lead (metal) Insignificant Insignificant Reserves consisting of complex lead-zinc ores are estimated to con- tain 1 million tons of lead and 600,000 tons of zinc. Theo- Bawdwin Mine has most of these reserves. Its ores contain and yield also nickel, copper, silver, cobalt, and antimony. There are a number of other newly found lead-zinc deposits that may have good potentialities. and Zinc (metal) Cobalt (metal) Nil 0 0 No figures are available. The cobalt is contained in the complex ores of the Bawd win Mine. Indo China Tin (metal) 62 long tons Less than 1 Less than 1 No figures are available but reserves are thought to be relatively small. Rubber (natural) 48,500 long tons 3 3 Reserves are in the form of rubber in trees with a present capacity of perhaps 80,000 to 90,000 long tons of rubber per year. Thailand 10,364 long tons 6 6 Reserves are the third largest in the free world. Measured, indicated and inferred reserves are estimated at 800,000 long tons of con- tained tin metal. Rubber (natural) 112,200 long tons 6 6 Reserves are in the form of rubber in trees with a present capacity not far exceeding the 1950 output. British Borneo Petroleum (crude oil) 31.0 million barrels. . 2 1 Proved reserves are estimated at 250 million barrels. Ultimate reserves for Borneo and Indonesia together are estimated at 30 billion barrels or 6.4% of the free world total. Page 99 Table N.—Asia Percent of total output in free Percent of total output in the free world Commodity Amount produced in 1950 Presently estimated reserves Malaya world areas out- side the U. S. Tin (metal) 57,500 long tons 35 35 Reserves are the world's largest and are estimated at 1,500,000 tons of contained tin in leased areas only. No effort has ever been made to appraise the unleased lands. Rubber (natural) 94,000 long tons 37 37 Reserves are in the form of rubber in trees with a present capacity of perhaps 750,000 long tons of rubber per year. Bauxite (ore) Nil 0 0 Total reserves are estimated at 15 million tons of washed ore averaging 56% to 58% aluminum oxide. Iron (ore) 500,000 tons Less than 1 Less than 1 Total reserves are estimated at 40 million tons of ore containing 55% iron at the Kuala Gungun Mine at Ulu Rompiu. Indonesia Tin (metal) 32,000 long tons 20 20 Reserves are the world's second largest estimated at 1 million long tons of contained tin. Considerable areas on the island of Banka remain to be prospected and there are known to be lode deposits of considerable future importance. Rubber (natural) 628,000 long tons 37 37 Reserves are in the form of rubber in trees with a present capacity of 800,000 to 900,000 long tons of rubber per year. Nickel (metal) Nil 0 0 Reserves amounting to some 300 to 500 million tons of ore are con- tained in a thin wide-spread blanket of lateritic ore in Celebes. The average nickel content is 0.8 to 1.0%. Spotty areas contain 10 to 20 million tons of higher grade ore averaging 2% or more nickel. The ores also contain an appreciable amount of cobalt. Bauxite (ore) 531,000 tons 8 7 Total reserves estimated at 25 million tons of bauxite now being exploited on a large scale by a Dutch company. Copper (metal) Nil 0 0 Measured reserves on Celebes are estimated at 200,000 tons of ore containing 2.9% copper metal. About 70% of the reserves are believed to be workable. Industrial diamonds Nil 0 0 Total reserves estimated at 351 million metric carats of which meas- ured reserves are 31 million, indicated 12 million, and inferred 20 million. Petroleum (crude oil) 48.4 million barrels. . 3 2 Proved reserves are 1 billion barrels. Indonesia and Borneo together have ultimate reserves estimated at 30 billion barrels or 6.4% of the free world total. Australia Table O.—Oceania [Australia, New Zealand, and New Caledonia] Lead (metal) 222,400 tons 20 14 15 10 Measured and indicated reserves are estimated at 13 million tons of contained lead and zinc in currently commercial or near commer- cial ores. Combined reserves are almost as large as those of the U. S. and are almost twice as large as those of Canada. and Zinc (metal) 196,400 tons. . Copper (metal) 15,900 tons 1 0.5 Total reserves are estimated at 450 tons of copper metal in ores of commercial grade. Tin (metal) 2,500 long tons Indicated reserves are estimated at 30,000 to 40,000 tons of contained tin. Tungsten (concentrates of 60% W03). 446 tons 4 3 Total reserves estimated at 32 million pounds of tungsten oxide in scheelite ores containing 0.2% to 1.25% tungsten oxide. Bauxite (ore) 3,000 tons Less than 1 Less than 1 Measured reserves are estimated at 20 million tons of low-grade baux- ite containing about 40% aluminum oxide. Page 100 Table O.—Oceania—Continued Percent of total output in free Percent of total output in the free world Commodity Amount produced in 1950 Presently estimated reserves world areas out- side the U. S. Sulfur (native sulfur and sul- fur content of pyrites). 54,000 long tons 1 0.5 Reserves consist of 1,400,000 tons of sulfur contained in pyrites de- posits and \ y2 million tons of sulfur in byproduct pyrites from ores of copper-lead-zinc. In addition about 1 % million tons of sulfur are potentially recoverable from smelter fumes. 450 tons Less than 1 1 Less than 1 Reserves are reported extensive and consist of high quality strategic mica found in the Hartz Mountain Range in Australia. Asbestos (all asbestos fiber) . . 3,700 tons Less than 1 Less than 1 No figures are available but the reserves of blue crocidolite asbestos are believed to be extensive. They are poorly developed. Australia and New Zealand Manganese (ore) 17,000 tons Less than 1 Less than 1 Measured reserves are estimated at 500,000 tons of ore containing 40% to 50% manganese. The deposits are widely scattered in re- mote regions. New Caledonia 84,800 tons 5 5 High-grade metallurgical chrome reserves in active mines are esti- mated at 500,000 tons. There are no figures for inactive mines or submarginal resources. Rich ores were largely exhausted during the Second World War, but workable low-grade ores are substan- tial. Deposits are numerous but are scattered over the Island. More rich ores probably will be revealed by expanded mining. New Caledonia 6,300 tons 5 5 No figures are available. Reserves are thought to be large but consist of many small deposits. 1 U. S. scrap mica omitted. Table P.—Middle East [Turkey, Egypt, Iran, Iraq, Saudi Arabia, and Kuwait] Turkey Chrome (ore) 420,000 tons 23 23 There are no reliable figures. Turkey is the free world's largest producer of metallurgical grade chrome. The best guess as to reserves is 1 million tons of metal- lurgical chrome in active mines, "large" reserves in inactive mines and "large" submarginal reserves. In addition, there are said to be "large" reserves of un- developed and presently submarginal refractory ore. Copper (metal) 13,000 tons 1 0.5 Total reserves in equipped properties are estimated at about 200,000 tons of recoverable copper. Manganese (ore) 20,000 tons Less than 1 Less than 1 Estimates vary widely. Total reserves are said to consist of about 1 million tons of ore averaging 45 %. Lead (metal) Small Less than 1 Less than 1 Total reserves are estimated at 350,000 tons of ore con- taining iy2% lead and 5% zinc. and Zinc (metal) Egypt Manganese (ore) 152,000 tons 5 5 Information on reserves is inadequate. Available data suggest somewhat over 10 million tons of ferruginous ore averaging about 25% manganese and high in iron. Middle East Petroleum (crude oil). . Iran, 240 million barrels; Saudi Arabia, 200 million bbl.; Kuwait, 125 million bbl.; Iraq, 50 million bbl.; Turkey and Egypt, 16 million bbl.; other Middle East, 22.5 million bbl. Total Middle East 648.5 million bbl. i 43 i 18 Proved reserves are estimated at 48.2 billion barrels for the whole of the Middle East. Ultimate reserves for the entire area are estimated at 155 billion barrels or 34.2 % of the free world total. i Total Middle East. Page 101 Supplying Energy for Economic Growth Chapter 16 The Energy Problem To assist the economy to expand normally and to assure the national security, the United States by 1975 must have a supply of fuels and electricity roughly twice as large as it used in 1950. The requirements of other free nations can be ex- pected to increase on about the same scale. Four questions briefly point up the energy problems which policy must attempt to solve: Does the United States have the natural sources—the petroleum and gas, the coal and water power—to provide enough energy for the future? Will the real costs of energy be forced upward, and will any resultant rise retard economic growth? In the event of all-out war at any time in the next 25 years, will the United States and its allies have enough fuels and other forms of energy to support full economic mobilization and maximum fighting strength? What opportunities are there for strengthening the long-term energy position of the United States and other free nations and what will it take to develop these opportunities? A score of factors must be considered in arriving at the answers. Basic in estimating demand are the uses to which energy is put, the reasons why requirements are increasing and should increase, the kinds of fuel and the forms of energy that are needed and in what proportions, and the hunger of war for energy in all its forms. In assessing the adequacy of supplies, it is necessary to examine the resources that exist, the cost fac- tors in their use or extraction, the efficiency of their use, the extent to which one fuel or form of energy can substitute for another, the possibility of imports, the problems of enlarging reserves, of getting greater use from them, and of expanding in- ternational trade. Many of these factors must be weighed for each of the fuel sources, but most importantly, the results must be correlated, for the emphasis is upon the total demand, and total supply. And throughout, two imperatives must be kept in mind: keeping real costs down, and preparing to meet the demands of possible war. The drama of the Industrial Revolution and a century of remarkable progress in United States living standards can be written in terms of constantly improved technology and ever- increasing use of energy from mineral fuels and waterpower in our factories, farms, and homes. With a labor force today little more than twice as big as in 1900, accompanied by more capital, better techniques, but with a four-and-one-half-fold expansion in energy use, the United States economy in 1950 turned out almost five times the 1900 total volume of goods and services.* In more familiar terms the same story is told all around us every day. The farmer operating a three-plow tractor today can plow 10 or 12 acres in the time it took a six-horse team to plow 4 to 5 acres a few decades ago. To mine a ton of iron ore, the average miner took 114 minutes in 1915, but only 26 minutes in 1950. The electric washing machine and drier save the housewife four-fifths of her former laundry time. As in the past, the combination of increased energy and improved technology today provides the main promise of fur- ther economic growth within the physical limitations of natural resources. The importance of energy to wartime strength is, if anything, even greater. Full production calls for vast con- sumption of energy in all forms. Modern military forces travel and fight on their fuel tanks. In the materials field, a large supply of low-cost energy will give technology wider scope for increasing supplies both from subcommercial grades of ores and from materials now relatively unused (prospects for technology are discussed in chapters 23-26). THE RISING DEMAND During the last 25 or 30 years, the consumption of electricity approximately doubled every 10 years—in 1950 it was eight times the 1920 level. Use of petroleum in 1950 was more than two-and-a-half times the 1925 total, water power four times, natural gas better than five times. Only coal consumption stood at about the same level as in 1925. If the Nation's output of goods and services is to double by 1975, the total supply of primary energy drawn from coal mines, oil and gas wells, hydro sites and imported fuels will have to almost double, rising from a level equivalent to about 1,300 million tons of bituminous coal (BCEf) used in 1950 to, in ^Measured in dollars of constant purchasing power. fBCE is used in this Report as a convenient common unit of measure for all forms of energy. It represents the heat equivalent to that con- tained in one short ton of bituminous coal, which is about 26,000,000 British thermal units. Page 103 1975, something like 2,600 million tons BCE. Consumption per capita may rise from the present level of 8 tons to some 13 tons for the increased population expected by 1975. In reach- ing these totals, industrial consumption may be more than double the 1950 level, residential and commercial consumption may rise about 97 percent, and transportation uses about 88 percent. ROLE OF SECONDARY FORMS An increasing percentage of this greater energy demand is expected to be for what are called the secondary forms—elec- tricity, gasoline, fuel oil, coke—in contrast to direct consumer use of primary fuels like coal from which secondary forms of energy may be derived. Secondary forms often are more con- venient to use and in some cases nothing else can be used as in the case of liquid fuels for motor and air transportation, elec- tricity for lighting, coke for steelmaking. While total demand for energy of all types roughly doubles, demand for liquid fuels thus may more than double, electricity demand rise three- to four-fold. And a smaller percentage of the coal used will be burned directly by consumers as a solid fuel; more will be used for conversion to electricity. It will take more primary fuel at the production level to yield an equivalent amount of secondary energy to the con- sumer. The production of secondary forms is itself a manu- facturing process and requires a heavy consumption of energy both for transportation and in the conversion process. Losses occur because, for example, in steam generation of electricity some of the energy content of the coal, oil, or gas, burned goes up the flue or is dissipated in the mechanical and other inefficiencies of the process. Thus the trend toward relatively greater use of secondary energy forms will place an extra drain upon the Nation's basic fuel resources. THE EFFECT OF WAR In the event of all-out war, demand for all energy would rise considerably. The sharpest increase would be in liquid fuels, not only because the military forces would require tremendous amounts, but because Western Hemisphere oil sources might have to assume an extra burden to meet essential allied require- ments, particularly those of Western Europe, if war cut off or impeded the flow from other more vulnerable sources. Within the United States, coal, natural gas, and hydroelectric power would have to fill the gap created by diversion of liquid fuels. THE LIMITED SUPPLY To meet these rising energy demands the United States is variously prepared. More coal, oil, and natural gas have been burned up in the last 50 years than in all previous history. It took nature over 500 million years to store in the ground these stockpiles of "fossil fuels" which, civilization is now con- suming in a flash of geologic time. The pressure of rising demand against the limits of known reserves and known tech- nology presents the possibility of energy shortages and mount- ing real costs which could impair the Nation's economic growth and security. The remaining reserves of gas and oil that are known to exist in the United States are no match for the demands of the next 25 years. We will certainly discover more in the years ahead, but real costs of discovery and extraction—in the absence of steady improvements in technology—seem likely to rise as we are forced to drill deeper, to drill more "dry holes" for every well brought in, and possibly to rely on new pools of smaller average size. Even if oil discoveries and production keep rising for a decade or more—which they may or may not do—United States demand may far outstrip domestic production, as it has started to do lately. Demand for natural gas may outpace supply and put further upward pressures on price. We will not suddenly "run out" of these highly important fuels, but we could well enter a long period of rising real costs. WATERPOWER AND COAL Water power, the sole big source of renewable energy in prac- tical use today, offers only limited assistance. In 1950, hydro- power supplied about one-quarter of the electricity. Even if the best remaining sites are vigorously developed during the next 25 years, hydropower will do well to continue to con- tribute this percentage to the expanding energy stream. Moreover, the cost of electricity from remaining undeveloped sites will be higher on the average than for present hydroelectric supply chiefly because most of the sites that remain to be developed will require much heavier expenditures of capital than in the past, and may be expected to produce less firm power in proportion to the money invested. The only really abundant reserves are in coal—enough theo- retically to last for centuries—but expanding their use presents a cost problem. Present economic and technical conditions would make it costly to shift consumption drastically toward coal away from gas, oil, and hydropower. Indeed, over the last 50 years the movement has been in the other direction: coal has lost heavily to lower cost competing fuels, and the percentage it supplies of the Nation's total has declined sharply. Opportunities for Improvement The United States can produce enough energy for all its needs without substantially increasing costs, but in order to do this it will be necessary to exploit fully the inherent flexibilities of the total energy complex: consumers' ability to choose among kinds of fuel, or forms of energy; industry's ability to convert one form or type of energy or fuel into another; regions' ability to draw on various distant sources of fuel or energy. Flexibility at the Consumer Level. Residential consumers can choose among coal, natural gas, fuel oil, and electricity for cooking and heating according to relative cost and convenience. The industrial consumer also usually can choose among dif- ferent forms of energy. The railroads' striking change-over in recent years from coal-fueled steam locomotives to Diesel- electric engines, and the use by other roads of electric engines powered from central stations, illustrates the point. Automotive and air transportation are closely tied to liquid fuel and there is no technological change foreseeable that would alter this; on the other hand, the nature of the fuel used in aircraft may alter if jets rather than propeller-driven craft dominate since jets do not require high-octane fuels. Page 104 ENERGY HELPS EXPAND PRODUCTION IN 50 YEARS LABOR FORCE INCREASED ONLY 119%, PRODUCTION 372% Energy, PMPC Staff An examination of the present pattern of use for major fuels suggests that well over half the current uses of coal, petroleum products, and natural gas could fairly readily be supplied by an alternative fuel so far as physical feasibility is concerned, though present prices would make the substitution cost the consumer more. The pattern of energy supply and consumption in practice is influenced heavily by competitive prices, particularly for the industrial user who generally chooses carefully that source, or combination of sources, that costs him least. A slight change in price relations could cause a considerable shift in the pattern of consumer purchases. Flexibility Through Conversion. The versatility and con- venience of electricity and liquid fuels, and the fact that both can technically be derived from several sources, make them important as a means for adjusting energy resources to future energy needs. Coal increasingly enters the consumer's home in the secondary form of electricity rather than as solid fuel, and may some day go into his automobile as gasoline and into his furnace as oil. Much petroleum and natural gas is likewise con- verted to electricity. Lignite used to generate electricity is be- coming a substitute for low-cost hydropower for aluminum production. Before 1975 shale is likely to contribute to con- sumer supplies of gasoline, fuel oil, and electricity. Flexibility in Location of Sources. The fact that energy can be transported makes it possible, within limits, to overcome obstacles imposed by Nature's very uneven distribution of energy resources over the earth. Homes and factories in New England, a fuel-deficit area like others in the United States, are fueled with Texas gas and with Pennsylvania coal, or Vene- zuela oil. Western Europe draws heavily from the coal and oil resources of other areas and continents. THE SHIFTING ENERGY "MIX" These various flexibilities have been worked hard during the last half century. Geology and geography, the invention of the internal combustion engine, the electric lamp and motor, along with great advances in producing and distributing energy, have caused not only a great increase in volume, but also a profound change in the composition of the Nation's energy stream. The tremendous rise in demand for gasoline evoked a similar increase in supply at lower real costs. Expansion of petroleum drilling brought with it a tremendous supply of natural gas often from the same wells and this, with the low- cost byproducts of petroleum refining, placed coal at a com- petitive disadvantage in costs and drove it from some traditional markets. At the same time electricity forged rapidly ahead. At the turn of the century coal supplied more than nine-tenths of the Nation's total energy from mineral fuels and waterpower (measured at the resource level), while petroleum and natural gas together provided less than one-tenth. By 1950, coal sup- plied only two-fifths, whereas gas and oil provided well over half. THE IMPLICATION FOR COAL Further shifts in the energy mix can be expected as the Nation's consumers constantly adjust to the lowest cost com- bination of energy supplies. The analysis in the chapters which follow suggests that sooner or later the Nation probably will have to rely more upon the coal which it has in abundance. The change will take place gradually as the Nation encounters increasing difficulties in meeting its energy needs from the far less abundant petroleum and gas reserves. Page 105 SHIFTING PATTERN OF U. S. ENERGY SOURCES (PRODUCTION PLUS IMPORTS) COAL | | WATER POWER NATURAL GAS OIL PERCENT OF TOTAL FROM EACH SOURCE 1W5 1950 POSSIBLE TOTAL DEMAND ■2500 1900 1925 1950 1975 REALIZING THE OPPORTUNITIES Meantime, the Nation's energy position can be strengthened by (a) enlarging effective domestic fuel resources, (b) getting greater use from these resources, and (c) getting more fuels from abroad. The fuel resources counted today as practical to use are only a fraction of the total potential of this country's energy resources. Continued exploration efforts combined with im- provements in the technology of discovery and recovery, plus heavy capital investment can, within limits, add to petroleum and gas reserves. Improvements in technology can provide, economically, far more electricity per unit of fuel consumed, and liquid fuels from shale and, eventually, from coal and low-grade reserves of lignite. The time will come, however, and perhaps well beyond 1975, when civilization's energy needs will outrun nature's declining store of fossil fuels available for economic use. Before this hap- pens, ways must be found to harness economically such uncon- ventional sources as solar and atomic energy. Encouraging progress is being made in learning to use such potentially great sources of energy—solar energy in heating homes, and atomic energy, experimentally, to produce electricity—but for the next quarter of a century our main dependence must probably remain upon the mineral fuels and electricity generated by water power. Huge quantities of potential energy are physically wasted today in the process of extraction and conversion—fuel left in the ground, other fuel lost through engineering and other in- efficiencies in producing secondary forms of energy—mainlv because, under prevailing conditions, it does not appear eco- nomic to avoid the waste. Industry finds it profitable now to recover only about two- fifths of the petroleum in an average pool. About 10 percent of natural gas output is flared or otherwise wasted in the field. Scarcely half the commercial grade coal is extracted from underground mines. In some cases, it would clearly be economic even under present conditions to make better use of energy resources: by using gas now flared from pools not yet operated as units to re- pressure oil and increase extraction; by better planning in coal mines, especially new mines, to take greater advantage of continuous-operation mechanization; by harnessing a higher proportion of the hydropower potential than has thus far been put to work. If we can find economical means to reduce physical loss of energy in conversion to secondary forms and in energy transportation, it would improve the energy position. When Page 106 a ton of coal is burned to generate electricity, better than 60 percent of the contained heat is lost, even in the latest and most efficient power plants. It has been estimated that the amount of oil spent each year in order to add a few extra octane points to gasoline in the refining process is equal to the annual output of the East Texas oil field, our largest pool. Large amounts of energy are consumed or dissipated in trans- porting fuels and transmitting electric energy from source to consuming points and here also efficiencies can be improved and costs reduced. Until recently, the United States has had energy resources to meet all its needs on favorable cost terms and has been able to export large amounts of coal and oil products to deficit areas. The United States has now begun to import oil in substantial amounts. Though energy exports, particularly of coal, are likely to continue, it will pay to expand imports of petroleum. If these various opportunities to strengthen the United States energy position are vigorously pursued, it should be possible with the resources at its command, supplemented by imports of petroleum and perhaps some natural gas, to keep supply in step with expanding demand from now to 1975, and to keep the average real costs of energy from rising significantly if at all above today's level. Many large tasks, obstacles, and problems in the path of this accomplishment present a major challenge to industry and Government alike. The task of policy is made greater by the risks of war and by the energy problems of other free nations whose future is closely linked with the prosperity and security of the United States. The chapters that follow examine the United States position in each major source and form of energy—oil, gas, coal, and electric power—and briefly review the energy outlook for other free nations. The Commission's studies have disclosed a variety of specific strengths and weaknesses, problems and opportuni- ties, which will affect the future of each kind of energy and which have accordingly influenced the Commission's recom- mendations. What is important above all else is that the energy supply must be viewed as a whole and the interrelations of its various sources and forms kept in the foreground in the formu- lation of policy. The central task of national energy policy is not simply to solve the problems and to seize the opportunities re- lating to each individual energy source; it is to fashion from all of them in combination a flexible pattern of energy supply which will grow to meet the expanding demand of the United States and other free nations in peacetime and in possible war and to do these things at the lowest possible real cost to consumers and to the economy. Chapter 17 Oil-How Much? How Long? Petroleum is the great enigma of future energy supplies. Many have guessed but no one can know how much more petroleum will be discovered in the United States during the next two decades, or how much it will be feasible—geologically and economically—to produce by 1975. For years some people have been predicting that the Nation's crude oil supply was going to be exhausted within 10 to 20 years. Yet discoveries and output have continued to rise. In 1951, two barrels of oil were found for every one extracted, and two cubic feet of gas found for every one extracted. Between 1925 and 1950 domestic oil production rose from about three-quarters of a billion barrels to nearly 2 billion, and rose another quarter billion barrels in 1951. Proved recoverable reserves in 1951 were estimated at 27.5 billion barrels (exclud- ing 4.7 billion barrels of natural gas liquids) against only 8.5 billion in 1925. But no matter how large the Nation's petroleum resources ultimately prove to be, one fact is now clear: eventually the resources will dwindle and become progressively inadequate. One warning signal has already appeared; within the last 5 years United States demand for crude petroleum has begun to outstrip domestic production, and for the first time, the United States has become an important net importer. This recent development suggests that the United States, faced with an approximate doubling of oil demand by 1975, will find it economical to turn increasingly to foreign supplies, and eventually to liquid fuel from shale and coal. What happens in oil will affect developments in gas, synthetic oil, imports, and coal and could importantly influence security in wartime. In spite of uncertainties over future sources of supply, these facts and prospects seem clear: First, discoveries of petroleum in this country will not stop abruptly, nor will reserves become exhausted suddenly and without notice. Second, domestic crude production can be counted on for a long time to supply a sizable portion of liquid fuel demand, even though it is debatable whether the 1975 level of produc- tion v/ill be lower or higher than now. Third, regardless of the level of domestic production in 1975, imports of crude oil and refined products by 1975 probably will be greater than now. Fourth, synthetic oil, probably first from shale and later from coal, will come into commercial production within a decade or so—perhaps sooner.* What appears fairly certain, then, is that the Nation's liquid fuel supplies by 1975 will come from three main sources: do- mestic crude, imports, and synthetic oil. The question that can- not now be answered is: What part of the total liquid fuels will each of these three sources supply to the Nation in 1975? The answer will be fashioned largely by the behavior of relative costs of domestic crude, imports, and synthetics, provided competitive market forces are allowed reasonably free rein. *"Synthetic oil" is sometimes used to describe only oil derived by syn- thesis from coal and similar carbonaceous material but in this Report is used more broadly to include oil from shale as well. A study on production of liquid fuels from coal is printed in vol. IV, Coal Products and Chemicals. Page 107 U.S. PETROLEUM DEMAND WILL OUTSTRIP DOMESTIC PRODUCTION THREE POSSIBLE TRENDS IN U. S. CRUDE PRODUCTION 1925 1940 1950 60 70 19/5 The Problem of Security and Costs Liquid fuels already present a serious security problem to the whole free world, and this problem is likely to increase. If war should come, whether next year or 25 years hence, the liquid fuel needs of both the United States and its allies would rise abruptly. The loss of any source of supply—particu- larly in the Middle East—would throw almost the full burden upon Western Hemisphere resources. Western Europe's de- pendence on Middle Eastern oil is expected to increase in the years ahead; the United States may rely to a greater extent on imports from vulnerable areas. The security problem obviously will increase with the passage of years. Limitations on our domestic petroleum resources will exert upward pressures on real costs from now on. Experts generally agree that the real costs of crude oil discovery and development may rise considerably. The Independent Petroleum Associa- tion of America recently stated: "There is an immutable, long- term trend toward higher crude oil replacement costs. . . . This trend may be temporarily arrested or even reversed but can never be permanently arrested or reversed." The deepest producing well in the United States in 1925 was 7,591 feet. A quarter of a century later, in 1949, the deepest producer went down more than twice as far—to 15,530 feet. Within the last 15 years, the average depth of all new oil wells drilled has increased 38 percent. An increase in the ratio of "dry holes" to strikes, a reduction in the average size of pools discovered, would exert further upward pressure on the cost of discovery per barrel. Technology can help counter these rising pressures on cost but cannot be counted on to overcome them entirely. OPPORTUNITIES FOR SOLUTIONS Domestic prices of crude undoubtedly could be expected to rise considerably as a result of these pressures except for the existence of competitive sources of liquid fuels. Actually, com- peting imports and expansion of synthetics can be expected to set a ceiling for the prices of all liquid fuels. Discovery and production costs of foreign crudes, particu- larly in the Middle East, are currently far below those in the United States and this situation probably will continue for many years. Even with high shipping costs, royalties and profits included, foreign oil will be increasingly competitive in the United States. "Synthetic" gasoline from shale already is estimated to cost no more than 25 to 30 percent more than gasoline from crude in some domestic markets, with opportunities for cutting costs further as technology advances. Whether or not synthetics from coal are close to becoming competitive still is a matter of controversy, but there is promise that they will become increasingly so as their technology improves. There is par- ticular promise in possible joint production of chemicals, liquid fuels, and electric energy from coal and lignite at lower costs than would be possible if each were produced separately. EFFECT ON DOMESTIC CRUDE These highly expansible competitive sources of liquid fuel can be expected to keep the price of domestic crude from rising more than 25 to 30 percent (relative to the Nation's general price level) over the next 25 years, and the rise may be far less. Thus, only that crude petroleum which can be discovered and produced in the United States within these economic limits will enter the energy stream. How large a quantity this will be cannot now be forecast with any accu- racy, but as oil gets harder to find, further cost-reducing advances in the technology of discovery and recovery will be required for domestic crude oil to hold a strong position. The industry certainly will take full advantage of future oppor- tunities. Domestic crude production is still far from the end of the road, but even under fairly optimistic assumptions it probably cannot keep pace with rising domestic needs up to 1975. The United States is currently consuming about two-thirds of the free world's total annual petroleum production, although Page 108 its domestic "proved crude oil reserves" are only about one- third of the free world's total, and its potential is probably a far smaller fraction. Though the spread between the real costs of foreign and United States petroleum production will probably grow, imports will not flood the United States market and drive out domestic production. A steady rise in free world demands for oil, accompanied by rising marginal production costs in the United States, will tend to push up the world price, thus supporting the market for domestic output. In short, the price of imported oil to the United States is likely to bear a much closer relationship to the production costs of marginal domestic crude output and synthetic oil than to the actual production costs of foreign oil. THE OUTLOOK ABROAD Oil production undoubtedly will expand much more rapidly abroad than in the United States over the next quarter century, though there are factors which put definite limits on the rate of such expansion. In the near future lack of steel for tankers, pipelines, and drilling, and of competent managers and labor trained in all of the specialized skills required in oil fields and refining will prove a handicap. For both the short and long run possible political difficulties may seriously discourage private investment in foreign petroleum and retard the growth of production. The Commission believes that present knowledge of this Nation's future oil position does not warrant discrimina- tion against imports of crude oil from any quarter of the world. Every encouragement should be given, within lim- its of economic reasonableness, to establishing greater oil reserves and production capacity in relatively safe areas, particularly in the Western Hemisphere, but not by placing penalties on oil production elsewhere. In view of its future needs and limited resources, this Nation should welcome crude oil imports, not place obstacles in their way. Tariffs on crude oil imports should therefore be held down, re- duced, or eliminated, within the limits imposed by national security considerations. THE OUTLOOK FOR SHALE Large synthetic oil production in the United States has be- come a likely possibility. Shale deposits near Rifle, Colo., of a grade sufficient to yield 30 gallons per ton are believed to be large enough to provide at least 80 billion barrels of liquid fuels. Because the location and quality of these resources are known, substantial expenditures for discovery can be avoided. Addi- tional deposits analyzed to date, in spite of lower yields and higher costs, could produce an estimated additional 420 billion barrels. Processes already developed by the oil industry and Govern- ment can now produce liquid fuels from shale comparable in quality to products obtained from petroleum. Adequate tech- niques have been established for mining and retorting the shale, and refining is similar to standard operations. A major problem is that markets close to shale sites cannot absorb the full output of a large-scale commercial plant and the oil would have to be transported overland to Pacific Coast or Midwest markets at considerable cost. The National Petroleum Council's Committee' on Synthetic Liquid Fuels Production Costs has estimated that gasoline made from shale on the basis of a 200,000-barrel-a-day opera- tion could be sold in the Los Angeles market at a price of 14.7 cents a gallon, providing a 6 percent return on invested capital after including the revenue from other products. This esti- mate may be compared with an average price at the Los An- geles refinery of 12.7 cents in October 1951. Department of the Interior officials estimate somewhat lower costs for oil products from shale. Work also is going forward to develop lower cost technology for producing synthetic liquid fuels from coal and lignites, which may well be competitive with products from crude petroleum before 1975. TASKS FOR OIL POLICY The tasks of policy in meeting expanding peacetime demands for liquid fuels do not appear formidable. It seems clear that imports and domestic synthetic oil over the years could take up any slack in United States liquid fuel supplies and impose a competitive ceiling on oil costs not very much above present levels. Private business can be counted on to bring about the bulk of necessary adjustments at an appropriate pace if no uneco- nomic impediments to domestic crude oil exploration and pro- duction are allowed to develop, if imports are permitted to flow freely in whatever amount the price situation dictates, and if synthetic production is not discouraged by shortages of capi- tal, monopolistic restraints, or the like. REDUCING USE AND WASTE There is need for private action on the demand side, too, so that more use can be made of available supplies. The Com- mission's studies indicate that there are many points at which this Nation could reduce the consumption and physical waste of liquid fuels with little or no reduction in the service rendered to ultimate consumers. The oil and automobile industries in particular carry a heavy obligation, in the Commission's judgment, to lead the Nation toward a more efficient use of its liquid fuel supplies, and consumers themselves can contribute strongly if kept properly informed of conservation measures they can take. Obstacles to Security The security problem in oil can be viewed realistically only in terms of total free world demand and total free world sup- ply. The outbreak of all-out war would create a sudden, and probably wide, gap between requirements and current supply for the United States and other free nations alike—particu- larly for naval and specialized aviation fuels. Enemy action could well curtail production or cut off rich sources. Severe rationing of nonmilitary use would fall far short of closing the gap even with much stricter reductions than in the last war. There can be no conventional stockpile of oil to fall back on. Therefore, the equivalent of a stockpile—an emer- gency cushion of oil production, refining, and transportation Page 109 capacity in the Western Hemisphere which can quickly increase supply—is imperative in meeting the problem. How can such a cushion be provided? The first prerequisite is, of course, to maintain a thriving oil industry in the Western Hemisphere. Given this, part of the answer lies in the ability of the industry to expand supply quickly by raising crude oil production above the normal peace- time production rate. If there is sufficient extra refinery and transportation capacity to handle this extra crude, an increase in refined products can be achieved quickly. But there are severe limitations on this particular cushion, both as to size and dura- tion. Many oil wells that now are operated below maximum because of State regulation could not be brought up to their "maximum efficient rate" (MER). Wells can even be operated above MER for a limited period though at the expense of re- ducing the ultimate total volume of recovery. It is estimated that increased production achieved in this way by pushing known United States reserves would be only about 10 to 15 percent. A further answer might be found in drilling more wells into known pools, but this approach has similar limitations. It was by no means enough during the last war, and as time goes on it may prove less and less adequate. The domestic oil industry now manages to maintain production only by constant explora- tion and drilling to find new pools. This is as true in peacetime as it is under war conditions. During the last war, large amounts of steel and manpower had to be devoted to oil exploration, and much of this effort went into the drilling of dry holes. With each passing year, ever-increasing numbers of wells must be drilled to find new pools to keep production abreast of rising demand. AN "UNDERGROUND STOCKPILE" What obviously would help most in time of war would be to have an "underground stockpile" of semiproved oil deposits which could be drilled up as required with maximum speed and at minimum expenditure of materials and manpower on "dry holes." A large area which lends itself to such treatment is presently the property of the United States Government—the Continental Shelf, particularly that section off the Gulf Coast. Geologists are agreed that prospects for finding large pools of oil in this off-shore area are excellent. But there still remain the difficult and expensive technical problems of exploring and producing "underwater oil." The private oil industry can solve these technical problems if given access to the Continental Shelf. Government leases per- mitting private oil exploration and development can provide such access and incentive. The Nation can help to establish a security reserve of crude oil if leases are so written as to require wide spacing of wells or limited withdrawals, or both, and by setting royalty provisions which allow for adequate financial incentive. By allowing fewer producing wells than would be worked in normal practice, or keeping withdrawals below the usual rate, or a combination of both measures, the life of off- shore pools might be considerably prolonged. Whatever resolution Congress may make of the long con- troversy over title to the oil resources of the Continental Shelf, provision should be made for the application of these security measures. Similar precautions should be taken to the fullest feasible extent on other oil reserves on both public and private lands. For a nation that is rapidly draining its known reserve of petroleum and is very uncertain as to how much remains t( be found, and that faces the prospect of growing dependent on imports from other parts of a world torn with tension, th< wise course would be to maintain a quickly expansible outpu from an established reserve of oil in its own ground. The Commission therefore recommends: That the Federal Government encourage immediate ex ploration for oil on publicly owned off-shore lands; tha, leases to private companies, whether by the Federal Gov- ernment or the States, contain provisions requiring wel spacing or withdrawal rates calculated to increase the nor- mal life of the pools with a view to providing faster with- drawals if ever such action is required to meet the need, of war. That, in administering Federal oil lands generally, the Department of the Interior, wherever feasible, require con- servative well spacing and withdrawal rates designed tc prolong the life of pools and thus ensure a larger, readily available crude oil reserve whose production can be quickly expanded for emergency use. That conservation agencies of oil-producing States likewist give heavy weight to this security objective in their regula tion of well spacing and production rates. It will also be desirable for the United States to encourage by any reasonable means the enlargement of crude reserve: elsewhere in the Western Hemisphere. REFINING AND TRANSPORTATION CAPACITY In addition to a crude oil reserve capable of supporting a higher level of production in an emergency, there must alsc be corresponding standby refining and transportation capacity, The industry itself, once the steel production shortage eases, ha* incentive to enlarge capacity enough to carry a moderate "reserve capacity." If, in the light of later facts, this cushion of refinery and transportation capacity appears to be inade- quate (which is likely to be the case at least for aviation gasoline refining capacity), then Government and industry should work out means of building more. Carrying out these recommendations will provide a "stock- pile" of extra production capacity for an essential of war which cannot be stockpiled in the conventional way. It will cost money—a great deal perhaps—but the price of this insurance would be cheap if war should come. SYNTHETIC OIL AS A SECURITY CUSHION The development of large-scale synthetic oil production using domestic coal or shale may some day lessen the security precautions that must be taken for petroleum, but that day is some years off at best. The technology of synthetic oil produc- tion has reached only the pilot-plant stage in the United States. To build immediately a huge synthetic oil development based on today's technology—involving an investment of dollars, materials, and manpower that might approximate that re- quired for the atomic energy program in the last war—would Page 110 be uneconomic, and by diverting strength from other produc- tion might hurt national security more than help it. To keep such vast facilities in "mothballs" like an aircraft carrier await- ing the call to action would be very expensive, but as an active industry it most likely would be incapable of meeting competi- tion without the aid of subsidies. In all probability lower cost methods of production would be found soon after operation began. PRIVATE COMPANIES INTERESTED It would seem wiser to learn these same engineering lessons more quickly and cheaply. Some private companies are evi- dently prepared to construct small-scale commercial plants for this purpose if they can overcome financial problems. Principal of these is the higher cost of transporting their product from shale deposits to market areas, especially if it is necessary to ship by rail because the scale of operations would not warrant constructing a pipeline. The Commission therefore recommends: That the Federal Government give limited financial as- sistance to any qualified private companies that will under- take the production of oil from shale in order to encourage as soon as possible the construction of small-scale commer- cial plants and thus accelerate the gaining of technical knowledge necessary for later economical expansion. For the present, one promising form of such assistance is for the Government to absorb a sufficient portion of the transpor- tation costs from plant to market to give synthetics pro- ducers a competitive position with crude petroleum prod- ucts in those markets. That the National Security Resources Board, with the aid of the Department of the Interior, undertake a continuing study of the economic aspects of producing synthetic liquid fuels from shale and coal in relation to security needs and the outlook for future petroleum supplies. Chapter 18 If the supply were available, use of natural gas by 1975 could readily rise 2/2 to 3 times as high as in 1950, even at somewhat higher prices. But resources of natural gas are being used up at a mounting rate. Proved reserves now are about 26 times the net amount extracted in 1950 and discoveries still are rising at about twice the current rates of production. Experts differ as widely in their guesses about 1975 gas reserves and production as they do about oil, but probably before the century is out, if not sooner, supplies of natural gas will decline. The United States cannot now supplement domestic supplies with large imports, though modest imports from Western Canada to the Pacific Northwest seem assured, and it may later become economical to pipe gas from Mexico. Nor is there yet developed for gas, as for liquid fuels, a substitute derived eco- nomically from this country's abundant reserves of solid fuels, though here again economic and technical developments may alter the outlook. The lack of balance between demand and supply is likely to exert continuing upward pressure on prices. The main objectives of long-range policy must be to— Encourage maximum economic discovery and recovery of the Nation's natural gas resources. Derive the greatest economic advantage from these re- sources while they last. Minimize the costs and dislocations of the eventual shift from natural gas to other forms of energy. In attempting to translate these policy aims into action, the Commission has concerned itself only with those issues which have a direct bearing on the future level of supply and pattern of use and has avoided policy issues which involve primarily questions of equity as between sellers and consumers. The natural gas industry never has been "normal." From the start it has been in continual transition. It began life as the more Natural Gas—Boom Fuel or less unwanted child of petroleum; one-third the 1950 supply of natural gas came from oil wells, the balance from "gas wells," many of which were found in the search for oil. In earlier years the main economic function of natural gas was to raise petroleum to the surface after which it was jetted into the air and burned. For years there existed simultaneously a heavy surplus of natural gas in source areas, particularly the Southwest, and a large unsatisfied demand in potential market areas—a paradox that reflected the difficulty of transporting gas. Vast quantities were physically wasted. Gradually, substantial local use began to be made of surplus gas from oil fields. Industries that needed large quantities of cheap fuel, such as those manufacturing carbon black, began to gravitate toward the gas fields. Great technical progress was made in returning gas to the ground to "repressure" oil pools and thereby both increased the low-cost recovery of oil and conserved gas for later consumption. Finally, and of greatest importance since the 1930's, the gas industry rapidly increased gathering lines in the fields and long distance pipelines—a com- bination that has opened up tremendous markets over a large portion of the United States. Private companies responding to profit opportunities did most of this but governments also contributed. Producing States limited the amount of casinghead gas that could be dispersed in the production of oil and discouraged through regulation the inefficient use of gas for manufacturing carbon black. Federal and State regulation held down transmission and distribution margins and consumer prices thereby encouraging wider use, and required that new pipelines be backed up by sufficient "dedicated reserves" to protect investors and to assure years of gas service to consumers (usually 20 years at capacity). These developments have increased the economic utility of natural gas in recovering oil, reduced sharply the percentage of Page 111 gas physically wasted, increased tremendously the useful con- sumption of gas, and increased substantially the field price of gas. In 1950, new contracts were being made in the Southwest at prices about double those at which most gas was being delivered under old contracts. NATURAL GAS- FASTEST GROWING PRIMARY FUEL THE PROBLEMS OF GAS Despite these improvements, much gas still is wasted either by being flared or by being used uneconomically. Demand still is running well ahead of supply in distant markets while many oil producers lack pipeline outlets and are left with a surplus. As a result, the Bureau of Mines estimates about 10 percent of extracted gas continues to be flared or otherwise wasted—an amount equal in 1950 to about two- thirds of the Nation's residential consumption of natural gas. Another problem results from the "overhead economics" of pipelines, whose owners have a strong incentive to maintain a year-round flow at full capacity so as to maximize earnings. The pipeline operator typically has year-round contracts to accept gas from oil wells and natural gasoline stripping plants which he must buy whether or not he has an immediate cus- tomer. This results in pipeline sales at summer dump prices to industrial customers (including electric utilities) that are glad to buy gas even on an interruptible supply basis when its price in terms of contained heat is sufficiently below that of competing fuels. For "special advantage" uses—household and commercial heating, cooking, specialized industrial uses like heat-treating, and certain chemicals production—the unique qualities of gas enable it to command a premium price, as compared with the price it brings as a boiler fuel for industries or utilities, par- ticularly in markets distant from the field. As of 1950 about three-quarters of the 6.3 trillion cubic feet of gas marketed was consumed by industry, a considerable portion for economically "inferior" use.* Only one-fourth went to "special advantage" household and commercial customers. Industrial consumption of gas is not necessarily "inferior," especially in special chemical, metallurgical, and similar pur- poses. Moreover, in certain gas-producing areas there is an economic advantage to the Nation in using gas at a low cost for nonspecial advantage purposes in preference to coal which costs more locally because of transportation charges. This is the case in Texas, which accounts for nearly half the Nation's natural gas supply, where industry has been expanding rapidly 1950 TOTAL BILLIONS OF CUBIC FEET *The distinction here between "special advantage" and "inferior" uses is purely an economic one. "Special advantage" uses are those for which consumers are willing and able to pay a higher price for natural gas than for other fuels, on a con- tained energy basis, because of its superior convenience or performance in the particular use. TOTAL CONSUMPTION INDUSTRIAL- RESIDENTIAL-COMMERCIAL - 1950 1905 Source.- 7905-7920 (incl.) Bureau of Mines 7927-7950 (incl.) Adapted from Bureau of Mines Data Page 112 partly because of low fuel costs. Nevertheless, much industrial use of gas in distant markets where alternative fuels are avail- able represents an inferior use from a long-range point of view. Declining supplies of gas may contribute to severe economic dislocation in gas-producing areas where industries and whole communities have grown to depend heavily upon natural gas. With new pipelines some inferior use also occurs from pro- motional sales to industry and utilities before the special advan- tage market has expanded enough to take the line's full capacity. In such cases, "dump" customers get squeezed out as high-priced sales expand, but a more stubborn problem results from wide seasonal fluctuation of special advantage demand, mainly when household and commercial heating requirements fall in summer. A pipeline generally must be large enough to meet cold weather peak loads of preferred customers, and for the rest of the year most pipeline operators face the choice of operating well below capacity or selling at dump rates. Re- cently, operators have begun to avail themselves of another choice: off-season underground storage where geologic condi- tions are favorable. APPROACHES TO SOLUTIONS The steps that should be taken to encourage maximum dis- covery and economic recovery of natural gas are closely linked with the problems of seeking to maximize the Nation's eco- nomic advantages from its natural gas resources. The key questions are: How can the Nation get the greatest use from gas in lifting oil so as to get maximum economic recovery of petroleum resources? How can it minimize economically the physical waste of gas in flaring? How can it minimize inferior uses of gas for which more abundant energy resources, notably coal, would serve as well— and, in the long run, at lower real cost to the Nation—in order to maximize special advantage uses in which gas serves its highest economic function in the long run? How can it avoid severe dislocation and heavy capital costs in transferring nearby and distant consumers to other fuels, and in abandoning pipelines, when the supply of natural gas turns downhill? Prices and Policy Goals The major job of bringing about adjustments in accord with national policy must be carried by the same private in- dustries that were responsible for the sensational growth of the gas fuel industry. Strong market forces already are en- couraging desirable adjustments which Government must help to guide and accelerate. Field producers, pipeline operators, and local distributors of gas generally, though not in all cases, have a strong profit incentive to shift sales away from certain industrial and utility customers to special advantage customers willing to pay higher prices. Long distance pipeline operators have an in- centive to develop off-season storage capacity close to distant markets when underground geologic formations are favorable. Finally, in constructing new pipelines, private sellers have a strong profit incentive to select markets where the ratio of high advantage customers is high. Thus, price and profit forces can be expected for the most part to press private producers, transporters, and distributors of gas toward the policy goal of maximum economic use, though the rate of shift may be slower than desirable. These same forces could also exert upward pressure on field prices; and higher field prices could both favor and hamper movement toward public policy objectives. They would pro- vide further incentive to search for oil and gas, to reduce flaring, and tend also to narrow the gap between prices charged to inferior and high advantage use customers—a change that might drive inferior use customers toward other fuels. On the unfavorable side, higher field prices might encourage producers to withdraw gas more rapidly than special advantage users could absorb it and to cycle less for maintenance of oil and condensate well pressure. Government Actions Since the early thirties the State and Federal Governments have promoted oil and gas conservation by controlling produc- tion; have protected consumers by regulating interstate sales and pipeline transmission charges (Federal Power Commis- sion) and consumer rates (State governments) ; and have pro- tected consumer and investor interests by controlling extension of pipelines and requiring dedication of reserves. Despite these advances in public policy, there is room for further progress, particularly in dealing with such problems as: conservation at the field, the pattern of economic use, and the authorizing of additional pipelines. conservation at the field Great strides have been made in reducing the percentage of flaring in the last 15 years. The main forces have been the spread of pipelines and the improvements of technology in repressuring oil fields, but conservation laws by gas-producing States, particularly Texas, have forced earlier and more dras- tic curtailment of flaring than might have resulted from market incentives alone. Some producing States still have no such laws, and there could be more vigorous application in those that do. It is not always economic to avoid flaring, but what is un- economic under today's conditions may become economic to- morrow. Thus time, technology, and economic trends are on the side of conservation. The natural gas currently flared rep- resents a tremendous waste of fuel which would have great value in future years. Long-run interests are most impaired in areas where waste is occurring, and this is properly a matter of serious concern to the State governments involved. A major economic deterrent to gas and oil conservation by private oil producers exists where multiple owners hold rights to an oil pool that has not been placed under unit operation. An individual operator has little incentive to pay for returning gas to the common pool since subsequent benefits would be shared by all owners. All reasonable steps by private parties and by State governments to encourage cooperative unified opera- tions in such cases will strengthen conservation of both fuels. The Department of the Interior, which administers leases of publicly owned gas and oil lands, has advanced unit opera- tions on Federal lands. Encouraging progress has been made in recently developed private fields, despite difficulties over con- flicting property rights. Page 113 The Commission nevertheless is convinced that there is substantial room for further progress toward conservation on public and private lands alike, particularly in older fields, and that no time should be lost in taking advantage of every such opportunity to strengthen the Nation's long- range energy position. In curtailing flaring, encouraging unit operation and the like, heavy weight should be given by both private producers and government administrators to the prospects that improved market and technological conditions may later pay off in situations where increased conservation now appears uneconomic. Imminent development of oil resources underlying the Con- tinental Shelf presents a special problem of gas conservation. At best it will be costly and technically difficult to avoid enormous amounts of flaring. Under some geographical pat- terns of development, gathering natural gas might be out of the question economically, whereas alternative patterns might make it feasible. This is a highly complex matter on which the Commission does not pretend to have specific answers, but seri- ous consideration needs to be given by private producers and Government officials to gas conservation on the Continental Shelf. ENCOURAGING THE HIGHEST ECONOMIC USES Industry and Government experts agree that natural gas consumption should be shifted as rapidly and fully as possible toward special advantage uses. Some observers believe that Government should impose direct curbs on economically in- ferior uses of natural gas. The Commission strongly doubts the efficacy of meeting the problem by detailed regulation. Other reasons aside, there appears no economic basis for designing curbs which would be any more suitable and valid than the normal pressures of price relationships. The chief exception, perhaps, is the carbon black industry which makes notoriously inefficient use of the heat and carbon content of natural gas and which already is under partial State regulation. But these users, too, as long-term contracts for low-price gas expire, are feeling market pressures and sub- stituting nonmarketable residual heavy products left after petroleum refining. Higher gas prices also are encouraging the development of such substitutes for carbon black as finely divided silica to serve the needs of rubber tire manufacturers. Eventually, carbon black production may develop on a large scale in petroleum-producing areas like Venezuela and the Middle East where natural gas is now being wasted for lack of a market. In addition to the efforts of private gas producers and car- riers, the shift to higher uses of gas can be encouraged: (a) by State utility commissions and the Federal Power Com- mission in their regulation of rates—narrowing the price gap between inferior and special advantage uses, (b) by Govern- ment advisory help to private pipeline operators in developing off-season storage facilities, and (c) by judicious authorization of further pipeline capacity. Eventually, less economic uses of natural gas will be squeezed out by unfavorable prices. The aim of private industry and Government alike should be to achieve this as rapidly as feasible, taking into account the problems of pipeline operators and of consumers and other long-run as well as immediate economic considerations. REGULATING EXTENSION OF PIPELINES With most major consuming areas of the Nation served by natural gas pipelines—New Jersey, New York, and New Eng- land are among the most recent to join the list—emphasis from now on will be upon enlarging pipeline capacity to markets already partly served. Considering the Nation's limited reserves of natural gas, there is no economic virtue simply in further expanding pipe- lines, but a clear advantage exists in extending or enlarging access of high advantage users. The problem is not yet one of whether or not to authorize further pipeline construction, but of how much to permit and under what circumstances. The Federal Power Commission, in evaluating applications for certificates to operate new pipelines, now gives consideration to the types of customers to be served. This is appropriate and perhaps should be given even heavier weight in the future. It would seem particularly inadvisable, for example, to authorize increased pipeline capacity to a market where a high proportion of natural gas supply already is going to inferior uses which could be served by other more abundant fuels at little greater consumer cost. In considering new pipeline proposals, the Fed- eral Power Commission also should question whether all rea- sonable efforts have been made to minimize off-peak dumping by developing storage facilities or by other means. It will become increasingly important for the Federal Power Commission, in considering dedicated reserves for a proposed pipeline, to consider the eventual impact of new dedications upon the useful life of existing pipelines, upon the consumers they serve, and upon the long-range supply position of com- munities in the producing area. Excessive building of pipelines and overcommitment of limited reserves could lead, when re- serves are gone, to premature obsolescence of costly capital equipment, for operators and consumers alike. Preparing for Eventual Transition A change-over from natural gas to an alternate nongaseous fuel, under present economic and technological conditions, would be far more difficult and costly for some customers than others. Some marginal gas customers, such as industrial firms and electric utilities distant from producing areas, have already made the shift quite painlessly; others will follow as the price advantages of natural gas diminish. Household and many other users, however, would be put to great expense and inconven- ience if forced to make this shift, with a particularly severe im- pact in gas producing areas. The transition will occur gradually, but unless technological advances meantime make alternate fuels available at favorable costs, the changeover will be difficult for many customers and communities. An economic method of producing high heat content gas from coal by gasification, either underground or al the pit-head, might extend the life of natural gas pipelines thai pass coal-bearing areas and thus avert problems for theii customers. Technology of this kind is still a long way off, and in view of the difficulties involved, Government and private industry should begin research promptly, even though supplie of natural gas will last for years. Page 114 Chapter 19 Coal-Can Costs Be Cut? The big problem of coal is how to put the vast reserves to greater use at lower costs. Reserves of coal and lower quality solid fuels are more than 90 percent of the Nation's total mineral fuel reserves and about 40 percent of the world's total coal reserves. Only about 2^2 percent of recoverable United States reserves have been mined to date. Reserves of coking coal are less favorable: they represent 2 percent of total United States reserves but support 15 to 20 percent of annual coal production. Coal has played a declining role in the Nation's total energy supply, falling from 92 percent in 1900 to between 40 and 45 percent in recent years because of strong competition from oil, gas, and waterpower. Use of coal by the steel industry rose one- third between 1925 and 1950 and use by electric utilities, threefold but sharp losses in residential, industrial, and railroad markets caused an absolute decline in total consumption from roughly 600 million tons per year in the mid-twenties to just over 500 million tons in recent years. DIFFICULT COMPETITIVE POSITION The long downward trend of coal's percentage share in the total energy supply may continue for the next 25 years unless war intervenes, but the past decline in volume is expected to reverse itself from here on. Volume seems likely to rise about 60 percent above the 1950 level by 1975, with the possibility of an even greater rise if coal has to take over more of the load which is now being carried by petroleum and gas, and especially if large cost-reducing gains are made in various coal technologies. In the event of war, demand for coal would rise sharply to support forced-draft economic activity and, to the fullest extent possible, to relieve petroleum. The difficulty with coal stems from its solid and bulky form. Compared to competing fuels, much more labor is required to mine, to ship, and to use coal. Thus, as real wages of labor rose across the Nation, coal was placed at an increasing competitive disadvantage despite considerable advances in the productivity of coal mining. A stronger competitive position requires rapid technological strides in labor-saving, transportation, and util- ization. Organized labor recognizes the importance of such advances, but the coal industry is at a disadvantage because, with few exceptions, it is made up of small companies that are financially unable to invest heavily in research and develop- ment. In 1951 private industry and Government together spent less than one dollar on coal research for every five dollars spent on petroleum research. For all these reasons, coal has earned the reputation of a sick industry. Nursed back to health after the thirties by the general prosperity and high demands of the war and postwar years, the coal industry could temporarily relapse. On the other hand, if opportunities are well developed, the coal industry could grow steadily and prosperously from now on. Eventually, when low-cost reserves of oil and gas decline and when the best remaining hydroelectric sites are fully used, coal will have to carry the major burden of making further additions to the Nation's energy supply. Accordingly, it would be in the national interest for the coal industry to start mov- ing vigorously now toward performing its long-range mission, rather than languishing first through an interim of slump. OPPORTUNITIES FOR COAL Coal not only is a major source of fuel but, as carbon, is a raw material for a wide variety of industries. Sooner or later several major industries will have to sink their tap roots deeply into the Nation's coal reserves. The railroads did so earlier, but now pre- fer oil. Steel will continue to need coal in increasing amounts. The electric power industry, long a major customer for coal, now has the incentive to become a major force in cooperation with other users toward putting coal to larger use in a combina- tion of ways. The fast-growing chemicals industry, long tied indirectly to coal through coke, may become a major direct customer, as may the oil industry which, when the need and technology are ripe, can convert coal to help provide the Na- tion's liquid fuel supply. Such electroprocess industries as aluminum have the oppor- tunity, by turning to coal and lignite, to break loose from their long dependence on closeness to cheap hydroelectric power sources for low-cost energy. These large coal-using industries, present and potential, have the financial and technical abilities and certainly the long range economic incentive to provide major leadership, along with Government and the coal industry, toward deriving greater benefits for themselves, the Nation, and other free nations as well, from our rich coal resources. TECHNOLOGY CAN BE IMPROVED Coal technology has made important advances in the last generation but far greater opportunities exist in coal produc- tion, transportation, and utilization. Man-hour output in underground bituminous coal mining in the United States rose 53 percent from 1925 to 1950; the large expansion of strip-mining, in which labor productivity is about three times as great as underground, lifted the industry average to 72 percent above the 1925 level. But strip-mining, now one-quarter of the total, cannot be expected to increase its share very much. Hence further gains in productivity must be in underground mining. Page 115 THE OUTLOOK FOR COAL—MORE DEMAND IN 197J (FIVE YEAR AVERAGES FOR BITUMINOUS COAL IN MILLION SHORT TONS) I 1975 1925 Much can be accomplished by fuller mechanization of ex- isting mines—greater application of "continuous mining" meth- ods, for example—and especially by laying out newly opened mines so as to give full scope to new mechanical methods. Lifting coal from the mine through pipelines under pressure is a possibility. There are opportunities for further gains in low- cost mechanical cleaning and preparation of coal to raise its value. CHEAPER HAULING, BETTER USE POSSIBLE Cheaper ways of transporting coal could benefit the industry enormously since costs of hauling are a major part of consumer prices, and hence strongly affect coal's competitive position. Devices now in the experimental stage, such as long-distance conveyor belts and pipelines to carry a "slurry" of powdered coal, deserve vigorous attention. Great technological gains have been made in coal utiliza- tion. In generation of electricity from coal, the coal-to-kilowatt- hour ratio has dropped from 7 pounds in 1899 to 1.19 pounds in 1950. Further increases in thermal efficiency in electric generation and fuller development of the coal-burning; turbine generator hold considerable promise. CONVERTING T Particularly attractive is the "multipurpose" approach to converting coal and lignite for the combined production of electric energy, liquid fuels, and important chemical byprod- ucts. This process, now in the development stage, involves low temperature carbonization to skim off important low volatile chemicals, with the remaining hot char used as a boiler fuel for generating electric energy. Underground or pithead gasification provides another pos- sibility of revolutionary improvement in the competitive posi- tion of coal, although experiments are still apparently a long way from success by commercial standards. In the Commission's view the experimental work of the Bureau of Mines in underground gasification merits strong and continuing support. Improvements in above-ground methods of coal gasification should likewise be sought, for reasons discussed in the previous chapter on natural gas. Page 116 PURSUING OPPORTUNITIES Though the promise is great for major improvement in use the nation's rich coal reserves, three main steps must be faken to bring this about: (a) much greater effort to ad- vance the technology of coal production, transportation, and (b) large-scale investment in widespread application of Inew methods, accompanied by a closer cooperation between ■the coal industry and major coal users, and (c) more stable [management-labor relations to ensure continuity of supply to customers. Government can help on all three scores but the main bur- den of the job should be carried by private industry and labor. The Commission recommends: That the Federal Government, acting through the Bureau of Mines, undertake, with the cooperation of private in- dustry, labor, and private research organizations, a thor- ough appraisal of present research and development work relating to coal; and the formulation of a strong program to advance coal technology to be carried out by a combi- nation of private and public effort. In light of the needs revealed by this proposed study, ample funds should be provided by Congress to carry out the Government's share of a comprehensive coal research and development pro- gram, with provision for using such funds in part for con- tracting to non-Government research organizations. Beyond this, Government policies and programs which affect the coal and coal-using industries, directly or indirectly, should be reexamined to insure that they are uniformly directed toward advancing coal technology, large scale investment in the appli- cation of such technology, and the broadening of markets for coal on a solid economic footing. In the Commission's opinion, this positive approach to putting the Nation's coal resources more fully to work through aggressive improvements in productivity and use is the only pattern that can be followed in the light of the expansion of the economy that will have to be sustained. The negative approach which seeks to cure the coal in- dustry's past ills by imposing artificial restrictions upon competing fuels is unacceptable. Chapter 20 Electricity—How Much at What Cost? The central problem of electric energy is how to increase the Nation's supply two and a half times during the next 25 years without running into considerably higher costs per unit. The supply of electricity has had to double every 10 years since 1920 and will have to continue to expand at a very rapid rate in order to support a doubling, by 1975, of the Nation's total output of goods and services. The Commission's studies estimate that demand for electricity will increase by 260 per- cent before 1975—from 389 billion kilowatt-hours in 1950 to something like 1,400 billion in 1975. Shortages of electricity and rising real costs would impede economic growth; they could throttle national effort in event of war. The Nation's electricity comes from two main sources: waterpower which produces about a quarter of the total, and thermal generation—chiefly steam plants burning one of the basic fuels: coal, oil, or gas. Other sites for hydroelectric power exist—enough to more than triple the production of electricity from this source. There are enough fuels for an almost in- definite expansion of thermal plants but, except for coal and lignite, they are not as abundant as could be desired. But we have enough waterpower and fuel together to produce the electricity we need. The question is, what will it cost? Electricity can be transmitted by high voltage lines, but transmission is not economic beyond a few hundred miles be- cause of current losses in transit. Consequently, the supply of electricity is largely an area problem. Cost prospects vary widely between one section of the country and another, ac- cording to the amount of hydropower available and the cost of the installation, according to the access to fuels and their local delivered price. So far, the trends of real costs and real prices for electricity have been downward. From 1925 to 1950, the average price of electricity to residential consumers, corrected for changes in the purchasing power of the dollar, fell 70 percent. Prices paid by industrial consumers likewise declined sharply. This reflected improved technology, the economies of larger scale generation and purchases and other cost-reducing factors. These downward trends could be reversed by an enforced shift in the sources of electric power to a combination which would result in higher costs. Today, the pattern of sources comprises—besides the 26 percent from hydropower—11 percent of electricity derived from oil, 14 percent from natural gas, and 49 percent from coal. Except for coal, as this Report shows, all of these sources of electricity, including hydropower, are subject to pressures which could force their real costs upward. The Nation- wide average cost of electricity from waterpower is less than that of thermal generation. The advantage of these lower costs is concentrated in areas which possess favorable water sources, whereas in many areas thermal generation, or a combination of hydro and thermal, presents the lowest cost alternative. A few large waterpower sites remain to be developed which will produce low-cost power, but the remaining sites will require a higher capital outlay per unit of output and other expenses to be able to deliver electricity at the same low cost. As a conse- quence, the costs of hydropower also are subject, on an average, to upward pressures. Page 111 Before examining the ways in which the threats of higher costs may be offset, the Commission wishes to define the limits of its inquiry in a field which long has been crowded with controversial issues of public policy. A Joint Public-Private Responsibility Private industry produces 85 percent of the Nation's electric energy supply (70 percent by private utilities and 15 percent by industrial concerns) and has been responsible for most technical advances during its 70 years of growth. More recently, Federal, State, and local Governments have entered the field as both direct producers and regulators. Because public policy recognized electric energy as a "natural monopoly," regulation by State commission and by the Federal Power Commission has been substituted for normal market competition to protect the consuming public against possible abuses. Such regulation, by statute, usually extends to rates charged, services rendered, and financial structure, though in practice it tends to concentrate largely on rates. The prime purpose of such regulation is usually regarded as establishing equity between producers and consumers, though by its in- fluence over rates and earnings on investments, regulation indirectly affects consumer demand and the willingness of private utilities to expand supply. The Commission has not felt it feasible or necessary to examine these matters in detail. By 1900, municipal ownership of electric generating and distribution facilities had made a strong start and for two or three decades thereafter it expanded, but has nevertheless re- mained a modest factor in the total picture. The Federal Government entered the electric power field later as a direct producer (Tennessee Valley Authority, Bonneville Power Ad- ministration, and the like) and as a promoter of electric services (via the Rural Electrification Program). During the 1930's, Congress acted to extend the Federal Government's influence and activities in the electric field to accomplish three main objectives: Extending electric services to more consumers, particularly in rural areas not adequately served by private utilities. Developing selected large-scale water resources where pri- vate development did not appear feasible, partly because of the huge investment but especially because maximum public benefits sometimes required coordinated multipur- pose development of an entire river basin. In such cases the primary purpose—with variation of emphasis from one project to another—was to obtain low-cost electric supply, flood control, navigation, recreation, and irrigation bene- fits. With respect to hydropower, the expressed Congres- sional purpose was also to expand the use of electricity, and beyond this, in the eyes of many, the aim was to provide a useful "yardstick" for measuring the performance of pri- vate industry and injecting a strong and healthy element of competition. Correcting financial abuses on the part of some utility holding company systems with the aim, among other things, of encouraging further regional integration of gen- erating and distribution facilities. After years of development and controversy, these Federal policies and programs appear to be well established and the respective roles of Government and private enterprise better defined and stabilized. Although, among others, such important questions as Government's role in transmission of power and in steam generation linked with hydro projects still remain to be clarified, Government and private industry probably will continue to share the field. The Commission recognizes the difficulties that remain in drawing a workable line between public and private enterprise in specific situations but accepts as a basic principle that Gov- ernment and private industry both have major roles to play and that there is need for close coordination. It does not seem pertinent to report on such issues as cost allocation in multi- purpose projects and comparisons of Government and private power costs. These are important, but their resolution is inci- dental to plotting the main course the Nation must follow to meet its future electric energy needs. THE JOINT OPPORTUNITIES The main focus of this Report, therefore, is upon the job which Government and industry must jointly undertake: (a) to expand generating and distribution capacity at a rate rapid enough to meet the growing electric energy demands of con- sumers in all areas of the Nation, (b) to hold the real costs of electricity down to the lowest possible level, and (c) to meet the electric energy needs of national security. Promising opportunities lie in the direction of both hydro- electric power and thermal generation. Hydropower Opportunities Waterpower is the one major source of electricity that does not depend on draining mineral fuel resources. Hydroelectric output by 1950 increased to four times the 1925 level, but because other electricity production increased even more, the fraction it contributed fell from about one- third to one-quarter of the total. There is no completely satisfactory measure of the remaining hydropower that could be developed. Theoretically every river, creek, and drop of water contains a hydro potential as it runs downhill to the sea, but obviously much waterpower would not be economically rewarding to harness. There are extreme variations in the probable capital and operating costs of gen- erating electricity at different sites. Even where costs are similar the economic possibilities of development will vary according to differences in the prospects for power demand and the con- ditions of supply in a particular area. Moreover, the potential level of power that can be generated and the costs will vary widely for a single site according to how the whole river basin is developed. A river with a wide seasonal fluctuation in water flow will have a much greater year-round power potential if storage reservoirs are built upstream to even out seasonal fluctu- ations at power sites downstream. undeveloped potential large The Federal Power Commission has estimated that a total of 105 million kilowatts (kw.) capacity could perhaps be de- veloped economically at known sites in the United States, with an annual output potential of 478 billion kilowatt hours, which would be better than four times 1950 output. Although this Page 118 THERMAL ELECTRICITY MUST CARRY BURDEN OF GROWTH OIL (MILLION BARRELS) estimate is necessarily subject to many qualifications, it estab- lishes an upper limit as a basis for estimates. As of January 1950, according to the Federal Power Com- mission, only 16 percent of this 105 million basic kw. capacity potential had been developed and another 5 percent was under construction—altogether 21 percent of the total potential ca- pacity and 24 percent of the kilowatt-hour output'potential. Federal water development agencies had undertaken precon- struction planning for another 12 percent, but had no funds for construction. The remaining 67 percent of potential capacity (64 percent of electricity output potential) contains a wide assortment of sites and ranges from relatively promising projects that private utilities are prepared to undertake, or in which Federal or State agencies are interested, to sites which no one considers worth seriously considering now. Opinions differ widely as to how much of the undeveloped potential it would be economical to establish before 1975, using either a single- or multi-purpose approach as appropri- ate. It is quite possible, however, that our supply of hydroelec- tric energy could economically be doubled and conceivably be increased to 350 percent of 1950 levels. Further study of each river basin and individual site would be necessary for a more exact appraisal. Even with maximum increase, hydroelectric energy could scarcely supply one-quarter of the Nation's probable total needs for electricity by 1975—thermal generation will have to carry the main burden of further expansion. ECONOMICS OF SITES VARY Few regions can count on substantial further increases of rela- tively low-cost hydro energy. The Pacific Northwest, however, has about two-fifths of the Nation's total hydro potential in the Columbia River system, and only a fraction of it has been harnessed. Major opportunities are provided by the proposed St. Lawrence project and the Niagara Falls redevelopment proj- ect. These three are the largest, lowest cost sites remaining. Smaller quantities of power can be produced in the Missouri and Arkansas drainages, and in the South and Middle Atlantic regions. Considerable energy also could be made available by complete development of New England rivers, particularly in Maine. For all drainage areas except the Niagara, St. Lawrence, and Columbia, however, additional power for around-the-clock base load generally can be produced more economically at thermal-electric stations burning coal or other fuels than at hydroelectric installations now planned. Never- theless, proposed hydroelectric plants may have a considerable cost advantage if alternated between storing water at night and operating by day in conjunction with high-load-factor thermal plants carrying the main base load. The economic feasibility of individual hydro sites will depend heavily upon construction costs. Capital costs for hydro plants are much higher than for thermal plants, although operating costs are much lower. There are important opportunities for reducing capital outlay through the further development and Page 119 fuller use of new equipment and methods, such as giant earth- haulers, and conveyer belts. Capital cost reductions can also be achieved by avoiding the kind of "overdesign" and "overbuild- ing" which has characterized some hydropower structures in past years. Thermal Power—and Coal Three-quarters of the Nation's current supply of electricity- is produced in thermal plants. The thermal power share of the 1975 production will depend on how rapidly hydro potential is developed, but it can hardly be less than three-quarters of the 1975 total and may well be more. This would mean a pro- duction of around 1,100 billion kilowatt-hours in that year, according to Commission estimates. For expansion beyond 1975, thermal will have to carry an even heavier share of the load—unless solar or atomic sources are developed to take over a sizable part of the burden. The physical limitations that handicap expansion of hydro- power do not so rigidly afflict thermal generation. A variety of fuels—oil, gas, coal, lignite—can be used and these fuels are available in most parts of the country through reasonably efficient transportation. Supplies of cooling water for steam generation plants are a necessity and somewhat limit the loca- tion of thermal stations. Coal has always carried the bulk of the fuel load for thermal generation and, though oil and gas have cut into its share during the last 25 years, in 1950 it supplied 113 million tons— about 25 percent of total coal production: Table I.—Fuels consumed in generating electricity Fuel 1920 1950 Per- cent* Per- cent* Quantity Quantity Natural gas. Fuel oil. . . . Coal 37 billion cubic feet. . 20 million barrels.... 50 million short tons. . 2 5 58 777 billion cubic feet. 93 million barrels. . . . 113 million short tons. 14 11 49 *Of total generation. Source: Federal Power Commission, PMPC staff. Although gas and oil undoubtedly will continue to be im- portant fuels for thermal generation for many years—mainly in well-supplied areas like Texas that are distant from coal— coal and lignite will probably become increasingly important for this use. The vast reserves can support huge expansions of electric supplies whereas oil and gas, as previously reported, will run into supply problems long before the Nation need begin to worry about coal. The chief question of thermal generation is not: Do we have the fuel? but rather: What will it cost to extract and deliver fuel? How much of its contained energy can eco- nomically be turned into electricity? What will it cost to trans- mit the electricity for long distances and to distribute it to home and shop and factory? The questions apply particularly to coal and lignite. The largest opportunity for cutting the costs of fuel trans- portation is provided by coal. Conveyor belts and pipelines carrying a slurry of powdered coal and water are being tested. Pit-head generation of electricity is being introduced more widely in major coal areas, particularly where strip mining is feasible. Increased productivity in coal mining and new meth- ods of conveying coal from the cutting face of the mine to the surface or to nearby generating stations (as by pipe with air pressure drive) could also cut fuel costs for thermal generation. Great improvement already has been made in generating efficiency. Steam generating plants used 7 pounds of coal per kilowatt-hour in 1899, about 3 in 1920, compared with the 1950 average of 1.19 pounds. More efficient plants are down to 0.7 and 0.9 pounds of 13,100 B. t. u. per pound of coal per kilowatt-hour, and as these better plants replace obsolete gen- erators, the average of efficiency will improve. New types of gas turbines using coal are a possibility and might have not only the advantages of lower capital investment and greater effi- ciency, especially for serving smaller markets, but also that of not requiring large quantities of cooling water. Increased economy of long-line transmission and local dis- tribution provides another point for attack on costs, and savings would benefit consumers of both thermal and hydroelectric power. Experience to date with high voltage transmission is encouraging; for example, the Bonneville Power Adminis- tration contemplates a 600-mile transmission line. The com- bination of pit-head thermal generation and highly efficient transmission could eventually reduce costs in areas along the Atlantic Coast where distant fuel sources result in electric rates well above the national average. Tying Systems Together Another way in which we may hold down future costs, applicable to hydro and thermal alike, lies in fuller integration and coordination of individual thermal and hydro generating plants and systems, and particularly in joint advance planning of new capacity. Electric needs over large areas can be met at lower cost through interchange of "off-peak" surplus power among plants and systems. Lowest cost combinations of generating and trans- mission facilities to serve large areas can be achieved over the long run—by cooperative planning of generating facilities in advance of construction—between private utilities and indus- trial plants operating in related areas, and especially between public power agencies concerned primarily with hydrodevelop- ment and private utilities engaged mainly in expanding thermal generating capacity. This reduces the capital costs of building and maintaining capacity to meet peak loads of short duration and permits maximum utilization of lower cost energy over a large area. Important economies have been achieved by these methods over the last 30 years as private utilities, industrial firms with generating facilities, and public power agencies have intercon- nected transmission lines to form broad grid systems. Good ex- amples are to be found in the Pacific Northwest, in the 17-state southeastern power pool which extends from the Gulf of Mexico to the Great Lakes, and in certain other areas. There is still considerable room for progress as in New Eng- land, where the State of Maine has restricted export of low-cost hydropower to other States, and where the utility companies in Connecticut have not tied in across State lines with other electric systems because of their reluctance to come under Fed- Page 120 eral jurisdiction. Further opportunities exist for integration and coordination not only within power regions but between them, such as the proposed California tie-line which would unite the major systems in California and the Pacific Northwest power pool. Opportunities To Strengthen Security The outbreak of war would impose a sharply increased bur- den upon the electric power industry, especially in major indus- trial areas. Moreover, if enemy air attacks disrupted facilities in one area, it would be necessary to draw electricity from other nearby regions in order to keep industry and the local economy functioning and thus minimize the effects of the damage. Since construction of electrical facilities requires consider- able time, the Commission believes that dangers can best be minimized by expanding generating capacity and es- tablishing interconnecting transmission lines between systems and areas in peacetime. For efficient operation, every electric system normally re- quires excess capacity to cushion emergency needs and repairs. If generating capacity is expanded in close step with rising peacetime demands, there will be at least some capacity cushion to meet a sudden war demand, though in some areas it may be important to provide even larger capacity for security purposes than would be required for normal industrial, commercial, and residential operations in peacetime. Coordination and integration of electric systems not only will reduce costs in peacetime as cited earlier, but will provide a high degree of flexibility, vital in case of war, for shifting electricity supplies from one area to another. CHANGING OPPORTUNITIES TO REALITIES In view of the industry's plans for expansion, and tech- nological progress, the Commission believes that future prog- ress can be attained without fundamental changes in policy or in the basic roles of industry and Government. Neither present Federal policies nor this Commission's rec- ommendations contemplate any major shift in ownership or operation of electric systems. It is expected that private utilities can and will provide most of the expansion the Nation will need, especially for thermal generation, but Government will have continuing large responsibilities of the sort presently handled, and especially for developing electricity from water- power sources. The Commission concludes that action in the following six main areas by private industry and Government is important in meeting the Nation's long-range needs for supplies of electricity: Incentives for Private Industry. To enable private utilities to expand and advance technology, it is obviously important that all related Government policies—Federal, State, and local—should be shaped to provide conditions favorable to intensive technological research and development and to capi- tal expansion, balanced with full protection of the consuming and investing public. Cooperation Between Public and Private Units. The na- tional interest in greater production at lower costs will be promoted by mutual recognition, between the Federal power agencies and private systems, of the needs of each for expansion to meet market requirements, for close integration between public and private facilities within the established principles of Federal power policy, and for strengthening joint public and prvate utility planning for future expansion. Protracted contro- versies will only contribute to power shortages and higher energy costs. Integration and Coordination of Plants and Systems. Re- maining opportunities for improved integration and coordina- tion of electric plants and systems everywhere, both within and between power regions, and regardless of ownership, should be exploited fully. This should apply with particular force to joint planning of new facilities. Removal of State restrictions on electric power exports and resolution of present issues con- cerning Federal Power Commission jurisdiction over interstate power shipments would help. Development of Hydroelectric Sites. The Federal Govern- ment will have to continue its work on economic hydro sites especially where multipurpose development of a river basin represents the best approach. There will be cases where part or all of the job can be handled by private business, particularly where a site can be developed best on a single-purpose basis, or where private industry and Government can collaborate in a multipurpose development. In some of these cases private utilities already have under- taken partial development. The Commission recommends: That the Nation's hydroelectric potential be developed as fully and as rapidly as is economically feasible. Priority should be given to projects that promise to contribute most economically to meeting the energy needs of particular regions, in light of their present and prospective energy costs, supplies, and needs. Specifically, early action is important in the St. Lawrence, Niagara, and Columbia River areas, where major projects already have been planned and which are among the best sites remaining to the Nation for developing hydropower in the lower cost range. Expansion of Thermal Power. Further steady advances are required in the technology of thermal generation and of electric transmission, along with large capital investments in thermal capacity, well timed to keep pace with the growing needs of various areas. Private enterprise is well equipped to carry the main burden, though Government can assist and supplement at various points by contributing technology and, where appro- priate, constructing limited amounts of thermal capacity to operate in conjunction with Government-operated hydro- electric systems. There is incentive and strong need for the electric power industry to join forces with the coal industry, along with Gov- ernment and other present and potential coal-using industries, Page 121 in a concerted effort to make the most of the Nation's coal resources through research along such lines as are described in chapter 19 of this volume and in studies in volume IV. Electroprocess industries should be encouraged to seek loca- tions for expansion convenient to coal and lignite deposits from which electric energy can be derived at moderate costs. Electricity From Atomic Sources. Electricity produced from nuclear fuels is already technically feasible and may prove to be a valuable supplement to other sources of energy, par- ticularly in regions remote from other fuel sources. Chapter 21 The future drain upon the energy resources of the United States and the cost level of its electricity and fuel will be influenced increasingly by the energy problems of other free nations. Competition for fuels will be heightened by the uneven geographic distribution of free world energy resources in rela- tion to demand. The attack upon these problems will require international cooperation based on United States recognition of its stake in the economic strength and security of the rest of the free world and of the vital role that energy plays in modern economies and military preparedness. The energy positions of the United States and other free nations are linked most closely through petroleum demand and supply. Our domestic crude oil production and costs, and our demand for imports, will strongly affect production and prices elsewhere. Conversely, demands and production of other nations will affect the prices which United States con- sumers must pay and the amounts available for purchase. Because of its vital connection with military operations, security concerns over petroleum are common to all nations. The energy needs and resources of other free nations thus will have to be given careful weight in the formulation of United States energy policies. These same matters will also need consideration in formulating broader United States eco- nomic policies concerning military and economic assistance to other countries, foreign loans and grants, trade and other com- mercial arrangements, private investment abroad, and—above all—general security provisions. By the same token, other countries of the free world will share in the responsibility to encourage the efficient flow of energy supplies between surplus and deficit areas in order to contribute to general economic growth and to bolster the security of all the free nations. There is wide disparity in the use of energy in different parts of the free world, correlated roughly with the disparity in in- comes and strongly influenced by variations in climatic condi- tions which affect heating requirements and by other differences in energy demands. The United States, with about one-tenth of the free world's total population, in 1950 consumed more than one-half of total free world energy supplies, derived very largely from do- mestic sources. The nations of Western and Southern Europe, The Commission recommends: That the present cooperative arrangements between the Atomic Energy Commission and privately owned electric utility companies and other interested companies and groups for developing economical ways to obtain electric power from atomic sources be continued, and that the tempo of developmental work in this field be kept at the maximum level permitted by urgent security demands upon supplies of fissionable materials and technical per- sonnel engaged in the atomic energy program. with approximately one-fifth of the population, used about one-fourth of the energy supply. Confronted with a growing energy deficit, most of the latter countries were obliged to turn heavily beyond their own borders to meet their energy demands. The remaining quarter of free world energy was divided among other nations of the Western Hemisphere, Africa, the Middle East, Oceania, South and East Asia, and Japan, with seven-tenths of the free world's population total. Expressed on a per capita basis, free world energy con- sumption in 1950 ranged roughly from 8 tons of bituminous coal equivalent (BCE) for the United States to 2 tons for Europe, and down to one-tenth of a ton for the average person in South and East Asia. The central problem is how to keep supplies moving to deficit areas, not only in sufficient amounts to avert shortages, but also at low enough costs to encourage economic growth. This problem in turn raises numerous other issues that involve the terms, and the barriers, of international trade, the flow of capital investment, foreign exchange balances, and technical assistance. The level of total free world energy demand by 1975 will be determined by a variety of unforeseeable forces and events. A plausible projection, assuming reasonably favorable con- ditions, would be something close to a doubling of demand. The total, including United States demand, would thus rise from about 2,400 million tons BCE to roughly 4,800 million tons by 1975. The greatest percentage increase is looked for in the less-developed areas where industrialization is just getting under way, whereas demand in Western Europe will probably increase somewhat less than in other areas. Western Europe nevertheless faces a particularly serious energy problem. Continued economic progress will depend in large part upon industrial processing and transportation—both heavy users of electricity and fuel, but the European economy is poorly equipped with resources to meet these demands. De- pendent in the past upon coal as its dominant source of energy, Western Europe now faces increasing difficulty in obtaining coal from poorer seams at greater depths. So far as is now known, the area has only meager gas and oil resources, though recent discoveries may lead to finding some additional reserves. Energy for Other Free Nations Page 122 Expansion of industrial activity more rapidly than coal pro- duction in recent years has led to large imports of coal from the United States at prices up to $25 a ton (transportation was most of the cost), causing a heavy dollar drain on Europe and indirectly upon United States foreign aid. The pressing need of Western European countries to import coal has been used by the Poles to exact a high price as well as strategic advantages in obtaining machinery and other spe- cialized items of importance to the economic development and military strength of the Soviet Bloc. Since Western Europe has a severe deficit in liquid fuels, increasing demands for auto- motive transportation, to meet a portion of thermal-electric fuel requirements, and for other purposes must be met mainly by en- larged imports of petroleum, primarily from the Middle East. This will aggravate already difficult problems of security and foreign exchange. While additional development of hydro resources in Western Europe is possible and highly desirable, the potential is limited. Low-grade coal reserves (such as German "Braunkohle") can, within limits, contribute to thermal-electric generation and synthetic liquid fuel production. Development of economic methods of underground gasification of coal would bring im- portant relief to the European energy situation. Electric power or heat from atomic energy may become economically feasible in Europe before it does in the United States, because of the basically higher energy costs in that area. But most of these possible measures for strengthening Western Europe's energy position will at best take considerable time. Improved efficiency in use of fuels could help alleviate the deficits. The capacity of the free world to meet its expanded needs for the next quarter century presents a very mixed picture. The more industrialized nations, with such notable exceptions as the United States and Canada, are faced with serious energy deficits. Like Western Europe, Japan and some parts of South America must obtain key energy supplies from imports. On the other hand, some of the less developed countries have rich resources whose fuller use not only can help meet the needs of neighboring countries and more industrialized nations which have energy deficits but also can be employed to assist their own economic development. This obvious matching of surpluses to deficits often can be acomplished only by overcoming barriers which range from the political and financial to the merely technical. In parts of the Middle East, for example, political difficulties are such that it would be highly impracticable for importing countries to depend on these sources for oil supplies although their quantity far exceeds any foreseeable local needs. In other areas of the world governments and industries are working out programs for resource development to their own mutual benefit and to the advantage of other free nations. Oil and Gas. The tremendous oil resources of the Middle East can meet the fuel demands of many areas of the free world, including Europe for the next three decades and possibly well beyond that time. Deficiencies in other energy sources make the Middle East dependent upon its own oil and gas. Gas is now largely wasted and could lend strong support to industrial development in the area. Much of this natural gas could be used to reduce Europe's energy deficit if a proposed pipeline can be built economically. A preliminary survey made in 1951 estimated a cost of 425 million dollars for a 2,500-mile pipeline from Iraq to Paris that would cross Turkey, Greece, and Yugoslavia, go through the Brenner Pass to Bavaria and thence to France. The proposal calls for a network of 300-mile branch lines that would serve most of Europe with a daily supply estimated at 500 million cubic feet. A project of this sort, still very much in the hypo- thetical stage, poses many difficulties, but if it could be accom- plished at anything like the costs initially estimated, it would greatly strengthen the energy position of Western Europe. Other areas with large petroleum resources, including Vene- zuela, Colombia, and Canada, probably will be able for a long time to meet their own rising demands for liquid fuels with considerable to spare for export. They can also put natural gas to work in their programs of industrial development. Other areas, such as India, are just beginning to promote develop- ment of their domestic oil reserves with the prospect of shift- ing eventually from an import to an export position. Coal. Although oil is by far the most feasible form of fuel for large-scale international trade, coal is being imported in substantial quantities by Western Europe and Japan, and there is a good possibility that international coal shipments, despite heavy transport costs, will continue to bulk large in the years ahead. Some parts of Africa, Southern Asia, and limited parts of South America possess significant coal reserves which, if developed along with transportation facilities, can contribute importantly to meeting the energy requirements of those regions. In addition there are large deposits of lignite and peat in many areas which, converted to electric energy or liquid fuels, could substitute for scarce fuels. ENERGY USE AND PRODUCTION DIFFERS IN FREE COUNTRIES—1950 % OF FREE WORLD * 10 20 30 40 50 60 Page 123 ENERGY RESOURCES ARE UNEVENLY DISTRIBUTED (1950) COAL (Original Reserves) OIL (Proved Reserves) WATER POWER (Potential*) 2000 1800 1600 1400 1200 1000 800 £00 400 200 BILLION SHORT TONS U. S. TOTAL OTHER FREE NATIONS TOTAL 70 65 60 55 50 45 40 35 BILLION BARRELS 500 MILLION KILOWATTS 20 15 10 OTHER FREE NATIONS TOTAL 3 400 300 200 100 I _U. s. TOTAL I OTHER FREE NATIONS TOTAL i 3 jmmm Source: Coal and Wafer Power—U. S. Dept. of Interior, Geological Survey Petroleum—Twentieth Century Petroleum Statistics, 1 950 Hydropower. Many countries have abundant hydroelectric potential, which can be developed to advantage and, among other things, improve the supply of electroprocess materials for the whole free world. Areas with the best possibilities for ex- tensive water power development include parts of Africa and South America, Canada, and India. PATHWAYS TO FREE WORLD PROGRESS The aims of international cooperation in the energy field must be: (a) to push back the physical, technical, and eco- nomic boundaries of free world energy resources, (b) to expand energy supplies and the shipment of such supplies from surplus to deficit areas as well as energy consumption in source areas, and (c) to achieve those patterns of energy production and use in each area which will satisfy needs at lowest cost. Beyond this, provision must be made to meet the energy needs of a possible *Based on Ordinary Minimum flow and 100% efficiency. war when requirements would press suddenly upward and normal sources of supply would be subject to grave disruption. Free world energy resources, if vigorously developed and effectively employed, appear adequate to support economic growth and rising living standards in all the free nations for many years to come, though at best certain deficit areas will experience problems of energy shortages and high costs. Progress toward these desired results will require tremendous capital investment, the wide application of modern technologies along with technical and management skills, the training of local workers and improvement in their health and general living conditions, enlargement of transportation facilities, and, perhaps most difficult of all, the overcoming of stubborn politi- cal difficulties. These various problems, which do not apply to energy alone, are considered in chapters 11 through 15 of this Report and the Commission there made recommendations designed to help in all these matters. Page 124 Chapter 22 Energy for the Nation: A Summary Does the United States have the natural resources to pro- vide enough energy for the future? Will the real costs of energy be forced upward, with possible injury to economic growth? If another world war breaks out, can the energy needs of the United States and its allies be met? Are there opportunities for strengthening this Nation's long-term energy position? These four central questions can now be answered with cautious optimism in summarizing the facts and analysis of energy problems and in examining their implications. Looked at as a whole the energy resources of the United States, especially if supplemented moderately by imports, seem adequate to meet expanding needs up to 1975, with little or no increase in real costs—provided full advantage is taken of the opportunities presented by the United States combination of energy resources. In order to do this, the Nation must: find new reserves; hold down costs of extraction and increase recovery rates; cut energy transportation costs; bring into practical use vast low-gradey resources not presently economic; increase the efficiency of the conversion of primary fuels into more convenient secondary forms; cut physical wastes by economical means at every step, from extraction to final use. It must, by all means at its disposal, exploit the flexibility of the primary sources of energy—coal and lignite, petroleum, natural gas, and waterpower—which can, within wide limits, each do the work of the other, thanks to the fact that fuels can be converted into other forms and types of energy, and to the fact that various forms of energy can substitute for one another for specific end-uses. Sooner or later—no one knows when—domestic supplies of petroleum and natural gas will be unable to meet the rising demands against them, and undeveloped economical hydro- electric sites will become scarce; but as these shortages develop, the vast reserves of coal, lignite, and oil shale can move in progressively to fill the gap. Atomic and solar energy may some day provide a still broader energy base to support economic growth. The security problem, centered on liquid fuels, remains dif- ficult, but reserves and new sources under development plus extra refining and transport facilities should in time help meet these needs. These many opportunities will pay off only if the advances of technology and tremendous necessary outlays of capital are timed to meet shifting conditions and rising demands in an orderly fashion. Private business, given favorable economic conditions, appears capable of shouldering most of the burden of providing enough energy. Government will have an im- portant role to play in assisting industry and in doing those parts of the job for which Government is inherently better suited. CHANGES IN THE ENERGY PATTERN Harnessing energy resources to meet expanding demand with the lowest cost combination of supplies consistent with security needs will require further large shifts in the pattern of United States energy supplies. These shifts will occur at every stage along the route from resources to end-use. They will be induced by the interplay of many forces—both short-range and long- term economic, geologic and technologic factors; private and governmental decisions and policies; national and international developments and attitudes—each brought to bear on the side of supply or demand, or both, and reflected in relative costs and prices of competing sources and forms of energy. The market ENERGY END-USES (IN MILLIONS OF SHORT TONS OF BITUMINOUS COAL EQUIVALENT) TOTAL END-USES WILL EXPAND BY '75 USE FOR INDUSTRY AND TRANSPORTATION WILL RISE MOST THE PROPORTION OF SECONDARY FORMS OF ENERGY WILL GROW Page 125 CONVERSION LOSS AND ITS EFFECT MORE SECONDARY ENERGY WILL MEAN HIGHER CONVERSION LOSS . . . AND INCREASING TOTAL DEMAND ON PRIMARY ENERGY SOURCES (IN MILLIONS OF SHORT TONS OF BITUMINOUS COAL EQUIVALENT) TOTAL, CONVERSION LOSS 20.4% OTHER* 16.2% SECONDARY USE 39.2% DIRECT USE 34% DIRECT USE 24.2% FOR CONVERSION TO SECONDARY FORMS mechanism is the main vehicle through which these forces will have their effect; hence it is to a well functioning competitive market and a dynamic energy industry that the United States must mainly look to achieve timely and economical adjustments of the energy pattern. To illustrate the general direction and character of the shifts in energy supply and use that are likely to occur, though with no pretense at predicting specific amounts, the Commission's staff has prepared a hypothetical picture of the 1975 energy pattern. The quantities arrived at are purely illustrative, though they properly fall between the extremes of expert expec- tations. The coal projections vary slightly from those in other volumes, which were based exclusively on demand assumptions. In the charts presented in this chapter, the 1975 figures are compared with actual data for 1947, the latest year for which full information is available, all expressed in terms of a common unit—bituminous coal equivalents (BGE). End-Use: Rise of Secondary Forms A review of the main influences likely to affect the size and composition of the Nation's energy stream can best begin at the mouth of the stream—where the choices and demands of final consumers make themselves felt—and then move upstream to the sources of energy. Total end-use of energy by final consumers by 1975 is pro- jected in the chart, Energy End-Uses (p. 125), as rising almost 100 percent above 1947 levels. This actual figure could of course be wrong by 10 or 20 points in either direction; but what seems certain is that the totals will increase substantially. What also seems certain is that consumption of secondary / forms of energy will increase more rapidly than direct consumer use of primary fuels, because of the greater convenience of such secondaries as electricity and gasoline, their unique suitability for certain purposes, and their practical usefulness as a way of getting energy to consumers from low-grade sources such as oil shale and lignite. Electric energy is expected to increase most, liquid fuels somewhat less, and coke least, among the secondary fuels. In 1947, the main secondary forms of energy together supplied less than half the total end-use, but by 1975 they may provide something like 63 percent. Conversion: Losses Will Rise The shift toward greater use of secondary forms will require a growing proportion of primary fuels to pass through a con- version process—such as petroleum refining, coking and electric generation—before reaching the consumer. As a result the amount of energy used up in the conversion process may in- crease from less than 17 percent of total primary fuels in 1947 to about 20 percent of the much greater total for 1975, even after allowing for improvements in engineering efficiency. The actual amount lost may increase from 214 million tons BCE in 1947 to about 520 million by 1975 (see chart, Conversion Loss and Its Effect). Accordingly, the total demand for pri- mary fuels will increase somewhat more than total demand at the end-use level to make up for the greater conversion losses. Resource Level: Mrx Will Change Much more energy must be extracted from resources than ever reaches the final energy user, not only because of energy used in transporting and converting, but also partly because of exports and diversions to nonenergy uses such as chemicals production. In 1947, more than 1,200 million tons BCE of primary energy, measured at the resource extraction level, was required to support total end-use consumption equal to only 67 percent of that amount. By 1975, better than 2,500 million tons BCE of primary energy supply may be needed, and the ratio of end-use to primary supply may decline to about 65 Page 126 percent of the total. The absolute contribution of each basic energy resource—coal, petroleum, gas, and hydropower—to the Nation's energy supply can be expected to increase sub- stantially. But their respective percentage contributions will undoubtedly change considerably, in response to shifts in their comparative production costs and market prices. Prospects indi- cated in earlier chapters are summarized here (see chart, A Hypothetical Picture of Energy Flow inl975,p.l28). OIL SOURCES: AN EXPANDING SHARE Domestic petroleum prices may trend upward (relative to the general price level) because of higher discovery and pro- duction costs, though further improvements in technology can slow the rise. Such price increases can be held, however, to moderate proportions (probably no more than 15 to 30 per- cent over present levels, in dollars of constant purchasing power) if imports are allowed to expand without artificial restraint and if synthetic liquid fuel production is encouraged. Any tendency of domestic petroleum supplies to decline can be countered by an expansion of imports and of synthetic liquid fuels from domestic shale and coal. These factors working together may be expected to expand the share of these three liquid fuel sources to better than 40 percent of the Nation's expanded primary energy supply of 1975 compared to 35 percent of 1947's much smaller total. GAS: PERHAPS A LARGER SHARE In contrast to petroleum, there may be no limitation on the price of natural gas from large and expanding supplies of an exact substitute or of imports. Since demand is expected to move ahead of supply, a substantial long-term price increase in natural gas is a strong possibility, though the percentage of increase to consumer prices would be much less than for field prices, and prices charged for special advantage uses would rise less than for inferior uses. It remains to be seen whether technology will provide an economic gaseous substitute for natural gas (the counterpart to synthetic oil as a substitute for crude petroleum), but as of now such a substitute cannot be counted upon. If relatively optimistic assumptions are accepted as to future discovery, however, natural gas may well expand from its 15 percent share in total basic energy in 1947 to 24 percent by 1975. HYDRO ENERGY: STILL ROOM FOR GROWTH In 1947, hydroelectric energy accounted for about 1 per- cent* of the Nation's total basic energy supply. If the largest of the lowest cost sites remaining are vigorously developed, and if a considerable number of smaller ones prove possible of economi- cal development, hydropower's share may rise to 2 percent of 1975's larger total. Increments to the total supply of hydroelectric energy will be higher in real cost, however, once the several lowest cost sites remaining have been developed. Only higher cost sites would then be left, and increasing amounts of thermal capacity would be required to work in tandem with hydro capacity to assure firm year-round supply. COAL: THE BIG POTENTIAL The production costs of coal have a chance of being held down and even reduced somewhat (relative to the general price level) if technological advances in coal mining come along fast enough to keep labor productivity rising at least as rapidly as miners' real wages. These accomplishments plus similar improvements in the transportation of coal could hold down or reduce market prices. *Because there is relatively little conversion loss in the generation of electricity from water power, its contribution to total energy supply is greater than appears when measured as a percentage of actual input of energy sources. The value of water power frequently is expressed in terms of the fuel that would be required to replace it and, on such a basis, the 1947 contribution of water power was about 4 percent. DRAIN ON ENERGY RESOURCES Page 127 A HYPOTHETICAL PICTURE OF ENERGY FLOW IN 1975 (IN MILLIONS OF SHORT TONS OF BITUMINOUS COAL EQUIVALENT) i TOTAL 1975 DEMAND FOR ENERGY END-USES i 1669 TOTAL CONSUMER USE OF ENERGY WILL RISE; PATTERN OF END-USES WILL SHIFT; THE PRO- PORTION OF SECONDARY FORMS OF ENERGY WILL GROW, CAUS- ING HIGHER CONVERSION LOSSES; AND THE CONTRIBU- TION OF EACH ENERGY RE - SOURCE TO TOTAL SUPPLY WILL SHIFT. ss TRASSPORTATION RESIDENTIAL AND COMMERCIAL 105 535 TOTAL ENERGY AVAILABLE FROM PRIMARY SOURCES 2548 Page 128 In 1947, coal accounted for 49 percent of the Nation's basic energy supply. If future oil and gas supplies are as heavy as shown in the chart, coal although greatly increasing in volume can be expected to continue its decline as a percentage of the total, perhaps reaching 33 percent by 1975.* Less expansion of gas and oil supplies would give coal a correspondingly larger role to play. Sometime beyond 1975, and conceivably before then, coal's percentage share can be expected to begin rising as coal is obliged to take over from petroleum and natural gas a larger share of the burden of increased demand for energy. Mean- while it probably will pay industry in the years immediately ahead to exploit vigorously the opportunities in coal, thereby relieving the drain on more limited energy resources and con- serving them for higher value specialized uses. Developing Unconventional Sources of Energy Although conventional energy resources, supplemented mod- estly by imports, appear adequate to meet the expanding en- ergy demands of the United States at least to 1975 and beyond, the time will eventually come when the fossil fuels will no longer be adequate to do the job. Long before then, the Nation should begin its transition to- ward currently unconventional sources, notably solar and atomic energy. Tremendous advances in technology will be required to make large amounts of energy economically avail- able from these sources, and at best it will take many years to achieve these advances. As long as the international situation remains tense, the em- phasis on atomic research and development will be on weapons of war. Meantime the atomic energy program is consuming much energy from other sources and is adding nothing to the Nation's energy supply. Scientists are reasonably hopeful, how- ever, that technologies will someday make it possible to per- form economically an important part of the Nation's work with electricity generated by use of atomic fission. NEEDED: A COMPREHENSIVE ENERGY POLICY While private industry should bear the major burden of expanding energy supply and adjusting the pattern to the needs of future national growth, Government must continue to make major contributions at many points, as previous discussion and recommendation has made clear. In the past, Government has dealt with energy problems largely on a piecemeal basis with separate programs for coal, for gas, for petroleum, for electricity, and for atomic energy, with each usually handled by one or more separate agencies operating under one or more separate legislative authorizations. The Commission is strongly of the opinion that the Nation's energy problem must be viewed in its entirety and not as a loose collection of independent pieces involv- ing different sources and forms of energy. So numerous and vital are the interrelations among all sectors of the energy field, that problems in any one sector must be dealt with always in full consideration of the side effects on all other sectors. The aim must be to achieve a constant pattern of policies and programs throughout the entire energy field. This aim is not inconsistent with the necessity, shown by past experience, to tailor public policies and actions to unique conditions in each sector of the energy field. Public utility regulations apply to electricity but not to coal; natural gas is a more regulated industry than petroleum though both are sub- jected to conservation controls not applicable to other energy resources; Government engages in substantial technical re- search programs in some parts of the energy field but not in others; the Federal Government builds hydropower projects and fosters atomic development but does not enter to the same extent into other energy sectors. Despite these necessary variations the fact remains that each such tailored policy or program has repercussions throughout the energy field. Programs to improve the technology of coal production, transportation and utilization can affect the re- quirements for hydropower, the costs of electricity, and even international petroleum markets; regulation of gas prices and extensions of pipelines can influence the consumption of petroleum and coal; the leasing of underwater oil lands on the Continental Shelf can affect not only the market conditions for coal and gas along with oil but is related to the fueling of naval vessels and aircraft and the efficient operation of the total economy in the event of war; the speed with which atomic energy is developed, and the extent to which private industry is brought into its progress, can bear importantly on the future of the entire coal industry. But if effects are carefully fore- shadowed and appraised, it should be possible to harmonize separate actions in particular sectors of the energy field with the broader aims of energy policy as a whole. Ideally, the Nation should have a comprehensive energy policy and program which embraces all the narrower and more specific policies and programs relating to each type of energy and which welds these pieces together into a consistent and mutually supporting pattern with unified direction. This im- plies no increase in Government activity; it well might mean less. It does mean that the multiple departments, bureaus, agencies and commissions which deal with separate energy problems must be less compartmentalized—more aware of the problems of coal vis-a-vis oil and gas; of waterpower as com- pared with lignite as a source of electricity; of the effects of pipeline regulation, for example, on oil imports from Vene- zuela. Petroleum production and costs are affected in the long run not only by tariffs and depletion allowances in tax legisla- tion, but by decisions of the Federal Power Commission on natural gas, by actions of the Petroleum Administration for Defense, by Bureau of Mines research on production of oil from shale and coal, by procurement plans and actions of the Department of Defense, as well as by regulation in the separate States. Obviously there must also be an awareness on the part of all those dealing with energy policy of the close relationship of energy to the broader problems of materials, economic growth, and national security. The Commission could not undertake to trace out the admin- *In the postwar period, 1947 was an abnormally high year for domestic consumption of bituminous and anthracite coal. The total of 605 million tons was higher than the comparable 1946 figure of 542 million tons and the tonnages for the years after 1947, which were in successive years, 584 million, 478 million, 493 million, and 514 million in 1951. Page 129 istrative threads that need to be knit together, nor can it lay down firm criteria for coordinated policy in an indefinite future. The situation is dynamic, and policy must shift with changing pattern. But on one point, the Commission is very clear: the hydra heads of energy policy must be reined together. This can be accomplished only if all parties concerned—the President and Congress, the State and Federal agencies, and the energy industries—work from a common base of understanding of the total energy outlook, the interrelations within the energy field, and of the relations between energy and the rest of the economy. Such a comprehensive understanding can be achieved only if one central agency of the Government has clear responsibility for assaying trends and policies throughout the entire energy field. The scrutiny will be effective only to the extent that the same agency carries out the broad analysis required to appraise the various specific energy policies and programs for which today responsibility is scattered among a score of agencies. The Commission believes that such an agency would have to include within its purview a thorough knowledge of the activities, the progress, and the problems of private industry as well as of the influence and effect of the activities of Government. The Commission therefore concludes that the most im- portant step for Government to take at this time toward developing a comprehensive energy policy is to achieve, through a single agency, a comprehensive and continuing review of the long-term energy outlook and an appraisal of the adequacy of public and private policies and pro- grams for coping with the problems that such a review may reveal. Such a coordinating office must obviously work closely with all other Government agencies concerned with energy prob- lems and with industrial and other private research organiza- tions with interest in that field. Its review and appraisal must embrace a consideration of demand prospects, the availability of energy resources both foreign and domestic, and not least of all, the trend of technological developments and the specific needs to further such developments. It should report potential shortages and other oncoming problems in time for corrective action by either private industry or Government, and should recommend the measures required and who might best under- take them. The agency's activities relating to energy should be closely coordinated with similar efforts involving materials gen- erally, the technology of materials, and national security. Page 130 Technology: Resource for the Future Chapter 23 The Scope of Technology Technology, that complex accumulation of knowledge, tech- niques, processes, and skills whereby we maintain a working control over our physical world, has had so enormous a growth during the twentieth century as to dwarf all the previous ac- complishments of its history. It has been called upon to improve everything in American life from steel mill blast-furnace prac- tice to the baking of a muffin, and it has responded to these demands with a series of amazing achievements. Its growth, pervading every level of human activity, has had two opposite effects on materials: it has greatly increased the efficiency of their use, and it has also greatly increased the total drain upon the resources from which they come. Evidence of the first effect lies in the increasing quantities of useful energy we have been able, over the years, to extract from a pound of coal, in the savings of steel and copper used in an electrical generator per unit of its output, or in the trans- formation of previously wasted natural gas into fuels and hun- dreds of chemicals. The second effect reaches everywhere; whereas the mineral fluorspar, for one example, was once in modest use as a flux in steelmaking, it must today also bear combined and increasing demands as a source material for refrigerants, new types of plastics, propellant gases, oil refining reagents, the production of aluminum, and the fluoridation of water supplies. The first effect is conscious and calculated; the second is neither; and has thus never yet been subject to control. It is toward the control of this second effect that technology must in the future increasingly address its efforts. Nothing could be more difficult. To forego a new development because it sets up a dangerous materials drain would be to stultify our econ- omy. Moreover, to foresee what kinds of materials demands will later arise from what new developments is sometimes close to impossible. The pioneers of the automobile had no notion of the enormous future demands their new invention was to make on lead, of which early automobiles used little or none; now auto- motive storage batteries and fuels account for 44 percent of a year's domestic lead consumption. The Wright Brothers thought many long thoughts when they flew at Kitty Hawk in 1903, but the relationship between their triumph and the future of sheet aluminum supply was almost certainly not among them. We in America are not accustomed to thinking of materials supply as a limitation upon progress; indeed, we resent the thought. But hereafter we may enjoy the luxury of this resent- ment only if we show a constantly increasing adroitness as to where our next inventions are coming from; what substances may be counted upon to give body to ingenuities still unborn. Few of the demands made upon technology by the materials problem lie in any realm of high scientific difficulty. The problem lies elsewhere—in costs. We can produce gasoline from coal, cattle feed from sawdust, and commercial power from atomic fission—at a price. We could transmute lead into gold—at a price. The all-embracing problem for technology in the materials field is to insure a steady, concentrated flow of materials, rich in diversity, at costs which will make possible their wider and wider utilization. The wonders of science are not at issue here; what is at issue is the hard facts of economics. An absolute shortage of anything is most unlikely. The threat that faces us is one of slowly fading supplies which, if not com- pensated, can produce a rise in costs to the point of arresting those increases in the standard of living which have up until now constituted America's major contribution to a truly dy- namic capitalism. Advances in our civilian economy must continue—but no less than military advances against an enemy on the battlefield, they can be turned into disasters by care- lessness in assuring the continuity of supplies. Time Is the Essence From the early days of its work, this Commission has been struck by the number of instances in which scarcity of a mate- rial can be overcome only with the aid of new methods of obtaining or using it. This is true equally of exhaustible min- erals and of renewable farm and forest products. It applies to the period between now and 1975 as well as to the longer pull beyond. In hunting for new reserves of minerals, the need is not merely for more exploration, but for new types of ex- ploration. In maintaining a large enough supply of agricultural products, the need is not so much for more farming as for better farming. In getting the fullest use of materials, the need is not just for more care in avoiding waste, but for imaginative use of new techniques in furnaces, foundries, forges, and fabri- cation, in substituting plentiful for scarce materials, putting byproducts to work, and getting the same results from smaller quantities of materials. In consequence, modern society must lean more and more heavily upon its technologists and engineers if a growing Page 131 economy is to be kept fed with enough raw materials. Indeed the strongest and most versatile single resource in the fight against scarcities of materials is technology. Until the Second World War the United States could afford to let its materials problems work themselves out at a leisurely pace. It took aluminum 60 years to move from a curiosity to a commanding position in the world of metals. Now, in the urgency of today's disordered world, there is less and less chance that what is casual will be adequate. Industry is pri- marily interested in providing products; whether or not the product relieves a problem in materials is usually incidental. Thus, industry ordinarily undertakes materials research only when hard pressed—that is, only after a crisis is already well developed. Individual companies have understandably only a limited interest in long-range research on problems whereby, if successful, they pay the bill for their competitors. On the other hand, the vigorous and resourceful attack necessary to antici- pate impending materials difficulties usually has not been forth- coming from Government either. Thus, in the whole area of materials research, there is a gap. Industry does not see this gap as its concern beyond the procurement of its own supplies; Government acknowledges the gap but has not yet moved toward policies by which it might be bridged. If we are not, in the future, to have the draughts of time by which new materials can transmute themselves into new indus- tries, we shall have to substitute something else for the slow ticking of the clock. We shall have to increase the over-all effort of materials technology and plan its whole pattern of research better than it has ever been planned before. What Technology Works With If we divide our environment into its three conventional parts, the earth, the ocean, and the air, we find that it is only the smallest part—the fraction of the earth's crust rising above the oceans—to which we have paid any long-range and semi- systematic attention by way of claiming materials. The attack upon the earth today is virtually the same as it was before history began: with blunt instruments. Today's instruments are greatly increased in size and power, but other- wise few revolutionary changes have occurred. The Frasch process for sulfur extraction substituted American hot water and compressed air for Sicilian picks and shovels—that is, it fused sulfur and pumped it from the earth. Nowhere else in mining has this idea of fusion yet been found useful as a means of acquiring a wanted material directly from the ground. It was only a few years ago that combustion—in this case, partially burning coal in the earth and drawing forth the gases—was first tried as an extractive method. The results were not good, and ridicule for this nonconventional method was ready and easy. The process of solution, or dissolving something out of the earth, is used in mining sodium chloride and other salts; per- haps an even wider use is practicable in the future. As to the air, only seven elements compose it, yet despite its seeming simplicity and its inexhaustible quantity, not until 1910 did any part of it become industrially useful; in that year the German chemist Haber achieved his process for taking nitro- gen from the air and converting it into fertilizer and explosives. Nitrogen from the atmosphere is today a well-harnessed and well-understood constituent of industry—and to a surprising degree so are the rare gases of the atmosphere, argon, neon, xenon, krypton. Curiously, this is not true of oxygen. Oxygen has been on the fringes of industrial usefulness for a long time and a dramatic battle has been waged to make it available by the ton rather than by the tank, but its cost is still too high for extensive industrial use, despite the fact that technology knows very well how it would like to use oxygen in massive quantities once its cost made this possible. The oceans, which cover almost three-quarters of the globe, are to all intents unexploited as a source of production ma- terials. Three to four percent of ocean water consists of dissolved solids, and nine-tenths of this dissolved material is sodium chloride—one of the most abundant substances on the globe. The remaining tenth consists of almost everything else—in dis- couragingly low concentrations. Not until 1934 was valuable bromine economically extracted from sea water; not until 1941 was magnesium similarly withdrawn. Again, the problem is a cost problem. As the cost problem is overcome, the inex- haustible wealth of the oceans becomes available to us. "Gold from sea water" is a joke because of costs—not because the gold is not there. Six Tasks for Technology The demands which the materials problem may place upon technology in the years ahead seem broadly to be these: To foster new techniques for discovery: There is plenty of reason to believe that great ore bodies lie farther below the earth's surface than we have ever yet been able generally to explore. To bring into use materials which so far evade our efforts. Industry has learned, so far, to use only a fraction of the ele- ments and substances which surround us in the physical world. There is no reason to think that we are limited to our present familiars. Atomic energy activities are creating new needs and stimulating the search for solutions, but many prosaic substances remain only partially utilized by today's industry. To apply the principle of recycling more and more broadly. We wring material from the earth, we use it, and after iti span of life it disperses by rot, fire, or corrosion back into the earth, into the air, or into the sea. It may not again become sufficiently reconcentrated by natural forces to the point ol industrial usefulness for geologic ages. Wherever we are able to shorten this cycle, we are able to use materials more inten- sively with less net drain on what the earth still provides. To learn how to deal with low concentrations of useful mate- rials. In one sense, this is the marching history of material* technology. Whereas the iron and steel industry has beer accustomed to 50-percent concentrations of the element ii needs, it is now becoming accustomed to concentrations haf as great—and the newer chemical industry can extract mag- nesium from sea water in which its concentration is only 0.1 J percent. The handling of more and more dilute concentration; seems an inevitable necessity for future technology; this shoulc ultimately make possible the complete recycling of mam materials, and thus an inexhaustible supply. To develop and use more economically the resources tha nature can renew. The sun yields the earth an endless bounty Page 132 the direct utilization of solar energy without the necessity for cycling it through stockpiles of fossil fuels millions of years old is perhaps the most important contribution technology can make to the solution of the materials problem. By better man- agement of all growing things susceptible to industrial use we can convert solar energy into materials and take increasing burdens from mineral materials which cannot be made to grow. To lessen or eliminate the need for a scarce material by substituting a more abundant one. We are witnessing today the substitution of aluminum for copper in electrical transmis- sion lines. We may later witness a more complete substitution of microwaves for wires. To what extent can boron replace scarcer materials as alloying agents in the steel industry? How much further can plastics go in substituting for metals, for bone, for special woods? The next chapter considers briefly the opportunities and problems in these six areas. More extended treatments of the technological problems of materials supply and of methods that give hope for their solutions are printed in volume IV of this Report, devoted exclusively to these considerations, under the title "The Promise of Technology." The next chapter is chiefly an indication of what might be done by way of technological advance. What will actually be done is another matter—and one that raises a number of questions. Does the United States have the basic resources of trained manpower and organized scientific research to bring about the technological progress that will be required? If these re- sources do not seem strong enough to bear the burden thrust upon them, how can they be strengthened? How well are the Nation's technological resources being directed? What can be done to guide them better? Such questions are considered in chapter 25. Chapter 24 Wherever it appears that known resources, exploited by prevailing methods will not meet demands established by prevailing use, there technology must take command and redress the balance. The last chapter listed six demands which the materials problem seemed likely to place upon technology. It is now appropriate to consider them in greater detail. NEW TECHNIQUES FOR DISCOVERY Except in the search for minerals that have come into use only recently, the days of the surface prospector are drawing to a close in the United States. This country and Europe have been thoroughly explored by conventional methods, and every year the unexplored accessible areas of other parts of the free world grow smaller. Yet geologists are convinced that vast stores of undiscovered minerals lie in the earth where no probe has ever gone. The earth's surface presents to the geologist a series of accidents of erosion; the presumption is that the same minerals thus exposed at or near the surface in some areas are present in others, too, only farther down. Perhaps as much as half the land surface of the United States is covered by a mantle of "young" rocks—unconsolidated sediments in the coastal regions, great flows of lava and volcanic ash, wash filling old valleys in the desert regions, and glacial debris in the northern States. Much of this mantle is thin enough so that mining be- low it for concealed ore deposits is physically possible. A few of the necessary geochemical and geophysical tech- niques for discovering these deposits are already known, al- though some have come into no more than academic use, and only recently. None has been fully exploited. It has been dis- covered that the rocks enclosing many ore bodies contain minute quantities of elements foreign to the ore itself. The overlying soil also may contain these elements or residual traces of the ore metals, left behind as weathering and rock decay destroyed the outcrop of the ore body and created the The Tasks for Technology blanket of soil above it. The vegetation growing upon this soil picks up some of these elements and incorporates them in its structure, mainly in the leaves but in other parts of the plant as well. Indeed, some of these metal constituents—zinc, copper, manganese, molybdenum—are vital to the growth processes of the plants. The streams that traverse a mineral area also pick up some of the constituents of the ores. These trace constitu- ents—in the rocks embracing the ore deposit, in the soil, in the vegetation, or in the water—form a sort of halo around the mineral deposit; sometimes they may indicate the presence of rich concentrations. Accurate methods of testing for these minute quantities are being developed. As their accuracy and inclusiveness increases, geologists will be progressively more able to determine the pat- tern of the halo and relate it to commercial concentrations of ore. In the United States the Geological Survey is developing these colorimetric methods and has begun to apply the tech- niques; spectrochemical methods are being successfully used in Scandinavia. Trace elements in vegetation also have effects on photo- graphic color film that the unaided eye could not detect; out- crops of mineral deposits, and the soil above them, can likewise have a photographic effect. Aerial infrared photography can show up differences otherwise not determinable, and so help to discover deposits that else would remain hidden. The geophysical methods that have been so successful in the discovery of oil and sulfur need to be translated more effectively into the broad field of all minerals. This will require more pre- cise methods of measuring the properties of rocks and ore bodies and the forms of energy that traverse them—but the scientific practicability exists. Methods that until a few years ago had to be applied by crews of men on foot are being modified so that they can be used aloft in airplane or helicopter. In this way areas can be surveyed faster and more accurately, and it becomes possible to test and support one method by another. A technique Page 133 HOW CAN WE FIND HIDDEN ORE BODIES? that by itself yields inconclusive results may, in combination with others, be sharpened into an effective tool. Above all, the techniques of geologic mapping can be im- proved and sharpened so that geologists can more assuredly determine the earmarks of a mining district short of the costly and time-consuming drilling of holes and sinking of shafts. ENLARGING THE STREAM OF MATERIALS Despite all that technology has done, tradition still plays a large part in our use of materials. In metals, our history of use was determined largely by the ease of reduction from the ore; bronze preceded iron; and iron preceded aluminum, not be- cause of the quantities available but because low-potential en- ergy from charcoal or coke could reduce bronzes and iron but could not reduce aluminum. In the history of chemistry, the first purely synthetic material—Sir William Perkin's mauve dye, achieved when he was seeking a substitute for quinine and which led to the replacement of natural indigo—is not yet 100 years old. We have come a long way in a century of chemical synthesis, but chemists agree we have scarcely begun to explore. The raw materials with which technology is concerned are mostly present as chemical combinations of the 90-odd elements in nature—combinations, that is, like ores or salts. A few, like gold or sulfur, are available also in uncombined form. Among the elements there is one, carbon, that because of its capacity for producing tremendous numbers of compounds with a few other elements, and because it is intimately associated with living processes, occupies a peculiarly important place. Of the known elements, 80 have at least some of the properties of metals, but only 4 are abundant enough to constitute even as much as 3 percent of the earth's crust. These are silicon (28 percent), aluminum (8.1 percent), iron (5.1 percent), and calcium (3.6 percent). Copper, which is the second most abundantly used, represents only two parts in 100,000 of the earth's crust. Nine of the metals in industrial use are present in the earth to an extent less than five parts in one million. Obviously, then, consumption of metals up to now has had little or no relation to their abundance in nature. The rapid expansion of the aluminum industry during recent years accord- ingly represents a significant forward step in materials tech- nology—although the manufacture of aluminum, requires roughly ten times more energy than the manufacture of steel. The beginning of the industrial production of magnesium is also important. Titanium and zirconium, two other relatively abundant metals, are beginning to show signs of having an industrial future. The abundance of silicon helps metallurgical industry com- paratively little. Although as a nonmetal its compounds find heavy use as chemicals and in building and other ceramic and refractory materials, silicon also has properties as a metal, but these avail us little because silicon, as a metal, lacks ductility and so cannot be drawn and shaped with any ease. Yet until well into the twentieth century the same difficulty blocked using tungsten and this has been so spectacularly overcome that tungsten, as a constituent of electric lamp fila- ments, high-speed steels, and in cemented carbide cutting tools is now one of the most useful and irreplaceable metals in all industry. Only in the last decade has silicon begun to yield to the technologist; when silicon atoms replace some carbon Page 134 atoms in certain organic compounds, there is produced the chemical family of the silicones, first known to the public as the interesting but baffling substance called "bouncing putty." Now the silicones are in some use as gasket and insulating mate- rials, sealing and parting compounds, in lubricants, and as silicone-rubber. These uses today do not begin to touch the potential that silicon could have in easing materials problems were its properties better understood. The silicon atom bears a resemblance to the carbon atom, but whereas the carbon atom is the most agreeable to change and rearrangement of any in chemistry, the silicon atom shows no such flexibility. Sometimes the properties and uses of a material are well enough understood so that industry highly desires it, and the resources upon which it depends are ample, yet the material is under-used. In such cases a bottleneck in costs or process is usually the cause. Two present examples are oxygen and titanium. The oxygen of the atmosphere can be readily distilled off and separated pure from liquefied air. The process, which requires large amounts of power, still costs too much to make oxygen available in massive quantities. Cheap oxygen might be a great thing for the steel industry in improving practices in blast furnace and open hearth. In the conversion of coal to the liquid and gaseous fuels which the future will unques- tionably demand, cheap oxygen is likely to play a vital role. But its full appearance upon the industrial scene is still awaited. A PROBLEM OF PRODUCTION Much newer as a production problem is the metal titanium. As a trace element it is widespread in nature, and the com- mercial titanium ores of ilmenite and rutile are plentiful in the free world (the United States has a good share). Alloyed titanium has a strength-to-weight ratio better than steel's, aluminum's, or magnesium's. It is ductile, and so resistant to corrosion and marine atmospheres that it engages the par- ticular interest of the armed services. As titanium dioxide it has a large and growing importance as a pigment, broadly replacing the lead and zinc oxides. But as a metal, titanium is still blocked off from industrial use by an expensive, high power-consuming, discontinuous and generally unsatisfactory batch process of production. Intensive work goes on today to bring titanium into an important industrial place; if its pro- duction problems can be solved, the world of materials may well see the incursion of still another "aggressive" light metal to take its place beside aluminum and magnesium. That abundance of resource is no guarantee of industrial use is demonstrated in still another way by the lateritic ores. The laterites, which are rock formations rotted by the weather of the tropics, form a surface blanket of soft materials that are the world's greatest potential source of chromium and nickel, and rich sources of iron and cobalt as well. From time to time quantities of the laterites have been used as a source of iron ore; currently and during the Second World War some were used as a source of nickel. If metallurgy could solve the problem of how all four metals, or even three or two, could be economically recovered in one operation, the cost burden pro- portionately borne by each could be so reduced that the laterites would become commercial sources of great importance. The billions of tons of laterite ores known in the free world contain, for example, perhaps as much as 5 billion tons of iron, 100 million tons of chromic oxide, 50 million tons or more of nickel, and several million tons of cobalt. Whereas today we waste a good many substances because we cannot recover them at an economical price, a great many materials sluice into streams and rivers and into the sea because we know of nothing better to do with them. A good example of such a material is lignin: a constituent of wood of which 9 million tons are yearly burned up or cast aside in spent liquors from wood processing for pulp and papermaking. This con- taminated and contaminating waste has long been a concern of chemists and engineers in the wood and paper industries, and uses for lignin exist: it can be used as a binder in road con- struction, as a fuel, as a soil conditioner and in other ways. But these uses do not begin to match the vast outpouring of lignin as waste. Further developments are likely when research on the hydrogenation of lignin progresses further. A complex of proc- esses whereby lignin might reenter the stream of the chemical and liquid fuel industries may be in the offing. The next decade might also provide some fascinating and significant linkages between wood wastes and the food industries, whereby, through the hydrolysis of wood cellulose into sugars to produce cattle feed, wood could enter the stream of human nutrition. The prospects are substantial, but the working out of economic rela- tionships still remains. Nor should the great progress being made in the production of artificial fibers from coal and petroleum resources make us forget that vegetable products—corncobs, for example—can be and are being converted into new "artifi- cial" fibers. Progress here did not stop with the one-time wonder of rayon derived from cellulose. Among the great number of elements that have not yet achieved any substantial use, a few have been produced only in fractions of a milligram. Yet it would be rash to disre- gard them in looking forward into the next quarter-century. Only 20 years ago uranium was an annoying waste product used only for analytical purposes and as a yellow pigment; today the Nation is spending millions of dollars in studying the minutest properties of this and related elements and how to get more of them. The increased importance of cobalt, the power- ful drive for thorium, the experiments in rare earths, all repre- sent today the churning excitement on the technological frontier of materials use. BROADER RECYCLING The principle of recycling applies in engineering terms to production plants that recover and reuse materials that would otherwise leave the stream of manufacture and go to waste. Heat interchangers, which warm entering boiler water by cool- ing condensates, kill two birds with one stone by transferring energy from where it would be lost to where it will be needed, and the same principle can often be applied to materials. . . . quaternary ammonium compounds, resulting from waste fats in the meat industry, are essential in the manufacture of penicillin and at the same time, they made possible the development of the frozen, concentrated, orange juice industry. Experiments have shown that lignin extracted from corn cobs . . . can be used in removing iron from potable waters. A chemical [used for medical treatment] of vitamin deficiency has been successfully extracted from California sugar pine.* *Charles H. Lipsett. Industrial Wastes, 1951. Page 135 This quotation well expresses the importance of intercon- nections between industries which at first thought may seem to have little or nothing to do with one another. It also implies the need for a constantly expanding .grid of such intercon- nections to the end that the great materials stream of all indus- try shall have as few pressure-reducing leaks as possible. The chemical industry is unique for the degree of care and ingenuity it displays in converting the wastes of one process into the feed materials for another—and this process of recycling will be of high and growing importance as rising costs and growing stringencies place a premium on "wastes." Moreover, the principle of recycling has as much application to the general economic flow of materials as it has within the pipes of a well-integrated chemical plant or throughout the transportation system of a highly industrialized region. Al- though it cannot be expected that any one industry will "save" materials whose recovery costs it cannot recoup by sale or reuse, it will certainly "pay" all industry, large or small, to be more conserving of materials even on a break-even basis. Sometimes the private economic factors, considered alone, will not provide the answer that, all things considered, is economically correct from the public point of view. Under these circumstances we must search for incentives and deterrents that will bring private practice more closely into line with public needs and interests. PHYSICAL WASTE OF SULFUR Sulfur offers a borderline case in the principle of recycling. That the great Texas and Louisiana deposits of pure brimstone are dwindling and that the costs of new sulfur discovery are rising are facts known and appreciated by industry, which has already been severely shaken by the thought of failing cheap sulfur supplies. The basic use of sulfur is for sulfuric acid, indus- try's prime heavy chemical. Sulfuric acid cannot be economi- cally transported by conventional means much more than 250 to 300 miles. Most of the industrial waste of sulfur occurs as fumes of sulfur dioxide in stack gases. To convert sulfur dioxide to sulfuric acid requires some plant investment, experience in the use of expensive catalysts, and so on. Unquestionably many companies with sulfur wastes are deterred from recovering sulfur dioxide from stack gases and manufacturing sulfuric acid mostly by the thought of the needed capital investment and management of a plant not directly connected with the prin- cipal activity of the company; that the recovery would "pay" is less questionable than that it would not pay very attractively. Yet the need for sulfuric acid will probably not abate during the next quarter century, and it is entirely possible that if we do not move toward recovering some more sulfur than we do now, a new and heavier sulfur stringency may be upon us again. That waste sulfur dioxide fumes are an industrial nuisance and a poison to vegetation and marine life lends some social pressure as well to the matter of better sulfur recycling. It is likely that such increased social pressure, expressed in local legislation, may in any case necessitate the installation of sulfur dioxide disposal units, which at only moderately increased cost could be made to recover the sulfur values. During the sulfur scare in 1950-51 a great deal of consideration was given to the reactivation of pyrites burners through which, in the days before Frasch process sulfur, we obtained most of our supplies; to the recovery of sulfur from the "sour gases" (hydrogen sulfide) of the petroleum industry; to pyrrhotite; to the wastes of Canada's nickel industry which produces its metal from sulfide ores. Were we to recapture and recycle even 10 percent of the suKi that now escapes in stack gases, we would considerably postpone the day when these more elaborate measures may be necessary. The Commission believes that compulsion toward sulfur recovery is stronger medicine than today's imbalance wai rants, but it points to the sulfur example as something which industry should not cease thinking about just be- cause one emergency did not occur as expected. The principle of recycling extends far beyond matters of plant and industrial practices and into the more general consideration of how the great stream of all materials responds to economic pressures in its passage from dispersed materials in the earth, through concentration and intensive use, and then into disuse, decay, corrosion, and final loss. That materials can- not be destroyed but only dispersed may comfort a theoretical physicist, but not a production specialist. The lead in a scrapped storage battery finds its eventual way, to the extent of 80 percent, back into new lead production. The lead blown from the tailpipe of an automobile using lead tetraethyl in its gasoline is so dispersed as never again in a million years to be available for commercial use. The recovery of most other metals falls between these two extremes presented by different uses of the same metal lead, but in general it is a matter of con- siderable concern, and'here the principle of recycling is most seriously neglected. SCRAP CAN SAVE NEW METAL The Second World War highlighted the great problem of scrap, particularly iron and steel scrap, and many volunteer movements helped augment a supply that remained insufficient. The steel industry is now again facing a serious scrap recovery problem, and it is not alone in its difficulties. For other metals, too, the amount of scrap used in the smelting processes is in- creasing in proportion. During the decade between 1940 and 1950, the ratio of scrap metal to new7 metal increased— For copper, from 38 to 52 percent. For lead, from 50 to 80 percent. For zinc, from 9.5 to 12 percent. To the scientist worrying about our continuing metals sup- ply, our arrangements as a Nation for recycling scrap and returning it to the materials stream are appallingly negligent. One chemist, pointing out that "when a few ounces of metal are worn from the motor and running gear [of an automobile] the machine is pronounced unfit and discarded," has gone on to add, "I should think the automobile manufacturer would want to lend the metal content of a car to the purchaser on a deposit basis, rather than sell it outright and rely upon the haphazard junking system to return part of it as scrap." Too many statistics can blunt the very point they try to make, but the citation of another authority, who confines himself to the fate of the tin can, is powerfully suggestive of the losses which our leaky system of recycling subjects us to: by our heedless methods of dumping tin cans we annually cast away 2 million tons of scrap iron and 12,000 tons of tin, "very little" of which is recovered, detinned or returned either to steel furnaces or tin smelters. Page 136 The problem of better recycling of materials proffers the :echnologist many roles. In one, he is the future designer of better plans and processes. In another he is the deviser of more and more elaborate identification systems for metal products so that, on their final rejection from use, more ease of classification as to alloying metal content can avoid down- grading of scrap and the continuing loss of irreplaceable industrial substance. Between these two he must double and triple as a scientifically minded conservationist. DEALING WITH LOW CONCENTRATIONS Metallic ores decline in concentration as we inevitably use the richest first and defer the use of all that is leaner. Metal- lurgists today recover copper from ores containing 0.5 percent of the metal, which would have been considered fit only for the tailings heap half a century ago when a 3 percent ore was con- sidered lean. But the problem of recovery is broader than this, since it also includes the salvage of such pollutions as sulfur from air and streams and the extraction of minerals from the ocean. Although technologists have been grappling with the prob- lems involved in low concentrations for a long time, the most dramatic recent spur to activity here comes from the work of the Atomic Energy Commission, some of whose processes in- volve dealing with concentrations of material lower than any previously thought practicable. The costs are vast, and in areas where costs must be counted such activities have no direct, immediate bearing. But in the longer run they may have a very great bearing indeed in what they will teach technologists about possibilities that lie in material sources so lean that they have never before been considered. Another impulse toward work with low concentrations arises now in a wholly different area. So great have become the needs of such regions of the United States as southern California for new sources of fresh water that the ancient proposal of deriving fresh water from the sea has arisen with new force. The con- ventional means for this is distillation, but the size of the plant needed for the requisite volumes of fresh water, and the costs of its operation and maintenance are discouraging. By no means fully tested, but now regarded as promising, are the possibilities that lie instead in the process known as ion exchange. This phenomenon whereby ions, or electrically charged constituents of dissolved substances, can be removed from water or replaced by other ions, was first observed a hun- dred years ago, and has had a limited industrial use for 50 years, chiefly for water softening. It is just now being consid- ered in terms of new importance. Its greatly increased potential for usefulness now lies in the chemist's ability to make new synthetic resins highly selective as to the ions they can remove and concentrate; the resins can be made effective for positive and negative ions of salts as well as of acids and alkalis. They can easily be regenerated and used over and over again. A recent process uses electric power to regenerate the resin which is used in the form of semipermeable membranes, tailored to a variety of capacities, porosities, and selectivities. If the ion exchange process is thought of as a producer of fresh water from sea water, it can be operated to produce two outflow streams: one of pure fresh water two-thirds the volume of the intake; another of one-third of the intake, into which all the mineral substances are concentrated. If the exchangers are thought of as minerals concentrators, the question would then be of further steps in concentration of the smaller stream. The principle of ion exchange might conceivably also be applied to the concentration of materials from streams of industrial waste. The costs involved are not at present accurately known but would depend greatly on power costs and the rate of output desired. The extreme importance of energy costs to the ma- terials problem is here once again emphasized. MORE USE OF RENEWABLE RESOURCES There falls upon the continental United States every year energy from the sun equivalent to the burning of 1,900 billion tons of bituminous coal—4,000 times the energy we annually get from our actual use of bituminous coal. In the sense that all life is dependent upon the sun, this energy is directly used. But for the purposes of industry which concern us here none of it is used directly save for that infinitesimal fraction from which we generate hydropower by using falling water that was previously vaporized by solar heat. Otherwise, we use solar energy by burning coal, or oil, or gas, in which the sun's energy from past millions of years has been stored. Few blanks in man's knowledge are so complete as how the storage of energy may be accomplished. He achieves his own growth by eating vegetable material or the flesh of other ani- mals who have previously fed on other vegetables. Industrially he has devised the lead storage battery in which small quantities of energy can be accumulated for use at will, but otherwise he has little at hand. And only in recent years has the study of how to use solar energy more directly than cycling it through millions of past years of fossil fuel accumulation been seriously attempted. Scientists are now giving minute attention to the photosynthesis reaction, whereby plants, through the agency of their chlorophyll, use sunlight to convert water and carbon dioxide from air into organic materials. Engineers are deeply concerned with methods for the direct collection and utilization of the sun's rays as everyday usable heat sources. By far the greatest of man's use of valuable and finite energy sources is not for the powerful engines of industry, nor even to run trains, trucks and cars, but merely to keep him- self warm. Space heating of homes, offices, schools, and so on, uses up a quarter of all fuels in the United States every year. In semitropical climates like Florida's there is now con- siderable activity looking toward the heating of hot water by the sun's rays instead of by oil or gas; in more northern latitudes there are preliminary experiments with the storage of solar energy for space heating through the use of Glauber's salt. The "heat pump," a device whereby living spaces may be heated or cooled by making heat flow from, or back to, the earth on the same principle that an electric refrigerator takes heat from a closed box and disperses it, represents another space-heating idea that can spell fuels savings even though the pump itself consumes some electric power. The day we learn to utilize solar energy directly will be a great day in the eventual working-out of the materials prob- lem. The use of solar energy for space heating would take an enormous load off fossil fuels; its use in a small heat engine operating at low potential to pump water for irrigation could change the cost structure of agriculture. And as the cost struc- ture of agriculture changed, so also would grow the legitimate share of our total materials needs which renewable resources could supply. Page 137 Although it is beyond expectation that we shall ever be able to "grow" mineral substances, a few interesting linkages be- tween the mineral and animal kingdoms are worth considering. A sedentary marine hermaphrodite, the tunicate, for rea- sons of its own, concentrates in its body the metal vanadium, present in its sea water habitat only to the extent of 3 parts in ] 0 billion. Tunicates are to be found throughout the seas of the world, and although it is not suggested that they can substitute for vanadium deposits in Colorado or Peru, some biologists are interested in this concentration power and wonder how its rate might be increased. In the Libyan desert British scientists encountered a lake bottomed wtih pure sulfur—reduced to elemental form from sulfates by micro-organisms. Some algae are concentrators of manganese. The action of bacteria on organic matter in sea water is accounted the most likely theory for the formation of petroleum; even though the bacteria may have needed 100 million years of their own time to produce a massive occurrence, it probably does not become us to scoff at their efforts or the possibility that we would one day try to enhance them. The significance of such facts is that the physico-chemical effects which make possible such concentration by these organ- isms should be capable, not only of duplication, but of wide extension by technologists to many other materials. Chromatog- raphy, ion exchange, and selective precipitation are some of the techniques pointing in the direction of enabling man, in effect, to emulate the tunicate. The whole question of growth rates underlies our ability to make increasing use of our renewable resources as the tech- nologist views the problem. Other chapters of this Report have emphasized the great drain our consuming habits place upon such resources as pulpwood for paper and other cellulose prod- ucts; some chemical engineers are already asking themselves why we should not begin to take advantage of the faster growth rates of trees in tropical latitudes and consider the eventual establishment of "cellulose plantations" in the vast jungles of Brazil. New supplies of timber, farm products, and fresh water con- stantly are being made available by natural processes, but this does not mean that annual supplies will be sufficient to meet the needs of a growing economy, or even a static one. New techniques of conserving the production base—farmland, for- ests, and watersheds—and of increasing the yields from the base must continually be devised. Not only do new kinds of epidemics arise to threaten crops, livestock, and trees, but insects and bacteria often work up stubborn immunities to control measures that once were effective. Great progress already has been made in breeding plants and animals for resistance to disease and also for greater quan- tities and improved characteristics of end-products. Some of the new hybrid poplars reach pulping size in less than half the time required by the fastest growing natural varieties. Better feeding and breeding methods have produced hens that lay more eggs and cows that give more milk. Recent experiences with arti- ficially induced rainfall have shown it possible for man to force rain out of clouds somewhat as he wants it. If more can be learned of the principles of rain-making and its practice brought under better control, this single technique might stimu- late farm and forest production in many areas as well as ease shortages of water for industries and municipalities. SUBSTITUTION Substitution provides a lengthy and inspiring catalog of en- gineering ingenuities—yet it is probable that we have not even begun the campaigns of substitution to which the materials problem will eventually direct us. It is in the domain of the metals that some of the greatest pressures for substitution oc- cur—within this, the most diligent search for engineering equiv- alents is directed against copper, lead, and zinc, and the scarce alloying metals. The last quarter century shows a slow but sig- nificant replacement of the old nonferrous metals by the new- comers, aluminum and magnesium, and by the great and grow- ing family of the plastics. Sometimes scarcity has been the factor hastening substitu- tion; sometimes superior properties in the new. Dr. Zay Jeffries, Vice Chairman of the Minerals and Metals Advisory Board, stated an important generality when he said, "It was demon- strated in the Second World War that an increase in the supply of any metal eased the strain on the others. Sometimes the ease- ment was not direct but two or more times removed. The more manganese there is available, the less the need for nickel, chro- mium, and even molybdenum. With more chromium we could get along with less molybdenum and nickel and manganese within limits." The simplest examples of substitution lie in the direct re- placement of a scarcer metal by a more abundant one. It is usually some subsidiary problem that stands in the way. In the domain of electric lighting, cheaper copper could not for many years substitute for more expensive platinum as lead-in wires in light bulbs because platinum and glass had the same expan- sion coefficients and copper did not; it took much exacting work to perfect a copper-to-glass seal which would make copper ef- fective as a platinum substitute. Very recently, after similar efforts, aluminum has been made to replace brass in the screw bases of electric lamps. Aluminum conducts electricity almost as well as copper, but could not for a long time replace copper in transmission lines because it was subject to stress-corrosion; now a steel-reinforced aluminum wire meets performance tests sufficiently well so that it is replacing copper in long electrical lines. These direct substitutions may themselves be made obsolete when a bolder supplantive idea presents itself: neither copper nor aluminum may be necessary in the future for the transmis- sion of low-voltage currents such as those used in telephony; the use of microwaves for this purpose has already released large quantities of metals for use as wires. The search for a material harder than the diamond may never be rewarded, but it may also become unnecessary: the use of industrial diamonds for drilling into the earth for oil and min- erals can perhaps be supplanted by "fusion-piercing" methods of drilling which are already being employed in the mining of taconites, whereby the rock cracks away from a high-tempera- ture jet of flame that replaces a drill. In these two examples we see not the direct substitution of one material for another, but the cross-substitution of energy for material. Strength and formability are two principal in-use properties which make metals so industrially essential. These once unique virtues of metals become less outstandingly important as our knowledge of plastics, including glass, grows. Glass fibers can now be made industrially with a tensile strength that dramati- cally exceeds steel's; when technologists succeed in making Page 138 glass so that its tendency to shatter is overcome, the use of glass, which calls for the relatively abundant resource of sand (although not any old sand will do) should make an enormous incursion into many fields where resource scarcity at present limits expansion. And the time has already arrived when plastics ■can become contenders with metals for piping, tubing, vessels or vessel linings where the pressures they must contain are, as in household uses, not excessive. So greatly is the flexibility of substitution techniques increas- ing, and so competitive have materials become one with another across boundaries that were once thought fixed, that as glass, for example, gains in one area it loses in another; while glass is being used for small-boat hulls by the Navy, a use that would have seemed fantastic a short time ago, the glass milk bottle, once the very symbol of household intrenchment, is now fighting a rear-guard action against a milk container that issues from the paper industry, with some help from petroleum chemistry. THE UBIQUITOUS PLASTICS The attractiveness of plastics as substitute materials in today's world lies not only in the great and growing variety of their chemical and physical properties, but in the relative strength of the resource base upon which they rest. Many of them trace their ancestry back to benzene, in the past derived from the byproduct coke-oven and hence from coal. Benzene has thus been tied to the steel industry, whose needs for coke determine the volume of coke's byproducts. A significant shift is now occurring here; it is likely that within the next few years the petroleum industry will begin to provide more benzene than have coke ovens in the past; since the petroleum industry will have more flexibility in benzene production, it not only is pos- sible but probable that the plastics industry, additionally based on the petroleum industry, will find still further opportunities for expansion and for supplanting more and more older ma- terials for which such supple chemical manipulations have never been devised. The inertness of plastics to chemical attack has already re- lieved some of the pressure on metallic lead; the plastic poly- ethylene is now replacing it for cable coverings. This same inertness has long made plastic coatings attractive as substitutes for an even scarcer metal, of which the availability is uncertain and the price high: the metal tin. The tinless tin can has been heralded almost as long as television or the prefabricated house; both have beaten it to the start, but an impressive beginning has been made in reducing the tin used per can. Arrival of the truly tinless can would release great quantities of tin for use as solder and bearing metal. SUBSTITUTES FOR SUBSTITUTES The great difficulty of tracing the effects of new designs or devices back to their ultimate limiting factors will always make the question of substitutions a tricky one. In the chemical in- dustry, some heavy reactions which once proceeded via sulfuric acid now proceed via chlorine; the chlorine supply, unlike the sulfur supply, is infinite, but to produce chlorine from salt requires a heavy consumption of power not needed for the production of sulfuric acid. The invention of the transistor, which may replace many uses for the larger, more highly fabri- cated and complex electronic vacuum tube, may release con- siderable quantities of glass, brass, machinery, and man-hours; but the transistor requires, as developed so far, the use of germanium, and although each transistor requires only the smallest fraction of an ounce, germanium is in such high de- mand and so scarce at present that the transistor does not offer an uncomplicated gain. Similarly, the further we develop the gas turbine, the more likely is the presumption that we shall need less of high octane gasolines, with their accompanying drain on lead for lead tetra- ethyl antiknock. But as this requirement eases, another rises high: the need for alloys to serve in turbine blades which must revolve at high speeds and temperatures never previously demanded brings us face to face with the unique properties of colum- bium in providing such an alloy. The supplies are wholly insufficient, and chemists, metallurgists, and engineers are faced with the ungrateful problem of having to seek a substitute for columbium only a few moments, so to speak, after they had overjoyed themselves with the discovery of its uniquely satis- factory properties. The search here tends at present to desert the field of metals in favor of substances more resembling ceramics, such materials as metallic carbides, nitrides and borides, none of which are as thoroughly explored as more conventional ferro-alloys. Although many techniques of substitution are in such dizzy- ing progress as those above, it must be admitted that in a few others there still exist problems which have been perennial stumpers throughout two world wars and all the active tech- nological years in between. Such a stumper is the manganese problem, with which the steel industry has been unsuccessfully wrestling for decades. Manganese has two principal uses in steelmaking: one as an alloying material, the other as a de- sulfurizer and deoxidizer for the open-hearth melt. This latter use accounts for more than half of manganese consumption, which stands at 14 pounds per ton of steel. Part of the manga- nese is lost in the slag, and only world conditions, which have denied the United States access to customary manganese re- sources, have prodded the steel industry into studies of how this loss should be recouped. Thus considered, the manganese problem is a recycling prob- lem—but there is no reason why methods cannot more actively be sought to eliminate the sulfur content of the open-hearth charge, or to discover a substitute in more ample supply than manganese to act as the desulfurizer. The manganese problem has long persisted and its solution is long overdue; it presents one of today's most conspicuous weak spots in the armor of materials technology. Page 139 Chapter 25 Government and Materials Research It is a truism to say that the successful solution of the mate- rials problem depends upon the supplies of trained manpower properly brought to bear upon research into its central aspects. The solution of any problem can be similarly idealized. So large and tempting a discussion as the whole subject of research cannot, however, be undertaken by the Commission which must limit its consideration to the core of its problem, not to all its ramifications. Yet even the briefest consideration of re- search and the manpower through which it is performed leads directly into such overarching matters as education in the United States, and the ends and aims of our total policy as a Nation. It would be easy indeed for a report on materials policy to demand greater and greater educational emphasis upon the physical sciences, disregarding the claims of other problems in our culture to have adequate attention. But the American ethos already gives much heavier support to the physical sciences than it does to the science of man and of society, and it will not be suggested here that this imbalance should be increased. Nor do we make the assumption that the materials problem will be solved only by recourse to the engineering and the physical sciences. Administrators, managers, legislators, sociologists, economists, and political scientists must all make their contribution to this as to any other problem whose solu- tion will help in the total effort of sustaining western civiliza- tion. This Commission believes, and urges, that further exami- nation into the relationship of the materials problem to other less tangible but even more important aspects of our society, be a continuing study. But it was not asked to examine these matters. Even within the physical aspects of the materials prob- lem there are strange imbalances, and it must be to them that primary attention is directed. This Commission knows of no adequate yardsticks against which scientific and technical achievement in a nation can be measured, except as that achievement gains a long historical perspective. If some contemporary measurement must be made only two standards seem to present themselves: the trained manpower engaged in research; the dollars spent or appro- priated. Neither of these scales can be applied with any delicacy, for they fail to distinguish between the contributions of the brilliant long-range scientific administrator, tihe theoretical physicist whose work may not be appreciated or even known of until after his death, and the practical engineer in hot pursuit of a specific problem assigned him by his front office. Only the loci of research can be sharply described; all but the smallest fraction of research takes place under one of three auspices: industry, the universities and foundations, and Government. To start with the bulk figures: in 1952 it is estimated (by the Research and Development Board of the Department of Defense) that 2.9 billion dollars will be spent on scientific and industrial research in the United States, although how this will be divided between "pure" or basic research and various de- grees of applied research can only be guessed. This figure is close to 1 percent of the gross national product (current dol- lars). As of 1952 the United States had about 625,000 trained scientists and engineers—once again, about 1 percent of the Nation's working force. Of these, about one-fifth are engaged in research—with effects and at levels of importance impossible to specify. Only from these uncertain landmarks can a journey of exploration into the size and shape and outline of physical research in the United States bearing on the materials problem be begun. RESEARCH DOLLARS Total expenditures for research in this country have mounted steadily over the last quarter century. In the last two decades they have multiplied over tenfold. But as this total has grown, its internal make-up has altered drastically. In 1942, industry performed 64 percent of the research, Government 26 percent, and the universities 10 percent, and 10 years later these divi- sions of performance remained about the same. But an exami- nation of who ordered and paid for the research performed reveals a basic shift in the source of the money. In 1942 pay- ment and performance were roughly parallel: industry paid for about 60 percent, Government for 35 percent, and the uni- versities for 5 percent. The full effects of the Second World War then intervened. In 1952, industry is paying for only 41 per- cent, the Government for 56 percent, and the universities for 3 percent. INDUSTRY^ PART This year, United States industry's 41 percent share of the total United States research bill will come to about 1.2 billion dollars, the share it performs and pays for itself. Mostly indus- try works, for obvious reasons, in the area of applied research rather than in pure scientific study, leaving "pure" research to the universities. Industry's support of research has grown with amazing speed. Today's dollar figure is close to three times the size of the 500 million dollars expenditure in 1941. For directing imagination, equipment, and devotion to hard prob- lems, some of the great laboratories of American industry are literally matchless—and some of the results they have produced have been of highest significance. But devotion to research is by no means spread evenly throughout industry. The best available picture of industrial research effort shows the greatest concentration in those fields which are relatively new and rapidly expanding. Thus, the chemical industry accounted in 1950 for some 20 percent ol total industrial research and far and away led the field. The next largest area was in communications; third in line was the petroleum and coal products group (probably more than 75 percent of this group in petroleum). Next came the aircraft industry. Together these four groups accounted for a good 5C percent of the total industrial research effort. Page 140 RESEARCH AND DEVELOPMENT EXPENDITURES GROW (1941 -1952) INDUSTRY 200 ^^^^^^^^^^^^^^^^^^^^^H 0 ^^^^^^^^^^^^^^^^^^^^^^^^^ 1941 '43 '45 '47 "49 *51 '52 1952 Source: Research and Development Board, Dept. of Defense By contrast, the primary metals industry accounted for about 3 percent of the total. Fabricated metals products contributed less than 2 percent, and the entire mining industry, less than •one-half of 1 percent.1 The outstanding fact is the high degree of research concen- tration in a few industries. Research effort must, of course, be balanced against the size of industry investments and profits. There are doubtless strong historical and economic reasons which have led to the unbalanced picture presented by indus- trial research at the present time: the degree to which an indus- 1 Estimates based on National Academy of Sciences-National Research Council. Research and Development Personnel in Industrial Labora- tories—1950, May 1951. try is dependent on research for its very existence; the nature of the product and its uses; the impact of war demands (as in aircraft, for instance); the degree and kind of competition. THE UNIVERSITIES' PART The climate of the American university in the past has been best for fundamental, or basic or pure research. Industry is concerned with problems closer to its profit sources, and re- search in Government can go only so far away from the prac- tical—the dollar-and-cents rewards of research—before encountering the fear of unsympathetic scrutiny by the holders of the public purse. Until the First World War the United States derived its basic scientific information almost wholly from European centers. American contributions to basic knowl- edge, increasing healthily thereafter, have now encountered some adverse conditions. The Second World War flung the universities pell mell into practical matters of desperate urgency and commanded their attention to applications of knowledge much more than to knowledge itself. Since the end of the war, the tense, high-velocity world in which we live has made it difficult for the universities to return to the pursuit of knowl- edge for its own sake. That the universities now perform only 10 percent of our research, and pay for only 3 percent, is more than a little disquieting; some scientific institutions are now so completely beholden to Government—to say nothing of industry—for their research support that it is hard to imagine how they would continue their basic programs were this sup- port to be withdrawn. government's part If Government is now the preponderant force in authorizing and allocating research, what agencies within Government do this allocating, and what do they spend the money for? The answer to the first question is that in fiscal year 1952 eighteen departments and agencies have research and development budgets, but eight of these account for 99 percent of the total. Table I shows how the eight share in the 1.6 billion dollars which the Government spends. Table I.—Share of major agencies in U. S. Federal research and development expenditures—fiscal 1952 Percent of total Department of Defense 76.3 Atomic Energy Commission 10.6 Department of Agriculture 3. 2 National Advisory Committee for Aeronautics 3. 1 Federal Security Agency (Public Health Service) 2. 5 Department of the Interior 2. 1 Department of Commerce 1. 1 Reconstruction Finance Corporation .5 Total 99.4 The answer to the second question, what do these agencies spend the money for, is considerably less easy. Government never even kept a break-down as detailed as the foregoing until 1948. It is an obvious presumption that the money spent by the Department of Defense is for research primarily concerned with weapons and the equipments of war. But a great deal of the research money spent by the other agencies, the Atomic Page 141 Energy Commission for example, also goes to the same end objects. It is probable that 90 percent of all the Government's research and development money appropriated this year is thus applied. Naturally, some of this becomes useful to the civilian economy. As to research directed not toward weapons and other end products, but into materials and the assurance of their con- tinuing supply, interest centers in the research appropriations for the Departments of Agriculture and Commerce—but par- ticularly in that of the Department of the Interior, where the funds for the Bureau of Mines and the U. S. Geological Survey are carried. This Department's 2.1 percent share of total re- search expenditures is only about 33 million dollars, and although it cannot be said that this represents the whole re- search interest of the Government in materials supply, there is not much reason for thinking that the sum can be very much greater—or even that it is that large. That the Government spends a grossly disproportionate sum in research directed toward materials consumption compared to materials aug- mentation and security of supply seems obvious. RESEARCH PERSONNEL Of the total United States population of scientists and engi- neers, roughly 625,000, one in five is a research worker. Two-fifths of the scientists contribute to research, but so adaptable are engineers to a multiude of jobs that fewer than 15 percent of their total number classify as research men. In round numbers, then, some 76,000 scientists and 59,000 engineers carry the research load for the entire population of the country. Nearly 60 percent of the total work in the labora- tories of private industry, about 20 percent are employed by Government and 20 percent are lodged in educational institu- tions, foundations, and the like. Such manpower is among the Nation's most precious resources, because without it our tech- nology could not advance. A very small number of these highly trained men can effect major material changes, and hence so- cial changes; their deployment by fields of endeavor has therefore a real relationship to the materials problem. As we have already seen, the relative emphasis given to research by different industries differs greatly. Also significant to the materials problem is the breakdown of total United States research personnel by disciplines. According to recent estimates made by the Research and Development Board, about 44 percent of the total research team is made up of engineers and about 56 percent of scientists. The latter group shows a heavy cluster in the physical sciences (i. e., chemists, metallurgists, physicists) and comprises almost two-thirds of the total science population engaged in research. Only 4 percent of the total are earth scientists (geologists and geophysicists), and this fact undoubtedly has some bearing on our present lag in exploration for metallic ores. In fact, only 3,000 researching scientists in the country fall into the earth science classification, and a large number of these are engaged in petroleum research. Industrial research leans most heavily upon engineers and physical scientists. Government laboratories also employ a large percentage of engineers although among their scientific work- ers, biological fields predominate. In universities and nonprofit institutions the largest proportions of workers are found in the biological and physical sciences with engineering specialists less important. In all three areas the earth sciences can claim a very small part. It is in the universities that such a dispropor- tion can be most critical. Earlier in the century the sparks kindled by a few outstanding university teachers and scientists were largely responsible for the growth of chemical engineering as a technological concept, at once sound and exciting, out of what once was an empirical and dreary business with few hori- zons beyond leather tanning and glue making. Anyone view- ing the materials problem today may well ask if a similar revitalization in mining, metallurgy, and geology is not overdue. The greatest scientific and educational activity over the last two or three decades has dealt with matters of chemistry, and the years since 1940 have seen a rapid rise in interest in nuclear physics. By contrast, geologists, and even metallurgists, are a static group. And even within the realm of chemistry the de- velopment of organic materials in the last half century has been so rewarding that inorganic chemistry was left in the shade until atomic energy's mineral demands began to restore it. The materials situation must be viewed against this background. TECHNICAL MANPOWER IN THE FUTURE Throughout this Commission's existence, the cry from indus- try everywhere has been for more trained manpower. The daily papers have carried the advertising of defense industry firms almost beseeching engineers and others to leave their present jobs in favor of vital defense work at higher wages. In 1951 and 1952 young engineering and scientific graduates have been hired months in advance of graduation for jobs paying from $300 to $375 a month. The strength of this demand indicates that industry considers its heaviest, most serious and crippling stringency to be an adequate supply of men who can handle complex terchnical jobs. The combination of high demand and short supply has created a job market for technical graduates the like of which never existed before. The Engineering Manpower Commission of the Engineers' Joint Council estimated that in 1951 there was a need for 80,000 engineering graduates; only 41,000 engineers finished their schooling that year and many of these were susceptible to being drafted into military service. This situation arose suddenly. Until the United States began to mobilize its defenses after the outbreak of conflict in Korea^ an unusually large crop of postwar bachelors' degree holders in science and engineering appeared to be adequate to fill the number of jobs open. Particularly in engineering, some educa- tors and Government statisticians believed that graduates in those years would encounter trouble finding immediate work. Publication of these beliefs had an effect upon entering classes of freshmen, and these numbers began going down only a little while before the demand for employment of new gradu- ates began to rise again, quickly and sharply. Because of the 4-year time lag needed to convert a freshman into a bachelor's degree holder, supply and demand began to cause an extremely troublesome tide rip in 1950-51. Nor will this disturbance soon disappear. The number of all college graduates through the year 1955 is roughly estimated by the number of young people who have already entered college, and the 1956 crop can be estimated this fall. To industries needing trained techni- cal and scientific workers the figures are discouraging, for they continue to run down hill through a period which everyone prognosticates as one of continuously high demand. The chart, Page 142 SUPPLY OF TECHNICAL MANPOWER AT LOW EBB UNTIL 1960 300,000 200,000 100,000 WHEN MALE GRAD TECHNICAL MANPOWER . ... TECHNIC 1948 '49 '50 '51 '52 '53 '54 '55 *60 Source.- 1 948-1 955, U. S. Office of Education; National Research Council 1 956-1 975, Bureau of Census '65 70 1975 *Projection based on normal college-age population Supply of Technical Manpower at Low Ebb Until I960, shows the expected pattern. A grain of comfort to hard-pressed indus- tries is offered by the fact that visions of high-salaried jobs caused a larger freshman class of engineering students to enter college in the fall of 1951, with a consequent hope that in 1955 the figures for these graduates will again turn upward. They will still remain well below the current estimates of needs in their graduating year. Moreover, the figures given above take no account of the operations of Selective Service, which may not only reduce the college population but withdraw graduates from their profes- sions for the unpredictable length of their military service. Only on the assumption that war and the draft do not com- pletely alter the prospects for college-trained men will the numbers of engineering and science graduates begin to rise again by 1955; only in that case will the number of graduates return to a more adequate level by the early 1960's. Numbers with advanced degrees would not increase until several years later. UNDERGRADUATE EDUCATION Many studies have been made of the effects of the Second World War draft upon university enrollments, and upon the deficit that resulted during that war from a failure to defer men for technical training in many fields. Systems of deferral are now in effect, and the Executive Branch and the Congress have the problem under consideration. This Commission has made no studies deep enough to warrant recommendations in this field. It does, however, wish to note that basic research and technological improvements are fundamental to solving many of our materials problems and to emphasize the need for con- tinued studies of deferral policies. In the whole field of future manpower training, equally serious questions arise. The Federal Government, in its support of education, cannot afford to place too heavy emphasis upon technical training. Support is valid at higher levels of education, particularly in graduate work, when individual choice of field of work already has been made. But to place undue stress upon technical training at lower levels—in high school, or college—might distort the educa- tional base of the Nation, and starve other equally necessary professional and nonprofessional fields. Like every other prob- lem known to man, the materials problem, pursued sufficiently far, becomes a problem in education. GRADUATE EDUCATION Industry and Government both offer numerous fellowships for education at the graduate level. Private industry has recently been spending over 2 million dollars a year for fellowships in this country. This sum represents about 2 percent of the total amount industry spends each year on research in universities. Most industrial fellowships have been tied closely to specific lines of research of immediate interest to donors, often because corporations are open to stockholders' suits if money is given without sufficient restriction. The majority of fellowships are thus still restricted, but there is a growing trend toward award- ing fellowships with fewer or no strings attached, so that the emphasis is more on training a technologist and expanding knowledge than on accomplishing a particular research project. As an example, one large chemical firm has been conducting its fellowship program along such lines since 1918, financing 895 students for postgraduate and postdoctoral work, through the fall of 1951. Candidates for these fellowships are selected by the universities, subject to approval of the company, and they choose their own research projects. They incur no obliga- tion to go to work for the company after completion of their project. Fellowships offered by the Federal Government also aug- ment the corps of trained technologists. In 1952, the Atomic Energy Commission will spend more than a million dollars in the training of advanced scientists in fields related to atomic work. Two hundred and seventy new fellowships were awarded by A. E. C. for the academic year 1951-52. Some of the 500 fellowships that the Public Health Service is supporting in 1952 will train advanced students in the fields of biology. Page 143 The National Science Foundation, established in 1950, has authority to grant fellowships. For 1952-53 this Foundation has awarded 624 fellowships in science. It is expected to take over all but a few of the kind of fellowships now granted by A. E. C. The need for highly trained scientists will continue to in- crease in this country and indeed throughout the world. The Commission believes that both industry and the Government should offer the maximum support to programs for advanced training consistent with the number of young scientists willing and able to continue their work. THE HEART OF THE PROBLEM The generality extractible from these manifold considera- tions is clearly that the Government, up from almost nothing since the beginning of the century, is now the great force behind scientific and technical research in this country. By what it denominates as the problems to be attacked, by the money it authorizes and the projects it assigns to industry and the uni- versities as well as to its own workers, it calls the tunes and pays the piper in a manner undreamed of before the Second World War. Yet this great force is headless. So far as research bearing upon the myriad aspects of the materials problem is concerned, unascribable amounts of effort take place within the Depart- ment of Defense, under the aegis of the Atomic Energy Com- mission and before the careful eyes of the National Advisory Committee for Aeronautics. Within the Department of Agri- culture, the Forest Service and the Bureau of Agricultural and Industrial Chemistry account for large specific sums. Within the Department of the Interior 57 percent of research funds will be spent this year by the Bureau of Mines, 30 percent by the Geological Survey and 12 percent by the Fish and Wildlife Service. Within the Department of Commerce, the National Bureau of Standards is the largest and most important research agency; it does 6 million dollars of research from its own budget and a great deal of work under contract from other agencies of Government. A great deal of all such research has to do with materials in one way or another—but when one looks for a coherent re- search policy directed toward materials, or indeed to anything else equally specific, one does not find it. Perhaps this obser- vation does not qualify as a criticism. Perhaps a hierarchical chain of command from policy makers to laboratory tech- nicians whereby the magical words "coordination" and "inte- gration" would be strictly applied to any great field of research would involve the Nation in some of the same philosphy, at once hideous in concept and ineffective in performance, as did Hitler's nazification of German research before and during the Second World War. Perhaps not. But the spectacle of the Government spending 1.6 billion dollars of the national total of 2.9 billion research dollars with so little top direction is somewhat breathtaking. Directors of Research Policy What are the scientific advisory or policy-making groups in Government, as distinct from agencies that spend the money? The most important are: National Academy of Sciences—National Research Council, The National Academy of Sciences was established under Congressional charter in 1863. Its charter provides that the Academy shall "investigate, examine, experiment and report on any subject of science . . . whenever called upon by any department of the Government." In 1916 the Academy estab- lished within its organization the National Research Council, comprising representatives of leading scientific societies of the country, of governmental agencies, and members at large, in order to secure broader scientific representation within the Academy and to strengthen its capacity to carry out its several functions. Among other things the order provides that the Council shall "survey the larger possibilities of science, formu- late comprehensive programs of research, and develop effective means of utilizing the scientific and technical resources of the country." National Advisory Committee for Aeronautics. Established by Act of Congress in 1915. Concerned with the direction and conduct of research and experiment in aeronautics. Under direct congressional appropriation. Research and Development Board of the Department of Defense. Created by the National Security Act of 1947, to "prepare a complete and integrated program of research and development for military purposes," and to "advise, recom- mend, and formulate policy" for such research. Interdepartmental Committee on Scientific Research and Development. Established in 1947 by executive order to "en- courage collaboration" among the different scientific activities of the Government. Principal purpose is liaison; the committee has no fiscal powers, and is not a maker of policy. National Science Foundation. Established by Act of Con- gress in 1950, "To develop ... a national policy for the pro- motion of basic research and education in the sciences; . . . to initiate and support basic scientific . . . research by making contracts or other arrangements." So broadly is the National Science Foundation's establish- ment conceived that the Foundation, of all governmental agen- cies involved in science and research, could certainly become the top policy coordinating instrumentality if and when prac- tical circumstances permit it. The function of the Foundation which this Commission sees as most applicable to its own sphere of interest in the materials problem is specified as follows in Public Law 507, 81st Congress— ... to evaluate scientific research programs undertaken by agencies of the Federal Government, and to correlate the Foundation's scientific research programs with those undertaken by individuals and by public and private research groups. The amount that Government, taken together with industry and the universities, spends annually on basic research, such as the National Science Foundation is interested in, has not been estimated with any accuracy since the President's Scientific Research Board concluded in 1947 that the figure was in the vicinity of 110 million dollars annually and recommended that this should be quadrupled as rapidly as competent manpower could become available. It would be fruitless to attempt any judgment on exactly what share of the national expenditure for research and development should be allocated to work on materials problems, and this Commission has made no such attempt. But a contemplation of the amounts spent for military Page 144 research today suggests that the basic research which governs our knowledge of and action toward the fundamental resources of human life is being seriously neglected by comparison. What is especially needed now is a source of funds to assist specialists whose ideas can be tested only if financial backing and freedom of experiment are provided. The Bush Report which initiated the idea of a national science foundation, called for an annual budget of 122.5 mil- lion dollars.* The President's Scientific Research Board (1947) thought that 250 million dollars would be a more suitable figure.f On the basis of such judgments on the level at which the Federal Government should support basic research, the 15 million dollars stipulated by law as a ceiling for annual appropriations to the National Science Foundation is inade- quate, and the 3.5 million actually appropriated for 1952 even more so. The Commission recommends: That the appropriations of the National Science Founda- tion should be increased to the 15 million dollar limit which the Congress wrote into its basic act, and that the Congress should re-examine the bases upon which it set this limit so low. This Commission further calls attention to the fact that the basic act establishing the National Science Foundation permits it to receive research funds as gifts from private sources. The Commission suggests that industries and individuals would find the National Science Foundation, operating under policies fixed by an able and widely representative board, an appropriate agency for the distribution of funds to further significant re- search projects. WHOSE RESPONSIBILITY? In spite of the number of Federal projects and of the con- siderable body of coordinating machinery, many problems in materials technology still fall into a no-man's land. These are in areas of insufficient immediate interest to industry that— except in emergencies—are either overlooked by Government agencies or handled with little attention to the many related questions usually involved. Most of these problems concern research policy, but there also are some opportunities for Government action to conserve materials by encouraging greater ingenuity and general technological progress. The Government's procurement program has developed to the point where it includes elaborate specifications and designs. The physical characteristics of the end product and even the method of manufacture are sometimes specified in minute detail. If the specifications were limited to performance char- acteristics of an item, there would certainly be opportunities to save materials, provided, of course, that procurement was made in a competitive market. Another opportunity for materials savings in Government is in the reduction of the vast number of specifications that now exist in Government procurement. Simplification of these specifications has been undertaken. Such efforts must be continued. *Bush, Vannevar. Science, the Endless Frontier, A Report to the Presi- dent, July 1945. tScience and Public Policy, August 1947. The Commission recommends: That Government, wherever feasible in the course of its procurement programs, specify only the performance char- acteristics of an article, the manufacturer then having the opportunity to conserve material so long as performance specifications are met. That the Secretary of Defense and the Administrator of the General Services Administration be directed to report an- nually to the President on the progress made by their respective agencies during the preceding year toward saving materials. The Federal Government can do more than simply make its own consumption more efficient; it can help increase the effi- ciency with which the other groups in the economy use ma- terials. Federal agencies such as the Bureau of Standards, vari- ous parts of the Department of Agriculture, the Department of Commerce, and the General Services Administration, are engaged in research leading to improved design and adoption of suitable standards. Their findings must continue to be made available to the widest possible circle of consumers. Better Coordination: The Pressing Need Even those problems of materials technology now dealt with by the various agencies of Government often are handled from different viewpoints. There are, it is true, good historical reasons for much of the lack of consistency, and some real drawbacks to seeking complete uniformity: separate agencies have separate functions, and at times they see the same ma- terials through very different eyes. But there is clear need for greater coordination of materials technology, not only to avoid gaps, overlaps and collisions among Federal policies and pro- grams but also to orient and foster the entire national effort, private as well as public. The Commission believes establishment of an active coordinating body is essential to shaping and executing a comprehensive, effective national policy of materials research. Such an organization should estimate and appraise the impact of technology and other forces upon supply. It should perform such tasks as— To revise on a continuing basis estimates of reserves in the light of new discoveries and the development of new uses and new methods. To project annually requirements on supplies at least 10 years into the future on the basis of scientific and technological developments as well as of data on do- mestic production and consumption, and imports and exports. To report potential shortages of important materials to Government, industry, and the public far enough in advance to allow time for corrective action. To maintain an up-to-date list of the materials research and development projects that should be undertaken; and, for those that cannot be assumed by industry in the normal course of events, to consult with appro- priate advisory bodies, and if necessary, to bring the problem to the attention of the President and of Congress. Page 145 In order to discharge these duties, the proposed central agency should be placed high in the structure of the Federal Government. It would need to maintain close relations with the National Science Foundation and the many agencies of Government concerned with separate phases of materials re- search and with industrial and other private research agencies in the United States; and, in the foreign field, it would need to keep in touch with governmental and private developments that concerned materials. But the technological problems of materials are only a part of the task that Government must perform, and this work must be closely related to action on all other materials fronts, as the Commission describes and recommends in chapter 31. Only through such a broadly based coordinating organiza- tion can all the diverse elements of materials technology be kept under review as a group and properly related to other aspects of the entire materials problem so that it can be dealt with whole. Chapter 26 Technology and Building—A Case Study In the kind of world economists dream of, each task of tech- nology would be completed when a practicable, low-cost meth- od had been developed for obtaining a material or for putting it to better use. But in the everyday world the perfection of a machine or a technique may only mark the beginning of the struggle to apply its benefits. There are many reasons why the work of innovators may be so long in bearing fruit: lack of public understanding, unfore- seen economic developments, active hostility from those with vested interests in the old methods, or plain human inertia. A meaningful advance in technology requires not only trained scientists and engineers and well-organized research, but effec- tive programs of education, a clearing away of economic, politi- cal, and social barriers, and a surmounting of countless small practical difficulties. Nowhere, perhaps, are technological opportunities and bar- riers to their attainment better illustrated than in the building industry. The possibilities of new methods and new materials or new combinations of familiar materials are great. Many inno- vations have been thoroughly tested.* They work; yet they have been put to relatively little use. The Commission has asked why, and has looked into a num- ber of the situations that seem to be causing the most trouble. Although by no means exhaustive, its studies in this area have been detailed. The Commission has endeavored to identify and appraise the chief difficulties and has offered suggestions for correcting some of them. Although the specific analyses and recommendations are tied directly to problems of the building industry, they also are examples of the kinds of action needed in other fields to put technology to work. PROMISE VERSUS PROSPECT The building industry is the largest user of materials in the United States economy. In 1950 new building construction and maintenance of existing buildings in the United States took one-third of the copper consumed by all industries in the Nation, one-sixth of the iron and steel, one-fifth of the lead, one-fifth of the zinc, and almost two-thirds of the lumber. "^Innovations in building construction are discussed at length in vol. IV, Technology in the Building Industry, an analysis by Arthur D. Little, Inc. Nearly one-fourth of total fuel consumption was devoted to the heating and air-conditioning of buildings. There are striking opportunities for improving the building industry's use of materials. Building construction methods, de- sign practices, and use of labor and materials are often costly and wasteful. Much of the waste is avoidable; to halt it would be to make a significant contribution to national security and standards of living. But a variety of obstacles stand in the way of rapid, widespread adoption of better building methods. Alr though some firms and individuals in the many different ele- ments of the building industry have made important contri- butions to improved use of materials, a large part of the indus- try resists change. It is saddled with a multitude of restrictions, some of them self-imposed, which seriously impede desirable change. The Job Ahead If total national output of goods and services doubles by 1975 and if population increases by more than one-quarter, as assumed by the Commission, the building industry will be called upon to do a tremendous job. It will have to provide something in the order of 35 million houses, 7.4 billion square feet of factory floor space, and 4.2 billion square feet of com- mercial warehouse, office, and store floor space, school facilities for 20 million desks, and hospital facilities for 1.4 million beds. In each instance, large increases over the rate of construction of the 1926-50 period will be required. In the construction of dwellings the performance of the past 25 years would have to be more than doubled. The building industry will probably use even more materials than the estimates in table I suggest. Dwellings of the future will be more numerous; if real incomes rise, they may also be larger and better. In 1950 the average value of new housing units was about $8,500. By the 1970's the average, measured in constant dollars of purchasing power, may be about $9,500. Table II compares, in 1950 dollar values, construction over the last few decades and what may be expected in the 1970's. The projection for construction volume in the 1970's in- dicate that public and private construction of new buildings, and repair and maintenance of existing ones, may increase by roughly 35 percent over the 1950 level, excluding such projects as roads, dams, and docks. Page 146 Table I.—Past volume and estimated future requirements of building construction in the United States Resi- dence (million dwell- ing units) Com- mercial (million Indus- trial (million square feet of floor space) Hospi- tal (mil- lion beds) Educa- tion (million desks) square feet of floor space) 1926-50 new construction. 13. 2 2, 290 4, 125 0. 9 16 1950 new construction. . . 1. 4 130 129 i. 05 U.O 1951-75 estimated new 35 4, 200 7, 400 1. 4 20 1970's estimated annual \. 6 220 375 . 67 .88 1 Estimated. The percentage increases over 1950 may seem small com- pared with the 100 percent increase assumed for the total national output, but 1950 was an unusually busy year for the construction industry. The industry was working off a large backlog of demand that resulted from low construction levels in the depression years of the 1930's and the restrictions that prevailed during the Second World War. Table II.—Past and projected annual construction value. [All building construction except engineering structures such as roads, dams and docks.] In billions of 1950 dollars 1970's (projected) 34.5 1950 25.5 1940-49 (average) 15.6 1930-39 (average) 11.4 1920-29 (average) 19.1 1915-19 (5-yr. average) 11.6 The building industry will be consuming something like one-third more materials in 1975 than in 1950 when its de- mand upon the economy's total supply of certain materials was already very heavy, as shown in table III. If no change occurred in the pattern of materials, the so- called "materials mix," used by the building industry over the next 25 years, the demand against such already scarce materials as copper, lead, zinc, and lumber would be further increased— for the group as a whole, about one-third. Failure of the indus- try to shift away from tight materials to more abundant ones would intensify the materials problem of the Nation. Table III.—Selected materials consumed in construction, repairs, and maintenance of buildings in 1950 Material Unit Steel Cast iron Copper Lead Zinc Aluminum Asphalt products. Gypsum products. Clay products Cement Glass Lumber Tons do.. . do.. . do. . . do.. . do. . . do. . . do. . . do.. . do. . . do. . . Board feet. Quantity (millions) 11 3 . 5 .2 . 2 .2 20 20 1 25,000 Technology offers a way out. Technological opportunities which are economically feasible may reduce the industry's 1975 demand for copper by more than half, its demand for lumber by one-half, lead by one-fourth, and zinc by one-fifth. There would be tremendous increases in the use of aluminum and plastics as substitutes for the scarcer materials, and more modest increases in the use of such relatively abundant materials as glass, asphalt, and gypsum products, concrete and various concrete aggregates. The shifts will not always be simple replacements. Iron and steel, for example, may replace lumber for some uses (house frames) and may in turn be re- placed by plastics in other instances (bathtubs, sinks). Or an unnecessary use of a scarce material may be eliminated alto- gether through changes in design: for example, wider eaves remove the need for gutters and downspouts, often made of scarce copper. These estimates assume the application of only the technological innovations that are now economical or may soon be expected to become so. The Commission has taken into account some improvement in design and methods of using materials by a streamlined industry, but it does not assume total replacement of one ma- terial by another by 1975, or any startling changes in design or methods. A bolder approach could prove the more accurate. Electronic air-conditioners, cheap wireless electrical power transmission, a structural wall material with high insulating properties, which could be made transparent or opaque at will, the use of solar energy to heat and to cool our buildings—such developments could revolutionize the use of building materials. Yet to assume these changes when they are not yet in sight would be misleading. Some Expected Changes Perhaps the most important shift in use of materials is ex- pected in the framing of buildings. Possibly many of our houses will be steel-framed. This change would reduce considerably lumber requirements for 1975 but would require additional quantities of steel. Larger buildings today usually have steel or reinforced concrete frames. A large part of the strength of these frames must be used to support the dead load—the weight of the framing, the weight of the concrete casing for fireproofing. and other fixed elements of the structure. By using lighter con- crete aggregates, such as the expanded slags, shales, pumices, cinders, the dead load can be reduced, making lesser amounts of structural and reinforcing steel necessary. There will possibly be a greater use of structural prestressed concrete, improved bonding reinforcing bars, new welding techniques, which, along with more reasonable safety standards, would do away with a good part of the requirements for reinforcing and structural steel. In basementless houses, the pronounced trend away from the conventional wooden floor structure over a "crawl space" toward concrete slabs as foundation and floor will increase the requirements for cement and concrete aggregates. The total use of aggregates, therefore, will increase considerably in vol- ume but the increase in weight will be somewhat less because of the use of lighter materials. The pressure on our lumber supply will be eased in other ways, too. The basementless slab-foundation house requires no wooden floor joists. There will be at least a partial replacement of wood window and door frames and other millwork by aluminum and steel. There is a growing use of asphalt and Page 147 plastic products for floors in place of hardwood, and where brick and lumber walls now are common we can expect greater expanses of glass, aluminum, and gypsum products by 1975. Sheet aluminum will replace some of the galvanized steel now used in industrial and farm buildings. Plumbing, heating, and air-conditioning in 1975 would take vast quantities of scarce metals if 1950 patterns of use are con- tinued. But there are many possibilities for change, both in design and in replacement of one material by another. Plastic pipes of various types are already becoming competitive with copper, lead, brass, iron, and steel pipe. More efficient designs and less stringent cedes could reduce cast iron pipe require- ments by another 20 percent, and allow replacing the cast iron in bathtubs, sinks, and toilets with plastic. Further savings in cast iron would result if hot air heating were used in place of hot water and steam systems and if more galvanized and aluminum duct work were used for increased air conditioning. Wide use of the zinc-saving electrogalvanizing process would more than offset the increased zinc requirements for the gal- vanized ducts. In electrical systems aluminum can substantially replace copper wire by 1975 if habit and unnecessary local code restric- tions are overcome. Codes and custom often require needlessly heavy galvanized steel conduits for wiring. Hundreds of thou- sands of tons of steel and zinc could be saved through use of lighter conduits or plastics and with no sacrifice of safety stand- ards. In hardware, screens, gutters, and flashing many shifts in uses of materials are foreseen. Plastics and aluminum have already begun to take the place of copper and brass. Titanium dioxide can, even more than in the past, replace the lead and zinc used in paint. There are then two sides to the problem of achieving better use of materials by the building industry. First, technology has the task of continuing to provide new opportunities for shifting from relatively scarce to relatively abundant materials for construction. Second, and presently more urgent, there is the problem of achieving a much more rapid and widespread application of the technology already available. Man-made obstacles to changing the use of materials impose a heavy eco- nomic waste upon the whole economy, needlessly high costs upon customers, and harmful handicaps upon the building industry itself. The great challenge, to public and private policy, is to clear away the roadblocks to maximum efficiency in the building industry. THE OBSTACLES None of the barriers to more efficient use of materials is immovable, but there are many of them and their roots go far down into the past and spread widely through the economy. They can be traced to four principal causes: the way the in- dustry itself is organized, the numerous restraints of trade that prevail in the industry, inflexibility of most building codes, and inadequacy of research in the field. The Nature of the Building Industry The building industry is an aggregation of many sorts of enterprise—producers of materials, distributors of materials, builders or contractors, architects, engineers, skilled and un- skilled labor, and financial institutions. The industry includes a large proportion of small, inefficient builders although a number of larger firms make effective use of equipment, methods, and materials. Most of the smaller builder's business is putting up single- family houses. He faces violent fluctuations of demand and has to deal with strong conservatism of public taste. The size of his operations has restricted his adaptability and he has often felt that he must hedge himself with protective measures. In general, he is not able, by his own efforts, to free himself of the consequent limitations. Usually, the small builder operates on credit granted him by materials distributors or financial institutions and is there- fore subject to the restrictions of these lenders. He must deal with a notoriously costly distribution system, while the large builder more often deals directly with the materials producers or even produces his own materials. Distributors often attempt to protect their market by combinations to boycott producers who circumvent the distributors and deal directly with the builder. Further, the small builder, operating on individual orders, cannot plan his marketing nor use initiative in intro- ducing new methods and materials. Experience has shown that organizational efficiencies cannot be achieved by very small building enterprises. The number of larger firms is growing. Consistent with development and pres- ervation of healthy competition, there is room for further con- solidation of smaller firms into larger units, including the bring- ing together of producers, distributors, and builders. Labor, as well as the small builder, has sought to protect itself against the rigors of the fluctuating construction market, and has successfully used the craft union for this purpose. Craft organization has sometimes led to costly jurisdictional disputes, opposition to shop fabrication of building parts, and to new materials and methods. It has also led to make-work policies and to limitation of entry into the craft. Although the small builder in many cases does not use unionized labor, the seasonal, temporary nature of his operation pushes up his labor costs because wages must be high to make up for periods of unemployment. Larger builders can more nearly guarantee annual wages, specialize the labor force and train labor in particular materials-saving operations. No other important group in our economy bears the burden of financial control and supervision that is imposed on the building industry. This control reaches down into the detail of the builders' operations, particularly in the case of housing. Here, not only is the builder tied to distributor credit but the buyer must generally seek long-term credit in the form of mortgages; the building must meet the mortgagee's standards^ usually requiring conservatism in design and materials. Restraints of Trade Restraints of trade have long been exercised in the building industry and they continue despite the fact that about one- quarter of all cases brought under the Federal antitrust laws has involved this industry. The records of the cases reveal thai the restraints take a variety of forms.* The loose federation of enterprises which characterizes the industry leads to withholding materials, barring use of new *See Antitrust Cases in the Construction Industry, Senate Committee Print No. 12, 79th Cong., 2d sess., 1946. Page 148 techniques and other activities which are prohibited by the antitrust laws. Combinations of distributors bar the use of com- petitive materials. Agreements among subcontractors in bid- ding reduce competition. Patent and license agreements are used to control prices and prevent competition. All these prac- tices are vastly expensive to the public. Moreover, they often take place with the concurrence of labor and are abetted by local codes and licensing provisions which have the effect of stifling competition. Sustained enforcement of the antitrust laws can remove some of these barriers to the efficient use of materials, and can inject beneficial competition into the industry. The Commission therefore recommends: That the Department of Justice and the Federal Trade Commission intensify their efforts in the building and building materials industries. The Department of Justice and the Federal Trade Commission should study the need for legislation authorizing prosecution in the case of restraints that cannot be reached under present laws. Building Codes Improvement in the use of building materials is frequently hampered by local building codes whose premise is the protec- tion of public health, safety, and welfare, but which in reality have often become devices for protecting select groups in and out of the building industry, at the expense of the general welfare. State governments have in general delegated to local gov- ernments their power to control building construction. There are now some 2,000 local building codes. But, in spite of this delegation of authority, there are also many State codes and incidental building regulations. The result is a multitude of conflicts, a wide range of requirements, and many absurdities. For instance, aluminum wire, though larger sizes and different connecting techniques are necessary than with copper, is ac- ceptable under the National Electrical Code, but most local building regulations, though subscribing to other parts of this code, have not permitted this substitution. About 100,000 tons of copper were consumed in electric wiring for buildings in 1950. The wide diversity of standards means that the manufacturer of materials must meet the highest prescribed anywhere. The alternative is producing many variations of the same product to meet the differing standards. Another drawback of the local code system is that it inhibits building research by causing it to be done within the limits of the codes. At best, the system causes long delays between de- veloping a new technique or material and putting it to work. UNIFORM PERFORMANCE CODES One path to improvement is development of uniform codes based on standards of performance rather than on particular specifications of materials and techniques. The performance type of code does not restrict the builder and owner to any specified methods or materials. If the struc- ture can be shown to "perform" satisfactorily by the standard of general welfare it complies with the code, regardless of ma- terials or methods used. Such a code is more difficult to administer, but does allow for continuing change and improve- ment in building construction. A number of uniform or model codes of at least a modified performance type have been drawn up by various interested groups. One or another of these uniform codes serves as a basis for about half the local codes in the country. But this is at best only a partial answer. Uniform codes must be constantly revised to keep abreast of technology. Even though the pro- mulgating group continues to revise its uniform code these re- visions often do not find their way into localities and earlier versions continue in use. Uniform codes also generally represent compromises between conflicting interests and tend to support some inefficient methods and materials. Materials producers have often sponsored such codes and their recommendations have not always appeared disinterested. Perhaps the most important difficulty, however, is that uni- form codes would be administered locally subject to inevitable local pressures. There clearly is a need for at least some degree of local administration, but the discretion necessary for an enlightened administration of performance-type codes also permits serious abuse. Massachusetts has established a Board of Standards which is empowered to apply State-wide building regulations to places of public assembly. This is a considerable advance over the ordinary State code systems which apply only where no local regulation already exists. Massachusetts also has a system of appealing local rulings to a State authority. Many municipali- ties provide for some degree of local appeal. In New York State a Building Code Commission is empowered to write a code on a performance basis which will become binding on local govern- ments unless they specifically reject it. Inadequacy of Research The disorganization, low capitalization, localism, and con- servatism which plague the building industry have discouraged research by the industry. Professional and technical asso- ciations of engineers, architects, and builders exert some in- fluence on technical progress, but their approach is at best sporadic and unorganized. Producers of materials conduct con- siderable research limited chiefly to improving and developing particular products. There has been little research in the performance of products when combined with others into elements and components of structures. Some responsibility for research has been assumed by seg- ments of the building industry through formation of the indus- try-sponsored Building Research Advisory Board within the National Research Council. The recently organized Advisory Board has undertaken a study of conservation of materials in building construction for the Defense Production Administra- tion. The Board operates, generally, as a clearing house for building research and performs an important coordinating function, but on a very limited basis because of inadequate support by the industry. In agriculture which, like building, is made up of a multi- tude of small, localized, low-capital units, the Federal Govern- ment and State governments have assumed most of the respon- sibility for research. In building, Government research is far less extensive. The Housing and Home Finance Agency, which is responsible for housing research, has had to curtail rather Page 149 than expand its research program. In 1950 its appropriation permitted allocation of about 3.3 million dollars for research; in 1951, about 1.2 million, and in 1952 only $445,000. The agency's job has been to coordinate and allocate research projects under contract to both Government and private or- ganizations. This collaboration with non-Government groups has brought direct results which have been rewarding, and it has stimulated research activity among other groups. The Bureau of Standards of the Department of Commerce, the Bureau of Reclamation of the Department of the Interior, and other Government agencies have made some important con- tributions to building research, but their efforts do not add up to a comprehensive pattern. The Government's role in research should be largely one of coordination and development of basic standards, with active participation only where non-Government groups cannot ade- quately do the job. The Commission recommends: That the Housing and Home Finance Agency be given continued and increased financial support in its housing research program. Federal housing and slum clearance programs should take the lead in applying the improved techniques and design developed by building research. Coordination, free interchange, and broad dissemination of research findings can perhaps best be accomplished with the assistance of a nongovernmental agency such as the Building Research Advisory Board. HELP THROUGH GOVERNMENT Although some of the obstacles to full utilization of new building materials and techniques are beyond the range of Fed- eral policy and programs, the direct and indirect effects of sustained Government leadership can bring about great econ- omies in the use of national resources, can reduce costs, and raise quality of buildings of all kinds. Three additional means by which the Government can ad- vance building technology are through its extensive programs of direct construction, through credit for housing, and through administration of building controls during emergency periods. The Federal Government is the largest single customer of the building industry. In 1950 it invested about 700 million dollars in buildings.* Most Federal construction is actually done by private firms under contract, but the Government has the opportunity to control this construction, to bring about maximum efficiencies in the use of materials and assembly methods. It is in a position to experiment, to lead the way in construction and code reform. Federal building activities are not legally bound by local regulations. Yet in practice most Government agencies conform with local construction codes and regulations, even though this may lead to waste. Only in periods of emergency have attempts been made to cut across local regulations to conserve materials. In the Sec- ond World War, the Lanham Act encouraged Federal agencies to construct buildings without regard to State or municipal laws and ordinances. In the present emergency 11 Federal *This includes direct Federal residential, nonresidential, and military building construction, and Federal aid to State and local building con- struction. It does not include State and local matching funds. Construction and Building Materials: Statistical Summary, U. S. Department of Com- merce, May 1951. agencies follow uniform standards in structural steel, rein- forced concrete, and lumber and timber construction, and in plumbing installation. The present emergency standards repre- sent a forward step, but they do not cover all phases of buildi construction, and some of their provisions still run counter principles of maximum efficiency in use of materials. Uniform standards should be adopted for all Government building and should apply in normal times as in emergencies. There should be comprehensive Government standards based as much as possible on performance criteria which would promote prog- ress in construction techniques and limit new methods and ma- terials only where necessary for safety. Where only extensive research could determine performance, acceptable alternative methods and materials would be specified. Any listing of specification standards should be subject to continuous revision, as should performance standards. New methods and materials should be constantly under inspection by the Government and by non-Government technical groups to determine their acceptability. Any national standards that are adopted should be drawn from the experience already gained in establishing uniform codes, in drawing Federal specifications and in building research. National standards should not only allow but require greater efficiency in construction methods and materials for Federal buildings. They should also serve as examples of efficient, safe methods and use of materials for all construction. The formula- tion and revision of local building codes is tedious and ex- pensive. If particular local governments could look to national standards for guidance in developing their own codes, much wasted effort could be saved. The Federal Housing Administration of the Housing and Home Finance Agency should take an active part in the formu- lation and application of national standards. Its experience in the application of research to residential construction require- ments could be of great value. The Commission recommends: That an agency of the Federal Government formulate and keep up to date national standards of building con- struction with the participation of an advisory board consisting of representatives of interested Federal agencies and non-Government technical groups. That these national standards be of the performance type where possible, and where specification of acceptable materials and building methods is necessary such specifi- cation should be frequently revised to include all acceptable alternative materials and building methods. That the results of housing research conducted by the Housing and Home Finance Agency and of all other Government-supported building research be promptly considered for incorporation in the national standards by the agency given the responsibility for formulation and revision of these national standards. National standards should be applied to all construction paid for with Fed- eral funds or built on property under Federal jurisdiction. Federal building construction should not use materials in excess of the minimum quantities established by the na- tional standards, except in such cases as monuments and buildings following an existing architectural plan. Page 150 Federal Housing Programs The Government's major effort in the field of housing has led at reducing the financial burden of private home owner- ) through the mortgage guaranty and insurance programs oi the Veterans Administration and the Federal Housing Ad- ministration, and through the mortgage purchase activities of the Federal National Mortgage Association. The largest part of the program is under the Federal Housing Administration set up to promote housing finance by assuming risks involved in loans. Federal credit programs were used in connection with about half of the houses constructed in 1950. Another 15 per- cent was directly affected by other Federal programs related to savings and loan institutions. The great possibilities of using Federal mortgage insurance or guaranty programs as a device for conserving materials have not been exploited. Thus far, although the Federal Housing Administration has formulated "Minimum Con- struction Requirements" for the guidance of its 72 local offices, it has permitted these offices to establish their own minimum standards, consistent with local codes which almost invariably call for greater use of scarce and costly materials. In practice, the Federal program has tended to fortify the rigidities and wastefulness of local codes instead of creating inducements for reform by offering financing for homes constructed on more economical standards. The Commission recommends: That the Housing and Home Finance Agency cooper- ate in the formulation, adoption, and frequent revision of the recommended national standards. When adopted by the Federal Government these national standards should become the f pyrites production. In addition, there has reportedly been )rivate uncertainty as to the exact need for increased supplies, and fear that low-cost reserves may be so extensive as to threaten higher cost competition. Public information on the ex- tent of salt-dome reserves is inadequate. The Geological Survey- should take the initiative in obtaining better reserve informa- tion on which future public policy can be based. SECURITY CONSIDERATIONS In the event of war the increased need for aviation gasoline and explosives may raise the total demand for sulfur by about 10 percent. It is generally held that should it not be possible immediately to increase the output of sulfur, civilian consump- tion (including phosphate fertilizers) could be reduced sub- stantially for a year or two without substantial harm to the economy. There is no formal stockpile program for sulfur, but the present policy of the Government is to operate the alloca- tions program so as to prevent private stocks from falling below an amount equal to 5 to 6 months of production. The security advantages of avoiding future shortages, of having available larger stocks or readily expansible production, and of keeping down the real costs of sulfur are clear. Selected General Statistical Sources Committee on Agriculture. "Fertilizer and Farm Machinery/' Hearings before the Subcommittee on Fertilizer and Farm Machinery. House of Representatives, 82d Cong., 1st Session, Feb. 21, 1951. Federal Trade Commission. Report on the Sulphur Industry and Inter- national Cartels. Washington, D. C, Government Printing Office, 1947. "A Half Century of American Sulfur Industry." Industrial and Engineer- ing Chemistry, Nov. 1950. Haynes, W. "The Stone That Burns." New York, Van Nostrand Co., Inc., 1942. Kreps, T. J. "The Economics of the Sulfuric Acid Industry." Stanford, California, Stanford University Press, 1938. Swager, W. L., and Sullivan, J. D. "Sulphur." Mining Engineering, Mav 1950. References Elsewhere in This Report This volume: Chemicals. Iron and Steel. Projection of 1975 Materials Demand. Reserves and Potential Resources. Rubber. U. S. Bureau of Mines Tables. Vol. Ill: The Outlook for Energy Sources. Oil. Vol. IV: The Promise of Technology. Tasks and Opportunities. Vol. V: Selected Reports to the Commission. United States Fertilizer Resources. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Lyons, C. J., and Nelson, H. W. Role of Technology in the Future of Coal. Munger, H. P. Waste Suppression—Waste Going into the At- mosphere. Ren ken, H. C. Waste Suppression—Role of Technology in the Future of Smelting and Refined Wastes. Swager, W. L. Role of Technology in the Future of Sulfur, Sul- fides, and Sulfuric Acid. 997199—52 7 Page 87 Chapter 18 Fluorspar The Situation in Brief The growing demand for aluminum, plastics, ceramics, steel, and other fluorspar-using products in the United States can, by 1975, be expected to increase the demand for fluorspar, possibly to nearly 3 times the 1950 consumption. Domestic reserves and likely discoveries, on the other hand, are not expected to support much more than a 10-percent increase in production at present prices. If fluorspar were the only avail- able source of fluorine, imports of fluorspar five times those of 1950 would be required to meet the projected 1975 demand. If the fluorspar producers in other free countries are to meet the rapidly growing demands of the rest of the free world, plus the large indicated exports to the United States, an expansion of their fluorspar production to 4/2 times their aggregate 1950 output would be required. Such an expansion is most unlikely. If there were no other means of meeting the demands for fluorspar a serious shortage would threaten. However, proc- esses now being developed give promise of deriving fluorine compounds from phosphate rock in sufficient quantities and in usable forms to fill the gap that would otherwise exist between demand and supply near the present price level. The principal problem affecting fluorspar, accordingly, is likely to be that of developing such processes and adopting them in time to avert a fluorspar shortage. Acid-grade fluorspar recently has been in tight supply. Out- put from Mexico and South West Africa, however, is expected to increase significantly in the near future, and domestic mill capacity will be substantially expanded, so that this shortage will presumably be relieved within a few years. The Government has embarked on programs designed (1) to encourage exploration for new domestic deposits, (2) to in- crease output from known deposits here and abroad, (3) to improve the methods of using low-grade ore, (4) to pursue the recovery of fluorine from phosphate rock, and (5) to ex- pand domestic mill capacity. Knowledge of reserves, both at home and particularly abroad, is unreliable. The prospects of a fluorspar shortage are so recent a development that sufficient action has not yet been taken to remedy this defect. The meas- ures suggested in volume I for stimulating exploration at home and abroad are applicable to fluorspar. The programs listed above, and various private programs in the same direction, should be given full support. THE UNITED STATES POSITION Extensive use of fluorspar in the United States did not de- velop until the end of the nineteenth century. Until 1887, the principal uses of fluorspar were in the manufacture of glass, enamels, and hydrofluoric acid, while small quantities were used as a metallurgical flux. At that time, annual consumption was about 5,000 short tons. With the swift development of open-hearth steel after 1888, and with increased demand from ceramic, chemical, and aluminum industries, annual consump- tion increased almost a hundredfold by 1950. Table I reveals this enormous growth and also shows that the most rapid ex- pansion since 1929 has come from hydrofluoric acid uses, which require the highest grade spar. Table I.—United States consumption of fluorspar (all grades), total and by chief uses, selected years, 1887-1950 [Thousand short tons] Hydro- Glass All Year Steel fluoric and Total other 1887 acid enamel 5 1902 i 50 1918 i 264 1929 162 16 12 5 195 1932 38 7 9 2 56 1939 124 26 21 6 177 1944 230 130 30 20 410 1950 239 124 43 20 2 426 1 Production. 2 Equal to 369,000 short tons, 100 percent calcium fluoride. Source: Ladoo, R. B., and Meyers, W. M. Nonmetallic Minerals, McGraw-Hill Co.,N. Y., 1951. "Fluorspar and Cryolite" Preprint, Minerals Yearbook, 1950. Fluorspar is a nonmetallic mineral consisting of calcium fluoride (CaF2). In mining, grades of fluorspar ore containing 35 percent or more of CaF2 are considered commercial although under certain favorable economic conditions, as low as 30 percent is acceptable. After milling, industrial grades of fluor- spar normally contain 80 to 98 percent CaF2. Virtually all commercial fluorspar consists of three grades, based on the content of calcium fluoride and certain specifications regard- ing impurities: (1) Acid grade, containing at least 97 percent calcium fluoride; (2) ceramic grade, containing generally not less than 93 percent; and (3) metallurgical grade, containing 80 percent or more. Nature occasionally provides fluorspar that neatly suits these specifications but usually some concentration is necessary. For- tunately, most fluorspar ore can be milled to suit all grades The following diagram illustrates the principal uses of the three grades of fluorspar and indicates what proportion o] total consumption each grade represented in 1950. Consumption of fluorspar, by grades and chief uses, 1950 Chief uses 1 Grade Metallurgical grade 58% of total fBasic open- '\hearth steel Ceramic grade 10% of total Acid grade 32% of total f Glass and '1 enamel / Alumi "U0% c uminum of total Hydrofluoric acid. 'Plastics, high- octane gas, uranium hexa- fluoride, pro- pellants, re- frigerants .22% of total Page 88 Acid-grade spar is used almost exclusively to make hydro- fluoric acid. This is the first step in the manufacture of several products important in the aluminum and chemical industries and in the atomic energy program. In the reduction of alu- minum, cryolite, another fluorine-bearing mineral, is used. As the supply of natural cryolite is insufficient, a synthetic cryolite, made from fluorspar, is necessary. In addition, fluorspar is necessary for the manufacture of aluminum fluoride, also needed in the aluminum reduction process. Finally, minor amounts of fluorspar are used directly in aluminum production. In all the uses of fluorspar in the manufacture of aluminum, there are currently no plentiful substitutes for it as a source of fluorine. In the chemical industry, hydrofluoric acid is used to man- ufacture such products as refrigerants, insecticide propellants, high-octane gas, and fluorine plastics. A fluorine compound, uranium hexafluoride, is important in the atomic energy pro- gram. Acid-grade spar supplies were tight all during 1951. Some aluminum producers attempted to guarantee future supplies by purchasing additional fluorspar mines. The Government em- barked on programs to increase mine output at home and abroad and to increase domestic capacity for upgrading fluor- spar ores. METALLURGICAL AND CERAMIC GRADES Metallurgical-grade spar is used almost solely by the steel industry, to promote smelting and to form a fluid slag that carries off impurities. In the past about 5.5 pounds of fluor- spar have been used per short ton of steel. Although good steel can be made without it, fluorspar or a substitute is needed to produce steel at a maximum rate of output and with minimum operating difficulties. Without fluorspar or a good substitute, production would be slowed by as much as 20 to 30 percent, according to an expert at the Battelle Memorial Institute. Substitute fluxes are feasible and in ample supply, but fluorspar has been universally preferred because of its high performance, low cost, and ample availability. Only if fluorspar rises greatly in price are these substitutes likely to be introduced under pres- ent technical conditions, inasmuch as fluorspar represents con- siderably less than 1 percent of the cost of steel. Ceramic-grade spar is used in the enamel and glass industries in the manufacture of opal, opaque, and colored glass, and in the manufacture of fiberglass and glass containers. Some goes into nonceramic uses such as ferro-alloys, magnesium smelting, and welding rods. In 1950, domestic mines produced 275,000 short tons of fluorspar of all grades. Imports established a new record of about 165,000 short tons in 1950, a gain of 72 percent over 1949 and 47 percent over 1948, the former record year. The largest foreign source is Mexico. Other suppliers include New- foundland, Spain, Germany, and Italy. The 1975 domestic demand for fluorspar, based on calcium fluoride content, has been projected to increase to nearly three times the 1950 demand. (See "Projection of 1975 Materials Demand.") This basis yields a higher rate of increase than a gross-weight basis, as the demand for highest grade spar is expected to grow more rapidly than that for other grades. The principal factors affecting this threefold demand are the fivefold growth projected for aluminum and the fourfold increase in the chemical industry, in which plastics, refriger- ants, and other fluorine chemicals are expected to expand greatly. 1950 consumption, short 1975 demand projection, Gross weight CaF2 Gross weight CaF2 426, 000 369, 000 1, 150, 000 1170 1,060, 000 '185 United States reserves of commercial fluorspar are the largest in the world, constituting about 40 percent of the free world total. Table II below shows estimated free world reserves. Table II.—Magnitude of fluorspar reserves* in the free world [Thousand short tons] weight CaF2 United States. 15, 000 6, 000 Canada (Newfoundland) 5, 000\ West Germany 4, 000 Mexico 3, 000 } 8, 800 3, 000 Others 10, 000J Total ±40, 000 ±14, 800 * Material 35 percent or more CaF3 content economic at 1951 prices. Includes measured, indicated, and inferred reserves. Foreign figures highly speculative. Source: U. S. Geological Survey and Bureau of Mines. At 1950 rates of consumption, presently known United States commercial reserves could "support" United States demands for fluorspar for only about 15 years. However, dis- covery of new deposits is certain; in addition, only recently has the price been high enough to warrant consideration of pros- pects handicapped by unfavorable transportation. Further-- more, the likelihood of finding additional reserves adjacent to known reserves is favorable because producers usually do not develop fluorspar deposits very far ahead of actual mining operations. Despite these possibilities, many geologists feel that discovery of very large new deposits in the United States is unlikely. Consideration of the reserve position and of the historical production record suggests that the domestic fluorspar industry is past its peak rate of growth and that only limited further expansion can be expected. A conservative estimate of United States mine output in 1975 would be about 300,000 short tons, or roughly 10 percent higher than in 1950. FLUORINE FROM PHOSPHATE ROCK As indicated below imports cannot be relied on over the long run to close the gap between United States demand and domestic supply of fluorspar. The United States must therefore expect to turn to another source of fluorine, namely, phosphate rock. Page 89 Within a decade it is expected that natural fluorspar output will be supplemented substantially by fluorine compounds from phosphate rock. Phosphate rock reserves in the United States and other localities in the free world are enormous. The scale of production of fluorine products, however, is limited by the need for special equipment to extract the fluorine compounds, and by the demand for phosphate fertilizer and chemical phosphate, of which fluorine compounds are potentially a byproduct. The major obstacles to large-scale commercial recovery are at present (1) inability to recover a product sufficiently low in silica for aluminum and chemical manufacture, (2) higher cost relative to natural fluorspar, and (3) the low recovery of fluorine from existing phosphate-treatment plants, requiring that completely new plants be built at large capital cost. Research toward better processes is being conducted by the Tennessee Valley Authority, Bureau of Mines, and various private companies. In 1950 the United States consumed about 9 million short tons of phosphate rock. The rock averaged about 3.5 percent fluorine and thus contained some 315,000 tons of fluorine. As only about a third of this was recoverable, the potential yield was about 105,000 tons of fluorine, equivalent to 215,000 tons of fluorspar. The doubling of fertilizer consumption expected by 1975 would require roughly 18 million short tons of phosphate rock, the fluorine content of which would be approximately 630 thousand short tons. As a substantial rise in the proportion of fluorine recoverable in the processing of phosphate rock can be expected, a recovery ratio of one-half of the fluorine contained is projected for 1975. Accordingly about 315 thousand short tons of fluorine may be available from phosphate rock in 1975, equivalent to approximately 650 thousand short tons of fluor- spar. At a 1975 domestic mine output of fluorspar of about 300,000 tons and a demand for 1,150,000 tons, as noted above, and if 650,000 tons fluorspar equivalent from phosphate rock is realized, required imports would be about 200,000 tons. These figures are summarized in table III. Table III.—United States fluorspar position in 1950 and projected 1975 [Thousand short tons] 1950 1975 Consumption 426 '1,150 Production from: Natural fluorspar 275 i 300 Phosphate reck 2 1 650 Imports 165 3 200 1 Projected. 2 Measured as fluorspar equivalent. 3 Required. Source: 1950 data from Bureau of Mines. Whether or not imports can reach 200,000 tons will depend on the supply-demand outlook in the rest of the free world. POSITION OF THE REST OF THE FREE WORLD In 1950 the rest of the free world used about 175,000 short tons of fluorspar of all grades. The demand projected for 1975 is about 640,000 tons. (See "Projection of 1975 Materials Demand.") This expansion is based, as for the United States primarily, on the rapid growth projected in aluminum and chemicals. Table IV.—Fuorspar position of the rest of the free world, 1950 and projected 1975 [Thousand short tons, all grades] 7950 1975 Consumption 1 175 2 640 Production i 325 3 840 Exports to U.S 165 3 200 1 Estimated from data from U. S. Bureau cf Mines. 2 Projected. 3 Required. To meet its own expanding demand and the import needs of the United States, the rest of the free world would have to expand its mine output by 1975 by about 2V2 times the level in 1950. If fluorine were not to become available from phos- phate rock and United States import needs were thus larger than projected by 650,000 tons, an expansion of production in other free countries to 4j/2 times current output would be re- quired to meet the total demand. Expansion seems feasible from existing reserves in Mexico, Newfoundland, and Spain. In addi- tion, the discovery of new deposits is certain. However, it is im- possible to estimate the effect of these two factors. Production abroad has almost quadrupled in the past 30 years. It tripled in the last 15 years. Conceivably 1975 production could increase to about double the level in 1950, but this would still be about 200,000 tons short of the estimated requirement. As noted above, however, the rest of the free world has extensive reserves of phosphate rock. Currently, production of phosphate rock in the rest of the free world is about equal to that in the United States. While recovery of usable fluorine products may not pro- ceed as rapidly abroad as here, it is reasonable to expect some development along these lines in the future. If, by 1975, fluorine recovery were about one-third the amount estimated for the United States, this, together with a doubled mine output of fluorspar, would permit estimated free world supply and de- mand to be balanced. Table V-A.—World fluorspar production, by countries, in 1950 Thousand Percent of short tons total United States 275 34 Mexico (exports) 72 9 Canada (shipments) 65 8 United Kingdom 60 8 France *44 5 Germany (Federal Republic) *39 5 Spain 36 4 Italy 35 4 Other countries 185 23 Total 811 100 Table V-B.—World fluorspar production and apparent consumption, by regions, in 1950 [Thousand short tons] Production Consumption U. S. and Canada 367 519 Caribbean 72 Other South America .... n. a. Western Europe 213 105 Africa *9 8 Free Asia 10 n. a. Oceania .... n. a. Soviet Sphere *140 *140 Total 811 772 *Estimated. Source: U. S. Bureau of Mines. Page 90 PROSPECTS AND PROBLEMS Selected General Statistical Sources If the United States and the other free countries were com- pelled in the future to rely on natural flurospar alone, serious obstacles to growth and security would emerge. Since the free world would find it difficult to meet its needs from natural fluorspar, substantial price increases would follow. Production abroad and imports to the United States can probably be expanded until such time as phosphate rock does make its expected contribution, provided foreign fluorspar re- sources are more fully utilized than at present. During the next few years, until fluorine from phosphate rock is widely used, imports of fluorspar will probably remain significant, perhaps even a larger proportion of United States supply than in 1950. SECURITY CONSIDERATIONS United States output, imports, and stockpiles of fluorspar place the United States in a generally secure position over the next 5 years, except to the extent that acid-grade remains scarce. However, present programs, if achieved, should resolve the shortage within a few years. Much of the fluorspar consumed in the glass and enamel industries could be withdrawn in times of emergency. In addi- tion, substitutes for fluorspar in steelmaking, such as calcium chloride and ilmenite, could be used in wartime. HignetT; T. P., and Siegel, M. R. "Recovery of Flourine from Stack Gases." Industrial and Engineering Chemistry. November, 1949. U. S. Bureau of Mines. Minerals Yearbook, 1949 and previous years. Washington, D. C, Government Printing Office, 1951. U. S. Bureau of Mines. "Preprint, 1950—Fluorspar and Cryolite." Minerals Yearbook, 1950. Washington, D. C., Government Print- ing Office, 1951. References Elsewhere in This Report This volume: Aluminum. .Iron and Steel. Magnesium. Projection of 1975 Materials Demand. Reserves and Potential Resources. U. S. Bureau of Mines Tables. Vol. IV: The Promise of Technology. Tasks and Opportunities. Vol. V: Selected Reports to the Commission. United States Fertilizer Resources. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Holmes, R. E. Role of Technology in the Future of Fluorspar. Chapter 19 The Situation in Brief A substantial increase in the demand for asbestos, industrial diamonds, mercury, mica, and quartz crystals is expected in the United States and the rest of the free world during the next 25 years. These are essential minerals, but domestic reserves are either nonexistent or highly inadequate, both as to quantity and qual- ity. The bulk of United States needs must therefore be supplied by imports from other countries of the free world, the reserves of which are deemed adequate to satisfy all free world needs. In some instances, however, there are potential obstacles to expansion of output. Moreover, as the import routes are stra- tegically vulnerable, security problems arise. These security problems must be met by accumulating and maintaining an adequate stockpile and ultimately by the de- veloping of synthetic substitutes and of processes for up-grad- ing low-quality materials from secure sources. ASBESTOS Asbestos is a mineral fiber of varying chemical composition characterized by effective heat-insulating and fireproofing properties. Asbestos from some localities, principally Southern Rhodesia, has high electrical resistance. Some fibers are long and can be spun. Asbestos is essential in the production of insulating, fire- resistant and acid-resistant textiles; for gaskets and pipe cover- Special Strategic Materials ings in ships, airplanes, and power plants; and for friction materials in clutches and brake bands. Asbestos combined with cement has found increasing use as roofing and siding material, a use for which it is excellent. These uses result in a demand for two distinct types of the mineral—long-fiber asbestos that can be woven into textiles, and short-fiber asbestos for other uses. United States consumption ©f spinning grades of asbestos has increased from about 10,000 short tons per year around 1925 to 30,000 tons in 1950. Consumption of short-fiber asbes- tos has increased from 220,000 tons around 1925 to about 700,000 tons in 1950. In the 1926-50 period the United States was able to supply only between 3 and 8 percent of its neds from domestic sources. Even of this small amount less than a tenth was of spinning grade. Almost ail the imports were from Canada, Southern Rhodesia, and the Union of South Africa. The growth in demand is expected to continue into the future, though at a slower rate. Estimates made on the same basis as those for other materials in this general study of key commodities, indicate that asbestos consumption of all grades in 1975 will be roughly half as much again as for the period 1946-49, implying a demand for spinning grades of approxi- mately 50,000 short tons, and for short-fiber grades of some 1 million tons. United States asbestos reserves are limited; most of them are in one mine in northern Vermont, the production of which is about 90 percent short fiber. Smaller occurrences are mined Page 91 in Arizona, North Carolina, Georgia, and California. Califor- nia appears to offer the greatest promise, but even so domestic sources will probably never meet more than the small fraction of United States demand that they have been able to meet in the past. Allowing for the same growth rate in asbestos consumption in other countries of the free world as in the United States dur- ing the next 25 years, the 1975 level of consumption is esti- mated at 35,000 short tons of spinning grades and other stra- tegic grades and 350,000 tons of short-fiber asbestos. Production of all grades in the rest of the free world tripled in the past 25 years, from 350,000 tons in 1925 to about 1,100,- 000 tons in 1950. Although no quantitative reserve data are available, the general impression is that reserves are adequate to sustain the increased production required to satisfy the suggested future demand. The large deposits in Canada are believed to have sufficient reserves to support mining at an expanded rate for many years. More fiber is now recovered from these deposits as a result of progress in milling and use technology. Asbestos from the other major producers, in southern Africa, differs in chemical composition and physical properties from the Canadian product and is essential for certain military uses. African reserves are said to be large enough to support an ex- panded production. Prospects and Problems Although there are no apparent physical obstacles to an in- crease in asbestos production, output might lag behind a grow- ing free world demand because of the situation in Africa, where expansion beyond the notable post-war increases are inhibited by desires of producers to avoid over-extension of facilities, to maintain a balanced production between standard and special grades, and to assure that the industry, and the communities that depend upon it, have long life. Nevertheless, it is unlikely that a significant long-term rise in the price of asbestos relative to the general price level will occur, as there are promising possibilities for substitution. In recent years the glass industry has devoted considerable effort to the development of glass fibers that can be used for textiles and insulating materials; these glass fibers have already given considerable competition to asbestos. General substitution, how- ever, is not in sight as long as the production costs of chemically stable glass fibers continue to be high. There are also some at- tempts to develop synthetic asbestos, but so far not much head- way has been made. Research in the chemical and mechanical treatment of natural asbestos has, however, apparently made progress. The future may well bring increasing intensification and diversification of processing methods for natural asbestos, ultimately permitting the production of a variety of grades from one stock. All in all, the free world is not likely to encounter any serious problems in its peacetime asbestos supply during the next 25 years. At the same time, security considerations demand various precautions. The search for and development of domestic as- bestos sources should be encouraged as should elimination of nonelectrical uses of strategic, low-iron asbestos. Continued and intensified research should be encouraged in substitutes for asbestos, the purification of long-fiber asbestos, and the possible building up of long fiber from short fiber. INDUSTRIAL DIAMONDS Because the diamond is the hardest known substance, indus- trial diamonds are essential for the sharpening and shaping of the very hard cutting tools and dies, particularly carbides, that are being used increasingly in high-speed metal working. This use largely determines the level of consumption. Other important industrial applications of diamonds are in drills for geological and mining work, in wire-drawing dies, and in abrasive-wheel dressing tools. United States consumption of industrial diamonds in 1950 was between 12 and 13 million carats (2,264 carats equal 1 pound). The entire supply originated abroad. Imports during the year were 11 million carats, including acquisitions for the stockpile; between 1 and 2 million carats came from stocks in the hands of the domestic trade. This level of consumption rep- resented a dramatic growth in the use of industrial diamonds over the past 25 years, the average yearly consumption between 1928 and 1939 being only 900,000 carats. Over the past 25 years United States consumption has been between 60 and 70 percent of total world consumption. As steel production is a convenient gage of metal-working activity, the likely level of the consumption of diamonds in 1975 can be tied to the rate of ingot production in that year. Con- sumption during the Second World War (a period considered more indicative of the present trend toward the increased application of carbide tools than was 1950) was 0.1362 carat per ton of steel ingot; on this basis indicated 1975 consumption is projected at 20 million carats, or 50 percent over the wartime level. As domestic sources of industrial diamonds are virtually nonexistent, and as there is no prospect for the discovery of an adequate domestic source, this country will continue to rely entirely on imports until synthetic diamonds are made or metal- working processes developed that will not depend on diamonds. Diamonds are so easily smuggled across international bor- ders that their movement is physically hard to control and sta- tistically difficult to chart. For this reason it is impossible to separate the free world from the rest of the world as a whole as is done for all other commodities in these studies. As far as can be determined, the rest of the world consumed between 4 and 5 million carats in 1950. Production was about 12,265,000 carats, almost all from southern Africa. About three-quarters of the total was from the Belgian Congo, mostly produced by a single mining company, which thus dominated world output. The remainder came variously from the Gold Coast, Union of South Africa, Sierra Leone, Angola, and French Equatorial and West Africa, in that order. There was also minor production in Tanganyika and South America. It seems reasonable to estimate that the ratio of diamond consumption to steel ingot production in the rest of the free world will increase during the next quarter century to about three-quarters of that expected for the United States, or about 0.1 carat per ton of steel ingot. On this basis, the estimate of consumption in the rest of the free world around 1975 is 14 million carats. Total free world needs would then be 34 million carats, an increase of roughly 175 percent over the 1950 level of output. Whether such an increase could be accomplished depends basically on the reserve position of the producing countries. Page 92 * Nonminerals Rubber Chemicals it Nonminerals Chapter 2© Rubber—Natural and Synthetic The Situation in Brief The consumption of rubber in the United States can be expected to continue to grow vigorously, possibly doubling over the next 25 years. An even greater rate of increase can be ex- pected in the other free countries, so that the total free world demand for new rubber about 1975 may possibly be around 23/2 times 1950 consumption. The competition of synthetic rubber is expected to bring the long-run world price of natural rubber down to the real cost of producing synthetic rubber—that is, to perhaps 20 cents a pound in terms of 1950 dollars. The physical basis for a very substantial increase in the pro- duction of natural rubber is provided both by the development of a new highly productive tree stock, and by the possibility of increasing acreage. However, at the price likely to be set by the competition of synthetic rubber, and with the uncertainties generated both by the security interests of rubber-consuming countries in stimulating their own synthetic production and by the possibility of unsettled political conditions in southeast Asia, natural rubber production is not likely, in the long run, to keep pace with the growth in total demand. In the near future total supplies of rubber are likely to be ample, but eventually there can be expected a growth of de- mand that will require construction of new capacity for syn- thetic rubber production as well, as the expansion of natural rubber production. It appears evident that fundamental market forces, if per- mitted to operate, would bring about a marked expansion in the production of both natural and synthetic rubber during the next 25 years. To the extent that natural rubber production fails to keep pace with growing world demands for new rubber, and that the price of natural rubber is significantly above the real costs of synthetic rubber, the production of synthetic rubber can appropriately be expanded to make up the difference. This would tend to hold the world rubber price close to the real cost of producing synthetic rubber. The market forces can operate only indirectly on synthetic production, however, so long as synthetic rubber continues to be produced principally by the United States Government, and this factor must also strongly influence natural rubber pro- ducers. Government production of synthetic rubber may oper- ate in two ways to inhibit natural rubber countries from ex- panding production: 1) To the extent that it leads to an administratively deter- mined and somewhat lower price for synthetic rubber, it would reduce profit potentials on natural rubber. 2) It confronts natural rubber producers with the possibility of administrative price actions possibly more severe than normal market conditions would provoke. In much the same manner, private industry in this country would hesitate to build synthetic rubber plants that might have to meet such competition from Government plants. If then synthetic rubber production is to expand adequately and with sufficient rapidity, and without injury to the econo- mies of the natural rubber producing countries, it should be allowed to take place through normal market forces. The syn- thetic rubber production expansion that would take place under such circumstances would be consistent with national security, provided the appropriate stockpiling policies are also followed. The Commission, therefore, concurs in the declared United States Government policy uthat the security interests of the United States can and will best be served by the development within the United States of a free competitive synthetic-rubber industry."* To this end, it appears desirable that efforts be continued toward an early disposal of Government plants and removal of Government regulations. THE UNITED STATES POSITION The total actual consumption of rubber in the United States in 1950, after adjusting for inventory changes, amounted to 1,620,000 long tons of new and reclaimed rubber, an all-time peak. Within that total consumption there was about 738,000 long tons of natural rubber, a level exceeded only in 1941; 582,000 long tons of synthetic rubber, making a total of 1,320,- 000 long tons of new rubber; and 300,000 long tons of re- claimed rubber. The properties of rubber, such as extreme elasticity, impermeability, softness, and electrical nonconduc- tivity, have made it an essential material in a wide variety of uses. Transportation, chiefly pneumatic tires, absorbed about two-thirds of the total rubber consumed in 1950. In nontrans- portation uses, industrial rubber goods (such as mountings, belting, hose, and fittings), sponge and foam rubber cushion- -Public Law 469—80th Congress ; extended to June 30, 1952. Page 99 ings, heels and soles, wire and cable insulation, and footwear, are the most important uses, in roughly that order. The tremendous growth in the consumption of rubber may be seen from the comparison with earlier years: in 1900, total rubber consumption amounted only to 20,000 long tons; by 1930 it had risen to 530,000 tons; by 1940 it was over 800,000 long tons, and by 1950 it had increased to over 1.6 million tons. During 1950 the United States produced 476,000 long tons of synthetic rubber, less than half its present capacity, and 313,000 long tons of reclaimed rubber; it imported 803,000 long tons net, mostly natural rubber, a level exceeded only in 1940 and 1941. The total supply of both synthetic and natural rubber in 1950—1,592,000 long tons—was slightly less than actual consumption. The difference came from net inventory reductions. Up to the Second World War, the United States was de- pendent on outside sources, principally southeast Asia, for its entire new rubber supply. This was all natural rubber. Synthetic rubber production capacity was developed during the war but much of it was closed down afterward, to be reopened after the invasion of South Korea. Synthetic rubber production amounted to 36 percent of new rubber consumption in 1950, and 74 percent in 1951 when much of the imported natural rubber went into the stockpile. The bulk of this synthetic capacity consists of a general- purpose rubber known as GR-S (Government Rubber—Sty- rene), a copolymer of butadiene and styrene. Butadiene, which is a gas at normal temperatures and pressure, may be produced from either petroleum or alcohol. Alcohol butadiene costs more because of the higher initial cost of alcohol as compared with petroleum. Styrene is made from benzene and ethylene. The remaining synthetic capacity is for certain special-pur- pose rubbers such as butyl from petroleum, neoprene from acetylene gas, and several so-called N-type rubbers which are copolymers of butadiene and acrylonitrile. All GR-S and butyl production facilities are Government-owned. During the war domestic synthetic rubber production reached 820,000 tons in 1945, of which over 700,000 tons was GR-S. In 1950 the United States produced 476,000 tons, of which 358,200 tons was GR-S. Total capacities of Government and private plants are expected to be about as follows by the middle of 1952: Long tons per year GR-S 860,000 Butyl §0,000 Neoprene 70,000 N-type 20,000 Total 1,040,000 United States consumption of rubber, new and reclaimed, may reach 3.3 million long tons by 1975. (See "Projection of 1975 Materials Demand.") This doubling of demand would represent a lower rate of increase than occurred during the preceding 25 years, a period when consumption tripled. The lower rate of increase would result partly from the fact that the number of motor vehicles in operation is not expected to increase in the future as rapidly as in the past. In fact, an even larger part of increased demand in the decades ahead may be associated with nontransportation uses—a category that increased more than fivefold between 1925 and 1950 and may be expected to continue to grow rapidly. The United States has two main sources of domestic supply- to meet its requirement—reclaimed rubber and the war-born synthetic industry. The growing volume of all rubber in use, and the high possible rate of recovery, provide a very high potential for production of reclaimed rubber. The competitive advantages and supply conditions of natural and synthetic rubber, as to both qualities and prices, have in the past kept reclaimed rubber production below its potential level. Relatively greater reclaimed rubber production may be expected in the future, and it is projected to supply about 800,000 long tons by 1975, compared with 313,000 in 1950. PRODUCTION OF SYNTHETIC RUBBER Given a projected total demand of 3.3 million long tons by 1975, and reclaimed rubber production of 800,000, new rubber supplies would have to be some 2.5 million tons. Present domestic synthetic capacity is over 1 million tons a year. This capacity can be expanded substantially by new-plant construction to keep pace with growing demands. Putting aside, for the moment, considerations of national security and possible future price and supply conditions for natural rubber and synthetic rubber production in other free countries, the basic factors that will affect expansion of syn- thetic rubber production in this country are the availability of feedstocks (such as butadiene, styrene, and isobutylene) and the quality and performance of synthetic rubber compared with natural rubber. The supply of feedstocks can be readily increased over the next 25 years with little, if any, rise in real costs. The basic feedstocks absorb only a small part—less than 1 percent—of the total supplies of petroleum and natural gas likely to be available. Thus, even if United States synthetic rubber produc- tion were to reach 2.5 million tons by 1975, a level equal to total domestic needs, the amount of hydrocarbon feedstocks needed would be only about 10 to 15 percent of total petro- chemicals, which in turn probably would constitute less than 5 percent of total petroleum and natural gas supplies. Of course, additional elaborate and expensive equipment would be re- quired to obtain these feedstocks. With regard to quality and performance, synthetic rubber is now equal or superior to natural rubber in a large proportion of uses, and its relative performance doubtless will continue to improve. New rubber polymers and, perhaps, new feedstocks may well be produced, while continued advances should be made in the qualities of the presently produced special and general-purpose synthetics. By 1975, therefore, natural rubber would have superior qualities, and be preferred, in a compara- tively small proportion of all uses. In all likelihood, therefore, insofar as availability of feed- stocks and performance qualities are concerned, synthetic rub- ber production can expand. Any judgment as to the likely rate and volume of expansion must, however, take into account the possible future developments in prices, in the total world demand for rubber and in the supply of natural rubber. Page 100 RUBBER IN OTHER FREE COUNTRIES The 1950 consumption of rubber in other free countries amounted to some 950,000 long tons, of which about 785,000 was natural rubber, 125,000 reclaimed, and 40,000 synthetic. On the supply side, natural rubber production was about 1,855,000 long tons; synthetic 58,000; and reclaimed about equal to its consumption, 125,000 tons. The excess production of 1.1 million tons, mostly natural rubber, covered net ship- ments to the United States and countries outside of the free world. Three-quarters of the world's natural rubber output was from Malaya and Indonesia; southeast Asia as a whole ac- counted for 95 percent. In view of the lower levels of rubber consumption in the other free countries, demands in those countries are projected as tripling over the next 25 years while that of the United States may double. Allowing for a roughly corresponding increase in production of reclaimed rubber, the demand for new rubber in the rest of the free world is taken as reaching about 2.5 million long tons by 1975, compared with 825,000 in 1950. In terms of physical potential alone, natural rubber produc- tion could be expanded substantially during the next 25 years. Given stable political conditions in the natural rubber produc- ing countries, particularly in southeast Asia, and a continuing favorable market, it is quite possible that the 1950 rate of pro- duction, 1,855,000 long tons, could be doubled by 1975. This could be achieved by a feasible rate of replanting with selected stock, which could triple rubber yield per acre. At the present time, yields per acre average 400 to 500 pounds. Improved stocks, which have been developed and used, have yielded as much as 2,000 pounds. Replanting could be supplemented by a sizable expansion in acres planted to rubber. Even with future stable political conditions in the natural rubber producing countries, however, conditions in the industry together with the competitive forces of synthetic rubber and other agricultural products, suggest the greater likelihood that the expansion of natural rubber production may be at a rate which would bring it to a maximum of 2.5 million tons, at best, by 1975, an increase of roughly one-third over 1950 pro- duction. The average age of the rubber trees throughout Asia is about 30 years, well past the peak yield. During the past few years the unusually high rubber prices stimulated production, a large part of which involved slaughter tapping. But with the an- ticipated significant decline in natural rubber prices, it will no longer pay to tap many trees now being tapped, and the slaughter tapping to date will mean an accelerated decline in future yields and productive capacity. The rate of replanting and new acreage development would have to be substantial in order to offset this declining productivity. Replanting may be curtailed as competition with synthetic rubber drives down natural rubber prices and makes it difficult for the rubber growers to compete with other agricultural producers for re- sources, particularly labor, in the producing countries. Further, while it is useful to attempt an evaluation of the possible future expansion of natural rubber production on the assumption of stable political conditions in the producing coun- tries, account must be taken of the unstable conditions that exist today. Necessary replanting is not going forward cur- rently. Since it takes about 7 years for new trees to reach a commercial yield, it seems possible that natural rubber produc- tion could be no more than sustained during the next 10 years or so and may even decline. Any future expansion may there- fore start from a lower level and would have to be correspond- ingly greater. The likelihood that such an expansion would bring total output about 2.5 million tons appears questionable, although it is undoubtedly physically possible. PROSPECTS AND PROBLEMS It is evident that, with the more than adequate supply of synthetic feedstocks and improvement in synthetic performance qualities that may be expected, the growing demand for new rubber could readily be met by expanding synthetic rubber production. It is, on the other hand, questionable whether the expansion in natural rubber production, subject to the price competition of synthetic, and possibly affected by political conditions in southeast Asia, will keep pace with growing demand. While national security policies must affect the rate of ex- pansion of domestic synthetic capacity, these policies can also be guided in part by market forces. At the end of 1951 the natural rubber price was about double that of synthetic rubber (around 50 cents a pound compared with 26 cents for GR-S rubber), and the supply of natural rubber was short of total free world demands for new rubber. Whenever the price of natural rubber is significantly higher than the cost of synthetic, including recoverable return on the investment, the incentive to expand synthetic rubber production will be strong. It is to be expected, therefore, that synthetic rubber supplies will continue to be increased over the long run, and will competitively bring down the price of natural rubber to the price level of synthetic rubber, which in turn should, in the long run, remain close to synthetic production costs. This situation would, of course, take hold after the next few years during which the world's new rubber supplies may be ample. Supplies currently available have induced a sharp decline in natural rubber prices. If the synthetic rubber industry is in private hand, this gen- eral policy for gearing the rate of construction of new plants to the market prospects should occur on a fairly orderly basis as each producer adjusts to his market possibilities. Until the synthetic rubber industry is in private hands, the governmental policy should follow the same general criterion of gearing syn- thetic production and the construction of new plants to the prospective demand for rubber at a price close to the cost of producing synthetic, subject, of course, to considerations of national security. THE COST OF PRODUCING SYNTHETIC RUBBER Present experience affords some guidance as to the possible future cost of production of synthetic rubber. With operations at comparatively low levels of capacity, the costs of GR-S and butyl rubber in Government plants during 1949 were about 18*4 cents a pound. Cost calculations indicate that if the plants had operated a full capacity, the costs per pound might have been as much as 3 cents lower. In spite of some new cost-saving production techniques, however, the Government has had to increase its selling prices. In the case of GR-S, the use of Page 101 higher cost alcohol feedstocks, required to expand production in the short run, necessitated a price increase from 18J/2 cents to 26 cents. And increasing costs of production led to a rise in the butyl price, from 18/2 cents to 20% cents a pound, in order to avoid a loss. Since the supply of the petroleum-based feedstocks can be expected to increase substantially, the use of alcohol may be regarded as temporary. Further, the increased quantities of feedstocks should be available with little, if any, increase in real costs, so that insofar as feedstocks are concerned the real cost of about 20 cents may be taken as a long-run cost guide, for both GR-S and butyl rubber, on the basis of Government- operated plants with present techniques. The cost experience of private operators may, however, be significantly different, possibly higher. Feedstocks may be more expensive if purchased in the open market instead of being supplied within an integrated system. Similarly, investment, research, sales, tax, insurance, and interest charges may be appreciably different and higher for private operators. Finally, profit allowances would lead to higher prices. In all, taking into consideration the likelihood of marked technological ad- vances which would tend to reduce costs, as well as improve the qualities of the synthetic rubbers, it appears that the long- run cost per pound of GR-S and butyl in private plants may be a few cents more than 20 cents a pound, based on the 1950 general price level. The future real costs of producing the bulk synthetic rubbers, GR-S and butyl, in this country may then conservatively be placed within striking distance of 20 to 25 cents in 1950 dollars, including a profit margin. And, allowing for special quality differentials, this would be the price range to which the natural rubber price would tend to adjust. SYNTHETIC SHARE OF NEW RUBBER It is not possible, nor is it necessary, to evaluate precisely the relative contributions of natural and synthetic rubber to the free world total of new rubber supplies in the future. It does appear likely that synthetic rubber supplies will continue to increase in relative importance and may account for as much as 50 to 60 percent of the total supply of new rubber around 1975. Taken together free world demand for new rubber, as pro- jected, would total some 5 million long tons by 1975. If natu- ral rubber production does expand to what appears to be the most reasonable outside limit of 2.5 million long tons by 1975, and if the total amount is available to the free world, synthetic rubber supply would need to provide 2.5 million long tons by 1975 (50 percent of new rubber consumption), as compared with slightly over one-half million long tons in 1950 (25 per- cent ) and less than 1 million tons in 1951. In 1950, however, the Soviet Union and satellite countries absorbed about 11 percent of the world's total consumption of natural rubber. To the extent that their future rubber needs were met out of natural rubber supplies, synthetic rubber would have to meet a larger share of the free world's new rub- ber demand. If around 1975 the Soviet sphere countries should purchase no more than in 1950, about 200,000 long tons, the share of synthetic rubber in total free world supplies then would be around 55 percent. It is quite possible that the Soviet coun- tries will buy an increasing amount of natural rubber, so that the share of synthetic rubber in free world consumption may be close to 60 percent. It is not possible to estimate just how the expanding synthetic rubber capacity would be distributed as between the United States and other free countries. At present, Canada and West- ern Germany have a combined capacity of less than 100,000 long tons, and the remaining 90 percent is in the United States. Plans are being carried out or are being explored to introduce synthetic rubber plants in the United Kingdom, France, Italy, the Argentine, and Brazil. On the whole, it is most probable that national security and economic considerations will lead to an appreciable expansion of synthetic rubber capacity outside the United States. Synthetic production may also be expected to increase in Soviet countries. The foregoing calculations as to the likely magnitudes and composition of consumption that may be expected by 1975, on the basis of the maximum production rate of 2.5 million long tons of natural rubber and the Soviet sphere countries taking no more than in 1950 (200,000 long tons), are summarized and compared with the 1950 data in the following table. Free world rubber consumption, 1950 and projected 1975 [Thousands of long tons] Natural rubber Synthetic rubber Total new rubber. Reclaimed rubber Total consumption United States Other free countries Total free world 1950 1975 1950 1975 1950 1975 738 582 (a) (a) 785 40 (a) (a) 1, 523 624 2, 300 2, 700 1, 320 300 2, 500 800 825 125 2, 500 400 2, 147 421 5, 000 1, 200 1, 620 3, 300 950 2, '900 2, 568 6, 200 a Not separately projected. Source: 1950 data, U. S. figure from 1951 Statistical Abstract: figures for rest of the world from Rubber Statistical Bulletin, vol. 6, No. 4, Jan. 1952. SECURITY CONSIDERATIONS In view of the United States ability to expand synthetic rub- ber capacity, no serious security supply problem need be en- countered during the next 25 years. If synthetic rubber capacity is expanded at a rate and volume close to the levels projected, a year or two should at any time enable the United States to build up any additional plant capacity needed for a war emergency. The national rubber stockpile, at goal level, would presumably provide supplementary supplies during the build-up period. The stockpile goal can, of course, be adjusted to changes in the relative dependence on imports, and to changes in the degree of substitutability as between natural and synthetic rubbers. Further the stockpile goal would be *affected by the extent to which natural rubber production is successfully fostered in Cen- tral and South America and in Africa. Should natural rubber production fail to expand signifi- cantly, the United States and other free countries should in- crease synthetic rubber production at a correspondingly greater rate, and thus be closer to the plant capacity levels that might be required in a war emergency. Page 102 Selected General Statistical References Secretariat of the International Rubber Study Group (London). Rubber Statistical Bulletin. Vol. IV, No. 4, January 1952, and previous issues. Steelman, John R. Report to the President on the Maintenance of the Synthetic Rubber Industry in the United States and Disposal of the Government-Owned Synthetic Rubber Facilities. Washington, D. C., Government Printing Office, 1950. U. S. Department of Commerce Statistical Abstract, 1951, and previous years. Washington, D. C., Government Printing Office, 1951. Chapter 21 The chemical industry differs from other industries chiefly in the fact that it has tremendous flexibility, both in the raw materials it utilizes and in its processing techniques. It has a unique facility for processing abundant raw materials not only into products suitable as substitutes for other materials, but also into new materials having new properties and superior to any- ing previously known. In the United States, the chemical industry may be consid- ered to have come of age only after the First World War. Since that time, it has made phenomenal progress by concentrating intensively on research and development. Practically every in- dustry is dependent on the chemical industry to a considerable degree, and this is also true of every household and consumer. The chemical industry itself is one of its own best customers. Heavy annual investments both in research and in plant have been necessary to achieve these results. Continued heavy in- vestment is necessary for further development. The steady growth in other fields of science and industry has of course been a vital factor in the growth of the chemical industry. The chemical industry in the United States faces no long- term problems of raw materials supply. In this it differs from the chemical industry in the other industrially developed coun- tries of the free world. In those countries the problems of the chemical industry are related chiefly to shortages of basic raw materials such as coal, petroleum, natural gas, lignite, sulfur, and others. These problems are covered elsewhere in this report, particularly in the individual commodity studies and are there- fore not considered here. In the underdeveloped countries of the free world, however, the development of the chemical industry is hampered not only by lack of capital and technologically trained personnel, but, more importantly, by the fact that a chemicals industry must lean heavily on other industry, especially in its more complex operations. Power, transportation, steel and its alloys all are necessary before a large-scale chemical industry can be built. This is only possible when general industrial development has reached a suitable level. This is a slow process and may take much of the next 25 years to achieve. THE PROMISE OF TECHNOLOGY Chemical technology works with what it can get: sand, salt, soda, brines, air, water, sulfur, phosphate rock, limestone, cellulose, coal, petroleum, lignite, natural gas, molasses, starch, References Elsewhere in This Report This volume: Projection of 1975 Materials Demand. Vol. Ill: The Outlook for Energy Sources. Oil. Vol. IV: The Promise of Technology. Coal Products and Chemicals. Oil and Gas as Industrial Raw Materials. Chemicals and even corn-cobs and oat-hulls. In general, these materials are cheap and plentiful. Chemical industry also, above all other industries, has a great capacity for adapting itself to variations in raw materials, because to a large extent it can work out methods for using raw materials interchangeably. Finally, it has a great capacity for meeting crises. Examples are many—dyestuffs, fixed nitrogen, medicinals, synthetic rubber, silk, quinine, ivory, camphor. The broad questions, therefore, that this report will attempt to answer are as follows: a) To what extent can chemical products alleviate potential shortages of raw materials, and what does chemical tech- nology promise in the way of new and superior products for the future? b) What is the structure of the chemical industry and at what rate is the industry expanding? c) In carrying on through the next 25 years, what drafts will the chemical industry make on the nation's supply of basic raw materials and energy? d) Although no long-range difficulties are envisioned for the next 25 years, what shorter range difficulties may the chemical industry encounter? Virtually everything the economy requires in a material sense is related to the following six basic needs of mankind: (1) food; (2) clothing; (3) shelter; (4) transportation and communication; (5) medication; and (6) tools, machinery, and equipment with which Therefore, if the chemical end-product consumption trends in these six categories can be appraised, there would be a basis for projecting trends in basic raw materials and intermediates and prime chemicals. FOOD, CLOTHING, AND SHELTER In foods, the big ultimate problem is more output per unit of land. The means of improving productivity are principally through mechanization, greater use of plant foods, more effec- tive and intensive use of pesticides, improved strains of plant and animal species, greater use of animal feed supplements (such as vitamins, antibiotics, amino acids), and better control of water in agriculture (i. e., irrigation, rain-making, rain pre- vention). Also there will be better use of what is produced Page 103 through more efficient processing and packaging and through better harvesting, transporting, and storage practices. Chemically, this general problem means enormous increases in the use of the basic plant foods—nitrogen, phosphorus, and potash; similar increases in the use of pesticides—chlorinated hydrocarbons in particular; greater use of protective films for packaging; and much more refrigeration. The future trend in clothing is clearly shown by develop- ments of the past decade—i. e., continued supplementing of natural fibers by synthetic polymer fibers, particularly the polyamides, the polyesters, the polyacrylonitriles, and new fibers yet to be developed. The polymers not only have further po- tential in textiles, but in leatherlike, furlike, and feltlike mate- rials. There will also be greatly increased use of chemical (polymeric) finishing agents, which will be applied to natural fibers to improve their competitive position. However, nothing can stop the onward march of the synthetic polymer fibers. Much greater use will be made of glass products in insula- tion, building blocks, reinforced sheathing, and woven glass- fiber goods for curtains and wall coverings. Synthetic fibers, asphalt, synthetic rubbers, and plastics also will come into greater use—particularly in floor coverings. Less hardwood but more hard-surface flooring will be used (polymers such as the vinyls). Wood will continue to be used, but it will be wood that has been chemically treated for longer life, greater fire- resistance, and lower maintenance. The trend in sheathing and roofing will be toward compounded compositions, combining inorganic fibers with polymeric binders—making use of integral pigmentation and therefore less paint and lower maintenance. Ducts and piping will be plastic or plastic composition, and metal cabinets will give way to combination fiber-plastic ones. Housing of this type may be somewhat more expensive, but depreciation and maintenance will be far below present levels, thus preserving the owner's equity and possibly reducing his real cost, or at least providing a higher standard of housing at equal cost. OTHER BASIC NEEDS One of the big developments of the next 25 years will be enormous construction programs for super highways, super air- ports, pipelines, rail rehabilitation, and coaxial cable and micro- wave radio relay for radio, television, and telephone systems. With respect to transportation, so far as the chemical industry is concerned, this means a tremendous demand for cement. For communication, the conducting metals, copper and aluminum, will continue to be used, but with plastic-metal sheathing and plastic dielectrics. Improved vehicles will be developed, using light metals and plastics together with glass-fiber reinforcing. Petroleum will be the basic fuel, but a given quantity will do much more useful work. The senseless waste of liquid fuel will tend to be reduced (particularly if unnecessary automotive horsepower is not further increased) as fuel efficiency increases. The use of medicine of all kinds will greatly increase— though many of the old diseases (malaria, for example) will dis- appear. The trend toward chemotherapy will continue. New antibiotics, polymeric blood plasma substitutes, synthetic cor- tisone and cortisone-like substances, and many new chemo- therapeutic agents will be produced. More medication will be taken for promoting good health than for curing disease. Here the quantitative drain on chemicals and basic materials will not be relatively great. A little will go a long way in terms of vitamins, minerals, antibiotics, and amino acid supplements. For capital goods requirements, there will be greater use of glass and glass-lined equipment for piping, stills, and reaction vessels used in high-temperature operations. There will be new refractories withstanding higher and higher temperatures, using compounds of zirconium, vanadium, aluminum, boron, silicon, carbon, and other elements. Glass-fiber-plastic combinations having the strength of steel will begin to be applied in industrial equipment. New carbon-fluorine and carbon-silicon plastics that can withstand high temperatures and artificial graphite pipes, rods, and shapes, will be increasingly used. Plastics, either alone or reinforced, will replace much industrial piping—espe- cially where corrosion resistance is important. The quantity of prime and intermediate chemicals needed by 1975 to supply these six major categories will have to be nearly three, and perhaps four, times that consumed in 1950. The minimum increase suggested will of course not apply to all types of chemicals; some, such as pigments, dyes, and in- dustrial explosives, will hardly increase twofold, whereas the synthetic polymer materials probably will increase between five- and ten-fold. In general, no long-range bottlenecks are foreseen for the basic materials. However, some shorter range bottlenecks, such as those experienced in sulfur and in benzene in 1950 and 1951, may well be encountered. These will be considered in a discus- sion of the projections of individual commodities later in this chapter. Given time, there should be plenty of all the raw materials required for chemical industry, even though in some cases at a slightly higher cost. Careful attention must be given to the question of training scientists and technologists. A con- tinued shortage here would be an especially serious impediment to the development of the industry. STRUCTURE OF INDUSTRY The chemical process industry as a whole included 18,000 plants in 1947 and produced products valued at 35.4 billion dollars. This includes such industries as rubber processing, petroleum refining, and paper and paperboard manufacture. Without these, the total volume amounted to 22.7 billion dollars [/]. There are 40 companies in the United States producing chiefly chemicals and having sales of more than 5 million dollars a years. There are also 6 additional companies making only rayon, and a number of petroleum companies and other large manufacturers whose products include a substantial pro- portion of chemicals. Finally, a number of the rubber com- panies are manufacturing synthetic rubbers and plastics and numerous other companies are making a wide variety of chemical end-products. Total 1939 and 1949 sales of the 45 leading companies were 1.1 billion and 4.5 billion dollars, respectively. Chemicals rose in price during this decade by 40 percent [2]. The 1939 figure corrected for this price difference amounts to 1.5 billion dollars. The 1949 figure thus represents a 200 percent increase in 10 years. During this period the Federal Reserve Board index of industrial production rose from 108 to 174, an increase of only 61 percent. This indicates a ratio of chemical growth to Page 104 all industrial growth of 300 to 161 or 1.9. On the assumption that this relative growth will continue over the next 25-year period—that is, at about two times as great as that of industrial production generally—and as the total value of all goods and services is expected to double by 1975, this would mean that the chemical industry as a whole will be about four times its present volume by then. EXPECTED SUPPLY AND DEMAND Estimates of growth, related back to basic raw materials and energy, should point up the difficulties that may be encountered in raw material supply in the next 25 years. The following nine chemical end-products have been chosen for analysis since they are in fields where the greatest growth is anticipated and where their expanded use for replacing products in short supply may be expected. Synthetic elastomers (rubber) are considered in a separate chapter. Plastics and synthetic coating materials Detergents Synthetic medicinals, including antibiotics Refractories Insecticides Glass Synthetic fibers Cement Halogenated hydrocarbons The wide variety of properties obtainable in different plastics has meant a growing impact by plastics on essentially every segment of industry. Plastics have in the past and will in the future substantially supplement the supply of the following materials by substitution: Copper Steel Ceramics Zinc Glass Rubber Lead Leather Wood Tin In addition, they will have many unique applications of their own, because of their physical properties and because of the ease with which they may be formed and applied. In many cases the substitutions expected are ones in which plastics do not appear today, or do so only slightly. Examples are household water piping, refrigerator cabinets, and furni- ture. Substitutions already occurring include replacement of lead sheathing for electric communication cables by poly- ethylene, of rubber by vinyl garden hose, leather by vinyl shoe soles, metal "tote" boxes by polyester laminates, metal office equipment housings by polystyrene and phenolics, and linoleum by vinyl flooring. Various industry estimates for the growth of plastics pro- duction indicate a likely figure of about 22 billion pounds by 1975 or 10 times current production. This is fairly close to an estimate of the Stanford Research Institute of 25 billion pounds for 1975 [3] and checks an estimate made by a technical group from the Koppers Co.,* but it is much higher than that of Gustav Egloff.t SYNTHETIC ORGANIC MEDICINALS Table I shows the growth of production of important syn- thetic medicinals over the past decade and expected produc- tion for 1975. Weight of medicinals is small and hence a large increase in use does not result in a great increase in total weight consumed. *Vol. IV: The Promise of Technology. Coal Products and Chemicals. flbid. Oil and Gas as Industrial Raw Materials. The projection for 1975 is by the Public Health Service specifically for this study. Estimates from other sources are generally substantially higher. In support of the Public Health Service estimate is the fact that new medicinals frequently replace substantially larger quantities of older ones; opposed to it is the fact that new uses are developing rapidly for many of the newer products. In any case, it appears likely that the dollar value of the medicinals will tend to rise much more rapidly than the poundage, because average value per pound is expected to continue to increase as the higher valued anti- biotics and materials like cortisone achieve greater production rates. Table I.—Production of synthetic organic medicinal chemicals [Thousand pounds] 1941-45 (aver- age) 1946-50 (aver- age) 1975 (pro- jection) Chemical 1941 1950 Total cyclic chemicals 31, 303 39, 139 38, 261 38, 652 52, 100 Benzenoids 23, 036 28, 633 30, 268 29, 803 42, 200 Some specific drugs: Acetylsalicylic acid 8, 084 5, 326 2, 091 9, 157 5, 094 5, 586 10, 906 5, 805 4, 753 11, 013 5, 615 4, 967 14, 000 7, 900 6, 100 Salicylic acid Sulfonamides Total alicyclic and hetero- cyclic drugs 8, 267 10, 505 7, 993 8, 847 9, 900 Some specific drugs: Antibiotics 0) 531 (0 0) 853 688 Barbituric acid deriva- tive. 572 751 995 Caffeine and derivative. Vitamins 0) 0) 0) 1, 699 1,727 1, 977 1, 600 n. a. n. a. 2, 200 Total acyclic chemicals 2, 896 n. a. 3, 643 n. a. 6, 069 1,051 7, 464 1, 478 9, 200 1, 900 Vitamins alone Grand total 34, 199 42, 782 44, 330 46, 116 61, 300 1 Data incomplete, n. a.=Not available. It is estimated that by 1975 annual production of insecti- cide materials will be approximately 500 million pounds. This estimate, made with the aid of industrial insecticide pro- ducers, includes only the active ingredients used in final in- secticides marketed. Although total insecticide production is expected to increase markedly, development of more potent active ingredients will hold down the poundage increase in active ingredients. SYNTHETIC FIBERS Fiber consumption in 1975 is projected to 7/2 billion pounds as compared with 6 billion pounds for 1950. This figure was arrived at by projecting the average number of pounds con- sumed per person per year—approximately constant for over 30 years at 39 pounds—on the basis of expected population of 193.4 million people in 1975. For individual kinds of fibers, the 39 pounds was apportioned at 2.2 pounds per capita for wool, 20.2 pounds for cotton, and 16.6 pounds for rayon and other synthetics. Estimating 1975 rayon consumption at slightly less than twice its present quantity of 1 billion pounds leaves a projection of about 1 *4 billion pounds for other synthetic fibers. Page 105 Cotton consumption may rise slightly to about 4 billion pounds and consumption of wool may drop to a little less than half a billion pounds. The Stanford Research Institute [2] estimates 6 billion pounds for all synthetic fibers, whereas Egloff* estimates 3 billion pounds for rayon and 4 billion pounds for other synthetic fibers. The estimated increase in the use of this class of chemicals is from 2 billion pounds in 1950 to 9.5 billion pounds in 1975, or a fivefold increase. This has been estimated from halogen- containing solvents, from vinyl plastics, from ethyl chloride used in tetraethyl lead, and others. An important factor is the use of halogen-containing solvent for metal degreasing. Consumption of surface active agents is expected to rise from 800 million pounds in 1950 to about 3 billion pounds in 1975, almost a fourfold increase. More potent agents are expected to be developed, and therefore the percentage of active in- gredients used in finished detergents will be diminished. REFRACTORIES: A SMALL BUT CRUCIAL FIELD A projection has been made of total refractories and nonclay refractories other than silica, magnesite, and chrome. The refractories industry, though small now (150 million dollars in 1946), is extremely important to the metallurgical, glass, thermal power, and chemical industries, and especially so to nuclear operations. In addition, it is likely to achieve great im- portance in various new types of power units. These include gas turbines, jet engines, and rockets. High-temperature mate- rials able to withstand temperatures of 1,000 to 3,000 degrees Centigrade for reasonable periods are needed in order to boost the thermal efficiency of these power units. Most metals soften at these temperatures, but ceramic-type refractories, either alone or coated on metals ("cermets"), have been found suitable. Refractory brick made of fire clay or silica still constitutes about half the volume of the total output of refractories, but their production is remaining relatively stationary. On the other hand, the use of magnesite and chrome refractories is increasing, having about doubled in dollar value between 1936 and 1946, largely due to the replacement of silica brick by chrome-magnesite in open-hearth furnaces. The most rapid increase in the field is occurring in refractories made from alumina, silicon carbide, and other special and more expensive materials; the dollar value of these has increased from 7 percent of the total in 1936 to 27 percent in 1946. A rapid rate of increase in these special types of refractories is likely to con- tinue during the next 25 years, the dollar volume possibly multiplying by as much as 8 to 10 times as compared with a doubling for the refractories industry as a whole. Although it is possible to estimate roughly the approximate increase in volume in the refractories industry, the demand for the specific materials that the industry will require is much more difficult to predict. This field is currently the subject of intense research by many universities and industrial and re- search institutions. The oxides that have been in use in the past include alumina, chrome, magnesia, and silica. Various others are now being investigated, including those of zirconium and *VoI. IV: The Promise of Technology. Oil and Gas as Industrial Raw Materials. thorium, and also carbides, nitrides, and borides of such ele- ments as iron, hafnium, columbium, silicon, molybdenum, tantalum, thorium, titanium, and zirconium. In addition, vari- ous applications of graphite and carbon, of silicon carbide bonded with graphite, and of metals bonded with graphite are being made. Carbon hearths have been installed in a consider- able number of blast furnaces. Many different techniques of combining metals with refractories are also undergoing de- velopment. Stabilized zirconium oxide has found application as a new refractory with outstanding resistance to shock. Among the products that will be important in growth of glass production are glass building materials and glass wool and fibers. The latter, in addition to their uses in thermal insulation and in textiles, will expand in use as a reinforcing agent for plastics. An approximate doubling of glass production by 1975, to about 12 or 14 million tons, is projected. The projected production of cement is based on projected gross national product and anticipated building volume. Large- scale substitution of prestressed concrete for steel is expected. Total 1975 requirements for cement may be approximately 2.5 times present production, or about 5.5 million barrels per year. AROMATIC CHEMICALS The aromatic chemicals (benzene, toluene, the xylenes, and phenol) are extremely important in the production of plastics, synthetic fibers, dyestuffs, medicinals, synthetic rubbers, and other products. None of these represents a long-term problem, but there is a definite short-term problem in relation to benzene and phenol that is discussed later. Various projections for these materials have been made. (See Volume IV: Coal Products and Chemicals; Oil and Gas as Industrial Raw Materials; and Forecasts for Petroleum Chemicals.) Projections for ethylene, propylene, the butylenes, and acetylene also are given in these reports. No difficulties as to raw material supplies up to 1975 are visualized. Sulfuric acid, nitrogen and phosphorus compounds, and fluorine compounds are treated elsewhere as indicated in the bibliography at the end of this chapter. The 1975 requirements for chlorine are projected to be 8 million tons, four times those of 1950. Chlorine is widely used for chlorinating water supplies, in the pulp and paper industry, in the manufacture of various plastics, in insecticide production, and in the manufacture of solvents for degreasing metals. It has many other uses. One of the problems associated with its production is the fact that caustic soda is produced simul- taneously, 1.1 tons of caustic soda being produced per ton of chlorine. The demand for caustic soda is not expected to increase at the same rate as that of chlorine. Hence, a readjustment in the uses of caustic soda may be necessary or some other solution to the problem may have to be provided to handle this possible surplus of caustic soda. The 1975 demand will probably not exceed 5 million tons. A projection of the requirements for soda ash, one of the most important materials going into the manufacture of glass, in- dicates that the requirements for this material will double in the next 25 years to eight or nine million tons. This should be no problem since the chief raw materials—salt, limestone, and coke—are plentiful. Page 106 BOTTLENECKS IN SUPPLY Requirements for benzene will be multiplied 8 to 10 times by 1975 from a 1950 output of 188 million gallons. Heretofore benzene has been recovered as one of the byproducts in the production of metallurgical coke by coal distillation. This source of supply has recently proved to be insufficient to meet requirements, and techniques have been developed to produce it from certain fractions of petroleum and natural gas, though at a higher cost. Benzene from petroleum is currently selling at about 32 cents a gallon. Practically all of it is under contract and not available in the open market. Imported benzene in 1951 sold at prices appreciably higher. Industry studies indi- cate, however, that there is little danger of a permanent short- age of this material, since there are several alternative methods for producing it. One of these is an expansion of the newer processes for its extraction from petroleum. The petroleum in- dustry could produce all the projected requirements for the next 25 years. Another alternative exists in the possibility of hydrogenerating coal chiefly for aromatic chemicals. This would produce large quantities of phenols, toluene, xylene, and naphthalene, as well as benzene, but again at relatively high prices. It seems clear that these aromatic hydrocarbons and phenols will be available in the quantities required in the fu- ture, but in order to get them the chemical industry will have to shift from its exclusive dependence on coke byproducts to these alternative sources, possibly at a higher price. This whole problem is intimately related to the production of liquid fuels. The direct hydrogenation of coal not only pro- duces liquid fuels but also makes possible the production of substantial quantities of the aromatic chemicals. From the point of fuel production alone, direct hydrogenation is the most expensive of the three possible processes for the production of liquid fuels (coal hydrogenation, the Fischer-Tropsch process, and the production of oil from shale), but credit for the aro- matic chemicals might be sufficient to make a limited applica- tion of this process feasible. The cost of producing aromatics from petroleum by present processes would be an important factor in determining the future trend of prices and the effect of such prices on the economic feasibility of the various proc- esses for producing liquid fuels. Since caustic soda is produced simultaneously with chlorine and no equivalent increase for it is expected, there will be the problem in chlorine production of utilizing the surplus caustic soda. The surplus of caustic soda may be further increased by the growing replacement of soap, which is a large user of caustic soda, by other detergents. The problem may be attacked by developing economical methods for the manufacture of chlorine that do not simul- taneously produce caustic soda (along the lines of the Deacon process), new and economically sound uses for caustic soda, and possibly methods for converting caustic soda to soda ash. The last mentioned possibility would take care of most of the surplus projected for 1975, since a sufficient market for soda ash exists, but it would be at a somewhat higher cost for either chlorine or soda ash. This is a problem that the industry itself will handle as it becomes pressing. Another problem related to the substitution of soap by other detergents is the decrease in the potential production of by- product glycerine from soap manufacture and from the hy- drolysis of fats generally. Fortunately a process exists for making glycerine from propy- lene, a petroleum product. This process is now in large-scale operation and can be substantially extended. Also research is in progress to make glycerine from some of the sugars. Here also is a problem that industry will be able to solve for itself. Various chemicals, such as calcium carbide, chlorine, phos- phorus, and silicon, require considerable energy for their man- ufacture. Heretofore they have been produced by using cheap hydroelectric energy. In view of the long range limitations on low cost hydroelectric potential, the chemical industry will have to look increasingly to thermal generation for cheap power. The prospects for lower cost thermal energy are dis- cussed elsewhere in this volume, but for the chemical industry as a whole, the availability of all types of energy seems reason- ably assured, even though its requirements may multiply as much as six times within the next 25 years. References 1. "Size and Shape of the Industry." Chemical Engineering, February 1950. 2. Stanford Research Institute. Chemical Economics Handbook, 1950. 3. Ewell, R. H. "Past and Future Growth of the Chemical Industry." Chemical and Engineering News, December 10, 1951. Selected General Statistical Sources Norton, F. H. "Refractories." New York, McGraw-Hill Book Co., Inc., 1950. Stanford Research Institute. Chemical Economics Handbook, 1950. References Elsewhere in This Report This volume: Copper. Lead. Magnesium. Projection of 1975 Materials Demand. Rubber. Tin. Zinc. Vol. Ill: The Outlook for Energy Sources. Coal. Electric Energy. Natural Gas. Oil. Vol. IV: The Promise of Technology. Coal Products and Chemicals. Forecasts for Petroleum Chemicals. Oil and Gas as Industrial Raw Materials. Tasks and Opportunities. Vol. V: Selected Reports to the Commission. United States Fertilizer Resources. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Foster, J. F. Role of Technology in the Future Supply of Natural Gas. Holmes, R. E. Role of Technology in the Future of Fluorspar. Munger, H. P. Waste Suppression—Waste Going Into the Atmos- phere. Stephens, F. M. Role of Technology in the Future of Lead. Page 107 * Background Information Projection of 1975 Materials Demand Reserves and Potential Resources Production and Consumption Measures IL S. Bureau of Mines Tables ft Chapter 22 Background Information Projection of 1975 Materials Demand* Part I. I . S. Materials Demand As the population of the United States grows and as the productivity of labor increases, the United States will produce an increasing flow of goods and services and in doing so will use up increasing quantities of materials. Any policy designed to guide us in the future must recognize this fact. But policies must depend not only on recognition of such growth but also on its prospective magnitude. Will the Nation's needs for steel, or copper, or oil increase by 50 percent in the next generation or by 250 percent? Will mineral reserves, at prospective rates of consumption and discovery, last for 25 or for 100 years? Clearly, different policies may be appropriate for different rates of growth. The choice of policy depends, however, on the broad order of magnitude of the prospective growth rather than on the precise amount. For few if any of the materials under review would the appropriate policy be different if the materials demand of a generation hence should be 100 percent larger rather than 50 percent larger than at present. For example, if our resources would last 29 years at the lower of these two growth rates, they would last but 25 years at the higher rate; if they would last 11 years at the lower rate, they would last 10 years at the higher rate. Indeed, serious difficulties would arise if much more preci- sion than this were vital to correct policy judgment. The forces that govern economic growth and development are themselves not regular enough to enable us to allege that a 60-percent growth is likely while a 75-percent growth is not. Accordingly, the projections of materials requirements presented below do not purport to be predictions but only indicators of the size of the problems the United States is likely to face. WORKING POPULATION AND PRODUCTIVITY The continued operation of the traditional free-market econ- omy of the United States at high levels of employment is as- sumed for the long-term future—both because it is an avowed objective of national policy and because, even in the absence of such a policy objective, we would want to provide a flow of *By Arnold C. Harberger, Johns Hopkins University. materials certain to be great enough to support economic growth. A defense program continuously adequate to meet any external threat is taken into account. It is also assumed that no all-out war will occur during the next generation, not be- cause all-out war is unlikely but because the nature and extent of the materials problems following in the wake of such a con- flict cannot be foreseen. Needs are accordingly projected on the basis of peace and prosperity in the constant shadow of war. THE LABOR FORCE IN 197 5 The Bureau of the Census estimates that in 1975 there might be about 146 million people 14 years of age and over in the United States. Some reduction of birth rates from recent peaks is assumed, but, owing to the small proportion in the total 1975 labor force of people as yet unborn, the estimate would not be changed by more than 10 percent even if very high birth rates were to continue. Historically, the labor force, except for war- time emergencies, has constituted a remarkably stable fraction of around 56 percent of the population 14 years of age and over. Applying this percentage to the Census estimate, the 1975 labor force would be 82 million persons. Of this total we assume that 4 million will be in the armed forces, 71/2 million employed in agriculture, and 2l/o milion (about 3 percent) unemployed. THE GROSS NATIONAL PRODUCT The number of hours per worker is expected to be reduced by about 15 percent, while product per man-hour is expected to rise at about 2l/2 percent per year. The assumed rise in man- hour productivity is somewhat in excess of the historical aver- age rate of increase of 2.1 percent per year, but continued high employment, together with a rate of increase of capital per worker somewhat in excess of that which prevailed in the past quarter century, should make such growth feasible. Much of the increase of output of the past 25 years was actually achieved in the 15 years 1935-50 in spite of the fact that the needs of the greatest war in history were in competition with the demand for producers' equipment. The joint result of the projected changes in the working Page 111 force, in productivity, and in the average work-week is a doubling of total national output of goods and services (the gross national product) between 1950 and 1975. If productivity should increase only at its historical average rate, a doubling of gross national product can nevertheless be achieved with a reduction in hours less than we have assumed. We therefore consider it prudent to develop a materials policy consistent with a 100 percent increase in our total production over the next quarter century, recognizing that a level twice that of 1950 is almost certain to be reached at some point in the decade 1970— 80. Readers may, 'n fact, view our use of the date 1975 as a shorthand means of denoting "sometime in the 1970's." For the purpose of projecting total production, estimates of total population are not necessary—the labor force suffices. Total population becomes significant only insofar as it in- fluences the pattern of consumption. And even for estimating consumption, the number of adults and the number of inde- pendent households probably have greater influence than the total number of persons. The number of households has been projected at 62/2 million for 1975, as compared with 43 mil- lion in 1950. The number of persons 14 years of age and over is, as indicated earlier, projected at 146 million. The increase in the number of households between 1950 and 1975 was allo- cated to successive 5-year periods on the basis of the number of people now living who will be in their twenties at the begin- ning of each period. Their allocations are given in table I. Total population a generation hence cannot be foreseen with great accuracy. Current estimates for 1975 range from below 180 millions to over 220 millions. Because of the frequent use of per capita figures in cases in which the underlying relation- ship is to adult and not to total population, it was felt desirable to choose from the possible range of population projections a figure that approximately preserved recent ratios of adult pop- ulation to the total. Such a figure is provided by a recent Bureau of the Census estimate, which, on the assumption of some decline in birth rates, sets the 1975 population at 193 millions. This estimate is 32 percent greater than the projected population 14 years of age and over, which is exactly the per- centage by which total population exceeded population 14 years of age and over in 1947. THE METHOD The actual consumption of a material for any prolonged' period is limited by the quantity that can be supplied. If, in a free market economy, the amount of copper that people would like to consume at a specified price exceeds the supply forth- coming at that price, the price of copper will rise, dissuading some potential consumers from their desire to buy copper, and providing suppliers with an incentive to increase output. A gap between supply and demand thus exists only insofar as free market forces fail to operate. THE OBJECTIVE Clearly, if this study were to attempt to predict actual con- sumption of copper and other materials around 1975, it would have to take into account the forces governing both supply and demand and would have to allow for the price adjustments necessary to equate the two. The real aim, however, is to at- tempt to answer the following question: How much copper (for example) would be demanded in the years around 1975 if the price of copper, relative to its close substitutes and to the general level of prices, were to be at its 1950 level? The actual course of events may thus belie the projections; if the amount that would be demanded at the 1950 price in 1975 exceeds the supply forthcoming at that price, the price that will actually prevail will be higher, and the amount actually consumed will accordingly be lower than the amount projected. Table I.—Projected increase of households, 1950-75 Increase in number of households during period Number of households Period at end of period • Millions M illions 1950 43. 0 1950-55 3. 8 46. 8 1955-60 3. 6 50. 4 1960-65 3.5 53. 9 1965-70 3. 9 57. 8 1970-75 4. 6 62. 4 What service, then, may projections based on the assump- tion of 1950 price relationships perform? By indicating the probable extent of demand at these prices, they may enable the Nation to foresee potential price rises and either to forestall them by providing suppliers with an inducement to expand their capacity, where this can be done without much increase in costs, or to adjust to them in a rational and unhurried fashion when increased supply can be induced only slowly. In some in- stances long years of development must precede the opening of a new mine or the working of lower grades of ore; or a long period of conscious research may be needed before a material previously deemed indispensable can be rendered unnecessary. PROJECTION BY END-PRODUCT USE If methods of production were to remain the same, the amount of a material used to produce a particular end-product (such as rubber to produce tires) would grow in proportion to the output of that end-product. Methods of production, in turn, can generally be expected to change only in response to changes in relative prices or in response to changes in technology. Since relative prices are assumed to remain at their 1950 levels, the demand for each material is projected to grow along with the demand for the types of products that the material makes, except where, for reasons other than relative price changes, substantial change in technology is anticipated. Thus, in pro- jecting the demand for copper, it is necessary to ascertain how much of this metal was used in each of its major applications in 1950, and then to project the amount used in the produc- tion of automobiles and trucks in proportion to the projected demand for motor vehicles, the amount used on construction in proportion to the projected level of construction activity, and the like. This method disregards the potential incidence of new prod- ucts, but it seems unwise to base materials policy on uses yet to be discovered, since nothing is known about what the new products of the future will be, what materials will be required Page 112 to produce them, or how much they will add to the future de- mand for any material. They may even, by substituting for old products, reduce the drains on some materials, but again there is no basis for determining which materials will be thus affected nor by how much. ALLOWANCE FOR TECHNOLOGIC CHANGES Wherever possible, allowance has been made for technologi- cal changes that are likely to be effected under recent price relationships. If, as with sulfur used for petroleum refining, the plants currently being built use less of a material than the average of plants now in operation, it is assumed that the plants to be built over the next 25 years will also use less. Like- wise, where the virtual elimination of a material from one of its current uses appears to be clearly in progress (as in the case of tin for collapsible tubes), the future requirement arising out of that use is either eliminated or reduced. PROJECTING MAJOR AGGREGATES AND END-USES If no changes were envisaged in the composition of the goods and services that together make up the gross national product, the projected increase of 100 percent in gross national product would imply an increase of 100 percent in all materials require- ments. However, the composition of gross national product ■will surely change in the next 25 years. The long-term tend- encies of growth and development are: (a) to increase the incidence of services in the expenditures of consumers, and (b) to increase the extent of fabrication that materials undergo before they find their way into final products. The first of these tendencies is somewhat obscured in available statistics, which show a decline in the ratio of expenditure for services to total •consumer expenditures, from about 38 percent in 1925 to about 31 percent in 1950. The 1950 figures have been widely recog- nized as being low because of the influence of rent control in keeping the allowance for housing services below the prewar proportion. In addition, the definition of services used in com- piling the statistics does not include the service components in food and other expenditures; these components have expanded in the past relative to total consumer expenditures and will probably continue to expand in the future. These tendencies toward increased fabrication and increased expenditures for services lead to the presumption that the need for materials will increase somewhat less than in proportion to gross national product. An additional and more forceful argu- ment can be presented with respect to those materials, partic- ularly metals, that are used largely in the making of durable goods. Demand for these materials may be expected to move substantially in proportion to the durable goods components of the gross national product. These particular components were at unusually high levels in 1950, but 1975 (which, to repeat, should be considered as a typical year in its decade) cannot be expected to be influenced by features peculiar to the 1950 postwar period. The arguments supporting this proposition, on which are based many of the projections in this study, are given in the following pages first in general terms and then are expanded and illustrated by specific examples. Over the 25-year period that began in 1925, durable goods as a whole (gross private domestic investment plus personal consumption expenditures on durable goods) averaged 18 percent of the gross national product; in 1950 these components constituted 27 percent of the gross national product.* Thus an increase of only a third in the absolute amounts of these components would succeed in restoring the average past ratio if, as we have assumed, gross national product is to double between 1950 and 1975. PLANT AND EQUIPMENT EXPENDITURES The components that most directly and strongly influence the growth of gross national product are producers' expend- itures on plant and durable equipment. These items provide the capital base on which industrial production may expand. Depending on whether the war years are included or excluded, the producers' durables part of this base averaged, in the quarter century prior to 1950, between 5.6 and 6.3 percent of the gross national product. In 1950 it was 9.5 percent of gross national product. An increase of less than a third above the 1950 level of these components, together with the projected doubling of gross national product, would restore by 1975 the same relationship between producers' durables expenditures and gross national product as helped to double gross national product in the past generation. Because the labor force is not expected to increase quite as rapidly in the next 25 years as it did in the past, somewhat more rapid growth of cooperating capital must be allowed in order to yield the same percentage increase in the total product. The producers' durables component is therefore projected as con- stituting about 7 percent of gross national product in 1975, as opposed to its somewhat lower past average figure. The pro- jected rise in this component from 1950 to 1975 is thus about 50 percent. Private nonresidential construction averaged, over the past 25 years, between 2.2 and 2.5 percent of gross national product, measured in constant prices. In 1950 it constituted almost 3 percent of gross national product. An increase of from one-half to two-thirds over the 1950 level would be sufficient to restore the average past relationship to the doubled gross national product projected for 1975. This component of the gross na- tional product is projected as increasing by 50 percent in the next 25 years, the projection being based on the predominance of producers' plant construction in this category, and on the relation between the number of workers and plant space needed. Although the ratio of plant space to workers employed need not remain constant as techniques of production change, there is considerable stability in these techniques. The projec- tion takes into account the fact that space is also required by the machines and tools, the numbers of which are expected to grow more rapidly than the labor force. RESIDENTIAL CONSTRUCTION Residential construction is most closely related to the number of individual households. For 1975, 62/2 million individual households are estimated, and it is assumed that there will be a dwelling unit for each household. Of these dwelling units an estimated 500,000 to 600,000 will have to be replaced in 1975, *Except as otherwise noted figures for gross national product and its components are taken from the Economic Report of the President, July 1951. Page 113 and an additional 800,000 to 1,000,000 will probably have to be built for the net increase in household units. Thus some- where, between 1.3 and 1.6 million new units are likely to be constructed in an average year around 1975, or less than 15 percent more than the 1.4 million units built in 1950. The replacement factor in this projection assumes some reduction in the average life of a dwelling unit from its present estimated level of 75 years, as felt to be justified by the projected increases in levels of living. If allowance is made for possible increase in the average size of dwelling units and if there are no substitu- tions, the use of materials in residential construction may be projected as rising by between 5 and 25 percent. Public con- struction in 1975 is expected to be some 50 percent above its 1950 level, with the result that construction generally is pro- jected to rise some 30 percent between 1950 and 1975. AUTOMOBILES Aside from residential construction, it is in the consumers' durables field that specific commodity analyses can best be undertaken. The outstanding example is that of automobiles. At the beginning of 1950 there was in use in the United States 1 car for about every 3 persons 14 years of age and over. By 1975 there is expected to be 1 car to every 2 to 2/2 persons over 13, or around 65 million cars on the road in the United States. Assuming the average life of a car to be 10 years instead of the present 12 years, the replacement demand for new cars in 1975 is estimated as between 5.5 and 6 million, to which must be added an additional 1 to 1.5 million to provide for the growth of population and incomes. The projected domestic requirement for automobiles is therefore between 6.5 and 7.5 million, an increase of less than 15 percent over 1950's total production of 6.66 million. No change is assumed in the size of the average automobile. The stock of trucks may well increase more rapidly than the number of passenger cars. But even should it grow from its present 8 million to around 20 million by 1975, the annual demand for new trucks would not be much more than double 1950's production of 1.34 million. Once the long-term relative share of trucking in total transportation demand has been attained, it is unlikely that stock of trucks will increase more rapidly than gross national product. Hence, a 20-million stock can be expected to grow at a rate of almost 600,000 per year. In addition, there will be a replacement demand that almost certainly would not exceed 2 million per year. This yields a probable maximum total 1975 demand for almost 2.6 million trucks, or less than double 1950's output. If an average truck is considered to be the materials equivalent of 1.5 passenger cars, the maximum likely demand will be for 11.4 million car-equivalents, as opposed to 1950's production of 8.6 million car-equivalents. CONSUMER DURABLE GOODS Consumer durables have averaged around 10 percent of total consumer expenditures during the past 25 years, reaching levels as high as 13 percent only in years of high prosperity. Some of the high-prosperity demand was demand deferred from years of low activity, and so 11 percent is assumed to represent the past average ratio, adjusted to a basis of con- tinued high employment. In contrast, consumers in 1950 allocated 15.6 percent of their total expenditures to durable goods, a proportion without precedent. If consumer expendi- tures are assumed to double along with gross national products, a 40-percent rise in expenditures for durables would be suf- ficient to reach the adjusted past average ratio of 11 percent. APPLIANCES A 40-percent rise in consumer spending for all durables, coupled with an increase of 15 percent in spending for new automobiles, implies a rise of about 50 percent in expenditures on appliances. If only the most familiar durables (such as re- frigerators, washing machines, and ranges) are considered, it is difficult to rationalize such an increase. For as with automobiles, 1950 output of these items was so large that only small in- creases would be necessary in order to meet expected 1975 needs. Even with an industry as new as television, no increase can be projected, because the mere maintenance of 1950 output would be adequate to provide a set in every household in 1975 and leave some to spare. Therefore a projected increase of 50 percent in consumers' expenditures on appliances makes a substantial allowance for rapid growth of such newcomers as air conditioners, home freezers, and dishwashers. Fortunately, these appliances are broadly similar in their materials requirements to the remainder of the group, so that it is appropriate to project the 1975 ma- terials requirements of the group as a whole at 50 percent above the 1950 level. CONSISTENCY OF DURABLE GOODS AND GNP PROJECTIONS The projected increases in residential construction (15 per- cent), private nonresidential construction (50 percent), and producers' durable equipment (50 percent) yield, when ap- plied to the 1950 values of these components, a projected in- crease of only 40 percent in gross private domestic investment. Readers may ask, in the light of these projections, whence will come the demand for the output, double that of 1950, that is projected for 1975? The basis having been shown on which the durable-com- ponent projections may be considered as reasonable expecta- tions, the next task is to show that these projections are not patently inconsistent with anticipated gross national product. It is assumed that the 1950 ratios of consumer disposable in- come to GNP, and of consumer expenditures to consumer dis- posable income, continue to 1975. Thus consumer expendi- tures are projected to be 69 percent, with gross private domestic investment at around 12 percent of the GNP. These percent- ages require that 19 percent of the GNP in 1975 be accounted for by Government purchases of goods and services and net foreign investment. Government purchases in 1950 were over 15 percent of the GNP, and net foreign investment was nega- tive. With continued international tension, a substantial mili- tary arm, a gradual increase in the social services rendered by local, State, and Federal Governments, and even a relatively small amount of foreign investment, the necessary 19 percent can be easily and plausibly accounted for. Any inconsistencies, then, would have to be sought in the allocation of consumer expenditures. The projections of total Page 114 consumer expenditures and durable goods expenditures imply that 11.8 percent of the money that consumers spend will go to buy durables. This is only a little above the average that consumers allocated to durable goods over the past 25 years, so that they need only retain the average past pattern of ex- penditure on other things in order to yield sufficient demand for the total of goods and services that we believe may be produced in 1975. Of course, there may be reallocations within the nondurable categories, with services possibly gaining at the expense of food and clothing. But it is well to recall here that expenditures for food and clothing are not as unresponsive to changes in income as one might suppose. It is true that the amount of food and clothing consumed is determined largely by the total population and does not increase much as the average man gets richer. But it is wrong to move from this belief to the assertion that as the average man gets richer he spends no more money than before on food and clothing. What is more likely to occur is a shift from lower quality to higher quality food and clothing, as indicated by the fact that the percentage of consumer spending allocated to food and clothing actually increased in the last generation. Readers must interpret with care the picture that emerges from the above analysis of an increase in aggregate durable goods requirements of 50 percent or less in the coming gen- eration. In particular, the conclusion should not be drawn that there is a basic, long-term tendency for durable goods demand to increase at only half the rate at which the gross national product expands. The main reasons why there is ex- pected to be a relatively slow growth in durable goods demand between 1950 and 1975 are to be found much more in the peculiarities of 1950 than in any such long-term tendency. THE ABNORMAL DURABLE-GOODS PRODUCTION OF 19 50 The fundamental economic function of durable-goods pro- duction is twofold: to replace worn-out items and to expand the total stock in a fashion consistent with the pattern of growth of the over-all economy. In 1950, and in fact in all postwar years, durable goods production performed even more. Since the war there has been a race on the part of durable goods pro- duction to meet the needs that it perforce failed to meet during the war years and to help the stock of durable goods to catch up with the wartime and postwar growth of the economy as a whole. Automobiles constitute the most striking example. If merely the fundamental long-term function of automobile pro- duction had been fulfilled, say in 1949 and 1950, the increase in the stock of cars would have been largely dependent upon the increases in population and disposable income. Yet more cars were added in 1949 and 1950 (over 7 million) than people were added to the population, and for this net increase there was probably spent more than the 15 billion dollars (at 1950 prices) by which disposable income, in 1949 and 1950 to- gether, exceeded the annual rate of 188.6 billion dollars that prevailed in 1948. Two further examples may be offered. If residential con- struction were to increase along with gross national product, there would be produced between 1950 and 1975 almost 50 million dwelling units, and there would be added in 1975 a new unit not for every 25-year-old married couple but for 80 percent of all 25-year-old persons. If the output of television sets were to increase in proportion to gross national product, and if television sets, like radios, were to last for 10 years or more, the 1975 stock would be so large that two sets could be placed in every household. The implausibility of these examples reflects the unusual incidence of the growth factor in 1950. Once stocks of durable goods have attained their normal rela- tionships to population, gross national product, and other ag- gregates, there would first be a falling off of the demand for new products and thereafter a rate of increase either about as great as that of gross national product, or slightly higher than the rate of growth of population, depending on what are the rele- vant determinants of the stock of the goods in question. Be- cause the timing of this transition from postwar to normal rela- tionships is not known, nor whether it will be smooth or pre- cipitous, the path by which the projected levels are likely to be attained cannot be predicted. Nor, indeed, can it be alleged that 1975 will not be another "special" year. The requirements with which this study is concerned are not those engendered by the fortuitous transfer of long-term needs from one year to another, but those reflecting the underlying necessities and consequences of over-all economic growth and development. OTHER END-USE AGGREGATES Aside from end-uses already projected, there are a number of others that are especially important in estimating future materials needs, as discussed in the following paragraphs. TELEPHONE INDUSTRY The telephone industry is projected to require no more mate- rials in 1975 than it used in 1950. At the beginning of 1950 some 40.7 million telephones were in use in the United States, and during the year a net addition was made of some 2.3 million. Since the life of a telephone is reckoned at 15 years, the number of replacements in 1950 were about the average number of telephones installed in the years around 1935, or about 2 to 2.5 million. Maintenance of an installation rate of 4 to 5 million new and replacement telephones per year would permit between 60 and 75 million telephones in use by 1975. It is difficult to see how the projected economy would be willing to pay for more. Similiar conclusions are indicated by an analysis of the wire needs of the telephone industry, for in 1950 the Bell System made a net addition of 9.4 million miles to the initial stock of 147 million miles of wire. FARM MACHINERY Output of new farm equipment constituted almost 2 percent of the gross national product in 1950, as opposed to a past average of less than 1 percent. Thus no increase at all in the absolute level of output of such equipment would provide in 1975 a ratio between investment in farm equipment and gross national product greater than that which prevailed in the past. Farm-type tractors are a good example. Mere maintenance of 1950 output of over 500,000 such tractors would be more than adequate, with a normal life of well over 10 years, to pro- vide a tractor for every man on the farm in 1975. Page 115 RAILROADS Railroad cars are a distinct exception to the 1950 pattern for most durable goods. Instead of outworn cars being replaced and many more added, there was failure even to replace all the cars that were retired. The total number of cars on Class I roads fell from 1,909,000 at the end of 1949 to 1,875,000 at the end of 1950, a total of only 41,254 new cars being installed during the year. Even if the average life of a railroad car were 30 years, it would require an average annual output of over 60,000 merely to maintain the 1950 stock. Naturally it would take still more to permit this stock to expand in accord with the growth of the total economy. Accordingly, the average require- ment for railroad cars around 1975 must be projected considerably beyond the 1950 output. Even allowing for considerable encroachment of truck and other transport, a doubling of 19505s railroad car output is conservative. The use of materials by railroads is therefore projected as increasing by 100 percent. This projection is made in spite of the fact that demand for locomotives themselves is unlikely to increase at all, since the 1950 acquisition rate appears more than ample to meet the transportation needs of the projected economy, especially as the locomotives added in the next 25 years will probably be more powerful than the average locomo- tive now in use. Cars and track, however, account for the over- whelming proportion of the materials consumed. If the relative share of traffic handled by railroads does not fall greatly, the amount of track replaced may easily double in the next 25 years. Thus, the projection for this component is consistent with that for railroad materials consumption as a whole. PRINTING AND PUBLISHING These uses of materials are projected to increase by about 75 percent. The Federal Reserve Board index of printing and pub- lishing almost doubled in the years from 1925 to 1950. In the absence of contrary assumptions, one might expect a further doubling in the next 25 years, during which the broad aggre- gates of the economy are projected to increase in comparable proportions. A somewhat lower figure was chosen because it is not felt likely that the size of the average newspaper and maga- zine will increase in the next 25 years by as much as it did in the past. PAINTS The demand for paints depends on both the total stock of paintable objects at the beginning of the year and on the num- ber of such objects made during the year. Residential housing in 1975 is expected to be about 50 percent greater than in 1950, while the number of new units is expected to be only 15 percent greater. Assuming an average painting to last about 5 years, the number of dwelling units to be painted in 1950 was about 10 million, and in 1975 will probably be less than 15 million. This assumes about 8.5 million old units repainted and 1.4 million new units painted for 1950, and about 12.5 million old units repainted and 1.8 million new units painted for 1975. With respect to automobiles, it is predominantly new auto- mobiles that are painted, so that an increase of about a third in this use of paint may be projected. Such painting of old auto- mobiles and trucks as is done will probably fall relative to the total stocks of these vehicles, owing to the projected shortening of their average life and improvements in durability of finish. The total uses of paint are projected to increase by about 50 percent between 1950 and 1975. Painting of commercial buildings and industrial structures has not been explicitly proj- ected, but an allowance for a somewhat more rapid rate of increase in such painting than in the painting of residential dwellings has been made in the over-all projection. SHIPS Shipbuilding uses are not expected to increase since the amount of shipbuilding done in the United States depends largely on unforeseeable political decisions regarding subsidies. If economic criteria alone were used, the Nation's shipbuilding would be projected to decline during the next 25 years. FAST-GROWING USES There are a number of products—aircraft, plastics, insecti- cides, and the newer synthetic fibers, to name a few—that defy projection in terms of the broad aggregates and specific prod- ucts already discussed. These are new and growing industries. They have not yet found their stable place in the economy, and there is as yet little basis to indicate what that place will be. Most readers, however, will recognize the likelihood of rapid growth in these industries. Whether that growth will be three- fold or tenfold in the next generation is subject to considerable debate and doubt. Yet it must be quantified for projection pur- poses, even though the quantification must be arbitrary. The value chosen must be adequately representative of the expecta- tion of rapid growth without being implausibly high. The afast-growing uses5' of materials are therefore projected to in- crease to 5 times their 1950 levels. A SUMMARY TABLE Table II summarizes the expectations expressed in the pre- ceding paragraphs. Table II.—Major end-uses and economic aggregates Approximate percentage End-use or aggregate growth from 7950 to 7975 Population 27 Labor force 27 Gross national product 100 Gross private domestic investment 40 Construction (total) 30 Residential construction 15 Private nonresidential construction 50 Demand for new producers' durable equipment 50 Demand for new consumers' durables 40 Demand for new passenger cars 15 Demand for new appliances 50 Demand for new automobiles and trucks 33\{ Number of dwelling units in use 50 Number of automobiles in use 75 Number of trucks in use 150 Demand for new railroad equipment 100 Demand for new agriculture machinery 0 Demand for new telephone equipment 0 Printing and publishing 75 Paints 50 Shipbuilding 0 Fast-growing uses (aircraft, plastics, insecticides, etc.). . 400 Page 116 THE PROJECTION OF SCRAP SUPPLIES Many of the issues of materials policy in the metals field relate to the problem of obtaining sufficient supplies of new metal or ore. The demand estimates relevant to these problems are therefore estimates of probable future needs for new mate- rial, not for the total of new material plus material recovered from scrap. If somehow future requirements could be fully and indefinitely met from scrap, there would be no policy problem. Demand for new material cannot be estimated directly, since for all the metals treated here there are numerous and quantitatively important uses that can be met equally well from scrap or from new material. A large percentage of con- sumers are indifferent as to which they use. To determine the demand for new metal, it is necessary first to estimate total demand and then to subtract from it the probable amount of scrap that will be returned for reuse. Supplies of scrap may change considerably from year to year, since large stocks are typically held by junkyards, auto- mobile graveyards, and the like. Underlying the supply of scrap, however, there is a fundamental long-term regularity, rooted in the fact that of each year's production of a metal the amount ultimately recoverable and the average length of time that must elapse before recovery are both reasonably well deter- mined. The ratio of scrap to total supply will vary with the percentage recoverable, with the rate of growth of the total requirement, and with the time lag in recovery. Furthermore, as the rate of increase in total consumption gets smaller, the significance of the time lag decreases. Relevant data are lacking for precise estimates of future scrap ratios, particularly those relating to the length of lag in recovery from specified end-uses. The necessary tools are pres- ent, however, for making intelligent statements regarding them. Thus, barring wide changes in the end-use pattern, if the projected rate of increase of total demand is about the same as that of the past, the same scrap ratio can be used for 1975 as is now prevalent. If the projected rate of increase is greater than that of the past, a lower scrap ratio must be projected, and vice versa. It is also possible to determine, from common knowledge, whether the lag in scrap recovery from particular end-uses is relatively long or relatively short, and on this basis, knowing the approximate percentage of recovery, to estimate the approximate average future scrap ratio. For example, one may be confident that the steel in automobiles will not return to the steel mills until well after 10 years, while it is equally certain that the lead in batteries will return for reuse after something less than 5 years. NEW SCRAP NOT INCLUDED The scrap referred to above is only that known as "old scrap," i. e., material that has been part of a final product. "New scrap," which is usable waste material generated in the process of manufacture, returns for reuse after a negligibly short lag and does not enter directly into the projection of demand for new materials. The rationale behind this special treatment of new scrap can be seen most clearly by dividing the economic process into three parts: raw materials production, the manufacturing process, and the consumption (or purchase) of final products. The need for materials, seen from the consumption level, is determined by the purchases of final products. It includes the materials actually embodied in the final products plus what- ever materials were rendered useless in the process of manu- facture (true waste). It does not include circular flows of materials, such as "new scrap," that are not lost in the process of manufacture. ALLOWANCE FOR EXPORTS The method used to project the 1975 levels of consumption of such end-products as automobiles, railroad equipment, and the like, makes no allowance for exports. Hence the projected levels of materials consumption derived from these end-use projections will not fully reflect anticipated 1975 consumption in United States industry. Furthermore, 1975 levels of such broad aggregates as producers' durables and appliances have been projected on the basis of the expected needs of the do- mestic economy. The unusually intensive domestic consump- tion of durables in 1950 led to the durable aggregates being projected at somewhat lower rates than would have been used if 1950 were a more "normal" year. In the rest of the free world in 1950, the consumption of durable products was not so abnormally high as in the United States; hence foreign consumption of these products will probably grow faster than our own. When, however, the expected growth rate of United States purchases of new appliances is applied to the 1950 use of steel in the production of these appliances, exports of appli- ances are implicitly projected to grow at the same rate as domestic purchases. Additional allowance must therefore be made in order to reflect the expectation that exports of appliances will grow more rapidly. In order to take into account potential exports of materials in finished-product form, and to allow for the somewhat more rapid expansion of exports than of domestic purchases, an adjustment factor labeled "allowance for exports" has been introduced into the 1975 projection where appropriate. This figure, except in the case of coal, does not include any allow- ance for exports of the material in raw form. The allowances for exports are rough and essentially arbi- trary. They are based on a general appraisal of the proportion of manufactured exports to the total output of manufacturing industries in the United States, on the incidence of exportable commodities in end-use patterns, and on an estimate of the probable rate of increase of exports. They are clearly subject to a much larger percentage error than are the projections of spe- cific end-uses of particular materials, and should therefore be used only to round out the total consumption figure. They have too wide a margin of error to be used as a measure of projected export developments in any case in which primary interest lies in exports. No allowance for exports is made where the projected de- mand for a material is not directly connected with end-product projections, as in the cases of aluminum and the additive metals. In these instances the projections must be interpreted only as broad indicators of the expected change in demand. Since plausible allowances for exports would not change the general order of magnitude of the projections, it was felt that the making of such allowances would give an unwarranted im- pression of precision in the original projected figures. Page 111 PROJECTIONS OF DEMAND The projections of United States materials demand around 1975 are developed in detail in sections that follow. They are summarized in table III. The method by which these projections were obtained has already been outlined. The percentages by which important end-uses and major economic aggregates are expected to rise in the next 25 years having been established, the materials needs generated by them were projected to increase proportionately. Where available data on end-uses fail to account for total 1950 consumption of a material, the part not accounted for is pro- jected as increasing with the gross national product, unless evi- dence or strong presumption dictates that it be related to an- other economic aggregate. In general, where an end-use has already been discussed, its 1975 demand for a material is pro- jected for that material but is not further discussed. Only those end-uses that have not been previously projected or that offer special problems for specific materials are discussed in the notes appended to the projection tables. INTERPRETING AND USING PROJECTIONS The following projections must be used and interpreted with great care, for they are conditional upon the meeting of explicit assumptions. Should the future invalidate the assumptions, the projections would require revision. Not always will the necessary revision be great; indeed, the projections would be quite useless if small changes in assumed quantities would lead to great changes in anticipated requirements. But if future events produce important differences from assumed quantities or forces, they are quite likely also to produce patterns of ma- terials demand substantially different from those projected. The crucial assumptions concern prices and techniques. The projection of raw material needs as growing in proportion to the demand for end-products has been justified on the assump- tion that no price changes would occur that would induce sig- nificant substitutions of one material for another by producers, or of one end product for another by consumers, beyond such substitutions as are clearly in sight. If no close substitutes exist, prices can vary rather widely without seriously changing the use of the material or product concerned. But if there are close substitutes (as among the energy fuels, and perhaps between copper and aluminum), the range of price variation within which the materials projections remain valid becomes very narrow. It has been further assumed, unless otherwise explicitly stated, that techniques of production do not change. Changes in technology that appear highly likely have been projected as taking place within the next 25 years; others, whose "wrinkles" have yet to be ironed out, have not been allowed for at all. Readers who wish to estimate the quantitative effect of a tech- nological change that has not been taken into account may do so by turning to the end-use breakdown of the commodity involved and reducing the projected requirement for the end- use by the saving they expect to be accomplished by the new technique. The allowances made for military requirements are quite arbitrary. Where munitions uses appeared in end-use break- downs of materials consumption, they were projected as doubling; aircraft uses were projected as increasing fourfold. But these two categories do not represent the total of military re- quirements, and in the breakdowns for some materials, even these uses do not appear. Although some neglected items may be minor, others (such as atomic energy uses) may not be. The problems of projecting military requirements for long spans of time go far deeper than the inadequacies of available Table III.—Consumption of materials in the United States, 1950, and as projected to 1975 1950 consumption Projected consumption about 1975 Projected percentage increase Material Unit In demand for new material In total demand Total Scrap New Total Scrap New Copper Lead Zinc Tin. Antimony Aluminum Finished Steel Crude Steel Products. . Iron Castings Pig Iron Iron Ore (50%) Nickel Chromite Molybdenum Cobalt Tungsten Manganese Ore (46%) Fluorspar (100%) Rubber Sulfur Petroleum Coal Natural Gas Electric Energy Thousand short tons.. Thousand short tons.. Thousand short tons.. Thousand long tons. . Thousand short tons. . Thousand short tons. . Million short tons.... Million short tons.... Million short tons. . . . Million short tons.... Million short tons.... Thousand short tons.. Thousand long tons. . Million pounds Million pounds Million pounds Thousand short tons.. Thousand short tons.. Thousand long tons. . Million short tons. Billion cu. ft Billion kw.-hr. . . . 1, 730 1,212 1, 156 93 475 428 1,255 784 1,081 71 2, 500 1, 950 1, 600 700 750 100 34 38 900 1,800 1, 200 1, 500 84 28 3, 600 45 61 38 27 76 358 62 55 62 54 54 100 100 170 340 150 50 187 104 110 110 56 138 260 43 53 39 18 81 291 75 22 118 66 4, 500 37.4 983 68 21. 9 15. 5 63 920 110 96. 8 150 13. 5 22 65 100 130 200 100 200 875 1,750 70 26 9 40 I 6 15 ! 1, 800 369 2, 700 1,060 1, 620 4. 806 300 1, 320 3, 300 10, 100 800 2, 500 89 2, 375 5, 000 815 522 6, 300 389 15, 000 1,400 Page 118 data, however. Future over-all military needs depend more on the nature, scale, and location of a possible war than on eco- nomic aggregates rigidly defined, and there is little basis on which to project these factors. Furthermore, the technology of warfare changes so rapidly that the raw materials needed for future defense cannot be predicted. The defensive strength of the United States can be expected to grow as its productive power grows, but the commodity composition of the growth cannot be foreseen. The token projections of military end-uses should therefore be accepted as invitations to the sophisticated reader to make such allowances as appear necessary with re- spect to specific military problems. RANGE OF ERROR The aim in making the projections has not been to draw a detailed picture of the future—an impossible task—but to help policy makers to decide among alternative courses of action. For this purpose a broad picture of likely future trends suffices. For many materials there is a wide range of possible rates of growth of demand that are small enough that no posi- tive action is necessary, and another wide range of conceivable growth rates so large that in the absence of policy action serious problems would confront the Nation. In many cases it may be highly useful to know that demand is net likely to more than double in the next generation; in others, it may be equally important to ascertain that even under the most favorable of prospective technological developments, requirements at recent prices are unlikely to be reduced to parity with the foreseeable supplies. Above all, these projections are highly useful for estimating how rapidly this Nation is likely to be drawing upon its mineral reserves. For the most critical materials—those whose commercial reserves are closest to running out—the precise rate of growth is the least important; ranges of error as high as 25 or 50 percent can often be easily tolerated with- out altering the appropriate policy conclusions. With respect to these particular materials, the reader can be most confident in using the projections. Where a very high degree of dis- crimination is required of the projections, they had best be left unused. By the use of intelligent analysis, it is possible to trace the broad outlines of the shape of things to come. But a wide range of uncertainty remains as the inevitable attribute of the future. We can do no more than recognize this uncertainty and provide as best we can, within the limits of what we are able to foresee, for the contingencies that lie ahead. COPPER Total United States consumption of copper in 1950 was about 1.73 million short tons. The estimate of the American Bureau of Metal Statistics is 1.37 million tons, but this in- cludes only that portion (0.12 million tons) of the scrap supply that passed through the hands of primary smelters and refiners. The total scrap used, as estimated by the Bureau of Mines, was 0.48 million tons. There is added, therefore, 0.36 million tons (for uncounted scrap) to the A. B. M. S. figure, yielding a total of 1.73 million tons. The end-use breakdown provided by the Copper and Brass Research Association allocates about 0.15 million tons to exports of copper in semimanufactured form. This is carried in the tables under the heading "Allow- ance for copper content of exports," but this 1950 figure does not include copper content of exports of automobiles, electric equipment, and the like. Such exports are, for 1950, included in the copper consumption allocated to these end uses in the table. The 1.73 million tons was allocated to end-uses approxi- mately as shown in table IV, which also shows the consumption projected for 1975 on the basis of these end-uses. Copper is no longer essential to most electrical uses, and indeed there are strong indications that it will be displaced by aluminum in many of them. Already aluminum has been sub- stituted for copper in long-distance transmission lines, and the bare beginnings of a similar shift away from copper have been witnessed for distribution lines. The projection of no more than a 50-percent increase for light and power uses is based on the assumption that copper's importance for these uses will continue Table IV.—Projected United States demand for copper 1950 consump- tion (thou- Percentage in- projected Projected con- sumption about 1975 (thousand short End-use Projected as moving with— ^"onsr Electrical equipment (*) 303 87 100 106 70 145 135 25 22 227 360 150 60 0 50 50 50 485 87 150 159 105 193 175 50 22 340 450 284 Telephone and telegraph Demand for telephone equipment Light and power Appliances^. Demand for new appliances (*) Automobiles Demand for new automobiles and trucks 33> Building Construction 30 100 0 Railroads Demand for new railroad equipment Ships Shipbuilding Other uses of new copper (*!:::::::::::::::::::::::::::::::::::::: 50 Other uses of old scrap 25 Allowance for copper content of exports Total United States demand for copper 1,730 -475 45 2, 500 -700 Less scrap Total United States demand for new copper 1,255 43 1,800 ♦Explained in paragraphs under "Copper." Page 119 to decline. It is thus consistent with the continued rapid growth of electrical generating capacity. A similar, though less inten- sive, shift away from copper is anticipated for electrical equip- ment, the output of which may triple or quadruple. Aluminum has already begun to invade the market for use in motor windings, long considered to be copper's firmest stronghold. The demand for ammunition is governed by the assumption of a continued cold war. The amounts of materials needed by the United States to defend itself 25 years hence cannot be effectively estimated, but it may be assumed that as the eco- nomic and military power of the potential enemy grows, the defense needs of the United States also will grow. In order to indicate the probable necessity of increased flows of materials into defense by 1975, the ammunition requirement is projected at twice that of 1950, but is expected to require only 50 percent more copper because of the substitution of other metals (par- ticularly steel). "Other uses of new copper" include clocks, watches, utensils, decorative housewares, and a host of others that cannot be assumed to grow only in proportion to consumers' or producers' durables. Since many of these uses are related to population or the number of households as well as to gross national product, they are projected as expanding by 50 percent, a rate greater than the projected rates of increase in households and popula- tion and less than the projected rate for gross national product. Old scrap for "other uses" (that which does not pass through the hands of primary smelters and refiners) is predomi- nantly in alloy form. Alloy scrap is predominantly melted down and resold as brass or bronze, no attempt being made to extract the pure copper. Most brass and bronze go into uses that can be classified under "construction" or "producers' or consumers' durables." Regardless of the breakdown in these categories, the projection for brass and bronze uses would be substantially less than 100 percent above the present level, since none of these categories is projected as increasing by more than 50 percent. Because some substitution of aluminum and other metals for brass and bronze is anticipated, the demand arising out of those uses consuming copper in secondary alloy form is projected to expand by a somewhat lower percentage. The total projected demand for copper is broadly consistent with the rate of increase of copper consumption of the past 30 years. Since the demand projections do not imply significant changes in average scrap recovery and average recovery lags, the 1975 scrap ratio is expected to be substantially the same (28 percent) as that prevailing in the past. United States demand for new copper is therefore projected to expand by about 43 percent, as compared with a 54 percent increase expected for the rest of the free world. LEAD United States lead consumption in 1950, as estimated by the Lead Industries Association, was about 1,212,000 short tons. The distribution of this total among end-uses, and the corresponding projections for 1975, are shown in table V. The number of storage batteries is determined both by the total stock of cars and trucks and by the annual increment to that stock. Only part of the cars and trucks in use at the be- ginning of each year must be supplied with new batteries in the course of the year. On the other hand, a new storage battery must be provided for each new car or truck added in the course of a year. The stock of cars and trucks is expected to about double between 1950 and 1975, while the production of new cars and trucks is expected to increase by about a third in the same period. Since the average life of a battery is around 2 years, the demand for batteries may be expected to increase by about 70 percent. In the absence of a reliable substitute, the use of lead for cable coverings would be projected as remaining constant, since the major cable using industries (telephone and tele- graph) are not expected to require an increased flow of new equipment. However, the introduction of plastic cable cover- Table V.—Projected United States demand for lead 1950 consump- sand short Percentage in- Projected con- sumption End-use Projected as moving with— jft>out 1975 projected (thousand short Storage batteries (*) 416 70 707 Cable (*) 133 -50 67 Paint and varnish (*) 64 20 77 Ammunition See copper projection 33 100 66 Oil refining and gasoline (*) 120 150 300 Construction (*) 128 10 141 Insecticides (*) 12 200 36 Printing (*) 31 75 Foil (*) 3 0 3 Ceramics (*) 24 100 48 Colors Paints 26 50 39 Railroads Demand for new railroad equipment 19 100 38 Automobiles and trucks Demand for new automobiles and trucks 23 33^ 31 (*) 18 50 27 Other uses (*) 162 50 243 Allowance for exports of fabricated lead 73 Total U. S. lead consumption '(*)'.'::::::::::::::::::::::::::::::::::::: 1,212 61 1, 950 Less scrap -428 -750 784 53 1,200 *Explained in paragraphs under "Lead." Page 120 ings indicates a substantial substitution, so that there is projected a 50 percent reduction in the consumption of lead for cable coverings. Continued substitution of titanium in pigments is antici- pated; hence the use of lead in paints is projected to rise by a smaller percentage than that projected for paints as a whole. The use of lead in gasoline is projected to expand more rapidly than gasoline itself, since it is expected that a greater proportion of future engines will require antiknock fuel. The use of lead in construction is expected to increase at a slower rate than construction generally, owing to the antici- pated substitution of other metals for lead in some applications. A rapid growth in use of lead in insecticides is indicated by studies showing the profitability of greatly intensified pest con- trol activity, but, owing to the development of chemical insecti- cides not containing lead, the projected increase in lead con- sumption in insecticides is lower than the projected rate of growth for insecticides as a group. (See projection of fast- growing uses.) The use of lead for foil is not expected to expand, since aluminum foil and new packaging methods will restrict lead foil to highly specialized purposes. In ceramics, use of lead is expected to grow at the same rate as gross national product. In the absence of substitutions, the demand for solder would be expected to rise 65 percent, i. e., the weighted average of the percentages by which its major uses are expected to expand. Electrical uses, which in 1950 took about 15 percent of the solder used, are expected to triple by 1975; autos and trucks, which took 40 percent in 1950, are projected to increase by a third. Other durable goods and construction uses took 25 per- cent in 1950 and are expected to grow 50 percent by 1975; miscellaneous uses took 15 percent in 1950 and are expected to double in the next generation. Anticipated substitutions in some uses (automobile radiators, cans) reduce the projected rise to 50 percent. Appliances and producers' durables other than trucks and railroad equipment are believed to account for the bulk of the unspecified uses. These uses are therefore projected to expand by 50 percent in the next 25 years. Over the past 25 years the scrap return has averaged about a third of total consumption. We expect this ratio to rise in the long-term future, largely because the major source of scrap (storage batteries) is projected to expand more rapidly than lead demand as a whole. From this source alone between 550,- 000 and 600,000 tons of scrap may be expected in an average year in the 1970's, since approximately 90 percent of the lead which goes into storage batteries returns in the form of scrap, after a lag which averages around 2 years. Other scrap-produc- ing uses (printing, automobiles, railroads, cable, and construc- tion) probably will provide close to 200,000 additional tons. Owing to the projected increase in the scrap ratio, the de- mand for new lead is projected to rise by about 53 percent .This compares with a projected increase of 78 percent in the demand for new lead in the rest of the free world. ZINC United States zinc consumption in 1950 was about 1,156,- 000 short tons. This figure (from Bureau of Mines data) repre- sents the sum of the figures on slab zinc consumption (947,000 short tons), return of old scrap (75,000 short tons), and zinc used in pigments (132,000 short tons) and salts (2,500 short tons) made direct from ore. It could not be subdivided accord- ing to consuming industries, but a breakdown (based on Bureau of Mines data in table VI and allocating old scrap into brass and bronze uses) has been attempted. Rolled zinc is used largely for dry cell batteries and engrav- ing plates. In both these uses substantial substitution of mag- nesium for zinc is anticipated. Numerous parts of appliances, automobiles, and small uten- sils are die-cast from zinc-base alloys, and these together account for most of such alloy material. The use of zinc-base alloys has increased more than tenfold in the past generation, but for the purposes of projection it is assumed that by 1950 the poten- tial new uses of such alloys has been substantially exhausted. Furthermore, a substantial substitution of aluminum for zinc in die-casting appears to be in process. Prior to the Second World War, some 60 percent of all die-castings were made from zinc-base alloys, but by 1951 only a third were so made. The projection assumes total die-castings to rise approximately in proportion to the demand for appliances, with some further substitution of aluminum for zinc as the basic metal. Table VI.—Projected United States demand for zinc 1950 consump- tion (thou- sand short Percentage in projected Projected con- sumption about 1975 (thousand short Galvanizing Brass and bronze Rolled zinc Die castings Pigments Other Allowance for export of fabricated z: Producers' durables n( See copper projection. . a paragraphs under "Zinc." Page 121 The projected demand for 1975 exceeds 1950 consumption by about the same percentage as that by which our consump- tion grew from 1925 to 1950. During recent years the scrap ratio in zinc has been about 7 percent. This ratio may be ex- pected to decline slightly in view of the fact that the major increase is anticipated to take place in galvanizing (which yields no scrap), while rolled zinc (an important scrap-producing use) is expected to decline. Hence the supply of old scrap in 1975 is projected at 100,000 tons, and the demand for new zinc is projected to about 1,500,000 tons, 39 percent above the 1950 figure. This compares with a projected rise of 61 percent in the demand for new zinc on the part of other free countries. TIN Total tin consumption in the United States in 1950 was about 93,000 long tons, of which about 71,000 long tons was new tin. The distribution of the total among consuming uses, together with the projected figure based on each use, is shown in table VII. Technological developments, primarily the electrolytic plating process, have reduced the tin used per ton of tin plate by about one-half in the last 10 years. Industry sources estimate that further foreseeable developments (such as plating on one side, plating in different thicknesses on two sides, and using plastic rather than metallic coatings) will lead to a saving proportionately almost as great in the next 25 years. Since tin plate is largely used in making food cans, its use may be ex- pected to grow broadly in proportion to population, though perhaps somewhat faster owing to the use of tin containers for other purposes. An expansion of total plate use of about 50 percent, together with savings in the amount of tin per ton of plate of something over 40 percent are expected to lead to a decline of 15 percent in the total amount of tin used for this purpose. Babbitt metal (used for bearings) is expected to grow by the weighted average of the projected growth rates of automotive vehicles and railroad cars. Effective substitutes for tin for collapsible tubes and foil have appeared in the last decade. By now but a small proportion of the earlier demand for tin remains, and this too is expected to disappear almost completely in the next 25 years. Since the overwhelming proportion of old scrap comes from non-tin-plate uses of tin, the scrap output is projected as in- creasing in proportion to such uses. ANTIMONY In 1950 the United States consumed about 37,000 short tons of antimony. This total was distributed among end-uses and projected to increase as shown in table VIII. Use of antimony for bearing metal and bearings is expected to expand at the weighted average of the growth rates for auto- mobiles, trucks, and railroad cars, that is, between 60 and 70 percent over the next 25 years. The projection is based on an assumed 1950 consumption of 2,500 short tons. The recorded 1950 figure of 3,256 short tons overstates the actual 1950 consumption by an unknown amount accumulated by con- suming industries in the form of inventories. "Other metal products" include some projected to grow rapidly, such as ammunition; some projected to decline, such as cable coverings, collapsible tubes and foil; and some pro- jected to expand along with the production of durable goods, such as castings. The 50 percent increase projected for the category as a whole is an estimate of the net effect of these divergent growth rates. Possible growth in the use of antimony for frits, ceramic enamels, paints, and lacquers is expected to be offset by sub- stitutions (such as titanium and zirconium compounds). Use for glass and pottery is expected to double by 1975, with the glass component increasing faster than construction as a whole because of the probable continued substitution of glass for other materials in construction uses. New developments promise to extend the life of flame- proofed textiles. Otherwise a somewhat larger increase would be projected. Since the use of storage batteries, the major source as well as the major user of scrap antimony, is projected to grow by about the same percentage as the demand for all metallic antimony, the scrap ratio is expected to remain substantially constant, i. e., between 55 and 60 percent. The demand for new antimony is thus projected to increase by about 81 percent, as compared with a 100 percent rise projected for other free countries. Table VII.—Projection of United States tin demand* 1950 consump- tion (thou- sand long Percentage in projected Projected con- sumption about 1975 (thousand long tons) Tin plate Babbitt Brass and bronze. Tubes and foil Other .g Allowance for expo See copper projectioi Based on 1950 data in U. S. Bureau of Mines Mineral Market Survey No. 2038, "Tin in 1950." Page 122 Table VIII.—Projected United States demand for antimony Metal products: Antimonial lead and battery metal. . Bearing metal and bearings Type metal Sheet and pipe Total metal products.. Nonmetal products: Frits and ceramic enamels.. Glass and pottery Paints and lacquers Flame-proofed textiles Other nonmetal products.. Projected as moving with— See lead projection (t) Printing and publishing... Gross private domestic ii for consumers' durables. See lead projection (t) Percentage in- projected Projected con- sumption about 1975 (short tons) Table IX.—Output of aluminum * Storage batteries are almost the sole end-product for which scrap antimony is used. In the absence of ai 1950, the total scrap consumed in 1950 is assumed to have gone into the production of storage batteries, f Explained in paragraphs under "Antimony." ALUMINUM Aluminum has not yet found its "normal" relative place in the materials demand of the American economy. In almost all its uses it is in the process of winning markets away from com- peting materials, as already cited in the discussions of the other nonferrous metals. But markets gained from the nonferrous metals are unlikely to be quantitatively the most important causes of aluminum's future expansion, for substitutions even far in excess of those anticipated could be effected by less than a million tons of aluminum. They may, of course, be highly valuable substitutions because of the specialized uses served by the nonferrous metals. In contrast, the possibilities of substitut- ing aluminum for steel and wood are almost unlimited. Alumi- num window frames and furniture, and aluminum in construc- tion could by themselves account for a four- or five-fold expan- sion of United States aluminum demand from its present level of 983,000 short tons. This fact frustrates any attempt at preci- sion in the estimate of aluminum demand. If there were no substitutions at all in favor of aluminum, its demand would probably expand by 1975 to 2 or 2/2 times its 1950 level. Readers may verify this statement by comparing the percentage breakdown of the 1949 output of the three major United States producers, shown in table IX, with the expected growth of the economic aggregates listed. The projected substitutions of aluminum for other nonfer- rous metals would add another 500,000 tons. To the resulting figure of 2 y2 to 3 million tons must be added an arbitrary allow- ance for the probable amount of aluminum that will substitute for steel and wood. We have chosen to project the 1975 United States demand for aluminum at 4.5 million (between 4 and 5 times the 1950 end-use breakdown for scrap antimony ii consumption) as indicating a plausible rate of growth. A fig- ure much less than this would imply almost no incursions of aluminum into fields now held by other materials. A figure much greater,, say 10 times the 1950 output, would be possible if aluminum were assumed to take over more than a small part of the functions now performed by wood and steel. The policy implications of a ten-fold increase should therefore be con- sidered. Aircraft Water and coal.. Automotive ..... Building Utensils Appliances Machinery Other i 1949 by categories 1.55 7.35 22. 26 5. 90 6. 63 3. 77 34. 85 Total 100. 00 The scrap ratio of aluminum has averaged less than 10 per- cent in the United States in recent years. Since the projected rate of growth is considerably slower than that of the past, this ratio is expected to increase in the future. In Europe, where the growth of aluminum consumption from 1935-38 to 1948-49 was at about the rate projected for the United States, recent scrap ratios have been around 30 percent, but these ratios were influenced by the presence of war scrap on the European mar- ket. An intermediate figure of around 20 percent is not im- plausible for the United States in 1975. This would make the projected United States demand for new aluminum around 3.6 million tons, an increase of about 300 percent over the 1950 consumption of 920,000 short tons of new metal. Page 123 STEEL Data provided by the planning staff of the Defense Produc- tion Administration indicate that 68 million tons of finished steel and steel castings were consumed in the United States in 1950. This figure excludes 4.6 million tons added to inventories in the hands of consuming industries and 1.1 million tons of exports. The consumption was subdivided among end-uses and projected for 1975 as shown in table X. Military and atomic uses of steel in 1975 cannot be foreseen. Their projected doubling is merely an indication that they are likely to grow under conditions of continued cold war. They may not be as large in 1975 as in 1951-53, a period in which the military demand is expected to be largely devoted to the rapid increase of stocks of equipment rather than to replace- ment and "normal" growth. Oil and gas uses of steel are projected to double by 1975. Gas consumption is expected to increase by 150 percent, but annual pipeline construction need not increase commensurately in order to accommodate the projected flow of gas to consum- ers. Oil consumption is expected to slightly more than double its 1950 level, but the steel needs for oil production will depend on what part of 1975 consumption is obtained from imports. The projection for these uses of steel is therefore subject to a particularly wide margin of error. Steel for containers is largely used in making tin plate. In 1950, 4.85 million tons of tin plate were produced, taking about 4.8 million tons of steel. This use is projected to expand 50 percent by 1975. The remaining 1.3 million tons were used mainly for industrial containers. This use is projected to double by 1975. If the amount of finished steel obtained from a ton of ingot steel remains constant at its recent average ratio of 74.6 percent, ingot production must increase from 96.8 million tons in 1950 to about 147 million tons in 1975, in order to meet average projected domestic requirement. Since exports of steel are left out of account in the projec- tion, the normal level of ingot steel production may be some- what higher than the projected domestic requirement figure, perhaps around 150 million tons annually. Furthermore, since the projections are designed to yield a "normal" level of de- mand, the level of capacity associated therewith must be higher, if it is expected to be able to accommodate "abnormal" de- mands, such as characterized 1950. CASTINGS, PIG IRON, AND ORE In 1950 the United States consumed about 13.5 million tons of iron castings in addition to the 68 million tons of finished steel and steel castings. The distribution of iron castings con- sumption among end-uses is not available for recent years, but it appears to be broadly similar to that of steel, with automobiles constituting the most important single use. The demand for these castings is therefore projected to rise by the same per- centage (62 percent) as the demand for finished steel over the next 25 years. This yields a 1975 figure of some 22 million tons for iron castings. Total United States production of finished steel, and of cast- ings made of steel and iron, was about 89 million tons in 1950. About 65 million tons of pig iron and about 22 million tons of old scrap were used, the remainder being accounted for by alloying materials and variations in the flow of new scrap. The amount of pig iron likely to be required in 1975 is the projected total demand for finished steel and castings (132 mil- lion tons) less the projected use of alloys and the amount of old scrap likely to be returned. Use of the additive metals in the years around 1975 is expected to be about 1 million tons while the supply of old scrap is expected to be about 32 million tons. Hence about 99 million short tons of pig iron would be needed to meet the projected domestic demand for steel. If allow- ances are made for the pig iron component of potential ex- ports of crude steel, the projected level of domestic pig iron demand may be set at about 100 million tons. The estimated scrap supply of 32 million tons was derived from a recent study by the Defense Production Administration. According to that study, the amount of scrap recovered from finished steel and castings averages about 30 percent, with a lag in recovery averaging 20 years. Thus the 1975 supply of scrap is projected at about 30 percent of the anticipated out- Table X.—Projected United States demand for finished steel End-use Military and A. E. C Residential construction Private nonresidential construction Public construction Oil and gas Containers Railroads Farm machinery Other machinery and equipment Ships Automobiles and trucks Maintenance, repairs, and operations. . . Consumers' durables Allowance for exports of fabricated steel. Total Projected as moving with— (*)• (*) (*) Demand for new railroad equipment Demand for new farm machinery Producers' durables Shipbuilding Demand for new automobiles and trucks. Gross national product Appliances 1950 consump- tion (million short tons) Percentage in- crease projected 1. 3 2. 1 6. 1 3. 1 6. 3 6. 1 5.0 2. 9 9. 4 . 3 16. 4 4.0 5.0 68.0 Projected con- sumption about 1975 (million short tons) 100 15 50 50 100 60 100 0 50 0 33/3 100 50 62 2. 6 2.4 9.2 5. 2 12. 6 9. 8 10. 0 2. 9 14. 1 . 3 21. 9 8.0 7.5 3. 5 110.0 ^Explained in paragraphs under "Steel." Page 124 put of finished ferrous products in the years around 1955. The defense goal of 120 million tons is accepted as the estimated 1955 output of crude steel. This amount of crude steel would produce about 90 million tons of finished steel and steel cast- ings. To this must be added 15 million tons or more for iron castings to be produced around 1955, yielding a total supply of finished ferrous products of around 105 million tons. The estimated 1975 scrap supply is 30 percent of this latter figure. The demand for iron ore may be derived from the demand for pig iron. In 1950 the United States used the equivalent of 130 million short tons of iron ore of 50 percent recoverable iron content. For the projected pig iron consumption of 100 million tons the equivalent of some 200 million tons of 50 percent recoverable content ore would be needed. ADDITIVE METALS Projection of demand for the additive metals is particularly difficult, because many of them are close substitutes for one an- other and because data on the end-uses of alloy steels are not separately available. It is anticipated, however, that as the American economy develops further, its machines and equip- ment will require relatively greater quantities of special-use steels. Hence the demand for the additive metals as a group will probably expand at a more rapid rate than the demand for steel. Use of the alloys of more generalized usefulness, chromium and nickel, is projected to double, with the demand for chromite (chromium ore) increasing from about 875,000 to about 1,750,000 long tons, and that for nickel rising from 100,000 to 200,000 short tons. Consumption of the more specialized alloys is expected to increase more than that of nickel and chromium, with that of tungsten and molybdenum growing about 150 and 170 per- cent, respectively, and that of cobalt expanding by almost 350 percent. The especially high increase for cobalt stems from its use in rockets, guided missiles, and atomic energy developments. Molybdenum consumption was about 26 million pounds in 1950 and is expected to increase to around 70 by 1975. Cobalt consumption, which was about 9 million pounds in 1950, is expected to rise to about 40 million pounds by 1975. For tung- sten the 1950 figure is 6 million pounds, but consumption in the latter part of that year was restrained by failing supplies. Allowance for this has therefore been made in projecting de- mand to rise to about 15 million pounds by 1975. These projections represent little more than the quantifica- tion of broad qualitative judgments. They are somewhat sup- ported by past trends, however. Consumption of tungsten had risen by 1948 to almost double its 1936 level; consumption of molybdenum in 1950 was some 50 percent larger than in 1936, and that of cobalt was over 4 times its prewar level. Nickel con- sumption in 1950 waii somewhat less than double and chromium consumption somewhat more than double their respective aver- ages in the immediate prewar years. The demand for the ferro-alloys is furthermore vulnerable to changes in military requirements, and might be more than doubled if a state of full mobilization were approached. MANGANESE The use of manganese in steel making is technically de- termined; it requires about 13 pounds of manganese to make a ton of crude steel. The projected average level of ingot steel production of 150 million tons would thus require about 975,- 000 tons of contained manganese. The average grade of the manganese ore currently consumed is about 46 percent, but almost 16 percent of the manganese content of the ore is lost in converting the ore to ferromanganese, the alloy actually used in the steel-making process. Hence about 2.5 million tons of manganese ore of 46 percent average grade would be needed to produce the projected 1975 steel output. An allowance of some 200,000 tons of ore has been made for other uses, which have typically accounted for a very small share of our consumption of manganese. Thus the total projected consumption of manga- nese ore of 46 percent average content is about 2.7 million tons, as compared with some 1.8 million tons in 1950. FLUORSPAR United States consumption of fluorspar of all industrial grades in 1950 was about 426,000 short tons. Presented in table XI is an approximate list by end-uses for the years 1950 and 1975. In order to expedite a comparison with reserves, the consumption figures are converted to short tons of pure fluor- spar (100 percent CaF2). On this basis the 1950 consumption was 369,000 short tons. The use of fluorspar in the manufacture of aluminum is pro- jected tc increase in two ways: first, through expansion of pro- duction of new aluminum; and second, through an increase in Table XI.—Projected United States demand for fluorspar Projected as moving with— | Percentage ir projected I Projected con- sumption about 1975 I (thousand short as CaF2) Steel Aluminum Glass Enamel Iron foundry and ferro-alloys. . Other hydrofluoric acid Miscellaneous Total antimony projection. . I {**T'.'.'..'.'.'.'.'.'.'.'.'..v.'.'. (**) | Gross national product... Page 125 the average amount of fluorspar used per ton of aluminum. At present an average of about 120 pounds of fluorspar of about 98 percent grade is used per ton of new aluminum produced. This rate is likely to change to about 150 pounds per ton as synthetic cryolite becomes completely substituted for natural cryolite. The natural cryolite source in Greenland is expected to be depleted within the next generation. The 1975 projection is obtained by applying the 150-pound-per-ton ratio to the 3.6 million tons projected as the United States demand for new aluminum. When rapid expansion in aluminum producing capacity takes place, as is expected in the next few years, the aluminum industry may at times consume as much as 190 pounds of fluorspar per ton of aluminum. This is due to the fact that fluorspar is used much more intensively in new plants or in the restarting of old plants than in normal continuous operations. Consumption of fluorspar in iron foundry and ferro-alloy uses is expected to double, with the largest part of the increase coming from ferro-alloy uses. Aside from its use in the manufacture of aluminum, hydro- fluoric acid is used in the production of plastics, propellants for insecticides, refrigerants, the atomic energy program and other chemical products. These end products are expected to grow greatly in the next 25 years, the 400-percent projected increase being an arbitrary quantification of their anticipated rapid growth. RUBBER In 1950 the United States consumed about 1.6 million long tons of rubber, of which about 1.3 million tons were new and about 0.3 million tons reclaimed. Transportation accounted for about 1.0 million tons of the 1950 total and is expected to take 1.6 million tons in 1975. Nontransportation uses, which took 0.6 million tons in 1950, are expected to take 1.7 million tons in 1975. Thus the total is projected as rising by a little over 100 percent, from 1.6 to 3.3 million long tons. The amount of reclaimed rubber is projected at 0.8 million tons in 1975; hence the demand for new rubber is expected to rise by about 90 percent, from 1.3 to 2.5 million long tons, between 1950 and 1975. No attempt was made to divide the demand for new rubber into the components of natural rubber and synthetic rubber. In 1950 replacement tires were bought at the rate of 1.29 per car in use at the beginning of the year, and at the rate of 1.25 per truck and bus. The rate of replacement is assumed to remain the same for passenger car tires; that for truck tires is assumed to fall to 1.1 to allow for an expected increase in recapping. These rates being applied to the projected 1975 car and truck populations, there emerges a projected replace- ment demand for 84 million automobile tires and 22 million truck tires. In addition there will be a new-car demand for some 35 million automobile tires (assuming 5 tires per car) and a new-truck demand for some 18 million truck tires (as- suming an average of 7 tires per truck). Thus there is projected a 1975 demand for 119 million automobile tires as compared with 83 million in 1950, and a 1975 demand for 40 million truck tires as compared with 25 million in 1950. Since a truck tire contains approximately 4 times as much rubber as an auto- mobile tire, the total projected tire demand is equivalent to 279 million passenger car tires, as opposed to a 1950 equivalent of 182 million. The resulting increase of about 53 percent is applied to all transportation uses of rubber, in recognition of the fact that the main category other than tires in these uses is tubes, which can be expected to move correspondingly. Thus 1.6 million tons of rubber is estimated for transportation uses in 1975 as opposed to 1.04 million tons in 1950. This projection neglects possible increases in the durability of the average tire, since such increases are likely to be counterbalanced by an increased rubber content. The nontransportation uses of rubber have increased more than five-fold in the past 25 years and may be expected to continue to grow rapidly. Increasing industrial use (as in con- veyor belts) is almost certain, as is the increasing use of foam rubber in household applications. A technique in the use of rubber in road construction has been experimentally developed. In the light of these, considerations, we have projected an in- crease of about 200 percent in nontransportation uses of rub- ber, from 0.58 million tons to 1.7 million tons. The ratio of reclaimed to total rubber is expected to rise slightly from its recent level of around 20 percent to about 25 percent in 1975. The corresponding absolute amounts of re- claimed rubber are 0.3 million tons in 1950 and 0.8 million tons in 1975. The 1975 figure represents our anticipation of the available supply. Reclaimed rubber comes mainly from tires, after an average lag of about 4 years. Hence the amount of such rubber available in a year around 1975 will be the amount of rubber embodied in tires produced 4 years earlier, less an allowance for tires not returned as scrap and an allow- ance for the amount of rubber worn off the tires that are returned as scrap. Total transportation demand for rubber in 1971 is expected to be about 1.5 million tons, of which 1 to 1.1 million tons will be in the form of tires. Allowances for wear and nonreturn bring the projected supply down to about 0.8 million tons. SULFUR United States consumption of sulfur in 1950 was about 4,806,000 long tons. This total was distributed among end- uses on the basis of data compiled by Chemical Engineering magazine and various Government agencies and was projected to 1975 as shown in table XII. The Bureau of Agricultural Economics reports that fertilizers as a whole can be economically applied to present farm acreage in about 2l/z to 3 times their present quantity, with phosphate fertilizers increasing by a slightly lower percentage than nitro- gen and potash fertilizers. The application of this amount of fertilizer to present acreage, together with the installation of other presently known techniques, would yield a supply of agricultural products ample to meet anticipated 1975 United States needs. Projections based on such expectations are there- fore not inconsistent with other assumptions in this study. Substitute methods are likely to result in superphosphates in- creasing somewhat less than total output of phosphate fertilizers. On the other hand, use of ammonium sulfate may expand at least as rapidly as total fertilizer production. Thus consumption of sulfur for fertilizers is likely to rise about 150 percent. Although the chemical industry as a whole may grow by as much as 400 percent in the next 25 years, the use of sulfur for chemicals is unlikely to expand so rapidly, since the fastest growing of the chemical products (such as plastics) are not among the important users of sulfuric acid. Page 126 Table XII.—Projected United States demand for sulfur End-use Projected as moving with— 1950 consump- tion (thou- sand long tons) Percentage in- crease projected Projected con- sumption about 1975 (thousand long Acid uses: Superphosphate fertilizer Chemicals Ammonium sulfate Paints and pigments Iron and steel Petroleum refining Rayon and films Miscellaneous (*)■ (*)• (*)• (*)• (*). Gross national product. Total in acids. Nonacid uses: Pulp and paper Rayon Pesticides Rubber Chemical and miscellaneous. Total in nonacid uses. Total sulfur (*) (*) (*) (*) Gross national product. 1. 145 780 407 390 320 310 220 163 3, 735 420 180 150 65 256 1, 071 4, 806 130 200 200 50 40 50 100 100 20 100 0 100 100 110 *Explained in paragraph under "Sulfur.' Although the projected demand for iron and steel products is about 60 percent above 1950 production, the use of sulfuric acid in the iron and steel industry is expected to expand by only 40 percent because of foreseeable savings in its use. Economies already instituted in some oil refineries are likely to save about 25 percent of the acid use that would be projected on the basis of no change from current practices. Thus, this use of sulfur is projected to expand by 50 percent rather than to double along with the output of petroleum products. The use of rayon and films is expected to about double in the next generation. Films are anticipated to proceed with gross national product, while rayon, though continuing to grow more rapidly than textiles as a group, is not thought likely to more than double. Rayon, which requires both sulfuric acid and carbon bisulfide, already accounts for about 10 percent of cloth production. Its ultimate growth at the expense of other fibers is limited both by its unsuitability for the bulk of cotton's present uses and by the fact that it is itself subject to incursions from newer synthetic fibers. Pulp and paper uses of sulfur are expected to increase by 20 percent. Although the total consumption of paper (includ- ing paper for wrappings and containers) may double in the next 25 years, sulfate and semichemical papers, which are rela- tively low sulfur consumers, are expected to account for most jf the increase. The use of pesticides of all kinds in 1975 is likely to be at several times the 1950 rate, but the continued substitution of acid-using chemical applications for elemental sulfur will prob- ably keep the nonacid use no larger than at present. THE ENERGY FUELS Projections of demand for the energy fuels (coal, oil, and latural gas) are subject to particularly wide margin of error because they can so readily be substituted for one another in certain major uses. Clearly, natural gas and petroleum are more convenient than coal for residential heating, and petro- leum is coming to monopolize the market for transportation fuel. Nevertheless, important quantities of all three fuels are currently consumed in industrial and power-generating uses— uses in which a small change in the relative prices and avail- abilities of coal, oil, and natural gas could cause very substantial substitutions. Athough it is recognized that the demand for the three fuels is highly sensitive to price, it is assumed that their relative prices remain unchanged. Hence, the relative shares in those uses in which they compete closely also are assumed to remain unchanged. Readers should, however, be aware of the vul- nerability to even small price changes of the projected levels of demand for any of these fuels in such uses. Electric Energy* Electric power production in the United States has approx- imately doubled every 10 years since 1900. The principal ele- ments that have contributed to the rapid growth of this form Oi energy are as folio a) A 100 percent increase in population. b) A 660 percent increase in the number of ultimate con- sumers. c) Approximately a 130 percent increase in real income per capita. d) The mechanization of industrial plants, farms, and homes. e) The electrification of mechanical processes in industrial plants, on farms, and in homes. /) The growth of electroprocess industries. The extension of electric service, which has accounted for much of the past growth, has been nearly completed. Popula- *By Herschel Jones. 997199—52 10 Page 127 tion growth and increased requirements per customer will be the most important factors from now on. Estimated electric energy requirements are shown in table XIII by 5-year intervals to 1975. These estimates are based in part upon the same assumptions—regarding size of popu- lation, number of households, gross national product, average weekly hours of labor, and size of the labor force—as have been accepted for the remainder of this study. In view of the "area-wide service" objectives of rural electric cooperatives and other systems, it is assumed that less than one- half of 1 percent of occupied dwellings will be without elec- tricitv in 1975, compared to 8 percent without electricity in 1950'. Accordingly, it is assumed that the number of commercial establishments will increase from 1 for each 27.6 people in 1950 to 1 for each 20 people in 1975. If the demand for more services is met by larger rather than by more service establish- ments, electric energy requirements may be slightly less than those estimated. A doubling of gross national product will greatly increase disposable personal incomes. This should stimu- late the continuation of the trend toward more service estab- lishments illustrated by a 53 percent increase in commercial establishments from 1930 to 1950. It is assumed that the use of electric energy per domestic customer will increase from 1,902 kw.-hr. in 1950 to 5,000 kw.- hr. in 1975. Higher personal incomes should make it possible for nearly every family to purchase major electric appliances such as stoves, refrigerators, water heaters, clothes dryers, tele- vision sets, air conditioners, electric blankets, radiant heaters, and heat pumps. Thousands of homes in the United States now use over 5,000 kw.-hr. per year. Annual consumption in the Tennessee Valley Authority area and in the Pacific Northwest averages more than 5,000 kw.-hr. per residential customer. An increase from 9,229 kw.-hr. in 1950 to 20,000 kw.-hr. in 1975 is assumed for each commercial customer. This is a slower rate of growth than that recorded from 1930 to 1950. More use of air-conditioning, better methods of heating— especially by use of heat pumps—together with continued growth of lighting for display and advertising are expected to contribute to the expanded demand. The increase shown for industrial power consumption per capita is at a slower rate than the increase from 1930 to 1950, yet it means that in 1975 more than 18 kw.-hr. will be used for each man-hour of industrial employment, approximately three times the 1950 ratio of 6.29 kw.-hr. per man-hour. If gross national product is to double by 1975 with only an 8 percent increase in industrial man-hours (27 percent more workers but 15 percent fewer working hours per week), pro- ductivity must rise rapidly. This can be accomplished only by an increase in the mechanical energy used by each worker. The so-called "miscellaneous" uses of electric energy include street and highway lighting, municipal water pumping, sewage disposal plant operations, and other municipal uses of electric energy. The rate of increase assumed for them is slower than the rate from 1930 to 1950. This may be much too low an estimate if, for example, proposed measures to overcome stream pollution are taken, if a large program of highway lighting to prevent accidents is initiated, or even if most communities undertake a thorough job of street lighting. LOSSES The assumption that losses will remain in or near the present relationship to total generation is based upon a judgment of the net effect of two important factors affecting such losses. First, energy losses are very small when industrial plants gen- erate their own electricity. The losses are larger when power is brought from distant utility generators to the industrial plant where it is used. Since it is expected that an increasing propor- Table XIII.—Electric energy in the United States—1930-75 Historical1 Estimated 1930 1940 1950 1955 1960 1965 1970 1975 Percentage of dwellings served 68 73 92 . 95 97 98 99 100 Millions of customers: Residential 2 20. 5 25.6 39. 1 44. 5 48. 9 52. 8 57.2 62.2 Commercial 3 3. 6 4. 3 5. 5 6. 1 6. 8 1 6 8. 6 9. 7 Kw.-hr. used per customer: 610 987 1, 902 2, 800 3, 500 4, 100 4, 600 5,000 Billions of kw.-hr. sold: 3, 843 5, 252 9, 229 12, 300 14, 500 16, 500 18, 500 20, 000 Residential 2 12. 5 25. 3 74. 5 124. 6 171. 2 216. 5 263. 1 311. 0 13. 9 22. 4 50. 4 75. 0 98. 6 125. 4 159. 1 194. C Industrial and miscellaneous 4 69. 1 105.4 208. 8 331. 1 434. 2 528. 3 611. 2 699. 1 Total 96. 0 153. 1 333. 7 530. 7 704. 0 870. 2 1,033.4 1,204. 1 Losses (billions of kw.-hr.) 18. 6 26. 9 55. 1 86. 4 114. 6 141. 7 168.2 196. C Percent losses 16. 2 14. 9 14. 2 14.0 14. 0 14. 0 14. 0 14. C Billions of kw.-hr. required 114. 6 180.0 388. 8 617. 1 818. 6 1,011. 9 1,201.6 1, 400. 1 • Sources: Edison Electric Institute Bulletins Nos. 17 and IS; Production of Electric Energy, Capacity of Generating Plants. 1950, Federal Power Commission "Electric Power in Industry—Its Source and Use," author L. A. Umansky, published in Load, October 1951; Bureau of Census, 1940 and 1950; National Electric Light Association Statistical Bulletin No. 7; Power Requirements in Electro Chemical, Electro Metallurgical and Allied Industries, Federal Power Commis- sion, 1938. 2 Includes farm customers. 3 Small light and power sales of electric utilities. 4 Large light and power and railway and railroad sales of electric utilities plus generation for industrial use in nonutility plants. Page 128 tion of industrial electric energy requirements will be supplied by utility systems, the losses involved in supplying industrial electric requirements will also be greater. Technical improve- ments in electric transmission and distribution equipment, however, will reduce the losses of energy incident to utility sys- tem operations. Such reductions in losses are estimated to about offset the gain in losses expected from the increased utility service to industrial plants. Like the other projections in this report, the projected re- quirements for electric energy represent only broad expectations regarding the future. A deviation of 10 percent on any end-use or on the total is likely even if all assumptions regarding popu- lation, income, production, and the like are realized. Petroleum Petroleum consumption in the United States in 1950 was 2,375 million barrels. This total was divided among end-prod- ucts approximately as shown in table XIV, which also shows the projected quantity of each end-product for 1975. Table XIV.—Projected United States demand for petroleum 1950 consump- tion (millions of bbl.) Percentage increase projected Projected con- sumption about 1975 (millions of bbl.) End-product 994 110 2, 085 Kerosene and distillates. . 513 130 1, 180 554 100 1, 110 Lubricants 39 100 75 Other products 275 100 550 Total 2, 375 110 5,000 MOTOR FUEL The projected increase in motor fuels assumes that the aver- age fuel consumption per car, truck, and bus remains constant. Sixty percent of the motor fuel used in 1950 was consumed in passenger cars; it is projected as increasing by 75 percent. Trucks and buses used 25 percent of our 1950 motor fuel con- sumption and are expected to use 2^2 times that amount in 1975. Aircraft used 4 percent and are projected as using 5 times that amount in 1975. Other uses (including industrial naphtha) accounted for about 11 percent of the 1950 consump- tion and are projected as doubling. If each of these uses is increased by the indicated percentages, total motor fuel con- sumption will increase by about 110 percent. KEROSENE AND DISTILLATES Forty-five percent of the fuel in the category "Kerosene and Distillates" goes into house heating. This use of oil products is projected as expanding by 150 percent. Projections of heating requirements for particular fuels are naturally subject to wide ranges of error, since coal, oil, and gas substitute readily for one another. It is assumed that most consumers will continue to prefer oil and gas to coal, and that the major heating uses of coal will be in apartment houses, hotels, and other places where the convenience advantages of gas and oil carry less weight. As between gas and oil, it is assumed that gas will be the predominant heating fuel, both because it has a moderate con- venience advantage over oil and because of the lower instal- lation cost of the heating unit. Thus, as many as half the total number of dwelling units may be heated by gas in 1975. Dwelling units heated by oil are likely to be most common in areas not supplied with natural gas, which will probably be those in which the density of population does not warrant the building of a pipeline. It is easily conceivable that 30 or 40 percent of the total number of dwelling units may, in 1975, be in such areas, which would include many rural and small urban areas in States whose metropolitan areas were served by natural gas. It is thus not unreasonable to assume that 10 to 12 million oil burners will be in operation in 1975, as opposed to some 4.8 million in 1950. Also in the "Kerosene and Distillates" category are range oil, which took 18 percent of the 1950 total and is not expected to expand; jet fuel, which took 1.5 percent in 1950 and is projected to increase tenfold; and railroad diesel fuel, which took 9 percent in 1950 and is anticipated to rise to three times that amount by 1975. The great rise in diesel fuel consumption is projected on the assumption of a continuing trend toward diesel as the major fuel of railway transport. This trend may be expected to continue, since diesel power is far more economi- cal than steam. Diesel locomotives, which constituted about one-fourth of the locomotives in use in 1950, accounted for about half of the work done. If heavy freight traffic increases between 50 and 100 percent between 1950 and 1975, and if substantially all hauling in 1975 is done by diesel engines, 3 or 4 times as much diesel fuel will be required. The 1975 re- quirement for diesel fuel is therefore projected as 31/% times that of 1950. The equipment to use other fuels will be of negligible importance, since nearly all locomotives built before 1945 will have gone out of service. Remaining uses in the "Kerosene and Distillates" category, which include nonrailway uses of diesel fuel, are projected as doubling. They accounted in 1950 for about 27 percent of the total. These projections, when combined, result in a growth of about 130 percent for the category as a whole. RESIDUAL OIL Residual fuels were used for heating (12 percent), railroad transportation (11 percent), public utility power generation (17 percent), marine transportation (18 percent), industrial power generation (37 percent), and other uses (6 percent). Heating uses are projected to expand by the percentages in- dicated in the discussion of the "Kerosene and Distillates" cate- gory, while railroad use of residual oil is expected to yield place to diesel. Public utility uses are projected as trebling, on the assumption that the percentage of electrical generating capacity fueled by petroleum remains substantially constant. Marine uses are expected to double, with part of the increase coming from substitution of oil for coal as bunker fuel. Industrial and other uses are also projected as doubling. These anticipated increases yield a growth of about 100 percent in the residual oil category. Lubricants and other products are projected as doubling along with gross national product. The projected growth for lubricants is thus substantially the same as that for motor fuels. Page 129 Coal In 1950 the United States consumed about 493 million short tons of coal. This consumption total is distributed among end-uses and projected to the year 1975 in table XV. Table XV.—Projected United States demand for coal End-use Bituminous coal: Coke ovens Steel and rolling mills Railroads * Residential and commer- cial ** Cement mills Electric utilities General industrial uses. . . . Anthracite Total domestic consump- tion Exports *** Total demand for United States coal 1950 consumption (millions of short tons) 103 8 61 87 98 40 493 29 Percentage increase projected Projected consumption about 1975 (millions of short tons) 52 62 -75 -65 150 240 100 -50 52 522 56 157 13 15 30 20 300 196 20 751 64 815 * Class I. ** Retail dealer deliveries. *** Includes exports of coal and coke; coal used to produce exported products is allocated to consuming industries. Sources: National Coal Association, Bituminous Coal Data, 1950; Bureau of Mines. The 103 million tons of coal consumed in coke ovens in 1950 went to make approximately 79 million tons of coke, of which 61 million were used by blast furnaces, 3.5 million by iron foundries, 4 million to make producer gas and water gas, 2.5 million for household fuel, and 8 million for unspecified indus- trial uses. The use of coke in pig-iron production is expected to expand by 54 percent, the percentage by which United States demand for pig iron in 1975 is expected to exceed its 1950 level. Foundry uses of coke are expected to rise by 62 percent, the projected percentage growth in the demand for iron cast- ings. Producer gas and water gas uses are expected to remain constant, their growth being limited by the competition of natural gas and other fuels, and the use of coke as household fuel is expected to decline in about the same proportion (65 percent) as the use of bituminous coal for residential heating (see below). Unspecified industrial uses are anticipated to double along with gross national product but with a 15-percent increase in efficiency. The resultant of these projections gives an estimated demand for 120 million tons of coke in 1975. This represents an increase of 52 percent over 1950 and entails a requirement for 157 million tons of coal. The coal used directly in steel making is projected to rise by the same percentage (62 percent) as crude steel. Railroad use of coal is expected, as noted in the petroleum projection, to fall prey to diesel oil. Bituminous coal is expected to hold only about 35 percent of its present market against the incursions of natural gas in resi- dential heating. Anthracite is expected to continue to be dis- placed by natural gas and oil, losing up to half its present mar- ket to them. The use of coal in cement mills is assumed to increase in proportion to the increased use of cement. This is estimated to increase by 150 percent over 1950, the use of cement for high- ways and as a substitute for steel in the form of concrete in- creasing by enough to counterbalance the slower rise of resi- dential construction. Electrical generating capacity is expected to rise by more than 300 percent. A lower figure was chosen for use in the projection of coal because of foreseeable increases of up to 25 percent in the efficiency of coal utilization for power generating purposes. In this projection, coal is assumed to maintain its present relative share in power generation and other industrial uses. This assumption is considered reasonable under the hy- pothesis that 1950 price relationships remain, but should they change drastically in favor of either oil or coal, a cor- respondingly altered demand for coal would result. General industrial uses of coal are projected to expand in proportion with gross national product, resulting in an antici- pated 1975 demand of 196 million tons. Natural Gas In 1950 the United States consumed about 6 trillion cubic feet of natural gas, distributed among types of users and pro- jected to increase as shown in table XVI. As indicated in the preceding discussion of petroleum uses, about 30 million residential dwelling units may be heated by gas in 1975. At a rate of 140,000 cubic feet per dwelling, resi- dential heating customers would consume some 4.2 trillion cubic feet in 1975. Residential nonheating customers numbered only 4.5 million in 1949 and not more than 10 million nonheating customers can be expected by 1975. If such customers con- tinued to use an average of 30 thousand cubic feet per year, they would account for some 300 billion cubic feet in 1975. Commercial use of gas, which is also largely for heating, may be expected to increase about 150 percent, owing to the expan- sion of areas served, so that the 1950 commercial demand of some 400 billion cubic feet may be anticipated to grow by 1975 to a trillion cubic feet. Table XVI.—Projected United States demand for natural gas 1950 consump- tion (billion cubic feet) Percentage increase projected Projected con- sumption about 1975 Type of customer (billion cubic feet) Residential nonheating. . 1,000 200 400 320 50 150 100 4, 200 300 1, 000 8, 800 Pipeline fuel and lost in transmission (5%). 4, 400 300 133 700 Total 6, 300 138 15, 000 Industrial use of natural gas is assumed to expand along with gross national product. This projection depends to a great extent on the validity of the assumption that the relative shares of the major fuels in the market for undifferentiated energy remain the same. Because of the responsiveness of the undif- ferentiated energy market to price differentials, this projection is subject to a particularly wide margin of error. Page 130 Part II. Materials Demand in Other Free Nations Just as the prospective growth of the United States economy will entail increasing consumption of materials, so increases in output and living standards abroad will result in growing drains on the free world's resources. And since it is in the national interest of the United States that the free nations of the world should be strong and prosperous, United States materials policy should be aimed not only at meeting its own prospective needs, but also at facilitating the growth and prosperity of other free countries. The foreign economic policy of the United States is based on the belief that the ingenuity and know-how that lie behind the great growth of the American economy are not American monopolies. Many other countries have already shown their potentiality for growth, and this Commission believes that still others should be able to expand their productivity and raise their levels of living at rates comparable to those attained in the United States. Other countries, some of them only recently awakened to the idea of economic growth, can do much by their own efforts to break down the barriers that impeded growth in the past. Once these barriers are down, their own ingenuity too, can be relied upon to bring about rapid advances. These coun- tries have, furthermore, an asset of great worth in the fund of processes and techniques discovered, applied, and perfected through long years of experiment and experience in the de- veloped economies of the world. With all these factors leading to a reasonable expectation of rapid growth abroad, and in the light of a policy that has this growth as one of its fundamental aims, the materials needs of the future must include ample allowance for economic expan- sion abroad. It is assumed that in Europe, the United Kingdom, Canada, Australia, New Zealand, and Japan, productivity per man-hour may expand as rapidly as in the United States. In Canada, Australia, and New Zealand, where living standards are pres- ently comparable to those in the United States, it is assumed that the number of hours worked by the average member of the labor force would fall by the same percentage as projected for the United States. (See Part I.) For the European coun- tries, where present levels of consumption are significantly lower than in the United States, a somewhat smaller percentage re- duction in the average hours worked is assumed. In Japan, productivity per man-hour is expected to rise more rapidly than in other developed countries, owing to the under-utilization of productive capacity in 1950; average hours worked are not expected to fall since they are already low. Japanese workers have much to gain before they attain a consumption level equal to that prevailing in other industrial countries. Labor forces have been estimated from population projections provided by the Department of State, by assuming that the labor force in each country remained at a constant percentage of the total population between the ages of 15 and 65. These projections are summarized in table XVII. Limitations of both time and data have prevented as detailed an analysis for the rest of the free world as was made for the United States. The projections for the rest of the free world are accordingly even rougher approximations than those for the United States. For aluminum, the additive metals, fluorspar, antimony, manganese, rubber, and sulfur, consumption is projected, for the rest of the free world as a whole, with no attempt at a geographical breakdown. For copper, lead, zinc, tin, iron, and steel the projected demand for the rest of the free world is subdivided among areas. Table XVII.—Projections for free countries FREE EUROPE* 1950 1975 Population of age 15-64 (millions) 165 187 100 114 Index of average hours worked 100 90 Index of productivity per man-hour 100 185 Index of gross national product 100 190 UNITED KINGDOM Total population (millions) 50.6 50.9 Population of age 15-64 (millions) 33. 9 32. 9 100 97 100 90 Index of productivity per man-hour 100 185 100 162 Total population (millions) Population of age 15-64 (millions).. Index of labor force Index of average hours worked Index of productivity per man-hour. Index of gross national product 13. 8 17. 9 8. 8 11. 4 100 130 100 85 100 185 100 204 AUSTRALIA AND NEW ZEALAND Total population (millions) Population of age 15-64 (millions). . Index of labor force Index of average hours worked Index of productivity per man-hour. Index of gross national product 11.5 18. 1 7. 6 12. 4 100 164 100 85 100 185 100 258 JAPAN Total population (millions) Population of age 15-64 (millions).. Index of labor force Index of average hours worked Index of productivity per man-hour, Index of gross national product.... 83.2 111 50 72 100 145 100 100 100 221 100 320 ^Includes France, Western Germany, Italy, Finland, Sweden, Norway, Denmark, Belgium, The Netherlands, Luxembourg, Portugal, Spain, Switzerland, Austria, Greece, and Yugoslavia. Only the method used to estimate the demand of the in- dustrial countries is discussed at this place, the nonindustrial areas being discussed separately below. Since patterns of con- sumption in the industrial countries are similar to these in the United States and probably will become increasingly so, the growth of their materials consumption relative to gross national products will presumably be broadly similar to that in the United States, with one important exception. Since the special characteristics of an abnormal proportion of durable goods in the United States consumption-investment pattern Page 131 of 1950 does not apply as strongly to these other countries, their metals demand cannot be expected to grow as slowly as projected for the United States. The precise choice of the rate by which the metals con- sumption of industrial areas is projected to grow relative to gross national products is necessarily arbitrary. It is assumed that for each doubling of gross national products the percentage increase in their total demand will be higher by 10 percentage points than the projected increase in the United States demand. But the possibility should be borne in mind that foreign demand might considerably exceed this level of projection, especially in view of the relatively low proportion of consumer expendi- tures devoted to durable goods abroad. Data on scrap in foreign countries are frequently not avail- able, but it is possible to estimate whether scrap ratios are likely to increase or decrease by comparing the projected growth rate of total demand with the historical rate of growth of consumption of new material, by considering the possible scrap-producing power of plausible future end-use patterns, and by assessing the potentialities for better organized scrap collection. If it is concluded that the scrap ratio will rise, the demand for new metal is projected to rise at a somewhat lower rate than that assumed for total demand, and conversely if it is concluded that the scrap ratio will fall. DEMAND IN LESS- DEVELOPED AREAS The countries for which gross national products are not projected are treated as a group. They have, up to now, been largely raw materials producing areas; with few exceptions, their levels of consumption are very low; and their industrial capacity has been but a small proportion of the free world's total. It would be wrong to attribute any special significance to changes in the gross national products of such areas. Not only are the data unavailable for adequate measurement of output (largely because they contain huge regions of local, relatively self-contained subsistence economies), but also the consequences of changes in their aggregate output may be substantially different depending on how these changes come about. If im- provements in local agricultural techniques permit the popu- lace to live at standards twice as high as before, no additional drain on exhaustible resources may ensue. But if there is an in- crease in real income mainly to wealthier groups, or if certain types of investment programs are undertaken, the require- ments for materials may increase substantially. Thus, even were it possible to quantify the expected increase in gross national product, it would not be possible to tell, within even very wide ranges of error, what materials drains would be associated with them. Rather than to base projections of materials requirements on an analysis in which a debatable estimate of gross national product is compounded with an uncertainty about the relation- ship between gross national product and materials demand, it has been decided to estimate the materials consumption of the less developed areas more directly though arbitrarily. The materials requirements of these areas surely will grow, and greatly, in the next 25 years, but quantitative assessment of such growth must necessarily be rough. The materials demand for 1975 in these areas has accordingly been projected to grow at more than three times the United States rate. The precise rates applied are not significant in themselves since they were chosen from within the plausible range in order to yield round numbers for total projected consumption in the rest of the free world. The projected levels of materials demand on the part of other free countries in the years around 1975 are summarized in table XVIII. The methods by which these projections were obtained have been outlined in earlier sections. The actual derivations of the figures are presented in the following pages. Copper In 1950, the rest of the free world consumed about 1.3 mil- lion tons of new copper, distributed geographically and pro- jected to increase as shown in table XIX. The projections are based on an assumed increase in new copper demand of 50 Table XVIII.—Projected 1975 demand for materials by the rest of free world [New material only] 1950 con- sumption Projected 1975 consumption f Percentage increase 1, 343 2, 050 54 844 1,500 78 1, 061 1,700 61 72.6 109 50 25 50 100 465 2, 400 415 64. 4 112 74 47. 6 82 73 95.2 165 73 32 64 100 *540 1, 100 100 10 27 170 6 26 340 22 55 150 1,400 2, 300 65 159 570 260 825 2. 500 203 6.7 14. 1 110 Material Copper Lead Zinc Tin Antimony Aluminum Crude steel Pig iron Iron ore (50%) Nickel Chromite Molybdenum Cobalt Tungsten Manganese ore (46% Fluorspar (100%)... Rubber Sulfur Unit Thousand short tons Thousand short tons Thousand short tons Thousand long tons. Thousand short tons Thousand short tons Million metric tons. Million metric tons. Million metric tons. Thousand short tons Thousand long tons. Million pounds Million pounds Million pounds Thousand short tons Thousand short tons Thousand long tons. Thousand long tons. f Rounded figures differing slightly from those obtained by applying the projected percentage increases to the 1950 consumption figures. Page 132 percent for every 100 percent increase in gross national product. This compares with a 43 percent increase as projected for the United States demand for new copper and includes an allow- ance for probable increases in scrap ratios in other countries. Table XIX.—Projected demand for copper in rest of the free world* Table XXL—Projected demand for zinc in rest of free world* 1950 con- sumption (thousand short tons of new copper) Projected consump- tion about 1975 (thousand short tons of new copper) Percent- age in- crease Area 100 45 152 81 52 79 31 45 110 123 Australia and New Zealand. United Kingdom 374 490 Japan 627 42 909 88 Others 155 345 Total 1, 343 2, 065 i 54 ♦ *Based on 1950 data from the International Materials Conference. 1 Average. Lead In 1950 the rest of the free world consumed about 840,000 short tons of new lead, distributed geographically and projected to increase as shown in table XX. The projections are based on an assumed increase in lead demand of 65 percent for every 100 percent increase in gross national product. This compares with a 61 percent increase projected for the United States and includes an allowance for probable increases in scrap ratios abroad. Table XX.—Projected demand for lead in rest of free world* 1950 consump- tion (thousand short tons of new lead) Projected con- sumption about 1975 (thousand short tons of new lead) Percentage increase Area Canada 56 94 68 Australia and New Zealand. . 42 85 103 United Kingdom 181 253 40 Free Europe 451 713 58 Japan 13 32 143 Others 101 323 220 Total 844 1, 500 i 78 *Based on 1950 data from the International Materials Conference. 1 Average. Zinc In 1950 the rest of the free world consumed about a million tons of new zinc, distributed geographically and projected to increase as shown in table XX. The projections are based on an assumed increase in zinc demand of 48 percent for every 100 percent increase in gross national product. This compares with an increase of 38 percent projected to the 1975 period for total zinc demand in the United States and assumes substantial constancy in the rate of scrap return in other nations of the free world. 1950 consump- tion (thousand short tons of new zinc) Projected con- sumption about 1975 (thousand short tons of new zinc) Projected percentage by 1975 Area 58 57 265 534 57 89 88 100 344 764 117 291 50 76 30 43 106 228 Australia and New Zealand. . United Kingdom Japan Others Total 1,061 1,705 i 61 *Based on 1950 data from the International Materials Conference. 1 Average. Tin The method used for the other major metals has been used for tin only with respect to tin not used for tin plate. The use of tin for tin plate in countries other than the United States was about 24,100 long tons in 1950 and is projected as re- maining substantially constant. The electrolytic process, already in operation in the United States, will eventually be adopted in the rest of the world and will permit large expansions in the amount of tin plate produced with this same amount of tin. The introduction of the process may be delayed by an apparent preference on the part of foreign canners to use thick platings as a precaution against long storage of canned products, but as present tin-plating facilities wear out, they are likely to be replaced by machines using the newer technique. Table XXII.—Projected demand for tin in rest of free world* Area Canada: Tin plate Other uses Australia and New Zealand Tin plate Other uses United Kingdom: Tin plate Other uses FreeEurope: Tin plate Other uses Japan: Tin plate Other uses Others: Tin plate Other Total Projected con- sumption about 1975 (thousand long tons of new tin) 1950 consump- tion (thousand long tons of new tin) Percentage increase 3.4 3. 4 0 1. 0 1. 5 52 0 t2. 0 0 2.4 4. 3 79 9. 8 9. 8 0 13. 5 . 6 31 7. 7 7. 7 0 18. 3 26. 5 45 1. 1 1. 1 0 1. 6 3. 4 110 2. 0 11. 8 31. 3 127 72. 6 108. 6 i 50 *Based on 1950 data from International Tin Study Group, Statistical Bulle- tin, January 1952, pp. 27-31. tBased on 1951 consumption of tin in tin plate production. 1 Average. Table XXII shows the geographical distribution of the free world's 1950 consumption, with projected figures for 1975. The projections for non-tin-plate uses are based on an assumed increase of 50 percent in the tin demand arising out of these uses for every 100 percent increase in gross national Page 133 product. This compares with a 55-percent increase in non-tin- plate uses projected for United States and includes an allow- ance for probable increases in scrap ratios abroad. Antimony The free world exclusive of the United States consumed about 25,000 short tons of new antimony in 1950. In the ab- sence of a geographical breakdown of consumption by coun- tries, this amount is projected to double between 1950 and 1975, yielding an estimated consumption of 50,000 short tons in 1975. This basis for this doubling is the relatively close relation- ship between antimony's end-use pattern and that of lead. For the United States, antimony demand is projected as in- creasing by 76 percent, as compared to a 61 percent increase in the demand for lead. Approximately the same relationship between the rates of increase in demand for the two metals is preserved by the projected 100 percent rise in foreign antimony demand, as opposed to a projected increase of 78 percent in the demand for lead by the rest of the free world. Aluminum The rest of the free world consumed, in 1950, about 465,000 short tons of new aluminum.* The same forces expected to bring about the rapid expansion of United States aluminum consumption will also operate in the other free countries. The prospective growth will certainly be large, but there is no sound basis for the choice of any particular figure. Abroad, as in the United States, aluminum is still growing into its place in the consumption pattern. Available data on scrap consumption in Europe reveal an abnormally high scrap ratio in 1950. Accordingly, foreign de- mand for new aluminum is expected to rise at a rate somewhat faster than that expected for total consumption, that is, new aluminum plus scrap. The new aluminum demand of the rest of the free world is therefore projected to increase from its present level to about 2.4 million tons in 1975, a figure that represents a fivefold increase in total demand and a scrap ratio stabilized at the 20 percent level projected for the United States. Crude Steel In 1950, the rest of the free world consumed about 64.4 million metric tons of crude steel, geographically distributed and projected to increase as shown in table XXIII. The projections are based on an assumed increased in steel demand of 72 percent for every 100 percent increase in gross national product. This compares with an increase of 62 percent projected for finished steel demand in the United States. Pig Iron It is assumed that the ratio of pig iron to scrap for the making of steel and cast iron will remain constant in all in- dustrial areas between 1950 and 1975. Accordingly, their demand for pig iron in 1975 is determined by applying to each area's 1950 consumption of pig iron the same percentage in- crease used for steel, as shown in table XXIV. *U. S. Bureau of Mines. Table XXIII.—Projected demand for steel in rest of free world* 1950 con- sumption (million metric tons of crude steel) Projected con- sumption around 1975 (million metric tons of crude steel) Percentage increase Area Canada 3. 1 1. 5 5. 4 3. 2 24. 1 58. 4 11. 6 9. 3 75 114 45 65 158 182 Australia and New Zealand. . United Kingdom 16. 6 35. 4 Free Europe Japan 4. 5 3. 3 Others Total 64. 4 112 f74 *Based on data from United Nations Economic Commission for Europe, f Average. Table XXIV.—Projected demand for pig iron in rest of free world \ 1950 consump- tion (million metric tons of pig iron) 1975 projec- tion (million metric tons of pig iron) Percent- age in- crease Area Canada 2. 3 1. 3 9. 8 28.7 2.3 3.2 4.0 2. 8 14. 2 47. 4 5. 9 7. 9 75 114 45 65 158 *147 Australia United Kingdom Others Total 47. 6 82. 2 **73 *Increase less than for steel because of assumed rise in scrap ratio, f Based on preceding table. ** Average. Iron Ore The 47.6 million tons of pig iron consumed by the rest of the free world in 1950 required the equivalent of 95.2 million metric tons of 50-percent iron ore. Correspondingly, the 82.2 million tons of pig iron projected for the rest of the free world in 1975 will require roughly 165 million metric tons of ore of 50 percent recoverable iron content. The Additive Metals Consumption of additive metals in the rest of the free world is projected as growing by about the same percentage as United States requirements in the next 25 years. Since the consumption of steel is expected to rise more rapidly abroad than in the United States, this projection implies a smaller rise abroad in the percentage of alloy steel to total steel than in the United States. The requirements during the next quarter century of the less developed areas of the free world are not likely to be for the highly specialized steels in which the alloys are important. If the projected quantities of the additive metals are used mainly in the more highly developed countries abroad, their ratios of alloy steel to total steel will expand by approximately the same percentage as the United States ratio. The projections for the additive metals demand in the rest of the free world are tabulated in table XXV. Page 134 Table XXV.—Rest of free world demand for the additive metals New material Nickel (thousand short tons).. Chromite (thousand long tons) Molybdenum (million lb.). . /. Tungsten (million lb.) Cobalt (million lb.) Projected consumption about 1975 Projected percent of increase Consump- tion 1950 32 64 100 *540 1, 100 100 10 27 170 22 55 150 6 26 340 ^Estimated. Source: U. S. Bureau of Mines. Manganese Ore Inasmuch as the production of a metric ton of crude steel requires about 14.3 pounds of manganese, the manganese metal required for steel making in the rest of the free world is projected at about 800,000 short tons. Allowance being made for a loss in converting the crude ore to a usable product (ferromanganese or speigeleisen); this is the equivalent of about 2.1 million tons of ore containing 46 percent of man- ganese. An additional allowance of 200,000 tons of ore has been made for nonsteelmaking uses, giving a projected 1975 de- mand for 2.3 million tons of 46 percent ore. This compares with a 1950 consumption of some 1.4 million short tons. Fluorspar In 1950 the free world outside the United States used the equivalent of about 159,000 short tons of pure fluorspar (100 percent CaF2), mainly in the production of aluminum and steel. While the use of fluorspar per ton of aluminum was about the same in other free countries as it was in the United States, their consumption of fluorspar in steel making was consider- ably lower than here. This is because considerable quantities of foreign steel were produced by the Bessemer process, which uses negligible quantities of fluorspar. Assuming that in 1975 the Bessemer process will account for the same proportion it does today, the demand for fluorspar arising out of the pro- duction of steel and aluminum is estimated to be the equivalent of 400,000 short tons of pure (100 percent) material. Even though other uses of fluorspar were negligible in the rest of the free world in 1950, their association with such rapidly growing products as plastics and refrigerants makes it unlikely that these other uses will remain small. An arbitrary allowance of some 170,000 short tons of pure fluorspar is made for these uses in foreign countries in 1975. Thus, the rest of the free world is projected to demand the equivalent of about 570,000 tons of pure fluorspar (or 640,000 tons of all grades) in 1975. Rubber Even if productivity in other free countries were not to grow significantly in the next 25 years, the number of motor vehicles in use in those countries would undoubtedly expand consider- ably. Hence the demand for rubber in the rest of the free world cannot be projected in direct relation to gross national products. It is feasible, however, to compare the present stage of develop- ment of automotive transportation in the rest of the free world with that attained in the United States in the late twenties. If, during the next 25 years, automotive transportation abroad grows at about the same rate as it did in the United States in the past quarter century, and if other uses of rubber also expand rapidly by 1975, the rest of the free world will be de- manding more than three times the amount of rubber it is currently using. Its demand for new rubber may, under such circumstances, easily increase from the 1950 figure of 825,000 long tons to a 1975 level of around 2,500,000 long tons. Sulfur During the next 25 years the demand for sulfur in the rest of the free world is expected to rise by about the same per- centage (110 percent) that is projected for United States sulfur demand. The projected 1975 sulfur consumption of other free countries is thus 14.1 million long tons, as opposed to their 1950 consumption of 6.7 million tons. The projected rise of 110 percent in foreign demand for sulfur is based on the assumption that a rate of increase of fertilizer demand lower than that projected for the United States will be counterbalanced by a rate of increase in the use of sulfur for rubber, iron and steel, and petroleum products higher than projected for the United States. The lower projected rate for fertilizer demand abroad stems from the fact that European farmers are already heavy users of fertilizer. They could not economically use much more fertilizer than they do now, while American agriculture can profitably use 2/2 times its current volume. References Elsewhere in This Report This volume: The Additive Metals. Aluminum. Antimony. Chemicals. Copper. Fluorspar. Iron and Steel. Lead. Manganese. Production and Consumption Measures. Reserves and Potential Resources. Rubber. Tin. Zinc. Vol. Ill: The Outlook for Energy Sources. Coal. Electric Energy. Natural Gas. Oil. Vol. IV: The Promise of Technology. Coal Products and Chemicals. Forecasts for Petroleum Chemicals. Oil and Gas as Industrial Raw Materials. Tasks and Opportunities. The Technology of the Building Industry. The Technology of Iron Ore. The Technology of Iron and Steel. The Technology of Manganese. The Technology of Tin. Page 135 Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Case, S. L. Role of Technology in the Future of Scrap as a Raw Material in Steelmaking. Craighead, C. M. Role of Technology in the Future of Aluminum. DeMont, C. S. Role of Technology in the Future of Chromium. Foster, J. F. Role of Technology in the Future of Supply of Natural Gas. Hall, A. M. Role of Technology in the Future of Nickel. Hodge, W., and Thompson, A. J. Role of Technology in the Future of Copper. Holmes, R. E. Role of Technology in the Future of Fluorspar. Lyons, C. J., and Nelson, H. W. Role of Technology in the Future of Coal. Chapter 23 The following statements have been prepared by com- modity geologists of the Geological Survey, with the collabora- tion on production and economic factors by commodity specialists of the Bureau of Mines. The effort is in response to a request of this Commission for estimates of reserves and potential sources—both in the United States and in the rest of the world—of selected mineral commodities as a function of grade and of price. The assignment was undertaken with the understanding that while adequate data on measured and indicated reserves might be available for domestic resources, comparable data on inferred reserves and other potential sources would not be available and the data on foreign resources would be deficient for all categories. The commodity sections that follow may be said, therefore, to contain the best "informed guesses" as of today, but they do not reflect the present trend of reserves, which is a more vital factor from the standpoint of national welfare. DEFINITIONS In considering reserves the standard definitions agreed upon by the Bureau of Mines and Geological Survey have been used in preparing the estimates. These definitions are: Measured ore is ore for which tonnage is computed from dimensions revealed in outcrops, trenches, workings, and drill holes and for which the grade is computed from the results of detailed sampling. The sites for inspection, sampling, and measurement are so closely spaced and the geo- logic character is so well defined that the size, shape, and mineral content are well established. The computed tonnage and grade are judged to be accurate within limits which are stated, and no such limit is judged to differ from the computed tonnage or grade by more than 20 percent. Indicated ore is ore for which tonnage and grade are computed partly from specific measurements, samples, or production data and partly from projection for a reasonable distance on geologic evidence. The sites avail- able for inspection, measurement, and sampling are too widely or other- *By the U. S. Department of the Interior: Geological Survey and Bureau of Mines. Moore, D. D. Role of Technology in the Future of Petroleum. Nelson, H. W. Role of Technology in the Future of Coking Coals. Parke, R. M. Role of Technology in the Future of Molybdenum. . Role of Technology in the Future of Tungsten. Sherman, R. A. Notes on Over-All Energy Picture. Simmons, W. F. Role of Technology in the Future of Cobalt. . Role of Technology in the Future of Columbium. , and Gonser, B. W. Role of Technology in the Future of V anadium. Stephens, F. M. Role of Technology- in the Future of Lead. . Role of Technology in the Future of Zinc. Sullivan, J. D. Role of Technology in the Future of Magnesium. Swager, W. L. Role of Technology in the Future of Sulfur, Sul- fides, and Sulfuric Acid. wise inappropriately spaced to outline the ore completely or to establish its grade throughout. Inferred ore is ore for which quantitative estimates are based largely on broad knowledge of the geologic character of the deposit and for which there are few, if any, samples or measurements. The estimates are based on an assumed continuity or repetition for which there is geologic evi- dence; this evidence may include comparison with deposits of similar type. Bodies that are completely concealed may be included if there is specific geologic evidence of their presence. Estimates of inferred ore should include a statement of the special limits within which the inferred ore may lie. Therefore as used herein the term "mineral reserves" refers only to the material that in some degree has been inventoried in terms of commercial enterprise. It is material that can be mined, processed, and marketed without financial loss under the economic and technologic conditions prevailing at the time of the inquiry. It includes all material at and above the eco- nomic and technologic margin known as the "cut-off grade." It does not contain material of submarginal grade which, with improved economic conditions, may become a reserve, nor does it include off-quality material which cannot be treated satisfactorily under current technologic practices. Reserve estimates apply only at the time and under the con- ditions prevailing when the estimates are made. As costs or market price fluctuate up and down, or as technology is im- proved, so also does the cut-off grade fluctuate. Thus the reserve is a constantly changing factor, for at all times there is present in by far the greater number of deposits material of submarginal grade or material of a quality unsuited to the production practices of the day. A technical fact to be kept in mind too is that cut-off grade differ§ from district to district and even, sometimes, from mine to mine, depending upon the complexity of local factors that influence cost. Estimates of reserves on a national scale then include blocks of diverse geographic origin and having diverse cut-offs; the national estimate does not have a cut-off of its own. The reserve problems and the probable means for their solu- tion vary from commodity to commodity. For example, a sub- marginal material may contain larger percentages of the metal Reserves and Potential Resources* Page 136 or mineral sought than is available in currently mineable ore, but the presence of a deleterious impurity or the physico- chemical form in which the metal or mineral occurs may make the apparently richer material unworkable under present prac- tices. If the lowering of grade is due merely to a wider scattering of the same ore mineral in the enclosing rock, such as in the change from vein to porphyry-type copper deposits, the pro- duction problem involved for the lower grade material may be largely one of cost and may not involve radical changes in processing. In other commodities the differences between types of material may be great, as between bauxite and high alumi- num clay and anorthosite—all of which are possible sources of aluminum. Under these conditions processing procedures be- come a very vital part of the production problem. An increase in market price alone may influence the situation in a number of ways. It may stimulate immediate production from deposits already developed; it may bring into production entirely new deposits or parts of deposits heretofore noncom- mercial; or it may lead to the building of new plant capacity. It may also lead to an improvement in the reserve situation by stimulating the search for new deposits and by giving impetus to technologic research, which in turn may result in the de- velopment of new or improved techniques that may make off- grade or entirely new types of material amenable to use. Be- cause of this, a study of the relation between grade, tonnage, and price inevitably must include a consideration of the time lag between the emergence of a higher price level and the pro- duction that ensues as a result thereof. The concept of higher price, as used in the following statements, connotes a relative improvement, the sale price of the commodity rising relative to production cost. It also connotes an assurance that the higher price will remain in force over a long enough period to become an influential economic factor. As indicated above, these studies were designed to estimate, in the light of present knowledge, the commercial reserves and also the submarginal or off-quality material of a selected group of commodities and to estimate the market price that might be needed to make the mining and processing of the sub- marginal or off-grade material commercially practicable. If adequate information on costs and long-term rates of discovery were available, it would of course be possible to estimate the grade-tonnage and price-grade relationships. Because of de- ficiencies in data, however, it was not found possible to give these phases of the problem adequate treatment. Nevertheless, when the concept of reducing grade to a fraction of present com- mercial ore and of raising prices to several times the present level is taken into account, the different materials eligible for consideration as possible future sources are of course greatly increased. The reports deal in part therefore with materials now classed as marginal and submarginal and in some instances even with materials of much less economic promise. The use of materials classed as "marginal" and "submar- ginal" primarily awaits more favorable prices, whereas utiliza- tion of most of the material classed as "potential future sources" must await new—in some cases revolutionary—technologies as well. None of the deposits included in these categories are now- considered by industry as ore reserves. Nor are they so treated herein. It is recognized, however, that in certain instances these materials contain some of the greatest potentialities for future sources of supply even though they cannot be tapped economi- cally by existing mining and metallurgical methods. They pre- sent major challenges to those concerned with technologic research in the mineral field. The lateritic iron ores are an out- standing example: they have been used as iron ore for many years on a limited scale, they were worked for nickel during the Second World War, and they represent the greatest potential source of chromium in North America. Eventually, too, they may make an important contribution to our supply of cobalt. MARGIN OF ERROR Appraisal of mineral resources on a national scale is a rela- tively new kind of endeavor. Skills and techniques are still in the making. In any event, however, inasmuch as ore reserves are always partly hidden in the ground, estimates will always have a large margin of error. No estimate of reserves is ever to be considered exact in the usual meaning of that word even for the time at which it is made. Measured ore, by definition, may have a margin of error of as much as 20 percent. In practice this allowable maximum tends to become the rule. The margin of error in estimates of indicated ore is even higher, and for inferred ore higher still. Thus, for estimates that in- clude all three categories, the margin of error commonly is in the order of 50 percent, but in reports of this sort the error may be even greater. This margin of error may be either plus or minus, although both the historical record and the usual conservatism of engineers and geologists suggest that on the whole estimate* of reserves are likely to be conservative. By and large then the reserve estimates presented here are regarded as being of the correct order of magnitude. The estimates of submarginal materials and potential resources on the other hand are little more than informed guesses, for there has been little commercial incentive to undertake the expense of investigating such materials. The reader is cautioned there- fore that none of the figures represent data than can be sub- stantiated in detail. Hence, it would be unwise and in some instances grossly misleading to use these figures separately from their supporting arid circumscribing texts. This lack of accuracy does not nullify the utility of such estimates nor minimize their implications. The data show that for several important commodities the United States is abun- dantly supplied; that for others, it already is partly and will become increasingly dependent upon foreign sources of supply, and that for nearly all commodities the vastness of very low- grade material is impressive. In addition the data show that the over-all information on geology, mining, and metallurgy for many actual and potential sources of mineral raw materials is alarmingly incomplete. This in turn means that research in geology, mining, and metallurgy has lagged, and, inasmuch as research in these sciences holds the key to future discovery and use of potential source materials, this lag has very serious im- plications from the standpoint of mobilization planning and national welfare. Moreover, such research is time-consuming and expensive, involving the use of highly trained and special- ized personnel. It cannot be carried on efficiently and with maximum effectiveness under emergency conditions, for not only is it impossible to train the requisite specialists in a short space of time, but in periods of emergency those who are trained and competent to do this kind of work are likely to be called upon to perform other duties that at the time seem of more immediate consequence. Page 137 Metals and Minerals ALUMINUM—POTENTIAL RESOURCES GREAT* The only common ore of aluminum is bauxite. Other mate- rials, including high-grade clays, anorthosite, and nepheline syenite (all rocks), and leucite, diaspore, and alunite (miner- als), have been used only in experimental or subsidized op- erations. By far the most important domestic bauxite deposits are those of central Arkansas. The second largest producing area is the Coastal Plain of Alabama and Georgia, followed by the Appalachian region of Alabama, Georgia, Tennessee, and Vir- ginia. The most recent large discovery in this country is that of the high-iron bauxites of northwestern Oregon, which, how- ever, are relatively low grade. The likelihood of discovering additional large high-grade deposits in the United States is slight. Domestic reserves that can be treated in existing alumina plants amount to only about 40 million tons of bauxite con- taining a maximum of 15 percent silica (Si02) and 8 percent iron oxide. This material contains an average of about 52 per- cent of alumina (AI2O3) and about 10 percent silica. The ton- nage would be roughly doubled by ignoring the iron and silica limitations, bring the average silica content up to 15 percent and reducing the average alumina content to about 42 percent. (See fig. 1.) All this material is sufficiently well developed to be classed as measured and indicated. The domestic deposits of low-grade bauxite are largely in Arkansas, in moderately FIGURE 1 1 1 1 1 1 1 1 1 1 1 1 Com ■nercic In ]9i lly Tr« >1 In U (atabi .S. • - j Oth Resou er rces 1 [A —1 —\ 1' n Ano rthosit s (U.S .) Id)/ 1 In f auxiU (Woi —"3: /& In E Other auxit? High- , Bau; Alumir citic C ia Cla ay I£ y (U.S ) ~^** -In B □uxite (u.s.) 2 900 g 700 Z < 600 o u IX. 500 O to z ,™ O 60 50 40 30 20 AV.% OF Al203 CONTAINED IN RAW MATERIAL Cumulative totals of U.S. and World aluminum resources. thick and extensive beds and could be mined most efficiently and at a minimum cost if mined concurrently with the high- grade material. These figures compare with a world total of high-grade material estimated at 2 billion tons, distributed as shown in table I. If the Caribbean region (British Guiana, Haiti, the Domini- can Republic, Jamaica, and Surinam) is considered to be within the immediate source area of the United States, then a total of more than 500 million tons is at hand, although Canada is also dependent on a part of these reserves. Within this source area the United States is dependent chiefly on Arkansas, Suri- nam, and Jamaica. Table I.—World bauxite reserves FREE WORLD Country United States British Guiana Haiti and Dominican Republic Jamaica Surinam Subtotal Australia Brazil France French West Africa Gold Coast Greece India Indonesia Italy Malaya Nyasaland Palau Island Yugoslavia Subtotal Total free world COMMUNIST WORLD China Hungary Rumania U. S. S. R Total Communist world Total world Millions of metric tons Percent of bauxite in AI0O3 the ground 1 2 50 2 50 65 61 30 47 315 50 50 + 59 500 + 20 39 150 61 60 61 50 60 230 53 60 57 250 60 + 25 54 5-10 10 56 20 42 2 51 100 60 987 1, 500 + 200 56-65 250 46-65 20 57 50 58 520 2, 000 ± *By R. P. Bryson and E. C. Fischer, U. S. Geological Survey, and H. W. St. Clair, U. S. Bureau of Mines. 1 Data not available for breakdown into measured, indicated, and inferred. 2 Virtually all measured and indicated. Includes about 10 million tons of ferruginous bauxite in Oregon, containing only 35 percent A1203 but low in silica. Domestic bauxite deposits, together with deposits in the Caribbean region, can be developed and brought into produc- tion as rapidly as ore processing and refining facilities can be built. In addition to its bauxite reserves, the United States contains great potential resources of bauxitic and other high-alumina clays that can be treated by known processes, although at addi- tional cost. Deposits of such material have been incompletely investigated, but present knowledge indicates that there are billions of tons of clays containing more than 30 percent A1203> and even greater tonnages of somewhat lower grade. (See fig. 1.) To these potential resources can be added enormous de- posits of the rock anorthosite and other aluminous silicate rocks. During the Second World War, attempts were made in the United States and in Japan to recover both alumina and potash from alunite. Deposits of alunite in the United States are a Page 138 potential source of about one-half million tons of contained aluminum. The relationship between grade and tonnage of potential aluminum ores is shown in figure 1. Although the known re- serves in the United States are relatively small, the potential resources become virtually unlimited as the grade decreases to 30 percent AL.Os. It should be pointed out, however, that alumina content is not the only qualification for an ore of aluminum; within certain limits the silica content may be more important. PRODUCTION OF ALUMINUM The production of aluminum from its ores involves two dis- tinct steps: (1) the production of pure alumina and (2) the electrolytic reduction of alumina to metallic aluminum in a bath of fused cryolite (sodium aluminum fluoride). In the Bayer process, used to recover alumina from high-grade bauxite ore, the alumina is dissolved in sodium hydroxide. This process is limited economically to bauxites containing less than 8 per- cent silica. The applicability of the Bayer process was extended to ores containing 15 percent silica through development of the "modified Bayer process," which was employed at the Hurri- cane Creek, Ark., plant constructed during the Second World War. Bauxite ores from Surinam and British Guiana can be treated by the Bayer process, but most of the ores remaining in Arkansas are too high in silica and must be treated by the modi- fied Bayer process. The ores from Jamaica require a different modification of the Bayer process to accommodate the larger iron content and the different mineralogical occurrence of part of the alumina. During the Second World War four experimental alumina plants were built by the Defense Plant Corp. to explore the feasibility of producing alumina from domestic deposits of clays and other aluminum silicate rocks and alunite. This ex- perimental program was not completed but was carried far enough to show that aluminum could be produced from non- bauxitic materials. One of the experimental plants, built at Laramie, Wyo., was designed to produce alumina from the rock anorthosite. This plant was never operated, but the Bureau of Mines recently was authorized to complete the experimental operation and to test clays as well as anorthosite. It is reported that the Soviet Union may be producing alumina from the rock syenite on the Kola Peninsula. The process that appears most promising is the limc-sinter process, in which clays or other aluminum silicates are heated with limestone in a rotary kiln. This preliminary treatment permits extraction of the alumina by the same general treat- ment as employed in the Bayer process. Production of alumina from kaolin clay containing 30 to 35 percent alumina requires 3 to 4 tons of clay and 5 to 7 tons of limestone per ton of alumina produced. As a larger amount of raw material must be handled and as the process includes an additional sintering step, the cost of treating clays is considerably greater than for treating bauxite ores. The fuel requirements are likely to be more than three times those for an equivalent Bayer plant. The treatment cost per ton of alumina is estimated to be 50 percent greater for clays than for bauxites. This is equivalent to an increase of about 2 cents per pound of aluminum. The lower grades of clay could be treated at additional moderate increases in cost. A further element of increased cost is the higher initial cost of a plant. Additional equipment for blending and sintering and for grinding the sinter increases the capital cost to per- haps three times that which would be required for a Bayer plant having the same alumina capacity. The cost to convert the aluminum industry to production of aluminum entirely from clays, at the rate envisioned for 1953, would be of the order of one-half to three-quarters of a billion dollars. It is difficult to estimate the time required to convert the alumina industry to clays or anorthosite as raw materials. After the process had been experimentally established, other plants probably could be built and put into operation within 2 to 3 years. Deposits of clay or aluminum silicate rock in the United States could be developed and brought into production as fast as processing facilities could be built. The aluminum industry already has taken the first step in adapting itself to lower grade ores through development of the modified Bayer process for treating low-grade domestic bauxite. With increases in the world price of bauxite and other costs of importation it can be expected that for purely economic reasons still lower grade materials in time will be included as ores of aluminum. It is important at this time to consider whether, as a matter of national policy, it is wisest to await the gradual utilization of lower grade bauxites and clays as dictated by economic factors, or, in the interest of national security, to hasten such development through a Government-sponsored research program and a subsidized production of alumina from domestic raw materials other than bauxite. ANTIMONY—PRICE CONTROLS PRODUCTION* Antimony is derived from two general types of deposits, the "simple" and "complex," although some gradations exist be- tween the types. Approximately two-thirds to three-fourths of normal world production is from the simple type of deposit, which consists of antimony sulfide or oxides in a gangue containing little or no other metal of value. Individual ore bodies are commonly small, irregular in form, and relatively high in grade, contain- ing 5 percent or more of antimony. They probably average be- tween 10 and 15 percent of antimony. Only the higher grade portions of even such small bodies are mined, however, and much of the metal content of the mined portions is eventually rejected in sorting the ore to a higher grade shipping product. The required grade for shipping is dependent upon price, costs, and other factors. The minimum grade shipped from Mexico is commonly 30 or 35 percent of antimony; from Bolivia it is 60 percent of antimony. Most simple antimony deposits are in countries far removed from the principal consuming centers of the world and in places where labor is cheap. Most of the sorting or concentration to shipping grade is by hand labor. The percentage of mined rock that can be sorted to a high-grade shipping product is therefore much more critical than the average grade. In the average deposit probably about half of the total antimony is unre- covered, either because only the higher grade portions are mined, or because after mining so much is rejected in sorting. The small size and irregular shape of individual ore bodies makes advance exploration for and blocking out of reserves *By Donald E. White, U. S. Geological Survey. Page 139 The present consumption ratios of chromite ore are far out of line with foreign reserve ratios as indicated by the following tabulation: Type of ore Metal- lurgical ! 1 Refractory Chemical Laterite i i i Percent I Percent Percent Percent Reserves (% of foreign j 12-15 I 3- 5 55-60 25-30 total). [ Consumption (% of for- 45-55 31-38 15-16 0 eign total). 1 i Refractor)7 ores will last 20 to 30 years at the present rate of consumption. Metallurgical ore will have to be augmented by large amounts of chemical (high-iron) ores within the next decade, because as reserves decline the high-grade deposits will be unable to maintain production at the required rate. More- over, as the shipping grade reserves are depleted, the ratio of concentrates to lump ore will rise rapidly. Major shifts are indicated, therefore, in the metallurgy of chromium within the next decade and may take several alternative courses. FIGURE 3 CHROMIUM World (United States induded) i i i. Layered complexes — — Accessory chromite in peridotite Lateritic iron ores 1 Pod deposits United States J M ✓ 250 200 150 100 50 5 3 o ex. I u to z o i— o z o z o 50 40 30 20 10 PERCENT OF Cr2 03 showing relation between chromium Cumulative curves showing relation between chromium reserves and grade of ores and other potential sources in the World and the United States. Horizontal lines show ranges in grades of materi- als by type, solid portion indicating grades now worked outside of the United States. Although the lateritic iron ores present major metallurgical problems, they offer great incentives because in addition to the chromium they contain the world's greatest reserve of nickel and possibly of cobalt and tremendous reserves of readily mine- able low-grade iron ore. It seems inevitable that all four metals will be recovered from Cuban laterite within a decade or so, whether or not research is accelerated in the interests of Western Hemisphere defense. The principal world sources of chromite supply for the next decade will continue to be about as they have been for the last 10 years, with a significant shift away from the present sources of metallurgical ore within a generation. AFRICA AND TURKEY The Union of South Africa and Southern Rhodesia com- bined are believed to have about 80 percent of world lode chromite reserves. Imports of metallurgical ore from Southern Rhodesia at the 1950 rate of about 150,000 long tons probably could be maintained for many years from the Selukwe district and the northern end of the Great Dyke. The reserves of stand- ard and marginal metallurgical ore in the Great Dyke are on the order of several million tons, and the Dyke now yields about half the Southern Rhodesian production. Reserves of chemical ore in the Great Dyke and in the Bushveld Complex in the Union of South Africa run into hun- dreds of millions of tons, in layers that range from a few inches up to 4 or 5 feet thick, extend for miles, and can be mined as bedded deposits. South Africa has a virtual monopoly on the production of chemical ore, partly because of limited trans- portation serving Southern Rhodesia. Some layers in the Bush- veld Complex yield high-chromium ores that are readily blend- able with standard metallurgical ores, and are now being mined, although the Cr/Fe ratio averages only about 1.9 to 1. Turkey was the largest supplier of metallurgical ore to the United States in 1950, with shipments of about 232,000 long tons, and probably will increase production significantly in 1951. Turkish reserves of high-grade ore are known to exceed a million tons, but data are totally inadequate for a realistic estimate of ultimate reserves. It seems most probable that Turk- ish reserves, mainly of milling or direct shipping-grade metal- lurgical ore with some refractory ore, will increase during the next few years as exploration progresses with improved trans- portation and more incentives for private capital. New Caledonia exported nearly 58,000 long tons of high- grade metallurgical ore to the United States in 1950, and is expected to continue at a rate of 50,000 to 75,000 tons for the next generation. Past production of more than a million tons from the Tiebaghi pipe alone and satisfactory success in post- war exploration imply substantial undeveloped resources. The Republic of the Philippines is our principal source of refractory ore. Measured and indicated reserves total 8 mil- lion to 10 million long tons, mostly in the Masinloc deposit. Recent improvements in loading facilities assure a higher ship- ping rate, and a modern ore treatment plant will greatly reduce milling waste. Reserves of metallurgical ore, mostly in milling- grade deposits, are on the order of several hundred thousand tons and almost certainly will be increased by further prospect- ing. Zambales Province, northwestern Luzon, where Hukbala- hap resistance is active, is the principal producer, and continued instability may seriously affect chromite production. Cuba provided most of our refractory chromite during the Second World War, reaching a maximum production of about 341,000 long tons in 1943, plus 7,000 tons of metallurgical ore. Because of high labor costs and inferior quality of ore the Camaguey district, with inferred and indicated reserves of more than a million tons, could not compete with Philippine ore and was closed down soon after the end of the war. Most of the Cuban post-war production has been from Oriente Province, where reserves are believed to be on the order of 250,000 to 500,000 tons of shipping and milling grade ore. Known Cuban reserves of metallurgical ore are on the order of a few tens of thousands of tons. Page 142 OTHER SOURCE COUNTRIES Pakistan, Sierra Leone, and Yugoslavia each may be expected to ship up to 10,000 long tons of metallurgical ore a year. The Pakistan and Sierra Leone ores are of good quality, but the Yugoslav ore has been partly concentrates and of inferior qual- ity. India and Greece in the past were important suppliers of refractory ore, and India also shipped some metallurgical ore; Greek production has not recovered since the war, possibly because of depleted reserves, and Indian shipments of both metallurgical and refractory ore will probably dwindle to in- significance in the near future in accord with a national policy of reserving the limited chromite resources for home use. The Brazilian situation parallels the Indian. Guatemala ships a few hundred tons of very high-grade ore each year from hand to mouth operations on scattered small deposits. Japanese re- serves total about 750,000 long tons evenly divided between metallurgical and refractory grades, and production is ex- pected to just about meet the national requirements. The U. S. S. R. is believed to have large reserves of high- grade metallurgical ores, in addition to reserves of refractory ore comparable in both tonnage and grade to the Philippines. Russian exports appear to be dictated by political factors rather than reserves or market price. Cuban reserves of lateritic iron ores are of such magnitude— several billion tons—that it will be many decades after proc- esses have been perfected for recovery of byproduct chromium before other lateritic ores will have to be considered as a po- tential United States source. The other principal chromiferous lateritic iron ores of the world are in the Philippines, Celebes, French West Africa, and the U. S. S. R. EFFECT OF PRICE Present base price has been assumed at $50 per gross ton of ore containing 48 percent Cr2Os and having a 3 to 1 chrome- iron ratio. Practically no ore could be obtained at a lesser price. The two largest domestic deposits of chromite that determine the slope of the curve in figure 4 are the Stillwater complex and the Oregon beach sands. Of these the beach sands are estimated to be available at about one and a half times the present price, followed by concentrates from Stillwater. Stillwater concen- trates cover a considerable spread due to higher mining and development costs at depth. Various small deposits would be- come economic at almost all points along the curve but would not contribute enough at any one point to make a significant change except in the aggregate. The lack of known domestic lateritic deposits eliminates the final up-turn on this curve as contrasted to that depicting the world situation. Nearly all the presently known domestic reserves would be available at a price of three times the present. A similarity in the proportion of high-grade and low-grade ores in domestic and world deposits exclusive of foreign later- itic material makes possible similar price-quantity curves for the world. An increase from two to three times present price is not thought to be effective in making more world chromite available. The effect of prices over three times the present is dependent largely upon lateritic deposits. The application of known metallurgy plus a considerable amount of metallurgical research possibly could bring these deposits into the economic reserve well below four times the present price. However, in the light of present knowledge it is estimated that chromium from this source would be available only at three and a half to four times the present price. The successful recovery of chromium from laterites would, of course, depend to a large extent upon the prices of the associated metals—nickel, cobalt, and iron. There has been an intensive, but as yet unsuccessful, search for chromite throughout the world since shortly after the end of the Second World War. No one would dare say that no large new deposits will be found, but the chances seem slim. Conse- quently, the requirements for significant expanded production are technology and price. Should the price rise as described, re- sponse in terms of increased production would begin in about 2 years and would reach full growth in about 7 years. FIGURE 4 _ 5 00 o X u CO z o O 2 O —i o CO 1 Z o 0 CHROMIUM United States — 'World / I (United States included) - - i i I o 300 ^ O o X u 200 O CO Z o 100 o z o CO z o $50 $100 $150 $200 EQUIVALENT PRICE PER LONG TON OF METALLURGICAL ORE Estimated World and United States chromium reserves available at various price levels. COPPER—A CONSTANT RESERVE* Copper reserves in the United States in all categories (meas- ured, indicated, and inferred) are about 25 million tons of re- coverable copper contained in ore averaging about I percent. Only a small fraction is measured ore; about one-fourth is inferred. The largest part is in a group of nine deposits of the disseminated or porphyry type, all of which are in production. A second component is a group of seven other porphyry-type deposits that are fairly well explored but not yet exploited. About two-thirds of the 25 million tons estimated are contained in these two components. S. G. Lasky estimates that the known porphyry deposits contain enough undiscovered ore averaging about 0.8 percent to yield on the order of 10 million additional tons of copper. A third component is the Butte District, Mont. The mini- mum figure for the district is the announced reserve of copper *By John J. Collins, U. S. Geological Survey, and C. H. Johnson, U. S. Bureau of Mines. Page 143 in the "Greater Butte Project": 1,300,000 tons of copper in ore averaging 1.1 percent. All told in the district there may be as much as a mineralized cubic mile of rock that might average 0.3 percent copper (30 million tons of metal). The fourth component is the Michigan copper district, dominantly the Nonesuch formation containing copper sul- fide minerals. The district is estimated to contain several hundred million tons of rock containing between 1 and 1.3 percent of copper. A fifth type, whose importance, however, is remote, is the so- called Red Beds sandstone type of the Southwest, particularly in Texas, New Mexico, Arizona, and Colorado. There are no quantitative data on which to base an estimate, and none is included in the reserve figure given. The ore occurs in low- grade lenses scattered, without recognized pattern, over an area of tens of thousands of square miles, at depths of hundreds and thousands of feet below the surface. Many undiscovered deposits certainly exist under com- paratively thin covers of rock or valley fill, and scientific ad- vances should lead to the discovery of some of them. It is particularly certain that the ordinary course of mining opera- tions will continue to find new ore year in and year out in established mines and districts. Over the years, the American copper industry has managed to find each year as much ore as it mined, in spite of an expanding production. As a result— and as shown in table III—the absolute value of reserve esti- mates has been gradually increasing, while "years supply in sight" has tended to remain constant. FOREIGN DEPOSITS As shown in figure 5 and in table IV, major foreign deposits are of much higher grade than those in the United States. Few, if any, of the large American deposits could be worked profitably if situated in Northern Rhodesia or Chile. Political stability, nearness to markets, adequate power, transportation, skilled labor, and competent management have, until now, been on the side of the domestic deposits. Recent world copper production has averaged around two FIGURE 5 COPPER Graphs comparing the potential copper resources of the United States with the rest of the world, based on extrapolations of company reports of production and proved ore reserves, supplemented by geologic estimates of probable and possible ore in the major districts. Graphs show cumulative tonnages of metal for a range of average grades of ore and submarginal materials. The minimum or cut-off grade at any point on the curves is Vz to % of the average grade, depending on mining condi- tions. The names of the major copper countries appear at the bottom of the graph under the grade figures which typify their reserves. The data supplied here are only of qualitative value for the sake of com- parisons; engineering proof is not available for specific points on the curves. World (U.S. excluded)! 1,000 900 800 700 g U a 600 ^ 500 Z o u 400 JJ Z o 300 g 200 100 6 5 BELGIAN CONGO 4 3 2 PERCENT CANADA CHILE NORTHERN RHODESIA pERU RUSSIA and a quarter million tons annually and United States pro- duction about a third of that. Earlier in this century United States production was two-thirds of the world total. United States consumption is about half the world total. Table III.—Trend of United States copper-reserve estimates'- Year Tons recoverable copper 2 Annual rate of production used to esti- mate "life" Reference 1931 1931 1934 1935 1936 1944 1945 At least 18,500,000 9 31 3 600, 000 18,800,000 9 31 3 600, 000 18,900,000 10 32 3 600, 000 16,000,000 10 22 4 750, 000 23,500,000 12 32 23,700,000 12^ 33 725, 000 20,000,000 5 13 25 800, 000 30,000,000 (6) 38 29,200,000 s 13 36 800, 000 Barbour, Percy, World Copper-Ore Reserves: Eng. and Min. Jour., vol. 131, p. 178. Rawles, W. P., The Nationality of Commercial Control of World Minerals: Am. Inst. Min. Met. Eng., Contr. 41, 1933. Barbour, Percy, World Copper-Ore Reserves: Eng. and Min. Jour., vol. 135, pp. 448-449. Leith, K., and Liddell, D. M., The Mineral Reserves of the United States and Its Capacity for Production, Nat. Resources Comm., p. 55, Washington, 1936. Do. Cannon, R. J., Mosier, M., and Meyer, Helena, Mineral Position of the U. S., pp. 240-241, Dept. of the Interior, 1947. Federal Trade Com., Report on the Copper Industry, p. 4, 1947. 1 S. G. Lasky, "Minerals Resources Appraisal by the U. S. Geological Survey," Colorado School of Mines Quarterly, vol. 49, January 1950, p. 22. 2 Recovery factor—90 percent. 3 1925-35 average. 4 Predicted by the estimators from trend. Actual production in 1935 was about 400,000 tons. 5 Premium price plan. 6 More favorable than 1944. Page 144 Table IV.—World copper reserves [Thousand tons of contained metal] Belgian Congo. Canada Chile Northern Rhodesia. United States Minimum free world total U. S. S. R Meas- ured Indi- cated 18, 000 10, 000 -5, 850- -1, 275- 75, 000 Inferred 30, 000 -25, 000- 50, 000 16,000 Total 10, 000 30, 000 1 5, 850 2 1, 275 75, 000 18, 000 50, 000 25, 000 ±200, 000 Grade of ore (%Cu) 6 4 1. 7 1. 1 1. 6 3. 85 3 i 1. 1 1 In producing mines. 2 In submarginal and inactive mines. The average grade of copper ore mined in the United States is now about 20 pounds per ton, or 1 percent. In general, mate- rial containing 10 pounds or more of copper can be treated commercially by current mining, milling, and smelting methods. Lower grades of material are mineable, but the metallurgical recovery decreases as the grade decreases, and the over-all cost goes up. The cost relationship is not accurately determinable from available data, but both direct and capital costs probably would increase much more rapidly than the grade decreased. For example, the cost of producing copper from ore containing 10 pounds of copper might be double the cost of production from ore averaging 15 pounds; the cost of exploiting material containing as little as 7 or 8 pounds is almost purely speculative. As the tonnage of ore that must be mined to yield a given ton- nage of copper annually increases, the size of the plant and consequently the capital cost also must increase. The cost in- crease is greater than the comparatively small reduction in operating cost that might result from the larger scale of opera- tion. Further cost increases would result from lower percentage recovery in concentrating, and from the increased cost of smelt- ing the lower grade concentrate that would be made. It appears now to be impracticable to reduce mill tailings to less than a pound or two of copper per ton, therefore the percentage recov- ery in milling necessarily falls as the grade of ore treated is lowered. The same irreducible minimum copper content ap- plies also to copper smelter slags. The trend of technology in mining is to employ fewer units of labor at higher real wages in the production of a unit of metal as more and better machines, more power, and more effective processes become available. Nevertheless, technical progress is slow already in some large mines in this country ores containing as little as an average of 0.7 percent of copper are being mined, and it seems reasonable to predict that richer ores in other parts of the world will be utilized before the average grade of do- mestic copper ore drops much lower. FLUORSPAR—DEMAND ALWAYS SATISFIED* Fluorspar reserves for the major areas of the world are shown in table V. The estimates for foreign deposits are specu- lative figures based chiefly on indefinite statements in published and unpublished reports and on production figures and trends; the foreign literature rarely contains data on reserves. Measured and indicated reserves never have been large, and yet demand always has been satisfied by discovery and develop- ment. The cut-off grade in most deposits is about 35 percent of CaF2, although a few domestic fluorspar deposits containing *By Ralph E. Van Alstine, U. S. Geological Survey, and Hubert W. Davis, U. S. Bureau of Mines. Table V.—Order of magnitude of world fluorspar reserves {short tons) FREE WORLD Ore (more than 35% CaF2) Concentrate equivalent Ore (15 to 35% CaF2) Concentrate equivalent Region If to metallurgical grade If to acid grade If to metallurgical grade If to acid grade United States 15, 000, 000 5, 000, 000 4. 000 000 3, 000, 000 3, 000, 000 2, 000, 000 2, 000, 000 1,000, 000 1,000, 000 700, 000 500, 000 1,000, 000 7, 500,000 6, 000, 000 20, 000, 000 9, 000, 000 7, 000, 000 6, 000, 000 5, 000, 000 3, 000, 000 3, 000, 000 2, 000, 000 2, 000, 000 3, 000, 000 2, 500, 000 Newfoundland Germanv Mexico Spain United Kingdom 11,000,000 9, 000, 000 6, 000, 000 5, 000, 000 South West Africa.... France Italy Union of South Africa 1, 000, 000 800, 000 Korea Others 1 2, 000, 000 Total free world ±40, 000, 000 ±18, 500, 000 ±15, 000, 000 ±60, 000, 000 ± 9, 000, 000 ±7, 500, 000 COMMUNIST WORLD Russia China Total Communist world 3, 000, 000 1,000, 000 4, 000, 000 2, 000, 000 2, 000, 000 1, 500, 000 1, 500, 000 5, 000, 000 2, 000, 000 7, 000, 000 1, 500, 000 1, 500, 000 1, 000, 000 1, 000, 000 1 Argentina, Australia, Bolivia, Brazil, Canada (other than Newfoundland), French Morocco, India, Japan, Norway, Southern Rhodesia, Sweden, Switzer- land, and Tunisia. Page 145 as little as 30 percent of CaF2 are profitably mineable because of the presence of other recoverable minerals or because of especially favorable location, mining conditions, or milling fac- tors. Thus, the reserves at the cut-off of 35 percent are regarded as commercial. Most of this fluorspar can be concentrated to meet the specifications for acid grade (97 percent CaF2 min- imum), ceramic grade (95 percent CaF2 minimum), or metal- lurgical grade (currently about 80 percent CaF2 minimum). About 2 l/i tons of typical domestic crude ore are needed to make 1 ton of acid-grade or ceramic-grade fluorspar, and about 2 tons of crude ore to make 1 ton of metallurgical grade. Deposits containing 15 to 35 percent of CaF2 are chiefly the low-grade parts of commercial fluorspar districts. Such deposits could be exploited if fluorspar prices were nearly double the prices of today. The group also includes ore deposits of other minerals having a gangue of fluorite, such as the Cripple Creek, Colo., and the Iron Mountain, N. Mex., deposits. This submarginal material can be treated by known tech- nology, and the increase in price specified above would have some immediate response in production. Full response could be expected in a few years. Material containing less than 15 percent of CaF2 has not been included in the reserve estimates. Data for estimating such re- sources are not available because there has been no commercial interest in them. In general, such material is in the low-grade parts of commercial districts and in numerous areas that now are considered to be little more than fluorite occurrences. It would not be utilized until fluorspar sold for at least three times the present prices, and might not be used even then, because fluorine and synthetic fluorspar probably could be made at a lower price and on a large scale from the vast resources of phos- phate rock. Phosphate rock containing fluorapatite and fluorite commonly averages 3 to 4 percent fluorine, roughly equivalent to 6 to 8 percent of fluorite. At the present time more fluorine is wasted each year in the United States in phosphate rock than is recovered from acid-grade fluorspar. Experimental processes for recovering the fluorine have not as yet yielded products that can compete with most natural fluorspar in quality or price. IRON ORE—A TEST FOR TECHNOLOGY* Natural iron ores consist of mixtures of iron-bearing min- erals—magnetite, hematite, hydrated oxides (limonite), car- bonates (siderite) and silicates—with rock matter and impuri- ties, some neutral, others deleterious. Relatively pure magnetite and hematite constitute high-grade ores. When mixed with im- purities in coarse-textured ores, magnetite and hematite can be separated easily by grinding and magnetic and gravity concen- trating methods; in fine-grained ores, separation may be diffi- cult, if not impractical, by present known methods. The limo- nitic ores contain large amounts of water, and usually other chemically admixed impurities. Carbonate ores can be con- centrated by simple roasting, except when mixed with finely divided silica. Some of the silicate ores cannot be concentrated by mechanical methods, and must be smelted directly. Iron ore also is recovered as a byproduct from pyrite and ilmenite. The amenability to cheap concentration is a major, if not the dominant, factor in utilizing low-grade material. Immense tonnages of known rock containing 35 percent or more iron cannot now be used in the United States. Other types of rock containing only 25 percent iron and large percentages of sulfur and phosphorus impurities are yielding millions of tons of high-grade concentrates by simple cheap milling processes. Large amounts of ores in the Mesabi Range are raised to ship- ping grade ( +50 percent iron) by simple washing. The cherty fine-grained magnetic taconites of the Mesabi Range, which average about 27 percent iron, can be concentrated by fine grinding and magnetic separation. Processes will undoubtedly be developed within a decade or two for utilizing the non- magnetic taconites. The reserve figures in this summary in- clude only those materials that can be used directly, or can be concentrated by methods now in commercial use or likely to be developed in the near future. For the purposes of this report, the possible sources of iron in the United States and the world have been estimated in three main categories: 1) Ores containing 50 to 70 percent of iron. Such ores can be utilized as mined. Owing to their high iron content, they can be transported for long distances to consuming areas. Table VI.—Estimated iron ore resources of the United States, by regions and grades [Million long tons] 50% Fe and above 25-35% Fe (submar- ginal and Total (round numbers) Measured Iron deposits: 35-50% Fe off-quality) and indicated Inferred Lake Superior region 1, 500 2, 500 i 60, 000 3, 000 69, 000 3, 000 45, 000 2, 000 20, 000 1,000 Northeastern region Southeastern region J2 1, 500\ I 300/ 9, 000 10, 000 7, 500 2, 500 Central and Gulf region 500 200 500 750 400 250 100 500 Western region 500 60 Byproduct deposits: Ilmenite 100 175 100 175 Pyrites Total (round numbers) 2, 000 4, 500 75, 000 80, 000 1 Includes published figures on magnetic taconite only. The total taconite is many times this figure, and the technology for beneficiating the nonmagnetic portions is now being developed. 2 Direct shipping ore because of its self-fluxing nature. *By Martha S. Carr, U. S. Geological Survey, and Paul E. Pesonen, U. S. Bureau of Mines. Page 146 2) Ores of intermediate quality containing from 35 to 50 percent iron. These ores can be used in their crude state when they are self-fluxing or are close to consuming areas, such as the Birmingham ores in the United States and the Lorraine ores in France; otherwise, they must be beneficiated. The lateritic iron ores (which contain chromium, nickel, and cobalt) and the pyrite and ilmenite ores (from which iron ore is obtained as a byproduct) are included in this classification. 3) Deposits containing 25 to 35 percent of iron are ex- tensive in the United States, Africa, China, Norway, and the United Kingdom. They vary widely in their physical and chemical characteristics and occurrence, and therefore in feasibility and sequence of exploitation. The major sources of iron in this classification are: magnetic taconites, fine-textured siliceous formations, carbonates, sedimentary hematite-carbon- ate formations, and residual and other limonitic iron ores. DOMESTIC RESOURCES Table VI lists the estimated iron ore resources of the United States. The largest reserves are the intermediate wash ores and "taconites" of the Mesabi Range, and the siliceous and carbonate iron formations in Michigan and Wisconsin. The intermediate wash ores are now being exploited. Concentration of the magnetic taconites is in the pilot plant stage, with commercial production expected within 5 years. Production from the other siliceous and carbonate iron formations in the Lake Superior district is still in the basic research stage. Table VI-A shows the impurities in these reserves, and table VII gives the history of domestic iron-reserve estimates. Table VIII lists the iron ore resources of the world. The largest high-grade iron ore resources of the Western Hemi- sphere outside of the United States are in Canada (Quebec- Labrador), Venezuela (El Pao and Cerro Bolivar), and Brazil (Minas Gerais and Urucum). Quebec-Labrador will begin shipping in 1954; El Pao's first shipment has been received; and Cerro Bolivar is expected to be in production in 1955. Although Cuba has moderate reserves of high-grade iron ore and more extensive reserves of intermediate grade ore, the lateritic ores constitute by far its largest potential source of iron. Table VI-A.—Iron ore reserves of the United States showing impurities to be removed to make the ore usable 1 [Million long tons] With- out impuri- ties 2 With impurities 3 Region Sulfur Silica Phos- phorus Tita- nium Total Lake Superior 1, 500 x 65, 000 3, 000 Northeastern x x x Southeastern 1, 500 x x x 10, 000 500 750 100 175 Central and Gulf x x Western 40 X X Ilmenite x x Pyrites X 1 Because most ores contain two or more of the above impurities, indi- vidual tonnage estimates are not practical. 2 Iron ores that can be used in the blast furnace as mined. Some of the Southeastern ores with high silica can be used if they are self-fluxing and within favorable distances to the furnaces. 3 Most districts have ores with one or more of the above impurities in varying chemical and mineralogical modes of occurrence. Technological processes are now known to recover most of them and basic research con- tinues to improve present processes and to develop new ones for the more complex ores requiring fine-grinding and other than magnetic separation. In the Eastern Hemisphere, India, Sweden, French West Africa, and China have the greatest reserves of high-grade iron ore. Large reserves of lower grade ore are available in all the continents, particularly in Africa. The part of West Africa including Sierra Leone, Liberia, and the adjoining parts of French West Africa is believed to be a major iron ore province geologically similar to the Lake Superior region; it includes the Marampa, Tonkolili, and Bomi Hills high-grade deposits, and the lateritic deposits near Con- akry. Estimates of ore reserves in these deposits have been made only provisionally. It is believed that enormous reserves of low- grade material are present in addition to the amounts listed. Total world reserves are of the order of magnitude of 300 billion tons of iron ore and iron-bearing materials containing about 115 billion tons of iron. The United States reserves of about 80 billion tons contain approximately 25 billion tons of iron. Table VII.—United States trend of iron ore reserve estimates Year Available reserves (long tons) Annual r£.te of production used to estimate "life" "Life" (years) Grade Percent 4, 800, 000, 000 36, 000, 000 70, 000, 000 70, 000, 000 133 3, 500, 000, 000 8, 000, 000, 000 6, 250, 000, 000 50 44 114 156 147 250 0) ± 2 40, 000, 000 30, 000, 000 4, 400, 000, 000 10, 000, 000, 000 50 50 ± 3 40, 000, 000 8, 250, 000, 000 5, 481. 000, 000 45 42 120, 000, 000 111, 000, 000 69 49 5, 000, 000, 000 3, 800, 000, 000 51 51 106, 000, 000 84, 000, 000 47 45 4 6, 400, 000, 000 49 98, 000, 000 65 Reference 1908 1918 1923 1932 1935 1938 1943 1944 1945 1946 1950 I Hayes (U. S. G. S. Bulletin 394, 1909). Harder (Dept. of Interior, Mar. 1, 1919). Kuhn (Iron Age, No. 6, 1924). Burchard (Jnl. Chem. Ed., May 1933). Leith (National Resources Committee, Mar. 1936). Hart (Iron and Steel Engineer, May, 1939. Data from U. S. Tariff Com.). Mikani (Economic Geol., Jan.-Feb. 1944). Burchard, Johnson and Melcher (Mineral Position of the U. S., 1947). Hewitt (A. I. M. E., May 21-22, 1947). Dept. of State O. I. R. Rept. 4260 (Data from U. S. G. S. and U. S. B. M.) U. S. Geological Survey, 1951. 1 Commercial grade. 2 Average for 1925-35. 3 Average for 1930-40. 4 This figure excludes marginal ore. With the addition of the taconite, siliceous, and carbonate iron-formations, the "life" of our iron ore reserves will be increased manyfold. Much of this iron-formation is not amenable to present methods of beneficiation but technological processes for their treatment un- doubtedly will be developed. Page 147 Table VIII.—Estimated world resources of iron ore measured, indicated, and inferred [Million metric tons] 50% Fe ! 35-50% j 25-35% j and above: Fe ! Fe f 1 Free world: Brazil 20, 000 50 200 15, 000 10, 500 700 100 Canada 4, 000 Cuba '. . . France 10, 000 French West Africa 2, 000 20, 000 India 60 Indonesia 1, 500 250 250 1.000 1. 000 Southern Rhodesia 100, 000 Sweden 2, 500 Union of South Africa 11,000 4, 500 United States 2, 000 1,000 1, 500 75, 000 Venezuela Others 6, 500 Free world total (round numbers). 53, 000 50, 000 200, 000 Communist world: China 1, 500 2, 700 250 1, 500 Austria Czechoslovakia 1 200 Poland 175 11,000 U.S. S.R 2, 000 Communist world total (round numbers) 1, 500 15, 000 4, 000 World total 55, 000 65,000 j 200,000 LEAD-ZINC—PROFIT THE RULING FACTOR* The bulk of both the lead and zinc output of the United States and of the world comes from mines that produce sub- stantial quantities of both metals, but despite this common association there are some features the two metals do not share. The principal lead ore mineral, galena, contains 86 percent lead as against 67 percent zinc in the principal zinc ore mineral, sphalerite. Lead ores commonly have a valuable silver content, but straight zinc ores ordinarily do not. Lead smelting is less costly per ton of metal recovered than zinc smelting, and re- coveries at lead smelters exceed recoveries at zinc smelters. COST OF PRODUCTION The cost of producing lead and zinc is made up of two more or less equal elements: (1) mining and milling, and (2) smelting. The mining and milling costs are dependent largely on the physical characteristics of the reserves, whereas the smelting cost is largely independent thereof. The financial as- pects of assumed decreases in grade of ore are complex, but it is obvious that the production of given quantities of metal from lower grade ores will require larger ore reserves, and larger mining and milling plants, with the result that capital costs per unit of metal production must be greater. The cost of produc- tion would probably increase more, proportionately, than the grade decreased. Lead and zinc are mined almost wholly by underground methods, of which a great variety are in use, as required by the very different physical characteristics of various ore bodies. *By E T. McKnight, U. S. Geological Survey, and R. H. Mote, U. S. Bureau of Mines. Mining costs therefore range widely, from district to district, and the cut-off, or minimum grade of ore that is profitable to extract from an operating stope, varies accordingly. The aver- age grade of lead ore (meaning ore mined solely or almost solely for its lead content) mined in southeastern Missouri is on the order of 2 percent, whereas in Idaho it is about 6 percent. Individual mines would show greater variations. The combined metal content of lead-zinc and lead-zinc-copper ores, which must in general receive more costly metallurgical treatment to recover the separate metals, range still more widely, from about 2.6 percent in the Tri-State district, to 12 or 15 percent in various western United States districts. The total cost of production is approximately the price of the metal, because, in order to extract the greatest financial return and at the same time extend the life of an ore body and its dependent operation the operator does not "skim off the cream," but mines the leanest ore and employs the most effec- tive (and not the least costly) metallurgical processes that will yield a reasonable profit; in other words, his costs tend to approach the price. For a time—perhaps a few decades—substantial increases in lead and zinc production could be obtained by mining lower grade reserves, now marginal, at disproportionately higher costs. It does not follow that such a step, if it could be taken now, would add substantially to the domestic or world lead and zinc reserves, as no great reserves of these metals are known to exist below current cut-offs. Any resulting volume of increased production would be contingent on the profit that management would be satisfied with, and on management's reaction to the resulting depletion. METAL CONTENT OF ZINC ORES The grade of zinc ore currently being mined varies greatly in different deposits. This is due in part to milling techniques which have been so perfected that almost any grade of primary sulfide ore can be beneficiated to a milled product ("concen- trate" ) containing 50 to 60 percent zinc. This is considered the standard mill product that is shipped to the smelter. The grade of primary ore that can be mined profitably will therefore depend upon such factors as mining, milling, and transporta- tion costs, rather than upon any deficiencies in milling tech- niques. Zinc is usually associated with lead and copper, so that the combined metal content must be considered in determining whether the grade of ore is high enough to permit profitable recovery. Furthermore, zinc-lead deposits commonly also con- tain appreciable quantities of silver and some gold. With in- creased silver and gold content, the base metal content can diminish proportionately and the ore still be commercial. Pyrite (including pyrrhotite), which is valuable as a source of sulfur when it occurs in massive deposits of large size, is also associated with zinc in some deposits. In the Ducktown, Tenn., district the zinc itself is recovered as a byproduct of a large pyrite production. The same is true of many Norwegian de- posits. Thus, merely stating the grade of presently commercial zinc deposits in terms of zinc content would be meaningless unless the other constituents are taken into account. However, it is misleading to add to the zinc content the weight percentage of Page 148 such a bulk mineral as pyrite on the one hand (which usually requires 50 percent or more of pyrite mineral before it is eco- nomic ), or of gold on the other hand, which would contribute an infinitesimal weight percentage in the ore although of great significance when value is considered. But for rough compari- sons, it is practical to add the lead and copper content to the zinc content to give the combined base metal content of the ore. This is feasible because the lead usually has about the same value, pound for pound, as the zinc, and the copper is usually within the range from one to two times as valuable as the zinc. DOMESTIC ZINC RESERVES In figure 6, the solid curve shows the combined base metal content of currently commercial domestic ores as abscissa, and the inferred tonnage of zinc metal in ores of this grade and of all higher grades as ordinate. The curve starts at the bottom with several districts which are rather poor examples because they have not been recently mined, and probably the grade of 18 to 30 percent ore shown will be lowered considerably by favorable economics of mining in some of these districts. It ends at the top with a district which is also a rather poor example because the 1.65 percent combined copper and zinc shown could probably not be worked except for the substantial gold and silver content. The dotted curve in figure 6 shows the zinc content of the ores as distinguished from the total base metal content. The lowest grade district that is essentially all zinc is the Tri- State district in Oklahoma, Kansas, and Missouri, where the grade of reserves averages about 2.2 percent zinc and 0.4 percent lead. Zinc reserves are rarely determined more than 4 or 5 years ahead of mining. In many districts, particularly the smaller ones but also including such important districts as Butte, proved reserves may be insufficient for even two full years' operation. Proved reserves are therefore of little value in predicting the future resource position of the country. Inferred resources must also be considered. An estimate of domestic zinc reserves re- coverable at or near present prices was made in 1944. Accord- ing to this estimate, there were 21,900,000 tons of the zinc metal in the ground, of which 11,700,000 tons was inferred. At that time this quantity was considered sufficient to supply the country for 26 years at an annual rate of 650,000 tons of recoverable metal. A more recent estimate made in 1950 indi- cated 21,200,000 tons of zinc metal remaining in the ground, sufficient to last the country for 25 years if mined at the same rate. Thus, the estimated number of years' supply dropped only 1 year, despite 6 years of production (though at an average annual rate of 628,000 tons instead of 650,000 tons). This 1950 estimate of about 21,000,000 tons, a little over half of which is inferred, is considered still valid. About 80 percent can be considered recoverable by modern technological practice. DOMESTIC SUBMARGINAL DEPOSITS In addition to this reserve of commercial ore, conceivably there may be present also another 20 million tons of zinc in submarginal deposits, although the margin of error in this figure is far greater than for the estimate of commercial ore, for there has been no economic incentive to explore and measure the submarginal deposits. FIGURE 6 ZINC Generalized curve showing combined base metal content of currently eco- nomic domestic zinc ores, plotted against cumulative inferred tonnage of zinc metal. At a given grade, the curve above tonnage of zinc in ore of that grade and all higher grades. Points on dotted curve show percent- age of zinc corresponding to the total base metal content at the equal ton- nage points on the generalized curve. Extension of the dotted line to right of the solid line is due to generalization in the solid line. Dashed line shows very hypothetical grade of ore and tonnage of contained zinc for submar- ginal ore. Currently economic ore J L 30 28 26 24 22 20 18 16 14 12 10 PERCENT ZINC, LEAD, AND COPPER One of the major carriers of submarginal material is the Tri-State district of southwestern Missouri, southeastern Kan- sas, and northeastern Oklahoma which although now largely mined out, is one of the outstanding zinc producing areas of the world. A recent 2-year study by the Bureau of Mines calculates the tonnage of metal left at two different grades, one with a 2 percent metal cut-oflf (the ore averaging 2.75 percent zinc, 0.48 percent lead) and the other with lJ/2 percent metal cut- off (the ore averaging 2.18 percent zinc, 0.38 percent lead). At the lower grade, which is about the current commercial cut- off, there are about 1,440,000 tons of zinc metal left in the dis- trict. Extrapolating from these figures suggests a total content of around 2,850,000 tons of metal in all grades of "ore" left in the ground, or roughly twice the quantity contained in cur- rently commercial ore. Other submarginal zinc deposits that can be estimated are certain pyritic deposits and low-grade slags, tabulated as follows: Total tonnage irjerred zinc Grade Deposit {short tons) (% Zn) Gossan Lead Belt 450, 000 0. 6-0. 7 Jerome, Ariz 1,900,000 1.9 Low grade slag dumps 1, 500, 000 5-6 The dashed curve in figure 6 shows qualitatively the prob- able situation with regard to domestic submarginal ores. This curve is a nebulous, tentative geologic guess and is not to be taken as conflicting with the earlier statement that "no great Page 149 reserves are known to exist below current cut-offs.'' The grade could start as high as 30 percent for very low tonnages in inaccessible areas, but for any considerable tonnage, anything above 10 percent zinc metal would probably be commercial. FOREIGN RESOURCES For the rest of the world an estimate compiled in 1950 shows a total of about 59,000,000 tons of zinc in proved and indicated ore of present commercial and near commercial grades. See also table IX. This total is based on information, largely published, of widely varying reliability, compiled for 250 separate deposits. No estimate of inferred ore can be made without an exhaustive search of minning company files through- out the world, coupled with field investigations in many dis- tricts, directed specifically toward the reserve problem. This task of international scope probably cannot be approached for many years. With such a complete lack of information as to inferred reserves of commercial grade in foreign countries, there is no background for estimating inferred tonnages of submarginal grades. No outstanding reserves of submarginal grade have been been publicized, although there are doubtless many zinc- bearing pyritic bodies in the rest of the world (in Scandinavia, for instance) that are comparable to those mentioned for the United States. Table IX.—Reported estimates of world lead-zinc reserves [Thousand short tons contained metal] Lead i Zinc Free world: Argentina Australia Belgian Congo Bolivia Canada and Newfoundland French Morocco Germany Japan Mexico Nigeria Peru Spain Sweden United States Others 2 Free world total (round numbers) Communist world: U. S. S. R China * Poland Total communist world (round numbers) 1, 300 1, 700 12, 700 14, 000 50 1, 500 100 1,000 1 4, 600 8, 200 1, 000 i 900 2, 000 5, 000 300 1, 300 i 750 1. 000 i 1, 200 600 1, 500 3, 700 1,200 1 1, 100 i 500 1, 100 8, 300 21, 200 4, 400 4, 000 40, 000 65, 000 3, 000 9, 000 500 900 400 4, 000 5, 000 15, 000 1 Incomplete data. 2 Includes Turkey, Finland, France, Italy, Yugoslavia, Greece, Green- land, Burma, Indochina, Rhodesia, Tanganyika, Southwest Africa, and Norway. LEAD DEPOSITS The difficulties in predicting the total reserve of lead metal in ores of submarginal grade, and the margin of error in such estimates, are similar to those for zinc. The two metals are closely associated in nature and a list of the major zinc deposits will include most of the major lead deposits. Those few lead deposits that contain little or no zinc are so similar in geologic occurrence to other lead-zinc deposits that they do not alter the conclusions given in the report on zinc. There is no lead counterpart of the zinc-bearing pyritic de- posits. Also the lead metal contained in slag piles is much less than the zinc, so that this occurrence has not been considered as a possible source of lead. Hence, two submarginal sources for which a considerable reserve of zinc has been estimated are not applicable to lead. DOMESTIC RESOURCES The commercial value of lead deposits is influenced by the association of other metals, particularly zinc, copper, silver, and gold. Using the same scheme as for zinc, figure 7 has been prepared showing the base metal content (lead, zinc, copper) of currently commercial domestic lead ores as abscissa and the inferred tonnage of lead in ores of this grade and of all higher grades as ordinate. The curve starts with the San Xavier dis- trict, Arizona, at the bottom, with 24 percent combined metals (although the lead content is only 5.4 percent) and ends with the southeast Missouri district with 2 percent lead. The dotted curve in figure 7 shows the lead content of the ores as dis- tinguished from the total base-metal content. FIGURE 7 Generalized curves showing com- bined base metal content of currently economic domestic lead ores, plotted against cumulative inferred tonnage of metal. At a given grade the curve shows tonnage of lead in ore of that grade and all higher grades. Points on dotted curve show percentage of lead corresponding to the total base metal content at the equal tonnage points on the generalized curve. Extension of dotted line to right of solid line is due to generalization in the solid line. Dashed line shows very hypothetical grade of ore and tonnage of contained a lead for submarginal ore. LEAD Currently economic ore, / -J / / ubmarginal or* 0 18 16 U 12 10 8 6 PERCENT LEAD, ZINC AND COPPER The lowest grade district that is essentially all lead is the southeast Missouri district where the grade of reserves averages 2 to 3 percent lead. An estimate, made in 1944, of domestic lead reserves recov- erable at or near then prevailing prices, showed 7,750,000 tons of metal in the ground, of which 5,150,000 tons was in- ferred. This was sufficient to supply the country for 13 years at an annual rate of 500,000 tons of recoverable metal. A similar estimate made in 1950 indicated 8,340,000 tons of metal still in the ground, or sufficient lead to last the country for 14 years. Thus, the estimated number of years of lead supply remaining increased 1 year, despite 6 years of production (at an average annual rate of 388,000 tons instead of 500,000 tons). The 1950 estimate can be accepted for 1951, though the past history of lead estimates suggests that the actual figures are only an indication of the minimum. The dashed curve in figure 7 shows qualitatively the likely situation with regard to submarginal domestic lead ore. As with the curve for zinc, this curve is a nebulous, tentative geo- Page 150 known reserves are in Europe, Africa, and the Pacific Islands. Asia, Australia, and South America do not contain large known phosphate deposits, but some undeveloped occurrences that may prove of importance have been found in recent years in Indochina, Venezuela, and Brazil. Large additional reserves that would be mineable under present conditions are almost certain to be discovered. The curves on the accompanying graph (fig. 13), show rough estimates of the phosphate resources of the United States and of the rest of the world. The curve showing the resources of the rest of the world does not include the Kara Tau deposits of Russia or the newly discovered phosphate deposits in Indo- China, South America, and Uganda. Moreover, since the African deposits are not fully explored they probably contain more phosphate than the estimate suggests. FIGURE 13 PHOSPHATE World (U 350 H300 United States 450 400 o Q_ to O X 250 O 200 to Z o y— O z o 150 ^ 100 co Z o 50 30 25 20 15 10 5 PERCENT-AVERAGE P205 CONTENT Cumulative curves showing relation between estimated phosphate re- serves and grade of phosphate rock in the World and the United States. It is apparent that both domestic and world reserves of economically minable phosphate rock are sufficient for many centuries, and that low-grade phosphate deposits ranging from 10 to 15 percent of P205 are almost inexhaustible. POTASH—1,000 YEARS' SUPPLY* The domestic reserves of highly soluble and economically re- coverable potash salts are adequate for more than 100 years at the current rate of production, which is about 1.2 million tons of K20 per year. Domestic potash resources are customarily classified as fol- *By C. L. Jones, U. S. U. S. Bureau of Mines. Geological Survey, and W. H. Waggaman, lows: (1) Highly soluble potassium salts; (2) slowly soluble potassium compounds; (3) insoluble potassium silicates. The materials in group one, consisting largely of potassium chloride and sulfate, are of the greatest agricultural and in- dustrial importance. They have supplied fully 98 percent of our potash in the past, and they promise to be the main source of potash for many years to come. The chief material in the second group, consisting of rela- tively low-grade and slowly soluble potash minerals, is poly- halite, of which enormous quantities occur in the New Mexico and Texas potash deposits. However, polyhalite, which con- tains an average of 13 percent K.O, requires certain extra processing steps to render it water soluble and to extract the potash in a form that is concentrated sufficiently to permit its economic shipment over long distances. Under present condi- tions, it is generally believed that polyhalite cannot be mined and marketed in competition with the highly soluble potash salts. The third group of potash minerals includes greensand, cer- tain shales, and feldspar, which have potash contents ranging from 6 to 10 percent. The possibility that these minerals will be used to any extent as domestic sources of potash appears very remote as long as there are adequate reserves in the other two groups. RESERVES The economic reserves of the United States presently are contained in the two following types of deposits: 1) Highly soluble potash salts carrying not less than 14 per- cent of K20 in buried saline deposits having a minimum thickness of four feet. 2) Natural brines containing an average of 2.5 percent K20. Whereas there is a pronounced difference in the grades of these two types of deposits, both are mineable because of the ease with which the potash is recovered. The economic reserves in the two types total more than a quarter billion tons of K20, mostly on Government land. MARGINAL AND SUBMARGINAL SOURCES Marginal sources comprise those potash deposits that may be exploited after further development of mining and process- ing technologies or under somewhat more favorable economic conditions. They include thinner strata of soluble potash salts as well as some beds of highly soluble potash salts containing less than 14 percent K20 (the present economic cut-off grade for optimum potash recovery), and contain somewhat more than a billion tons of K20. Deposits of polyhalite may be placed at the lower level of marginal sources. The potassium silicates are definitely submarginal. They offer little promise of being a prime source of potassium salts, although minor byproduct quantities are recovered from sili- cates in the manufacture of cement. The application of flotation as a means of separating highly soluble potash minerals from sodium chloride and other im- purities has promoted the economic extraction of potash from Page 157 its natural deposits. Fractional crystallization, based on the relative solubilities of the various ingredients in brines, has con- tributed salable byproducts which pay much of the cost of processing such salines and make possible the comparatively low price at which potash salts are offered. Further develop- ments in mining and technology may well bring additional marginal sources into the economic picture, probably within the next 25 years. FOREIGN POTASH Table XVI.—Estimates of world potash resources Range of estimates {millions of tons of Country K20) West Germany 2-20,000. Israel-Transjordan (Dead Sea) 1,200-1,400. France 300-400. Spain 270-500. Russia 700-18,400. East Germany 14,000. United States 250 ±. The world's potash resources in the form of highly soluble potassium minerals and natural brines are large. The reserves in the deposits presently being mined are estimated to be more than 5 billion tons of K20, which would be sufficient to last for more than 1,000 years at the 1949 production rate of about 3.5 million tons. The principal deposits are located in only a few countries, as listed in table XVI. In addition to these deposits, large but as yet unevaluated deposits have been found in Canada and in England. The domestic and world potash resources are shown on the accompanying graph (fig. 14), though the curves shown are based upon quite sketchy data. Estimates for individual coun- tries range widely, and bases used in preparing them are not known. FIGURE 14 POTASH World (U. S. excluded) / / / / / / / / / / / / / / / / '1 "5 u U. S. o O ON CO Z o CO z 3 2 ■ i 24 20 16 12 8 4 PERCENT OF K20 Cumulative curves showing relation between total contained potash and grade of ores and other potential sources of potash in highly soluble salts and brines in the World and the United States. SULFUR—PRIMARILY AN ECONOMIC PROBLEM* Native sulfur and pyrites supply most of the sulfur used in the world today. The rest is obtained from fumes of zinc, copper, lead, and nickel smelters, from "sour" natural gases (contain- ing hydrogen sulfide), and from industrial gases (at oil re- fineries, coke ovens, power plants), and in Europe from an- hydrite. Pyrites are recovered not only from pyrite deposits that consist mostly of the iron sulfide minerals (pyrite, marcasite, and pyrrhotite) but also as a byproduct from different types of metalliferous deposits (copper, zinc, lead, gold, iron, and molybdenum) and from washing certain types of coal. The multiple sources of sulfur give the sulfur-producing in- dustry a flexibility unusual among mineral industries. The type of sulfur-bearing material used has changed from time to time as relative costs and availability have changed. In the United States consumption has fluctuated principally between sulfur and pyrites. Sicilian native sulfur was the preferred material until about 1890, domestic and Spanish pyrites until the First World War, and Gulf Coast native sulfur since then. At present nearly 85 percent of the sulfur consumed in the United States comes from the Gulf Coast native-sulfur deposits, about 10 per- cent is derived from pyrites, and the rest is recovered from smelter and industrial gases. About three-fourths of the sulfur used in the United States in 1949 was converted into sulfuric acid. After the First W'orld War many acid manufacturers adapted their plants to native sulfur, because it was cheaper and more convenient to ship and use than pyrites. The abundance of cheap native sulfur has inhibited the use of byproduct sulfur from smelter and in- dustrial gases or from sulfide ore mining operations. But now with the current shortage of native sulfur, the mining industry and acid manufacturers are showing greater interest in pyrite and other marginal sources of supply. It can be expected that the market for these sulfur-containing materials will widen dur- ing the coming years. WORLD RESOURCES It is generally agreed that there are ample reserves of sulfur- bearing materials in the United States and the rest of the world to supply any probable future demand. However, the bulk of these reserves is contained in deposits that have not been eco- nomically workable owing to the availability of cheaper high- grade sulfur. Various processes for treating the marginal sulfur sources are available, and further technologic improvements are in progress. The problem, therefore, is primarily economic. *By G. H. Espenshade, U. S. Geological Survey, and G. W. Josephson, U. S. Bureau of Mines. Page 158 Table XVIII shows world resources of sulfur classified by source and by estimated availability at a price. Table XVII shows distribution of foreign sources by country. Table XVII.—Order of magnitude of foreign sulfur resources [Long tons of sulfur] A. DEPOSITS OF NATIVE SULFUR Available at Available at prices up to four times present level (long tons) Area , present prices (long tons) Latin America 1 16, 000, 000 10, 000, 000 7, 000, 000 (3) 45, 000, 000 20, 000, 000 18, 000, 000 (3) Western Europe 2 Japan Russia B. PYRITES DEPOSITS Canada 26, 000, 000 12, 000, 000 10, 000, 000 3, 500, 000 6, 500, 000 21,000, 000 1, 400, 000 (?) (4) 46, 000, 000 20, 000, 000 12, 000, 000 4, 000, 000 10, 000, 000 35, 000, 000 1, 500, 000 100, 000, 000 Norway Cyprus Finland Sweden Japan Australia Latin America Russia 0) Others 5 112,000, 000 190, 000, 000 C. BYPRODUCT PYRITES FROM METALLIFEROUS DEPOSITS Canada 10, 000, 000 15, 000, 000 13, 000, 000 3, 500, 000 2, 500, 000 600, 000 500, 000 Latin America (?) Australia 1, 500, 000 1,000, 000 400, 000 200, 000 (4) Africa Europe 6 Turkey Russia (4) D. RECOVERABLE FROM METAL SMELTER FUMES Canada 3, 500, 000 26, 000, 000 12, 000, 000 7, 500, 000 2, 000, 000 1, 700, 000 Latin America 4, 500, 000 6, 000, 000 Europe and Near East 7 Africa 500, 000 1,000, 000 Japan Asia (Ex. Japan) 500, 000 1, 300, 000 (8) 1, 000, 000 Australia 2, 000, 000 0) Russia 1 Mostly in Chile and Mexico. 2 Mostly in Sicily and Italy. 3 Assumed at one-fourth U. S. estimate. 4 Assumed at about equal to U. S. estimate. 5 Includes Italy, Spain, Portugal. Germany (mainly western)7 Rumania, France, Greece, Austria, Albania, and China, for which data are too vague to permit breakdown by individual countries. 80 percent or more is in Spain. The Communist satellite countries seem to have about 3 million tons at present prices and 4)/2 million tons at the higher price. 6 Mostly in Yugoslavia and Poland. 7 Large part in western Europe. 8 Assumed at about one-half U.S. estimate. Very few of the deposits now being mined have been ex- plored sufficiently to permit a fair estimate of the total amount of material that will ultimately be recovered. The data avail- able for deposits currently of subcommercial grade are even less satisfactory, because (there being little incentive to explore for them) no one knows much about them. Probably the esti- mates in tables XVII and XVIII are low. The sulfur content of the various raw materials covers a wide range, from over 50 percent sulfur for some of the richer native sulfur deposits to about 1 percent in some ores yielding pyrite as a byproduct and in some mineral fuels. The principal domestic native sulfur deposits are in the salt domes of Texas and Louisiana, which have produced about 88,000,000 long tons of sulfur in the past 50 years. Smaller deposits occur in some of the Western States and Alaska but high mining and processing costs have retarded their develop- ment. Major native sulfur deposits in other parts of the world are those of Sicily, Japan, and the volcanic deposits of the Andes (principally in Chile). Salt dome deposits on the Gulf Coast of Mexico are being explored and may prove to be important. The principal productive domestic pyrites deposits are those of the Appalachian region and Shasta County, Calif. Large deposits in Maine and at Jerome, Ariz., and smaller deposits in other States are not being worked. Major deposits in the rest of the world are in Canada, Spain, Norway, Sweden, Finland, Portugal, Germany, Italy, Cyprus, Russia, Japan, Australia, and Peru. Enormous tonnages of pyritic slates and schists containing 10 to 20 percent sulfur, and a similar amount of iron, occur in the iron districts of Iron River, Mich., and Cuyuna, Minn. These deposits are important potential sources of both sulfur and iron if satisfactory methods of mining and treatment are developed. BYPRODUCT POTENTIALITIES Pyrites are the most abundant metalliferous minerals and occur in the ores of a great number and variety of metalliferous deposits. Much of the pyrites now discarded could be recovered as a byproduct from these ores. In the South African gold fields more than half a million tons of sulfur in the form of pyrites are discarded annually. Byproduct pyrites are at present being recovered in the United States from copper ores in Mon- tana; zinc ores in Wisconsin, New York, and Colorado; iron ores in Pennsylvania; and molybdenum ore in Colorado. In the process of smelting copper, zinc, lead, and nickel concentrates, large quantities of sulfur are released in the smelter fumes in the form of sulfur oxide gases that can be recovered as sulfuric acid. A substantial tonnage of byproduct acid is recovered in the United States—equivalent to over 200,000 tons of sulfur annually—but large additional tonnages are not economically recoverable at present. The large Cana- dian smelters at Sudbury, Trail, Noranda, and Flin Flon are also important potential sources of byproduct acid. Recovery of the sulfur wasted in metal smelter fumes has been under- taken principally where air pollution was serious and when a local market existed for sulfuric acid. Sulfur occurs in various forms in the mineral fuels, and is currently recovered from petroleum refineries and from "sour" natural gas; a small quantity is also recovered from coke oven gases. There is some prospect of obtaining considerable sul- fur from synthetic liquid fuel operations in the future, but this is not a present source of supply in the United States. Pyrites commonly occur in coal, and much is removed from the coal in washing processes. Coal pyrites contain impurities that are undesirable for acid manufacture, and only a very small portion of the total potentially available has been used in this country. Very large deposits of anhydrite (CaSCh), gypsum 997109—52 12 Page 159 Table XVIII.—Order of magnitude of the sulfur resources of the world [Long tons of sulfur] United States Rest of world Sources Percent of sulfur contained Available at 'present prices Available at prices up to 4 times present level 1 Available at present prices Native sulfur deposits 20-50! 50,000,000 Pyrites deposits 20-45 18,000,000 Pyritic slates and schists 10-20 0 Byproduct pyrites from deposits of copper, lead, zinc, etc 1- 5 14, 000, 000 Sulfur recoverable from smelter fumes 10, 000, 000 Sultur recoverable from natural gas and crude petroleum 2 6, 000, 000 ! (400,000) Sulfur recoverable from coke ovens, coal gas plants, and power plants 2. . . j ! Small Byproduct pyrites from coal 2 I 1_ 5 | Small Sulfur recoverable from anhydrite, gypsum, and other sulfate minerals. . . . 15-20 0 70, 000, 000 80, 000, 000 150, 000, 000 36, 000, 000 22, 000, 000 15,000, 000 (500, 000 + ) 6, 000, 000, 000 (200, 000) 3, 000, 000, 000 (600, 000) Very large 45, 000, 000 210, COO, 000 (3) 26, 000, 0C0 32, 000, 000 (3) (3) (3) (3) Available at prices up to 4 times present level 1 100, 000, 000 500, 000, 000 Large 70, 000, 000 75, 000, 000 (3) (3) (3) (3) 1 Includes quantity available at present prices. 2 The fgures in parentheses indicate potential annual production from mineral fuels; present production is mainly from natural gas and crude petroleum. 3 Data not available. (CaS04.2H20), and other sulfates exist in the United States but have never been commercial sources of sulfur. Anhydrite has been used for making sulfuric acid in Europe, with port- land cement as a byproduct. The quantity of sulfur contained in domestic anhydrite and gypsum deposits is enormous. A bed of anhydrite rock 1 mile square, 12 feet thick, and 90 percent pure (such as underlie many square miles in about 20 States), would contain over 5 million long tons of sulfur. Such mate- rials constitute a vast potential source of sulfur that may be utilized under future economic conditions, particularly in or near the industrialized parts of the nations, where the largest markets exist for sulfuric acid and cement. The production that could be obtained from the various types of deposits described, as a result of an increase in price to four times the present level, would be determined by the time necessary to install the requisite technology. TIN—A VITAL U. S. IMPORT* World mine production of tin in the 20th century has been derived from placer deposits (two-thirds) and lode deposits (one-third). This ratio is roughly applicable to current output. As the geologic origin, grade, and susceptibility to measurement of placer and lode reserves are so dissimilar, generalization about tin reserves must be sharply limited. Tin presents two reserve problems—one for placer deposits and one for lode deposits. For many years the United States has been the world's largest consumer of tin. Since the Second World War, during the years 1945-49, for example, approximately 45 percent of the world's total mine production of tin (or approximately 56,000 long tons of metallic tin annually) was consumed by the United States. During this period, United States mines pro- duced a total of about 75 tons of tin. The important tin resources of the world are in southeast Asia (Malaya, China, Indonesia, Thailand, and Burma); South America (Bolivia) and Africa (Belgian Congo and *By Frederic M. Chace, U. S. Geological Survey, and Charles White Merrill, U. S. Bureau of Mines. Nigeria) and several other areas of lesser importance widely scattered about the world. Unmined tin ore reserves of the world are estimated at about 6,500,000 long tons of contained metallic tin (table XIX). Of the total about 65 percent is in alluvial deposits and 35 percent in lode deposits. The average grade of the alluvial material is about one-half pound of metal- lic tin per cubic yard of gravel and the grade of the lode deposits averages 1 to 2 percent tin. (In terms of pounds of metallic tin per short ton, gravel would average % and lode 20 to 40.) Table XIX.—Estimated tin reserves of the world [Long tons contained Sn] Malaya 1,500,000 Indonesia 1,000,000 Thailand 800, 000 Bolivia 1500,000 Belgian Congo 2 500, 000 Burma 300,000 Nigeria 250,000 All others 150, 000 Subtotal 5,000,000 China 1,500,000 1 Includes 150,000 tons in mill tailings. 2 400,000 placer; 100,000 lode. With some exceptions in Bolivia, reserve data in foreign countries are not subject to direct determination. The infor- mation given above was obtained from published documents. In general, these publications give "tons of contained metallic tin" with little or no mention of grade, price, recovery factors, or economic cut-off points. Moreover, the bases for the calcu- lations are not given, the years used vary, and little or no separation is made into measured, indicated, inferred categories. In general, it is not possible to give reserve estimates of foreign tin deposits as a function of grade and price. Not only are the data not available in published sources but in most instances the mining companies themselves do not have such information. Drilling, sampling, and measuring are costly, and generally no effort is made to block out or obtain information about submarginal grades. However, considerable general in- Page 160 formation of a qualitative nature is available on potentially productive areas that, no doubt, will be investigated as depletion advances in the operating districts. SOUTHEAST ASIA In Malaya all mineral lands are held by the Government. Certain areas are leased to the operating mining companies for prospecting and mining. The figures given above for Malaya pertain only to these leased areas, but considerable tin-bearing ground is held also by the state. These Crown lands have not been prospected and little effort has been made to estimate tin-ore reserves on them. Moreover, there is considerable oppo- sition from agricultural interests, as well as from certain political groups, to opening these areas for mining. The future tin pro- duction of Malaya depends to a considerable extent on solving this impasse. In the tin islands of Indonesia—Bangka, Billiton, and Singkep—the Government is actively engaged in tin-mining and tends to help prospecting. On Bangka, there are probably lower grade deposits available for mining when the economic situation is more favorable. Much of southern Bangka, although known to be tin-bearing locally, is "terra incognita" and awaits prospecting. Bemmelen, in his report of the Geology of Indonesia, states that "Bankga, during many decades, will rank prominently among tin producers, although the grade of the deposits will gradually decline." The grade of reserves and tonnage available on Billiton are much lower than Bangka. Moreover, the reserves have shown a gradual decline, although production will continue for many years. Singkep is of less importance but there is considerable low-grade material avail- able, both in alluvial and lode deposits. There are possibilities also on the islands of the Riouw Archipelago. Exploration by the Netherlands Government has revealed many small deposits, but more detailed investigations are necessary for a full appraisal. China has many potential tin-bearing areas. This is particu- larly true of the Kochiu tin district of Yunnan Province where it is reported that there are still many millions of tons of virgin tin-bearing alluvium on the hillsides and in the more concen- trated deposits in the valley bottoms. Moreover, there are old ;ailings in China that probably have a grade high enough for Drofitable recovery of tin if retreated by modern methods of :oncentration. AFRICA AND SOUTH AMERICA In the Belgian Congo, according to Colonna and Fisher, 'any substantial addition to reserves must come from discovery >f entitrely new, now unknown, tin fields or from the develop- nent of lode deposits now known but only partly developed. Some addition to the ultimate reserves may result from techni- :al improvement, making possible reworking of old tailings ind higher recovery from virgin ore. . . . The future of lode nining is not yet established and mining is in its infancy." In Bolivia a few low-grade placer deposits are known that mdoubtedly will be worked in the future but probably these vill not add substantial tonnages to the reserve figures. An ap- preciable tonnage of low-grade tin-bearing material exists in everal of the older lode mines, particularly at Llallagua. A considerable tonnage of tin is available in old tailings piles and waste dumps. Much of this will be recovered when technologi- cal advances make reworking profitable. According to Singe- wald, who made an examination of Bolivia tin deposits for the Foreign Economic Administration in 1945, "future produc- tion is likely to exceed new ore developed, at a gradually accelerating rate. . . . Llallagua seems destined to dominate the tin picture, in the future as in the past, and Potosi and Colquiri may continue to be the next important producers. .. . The most promising districts may possibly continue operating for as many as 20 years." Several of the other tin-producing countries, such as Nigeria, Australia, Thailand, and South Africa, undoubtedly have tin- bearing ground of low grade that will be mined as tin prices rise or costs fall. Except for Cornwall, tin production in the past has come from areas remote from tin consumption. It seems probable, therefore, that exploration for tin has not reached as advanced a state on the average as has that for most other minerals. If it is also assumed that industrialization of the underdeveloped areas is to be accelerated greatly in the future, it may also be expected that tin reserves should benefit more on the average than those of other minerals which have been explored more adequately. It should also be pointed out that placer deposits have played the major role in furnishing tin in the 20th century. From this it can be reasoned that advancing mechanization which has been phenomenally successful in its application to placer de- posits, should continue to change submarginal tin placer de- posits into profitable mines before there will be any great expansion in lode tin production. LITTLE TIN IN U. S. Most of the known tin deposits of the United States have been thoroughly explored, and in all cases have been found to be so small, or of such low grade, that they gave no promise of profitable exploitation. The lot of them is estimated to con- tain a total of not more than 7,000 tons of tin, 5,000 tons in Alaska and 2,000 tons in the States. More than half of this estimate is inferred. Many attempts have been made to mine these deposits, but all have been unsuccessful; the chances that much higher prices, or now unknown mining methods ever will make the deposits worth mining have seemed so remote that careful estimates of the possible quantity of tin present have never seemed worthwhile. TUNGSTEN—U. S. DISCOVERIES EXPECTED* Tungsten occurs commercially in the ore minerals scheelite and wolframite. The commercial term "wolframite" covers a range of composition from FeW04 (ferberite) to MnW04 (huebnerite), most wolframite being intermediate in composi- tion ((Mn,Fe) W04). Both scheelite and wolframite can be separated from other minerals by gravity or flotation methods of millings. The steel industry uses scheelite concentrates for direct addi- tion to steel and wolframite or scheelite for manufacture of *By Dwight M. Lemmon, U. S. Geological Survey, and Robert W. Geehan, U. S. Bureau of Mines. Page 161 ferro-tungsten to be used in steel. Wolframite and scheelite are used for the manufacture of tungsten powder but the former predominates. In 1949, 37 percent of the United States tung- sten was used to make tungsten powder, 63 percent for steel. In 1951, nearly 50 percent of the tungsten is being used for tungsten powder. Of the tungsten used for steel in 1949, 47 percent was in the form of ferro-tungsten, the balance being scheelite. Reserves in virtually all nations are combinations of scheelite and wolframite. The United States reserves are largely scheelite, and current production is 80 percent scheelite. The nature of the principal reserves in major foreign sources is indicated in table XXI. South Africa (not listed) is reported to have sizable wolframite deposits. UNITED STATES RESERVES Table XX shows reserves of tungsten in the United States as currently estimated, for grades as low as 0.4 percent WO*. The principal reserves are in the range from 0.4 to 1.0 percent of WOs, and it is anticipated that new discoveries will be made in this range. Deposits containing less than 0.4 percent of WOs FIGURE 15 TUNGSTEN World (United States excluded) (Av. grade) 'China, 130 million (Grade Speculative see text) Cumulative curves showing relation between total contained tungsten and grade of ores and tungsten bearing materials in the World and the United States. 160 140 O 120 ^ LL- O CO 100 z Z o H 80 oe. O x CO -I 60 O CO Z o I 40^ /I United States^ 2.5 2.0 1.5 1.0 PERCENT OF W03 0.5 20 0 have not been extensively explored or sampled, but the general trend shown in figure 15 is believed correct. Substantial quantities of tungsten are present in rock con- taining about 0.1 percent W03 at Henderson Gulch, Mont., and on the Ortiz mine grant in New Mexico. The total might amount to 1,000,000 units of WO3. The molybdenum deposit at Climax, Colo., contains about 0.03 percent of WO3 of which part is recovered as a byproduct. The Climax deposit as a whole is inferred to contain on the order of 5,000,000 units of tungsten oxide. FOREIGN RESERVES Table XXI shows estimated world reserves in terms of units of contained WOs and the estimated grade of ore containing the tungsten. The reserves in China are undoubtedly the world's largest many times over although no figure that can be presented has any absolute validity. Different estimates range widely. The average content of WO3 is unknown; the range is reported to be from 0.5 to 4 percent. T^able XX.—Estimated tungsten reserves of the United States [Units of W03] Grade Measured (percent and W03) indicated Inferred Total 'Cumulative | l 1.5 and over 50,000 150, 000 100, 000 250, 000 2, 500, 000 1, 500, 000 200, 000 100, 000 200, 000 600, 000 2, 000, 000 8, 000, 000 10, 000, 000 1.0-1.5 300,000 0.7-1.0 1, 150, 000 1, 400, 000 6, 000, 000 0.5-0.7 !3,500,000 0.4-0.5 500,000 2, 000, 000 Total | 5, 500, 000 4, 500, 000 Table XXI.—Estimated world tungsten reserves [Measured, indicated, and inferred] Country Argentina. Australia. . Bolivia 1. . Brazil.... Principal product Units of contained W03 Wolframite Scheelite Scheelite Wolframite Wolframite Scheelite Scheelite Wolframite Burma j Wolframite Canada j Scheelite China 3 Wolframite Korea j Scheelite Wolframite Scheelite Scheelite Huebnerite Wolframite Portugal 2 !Ferberite Spain i Wolframite Thailand j Wolframite United States !Scheelite Huebnerite Malaya. Mexico. Peru. . . 500, 000 1. 600, 000 2, 500, 000 I 2, 500, 000 I 5, 000, 000 500, 000 1130, 000, 000 i 7, 000, 000 I ! 1.400.000 60, 000 j 550,000 ! 1 1,200,000 : 650,000! j 500,000 I I 10,000,000! Grade of Ore (percent W03) Average | Range 1. 5 0.7 +! 0.2-1.25 2. 0 I 1. 3-3. 6 0. 5 1. 5 1. 0 (?) 1. 7 1. 5 1. 2 1. 8 1. 2 1. 2 1. 5 \. 5 0. 5-4 0. 4(?) '0.' 03-6 1 Measured and indicated only. 2 Ore contains tin. 3 See text. Page 162 The Mineral Fuels COAL—A TREMENDOUS RESOURCE The coal reserves of the United States are large as compared to reserves of other fuels. Coal-bearing rocks ranging from several hundreds to several thousand feet thick cover approxi- mately 14 percent of the total area of the United States, and in some States contain more than 100 individual coal beds. The total reserves of coal in this tremendous volume of rock have not been accurately measured. Many coal-bearing areas, for example, have not been mapped geologically, and even in the well-mapped areas few coal beds have been explored for more than a mile or so from the outcrops. In the few States where the available information about coal reserves has been completely summarized, it is possible to report on reserves in various categories according to rank, thickness of beds, thickness of overburden, and the relative abundance and reliability of information. In most States the available estimates of coal reserves are based largely on general assumptions as to the thickness and continuity of the coal beds, and thus are not susceptible to breakdown into precise cate- gories. In general, therefore, the amount of accurate, detailed information about the coal reserves of the United States is small compared to the size of the estimated total reserves. The status of the available information about the coal reserves in each State in the United States and in the world is sum- marized in a report titled, "Coal Resources of the United States, a Progress Report, November 1, 1950," published as U. S. Geological Survey Circular 94. Figures 16 to 19, inclusive, which have been prepared in considerable part from data in Circular 94 especially for use in the present statement, are based on the results of detailed studies of reserves in the few States for which such information is available, extrapolated and somewhat modified to represent the entire United States. The results are believed to be accurate within the range specified. In general, the percentage distri- bution of reserves in the several categories shown in the diagram represent only general orders of magnitude. In each of the diagrams the recoverable reserves of coal in the United States are estimated to be 1.2 trillion tons, or half of the estimated reserves remaining in the ground on January 1, 1950. Specific FIGURE 16 UNITED STATES GEOLOGICAL SURVEY ANTHRACITE LOW-VOLATILE MEDIUM- SUBBITUMINOUS LIGNITE AND BITUMINOUS AND HIGH- COAL SEMIANTHRACITE COAL VOLATILE BITUMINOUS COAL Estimated recoverable reserves of coal in the United States according to rank. comments about the individual diagrams are given in separate paragraphs below. Figure 16 shows estimated recoverable reserves of coal in the United States according to rank. Distribution of reserves by rank is based on new conservative estimates of the subbitumi- nous coal in Montana and Wyoming, and older, more general estimates of lignite reserves in North and South Dakota. When new estimates of the lignite reserves in North and South Dakota, now in progress by the Geological Survey, are completed it is likely that the estimate for lignite in the United States will be reduced to about the same order of magnitude as that for sub- bituminous coal. The comparisons shown in figure 16 are based on tons. Because of the difference in heat value between the different ranks of coal, a comparison based on heat value would show somewhat shorter columns for subbituminous coal and lignite. Figure 17 shows estimated recoverable reserves of coal in the United States according to thickness of overburden. A large percentage of the estimated recoverable coal reserves of 1.2 trillion tons is believed to be less than 1,000 feet below the FIGURE 17 960 UNITED STATES GEOLOGICAL SURVEY 0 - 1,000 ft. 1,000 - 2,000 ft. 2,000 - 3,000 ft. Estimated recoverable reserves of coal in the United States according to thickness of overburden. surface, and successively smaller amounts are believed to be present in the 1,000-2,000, and the 2,000-3,000-foot over- burden ranges. These differences are due in part to the fact that the coal-bearing rocks lie near the surface in many places, and in part to the fact that less information is available for the more deeply buried beds. Most of the coal mined in the United States today is from beds less than 1,000 feet below the surface, but a small amount is mined from beds 1,000 to 2,000 feet below. In general, no significant amount of coal is mined in this country from beds more than 2,000 feet below the surface, although in England mining has been extended to depths of more than 3,000 feet. Figure 18 shows estimated recoverable reserves of coal in the United States according to relative abundance of reliable Page 163 information available for making estimates. Definitions for the terms used in figure 18 are as follows: Measured coal is coal for which tonnage is computed from dimensions revealed in outcrops, trenches, mine workings, and drill holes. The points of observation and measurement are so closely spaced, and the thickness and extent of the coal are so well defined, that the computed tonnage is judged to be accurate within 20 percent or less of the true tonnage. Although the spacing of the points of observation necessary to demonstrate continuity of coal varies in different regions according to the character of the coal beds, the points of observation are, in general, about half a mile apart. Indicated coal is coal for which tonnage is computed partly from specific measurements and partly from projection of visible data for a reasonable distance on geologic evidence. In general, the points of observation are approximately 1 mile apart, but they may be as much as 1 l/i miles apart for beds of known geologic continuity. Inferred coal is coal for which quantitative estimates are based largely on broad knowledge of the geologic character of the bed or region and for which they are few, if any, measurements. The estimates are based on an assumed continuity for which there is geologic evidence. In general, inferred coal lies more than 2 miles from the outcrop. At the present time only a small part of the total estimated coal reserves can be said to be actually measured or proved. The 20-percent estimate for measured reserves in figure 18 is intended as a fraction of the total estimated reserves that could be measured if all of the data available (in published sources, files of mining and drilling companies, or obtained easily by mapping and trenching of outcrops) could be gathered together and analyzed. The successively larger amounts of indi- cated and inferred reserves reflect merely the lack of quantita- tive, precise data for much of the coal field areas. FIGURE 18 * UNITED STATES GEOLOGICAL SURVEY MEASURED INDICATED INFERRED COAL COAL COAL RESERVES RESERVES RESERVES Estimated recoverable reserves of coal in the United States according to relative abundance of reliable information available for making estimates. Figure 19 shows estimated recoverable reserves of coal in the United States according to thickness of bed. The terms "thick," "intermediate," and "thin," as used in figure 19 refer to beds in three thickness categories, which differ for the different ranks of coal. Included as "thick" are beds of bituminous coal and anthracite more than 42 inches thick, and beds of sub- bituminous coal and lignite more than 10 feet thick. Included as "intermediate" are beds of anthracite and bituminous coal 28 to 42 inches thick, and beds of subbituminous coal and lignite 5 to 10 feet thick. Included as "thin" are beds of an- thracite and bituminous coal 14 to 28 inches thick, and beds of subbituminous coal and lignite 2/2 to 5 feet thick. Of the FIGURE 19 UNITED STATES GEOLOGICAL SURVEY % z z o < o THICK INTERMEDIATE THIN Estimated recoverable reserves of coal in the United States according to thickness of beds. total amount of coal mined in the United States today, only a very small amount is obtained from "thin" beds. Because of the practice of using average thicknesses of coal to obtain esti- mates of coal reserves in the "indicated" category, and because of the tendency of many estimators to omit thin beds, an esti- mate of the general distribution of reserves in the United States according to the thickness of the beds must be based in large part on opinion. Figure 19 is therefore believed to be less accurate than figures 16, 17, 18, although it is adequate to show the probable general quantitative relationships between reserves in the three thickness categories. Figure 20 shows estimated cost, in man-hours and materials, of mining remaining recoverable reserves of coal in the United States. In constructing figure 20, it was assumed that of the estimated recoverable reserves of 1.2 trillion tons, 30 billion tons, or 2/2 percent of the total, could be recovered at the same cost, in man-hours of labor expended and materials used, as prevailed in early 1951. This amount of coal is approximately the same as the total amount of coal mined in the United States from the beginning of mining to January 1, 1950. Costs will increase gradually as additional amounts of coal are mined, due in part to the normal, expectable higher costs of replacing older, depleted, or obsolete mines with modern mechanized mines, and in part to the fact that the thinner and less acces- sible beds are more expensive to mine. It is assumed, therefore, that by the time 50 percent of the total estimated recoverable reserves has been mined the cost of mining, expressed in man-hours and materials, will have increased to 1 y2 times that prevailing in early 1951. Page 164 When 50 percent of the estimated recoverable reserves has been mined costs probably will begin to increase more rapidly due to the necessity of mining even thinner and less accessible beds, beds below the water table, and beds having poor roof rock. It is further assumed, therefore, that by the time 70 percent of the estimated recoverable reserves has been mined the cost of mining, expressed in man-hours and materials, will have increased to 2 times that prevailing in early 1951. Simi- larly, when 80 percent of the estimated recoverable reserves has been mined, it is assumed that the cost of mining will have increased to 2 ^ times that prevailing in early 1951. From this point on, costs of mining the remaining 20 per- cent of the estimated recoverable reserves probably will in- crease very rapidly, and when 90 percent of the reserves has been mined, it is assumed that the cost of mining will have increased to 4 times that prevailing in early 1951. The cost of mining the final 10 percent of the estimated recoverable re- serves is assumed to be more than 4 times that prevailing in early 1951. WORLD RESERVES The United States appears to have about 40 percent of the coal reserves of the world, as shown in table XXII. Russia appears to have about 21 percent, and China 18 percent. Be- cause of different standards and procedures used to calculate reserves in various countries, it is not possible to make a more detailed comparison but the percentage distribution figures shown in table XXII will be helpful for over-all comparisons. Table XXII.—Estimated original coal reserves of the principal coal-producing countries FIGURE 20 UNITED STATES BUREAU OF MINES Original reserves (in thousands of metric tons) Percent of world total 2, 254, 027, 000 39. 9 U. S. S. R 1,200, 000, 000 21,2 1,011,000, 000 17. 9 336, 274, 000 5. 9 172, 200, 000 3. 1 Poland 80, 018, 000 1. 4 18, 950, 000 0. 4 205, 395, 000 3. 7 India 62,143,000 1. 1 53, 100, 000 0. 9 16, 218, 000 0. 3 242, 595, 000 4. 2 5,651,920, 000 100 Perhaps of greater immediate importance than total re- serves is the relative productive capacities of the various major coal-producing countries. Table XXIII, taken from Bitumi- nous Coal Facts and Figures, Bituminous Coal Institute, 1950, shows the percentage contribution to the total world production of coal of each of the major coal-producing countries for the year 1949: Table XXIII.—Percentage distribution of 1949 world coal production Percent of Country production United States 26. 6 Germany 18. 2 Russia and Finland. 13.9 Great Britain 13. 3 Poland 4.6 France 3. 2 Percent of Country production Czechoslovakia .... 2. 7 Japan 2. 5 All others 15.0 PRESENT COST Estimated cost, in man-hours and materials, of mining remaining re- coverable reserves of coal in the United States. Total 100.0 PETROLEUM AND NATURAL GAS Reserves of petroleum are always reported as "proved re- serves," which are defined as follows by the American Petroleum Institute: [2] "Proved reserves include only oil and natural-gas liquids recoverable under existing economic and operating conditions. They do not include: 1) Oil (liquid hydrocarbons) under the unproved portions of partly developed fields. 2) Oil in untested prospects. 3) Oil that may be present in unknown prospects in regions believed to be generally favorable. 4) Oil that may become available by secondary-recovery methods from fields where such methods have not yet been applied. 5) Oil that may become available through chemical processing of natural gas. 6) Oil that can be made from oil shale, coal, or other substitute sources." As estimated by the American Petroleum Institute, proved reserves in the United States were 29.5 billion barrels on Janu- ary 1, 1951. This estimate is the largest in the history of Ameri- can oil exploration and development. The estimates by the A. P. I. are prepared from geologic and engineering data ob- tained by the petroleum industry in the development of pro- ducing fields. Exploratory drilling and the discovery of new areas, application of secondary recovery methods in old fields, and the utilization of new and more efficient production tech- niques are continually adding to the increasing volume of proved reserves. New fields discovered each year add to the proved reserves, and new discoveries in regions little explored are of particular importance in considering future reserves. For example, the discovery of oil in commercial quantity in the Williston structural basin in North Dakota in April 1951 opened possibilities of finding oil-productive areas throughout a large area which may result in substantial additions to our known reserves. The discovery of oil in reefs of Pennsylvanian age in Scurry County, Tex., in 1941 and the subsequent devel- opment added 2.5 billion barrels to petroleum reserves of the country. If the present price of crude oil should be increased two to four times, the economic limit of the productive life of "stripper Page 165 wells" in the older fields ^would be prolonged by as much as a quarter century. Their premature abandonment would be pre- vented and secondary recovery operations such as gas or air drive and water flooding would be encouraged. The older fields, under "primary production methods," will have produced on the average 25 to 30 percent of the total oil in place prior to abandonment. Another 25 percent may be produced by present-day secondary recovery methods depend- ing upon type of reservoir. Thus, approximately 45 to 50 per- cent of the original oil in these old fields is not recoverable by methods now in use. However, fundamental research may be expected to deter- mine the nature of the forces that so tenaciously hold this unre- coverable oil in the pores of the rock and to open the way to the recovery of a greater percentage of the contained oil. The addition of 3 to 3.5 billion barrels of oil to the proved reserves in the United States may be expected through the further ap- plication of secondary recovery methods that are now in use, as indicated by production histories in three oil-producing Ap- palachian States from the period 1925 to date. Certainly the possibility of increasing the known reserves of the United States and by inference the known reserves of the world by one-eighth is an important element in the reserve situation. For example: A West Virginia field was discovered in 1906, produced a total of 705,000, barrels and was abandoned in 1923. In 1927, secondary recovery operations were started, with both air and mixtures of air and natural gas used for injection. It is estimated that an additional 357,000 barrels of oil have been produced as a result; i. e., an additional 50 percent recovery of oil has been obtained. Further, it has been estimated than an additional 460,000 barrels of oil can be recovered economically by water flooding. POTENTIAL UNITED STATES PETROLEUM RESOURCES Based upon the record of discovery and recovery in the past and a study of available geologic data, Weeks [3] in 1948 concluded that the ultimate petroleum resources of the land area of the United States were 110 billion barrels (fig. 21). If the figure be accepted and allowance be made for the total amount of oil produced plus the reserves now proved, the quantity of petroleum yet to be discovered in the United States would be about 39.5 billion barrels. The ability to drill to ever-increasing depths, increased geologic knowledge, and new discovery and recovery techniques may bring about consider- able upward revision of this estimate of undiscovered oil. Estimates of proved reserves of petroleum of the world as of January 1, 1951, have been reported by the petroleum industry at an all-time high of about 98.5 billion barrels, distributed as in table XXIV and figure 22 [4], In South America, the proved reserves in Venezuela are more than 9 percent of the world reserves and are larger than the reserves elsewhere on the continent. Russia leads other countries in Europe with about 5 */2 percent of the world reserves. Estimates have been made of the world's ultimate pro- duction of petroleum based upon geologic studies of oil bearing and potential oil bearing rocks in the sedimentary basins of the continents [3]. As with similar conclusions respecting the United States, they are subject to periodic revision. Weeks in 1948 believed the total ultimate production of the land areas of the world to be 610 billion barrels. On the basis of this esti- FIGURE 21 UNITED STATES GEOLOGICAL SURVEY Pogue (1946) .• Weeks '(1948) Pratt J" 1944) / Es imates of ult imate petrol sum producti / / / Arr old and Ken initzer (1928 'V f mates of pr gas liqu sved reserve ids from 19A s (including n 6 to 1950) atural o ~\ t * *1 f" ": Day (1908 ) U.S. (19 3.S. U.S.G 5) (191 s. / i... ......H 81 /U.S.G I .• A.A. S. and • P.G. > Arnold (1915) «o—- (19 ».^* j 21) ^ • * '"u" y i i i i 1 1 1 1 l 1 1 1 1 First estimat i f . 1 i e of proved I i M reserves <■ *] t t 1 i i i t 1 1 Dec. 31.1905 1910 1915 1920 1925 1930 1935 1940 1945 1930 Estimates of ultimate petroleum production in the United States/1908-1948 (assuming present production methods), and estimates of proved reserves, 1921-1950. mate and with allowances for known reserves and past pro- duction, the oil yet to be discovered on land might be assumed to be about 450 billion barrels. Weeks also estimated the potential reserves for the Continental Shelf sediments of the world to be about 400 billion barrels. PROVED NATURAL GAS RESERVES Petroleum and natural gas occur under similar geologic conditions and are produced from similar and, in many places, common reservoirs. The gas may occur with, or dissolved in, the oil, or it may occur independently. Most estimates of natural gas reserves include not only gas occurring by itself but also gas that would be produced with oil (fig. 23). Proved natural gas reserves of the United States on January 1, 1951, as estimated by the American Gas Association are Table XXIV.—World proved reserves of petroleum as of Jan. 1, 1951 Billions of Percent of barrels world total United States *29. 5 30.0 Balance of North America 2. 5 2. 5 South America 10.7 10.8 Europe 6. 2 6. 3 Africa ... 0.2 0.2 Asia (Middle East) 48. 0 48. 8 Asia (Far East)f 1. 4 1. 4 Total world 98.5 100.0 * A. P. I. includes natural gas liquids. f Including a small amount of proved reserves in Australia and New Zealand. Page 166 about 185*/2 trillion cubic feet. As with petroleum, this is the highest estimate in the history of the industry. Further increases in the reserves may be expected from the continuing exploration for natural gas and also through the exploration for oil and the discovery of gas associated with oil in new production areas. The future recoverable natural gas in the United States was estimated by Terry [5] in 1950 to be more than 500 trillion cubic feet. On the basis of this estimate it might be assumed that the gas yet to be discovered is about 315 trillion cubic feet. FIGURE 22 UNITtO STATK OKXOGieAl SU»VIY —=— — . AVERAGE DEPTH OF EXPLORATORY WELLS DRILLED IN 1949 Product In 1950 (U.S. *u'«o« Of Min..] 1 .. ll ll 1 -■- -- i el m _a ja AMICA MIDDLE fAST World petroleum reserves (proved), Hon and average depth of explora- cumulative production annual produc- tory wells. The estimated proved reserves of natural gas in Canada amount to about 7 trillion cubic feet. Estimates for the re- mainder of North America and the other continents are not available at the present time. FIGURE 23 UNITED STATES GEOLOGICAL SURVEY J 170 i 1*0 1 | nr -A VE T" RA 3E DE rin ur all vv or ELL > c RIL LED A VE AC ;e DEP TH OF EXPL OR AT OR f V VE LS IL E ST M> kTI :c n>t : P or V =n DC D\y cc Dl 1 K > K A Uf ',„ = u U jm UIG TIV e; ■>:, ■ IN AT UK Al a: > - bai.d upon jTol.m.nt of (Projection of'cvrv. V at and eilimolei of fuhtr. petroUum reduction by Ih. NoHonol Oil Policy Comm.fi.., 9 A.P.I . N ib. 48 | ( NATIIP Al CAS AJ AC =TFn of <) r, AA 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 t>«c. Jl, 1918 '19 '20 "21 '22 23'24 '25 26 27'28 '29 '30 '3I '32 '33 '34 '35 36 '37 '38'39'40 41 '42 '43'44 '45 '46 ,47'48 '49'50 '52 '53 S* 55 i6 '57'58 LONG-TERM AVAILABILITY OF PETROLEUM A comprehensive study of the availability of petroleum made by the American Petroleum Institute in 1948 and by the Na- tional Petroleum Council in 1950 [6, 7] reached the conclusion that the petroleum and petroleum products available for con- sumption in the United States would increase substantially from 1949 to 1958 (fig. 24). Availability was expected to in- crease in the period between 1948 and 1953 by more than 1 million barrels daily. At the same time it was estimated that the availability of petroleum products from synthetic processes under foreseeable economic conditions would be small during the period 1948 to 1953 and that petroleum production in foreign countries would increase substantially during that pe- riod. The study also showed no significant decline from the 1953 estimated rates in United States production of natural liquid hydrocarbons in the 5-year period 1954 to 1958, and it was estimated that larger quantities of natural gas would be available to supplement liquid petroleum products in supply- ing the nation's energy requirements. FIGURE 24 UNITED STATES GEOLOGICAL SURVEY r2 = 40 — / ,VE RA 3E ucnn ur all yv 1 (World Oil) ILL \ D *IL ED A VER AC E DEP TH OF E> CPL DR MC )R1 EL S 1 (Lahee) '« ,t ST AT :S C o = F Ul RC .Al )V IV :D : P RE RC SE )D ?V UC ES TIC o B F T< ET D RC 19 )LE 50 UA. ./* PL US '.' >'x l <\ 3f th* Notionol Oil Policy ICurv. proj.ct.d r r JLC IUA Corr A.P ., N ov., 19 «8) C LA (C nv E e SR< DD on UC m Oh ^ ud y) D«c. 31, 1921 '22'23'24 '25 '26 '27 '28'29 '30'31 '32 '33'34 '35 '36 '37 '38 '39'40 '41 '42 '43'44 '45 '46 '* '48 '49 '50 '51 '52 '53 '54 '55 '56 '57'58 Production and proved reserves of petroleum 1921-1950, estimated pro- duction 1950-1958, and average depth of wells. Natural gas marketed,proved reserves of natural gas 1918 -1950, estimated production 1950 -1958, and average depth of wells drilled. Within a short period the future availability of petroleum can be approximated with some assurance, but as the period is extended the margin of error increases. Discovery and con- sumption rates may vary greatly within a short time. Interpre- tation of future productive capacity and reserves would also be greatly affected by increased prices, and by increased de- mands which would stimulate exploration for new reserves, provided development was not retarded by shortages of mate- rials and manpower. A reduction in availability of natural oil Page 167 might be offset by synthetic oil from the great reserves of oil shale and coal in the United States and from the large deposits of tar sands in Canada. The fuel reserves of the United States have been discussed more fully by the Geological Survey in a recently published statement. [8] EFFECT OF INCREASED PRICE The effect of any specific price increase on reserves of petro- leum or substitute fuels is not subject to precise measurement. Price increases, even of relatively small extent, tend to encour- age exploratory activity and thereby increase reserves, while price decreases have the reverse effect. Roughly, when reserves decrease toward the point where the optimum production rate will be insufficient to supply the needs of the economy, prices rise; the prospect of increased income from production causes increased exploration until productive capacity is excessive to demand when prices decrease sufficiently to discourage further intensive search for oil. In addition, many other factors con- stantly enter into or bear upon this reaction. The increasing demand for petroleum products, accompany- ing the depletion that will eventually result in a decreasing production of crude oil, directs attention to a number of other elements: foreign supplies of oil, extraction of oil from natural gas, oil shales, and tar sands, and synthesis of oil from coal or agricultural wastes. The technical knowledge of these vari- ous processes is available today. The cost, either in dollars or materials, of installing them has not been justified because of the continuing availability of petroleum at relatively low cost. As the declining supply of petroleum at some future date in- creases the cost of oil, and as technological improvements re- duce the cost of production from alternate sources, these other sources will come into use. Changing relationships in these costs make it impossible to say that any one of them will come into play when petroleum prices reach a certain level or at any specific time. However, the various results that will occur due to increasing demand for petroleum with less abundant supply- are discussed in the following paragraphs. The extent to which production from existing wells can be increased without decreasing the ultimate total production is definitely limited. As of April 1951 probably not more than 500,000 barrels per day (about 8 percent) could be added to the supply by this method. Much of this reserve capacity is in inaccessible areas (where transportation capacity is inadequate to move the total amount of oil that can be produced) or is of a quality that makes it less desirable than other oils, but even a slight price increase would overcome these handicaps to a great extent. IMPORTS During 1950, approximately 12*4 percent of the total United States supply of oil was imported. Relatively low production costs in foreign areas (principally Venezuela but with the Middle East increasing in importance) more than offset the transportation costs and import duties involved so that foreign oil could be supplied to the United States at a cost competitive with domestic oil. A policy has been developed by mutual agree- ment within the oil industry, and between the industry and Government, that imports will be utilized only to supplement and not to supplant domestic production. This policy has de- veloped as a result of the necessity to maintain a high rate of productive capacity in the United States to provide against possible loss of foreign sources in time of emergency. The ability of foreign sources to provide increasing quanti- ties of petroleum for the United States is indicated by the fact that 48.3 percent of proved reserves are located in foreign countries (excluding Russia), while foreign consumption in 1948 represented only 33.1 percent of the world total. While foreign demand is expected to increase more rapidly than that of this country, the availability of foreign oil in excess of foreign requirements and need for dollars abroad will tend to increase the flow of oil into the United States. The continuance of foreign countries as sources of oil is de- pendent upon several factors, chief of which are: the control of these countries by elements favorable to the United States, freedom to utilize the seas for shipping, the availability of tankers which require large amounts of steel and manpower for construction, and the availability of materials and man- power to the foreign countries. DRILLING IN KNOWN FIELDS The quickest and the most economical method (in terms of materials and manpower) of increasing the domestic supply of petroleum is by drilling additional wells in reservoirs known to contain oil. While the recovery from a field may not be materially increased by additional wells, the total available oil can be produced over a shorter period of time. The additional productive capacity that can be gained by this method is not subject to measurement but would probably be considerable over a relatively short period of time of 2 to 5 years. Additional installations of secondary recovery methods would also be stimulated by a rise in price. Traditionally, a variation in the price of oil of 25 cents per barrrel or even less has been sufficient to produce a noticeable change in rate of exploration and discovery. Furthermore, any substantial increase in price would justify exploration for and development of oil fields which, because of their remote loca- tion or extreme depth are not economically justified at the present price range. In the field of exploration, increasing technical knowledge and development of improved equipment are constantly increasing accuracy while better equipment and drilling techniques are enabling the industry to drill deeper and deeper wells in the search for oil. See figure 25 and table XXV. PRODUCTION FROM OTHER SOURCES Higher prices for oil also would stimulate production from other sources: Natural gas. It is technically and economically feasible to produce gasoline from natural gas at a price that is competitive with gasoline produced from petroleum. However, the existence of an adequate supply of gasoline from petroleum and a rapidly increasing market for natural gas for other purposes have dis- couraged commercial development of this process. Oil shale. Coal. Processes for synthesizing petroleum products from coal were developed to a high degree in Germany prior to the Second World War and with slight subsidization competed Page 168 Table XXV.—Relationship of crude oil price to drilling activity and oil discovered [Index 1936 = 100. (See fig. 5)] Crude oil price New reserves added Total footage drilled Value of crude oil produced 1936. 1937. 1938. 1939. 1940. 1941. 1942. 1943. 1944. 1945. 1946. 1947. 1948. 1949. 1950. Dollars per barrel Million barrels Million feet Million dollars Index Index Index Index 0. 93 100 1, 158 100 61. 1 100 971 100 1. 06 114 1, 938 168 77. 5 127 1, 138 117 1. 09 117 2, 430 210 86. 1 141 1, 247 128 1. 11 119 2, 725 235 90. 6 148 1, 343 138 1.09 117 2, 767 239 94. 4 154 1, 399 144 1.09 117 2, 329 201 92. 9 152 1,415 145 1. 10 118 2, 035 176 87. 2 143 1, 398 144 1. 14 122 1, 807 156 81. 4 133 1, 414 145 1. 19 128 1, 850 160 78. 4 128 1, 452 149 1. 20 129 1, 886 163 76. 8 126 1, 481 152 1.25 134 2, 080 180 85. 1 139 1, 553 160 1.43 154 2, 388 206 97. 8 160 1, 673 172 1. 78 191 2, 938 254 110. 9 182 1, 922 198 2. 11 226 2, 304 285 122. 1 200 2, 132 219 2. 40 259 3, 524 352 136. 6 224 2, 399 246 with gasoline imported as such or produced from imported crude oil. Other countries lacking a domestic supply of pe- troleum also found it economic to utilize coal as a source for petroleum products. In the United States research on coal to oil synthesis has continued. Increased prices for oil and techno- logic progress will make it competitive with petroleum. Tar sands. Tar sands which can be processed to yield crude petroleum can add several billion barrels to the United States reserves. Agricultural wastes. Conversion of agricultural wastes into liquid fuel products is technically feasible but the present high cost of this process makes it a less attractive alternative to the other natural resources. To varying degrees, all the above measures to increase re- serves of petroleum or substitutes, or to increase productive capacity, require extensive expenditures of manpower, mate- rials, and time, not only to provide the increased production FIGURE 25 2 250 VALU IN PR E OF PR E-WAR ODUCT1C 1935-19 3N EXPR 39) DO ESSED LLARS w reserve > odded ( A.P.I.I — y \ T, of / 4 / Tor s oil prod >ced \ / al footage drilled — ^ ""olde Oil Price 1936 1937 1938 1939 1940 1941 1942 1943- 1944 1945 1946 1947 1948 1949 1950 Relationship of crude oil price to drilling activity and oil discovered. but also for necessary processing and transportation. In order to provide an immediately available reserve crude-oil capacity, it is necessary to maintain actively producing fields with ability to produce beyond present requirements. Fields without wells and equipment are useless because of the possibility that ma- terials, men, and time may not be available when most needed. Similarly, maintenance of productive fields with a substantial shut-in capacity is impossible if the huge investment necessary to their development is to be repaid. References 1. The approximately straight-line characteristic of semi-log plots of re- serves such as these was pointed out by Lasky, S. G., "How Tonnage and Grade Relations Help Project Ore Reserves." Eng. and Mining Journal, April 1950. 2. American Petroleum Institute estimate of United States oil reserves and natural gas liquid reserves, in Fanning, L. M., Our Oil Resources. 2d ed. New York, McGraw-Hill Publishing Co., 1950. 3. Weeks, L. G. "Highlights on 1947 Developments in Foreign Petro- leum Fields." American Association of Petroleum Geologists Bul- letin, June, 1948. 4. Estimate Tables. World Oil February 15, 1950. 5. Terry, L. F. "Our Natural Gas Reserves Will Exceed 500 Trillion Cubic Feet." Gas Age, No. 9. October 26, 1950. 6. Subcommittee on Long-term Availability. "Long-Term Availability of Petroleum." Washington, D. C, American Petroleum Institute, November 1948. 7. United States Crude Petroleum Reserve Productive Capacity. Wash- ington, D. C, National Petroleum Council, January 1950. 8. United States Geological Survey. "Fuel Reserves of the United States: A Statement Prepared at the Request of the Committee on Interior and Insular Affairs." (Committee Print.) United States Senate, 1951. Selected General Statistical Sources U. S. Bureau of Mines and U. S. Geological Survey. "Mineral Position of the United States." Appendix to Hearings before the Subcom- mittee of the Committee on Public Lands. United States Senate, 80th Congress, 1st Session, May 1947. Washington, D. C, Govern- ment Printing Office, 1947. President's Materials Policy Commission References This volume: The Additive Metals. Aluminum. Antimony. Coal. Copper. Fluorspar. Lead. Manganese. Production and Consumption Measures. Projection of 1975 Materials Demand. Special Strategic Minerals. Page 169 This volume—Continued Sulfur. Tin. U. S. Bureau of Mines Tables. Zinc. Vol. Ill: The Outlook for Energy Sources. Coal. Natural Gas. Oil. Vol. IV: The Promise of Technology. Coal Products and Chemicals. Forecasts for Petroleum Chemicals. Improved Exploration for Minerals. Oil and Gas as Industrial Raw Materials. Tasks and Opportunities. The Technology of Iron Ore. The Technology of Iron and Steel. The Technology of Manganese. The Technology of Ocean Resources. The Technology of Tin. Vol. V: Selected Reports to the Commission. Government Exploration for Minerals. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Brison, R. J., and Carter, J. N. Role of Technology in the Future of Potash Supplies. Craighead, C. M. Role of Technology in the Future of Aluminum. DuMont, C. S. Role of Technology- in the Future of Chromium. Foster, J. F. Role of Technology in the Future Supply of Natural Gas. Hall, A. M. Role of Technology in the Future of Nickel. Hodge, W., and Thompson, A. J. Role of Technology in the Future of Copper. Holmes, R. E. Role of Technology in the Future of Fluorspar. Lyons, C. J., and Nelson, H. W. Role of Technology- in the Future of Coal. Moore, D. D. Role of Technology in the Future of Petroleum. Parke, R. M. Role of Technology in the Future of Tungsten. Stephens, F. M. Role of Technology in the Future of Lead. . Role of Technology in the Future of Zinc. Sullivan, J. D., and Dehlinger, P. Role of Technology in the Development of Discovery Techniques. Swager, W. L. Role of Technology in the Future of Sulfur, Sul- fides, and Sulfuric Acid. Chapter 24 Production and Consumption Measures* Aggregate measures of the physical volume of production and supply of raw materials available for consumption in the United States were constructed by the staff of the President's Materials Policy Commission. These statistical series measure raw materials production and supply for consumption (here- after referred to as apparent consumption) of raw materials annually from 1900 to 1950 in the following areas: agricultural materials, fishery and wildlife products, forest products, and minerals. In this task the Commission had the assistance of the Government agencies which collect or compile the basic data used. The contributions of specific agencies are indicated below. In various portions of the work the Commission was also assisted by various private organizations. The following tables were prepared: Table I—Raw Materials Production in the United States: Part 1—Physical volume of output, by broad product groups: 1900-50. Part 2—Physical volume of metal ores produced, by type of metal: 1900-50. Part 3—Physical volume of primary and secondary production of nonferrous metals (except ferro-alloy and precious metals) by type of metal: 1910-50. Part 4—Physical volume of mineral fuels, fuel wood, and hydro energy produced, by type of energy: 1900-50. Table II—Raw Materials Apparent Consumption in the United States: Part 1—Physical volume of consumption, by broad product groups: 1900-50. Part 2—Physical volume of consumption of metals, by type of metal: 1900-50. Part 3—Physical volume of consumption of mineral fuels, fuel wood, and hydro energy, by type of energy: 1900-50. *By Vivian Eberle Spencer, Bureau of the Census, and Charles A. R. Wardwell, Office of Business Economics, Department of Commerce. Table III—Raw Materials Surplus or Deficit in the United States: Physical volume of net exports, by broad product groups: 1900-50. Table IV—Per Capita Consumption of Raw Materials in the United States: Physical volume of per capita consumption, by broad product groups: 1900-50. Figures appearing elsewhere in this Report may differ slightly from those in the tables described above because in some in- stances later figures were available and were used. The purpose of constructing these statistical series was to pro- vide historical background broad enough to indicate general trends in raw materials production and consumption since the beginning of this century. Despite shortcomings in the data, especially prior to the First World War, the series appears to ac- complish that purpose. Even for the opening years of the cen- tury—for which many estimates were made in certain items— the summary' production and consumption figures for all raw materials were always based on at least 95 percent reported data as summarized in standard Government publications. The remaining 5 percent or less was estimated by the Commission's staff. After the First World War there was such an increase in the volume of basic data collected that the need for making estimates for incomplete series became almost negligible. However, even for recent years, the coverage is not entirely complete. No data collected include the output of every person or establishment engaged in manufacturing, mining, or other types of production. The Commission's staff estimates that in recent years its measure of production covers at least 95 per- cent of the constant dollar value of all rawr materials produced in the United States and approximately as high a proportion of total raw-materials consumption. Since some components of these series are more comprehensive than others, they should Page 170 be appraised in the light of the following more detailed dis- cussion and evaluation of the figures for specific groups. The statistical procedure employed by the Commission's staff in measuring the production of all raw materials was to express the physical-volume output of each raw material in a given year in terms of its average unit dollar value over the 1935-39 period and then to add together for that year all these constant dollar values. A weight base in the period 1947-49 would have been preferable, but the lack of a Census of Mineral In- dustries since 1939 made it impossible to arrive at reasonably accurate mine values of major minerals for the later period. The Commission's series of raw-materials production for 1900- 50 (see table I) are thus series of constant-dollar aggregates measuring the annual volume of raw-materials output. Al- though the output of different raw materials such as bales of cotton, barrels of oil, tons of ore, and cubic feet of gas cannot be added together, their values in constant dollars can be added meaningfully. The measures of raw-materials apparent consumption (see table II) are likewise series of annual aggregates of the physical volume of consumption of the individual materials in terms of 1935-39 average unit values. Apparent consumption is de- fined as primary production plus imports minus exports. This method of measuring apparent consumption does not take into account changes in business inventories or changes in Government stockpiles of the various materials. Another way in which this apparent consumption differs from actual con- sumption is that imported materials are not always consumed in the same year in which they are imported. Likewise, ex- ported commodities may not be produced in the year in which they are exported. A prime example of this is merchant-vessel exports, the estimated iron-ore equivalent of which is included in the consumption series. By taking the difference between the production and ap- parent consumption of a given raw material, or group of mate- rials, a third measure was obtained: namely, a series of net exports or of surplus raw materials (see table III). The trend of this latter series shows the shift in the raw-material position of the United States from a net exporter in 1900 to a net importer in 1950. The consumption figures were compared with a series repre- senting United States population, yielding measures of per capita consumption of broad classes of materials (see table IV). SOURCES OF DATA As much as possible, the Commission's staff used data com- piled by the most authoritative sources. Thus data on mineral production came largely from the Bureau of Mines in the U. S. Department of the Interior; on agricultural production, from the Bureau of Agricultural Economics, and on forest products, from the Forest Service, in the U. S. Department of Agriculture; and on fish and wildlife production, from the Fish and Wildlife Service in the U. S. Department of the Interior. Data for the imports and exports of raw materials were origi- nally compiled by the Bureau of the Census (prior to 1941 by the Bureau of Foreign and Domestic Commerce) in the U. S. Department of Commerce. For many raw materials, the same agencies that compiled the production data had also developed series summarizing the foreign-trade data, and the Commis- sion's staff used much of this secondary source material. SCOPE OF DATA The production series for minerals, forest products, and fishery and wildlife products include data for production in the 48 States and Alaska; that for agricultural materials includes data for production in the 48 States only. Import and export data relate to the trade of the United States and noncontiguous territories (United States Customs Area) with foreign coun- tries. The noncontiguous territories which comprise the United States Customs Area are Alaska, Hawaii, Puerto Rico, and dur- ing 1935 through 1939, the Virgin Islands. All production series, except those for selected nonferrous metals shown in table I, part 3, represent primary production only. AGRICULTURAL RAW MATERIALS PRODUCTION SERIES The agricultural production series, based on 75 commodi- ties, is approximately that compiled by the Bureau of Agri- cultural Economics, entitled "Production for Sale and for Farm Home Consumption." The food component of this series in- cludes one or more forms of 60 agricultural products used as human foods. It also includes portions (such as corn used for corn meal, corn sugar, and cornstarch, and vegetable oils for shortening) of the output of certain grains and oil-seeds, which are chiefly used for animal feeds or other nonfood uses. The nonfood component includes 15 agricultural products used chiefly for industrial purposes or as animal feed. Cotton is the major nonfood agricultural product; others are tobacco and oil seeds not used for human food. The series excludes such items as feed grains fed directly to animals on the farm where they are grown; instead, the animals, when marketed, are counted in the food component of the series. However, the feed crops sold constitute about one-third of this nonfood component. The statistics measuring nonfood production were obtained by subtracting the food component from the total agricultural production. The Commission's staff used the agricultural pro- duction data as provided by the Bureau of Agricultural Eco- nomics except for one adjustment. This was to subtract from the total production series, and from the food production com- ponent, the farm values in 1935-39 dollars of imported cattle and hogs implicitly included there by the method of con- struction. COVERAGE OF AGRICULTURAL PRODUCTION SERIES The series for agricultural production represents in 1939 and later years approximately 96 percent of the constant-dollar value of the total agricultural output for sale and for farm home consumption. The major items not covered by this series are nursery and greenhouse products, seeds, and forest products from farm wood-lots. Most of the forest products from farms, however, are included in the forest-products component of the raw materials series. Fur animals raised on farms are also ex- cluded from the agricultural production series, but the Commis- sion has attempted to include them in the fur production com- ponent of the fishery and wildlife series. The food production component represents between 97 and 98 percent coverage of the constant-dollar value of farm food Page 111 output. Since many of the agricultural materials not included in the agricultural production series are nonfoods such as seeds, the nonfood production series represents a lower coverage— only about 87 percent. The 60 agricultural commodities included in one or more forms in the Commission's food production series are: Meat animals and their products: Cattle and calves Hogs Sheep and lambs Poultry and eggs: Chickens and commercial broilers Chicken eggs Turkeys Dairy products: Cream Farm butter Milk, wholesale and retail Food grains: Buckwheat Rice Rye Wheat Truck crops: Artichokes Asparagus Beets Cabbage Cantaloups Carrots Cauliflower Celery Cucumbers Eggplant Lettuce Lima beans Onions Peas Peppers Snap beans Spinach Sweet corn Tomatoes Watermelons Sugar crops: Maple sugar Maple syrup Sorgo syrup Sugar beets Sugarcane for sugar Sugarcane syrup The 15 agricultural commodities covered in the Commis- sion's nonfood production series are: Fruits and tree nuts: Almonds Apples Apricots Cherries Cranberries Figs, dried Grapefruit Grapes Lemons Olives Oranges Peaches Pears Pecans Plums Prunes, dried Strawberries Walnuts Vegetables: Beans, dry, edible Potatoes Sweetpotatoes Fibers: Cotton lint Mohair Wool Other crops: Tobacco Cowpeas Hops Feed crops: Barley Corn Hay Oats Sorghum for grain Oil-bearing crops: Cotton seed Flaxseed Peanuts Soybeans APPARENT CONSUMPTION SERIES The quantities of food imports and exports used were com- piled by the Bureau of Agricultural Economics for the purpose of measuring the supply and distribution of foods. The only adjustment made by the Commission in these food series was to add the imports and exports of cattle and hogs. After this ad- justment, the food series is believed to represent almost com- plete coverage of the foreign trade in food products. The quantity data were weighted by the 1935-39 average unit farm prices in the case of products produced in the United States. Processed products such as cheese, meats, etc., were priced at the equivalent of their raw-material values on the farm in the United States. In the case of imports of items not usually produced in the United States, the 1935-39 average unit import values were used after they had been adjusted downward by amounts estimated to bring them to the primary producers' levels. Data measuring the imports and exports of all major non- foods were furnished by the Office of Foreign Agricultural Relations in the U. S. Department of Agriculture, while 1935— 39 average farm prices of nonfoods were furnished by the Bureau of Agricultural Economics. COVERAGE OF NONFOOD CONSUMPTION SERIES It is estimated that the nonfood import and export data cover 95 percent or more of the total value of foreign trade in such materials in 1939 and later years and slightly less in earlier years. For years prior to the early nineteen-twenties, how- ever, it was necessary for the Commission to estimate import and export quantities for a number of agricultural products that were not separately reported in the official foreign-trade statistics. In many cases, these quantity estimates were based on reported quantity totals for groups of commodities in which the item was included, or on reported value data, but in other instances they were based on the movements of related items. These estimates for this early period ranged from 19 to 23 percent of the total value of foreign trade in agricultural non- food products, but always amounted to less than 10 percent of the total value of nonfood consumption. Nonfood commodities included in the consumption series but not in the production series are principally abaca, bristles, bulbs, copra, drugs and herbs, jute, kapok, palm oil, natural rubber, shellac, raw silk, sisal, tampico, tung oil, and vegetable ivory. FISHERY AND WILDLIFE PRODUCTS FISHERY SERIES The series for production of fishery items is based on data provided by the Fish and Wildlife Service. The data represent the quantities of approximately 200 varieties of both fresh- and salt-water fish and shellfish caught by commercial fishermen of continental United States and Alaska. In addition to the various kinds of fish, other marine products included are sponges, shells, seaweed, and the like. The quantities of the various marine products were weighted by their average 1935— 39 prices. The Fish and Wildlife Service considers that the pro- duction data for the period after 1930 represent 97 or 98 per- cent of the total constant-dollar value of production of fishery products. Coverage in the period prior to 1930 is much more uncertain because of the lack, except for the year 1908, of good bench-mark data. The production series for this early period contains many estimates, the figures for some years being en- tirely estimated by means of straight-line interpolation between bench marks. For the years 1924 to 1950 inclusive, the foreign-trade series for fishery products, in 1935-39 constant dollars, was assembled by the Fish and Wildlife Service. For prior years, Page 172 the Commission compiled, from the records of the U. S. De- partment of Commerce, figures showing the values of fish im- ports and exports. These values were then deflated, by means of indexes of fish prices, to obtain estimates of the quantities imported and exported. Data measuring the foreign trade in fishery products represent essentially complete coverage in terms of value of the items imported and exported, and the errors introduced in converting to quantities measured in 1935-39 dollars are believed to be small. FUR SERIES The fur production component is the weakest element of the Commission's raw-materials figures. In the base period (1935— 39) furs constituted about 38 percent of the combined fish and wildlife production. The fur output data are based on three bench-mark figures for the years 1900, 1925, and 1947. For these years the Fish and Wildlife Service estimated total value of domestic raw or undressed fur production, including furs from wild animals and from animals raised in captivity. The Commission converted these three bench-mark values into 1935-39 dollars and interpolated or extrapolated production figures for all the other years of the 1900-50 period. For 1934 to 1950 these interpolations and extrapolations were based on numbers of wild animals trapped, as reported by the Fish and Wildlife Service. For this purpose, use was made of a sample of 12 wild animals caught in 24 selected States, Alaska, and the Pribilof Islands, for which areas more or less regular reports were available. This sample represented 34 percent of the esti- mated constant-dollar value of total fur production in 1947. For years prior to 1934, the production was estimated by straight-line interpolation between the bench marks. The quantities for the different types of furs produced were weighted by the 1935-39 average unit values of furs exported, wherever such data were available, and by 1935-39 average unit import values where export data were not available. For the period 1935 to 1950 inclusive, quantity figures for the different types of furs imported and exported were multi- plied by their respective 1935-39 average unit values. For years prior to 1935, the fur import and export quantities were ob- tained by deflating the corresponding total values by related price indexes. These foreign-trade data represent essentially complete coverage of raw furs, with any errors in measurement due primarily to conversion of values into number of skins. FOREST PRODUCTS PRODUCTION SERIES The series for forest products is based on statistics compiled by the Forest Service and the Bureau of the Census. The total forest-products output represents the sum of production aggre- gates for 15 forest products: sawlogs (in terms of lumber pro- duction ); pulpwood; fuel wood; logs and bolts for plywood and veneer; mine timbers, not sawed; hewed railroad ties; poles; piling; fence posts; wood used by distillation plants; bolts used by turneries; cooperage bolts; handle bolts; miscellaneous logs and bolts for other uses; and naval stores. These production aggregates were obtained by multiplying quantity production by the corresponding 1935-39 average prices paid to the pri- mary producer. For the period prior to World War I, esti- mates were necessary for approximately half of the total pro- duction in terms of constant-dollar value. These series represent about 99 percent of the total value of forest products from continental United States and Alaska. The major item not included is Christmas trees. (Maple syrup and maple sugar are covered in the agricultural production series rather than in forest products.) Other minor forest prod- ucts excluded are tanbark, holly, mistletoe, ferns, wild nuts, and balsam. APPARENT CONSUMPTION SERIES All consumption figures were measured in terms of 1935-39 average prices at the primary level. The import and export data, which cover 96 to 98 percent of the total value of foreign trade in forest products, were compiled by the Forest Service. In addition to the 15 products listed above, they include im- ports of camphor, which is not produced in the United States. Imports and exports of processed products such as wood pulp, paper, etc., were converted to their pulpwood equivalent. MINERALS PRODUCTION SERIES Figures for 70 mineral products have been included in the series, which correspond to over 99 percent of the total value of mineral output as indicated in the 1939 Census of Mineral Industries, published by the Bureau of the Census in the U. S. Department of Commerce. Although comparable value com- parisons cannot be made for other Census years, an analysis of the production information available on the few mineral items omitted indicates that the coverage was not significantly lower for these years. The Commission is very much indebted to Dr. Y. S. Leong, of the Bureau of the Budget, for making available work sheets which he used in constructing his index of mineral production. Since it was desirable, for the purposes of the Commission, to express all raw-materials figures in terms of 1935-39 average unit values, Dr. Leong's index—which is based on different weights for different periods—was not used directly. In general, production quantity data were taken from Dr. Leong's work sheets. Exceptions are data for antimony, chromite, cobalt, titanium, asbestos, diatomite, emery, flint and grinding pebbles, and graphite, which were not included in the Leong index. In cases where a mineral first appeared in the Leong series for a year later than 1900, its output for the early years was esti- mated from related information. Most of the 1949-50 figures were also supplied by Dr. Leong. These were supplemented by data obtained directly from the Bureau of Mines and by some estimates by the Commission staff. SOURCE OF DATA The basic source of all mineral production series is the annual reports of production collected by the Bureau of Mines, U. S. Department of the Interior, and to a large extent pub- lished in its Minerals Yearbook {Mineral Resources of the United States, prior to 1932). Most of the unit values used for Page 173 1935-39 represent figures published in these yearbooks and are based partly on producers' reports to the Bureau of Mines and partly on various other source material. These Bureau of Mines figures do not always represent value of the product at the mine. This is particularly true of the figures for metals, where the yearbook prices may be market quotations at St. Louis, New York, or elsewhere. If the 1939 Minerals Yearbook value differed significantly from the mine value as obtained in the 7939 Census of Mineral Industries, an adjustment was made in the 1935-39 average on the basis of the ratio of the two unit values in 1939. Such adjustments were made by Dr. Leong in constructing his index, and, in general, the unit values as adjusted by him were used in the Commission aggregates. However, revised adjustments to bring the unit values more closely in line with Census data were incorporated for gold, silver, cement, lime, and limestone. Bureau of Mines and Census data were used directly for those series included by the Commission but not included in the Leong index. MINERAL INCLUDED IN PRODUCTION SERIES The minerals covered in the Commission mineral produc- tion series are: Iron and ferro-alloy ores (Measured in terms of metal contained) Iron Cobalt Molybdenum Chromium Manganese Tungsten (In general, measured in terms of metal contained) Other metal ores Gold Zinc Magnesium Silver Antimony Mercury Copper Bauxite Platinum Lead Cadmium Titanium Mineral fuels Bituminous coal Crude petroleum Natural gasoline Anthracite Natural gas Construction materials Asbestos Crushed stone Granite Asphalt for cement Marble Common clay Crushed stone Sandstone Gypsum for lime Slate Magnesite Limestone, except Miscellaneous stone Sand and gravel stone for cement Basalt and lime Other nonmetallic minerals Arsenious oxide Sodium carbonates Silica sand and sand- Barite Sodium sulfates stone Borates Sulfur Tripoli Bromine Diatomite High-grade clay- Calcium-magnesium Emery Feldspar chloride Flint and grinding Fuller's earth Fluorspar pebbles Graphite Magnesium Garnet Greensand compounds Grindstones Mica sheet Phosphate rock Pulpstones Mica scrap Potash Pumice and pumicite Crude talc and soap- Pyrites Quartz stone Sodium chloride APPARENT CONSUMPTION SERIES The foreign-trade quantity data for minerals were compiled primarily by the Bureau of Mines staff. These were supple- mented by foreign-trade figures for chemicals and selected other commodities compiled by the Office of International Trade, in the U. S. Department of Commerce, and by the Commission staff. Where reported quantity data were lacking, the series were completed by estimates made by the Commission staff. In some instances, these estimates were based on reported value data for the item, in others on values for groups of commodities in which the item was included, and occasionally on the move- ment of related items. These estimates amounted to 2 percent or less of the constant-dollar value of the combined production, exports, and imports of all minerals in any year, and less than 1 percent in the later years. However, the estimates amounted to 3 to 6 percent of the totals for "Other metals," "Construc- tion materials," and "Other nonmetallic minerals" in the period 1900-20. The physical quantities produced, exported, and imported were multiplied by their average 1935-39 unit values at the mine. For imports or exports of semiprocessed or processed items, the major raw materials contained were estimated. Thus, the mineral equivalents of the foreign-trade statistics for paints, other chemicals, and machinery were computed and added to the figures for the crude minerals. For example, an import of aluminum sulfate was represented by additions to the bauxite and sulfur series. Many of these conversions were made by the Bureau of Mines staff and many others by the Commission staff. IRON-ORE EQUIVALENT OF MACHINERY AND VEHICLES It was desirable, because of the large quantity involved, to obtain a series for the iron-ore equivalent of machinery-and- vehicles exports and imports. This series was based on 1943-44 data published by the Bureau of the Census showing the gross shipping weight of these items. In order to reduce these gross- weight figures to net weight, excluding the weight of contain- ers, estimates of the ratio of net to gross weight for specific groups of items were obtained from various Government agen- cies and private manufacturing firms. The next step was to obtain a measure of iron-ore equiv- alent by estimating the iron content of items in the principal machinery and vehicles sub-groups. This content was based on statistics for iron and steel consumed by each industry, as published in the 1947 Census of Manufacturers volumes, sup- plemented by unpublished Census statistics on value of specific materials consumed in manufacturing plants. Some data on materials contents were also obtained from private firms. The 1943—44 figures for iron content of machinery-and- vehicles exports were carried back to earlier years and forward to 1950 in four segments: (1) Exports by vessel were based on an index constructed from data collected by the Chief of Engineers of the United States Army for annual tonnages of types of machinery and vehicles shipped by vessel for the years 1920 through 1949. The 1950 figure was estimated by the Commission's staff. (2) Shipments by rail and truck were de- rived for 1918-50 by deflating the total value of exports of machinery and vehicles to Canada and Mexico by an index of the average price of machinery and vehicles. (3) Shipments Page 174 by air and all other means, largely merchant vessels and air- craft exported under their own power, were extrapolated by an index of the total light displacement weight of merchant-vessel exports available for the period 1938-50. This type of export was negligible prior to 1938. (4) Finally, exports for years prior to 1920 were extrapolated by deflating the total value of machinery and vehicles exported by a price index. The iron-content of machinery and vehicles exported, as thus estimated, proved to be quite substantial. It amounted to about 5.5 million tons at the peak volume of merchant-vessel exports in 1947. In 1950, it was nearly 2.5 million tons, or about 5 percent of the United States production of iron. The iron-ore equivalent of machinery-and-vehicles imports is negligible in comparison to the exports. MINERALS INCLUDED IN CONSUMPTION SERIES In addition to the 70 minerals included in the production series, the minerals consumption series included the following 10 items for which there was no significant United States pro- duction but for which there were significant imports: nickel, tin, witherite, radium salts, cryolite, chalk, corundum, dia- monds, emeralds, and guano which was most nearly related to the mineral items—although not itself a mineral. SECONDARY METALS Secondary domestic production is excluded from all series except those in table I, part 3. The latter table has been in- cluded to indicate the relative importance of primary and secondary production for a major segment of the nonferrous metals. Sufficiently adequate data were not available to include iron and ferro-alloy metals, or to cover years prior to 1910. The quantity production series used for secondary metals were all compiled by the Bureau of Mines, U. S. Department of the Interior. HYDRO ENERGY In order to compare the detailed series for mineral fuels production and consumption with series for competitive sources of energy the figures for fuel wood included under ''Other forest products" and figures for hydro energy are shown in table I, part 4 and table II, part 3. The quantity series and the cor- responding 1935-39 unit values for hydro energy were fur- nished by the Federal Power Commission. SUMMARY The measures of raw materials production and apparent consumption that have been constructed by the staff of the President's Materials Policy Commission enable the analyst of economic trends to appraise the long-term changes in the physical volume of output and consumption of all raw ma- terials in the United States. Previously no such aggregate measures existed, notwithstanding the existence of separate indexes of output in such fields as agriculture, mining, and forestry. 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CO CO ^ ^^h^^^^m^^^,^ rtd-codoodo oodododoo'd ©'©©©©©'©©' o' © o'odo'o'o'o'o'o'o' TMWXnmXXN OvOOONTfONOO-f^—< —'O—o-nt-^^OOr^^O^f -t NNmOt^CMNO* lt, (S O 0\00000(>^ ^-O^NcSMt^nt^^ ■«*O0N WvOOON^O'^t'iM^^ t^-ONtv~O0rv.\OvO^,'4',s0 lt, iv-i m to tJ< rf- lt, if, ^uivOnOnOnO^^OnOvO © © On —«— TfLo ~- oo \OCNT*"l"tNNOO O NOsX-^NX^-isO'O u-> ON CO —< u-> 00 On CC r*~. ^OvOXmX^n^Om --\0cOOnnO0C--0nnOnO ^i>r,-O(N(N^\0M NO r^ONr^wicoC^OOCNlThO CNr*~>NO00>—i-^cocO XcoOm^^iO^^X'-' NOXinX^^Om-- NCN^'t^'fZiOf On O^O^^OXi H!>^^VA,a\NTj<-« nO N N O ^ N X r J* O c iOn NO u~> wi CO O \0 u-> OiNONO^O^Xin On CO-!t"-*\0-*t 2,600 636,997 9,153 66,452 579,698 218,900 282,400 335.408 36,248 47,300 United States 998,348!; '1,015,044 | | !617,336 15.441 836,708 j! 6,374 South America: Argentina 3,100 14,955 331 21,400 5,130 70 9.000 5,575 14,575 24,714 13,168 318 58,044 9,201 2,630 15,617 13,168 825 29,266 Brazil • • • 14,955 331 3,095 1,900 18,500 e 5,900 327 1,028 18,718 5,900 (s) 1,028 Other 1,634 Western Europe: 41,420 | | 27,500 | | 21,503 Belgium-Luxembourg 7,500 1,200 27,600 1,100 6,600 2 53,600 9,600 31,338 5,885 640 1,100 21,029 259 15,100 63,909 5,626 640 112,058 224,753 2,213 47,161 19,876 1,169 43,380 8.513 n. a. 4,780 69,400 2,800 96,500 136,814 1,239 24,711 4,800 22,361 4,387 200 1,267 338 99,600 147 86 5,000 31,400 91,800 6,900 200 52,700 5,400 30,500 50,700 14,180 2,600 7,600 110,300 5,361 22,650 21,143 300 96,000 4,100 Italy 2,100 39,498 8,280 121 2,000 32 1.207 146 31,810 8,620 190 Sweden ... 116,500 7,000 440 3,400 8,800 142,753 227 200 8,460 n. a. n. a. 9,000 245 9,700 58,200 Switzcrls nd 110 390 10,200 2.200 11,603 269,386 1,099! 10,504 4,926 I 275,260 24 I 9,447 Yugoslavia . . 18,900 11,800 2,300 10,800 9.471 30,220 93,316 120 Africa: 261,532 . 1 '403,536 ■ i 1 839,609 308,796 i j 2.023 5,277 1 28 9,000 2,500 12,000 2,270 247 5,300 3,400 1,430 15,500 2,690 2,690 4,600 French Morocco 3,500 1,700 21,400 17,400 51 3,700 167 167 2,337 19,000 300 18,000 16,000 127 Northern Rhodesia 1,661 2,802 18,900 2,087 3,481 18,296 10 (s) (s) (s) 1,335 South-West Africa 4,300 700 122 1,345 9,200 12,802 400 Union of South Africa Total 53,051 23,363 6,215 65,641 | Asia: 88,100 3,400 6,600 200 626 81,500 3,400 6,600 230 60,551 1,020 78,000 3,730 63,951 7,557 84,900 180 Ta n 12,000 5,600 Turkey 63 Total 98,100 91,500 75,238 102,500 Oceania: Australia . . . . 197,100 15,567 180,400 151,442 28,958 1,287 278,800 29,704 ! 1,287 Total 197,100 180,400 30,245 1 278,800 i i Total free world 1,649,551 I 1,741,343 ! j 1,590,146 1,697,890 1 Note: Lack of complete world statistics, particularly in international trade, and the absence shipments to iron curtain countries, and shipments to relatively small consuming countries of data on which to base estimates, preclude presentation of balanced figures. It should be noted in the free world, not shown in the table. that apparent consumption as computed by the formula, production plus imports minus exports. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the does not present an accurate appraisal of requirements because of the fluctuation of inventories, Interior. Page 194 consumption in the free world: 192931938, and 1950 [Metric tons] 1938—Continued 1950 Refined Crude (metal content) Refined Production Imports Exports Apparent con- sumption 1 Mine produc- tion Imports Exports Production Imports Exports Apparent con- sumption 1 181,782 222,300 330,963 25 60 1,815 140,552 208,372 41,609 41,255 i 2,500 291,169 154,119 238,078 389,974 17,487 4,200 120 154,550 230,831 458,171 1,121 104,477 252,318 2,481 51,194 i 9,600 849,737 735,045 334,924 782,171 87,239 843,552 394,047 910,531 10,200 567 5 10,762 20,000 31,203 4,000 57,356 e 3,200 n. a. 31,203 35,000 e 10,000 45,000 8,498 74 828 8,498 2,180 31,421 9,123 n. a. 1,523 11,303 28,479 28,670 (s) n. a. e 3,000 n. a. (s) 828 1,523 38,679 20,088 115,759 68,601 57,826 9,280 2 94,170 9,022 28,881 6,630 7,615 46,945 75,327 2,904 67,535 2,226 15,398 55,516 4,440 54,000 2 10,910 2 62,094 1,700 32,646 16,232 e 5,000 29,027 100 44,117 5,289 12,510 50,623 10,943 e 5,000 72,589 85,097 4,404 41,753 175,980 6,050 46,894 2,881 541 690 700 1,930 1,877 n. a. 300 184 6,682 5,639 7,615 85,817 250,766 e 150 11,000 44,830 44,111 19,300 900 61,236 140,000 2,125 37,469 3,852 17,674 58,755 6,214 36,499 3,157 5,360 52,408 34,569 2,000 38,000 5,700 1,800 5,548 27,690 7,308 238 12,189 19,610 174,448 n. a. 703 1,536 2,125 42,314 26,154 323 31,809 (s) 25,554 9,988 388,281 1,603 e 20,000 25,254 e 350 31,083 23,600 9,700 34,876 12,400 12,833 7,308 22,281 24,589 19,610 177,066 e 5,000 11,000 8,646 9,804 392,600 3,073 80,000 (s) 3,073 e 69,800 455 e 65,000 3,007 n. a. 425,905 964,121 238,526 433,983 563,209 1,367 982 385 1,408 n. a. 1,408 e 1,500 n. a. e 1,500 120 120 1,814 47,429 13,905 34,009 19,000 457 1,976 26,500 12,097 13,905 n. a. il,675 12,577 422 277 3,214 23,800 3,379 20,513 14 (s) (s) (s) 39,000 n. a. n. a. (s) (s) (s) 347 4,125 4,111 n. a. 23,536 n. a. e 10,900 23,413 n. a. 10,900 27,291 4,616 118,022 49,538 12,822 81,400 85,300 e 500 6,253 78,600 n. a. n. a. 754 12,000 6,253 66,600 1,236 10,853 260 n. a. 600 9,984 14,269 1,200 1,674 18,6i9 14,869 i 11,000 99 (s) 598 (s) 93,400 85,353 11,113 . . 10,584 25,869 1 226,155 2,156 216,433 9,722 2,156 222,419 e 13,200 164,165 e 4,200 135,600 28,565 4,200 226,155 11,878 222,419 164,165 32,765 1,546,475 1,420,980 1,488,010 1,570,423 1,603,022 n. a. Not. available. i Where apparent consumption calculates to a negative figure or seems otherwise unreasonable, e Estimated by the Bureau of Mines. actual or estimated consumption figures have been inserted, s Very small. 2 Includes secondary. 3 Western Germany only in 1950. Page ,195 Zinc productiony imports, exports, and apparent [Metric tons Continent and country Ore (metal content) 1929 Refined metal Ore (metal content) 1938 Mine production Imports Exports Production Imports Exports Apparent consumption1 Mine production Imports Exports North America: Canada (including Newfoundland) . .... 89,479 179,050 657,232 23,791 157,762 64 78,061 15,099 567,393 1,200 1,259 205 61,300 16,288 13,073 17,961 70 178,958 172,218 468,743 96,390 128,665 122 Mexico 13,073 554,525 4,409 South America: 925,761 660,553 1 572,556 819,919 j Bolivia 1,395 1,395 13,313 13,313 20,829 10,706 2,300 10,706 Chile 2,514 2,514 Peru 23,686 11,759 28,903 14,566 Total 25,081 15,827 60,438 Western Europe: Austria 1,600 5,000 1,540 28,000 8,198 6,896 2,226 482 39,285 136,207 476 8,322 5,344 1,100 923 8,843 7,534 144,716 30 429 71,549 209 7,769 133,247 2,017 482 110,254 200,199 5,876 22,945 8,462 3,554 9,275 8,788 3,679 199,420 2,255 2,709 90 510 38,000 Belgium-Luxembourg 305,000 197,900 269,000 Finland 380 9,600 102,000 5,400 87,000 395 1,000 158,336 4,100 88,000 n. a. 19,000 21,200 1,140 34,700 138,500 80,500 6,700 81,200 78 87,330 102,000 16,361 38,008 115,300 < 83,300 Italy 68,200 300 1,150 36,100 31,200 5,400 15,804 25,712 1,181 22,594 3,062 3,473 4,773 3,855 4,530 4,066 25 Netherlands 1,400 53,000 29,900 39,200 8,800 5,516 11,825 8,000 e 38,600 36,000 22,700 50,000 6,590 n. a. 35,800 Sweden 3,000 4,718 900 300 63,500 9,700 10,100 900 59,234 6,291 11,700 41,658 76,400 2,100 12,100 35,400 Africa: 296,480 521,730 718,222 390,498 Algeria 14,660 600 14,600 1,610 518 1,092 4,570 4,100 1,400 3,000 10,400 3,600 1,400 French ^'lorocco 1,000 22,500 85 1,100 Northern Rhodesia 12,316 12,071 245 Tunisia 3,800 3,000 700 Union of South Africa 272 272 Asia: 41,960 12,316 1,609 24,170 Burma 59,373 6,905 6,905 Indochina 18,800 10,000 4,000 i5,i66 3,808 22,098 4,286 (s) 5,200 22,000 13,000 Turkey 15,700 3,300 27,111 49,209 11,680 13,000 Total 92,173 157,043 25,906 52,705 56,114 20.405 40,200 226,155 Oceania* Australia 94,136 32.300 121,815 1,538,498 1 1,273,210 i 1 1,384,733 1,561,380 [ 1 Note: Lack of complete world statistics, particularly on international trade, and the absence of data on which to base estimates, preclude presentation of balanced figures. It should be noted that apparent consumption as computed by the formula, production plus imports minus exports, doe; not present an accurate appraisal of requirements because of the fluctuation of inventories, shipments to iron curtain countries, and shipments to relatively small consuming countries in the free world, not shown in the tables. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the Interior. Page 196 consumption in the free world: 1929, 1938, and 1950 [Metric tons] 1938—Continued Refined metal Ore (metal content) Refined metal Apparent consumption1 Mine production Apparent consumption 1 Production Imports Exports Imports Exports Production Imports Exports 156,008 35,881 404,912 119,940 30,188 181 36,068 5,693 411,290 283,571 223,530 565,513 117,535 185,935 53,492 40 133,246 48,460 11,718 52,689 5,072 894,347 6,559 215,075 1,034 765,176 140,889 596,801 453,051 1,072,614 1,004,603 1 952,108 6,545 6,545 12,699 e 7,530 e 10,000 e 17,530 883 883 19,570 19,570 1,474 1,474 73,812 71,000 1,262 1,883 (s) 7,428 106,081 8,792 19,004 6,994 93 6,901 92,734 2,970 250 3,000 18,000 6,049 2,314 6,049 60,388 5,633 4,320 95,959 107,925 873 210,400 14,508 132,174 202,000 2 177,326 119,252 974 4,330 1,376 1,266 3,064 1,376 6,607 4,320 (s) e 1,800 2,800 54,713 194,370 4,100 31,519 74,900 1,025 4,475 6,890 81,757 262,380 5,125 33,713 12,419 92,585 71,531 112,791 28,182 5,876 873 3,754 10,742 69,298 3,184 85,348 n. a. 33,367 25,300 46,523 419 73 47,900 38,119 2,931 10,982 7,503 10,260 33,148 33,547 20,474 10,852 21,264 20,002 7,410 215,608 e9,285 10,871 1,300 14,954 44,354 n. a. 21,217 3,469 7,672 6,900 e64,000 36,714 23,000 32,100 19,752 44,000 21,264 7,672 n. a. 47,400 21,629 751 20,878 6,481 217,347 2,545 38,000 20,158 7,410 144,190 156 8,737 2,256 6,548 1,603 56,190 167,705 96,500 71,418 3,956 192 e 43,500 21,000 e 10,700 1,415 636,591 766,659 326,133 566,901 619,589 576 576 7,136 76,312 8,900 67,500 10,379 6,790 (s) 12,521 38,275 11,500 2,932 9,350 23,080 23,040 40 2,508 2,508 16,440 2,900 e9,000 e9,000 10,379 3,084 148,676 23,080 9,000 9,040 21,568 40 370 21,198 30,775 n. a. (3) 30,775 4,470 s 54,203 4,619 Is) n. a. (s) 646,690 560 47 100,893 513 52,032 e60 49,008 49,008 58,673 70,941 38,700 122,604 32,241 52,092 196,360 e194,500 49,008 85,146 e48,000 79,783 37,146 1,373,385 1,385,067 1,901,956 1,737,530 1,716,630 n. a. Not available. e Estimated by the Bureau of Mines. s Very small. ! Where apparent consumption calculates to a negative figure or seems otherwise unreasonable, actual or estimated consumption figures have been inserted. 2 Includes secondary metal. 3 Western Germany only in 1950. 4 January to July. 5 Fiscal year ending March 31, 1939. 6 January to June. * Page 197 Crude petroleum and petroleum products, production, imports, and exports, [Thousands of barrels] Continent and country North America: Canada Cuba Mexico United States. Other 1929 Crude Petroleun Refined Products Production 1, 117 44, 688 1, 007, 325 Total. 1, 053, 128 South America: Argentina Bolivia Brazil Chile . . Colombia Ecuador Netherlands Antilles . Peru Trinidad Uruguay Venezuela Other 9, 391 20, 385 1, 381 13, 422 8, 716 Imports 30, 458 5, 842 507 78. 933 Exports 15,471 26, 401 Apparent I consumption! 31,575 5, 842 29, 724 1, 059, 855 1, 126, 996 ,792 .. 210 13, 183 210 125 90, 048 14 18,600 1, 093 17, 438 7, 630 909 1, 785 413 72,610 5, 806 7, 807 Production (runs to stills) 30, 652 5, 842 24, 623 1, 034, 165 Imports 1, 095, 282 12, 897 210 127, 506 9, 966 Total. Western Europe: Belgium Denmark France Germany 1 Greece Ireland Italy and Trieste. Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom . Other 535 704 Total. Africa: Algeria Canary Islands Egypt French Morocco. ..... Union of South Africa. Other 1, 785 413 72,610 5, 740 7, 80/ 8,418 1, 205 4,0/1 29, 7/7 10, 000 10, 488 83 6, 032 2, 653 550 150 3,337 39 Exports 11, 565 136, 719 Apparent consumption 38, 093 7, 047 17, 129 927, 223 10, 000 999, 492 1938 Crude Petroleum Production 6, 966 78 38,506 1, 214,355 9, 966 2, 500 10,000 67, 369 4, 008 5, 329 '7,500 25, 385 295 6, 032 2, 653 2, 135 563 8, 578 1, 771 2,478 2, 500 2, 466 10, 000 1, 259, 905 17, 076 226 Imports 35, 103 900 250 26,412 Exports Apparent consumption 4, 840 77, 254 42, 069 9/8 33,916 1. 163, 513 62, 854 23,400 630 23,935 1, 334 419 . 1,667 I 464 ,667 825 '14,065' 825 14,065 23, 935 1, 334 464 1, 66/ 825 14,065 3, 366 4, 600 20, 475 12, 857 1, 127 1, 341 9, 057 5, 645 2, 088 1, 200 5, 153 3, 070 3, 300 47, 089 10, 000 44 658 347 600 366 533 127 400 , 170 1, 341 9, 501 6, 912 2, 088 1, 200 5, 153 3, 855 3, 300 57, 9s4 10, 000 21, 582 2, 246 15,' 839' 17, 737 166, 394 700 , 544 18, 453 1,686 7, 576 9, 183 655 178, 780 2, 225 513 , 861 51, 361 2, 000 10, 767 j 3,032! 256 600 300 644 400 392 16, 227 1,013 168, 307 j 2,000 3,000 3, 000 900 3, 236 12,000 300 300 2, 000 2, 700 4, 568 900 3,236 , 12,000! 1, 581 27 2, 000 800 Total. Rahrein Island. Formosa. 1, 868 1, 868 25,404 j 1,608 500 500 8, 298 456 336 , 240, 476 22,018 226 3, 129 560 158, 818 6, 656 17, 782 1, 544 9, 394 220, 127 , 874 , 861 868 032 256 601/ 300 644 93, 692 2, 000 2, 381 27 8,418 India, Burma, and Pakistan. Iran Iraq Israel Japan . 8, 747 42, 145 798 1, 700 11, 311 200 7, 047 30, 834 598 7, 047 30, 834 598 2, 023 1,000 3,023 5, 000 398 1, 500 399 7, 235 27, 005 12, 047 4, 227 2, 098 399 10. 258 10, 026 78, 372 32, 643 2, 723 2. 910 31,098 2, 511 19, 979 Kuwait. 7, 303 75, 462 1, 545 22, 490 Qatar. Saudi Arabia Syria and Lebanon. Turkev Other." Total. Oceania: Australia British Borneo. Indonesia New Guinea. . . New Zealand. . . Philippines Other Total. . Unaccounted. Total free world. 53, 713 5, 290\ 39, 279J 44, 569 1, 345, 329 2, 938 41, 502 15,000 11,664 2, 988 29, 569 32, 557 -11, 664 1, 345, 329 567 882 20, 000 567 882 20, 000 495 495 41. :02 50, 978 2. 988 29, 569 8, 004 539 3, 000 2, 500 8, 000 32,557 21, 281 1,324,927 !. I I 10, 936 8, 827 3, 000 2, 500 8, 000 33, 263 -15, 371 'I 1, 324, 927 6,913 :i 57, 318 ij 64, 234 12, 520 1, 403 1, 726, 239 115, 218 2,007 51, 711] 53, 721 -1,403 1, 726, 239 Note: This tabulation attempts to account for all crude petroleum produced in the free world during the years 1929, 1938, and 1950. Available data on crude oil production are relatively complete and accurate, but information concerning refining, international trade, and consump- tion is frequently incomplete, inaccurate, and often contradictory, when provided by 2 or more sources. An effort has been made to estimate quantities for each country that are consistent over the years for the country and to provide for a reasonable accountirg for kncwn production during each year. Since information concerning stock changes is virtually nonexistent for coun- tries other than the United States, no provision has been made for them and they are reflected in the consumption figures. In achieving an approximate balance it has been necessary in many instances to alter figures. Page 198 and apparent consumption in the free world: 1929, 1938, and 1950 [Thousands of barrels] 1938—Continued | 1950 Refined Products ( Crude Petroleum 1 Refined Products Production (runs to stills) Imports Exports Apparent consumption Production Imports Exports Apparent consumption Production (runs to stills) Imports Exports Apparent consumption 42,069 978 43,189 1,204,976 4,733 4,222 1,132 27,896 12,000 218 46,584 5,200 35,358 1,116,398 12,000 29,146 156 72,443 1,971,845 81,791 1,993 110,937 2,149 56,331 2,114,761 100,425 1,833 . 52,302 2,223,221 19,920 11,973 6,116 131,435 15,000 8 120,337 13,806 50,761 2,278,419 15,000 1,291,212 8,963 116,474 1,215,540 2,073,590 177,714 16,112 34,798 2,284,178 2,377,781 7,657 76,237 2,478,323 22,304 134 6,896 266 8,327 5,040 213 200 29,200 400 8,327 5,040 2,975 760 23,353 616 278 629 21,750 54 45,103 562 673 159 9,471 1,590 276,507 12,147 29,559 5,531 94,330 40,300 609 560 16,684 285 30,765 7,373 1,694 106 12,403 413 20 1,912 706 14,050 176 15 56,808 879 2,762 560 172,614 34,059 2,632 395 470 24,588 1,042 6,765 2,930 2,448 9,363 1,587 271,563 13,085 26,838 5,238 84,820 3,681 31,325 7,373 7,376 1,693 6,404 17,782 56 155,264 3,957 11,958 17,350 2,503 5,824 2,750 3,939 15,077 20,632 283,272 249,466 5,007 15,858 34,500 8,491 1,544 1,206 149 12,000 11,375 5,531 11,000 7,150 9,771 5,981 546,783 452,453 67,198 18,328 12,000 14,050 233,875 91,068 644,059 475,632 453,963 198,973 2,355 3,599 6,500 8,505 515 253 3,100 5,439 6,247 57,279 28,000 2,457 2,064 19,179 12,229 4,434 1,900 4,500 9,950 3,291 92, 782 16,405 3,275 232 103,855 16,220 3,275 232 104,700 24,124 2,666 71 14,793 10,349 2,195 6,724 7,968 4,715 4,420 9,975 10,251 2,211 8,210 20,363 8,057 77,252 11,150 1, 106 16,353 10,420 73,357 26,689 51,874 5,861 909 7,904 64 92,162 19,997 21,000 22,139 2,457 2,064 32 7,968 10,1.37 3,OS2 256 600 300 450 10,177 9,383 4,178 1,300 4,200 9,500 3,291 i,135 186 63 4,897 37,466 34,785 133 1,963 2,108 6,615 37,529 39,682 133 1,963 2,108 6,615 33,125 38,169 60 1,888 1,963 5,830 5,824 20,200 4,715 31,721 27,944 10,311 4,099 10,173 26,193 17,480 1,405 75,302 340 6,930 67,923 730 68,263 3,660 60,844 3,300 7,023 8,057 131,073 14,450 93,750 15,000 266,156 21,043 4,000 292,284 260,075 403,523 2,000 2,381 27 1,855 3,825 4,417 1,173 8,504 15,000 534 287 1,855 5,291 6,511 1,200 8,374 15,000 24 5,910 24 5,910 16,373 305 5,258 14,511 271 7,805 11,368 16,815 4,626 56 7,805 12,000 31,270 130 16,373 305 3,783 21,000 20,800 4,054 21,000 20,800 4,408 38,231 16,702 22,612 20,040 96,929 8,418 5,397 3,021 11,016 23 3,117 242,475 49,919 46,287 815 57,303 838 3,117 194,129 3,820 1,670 11,688 9,026 568 46,511 3,682 54 56,059 754 2,900 177,875 2,672 1,350 9,809 7,599 161 50 27,751 150 1,260 650 6,253 10 48,821 7,399 804 30,651 39,525 7,303 75,462 1,545 i3,605 300 559 1,225 5,000 5,904 64,402 15,004 11,360 2,104 1,225 27,490 48,346 46,099 138,500 3,932 22,490 2,048 125,722 12,268 199,547 1,670 9,640 2,000 16,062 116,696 11,700 153,036 2,323 5,286 200 749 1,261 35,000 200 749 1,261 35,000 35,990 3,567 32 110 25,875 10,225 3,965 3,914 54 3,682 398 3,882 47,000 47,000 115,218 97,414 646,189 332,406 298,607 170,763 2 007 51,711 15,139 76 17,070 5,460 5,462 4,850 | 68,123 33,085 160 47,401 22 37,775 30,958 48,400 1,748 7 ) 1,070 42,466 10,315 / 9,570 1,730 69,788 440 21,162 5,000 3,440 15,000 5,000 3,440 15,000 18 7 7,595 9,792 20,500 7,573 9,792 20,500 53,718 . 1 50,825 32,947 81,115 75,275 1 72,973 311! 96,802 38,126 32,947 1 311 38,126 1,792,181 1 1 1,792,181 3,482,698 3,482,698 | 3,483,439 3,483,439 that have been published previously, but in most instances these alterations have been of a minor Source: Prepared by the Petroleum and Natural Gas Branch, Bureau of Mines, U. S. Depart- nature. It has also been necessary in some instances to make estimates with little or no actual ment of the Interior. information. In spite of this, it is believed that this table indicates fairly accurately the magni- 1 Western Germany only in 1950. tude and trends of the various phases of the petroleum industry in the more important producing, refining, and consuming countries and areas. 997199—52 14 Page 199 Fluorspar production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950 [Metric tons] Continent and country 1929 Apparent consump- tion 1938 Apparent consump- tion 1950 Apparent consump- tion Production Imports Exports Production Imports Exports Production Imports Exports North America: Canada (incl. Newfoundland) 16,211 10, 969 27, 180 9, 141 n. a. 72, 940 13,660 "' i 7.' 801" 8, 743 n. a. 14, 058 n. a. 90, 741 58, 253 65, 667 273,524 972 e 11,035 65, 667 48, 190 Mexico United States 132, 847 49, 301 182, 148 1 n. a. 149, 352 623 4-2? 2k\ Total 149, 058 209, 328 82, 081 104, 799 397, 444 470. 443 South America: ! Areentina 1, 406 1,406 n. a. n. a. Bolivia 61 e600 61 Brazil e 600 P'eru 204 204 Total 1,406 1,610 661 i 600 Western Europe: Austria 5, 196 1, 186 780 5, 196 956 780 52, 968 23, 242 5, 740 2, 447 e 500 2, 567 33,451 903 11 11 Beleium-Luxembourg 230 7, 313 751 1, 537 5, 776 751 51,920 66, 520 12, 186 n. a. n. a. n. a. n. a.' n. a. Denmark France 52, 968 50, 797 5, 740 101 13, 478 51,920 81, 269 12, 186 1,676 8, 596 35, 400 e 35, 000 31,611 732 3, 728 54,461 32, 404 e 10, 000 31,611 n. a. e 900 n. a. 52, 867 Germany 1 174 27, 729 1 14, 750 Italy Norway 2, 348 2 1, 130 694 e 8, 100 2, 112 n. a. 32, 669 n. a. n. a. e 32, 000 n. a. e 2, 000 Spain e 13, 000 e 500 n. a. 31,015 Sweden 2, 567 33, 866 n. a. 2,'85l' n. a. 54, 867 n. a. United Kingdom 42,432 8, 981 Others 903 1, 313 1, 313 Total 165,516 128, 750 189,513 172, 104 189, 547 2,460 127, 782 10, 937 Asia: Japan 8, 477 Africa: Union of South Africa 3, 974 565 3, 974 79 4, 736 2, 628 3, 344 2, 043 1, 392 e 7, 200 664 42 487 7, 158 177 Others (2) Total 4,539 698 7, 364 3, 283 1, 392 3, 283 7, 864 585 7, 335 585 Oceania: Australia 698 Total. 319,811 338, 776 283, 18 598, 561 617, 682 Note: Lack of complete world statistics, particularly in international trade, and the absence of data on which to base estimates, preclude presentation of balanced figures. It should be noted that apparent consumption as computed by the formula, production plus imports minus exports, does not present an accurate appraisal of requirements because of the fluctuations in inventories, shipments to iron curtain countries, and shipments to relatively small consuming countries in the free world, not shown in the table. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the Interior. n. a. Not available. e Estimated by the Bureau of Mines. 1 Western Germany only in 1950. 2 It is estimated that there was no consumption. Page 200 Phosphate rock production, imports, exports, and apparent consumption in the free world: 1929,1938, and 1950 [Metric tons] Continent and country 1929 Apparent consump- tion 1 1938 Apparent consump- tion 1 1950 Apparent consump- tion 1 North America: Production Imports Exports Production Imports Exports Production Imports Exports Canada 1,075 3,821,217 16,549 45,618 46 17,578 2,705,749 189 116,490 7,118 n. a. 1,159,150 116,679 2,647,221 117 563,185 88,571 563,302 p8,725, 811 United States 1,161,086 3,799,253 10,418,122 pi,780,882 Total 3,822,292 2,723,327 3,799,442 2,763,900 10,418,239 9,289,113 South America: Brazil 100 24,000 99,283 100 24,000 15 n. a. n. a. n. a. 13,437 Chile 13,437 104,240 Netherlands Antilles (Curacao) i03,289 103,288 99,268 'i64^240* Total 103,289 123,383 24,115 117,677 13,437 Western Europe: Belgium-Luxembourg ^ 40,330 359,092 159,089 110,697 288,725 159,089 e 75,000 329,304 193,096 46,779 357,525 193,096 50,846 404,270 237,671 3 208,256 1,113,994 415 1,520 453,596 237,671 Denmark Finland 19,064 1,626,198 513,928 19,064 1,797,432 509,365 46,101 913,143 609,436 46,101 994,707 611,239 3 208,256 France 179,620 8,386 4,563 82,000 1,803 436 73,752 596,552 609 1,187,137 596,967 n. a. Germany * Greece... . 48,853 48,853 45,394 45,394 Ireland ...... 94,832 769,732 394,923 94,832 769,508 394,923 81,551 846,849 434,520 81,551 846,849 434,520 n. a. n. a. e 180,000 873,559 567,945 68,997 e 182,000 417,181 341,064 49,559 1,127,343 e180,000 873,529 567,945 68,997 Italy 224 30 Netherlands Norway 15,525 120,592 562,121 137,654 15,525 120,592 569,747 137,654 36,994 126,524 203,455 199,472 36,994 126,524 228,455 205,664 Portugal e 182,000 441,261 341,064 48,593 Spain . . 7,626 25,000 6,192 24,080 n. a. Sweden Switzerland 23,122 883,591 23,122 883,591 18,833 417,035 18,833 417,035 966 United Kingdom 1,127,343 Others 75,310 75,310 37,329 37,329 Total 227,576 5,907,332 189,995 4,681,816 745,230 6,514,359 Asia: Angaur Island 65,494 63,907 105,578 105,578 e 119,000 e119,000 Ceylon 13,901 13,901 11,418 ii,4is 32,054 32,054 Christmas Island . . 119,756 18,772 3,172 14,573 119,756 43 162,425 37,341 33,113 n. a. 162,425 287,000 n. a. n. a. 258 287,000 n. a. n. a. French Indochina 18,729 3,172 573,650 6,419 43,760 33,113 564,168 n. a. n. a. 999,624 n. a. n. a. Indonesia Japan . 559,077 564,168 999,882 Pacific Islands (incl. Ryukyu, Daito, Mariana, Caroline, and Palau (ex- cept Angaur) groups) . n. a. 1,492 13,463 n. a. e 150,000 e150,000 e 81,000 32,606 319 n. a. e81,000 Philippine Islands n. a. 11,796 32,606 319 Others 3,678 17,141 5,722 155,166 149,092 Total 236,722 628,085 494,179 664,255 520,183 1,064,861 Africa: Algeria 747,035 215,311 747,035 214,539 e67,000 584,452 458,404 3,420 485,586 402,757 e55,000 e 15,000 e15,000 684,657 397,207 3,872,250 10,005 1,524,800 51,844 12,587 590,699 499,895 93,958 e 30,000 e35,000 Egypt French Morocco 1,608,249 12,789 1,577,595 12,789 e 21,000 1,447,544 21,703 1,432,896 21,703 4,299,400 10,005 Seychelles Tunisia 2,511,000 3,017,756 e 80,666 46,434 25,940 1,934,200 1,591,294 e90,000 99,273 6,536 1,571,880 e157,000 51,844 12,587 Union of South Africa ... .... 46,434 12,499 99,273 5,411 n. a. n. a. Others 13,441 5,768 4,643 Total 5,107,825 240,374 4,452,071 280,809 6,553,350 380,389 Oceania: Australia ... 71 592,901 17 592,955 244 113,848 788,005 788,249 1,653 245,804 /1,070,358 \ 251,218 n. a. 759,528 761,181 Makatea Island. 242,990 } 585,844 5,663 242,990 585,844 5,663 113,848 1,184,816 5,000 245,804 1,070,358 251,218 n. a. Nauru 5,000 1,184,816 Ocean Islands New Caledonia New Zealand 157,395 157,395 268,240 268,240 "V550^666" "V 556; 666 Total 834,568 750,350 1,303,908 1,056,489 1,569,033 1,311,181 Total free world 10,332,272 10,249,462 10,362,978 1 9,471,384 19,923,712 18,573,340 1 1 Note: Lack of complete world statistics, particularly on international trade, and the absence offdata on which to base estimates, preclude presentation of balanced figures. It should be noted that apparent consumption as computed by the formula, production plus imports minus exports, does not present an accurate appraisal of requirements because of the fluctuations in inventories, shipments to iron curtain countries, and shipments to relatively small consuming countries in the free world, not shown in the table. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the Interior. n. a. Not available. e Estimated by the Bureau of Mines. p Preliminary. 1 Where apparent consumption calculates to a negative figure or seems otherwise unreasonable, actual or estimated consumption figures have been inserted. 2 Production for Belgium; trade for Belgium-Luxembourg. 3 Includes phosphate rock, superphosphates, and basic slag. Western Germany only in 1950. Page 201 Potash production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950 [Metric tons of equivalent K2O] 1 Continent and country 1929 Apparent consump- tion 1938 Apparent consump- tion 1950 Apparent consump- tion North America: Production Imports Exports Production Imports Exports Production Imports Exports 9,991 2,286 294,505 601 37 9,954 2,286 342,643 601 25,993 2,136 175,148 4,837 25,993 2,136 416,867 4,837 49,376 49,376 Others (incl West Indies) 55,873 7,735 287,532 45,813 1,167,325 180,976 n. a. 59,009 1,289,292 n. a. Total 55,873 355,484 287,532 449,833 1,167,325 1,338,668 South America: Brazil 6,092 720 6,092 645 12,594 849 12,594 849 775 n. a. 775 30 Others n. a. 75 n. a. 11,500 11,470 Total 6,737 13,443 11,500 805 Western Europe: 29,024 147,191 29,577 8,305 3,467 275 18,135 403,549 9,300 4,941 39,007 10,877 74,201 4,968 11,342 20,389 17,682 126,802 29,577 7,933 500,868 206,742 23,721 402,126 9,300 20,903 35,930 9,268 72,474 4,968 2,264 413,381 32,114 11,553 828 70 80 2,184 234,969 32,114 11,218 203,558 227,390 12,802 138,065 20,665 8,128 54,221 9,931 97,334 13,392 Belgium-Luxembourg 178,412 390,633 11,107 13,998 1,359 2,140 15,363 e 189,176 29,102 275,713 114,920 11,107 13,998 Denmark Finland 505,253 804,457 5,618 372 7,852 597,990 32 1,423 580,767 619,400 325 335 378,037 392,080 127 377 1,017,800 911,600 341,076 379,422 678,083 Italy 12,604 138,442 20,665 534,318 15,363 e 187,743 29,102 Netherlands e 1,433 ^^orway 22,157 6,195 3,077 1,609 1,727 8,128 177,698 98,851 974 1 3 52,268 65,003 15,951 Switzerland ... 54,750 17,879 98,332 13,392 529 7,948 998 65,977 15,952 213,117 n. a. United Kingdom 2,329 210,788 n. a. Others 1,337,485 1,468,294 1,208,620 1,065,971 2,107,098 1,928,644 Asia: Ceylon ■ • 4,413 1,924 42,432 4,413 1,828 42,423 3,676 5,802 87,269 114 5,395 3,676 6,422 85,508 5,425 4,532 n. a. n. a. 126,624 n. a. n. a. 126,874 n. a. n. a. e 2,000 2,096 9 4,000 3,380 1,761 23,747 863 n. a. e 250 n. a. n. a. Israel 29,058 n. a. n. a. Others 3,187 288 2,899 n. a. Total e 2,000 51,563 33,058 105,563 | 250 126,874 Africa: 5,039 1,942 2,648 5,039 1,942 2,648 6,530 2,554 5,831 6,530 2,554 10,403 n. a. n. a. n. a. n. a. n. a. n. a. Union of South Africa Others 4,572 Total 9,629 4,515 4,572 19,487 8,890 Oceania: Australia and New Zealand (s) 4,515 (s) 8,890 n. a. e 7,438 e 7,438 Total free world 1,395,358 1 1,896,222 1,533,782 1 1,663,187 3,286,173 3,402,429 Note: Lack of complete world statistics, particularly on international trade, and the absence of data on which to base estimates, preclude presentation of balanced figures. It should be noted that apparent consumption as computed by the formula, production plus imports minus exports, does not present an accurate appraisal of requirements because of the fluctuations in inventories, shipments to iron curtain countries, and shipments to relatively small consuming countries in the free world, not shown in the table. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the Interior. n. a. Not available. e Estimated by the Bureau of Mines. 8 Very small. 1 International trade in potash is complex because of the great variety of products. All statis- tical data have been converted to K26 using standard coversion practice. Data on imports in some important agricultural areas are not available. 2 Western Germany only in 1950. 3 Actual consumption. Page 202 Pyrites production, imports, exports, and apparent consumption in the jree world: 1929, 1938, and 1950 [Metric tons] Continent and country 1929 Apparent consump- tion 1938 Apparent consump- tion 1950 Apparent consump- tion North America: Production Imports Exports Production Imports Exports Production Imports Exports Canada 70, 087 338, 466 29,016 41,071 861, 062 40, 464 564, 547 20, 054 20, 410 250, 000 946, 107 e 211,010 38, 990 1, 158, 220 United States 522, 596 334, 234 898, 781 212, 113 Total 408, 553 902, 133 605,011 919, 191 1, 196,107 1, 197, 210 South America: Brazil 2, 486 70 2, 486 70 3,600 3, 600 Uruguay... Total 2, 556 2, 556 3,600 3,600 Western Europe: Austria 71,974 117 71, 857 82, 972 259, 025 102, 788 82,972 236, 511 102, 788 102, 979 560, 842 12, 489 12, 489 103, 757 147, 182 210, 000 756, 882 1, 157, 854 Belgium-Luxembourg 22,514 103, 757 147, 182 Denmark 71,873 71, 873 Finland... . 102, 979 147, 208 414, 442 243, 852 e2i6,6oo n. a. France .... 202, 189 351,909 134, 399 922, 580 1, 170, 340 2, 269 46, 780 96, 910 1, 122, 500 1, 522, 249 37, 489 36, 486 619, 101 149, 393 83,059 94, 928 1, 145,483 245, 278 334, 266 29, 176 430, 497 1,430, 926 16, 863 25, 106 202,238 200, 000 525, 400 87, 678 556, 882 639, 054 Germany 1 1, 820, 262 6, 600 47, 070 Greece 41,614 31,088 856, 833 361, 127 372, 817 50, 733 40, 608 Irish Republic . 36, 486 185, 174 156,253 31,088 19, 790 361, 307 46, 019 e 63, 000 317, 871 46, 019 860, 459 Italy 664, 543 230,616 6, 860 656,538 289, 422 2, 721, 767 930,312 93, 269 180 654, 959 507, 594 n. a. 40, 695 2,148 132, 938 895, 459 e 98, 000 248, 258 389, 066 498, 859 1, 174,043 61, 663 Netherlands 69,613 360, 297 114, 663 132, 816 444, 128 208, 971 e 120, 000 Norway 739, 597 384, 350 3, 867, 250 72, 055 4, 441 61, 153 1,027, 776 558,327 749, 363 613,522 1, 306, 859 406, 800 e 10, 000 220, 000 Portugal Spain 2, 727,003 186, 390 4, 351 150, 402 2, 727, 003 384,912 410,008 Sweden 173,223 340, 044 26, 636 239, 217 407, 805 36 98, 991 198, 971 United Kingdom ... 10,219 58,613 Yugoslavia ... 17, 500 e 100, 000 Total 6, 481,886 5, 563, 138 6, 493, 042 8, 159, 989 5,237,570 4, 785, 738 Asia (excluding China and North Korea): Cyprus 297, 125 618, 743 295, 723 1,402 618, 743 987, 651 2, 104, 800 523, 579 375, 900 464,072 1, 728, 900 829, 889 1,916, 181 5,000 655, 059 174, 830 1,916, 181 Japan Others 5,000 Total 915, 868 620, 145 3,092,451 2, 192, 972 2, 751,070 2, 091,011 Africa: Algeria 16, 804 16, 804 44, 150 49 44, 199 25,075 25,075 13, 800 10 Northern Rhodesia... 13, 800 Southern Rhodesia 27,065 31,017 13, 571 13, 494 31,017 13, 810 36, 026 2, 620 13, 800 Union of South Africa . . 4, 116 4, 116 36, 026 1,466 Others 1, 154 Total 20, 920 20, 920 102, 232 51,084 88,710 51,084 77, 531 113,973 76, 377 113,973 Oceania: Australia Total free world 7, 827, 227 7, 106, 336 10, 346, 376 11,414,502 9, 379, 851 8, 267, 909 Note: Lack of complete world statistics, particularly on international trade, and the absence of data on which to base estimates, preclude presentation of balanced figures. It should be noted that apparent consumption as computed by the formula, production plus imports minus exports, does not present an accurate appraisal of requirements because of the fluctuations in inventories, shipments to iron curtain, countries, and shipments to relatively small consuming countries in the free world, not shown in the table. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the Interior. n. a. Not available. C Estimated by the Bureau of Mines. 1 Western Germany only in 1950. Page 203 Native and elemental sulfur production, imports, exports, and apparent consumption in the free world: 1929,1938, and 1950 [Metric tons] Continent and country 1929 Apparent consump- tion 1938 Apparent consump- tion 1950 Apparent consump- tion North America: Production Imports Exports Production Imports Exports Production Imports Exports Canada (including Newfoundland) 218, 389 60 218, 389 60 85, 001 88 5, 760 2,604 142 85,001 88 5, 801 1,833,113 157 354, 102 15, 159 3,048 25 354, 102 15, 159 7, 246 3, 773, 292 Cuba 50 9 4, 837 5, 275, 519 639 1, 502, 252 United States 2, 400, 305 1, 182 886, 855 1,514,632 63 2, 431, 822 15 601, 313 Other 63 Total 2, 400, 305 1, 733, 144 2, 431, 887 1, 924,160 5, 280, 356 4, 149, 799 South America: Argentina 12, 884 23 8, 748 83 238 2, 128 297 12, 884 23 8, 748 16, 058 238 2, 128 297 22, 436 25 1,658 22,411 10, 161 4, 376 24, 385 (8) 34, 546 Bolivia 1,658 4,376 Brazil 14, 123 2 14,123 15,411 67, 774 67, 774 12, 127 Chile 16, 300 325 21, 295 1,975 5, 886 1,975 15, 228 250 n. a. 1,511 3, 101 100 n. a. Peru 126 2, 225 236 126 2,225 640 n. a. e 790 n. a. Uruguay Other 69 305 226 1, 737 Total 16, 300 40, 376 24, 997 54, £01 31, 526 116, 974 Western Europe: 11,568 11, 318 440 58, 946 220,694 120, 434 5, 899 35 2, 380 36 2, 875 11,532 12, 888 957 55, 188 7, 246 207,811 103, 594 18, 382 6, 809 6,079 957 55,188 7, 246 199, 111 80, 351 18,457 166,168 2,134 3 40, 825 3 14, 926 27, 159 3 65, 847 4, 481 131, 314 7, 112 63, 446 7, 112 60, 662 1,201 22, 638 154, 782 18, 159 16, 820 ? 100,000 2, 696 3 20, 008 3 14,430 * 48, 396 3 63,015 28, 043 446, 362 Belgium-Luxembourg 8,443 440 58, 946 188,092 60, 634 2, 784 Denmark 1,201 22,638 141, 196 25,401 16, 820 Finland France 32, 602 59, 800 142 8, 842 23, 243 14, 517 93 i 7, 242 Germany 1 Greece 354 345, 323 6,253 123,627 75 n. a. 213, 132 Italy 221, 731 397, 158 230, 990 4 243, 852 Netherlands 99 583 2,281 17, 043 2, 138 6, 654 2, 696 (s) Norway 17, 626 7, 775 3 110, 801 3 11,422 27, 159 s 17, 793 3 76, 630 3 96, 170 3 14, 430 * 39, 722 e 10, 000 3 76, 162 Portugal 7, 775 30, 574 85, 782 3, 504 Spain 11,903 18, 674 85, 782 3 n. a. 14 e 10, 000 53,015 28, 043 * 1, 326 Sweden 48, 068 4, 481 132,945 (s) Switzerland 5,217 96, 642 5,217 95, 904 United Kingdom 738 1,631 446, 362 Total 357, 580 702, 543 564, 550 820, 243 387, 971 1,004, 324 Asia (excluding China): Ceylon 102 102 1,073 1,073 66 66 73 Formosa 474 524 73 (s) 19, 532 17, 569 19,532 19,106 23, 333 6, 579 4,984 148 23, 333 19,233 4, 984 287 195, 372 6, 431 3, 387 s 48, 529 4, 999 n. a. e 1, 800 s 48, 529 14, 999 n. a. e 1, 800 91, 848 5, 932 Indonesia 1, 560 23 16, 243 3,589 e 10,000 n. a. Iran Israel-Jordan 5 5 1,215 226, 612 3, 893 1,076 31,240 Japan 71, 801 10,442 61,359 3, 760 1, 594 92, 400 5,800 552 Turkey 3, 760 1,619 2, 538 132 Other 25 3, 404 17 Total 73, 835 105, 458 247, 963 254,100 108, 273 163, 247 Africa: Algeria 21, 776 4, 278 1,639 713 2,618 8, 732 2,289 54 21,722 4,278 1,639 713 2,618 8, 723 2,289 16, 587 3, 835 12, 752 1,591 2, 288 e 20, 000 n. a. 9, 474 4, 682 31,498 78, 439 e 20, 000 n. a. 9, 474 4, 682 31,498 78, 439 Belgian Congo 1, 591 French Morocco 2, 288 Tunis 10, 474 10, 805 1,049 10, 474 10, 804 1,049 Union of South Africa 9 1 Other Total 41,982 38, 958 144, 093 Oceania: Australia 94, 387 33, 851 94, 387 34, 834 144, 130 144, 130 53, 319 194, 878 73, 156 194, 878 73, 156 New Zealand 983 53, 319 Total 983 129, 221 197, 449 268, 034 Total free world 2, 849, 003 2, 752, 724 3, 269, 397 1 3, 289,511 5,808, 126 ( 5,846,471 Note: Lack of complete world statistics, particularly on international trade, and the absence of data on which to base estimates preclude presentation of balanced figures. It should be noted that apparent consumption as computed by the formula, production plus imports minus exports, does not present an accurate appraisal of requirements because of the fluctuation of inventories, shipments to iron curtain countries, and shipments to relatively small consuming countries in the free world, not shown in the table. Source: Prepared by the Foreign Minerals Region, Bureau of Mines, U. S. Department of the Interior. n. a. Not available. e Estimated by the Bureau of Mines. s Very small. 1 Western Germany only in 1950. 2 Where apparent consumption calculates to a negative figure, actual or estimated consumption figures have been inserted. 3 Sulfur recovered from pyrites. 4 Includes sulfur recovered from pyrites. •'Fiscal year ending March 31, 1951. Page 204 Index A Additive metals (see also: Chromium, Nickel, Molybdenum, Cobalt, Tungsten, Vanadium, and Columbium), 25-30. as ferrous alloys, 25. as nonferrous metal alloys, 25. estimated world reserves of (table), 27. free world: consumption and; supply 26-27. position projected 1975, 26. reserves, estimated, 27. rest of, demand for, 135. i in alloys, 26. in chemical compounds, 26. pattern of use, in the United States in 1950, 25-26. projection of demand for, 125, 134. situation in brief, 25. supply: chromium (chromite), 27. cobalt, 28. columbium, 29. in time of peace, 26. in time of war, 27. molybdenum, 28. nickel, 28. tungsten, 28. vanadium, 29. Agricultural raw materials, measures of produc- tion and consumption, 171. Aluminum (see also Bauxite), 65-73. continued growth of uses in prospect, 66. cost factors, 68. dependence on hydroelectric power lessen- ing, 68. experimental plants and processes, 139. fluorspar in, 125. free world, rest of: position, 69-70. primary production in 1950 (table), 69. hydroelectric power and U. S. Government action, 72. industry, adaptation to use of lower grade ores, 139. other materials for extraction available, 69. pattern of use in the United States (table), 66. percentage breakdown of 1949 output, 123. possibilities for new uses and substitutions, 67 potential resources of bauxite and other high-alumina clays, 138. produced in Canada, 71. production of, steps involved in, 139. projections, 123, 134. prospects and problems, 70-73. reserves and potential resources, 138. scrap, 66, 123. situation in brief, 65. United States: market structure and competition, 72-73. pattern of use (table), 66. power outlook for, 67-68. security, 70-71. stockpiling of, 71. supply and consumption of, 65-66. tariffs on, and import policy for, 71. Ammonium sulfate, sulfur, end-use, 126. Ammunition, projection, copper, end-use, 120. Antimony, 53-55. consumption 1950, 123. end-uses, 122-123. free world, rest of: expansion, 54. foreign ore reserves appear adequate, 54. position of, 1950 and projected 1975,54. projections, 134. prospects and problems, 55. projections, 122. reserves and potential resources, 139. scrap, 122. security considerations, 55. situation in brief, 53. United States: expansion in domestic mining, 53. imports, 54. position, 53-54. position, 1950 and projected 1975 (table), 54. present use and supply, 53. projected future demand, 53, 123. scrap recovery, 54. world reserves, 140. Anthracite, projections for, 130. Aromatic and aliphatic chemicals, 106. Asbestos (see also Special Strategic Materials), 91-92. B Babbitt, tin, 122. Bauxite: reserves in the free world (table), 69. source area for the United States, 138. world, free and communist, reserves (table), 138. Beryl: free world, rest of, consumption and supply in, 1950 and projected 1975 (table), 61. United States: consumption, 1936-51, selected years (table), 59. imports, 1936-50 (table), 60. supply and consumption, 1950 and pro- jected 1975 (table), 60. world production in 1950, estimated (table), 61. Beryllium: 59-61. free world, rest of: position of, 60, 61. supply prospect, 61. present use and supply, 59. prospective demand, 1975, 60. prospects and problems, 61. security considerations, 61. situation in brief, 59. stockpile goal, 61. United States: imports and mine production, 60. position, 59. Bismuth, 57-59. free world, rest of: consumption, third of United States 1950 total, 58. demand, projected, 250 percent in- crease needed to meet, 58. position of the, 1950 and projected 1975 (table), 58. position, United States, 1950 and projected 1975, 57-58. prospects and problems, 59. reserves in Bolivia, 58. security considerations, 59. situation in brief, 57. Bureau of Mines Tables: Aluminum. See primary aluminum. Bauxite production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 187. Chromite production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 191. Copper production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 192-193. Fluorspar production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 200. Iron ore production, imports, exports and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 188. Lead production, imports, exports and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 194-195. Manganese ore production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by conti- nent and country, 189. Petroleum, crude and petroleum products, production, imports, exports, and ap- parent consumption in the free world: 1929, 1938, and 1950—by continent and country (table), 198-199. Phosphate rock production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by con- tinent and country, 201. Potash production, imports, exports, and apparent consumption in the free world: 1928, 1938, and 1950 by continent and country, 202. Primary aluminum production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 186. Pyrites production, imports, exports, and apparent consumption in the free world: 1929, 1938, and 1950—by continent and country, 203. Page 205 Bureau of Mines Tables—Continued Sulfur production, native and elemental, imports, exports, and apparent consump- tion in the free world: 1929, 1938, and 1950—by continent and country, 204. Tin production, imports, exports, and ap- parent consumption in the free world: 1929, 1938, and 1950—by continent and country, 191. Zinc production, imports, exports, and ap- parent consumption in the free world: 1929, 1938, and 1950—by continent and country, 196-197. c Cable, lead end use, 120. Cadmium, 55-57. Primary, position of the other free world countries, 1950 and projected 1975 (table), 56. prospects and problems, 57. situation in brief, 55. security considerations, 57. United States: domestic mine output, 56. imports, 56. position, 55-56. reserves, 56. use and supply, future and present, 55- 56. Cement: mills, coal for, projections, 130. production of, projected, 106. Ceramics, lead end use, 121. Chemical industry: in the United States, 103-105. rate of expansion, 104-105. structure, 104-105. Chemical technology: clothing, 104. food, better land productivity, 103. medication, 104. promise of, 103. quantity of prime and intermediate chem- icals needed by 1975, 104. shelter, 104. tool, machinery, and equipment, 104. transportation and communication, 104. Chemicals (see also Synthetic fibers), 103-107. aromatic, 106. bottlenecks in supply, 107. four major problems of, 103. refractories industry and, 106. situation in brief, 103. sulfur, end use, 126. supply and demand, expected, 105-106. Chlorine, caustic soda, and soda ash, demand projected, 106. Chromite: deposits, types of, 140. ore, consumption ratios of compared with foreign reserve ratios, 141-142. reserves and potential resources, 140-141. resources: effect of price on, 143. foreign, 141-142. lateritic iron ore, 143. United States, 141. Chromium (See also Additive metals) 27- 28, 125. Coal: consumption 1950, 130. end-uses, 130. projections, 130. production, world, percentage distribu- tion of 1949 (table), 164. reserve data, available United States, 163. reserves: of the principal coal-producing coun- tries, estimated original (table), 164. world, 164. United States, projected demand for, 130. Cobalt (see also Additive metals), 25, 28, 125. Coke ovens, projections, coal for, 130. Columbium (see also Additive metals), 25, 29. Construction, lead end use, 121. Consumption and production, measures, 170- 175. Copper: consumption 1950, 119. cost of production, 145. demand for, 34, 119. deposits: foreign, 144. known, well explored, 35. discoveries of new districts, 35. end uses, 119. free world: production and consumption, geolog- ical pattern of, 1950 (table), 36. rest of: expansion, obstacles to, 37. position of new, 1950 and projected 1975 (table), 36. projected demand for, 132-133. reserve base, 36. imports, 36. mine capacity, long-run, 34. projections, 119. prospects and problems, 37-38. reserves: the factor of, 34. and potential resources, 143. world (table), 145. security considerations, 38. situation in brief, 33. stockpile, 38. substitutions for, 34. United States: imports, tariffs on, 38. position, 33-36. position, 1950 and projected 1975 (table), 36. reserve estimates, trend of (table), 144. reserves, 34-35, 143. scrap, domestic, 35. supply and consumption in 1900-50, 34. uses, in 1950 (table), 33. D Demand. See: Materials demand, Production and consumption, Projection. Detergents, consumption projected, 106. Die castings, zinc, 121. Durable goods consumption, 5. E Electric energy: commercial establishments uses, 128. dwellings served, 128. in the United States—1935-75, 128. Electric energy—Continued industrial power consumption per capita, 128. losses, 128. projections, 127 use of per domestic customer, 128. Electric utilities, coal for, projections, 130. Electrical equipment, 119. Energy fuels (see also: Coal, Oil, Natural gas), projections of demand for, 127. F Ferro-alloys. See Additive metals. Ferrous metals. See: Iron and steel, Manga- nese, Additive metals. Fishery and wildlife products, measures of pro- duction and apparent consumption, 172. Fluorspar, 88-91. acid-grade spar, 89. ceramic grade spar, 89. consumption 1950, 125. deposits submarginal, 146. end uses, 125. fluorine recovery from phosphate rock, 89. free world, rest of: fluorine from phosphate rock needed, 90. position of the, 1950 and projected 1975 (table), 90, 135. in aluminum, 125. in iron foundry and ferro-alloys, 126. metallurgical-grade spar, 89. mine production and imports, 89. production and apparent consumption, world, by regions, in 1950 (table), 90. production, world, by countries, in 1950 (table), 90. projections, 125. prospects and problems, 91. reserves, 16. and potential resources, 145. magnitude of, in the free world (table), 89. world, 145. security considerations, 91. situation in brief. 88. United States: consumption of, 1950, by grades and chief uses, in percentages, 88. consumption of total (all grades), and by chief uses, 1887-1950, selected years (table), 88. demand for projected, 125. position, 88-90. position, in 1950 and projected 1975 (table), 88, 90. use and supply, future and present, 88. Foil, lead end-use, 121. Forest products, measures of production and consumption, 173. Free World: Production Must Rise to Meet Higher Materials Demands (chart), 6. rest of: additive metals demand, 135 copper consumption, 1950, 133. lead, consumption, 1950, and projected demand, 133. materials demand in the, Part II, 131- 132. tin consumption, 1950, 133. zinc consumption, 1950, 133. Page 206 Frits and ceramic enamels, 122. Fuels, reserves and potential resources, 163. G Gasoline production from other sources, 168. Glass: and pottery, antimony end-use, 122. production, growth of projected, 106. H Halogenated hydrocarbons, estimates, projected, 106. Hydro-energy, measures of production and consumption, 175. Hydrofluroic acid uses, other, 126. i Ilmenite reserves, 77. Industrial diamonds (see also Special Strategic Materials), 92-93. Insecticides, lead end-use, 121. Iron: castings, projections, 124. foundry and ferro-alloys, fluorspar in, 126. Iron and steel, 11. capacity expansion required, 16-17. castings, projections, 124. coke for blast furnace and foundry use, 15. demand projected, 12. free world, rest of: position, 18-19. British Commonwealth, 18. Japan, 20. Latin America, central and northern Africa, South Asia, 20. Western Europe, 18-19. investment in productive facilities, 17. Lake Superior taconites, 14. long-run outlook, 13. materials, processes, and products, 12. prospects and problems, 19-20. scrap supply, 13, 17. security considerations, 11, 20. situation in brief, 11-12. strategic stockpiles, 11. sulfur end use, 127. supplies in time of peace, assurance of, 11. technology, continuous casting, 16. United States: position, 12-18. production, consumption, and capacity in 1950 with estimates for 1975 (table), 13. Iron ore: composition of, 146. equivalent of machinery and vehicles, meas- ure of production and consumption, 174. imports from foreign sources, 15. material demand projection for rest of free world, 134. measured, indicated and inferred, estimated world resources of, 148. quality of, 146. reserve estimates, United States trend of (table), 147. reserves and potential resources, 146. reserves of United States, 14. reserves of the United States showing im- purities to be removed to make the ore usable (table), 147. Iron ore—Continued resources: domestic and foreign, 147. of United States, by regions and grades, estimated (table), 146. supply of in the United States in 1950 (table), 14. Transportation of (map), 10. K Kerosene and distillates, projections, 129. L Labor force in 1975, U. S., 111. Lead, 39-45. consumption, 1950, 120. demand adjustment, 44. deposits, 150. end uses, 120-122. free world: major producing countries of (table), 42. production and consumption, geograph- ical pattern of (table), 43. free world, rest of: discovery and expansion possibilities, 43. position of the, 1950 and estimated 1975 (table), 42-43. present use and supply, 42. reserve base, 43. prospects and problems, 44. resources, foreign, 151. scrap, 121. security considerations, 44. situation in brief, 39. tariff unjustified, 44. United States: consumption, expected pattern of, 40. demand, projected, 120. discovery is essential, 41-42. imports must rise, 41. mine production, history of, 40. position, 39-42. position, 1950 and projected, 1975 (table), 42. reserves factor, 40-41. resources and, 150. role of small mines in production of, 40. scrap supply, domestic, 41. substitution has already gone far, 40. supply and consumption of, 1900-50 (table), 39 supply prospects around 1975, 40. use and supply, future and present, 39. Lead and zinc: cost of production, 148. occurrence together, 40. reserves and potential resources, 148. reserves, world, reported estimates of (table), 150. Light Metals. See: Aluminum, Magnesium, Titanium, Zirconium. Limestone, reserves, 16. Lubricants, other products projections, 129. M Magnesium, 73-77. basic processes for producing primary, 74. free world position, 75. prospects and problems, 75. scrap and imports, 74. Magnesi um—Continued security considerations, 75. situation in brief, 73. stockpile, national, 75. supply and consumption of in the United States (table), 74. technology governs future demand, 74. United States position, 73-75. United States supply, 74. use, 73. Manganese, 21-24. and the alloying metals, supply problem, 16. conservation in use, 24. demand and supply, 22-23. deposits, U. S. reliability of data, 154. future outlook, 155. free world, steel production and estimated manganese consumption (table), 23. free world, rest of, position, 22-24. projection of ore demand, 135. world production and consumption of ore by countries and by regions, 1950 (tables), 23. projections, 125. prospects and problems, 24. recovery from low-grade ores, 24. recovery, technologic factors in, 151. reserves and potential resources, 151. free world known (table), 23. resources: according to contaminants, summary of (table), 153. according to geologic or mineralogic type, summary of (table), 153. cost and availability of, 152. foreign, 154. United States according to grade, tabular summary of the (table), 151. principal deposits (table), 22. world—exclusive of the United States, tabular summary of, 154. security considerations, 24. situation in brief, 21-22. stockpiling, 24. United States position, use and supply, present and future, 22. waste recovery, 24. world production and consumption bv regions, 1950 (table), 23. Materials cost, determining factors in, 3. Materials demand projections: for 1975, 5, 111-136. for free countries (table), 131. Australia and New Zealand, 131. Canada, 131. Free Europe, 131. Japan, 131. United Kingdom, 131. for free world, 131-136. additive metals, 134-135. aluminum, 134. antimony, 134. copper, 132-133. fluorspar, 135. iron, pig, 134. iron ore, 134. lead, 133. manganese ore, 135. rubber, 135. steel, crude, 134. sulfur, 135. tin, 133-134. zinc, 133. Page 207 Tungsten (see also Additive metals), 25, 28-29, 125. reserves: potential resources, 161. foreign, 162. United States, 162. world, estimated (table), 162. Turkey, chromium production in, 27. u United States: Economy, pattern of growth of, by Quarter Centuries, 5. foreign economic policy of the, 131. materials demand. See Materials demand projections, U. S., and passim. v Vanadium (see also Additive metals), 25, 29. z Zinc, 45-49. consumption, 1950, 121. deposits, domestic, submarginal, 149. die castings, 121. end uses, 121. free world: major producing countries of the (table), 47. production and consumption, geo- graphic pattern of (table), 47. free world, rest of: position, 47-48. position, 1950 and estimated 1975 (table), 48. use and supply, future and present, 47. projected demand for, 133. ores, metal content of, 148. projections, 121. prospects and problems, 48, reserves, domestic, 149. Zinc—C on tin ued resources, foreign, 150. rolled, 121. scrap, 122. security considerations, 48-49. situation in brief, 45. United States: imports must more than double, 47. supply, outlook for, 46. production, pattern of, 46. projected demand for, 121. position, 45-47. 1950 and projected 1975 (table), 47. use (consumption), and supply, futur and present, 45. scrap supply, domestic, 47. Zirconium, 78-79. ores plentiful, 78. prospects and problems, 78. situation in brief, 78. small tonnage, metal, 78. Page 210 RESOURCES for FREEDOM Volume III The Outlook for Energy Sources A Report to the President by THE PRESIDENT'S MATERIALS POLICY COMMISSION June 1952 * , IN FIVE VOLUMES Volume I—Foundations for Growth and Security Volume II—The Outlook for Key Commodities Volume III—The Outlook for Energy Sources Volume IV—The Promise of Technology Volume V—Selected Reports to the Commission * UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1952 For sale by the Superintendent of Documents. U. S. Government Printing Office Washington 25, D. C. - Price 50 cents DEPOSITED BY THE INITED STATES OF AMERIGA RESOURCES for FREEDOM Volume III—The Outlook for Energy Sources The Commission William S. Paley, Chairman George R. Brown Arthur H. Bunker Eric Hod gins Edward S. Mason The Executive Staff Philip H. Coombs William C. Ackerman Executive Director Executive Secretary Max Isenbergh General Counsel Norvell W. Page Editorial Director Foreword and Acknowledgment In publishing separately the commodity studies that deal with the major sources of energy for the United States and the free world, the Commission seeks to emphasize the strong interrelationships among energy sources. Equally important, it wishes to stress the basic importance of ample*low-cost energy, along with technology, as the foundation on which industrial growth is built, and a prime essential in supporting national security. The studies presented here—on oil, gas, coal, and electric energy—were pre- pared to assist the Commission's analysis of this important field. Recommendations are not made here; volume I of this Report gives the Commission's findings and views, and lays special emphasis upon the key point of the energy problem: the fact that all sources of energy must be considered not as separate entities but as the related parts of an essential whole. Here, the Commission wishes to express its thanks to the staff members who prepared these studies, and to the many consultants, both in Government and industry who, during the preparation and later review, assisted the staff and the Commission. The original staff work on coal was done by Fred H. Sanderson; on electric power, by Herschel F. Jones; on natural gas, by E. Wayles Browne; and on oil, by Cornelius J. Dwyer. Mary E. McDermott assisted on the oil study, and John G. Godaire gave general assistance as statistical analyst. The staff was supervised by Robert Blum during the period of the original staff work and preliminary writing. In the preparation of the final reports, the major analytical and writing contributions were made by Sidney S. Alexander, with the assistance of David W. Lusher on the report on electric power. Samuel G. Lasky served as editor of the volume. The consultants who assisted in the preparation of these studies are Eugene Ayres, Walter E. Caine, Walker Cisler, David E. Cohn, E. L. DeGolyer, Edward Falck, Martin G. Glaeser, W. F. Hahman, Serge B. Jurenev, R. A. Kampmaier, George A. Lamb, A. I. Levorsen, Walter J. Levy, Louis C. McCabe, E. W. Morehouse, Philip Sporn, John R. Thomas, Jack L. Ziercher, and Hanina Zinder. They provided valuable data and suggestions, but did not necessarily support the conclusions of the Commission. Letter of Transmittal June 2, 1952. Dear Mr. President: As a part of the task which you assigned us, we present volume III of our Report, entitled "The Outlook for Energy Sources." It discusses the present and estimated future use and supply of energy as derived from the principal sources— oil, natural gas, coal, and waterpower—and the special problems for each of these sources. Energy is an integral element with materials and technology in the continued economic growth of the United States and the rest of the free world. The studies that make up this volume, therefore, figured importantly in the Commission's appraisal of the materials position of the United States and formed the basis of the recommendations made in volume I concerning the expansion and efficient use of the Nation's energy resources. In preparing these analyses, the Commission staff received the assistance of many individuals, both in Government service and in private industry, who are especially qualified in the energy field. Respectfully submitted, The President, The White House. Contents Foreword and Acknowledgments Letter of Transmittal Page THE OUTLOOK FOR ENERGY SOURCES Introduction, Four Studies on Energy, p. 1 Chapter 1, Oil The Situation in Brief 2 Use and Supply in the United States 2 Future Use and Supply 4 Rest of the Free World 9 Problems of Public Policy 10 Chapter 2, Natural Gas The Situation in Brief 15 Use and Supply of Natural Gas 16 The Future of Natural Gas 19 Special Problems 21 Chapter 3, Coal Page The Situation in Brief 24 United States Demand and Supply 24 Production and Productivity 25 The Problem of Coke 27 The Cost Outlook 27 Coal in Other Free Countries 29 Energy Economy of Western Europe 29 Japan's Coal Needs 30 Canada Looks to U. S. Coal 30 Chapter 4, Electric Energy The Situation in Brief 31 Rapid Growth of Electricity 31 Future Demand and Supply 32 The Problem of Security 34 Expansion in Fuel-Electric Generation 35 Opportunities in Hydroelectric Energy 36 Other Opportunities 38 Electricity From Nuclear Energy 39 Electricity in Other Free Nations 39 VII The Outlook for Energy Sources Introduction Four Studies on Energy In this third volume of its Report, the Commission presents the basic studies which helped its analysis of the outlook for energy sources and provided foundations for its recommenda- tions in this field. The four studies interconnect at many points. The survey of the problems, and the approaches to solutions, of liquid fuels includes not only petroleum but the possibilities of extracting oil from shale. The discussion of coal and lignite necessarily includes the possibility of extracting liquid fuels, or gas, from these sources, as well as their use for thermal generation of electricity. Natural gas was considered not only as a fuel, but as a tool for helping to lift oil from under- ground pools. Hydropower is only a part of the electricity supply study because electricity generated by burning coal, gas, and oil is such an important part of total production. Necessarily, the divisions between the studies have been somewhat arbitrary—the interrelations are much more im- portant than the separations. As the brief discussions of volume I make clear, a supply of energy sufficient to meet the total de- mand of the United States can be achieved without prohibitive increases in real costs only if the Nation looks at its energy resources as a whole; only if it exploits fully the shifting interrela- tionships among various sources of energy; only if it takes the fullest economic and technical advantage of the flexibilities in end-use, in distribution, in drawing on each energy source for its best and most efficient contribution. Moreover, the energy position of this Nation must be judged and acted upon in the light of energy needs and resources of other free nations. These studies therefore complement the volume I discussions and in turn are supported by various studies in other volumes, partic- ularly those in volume IV, "The Promise of Technology," which report on advances that engineering has made, or may be expected to make, in improving use, extraction, and distribu- tion, as well as on the potentialities of synthetics and fuel byproducts. The estimates of future demand herein follow the same pat- tern applied to key commodities in- volume II—an approxi- mation of the situation in the decade of the 1970's, with 1975 chosen as a typical year of that period. Projections of United States energy demands for 1975 were based on the Commis- sion's assumptions on population growth and increases in the total national production of goods and services, and the premise that international tension will continue but that a third world war will be prevented. These projections are not offered as predicitions but only as possibilities neither optimistic nor pessimistic, which can form a prudent basis for analysis and recommendation. The chapter in volume II, "Projection of 1975 Materials Demand," discusses the application of the Commission's assumptions to the individual energy sources. Some of the projections in that chapter and in this volume vary slightly from the energy estimates in volume I, which were not based exclusively on demand assumptions. Estimates of reserves follow the findings of the chapter on "Reserves and Potential Resources" in volume II. Security considerations have been important in analysis of the adequacy of energy supply, particularly of petroleum. The essence of the energy problem—the total energy problem which in this volume is dissected in individual studies—is that huge further expansion of supply must be accomplished in the face of limitations upon the free world resource base which threaten to force real costs upward and which might, in event of war, cause serious shortages. It is pertinent to repeat here, as summarizing the total energy problem which industry and Government together must attempt to resolve, the four questions which the Commission attempts to answer in volume I, with the help of the analysis presented in basic studies printed here: Does the United States have the natural resources—the petro- leum and gas, the coal, the waterpower—to provide enough energy for the future? Will the real costs of energy be forced upward, and will any resultant rise retard economic growth? In the event of all-out war at any time in the next 25 years, will the United States and its allies have enough fuels and other forms of energy to support full economic mobilization and maximum fighting strength? What opportunities are there for strengthening the long- term energy position of the United States and other free nations, and what will it take to develop these opportunities? Page 1 Chapter 1 Oil The Situation in Brief The free world's demand for oil products can be expected to continue to grow vigorously over the next quarter century. Consumption may be expected to double in the United States, triple in Europe, and possibly quadruple elsewhere. Free world oil demand, about 10 million barrels daily in 1950, may ac- cordingly approach 27 million barrels in 1975. The free world's liquid fuel resources can support this tre- mendous increase in demand. The geological basis for greatly increased crude petroleum production is clearly visible in the Middle East, and prospects in Venezuela, Canada, and else- where in the Western Hemisphere are favorable. In the United States, however, the outlook is somewhat uncertain. This country is presently producing about half the world's oil on the basis of less than 30 percent of the world's proved reserves and of probably a considerably smaller fraction of the world's undiscovered deposits. Oil is still being discovered in this country more rapidly than it is being produced. The prevailing view in the petroleum industry is that there is no lack of places in which the search for oil may be successful, so that greater knowledge, improved technology, and increased exploratory work give promise of large supplies for the foreseeable future. There are, however, some signs that the cost of new discovery and development is rising, as measured in dollars of constant purchasing power, though these signs are as yet far from clear-cut. Ultimately the growth in United States crude production will have to taper off as it becomes increasingly difficult to make new dis- coveries. In any case, production prospects are better abroad, so that it will be economical for the United States to turn to imports to meet an increasing proportion of its growing demand for oil. At some point it will also pay to supplement supplies increasingly with liquid fuels derived from the Nation's abun- dant reserves of oil shale, coal, and lignite. The gravest problem is the threat to the wartime security of the free world implicit in the pattern of world oil supply that is taking shape. The Eastern Hemisphere, and Europe in particular, is coming to depend on huge imports of oil from the Middle East, which must be considered more vulnerable to attack by a potential enemy than are Western Hemisphere sources. Oil is even more urgently needed in war than in peace, and sources of supply and transportation routes may be vulnerable to enemy attack. There is accordingly required a continuously operative joint Government-industry program of preparedness to meet a wartime emergency. A balanced reserve capacity to produce oil in the Western Hemisphere, and to transport and refine it, must be kept in being along with an ability to expand this capacity further in wartime as required. In the near future an emergency cushion can be maintained as part of the normal structure of the industry, but additional arrangements are necessary to preserve the basis of wartime expansion for the more distant future. As free world depend- ence on vulnerable sources grows, emergency expansibility of production in secure areas must also grow. There are two principal methods by which this end may be achieved: first, proved reserves may be set aside to be used only in an emergency; second, peacetime oil production may be so conducted that output can be greatly increased in a reasonable time. The second method must eventually include the ability to increase output through rapid buildup of shale oil production capacity and possibly of synthetic production from coal. In the less distant future, however, it seems more economical to maintain an emergency capacity to increase pro- duction through the drilling of additional wells in known fields. Government (both Federal and State) and industry should therefore work toward the encouragement of exploration, and of so conducting operations as to preserve maximum expansi- bility consistent with economic operation of petroleum pro- duction. In particular, the development of the Continental Shelf should be so governed as to provide a basis for a large expansion of production in an emergency. In addition, Government research should continue to be directed toward bringing the production of oil products from shale and from coal-based synthesis to a stage where it is commercially attractive. Moderate financial assistance should be given to private companies that are ready to go ahead with commercial production of shale oil or of oil from coal. Such developments can reasonably be expected to lead to improve- ments and cost reductions that promise to make our tremendous resources of oil shale and coal the basis of wartime oil security and long-run oil supply. Great advances have been made in the oil producing States toward the conservation of oil through use of more efficient methods of production. The adoption of these methods has been closely associated with State regulation of production directed primarily at adjusting production to demand. The principal obstacle to the adoption of the most efficient known produc- tion practices at present is to be found in the difficulty of apply- ing these practices while protecting the correlative rights of separate owners of a common oil reservoir. Further advances in conservation must be made not only to increase ultimate recovery of oil and to avoid the wastes of excessive drilling of wells, but also to support the increasing emergency expansi- bility of production that will be required for wartime security of the free world. USE AND SUPPLY IN THE UNITED STATES In the past 50 years, petroleum has changed from an in- significant to a major factor in thctotal energy supply of the United States. Together with natural gas, which is found ,/Targely as a byproduct of the search for oil, it accounts for well over half of the Nation's present energy supply, compared to less than one-tenth at the turn of the century. ,, The United States used more than 2l/$ billion barrels of petroleum in 1950 (6.5 million barrels a day), three times as Page 2 much as in 1925. The rapid development of automobile, bus, and truck transportation created an enormous market, and the superiority of liquid fuel for rail and water transportation resulted in the extensive displacement of coal in those fields. In addition, liquid fuel has many advantages in residential and commercial heating and in many industrial uses, and along with natural gas has taken from coal large sectors of these markets. Table I shows the total consumption of oil products in 1929 and 1950 and the portions going to various major uses. Table I.—Consumptio: of petroleum products i '1929 and 1950 the United States, Total domestic consumpti Annual Daily Transportation: Highway Railroad Water Air Total transportation Residential and commercial Industry and agriculture: Manufacturing and mining. . Generation of electricity Manufacture of gas Agriculture Total industry and agriculti Miscellaneous 2 Nonfuel uses Grand total 1 0.05 percent. 2 Not allocable. The decline in this category from 1929 to 1950 undoubt- edly reflects more complete statistical information for 1950. Sources: 1929—Adapted from Bureau of Mines Report ojInvestigations, 4805> W. H. Lyon and D. S. Colby. 1950—Bureau of Mines, Annual Petroleum State- ment, No. P 347; and Mineral Market Report, MMS 2003. , Although transportation has dominated the great increase of oil consumption since the beginning of the century, the share used by transportation has actually declined from 1929 to 1950, while that of residential and commercial use more than tripled. Fuel oils, which are derived as joint products with gasoline, kerosene, and lubricants, have come to find a substantial market. A wide variety of other products is also obtained from crude oil—such as wax, asphalt, road oil, coke, and chemicals. The four major bulk petroleum products—gasoline, kero- sene, distillate, and residual fuel oil—serve some uses in com- mon, although each is used predominantly in one or two fields, as shown by table II. Oil products used for stationary heat and power furnish en- ergy in close competition with other fuels, while in transporta- tion and in special uses, other fuels are not closely competitive. The principal concern for future oil supplies therefore cen- ters upon transportation fuel and special products. An inade- quate supply of liquid fuel to meet transportation demands would raise very serious problems, since a shift to nonliquid fuels for transportation would be difficult and expensive. Fortunately such a shift need never be required. Should domestic supplies of crude petroleum become inadequate and foreign crude supplies unavailable, the problem could be met over the long run not only through recourse to synthetics from oil shale and coal, as described later herein, but also in part from a shift in the pattern of use. Coal, for example, could be used in many stationary heat and power applications, and more distillate could be used as diesel fuel. A whole series of readjustments would take place, the net effect of which would be to permit an increased proportion of oil products to go to uses where the liquid form has special advantages. Meanwhile synthetic liquid products from oil shale and coal might find substitution possibilities over a broad range of uses, both station- ary and in transportation. AN OUTSTANDING SUPPLY PERFORMANCE Many materials are possible sources of liquid fuels: crude oil, natural gas and natural gas liquids, oil shale, coal, lignite, and tar sands. Crude oil, however, is now the overwhelmingly dominant source, as shown in table III. Production and consumption of oil in the United States have grown vigorously since 1859, when Drake's well was brought in, the date conventionally regarded as the origin of the petroleum industry in this country. In the following year about half a million barrels were produced; in 1950 (90 years later), more than 4,000 times as much (table IV). In the early days of the industry, the principal demand was for kerosene for illumination, but after the First World War gasoline became the leading product in volume and value of production. In 1951, for the first time since 1929, consumption of distillate Table II.—Consumption oj major petroleum products in the United States in 1950 and the portion going to each principal u Consumption (millions of barrels) Use (percent of total consumption of the product) Product Annual Daily Percent of Transpor- Residen- tial and Industry and agri- culture All other Total sumption of all products oline 994 118 2. 7 42 88 7 5 100 .3 5 7 87 6 100 395 17 21 60 15 100 554 1. 5 23 33 13 53 100 39 .'8 2 59 41 100 275 17 38 45 100 (, No. P 347, and Mineral Market Report, MMS 2003. Page 3 Table III.-—United States supply and demand, crude oil and petroleum products, 1950 Annual (millions of barrels) Daily (thousands of barrels) Percentage of total supply or demand Item Supply Domestic production: Crude oil 1, 974 182 5, 407 499 79. 4 7. 3 Natural gas liquids Total domestic produc- tion 2, 156 5, 906 86. 7 Imports: Crude oil 178 120 12 487 329 34 7. 2 4. 8 . 5 Residual fuel oil Other products Total imports 310 850 12. 5 Total new supply 2, 466 20 6, 756 56 99. 2 . 8 Stock withdrawal Total supply 2, 486 6, 812 100. 0 Demand Domestic consumption 2, 375 6, 507 95. 5 Exports: Crude oil 35 16 60 95 44 166 1. 4 . 6 Residual fuel oil Other products 2. 5 Total exports 111 305 4. 5 Total demand 2, 486 6, 812 100. 0 Net imports 199 545 i 8.0 1 8.4 percent of domestic consumption. Source: Bureau of Mines, Annual Petroleum Statement, No. P 347, and Bureau of the Census. and residual fuel oil together exceeded gasoline consumption by volume. Along with this greatly increased volume of production, the quality of motor fuels, lubricants, and other products has been steadily improved and the real cost of refining greatly reduced, and all in all the technical performance of the petroleum industry has been outstanding. Prices of petroleum products, / measured in dollars of constant purchasing power, were more than 16 percent lower in 1950 than in 1925, in spite of a 24 percent rise in the price of crude oil in constant dollars. Table IV.—Production and consumption of petroleum in the United States, selected years, 1900 to 1950 [Millions of barrels] Production, Consumptioi i crude oil and natural gas liquids Year Gasoline Other products Total 1900 64 0) 0) 1910 210 0) 0) 0) 1920 454 101 355 456 1925 792 224 503 727 1929 1, 063 376 564 940 1940 1, 412 589 738 1, 327 1950 2, 156 994 1, 381 2, 375 Not available. Source: Bureau of Mines. Spectacular as the growth has been, however, it has not kep up with the enormous growth of consumption, and late in 194"/ petroleum imports began to exceed exports. The United State has shifted from its former position as the world's largest ex porter of petroleum to being one of the largest importers. Ir 1950, net imports were 545,000 barrels a day, or 8.4 percent o domestic consumption. (Table III.) FUTURE USE AND SUPPLY The consumption of petroleum products in the United State: can be expected to grow vigorously though at a percentage rat( considerably below that of the past 25 years. Total demand foi petroleum products by 1975 has been projected for the Com- mission at slightly more than double the 1950 amount, as indi- cated in table V. The projected rise may be compared with a 4^4-fold expansion of gasoline consumption, and a 2%-folc growth for other oil products in the preceding 25 years. Th( slackening rate of growth of gasoline consumption is expectec principally as the result of a slowdown in the increase in the number of passenger cars, which are projected to consume ir the aggregate only about 75 percent more motor fuel in 1975 than in 1950. Table V.-—United States domestic demand for petroleum products 1950 and projected 1975 [Millions of barrels] Product 1950 Projected 1975 Annual Daily Annual Daily Motor fuel1 994 2. 7 2, 085 5. 1 Kerosene and distillate fuel 513 1. 4 1, 180 3. 7 Residual fuel oil 554 1. 5 1, 110 3. 1 Lubricants 39 . 1 75 . 2 Other products and losses 275 . 8 550 1. 5 Total 2, 375 6. 5 5, 000 13. 7 1 1950, gasoline only; 1975, gasoline, highway diesel and LPG, and aviation fuel. Source: 1950—Bureau of Mines, Annual Petroleum Statement, No. P 347. 1975—See vol. II, Projection of 1975 Materials Demand. These projections should be considered not as predictions but only as the most plausible assumption of future tendencies. Should there be long-run stringency in oil supply, the con- sumption of fuel oils might decrease significantly, inasmuch as competitive fuels, coal in particular, stand ready to invade the market. On the other hand, if future technological ad- vances make possible an increased use of fuel oil for transpor- tation and other special purposes, demand might increase by / more than is projected. The principal question raised by a doubling in demand for oil, accordingly, is how the increased demand for transportation and other special uses is to be met, at what cost and with what safeguards for essential supplies in the event of war. RESERVES AND DISCOVERIES The future rate of oil production in the United States will depend primarily on the rate of discovery of additional reserves Page 4 relative to demand. Proved reserves of crude oil and natural gas liquids at the end of 1951 are estimated at 32 billion barrels,1 13 times 1951 production and 12.5 times 1951 domestic con- sumption [1]. This is a fairly normal relationship between reserves and annual production, since over the past 30 years proved crude oil reserves have characteristically averaged from 12 to 13 times annual production, as shown in table VI. Table VI.—United States petroleum reserves, new discoveries, and new developments compared with annual production [Annual averages] Period Millions of barrels Ratio to annual Produc- Proved (Dec."?!) mentsPi" Proved dmenT 1901-1910 137 305 772 1,068 3, 740 5, 870 9, 610 14, 530 20, 203 23, 112 27, 468 297 575 1,412 1, 608 27. 3 19.2 2. 2 1. 9 1. 8 1. 5 1. 2 1911-20 1921-30 12. 4 1931-40 13. 6 13. 1 12.4 12.4 1941-45 1, 542 1,868 1, 902 1946-50 2, 934 4,414 1. 6 1951 2, 214 2. 0 Ltaun, HYDROCARBONS 1951 (total). . . 2, 481 32, 193 5, 138 13. 0 2. 1 1 New discoveries and developments each year are composed of new discoveries, running about 16 percent of new reserves proved in recent years, and extensions and revisions of previous discoveries, running about 84 per- Source: 1901 to 1949—Petroleum Facts and Figures, 9th ed., pp. 182 and 189. 1950-51—American Petroleum Institute press release, Mar. 12, 1952. Public judgments of the prospects for future petroleum sup- plies have frequently been distorted because of popular miscon- ceptions concerning the nature of proved reserves. Time after time the fact that proved reserves were equivalent to only about 12 to 15 years' production has come to the attention of publicists who have then sounded the alarm that the United States was about to run out of oil. Reserves must be considered not as thev total reservoir from which all future production is to be drawn, but as the basis of operations, a sort of working inventory. Proved reserves are indeed like a reservoir, but a reservoir into which there is an inflow as well as an outflow. The fact that at any one time reserves are only a little more than a decade's outflow need not of itself be alarming if a steady inflow can be anticipated. The future position of United States oil production can accordingly be gaged not by the size of proved reserves but by the prospects for future discoveries relative to future demands on production. If United States domestic production is to keep pace with y the projected growth of consumption over the next 25 years it would have to increase at a rate of about 3 percent per year—to about 4*4 billion barrels in 1975, allowing for a proportionate rise in imports. To support this growth, new reserves proved each year must on the average replace the pro- duction of that year plus a net addition of 3 percent of total reserves to permit the latter to increase in proportion to the 3 percent growth in annual production. Since reserves average about 13 years' annual production, 3 percent of total reserves equals about 40 percent of annual production. New discoveries and developments must accordingly run about 1.4 times annual production. Except during the Second World War when the steel shortage greatly limited exploration, and in the depression of the thirties when incentive for exploration was small, new discoveries and developments have exceeded this ratio by a considerable margin. In 1951, the year of greatest gross addi- tion to reserves, new discoveries and new developments were more than double production, which also set a new high. The petroleum industry is confident that,, given a favorable economic and political environment, it can continue for a long time to meet the growing demands upon it. It is generally accepted, however, that at some time in the future the job will become considerably more difficult, but there is a broad difference of opinion as to when that time can be expected. Its approach will be indicated fairly well in advance by two s' closely related developments: (1) failure to provide new dis- coveries sufficient to support the growth of production and (2) increased cost of discovering and developing oil relative to the general price level. IS COST OF DISCOVERY GOING UP? As indicated in table VI there is as yet no evidence of fail- ure to discover reserves adequate to support growing produc- tion. Any indication of future supply difficulties must therefore be sought in evidence of increased costs of crude oil. The total cost of crude oil is composed of three elements: the cost of finding new supplies, the cost of development, and the cost of lifting. In 1948, according to one estimate, finding and de- velopment each accounted for about 40 percent, and lifting for about 20 percent, of total cost [2]. Because of more wide- spread application of improved recovery methods, which should more than compensate for the additional difficulties of pro- ducing oil from ever greater depths, the average cost of lifting a barrel of oil is likely to decrease over the next 25 years. The principal factors therefore will be those affecting the costs of discovery and development. Experts consulted by the Commis- sion agreed that these costs can be expected to rise in the United States in the future, but there is a considerable differ- ence of opinion as to the magnitude of the cost increase. Two sets of estimates are given in table VII, from which it appears that there was a rise of about one-third in the cost of finding and developing a barrel of proved reserves of crude oil between 1927-30 and 1936-41, and a further rise of the order of 15 percent to 1947—50. But for every barrel produced (as contrasted with discovered) the oil industry spends only very little more in constant dollars on finding and developing than in the past. These estimated expenditures are, however, subject to a wide range of error. Except in the depression of the thirties, about 25 barrels of new oil reserves were proved for each foot of well drilled since 1925. See table VIII. At the same time the cost of each foot drilled is reported to have gone up, from $4.30 per foot in 1939 [3] to $9.44 [4] per foot in 1947, or $5.60 in 1939 dollars. Page 5 Table VII.—Estimated expenditures for finding and developing oil in the United States per barrel of new reserves proved, and per barrel produced [Constant dollars 1950 purchasing power] Expenditures per barrel proved 2 Expenditures per barrel produced 3 Period A< | B s A * B * 1927-30 0. 37 0. 85 1936-41 .51 0. 56 . 98 1. 08 1947-50 6 0. 64-0. 56 • 1. 02-0. 92 1 Original expenditures converted to 1950 purchasing power on basis of implicit price deflators for gross national product, 1929-50. Department of Commerce, National Income Supplement to Survey of Current Business, 1951, p. 146, table B. 1927 and 1928 implicit deflator estimated by P. M. P. C. staff. 2 Total new crude oil reserves proved as estimated by the American Petroleum Institute. 3 Crude oil produced, as reported by the Bureau of Mines. * Petroleum Administration for War, Production Division, November 1943, "Survey of Expenditures for Finding, Developing and Producing Crude Oil in U. S., 1927-42." 5 1936-45—estimated expenditure from "Capital Requirements of Crude Oil Production" by Pogue and Coqueron, Mining and Metallurgy, October 1946, p. 503. 1946-50—Based on data compiled by Pogue and Coqueron for 30 oil companies and published annually by the Chase National Bank. 6 Higher figure on basis of crude only; lower figure on basis of crude plus natural gas liquids (total liquid hydrocarbons). Table VIII.—New crude oil reserves proved relative to footage drilled in the United States, 1925-51 [Annual averages] Total footage drilled (mil- lions of feet) Total reserves proved (millions of barrels) Reserves proved per foot drilled Period (barrels) 1925-30 77 1,890 24.5 1931-34 45 507 11.2 1935-41 89 2, 289 25.6 1942-45 77 1, 886 24. 5 1946-51 137 i 3, 181 (3, 614) i 23. 2 (26. 3) 1951 174 14,414 (5,138) > 25. 3 (29. 5) 1 Figures in parentheses refer to total liquid hydrocarbons (crude oil plus natural gas liquids). Source: Footage drilled, World Oil, Feb. 15, 1951, p. 95, and Feb. 15, 1952, p. 113. Reserves: American Petroleum Institute. As to the number of dry holes drilled relative to the number of successful new-field wildcat holes, statistics prepared an- nually by the American Association of Petroleum Geologists [5] / show that among new field wildcats the ratio has remained about constant since 1944 at 8 to 1. Data for new field wildcats are not available for the years before 1944, but the ratio of dry holes to producers among all exploratory wells (including out- post wells to determine the outer boundaries of a known field and tests for new pools in old fields, as well as new field wild- cats) is reported to have dropped from an average of 6.9 to 1 in 1938-41 to an average of 4.1 to 1 in 1947-50 [6]. Various sources of information differ as to the total number of wild- cats drilled in various years but one Government agency con- cludes that "the ratio of successful to total completions has not declined significantly during recent years. In other words, a wildcat drilled today has as good a chance to be a producer as it would have had 10 years ago" [7]. All in all, the available evidence gives some support to the argument that discovery and development of oil in the United States are becoming more costly, but this conclusion is not clearly established. It cannot be doubted, however, that at some time in the future, discovery in this country will become much more difficult, with attendant rises in cost, so that eventually alternatives to domestic crude oil production must be sought. ULTIMATE DISCOVERY POTENTIAL Various estimates have been made of the amount of oil that can be expected ultimately to be found and produced in the United States. One well-known estimate, made in 1948, was 110 billion barrels—the sum of past production, current proved reserves, and estimated total future discoveries of economically producible oil [8]. The United States had already produced 35 billion barrels by the end of 1947, and proved reserves were about 21 billion, so that according to this estimate only about 54 billion barrels remained to be discovered and 75 billion to be produced. The most serious challenge to this estimate is the continued success, since the estimate was made, in discovering oil roughly in proportion to the exploratory effort. Within 4 years, about 14 billion barrels of new reserves, or over 25 percent of the 54 billion barrels of oil estimated as discoverable, were proved, with no sign of a declining rate of discovery. In addition, a large part of the new reserves proved was found in areas con- sidered already intensively explored. Thus there is a pre- sumption that considerably more oil remains to be found and recovered than the above estimate indicates. Past estimates of ultimate discovery have all turned out to be much on the low side, and while this does not necessarily apply to all sub- ^sequent estimates, it does support the conclusion that future prospects for oil production must be inferred continuously from the success currently being encountered in exploration and discovery rather than from estimates of how much may ultimately be discovered. IMPROVING RECOVERY Only about 40 percent of the total oil-in-place in the average petroleum reservoir can be economically recovered at current prices with techniques currently used. The percentage recover- able varies with the characteristics of the reservoir, especially with the type of drive that forces the oil to the surface. Accord- ing to modern theory there are three general types of drive, /often found in combination: water drive, expanding gas-cap drive, and dissolved-gas drive. An extraction rate of 85 percent has been achieved by water drive in the east Texas field. It is believed that the remaining 15 percent, consisting of oil ad- hering to the surface of the sand particles, could not be extracted without actual mining and retorting. An expanding gas-cap can produce from 20 to 40 percent of the oil-in-place, while dissolved gas alone yields on the order of 10 to 20 percent. Considerable advance has been made in the past 20 or 30 years in understanding the performance of petroleum reser- voirs. This improved knowledge has led to the development of important practices for conserving and augmenting reservoir energy or otherwise improving recovery. The principal tech- Page 6 niques involved are the return of gas or water to the reservoir to maintain the drive, or the introduction of gas or water from other sources to augment it. Methods such as these have been successfully used in secondary recovery, in order to aug- ment reservoir energy after the economic production limits by primary recovery methods have been reached. In 1947 it was estimated that there were more than 7 billion barrels of recoverable secondary oil in the United States, and in 1950 one authority ventured the guess that probably twice as much was physically recoverable [9]. Only such portions of these reserves as are found in fields where secondary recovery is now under way are included in estimates of the country's proved reserves. Of course, to the extent that full advantage is taken of the best techniques in primary production, the amount left for second- ary recovery decreases. To some extent the adoption of methods to improve recovery is waiting until higher costs of discovery make secondary recov- ery a more attractive alternative method of increasing supplies. There is relatively little present interest in some of the techniques of increasing recovery because the cost per extra barrel recov- ered is higher than that of finding and developing new oil. Nevertheless, some improvements may in fact be striking enough to lead to their widespread adoption even in the absence of a rise in the cost of finding oil. Secondary recovery or repressuring operations are likely to be practical in many cases only if arrangements can be made for unit operation of each program. Inasmuch as each program is likely to affect the oil pool as a whole, it can most advantage- ously be carried on if applied to the whole pool. It would not, for example, generally pay an individual leaseholder of a small part of a pool to attempt gas injection. In one of the earlier large- scale repressuring operations (at Kettleman Hills in 1931), considerable waste and loss of efficiency in the development and operation of the pool resulted from the lack of control of 540 acres out of the total of more than 16 thousand [10]. The operation as a whole did achieve some success, but the benefits were minimized for lack of control of less than 5 percent of the acreage. The advantages of unit operation are so clearly marked for repressuring and for secondary recovery that unitization has made considerable progress in these activities in contrast to its rare use in primary oil recovery as a whole. Recovery may be increased not only by maintaining and aug- menting the drive, but also by increasing the permeability of the material through which the oil must travel underground to reach the well. In the great Spraberry Trend of West Texas, many a well would be a dry hole were it not for new techniques of fracturing the impervious rock to create channels through which the oil can flow to the bottom of the well. The amount of oil-in-place in the Trend is now estimated at from 10 billion to 20 billion barrels, but the amount recoverable with present techniques and at present prices is calculated at only 5 or 10 percent. This new fracturing technique, still in its infancy, is now coming to be applied in other localities with similar char- acteristics. It has been estimated [11] that about 175 billion barrels of oil-in-place had been discovered in the United States by Jan- uary 1, 1950, of which 68 billion either had been produced or presumably could be economically recovered with present techniques at present prices. That included 39 billion barrels already produced, 25 billion in proved reserves, and another 4 billion barrels that presumably could be produced by appli- cation of conventional secondary recovery methods to fields where thev were not yet applied. Of the remaining 107 billion barrels, it was calculated that perhaps 65 billion may eventually be recovered. In short it may be possible to increase the re- covery of oil-in-place from the current 40 percent to about 75 percent. Some of the measures that contribute to improved recovery are being encouraged by State regulatory authorities. A bonus of allowable production is given in some cases for the return or introduction of water or gas to the reservoir; and restrictions on the gas-oil ratio permitted lead to the return of excess gas to the reservoir. These regulations make valuable contributions, but they are only part-way measures toward the most efficient operation of each reservoir as a unit. TECHNOLOGY OF EXPLORATION Great advances in the technology of identifying geological structures favorable to oil accumulation have been achieved during the last 30 years. Such geophysical methods as the torsion balance, gravity meter, refraction and reflection seismo- graphs, magnetometer, electrical and radiological well-logging, infrared and mass spectrometers, aerial photography, and a host of others have been of immeasurable benefit. Geochemistry, which has not been used to a great extent in the past, may play a greater role in the future. No technique other than drilling has as yet been discovered, however, for indicating the actual presence of oil in the ground; all that wildcatters can do is to determine the location of possi- ble traps and then to test, with the drill, whether or not oil is present in them. For many years, the rotary drill has been the chief tool in the actual locating of oil deposits. Depths greater than 20,000 feet have been reached. Even more recently, automatic controls have been developed, speeding operations, improving safety, and lowering personnel requirements. New instruments, methods, and concepts in the fields of exploration are being developed all the time. Many areas and types of formations, formerly believed to be valueless, have been reassessed and developed, some as a result of geophysical inter- pretations, others as a result of new concepts and of recognition of new types of accumulation such as fractured reservoirs and stratigraphic traps. Continuing refinements of existing methods and development of new techniques and concepts are necessary if the ratio of productive wells to dry holes is to be kept within bounds. SUPPLIES FROM ABROAD If domestic production of oil cannot economically keep pace with growing demands, the gap can be met by additional imports. How great the imports will be will depend on the size of the demand, the willingness of the United States to accept the imports, political conditions in the producing areas, and their relationships with the United States. The favorable conditions for expanding oil production out- side the United States are reflected in the greater rate of growth of foreign production in recent years. From 1945 to Page 7 1951 annual production of crude oil in the United States increased half a billion barrels or about 30 percent, while in the rest of the free world annual production increased almost a billion barrels or about 140 percent. The 199,000 wells drilled in the United States from 1946 to 1951 brought in new proved reserves of 23.5 billion barrels. In the same period about 400 new wells completed in the Middle East brought in new proved reserves of 27.6 billion barrels. In the Middle East growth of production is presently limited almost entirely by available facilities for transporting and proc- essing the oil rather than by the geological potentialities. This condition is likely to continue for some time. Venezuela, pres- ently the greatest single producing country outside the United States, also has many undeveloped possibilities, probably stand- ing somewhere between the United States and the Middle East in the effort required to maintain and extend production. For example, in the United States 38 percent of the 44,826 new wells drilled in 1951 were dry holes, whereas in Venezuela the corresponding percentage was 11 percent of the 673 wells drilled, and in the Middle East 7 percent of the 91 wells drilled. Production per well in 1950 averaged about 238 barrels per day in Venezuela, about 5,000 in the Middle East, and only about 12 in the United States—or about 40 if stripper wells are excluded. Production per well in the United States in 1950 was somewhat limited by pro-rationing but not by enough to affect the general significance of the comparison. Despite heavy transportation costs, foreign oil is now com- peting in the United States market. At present, however, most United States imports are from Venezuela, with very little from the Middle East since the markets in Europe and elsewhere in the Eastern Hemisphere are more attractive for the oil that can be supplied from the Middle East with the trans- portation and processing facilities that now exist. The cost of finding and producing oil in the Middle East (excluding royalties and taxes) is much below corresponding costs in the United States. Transportation rates are high but super-tankers are becoming available at costs far below present rates. With such super-tankers Middle Eastern oil could be competitively delivered to the East Coast of the United States. To the extent that pipeline transportation is used between the Middle East and the Mediterranean, costs of delivering Middle East crude can be cut even further. Venezuela also is capable of supplying more oil to the United States. As Middle East crude increasingly displaces Venezuelan crude and products in the European markets, Venezuelan supplies could be diverted to the United States and the rest of the Western Hemisphere at prices no higher than at present. Venezuela can accordingly be expected to be the principal source of increased United States imports in the next 10 or 15 years. If, however, greatly increased production is required in Venezuela, it could probably be met only by permitting widespread exploration in areas not now under concession. The flow of oil is of course influenced by factors other than pure economic considerations, in particular, trade agreements and restrictions, currency considerations, national security policies, and the pattern of company interests in production and marketing in various areas. Nevertheless, the fundamental conditions of potential supply of petroleum throughout the free world in the foreseeable future are favorable to support any required imports into the United States. The problems of policy likely to be raised are accordingly the degree to which the United States shall choose to import oil and the reliance that can be placed upon foreign supplies in an emergency. SYNTHETIC OIL FROM SHALE AND COAL Another supplement to domestic supply of liquid fuels can be found in the production of oil products from oil shale or from coal. The oil content of known deposits of oil shale in the United States, located principally in Colorado, Wyoming, and Utah, is far in excess of proved crude oil reserves. The Bureau of Mines estimates the total oil content recoverable at prices ranging up to four times the present price of crude oil to be 500 billion barrels, of which 80 billion barrels in the Mahogany Ledge is presumably recoverable at crude oil prices not much higher than at present. While a major cost of new crude supplies is that of finding the oil, the oil shale is already found. The cost problems of shale oil are those of mining, extraction, refining, and transporting the product to distant markets. The Bureau of Mines has been experimenting for some years on low-cost techniques for mining the oil shale and producing refined products therefrom in a demonstration mine and re- finery at Rifle, Colo. On the basis of this work the Bureau of Mines concluded that gasoline could be made from the shale at a cost comparable with gasoline from crude oil. In April 1950, the Secretary of the Interior requested the National Pe- troleum Council, his official industry advisory group, to make an independent study of the probable cost of production of liquid fuel from shale, as well as a similar study of probable costs of production from the hydrogenation of coal. The Council's conclusion was that, after allowing for the retunxon other prod- ucts, gasoline made from shale on the basis of an operation producing 200 thousand barrels of products daily could be sold in the Eos Angeles market at an average price of 14.7 cents a gallon, allowing for a 6-percent return on invested capital. This compared with Los Angeles prices averaging 12.7 cents per gallon at the refinery on October 6, 1951, for equivalent grades and proportions of gasoline. Some unresolved differences, based principally on the cost of financing, still remain between the findings of the National Petroleum Council and those of the Bureau of Mines, but the two studies: agree fairly closely on operating costs. Whether the process is now economic remains an open question, but all are agreed that the production of gasoline and other products from shale is so close to being economic that any considerable rise in the cost of crude, say of the magnitude of 25 or 30 percent, would almost certainly make the processing of oil shale attrac- tive commercially. The economic rate of production, however, would be limited by such factors as the availability of labor and of water. A study prepared by a consulting engineering firm for the Army Corps of Engineers indicates that output could reach 6,500,000 barrels per day (2,373,000,000 barrels per year) before water supplies are strained if provision is now made to reserve water supplies for this industry. Shale oil thus constitutes a tremendous resource if something goes wrong with the crude oil supply. If, in the normal course of events, the year to year results of exploration for crude oil de- teriorate and costs of oil products from crude rise to meet those of products from oil shale, private industry can be expected to Page 8 begin the building of commercial-scale plants. Although initial operations would be small relative to the total crude production of the country, they must still be fairly large in order to be efficient. Even the smaller commercial plants considered—40,- 000 barrels a day—would produce far more than the thinly populated environs could absorb. A market would have to be sought as far west as California, where demand is expanding most rapidly, or east to Kansas City, St. Louis, and Chicago, where competition from the Mid-Continent field would be encountered. The Bureau of Mines has also undertaken operations in the production of gasoline and other products from coal, using two processes that were extensively relied on by Germany for part of its oil supply in the Second World War. These two processes are known as hydrogenation (Bergius) and gas synthesis (Fischer-Tropsch). The Bureau of Mines has estimated that gasoline and other products could be made by hydrogenation of coal in Wyoming at a cost of 11.1 cents a gallon at the re- finery, competitive with petroleum products. The National Pe- troleum Council estimates that the required selling price would be 41.4 cents. The Council also estimates actual production costs (i. e., all costs except income taxes and return on invested capital) to be 18.4 cents per gallon of total product as com- pared to the Bureau's equivalent figure of 10.2 cents per gallon of total product. The large discrepancy in these two estimates of gasoline costs was attributable to large differences of estimates in the sale value of coproducts, in the amount of total investment required, and in operating costs. These differences have not yet been resolved. The Bureau of Mines retained an independent en- gineering firm to review some of the more important cost factors. The resulting study supported many of the Bureau's figures. The over-all result of the new findings was to raise the Bureau's estimate of actual production costs from 10.2 cents per gallon of total product to 11.4 cents, still substantially less than the corresponding 18.4 cents indicated by the National Petroleum Council. It accordingly appears that, even if shale and coal are not yet competitive sources of liquid fuel, they are not too far away. A number of oil companies have interests in the shale deposits and are actively investigating their commercial possibilities. Synthetic oil from shale or coal thus sets a ceiling on the pos- sible rise of crude oil prices in the long run. Since it is almost certain that shale and coal will eventually provide an important part of our oil supplies, the principal policy issue involved is one of timing—whether to wait for the normal operation of market forces to bring these processes into large-scale operation, or in view of security considerations to speed up their adoption by subsidies at those points where they are already almost commercial. REST OF THE FREE WORLD The rest of the free world consumed in 1950 only a little more than half as much oil as did the United States. Oil con- sumption can be expected to increase much more rapidly abroad than in the United States as the pattern of consumption overseas comes more closely to resemble that of this country. In particular, automobiles and trucks are much less commonly used, but an increase paralleling the growth of motor vehicles in the United States over the past 25 years is in prospect. Furthermore, coal will probably continue to be much more expensive or less freely available in many countries abroad than in the United States. Some important industrial countries will find it necessary to import large amounts of energy fuels, and petroleum from the Middle East is likely to be the most economical form. Consequently, the oil demand of the rest of the free world can be expected to increase even more rapidly than in the United States, possibly increasing between three- and four-fold as indicated in table X. Table X.—Free world demand for crude oil and products [Thousands of barrels per day] Projected 1975 Percent increase 1950-75 Region 1929 1950 Other North America 2, 580 210 170 6, 510 590 600 13, 700 2, 300 2, 300 110 290 283 Total Western Hemisphere. . Europe 2, 960 7, 700 18, 300 138 Africa, Asia, and Oceania 460 300 1, 200 1, 100 4, 000 4, 500 233 309 Total Eastern Hemisphere. . . Free world excluding United States. 760 1, 140 2, 300 8, 500 13, 100 270 275 3, 490 Total free world 3, 720 10, 000 26, 800 168 Source: 1929 and 1950, Bureau of Mines estimates. 1975 for U. S.— vol. II, Projection of 1975 Materials Demand. Adequate supplies should be available to meet even this growth. Not only can the present great exporting areas—the Middle East and to a lesser extent Venezuela—greatly increase their production, but some countries formerly net importers can be expected to increase their output as well. As techniques of finding oil improve, areas previously deemed unfavorable come to have important production possibilities. Canadian production is already growing rapidly and may soon support net exports from that country. Other discoveries may be made in countries not now producing significant amounts of oil. Even in the absence of these new sources of production the Middle East and other major exporting countries appear to have the resources for meeting the projected vigorous growth in demand. The physical basis accordingly exists for an adequate peace- time oil supply at real costs substantially unchanged from those of the present. In the Middle East these potentialities can be realized by drilling more wells and by providing tankers, pipe- lines and refineries to transport and process the oil. In other areas the geological prospects for success in further exploration are promising. The future balance sheet of world petroleum supplies might look something like the hypothetical pattern in table XI, in which projections are compared with actual 1950 figures. This picture is merely one possible shape that the future pattern may take, but it does emphasize the prospective devel- opments that set the background for the future oil problems of the free world. Those developments are a tremendously in- creased level of consumption and correspondingly increased dependence on production in the Middle East and in the Western Hemisphere outside the United States. 206058—52 3 Page 9 Table XI.—Hypothetical pattern of free world oil supplies and demand in 1975 compared with 1950 [Thousands of barrels per day] Region Production Apparent consump- tion Net imports - Net exports-} 1950 1975 I 1950 i 1975 i 1950 1975 United States 5. 910!i 1L 200 6, 450,13, 700 -540 -2, 500 Other Western Hemipshere. 2. 0401 5, 900 1, 190| 4, 6001 -f 850j-f 1, 300 Total Western Hemis- i !I j phere j 7, 950 17. 100 7, 640 18, 300 +3101-1,200 Europe 60| i 300;1, 200 Middle East and other Eastern Hemisphere \ 2, 040 9, 400(1, 100 4, 000 -1, 140 4,5001 +940 Total Eastern Hemis- j , | i phere 2, 100j 9,700 2,300, 8,500! -200 Free worldex eluding United I j '' i States I 4,140! 15, 600 3, 490 13, 100! +650 Total free world ilO, 050i 26, 800,9, 940.26, 800i +110 -3, 700 -4, 900 + 1, 200 + 2, 500 1 Crude oil, natural gas liquids, shale oil and other synthetics. Source: 1950, Bureau of Mines. Illustrative 1975, PMPC. It is quite possible that production in the United States by 1975 may differ considerably from the 11.2 million barrels per day suggested in table XI. If it should be much below, free world dependence on the Middle East and possibly on Western Hemisphere production outside the United States would be correspondingly greater. In view of the wartime essentiality of oil, and the hazards to the Middle East in particular and to world oil supplies and transport in general, the future pattern poses a serious problem of free world security and offers a strong- challenge to public policy to encourage the growth of produc- tion capacity in the United States and the rest of the Western Hemisphere. PROBLEMS OF PUBLIC POLICY SAFEGUARDING SECURITY As the scale of normal peacetime consumption grows, ever greater amounts of oil will be required for essential civilian needs in case of war. Moreover, the scale of military require- ments can be expected to grow rapidly as well. At the same time the dependence of the free world on vulnerable supplies is also likely to grow. Clearly the security problems in oil are likely to become increasingly difficult as time goes on. Wartime petroleum needs can be prepared for only by con- tinuous day to day cooperation between industry and Govern- ment in the countries of the free world. This sort of cooperation made notable achievements in meeting the oil problems of the Second World War, and it is continuing, under the Petroleum Administration for Defense, to yield good results in the United States in the present emergency. The problem must be approached on a world-wide basis. The United States cannot take undue comfort from the prospect that the Western Hemisphere will perhaps remain self-suffi- cient in oi! for a long time. Its friends and allies in the Eastern Hemisphere will become increasingly dependent on the Middle East, but if supplies from that area should be substantially re- duced in time of war, those allies would then have to be sup- plied from the remaining sources, largely in this hemisphere. The pattern of wartime supply and consumption for which preparation must be made is, therefore, a single comprehensive pattern for the entire free world. The initial bottleneck in wartime supply would almost cer- tainly be tankers. The convoying of tankers and wartime con- ditions of port operation would increase turn-around time and so reduce the over-all capacity of the tanker fleet. Tankers would be sunk. Military demands for oil would require deliveries to ports not well equipped for unloading of tankers and storing oil, so that tankers would come to be used as floating storage facilities. All in all it can be expected that, in the absence of the loss of a major producing area, such as the Middle East, tanker availabilities would initially govern wartime supply. If major producing areas (in particular the Middle East) were denied to the free world, tankers from those runs would pre- sumably be available to transport increased production from Western Hemisphere sources. After tankers, the next most critical facilities would be refin- eries. Far more vulnerable than oil fields or even tankers, they offer a tempting target for aerial bombardment and possibly for sabotage. A modern refinery takes from 18 months to 2 years to build under normal conditions, and some of the specialized capacity for products needed in modern warfare takes even longer. Given high priorities for steel, manpower, and compo- nents, refineries can be constructed considerably more rapidly, but at the expense of other parts of the war effort. Finally, there is required the ability to achieve an extraor- dinary increase of crude oil production in secure areas, balanced with corresponding refining and transportation facilities first discussed. The emergency oil production and transportation cushion must be planned for in terms of two time phases: that cushion of "standby capacity" which would be immediately available if war should break out, and the additional increases of capacity and output that could be provided with satisfactory speed after war had started. As a short-term target, officials of the Defense Department have publicly called upon the domestic petroleum industry to provide a reserve capacity within the United States equal to 15 percent of annual consumption (about a million barrels per day at the present consumption level of about 7,000,000 barrels per day). WTith a reserve capacity of this magnitude, the United States could provide its share of allied military demand in the opening phase of a war in the near future. It has not been possible to guarantee the availability of reserve capacity of this magnitude up to now, because of the limited availability of steel. The oil industry has been able to obtain the steel it needed to expand to meet rising demand, but not enough to provide a security cushion. As ample supplies of steel become available, however, the industry will probably be able to carry reserve capacity of 10 or 15 percent of demand. Beyond this reserve capacity, there must be maintained the ability to expand production, refining, and transportation capacity rapidly enough to meet the developing requirements of a war and to offset losses that may be suffered. Refining Page 10 capacity can be fairly rapidly expanded provided sufficient priority is given for the required materials and skills. It re- quires a longer time to construct a sizable tanker fleet. Additional wells can be drilled fairly quickly and crude production thereby increased up to the limits set by proved and semiproved reserves. The most important type of reserve pro- duction capacity in the long run will probably be the preserva- tion of conditions that will permit an emergency campaign of well drilling to bring big returns in increased crude production. At present and for some years such conditions are likely to exist as a normal feature of the petroleum industry. But as time goes on special provisions are likely to be required to insure that Western Hemisphere crude production could be expanded quickly, easily, and by a great amount in the event of war. BUILDING AN "UNDERGROUND STOCKPILE" Since it is not practicable to stockpile huge quantities of crude petroleum in the conventional manner, security needs can be met only by having underground reserves of petroleum, proved and semiproved, that are large enough to support a rapidly expanded and sustained high rate of crude output in the event of war. As the years go by, the normal reserves on which the oil industry bases peacetime production may prove less and less adequate for security purposes. The ratio of output to reserves, although satisfactory in ordinary years may lack sufficient flexi- bility to permit a large and sustained increase in withdrawals during an emergency. Even in peacetime, it is necessary in order to maintain a balanced flow of oil, for the industry to match withdrawals with at least equivalent additions to reserves, and this calls for continued high level of exploration and development. The manpower, materials, and equipment needed to support such effort in wartime are a heavy drain on a tight economy. More- over, there is no guarantee that the use of those resources will provide the oil that is needed. These circumstances must be kept in mind in looking for solutions to the problem of a security reserve of petroleum. In theory, at least, the problem could be eased by making extra efforts to find additional reserves prior to any emergency need and then "sterilizing" them, to be tapped only in the event of a national emergency. Alternatively, the same result might be achieved if industry's working reserves were expanded and then maintained at ab- normally high levels relative to production, thus shifting the ratio of output to reserves. Instead of the usual ratio of 1 to 12 or 13, reserves of 16 to 18 times production might be main- tained, with the surplus left unsterilized but available for stepped up withdrawal should the need arise. An example of the first approach is the Navy's petroleum reserve at Elk Hills, Calif., where crude oil cannot be produced in quantity unless the Secretary of the Navy certifies to the President that an emergency exists and both Houses of Congress pass a resolution authorizing such production. These reserves, which looked big when they were set aside many years ago, are small in the light of today's needs. During the Second World War, peak production on naval reserve lands was less than 1 percent of the national total, and such reserves in 1952 were 2 percent of all proved reserves in the United States. Thus, the Government's security reserves of oil would have to be greatly enlarged to be of any real consequence for the future. This approach has the evident attraction of guaranteeing that the oil would be there if and when it is needed for an emergency, but it also has many practical drawbacks. If the Government sought to build up and set aside large reserves of oil for possible war use, this would involve a prolonged and costly process of buying up private rights to established pools and could prove disruptive to the normal operations of the industry. Possibly a simpler course would be to set aside large portions of the oil lands underlying the Continental Shelf, which is still largely undeveloped but which is believed to contain vast amounts of oil. In either case, pools would have to be sufficiently drilled to determine their size and structure and to insure that they could be put to relatively prompt use in the event of war. Drilling and capping wells, and maintain- ing them in a state of readiness, is expensive and in the case of the Continental Shelf the cost might well prove prohibitive, even if present technical obstacles could be overcome. Beyond this, the "sterilized reserve" approach might involve additional heavy costs to provide standby refining and transportation facilities in the area so that the reserves could in fact be used if needed. These various difficulties could be avoided if private in- dustry, in the course of its normal operations, were permitted to develop the same reserves but were encouraged or required, as the situation warranted, to maintain a stronger reserve posi- tion relative to production than is average custom today. Annual crude production in the United States is averaging 7 to 8 percent of proved reserves, leaving little room for a large and sustained increase of output, but it is noteworthy that private companies are finding it profitable to operate some of the newer and larger pools at rates as low as 3 or 4 percent. If reserves could be expanded more rapidly than output in the next decade so that the national average rate of extraction were lowered to say, 5 percent of proved reserves, then there would be great flexibility to expand output from known reserves in time of emergency. In view of recent experience, this might well be accomplished without altering seriously the normal economics of the industry. The most attractive opportunity for approaching the security problem in this way is provided by the Continental Shelf. If private industry were permitted and encouraged to develop these large underwater oil resources and to overcome the tech- nical difficulties involved, but in such a way as to keep the withdrawals at a rate that could be stepped up with reasonable speed in time of emergency, the Nation's security position in oil would be greatly strengthened. This could be accomplished by leasing arrangements (either by the Federal Government or, if a portion of the rights are awarded to adjacent States, then by State governments) that would specify spacing of wells and rates of withdrawal, coupled with royalty charges sufficiently low to provide adequate incentive. Some of the geologists consulted by the Commission expressed the belief that, even under normal conditions, the industry will find it most economical to produce oil in the Continental Shelf at a lower rate than the current average elsewhere; thus the leasing arrangements indicated above might not require any Page 11 substantial change from what private industry would prefer to do in any event. The same logic applies to all petroleum pools in the United States, particularly the newer ones and those yet to be found. Administrators of Federal oil lands should keep this goal in the forefront of their operations, and State regulatory agencies, which have jurisdiction over the bulk of production, can make a great contribution to national security by seeking the same objective. The main challenge to industry and Government alike is to find ways of achieving a sufficiently rapid expansion of reserves to make possible a ratio between output and reserves compati- ble with both rising national production and a healthy oil in- dustry. Any reasonable measure for encouraging similar results in the other oil-producing nations of the Western Hemisphere would contribute much to the security of the free world. SHALE AND SYNTHETICS Another basis for meeting the security problem is the tre- mendous potentiality of liquid fuels production from shale and possibly from coal and lignite. Constant improvements in cost- reducing technologies may make it possible to expand synthetic production of liquid fuels from these sources on an economic basis and thus ease the security problem. Because of uncertainties as to the future volume of domestic crude petroleum production, the question arises as to whether the Government should accelerate development of synthetic liquid fuels so that they will be available in substantial quanti- ties if the Nation has to rely upon them. Some private com- panies are reported to be prepared to construct small-scale commercial plants for production of oil from shale in Colo- rado if the extra cost of transporting the oil to the nearest refin- ing and marketing area could be met by the Government. This appears to be a promising possibility for acquiring the tech- nical knowledge that would be needed for a rapid expansion of synthetic production in the event of an emergency. EXPLORATION The prospects for future production of crude oil in the United States depend primarily on the rate of exploration and its success. In the past the rate of exploration has been respon- sive to market conditions. Furthermore, discoveries have largely been proportional to the rate of exploration with such year to year variability as is to be expected from the uncertainties inherent in wildcatting. The principal influence of public policy to date upon the rate of exploration for crude oil, beyond the provision of the general legal and social framework in which the free enterprise of the wildcatter can flourish, is to be found in the tax system. In particular, the provisions permitting the expensing of the intangible costs of drilling and the charging of depletion as a percentage of the value of oil produced and sold have acted as powerful stimulants to exploration. If these provisions were removed, wildcatting activities would be sharply reduced with two possible results. Either domestic petroleum prices would eventually rise in response to reduced production, tending to restore the incentive to exploration, or more probably under present circumstances, imports would increase. These tax provisions are discussed in volume I as they apply to the entire minerals industry. The conclusions there reached are in particular applicable to petroleum. It was there recom- mended that percentage depletion be retained because of its strong inducement to risk capital to enter the minerals in- dustries fields but that the rates now provided in the Internal Revenue Code be raised no further. It was also suggested that there is one notable exception to this conclusion—exploration and development costs for minerals should be fully expensible for tax purposes because of the direct incentive this arrange- ment gives for capital to take risks in highly uncertain fields. Such expensing would be likely to be particularly important for the petroleum industry whose annual exploration and develop- ment costs are measured in billions of dollars. CONSERVATION IN PRODUCTION There has been a great deal of controversy over oil conserva- tion, rising largely from two different concepts of waste. One, the absolute concept, regards it as wasteful if any recoverable oil is lost; the other, the economic concept, regards it as waste- ful only to lose oil that could be saved at a cost less than the value of oil. The economic concept need not stop with waste of oil. If, for example, steel and human effort are wasted in drill- ing unnecessary wells, that is as much a matter of public concern as is improper extraction that leaves too much oil behind. Fun- damentally, the economic concept of conservation boils down to eflicientcy of operation and the avoidance of waste of materials and human effort, as well as oil resources. As viewed today, past history furnishes examples of waste on a grand scale in the production of oil. In the early days of the industry wells were run wide open, frequently leading to tre- mendous losses above ground from fire and evaporation and below ground from impairment of the producing capacity of the oil pools, with ultimate recovery far below the amount that could be recovered under the best modern operating practice. Very little was known of the nature of oil deposits and much waste resulted from that ignorance. Furthermore, under the law of the doctrine of capture, the oil from beneath the land of many owners became the property of the one first able to reduce it to his own possession. Consequently the prize went to the one who produced the most oil the fastest irrespective of the damage that might be done to the pool as a producing unit. The resulting wide-open flow had little relation to market demand, so that when great new discoveries were made a dis- ruption of the market followed, the oil sometimes selling at fan- tastically low prices. Measures came to be adopted in the early thirties in the oil-producing States that have since established orderly methods of regulation of oil production. These meas- ures, and the authorities which enforce them, have made notable contributions to economic conservation in the production of crude oil and, more recently, of natural gas and condensate. Progress has been gradual, however, against a great deal of opposition based partly on misunderstanding, but more funda- mentally on the conflict with the interests of individual lease- holders or royalty owners who felt that they could do better without regulations, even though all producers as a group were better off for the regulations. The doctrine is now firmly estab- lished that the State governments have the power of making and enforcing regulations designed to avoid waste and to pro- Page 12 tect correlative rights in the production of petroleum and natural gas. The principal measure of regulation has been the device of prorationing, exercised by State authorities in most of the important oil-producing States. The mode of operation consists in setting a limit on total production of oil in each State and an allocation of allowable production among the individual wells or producing units. As the system operates at present the limits set by prorationing are geared to estimates of market demand made by the individual State authorities, usually con- sistent with the U. S. Bureau of Mines estimates. The Federal Government cooperates closely with the State regulatory au- thorities not only through the activities of the Bureau of Mines in estimating demand, but also through legislation (the Con- nally Act) that excludes from interstate commerce oil produced in contravention of the regulations of the State authorities. The first achievement of State regulation of petroleum pro- duction was essentially that of adjusting output to market de- mand through prorationing, thereby bringing greater market stability. The conservational consequences came largely from the fact that some limitation on production per well, and perhaps more important, regulated uniformity of production among wells, does lead to a better preservation of the produc- tive capacity of the oil reservoirs. Gradually the State authori- ties have extended the scope of their regulations. Limitations on the oil-gas ratio have been imposed to reduce the waste of natural gas and to prevent excessive impairment of the gas pressure. Similar regulations have been imposed to preserve the driving force of underground water pressure. It has been esti- mated that perhaps 50 percent more oil has been recovered during the last 20 years than would have been recovered in the absence of state regulation.* The State authorities have cooperated in seeking methods of avoiding waste through the Interstate Oil Compact Commission. One other major form of waste—the drilling of too many wells—has been slower to feel the impact of State regulation; in some measure prorationing, as it was applied, actually gave incentive to excessive drilling by setting production quotas somewhat in proportion to the number of wells. In the most important producing States, however, the regulating authori- ties now have the power, within limits, to govern the spacing of wells, and so to reduce excessive drilling. Little progress has so far been made in achieving a unified program of operations for each oil reservoir best fitted to the particular characteristics of that reservoir. An oil pool is a complex structure with ultimate recovery depending upon how skillfully advantage is taken of the particular shape and struc- ture of the pool, and of its gas and water pressures. In the absence of a unified operation program it is likely that wells tapping pools with multiple ownership will be located improp- erly for maximum efficiency of development, even where regulation provides for minimum spacing. The principal obstacle to a unified operation is the inevi- table holdout, the leaseholder or royalty owner who thinks he can do better without the unit operation, even though the pool *Robert E. Hardwicke, "Adequacy of Our Mineral Fuels," Annals of the American Academy of Political and Social Science, May 1952. as a whole will do much better with unit operation. In some States unit operation can be made compulsory for a pool under certain conditions, usually if owners of a specified majority of the acreage agree, but such agreement has been so difficult to achieve that very few common sources of supply have so far been subjected to unit operations, except where special conditions make unit operations imperative as in condensate reservoirs or in secondary recovery. Petroleum engineers have largely demonstrated the benefits of unit operation. It is up to the lawmakers and industry leaders to devise arrangements for achieving unified operating programs with proper respect for the rights of each leaseholder to his fair share. The problem, although difficult, does not appear insoluble. All in all, though considerable progress has been made over the past 15 years toward greater conservation of oil resources, much room remains for further progress. CONSERVATION IN USE There are likewise large opportunities for conservation in use of oil, especially in the design of passenger automobiles and in their operation. There is no doubt that the estimated 680 billion passenger miles of automobile travel in the United States in 1950 could have been achieved at a lower expenditure of gasoline than the 24 billion gallons actually used. If, for example, passengers rode three or four to a car in cars aver- aging 25 to 30 miles to the gallon, only 7 to 9 billion gallons would have been required. The American public is willing to pay added costs for the comfort of large cars and for the pleasure of what is popularly referred to as automobile "performance"—power to accelerate rapidly, to maintain high speeds, and to climb hills in high gear. The additional possibilities of improving mileage per gallon without using smaller cars or less powerful engines are rather limited, in spite of the dramatic fact that the automobile utilizes only 6 percent of the energy put into the gas tank. The theoretical efficiency of an automobile engine at full load is about 25 percent. The average fuel utilization efficiency of the American motor car is so low relative to the best attainable largely because it operates most of the time under a low load. The average automobile is probably capable of carrying five or six persons at steady high speeds, yet it is estimated that in 1950 the driver rode alone in more than half of the private car trips while in less than a fifth of the trips did he have two or more passengers with him. There are three principal methods of improving the efficiency of the automobile by change of design without sacrificing comfort or performance: increasing the compression ratio, supercharging, and use of an overdrive or an automatic trans- mission designed for maximum efficiency. The efficiency gained from an increased compression ratio is, however, at least in part illusory because a great deal of energy is lost at the refinery in making the high-octane gasoline that must be used. Super- charging designed to increase economy presents difficult engineering problems. The biggest scope for improvement therefore probably lies in greater use of the overdrive or of an automatic transmission. It has been estimated that a combina- Page 13 tion of high compression ratio and fully automatic transmission or suitable overdrive might double automotive efficiency from the usual 15 or 20 miles per gallon to 30 or 40, without any loss in performance characteristics. The average utilization efficiency, with allowance for the greater work done in moving a given distance at high speed, can also be increased by giving the private automobile the kind of highways and streets on which it can operate at its maximum efficiency. That means the construction of city express high- ways along which cars could run at 40 or 50 miles an hour with a minimum of stops, and cross-country highways on which even higher speeds can be safely maintained. Much greater gains are likely to be achieved in the United States from further development and improvement of the street and highway system than from fuel economies derived from im- proved designs of cars and engines. CONSERVATION ON FEDERAL OIL LANDS Production of crude oil from federally controlled lands in recent years has run about 6 percent of total production in the United States. Proven reserves on these lands constitute about 9 percent of those of the entire country. Production from such lands is likely to increase, particularly if the submerged oil lands of the Continental Shelf remain under Federal control. Recent Supreme Court decisions have confirmed Federal rights to the submerged lands adjoining the States, but legislation is currently being considered to transfer some of these rights to the States. In either event the oppor- tunity should not be lost for insuring that this great potenial source of petroleum be developed in a manner consistent with efficient productive practices and with the needs of security. At present, federally controlled oil lands are leased under terms that permit Federal authorities to require adoption of efficient operating practices, within the general context of State regulation and private ownership of other parts of fields in which the federally controlled oil lands are located. About 50 percent of the production from federally controlled lands comes from fields with unit operation. In many cases the federally owned lands constitute only part of the fields in which they are located, so that their operation must be conducted in a manner not greatly different from that of neighboring holdings, gov- erned largely by the regulatory policies of the'States. Depar- tures from technically desirable operating conditions are often necessary in order to avoid drainage by neighboring leasehold- ers, or for other reasons associated with the absence of unit operations. The major responsibility for the regulation of operations in fields only partly federally controlled must remain with the State authorities, with the Geological Survey continuing to re- quire Federal lessees to follow the best practices consistent with the operations on neighboring tracts. Unit operation can be required in fields that are entirely publicly owned. It should be possible to maintain reserves at those fields at the highest level commercially feasible relative to annual production. IMPORTS AND TARIFFS The energy economy of the United States has prospered on the basis of using the cheapest available fuels and can prosper most in the future if our import policy continues to permit oil consumers to have access to the lowest cost sources consistent with security. Geological and economic conditions throughout the world favor an increasing reliance on imports to meet a considerable part of the future growth of United States con- sumption, even though United States production of oil can also be expected to continue to grow. Consumption is ex- pected to increase more rapidly than production, so as to leave room both for increasing imports and a healthy domestic petroleum industry. The present excise tax on imports of crude oil and fuel oil stands at 21 cents a barrel for all imports over a quota, which in each year is equal to 5 percent of the previous year's run of crude to refineries in the United States. Other refined prod- ucts are taxed at a comparable level, except for gasoline and lubricating oils, which are taxed at prohibitive levels. It is clearly to the interest of the United States and the rest of the free world to develop the oil production capacity of the Western Hemisphere. In view of this fact and of the general desirability of reducing trade barriers throughout the free world, the tariff on crude oil should eventually be abolished. In the short run, however, the problem involves many com- plicated questions affecting broader foreign diplomatic, eco- nomic, and trade policies. Within that larger framework considerations other than those that are the special concern of this Commission must largely govern the tariff policy. None- theless, heavy weight should at all times be given to the impor- tance of demonstrating, clearly and consistently, to oil exporting nations our basic long-run policy of encouraging foreign oil development and imports to the United States, to the fullest extent consistent with security. References 1. American Petroleum Institute, Press Release, March 12, 1952. 2. Independent Petroleum Association of America. Report of Econom- ics and Cost Study Committee. Approved Sept. 27-28, 1948. Table 9. 3. Siskind, David. Construction Division, Office of Domestic Com- 4. Siskind, David. "Expenditures for Oil and Gas Well Drilling, 1947." Division of Interindustry Economics, Bureau of Labor Statistics, 1950. 5. Reported annually in the June issue of the Bulletin of the American Association of Petroleum Geologists. 6. Op. Cit. June 1951, p. 1133. 7. Petroleum Administration for Defense, Petroleum Division. Fore- casting Crude Oil Productive Capacity, vol. II. Department of Interior, August 1951, p. 4. 8. Weeks, L. G. "Highlights on 1947 Developments in Foreign Petro- leum Fields." Bulletin of the American Association of Petroleum Geologists, vol. 32, 1948, p. 1094. See also vol. 34, no. 10, p. 1952. 9. Torrey, P. D. "A Review of Secondary Recovery of Oil in the United States." Secondary Recovery of Oil in the United States. Standing Subcommittee on Secondary-Recovery Methods. New York, American Petroleum Institute, 1950, p. 27. 10. Collom, R. E. and Watson, C. P.. "Review of Developments at Kettleman Hills." Petroleum Development and Technology, vol. 123. New York, The American Institute of Mining and Metallurgi- cal Engineers, 1937, p. 198. 11. Murphree, E. V. "Benefits from Research to the Petroleum In- dustry." The Hague, Netherlands, Third World Petroleum Con- gress, June 1951. Page 14 References Elsewhere in This Report Vol. II: The Outlook for Key Commodities. Production and Consumption Measures. Projection of 1975 Materials Demand. Reserves and Potential Resources. U. S. Bureau of Mines Tables. Vol. IV: The Promise of Technology. Forecasts for Petroleum Chemicals. Improved Exploration for Minerals. Oil and Gas as Industrial Raw Materials. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Foster, J. F. Role of Technology in the Future Supply of Natural Gas. Moore, D. D. Role of Technology in the Future of Petroleum. Perry, P. G. Role of Technology in the Future of Electrical Energy Transmission. Selected General Statistical Sources Principal References American Petroleum Institute, Petroleum Facts and Figures, 9th ed., New York, The Institute, 1951. Basic Data Relating to Energy Resources. Study made by the Committee on Interior and Insular Affairs Pursuant to S. Res. 239 (81st Con- gress) to Investigate Available Fuel Reserves and Formulate a National Fuel Policy of the United States, Document No. 8. United States Senate, 82nd Congress, 1st session, Washington, D. C, Govern- ment Printing Office, 1951. Piatt's Oil Price Handbook (various years). Cleveland, Ohio, Piatt's Price Service, Inc. U. S. Bureau of Mines. Mineral Yearbook, 1949 and previous years. Washington, D. C, Government Printing Office. Individual References American Institute of Mining and Metallurgical Engineers, Petroleum Branch. Transactions, Petroleum Development and Technology (various years). Bulletin of the American Association of Petroleum Geologists, particularly June issues (various years). Chapter 2 The Situation in Brief The consumption of natural gas in the United States has been rising dramatically since the twenties. More than five times as much was marketed in 1950 as in 1925, and the increase in consumption in 1951 was the largest in history. Natural gas now supplies more than 18 percent of the energy used in the United States as compared with 4 percent of a much smaller total energy use in 1920. This impressive growth was based on great new supplies of natural gas that have become available largely through discoveries resulting from the exten- sive search for oil. In the past two decades there has been a rapid development of gathering and transporting facilities to carry these supplies to markets. Extensive markets have been developed near the source of production where gas prices have been far below those of competitive fuels for the energy con- tained, while in more distant markets consumption has been stimulated both by the superiority of natural gas in specialized uses and by favorable prices. Ebasco Services, Inc. Coal Hydrogenation Plants. For United States Department of Interior. New York, March 1952. Ely, Northcutt. "The Conservation of Oil." The Harvard Law Review, vol. LI, No. 7, 1938. Independent Petroleum Association of America. "Crude Oil Price Con- trol and Replacement Costs: Report of the Cost Study Committee." Presented Oct. 22-23, 1951, Houston, Tex. Independent Petroleum Association of America. Report of Economics and Cost Study Committee. Approved Sept. 27-28, 1948. Table 9. Murphy, B. M., ed., Conservation of Oil and Gas, Section of Mineral Law. American Bar Association, Chicago, 111., 1949. National Petroleum Council. "Report of the National Petroleum Coun- cil's Committee on Synthetic Liquid Fuels Production Costs." Wash- ington, D. C, Oct. 31, 1951. National Petroleum Council. "Synthetic Fuels Production Cost, Subcom- mittee Report to National Petroleum Council Committee on Synthetic Fuels Production Cost." Washington, D. C, Oct. 15, 1951. National Petroleum Council. Committee on Oil and Gas Availability. "Petrokum Productive Capacity, a Report on Present and Future Supplies of Oil and Gas." Houston, Tex., Jan. 29, 1952. Pogue, J. E. and Coqueron, F. G. Financial Analysis of 30 Oil Com- panies (various years). New York, Chase National Bank. Standing Subcommittee on Secondary-Recovery Methods of the Topical Committee on Production Technology of the Central Committee on Drilling and Production Practice. Secondary Recovery of Oil in the United States, 2d ed. Division of Production. New York, Amer- ican Petroleum Institute, 1950. U. S. Bureau of Mines. "Cost Estimate for Coal Hydrogenation" Washington, D. C, Oct. 25, 1951. U. S. Bureau of Mines. Report of Investigations 4770, Synthetic Liquid Fuels, Part I: "Oil From Coal": Part II: "Oil From Shale." Wash- ington, D. C, February 1951. U. S. National Resources Committee. Energy Resources and National Policy. Washington, D. C, Government Printing Office, 1939. U. S. Department of Interior, Petroleum Administration for Defense, Petroleum Division. "Forecasting Crude Oil Productive Capacity." Washington, D. C, August 1951. U. S. Petroleum Administration for War, Production Division. "Survey of Expenditures for Finding, Developing and Producing Crude Oil in the United States, 1927-42." Washington, D. C, November 1943. Natural Gas There is no doubt that a potential market exists for all the natural gas that can be produced, transported, and distributed in the United States, so long as it is offered at prices more favorable than for other fuels for the energy contained. The future position of natural gas in the energy economy therefore depends on how much more of that fuel is discovered and how efficiently the Nation recovers and uses that which is found. Natural gas is subject to greater regulation than its prin- cipal competitors, coal and fuel oil. Its distribution is regulated by State public utility commissions in a manner similar to the regulation of electric power, its interstate transportation by the Federal Power Commission somewhat after the same pattern, and its production by the State authorities who regu- late petroleum production. Many problems arise from the dif- ferent aims and methods of these regulatory agencies, as well as from the fact that regulated natural gas competes with unregulated fuels. Page 15 As shown in table II, about 70 percent of 1950 marketed production went into industrial uses—almost 20 percent into field uses and more than 50 percent into other industrial uses. Residential and commercial consumption absorbed about 25 percent of marketed production, while the remainder (about 4 percent) was accounted for by transmission losses, net addi- tions to underground storage, and exports. Field uses include power for drilling, and raw material and fuel for plants that extract gasoline and other liquid products from the gas. In this last use only the difference between the gas taken into such plants and the gas returned to the line after removal of liquid products is counted, since the returned "stripped"5 gas can be consumed elsewhere. In nonfield industrial uses the largest consumers are electric power generating plants, oil refineries, and carbon black plants, in that order. These three activities in 1950 consumed almost half the natural gas used industrially outside of field uses. The most important remaining industrial consumption is in the metal industries. (See table III.) Well over half of the gas marketed is consumed in the general area in which it is produced. Texas, California, and Louisiana consume more than half the gas used throughout the country. In 1950, 2.5 trillion cubic feet (about 40 percent of net mar- keted production) went into interstate shipments, as compared with 0.2 trillion, or 17 percent in 1925. About 75 percent of the gas moving across State lines originated in Texas, Louisiana, and Oklahoma. The principal net importing markets in 1949 were Illinois, Ohio, and Pennsylvania, though since then the pipelines have been extended to New York, New Jersey, and New England. GAS IS CHEAP ENERGY The current average price of natural gas in the field is much lower, for the energy contained, than that of crude petroleum. A barrel of petroleum sells at the wellhead in Texas or Louisiana for about $2.65 on the average, while its thermal equivalent in natural gas sells on the average for about 30 cents in the same producing regions. (See table IV.) That average price of 5 cents per M cu. ft. largely refers to gas sold at old contracts at low prices; contracts are currently being made in Texas and Louisiana at double or more the price in old contracts. Pro- vision is often made for later price rises, typically at the rate of 1 cent for each subsequent 5-year period. Field prices are, of course, higher at fields that are closer to markets. For example, the average 1950 prices at the well were about 12 cents in California, 19 cents in Ohio, and 25 cents in Pennsylvania. For those customers who can purchase and use the natural gas at or near the Southwest fields the low prices represent tremendous bargains. For the large industrial energy users the relevant comparison is between the price of residual fuel oil, about $1.75 at a Texas refinery, and the cost of equivalent energy in natural gas at 30 to 36 cents on old contracts, or 60 to 70 cents on new contracts. Table III.—Industrial consumption of natural gas in the United States, by type of industry', 7932-50 [Billions of cubic feet] Year Carbon black plants Petro- leum refineries Portland cement plants Electric public utility power Other industrial Total (1) Field use (2) plants 1 (3) (4) (5) (6) (7) 1, 168 529 168 67 21 107 275 1, 185 491 190 66 22 103 312 1, 385 555 230 80 27 128 366 1, 496 580 242 80 27 125 442 1, 705 619 283 93 37 156 517 1, 913 651 341 113 40 171 597 1, 812 659 325 110 37 170 511 1, 964 681 347 98 40 191 607 2, 077 712 369 128 42 183 643 2, 217 686 365 148 54 205 759 2, 364 721 336 202 65 239 801 2, 670 781 315 244 52 306 972 2, 914 855 356 315 36 360 992 3, 062 917 432 338 38 26 1, 011 3, 111 898 478 332 58 307 1, 038 3, 339 934 485 364 60 373 1. 123 3, 726 1, 022 481 441 72 478 1, 232 3, 855 1. 060 428 422 85 550 1, 311 4, 440 1, 187 411 455 97 629 1, 661 Selected industries2 Food Paper and j and kindred! allied products products (8) I (9) Chemical and allied products3 (10) Primary metal indus- tries (id Glass (12) [ Clay and similar products (13) 1932. 1933. 1934. 1935. 1936. 1937. 1938. 1939. 1940. 1941 . 1942. 1943. 1944. 1945. 1946. 1947. 1948. 1949. 1950. 80 33 149 i 64 45 109 69 154 168 1 Includes small quantities of manufactured gas, believed to be negligible. 2 These data available only from the Census of Manufactures for 1939 and 1947; amounts are included in "other industrial." 3 Excludes carbon black. Sources: U. S. Department of the Interior, Bureau of Mines, various publications; U. S. Department of Commerce, Bureau of the Census, Census of Manufactures, 1939 and 1947. Page 18 Table IV.—Average value of natural gas at the wells and at points of consumption in 1950, by States [Gents per thousand cubic feet] Aver- Average value at points of consumption State age value at wells ! Field Indus- trial Com- mercial Resi- 1 dential ! 1 Alabama 1 5. 0 | 1 18. 0 20. 3 1 51. 9 1 80. 9 Arizona 6.y 35. 4 84. 6 Arkansas 3. 5 9. 0 37.0 50. 5 California 11. 9 12. 2 22. 1 41. 4 66. 4 Colorado 6. 2 6.2 15. 3 48. 6 57. 4 Georgia 18. 4 37.9 67. 0 Illinois 10. 1 7. 8 24. 1 65. 2 97. 6 Indiana 7. 0 7. 1 33. 7 90. 5 110. 6 Iowa 19. 9 54. 6 68. 8 Kansas 6. 6 I 7. 0 13. 3 32. 7 48. 1 Kentucky 19. 7 19. 6 25. 2 48. 0 56. 4 Louisiana 5. 3 5.2 9.7 30. 2 60. 2 Maryland 19. 8 20. 0 74. 0 133. 3 140. 0 Michigan 13. 2 14. 3 50. 3 77.2 85. 4 Minnesota 22. 0 48. 5 72. 3 Mississippi 6. 3 8. 2 12. 9 40. 4 70. 3 Missouri 14. 3 16. 3 20. 3 46. 1 69. 9 Montana 5. 3 9. 6 15. 0 32. 8 47. 3 Nebraska 12. 4 9. 1 18. 7 41. 3 66. 2 New Mexico 3. 0 3. 4 8. 3 33. 3 66. 0 New York 25. 1 21. 9 60. 1 80. 6 88. 7 Ohio 19. 4 20. 9 39. 8 56. 2 60. 4 Oklahoma 4. 9 4. 4 11. 6 31. 3 45. 4 Pennsylvania 25. 3 28. 9 36. 0 53.0 62. 1 Tennessee 10. 0 17. 9 56. 9 72. 7 Texas 4. 7 4. 7 7. 6 38. 9 63. 1 West Virginia 16. 8 19. 9 27. 2 37. 4 40. 7 Wisconsin 71. 2 130. 6 156. 1 Wyoming 6.0 6.2 14. 0 36.7 51. 0 Other States 1 5. 9 4. 3 22. 5 70. 8 86. 2 Total 6. 5 6. 2 16.0 47. 4 68. 5 1 Includes Delaware, District of Columbia, Florida, New Jersey, North Dakota, South Dakota, Utah, and Virginia. Source: Bureau of Mines, Mineral Market Report No. MMS 2027. Because costs of transportation and distribution of natural gas are higher than those for petroleum and petroleum prod- ucts, the price advantage of natural gas tends to be reduced the farther one goes from the areas of production. Nevertheless, natural gas is now selling in many markets, even at great dis- tances from the principal fields, at a substantially lower price energywise than competitive fuels for industrial use, and either cheaper or at roughly a competitive price for domestic and commercial uses. Tn the latter uses the inherent superiority of natural gas supports in some markets a premium price for natural gas over its nearest competitor, furnace oil. The present structure of prices in the natural gas industry cannot be easily described because the rapid changes in the in- dustry have led to a set of price relationships that reflect con- ditions of different times and so does not present a uniform picture. The general price relationships may, however, be illus- trated by some of the operations of one transportation and dis- tribution system in 1950. Gas was purchased at the field in Texas and Louisiana at an average price close to 5 cents per M cu. ft. and was sold to main-line industrial customers or to gas distributing utilities in Ohio, about a thousand miles from the source of supply, for about 19 to 21 cents per M cu. ft. The utilities resold the gas to their industrial customers at the aver- age price of 42 cents and to residential customers at the average price of 54 cents. At these average prices the main-line Ohio customers were getting gas at considerably less than half the cost of equivalent energy in the form of heavy fuel oil. The industrial customers of the utilities were buying energy about 30 percent cheaper than if they had bought residual fuel oil at tank-wagon prices, and the residential consumers about 40 percent cheaper than if they had bought furnace oil. Of course, a new pipeline company buying all its gas at new contract prices of 10 or 11 cents per M cu. ft. would presumably have to charge, correspondingly higher prices, though still well below the prices of competitive fuels within a thousand-mile radius. The potential demand for natural gas at or near present prices to consumers far exceeds the amount currently being marketed. The construction of additional facilities for trans- portation and distribution will help meet some of the unsatis- fied potential demand, but the excess demand will eventually have to be squeezed out either by company or governmental allocation or by such increases of price at points of consump- tion as will make the energy costs of natural gas comparable in competing uses with the cost of other fuels, with allowance for differences in convenience of use. The pattern of consumption is complicated by the fact that residential and other heating loads are so different in winter and summer. Gas pipeline and distributing companies, which must have sufficient capacity to meet winter peaks in northern markets, have excess capacity in summer. Furthermore, gas that is produced in the field on a year-round basis in con- junction with petroleum must be sold. Gas suppliers therefore try, in nonheating periods, to keep up the volume of sales by making "off-peak," uinterruptible," or "dump" sales to large- scale industrial customers at whatever rate is necessary to meet the prices of competing fuels, particularly residual fuel oil and coal. This enables the gas transporter both to dispose of gas which he is obliged to take delivery on under firm contracts and to improve his "load factor," thereby adding revenue from his off-peak sales as an additional source of income. An additional complicating factor arises from the desirability of building pipeline capacity large enough to serve the markets that can be expected to develop only gradually after the gas is available. While waiting for the regular market to develop, the pipeline companies can meet some of the costs of the extra capacity by using it to transport gas for sale at low prices to large industrial customers. These customers can be gradually displaced as the demand of higher-paying consumers grows. While this system of off-peak and capacity-carrying sales is clearly economically advantageous to both supplier and pur- chaser, it does result in a large consumption of gas for purposes that could be met equally well by coal or residual fuel oil. THE FUTURE OF NATURAL GAS The same uncertainties that cloud the long-run future of petroleum supply from domestic sources in the United States also affect estimates of future supplies of natural gas. Proved economically recoverable reserves of natural gas at the end of 1950 were 186 trillion cubic feet, or about 26 times the 1950 net production of 7.1 trillion cubic feet. Page 19 Few estimates have even been attempted of the total amount of "economically recoverable"5 natural gas that can be ex- pected to be discovered in the future. The only well-known projection so far published indicates that 510 trillion cubic feet, including reserves already proved, may remain to be produced in the future [1], This estimate is closely linked to the estimate of ultimate potential petroleum reserves discussed in the chapter on oil. Both estimates are highly speculative. The prospects for future gas production, like those for oil, can more safely be evaluated on the basis of the relation of rates of discovery to rates of production than on estimates of ultimate potential. Natural gas discovery rates have been highly satisfactory relative to production over the recent past. New reserves proved from 1945 to 1951 have been more than twice as large as net produc- tion over the same period, as shown in table V. When new discoveries and developments run closer to annual production it may be taken as warning of an imminent slowdown of production. Table V.—Estimated new discoveries and developments relative to production of natural gas, United States [Billions of cubic feet] Estimated new discoveries and developments 1 Ratio of new discoveries and developments to production Period Production 2 1918 and earlier 23, 296 68, 062 105, 013 99, 531 8, 296 21, 062 33, 513 42, 588 2. 8 1919-34 3. 2 3. 1 2. 3 1935-44 1945-51 1 The sum of accumulated production and estimated reserves at the end of the period minus the corresponding sum at the beginning of the period. Reserve estimates at beginning and end of the periods before 1945-51 were of very poor comparability. 2 Marketed production prior to 1934; net production for 1935 and later. Source: World Oil, Feb. 15, 1952, pp. 181, 186. The important fact is the expectation that new discoveries will run about 6 M cu. ft. of recoverable gas per barrel of recoverable oil so that in the long run that relationship can be expected to hold in production. (See table VI.) If, then, the United States oil industry manages to produce over the distant future from 2 to 4 billion barrels of crude oil a year, there should be an annual rate of net gas production of 12 to 24 trillion cubic feet. When oil discoveries taper off and decline, a roughly concur- rent slowdown of natural gas production can be expected. While substantial imports of natural gas may eventually come in from Canada and Mexico, they are likely to be small relative to the total future United States demand. The decline of natural gas production may come sooner if, as is possible, production should for a time outrun discoveries. Thus, even if long-run petroleum output settles down to 2/2 billion barrels a year, natural gas production might in the mean- time reach a peak of say 18 to 20 trillion cubic feet and then gradually decline to the long-term level of 15 trillion, later to fall off from that level as domestic petroleum production falls off from the 2/2 billion barrel annual level. THE FUTURE PATTERN OF PRICE AND USE There are many uses (particularly household and commer- cial uses and in those industries where delicate automatic tem- perature control is important) in which natural gas has such considerable advantages over competitive fuels that it would be chosen even if its price were higher than the prices of other fuels. A distinction can accordingly be drawn between the spe- cial advantage uses for which natural gas would be preferred even at higher prices than competitive fuels, and the general uses for which it will be bought only if it is as cheap as, or cheaper than, competitive fuels. It may be estimated from table III that special advantage uses absorb only about 40 percent of total marketed produc- tion, exclusive of field use. It is not possible to calculate the spe- cial advantage uses exactly, but they may be roughly placed as the sum of residential and commercial uses plus some frac- tion, say one-fourth, of the "other industrial" group of table III,, or altogether about 2 trillion cubic feet in 1950. It may, there- fore, be inferred that, as transportation and distribution facil- ities are constructed to permit the satisfaction of demand for additional special advantage uses, there will be room for the supply of these uses not only from the expansion of production but possibly also from displacement of general uses. The first step in the estimation of the future pattern of demand and con- sumption must then be to consider the possible extent of special advantage uses. The largest of these will be residential and commercial consumption. In 1950 about 20 to 25 percent of all homes in the country were heated by gas. In view of the rapid spread of natural gas availability and the present rates of installation of gas-burning house heating equipment, it can reasonably be expected that by 1975 about half of the homes in the country will be heated by natural gas. That means 30 million heating customers, possibly consuming about 140 M cu. ft. each, or about 4.2 trillion cubic Table VI.—Marketed production of natural gas relative to crude oil production in the United States, exclusive of the Appalachian field 1 [Annual averages] Marketed production of natural gas Produc- Ratio of natural Period Millions of barrels crude oil equiva- lent 2 tion of crude oil (millions of barrels) gas to crude oil produc- tion (percent) Billions of of cu. ft. 1906-10 108 18 70 13 1911-?o 225 38 276 14 1921-30 945 158 740 21 1931-40 1,728 288 1,033 28 1941-45 2, 951 492 1,503 33 1946-50 3 4, 680 780 1, 852 42 1951 7, 035 1, 173 2, 182 54 4 90-95 1 Kentucky, New York, Ohio, Pennsylvania, and West Virginia. 2 On basis of 6,000 cubic feet of natural gas = l barrel of crude oil. 3 For 1947 and later years marketed production includes gas stored and lost in transmission. 4 On the basis of 6,000 cubic feet of gas recovered per barrel of crude oil, and 90 to 95 percent of that marketed. Source: Natural Gas—World Oil, Feb. 15, 1952, p. 186. Crude Oil— World Oils Feb. 15, 1952, p. 176-179, and American Petroleum Institute, release of March 12, 1952. Page 20 ^eet a year. Other nonindustrial special users, such as commer- :ial establishments and households using gas for cooking and hot water but not for space heating, might add another trillion :ubic feet of annual demand. (See vol. II, Projection of 1975 Materials Demand.) Total residential and commercial demand may thus more than triple bv 1975 to about 5 trillion cubic feet. A rough allowance might also be made of about a trillion cubic feet jI future consumption for special advantage industrial use. How much will then go into general industrial uses will depend Fundamentally on the available supplies, and more immediately Dn the price structure likely to result from the relation of those available supplies to future demand. The different adjustments of the consumption pattern to various possible levels of supply are too complicated to present in detail, but a few hypothetical examples may serve broadly to illustrate how market forces would operate in the absence of regulation to the contrary. If 1975 net production should be no larger than that of 1951, natural gas would then be in short supply relative to increased demand. Waste and loss could probably be halved by more extensive collection systems to about half a trillion cubic feet, leaving a marketed production of 7l/2 trillion. Field use would quite possibly be as large as in 1950—say about a trillion cubic feet—leaving 6 J/2 trillion for other uses. These could almost entirely be absorbed by special advantage uses, leaving almost all general energy uses to be satisfied by other fuels—presumably fuel oil and possibly lignite in the Southwest, and some combination of fuel oil and coal or its products in the rest of the country. Under these circum- stances natural gas might sell at the Southwest fields at a price, for the energy contained, above that of residual fuel oil at the refineries in that area. With supplies larger by several trillion cubic feet, the addi- tional gas would probably go mostly to general energy con- sumption in the producing areas, with gas used outside those areas largely for special energy uses. The field price could then be expected to be below the equivalent energy cost of residual fuel oil, but not a great deal below. If, to take a quite different assumption, 1975 net production should be as much as two and a half times that of 1950, or 15 trillion cubic feet, the pattern of consumption need not change from that of the present in its main essentials, except for the more than proportional growth of special advantage uses. Other uses might double in proportion to the expected doubling of the country's total energy consumption. The rela- tive shifts in consumption then need not be of major signifi- cance. Nor need the price structure be much different from that which is now taking shape. SPUR TO EXPLORATION POSSIBLE If exploration should be active enough to support a growth of domestic petroleum production in proportion to consump- tion, it would be likely also to support a natural gas production level in 1975 of well over 20 trillion cubic feet. In that case natural gas would tend to displace oil and coal from some general energy uses they now serve. It might then continue to sell to industrial consumers in markets close to the main sources at prices well below those of coal or petroleum products of equivalent thermal content, depending largely on the rate of long-distance pipeline construction in the meantime. A close relationship will exist, in any event, between natural gas supplies and domestic petroleum exploration. If natural gas should be in short supply relative to demand, and if its field price should rise correspondingly, that fact would add considerable stimulus to the exploration for oil and gas. For example, the recent rise in the new contract price of natural gas in the Southwest to about 11 cents per M cu. ft. as con- trasted with an older average of about 5 cents means that the 4.6 M cu. ft. of natural gas likely to be discovered per barrel of oil are now worth about 28 cents more at the new prices than at the old. If in the future about 6 M cu. ft. of natural gas can be expected to be discovered for every barrel of oil, each 5- cent price rise of natural gas would be the equivalent, in its effect of stimulating exploration, of a 30-cent increase in the price of a barrel of oil. On the whole the cost of finding a barrel of oil to date has probably been on the order of 30 or 40 cents in 1950 purchasing power, so that the possible increase of natural gas prices would be quite significant relative to that cost. If Middle Eastern oil competes in the United States market and if shale oil production should become economic, there will be a ceiling on the possible price rise of crude oil. Under these circumstances, a rise of natural gas prices might be almost as powerful an increased stimulus to oil exploration as any prospective price rise of crude oil. It would also stimulate gas exploration in its own right. In addition to this tendency to encourage discovery of more oil and gas, a higher price for natural gas would probably induce some reduction in the field losses and waste that now absorb over 10 percent of the net production of natural gas. The higher price would stimulate investment in gathering and handling equipment that it would not pay to install at lower gas prices. It might, however, dis- courage those practices that involve return of gas to the ground, and would probably also lead to a more rapid depletion of proved reserves. SPECIAL PROBLEMS It is sometimes argued that end-use control is necessary to prevent gas from being used now for low value general uses, in order that it may be saved for higher value special advantage uses later. The desirability of eliminating low value general uses (such as for boiler fuel at points distant from the fields) as rapidly as possible is universally recognized. There is, however, some controversy over whether this should be achieved by a prohibition of low-grade uses, or by positive measures to en- courage such a development of the gas industry that it no longer pays to use gas for low-grade uses. The development of underground storage near markets is already leading to the discontinuation of the off-season sale of natural gas for boiler fuel to electric generating utilities in the East. For example, natural gas from the Texas-Louisiana area can be put into underground storage in abandoned Pennsylvania gas fields, or similar geological structures, in the summer, rather than being sold for boiler fuel; the stored gas Page 21 can then be sold for high-grade winter uses such as house heating. In this way also, a given sized pipeline (from field to storage areas) can serve a larger number of special advantage customers. Further development of such storage can greatly contribute to the reduction of off-season consumption in low- grade uses and so support a greater flow to seasonal special advantage uses. SHIFTING TO HIGH-GRADE USES During the period of rapid extension of pipelines, sales of natural gas for low-grade uses help to absorb the cost of devel- oping and carrying the high-grade markets. As those markets are developed the gas industry will find it worthwhile to shift its supplies to them. The argument for direct end-use control must be tempered by consideration of the difficulties in the way of a rapid development of facilities to extend the market to high- grade uses, and the contribution of industrial sales in carrying part of the costs of such development. There appears to be no economic basis for designing curbs on low-grade uses that would be more valid and more suitable than market forces in guiding the gas to the highest grade use. There is obvious justification, however, for the Federal Power Commission's consideration of the type of consumption to be served in connection with its granting of pipeline certi- fication. It must be the objective of all concerned to see that highest priority is accorded those facilities that serve the highest grade uses, and the Federal Power Commission plays an im- portant part in this process. Because of the costs of transporta- tion and distribution, some classes of use that are considered low grade far from the fields must be considered high grade near the fields. AVOIDANCE OF WASTE AT THE WELL Casinghead gas and gas "stripped" of its liquids are some- times disposed of as waste by being vented to the air and flared. The flaring, or other wastage, of natural gas at the rate of 1 cubic foot for every 10 produced is one of the most dramatic features of the gas industry. Some of the gas now flared or otherwise wasted is not now worth the expense of saving it, but much of it is, especially if future needs are taken into account. Some producers are not always sufficiently alert to the present and future economics of the situation to do what in the long run it will pay them to do. In many cases the best conservation practices are economic only if uniformly followed by all producers from a common source; there may be no incentive for each producer by him- self to avoid wastage. State commissions have therefore had to act to limit wastage of natural gas. State legislation in the last 15 years, together with higher field prices and improvement of techniques of transporting the gas to market and of returning it to the ground to maintain pressure, have led to a considerable reduction in the percentage of natural gas production that is flared, though the quantity flared is nearly as large as ever. The practice of flaring is still frequently encountered where it does not currently pay to gather the gas or return it to the ground, or, less frequently, where the impatience of producers or their limited capital prevents adoption of the most economical techniques of handling the gas. State conservation measures have achieved good results, but have not yet everywhere been carried to the point where all uneconomic practices have been eliminated. The economies of returning casinghead gas or stripped gas to the ground depend in large part on the adoption of unit operation—the orderly development and operation of a field as a single unit. It would hardly pay a producer to return gas underground only to have it withdrawn by somebody else. Experience has shown that unit operation is not enough by itself to avoid wastage of natural gas or of the petroleum that is lost by an uneconomic withdrawal of the gas, but it is an important step in conjunction with other arrangements and regulations. In the absence of unitization, however, proper regulation can achieve many of the same benefits. In the leasing of Federal oil lands, certainly, care must be taken to insure the economic use of natural gas both for sale and for maintaining the pressure in the oil reservoirs. Imminent development of oil resources underlying the Continental Shelf presents a special problem of gas conservation. At best it will be costly and technically difficult to avoid enormous amounts of flaring. Under some geographical patterns of development, gathering natural gas might be out of the question economi- cally, whereas alternative patterns might make it feasible. That method of development must be selected that will insure the ultimate recovery of as much of both gas and oil as is economically practical. BURNING GAS FOR CARBON BLACK Next to flaring, the most dramatic and apparently wasteful use of natural gas is the making of carbon black. Natural gas is burned off in order to catch carbon black from the smoke. Producers of carbon black stood ready to take the gas near the fields at a steady rate at a time when other customers were lacking. They obtained long-term contracts permitting them to buy gas at very low prices. In view of the fact that there are now demands for natural gas that can afford to pay much higher prices and that there will be even more in the future, there has been some sentiment in favor of prohibiting the buring of gas for carbon black. Some States already prohibit the practice or restrict it to types of gas not suitable for other uses without further processing. Carbon black is required for the manufacture of rubber tires, and, if other sources or substitutes were not available, carbon black manufacturers would probably pay a competitive price for natural gas. However, as the price of natural gas rises and as new contracts have to be made, or as additional restrictions are placed on the use of natural gas for this purpose, manufac- turers can turn more to residual products of petroleum as a source material, and can possibly transfer some of their opera- tions to foreign fields where there are no other customers for the natural gas. Finely divided silica is being developed as a sub- stitute for carbon black though it is not yet possible to judge whether this substitute is likely to become a major competitor. Its developers are confident, however, that it can successfully compete with carbon black within the next 15 years. Page 22 EVENTUAL. SUBSTITUTES FOR NATURAL GAS Over the next 25 years or so? such substitutions as will be required of other fuels for natural gas need not cause serious problems. Some industrial users, such as electrical generating stations, who have been getting natural gas at bargain prices, largely in off-peak seasons, will probably have to shift to full- time use of coal or fuel oil, a process that has already begun on the East Coast. There will be some modest increase of their costs on this account but no serious further problems can be expected. At some point beyond 1975, however, more serious problems are likely to arise when natural gas supplies will eventually have shrunk to the point that the general uses in gas producing areas and special uses in all areas are forced to shift to substitute fuels. Costly dislocations may result in the economy of the Southwest, heavy capital costs of conversion will be forced upon nearby and distant customers, and the extensive transportation, distribution, and utilization systems may be rendered useless. The impact could be reduced if it becomes economic to manu- facture gas for at least some of these gas customers, presumably from coal, which could then be distributed through portions of existing transmission and distribution lines, though large seg- ments of such lines would probably no longer be used. The present and currently prospective costs of deriving gas from coal, either by underground gasification or above-ground man- ufacture, are so high that the processes do not promise to be economic for any but those very high-grade special uses, such as household cooking, that can afford to pay very high prices. Improved methods of obtaining gas from coal are being sought, however, and the prospects may be considerably improved by 1975. Meanwhile, in guiding the rapid development of the natural gas industry, it is important for regulatory authorities to bear in mind the ultimate exhaustion of natural gas supplies, with the aim of avoiding costly over-expansion. The Federal Power Commission has customarily required, as a condition for author- izing construction of a pipeline, that a certain number of years' supplies be reserved for the particular pipeline, usually 20 years, although shorter periods have sometimes been counte- nanced. As the natural gas industry matures, an even longer horizon may be appropriate. It will become increasingly important for the Federal Power Commission, in considering "dedicated reserves" for a proposed pipeline, to take into account the eventual impact of new dedications upon the useful life of existing pipelines, upon the consumers they serve, and upon the long-range supply position of communities in the producing area. Excessive build- ing of pipelines and over-commitment of limited reserves could lead, when reserves are gone, to premature obsolescence of costly capital equipment, for operators and consumers alike. The owners of the pipelines and those who extend them credit can generally be expected effectively to safeguard continued supplies for their transportation and distributing systems. However, the regulatory authorities must also have a strong responsibility in this direction. Reference 1. Terry, L. F. "The Future Supply of Natural Gas Will Exceed 500 Trillion Cubic Feet." Gas Age, Oct. 26, 1950, p. 58. Selected General Statistical Sources American Gas Association. Gas Facts, a Statistical Record of the Gas Utility Industry, 1950 (and previous years). New York, The Association, 1950. American Gas Association and American Petroleum Institute. Reports on Proved Reserves of Crude Oil, Natural Gas Liquids and Natural Gas. No. 6 (and previous years). New York, The Associa- tion and Institute, Dec. 31, 1951. "Annual Review and Forecast Issue." Oil and Gas Journal, Jan. 26, 1950. "Annual Review and Forecast Issue." Gas Age, Jan. 26, 1950. Bureau of the Census. Census of Manufactures: 1947 (and previous years). Washington, D. C, Government Printing Office, 1949. . Historical Statistics of the United States, 1789-1945. Washington, D. C, Government Printing Office, 1949. . Statistical Abstract of the United States, 1949 (and previous years). Washington, D. C, Government Printing Office, 1951. Committee on Interior and Insular Affairs. Basic Data Relating to En- ergy Resources. 82d Congress, 1st sess. Senate Document No. 8. Washington, D. C, Government Printing Office, 1951. Federal Power Commission. Natural Gas Investigation. Docket No. G-580. Washington, D. G., Government Printing Office, 1948. . Statistics of Natural Gas Companies. Washington, D. C, 1949. "Forecast Issue." World Oil, Feb. 15, 1951, U. S. Bureau of Mines. Energy Uses and Supplies, 1939, 1947, 1965. Information Circular 7582. October 1950. (Mimeographed.) . Production, Consumption and Use of Fuels and Electric Energy in the United States in 1929, 1939, and 1947. Report of Investi- gation 4805. October 1951. (Mimeographed.) . Minerals Yearbook, 1949 (and previous years). Washington, D. C. Government Printing Office, 1951. References Elsewhere in This Report Vol. II: The Outlook for Key Commodities. Projection of 1975 Materials Demand. Reserves and Potential Resources. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Engdahl, R. B. Role of Technology in the Future of Thermal Gen- eration of Electricity. Foster, J. F. Role of Technology in the Future Supply of Natural Gas. Munger, H. P. Waste Suppression—Waste Going Into the At- mosphere. Perry. P. G. Role of Technology in the Future of Electrical Energy Transmission. Page 23 Chapter 3 Coal The Situation in Brief Despite a rapid increase in energy demand in the United States in the last 25 years, coal's share of the market has steadily declined. Both less convenient use and—with bulkier handling in transportation—higher prices have caused coal to lose out in many market places to oil and gas. Some markets, however, are expanding and this trend—particularly greater consumption to produce electricity—is likely to continue. While coal's percentage share of the 1975 energy total is likely to be still less than now, actual volume of coal at that date may be 60 percent above present levels. Sometime after that date—whenever the cost relationship shifts and domestic oil and gas production become either too high in cost or too low in volume—coal is expected gradually to take over the heavier part of the energy burden in the United States. Reserves are more than ample. The extent and the timing of coal's upward turn will depend importantly on technological developments: better mining and processing methods, cheaper transportation methods, more efficient utilization. Advances in manufacture of gas or liquid fuels from coal, as well as chemicals, could increase consump- tion. Coke is a special problem. The Nation is consuming coking •coal rapidly in relation to its proportion of reserves, but the main problem is in building enough ovens to take care of needs. Capacity for some 40 to 50 million tons a year needs to be built within the next 10 years. Coal requirements of other free nations are being met partly with United States exports; probably oil will be the chief reliance for energy expansion in Western Europe. Japan's traditional sources are chiefly within Soviet territories and it currently relies on the United States. Canada depends upon the United States for increasing supplies. UNITED STATES DEMAND AND SUPPLY To what extent will coal share in the possible doubling of energy requirements of the United States within the next 25 years, and in further increases thereafter? During the last 25 years, the share of coal in the energy market declined steadily. Total consumption of energy in- creased by 60 percent. In terms of bituminous coal equivalent, it rose from some 815 million short tons in the mid-twenties to about 1,300 million tons in 1950. The net increase was satisfied entirely by petroleum products, natural gas, and hydro- electric power. Coal, which supplied two-thirds of the total energy consumed in the mid-twenties, dropped to slightly more than 40 percent in 1950. In round figures, consumption of bituminous coal and anthracite dropped from about 600 million short tons a year in the twenties to around 500 million now. In 1950 demands on United States coal production amounted to 522 million tons including 493 million tons con sumed domestically and exports of 29 million tons. The dis tribution of domestic consumption is shown in table I. The downward trend of coal's percentage share in the tota energy stream may continue for the next 25 years, unless wa intervenes, but the past decline in volume is expected to reversi from here on and rise perhaps 60 percent by 1975. Table I.—Consumption of coal in the United States, by class of con sumer: 1925 and 1950 Class of consumer 1925 1950 Percent change from 1925 Millions of tons Percent of total Millions of tons Percent of total Industrial n. a. n. a. 217 44. 0 n. a Coke ovens 75 13. 3 103 21. 0 + 38.: Steel and cement mills 0) 0) 16 3. 2 0) Other industrial i 248 i 44. 1 98 19. 8 119. ( Electric utilities 36 6.4 92 18. 6 + 155. ( Residential and commer- cial (retail) n. a. n. a. 122 24. 6 n. a Bituminous coal 0) 87 17. 6 0) Anthracite 56 10.0 35 7. 1 -37. f Railroads 137 24. 4 61 12. 5 -54.' Miscellaneous 10 1. 8 1 . 2 -90. C U. S. total 562 100.0 493 100. 0 -11. S n. a. Not available. 1 Figures for bituminous coal used by steel and cement mills and for resi- dential and commercial purposes are included in figures for "Other industrial." Source: Bureau of Mines, U. S. Department of the Interior; National Coal Association, Bituminous Coal Annual^ 1951. Coal has some uses for which other fuels do not compete, such as coke in metallurgical uses, but such special demands account for only about 20 percent of domestic coal consump- tion. The remaining 80 percent faces competition from petro- leum products and natural gas which are certain to gain the major part of the residential heating market and substantially all the railroad market. Most of the new railroad locomotives recently installed burn Diesel oil. Even if the coal-fired gas turbine is developed to the point at which it can successfully compete with the Diesel engine, its fuel efficiency would then be so great that it would contribute little to the total demand for coal. big use: thermal generation These declining uses of coal will be more than compensated by increased consumption in industry and electric utilities. By 1975, over 300 million tons of coal and lignite (in terms of bituminous coal equivalent) may be required for electric power generation in spite of anticipated further increases in the effi- ciency of conversion. Total foreign demand for United States Page 24 coal is likely to remain high since increasing exports to Canada are expected to offset declining exports to Western Europe. These are the factors which lead to the estimate that total demand for United States coal will grow some 60 percent over the next 25 years, from the 1950 level of 522 million tons (including exports) to more than 800 million tons. Synthetic oil production from coal, if it became economic, might push demand even higher. A major war could sharply increase dependence on coal because energy requirements would rise while supplies of other fuels—particularly of im- ported petroleum—might be reduced. During the Second World War, the demand for coal rose more than 35 percent, from about 480 million tons in 1940 to 650 million tons in 1943 and 1944. A similar or greater increase would have to be anticipated in a future full-scale war. Coal currently requires much more labor in its production, transportation, and use than its principal competitors, petro- leum and natural gas. It is easier to raise liquids and gases from the ground, to handle them mechanically, and to control them automatically than to perform similar operations for coal. On the other hand, exploration for oil and natural gas adds a considerable expense burden, whereas immense reserves of coal are already known. The decline of coal relative to oil and gas can, accordingly, be arrested by one or both of two developments: (a) a fall in coal costs through new ways to produce and handle coal with greater economy of labor, (b) a rise in the cost of com- petitive fuels relative to coal. Both developments are expected to happen. The time cannot be forecast, but sometime later than 1975 the share of coal in the total supply of energy can be expected to increase markedly. Gas, liquid fuels, and elec- tricity can be produced from coal. The United States has enough coal to meet its energy requirements for a long time to come. When the prices of other fuels begin to rise significantly in relation to coal and most economical hydroelectric power sites have been developed, the demand for coal will go up substantially. Numerous obstacles will have to be overcome in the development of the Central and Western coal regions.* Central coals are generally poorer in quality than Appalachian coal, though adaptable to a wide range of industrial uses; they are entirely suitable for power generation and for production of synthetic fuels. Western coal will have to surmount greater handicaps. Long hauls are ruled out by the low fuel value of the coal and its tendency to spontaneous combustion. The region is too arid to support a large population and intensive industrial develop- ment. Inadequate water supply may limit use of the coal either for large-scale production of synthetic fuels or for steam genera- tion of electric power. Large-scale use of western coals for electric power production could become possible, though, with development of coal-fired gas turbines, as these would elimi- nate the dependence on water supplies. *The Central coal region includes the Mississippi Valley field extending from Illinois into western Indiana and into western Kentucky; a field extending from Iowa into northwest Missouri and Kansas and then into Oklahoma and western Arkansas; a field in Michigan; and a field in mid-Texas not mined at the present time. Production and Productivity United States production of 556 million short tons of bitumi- nous and anthracite coals in 1950 represented more than one- quarter of world production and was 100 million tons greater than that of the entire Soviet bloc. The United States is also foremost in coal productivity per man-day. In 1949, underground coal miners in the United States produced an average of 6.7 tons per day?—more than 3 times the average daily output of the Polish miner; 4 times the British and German; 5 to 6 times the French, Belgian and Russian; 10 times the Japanese. Since foreign miners work longer hours, the United States advantage is even greater in terms of output per man-hour. Also, productivity in United States mines has been rising more rapidly than in other coun- tries. During the past 25 years, United States output per man- hour rose by 72 percent, from 0.5 tons in the mid-twenties to 0.86 tons in 1950, a rise partly attributable to the increase of open-pit or strip mining. This increased productivity in the United States has offset the gradual exodus of labor from the coal mines—a trend that has created such serious problems in Europe. In the mid- twenties, nearly 600,000 miners were necessary to produce some 600 million tons of bituminous coal in the United States; in 1947, the most recent year of full utilization of coal produc- tion capacity, some 420,000 miners produced more than 630 million tons. These remarkable achievements were assisted by favorable geological conditions as well as by continuous improvements in mining methods. Indeed geological conditions are largely responsible, both for the higher absolute level of productivity in the United States and for the more rapid increase of produc- tivity over that of Europe. The greater thickness of the seams in the United States, the smaller overburden (the average depth of European mines is greater than the maximum depth of American mines), the prev- alence of horizontal seams in which locomotive haulage can be used effectively, the relative absence of faulting—all these have been favorable to rapid mechanization. The abundance of eco- nomically minable coal beds has permitted the use of the labor- saving (though coal-wasting) room-and-pillar system of min- ing. These factors will continue to favor an increasing level of productivity in the United States. Two other geological factors, favorable in the past, will not hold good much longer. The fact that beds minable through drift or slope entries are becoming scarce and that vertical shafts often will have to be used, especially in the Appalachian fields, will tend to increase costs. Of even greater importance, deposits that are economically minable by strip methods are. limited. MECHANIZATION BOOSTS PRODUCTION Strip mining for coal js relatively recent and became prac- tical only when large power shovels, excavators, and bulldozers became available to remove heavy overburden. Its output per man is about three times as high as in underground mining, fExcludes surface personnel of underground mines. Page 25 and 95 percent of the coal can be recovered as compared with some 50 percent underground. Strip mining increased rapidly during the war and now accounts for 25 percent of domestic production. Substantial reserves suitable for stripping exist in Ohio, Indiana, Illinois, and farther west, but further expansion is likely to require removing a thicker overburden. Increasing overburden seems to have been the reason that no increase in man-hour pro- ductivity has occurred in strip mining since 1930. If, as is likely, strip mining continues to supply only about the present per- centage of production, it will cease to push upward the average of total productivity, and further progress will depend on improvements in underground mining. Productivity per man-day of underground bituminous mines has increased by 28 percent since the mid-twenties—from 4.5 tons to 5.75 tons in 1950—despite a considerably shortened work day. Productivity per man-hour actually increased by 53 percent, substantially all due to mechanization. Power cutters and drilling machines replace the pick and hand-operated drill of yesterday; mechanical loaders do the work of the hand shovel. New explosives replace the old blasting powder with far greater efficiency and safety. Hand-cutting of bituminous coal in underground mines has dropped in 25 years from 16 percent to less than 2 percent. In the mid-twenties only about 1 percent of bituminous coal was loaded mechanically in under- ground mines; today 70 percent is. Timbering machines and- roof bolting devices have made their appearance, and the trans- port of coal in the mines is speeded by electric engines, larger cars, and belt conveyors. The last few years have seen the advent of "continuous mining" which uses a single mole-like machine to combine all operations formerly performed individually and separately, at the face, into a synchronized operation. Considerable progress has been made in mechanical process- ing—cleaning, washing, and sizing—which has improved the quality of the coal and adapted it to particular consumer needs. In 1950, 39 percent of bituminous coal produced was mechani- cally cleaned as against less than 5 percent a quarter century ago. Mechanical cleaning is increasingly necessary as mechani- zation increases the proportion of impurities and finer sizes. OTHER FACTORS IMPEDE PRODUCTIVITY More rapid progress would undoubtedly have been made in productivity if the coal industry had not been depressed, partly because of low general economic activity during the thirties, partly because of competition from other fuels. There was little incentive for large-scale investment in the face of a shrinking market. Funds for research and for modernization have been inadequate. The war demand was readily met by increasing the number of days of operation, by enlarging the working force slightly, and by advancing into reserves at existing mines. Few new mines were opened or shafts sunk. Recent high levels of economic activity have permitted profit- able operation of most coal mines, and technological improve- ment has quickened. Research programs have been expanded, but they are small compared with programs in the petroleum or chemical industry. Moreover, tremendous possibilities exist for improving the techniques of coal production, preparation, transportation, and utilization. Some already are sufficiently advanced to justify large-scale investments by the coal industry if it could be assured of a sustained high demand. RESERVES AND RESEARCH The coal reserves of the United States are estimated at 2,500 billion short tons, of which about half may be deemed recoverable with present techniques. The recoverable reserves contain more than 80 percent of the energy of all recoverable mineral fuel reserves. United States coal reserves are about 40 percent of the world total—as much as those of the Union of Soviet Socialist Republics and China combined. About 30 percent of United States coal is in the Appalachian and interior regions; the rest is west of the Mississippi. Virtu- ally all Eastern coal is bituminous. Seventy-five percent of Western coal consists of sub-bituminous coal and lignite, and most of the bituminous coal also is not suitable for coking. Only 1 percent of United States coal reserves is anthracite— nearly all in Pennsylvania. The small size and financial resources of most coal com- panies make it impossible for all but the largest to undertake individual research programs. A significant individual effort is the research laboratory of the Pittsburgh Consolidation Coal Co. at Library, Pa., which is investigating coal hydrogenation, gasification, and pipeline distribution of pulverized coal. The coal mining industry is contributing to such private re- search organizations as the Battelle Memorial Institute and to research laboratories of universities. Three hundred coal com- panies have joined with railroads and equipment manufacturers in supporting Bituminous Coal Research, Inc., which is investi- gating the development of a continuous mining machine, stain- less steel belting for coal mine conveyors, coal-fired gas turbines, household space heaters and automatic boilers, smoke abate- ment, and the adaptation of a wider range of coals for coking. This work is supplemented by private research in other indus- tries (for example, the work of the Koppers Co. in synthetic fuels technology) and by Government projects. Notable Gov- ernment projects are those conducted by the Bureau of Mines in the Fischer-Tropsch and hydrogenation plants at Louisiana, Mo., and in other laboratories. The Bureau of Mines and the Alabama Power Co. are jointly experimenting with under- ground gasification of coal at Gorgas, Ala. Total expenditures for coal research and development amount to approximately 23 million dollars a year. In contrast, the petroleum industry spends more than 120 million. The bitu- minous coal industry is estimated currently to be spending about 15 million. The Bureau of Mines obligated $7,669,000 in fiscal year 1951 for coal research and development, ncluding work on synthetic fuels. Prospects for further increases in productivity in under- ground mining are good and will become better as coal mar- kets improve and as operators and investors accordingly gain greater confidence that the long-term trend is upward. Phys- ical difficulties of extraction will grow but can be more than offset by further improvements in methods of extraction and haulage. Page 26 A rising demand for coal will accelerate technologic improve- ment, and there will be incentives for opening new mines and new coal areas. New mine layouts will be far better adapted than present mines to continuous mining. In old mines, con- tinuous mining machines frequently turn out coal more rapidly than it can be hauled to the surface, and the full value of the machine is not realized. New mines can use belt conveyors in solving this problem. It is possible that by 1975 productivity per man-hour in underground coal mines may be almost tripled, and total productivity in underground and strip mines combined may be more than doubled. CAPACITY FOR POSSIBLE WAR The prospective increase in productivity has an important bearing not only on the cost of coal, but also on the prospects for maintaining reserve capacity for use in case of possible war. Between 1938 and 1949, the theoretical production capacity of the United States bituminous coal industry rose by 30 per- cent, from 600 to 780 million tons. Theoretical production capacity assumes the current labor force working 280 days per year at the current level of pro- ductivity. Attaining the actual capacity, presently estimated at about 700 million tons, would depend on whether or not steel, mining machinery, operating supplies, and transportation facilities were available. The increase between 1938 and 1949 may be reversed and present adequate reserve capacity en- dangered, if expansion of strip mining is slowed down, and if the labor force resumes its gradual downward trend. Con- tinuing technological progress in coal is, therefore, important to the security and general economic growth of the United States. The Problem of Coke While the total coal supply has always been adequate, except during work stoppages, this has not been true of coke. Total United States reserves of good quality coking coals are esti- mated at about 50 billion tons, 80 percent in West Virginia, Pennsylvania, and Maryland. They are being depleted more rapidly than other types of coal, since they account for about 15 to 20 percent of production although only 2 percent of total reserves. Much of the better grades have been mined, and the iron and steel industry has been adjusting to lower grades. Coke can be produced from medium-volatile bituminous coal which has low sulfur and ash content, although a blend of low-volatile and high-volatile coal is most commonly used. About 50 percent of low- and medium-volatile coking coal currently being produced normally is used for other than metallurgical purposes. If the iron and steel industry should run short of coking coal, its needs could be met by diverting it from less essential uses. Considerable progress has been made in developing new blends with anthracite fines, petroleum coke, or low-tempera- ture char. It is also possible to produce a low-volatile, smokeless fuel by low-temperature carbonization of high-volatile bitumi- nous coal. Excessive impurities often can be removed by im- proved preparation procedures and equipment. With further development of these techniques, United States supplies of acceptable coking coal can be stretched sufficiently to meet future requirements, though at slightly higher costs than in the past. insufficient coke-making capacity The real problem has not been in the supply of coal suitable for coking, but in coke-making capacity. Coke for steel manufacture is produced by integrated steel companies and their affiliates, by merchant and gas utility plants, and by beehive coke ovens. Historically, the steel indus- try has constructed coke-making facilities to operate its fur- naces at 75 percent capacity and has depended upon others for the rest. When the steel industry operates at full capacity, all three coke-making sources are utilized, beehive ovens being called on last. During the next 5 years, it will be difficult to construct enough new ovens and at the same time maintain existing ovens at a rate adequate to meet requirements for the expanding pig iron production. The stringency will be increased by a decline in utility coke-making as natural gas supplants coke-oven gas. A Bureau of Mines survey concludes that capacity for approxi- mately 2.5 million tons of utility coke will go out of existence during the next 10 years. The number of beehive ovens, which currently contribute approximately 7 million tons (9 percent of the total), will also decline rapidly. Beehive ovens waste byproducts; moreover, as reserves of satisfactory- coking coals available to beehive opera- tors dwindle, the coke they produce tends to become sub- standard. Over the next 10 years, beehive production is ^ expected to decline, by 3.5 to 5 million tons. In addition to this estimated loss of 6 million to 7.5 million tons, over-age slot-type ovens that now produce an estimated 23 million tons are expected to be withdrawn from operation. These declines are occurring at a time when the expanding steel industry requires between 10 and 15 million tons over and above previous production. Consequently, new coke-making capacity of 40 to 50 million tons must be built during the next 10 years. Private industry will be inclined to risk money in coke-oven construction only if convinced that a high level of steel opera- tion will be sustained over a long period. There are indications that the high level of demand for steel during the past few years and the current rearmament program have led the steel industry toward such a conviction. In the long run, therefore, coke-oven construction is likely to catch up with requirements. The Cost Outlook Despite the increase in output per man-hour, the price of producing bituminous coal since the prewar period has in- creased more rapidly than the price level in general. The aver- age value per ton of bituminous coal f. o. b. mine stood in 1950 at 262 percent of the 1935-39 average ($4.85 as compared with $1.85), while the wholesale price index averaged 200 and the general price level averaged 183 [1]. This increase can be attributed largely to the fact that coal miners' average hourly earnings (in dollars of constant pur- chasing power), including adjustment for portal-to-portal pay and employers' contributions to the miners' welfare-and-retire- Page 27 ment fund, increased more rapidly than output per man-hour, with a consequent rise in labor costs per unit output. This placed coal at a price disadvantage relative to gas or oil in many areas: the average wholesale price of bituminous coal doubled between 1935-39 and 1950, while the average delivered price of natural gas for industrial use remained practically un- changed. The wholesale price of fuel oil increased in rough parallel with coal, but since handling charges are greater for coal than for other fuels, coal was placed at an even greater disadvantage in the retail market. Between 1935-39 and 1950, the average price of bituminous coal to the domestic consumer has more than doubled, while the price of fuel oil increased only 87 percent and the price of gas remained practically unchanged. The average price of anthracite increased 91 per- cent during the same period. In many parts of the country, natural gas and fuel oil sold at lower cost to the consumer than coal of equivalent heating value. Fuel oil has been underselling coal of equivalent heating value at New York harbor in 10 out of 19 nonwar years since 1928. The competitive position of coal would have been even worse if railroad freight rates had increased in proportion with the general price level, but they have risen only about 50 percent since 1935-39. In the rail market, the price of Diesel oil has increased slightly more since 1935-39 than that of bituminous coal, but the greater efficiency of Diesel engines made fuel-operating costs only a fraction of those of coal-fired steam engines. Rela- tive costs in the first 4 months of 1951 are shown in table II. Table II.—Fuel costs of locomotive operation, January-April 1951 Per yard switching Per thousand gross ton- miles road freight Per thousand passenger Locomotive type Coal steam $2. 45 $0. 33 $57. 00 Oil steam 3. 10 .40 50. 00 1. 12 .29 37. 00 .69 . 17 30. 00 Whether coal prices will continue to increase in relation to other fuels will depend on such factors as the rate of increase in coal mining productivity compared with other fuels and the economy as a whole; the course of real wages in coal mining and other industries; and the development of new techniques of preparing, shipping, and utilizing coal. The prospective increase in productivity in underground coal mining and the anticipated further progress in the tech- niques of preparing coal for the market are favorable to cost reduction. There also is room for considerable cost reduction after the product leaves the mine. Cheap methods of bulk movement are being developed, including long-distance con- veyor belts and the use of pipelines to move coal. The cost of coal to the consumer will be brought down also, indirectly, through greater efficiency in conversion and use, and through the more effective use of the byproducts of coal con- version. Efficiency of coal conversion to electric power can be expected to increase by at least 25 percent in the next quarter century, and even more if the coal-fired gas turbine proves out. The rapidly expanding chemical industry will generate an ever- increasing demand for the byproducts of carbonization, hydro- genation, and the Fischer-Tropsch process. Large-scale pro- duction of synthetic liquid fuels from coal, particularly in conjunction with electric energy generation and chemical by- products, may eventually develop into a tremendous use of coal and contribute importantly to the Nation's supply of energy at relatively low costs. ROLE OF LABOR Substantial reductions in the cost of coal at the mine head would be possible, relative to the general price level, if coal miners' real wages should remain unchanged. But coal miners' wages may be expected to increase at least as much as other wages if only to retain an adequate working force in the industry. Rising real-wage rates are compatible with cost reduction as long as they do not completely absorb the savings due to technological improvements or outstrip them as in recent years. Now that coal miners have reached the top of the wage scale, further wage increases are likely to be more nearly in propor- tion to the general rise of wage levels. At the same time, the pace of technological progress in the coal industry is likely to quicken. Organized labor recognizes the importance of technological progress. Labor, management, and the general public all have a large stake in achieving the more stable industrial relations necessary to improve the competitive position of coal. In recent years, lack of assurance of a continuous supply has contributed to the displacement of coal by other fuels. Large-scale work stoppages cut deliveries to markets, often at times when coal stocks were low. THE GENERAL OUTLOOK This Nation's abundant reserves of coal make coal a major long-range source of fuel and raw materials for a wide variety of industries. Sooner or later several major United States industries will have to sink their tap roots deeply into our coal reserves, as did the railroads earlier. Steel has long been rooted to coal and will need increasing amounts. The electric power industry too has been a major customer but now shows signs of becoming a far larger one and a major collaborator toward putting coal more abundantly into use in a variety of ways. likewise the fast-growing chemicals industry, long tied indirectly to coal through the route of coke and the steel indus- try, holds promise of becoming a much greater user along with the oil industry, which when need and technology are ripe, can turn to coal conversion to secure an important portion of the nation's liquid fuel supply. Nor is it inconceivable that the natural gas industry may some day turn heavily to coal as a source of product to fill its pipelines. These great coal-using industries, present and potential, have the financial and technical abilities to provide major leadership, along with Government and progressive members of the coal industry itself, toward deriving abundantly greater benefits for the Nation, and for other free nations as well, from Page 28 our rich coal resources. The jobs to be done are evident. They will require intensive technological effort and large capital in- vestment. The job is almost certain to get done someday as the need increases; the big issue is whether it will get along rapidly enough to keep the coal industry from going through another interim period of depression at great cost to the Nation. The challenge to avert such a misfortune rests largely with the several industries concerned. COAL IN OTHER FREE COUNTRIES Since the Second World War, Western Europe and Japan, both vital to the security of the United States, have found them- selves short of coal and dependent on imports, with the United States and the Soviet bloc as the principal sources of supply. At the same time, Canada has become increasingly dependent on imports of coal from the United States. Assured coal sup- plies from the United States will be important, perhaps essen- tial, to the future industrial development of these areas. Energy Economy of Western Europe The total energy consumption of Western Europe (includ- ing the United Kingdom) in 1950 was equivalent to 630 mil- lion metric tons of bituminous coal. Per capita consumption of energy was thus less than one-third that of the United States. The economy of Western Europe is still predominantly based on coal. In 1950, 75 percent of its total energy supply was derived from solid fuels, 14 percent from petroleum, and 11 percent from hydroelectric power. While Europe still has large coal reserves—though not as economically minable as those of the United States—and con- siderable undeveloped hydropower, it has no reserve produc- tion capacity immediately available. As a result, Western Europe has been unable to meet rapid increases in the demand for energy during recent years, and has had to import coal and oil for an increasing proportion of its total requirements. Polish coal has been imported at a rate of 10 to 12 million tons a year. During the past 18 months, Polish coal has been available only in reduced quantities and on onerous terms. Imports into Western Europe from the United States reached a peak of 37 million metric tons in 1947, dropped to almost nil in 1950, and are running again at a rate of more than 25 million tons a year. Long-term projections of Western Europe's energy require- ments are particularly hazardous because of the difficulty of interpreting past trends. Between 1913 and 1950, total Euro- pean consumption of energy rose only about 20 percent. Prac- tically all this increase was accounted for by increases in pe- troleum and hydroelectric power. Fluctuations during this period have been violent as a result of two world wars and the intervening depression. These movements in total energy requirements reflect the slowness of economic growth and the large fluctuations of European production of goods and services during the past few decades. Past trends are, therefore, not a reliable guide to energy requirements during a more rapid and continuous in- crease in total production. Experience shows, however, that energy requirements range between 35 and 75 percent of the increase in industrial volume. If Western Europe's aggregate gross product increases by 75 percent over the next quarter century and is accompanied (as is likely) by a doubling of the physical volume of industrial production, total energy requirements may be expected to increase by about 50 percent, from 630 million metric tons bituminous coal equivalent in 1950, to around 950 million tons by 1975. Most of this increase will be met by increased petro- leum imports, which are expected to more than triple during the next quarter century. Hydropower should be more than doubled and solid fuel consumption remain substantially un- changed. These projections depend, of course, on increased availabilities of petroleum at a real cost not much above present levels. (See table III.) Table III.—Energy consumption of Western Europe 7938, 1950, and projection for 1975 [In millions of metric tons, bituminous coal equivalent] Year Total Solid fuels Petro- Hydro- 1938 532 440 52 40 1950 630 475 • 85 70 1975 (projected) 950 500 300 150 European Oil Consumption. By 1975 it may be expected that about one-third of Western Europe's energy requirements will be met by petroleum, as compared with 14 percent in 1950 and 10 percent in 1938. A major factor will be high production costs of coal in Europe and low production costs of oil in the Middle East. Another is the great growth of demand for liquid fuels in transport uses. Western Europe's petroleum consumption has increased by 66 percent since 1938, despite interruption of refinery con- struction during the war, maintenance of artificially low coal prices, and despite exchange difficulties, trade restrictions,, tariffs, and high petroleum taxes. If the next 25 years bring rapid economic growth, Western European petroleum con- sumption should rise at an accelerated rate. ^' Europe's Hydropower. Western Europe still has consider- able undeveloped hydropower resources, but much of this is located on the Scandinavian Peninsula far removed from Europe's industrial centers. In 1938, less than 15 percent of Western Europe's waterpower resources had been developed. In 1950, this figure had increased to nearly 25 percent. By 1975, it is estimated that about half of Europe's waterpower will have been developed, providing for about 15 percent of Europe's total energy consumption as compared with 11 percent at present. The Future for Coal in Europe. Coal consumption will probably not increase substantially above the present level. The average cost of coal at the mine head, which at present varies from about $8 per ton in the United Kingdom to $10 or more on the Continent, may be expected to increase by 50 percent or more in relation to the average price level as prices Page 29 are decontrolled and as mines have to be deepened, more diffi- cult seams worked, and miners' wages raised. Geological con- ditions will continue to hamper mechanization. Real wages of coal miners will have to be increased more rapidly than those of other workers in order to maintain an adequate labor force. These increases in the cost of producing coal in Europe will occur during a time when increasing amounts of petroleum will become available from the Middle East. These petroleum sup- plies should, in the absence of interruption from political de- velopments, be the principal source from which Europe's increased energy requirements are to be met. Coal imports from the United States will taper off, though it is possible that American coal will retain a permanent foothold in Southern Europe to the extent that petroleum cannot be substituted for coal. Japan's Coal Needs In 1951, Japan's total energy consumption, like its industrial production, almost regained the prewar level. Japan's total energy consumption is now equivalent to 93 million metric tons of bituminous coal. Half of this is based on coal and lignite; 40 percent is contributed by hydroelectric power; 5 percent each is accounted for by petroleum and by wood and charcoal. Between 1930 and 1939, Japan's industrial production in- creased by 115 percent and total energy consumption rose by 70 percent. By 1975, Japan's industrial output may be expected to increase more than threefold and its energy requirements to more than double. A substantial part of the energy increase will be hydroelectric power. Although Japan has developed nearly half its suitable water power sites, its hydroelectric power capacity probably will be doubled by 1975. Its hydroelectric power output then would be equivalent to nearly 80 million tons of bituminous coal. Petroleum consumption may be expected to increase five- fold or more, but even so it would contribute only about 20 to 30 million tons, bituminous coal equivalent. This would leave coal requirements of some 70 to 80 million tons yearly. Japan will experience great difficulties in covering these requirements. Its coal beds—primarily in Hokkaido and Ky.ushu—are generally deep, thin, steeply pitched, and of rela- tively poor quality. Average output per worker is between one- half and two-thirds of a ton per day—less than one-tenth of that in the United States. Possibilities of mechanization are lim- ited by increasingly difficult mining conditions; output per man actually declined since 1933 and increased production was made possible only by a rapid increase in the labor force. Total production—about 44 million tons in 1951—has not yet re- gained the prewar peak of 57 million tons, reached in 1940. Before the war, Japan imported between 7 and 10 million tons, almost all from areas now under Soviet control (Sakhalin, China, Manchuria). Japan was—and still is—dependent on imports for almost all its metallurgical coking coal and for some high-calorie gas coal and anthracite. On the other hand, Japan exported some boiler coal (1.8 million tons in 1938). The loss of its customary sources of coal imports has forced Japan to turn to the United States for coking coal. During 1951 Japan imported about 2 million tons of coking coal and 300,- 000 tons of anthracite from the United States. Exports oi boiler coal amounted to about 700,000 tons. Net imports thui amounted to 1.6 million tons, but another 2 million tons were withdrawn from stocks. Imports are scheduled to rise to 3 mil- lion tons in 1952. Imports from the United States of at least this magnitude are likely to continue as long as Japan cannot be supplied from sources on the x\siatic mainland. Canada Looks to U. S. Coal f Canada's energy consumption has increased by 70 percent since 1939. In 1950, coal still accounted for 46 percent of total energy consumption (excluding fuel wood); petroleum, 22 percent; hydroelectric power, 29 percent; natural gas, 3 percent. Well over half the coal consumed in Canada is imported, almost all from the United States; and Canada's dependence on such imports is increasing. Coal imports from the United States rose from 11.6 million metric tons in 1939 to nearly 25 million tons in 1951; their share in Canada's total consumption rose from 44 to 60 percent. (See table IV.) Canada's dependence on coal imports is explained primarily by transportation costs. Canada has large coal reserves in Alberta and Nova Scotia, but they are far from principal markets. Two-thirds of Canada's industry is concentrated in the Toronto-Ottawa-Montreal triangle, which can be supplied more cheaply from United States mines. There is no clean-cut trend to Canada's energy requirements. They have gone up sharply during the past decade when in- dustrial development was rapid; but during the preceding quarter century when industrial development was slow, fuel consumption also increased slowly. If a rate of industrial growth comparable to the past decade is assumed, Canada's total energy requirements would about triple during the next 25 years. The largest increases would undoubtedly occur in petroleum, natural gas, and hydroelectric power; but coal con- sumption may be expected at least to double. Perhaps two- thirds of Canada's coal would come from the United States— more than 50 million tons yearly. Table IV.—Energy consumption of Canada [In millions of metric tons, bituminous coal equivalent] Coal Petro- leum Natural gas Hydro- power Grand total Year Domes- Im- tic 1 ported 2 Total 1926. . .! 1939. ..; 1950. . .! 13. 2 12. 8 15. 4 16. 1 13. 9 24T8 29. 3 26. 7 40. 2 3.8 8. 1 19.0 0. 7 1. 3 2. 5 9. 0 14. 4 25. 4 42. 8 50. 5 87. 1 1 Bituminous, sub-bituminous, and lignite. 2 Bituminous coal, anthracite, and coke. Reference 1. Department of Commerce. "Implicit Deflator' of the gross national product. National Income. 1951 ed. Washington, D. C, Govern- ment Printing Office, 1951, p. 141, table B. Page 30 Selected General Statistical Sources Anthracite Institute. Manual of Statistical Information, 1950. Wilkes- Barre, Pa., The Institute, 1950. Bituminous Coal Institute. 1951 Bituminous Coal Annual. Washington D. C, The Institute, 1951. Committee on Interior and Insular Affairs. Basic Data Relating to Energy Resources. 82d Congress, 1st sess., Senate Document No. 8. Washington, D. C, 1951. ISational Coal Association. Bituminous Coal Data, 1950. Washington, D. C, The Association, Sept. 1951. U. S. Department of Commerce. Business Statistics, 1951 ed. (statistical supplement to The Survey of Current Business). Washington, D. C, Government Printing Office, 1951. U. S. Bureau of Mines. Energy Uses and Supplies, 1939, 1947, 1965. Information Circular 7582, October 1950. (Mimeographed.) . Bituminous Coal and Lignite in 1950. Mineral Market Report No. 2032, November 20, 1951. (Mimeographed.) . Production, Consumption, and Use of Fuels and Electric Energy in the U. S. in 1929, 1939, and 1947. Report of Investigations 4805. October 1951. (Mimeographed.) U. S. Geological Survey. Coal Resources of the United States. Circu- lar 94, December 1950. (Mimeographed.) Chapter 4 The Situation in Brief The demand for electric energy in the United States during the next 25 years may be expected to increase two and one-half times if there is to be a doubling of the Nation's output of all goods and services in that period. With such a growth, the electricity demand around 1975 would be about 1,400 billion kilowatt-hours, compared with the generation of 389 billion kilowatt-hours in 1950. The country has enough of all energy resources—water- power, oil, gas, and particularly coal—to support a rise in electric energy supply of this magnitude. The major question is whether supply will in fact be expanded rapidly enough in relation to demand and without a rise in real costs. The requirements of a successful program of electricity expansion are threefold: First, every opportunity must be taken to harness unde- veloped waterpower potential at a rapid pace, wherever economically feasible. Since much of this development will have to be at Federal multipurpose sites, Government surveys, planning, and authorization and appropriation procedures should be markedly hastened. Second, full advantage should be taken of opportunities that exist to improve technical efficiencies and otherwise effect economies to hold down or reduce costs of electricity produc- tion, particularly in thermal generation plants. Third, existing capacity and future installations should be geared into broadly designed, integrated operations covering wide regions. This approach holds great promise for the most efficient use of sources of electric power. References Elsewhere in This Report Vol. II: The Outlook for Key Commodities. Aluminum. Chemicals. Iron and Steel. Projection of 1975 Materials Demand. Reserves and Potential Resources. Vol. IV: The Promise of Technology. Coal Products and Chemicals. Tasks and Opportunities. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Lyons, C. J., and Nelson, H. W. Role of Technology in the Future of Coal. Munger, H. P. Waste Suppression—Waste Going into the Atmosphere. Nelson, H. W. Role of Technology in the Future of Coking Coals. Perry, P. G. Role of Technology in the Future of Electrical Energy Transmission. Richardson, A. C. Waste Suppression—Role of Technology in Increasing Mineral Supplies by Suppression of Waste in Beneficiation. Snavely, C. A. Waste Suppression—Waste Going into Streams. Electric Energy In the rest of the free world as a whole, demand for electric energy may be expected conservatively to increase at a rate as great as that of the United States, with expansion fastest in the comparatively underdeveloped countries. Such a growth rate probably will press hard on the relatively tight gas, oil, and coal resources of some free countries, especially the industrial coun- tries of Western Europe. Where hydroelectric resources exist, therefore, every effort should be made to develop them. RAPID GROWTH OF ELECTRICITY Electricity has had a phenomenal growth in the United States ever since it was introduced commercially in 1882. Since 1920, its use has approximately doubled every 10 years, con- tributing greatly to increased labor productivity, larger national economic output, and improved living standards. By 1950 electricity was being used for lighting and other purposes in 92 percent of all houses in the United States and in 83 percent of rural homes. It is estimated that electric motors provided at least 90 percent of the mechanical power used in industrial plants. An analysis of comparable industries, as cov- ered by the Census of Manufactures, shows that the use of electric energy per man-hour of labor increased from 2.61 kilowatt-hours (kw.-hr.) in 1929 to 4.60 in 1939 and to 5.71 in 1947. By 1950, the average was estimated at 6.29 kw.-hr. Total consumption of electric power in the United States in 1950 had reached 334 billion kw.-hr. compared to 74 billion in 1925. By far the largest part of the 1950 total, about 200 billion kw.-hr., was used for industrial purposes; residential and farm consumption was about 75 billion kw.-hr.; and commercial consumption, some 50 billion kw.-hr. Page 31 Production of electric energy in 1950 was 389 billion kw.-hr. with transmission and distribution losses accounting for 55 billion kw.-hr. Generating capacity amounted to 82.8 million kilowatts (kw). About one-quarter of the electricity produced in 1950 was supplied from hydroenergy, and three-quarters from thermal generation. Table I shows the growth of electricity production in the United States from 1902 to 1950, broken down between hydro and thermal generation. For the most part electric energy in this Report is measured in kilowatt-hours. The term kilowatts is used as the measure of capacity to produce energy, or to measure demands for electric power at an instant or short inter- val of time. The relationship can be explained as follows: one kilowatt of electric generating capacity operating for 1 hour will produce 1 kilowatt-hour of electric energy; for one entire day—24 kilowatt-hours of energy; and constantly for a year— 8,760 kilowatt-hours of energy. Few generating plants operate at a constant rate because demands for energy vary with the hour of the day, the day of the week, and the season of the year. Furthermore, all generating plants must be taken out of service for routine and emergency maintenance and repairs. Table I.—Growth of electric energy production in the United States [Billions of kilowatt-hours] Year Hydro Thermal Total* 1902 6.0 1907 17.4' 1012 7.4 24. 8 1917..... 13.9 29. 5 43.4 1922 21. 3 39. 9 61.2 1925 f26. 2 t 58. 5 84.7 1927 32. 9 68.5 101.4 1932 36.0 63.4 99.4 1937 48. 3 98.2 146. 5 1942 69. 1 164.0 233. 1 1947 83. 1 224.2 307. 4 1950 100. 9 287.8 388.7 * In some cases will not add due to rounding, f Estimated. Source: Federal Power Commission, Electric Power Statistics 1946-51. Bureau of the Census, Historical Statistics of the United Stales, 1789-1945, p. 156, Series G—171-182. Most of the electricity in the United States is produced by privately owned utility companies, although a significant por- tion is also accounted for by industrial concerns that supply their own power and by municipally owned, cooperative, and federally owned facilities. The pattern of production in 1950 by ownership of generating plants is shown in table II. FUTURE DEMAND AND SUPPLY The Nation's demand for electricity is expected to continue to rise rapidly up to 1975, though at a somewhat slower pace than in the past. In the 25-year span from 1925 to 1950, total national output of goods and services approximately doubled while consumption of electricity increased 3 J/2 times. If total national output should double again from 1950 to 1975, de- mand for electricity may increase 2 J/2 times. This projection, prepared by the Commission's staff, is, of course, only a rough approximation intended to suggest the general magnitude of probable increase. Table II.—Electric energy generation by type of ownership [Billions of kilowatt-hours] Percentage Generated by— Thermal Hydro Total of grand Privately owned electric utility total 217 51 268 68. 9 Privately owned industrial plants. 54 5 59 15.2 Municipal and cooperative elec- tric systems 15 7 22 5. 6 Federal electric systems 2 38 40 10.3 Total 288 101 389 100.0 Percentage of grand total 74.0 26.0 100.0 Sources: Edison Electric Institute, Statistical Bulletin #18, July 1951. Federal Power Commission, "Production of Electric Power in the United States," monthly reports, 1950 and 1951. Table III shows this 1975 projection by main classes of custo- mers and for each class compares the 1925—50 percentage increase with the projected increase from 1950 to 1975. A fuller explanation of these 1975 projections is given in volume II of this Report ("Projection of 1975 Materials Demand"). Table III.—Consumption of electric energy in the United States, actual, 1925 and 1950; projected, 1975 [Billions of kilowatt-hours] Class of consumer 1925 i 1950 i 1975 Percent change 1925 to 1950 to 1950 1975 6. 5 74. 5 311 1,046 31 . Industrial: 4 8.9 50.4 194 466 285 Major electro-process 4. 1 37.5 207 815 452 Other 53.2 160. 6 470 202 193 Miscellaneous 1.0 10.7 25 970 107 Total consumption 73.7 333.7 1,204 353 260 11.0 55. 1 196 400 256 Total generation 84.7 388. 8 1, 400 359 260 1 Edison Electric Institute. 2 Includes farm customers. 3 Small light and power sales of electric utilities. 4 Large light and power and railway sales of electric utilities, plus genera- tion for industrial use in nonutility plants. 5 Losses incurred in transmission and distribution. EXPANSION OF GENERATING CAPACITY In order to meet the projected electric power needs during the next 25 years, generating capacity would have to be in- creased by about two and one-half times the 1950 level, that is, from some 83 million kilowatts to close to 300 millions, on the basis of the 1950 relationship of capacity to production. Includ- ing a small amount for replacements, this would mean an average gross addition of close to 10 million kilowatts of capacity each year. By comparison, the gross additions in 1950 were about 7 million kilowatts and in 1951 about 8 million. The projected rate of expansion is readily feasible, though meeting these requirements would necessitate some expansion of the heavy electric power equipment manufacturing indus- Page 32 try, would place a heavy load on the construction industry, and would call for large amounts of materials. It would also necessi- >.te a sustained high rate of capital investment in electric gen- erating and transmission facilities, especially by private utilities. To avoid shortages that might inhibit economic growth and perhaps impose costly dislocations in the areas affected, this expansion of generating capacity will have to be timed to pace the growth of demand in each region and locality. A sufficient and timely rate of expansion by the private utility industry might be impeded by uncertainty of investors as to future markets and earnings, by financing difficulties, shortages of material and equipment and the like. In the past, the expansion of Federal hydroelectric facilities—the planning, authorizing, and appropriating procedures—has been time- consuming and inadequately geared to the rate of growth of demand. Unless deterrents to private expansion are averted, and unless orderly and more expeditious procedures for public hydro expansion are developed, future growth and security will be hampered. BASIC ENERGY SOURCES FOR ELECTRICITY Corresponding increases would have to take place in the total supply of basic energy for generation of electricity—in the aggregate supply of developed water flows and of coal, gas. and oil fuels, though the proportions of these several sources might change. This fact raises three crucial questions: can the energy resources of the United States support such a large expansion of electricity production? Can such expansion occur without encountering increases in the real costs of electricity large enough to have a deterrent effect on economic growth? Tf war should break out before 1975, will there be enough electricity to support a maximum effort? The growth of electricity production has imposed a steadily increasing load upon the basic energy resources of the United States. At the same time a great shift has occurred in the "mix" of basic energy sources used for generating electricity. These changes are shown in table IV. Table IV.—Primary energy sources used for electricity production in the United States, 1925 and 1950 » Amount of basic energy consumed Kw.-hr. produced (billions) 1925 | 1950 1925 1950 Millions of short 537 113 Billions of cubic feet 67 ] 777 Millions of bands 15' 93 Coal 52 3 59 191 Gas 55 Oil 42 288 Total thermal production. . . Millions of kw. ca- t"\IJ 19 Hydroelectric 26 101 85 389 i Includes electric utilities and industrial user-owned generation. Source: Federal Power Commission. Hydroelectric production multiplied fourfold from 1925 to 1950, but its contribution to total electricity supply nevertheless fell from nearly one-third to one-quarter in this period. There still remains a considerable undeveloped hydroelectric potential in the United States that could be economically used, but it is physically limited and is clearly inadequate to provide more than a fraction—perhaps one-quarter, at best—of the ex- panded supply of electricity needed between now and 1975. The bulk of expansion will have to be provided by thermal (fuel-fired) generation. Thermal generation actually carried the largest part of the growth from 1925 to 1950, with an almost fourfold increase in supply and with its contribution to total electricity supply ex- panding from just over two-thirds in 1925 to about three- fourths in 1950. During this period oil and natural gas ex- panded dramatically as major fuel sources for electric genera- tion; the contribution of oil for this purpose rose to 10 times and gas to 18 times. Coal's contribution, on the other hand, increased to less than fourfold; whereas coal supported nearly nine-tenths of thermal generation in 1925, it accounted for only two-thirds by 1950. Though the extent of future discovery and production of petroleum and natural gas in the United States is uncertain, as discussed elsewhere in this volume of the Commission's Report, vast reserves of coal and lignite give the Nation the resource base for a tremendous expansion of thermal electric generation. WILL COSTS OF ELECTRICITY RISE? The big question remains as to whether an expansion of the magnitude indicated above can be accomplished without sub- stantial increases in the real cost of electric energy. The general economic objective of keeping costs of all ma- terials as low as possible applies with particular force to elec- tricity, because it enters into the cost of practically all goods and services produced in the economy and into the budget of nearly every family. Even though electricity typically repre- sents only a small fraction of total production costs for most items, a substantial increase in its real costs, reflected in corre- spondingly higher prices to industrial and other consumers, could have a considerable retarding effect on economic growth. The impact would be particularly serious upon the electro- process industries, which thrive because of low-cost electric power and upon which the United States must depend heavily for solving some of its difficult materials problems. Table V shows the electricity requirements for selected materials whose growth will be highly important to the United States economy from now to 1975. In the manufacture of aluminum, for example, reduction plants require approximately 9 kw.-hr. of electric energy for each pound of aluminum produced. At about 2 mills per kw.-hr., the cost of energy per pound of aluminum*s close to one-tenth of the present price of the metal. Each increase of 1 mill in the cost of power, therefore, results in an increase of nine-tenths of a cent in the cost of the metal, or nearly a 5 per- cent increase in the total price. Relatively small price changes in such materials as aluminum may affect considerably their competitive position and the extent of their long-run growth. Page 33 Table V.—Power requirements for selected electro-process materials Approximate kw.-hr. required per ton of product Titanium metal* 40,000 Aluminum metal 18,000 95 percent silicon metal 17,500 Electrolytic magnesium 16, 000 35 percent hydrogen peroxide (100 percent basic) 16, 000 Electrolytic manganese 10, 200 Silicon carbide 8, 600 70 percent ferrotungsten 7, 600 Sodium chlorate 5, 200 Rayon 5, 200 Phosphoric acid (via electric furnace) 3, 900 Electrolytic zinc 3, 400 Chlorine 3,000 *Kw.-hr. per pound of titanium from the President's Materials Policy Commission staff report on titanium. Source: Adapted from chart of "Process Power Requirements," Chemical Engineering, March 1951, p. 115. Changes in production technology will probably increase the number of electro-process materials and will enlarge the power requirements of many other materials by 1975. Broadly and over the long-run, as important materials like copper become more difficult to obtain, the Nation will need to develop substi- tutes, such as aluminum, to replace them. Moreover, as high- grade reserves of important minerals dwindle, more electric energy will be needed in some cases to use lower grade ores. To mine and concentrate the low-grade iron ore of the Lake Superior region will require 75 to 80 kw.-hr. per ton of con- centrates as compared with an average of 3 kw.-hr. per ton of usable high-grade ore. [/] Unless sufficient electric energy is available at favorable costs the expansion of substitute ma- terials and of output from low-grade ores will be retarded. Until fairly recently, electro-process industries have turned mainly to large-scale hydro sources for low-cost energy, such as the Shawinigan Falls development in Quebec, the Niagara Falls developments in Ontario and New York, and the Govern- ment hydroelectric systems in the Tennessee Valley and in the Pacific Northwest. As the general utility demand for electric energy has grown in these limited areas of low-cost hydro- power, however, the electro-process industries have been in- creasingly unable to compete with the prices offered by other industries and by general utility consumers. Today most of the power from Shawinigan Falls is used for general utility pur- poses, and large blocks of additional low-cost hydroelectric power will not be as readily available at Niagara Falls or in the Tennessee Valley for the expansion of electro-process indus- tries as they have been in the past. The growth of gen- eral utility requirements will in time encroach upon all these low-cost hydropower supplies, including those now being de- veloped. Accordingly, there will be need for a large-scale expansion of low-cost electricity supplies from fuel-fired generation. The great contribution of electricity to the economic growth of the United States to date has resulted not only from the tre- mendous expansion of supply and use, but also from the decline in real costs and real prices of electricity. Between 1925 and 1950 the average price paid for electric power by industrial and commercial customers, adjusted for changes in the purchasing power of the dollar, dropped 58 percent, and by residential users 70 percent. The declining real costs of electric power re- flected in these falling prices to consumers were made possible primarily by steady technical advances in the production^ transmission, and distribution of electricity, by the economies inherent in larger volume operations and sales, and by declin- ing fuel costs. There is serious question whether a reversal of this long downward trend in the cost of electric power can be prevented. Several factors tending to push the cost upward are already at work and others are in the offing. First, future increments of hydropower will cost more on the average than present hydroelectric supply, which for the Nation as a whole now has an average cost lower than thermal electricity. A few large, low-cost hydro sites remain to be de- veloped. There are other available sites that can be economi- cally developed, but they will entail higher average costs for the electricity produced. Second, the real cost of oil and particularly natural gas for thermal generation may rise considerably, thus forcing up thermal electric costs. If limited supplies and higher costs of oil and gas force a greater shift to coal, there will be an addi- tional upward pressure on electric generating costs insofar as oil and gas are presently cheaper sources of energy than coal in certain areas. These increases in real cost are exclusive of upward changes in money costs that might result from general price inflation, higher wage rates, increased property taxes and the like. THE PROBLEM OF SECURITY If war should break out, a burden would be thrust upon the electric power industry and those industries that supply it, as demonstrated by the experience of the Second World War. Not only did the requirements of many existing industrial custo- mers increase considerably, in line with increased demands for their products, but there emerged a new demand for large blocks of electric power to support new industrial capacity, as in the case of aluminum. Fortunately the Nation entered the war with a comfortable cushion of generating capacity and large blocks of new hydro capacity nearing completion. Even so, generating capacity had to be expanded considerably, in spite of some displacement of nonessential civilian loads. Altogether, total production of electric, power increased from 180 billion kw.-hr. in 1940 to 280 billion kw.-hr. in 1944, a rise of 56 percent. Generating capacity rose in the same period from 51 million kw. to 62 million. In the event of another war, there would be similar need for a cushion to provide a fast increase in electric energy supply to match the upsurge of industrial demand. In coming years the expansion of generating capacity must not simply keep in step with rising peacetime demand but a step ahead in order to insure a security cushion. There is always the strong possibility of enemy air attack on United States cities and industries. In order to meet emergency needs for electricity in particular areas resulting, for example, from damage to generating facilities in such areas, or simply from abnormally heavy industrial war demands there, it would be important to have maximum flexibility in obtaining electric power supplies from other areas. Such flexibility requires the Page 34 full development of high-voltage transmission interconnections within power regions and of tie lines between regions. Most of these would have significant economic value in peacetime and all would be of great importance in case of war. EXPANSION IN FUEL-ELECTRIC GENERATION As indicated earlier thermal generation will probably have to supply at least three-quarters of the needed growth in electric energy supply up to 1975. Beyond 1975 thermal generation will have to carry an even larger share of the growth load. Oppor- tunities for achieving this expansion and at the same time holding costs to a minimum are promising. They lie in two main directions: (1) raising the engineering and economic efficiency of generating plants and (2) reducing fuel costs. Opportunities to reduce transmission costs and to secure advantages from fuller integration and coordination of electric systems apply also to hydroelectric power and hence will be treated later. INCREASING THERMAL GENERATION EFFICIENCY Great advances have been made over the last 25 years in raising the efficiency of fuel-fired generating plants, with the result that plants being built today are far more economical to operate than many older plants with smaller units still in use. As time goes on, these older, high-cost plants will be retired and this shift will exert a downward influence on average thermal generation costs. A recent study by the Federal Power Commis- sion compares the cost performance of generating stations hav- ing more than 75 percent of capacity installed after 1931 to stations having more than 75 percent of capacity installed prior to 1931. [2] The comparison assumes equivalent fuel costs and operating plant factors for the various plants, and is based on stations of roughly equivalent size. The study shows that average over-all production costs in the more recently constructed stations were close to 25 percent lower. All cost components except supervision and engineering were less; labor costs were 15 percent less; maintenance, 43 percent; water, supplies, and other expenses, 18 percent; and fuel costs, 21 percent. The same study indicates that substantial economies are en- joyed by large stations (of about 100,000 kilowatt capacity) as compared with small ones; their total costs tend to be 25 to 40 percent lower. The trend is toward such large, low-cost plants with larger units. The average capacity of stations in- stalled from 1942 to 1946 was about one-third larger than in the period 1927-31, and the average size of stations being in- stalled today is considerably greater than in 1946. Data published annually by the Federal Power Commission during the subsequent years 1947 to 1951, inclusive, bear out these general conclusions. [3] Despite higher construction costs, higher operating labor and fuel costs the total costs have been further reduced in many instances. This is attributed to better- ment of thermal efficiencies with larger units operated at higher pressures and temperatures and reduction of investment costs through elimination of part or all of the relatively expensive station building. Continuous operation at high capacity factors has also been an important factor in the relatively low kw.-hr. costs of these new postwar plants. Fuel costs constitute about 75 percent of "production costs" and 50 percent of total costs, including capital allowances but excluding taxes of thermal stations. Consequently, improved thermal efficiency represents a major approach to reducing costs. Around 1900, somewhat more than 7 pounds of coal were required to generate one kilowatt-hour of energy; by 1925, only 2 pounds were required, and by 1950 only 1.9 pounds. Further improvements cannot be expected at the same rate, but a one-third reduction by 1975 below the 1950 figure seems possible, as against the 40 percent decline in the preceding quarter century, and the 70 percent decline between 1900 and 1925. A more specific example of cost-reducing opportunities may be obtained from a comparison of costs in three reasonably comparable steam plants in Washington, D. C, where installa- tions were made at three significantly different periods: the 1920's, the 1930's and early 1940's, and in 1949-50. In spite of size and plant-factor differences, the three plants may be com- pared, in rough terms, for cost indications. Total production expenses per kw.-hr. during 1950 in the most recent and mod- ern plant were about 20 percent lower than in the intermediate- age plant, and about 50 percent lower than in the oldest plant. Fuel expenses per kw.-hr., with all three plants using coal at roughly the same purchase cost, were about 15 percent lower in the most modern plant than in the intermediate-age plant, and 35 percent lower than in the oldest plant. Corresponding figures were 33 and 70 percent for operation labor, supervision, and engineering: and 68 and 90 percent for maintenance (including labor, material, and other expenses). Average B. t. u. consumption per net kilowatt-hour generated was 10 percent lower in the newest plant than in the intermediate-age plant, and 30 percent lower than in the oldest plant. WAYS TO HOLD DOWN FUEL COSTS There are also opportunities for holding down the costs of the fuels themselves. These are discussed in more detail else- where in this volume in the chapters on oil, gas, and coal but deserve brief mention here. Since fuel-fired generation of electricity has wide flexibil- ity in choice of fuel, there is always incentive to use the lowest cost fuel or combination of fuels, often in conjunction with hydro-generation. Large amounts of natural gas are accord- ingly used in those areas, particularly in the Southwest, where gas is indigenous and relatively cheap as compared to coal, which must be transported from mines far away. Whether or not natural gas will in the future be abundant enough and cheap enough to be competitive with coal for thermal genera- tion in areas distant from gas fields, it is likely that gas will remain in heavy use for this purpose in gas-producing areas up to 1975. Similarly, fuel oil is likely to remain an important fuel for thermal generation in areas with large refinery capacity. Conceivably oil and gas will be sufficiently abundant to account for a considerably higher proportion of total fuel for electric generation than at present; if not, coal can move in to take up the slack. In any event, coal will remain the predominant fuel for electricity production for the Nation as a whole, and it offers Page 35 the greatest opportunities for holding down fuel costs. Table VI illustrates how electricity requirements around 1975 might be met from various basic energy sources, assuming relatively favorable gas and oil supply conditions. Table VI.—Primary energy sources and production of electricity, 1950, and a possible pattern of sources and production, 1975 Consumption of basic energy Kw.-hr. produc- tion (billions) 1950 | 1975 1950 1975 Millions of short Coal 113°f 320 Billions of cubic feet 191 800 Gas 777 | 1, 600 Millions of barrels 93 |" 300 55 42 150 150 Oil Total thermal production Millions of kw. capacity 19 1 60 288 101 1, 100 300 Hydroelectric Grand total I 389 1,400 1 During 1950, the average cost of coal at the mine was close to $5 a ton, though it was as low as $l-$2 per ton at open pit mines. To this must be added the cost of transportation, unless the steam-electric generating plants are located in the vicinity of the mines. Transportation costs in 1950 averaged about $2 per ton and in some areas considerably higher. There are tre- mendous possibilities, discussed in the coal chapter of this volume, for improving techniques of coal production, prepara- tion, and transportation and thereby exerting a downward pressure on thermal generation costs. The electric power indus- try itself can take action to reduce coal costs in many cases by installing thermal stations directly at mine heads, thus substi- tuting the cost of transmitting electric power to customers for the cost of shipping coal to generating stations near customers. Another saving opportunity exists in the use of inferior solid fuels. Prior to 1939 approximately half of the electric power production in Germany came from "braunkohl" plants, which produced not only power but also briquets, chemicals, and liquid fuels from lignite and sub-bituminous coals. In the United States there are extensive deposits of such low-grade coals that can be strip-mined at low cost and that can be com- petitive with other fuels after realizing the coproducts yielded by low-temperature carbonization. The plan to use lignite for power at a large aluminum reduction plant now under con- struction in Texas is based on evidence that power may be produced at satisfactory costs from such lignite char. Since the B. t. u. content of lignite or char per ton is too low to stand the costs of transportation, the power must be generated near the lignite beds. While this limits the market for lignite to produce power for general utility use, electro-process plants may find it profitable to locate near such energy sources. For example, power plants near lignite beds could perhaps be developed for base-load electric energy production in such areas as the Da- kotas and Montana to supplement Missouri River hydroelectric developments. If these various opportunities are vigorously pursued, there is a strong possibility that the costs and prices of thermal elec- tricity for most areas of the Nation can be kept from rising (in relation to the general level of prices) and perhaps even further reduced. OPPORTUNITIES IN HYDROELECTRIC ENERGY Hydroelectric power has the advantage of being based on a nonexhaustible source of energy—the constantly replenished flow of water in rivers and streams. In some areas it also has the advantage of providing electric energy at substantially lower costs than thermal generation. Cost accounting complexities make it difficult to compare costs of hydro and thermal generation with precision, particu- larly if comparisons are attempted between Government multi- purpose projects and private steam plants. Information com- piled by the Federal Power Commission on total costs of privately owned electric utilities provides a valid basis, how- ever, for concluding that on the average the cost of electricity supplied today by hydro plants is substantially below the cost of electric energy from thermal plants. Wide variations in cost exist, of course, among individual plants in each cate- gory. Moreover, wherever it is necessary to supplement hydro with thermal capacity to meet market loads, the benefits of the low-cost hydro energy can be fully achieved only by in- curring the higher cost of the complementary thermal energy. Enabling legislation has made it possible to develop rivers for irrigation, navigation, flood control, recreation, and pollu- tion abatement along with development for electric power. During the past 50 years there has evolved a concept of multi- purpose development that is now embodied in Federal policy with respect to water resources. In many areas there is a grow- ing need for the nonenergy functions served by these projects. Without hydroelectric power production, however, many multi- purpose projects would not be economically feasible since all purposes share the costs of development. Similarly, hydroelec- tric power costs also may be lower because of this sharing of joint costs with other purposes. Unfortunately there is a definite limit to the number of sites in the United States at which low-cost hydropower can be de- veloped, though such sites have by no means been fully utilized. FUTURE EXPANSION POSSIBILITIES The Federal Power Commission has estimated that the total hydroelectric power potential of the United States is about 105 million kilowatts, with an average annual generation potential of about 478 billion kilowatt-hours. This estimate (which ex- cludes small sites of less than 2,500 kw. potential) is necessarily subject to many qualifications and later revisions but in the view of the Federal Power Commission it nevertheless serves to indicate the long-range economic waterpower potentialities of the Nation. At the beginning of 1950, a total of 16.5 million kw. of capacity (excluding sites under 2,500 kw.) was actually in- Page 36 stalled, only 16 percent of the estimated potential of 105 mil- lion kw. The average annual generation from this installed capacity is estimated at 87 billion kw.-hr., about 18 percent of the estimated total potential of 478 billion kw.-hr. Forty-seven projects then under construction would add another 5.6 million kw. of capacity, bringing installed capacity to nearly 22 percent of total potential and average annual generation to about 24 percent of the estimated total potential. The remaining 78 percent of potential capacity is made up of a wide variety of sites, large and small, low-cost and high- cost, some carefully studied and others only superficially ap- praised. Sixty-nine projects, accounting for about 12 percent of total potential, were in various stages of planning by Federal agencies and a number of others were being seriously con- sidered by private utilities. More than 1,000 other sites, mostly relatively small ones, were apparently not receiving serious at- tention by anyone and many of these may upon closer examina- tion not prove economically feasible to develop by 1975. Table VII summarizes these estimates of the Federal Power Commis- sion. The estimates have been based in some cases upon pre- liminary investigations and must be revised from time to time as additional information is obtained and new studies made. Detailed investigation may find some projects infeasible for physical, economic, or other reasons. Table VII.—Potential hydroelectric power in the United States 1 Number Installed Average annual of projects lfoOOrkwl°hr. Non-Federal2 55 497 6, 098, 912 10, 401, 359 35, 497, 600 51,613, 750 Total 552 16, 500, 271 87, 111, 350 Projects under construction: Federal 30 17 3 4, 889, 575 4 708, 020 » 26, 112, 000 « 3, 490, 200 Non-Federal Total 47 5, 597, 595 29, 602, 200 Federal projects in planning stage... 69 1, 695 « 12, 651, 570 * 69, 820, 960 5 54, 580, 100 * 306,916,205 1,811 88, 070, 125 391, 098, 505 Total potential power 2, 363 104, 570, 396 478, 209, 855 1 Source: "Potential Hydroelectric Power in the United States," Federal Power Commission, May 1950. 2 2,500 kilowatts or more installed capacity. 3 Including additions to existing plants. 4 Including additions to and redevelopments of existing plants. 5 Including authorized additions to existing plants and plants under THE BEST REMAINING SITES Decidedly the most important and attractive hydroelectric sites remaining to be developed in the United States are those located in the Great Lakes drainage area (at Niagara Falls and on the St. Lawrence) and in the Pacific Northwest (the Columbia River basin). The principal advantage in energy costs enjoyed by the Great Lakes drainage area and, to a much lesser degree, the Pacific Northwest region is the quantity and continuity of the flow of their principal streams. The Great Lakes form a natural storage reservoir unsurpassed anywhere in the world. This reservoir in part does naturally what storage reservoirs else- where must be constructed to do, namely, even out the flow of the rivers that drain the region. The Columbia River and its tributaries have a large volume of water flowing approximately 1,200 miles from sources in the American and Canadian Rocky Mountains, and dropping as much as 3,000 to 6,000 feet to the ocean. The Columbia runs at flood in summer when the snow on the mountains is melting. Since the snow melts gradually, the river varies less in flow than most other American rivers, but nevertheless still requires a great deal of conservation storage. The Federal Power Commission has estimated that the re- development of Niagara Falls to use additional stream flow, released for power generation by a United States-Canada treaty in 1950, would provide a net increase of 1,132,000 kw. of dependable capacity, and a net increase of 7,884 million kw.-hr. in average annual energy production to the United States. The costs of energy at the site would be very low and would thus make possible economic transmission of electricity over long distances to New York and New England markets at delivered prices well below rates now prevailing in those markets. [4] Even though modern new steam plants could generate power much more cheaply than older existing plants in the latter markets, the costs would still be higher than hydroelectric energy from this project. The proposed St. Lawrence Seaway and Power project would develop an estimated 12.6 billion kw.-hr. in an average water year, half of which would be available to the United States and half to Canada. Again, the generating costs would be very low, thus making bulk transmission to higher cost distant markets economically feasible and desirable. [5] In 1950, the Bonneville Power Administration marketed 13 billion kw.-hr. of low-cost electricity from the Bonneville and Grand Coulee plants on the Columbia River. New projects now under construction should increase the power available for marketing to about 37 billion kw.-hr. by 1960. The cost of this increased power may be somewhat higher than at present de- veloped sites, but would still be comparatively low. * Smaller quantities of energy can be produced by projects now planned for construction in the Missouri and the Arkansas drainages, in the South and Middle Atlantic areas, and in other regions. Considerable energy could also be made available by the complete development of New England streams. For most drainage areas except the Niagara, St. Lawrence, and Colum- bia, however, energy for round-the-clock base load can gen- erally be more economically produced at thermal-electric gen- erating stations. Nevertheless, the proposed hydroelectric plants may have a cost advantage—over thermal capacity having a low-load factor and used for peaking purposes—if they are alternated between storing water at night and oper- ating by day to help meet heavy daytime loads. In addition to the 16.5 million kw. of hydroelectric capacity installed as of early 1950, another 8 million kw. is now com- pleted or under construction. An additional 8 million of rela- Page 37 tively low-cost power could be added by the construction of the St. Lawrence project, the redevelopment of Niagara Falls and by the completion of the immediate programs of the Bureau of Reclamation and the Corps of Engineers on the Columbia River. Plans for these projects are practically complete and need only Congressional authorization and appropriations. Thus it is clearly feasible, within 10 to 15 years, to double the installed hydro capacity over the early 1950 level. In addition, there would remain other sites that probably could be economically developed before 1975. An output of hydroelectric energy on the order of three times the 1950 level might be achievable by 1975. REDUCING COSTS OF HYDRO GENERATION The generation of electric energy from falling water is physically a much more efficient operation than the generation of electric energy by fuel. Modern hydroelectric plants have an over-all engineering efficiency of 80 to 85 percent in converting the power of falling water to electric energy delivered to the transmission line. There is thus not much room for improve- ment. The main opportunities are in the direction of reducing the initial cost of construction and installation. The costs of pro- ducing hydroelectric energy are largely fixed costs, consisting chiefly of interest on investment and depreciation. So-called variable costs, including operation and maintenance expenses, for large modern hydroelectric installations average less than $ 1 per kilowatt per year [6]. They may be as little as one-tenth of a mill per kilowatt-hour. Even these costs do not vary pro- portionately with output. Construction costs and interest rates are therefore the most important elements in the cost of hydro- electric energy. The past 25 years have brought important improvements in construction methods for large dams. Especially important have been larger earth-moving equipment, long-distance con- veyor systems to move aggregates, and improvements in cement and cement extenders. Continued improvements can be ex- pected in the construction techniques and machinery used for placing mass concrete, and in moving and compacting earth fills for large dams. Such improvements will tend to offset the increasing costs expected in the acquisition of reservoir lands and in the relocation of railroads, highways, and utilities. Popular interest has been expressed in the long possibility of modifying the wide seasonal fluctuations of stream flows in some areas by artificially inducing rainfall during periods of low stream flow, thereby raising the hydro potential at sites along the river, increasing the utilization of installed generating equipment, and lowering the unit costs of energy production. While this is a theoretical possibility, its practicability, even in the long run, is still questionable. OTHER OPPORTUNITIES Additional opportunities to improve both hydro and thermal electric service to particular areas, and to hold down costs, lie in the further improvement of transmission methods, the fuller integration and coordination of individual electric systems, and cooperative planning of expansion. Because electric plants, particularly at hydro sites, are often located at some distance from markets for electric-energy, part of the energy generated is lost in transmission. Losses range from 5 to 15 percent, depending upon distance and line load- ings. The opportunity exists for using higher voltages—up to 350,000 volts or higher—in order to decrease transmission losses. There are also other possibilities for reducing costs of long-distance power transmission. In the last 10 years impor- tant increases in the capacity of lines have reduced the cost per kilowatt of power transmitted. It is now economically feasi- ble with a high load factor to carry power from 200 miles up to 600 miles at lower costs than only a few years ago. Significant economies in the cost of electric energy have been achieved in the last 30 years by the coordinated operation of thermal and hydroelectric generating plants of utility systems and industrial firms. Early examples of pooling include the Connecticut Valley Power Exchange and the Pennsylvania- New Jersey interconnection. Wide areas of the United States, such as the Pacific Northwest, now have practically complete coordination of electric utility and industrial power generation through interconnections by high-capacity transmission cir- cuits. An outstanding example is the 17-State power pool which extends from the Gulf of Mexico on the south to the Great Lakes on the north. There remain, however, a number of areas where interconnection is incomplete. An excellent example of additional opportunities is the pro- posed California tieline, which would link the major systems in California with the Pacific Northwest Power pool. This inter- connection would permit the transfer of energy from the North- west hydroelectric systems to reduce steam-electric generation in California, directly conserving residual fuel oil in that area. It would also substitute for standby generating capacity that would otherwise have to be installed in the Pacific Northwest in order to meet power requirements in periods of low stream- flow. Another good opportunity is in New England where, because the State of Maine prohibits the export of low-cost hydroelec- tric power, important hydro potential remains undeveloped. Removal of this restriction would lessen the dependence on high-cost thermal energy for which many New Englanders are now obliged to pay. As advances in the science of power transmission increases the distance of power transmission and reduces the cost, the size of the integrated areas could be increased and more inter- regional interconnections would become practicable. Still greater economies can be achieved if generating f acili- aies are cooperatively planned by related systems, whether pri- vate or public. Such planning has been achieved to a high degree over large areas of the United States served by private utility systems, as in the Southeast and North Central areas. It has also been achieved by agreement between nonaffiliated utility systems, as in portions of Maryland, Virginia, and Wash- ington, D. C. There are encouraging beginnings of cooperative planning between private utilities and public power agencies. The Tennessee Valley Authority and the neighboring utility systems have made significant strides in cooperative agreements in connection with the power requirements of the Atomic En- ergy Commission and otherwise. Complete cooperation in the planning of power supplies, however, is still far from achieved in spite of the obvious need. Page 38 ELECTRICITY FROM NUCLEAR ENERGY • One of the possibilities of the future is that nuclear fission can be used to generate large amounts of electric power. The process already has been demonstrated on a small scale by the Atomic Energy Commission in an experimental plant at its reactor testing station in Idaho. The same reactor is being used to test the principle of "breeding" atomic fuel, a process by which nonfissionable material may be converted into fuel at a rate more rapid than fuel is consumed in operating the re- actor. Successful breeding of atomic fuel would do much to make electric generation economical, in commercial terms, and would help to overcome one of the major blocks against wide- spread generation of power by considerably increasing the amount of potentially fissionable materiaL Most thought, manpower, and materials are understandably being devoted currently to military applications of atomic energy. However, industry is attempting with A. E. C. help in a number of independent surveys to determine how electric- ity can be produced economically with nuclear reactors. The method under consideration is, in effect, to generate electricity as a byproduct of plutonium production. At this time, it does not appear that nuclear fission can be regarded as a contribution in any substantial degree to electric generation during at least the next 10 or 15 years, and the probability is that the atomic energy industry will remain a heavy net consumer of electricity. ELECTRICITY IN OTHER FREE NATIONS The generation of electric energy in 1950 in all other free countries taken together amounted to almost 400 billion kilowatt-hours, or roughly the same as in the United States. With reasonably favorable developments, the rate of growth in consumption of electric power in these countries as a group should be little if any less than the growth projected for the United States, with the most rapid growth taking place in the comparatively underdeveloped countries. The combined fuel and hydraulic resources in the rest of the free world are huge, but unevenly distributed. Western Europe has scanty reserves of oil and gas, coal reserves that are increas- ingly difficult to exploit, and comparatively limited waterpower sites that can be economically developed. Japan and certain parts of South America likewise appear to have limited resources for electric energy generation. But Canada, much of Latin America, the Middle East, India, and Africa should have ample resources of either fuels or waterpower. In view of the great comparative advantages of hydroelec- tric generation, the fullest economic development of the free world's waterpower sites appears most desirable. At the pres- ent time, about 5 percent of the world's total supply of energy of all types is produced in hydroelectric plants. [7] The total that could be produced annually at known hydroelectric sites in the free world exclusive of the United States, if and when developed, is estimated at more than 3 trillion kw.-hr. com- pared to about 200 billion kw.-hr. produced in 1950. If plants were constructed at all of the world's hydroelectric sites, they would produce each year for an indefinite period as much electric energy as could be generated by burning 2 billion tons of coal per year. This is approximately the current rate of world coal consumption for all purposes. These estimates are, of course, necessarily crude and should not be regarded as repre- senting an appraisal of what would in fact prove economically feasible to develop. The extent to which the world's hydroelectric sites will be exploited in any given period will depend upon a number of factors. In those countries where falling water is the principal undeveloped energy source, development may be much earlier and much more complete than in countries where hydropower is competitive with energy from coal, oil, and natural gas. Com- parative costs will be extremely important. If fuels are available for thermal generation, hydroelectric sites will be developed only if they can produce power more cheaply than the thermal plants. In many regions, hydro and thermal generation will have to be developed together for the best results. In some in- stances, the development of abundant waterpower sites may permit the export of electricity to nearby countries, or the de- velopment of important electro-process industries. Canada pro- vides an example of such possibilities. UNTAPPED HYDRO POTENTIAL IN CANADA Canada has important waterpower resources that have not yet been tapped. The 9.3 million kw. installed by the end of 1950 are almost entirely in the southernmost 100-mile strip of that country. Estimates of Canadian hydroelectric potential made by the Canadian Water Resources Division place the total at 32 million kilowatts. Competent Canadian engineers believe this to be a conservative estimate, for three reasons: (a) it assumes no storage developments; (b) it allows for no diver- sions from one watershed to another; and (c) it is based on in- adequate streamfiow records and incomplete mapping. All present Canadian developments are single-purpose proj- ects except those contemplated on the St. Lawrence River. The need to control floods, to improve navigation, and to provide for irrigation has not been a problem in Canada because its population is small compared with its land area. Substantial quantities of the undeveloped hydroelectric potential are within economic transmission distance of existing markets. At sites too distant from existing markets for economical transmission, metallurgical, or forest-product plants can be economically de- veloped to use the power. Such a site is now being developed in British Columbia at Kitimat, where the Aluminum Co. of Canada is constructing a hydroelectric plant that will even- tually produce approximately 9 billion kw.-hr. per year. The power will be used for aluminum production and the manufacture of forest products, principally pulp and paper. Similar developments in eastern and northern Quebec may be possible. A significant part of the potential hydroelectric power, devel- opment in Canada is on the Columbia River and its tribu- taries in British Columbia. This can best be developed in coop- eration with the United States. For example, an investigation is now being made of a site on the big bend of the Columbia River in Canada where 20 million acre-feet of water can be stored to increase the firm power production of installations downstream, principally in the United States., Only by coordi- nating the operations of storage reservoirs with the operations of downstream plants can maximum power production be real- Page 39 ized. The development of transmission lines for the interchange of power across the boundary, coupled with storage develop- ments, will increase the power available in both countries. It is presently doubtful that very much Canadian power will be available for use in the United States in view of the estab- lished Canadian preference for exporting refined and processed materials (such as petroleum products, pulp, paper, and lum- ber) rather than promoting exports of raw materials such as crude petroleum, logs, natural gas, and hydroelectric power. Even if Canadian hydroelectric energy is not available for export as power, it would be possible for the United States to obtain somewhat equivalent results if it were willing to expand its importation of electro-process materials, such as aluminum. POTENTIALS IN OTHER COUNTRIES The Mexican hydroelectric potential is not large enough to promise much help to other countries, although it may be sig- nificant for the industrial development of Mexico. In South America, Brazil has a significant hydroelectric potential that, coupled with other Brazilian resources, could support local eco- nomic growth and contribute to easing the energy problems of other free nations if electro-process materials were produced for export. Peru, Argentina, Colombia, and Venezuela also have significant hydroelectric power potentials. More than 40 percent of the world's estimated potential of hydroelectric power is in Africa. The Belgian Congo and man- dates together have an estimated potential in excess of 97 mil- lion kw., while the French Congo has another 37 million kw. Other areas, such as British East Africa, Ethiopia, Liberia, and Portuguese East Africa, have large hydroelectric potentials. Coupled with the mineral wealth of Africa, these hydroelectric potentials could make large contributions both to local eco- nomic development and to the production of electro-process materials for the free world. The principal problem involved is the transportation of materials to and from power sources. In most cases, distances appear to be too great to transmit power to either the raw materials or the markets. In Western Europe known sources of hydroelectric power are about 25 percent developed at the present time, though there is no satisfactory estimate of how much of the balance would be economically feasible. Further development of hydro- power would lessen somewhat the general economic strains in- duced by large imports of Middle East oil and North American coal. Important gains would also be made if existing and fu- true hydro plants, mainly in southern Europe, were integrated with the thermal-electric capacity of northern Europe, thereby reducing the cost of electric power and conserving fuel. Table VIII indicates the estimated size of the principal de- veloped and potential hydroelectric resources of the world. The figures of potential water power are based on minimum flow available for 95 percent of the time and 100 percent efficiency. The effect of storage has been disregarded except for con- structed reservoir sites, the potential power being based on the existing flow. The amount of developed power by countries is based on~the installed capacity of waterpower at constructed plants, which averages 2 to 4 times, and may be as much as 10 times, the potential power at low flow at the same sites. Thus potential power may be considerably understated, particularly when compared with developed power. This fact should be considered in comparing potential power with developed power and also in estimating the percentage of a nation's waterpower resources that is utilized. Table VIII.—Principal world sources of hydroelectric power at end of 1950 Hydroelectric power (millions of kw.1) Region Developed j Potential Angola Belgian Congo and Belgian mandate 97 5 4 French mandate in Cameroons 37 Nigeria and British mandate in Cameroons 10 19 Portuguese East Africa Other Total 203 India, Pakistan, and Ceylon 7 16 4 29 Siam and Malay States U. S. S. R 48 7 Other 2 Total 10 113 Italy 5 4 4 7 4 10 22 ups. s. r 3 2 2 12 Other Total 30 51 North America 2 8 1 21 1 25 6 27 United States Other 7 Total 31 65 Oceania: Borneo, including New Guinea and Papua.... 8 4 New Zealand 1 Other Total 1 17 South America: 4 12 Brazil 2 4 Other 1 Total 3 41 Grand total 75 s 490 1 Source gives data in horsepower. Since this Report uses kilowatts, data have been converted by using factor of 0.7457. 2 Data for Canada and the United States do not agree with data used in this Report because of assumptions of efficiency and because these data are based on minimum flow instead of average flow of streams. 3 Data are qualified by source, viz: "The estimates of potential power for the United States, Canada, and most of the countries of Europe are based on known sites. For other countries, particularly Asia (except Japan), Africa and South America (except Brazil), the estimates are based mostly on rainfall and topography and therefore are not so reliable." Source: "Developed and Potential Water Power of the World," Geolog- ical Survey, U. S. Department of the Interior, Washington, D. C, 1951. Page 40 References Sage, R. S. "Electric Power in the Mining Industry." General Elec- tric Review, August 1948, p. 22. "Electric Utility Cost Units in Steam Electric Generating Stations." Federal Power Commission, 1946. "Steam Electric Plant Construction Cost and Annual Production Ex- penses." Federal Power Commission, 1947, 1948, 1949, 1950. "Possibilities for Redevelopment of Niagara Falls for Power." Federal Power Commission, Sept. 1949. "The Great Lakes-St. Lawrence Deep Waterway and Power Project." Federal Power Commission Information Memorandum, Feb. 15, 1951. "Electric Utility Cost Units in Hydroelectric Generating Stations." Federal Power Commission, 1950. Department of State. Energy Resources of the World. Publ. no. 3428. Washington, D. C, June 1949. Selected General Statistical Sources ireau of the Census. Historical Statistics of the United States, 1789- 1945. Washington, D. C, Government Printing Office, 1949. apartment of State. Energy Resources of the World. Publication No. 3428. Washington, D. C, Government Printing Office, June 1949. Jew Process Obtains Tar and Low-Cost Power from Lignite." Combus- tion Engineering, Sept. 1951. ie President's Water Resources Policy Commission. A Water Policy for the American People. Washington, D. C, Government Print- ing Office, Dec. 1950. atistical Bulletin. New York, Edison Electric Institute, 1950. S. Geological Survey. "Developed and Potential Water Power of the World." (Mimeographed.) adman,, R. W. "Kaiser Aluminum." Diesel Progress, Feb. 1952. Federal Power Commission "onsumption of Fuel for Production of Electric Energy," S-80, 1949. ectric Utility Cost Units: "Hydroelectric Generating Stations," S-78. "Internal-Combustion Engine Electric Generating Stations," S-85. "Steam Electric Generating Stations," S-68. "Transmission Plant," S-88. "The Great Lakes-St. Lawrence Deep Waterway and Power Project." Feb. 15, 1951. "Possibilities for Redevelopment of Niagara Falls for Power." Sept. 1949. "Potential Hydroelectric Power in the United States." May 1950. Power Requirements in Electrochemical, Electrometallurgical, and Allied Industries. Washington, D. C, Government Printing Office, 1938. "Production of Electric Energy and Capacity of Generating Plants," S-79. 1949. "Sales of Electric Energy to Ultimate Consumers, 1945-1949." Feb. 1, 1950. "Statistics of Electric Utilities in the United States," (Summary section). 1950. "Steam-Electric Plant Construction Cost and Annual Production Ex- penses," S-94. 1950. References Elsewhere in This Report Vol. II: The Outlook for Key Commodities. Projection of 1975 Materials Demand. Vol. IV: The Promise of Technology. Tasks and Opportunities. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Engdahl, R. B. Role of Technology in the Future of Thermal Generation of Electricity. Kerr, S. L. Role of Technology in the Future of Hydroelectric Power. Landry, B. A., and Dayton, R. W. Role of Technology in the Future of Unconventional Sources of Energy. Perry, P. G. Role of Technology in the Future of Electrical Energy Transmission. Sherman, R. A. Notes on Over-All Energy Picture. Page 41 Index A Argentina hydroelectric power potentials, 40. B Bituminous Coal Research, Inc., 26. Brazil, hydroelectric potential of, 40. c Canada: dependence on coal imports from the United States, 30. energy consumption, 30. energy consumption of (table), 30. energy potential in, 39. hydroelectric potential, estimates of, 40. Coal, 24-31. for electricity, 33. in other free countries, 29—31. mining industry, U. S. and private research organizations, 26. needs, Japan's, 30. prices (see also Fuel costs), 28. United States: demand and supply, 24. capacity for possible war, 27. consumption of, by class of consumer: 1925 and 1950 (table), 24. cost outlook, 24-25. declining uses of, 24—25. development of the Central and Western regions, 25. foreign demand for, 24-25. general outlook, 28. Government research projects, 26. increased consumption in industry and electric utilities, 24. miners' real wages and the role of Jabor, 28. production and productivity, 25-27. productivity, factors impeding, 26. productivity per man-day, 25. research and development, Bureau of Mines obligations for, 26. expenditures, 26. research laboratory of the Pittsburgh Consolidation Coal Co. at Library, Pa., 26. reserves estimated, 25, 26. situation in brief, 24. strip mining for, 25-26. synthetic oil production from, 25. Coke, U. S., capacity, 27. and beehive'ovens, 27. and over-age slot-type ovens, 27. problem of, 27. Colombia hydroelectric power potential, 40. Continental Shelf oil reserves, 11. E Electric energy, 31-41. expansion in fuel-electric generation, 35-36. expansion of generating capacity, 32. generation by type of ownership (table), 32. thermal generation efficiency and lowered costs, 35. United States, consumption of actual, 1925 and 1950; projected, 1975 (table), 32. production, growth of (table), 32. situation in brief, 31. Electric fuel costs, 35. Electric power: declining real cost of U. S., 34. industry, the problem of security, 34-35. pools: California with the Pacific Northwest Power pool, 38. 17 States, 38. requirements for selected electro-process materials (table), 34. Electricity: cooperative planning between private utili- ties and public power agencies, 38. costs, 33-34. factors tending to push upward, 34. expansion, requirements of a successful program, 31. requirements for selected materials, 34. U. S. demand and supply, future, 31. hydroelectric energy opportunities, 35. in other free nations, 39-40. Energy (see also Coal, Electric energy, Natural gas, Oil, Western Europe): consumption: of Canada (table), 30. ofJapan, 30. potential in Canada, 39. problem, essence of the, 1. sources, primary and production of elec- tricity, 1950, and a possible pattern of sources and production, 1975 (table), 36. primary, used for electricity production in the United States, 1925 and 1950 (table), 33. studies on, 1. Europe: coal reserves, 29. hydropower resources, 29, 40. oil consumption, by 1975, 29. F Federal Power Commission and "dedicated reserves" as a condition for authorizing con- struction of a pipeline, 23. Free World oil, hypothetical pattern of supplies and demand in 1975 compared with 1950 (table), 10. Fuel costs of locomotive operation, coal steam! oil steam, electric, and Diesel, January- April 1951 (table), 28. G Gas for electricity, 33. Gasoline and other products, production of from coal, 8-9, 12. H Hydroelectric energy: and the State of Maine, 38. and thermal electric service, 38. and thermal generating plants, coordinated operation of utility systems and industrial firms, 38. at end of 1950, principal world sources of (table), 40. for electricity, 33. generation, reducing costs of, 38. potentials: African, 40. Argentina, 40. Brazil, 40. Colombia, 40. Mexican, 40. Peru, 40. United States (table), 37. United States, Federal Power Commis- sion estimate, 36. Venezuela, 40. Hydroelectric sites remaining to be developed in the United States, 37. J Japan: coal needs, 30. energy consumption, 30. imports of coking coal from United States, 30. petroleum consumption, 30. L Liquid fuels production, potentiality of from shale, coal and lignite, 12. M Mexican hydroelectric potential, 40. N National Petroleum Council, estimates of gaso- line selling price, 8. Natural gas, United States, 15-23. burning for carbon black, 22. challenges to, 16. consumption, pattern of, 19. demand for, potential, 19. Page 42 Natural gas, United States—Continued discoveries, and developments relative to production of, estimated new (table), 20. discoveries of, new, 20. industrial consumption of, by type of indus- try, 1932-50 (table), 18. future of, 19-21. marketed production of, disposition of, 1935-50 (table), 17. marketed production cf, relative to crude oil production exclusive of the Appa- lachian field (table), 20. price and use, future pattern of, 20. price, current average, of, 18. price structure in industry, 19. prices, rise of, and oil exploration, 21. problems, special, 21-23. production, decline of, 21. production estimated, 1935-50 (table), 16. production, tied to oil industry, 17. storage near markets, development of underground, 21. substitutes for, eventual, 23. shift to high-grade uses, 22. situation in brief, 15. use and supply of, 16-19. value of, average, at the wells and at points of consumption in 1950, by States (table), 19. waste at the well, 22. Niagara Falls, redevelopment of, 37. Nuclear electric generation, 39. o Oily 2-15. Bureau of Mines, operations, 8-9. conservation in production, 12. conservation in use, 13. Oil—Continued cost of production of liquid fuel from shale, 8. discovery cost, 5. Estimated expenditures for finding and developing oil in the United States per barrel of new reserves proved, and per barrel produced (table), 6. free world demand for crude and products (table), 9. free world, rest of, 9-10. lands, federal, conservation on, 14. problem of public policy, 10—14. production and transportation, emergency cushion, 10. security safeguarding, 10. supplies: from abroad, 7-8, 10. from Middle East, 9. from Venezuela, 9. "underground stockpile," 11. United States: discovery potential, ultimate, 6. imports and tariffs, 14. new crude, reserves proved relative to footage drilled, 1925-51 (table), 6. petroleum products, domestic demand for, 1950 and projected 1975 (table), 4. recovery, improvement in, 6. synthetic from shale and coal, 8-9, 12. technology of exploration, advances in, 7. use and supply, 2—4. future, 4-9, p Peru hydroelectric power potential, 40. Petroleum. (See Oil, United States). Polish coal, 29. S Shale and coal as sources of liquid fuel, 9. St Lawrence seaway and power project, 37-38. Studies on energy. 1. u United States: coal, Canada looks to, 30. consumption and uses of petroleum products, 1929 and 1950 (table), 3. consumption of major petroleum products in 1950 and the portion going to each principal use, 3. petroleum reserves, new discoveries, and new developments compared with annual production (table), 5. * production and consumption of petroleum, 1900 to 1950 (table), 4. supply and demand, crude oil and petroleum products, 1950 (table), 4. Utility coke-making, decline in as natural gas supplants coke-oven gas, 27. v Venezuela hydroelectric power potentials, 40. w Wartime petroleum needs, 10. Western Europe: energy consumption of, 1938, 1950, and projection for 1975 (table), 29. energy economy of, 29—30. energy requirements, long-term projections of, 29. hydroelectric power in, 40. Page 43 kftikit^kftikik^kikikikikik^kik RESOURCES for FREEDOM ^ikik-kikikikikikikik-kikik-k-k Volume IV The Promise of Technology A Report to the President by THE PRESIDENT'S MATERIALS POLICY COMMISSION sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, I). C. - Price $1.75 June 1952 * IN FIVE VOLUMES Volume I—Foundations for Growth and Security Volume II—The Outlook for Key Commodities Volume III—The Outlook for Energy Sources Volume IV—The Promise of Technology Volume V—Selected Reports to the Commission *: UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1952 DEP^SITtD BY THE UNITED STATES OF AMERICA RESOURCES for FREEDOM Volume IV—The Promise of Technology The Commission William S. Paley, Chairman George R. Brown Arthur H. Bunker Eric Hodgins Edward S. Mason The Executive Staff Philip H. Coombs Executive Director William C. Ackerman Executive Secretary Max Isenbergh General Counsel Norvell W. Page Editorial Director Letter of Transmittal June 25 1952. Dear Mr. President: We take pleasure in presenting herewith volume IV of the Report of the President's Materials Policy Commission. This volume, entitled "The Promise of Technology," contains a series of selected studies dealing with the problems and the prospects of technology in improving the materials base of our economy. Our problems of future materials supply, which caused you to appoint this Commission for the purpose of making a long-range study of materials resources, must depend heavily upon technological progress for their solution. In its inquiry into the relation of technology to materials, the Commission relied not only upon the investigations of its staff, but also upon studies made at our request by a number of organizations and individuals especially qualified to examine particular areas in this field. The present volume contains reports on some of the special projects assigned by the Commission to organizations and individuals, whose names are given with their respective contributions. These studies, a representative group, underlie many of the conclusions and recommendations of the Commission pre- sented in volume I and the Report and supplement various commodity studies contained in volume II. We have been gratified by the generous response and the unfailing cooperation which the Commission has received from the organizations and individuals whose assistance we sought. It gives us much satisfaction to inform you of the valuable contributions which they made and of the genuine desire to be helpful which they manifested at all times. Respectfully submitted, The President,, The White House. Foreword and Acknowledgments In the course of the Commission's inquiry into the relation of technology to materials problems, technical research projects were assigned to specially qualified organizations and individ- uals, in addition to the development of basic material in this field by the Commission's own staff. These special projects called for substantial research and analytical efforts. The resultant reports constitute, the Commission believes, a distinct contribution to the sum of knowledge of materials technology. A number of the studies in technology prepared for the Com- mission are published in this volume, together with an intro- ductory chapter, by the staff, entitled "Tasks and Oppor- tunities." In formulating- its report on the future of tech- nology in the materials field, the staff had the benefit of comments and suggestions of leaders in science and technology, both in and out of Government. In response to a questionnaire, leading research directors in private industry gave their views on the contributions research can make to the relief of present or anticipated shortages. Studies in the technology of a long list of metals and min- erals were assigned to Battelle Memorial Institute, of Colum- bus, Ohio. In all, 41 individual reports were received from Battelle; they are listed by title in the bibliography at the end of this volume. From the forty-one, eight representative studies are published. They appear as they were received from Battelle, except for minor editorial revisions and the deletion of material considered confidential for security or business reasons. The Battelle reports which appear in this volume supplement the commodity studies on the same materials in volume II. Underlying a number of the Commission's recommendations in the minerals field is the conviction that improved techniques of exploration can be developed and applied to find presently hidden and unknown mineral deposits and to do so on economic cost terms. The basic paper on this subject was provided by a panel of consultants assembled at the Commission's request by the National Research Council. Three special studies on chemicals were prepared: "Fore- casts for Petroleum Chemicals" (covering nonfuel uses of petroleum and natural gas), by a technical group at Standard Oil Development Co., in cooperation with Standard Oil Co. (New Jersey); "Coal Products and Chemicals," by a group of experts at the Koppers Co.; and "Oil and Gas as Industrial Raw Materials" (embracing nonfuel uses), by an official of Universal Oil Products Co. These three reports directly support the commodity study on "Chemicals" in volume II, and are referred to in that study. The Commission has made no attempt to reconcile differing estimates among the various reports concerning the quantities of materials which will find commercial use during the next 25 years and the sources from which they will be drawn. The whole field of organic chemical materials is in a state of rapid develop- ment, and estimates for 25 years ahead must necessarily be subject to differences of opinion. The Commission believes, however, that though estimates may vary, these studies will indicate the range of possibilities and resources which may be called on by industry in this field. The choice of particular resources for any undertaking, of course, will be dictated by economic factors. Utilization of energy from the sun was discussed in a survey prepared by a former consultant to the Atomic Energy Com- mission; the report on "Possibilities of Solar Energy" in this volume is based on this survey. From the U. S. Forest Service, the Commission received the study by the Forest Products Laboratory at Madison, Wis., on "The Technology of Forest Products," covering the recent and prospective impact of tech- nology on both the supply and the use of forest products. When the construction industry was selected by the Commission for a "case-history" study of opportunities and obstacles in tech- nology, Arthur D. Little, Inc., of Cambridge, Mass., was asked to prepare a report on "Technology in the Building Industry." The common theme of all the papers in this volume is the role technology can play in meeting future requirements of materials. They are offered not as reports bearing the endorse- ment of the Commission, but rather as studies prepared for the information of the Commission by the various organizations and individuals whose names they bear. Several of the original reports have been condensed, with the consent of their authors, because of space limitations. All the papers reflect the willing cooperation which the Commission's calls for assistance invariably received. In a number of cases other work was set aside, so that the Commis- sion's request could receive more prompt and more complete attention. Because of the limited time available for their preparation in order that they could be of maximum use to the Commission in its deliberations, some of these reports are re- garded by their authors as being more in the nature of exploratory working papers than as exhaustive studies. For the same reason, the reports reflect conditions as of the dates when the papers were submitted to the Commission and have not been subsequently revised. To all who gave assistance, the Commission wishes to express its grateful appreciation. For their unfailing cooperation in the planning and execution of projects, special acknowledgments are due to Dr. Clyde D. Williams, Richard J. Lund, and Rich- ard J. Anderson, of Battelle Memorial Institute; Dr. G. F. D'Alelio and Dr. A. R. Powell, of the Koppers Co.; Raymond S. Stevens and L. F. Marek, of Arthur D. Little, Inc.; Dr. R. C. Gibbs (Chairman, Division of Physical Sciences, National Research Council) and Dr. John N. Adkins (Earth Sciences Division, Office of Naval Research); Dr. E. V. Murphree, E. K. Burger, and A. D. Green, of Standard Oil Development Page VII Go.; Palmer Putnam, former consultant to the Atomic Energy Commission; Dr. Gustav Egloff, of Universal Oil Products Co.; and Lyle F. Watts, Chief, U. S. Forest Service. Many others participated in the preparation of the reports contained in this volume. The material in the unpublished Battelle reports and in other papers not included in this volume will be available at the National Security Resources Board library for inspection by members of Government and other qualified persons in the technology field. Contributions were made in other ways than the preparation of special papers. A group of invited experts discussed with the Commission and staff the role technology can play in the future of the materials field; these experts were Julian Avery, consult- ing engineer; Dr. Willis Gibbons, United States Rubber Co.; Dr. W. K. Lewis, Massachusetts Institute of Technology; L. F. Marek, Arthur D. Little, Inc.; V. H. Schnee, Minerals and Metals Advisory Board; and Chaplin Tyler, E. I. duPont de Nemours & Co. The General Motors Co. made available a group of its staff members for a 2-day discussion of the com- pany's technical and other studies on various materials. Ruth Miller, as Director, and Nathaniel M. Elias, as Associ- ate Director, have borne the principal responsibility for developing the staff work and for the assignment of outside projects. Dr. Frances Clark served as staff metallurgist. Samuel G. Lasky, on loan from the Department of the Interior, was consultant on geological and other technical aspects. Chaplin Tyler, of the Development Department of the duPont Co., was loaned to the Commision on a part-time basis to serve as a consultant, particularly on prospects for chemicals. Roger Williams, Jr., also served as a consultant. To all who collaborated in these undertakings, the Commission expresses its gratitude. Page Vlll Contents Letter of Transmittal V Foreword and Acknowledgments vii Chapter 1 Tasks and Opportunities, page 1 Page Present Production Materials 2 Potential Materials 3 The Dominant Materials 3 Potash, Phosphorus, Nitrogen 3 Chlorine 4 Sulfur 4 Coal 5 Iron and Steel 6 Aluminum 8 Summary 8 The Problem Materials 9 Manganese 9 Fluorspar 9 The Additive Metals 10 Nickel 11 Chromium 11 Vanadium 12 Molybdenum 12 Boron 12 Tungsten 12 Cobalt 13 Columbium 13 Nonferrous Metals 13 Copper 13 Lead 13 Zinc 14 Tin 14 Other Problem Metals 14 Scrap for Problem Metals 15 Technology of Problem Metals 15 Hydrocarbon Resources 16 Tasks for Hydrocarbon Technology 17 Forest Resources 17 The Potential Materials 19 Magnesium 19 Titanium and Zirconium 19 Glass, Cement, and Silicon 20 Calcium, Sodium, Potassium 20 Uranium, Thorium, Plutonium 20 Polymeric Materials 21 Scarce Undeveloped Materials 21 Elements for Electrical Use 21 Special Metals 22 The Rare-Earth Group 22 Ocean Resources 22 Chapter 2 Improved Exploration for Minerals, page 25 Geochemical Investigations Aerial Photography Geophysical Prospecting Summary 26 27 28 29 Chapter 3 The Technology of Iron and Steel, page 31 Page 31 33 34 35 38 40 41 43 43 44 Chapter 8 The Technology of Uncommon Metals, page 95 Better Blast Furnaces Coke Supply and Quality Direct-Reduction Processes Better Steel Production Savings Through Technology The Technology of Iron Ore Chief Sources of Iron Ore Chief Foreign Sources of Iron Ore Central Area Is Key Other Sources of Iron Chapter 4 The Technology of Manganese, page 45 ]/' 46 47 47 49 49 53 Recovery from Manganiferous Ores Pyrometallurgical Methods Chemical Recovery Methods Electrolytic Recovery Recovery from Waste Products Downgrading and Substitution Chapter 5 The Technology of Tin, page 55 Sources of Tin 55 How Technology Can Add to Pri- mary Supply 56 Eliminating Waste in Production and Use 56 Substitutes for Tin 57 New Uses for Tin 62 Conclusions 63 Chapter 6 The Technology of Titanium, page 65 Extractive Processes 65 Lowering Process Costs 70 Problems of Fabrication 72 Improving Performance 73 Advantages of Strength-Weight Factor 76 Corrosion Resistance Aids Performance 78 Titanium as a Substitute 78 Titanium Dioxide Industry 80 The Future of Titanium 81 Chapter 7 The Technology of Zirconium, page 83 Production Problems 83 Processes in Development . 85 Improving Performance 86 In Corrosion-Resistance Applications 87 In Structural Applications 91 In Other Fields 91 Zirconium as a Substitute 92 Improved Technology 92 Future of Zirconium 93 Alkali Metals Lithium Sodium Potassium Rubidium and Cesium Alkaline-Earth Metals Beryllium Calcium Strontium Barium The Position of Antimony Outlets for Arsenic Bismuth Uses Expansion in Boron Cadmium Applications Gallium, the Newcomer Germanium in High Demand Hafnium's Potential Indium's Future Growth in Mercury The Platinum-Group Metals The Promise of Rhenium The Increasing Use of Selenium Abundance of Silicon Tellurium Under Study Thallium Resources Thorium, Cerium, and the Rare Earths Thorium Use Limited by Supply Cerium and the Rare Earths Page 95 95 96 97 97 97 97 98 99 99 99 100 100 101 102 103 104 105 105 106 107 109 109 110 111 111 112 112 113 Chapter 9 The Technology of Ocean Resources, page 115 Sea Water as a Resource 115 Water From Sea Water 117 Minerals From Sea Water 119 Sea Life as a Resource 122 The Ocean Bottom 124 Chapter 10 The Technology of Forest Products, page 127 Logging and Sawmilling The Role of Forest Management Processing and Use of Products The Pulp and Paper Industry The Veneer and Plywood Industry Wood Components and Derived Prod- ucts Chapter 11 Technology in the Building Industry, page 139 Wood and Wood Products Lumber Plywood and Related Products Engineering Laminates 127 128 129 135 135 136 139 139 140 141 Page IX 995554°—52 2 Page Nonmetallic Mineral Products 142 Cement and Concrete 142 Clay and Shale 143 Glass and Porcelain Enamel 143 Autoclaved Products 144 Metallic Products 145 Structural Framing 145 Piping and Duct Work 146 Trim, Hardware, Windows 146 General and Miscellaneous 146 Light Metals 147 Plastics and Other Synthetics 148 Plastic Pipe 148 Polyester Resin Laminates 149 Resin Molding Developments 149 Paint 150 Pigments 150 Resilient Floor Covering 150 Temperature Regulation 151 Fuels and Furnaces 151 Unconventional Heat Sources 152 Heating Systems 153 Air Conditioning 155 Construction Methods 156 Construction Techniques 156 Chapter 12 Coal Products and Chemicals, page 159 Page Summary 159 Coal Carbonization (Part A) 162 Chemicals From Coking 163 Coke-Oven Gas and Coal Tar 167 Coal tar 167 Ammonia From Carbonization 168 Light Oil Production 169 Miscellaneous Products 170 Synthetic Fuels (Part B) 171 Liquid Fuels Supply and Demand 172 Synthetic Fuel Process 173 Production Requirements 175 Summary 177 Coal Gasification (Part C) 177 Future Requirements (Part D) 185 Chemicals From Acetylene 190 Conclusions 191 Chapter 13 Oil and Gas as Industrial Raw Materials, page 194 Chemical Intermediates 194 Aromatic Chemicals 196 Important End-Products: Detergents 198 Important End-Products—Continued Page Insecticides and Weed-Killers 198 Plastics 198 Petrochemical Requirements for Major Plastics 199 Plasticizers 199 Solvents 200 Synthetic Rubber 200 Synthetic Fibers 200 Other Chemical Requirements 201 Summary 201 Chapter 14 Forecasts for Petroleum Chemicals, page 205 Summary 205 Basic Assumptions 207 Discussion 207 End-Uses of Petrochemicals 207 Forecasts 209 Chapter 15 The Possibilities of Solar Energy, page 213 Energy From the Sun 213 Methods Now in Use 214 Methods Not Yet Economical 214 Solar Power Output Methods 219 Summary and Conclusions 220 Page X The Promise of Technology Tasks and Opportunities Chapter 1 Technology is a complex accumulation of knowledge, tech- niques, processes, and skills whereby we maintain a working control over our physical world. The enormous growth of tech- nological achievement in the twentieth century has had two opposite effects on materials: it has greatly increased our efficiency of use but it has also greatly increased the total drain upon our resources. Evidence of the first effect lies in the increasing quantities of useful energy we have been able over the years to extract from 1 pound of coal, or in the savings of steel and copper used in an electrical generator per unit of its output. The second effect reaches everywhere; whereas the mineral fluorspar, for one example, was once in modest use as a flux in steelmaking, it must today also bear the combined and increasing demands for refrigerants, certain new types of plastics, propellant gases, oil distillation reagents, production of aluminum, and the fluorida- tion of water supplies. The first effect is conscious and calcu- lated; the second is neither, and has thus never yet been subject to control. It is toward the control of this second effect that technology must in the future increasingly address its efforts. Nothing could be more difficult. To forego a new development because it sets up a dangerous materials drain is stultification. Moreover, it is often quite difficult to see what materials demands will later arise from what new developments: as if the pioneers of the automobile could have foreseen the enormous future demands their new invention would have made on lead, of which early automobiles used little or none, but whose storage batteries and fuels today account for 44 percent of a year's domestic lead consumption. Only when a jet engine is so designed that a projected production program calls for several times more of an alloying metal than geologists know to be available in the earth's crust can it be said that the programmers have shown a dis- tressing lack of foresight. We in America are not accustomed to thinking of materials supply as a limitation upon progress; in- deed, we resent the thought. But we may enjoy the luxury of this resentment only so long as we show a constantly increasing adroitness as to where our next inventions are coming from; what substances may be counted upon to give body to our ingenuities still unborn. The demands which the materials problem places upon technology today seem roughly to be these: To foster new techniques of discovery. Although it is clear that our supplies of the abundant and accessible are running low geologists firmly believe that there is still a vast store of mineral materials deeper in the earth than we yet know how to discover or, discovering, know how to move and extract at costs comparable with the past. To bring into the stream of use materials which so far evade our efforts. Silicon is the most abundant metal in the earth's crust; but we do not yet know how to use it in any ways which take advantage of this abundance. Per contra, the desirable properties of oxygen are so well known that we have urgent wishes to use it, and infinite quantities of it exist in the atmos- phere. But so far we cannot bring it into industrially useful concentrations at a low enough cost to make its abundance significant to our needs. To apply the principle of recycling more and more broadly. Considered in the broadest terms, we wring mate- rial from the earth, we use it, and after its span of life it disperses by rot, fire, or corrosion back into the earth, into the air, or into the sea. Wherever this long cycle can be shortened we are able to use materials more intensively and thus with less net drain on what the earth still provides. To learn how to deal with low concentrations of useful materials. Metallic ores decline in concentration as we in- evitably use the richest first and defer use of the leaner. Today we can recover copper from ores containing 0.5 per- cent of copper whereas half a century ago 3 percent was regarded as lean. But the problem is still broader than this. We pollute air and streams with sulfur because recovering it from high dilutions costs more than the sulfur is worth; we thus annually waste more sulfur than we use. The oceans con- tain most of the elements we need in industry, but so far only one metal—magnesium—can be economically recovered from its low concentration. To lessen or eliminate the need for a scarce material by sub- stituting one that exists in greater abundance. The substitu- tion of aluminum for copper as an electrical conductor is always the example that first comes to mind, but substitution can be more subtle and far reaching than this. The vacuum tube, new 40 years ago, was so remarkable a device that for years it oc- Page 1 curred to no one to do more than improve it in detail. Most recently the creation of the transistor will make obsolete some functions of the vacuum tube, and in so doing makes a fraction of an ounce of germanium serve the same useful purposes as a much more complex instrument of metals and glass. This is substitution in its truly creative form. To develop and use more economically the resources that are renewable in nature. The sun yields boundless supplies of energy that technology can learn to harness, as it has put to use—and can further use—the power of falling water. Every day new supplies of wood, crops, and livestock are being created by natural processes. Here, in contrast to the exhaustible min- erals, are important materials that need never run out. But these, too, can run out, and they will, without constant effort. One of the major tasks for technology is preservation of the production base of each renewable through better methods of holding soil and maintaining its fertility, of regulating stream flow, and, perhaps of exercising some control over rainfall. Another task is increasing the annual production from each resource base. Few of the demands made upon technology by the materials problem lie in any realm of high scientific difficulty. The realm of difficulty for technology lies elsewhere—in costs. We can transmute lead into gold—at a price. We can produce gasoline from coal, cattle feed from sawdust, and electricity from atoms—at a price. The all-embracing problem for technology is to do the things that must be done to ensure a steady, con- centrated flow of materials, rich in diversity, at costs that will make possible their wider and wider utilization. The wonders of science are not at issue here; what is at issue is the hard facts of economics. In presenting this volume, The Promise of Technology, the President's Materials Policy Commission stresses that an absolute shortage of anything is most unlikely and is not the threat that faces us: the threat is of slowly fading supplies which, if not compensated, could produce a rise in costs to the point of arresting those increases in the standard of living which have up until now constituted America's major contribution to the economics of a truly dynamic capitalism. Advances in our civilian economy must continue—but, no less than military advances against our enemy on the battlefield, they can be turned into disasters by carelessness in assuring the continuity of supplies. Our materials and energy resources may be divided into two major categories: (a) those that we use on a large scale as the basic production ingredients of our economy and (b) those that we presently use very little or not at all. These two cate- gories may be further subdivided into materials which are plentiful when we compare the rate of use with known reserves and those which are scarce by the same criterion. Each of these four categories has its technological problems, which differ in kind and importance. Present Production Materials The abundant materials we now use on a huge scale include iron, aluminum, coal (both as a source of energy and as a raw material); materials, such as sulfur and salt, for making basic chemicals (i. e., sulfuric acid, chlorine, caustic soda, and soda ash); and the nonmetallic building materials. Because of the large-scale use and basic importance of these materials, slight increases in cost can have tremendous effects on the whole economy of the country. Therefore, technology has the task of holding costs down. Ample resources of varying concentrations exist for all of these materials. For this reason discovery techniques, while im- portant, are not the chief problem. If rich iron ores are no longer available, we know where other ores are, and we can use a lower grade ore at a tolerable cost. If sulfur deposits suit- able for the Frasch process can no longer be found at a sufficient rate, we can use volcanic sulfur, pyrites, pyrrhotite, or even gypsum. With this group as a whole the chief concern is to de- velop techniques for processing lower grade resources without permitting costs to throttle development. The resources that are plentiful in relation to their use include: Goal and lignite Iron ore Sulfur and pyrites (sulfuric acid) Salt (chlorine, caustic soda, etc.) Bauxite (aluminum) Potash Phosphates Air (oxygen, nitrogen, etc.) Boron compounds Water Clay Stone Sand Gypsum Limestone Bromine Iodine When we come to the scarce production materials we find ourselves dealing chiefly with metals and their ores, particularly the materials needed for making steel and its alloys—manga- nese, nickel, chromium, molybdenum, tungsten, vanadium, and cobalt. Fluorspar, the hydrocarbons, petroleum, and natural gas, and forest resources also fall into this category. These are our problem materials. In this classification the main problem is availability and cost, though vital, is secondary. These substances we presently cannot do without, and their supply is limited. In each case the question is whether the material is irreplaceable in the particu- lar uses to which it is put, or whether some more plentiful ma- terial can give the same service. We must also make sure that mining and processing operations do not unnecessarily disperse some of the material which is being extracted. We must find further ways of recovering and recycling dispersed material so that the total of new material required will be reduced. With this group especially we must find ways of discovering new sources of supply. In the case of our forest resources we must try to increase their rate of renewability as well as decrease unnecessary dispersion. The resources that are scarce in relation to their use include: Common metals: Copper Lead Zinc Tin Uncommon metals: Mercury Cadmium Selenium Cerium Antimony Bismuth Noble Metals (gold, etc.) Radioactive Metals Germanium Beryllium Platinum Group Additive metals: Manganese Chromium Nickel Molybdenum Tungsten Tantalum Vanadium Cobalt Columbium Other materials: Fluorspar Petroleum Natural Gas Forest Products Page 2 Potential Materials Some materials are abundant in nature but, compared to that abundance, little used. The problem with these materials is essentially one of learning how to produce and to use them in larger quantities and at lower cost. These are the materials from which substitutes for our problem materials could come. How can we produce titanium and where can we best use it? Can we make it cheaply enough so that it can be widely used as a substitute for scarce metals? What can we do to make silicon useful as a metal? How else can we use it? Can we expand its use in silicones as substitutes for scarce materials? We know how to make magnesium. Can we overcome its defects in fabrica- tion and use? The plentiful resources include: Alkaline Earth Metals: Other Metals: Magnesium Titanium Calcium Zirconium Alkali Metals: Silicon Metal Sodium Polymeric Materials Potassium Finally, there are materials both scarce and undeveloped. These include tellurium, rhenium, lithium, strontium, the rare earths, and others. Here the main job is to study every property of these elements and use them as far as possible only where the are essential. The scarce resources include: Lithium Cesium Strontium Gallium Indium Hafnium Thallium Tellurium Rhenium Rare Earths The four ensuing sections of this chapter will amplify this summary and describe some of the most promising new develop- ments in science and technology from which answers to a number of difficult problems may come. The position that each of the materials cataloged here occupies in the national economy will be looked into and related to the problems of supply and processing peculiar to the material. The role that technology will have to play in each instance will be examined and its promise a The Dominant Materials The dominant materials today are those which support our whole economy and are at the same time abundant in relation to our needs. The full list is given earlier, but only certain ones will be discussed here. They are potash, phosphorus, and nitrogen (the fertilizer materials), chlorine, sulfur, coal, iron and steel, and aluminum. The remainder have no serious prob- lems either of technology or supply. POTASH, PHOSPHORUS, NITROGEN In the case of the potash, phosphates, and fixed nitrogen group, the problems are relatively minor. Potash reserves are ample for several hundred years to come, and techniques are known which would at slightly higher cost increase reserves enormously from sources such as alunite, feldspar, leucite, etc. In addition, a process recently developed in Norway indicates that potash may be extracted from sea water by the use of specially prepared ion-exchange resins. The situation with regard to phosphate rock is similar. There are large economic reserves and, in addition, practically in- exhaustible quantities of low-grade material. Flotation to re- move silica has made the Florida pebble deposits economic. In the electric furnace production of phosphorus low-grade ores high in silica can now be used since silica is required in the smelting operation. Ores containing 23 to 25 percent P2Os can be used in this process compared to the 32 percent P2O5 material now generally used for making superphosphate. The present temporary shortage of sulfuric acid for treating phos- phate rock to make superphosphate has stimulated study of other methods of treatment. Among these are the use of nitric and phosphoric acid, as well as calcination alone, to break down the rock and make it available to the soil. Another im- portant factor which may make lower grades of phosphate rock economically useful is their possession of certain minerals currently in demand: small percentages of fluorine (3 to 4 percent), vanadium (in western deposits up to 0.6 percent), and uranium (a few hundredths of a percent). Work is in progress to recover these values as coproducts in producing superphosphate and other phosphorus compounds. A very large percentage of the nitrogen utilized by plant life is fixed by micro-organisms in the soil. With the improvement of agricultural techniques and with the drive to produce ever larger yields of crops per acre, this nitrogen has proved in- sufficient for soil requirements, and has been supplemented from other sources. Some of it comes from Chilean deposits as sodium nitrate, and a small amount from organic sources such as oil seed meals, fish products, and tankage. Some was and is available as a byproduct from coke manufacture in the form of ammonium sulfate. The earth's reserves of nitrates are very limited, and no deposits of sufficient size and quality have been found in the United States from which a natural domestic nitrate industry could be developed. Technology, in this instance, however, has been able to complete the materials cycle by "fixing" nitrogen which has been dispersed into the air and converting it into various useful forms by the use of energy. Synthesis of ammonia from nitrogen and hydrogen has been found the most economical method of fixing nitrogen domes- tically, and this process is expanding steadily. There are 22 plants in the United States. Since the operation is done under high pressure, low-cost power is an important factor. Power consumption is 0.75 kilowatt-hours per pound of ammonia. The other important cost factor is hydrogen. Page 3 About 6 percent of this hydrogen is now produced electro- lytically, as a byproduct of caustic soda and chlorine manu- facture; 45 percent is produced from coke; and 49 percent from natural gas. To prepare hydrogen from coke requires 1.7 tons of coke per ton of nitrogen fixed as ammonia. The use of natural gas calls for 43,000 cubic feet of natural gas per ton of nitrogen, fixed as ammonia. Most of the hydrogen for operations in the immediate future will probably come from natural gas, but over the very long range, it will probably be cheaper to produce the hydrogen from coke. A nitrogen fixation process which is currently being devel- oped is one in which the nitrogen and oxygen of the air are combined at a high temperature attained by the combustion of natural gas. One of the chief problems still involves obtaining satisfactory refractories for lining the reaction chamber. This process promises to produce nitric acid at a cost competitive with that produced from synthetic ammonia in certain areas. CHLORINE Chlorine is consumed currently at an annual rate of about 2J4 million tons. Raw materials supply is ample since salt is available in practically unlimited quantity, but purity is im- portant and must be carefully controlled. The technology of chlorine manufacture from salt is well established, and no great changes can be expected within the next 25 years. The problem in regard to chlorine manufacture is finding sufficient outlet for the caustic soda produced along with it. For each pound of chlorine 1.1 pounds of caustic soda are produced, and a fair amount of cheap power is needed. Due to the rapidly increasing use of chlorine in solvents, plastics, and public water supply, it is expected that the annual demand for chlorine by 1975 may increase to approximately 8 million tons. The demand for caustic soda, on the other hand, is ex- pected to rise to only about 5 million tons. The delicately balanced economics of salt as a source for chlorine may thus be badly disturbed, unless some use is found for the 4-million ton surplus of caustic soda. Most of this surplus could be converted into soda ash (sodium carbonate) and find a market in the glass, pharma- ceutical, and other industries, provided that some of the power charge now contained in the price of caustic soda could be shifted to chlorine without disturbing its market. Any substan- tial rise in the cost of power itself would further complicate this solution. The alternative is to make the additional chlorine needed from sources other than salt, such as byproduct hydro- chloric acid. This will require the development of more suit- able processing techniques than those now available. SULFUR Sulfur, like steel, enters into so many facets of industry that there is a close correlation between its consumption trend and total national production. The United States currently con- sumes about 5 million tons of sulfur per year, most of which goes into the production of sulfuric acid. The wide use of sul- furic acid is attributable not only to its specific properties, but also to the fact that it is far away the lowest cost acid. Although originally made from pyrites and volcanic sulfur, most of the sulfuric acid in the United States has been derived from subterranean sulfur deposits mined by the low-cost Frasch process, which melts and pumps the sulfur to the sur- face in pure form. This source of supply now furnishes 85 percent of domestic and 20 percent of foreign consumption while pyrites supply 10 percent of domestic and 60 percent of foreign requirements. Insufficient prospecting has been done to determine to what extent additional supplies may be found in the pure form. How- ever, general opinion seems to be that within the next 25 years such deposits will no longer be adequate. The chief problem is to determine what other sources may be used to make up the deficit without serious increases in cost. Sulfur in gypsum is available in practically limitless amounts. The technology of treating it with coke to produce sulfur di- oxide, while simultaneously producing cement, is well known and is currently being practiced abroad. However, the cost of sulfuric acid so produced in the United States would be approximately two to two and one-half times present costs. The uses of pyrites is also well established technologically. But any substantial shift to pyrites as a source for sulfuric acid in the United States would entail importing large quantities of pyrites, or methods for recovering the substantial quantities of pyrites present in coal-cleaning residues, plus a plant invest- ment cost about two times that for a plant using sulfur. Pyrrhotite, available as a byproduct from the concentrating of copper ores, is a very limited source, economically usable only in those special localities where it is produced. EXTRACTION OF SULFUR FROM WASTE PRODUCTS Sources which will be increasingly developed in the next 25 years are gases from smelting and from petroleum refining, natural gas, and the various proposed new liquid fuel sources. Some sulfur is now being recovered from smelter gases. The International Nickel Co. expects to obtain a high concentra- tion (70 percent) sulfur dioxide gas, from which sulfuric acid may easily be made by the use of oxygen instead of air (which is 80 percent unwanted nitrogen), in its flash smelting process. This technique, used in other roasting processes as well, could make possible much higher recoveries than at present. Of the 2 to 3 million long tons of sulfur equivalent in the petroleum annually entering refineries in the United States, about 10 to 20 percent is released in the form of hydrogen sulfide and is, therefore, recoverable. As catalytic cracking becomes more extensively used, a much higher percentage of sulfur will be released and made recoverable. Sulfur is also recoverable as hydrogen sulfide from natural gas. Considerable quantities of sulfur can be recovered in the processing of coal and oil shale to produce liquid hydrocarbons, and such sources ma) contribute substantially to our sulfur supply by 1975, perhaps as much as 1 million tons per year. If all the sulfur from coke ovens, coal gas, and coal-burning power plants were recovered, there would be little problem with relation to sulfur, and one important source of public nuisance via atmospheric contamination would be eliminated. Over 1 million tons of sulfur go into the atmosphere per year in the United States and the amount so lost in the world has been Page 4 estimated at 25 million tons. From the point of view of public health, sulfur dioxide has been proven to be one of the several common irritants which can affect not only persons weakened by pulmonary and cariovascular diseases, but also those in good health. As long ago as 1927 sulfur emission control was considered necessary as a prerequisite to the erection of the Battersea Station of the London Power Co. where 1.5 million cubic feet of gas per minute, with an initial sulfur dioxide concentration of 0.02 to 0.05 percent, is treated and 90 to 92 percent of the sulfur is extracted by a scrubbing process. Urban districts in England are increasingly requiring firms to reduce sulfur dioxide concentration in the exit gases of their power plants to about 50 parts per million. By contrast, Los Angeles County has set a limit as high as 2,000 parts per million in stack gases; this in spite of its difficulties with "smog." The problem with combustion gases is their low concentra- tion of sulfur dioxide (0.3 percent), which makes economic recovery of the SO2 somewhat elusive. Consequently, processes have been confined in most cases to its disposal rather than its recovery. Numerous possible recovery processes have been tested, but they indicate a cost somewhat higher than the cur- rent commercial cost of sulfur dioxide. Some processes for the recovery of sulfur are beginning to be installed in large indus- trial coke oven and thermal-power plants, but more practical methods will have to be developed before we can hope for substantial spreading of sulfur recovery practices to medium and small gas and power plant operations. With intensification of research aimed at solving this problem accompanied by more stringent local limitation on atmospheric pollution, sulfur recovery from flue gases might become profitable, since the health limitation would make the disposal of the sulfur dioxide necessary in any case. Similar limitation on stream pollution would hasten the economic recovery of the substantial wastes of sulfuric acid discharged into streams. Over 600 million gallons of spent pickle liquor alone (essentially a solution of ferrous sulfate in sulfuric acid) are so discharged annually. It is possible, by con- centrating these liquors, to precipitate out the ferrous sulfate, recover it and reuse the sulfuric acid. This process, however, will not be economic as long as zero or near zero disposal costs pertain. COAL The United States is blessed with extremely large reserves of coal, which currently shares with petroleum and natural gas the burden of supplying our needs for the important element carbon. Coal is both a fuel for heat and power and the source of coke, which is used in the blast furnace for the production of iron, our most important metal. From the byproducts of the coking of coal are obtained the raw materials for much of our organic chemical industry. Although our steel and coal-tar chemical production have gone up very substantially in the past 30 years, our consumption of bituminous coal is scarcely any more now than it was 30 years ago, and that of anthracite is appreciably less. Our con- sumption of coal has dropped to one-half what it was in 1920 per unit of national product. Coke consumption, however, has more than tripled in this century largely because of the requirements of the steel industry. The various causes for the reduction in coal use include the substitution of fuel oil, natural gas, and diesel oil for the pro- duction of heat and power, the development of hydroelectric power which because of its low cost in certain areas is preferred by many important industries, and, finally, a very considerable increase in our efficiency in using coal itself for the production of power. In 1900 7 pounds of coal were required to generate 1 kilowatt-hour of electrical energy. This quantity has been steadily reduced until in 1940 only 1.34 pounds of coal and in 1950, 1.25 pounds were required per kilowatt-hour. In the newest plants today there has been a further reduction to 0.75 pound per kilowatt-hour. LOW RECOVERY RATE In both open-cut and underground mining of coal impressive advances in mechanization have steadily reduced the number of man-hours required per ton of coal. But the progress of mechanization has brought with it the recovery of less and less of the coal available in each seam. It is estimated that in the underground mines throughout the country a 50-percent recov- ery is above average, and in some of the western mines, notably in the Utah areas where there are very thick seams, as little as 15 percent is recovered. In many cases there is considerable doubt whether the coal left behind for any extended period can ever be recovered later. In European practice, with deeper mines and a lower rate of production per man, recoveries may reach 80 percent. While it is likely that an 80-percent recovery cannot be achieved here with our mechanized mining, this contrast still represents a serious challenge to the coal industry. It would be surprising if substantial improvements could not be obtained as a result of vigorous technological attack. Such attention is especially im- portant for coking coal, the reserves of which are relatively limited. USE RESEARCH NEGLECTED The coal industry in the past has been dilatory in the de- velopment of improvements in efficient utilization of its prod- uct, in general tending to rely on its large consumers for such advances. Hence it was not prepared to meet the competition of the diesel locomotive. Research work is now in progress by the Locomotive Development Committee of Bituminous Coal Research, Inc., to develop a coal-gas fired turbine locomotive, which may ultimately be able to compete with a diesel engine at a substantial annual saving per locomotive. By one estimate, such a saving might amount to $50,000 a year for each locomotive. The fact that a beginning has been made in coal hydro- genation should put the coal industry on an upward path. An estimate made by one large company indicates that while only 95 million tons of coal per year were processed for coke and byproducts in 1950, the total in 1955 may rise to 126 million tons and by 1975, to 428 million tons. A large part of the 1975 amount would go into the production of liquid fuels, aromatics, synthetic ammonia, and synthetic methanol. Whether or not this volume is achieved will depend on the availability of low- priced crude oil and natural gas and on the extent of develop- ment of liquid fuel from shale. However, the inherent ad- Page 5 vantages in making a variety of chemical raw materials and chemicals in the coal hydrogenation processes will make for substantial progress in the use of coal in this field regardless of what happens in the fields of petroleum, natural gas, and shale. The evidence can be seen in the already existing Union Carbide and Carbon Co. plant for coal hydrogenation. It was installed at a cost of 11 million dollars and company-financed, and has a capacity for treating 300 to 600 tons of coal per day. IRON AND STEEL Our iron ore requirements overshadow those for all other metallic minerals. Resources of high grade (51 percent or better) domestic ore are rapidly becoming depleted. The taconite ores, containing 25 to 40 percent iron, are beginning to be exploited after much private and Government research has revealed how they might be utilized. Further research will be needed, but plants in process of construction will grind and concentrate the product magnetically and agglomerate it into a 65 percent iron-containing product eminently suited for blast furnace reduction. The much more abundant, nonmagnetic ore (actually a hematitic jasper though it is often loosely included in the term "taconite"), has presented greater difficulty. But a recent announcement indicates that a process has been developed for concentrating such ore and that two plants will be built, one to be completed in 1953 and one in 1955. Foreign deposits of iron ore as rich as the best in our Mesabi range are beginning to be exploited in Labrador, Venezuela, Liberia, and other free world locations and imported for use in the United States blast furnaces. This will tend to decentralize the iron and steel industry, since shipping economies will be possible if new blast furnaces are located conveniently for re- ceiving and processing the ore. New rail facilities and ocean- going ore boats of large size (one of 40,000-ton capacity) are being built for the importation of these ores. THE BLAST FURNACE AND ITS PROBLEMS The modern blast furnace is a gigantic and beautifully coordinated mechanism which operates continuously and pro- duces 1,500 tons per day of pig iron with a consumption of 1,750 pounds of coke per ton of metal and with a metal re- covery of 98 percent of the metal charged. Technological change in this operation will be necessarily slow because it is so efficient in the use of fuel and can produce in such large volume. Increase in top pressure of the blast furnace is one of the newer methods for increasing blast furnace output. One company has converted about one-third of its furnaces with a boost of about 12 percent in the rate of pig iron production and a saving of about 10 percent in consumption of coke per ton of pig iron. LOWER GRADES OF COKE The industry will have to face a gradual deterioration in the quality of metallurgical coke, which will be more fragile and have a higher sulfur content as our best sources of coking coal become depleted. At present, the function of coke in the blast furnace is fourfold; it keeps the burden open and per- meable in the shaft and also serves as fuel, reducer, and car- burizer. Even in the melting zone, the burden is supported by a skeleton structure through which the molten iron and slag trickle. In the upper regions of the shaft, properly pre- pared ore and limestone could probably support the burden, but support of the burden in the melting zone seems to be dependent upon coke, even a coke reduced in strength. It is currently reported that one blast furnace is operating on low-grade coke with the aid of an ore in the form of a high- grade sinter. Should the supply of strong metallurgical coke become depleted, a blast furnace with a low shaft may be developed, so that weaker coke could support the charge. With this equip- ment, a blast enriched with oxygen could be used with the weaker coke, and an increased production of pig iron would result because of a more rapid reduction of the iron oxide. However, there is a limit to the temperature rise permissible and, thus, to the amount of oxygen which may be used. A higher sulfur content in coke results in higher sulfur in the pig iron. Several methods for removing the sulfur appear feasible, such as desulfurization of the iron after tapping, or treatment with caustic soda, or treatment with powdered lime. The costs for these processes are not too great and they will make possible the use of higher sulfur coke. As the industry shifts to the taconites, which after bene- ficiation will have a high iron content (65 percent), a higher iron output per blast furnace should result, which will at least partially offset the cost of grinding, concentrating, and pelletiz- ing the taconite. An additional economy in the taconite process may be obtained by pelletizing with coke breeze (finely divided coke not now suitable for metallurgical work), thereby reduc- ing the requirement for metallurgical coke and further increas- ing the rate of reduction of the ore to metal and thus the out- put of the blast furnace. STEEL MAKING PROCESSES AND SOME PROBLEMS Steel production is about 100 times that of the second largest metal, copper, and about 20 times that of all other metals com- bined. The raw materials are pig iron and steel scrap plus slag- making and deoxidizing substances such as fluorspar, f erroman- ganese, aluminurm etc. The basic open hearth furnace (lined with dolomite) ac- counts for 85 percent of this production, and the charge usually contains about 50 percent each of pig iron and scrap though these proportions vary appreciably. The chief advantage of this process is efficient dephosphorization of the steel, but it achieves only moderate disulfurization. Since sulfur in pig iron and fuels is tending to increase, desulfurization is becoming a serious problem and may tend to reduce the importance of the basic open-hearth furnace in the next 25 years. The Bessemer converter produces steel by blowing air through molten pig iron for 9 to 12 minutes to reduce its carbon content and to oxidize silicon and manganese. It is responsible for only 5 percent of present day steel production as contrasted with 85 percent in 1890. This shift has come about because the Bessemer converter requires special lowr-phosphorus pig iron no longer easily available and turns out a product high in both phosphorus and sulfur. Page 6 The basic electric furnace is the most versatile of all steel making furnaces. It is responsible for only 10 percent of total annual steel production, but due to its flexibility it may become a much more important factor in making steel by 1975. It can operate under oxidizing or reducing conditions; it can decar- bonize, dephosphorize and desulfurize. Up to the present it has operated only on all-scrap charges. SCRAP., A STEEL ESSENTIAL The recycling of scrap is essential to the maintenance of high steel capacity. Home scrap, or that produced by the primary steel industry itself, represents about half of the total scrap used. About 10 to 12 percent of the steel shipped to fabricating plants returns to the steel plants and represents roughly 40 percent of the total purchased scrap. The other 60 percent comes from railroads, auto-wrecking yards, farms, mines, utilities, and industrial plants. Purchased scrap, for steel production of 96.7 million tons in 1950, amounted to 29.5 million tons, and home scrap to 32 million tons. For several reasons the availability of scrap will tend to become more acute for some time. Home scrap will be ap- preciably reduced by some of the newer processes such as con- tinuous casting and hot extrusion. In the latter case the use of molten glass as a lubricant seems to offer considerable promise. New foundry methods using plastic bonded sand (shell mold process), which promise to decrease substantially the amount of metal needed in preparing castings and to eliminate much of the machining on rough castings, will also reduce scrap in the cast iron foundry. An aggravating factor will be the time lag between our expanded steel production and its recycling of scrap. One of the chief problems will be to develop new tech- niques for pig iron treatment or direct iron ore reduction to provide a "synthetic" scrap. "Synthetic" scrap can be defined as a material which has some of the qualities of steel scrap in that it is reasonably low in carbon, silicon, and manganese. It is produced now by blow- ing pig iron in a Bessemer converter for addition to the open hearth, as in the duplex process. Various new lines of attack are currently being investigated. These include the use of airblown converters such as the Bessemer, the Thomas, and the Turbo- Hearth, which are relatively inexpensive to install and operate on a very short cycle (under 20 minutes). Of these, the Turbo-Hearth, which is still in the pilot plant stage, promises to have the most far-reaching effects on steel production. A basic lining and a basic slag is used to remove most of the phosphorus and much of the sulfur. It may be pos- sible to use a limited amount of iron ore instead of scrap to cool the metal during treatment. Indeed, the Turbo-Hearth surface- blown basic converter may be developed as a substitute for the basic open hearth furnace, since it starts with regular basic pig iron and produces steel whicn is in every respect equal to the best basic open hearth steel. Instead of requiring 8 to 12 hours per charge, as in the basic open hearth, the blowing time is only 12 to 20 minutes. There has always been the hope that someone would devise a direct reduction process which could compete successfully with the blast furnace. Direct reduction of iron ore to metallic iron has been carried out in rotary kilns at temperatures below 2,000 degrees Fahrenheit, and does not require metallurgical coke as the reducing agent. It produces a porous spongy low- carbon product known as sponge iron. Much developmental work has been done, but none of the processes have been com- mercially successful to date, except one developed in Sweden using charcoal as the reducing agent. The Swedish product is sold for electric furnace melting stock and powder metallurgy. In spite of this poor record the steel industry is continuing to investigate direct reduction, especially as a possible source of "synthetic" scrap. CORROSION TAKES HEAVY ANNUAL TOLL No discussion of iron and steel can ignore corrosion. Cor- rosion in 1948 cost the United States in direct charges approxi- mately 2 billion dollars. If the various paints, coatings, galva- nizing, electroplating, and alloying are added, the total bill comes to 5.5 billion dollars. A calculation based on 1950 would probably bring the latter figure to about 8 billion dollars. In other words, the protection and replacement of iron and steel to prevent corrosion amounts to over 2 percent of the gross national product. To reduce this cost, much work is in progress. Some of it involves direct replacement of steel by stainless steel and by aluminum, and the cladding of steel with stainless steel, alu- minum, nickel, copper, monel, etc. For use in the chemical industry, steel is also coated with rubber and plastic-type ma- terials. Atmospheric corrosion tests have shown that steel hot- dipped with aluminum can substitute for galvanized steel. Although the cost is currently the same for the two coatings, eventually the aluminum coating may be cheaper. The price per pound for zinc or aluminum is roughly the same, and one pound of aluminum will coat 2.6 times as much steel for the same thickness of coat. The equipment used is the same as that used for galvanizing with zinc. Ceramic glass coatings are finding important uses for cor- rosion prevention, especially on aircraft engine exhaust pipes and other places where oxidation resistance at high tempera- ture is essential. This usage should decrease the necessity for scarce high-temperature alloy material. The development of new organic coatings which have rust inhibiting properties is progressing, and within the next 25 years such coatings may have a 50 percent longer life. Various inhibitors such as those added to the cooling systems of radiators and those used in the vapor phase inside of special wrappings to protect steel parts during shipping are either in use or in various stages of development. Cathodic protection is being more and more used, not only for underground structures such as pipe, but also in tanks con- taining corrosive solutions. This is done by supplying anodes which may be made from magnesium, aluminum, zinc, or graphite, or a rectified current may be used. This system drains sufficient electricity from the metal so that at no point will there be any local anodes and corrosion is thereby prevented. Pipelines used for liquids or gases which are properly inhibited and coated and cathodically protected should have greatly increased life compared with pipe that has been installed in the past. Page 7 ALUMINUM The aluminum industry, which is based on bauxite as a raw material, has some problems very similar to those of the iron and steel industry. World bauxite reserves are very large, but high-grade domestic reserves have become scarce and heavy imports are necessary. One of the chief problems is to perfect processes for beneficiating clays or other domestic minerals at a cost which will not be greater than the present treatment of bauxite for the production of pure aluminum oxide (alumina). Various processes have been investigated including the Kalu- nite process, using alunite; the ammonium sulfate process and the lime-sinter process, using clay; and the lime-soda-sinter process, using anorthosite. (Of these, the ammonium sulfate process was the least satisfactory.) Costs of producing alumina by these methods were less than 50 percent higher than by the Bayer process now used for extracting alumina from high-grade bauxite. Further develop- ment work should bring these costs down. In addition, a high iron bauxite process known as the Pederson process and used commercially in Europe may be applicable to some of the high iron lateritic ores of the Northwest. The cost of extracting alumina in the Bayer process amounts to between 30 and 40 percent of the total production cost of aluminum metal. THE POWER FACTOR The second most important item in aluminum production is power, contributing 15 to 20 percent of the total cost. Unless electric power is available at low cost, the manufacture of aluminum on a large scale at a reasonable cost is impossible. The new process developed by the Bureau of Mines for producing power from lignite promises at least partially to solve the power problem for the aluminum industry. The process involves the drying and pulverizing of the lignite and its treatment in a "fluidized" bed to drive off the tar, oxidizing a portion of the material to provide heat for the operation, and leaving a char in finely divided form which is immediately burned for generating power. If suitable economic uses can be found for the byproduct high molecular acid tar, it is estimated that the cost of power generated by this process will be equal or only slightly higher than cheap hydroelectric power. If the process can also be extended to low-grade semi-bituminous coal in areas mineable by the open cut method, an important new source of low-cost power will become available. A technological advance of considerable interest is the appli- cation of the Soderberg continuous electrode to the aluminum process. This electrode is formed by feeding petroleum coke and pitch through a large consumable sleeve which extends downward into the pot. It has a number of advantages which include less time in its production and in the replacement of individual electrodes, the production of higher purity metal, and the greater ease of capturing fluorine and fumes, as well as a somewhat lower power requirement. Developments along this line are expected to lead to totally enclosed single electrode refining cells and reduce the power requirement per pound of metal from the present 9 kilowatt-hours to between 6.4 and 6.8 kilowatt-hours. Another serious technological problem in connection with aluminum is the decomposition of the cryolite which is the fluorine-containing flux used to dissolve the alumina. Periodic additions of aluminum fluoride and cryolite have to be made to maintain the volume and to adjust the operating character- istics of the bath. The loss of the fluorine in the process is important because of an impending shortage of fluorspar. Several processes have been suggested to produce aluminum by methods radically different from the Hall process. One of these involves electrothermal production of an aluminum-sili- con alloy and subsequent extraction of the aluminum from the alloy with zinc or mercury, which would be distilled off to leave the aluminum. This process has not so far been found to be feasible in the United States, although it was developed com- mercially in Germany during the war. Another departure is the subhalide process for the production of aluminum metal from electrothermic alloys and scrap. It involves the treatment of the alloy with aluminum chloride to form a subhalide of aluminum at high temperatures. This in turn is dissociated at lower temperatures to form metallic alumi- num with the recovery of aluminum chloride. The develop- ment of this process is still being carried on by Alcoa, and it may have, when established, important advantages in the utilization of low grade ores and the lower consumption ol power. SUMMARY Summarizing the problems to be tackled in connection witt our dominant materials, we find that: a) We must find ways in most cases (potash, aluminum phosphate, iron ore) of using lower grade resources with- out increasing cost. b) We must improve details of processing techniques so as tc increase output per plant unit, by such means as mon rapid reduction of iron ore; the use of oxygen in variou: types of blast furnaces and in the making of steel; th< development of new steel making furnaces; and the de velopment of new types of electrodes for the productioi of aluminum. c) We must study byproduct recovery, such as the recovery of fluorine wastes in aluminum production and wastes o sulfur in smelting operations, in petroleum and natura gas refining, and in the combustion and cleaning of coal d) We must find ways of recovering waste products such a iron and sulfuric acid from pickling liquors by technique like reconcentration, ion exchange, etc. e) We niust find means for more complete extraction of coa from the mine, and more efficient methods for utilizatioi of coal in the production of heat and power, in competi tion with liquid fuels. /) We must find means for minimizing increases in the sulfu content of metallurgical coke, and for minimizing th< deleterious effects of such increases in the resulting iroi and steel. * g) We must develop new methods of desulfurizing and de phosphorizing steel. h) We must develop cheaper sources of power, or at leas prevent serious increases in cost of power, for such opera tions as the manufacture of phosphorus, nitrogen, alumi num, and chlorine. Page 8 load before permanent deformation. They are weldable and find wide use in bridges, railroad cars, and similar heavy equipment. The next largest volume of alloy steel is the class of tool steels, die steels, and permanent magnet steels representing only about 1 percent of the total quantity of steel used, but the very life blood of the metalworking, woodworking and plastic in- dustries. Not only are the previously mentioned alloying ele- ments used, but others such as tungsten, vanadium, cobalt, columbium, and tantalum. Alloy metals are also used for improving the properties of plain carbon steels at the low temperatures encountered in arctic regions where the cracking failure of ordnance equip- ment, tanks, and aircraft parts is a serious matter. During the Second World War, cracking of welded structures in Liberty ships exposed to low temperatures and heavy seas resulted from loss of toughness in the temperature range of freezing water. Nickel is one of the chief elements used to decrease the brittle- ness of steel at low temperatures. HIGH-TEMPERATURE ALLOYS Steels for high-temperature service are rated as to tem- perature range of useful life based on strength, creep rate, and oxidation resistance. The lower alloy steels with 4 to 6 percent chromium can be used under 500 degrees Fahrenheit. Certain stainless steels contain, in addition to chromium and nickel, small amounts of tungsten and molybdenum, which make them suitable for use in the neighborhood of 1,000-1,200 degrees Fahrenheit. Above this range of temperature, useful alloys con- tain no iron but are based mainly on cobalt, nickel, and chro- mium with smaller additions of columbium, tungsten, molyb- denum, and tantalum. During the Second World War, the designing needs of the turbo-super-charger for bombers for high-level flying suggested the trial of an alloy containing over 60 percent cobalt. This remarkable material stood the test, and has led to a whole series of experiments on heat-resistant alloys, the possibilities of which are only just beginning to be understood. The advent of the gas turbine and jets for fighter aircraft, and the possible development for commercial flying and later for automobiles, has accentuated the need for materials to withstand high temperature and stress. One reason why it has taken so long to develop the gas turbine commercially is that there were no materials that could withstand red heat and at the same time take the stress of the centrifugal forces gen- erated by 20,000 revolutions per minute. Since in the gas turbine the higher the temperature, the greater the efficiency, there is urgent need for metals, ceramics, or other substances that can operate under stress in the range above 2,000 degrees Fahrenheit. There are also requirements for materials for carrying out nuclear reactions, many of which occur at high temperatures. Some of these materials must have a low capacity for neutron absorption as well. Thus, the need for higher and even higher temperature resistance becomes one of our most critical prob- lems. A vast assortment of research problems lies in the whole additive metal field, and these questions will occupy science and technology for decades to come. Nickel Nickel has a remarkable ability to alloy with steel and copper and exists in about 3,000 different compositions, im- parting increased ductility, strength, and corrosion resistance. It is already scarce relative to demand, and the projected re- quirements for 1975 will be difficult to meet. The rich sulfide ores at Sudbury. Ontario, are responsible for 90 percent of domestic consumption, which is currently 100,000 tons per year. Future sources must include the lateritic ores which are spread throughout the world and contain somewhat less than 3 percent nickel. Deposits of lateritic ores in Cuba, associated with iron and small amounts of cobalt and chromium, were treated for re- covery of nickel during World War II. They are now, under new management, being developed again with improved tech- niques. Along with nickel recovery, it is hoped that iron con- centrates obtained from this source may be marketable and that both cobalt and chromium may be procured as byproducts. Laterites cannot be concentrated by presently known means and thus must be processed as mined through sizeable equip- ment. Intensive study will be required to separate economically all the metals contained in the lateritic ores. Chromium Chromium is also in short supply, and there is serious need for new sources. The over-all recovery of chromium from mine to the finished chromium-bearing steel is now only about 60 percent. Therefore, in addition to new discovery, technology must provide new techniques for the extraction and upgrading of low-grade ores and for improved smelting and steelmaking procedures. In addition to its use in making alloy steels, chromium ore is used in somewhat larger tonnage but somewhat lower grade for refractory and chemical manufacturing. The refractories made are essential in ferrous metal production and are begin- ning to be used in copper smelting. The elimination of the use of chromium for decorative purposes would bring about a 20 percent reduction in the peacetime demand for this material. Chromium occurs in nature as chromite (FeOCr203). Only low-grade chromite ores are known in the United States and the peak year of domestic production in 1943 filled a meager 10 percent of the requirement at that time. The chief imports of chromite ore at present come from Turkey, with smaller quantities from the Philippines, Union of South Africa, and Southern Rhodesia. Russia also has large reserves of high- grade ore. One of the immediate needs in mining these foreign deposits is to recover the low-grade ores which now are left behind as the rich deposits are cleared away. This low-grade material, beneficiated on the site, (especially in the smaller independent mines in Turkey) by the most modern mechanized techniques possible, could help in the solution of the chromium supply problem. Beneficiation methods treat low-grade chromite ores by removal of the gangue in float-sink concentration, by tabling, or by magnetic or electrostatic separation. However, these tech- niques do not raise the chromium to iron ratio, which must be within a certain range to make the product useful for smelting. Page 11 A number of methods for increasing the ratio of chromium to iron are being investigated. They include a double smelting method, a blending and sintering method, a combination roast- ing and leaching process, a chlorination process, and a process in which the ore is heated with lime and magnesia. Operating costs of such upgrading are roughly estimated to be in the neighborhood of l/2 to 2l/2 cents per pound of contained chromium. Work is also in progress on improved methods of smelting and refining to produce the ferrochromium which is added to the steel in making alloy steels. The average recovery of ferrochromium made by the electric smelting method is 80 percent. Recently a large producer of low-carbon ferro- chromium has developed a new production process which increases this recovery to 90 percent. In both open-hearth and electric-fumace steel making, the chromium is added as ferrochromium with various carbon con- tents. For certain special applications it is added as chromium metal. When high-carbon ferrochromium is added to the open hearth, the chromium recovery is about 75 to 80 percent. By the Chrome-X process, in which special briquettes are added containing sodium nitrate, high- or low-carbon ferrochrome, ferrosilicon and a binder, a chromium recovery of 90 percent is achieved. Vanadium Vanadium is the least critical of all the alloying elements used for steel making. Its price, however, is very high in com- parison to the other additive metals ($3 per pound of con- tained vanadium for ferro-vanadium), so that it has not expanded so rapidly in use. A lower price would create an incentive to use it on a much larger scale. Use of vanadium in tool steels and in die steels is important, as are its uses in catalysis. Molybdenum Molybdenum is the most abundant of the high-melting point metals and is used chiefly for alloying. Peacetime world re- quirements are below United States productive capacity. But in wartime and during the present mobilization period, it is short due to its value in ordnance material. Molybdenum is mined at Climax, Colo., and is also obtained as a byproduct from copper concentrates. Other sources of the metal come from gold and tungsten ores. Molybdenum can at least par- tially replace some of the other additive metals in the production of alloy steels. Boron Boron usage in steel is an important development, first studied during the recent war. It promises to furnish a partial solution for the critical supply problems of such materials as nickel, chromium, molybdenum, and manganese. Remarkably small amounts of boron (from about 0.001 to 0.006) added to steel increase the hardenability of low and medium carbon- steels so that the addition of other scarce alloying metals may be reduced. Boron combined with zirconium, tungsten, tanta- lum, or silicon may find other important uses in heat-resistant materials. The use of boron has now progressed substantially and—for current steel production—is saving 656,000 pounds of nickel, 119,000 pounds of chromium, 52,000 pounds of molybdenum, and 9,100 pounds of manganese annually. It is predicted that 10 million tons of alloy steel ingots will soon contain boron and that 600,000 pounds of boron annually will be required. Boron, though not a plentiful element in the earth's crust, occurs in large deposits in the region of Death Valley, Calif., and other areas, and there is an ample supply in comparison to expected requirements. Tungsten Tungsten has certain outstanding physical properties which make it very important and assure a rapidly expanding demand during the next 25 years. Its melting point (3,400 degrees Centigrade) is the highest, and its vapor pressure the lowest, of all metals. Its density (19.3 grams per cubic centimeter) is surpassed by only a few of the precious metals. Where these properties are essential, there will be no substitute by any other metal. As the best material for incandescent lamp filaments and electrical contacts, as an essential ingredient in high speed steel and sintered carbide cutting tools, and in applications requiring high density, tungsten occupies a position in our economy whose importance is quite out of proportion to the amount used. Until recently, about 85 percent of the tungsten supply was used for high speed steel and other alloys. Recently, a much greater proportion of the tungsten is being used in tungsten carbide cutting tools. Our requirements can be met by conser- vation and stockpiling, within reasonable limits. However, a proposal for using tungsten carbide in cores for ammunition may, if adopted, drain our reserves of this valuable metal. At present, tungsten carbide required for the lamp industry for filaments is made from high purity tungsten powder. Proc- ess capacity in the United States is limited and, should the military demand tungsten carbide in quantity, plant expansion will be necessary. A new process for making the carbide directly from the ore has been reported, and should be examined. At- tempts to find methods to release tungsten carbide from am- munition, such as the development of the shaped charge, should be studied. Industry and Government should draw up specifications in a joint effort for conservation of this important metal. The purity of tungsten concentrates should be reexamined in the light of specification requirements for the various grades to be used in manufacturing ferrotungsten; for direct addition to steel in the form of natural or synthetic scheelite; for making tung- sten metal, and for the manufacture of tungsten in the form of tungsten carbide. A new method of lubricating tool steels during use has been reported to extend the life of the tool substantially. This may, if developed, reduce somewhat the demand for tungsten for this purpose. Since the United States is substantially dependent on imports for tungsten, further exploration and discovery of new sources of supply are very important. The fluorescent properties of the tungsten-bearing mineral, scheelite, make discovery of surface deposits of such ore relatively easy. New extractive methods Page 12 should be studied to find improved methods for recovery of tungsten as a byproduct from the processing of other ores, such as those of molybdenum, copper, and tin. Cobalt Like the other alloying elements, cobalt is a vital metal be- cause of its resistance to oxidation, its toughness, and its high strength at red heat. Cobalt is important in such products as permanent magnets, cemented carbide cutting tools, and cobalt- base tool alloys for high temperature service. Cobalt is mined chiefly in the Belgian Congo with smaller quantities located in Northern Rhodesia, French Morocco, and Canada. Low-grade ores from the western United States are in the early stages of production and, in combination with other domestic low-grade ores, will supply only a small proportion of requirements at current demands. Supply in 1950 did not meet demand, and since projections for 1975 indicate about three times 1950 demand, a very substantial deficit is indicated during the next 25 years. Obviously, exploration and discovery of new sources of supply are important. Attention should also be directed to improved extractive metallurgical processes to provide recovery from the lateritic ores of Cuba and from the nickel deposits of Sudbury, Ontario. Normal uses for cobalt could be met by foreign and domestic metal production, but the military program has increased re- quirements 2/2 times since 1949 and consumed 62 percent of the total supply in 1950. Rockets, guided missiles, and nuclear uses form the basis for these and future demands for cobalt. In the jet engine program, the military services have designed equipment with a cobalt requirement far beyond visible supply. The use of cobalt should be reserved for those special in- stances where it is irreplaceable, and where its application is most critical, and the development of substitutes should receive intensive study. A likely substitute for cobalt magnetic alloys is a magnet made from finely divided iron powder which may replace all theAlnico (aluminum-nickel-cobalt alloy) magnets except the one known as Alnico VI. The problem is not completely solved since the iron magnets deteriorate through oxidation of the fine particle structure. Cemented tungsten carbide containing 6 per- cent cobalt could be cemented with nickel, although tool life might be decreased by this substitution. With time and study, the jet engine alloys requiring cobalt may themselves be re- placed. To mention only a few possibilities, there are the molyb- denum-base alloys, combinations of metal powder and ceram- ics, and ceramic materials such as zirconium boride. Columbium Columbium is at the top of the scarce metal list, and prac- tically all of it comes from abroad, chiefly from Nigeria. The total known world supply is very small indeed, and exploration and discovery are essential. Some columbium can be obtained as a byproduct in processing tin ores. Technology in the case of this material must concern itself chiefly with making more efficient use of the very limited supply by substituting as much as possible such elements as titanium and tantalum in various alloys. For certain of the so-called super-alloys, where the best high-temperature prop- erties are required, no satisfactory substitute is yet known. NONFERROUS METALS The use of the nonferrous metals, copper, lead, zinc, and tin, preceded iron and steel, for they were found early and in rich deposits, and were easily smelted. In the early smelting of copper, it was contaminated with tin, zinc, and other metals so that the products were really bronzes, and they gave the Bronze Age its name. The supply situation for these metals is somewhat mixed. Peacetime copper supplies are not critical in the free world for the next 25-year period, but United States exploitable re- sources are chiefly in low-grade ores—as low as 0.7 percent copper—and substantial imports are needed to meet require- ments. Production rates are not sufficiently high to provide for extraordinary military requirements. United States zinc reserves, though ample for a 25-year peacetime demand, might also be inadequate in an emergency. Lead reserves are low. In both lead and zinc there is a steady trend toward treating lower and lower grade ores. Tin is entirely imported, most of it from areas of political unrest. Copper The properties of copper which determine its essential uses are high electrical and heat conductivity combined with corro- sion resistance and ease of forming. Next in importance is its ability, when combined with tin and small amounts of alumi- num and silicon, to provide alloys such as the bronzes which are resistant to marine corrosion. Except in special brasses and bronzes, the strength of copper and its alloys is low in compari- son to steel, and the stronger bronzes are too costly to be competitive. Certain special copper alloys have important characteristics. For example, the copper-beryllium alloys give a material with high fatigue strength suitable for springs which must withstand rapidly alternating stresses without failure. The use of copper powder to make corrosion-resistant, porous oil-carrying bear- ings is also important. Copper now must compete with aluminum, since the costs of the two metals are roughly comparable, making substitution possible in many uses. An important example is the substitution of aluminum reinforced with steel for copper in electrical trans- mission lines. There are nevertheless many electrical uses for copper which would be very difficult to replace, especially in such things as transformers and heat transmitting and radiating devices. Its usefulness in applications such as these should con- tinue to expand its consumption for a long time to come. Lead One important property of lead is its high specific gravity, which gives it value in nuclear work for protection from radia- tion, and which makes it a difficult metal to replace in small arms ammunition. Lead's inertness to corrosion makes it useful in the chemical industry for lining tanks, sulfuric acid cham- bers, etc., and for storage battery plates. It also has a great capacity for forming alloys with low-melting metals such as tin, antimony, and bismuth, and these provide excellent bearing metals and solders. Lead also has the peculiar property, when transformed into tetraethyl lead, of increasing the high octane value of gasoline. Page 13 A unique problem in substitution exists in the case of tetra- ethyl lead. Its function in obtaining high octane liquid fuels is a completely nonrecoverable use. No satisfactory substitute for tetraethyl lead has so far been found, but a combination of factors may ultimately prevent serious expansion of its use, and possibly in the long run eliminate the necessity for it alto- gether: (a) improved refinery practice can over a period produce higher and higher octane fuel without tetraethyl lead; (b) by improved engine design, such as the "turbulent-fuel- intake" and the "squish" piston, can increase the octane num- ber from 80 to 100; (c) additions such as boron or silicon compounds reduce the octane rating needed in the fuel as does cleanliness of the cylinders; and (d) internal combustion en- gines may in the long run be replaced by other types which do not require high octane fuel. The increasing use of turbo-jets will decrease the employment of this fuel in military aviation and later in civilian aviation, as will the increased use of diesel engines in trucks. Zing The strength of zinc is low, but the position of zinc in the electromotive series makes it useful in dry cells, in the galva- nizing of steel, and in cathodic protection against corrosion. Its relatively low melting point and cheapness make it attractive for die casting. In dry cells and in cathodic protection it can be replaced by magnesium. The other two uses are presently being threatened by aluminum, because for the first time, the price of zinc and aluminum are competitive, and aluminum may have a possible edge due to its lightness and greater strength. Tin Tin besides its uses in the manufacture of bronzes, solder, and bearing metals, and because of its position in the electromotive series, is valuable as a protective coating in tinplate, specifically for cans. Its inertness against attack by the ingredients in pre- pared foods (in the absence of air) enables it to store foods for years without deterioration. This inertness, however, is not peculiar to tin or tinplate; plastic film backed up by aluminum can carry out the same function. Considering the efficient recovery of tin from present dredg- ing operations in Malaya, there is slight margin for improve- ment in this process. In mining operations such as those in Bolivia, work is in progress to improve mining techniques, but only moderate change can be expected. However, in ore con- centration there is ample room for advancement. Recoveries are under 50 percent, and intensive research is needed to im- prove this figure. Smelting recoveries are high, ranging between 95 and 98 percent. Progress could be made in the recovery of byproducts from tin smelting, because tin ores frequently contain tungsten, columbium, tantalum, and other valuable metals. In some cases the recovery of these values could come in the beneficia- tion process. Such work is being done by Geomines in the Belgian Congo, which produces tantalite concentrates in processing the tin. The slags of the Panang smelter in Malaya contain 5 to 8 percent, and the tin in Nigeria occurs with several percent of columbium and tantalite. Economical methods should be developed for recovering byproducts. OTHER PROBLEM METALS Cadmium is used chiefly in plating for protection against corrosion and in low melting alloys. For atomic energy produc- tion equipment, about 100 pounds of cadmium are estimated to be needed for controls in each 100,000 kilowatt output nuclear power plant. Cadmium comes as a byproduct from the roasting, sintering and hydrometallurgy of zinc, lead, and copper concentrates, though most of it is produced in association with zinc. Future supplies will naturally be limited by supplies of these other metals. Every effort should be made—especially in zinc process- ing—to improve recovery of cadmium by salt sintering, double sintering, and more dust-catching equipment. The metal germanium obtained from the residue of zinc ores, coal ash, and flue dust, attained prominence quickly when its property of semiconductance proved to be of value as a rectifier for electric circuits and for transistors. Germanium also has the unusual properties of high thermoelectric power and an increase in electrical resistivity with increased purity, which is the re- verse of many other metals. The amount of various metals used in vacuum-tube construction that may be released for other purposes by substitution of germanium-containing devices can- not now be estimated, but undoubtedly it will be substantial. A germanium crystal rectifier useful for ultrahigh frequencies can be of such a small size that it can be used in miniature or portable equipment, thus replacing bulkier tubes. As a rectifier or detector, it not only replaces the normal vacuum diode, but uses less energy, since it does not depend on a hot cathode sur- face. Likewise, as a transistor, less power is used and the normal vacuum tube (triode) can be replaced. Even at the current price of $210 per pound, the domestic supply of this metal (about 2,000 pounds annually) is far from adequate for the demand. Additional production is being de- veloped, but better recovery methods are needed. substituting within group can stretch platinum supply The platinum group can be divided into the lighter metals, ruthenium, rhodium, and palladium, and the heavier metals, osmium, iridium, and platinum. The "queen" of the series is platinum itself; the other metals in the platinum group may match platinum in one or more characteristics, but none equals it on an over-all basis. It is very ductile and easily worked, it has the lowest loss from volatilization and oxidation on heating in air, and it is not attacked by any single acid (but is dissolved by aqua regia). Although measured in ounces and produced to the extent of only half a million ounces in the world in 1949, the platinum group metals are exceedingly important in many industries. Platinum has many catalytic uses in the chemical industry. It is important in the electrical industry for fuses, contacts, and thermionic cathodes. Metal-to-glass seals and equipment re- sistant to chemical corrosion consume platinum also. The United States is in a good position for resources. The principal world supply of platinum is associated with the nickel ores in Canada, and there are supplementary deposits in Alaska. The platinum group metals and their alloys are also recovered as secondary metals to a large degree. Page 14 However, there is a shortage of platinum at present. Other platinum group metals should be substituted for platinum wher- ever possible. Dental uses could very likely find substitutes, and rayon spinnerets could be made of palladium-gold alloys to replace the platinum alloys. The use of platinum for jewelry and for decorative purposes could be limited. Platinum clad- ding has been used for many years in place of solid platinum. It will be difficult to replace the platinum now used in bushings for forming glass fibers, for without this metal, the industry would be almost nonexistent. SCRAP FOR PROBLEM METALS The recovery of scrap in the secondary metal market is essen- tial for economic operation of the metal industry. Although the secondary metal industry is rated in millions of dollars annually, there are many avenues which could lead to further decreases in waste. Collection and segregation of all scrap metals and alloys for reprocessing could be substantially im- proved. At the present time, segregation of scrap is accomplished by considering color, luster, the apparent density, the color and type of fracture, the nature of sparks when touched to a grinding wheel, relative hardness, the type of composition used in wrought as compared to cast products, chemical spot tests, magnetic susceptibility, machinability, and by the more time-consuming but exact process of spectre graphic analysis. Aluminum refiners are aided in scrap identification by looking for the manufacturer's identification symbol on wrought materials. IDENTIFYING SCRAP On commodities which reach a high production rate, it should be possible to stamp, emboss, or mark an identification number or symbol on each item as it is produced. This system would establish positive identification of scrap and would make its collection attractive due to ease of sorting. The remelting of such scrap would require a minimum of refining, would be more economical in power consumption, and would be more efficient in the recovery of the elements involved. Less primary metal would be consumed in the secondary metal industry because the remelted scrap would contain fewer contaminants, which frequently have to be diluted by addition of primary metals in order to meet chemical specifications. It may even be possible to restamp some products which require machining. A national code would, of course, have to be established to keep the system from becoming unwieldy. Two programs, by the Navy and the Air Force, have re- cently been initiated to salvage and identify all heat-resistant alloys from obsolete and worn out jet engines. The Navy pro- gram is set up to return identified scrap to the engine manu- facturer, who in turn will return it to the particular alloy man- ufacturer. The Air Force will identify its scrap by trade names and will then sell it under open bid to secondary metal dealers specified by the National Production Authority. Subsequently, the scrap will be available for resale to the alloy manufacturer. Whichever of these two programs appears to be the better will be adopted by the two military services. TECHNOLOGY OF PROBLEM METALS The technical jobs to be done in connection with problem metals include: a) New discovery of all these metals. b) Improved mechanical mining methods, like those devel- oped for coal and evolving in copper mining, to increase tonnage mined per man, thus enabling economical treat- ment of lower concentrations of ore. c) Improved milling, especially in the substitution of more efficient grinding methods for present ball mills, which would cut costs by reducing power consumption. d) Evolving methods of making notation applicable to the oxide-containing ores of copper, lead, and zinc as well as to their sulfides, perhaps with cationic notation agents. e) Studying and applying processes for extracting metal values from worked-out mines, waste dumps, tailing piles, and mixed ores. An example is the sulfuric acid leaching process for copper. Other leaching methods should be developed for other metals. Ion exchange methods, such as have been applied to the separation of copper and zinc, should be studied and applied to various tailing waters. /) Investigating and developing other new separation tech- niques such as: vacuum distillation which recovers zinc from zinc-lead mixtures (formed by electric furnace treat- ment of the mixed oxides) and lead sulfide from lead ore, followed in this case by electrolysis to lead and sulfur; addition of metallic copper to a complex copper-zinc ore to form copper sulfide with subsequent distillation off of zinc and treatment of the copper sulfide in the conven- tional process to recover the copper. g) Improving roasting techniques, such as nuidized-bed roasting, to get better control of the operation, as is done in the prevention of zinc ferrite formation in the roasting of zinc ores. h) Recovering byproduct metals such as columbium, tanta- lum, and tungsten from tin and other ores. i) Applying best known techniques to the whole metals in- dustry, as for example: use of continuous vertical retorts, which can improve recovery by as much as 10 percent, instead of the horizontal retorts still used by 80 percent of the zinc-smelting industry, and use of better washing and filtering techniques, such as the "reverse leaching" practices followed at the Monsanto plant of the American Zinc Co., where leaching acid is added to excess roaster calcine instead of the reverse, thus preventing much of the present leaching loss. Researching to develop better ways of making more effi- cient alloys with less of scarce additive metals, and to make practicable the substitution of alloys using boron, nitrogen, and other relatively plentiful materials, and of new metals such as titanium for alloys using scarce additive metals. k) Discovering materials, whether metal or not, which can retain strength at very high temperatures and which can substitute for additive metals. Page 15 HYDROCARBON RESOURCES Petroleum and natural gas, because of the tremendous con- sumption of them, are problem materials in that proved reserves represent an insecure supply. They have offered a great challenge to technology in discovery, production, refining, and utilization. This challenge has been very effectively met in the fields of discovery and refining. However, the industries con- cerned have yet to learn how to get much more than a 50-percent recovery from a well and how to use automotive fuels with an efficiency greater than 15 to 25 percent. Only in diesel engines is higher efficiency being achieved and there, too, great improvement is possible. Research is in progress in industry and Government labo- ratories to find ways to recover oil left in old wells, i. e., second- ary recovery. Gas recirculation and unitization made possible present recovery rates. New methods being tested include the use of detergents to release oil from sand, the use of carbon dioxide gas instead of natural gas, and the use of gas at very higher pressures and water at moderate pressures. The petro- leum industry expects, as such methods are perfected, that it will ultimately recover about as much oil from these old wells as it has already taken out of them. Will there be enough hydrocarbons for all needs? There should, because processes are being developed for making hydrocarbon products from shale, coal, lignite, and possibly tar sands. Some of these are currently almost ready for straight- forward commercial development. Hydrocarbon technology permits tremendous interchangeability in making any of the required end-products from any of these sources. Since the first commercial cracking process was carried out in 1912 by Burton, when he heated petroleum fractions in a cylindrical horizontal still at pressures ranging between 60 and 75 pounds per square inch, a tremendous development has oc- curred in the petroleum industry. This evolution has included not only petroleum products but also natural gas. Cracking, which was originally designed to produce more of the fractions of petroleum in the most useful middle range, has now been extended in many directions to effect the production of almost any hydrocarbon from any other hydrocarbon source, and, indeed (by hydrogenation) from carbon itself. Today, using equipment of the most varied types and proc- esses such as catalytic cracking, alkylation, polymerization, hydrogenation, platforming, and isomerizing, the industry can produce on a large scale the unsaturated hydrocarbons called olefins and diolefins (for making synthetic rubbers and plastics); ordinary gasoline and high octane gasoline; high quality lubricating oils; diesel oil. It can also turn out aromatic chemicals to supplement chemical byproducts from the coking of coal which are no longer available in sufficient amount to supply our requirements. It can provide the raw materials for synthetic fibers; the ethylene for the production of synthetic alcohol; the propylene for the production of synthetic glycer- ine; the compressed gaseous fuels for household cooking; the synthesis gases for making many other alcohols, and a host of other products. The interchangeability of carbon and hydrocarbon sources is indicated by the fact that liquid fuels can be made from nat- ural gas as well as from coal. By properly controlling the proc- esses, particular types of liquid fuels can be made from either petroleum, natural gas, or coal, and the proportions of each particular product can be closely regulated. With a proper source of cheap hydrogen the residual oils now used for heat and power production could be converted to high-grade uses such as plastics, fibers, automotive fuels, etc. CATALYTIC CRACKING In most of these processes catalysts are essential. The latter by their presence, not only affect the particular type of product obtained but also make the engineering conditions required for producing the materials much less rigorous. A very significant development has been the fluid catalytic cracking process, in which the catalyst, in the form of a fine powder, is mixed with oil vapor and maintained in a state of turbulent movement so that the whole mass is handled as fluid. After reaction, the catalyst and the vapor pass through a cyclone separator and the catalyst is then recycled, a portion being removed each time for regeneration. Cracking occurs between 850 and 1,000 degrees Fahrenheit. The catalyst is regenerated by means of air, which burns up any carbon deposition and heats the catalyst to a high temperature, thus providing some of the heat for the reaction. The vapors are then fractionally distilled. Since the catalyst- to-oil ratio in many processes may be over 5 to 1 by weight, such a system has unique properties in that it consists chiefly of finely divided solid particles but behaves very much like a liquid. The catalysts used for cracking vary a good deal in composition but, in general, are based on alumina-silica. Pressures slightly above atmospheric 8 to 40 pounds per square inch are used. This principle of using fluidized solids is penetrating a num- ber of industries and will have a marked effect on technological development in such operations as the preparation of powdered fuels from lignite, and in the metallurgical industries. An incidental advantage of the catalytic process is that, in cracking petroleum with a high sulfur content, much of the sulfur is eliminated as hydrogen sulfide. In this way a much purer end-product is obtained and some of the sulfur can be recovered. The average distribution of the sulfur content of a charging stock is as follows: 30 percent is discharged as hydro- gen sulfide, 45 percent goes into the recycle stock, 20 percent is burned out of the catalyst when it is regenerated, and 5 percent remains in the gasoline. Catalytic cracking has the further advantage that in each cracking cycle about 2j/2 times as much material is cracked as in thermocracking. Within the next 25 years it is to be expected that most of the thermal cracking will be replaced by catalytic processes. NONFUEL USES FOR HYDROCARBONS The petroleum and chemical industries together have achieved outstanding triumphs in the nonfuel utilization of hydrocarbons. This use, though small, is extremely important. In 1950, it represented 0.7 percent of total hydrocarbon con- sumption; even at a growth rate during the next 25 years which is expected to multiply by six the total tonnage of nonfuel hydrocarbon products; such consumption will represent only about 2.7 percent of the total hydrocarbon requirements at that time. Nonetheless, the United States will obtain from this source most synthetic rubber, plastics, synthetic fibers, solvents, and other chemicals. It is estimated that such products increase Page 16 the value of the hydrocarbon raw material approximately 12 times; conversion to fuels increases the value of the raw material only iy2 times. Aromatic chemicals from petroleum have become more and more important as the quantity of these obtained as byproducts of coke production has become insufficient for requirements. Because of the tremendous growth in those requirements ex- pected during the next quarter century for the manufacture for plastics and other chemical end products, active investiga- tion is under way to seek the best sources for additional supplies of these materials. Certain of them, especially toluene and the xylenes, are now being supplied in ample quantity by the petroleum industry and can undoubtedly be supplied in the much larger quantities which will be required. However, benzene and phenol may present some difficulties. The naphthenic components of pe- troleum from which benzene is easily made are not too plenti- ful; other methods of producing benzene from petroleum are expensive. Phenol must be synthesized from benzene if no other source is available. However, in coal hydrogenation, benzene is obtained easily and in large proportion, and substantial quantities of phenol are obtained directly without further processing. This fact may make coal hydrogenation for chemicals, with liquid fuels as a byproduct, an economic operation. Such a development is being carried out by Union Carbide and Carbon Chemical Co. Because the tonnage of chemicals required is small relative to liquid fuels needs, this arrangement will not contribute substan- tially to liquid fuels. But it will help solve the aromatic chemicals problem for benzene and phenol, if the answer is not entirely provided by the petroleum industry. Proponents of aromatic chemical production both from coal hydrogenation and from petroleum are confident that this supply problem can be solved, either by using coal hydrogena- tion plus petroleum, or production from petroleum alone. TASKS FOR HYDROCARBON TECHNOLOGY The jobs to be done in hydrocarbon resources are: a) Discovering new reserves. b) Developing economic techniques for recovering the ap- proximately 100 billion barrels of oil left behind in old pools. c) Developing economic methods of coal hvdrop-enation to / 1 O JO bring about the simultaneous production of chemicals (es- pecially benzene and phenol) and liquid fuels. d) Developing techniques for large-scale production of aro- matic chemicals, especially benzene, not only by dehydro- genation of naphthenes but also by cyclizing and otherwise processing straight chain hydrocarbons. e) Completing development of oil production from shale. /) Developing the gas turbine for automotive use to make pos- sible the utilization of more available liquid fuels without anti-knock properties. g) Developing more efficient power production direct from liquid and gaseous fuels through improved engine design. FOREST RESOURCES The annual timber growth in prospect for 1975 would be more than enough to meet the estimated requirements if just any size and quality of wood would suffice. This is not the case. About three-quarters of the total volume of timber products consumed is cut from trees of saw timber size, and the prospec- tive 1975 growth of this kind of material is about 50 percent short of estimated requirements. Under these conditions eco- nomic ways must be found to convert a larger fraction of the wood that is harvested into useful end-products, and to utilize a larger volume of small and low-quality trees. The utility of wood depends on the extent of our knowledge of its physical and chemical properties, aided by an understand- ing of the effect of growing conditions on these properties. Phys- ical properties include strength, structure, specific gravity, dura- bility, heat conductivity, effects of moisture (swelling, shrink- ing ), and others. Knowledge of chemical structure is also highly important but is far from complete, even though standardized tests exist to determine such groups as cellulose, hemicellulose, lignin, etc. To get the best out of our forest resources will require continual coordinated study of growth problems by forest ecol- ogists, physiologists, and biochemists and of problems of utili- zation by physicists, chemists, and engineers. Existing technology and economics of the timber-based in- dustries are such that only about 50 percent of the volume of wood cut down in the forest finds its way into lumber and other semi-finished products. About 25 percent is left in the woods as offal from logging operations, and the other 25 percent comes off as slabs, edgings, sawdust, shavings and other offal of milling operations. About 7 percent of the logging waste and 60 per- cent of the milling waste is used for fuel. The rest is left to rot or is burned to get it out of the way. The important goal for technological development is more complete economic utilization of wood. This goal involves wider adoption of good existing techniques and the development of new ones: i. e., (a) better mechanical harvesting and handling devices; (b) improved physical and chemical processing; (c) better integration of processing operations with harvesting oper- ations, and (d) organizing carefully planned over-all forest management. MECHANICAL HARVESTING AND HANDLING DEVICES The bulldozer and other mechanical road building equip- ment have practically eliminated railroad logging with a con- siderable decrease in capital investment required, thereby increasing the economic possibility of lighter and more frequent cutting. Trucks with heavy pneumatic tires and crawler-type tractors are displacing the horse and the mule. Special equip- ment developed for logging now includes extensible-boom log trailers, and the mounting of cable and winch on the tractor. The power chain saw is cutting labor costs of timber har- vesting. These saws, in various sizes, can cut timber as small as 6 inches and as large as 12 feet in diameter. Tractor arches which facilitate bunching and skidding logs are coming into extensive use. Mobile loaders permit loading of road transport trucks closer to the cutting area in forest operations and make for efficient roadside pickups from partial cutting in second growth operations and on small holdings. Page 17 A beginning has been made in "prelogging" and "relogging" heavy timber stands of the West. These terms refer to removal of substantial quantities of materials previouly left as logging offal either before or after the main operation. The material thus saved is used for pulpwood. In 1950, 50 million board feet was recovered this way in the Douglas fir region. Some of this work is done by bundling the material for bulk loading and using semiportable truck loading units. Bark-removing devices of various kinds are being developed, both portable for use in the forest, and stationary for use at the mill. Portable chippers which can be used on thinnings and tops are in the early stages of development, and the supply of chips for container board manufacture should be augmented from this source. Economies are being effected in lumber handling equipment which uses lift trucks for package-handling of lumber. WOOD PROCESSING, PHYSICAL AND CHEMICAL Much research still is needed in the proper processing of wood, including studies of seasoning, laminated-wood con- struction and the adhesives needed for it. A variety of such adhesives have been developed, but much remains to be done. Plywood is rapidly becoming an essential construction material. Further work is also necessary on wood preservation, coating materials, and fire retarding agents. Wood impregnated with phenolic resins, to increase hardness and decrease moisture absorption has been developed (Impreg, Compreg) and used for special purposes with some success. Wood consists of cellulose, lignin, and extractives. The cellulose in fibrous form is used to produce paper and paper products. Cellulose derivatives are used for rayon and acetate fibers, films, lacquers, plastics, and nitrocellulose explosives. The lignin is currently discharged or burned in the pulp-mill spent liquor. Some chemicals and plastics have been produced from lignin and there are other miscellaneous uses, but it still represents a challenge. The use of wood for pulp and paper ranks second among its industrial uses. It is possible to use practically all American wood species for pulp and paper, thanks to continued research by the pulp and paper industry, by the Forest Products Laboratories, and work such as that of Herty on resinous southern pines. Softwoods are still our chief source of pulp- wood for paper. Hardwood fiber is short compared to that of the softwoods, and this attribute limits its use where great strength is required, but it can be used much more widely than at present. Technology must develop further the tech- niques for using hardwoods for pulp and paper production. Two important additional sources of raw material for paper are wastepaper and logging and milling offal. Further research is needed on improving pulping techniques. The groundwood process gives highest yield, but its pulp has limited uses because of a tendency to become brittle and turn brown after exposure to sunlight. The sulfite process gives less than 50 percent yield but a much stronger paper, useful for fine tissue and wherever strength and brightness is essential, and in combination with groundwood for newsprint. Purified sulfite pulp is used for viscose rayon and cellulose derivatives. The sulfite process is not expanding because of difficulty of disposing of waste sulfite liquor. The sulfate process is expanding. The yield is somewhat higher than in the sulfite process. The pulp is used for wrapping paper, bags, boxboard, and other products in which strength is essential. Sulfate now constitutes 51 percent of total pulp produced. The soda process gives a 40 to 48 percent yield and is used chiefly for book paper. The semi-chemical process gives a 70 to 80 percent yield, and produces mostly corrugated board. Magnesia, soda, and ammonia-base sulfite processes are being developed in which spent liquor can be disposed of entirely and chemicals recovered by evaporation and burning. These processes require further development. HYDROLYSIS OF RESIDUES A market could be found for most of the mill and forest residues in the United States if they could be collected and processed. Hydrolysis of wood to produce sugars is a promising method for utilizing wood residues. Various processes such as the Bergius, the Scholler, and the Madison process have been developed. The latter gives a sugar yield of 45 to 55 percent by weight of the dry, bark-free tree. This yield may be fermented to ethyl alcohol or other products, or may be evaporated to produce molasses for animal feed. In the process, the lignin and certain other fractions may be separated out and used for the production of plastics with a possible saving of phenolic resins. Hydrogenation of lignin residues whether from pulp mill effluent or from the hydrolysis process is also a promising possibility. Neutral oils, cyclic alcohols, phenols, and high boiling tars are obtained, and markets for these may be developed. The integration of various wood processing operations to use timber resources more efficiently is gradually being accom- plished. A primary combination includes a pulpmill and a large saw-mill together, the pulpmill using up the saw-mill waste and other material not suited for lumber manufacture. Processes developed within the past 25 years, such as that for making masonite, in which wood chips are exploded from auto- claves at pressures of 1,000 pounds per square inch and thus shredded very economically and formed into pressed board, now use large quantities of wood but could use saw-mill waste. Processes in which wood in various forms is being converted into board with plastic materials as binders also promise much for integrated operations. Proper forest management is now essential for obtaining timber as a crop in second growth operations. Pruning, thin- ning, and improved cutting are not only possible with the technical equipment available but essential to obtain yield and quality. More intensive management of the more productive areas can produce the required timber on accessible land which is easy to log. Size of timber can be regulated and optimum size cut. Techniques to promote the growth of species best suited for production of desired products can be adopted. Better forest management practices can also reduce the time required to grow high-grade timber; produce wood of highly uniform quality throughout the trees or stands; improve the form of trees by reducing taper and knottiness; produce more clear lumber by pruning butt logs; avoid growth of abnormal wood by removal of leaning trees, and make available wood of high strength by growing special varieties, such as hickory and ash for handles and southern yellow pine and Douglas-fir for structural timbers. Page 18 The Potential Materials The potential materials—those used in small amounts rela- tive to the sources that exist (see p. 3)—are valuable as sub- stitutes for scarce materials, as well as for unique properties. Steel and aluminum have been treated as dominant mate- rials because of their tremendous production, but they also have a great potential for solving many materials problems. Aluminum particularly has been making substantial inroads into fields previously monopolized by other metals, such as cop- per, lead, zinc, and tin. This section reports on the potential of magnesium, titanium, and zirconium, silicon and cement, calcium, sodium, potassium, and synthetics. MAGNESIUM With a practically limitless supply and a weight one-third lighter than aluminum, magnesium is a strong candidate for widespread use. Under the stimulus of the Second World War, its production rose to something over 350 million pounds. After the war, production dropped sharply and is only now being expanded again. Magnesium's use has been somewhat impeded by its tend- ency to corrode easily in a marine atmosphere or under stress. However, it is being used increasingly where it is not under great stress—in aircraft and in truck flooring. It is also replac- ing certain additions of nickel for improving the properties of ferrous castings. In structural shapes of thick cross-section, the corrosion factor is minimized, and magnesium should prove of great value where light weight is vital. It has been used as an engineering material and as an expendable material for photo- graphic flash bulbs, incendiary bombs, and tracer bullets. It is currently being used as a reducing agent in the manufacture of titanium from titanium tetrachloride. The chief source for magnesium is a magnesium compound which is recovered from sea water by precipitating it out with lime. This compound is then converted to magnesium chloride with hydrochloric acid and, in 85 percent concentration, is electrolyzed in a fused bath to give the metallic magnesium. Several electrolytic processes have been used for magnesium production. The Dow process, apparently the most economical so far, uses about 8 to Ql/2 kilowatt-hours per pound of metal. Much more work is needed on magnesium, and because of the large potential supply such effort would appear to be justi- fied. Large-scale use would be expedited by development of a magnesium alloy with better corrosion resistance, or by finding a satisfactory coating or cladding for the metal. Contact with the iron, copper, and aluminum causes serious corrosion of magnesium, most severe in the case of iron and progressively less with the other two metals. The promise of a solution to this problem is not close at hand. TITANIUM AND ZIRCONIUM It took 65 years from the discovery of an economical method of aluminum production to the use of the metal on a wide- spread scale. The same pattern is seen in the history of mag- nesium where 36 years have passed and the product has still found only minor application. In the case of titanium and zir- conium we are in the reverse position of attempting to develop uses for these products before economical methods for their production have been discovered. Demand has been created for defense products. The Atomic Energy Commission uses zirconium because it combines high corrosion resistance with a low neutron cross-section (high permeability to slow neutrons). In the case of titanium, its combination of a strength equal to steel, of weight only two- thirds that of steel, plus corrosion resistance, make it valuable for military aircraft, naval vessels, and other defense equipment. The task for both titanium and zirconium is simultaneously to find and develop economical methods of production, and to work out the properties of the metals and their alloys, so that the materials can come into widespread use. This might elimi- nate the lags experienced in aluminum and magnesium. Titanium is widely available in Florida, New York, Idaho, and to a much greater extent in Canada. What is still needed is a cheap, continuous method of separation of the metal from its ores, ilmenite and rutile. Titanium metal is now produced on a moderate industrial scale by the Kroll process which feeds liquid titanium tetra- chloride at a controlled rate into a reaction vessel containing molten magnesium. Titanium in the form of a crude sponge tends to settle to the bottom as molten magnesium chloride is formed, and the unreacted magnesium floats on top. Vacuum distillation removes magnesium chloride, and the crude sponge titanium metal is refined by melting under a controlled atmos- phere or in vacuum in water-cooled crucibles. At present, this refining process is limited to batches of about 200 pounds, due to evolution of heat from the reaction and combination of titanium with the side walls of the vessel. Other possible extractive processes are hydrogen reduction of the halides or oxide of titanium, or electrolysis of titanium compounds. One company recently reported the development of a continuous Kroll process, and a second company claims a method based on electrolysis of a titanium compound. Should the problem of low-cost production be solved, titanium has properties which would enable it to substitute for many of our problem metals. ZIRCONIUM CAN USE TITANIUM PROCESSES If a cheaper commercial process is developed for titanium, zirconium will also very likely be available at a reasonable price. It is close to titanium in its chemical properties and can be iso- lated by similar methods. Zirconium is available in Florida beach sands and also is found in Australia, Brazil, and India. If new extraction methods can be devised, zirconium could become valuable in several uses other than in atomic energy work. One possible outlet is in the construction of corrosion- resistant equipment, substituting for platinum and tantalum. It may also possibly be used as an alloying element in heat- resistant materials. Zirconium oxide is important as a refrac- tory (20,000 tons produced in 1946) and in vitreous enamel and pottery glazes. Investigations are being made of zirconium boride, which retains strength at about 2,000 degrees Fahren- heit, and may be suitable for gas turbine blades. Page 19 GLASS, CEMENT AND SILICON Silicon makes up 27 percent of the earth's crust. In the form of the silicates it enters into a number of important materials such as cement, glass, ceramics, brick, stone, etc. As silica it provides silica brick which is an important refractory material. As fused quartz it provides equipment for high-temperature chemical reactions and a transparent medium for ultraviolet light lamps. Glass is made from sand, lime, and soda, and, in some cases more recently, from oxides of boron to provide a low coefficient of expansion. Since all of these ingredients are plentiful, glass provides one of the important sources for supplying deficiencies in other materials. It is estimated that United States consumption of glass will double in the next 25 years. The older uses of glass are increas- ing in volume, but the great expansion in glass has been in the production of hollow building blocks, and in fibrous textile materials, and as a reinforcing material for plastics. This latter use is extremely interesting and important, for the use of fiber glass imparts great strength to plastic compositions. New fabri- cating and dyeing methods have produced many uses for fiber glass ranging from fabrics and rugs to packing for life preservers. Strength is developed in the drawing of glass fibers under proper conditions of tension and temperature. Greater strength and toughness can now also be imparted to glass objects by shock-cooling. Cement also is expanding in use, in highway and airport construction, and particularly in housing. Twenty-story build- ings of reinforced concrete are becoming commonplace. New methods of using prestressed concrete are effecting the replace- ment of structures and processing equipment. Silicon itself is the outstanding example of a metal in huge potential supply which so far has been used to a very minor degree. It can be produced in the pure, solid state, but it is too brittle to be formed into shapes or to withstand impact as other metals do. Its attractive properties as a material are that it is 14 percent lighter than aluminum and yet has a high melting point, only slightly lower than that of iron. It is resistant to atmos- pheric corrosion and heat, and is unattacked by salt solutions and many acids. In the form of ferrosilicon, it is used in the steel industry to produce silicon steel sheet and also in one process for producing magnesium. Silicon metal is finding use in coating steel or molybdenum to prevent oxidation. For a coating on steel which does not require the property of ductility, silicon can be applied in a new process which treats the base metal with gaseous mixture of silicon tetrachloride passed over the surface at about 1,750 degrees Fahrenheit. The silicon is deposited in a replacement reaction to release ferrous chloride; the latter in turn is reduced in separate equipment to hydrochloric acid and iron. The acid then combines with ferro- silicon to recycle silicon tetrachloride. The surface of the steel is an alloy with 14 percent silicon, and it is acid-resistant. Alloys of silicon and boron for coating on steel also show great promise for surface protection since they have some ductility. Another important use of silicon is the dramatic improve- ment in oxidation resistance it gives when coated on molyb- denum wires used as resistance windings for high-temperature electric furnaces (above 2,000 degrees Fahrenheit). Ordinar- ily molybdenum-wound furnaces must be operated in an atmosphere of hydrogen to prevent burning out. The new siliconized wires can be burned in air for many hours at 3,800 degrees Fahrenheit, far above the temperature possible for any resistance-wound furnace of conventional design. One of the most remarkable and constructive developments in the use of silicon is the development of the silicones. These products are compounds of silicon, hydrogen, oxygen, and carbon. They range in type from limpid through viscous liquids to rubberlike and finally hard resinous materials. They have the property of remaining stable and maintaining their physical properties over a wide temperature range from far below freez- ing point of water to far above its boiling point. The manufac- ture of these products will create a substantial demand for metallic silicon from which many of them are made. In spite of all these encouraging applications the basic task for technology is to find some way to impart ductility and form- ing ability to metallic silicon. Although work has been done on this problem, it has not so far been successful. Much more re- search will be necessary to bring exploitation of silicon in line with its availability. CALCIUM, SODIUM, POTASSIUM The alkaline earth metal, calcium, and the alkali metals, sodium and potassium, are plentiful and might be formed into useful alloys with reasonable strength and, possibly, with a certain amount of ductility. They have limited use as reducing agents and as reagents in chemical reactions, but their susceptibility to corrosion from the slightest traces of moisture inhibits any wide adoption in industry. URANIUM, THORIUM, PLUTONIUM The chief use outside of military purposes presently visualized for uranium and its nuclear derivative, plutonium, and of thorium and its nuclear derivative, uranium 233, will be for producing energy through release of nuclear energy. Here technology faces an unprecedented challenge, which if met successfully might double or triple the world's reserves of energy. According to a prewar estimate, the minable reserves of these atomic energy materials in the United States were 100 million pounds, and those probably minable were 1 billion pounds. If we assume the complete conversion of these mate- rials into fissionable material—an achievement toward which experimental research has long been directed—the energy pro- ducible from the lower amount alone would be equivalent to all present fuel consumption for a period of 100 years, or all electric power for a period of 1,000 years. Since this estimate was made, additional deposits have been discovered in the United States, Canada, and Africa. Studies also are under way to recover uranium as a byproduct from phosphate processing and from certain shales. An estimate has been made of the cost of uranium from Swedish shale at about 23 dollars per pound. On an energy basis this would be equivalent to coal at 2 cents per ton. Even assuming a cost 10 times as great, it is evident that the cost of the fuel for energy production from this source would be negligible. Page 20 The chief problems in developing nuclear energy for power are first, to develop a "breeder" reactor, i. e., one which pro- duces fissionable material at a rate at least equal to its con- sumption; and second, to produce an efficient reactor at low cost. As to the first problem, an experimental power breeder has been designed to produce plutonium from uranium and is being tested at Arco, Idaho. Various other designs have been studied. The technical consensus appears to be that breeder reactors will ultimately be successful. The problem of designing a reactor to produce power at costs competitive with conventional systems is being studied currently by industrial and utility groups associated with the Atomic Energy Commission. Such a reactor substitutes for the conventional furnace in a thermal power plant, but because of the nature of the reaction and the fact that, within its shields, the reactor and all its materials become dangerously radioactive, all processes and operations are difficult and expensive. An important economic advantage of atomic power is that, not only is nuclear fuel cost relative to energy produced almost negligible, but the bulk of fuel required is small—an important consideration for areas remote from conventional fuel sources. These two factors open up the possibility of providing energy for developing and processing resources in areas now considered too inaccessible to be economic. Mining and beneficiating, and possibly even smelting, operations for valuable materials in such areas, would thus become practicable. The whole field of nuclear energy is in its infancy. A tremen- dous amount of research is under way, but much more is neces- sary before any definitive picture for the future can be drawn. Even from our present knowledge, it becomes evident that atomic energy will some day become a very important factor in the economy of the world. During the next 25 years its total effect on the energy picture may be limited by military use. POLYMERIC MATERIALS Polymeric materials are materials of high molecular weight. They are made largely from carbon, hydrogen, oxygen, chlo- rine, and to a minor degree from silicon and fluorine. Raw material supply presently comes chiefly from the chemical byproducts of coke production and from petroleum and natural gas. Coke, for example, can be converted into graphite, coal tar into dyes and drugs, natural gas into rubber and fibers. In the organic field, research is in progress for the production of synthetic mica and synthetic asbestos. It has been successful in the production of synthetic rubies and sapphires. The development of various high temperature resistant ceramic substances such as metallic carbides, nitrides, and borides is in active progress and may be important in substitution for special jet engine alloys. Various forms of aluminum oxide, which may have possibilities as substitutes for tungsten, are being tested. In organic compounds the chemist can tailor molecules to produce many of the properties he desires. Scientists are learn- ing more and more how to prophesy the properties of new compounds and, consequently, what to expect from them, since performance depends on the properties of materials. They already know many of the kinds of structures in com- pounds which will produce, in addition to rubber, fibers, and dyes, such materials as perfumes, soaplike detergents, antibiot- ics, hormones, antiknock fuels, lubricants, plastics of various de- grees of hardness, coating materials, and ion exchange resins. This ability that man has developed to alter the physical and chemical structure of matter has already influenced our econ- omy to a great extent. Synthetic rubber could, if necessary, meet the greater part of our rubber requirements, and synthetic fibers are making an important contribution to our fiber needs. The synthesis of materials shows promise of becoming an im- portant source of substitution which is perhaps the most power- ful and flexible tool of technology for solving the materials problems we face. Because of the wide range of properties possible, by proper choice and combination of materials a great volume of substi- tution is becoming possible for such materials as copper, lead, zinc, tin, wood, leather, steel, glass, ceramics, drying oils, and vegetable adhesives. Much of this substitution will be carried out with plastics and where great strength is required, the plas- tics will be reinforced with fiberglass. The polymeric materials made from silicon and fluorine have recently found important use. They possess remarkable prop- erties. The silicones, which maintain their stability over wide temperature ranges below and above normal, are used in lubri- cants, parting compounds, and rubbers. The fluoropolymers are characterized by their inertness to chemical attack and their resistance to high temperatures. These are the materials that are helping supplement asbestos and mica. Large increased supplies of polymeric materials are certain to be required over the next 25 years. The coke industry cannot be expected to supply very much of this increased demand. Some additional supplies may become available from coal hydrogenation operations, but substantial reliance must be placed on the petroleum industry for the bulk of additional requirements. Substantial expansion of facilities will be neces- sary to meet the demand. Scarce Undeveloped Materials Most of the elements which make up the earth's crust are present in exceedingly minute quantities. A few have been developed commercially. Certain ones exist only as curiosities, since they are expensive to isolate, and only some of their prop- erties are known. Because of their relative scarcity, any sub- stantial commercial development of new uses for these sub- stances soon would tend to increase demand beyond supply. Then new recovery methods would be needed to obtain greater quantities. It is obvious therefore that they must be used for special and relatively irreplaceable uses. Page 21 ELEMENTS FOR ELECTRICAL USE Some undeveloped elements have electrical properties which may be developed into important future uses. The phenomenon of thermoelectricity, or the production of an electric potential upon heating, combined with the property of maintaining conductivity at a high temperature, provides a material valu- able in transforming heat directly to electricity. Such a com- bination of properties in these undeveloped materials could be of. great importance. The property of photoconductance, involving a change in electrical conductivity on exposure to light, is also important. Selenium has such a property, and many uses have been found for it. Though production in the United States and Canada is 1 million pounds per year, present demand is in excess of this amount. Germanium's special prop- erties as a semiconductor are being exploited, and the demand exceeds the supply. Tellurium is a minor element which has been a drug on the market as it is recovered from anode sludge in the electrolytic refining of copper. However, tellurium has desirable prop- erties as a semiconductor, and within 10 years its requirement in the electrical field may be large. It is estimated that the United States and Canada could produce about 100,000 pounds annually. Thallium is another minor metal which could be obtained as a byproduct from ores, in this instance, old cyanide tailings. Thallium compounds could be used in photosensitive cells; as semiconductors capable of changing their electrical resist- ance with intensity of radiation; also in making phosphors. Thallium has some interesting alloys. When added to mercury, the freezing point is lowered from 38 degrees below zero to 76 degrees below zero Fahrenheit. While no bright future can be painted for thallium, the supply situation and properties of the metal favor a moderate increase in its use in the years ahead. SPECIAL METALS Rhenium has almost the highest melting point for metals, 5,740 degrees Fahrenheit, and nearly the highest specific gravity, 21.04, but its current price of $1.75 per gram, and its dependence upon byproduct recovery from molybdenum concentrates derived from copper mines, have not encouraged wide use. During the war, Germany used it as a substitute for platinum in penpoint alloys containing up to 90 percent rhenium. This metal can replace tungsten as well as the plat- inum group of metals. Certainly the next 25 years will see a change in the rhenium market. Hafnium is found associated with the ores of zirconium. It occurs in amounts of about 2 to 5 percent in these ores and, if zirconium is produced in quantities, hafnium should be avail- able potentially in tons rather than in pounds or grams. Haf- nium is almost as dense as lead, it is corrosion-resistant, and has a high electron emission. The mixed carbides of hafnium and tantalum are reported to have the highest melting point of any substance. It is thus a potentially important and unusual metal and will find uses when the price becomes lower and it is studied further. The development of indium from a metal of great rarity to one of fair abundance and then ample supply has all occurred in less than two decades. It is a byproduct metal from electro- lytic zinc producers and to some extent from the cadmium in- dustry. The outstanding properties of indium are its softness and smeariness, adherence to other materials, and low melting point (315 degrees Fahrenheit). It has been used as a solid lubricant coated over deep drawing dies with an increase of 50 percent life claimed. Applications as a gasket or seal offer pos- sibilities and its adherence to glass or ceramics is a unique char- acteristic. A new field of usefulness that is in the early stage of research is the application of indium oxide, sulfides, and other compounds in the electrical industry. The position of indium is one of a present abundant supply, of potentially rather good resources for a byproduct metal used in pounds rather than in tons, and with sufficient known and unexplored properties to indicate a gradually expanded growth in the next 25 years. THE RARE-EARTH GROUP Although called rare, and certainly not well known, the rare- earth group as a whole is fairly common and widely distributed among minerals in the earth's crust. In fact, as a group, these elements are higher in abundance than either copper or nickel. Up to the present the chief source for the entire group and for thorium has been monazite. The current demand for tho- rium, and consequent effort to achieve independence in the rare-earth supply situation, has resulted in discoveries of size- able monazite deposits in Idaho and of large bastnasite deposits in New Mexico and California. The deposits of bastnasite, a fluorcarbonate of the rare earths, could supply all the rare- earth elements at our present rate of requirement for years to come. Unfortunately bastnasite contains practically no thorium. The lag in the use of the rare earths has been due to the difficulty of separating them. Methods of multiple-fractional- crystallization of their salts were used, which required hundreds of recrystallizations. New separation techniques by chromatog- raphy using adsorptive alumina have been successful in obtain- ing larger quantities of the rare earths. More recently, ion ex- change resins offer promise for improving the separation of these metals. The method uses an 8-foot column of synthetic resin ion-exchange material through which the concentrated solution of rare earths are passed. The rare earth ions, which are differentially absorbed by the resin, are eluted with buffered citric acid solution. Spectroscopically pure samples of many rare earths were thus obtained for the first time. Although thorium and cerium were originally used mostly for making gas mantles, this use has practically disappeared today. Most of the cerium now is sold as mischmetal which has a composition of about the ratio of the rare earths existing in the mineral, or about 50 percent cerium, 46.5 percent lanthanum and other members of the subgroup, 2 percent yttrium and members of its subgroup, and not 1.5 percent of impurities such as iron, silicon, and carbon. Mischmetal increases the strength of magnesium at moderately elevated temperatures. It improves the forgeability of stainless steels. It may play an important role in decreasing the brittleness of steel at subzero temperatures. Cerium is used in sparking flints, tracer bullets, star shells, and for producing white lights in carbon arcs. Certain of the more unusual rare earths have special uses. Neodymium gives an amethyst color to glass. Samarium and Page 22 europium are used as activators for infrared phosphors (ma- terials which absorb light and glow in the dark). Lanthanum is used for producing glass lenses with a high refractive index and low dispersion suitable for aerial cameras. Gadolinium has the highest neutron-absorption cross-section of any element, about 10 times that of cadmium. This may make it useful in nuclear applications. Many of these uses of the rare earths are unique and cannot be easily replaced. Research is also currently being done on alloying some of the rare earths with magnesium or steel in order to improve the physical properties of these metals. For all these reasons it may be expected that the rare-earth group will be used in increasing amounts. There are many others of the scarce undeveloped elements. There are also isotopes of nearly all the elements, the properties of which we are just beginning to comprehend. Developments in science and technology together will, in the future, undoubt- edly make many of these substances useful. OCEAN RESOURCES The sea, besides being one of the two major sources of the world's food supply, contains vast quantities of materials which are recoverable for man's use. Some of these materials are being recovered already on a commercial basis—magnesium, bro- mine, salt, seaweed products, fish oils. Many other materials are recoverable from sea water, although technologies have not yet pulled down costs to commercial levels. Covering 71 percent of the earth's surface, the sea is a great reservoir of minerals. In its 300 million cubic miles of water, the sea probably contains, in solution, all the elements found in the earth's crust, although many of them have not yet been detected in measurable quantities. Those so far not de- tected include the more insoluble elements, and the ones hard to detect by analysis; but continually additional elements are being discovered in sea water. A cubic mile of sea water, weighing about 4,000 million tons, contains 166 million tons of dissolved salts. The water itself, as distinguished from the elements contained in the salts, is a po- tentially useful resource. The water may be obtained by either of two processes, demineralization or distillation. Either process would be economically feasible, in competition with present water supplies, only if the salts were recovered as byproducts. In the recovery of minerals from sea water, some significant technological advances have been made, notably the processes of ion exchange and vapor-compression distillation. Such ma- terials as magnesium, potassium, sodium, and chlorine have been successfully extracted by ion exchange. Various processes have been developed for the recovery of different minerals. Other ocean resources besides sea water are marine life and the ocean bottom, including beaches. Marine plants range from submicroscopic to giant size. Animal life in the sea consists of an enormous variety of kinds and sizes of fish, shellfish, mam- mals, and other organisms. The plants and animals extract minerals from sea water, and sometimes the concentration in the organism is many thousand times greater than that of the same mineral in the water. A substantial seaweed industry exists, engaged mostly in the manufacture of extractives, such as agar, carrageen, and algin, for use in the pharmaceutical, food, and other industries. It is believed that the seaweed indus- try may expand considerably in the next 25 years as a result of advances in technology. As byproducts of the fish industry, we obtain fish oils, used as drying oils in paints and varnishes to replace linseed oil, and fish-liver oils, which have high concentrations of Vitamins A and D. - About half the ocean bottom is covered with a thick sedi- ment of red clay, in which are found extensive deposits of iron-bearing minerals, manganese ores, phosphorite, barite, glauconite, cassiterite, and other minerals. At depths greater than about 3,000 feet, manganese and iron oxides are found in red clay in the form of nodules, which are abundant, and some of which weigh several hundred pounds. Because of the depth at which they are found, these nodules are not likely to be a source of manganese or iron within the next 25 years, but the extent and richness of the deposits could be determined. Tin is already being dredged from shallow water in the Netherlands Indies. A tiny sea-organism, the tunicate, extracts vanadium from the minute concentration—three parts in 100 million—in which it exists in the sea. Oakland Bay is floored knee-deep with this deposit. Finally, along continental shelves petroleum has been discovered. Man has tapped very little of the ocean resources so far, chiefly for the reason that exploitation of land resources has been more economic. As the needs for materials become more urgent in the years ahead, and as the technology of exploration and development of ocean resources improves, man may turn increasingly to the sea. References Adams, B. A., and Holmes, E. L. "Absorptive Properties of Synthetic Resins." Society of Chemical Industries Journal, January 11, 1935. Arbiter, N., and Kellogg, H. H. "What the Future Holds for Hydro- metallurgy." Engineer and Mining Journal, July 1951. Bush, Vannevar. Science, the Endless Frontier. Washington, D. C, Government Printing Office, 1945. Gonser, B. W. Formation of Refractory Coatings by Vapor-Deposition Methods. Santa Monica, Calif., Rand Corp., 1949. Gross, P., and Levi, D. L. Production and Purification of Metals by Intermediate Formation for Their Halide Vapours. New York. Twelfth International Congress of Pure and Applied Chemistry, 1951. "Jasper Soon to Yield High-Grade Iron Ore." Business Week, November 24, 1951. Kaufmann, A. R., Gordon, Paul, and Little, D. W. "The Metallurgy of Beryllium." Transactions of the American Society for Metals. Cleveland, Ohio. The Society, 1950. Knowlton, H. B. "ISTC Division Reports on Boron Steels." Society of American Engineers Journal, August 1951. Luzzato, B. A. "Reflections on the Electrolytic Cell Used in the Pro- duction of Aluminum." Journal of Metals, January 1950. Partridge M,. W., and Chilton, J. "Reversed Phase Chromatography." Nature, January 1951. "Pig Iron Must Shoulder Scrap Load." Steel, November 12, 1951. Pigott, R. J. S., and Ambrose, H. S. "Petroleum Lubricants." Progress in Petroleum Technology: Symposium of American Chemical Society. Washington, D. C. The Society, September 1951. Post, C. B., Schoffstall, D. G., and Beaver, H. O. "Rare Earths Im- prove Forgeability of Stainless Steel." Iron Age, December 1951. Rabinowitch, E. I. "Photosynthesis." Scientific Monthly, August 1948. St. Clair, H. W., and Blue, D. D. "Recovery of Aluminum from Crude Aluminum-Silicon Alloy by Extraction with Molten Zinc." Bureau of Mines R. I. 4535. Washington, D. C. Government Printing Office, 1949. Page 23 Schurr, S. H., and Marschak, J. Economic Aspects of Atomic Power. Princeton. Princeton University Press, 1950. Schwarz, M., Cornefield, J., and Burk, D. "The Efficient Transfor- mation of Light into Chemical Energy in Photosynthesis." The Scientific Monthly, October 1951. Sims, G. E., and Toy,, F. L. "Operation of a Basic-lined Surface-blown Hearth for Steel Production." Journal of Metals, April 1950. Smatko, J. S. Experiments to Produce Ductile Silicon. Field Infor- mation Agency Technical Final Report No. 789. Office of Military Government for Germany (U. S.), April 3, 1946. Telkes, M. "Future Uses of Solar Energy." Bulletin of the Atomic Scientists, August 1951. Wright, E. C. "More Manganese from American Ores and Slags." Metal Progress, March 1951. References Elsewhere in This Report This volume: Coal Products and Chemicals. Forecasts for Petroleum Chemicals. Improved Exploration for Minerals. Oil and Gas as Industrial Raw Materials. The Technology of Forest Products. The Technology of Iron and Steel. The Technology of Manganese. The Technology of Tin. The Technology of Titanium. The Technology of Uncommon Metals. The Technology of Zirconium. Vol. II: The Outlook for Key Commodities. The Additive Metals. Aluminum. Cadmium. Chemicals. Copper. Reserves and Potential Resources. Fluorspar. Iron and Steel. Lead. Magnesium. Manganese. Special Strategic Materials. Projection of 1975 Materials Demand. Sulfur. Tin. Zinc. Zirconium. Vol. Ill: The Outlook for Energy Sources. Coal. Electric Energy. Vol. V: Selected Reports to the Commission. Domestic Timber Resources. The Free World's Forest Resources. Government Exploration for Minerals. Incentives for Minerals Industries. United States Fertilizer Resources. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Brison, R. J., and Carter, J. N. "Role of Technology in the Future of Potash Supplies." Case, S. L. "Role of Technology in the Future of Scrap as a Raw Material in Steelrnaking." Craighead, C. M. "Role of Technology in the Future of Aluminum." Dahle, F. B. "Waste Suppression—Role of Technology in the Fu- ture of Metallic Production Wastes." DuMont, C. S. "The Role of Technology in the Future of Chromium." Engdahl, R. B. "Role of Technology in the Future of Thermal Generation of Electricity." Foster, J. F. "Role of Technology in the Future Supply of Natural Gas." Hall, A. M. "Role of Technology in the Future of Nickel." Hodge, W. and Thompson, A. J. "Role of Technology in the Future of Copper.' Holmes, R. E. "Role of Technology in the Future of Fluorspar." Kerr, S. L. "Role of Technology' in the Future of Hydroelectric Power." Kura, J. G. "Waste Suppression—Nonferrous Scrap." Landry, B. A., and Dayton, R. W. "Role of Technology in the Future of Unconventional Sources of Energy." Lyons, C. J., and Nelson, H. W. "Role of Technology in the Future of Coal." Moore, D. D. "Role of Technology in the Future of Petroleum.' Munger, H. P. "Waste Suppression—Waste Going Into the Atmosphere." Nelson, H. W. "Role of Technology in the Future of Cokinc Coals." Parke, R. M. "Role of Technology in the Future of Molybdenum.' . "Role of Technology in the Future of Tungsten." Perry, P. G. "Role of Technology in the Future of Electrica Energy Transmission." Pray, H. A., and Fink, F. W. "Role of Technology in the Futun of Corrosion Control." Renken, H. C. "Waste Suppression—Role of Technology in th< Future of Smelting and Refined Wastes." Richardson, A. C. "Waste Suppression—Role of Technology ii Increasing Mineral Supplies by Suppression of Waste ir Beneficiation." Sherman, R. A. "Notes on Over-All Energy Picture." Simmons, W. F. "Role of Technology in the Future of Cobalt." . "Role of Technology in the Future of Columbium." , and Gonser, B. W. "Role of Technology in the Future o Vanadium." Snavely, C. A. "Waste Suppression—Waste Going Into Streams.' Stephens, F. M. "Role of Technology in the Future of Lead." . "Role of Technology in the Future of Zinc." Sullivan, J. D. "Role of Technology in the Future of Magnesium.' , and Dehlinger, P. "Role of Technology in the Develop ment of Discovery Techniques." Swager, W. L. "Role of Technology in the Future of Sulfur Sulfides, and Sulfuric Acid." Page 24 The Promise of Technology Chapter 2 Improved Exploration for Minerals* The technology of mineral exploration has lagged because comparatively little attention has been given to research and development in this field. The brilliant success of military detec- tion equipment and of geophysical techniques in petroleum exploration is largely a direct result of the millions of dollars invested in research and development. Although the problems here are much more difncuh and complex, there is every reason to believe that an equivalent effort directed toward developing techniques for mineral exploration would yield commensurate results. The underlying reason why this effort has not been made to date is clearly the lack of an adequate economic incentive on the part of any single group to undertake such a program. Furthermore, the situation has not been too critical for the mining industry because most mineral reserves have been rea- sonably abundant until recently. However, the shortage has become increasingly significant over the past few decades. In the United States this change has been due in part to an increased use of minerals in order to maintain our rising standards of living and in part to our increased use of mechani- zation in all aspects of American culture. It has been acceler- ated also by the metal requirements of the last two great wars and is currently further accelerated by the present world situ- ation. The shortages are now commonly known. The many studies by the National Security Resources Board, by the *This report to the Commission from a panel of the National Research Council is in response to a request to Dr. R. C. Gibbs, Chairman of the Council's Division of Physical Sciences, for an advisory memorandum on the problem of discovering hidden mineral deposits. The memorandum presents conclusions reached at meetings in Washington over a period of 3 days attended by an invited panel composed of the following: Dr. John M. Adkins, chairman; Dr. Louis H. Ahrens, Dr. Ernst Cloos, Dr. Herbert E. Hawkes, Dr. Ellis A. Johnson, Dr. George C. Kennedy, Dr. Arthur C. Lundahl, Dr. Judson Mead, and Dr. Morris M. Slotnick. This procedure had the advantage of bringing together at one time rep- resentatives of geology, physics, geochemistry, and geophysics for a co- ordinated attack on the problem, and of giving to the Commission a consensus of representative scientific opinion. The procedure of panel discussion could not, however, lead to a detailed and exhaustive report. This presentation is therefore limited to some of the more salient features and aspects of the subject; a number of procedures are suggested, though they have not been arranged in any rigid pattern of comparative Munitions Board, as well as by other Government agencies, private industry, and individuals, including scientists inter- ested in the conservation of our resources, have pointed out many times the growing critical nature of the problem. For the free world this shortage had led in September 1951 to an allocation of scarce metals to the individual countries, includ- ing the United States Despite the growing shortage, the development of mineral resources has not kept pace with developments in other fields such as agriculture, forestry, and fuels, where the application of science and technology has been much more extensively practiced. Furthermore, in several critical metals used exten- sively in this country, the United States has contributed a disturbingly small percentage of the total world production. Of the general tools available to search for mineral deposits, geophysical methods as presently developed are so expensive as to be considered uneconomical and their use in the United States has been very limited. Exploration techniques based on new developments in geochemistry and aerial photography are less well known and accordingly have been used relatively little. Furthermore, it must be noted that in many States exploration is indirectly discouraged by tax policies which penalize the mining industry for increasing its reserves. Generally, it is not to the advantage of a mining enterprise to develop ore very far in advance of operation. It is the opinion of the National Research Council panel which made this report: That abundant reserves of undiscovered minerals lie within economically accessible depths below the surface; That with adequate research and development, explora- tion techniques capable of locating a large part of these reserves can be made available. Following are some rapidly assembled examples and tech- nical discussions of suggested lines of attack on the exploration problem. The methods of implementing or encouraging re- search and development in the field of mineral exploration are outside the scope of this report. However, it is generally agreed that the best comprehensive solution would be one by which the mining companies would find it economically advantageous to initiate and maintain an aggressive research program. Page 25 GEOCHEMICAL INVESTIGATIONS Many economic deposits are local concentrations of minerals originally precipitated from solutions moving through narrow openings in rock. Temperature, pressure, and chemistry of ore solutions undoubtedly range widely within a given vein during the formation of an ore body. If it were now possible to detect such primary variations in the conditions of ore formation with- in a mine, our chances of finding new ore deposits and of follow- ing the extensions of known ones would be sharply raised. Some work has been done on these problems within recent years. However, a great deal of work must still be done. It seems likely that if successful criteria of temperature, pres- sure, and composition differences in the origin of ore minerals were developed we should have a keen prospecting tool, and the rate of discovery of new reserves might be materially in- creased. Three individual programs of investigation covering related phases of this topic are envisioned with the hope that one or more of these might prove profitable. These are: Temperature and Pressure. Several methods of deter- mining the temperature and pressure of solutions at the time of ore deposition have been suggested and some work has been done, but a great deal more remains to be done. These methods include studies of: Solution-filled cavities in crystals (i. e., vacuoles), Perfection of crystal lattice, abundance of lineage structure in crystals as a criterion of temperature of origin, and Thermo-electrical property variation as a criterion of temperature of origin. Chemistry of Mineral Composition. The composition of minerals reflects variations in the composition of the solu- tions from which they formed. Little is known to date of the significance or extent of compositional variation in isomor- phous mineral series within a vein. Furthermore, the variation of minor constituents in minerals within a given framework might prove of value in the search for loci of mineralization and new ore deposits. Wall Rock Alteration. Study of wall rock alteration and the significance of alteration suites has been going on for some time but has recently been intensified. This work shows promise and should continue at an accelerated rate. The use of recently developed methods of rapid analysis of rocks, soils, vegetation, and water for traces of metals has re- ceived an increasing amount of attention in this country within the last 5 years. Although these methods are very new and their ultimate potentialities not fully understood, the data of trace analysis surveys already has guided exploration to the discovery of new ore in at least three areas of the United States. This approach to prospecting makes use of the fact that, in many if not most mineralized areas, detectable traces of the ore metals extend outward a considerable distance from the highgrade core of commercial ore. Systematic sampling of sur- face material in geologically promising areas may uncover such patterns of trace metals and guide exploration to the site of mineralization even though the ore itself may be hidden from view by a cover of surface material or overlying rock. The basic tools that make work of this kind possible are sensitive, rapid, economical methods of trace analysis that have become available only in recent years. The most useful of these new methods are: colorimetric chemical methods, spectro- chemical methods, radiometric methods. Other techniques such as polarographic, isotope dilution, and X-ray fluorescence appear at best to have only limited application. Colorimetric methods provide a means of estimating small quantities of elements by forming strongly colored compounds of the element with various organic reagents. Under proper working conditions, the depth or hue of the color is a quantita- tive measure of the amount of the element extracted from the sample. Colorimetric tests suitable for mineral exploration work have been or are being developed by the United States Geo- logical Survey for copper, zinc, lead, cobalt, nickel, tungsten, molybdenum, silver, arsenic, antimony, selenium, germanium, and uranium. Spectrochemical methods have been used successfully in ex- ploration in Scandinavia and the Soviet Union and numerous discoveries have been reported as a result of this work. At last report in 1947, the Soviet Ministry of Geology had 10 mobile spectrochemical units in the field. In this country, work is just starting on the application of spectrochemical techniques in prospecting. When suitable mobile equipment has been devel- oped, it is anticipated that rapid tests for lead, copper, silver, gallium, rare earths, vanadium, nickel, cobalt, lithium, fluorine, and barium plus several others of less economic importance will be available. Developmental work is now under way in the Geological Survey to provide spectrographic equipment suitable for this work. Radiometric methods have come into prominence recently as a field technique for finding and delineating deposits of radioactive ores. Research on new or improved radiometric field equipment is currently being pushed both in commercial and government laboratories. The trace analysis methods now in use are new and in many cases fall considerably short of providing ideal tools for the field man. Continued intensive research is needed both to im- prove current techniques and to extend the field to other elements. Analysis of water for critical elements could be a powerful tool for exploration. However, at present, suitable tests for only zinc, copper, and cobalt are available. Procedures for analyzing water for additional critical elements are needed. FIELD APPLICATIONS NEEDED FOR GEOCHEMICAL GUIDES Mineral exploration by geochemical methods involves the systematic testing of a large number of samples, in an effort to find and map patterns of dispersed elements related in some way to the commercial concentrations of ore minerals. Inas- much as every mineralized area has its own peculiarities that differ from any other area, it has become standard practice to run trial surveys in the vicinity of known ore, for the sake of calibrating the methods before undertaking exploration sur- veys in unknown areas. Although this has been reasonably successful on an empirical basis, it leaves unexplained a large host of basic questions regarding how the patterns of dispersed elements are formed. The full potentialities of the techniques cannot be exploited until we understand more thoroughly the Page 26 geologic processes controlling the migration of the elements in question. Primary halos are the patterns of dispersed metals in the rock surrounding and overlying the ore bodies. At the present time, this phenomenon is explained as a reflection of zones to which the ore-forming solutions had access but where conditions were not favorable for metal deposition on a large scale. High caliber research is required to explore the mode of formation of primary halos to work out the mechanics of transport of ore solutions through the rock and to explore the mineralogy of the dispersed elements in the halos. Secondary halos are the patterns of dispersed metals in soils, vegetation, stream sediment, water and other surface material resulting from processes of weathering at the present surface. Although empirical data are accumulating as to the normal characteristics of these patterns, actually very little is known about the chemical, mineralogical, and botanical principles in- volved in this process of dispersion. Here again, specialized research of the highest quality is needed to provide the answers to the problems. Geochemical provinces are large areas where certain ele- ments occur in relatively large proportions both as commercial deposits of ore and as disseminations throughout the country rocks. Identification of a geochemical province of a certain element by analysis of the common rocks would provide a basis for more intensive exploration within the province for pre- viously unsuspected ores. At present this concept is still in a highly controversial stage and research is needed first to ex- plore the characteristics of geochemical provinces, and then to determine whether or not the concept will provide a useful exploration guide. Although systematic trace analysis as an exploration method has come into use only within the last few years, it offers promise of accomplishment far in excess of what has yet been realized. In the course of the preliminary development of the methods, the field for productive research has widened rather than narrowed, as several new problems and channels of approach have been revealed for every one that has been ex- plored. There is every reason to believe that an intensification of research in this field would pay off manyfold in increasing the discovery rate of our mineral resources. AERIAL PHOTOGRAPHY Aerial photography represents a significant tool which can be used widely, quickly, and relatively inexpensively in any programs of mineral discovery. The following examples are only a few of the uses thus far suggested. Two examples in which aerial photography is used indirectly are: 1. To complete the topographic mapping of the United States and other world areas as quickly as possible by photo- grammetric means. Topographic maps are needed in planning the systematic search for minerals, the preparation of geologic maps and the efficient exploitation of all significant mineral discoveries. Photogrammetry, the science of making maps and extracting quantitative information from photography, offers the cheapest and fastest means yet devised for making topographic maps. 2. To prepare aerial photographic mosaics of potential minerals discovery areas as a basis for many types of annotations or transparent overlays bearing geochemical, geological, geophysical, geobotanical and other earth science field data which may offer "convergence of evidence" as to place and type of mineral existence. Among the suggestions for direct use of aerial photography in mineral discovery are these: To test color photography in regional geobotanical study as a guide to the existence of specific elements or minerals on the basis of variations in vegetation color or type. Further research is needed to experiment with new combinations of films, filters, flying heights, and seasons to determine ranges of optimum conditions for indication of mineral existence from these surface evidences. The high mineral content of plants in mineral bear- ing regions may produce differences in light reflectance from the vegetation which are discernible on aerial photographs. Some plants are fond of particular elements and thereby serve as indicators. Examples are Polycarpaea spirostylis used in Australia as an indicator of copper, Amorpha canescens, asso- ciated with galena deposits in Missouri, and the classical zinc pansy, Viola calaminaria et zinci, found extensively on waste ore dumps of zinc mines in Central Europe. To continue tests of color photography in regional geological studies to infer the existence of specific elements or minerals on the basis of changes in the color or tone of surface rock or soil as affected by differential weathering, alteration patterns, zones of mineralization, etc. Alteration pattern boundaries are some- times worked out only with great difficulty from ground study alone. In favorable cases the same boundaries may be worked out more rapidly on a regional scale from aerial photo interpretation. To use experimental combinations of colored or dichroic stereoscope filters in laboratory study of colored aerial photos to suppress unwanted ground data and intensify sought-for diagnostic color indicators. To extend, generalize, and disseminate the general prin- ciples of "photogeology." The geomorphic or land form in- terpretations made through a three dimensional study of aerial photos is valuable in arriving at structural conclusions that might not otherwise be determined. Photogeology itself is the most economic method of rapid geological reconnaissance yet developed. By this technique outstanding structural anoma- lies can be located quickly and evaluation of these can proceed without the delay occasioned by detailed exploration. The interpretation of aerial photographs considers not only land forms and obvious geologic units but also the effects caused by variations in reflecting power of soils and rocks of exactly similar colors, the habit and density of vegetation, drainage patterns, the distribution and pattern of cultivated lands, rail- roads, quarries, reservoirs, and other cultural features. The application of photogeology to exploration work should be con- sidered as an aid rather than an end. To precede every major mineral search with detailed aerial photographic study to locate critical or key zones and thereby save geological effort otherwise wasted in general reconnaissance. Page 27 To experiment with airborne infrared night photography where possible to determine the feasibility of detecting surficial mineral deposits by their characteristic photo-luminescence. To compile photogeologic information as tables, cross-in- dexed charts, and annotated photographs for use as diagnostic "keys" to assist other photogeologists in deciphering analogous areas or other earth features under study. To extend the use of the "convergence of evidence" prin- ciple by securing airborne magnetic or other instrumentation records simultaneously with black and white or colored pho- tography over potentially fruitful mineralized areas. The most spectacular recent example of the successful application of this principle in a limited sense is the discovery in 1947 of what appears to be the world's greatest iron ore deposit, Cerro Bolivar, in Venezuela, by the U. S. Steel Corporation. Of out- standing importance to the Nation's mineral program is the fact that this huge deposit was discovered just in the nick of time. The U. S. Steel Corporation was just about to spend millions of dollars in a taconite (low-grade ore containing 25 to 35 percent iron) program which would have been much less fruitful. The diamond core drill is an indispensable tool in mineral exploration. Probably more money is spent by the industry on diamond drilling than on all other methods of surface explora- tion put together. However, except for the use of gasoline power in place of steam, the diamond drill of today is not substantially different from its prototype of 50 years ago. Obviously any improvements in drilling techniques that could reduce costs or increase core recovery even slightly would make a large difference in the effectiveness and economy of exploration. One or two of the more progressive manufacturers of drilling equipment have research programs in progress. These pro- grams are small because they must be financed out of current profits, which vary greatly from year to year. Nothing remotely resembling the effort put into drilling technology by the oil industry has gone into drilling equipment suitable for mineral exploration. A considerable advance might be possible without any addi- tional developmental work, if the equipment, now in common use in the oil industry, were canvassed to find ideas and rigs that could be applied directly to mineral exploration. For in- stance, the use of drilling muds might cut down water loss and improve sludge recovery. The use of tall, portable towers and derricks would speed up drilling operations and the moving of drill sites. Truck- or tractor-mounted rigs might provide greater speed and economy. Some problems peculiar to mineral exploration might deserve special developmental work, such as methods of improving core recovery in soft ground. There is need for improvements in cements and cementing techniques, techniques and equipment for surveying slim holes, and techniques for directional drilling. Drilling is an engineering rather than a scientific problem. However, it is such a vital part of exploration technology that it cannot very well be neglected in a consideration of how to increase the effectiveness of mineral exploration. GEOPHYSICAL PROSPECTING The power of geophysics as a tool in mineral exploration stems from the fact that various physical phenomena associated with many mineral deposits can be detected at a substantial dis- tance from the deposits. By suitable physical measurements, evidence for the existence of ore buried beneath a surface cover of soil or overlying rock may under favorable conditions be obtained. Contrasts in density, electrical conductivity, state of magnetization, porosity, elastic behavior, or other properties singly or in combination may be the basis of an effective direct prospecting technique. Less directly, ore may be discovered or the search narrowed down by the geophysical determination of materials or structural configurations known to be associated with mineralization. One example might be the location, by geophysical methods, of the trace of a buried fault which is known to be mineralized. The success of exploration geophysics in the oil industry has led to a multimillion dollar enterprise. In mining, however, the application of geophysics to exploration has been on only a small scale, despite the fact that most of the basic principles involved have been known for many years. There are several contributing reasons why the potentially powerful geophysical approach has not been more fully ex- ploited. A mining company is often apathetic, usually because of an early disappointment after it had been led to expect too much from a geophysical survey which it had been induced to buy. The physical environments of mineral deposits are extremely varied and there has in general been far too little effort spent in adapting the general geophysical methods to specific problems of particular local situations. Too often, geo- physical exploration has been carried out with existing equip- ment and procedures without consideration of modification necessary to make effective use of the equipment under the particular field conditions at hand. For this and other reasons, geophysical methods have been uneconomical. In other in- stances, geophysical surveys, though effective, cost more than is commonly justified by the chances of discovery. The objections to the use of geophysics could be eliminated in part if the techniques could be simplified to a point where any competent exploration group could acquire satisfactory equipment cheaply, operate it with low-cost personnel, and make simple interpretation of the data in terms of possible ore without recourse to high-priced consultants and expensive laboratories. Geophysics then would be truly a geological tool, and not a form of black magic to be used only in desperation. The general utility of geophysics in exploration could be greatly increased if advantage were taken of recently developed technical advances in instrumentation. Although the basic physical properties of the ore deposits are the same, new meth- ods of measuring those properties may provide data that are easier to interpret in terms of possible ore. In special cases, also, cost could be reduced and effectiveness increased by using airborne equipment. Following are a few examples of desirable improvement and innovations in geophysical instrumentation and applications: Adaptation of known techniques to the problem of mineral exploration. As an example, the Naval Ordnance Laboratory has developed a technique for distinguishing metallic con- Page 28 ductivity from electrolytic conductivity. This idea might be useful in detecting the presence of sulfide ore bodies which commonly act as metallic conductors in contrast to the electro- lytic conduction of water filled or saturated zones. Design and development of electromagnetic generating and measuring equipment. Such equipment should be designed and developed to meet the needs of the geophysical engineer as conditioned by the field requirements. There is essentially no commercially produced equipment designed for geophysical prospecting purposes. Development of airborne electromagnetic equipment and techniques. The economy and speed of airborne operations, particularly over inaccessible areas, makes this an attractive field of investigation. Investigation of natural potential differences. While the use of self potential surveys in mineral exploration is well known, more fundamental investigation into the detailed causes and significance for mineral exploration is required. Research on techniques and development of equipment for small scale seismic or sonic exploration should be pursued. This technique would be valuable especially in underground workings. Various sonic methods and much equipment have been developed for detection purposes by the military. Some of the ideas and equipment could profitably be adapted as effective exploration tools. Research should be carried out on the thermal effects of ore bodies and associated structural features. An effective theory for the interpretation of thermal anomalies could provide a valuable technique. Geophysical techniques should be developed, and necessary equipment designed for use in underground mine workings. These techniques should be extremely valuable particularly for detailed work.- Also, the necessary equipment for working in drill holes should be developed. This would be largely a question of minia- turization. By geophysical methods it should be possible to in- crease greatly the information obtained from each drill hole. In other words, it should be possible, by greater exploitation of each hole, to obtain the same total geological information from fewer holes. Summary Geophysics has not come into common use because of high cost of surveys and the difficulty in interpreting data. Members of the mining and geological professions should have a far greater appreciation of the capabilities and limitations of geo- physical techniques. Research aimed at applying modern know- how to making geophysical techniques simpler, cheaper, and in general more directly useful to exploration geologists could make a vast contribution to the nation's mineral resources picture. OIL EXPLORATION SUGGESTS METHODS Geophysical methods have been outstandingly successful in exploration for petroleum, and it is only reasonable to inquire how the experience gained can be applied in the search for minerals. It must be remembered that the mineral exploration problems are more complicated and more difficult and that the tax provisions regarding reserves, depletion, discovery, and exploration have been more favorable to the petroleum indus- try. Economic incentives and the forces of competition play im- portant roles and cannot be disregarded. Many an important advance in methods and techniques in geophysical exploration for oil can be traced to a particular unit in the industry seeking some competitive advantage. The scientific and technical concepts on which the search for petroleum deposits is based represent a cooperative effort on the part of geologists with other physical scientists. Begin- ning with White's Anticlinal Hypothesis and continuing to the present, the geologist, by observation, inference and imagina- tion, has learned directly and empirically the special relations and the physical attributes of the sediments which are asso- ciated with petroleum reservoirs. With this knowledge, areas of possible interest are localized, in the first place, and secondly, the talents and abilities of the physical scientist are made to bear on the more precise problem of locating drilling sites. Thus, it is a scientific partnership based on a considerable degree of intelligent cooperation which makes geophysical prospecting for petroleum the successful venture, scientific and economic, that it is. This partnership and the at- tendant imaginative pioneering might well be applied in pros- pecting for other minerals and ore bodies which lie hidden from direct geological observations. It seems that up to the present, the mining industry has done a negligible amount of geophysi- cal exploration and practically nothing in applying research for the development of geophysical techniques for exploration. The reasons for this state of affairs merit consideration. We propose to outline very briefly the methods—tried and proved—used by the petroleum geophysicist in the hope that some of the information may be of value to the mining geologist. METHODS THAT MAY BE VALUABLE TO THE MINING GEOLOGIST Generally speaking, the magnetic methods have been most used by the mining prospector. The dip needle and magnetom- eter have a long history and have led to greater success in mining than in oil finding. Nonetheless, the refinements of modern instrumentation and techniques in magnetic prospect- ing made by the oil industry should be carefully considered in the problems of exploration for some ore bodies whose presence can be implied from magnetic observations of great sensitivity. The "flying magnetometer" is an efficient low-cost exploration tool of high accuracy even in areas of difficult accessibility and its use can often be combined with aerial mapping. There are some ore bodies which, by virtue of their geological and physical characteristics, lend themselves to electrical pros- pecting methods. The number of techniques of this type is large indeed, and the choice of suitable ones depends on the precise problem. There are D. C. and A. C. methods, and in the latter case a further parameter is the frequency employed. Inductive methods have possibilities and the measurements of natural earth currents have others. The oil explorer has learned much about these matters which may be of use in the search. The idea of using radioactive observations is, of course, self-evident and need only be mentioned here. Page 29 Refined gravimetric measurements, that is gravimetric meas- urements of high sensitivity, whether by the "direct" gravity meters of the petroleum geophysicist or by the torsion balance, can be used if the existence of the ore body can be implied from the surface gravity field over the area. Detailed gravity sur- veys can often be used to outline geological "trends" and often even small geological provinces. To study the geometry of the crustal subsurface from which clues as to the nature of some strata may be inferred, the seismic methods are eminently successful. The refraction techniques often enable one to separate one type of rock from another. The high cost of seismic prospecting is more than justified by its results in certain types of problems. Short reflection and refraction profiles should find the answer to many exploration problems in mining. A joint effort of geology and physics in research for explora- tion tools would seem to hold high promise of success in locating new reserves for the needed minerals. References Elsewhere in This Report This volume: Tasks and Opportunities. Vol. II: The Outlook for Key Commodities. Reserves and Potential Resources. Vol. Ill: The Outlook for Energy Sources. Oil. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Moore, D. D. "Role of Technology in the Future of Petroleum." Stephens, F. M. "P.ole of Technology in the Future of Lead." . "Role of Technology in the Future of Zinc." Page 30 The Promise of Technology Chapter 3 The Technology of Iron and Steel* Iron as cast iron or in the various forms of steel holds a unique position among metals. It is the principal component in the backbone of our civilization and easily dominates all other metals and many nonmetal structural materials in abundance, low cost, and versatility. It is one of the most abundant elements of the earth's crust, and its production far exceeds the total of all other metals. In billet form, unalloyed steel costs less than 3 cents per pound, whereas the next lowest priced metals, lead, zinc, and aluminum, cost 5 to 6 times as much. Tensile strengths ranging from 10,000 to 500,000 p. s. i. (pounds per square inch) are possible with an equally wide range of hardness and toughness. These are only a few of the reasons why it is so essen- tial that steel production be maintained in abundant supply. While the demand for steel has been increasing sharply (pro- duction has almost doubled since 1940), our visible reserve of high-grade iron ores has been decreasing at what has sometimes been called an alarming rate. At the same time, the cream has been skimmed from our coking coals and we are depending more and more on coals of inferior coking quality and of higher sulfur content. Capital costs and labor costs are steadily increas- ing. In the face of these adverse conditions, what can technology do to maintain an abundant supply of steel at low cost and of high quality? The following is an attempt to answer this question from the standpoint of iron and steelmaking. BETTER BLAST FURNACES Practically all of our iron and steel starts its metallic existence as pig iron and, with unimportant exceptions, all pig iron is produced in coke-fueled, modern-type blast furnaces. Thus, steel supply is keyed very definitely to pig-iron production and, proportionately, cannot outstrip the latter. The typical, modern blast furnace is a highly efficient metal- lurgical apparatus. It produces 1,500 tons of pig iron per day with the consumption of 1,750 pounds of coke per ton and with the expenditure of less than 1 man-hour of labor per ton. More than 98 percent of the iron charged is recovered as pig. It is often stated that the blast furnace has a thermal efficiency of more than 90 percent, but this is contingent on the full utiliza- *Bv Clarence E. Sims, Battelle Memorial Institute. tion of the top gas. Almost 47 percent [/]f of the heat units put into a blast furnace exists as latent heat in the top gas, which is a low-grade fuel (90 British thermal units—B. t. u.). Some blast furnaces are now turning out more than 1,500 tons of pig iron per day, and operators are talking confidently of 3,000-ton-per-day furnaces. It appears, however, that the present blast furnace is approaching its maximum practical size, and rates of production will not be increased merely by making larger furnaces. The penetration of the combustion zone at the tuyeres is only about 3 feet, and in furnaces with a 30-foot-diameter hearth, there is a large static cone in the center that interferes with the flow of the burden and the penetration of the blast. Oval- or rectangular-cross-section furnaces have been proposed, to eliminate this dead center, but none have been constructed to test the principle. The huge capital cost of a blast furnace today (about 45 million dollars for a 1,500-ton-per-day furnace with auxiliary equipment) makes very attractive any method or device that will increase the efficiency or production of such a furnace. Efficiency is usually figured on fuel consumption per ton of pig iron, while increased production saves on charges for labor, overhead, and depreciation costs. Other things being equal, the production of a blast furnace is proportional to the amount of air put through. When blast velocities get too high, however, excessive channeling of the blast will lower efficiency, the dust loss from fine ore will in- crease, and the burden will tend to float on the blast, preventing proper descent through the shaft. HIGH TOP PRESSURE IN BLAST FURNACES A method has been proposed to overcome these objections. From the gas laws, it is easy to see that, if the average real pressure in a blast furnace were to be doubled, it could contain twice as much gas. Thus, by restricting the gas exit and build- ing up high top pressure, the amount of gas in the furnace at any instant can be increased and more air can be put through the furnace without increasing the linear velocity. It has been claimed that by raising the top pressure to about 10 to 12 p. s. i. the production could be increased by about 20 percent, fltalic figures in brackets refer to references at end of chapter. 995554°— 52- Page 31 with lower fuel consumption and much lower dust loss. The claims for higher production and lower dust loss seem theo- retically sound, but the reason for lower coke consumption is not quite so obvious. High-top-pressure blast furnaces have been under test at one steel plant for more than 3 years. Some trouble has been reported, such as with high-temperature corrosion of the bell and hopper mechanisms. An early report [2] indicated increased output up to 20 percent, a reduction of coke consumption of 13 percent, and the flue-dust loss down 30 percent. Subsequent (informal) reports did not substantiate these claims, except for the flue-dust loss. No data have been released which would allow an evaluation of the process. High top pressure, of course, is not needed to reduce flue dust; it can be accomplished by ore preparation which would include elimination of fines. The cost of converting a furnace for high top pressure is about $200,000, but the cost of extra blowing equipment might be as much as 1 million dollars. Then there is said to be a royalty involved. Thus, the cost of experimentation is high, and until more definitely favorable reports are available from the present tests, other operators appear loath to try high top pressures. OXYGEN-ENRICHED AIR MAY LOWER COKE USE One technical development that has been widely heralded as a boon to iron and steel practices is the production of low- cost oxygen. By way of definition, low cost for oxygen is con- sidered to be the reasonably attainable figure of $10 per ton. It can have such a cost, however, only when the oxygen plant is close to the point of consumption and the oxygen can be piped directly to that point without intermediate high-pressure storage. Although some opinion predicted definite advantages for the use of oxygen or oxygen-enriched air in the blast furnace, trials to date seem to have shown no such advantage in a conven- tional-type blast furnace. Reports in the literature of trials in Russia indicate favorable results on very small-scale operations. Only one large-scale trial has been made in the United States, that at Johnstown, Pa. This trial has been quietly discontinued without any official comments as to its outcome. Unofficial reports, however, are positive in saying the test did not come up to expectations. One reason why the blast furnace had such early success when operated under crude and relatively uncontrolled condi- tions is that coke burned with air gives just about the right- temperature flame to reduce iron ore and melt the reduced iron to pig iron in a counter-current system. The introduction of preheated blast gave a greater margin of available tempera- ture in the pig iron and a very favorable reduction in fuel consumption. Blasts are usually preheated in the range of 800-1,200 degrees Fahrenheit, although there is plenty of top gas available to heat them hotter. As soon as a temperature in excess of about 1,200 degrees is reached, however, trouble with prefusion of the burden occurs and causes hanging. In colloquial terms, the furnace "freezes." The principal effect of oxygen-enriched air is to produce a hotter flame, but this is of doubtful advantage because the flame already is hot enough. Oxygen could be used to elimi- nate preheating of the blast, but this, also, would have no advantage unless some other good use could be made of the top gas. Nevertheless tests and calculations [3] have indicated that enriching air with oxygen up to about 30 percent will pro- gressively lower coke consumption. Above 30 percent oxygen, there is a reversal, and fuel consumption increases again. SHORT-SHAFT FURNACES It has been proposed to utilize ozygen in an unconventional short-shaft furnace to gain the greatest advantage. Although no such furnace has yet been operated on a sufficiently large scale to obtain authentic data, it seems to have certain theoreti- cal advantages. It has been observed, for example, when oxygen-enriched air is used in a conventional blast furnace, that the top gases leave at much lower temperatures than with air and that the upper part of the shaft is, therefore, serving no purpose. On the contrary, the cold upper portion of the burden causes useless restriction to gas flow. The reason for the low top temperature is thought to be the lower volume and velocity of gas produced when burning coke with oxygen-enriched air, which result in better heat transfer to the charge. If the shaft were shortened to remove the cold top part, the resistance to blast flow would be decreased. The blowing rate might then be increased to gain production, but the residence time of the ore might not be long enough to allow complete reduction. This could be remedied by using small particle size for both ore and coke to give shorter reduction time. This would again increase the resistance to gas flow but would give better heat transfer, which, in turn, would allow further reduc- tion in stack height. It is apparent that a much weaker coke could be used in such a furnace. Obviously, there is a limit to which such changes may go, which must be found by trial. Special preparation of the charge for fast reduction of the ore seems necessary to prevent ores reaching the melting zone unreduced and promoting excessive direct* reduction (C + FeO->Fe + CO). In small plants, it appears that the use of oxygen would eliminate the cost of stoves, while the cost of oxygen would be recovered in lower coke consumption. Thus, a small plant, built at low cost and using low-grade coke, could have a relatively high rate of pro- duction. It is not likely that such furnaces will displace any modern blast furnaces now in use, but the short-shaft furnace seems to hold high promise for small installations, especially where good coke is scarce. Tests are not now sufficiently ad- vanced for reliable cost figures, but the next several years should develop some interesting data. OTHER TECHNICAL CHANGES Another method that, theoretically, could be used to advan- tage would be to use a blast made up of top-gas and oxygen, in- stead of oxygen-enriched air. By recirculating part of the top- gas, nitrogen would be eliminated, making the blast a mixture of 02, CO, and C02. The oxygen would be mixed right at the tuyeres to prevent premature combustion. The CO would ab- sorb heat and carry it up the stack just like nitrogen, but it would be a reducing gas as well. The C02 would, in addition, absorb *This is not a solid-solid or solid-liquid reaction, as the equation implies, but thermodynamically it is the same because it occurs at a temperature where C02 cannot exist in appreciable quantity. Page 32 heat in being reduced to CO. Thus, the combustion-zone tem- peratures could be controlled by proportioning the top-gas. The products of combustion would be entirely CO. Enriching the CO content of the bosh gas increases the partial pressure of CO and, theoretically, should have the same advantage as in- creasing the top pressure. This practice could have all the ad- vantages of the short-shaft furnace, plus a big saving in coke. The excess top-gas would have a calorific value two to three times that of ordinary top-gas. Although changes in practice and furnace design of the character described will undoubtedly be developed and utilized to increase production, lower costs, and compensate for lower grade coke, one of the most promising things that could be done to achieve these ends would be the proper preparation of the ore before charging. To illustrate, it is reported that a fur- nace operating with a charge containing lump ore with 30 per- cent of sinter (sintered fines and flue dust) may have its output increased by 20 percent. Preliminary and guarded, but appar- ently reliable, reports from tests on pelletized concentrates indi- cate that their use may increase the output of a furnace to double or better, provided, of course, that the pellets can be made sufficiently durable for handling. The simplest method of ore preparation would be to screen out all the fines and agglomerate them before charging. This would give a more open burden, reduce channeling, allow a greater volume of blast, and put less responsibility on the coke to keep the burden open. Probably the only reason Mesabi ore, with its high ratio of fines, can be used as received is an ade- quate supply of high-grade coke. An extreme in ore prepara- tion would be to crush all ore to a fine size and then agglom- erate it, as by sintering, extrusion, pelletizing, or briquetting, to optimum-sized and shaped lumps. Such treatment is, of course, being accorded the magnetites of the East and the taconite of Minnesota in the process of beneficiation. The advantages are greater than merely obtaining more per- meable burden. The time required to reduce a lump of ore, other things being equal, is a direct function of its thickness. It is also a function of its apparent density (lack of porosity). Thus, magnetite in lump form is harder to reduce than most hematite. When ore is finely crushed and then agglomerated to a porous, permeable lump, the time required for complete re- duction is intermediate between that of the fine ore, freely suspended, and that of a lump of hard ore of similar size, but very much shorter than for the latter. The increased permeability of the burden, which allows greater blast rates, and the shorter reduction time needed for the ore appear capable of bringing a revolutionary change in the production of a blast furnace. If a blast furnace working on ordinary lump ore is pushed too hard, unreduced oxide reaches the bosh. There it is reduced by direct reduction and tends to make the furnace run cold. There is need for improved and cheaper methods for agglomerating fines, but these will be forth- coming from work now in progress or planned. Proper charge preparation, with elimination of fine material to prevent dust loss and increased permeability of the charge to allow greater blast rate, theoretically can give all the advantages that have been claimed for high top pressure. Still another advantage may be gained if, before agglomera- tion, finely crushed carbonaceous material, such as coke breeze or powdered coal, is mixed with the ore. This decreases the need for metallurgical lump coke in the charge but, more impor- tantly, brings reducer and oxide into intimate contact, and re- duction will take place very fast in such a mixture when it is heated in the range of 1,600 to 1,800 degrees Fahrenheit. This technique appears to be better suited to the low-shaft blast furnace than to the conventional type. Much of this is already known to the steel industry, but its exploitation will advance slowly for a while for several reasons. There is not enough known about the best methods for agglom- erating fine ore. The cost of crushing and agglomerating equip- ment is too great to risk mistakes in commitments to a poor process. Also, it costs something to crush and agglomerate ore, and there are no reliable data to show positively that the sav- ings will be greater than the costs. There is no stalemate, how- ever, for experimental work is being conducted and the ex- perience with magnetite and taconite concentrates will furnish many of the desired data. It is predicted here that proper ore preparation will lead to greater unit production and lowered fuel costs. Greater production per unit will result in lower fixed costs and labor costs, with appreciable over-all saving in cost of production. It is impossible to estimate now the magnitude of such cost savings. COKE SUPPLY AND QUALITY Undoubtedly one of the prime questions on the future of the iron and steel industry concerns the future coke supply. There is no reason to anticipate a shortage in our reserve of coking coal per se. We know, however, that the cream of our coking coal has been skimmed and that the quality of coking coal mined in the future will continue to deteriorate. The two out- standing aspects of this deterioration are weaker, more fragile coke and higher sulfur content. How will this affect pig iron production? COKE IS ESSENTIAL TO BLAST FURNACES In attempting to answer this, the premise is first made that the iron blast furnace, operating on the counter-flow prin- ciple, cannot operate without some coke. The coke performs at least four useful functions. In the shaft, it helps to keep the burden open and permeable to the blast. It serves as fuel, reducer, and carburizer. In the melting zone, it alone does not melt or soften perceptibly, but supports the burden with a skeleton structure that allows the blast to penetrate for com- plete combustion, while the molten iron and slag trickles down over it to accumulate on the hearth below. As described earlier, properly prepared ore and limestone could, presumably, take over part or all of the function of coke in the upper part of the shaft. In the lower part of the shaft, some carbon is necessary for so-called solution, to reduce back to CO some of the C02 formed by reaction of CO and iron oxide. Perhaps a charcoal would serve for this. The neces- sary heat and reducing gas might possibly be provided by the combustion of a heavy fuel oil or even of natural gas. It would be difficult to find so good and cheap a carburizer as coke. The most indispensable function appears to be the support of the burden in and below the melting zone and providing entry for the blast. Page 33 It appears, therefore, that coke will be in demand for many years as a necessary fuel for the blast furnace, even though technological developments decrease the amount needed per ton of iron and the need for so strong a coke. In regard to the quality of coke required, blast-furnace operators have no accurate knowledge of just what physical characteristics are necessary. This is in spite of years of coke testing by such methods as tumbling and shatter tests. A hopeful indication is the information that a West Coast plant is currently making record production in a blast furnace using coke that would be considered very low in quality by Eastern standards. The rea- son they can do so lies in ore preparation; they make a high-grade sinter. If coke quality suffers because of high ash content, the cost of pig iron will increase. It has been shown that a reduction of 1 percent in coal ash content will save 30 cents per ton on pig iron cost. Coal-washing equipment and practices are be- coming more and more efficient in removing ash from coal, and coke ash need not increase at the same rate as ash in coal as mined. The sulfur content of coking coals seems to be steadily increas- ing, and this has caused some concern, especially in view of the fact that sulfur in fuel oil is also increasing. The use of high- sulfur fuel oil in the open-hearth furnace increases the need for low-sulfur pig iron (see section on steel). Greater knowledge,of sulfur equilibria will lead to more desulfurization in the blast furnace, but any substantial increase in the sulfur content of coke will inevitably lead to high sulfur content in the pig iron produced. Desulfurization treatment of the iron after tapping has been shown to be entirely feasible. The Byers Co. of Pittsburgh has developed a highly efficient treatment using caustic soda, and recent Swedish experiments show that powdered-lime treat- ment can be cheap and very effective. Such methods will sup- plant the old soda-ash treatment, which gave only fair results. These treatments; requiring a separate operation, will involve a small extra cost, but will enable us to use higher sulfur coke. At the present time, iron ores containing as little as 35 per- cent Fe are being smelted in the South. In England and in Europe, ores containing less than 30 percent Fe are being smelted. A few of such ores have gangue that is nearly self-flux- ing, and it probably would not pay to attempt to beneficiate them. In most ores, however, the principal contaminant is silica, or silica plus alumina, which requires lime for fluxing. Inasmuch as it costs about 20 cents per unit to flux and smelt silica in an ore, and modern methods of benefication can re- move much of it at about half that cost, it seems certain that, in the near future, many marginal ores will be beneficiated before smelting. This practice will conserve our coke supply and increase the production of existing blast furnaces. DIRECT-REDUCTION PROCESSES Direct-reduction processes for iron involve the reduction of iron ore to metallic iron at temperatures usually below 2,000 degrees Fahrenheit in a manner that leaves the particle rela- tively unchanged as to size and shape. The iron is porous and spongy and is often referred to as "sponge iron." It is also quite low in carbon content, which gives rise to the term "direct re- duction," i. e., without going through the stage of pig iron. Direct reduction is not new; virtually all the iron produced was made in this manner from earliest antiquity to the advent of the blast furnace. The last bloomery to make iron commer- cially by direct reduction in this country was shut down in 1901. Nevertheless, direct reduction has proved to be a hardy epiphyte* which, over the last half-century, has blossomed almost annually with new proposed processes, few of which have borne fruit. The only process which has been successful commercially is at Hoganas, Sweden, where an especially high- grade iron ore concentrate is reduced with charcoal in crucibles to produce sponge-iron cakes which are sold for electric-furnace melting stock. As high as 15,000 tons per year have been made there. Iron ore is so readily reduced at moderate temperatures that the production of sponge iron seems deceptively simple. In fact, practically all the proposed processes are technically possible; they have fallen down on economic aspects, and these are some- times difficult to evaluate short of a pilot-plant scale of test. One obvious handicap of most sponge-iron processes is that they appear to require larger equipment for a given tonnage than a blast-furnace plant. Most processes have not been tried on a large scale where greater technological problems are sometimes encountered. An outstanding example is the Brassert process, which was tested near the close of the Second World War. It is not considered a good example, but is one of the few available. This process worked on a counterflow principle for ore and reducing gas. The furnace was equipped with a series of circular horizontal hearths axially alined. The ore was rabbled and fed from hearth to hearth by paddles on rotating arms. The test was favored by an exceptionally high-grade feed, a magnetite concentrate that was nearly pure iron oxide. Before construction, it was estimated that a plant to produce 100 tons of sponge iron more than 90 percent reduced could be built for $400,000. This is only about one-third the cost per ton of product that a blast-furnace plant would have cost at the same period. Actually, however, the plant cost more nearly 2 million dollars, and instead of producing 100 tons a day, it produced about 15 tons, which, instead of being 90 percent reduced, was only 65 percent reduced. The Wiberg process has been tested at Soderfors in Sweden on a scale of about 21 tons of sponge iron per day [4]. It is reported that the cost of sponge iron 85 percent reduced was $15 to $18 per net ton of iron, depending on whether coke or charcoal was used as a reducing medium. For comparison, a blast furnace at the same locality, making charcoal iron on a production rate of 10,000 tons per year (27 tons per day), had a cost of $23.60 per net ton of pig iron. Also, charcoal- reduced pig iron was produced in an electric shaft furnace at $23.40 per net ton and coke-reduced pig iron made in a Tys- land-Hole electric furnace cost $19.50 per net ton. For sponge-iron production, both heat and a reducing gas are needed, Sometimes the reducing gas is generated locally by mixing carbonaceous material with the ore and heating the mass, and sometimes the gas is generated and heated separately and passed through or over the ore. The blast furnace, of course, does a fine job of making sponge iron in the shaft where there *Air plant, not a parasite, which grows on other plants but obtains its nourishment from air. Page 34 is a counterflow of ore and gas, the gas being generated in the bosh. After the iron is reduced to the metallic state, it descends to the bosh without cooling or handling. There the gas gen- erator also serves as a melting unit where the iron is separated from the gangue of the ore. Sponge iron will reoxidize readily if exposed to the air while hot, and it is somewhat of a problem to cool it in large quan- tities without such exposure. Besides the conservation of sen- sible heat, there is a clear advantage in melting it in a con- tinuous process without letting it cool. This is proposed in some processes, notably the Harman Process. Sponge iron, naturally, is not a finished product but must be melted and purified before it can be used. The sponge-iron step has long been advocated as a means of utilizing low-grade ores or of obtaining pure iron. This is postulated on the magnetic separation of the iron from the impurities after reduction. This is not feasible, however, because the iron and gangue are all mixed together, just as they were in the ore. The sponge iron cannot be ground or crushed to separate the constituents because the iron is malleable. If concentration previous to melting is de- sirable, the ore should be given a magnetic roast (see section on iron ore) to form magnetite or gamma hematite, either of which is not only magnetic but is friable and readily crushed to any size that may be necessary for mechanical separation of the constituents. The Krupp-Renn process proposed not only to reduce the iron ore in a rotary kiln but to heat it to the point where the iron softens and the gangue constituents melt into a glassy sili- cate slag. This would give mechanical separation, which would allow later magnetic concentration of the metallic iron. The rotary kiln, however, is a notably poor performer when handling materials that fuse because of the tendency to build up rings in the fusion zone. THE FUTURE OF DIRECT REDUCTION Despite the poor record of the past, most of the steel pro- ducers are seriously considering and investigating direct- reduction processes. One reason for this is the ever-present chance that someone will devise a process that can compete successfully with the blast furnace. More important, however, is the desperate situation on steel scrap, and sponge iron could be used as a substitute for steel scrap. As long as the stringent scrap situation exists, and the condition is likely to continue for years with an expanding steel production, direct-reduction processes have a potential place in the future production of steel. It is predicted, however, that the direct-reduction process will not compete with the blast furnace as a major producer of primary iron. To sum up, the sponge-iron or direct processes only do what the blast furnace does in the stack, but they can operate on a variety of fuels and are not dependent on metallurgical coke. Therefore, they can be operated in those regions where metal- lurgical coke is not available. They also appear to be better suited for small- scale operation and are thus favored for remote places or for exploiting small ore bodies. The best showing is made on high-grade ore feeds such as are used in Sweden, and direct-reduction processes are not a promising means of exploiting off-grade ores. BETTER STEEL PRODUCTION The importance of the basic open-hearth furnace may be stated in the fact that between 85 and 90 percent of the steel is currently produced in this type of furnace. The basic open hearth has well earned this position, because it has long been without a peer in producing tonnage steel of high quality at low cost. Furnace capacities van' in size from 50 to 500 tons, the latter being the capacity of a tilting type. The pig-and-scrap process on which it normally operates is quite flexible, and charges have been run ranging from no pig iron to 100 percent pig, although the preferred charge is about 50-50. When the pig iron is more than about 25 percent of the charge, it is usually added as hot metal. Scrap which varies widely, both as to physical size and condi- tion and as to composition, can be handled in the basic open hearth. The dephosphorizing ability of the basic open-hearth slag makes this furnace extremely well adapted for conversion of the basic pig iron produced in this country which contains from 0.25 to 0.35 percent of phosphorus. The open-hearth furnace, including the downtakes, slag pockets, checker chambers, flues, and stack, is a large, rambling structure that takes up quite a bit of space and requires a large amount of refractory material and steel for its construction. Thus, capital costs in building or rebuilding these furnaces are quite high. Some sulfur is held in the slag of the basic open hearth, but this furnace is rather poor in handling sulfur. A moderate desulfurization is sometimes possible, but often it is difficult just to keep the sulfur content from increasing. Pig iron, steel scrap, and fuels are constantly increasing in sulfur content, and the sulfur problem is becoming acute. Fuel oil, for example, may run as high as 3 percent of sulfur, and it is difficult to get any containing less than 1 percent. The sulfur problem and some other factors are militating against the basic open hearth, and in spite of sulfur's fine past record and its present paramount position, there is reason to believe it may be approaching obsolescence. This does not imply any sudden abandonment, because open-hearth furnaces are still being built, but the prospect is that they will lose their dominant position in the Nation's steel industry during the next quarter century and be replaced by other types of furnaces. THE ACID OPEN-HEARTH FURNACE WILL SOON BE DISCONTINUED The acid open-hearth furnace differs from the basic open- hearth furnace primarily in having its hearth constructed of siliceous material instead of magnesite or dolomite, and in carry- ing an acid (siliceous) slag. The early open-hearth furnaces were all acid, but they have been largely superseded by the basic furnaces because of the ability of the latter to dephosphorize. Today, less than 5 percent of open-hearth steel is made on an acid hearth. Steel can be made more cheaply in an acid furnace largely because the refractories have a lower first cost and a longer life. Inasmuch as it can accomplish no desulfurization or dephos- phorization, it is quite dependent on a source of high-grade scrap, low in sulfur and phosphorus. In fact, it is dependent on scrap from steel made in a basic furnace. Except for its lower operating cost, the chief reason for its continued existence is a Page 35 persistent belief that it produces a higher quality of steel. It has been shown generally to have lower hydrogen content, but, otherwise, this belief cannot be substantiated. Because it is be- coming increasingly difficult to obtain appropriate scrap, it is believed that the acid open-hearth furnace is obsolescent and will soon be discontinued. USE OF BESSEMER PROCESS EXPECTED TO DECLINE The acid-lined-Bessemer-converter process is the simplest of all methods for converting pig iron to steel. The pig, as hot metal, is poured into a vessel where air is bubbled through it to oxidize silicon, manganese, and carbon to very low residual contents. The operation is completed in from 9 to 12 minutes. The Bessemer process antedates the open hearth, and in 1890 it produced 85 percent of the total steel tonnage. In 1949, the tonnage of Bessemer steel was practically the same, but was only 5 percent of the total tonnage. While Bessemer steel is simple and cheap to produce, it ends up with sulfur and phosphorus contents even higher than in the pig iron used. High contents of nitrogen are also acquired from the air used for blowing. Ordinary basic pig iron cannot be used for making Bessemer steel because of its high phospho- rus content, and a special low-phosphorus pig, known as Besse- mer pig, is required. Ores suitable for this purpose are becoming scarce and, recently, magnetite concentrates have been used to make Bessemer pig. Whereas the high impurity content of Bessemer steel makes it unsuitable for many uses, it appears to be better than other steels for some particular uses, notably free-machining screw stock and butt-welded pipe. Another use for Bessemer steel is as a replacement for scrap in the so-called Duplex process. In this process, blown metal is put into the open hearth and mixed with hot metal from the blast furnace, and the two materials are refined to steel. Oxygen-enriched air has recently been tried for blowing- Bessemer steel. This results in hotter metal and enables more scrap to be melted in the process and thus lowers the cost some but, except for lowering the nitrogen somewhat, has no effect on the quality of the steel. Low cost and special uses have kept the Bessemer process going, and it will continue for years, but with a decreasing degree of importance. THOMAS PROCESS UNSUITABLE The Thomas-converter process is very much like the Besse- mer, except that it uses a basic- (dolomite) -lined vessel and uses a high-lime basic slag for phosphorus removal. It has never been used in North America, but is widely used in Europe and England. It seems peculiarly adapted to handle their high- phorphorus iron which contains up to 2 percent of phosphorus. Although the process does remove the bulk of the phosphorus, the steels may finish with about 0.05 percent of phosphorus, which is too high for some of our specifications. The steel is also as high as Bessemer steel in nitrogen. It requires higher skill to run the Thomas converter, which seems always to be in danger of freezing up. Recently, much work has been done with the use of oxygen-enriched air and with mixtures of oxygen and carbon dioxide or oxygen and steam instead of air. These alleviate the danger of running too cold, enable cold scrap steel to be charged, and greatly reduce the nitrogen content of the blown metal. It has long been believed that the typical American basic pig iron with about 3 percent of phosphorus is not suitable for blowing in the Thomas converter because the oxidation of considerable phosphorus is needed to supply sufficient heat. With the aid of oxygen, however, it seems certain that Ameri- can basic pig could be used with the Thomas process, but the basic open hearth does such a satisfactory job that there seems to be no point in trying the former, which would give an inferior steel. SURFACE-BLOWN BASIC CONVERTER HOLDS GREAT PROMISE FOR FUTURE The surface-blown basic converter, also known as the "Turbohearth," is still in the pilot-plant stage but promises to have far-reaching effects on steel production. Like the Bessemer and Thomas processes, it uses air to oxidize impurities in the pig, but instead of bubbling through the iron, an air jet impinges on the surface at a low angle. The pressure of the air blast is only 3 to 5 p. s. i., as compared with 30 p. s. i. for the blast to the Bessemer. Like the Thomas process, it uses a basic lining and a basic slag to remove most of the phosphorus and much of the sulfur. There is no nitrogen pickup from the air, however. Starting with regular basic pig iron, it can produce steel which in every respect is the equal of the best basic open- hearth steel. Instead of requiring 8 to 12 hours to process a charge as the basic open hearth does, the blowing time for a charge is only 12 to 20 minutes. Potentially, one 50-ton unit would produce as much steel as four 250-ton open hearths and occupy about 20 percent of the floor space of the latter. Although it is essentially a converter of pig iron, it generates much more heat than the bottom-blown converter. The metal would get too hot unless cooled in some manner. Charging steel scrap is one of the most convenient means of cooling a steel bath, and thus it could melt some scrap. Presumably, this excess energy could just as well be used to reduce more ore. If oxygen-enriched air were used in the blast, it could handle much more scrap or ore. The low capital cost and high rate of production for this apparatus make it look very attractive for future use. The actual cost of conversion by this method is not yel known, particularly the refractory costs. It is estimated, how- ever, that costs should compare favorably with the Thomas process. It will be most popular when pig iron is plentiful and scrap scarce. Both are scarce today, but projected constructior should take care of the pig-iron situation in a few years, whereas steel scrap will not be plentiful until total steel production has been stabilized for some time. This process will be tried oul extensively on a pilot-plant scale during the next year. This is a necessary step before going into full production. BASIC ELECTRIC FURNACE GROWING IN IMPORTANCE The three-phase, direct-arc furnace with a basic hearth anc using a basic slag is easily the most versatile of our steelmakim units. It can be operated under oxidizing or reducing con- Page 36 ditions and is capable of decarburizing, dephosphorizing, and desulfurizing a bath of steel. It is the only unit that does an outstanding job of desulfurizing. Temperatures can be con- trolled more accurately and faster than in the open hearth or converter. Until recently, it has been operated for the most part in com- paratively small units where productivity was low and costs high. Its use was confined largely to the so-called quality steels for which a premium price could be demanded. It has practi- cally preempted the production of high-alloy steels. Thus, it has been thought of as a specialty producer which in no manner competed with other units. Three things have happened recently which may well make marked changes in this trend and elevate the electric steel fur- nace from a minor producer (10 percent of the total tonnage) to the major producer. In the first place, electric furnaces have been made in larger sizes. Those with holding capacities of 100 tons are in use today, and furnaces rated at 120 tons (which may hold as much as 150 tons) are being built. Power is being stepped up with the size in order that the melting time will not be greater than for small furnaces. These appear to be approach- ing the maximum size in which the bath can be heated uni- formly with three electrodes, but induction stirring devices are being introduced, and these should extend this range, besides giving other valuable benefits. After the end of the Second World War, there was an insati- able demand for flat-rolled low-carbon steel and an excess of alloy steel capacity in the form of electric furnaces. One bold producer experimented with the making of rimming grade steels in a basic electric furnace, and, to the surprise of many, it worked exceedingly well. Furthermore, preliminary estimates indicated that it could compete on an even cost basis with an open-hearth furnace making the same grade of steel. The steel from the electric furnace is reported to be of better quality. Recently, the campaign against air pollution has been ac- celerated and many States and local communities have passed stringent laws against the exhaust of fumes and noxious gases into the atmosphere. The tremendous volume of gas (100,000 cu. ft. per ton) from the open hearth will be difficult and costly to corral and clean, while the comparatively small vol- ume of gas (1,000 cu. ft. per ton) from the electric furnace should be commensurately easier and cheaper to clean. HANDLING HOT METAL AN ELECTRIC FURNACE PROBLEM These three factors plus the greater versatility and lower capital cost of the electric furnace will, it is anticipated, go far in enabling the electric furnace to displace the open hearth from its dominant position as a tonnage steelmaker. One hurdle the electric furnace faces is its unknown ability to handle large portions of its charge as hot metal. Up to the present, the electric furnaces have been operated on virtually all scrap charges. Re- cent tests, however, have used up to 50 percent hot metal in the charge with success. This is not considered a serious obstacle, in any case. For example, the basic electric furnace and the basic surface-blown converter would make a complementary team, the former utilizing the scrap and making all the high- carbon and alloy steels, while the latter would take care of the pig iron and produce low-carbon steels or furnish hot blown metal to the electric furnace when scrap is in short supply. In considering the economics of such a combination, it is first postulated that all scrap produced will always be used in steelmaking. The demand always exists, and the price of scrap is governed by its supply. The price will always be such as to allow its use. The electric furnace can compete on even terms of cost with the open hearth when both are melting cold charges. The relative capacities of the electric furnaces and converters would be proportioned to keep both busy when on normal production. If there should be any overproduction, the converter would be shut down in preference to the electric furnace because lower capital cost allows lower standby charges. The acid electric furnace is used almost entirely by foundries in melting steel for castings. When there is an ade- quate supply of suitable scrap, it produces a satisfactory steel at lower cost than a basic electric. The scrap situation, however, threatens to force the abandonment of the acid electric in favor of the basic electric furnace. The latter is more conservative of oxidizable alloying agents also, which is another force in the same direction. Under the present conditions where demand consistently exceeds production for steel, every pound of ferrous scrap made available is being used regardless of composition or physical condition. The use of scrap is a means of increasing steel pro- duction, and strenuous efforts should be made to collect it. The time will inevitably come, however, when production capacity will exceed demand, and at that time the use of scrap will be on an economic basis. It will have to compete with pig iron, which can readily be converted, and the price of scrap will depend on the cost of pig. It will then be uneconomical to collect and use some types of scrap. STEEL MAKERS SEEK LOWER COST OXYGEN While in general the use of oxygen in steelmaking is still con- sidered to be in the experimental stage of development, its use is virtually routine in many steel plants. For permanent use, cost is, of course, an important item. There has been much en- thusiastic talk about producing oxygen at costs as low as $3 to $4 per ton, but these figures appear to be too optimistic. An unofficial estimate of one large steel producer, who has a bulk oxygen plant operating right on his premises, is that he can manufacture it in full-scale, continuous operation for $8 per ton. A reasonable, anticipated, rounded figure for cost of oxygen produced on a large scale and with minimum storage and distribution costs is $ 10 per ton. Most of the oxygen in use in steel plants today is delivered in large multiple tanks mounted on trailers. Oxygen is also being delivered as liquid, to be vaporized and used as needed. The cost, under these conditions, is nearer $30 per ton, but even at this price is attractive for many operations. For some other oper- ations, this price is too high for any but experimental purposes, but operators are looking ahead to lower prices. OXYGEN IN THE OPEN-HEARTH FURNACE In the open-hearth furnace, oxygen may be used in several ways. One is to enrich the air used to burn the fuel. This results in a higher flame temperature. In a regenerative system like the open hearth, however, the flame temperature is amply high Page 37 for most of the operation without such aid. It is useful, mainly in the melt-down period. Tests have shown that the use of oxygen for combustion can increase production by 1.45 tons per hour charge to tap and save 362,000 B. t. u. per ton in fuel, but at the cost of 325 cubic feet of oxygen per ton and increased furnace wear. It is not likely that oxygen will be used in this manner, except in rare cases where increased production can justify the increased cost. The prevalent manner of using oxygen in the open hearth is to introduce it beneath the surface of a molten steel bath with a lance, which may be a bare or refractory-coated steel pipe, or as a high-pressure jet impinging on the surface at a high angle. Used in either of these ways, its prime purpose is to oxidize carbon. Incidentally, the exothermic reaction C + O-^CO causes a considerable temperature rise in the steel bath. Ordinarily, the carbon is lowered to about 0.3 percent by the regular oring-down method before the oxygen is used. There are several good reasons for this. In the first place, car- bon is rather easily oxidized in the higher ranges by ore, and it is cheaper than using oxygen. Second, the ore is reduced to iron while oxidizing carbon. This is important when half the charge is pig iron, because 2 percent of carbon will reduce 4 percent of iron and increase the yield. With lower carbon contents, the rate of oxidation with ore becomes increasingly slow, and in the low ranges, oxygen shows to great advantage. Below 0.3 percent carbon, it can eliminate carbon three to four times as fast as ore and can save to 2 hours on a heat, depending on the final carbon. Its chief advan- tage is to shorten the heat time and increase productivity about 6 percent, but used properly it can also save on refractory life. In early tests with oxygen, great damage was done to open- hearth roofs. The improper use of the lance caused excessive splashing of basic slag against the acid roof. Also, because of local overheating, large amounts of iron were vaporized and burned, and it added its damage to the roof and checkers. More judicious use of oxygen has largely eliminated this damage and has actually lowered refractory loss by shortening the heat at the end where the highly oxidizing slag is most corrosive. The damage to refractories and the formation of fume is very much worse above 0.3 percent of carbon than below that content. The fine fumes of iron oxide will not settle out, however, and will go out the stack to make a fume nuisance much worse than for normal operation. It is so bad, in fact, that many plants have had to abandon the use of oxygen until adequate air-cleaning equipment could be installed. OXYGEN IN THE ELECTRIC FURNACE The first commercial use of oxygen in steelmaking was in the basic electric furnace where it was found that the carbon in a stainless steel heat could readily be oxidized to contents virtually impossible to attain with ore. This has made it possible to pro- duce, on a large scale, stainless steels so low in carbon that they do not need carbon stabilizers like scarce columbium (niobium) or titanium for many uses. Where they still need it, much less is necessary. The increase in temperature that accompanies oxidation of carbon with oxygen also allows much greater contents of chro- mium to be retained in the steel bath while oxidizing the carbon. This has resulted in the use of a higher percentage of scrap in the charge, and the use of more high-carbon and less low- carbon ferrochromium. The use of oxygen in the electric furnace is by no means con- fined to stainless steel heats. Practically every electric steel fur- nace, large or small, has oxygen constantly available for use. It is used not only to oxidize carbon as in the open hearth but also is extremely useful toward the end of the melt-down period. When most of the charge of a furnace heat is melted, a con- dition is likely to occur in which there is unmelted steel on the banks and bottom, while the molten steel under the electrodes is being superheated. There is no boil at this time and no convec- tion currents to distribute the heat, and much damage to the roof and walls may occur while trying to complete the melt- down. Oxygen injected at this time will cause turbulence, raise the temperature, and quickly melt the remaining steel. At the same time, it causes the carbon boil to start. The use of oxygen appears to be an established part of our steelmaking practice. At its present rate of use, where used, of nearly 1,000 cubic feet per ton, there is a potential use of at least 500,000 tons per year in the steel industry. The larger consumers will build their own plants for producing oxygen, while gas producers will build plants in steelmaking centers to supply the smaller users. Delivery as liquid oxygen to the small plants seems likely. SAVINGS THROUGH TECHNOLOGY One method that is being used more and more to conserve steel is to make steels stronger while retaining adequate tough- ness or ductility. The three principal means of accomplishing this are by alloying, heat treating, or cold working. Often a combination of these is used. The thin section, structural types of steel are often made in the low-alloy compositions that give strength without special heat treatment. In these, phosphorus is often used as a low-cost strengthener, but its use is confined to low-carbon steels. Flat stock is cold rolled and bar stock is cold drawn to increase the strength and to give a finished surface, together with close sizing. Examples of combination treatment are bridge wire and music wire. In making these, high-carbon steel is "patented" by quenching in a hot-lead bath and then cold drawn with heavy reduction to produce strengths of 200,000 to 400,000 p. s. i. Quenching in water or oil and tempering is a well-known method of increasing the strength and toughness of steels, but it is predicted that strengthening by cold working will become increasingly used. It is an excellent way of conserving alloys be- cause carbon steels can be cold worked to strengths very diffi- cult or impossible to obtain by quenching unless alloy steels are used. Light-gage steel may have adequate tensile strength but fail because of lack of stiffness due to its low section modulus. This can be remedied by fabricating the steel to tubes, box sections, angles, channels, corrugated plate, etc. Much steel can be saved and lighter structures obtained by such means. Another way in which steel can be saved is by using light- weight aggregates in the concrete of steel-frame construction. As much as half of the steel can be saved this way. Examples are bridges, and buildings more than about six stories tall. Page 38 Corrosion is the greatest waster of steel, but much is being done and more will be done in producing corrosion-resistant alloys and in protecting metals by galvanic action or by pro- tective coatings. Wear also is a great waster of iron and steel but is being combated by making harder steels through alloying and by heat treating. In some cases, the article may be completely hardened, but more and more products are being protected against wear by hard facing. This may take the form of cladding during fabrication as by rolling, or the hard-facing material may be acquired by electrodeposition. The most popular hard-facing technique, however, is fusion welding of a very hard material, usually a material containing tungsten carbides or chromium carbides. CONTINUOUS CASTING, EXTRUSION PROCESSES Although continuous casting of nonferrous metals such as wire bar of copper has been practiced successfully for a long time, success has been had only recently in continuous casting of steel. It is now declared ready for commercial exploita- tion.^] There are three competing processes which are pres- ently being tested on a small commercial scale. In continuous casting, a bottomless, water-cooled mold is used. Steel is poured steadily into the top and withdrawn through the bottom at the same rate, which must not be greater than the time required for freezing. The obvious advantage in continuous casting is the greater yield obtained by eliminat- ing crop ends of ingots. So far, continuous casting has been confined to small diame- ters, up to 5 or 6 inches. The difficulty of going to larger sizes may be realized by the fact that the time for complete freezing varies as the square of the thickness, and an impracticable size can quickly be reached. The method seems very favorable for producing bar stock, tubing and narrow strip, up to about 2 feet wide. By casting billets directly, it does away with the need for a costly blooming mill. A large modern blooming mill may cost 20 million dollars but can handle 700,000 tons of ingots per month. If kept fairly busy, this is not a large cost. The cost of continuous casting equipment is not known and will vary with the number of units involved, but should be well within the financial range of a small steel plant. This will make it easier for a small steel mill, such as a cold-melting shop, to get into some form of the wrought steel business. Because of the need for comparatively small batches of steel at fairly frequent intervals, electric furnaces are best suited to fur- nish steel for continuous castings. Thus, it will encourage decentralization. Good cost figures for continuous casting are not yet available, but it is doubtful that it can compete in cost with large ingots made in a plant where production is large enough to keep a blooming mill busy. Furthermore, continuous casting is not suited to the production of semikilled and rimming grades of steel which are the large tonnage steels. On the other hand, some steel products are made of semikilled or rimming steel merely to avoid the use of hot-tops and to obtain greater ingot yield than can be obtained from killed steel. There would be no objection to killing many such steels for continuous casting. It would appear, therefore, that continuous casting has a bright future but mainly for the smaller plants and for the smaller steel products. Because of the higher ingot yield, however, even the large steel plants may eventually produce most of their bar stock, tubing, and structural steel by this method. Within the past several years, both hot extrusion and cold extrusion of steel have made such rapid strides that they are both commercial operations, although production has just started with trial orders for some of the more,readily made products. Hot extrusion is, of course, similar to the older operations of hot-press forging and piercing but extended to much greater amounts of deformation and to more complicated shapes. At present, it is being conducted successfully on some deep- hardening alloy steels such as the hollow steel propeller blade at Curtiss-Wright. The advantages of hot extrusion include faster production, saving of machining costs by forging articles close to the finished size, less steel needed for processing, and less scrap produced which would require reconversion. One of the great problems is in preventing excessive die wear. The use of molten glass as a lubricant has met with apparent success for this purpose. The greatest present deterrent to ex- tension of hot-extrusion fabrication is a shortage of suitable presses, but it seems destined to become an important procedure in the future. Cold extrusion has much in common with hot extrusion. Die wear is also a problem, and high-pressure lubricants are being studied to minimize it. Molybdenum sulfide has had some success and a favored treatment is a phosphate coating, such as is used for preventing corrosion, applied to the blank before extruding. Cold extrusion has all the advantages of hot extrusion plus the fact that the steel is strengthened by the cold working. Thus a soft, low-carbon steel may have the strength of a higher composition made by some other process, or a heat treatment may be eliminated. There are good prospects that most steel shell casings will soon be made by cold extrusion. It is re- ported that twice as many shells can be made from the same amount of steel as compared with hot forging and machining. [6] PREDICTED TRENDS In the broad sense, there is no substitute for steel. It is true that other metals are invading the field of steel. For example, copper beryllium, Inconel, and Elgiloy are used to make certain high-duty springs once made from steel. Titanium has greater resistance to salt-water corrosion than stainless steel. Aluminum and magnesium sand and die castings are replacing steel stamp- ings and iron castings in some uses. Aluminum has partially replaced steel in window frames and roofing sheets. Even plastics have made minor replacements. In spite of these inroads, the demand for steel continues to increase. Aluminum is the leading competitor for steel uses, but with the present and planned capacity the production will be only slightly more than 1 percent of steel production. This would be nearly 3 percent by volume but is not stiff com- petition. Titanium, though still in its infancy, has a high strength, admirable corrosion resistance, and light weight that will cause it to take over many of the uses of stainless steel, when it becomes available. It is predicted, nevertheless, that Page 39 the demand for stainless steel will continue to grow at a rapid rate. Steel stands alone, and over the next 25 years there will not and need not be a substitute. With improved technology, increased per capita use, and the natural increase in population, it is predicted that the production of steel will increase over the next 25 years about 50 percent. Because of improved technology, the real cost will remain about the same, or be somewhat lower. The great bulk of primary iron will continue to be produced in blast furnaces with carbon from coal, mainly as metallurgical coke, being the principal reducing medium. There is a good chance that some unconventional type of blast furnace using an oxygen-enriched blast will reach a successful development. It is possible these may be operated economically on a smaller scale than conventional blast furnaces. So-called direct-reduc- tion processes in which sponge iron is an intermediate product are unlikely to play an important part in total steel production. They might well have success, however, under special condi- tions such as to serve small, remote markets in regions where coking coal is unavailable. The development of the surface-blown basic converter, which can refine regular basic pig iron to high-quality steel rapidly, seems likely to revive interest in pneumatic processes in which air, oxygen, or a combination of these will be used. Electric-melting furnaces will play an increasingly important part, probably eventually replacing the open hearth as the chief producer of steel. Factors tending to decentralize the steel industry are increas- ing freight rates, successful development of continuous casting processes, and the trend to electric furnaces. Oxygen has an established place in steel metallurgy and, as low-cost oxygen becomes increasingly available, it will be used in amounts estimated at upwards of 500,000 tons per year. Alloy steels will be increasingly popular, but alloying ma- terials will be used more judiciously and more sparingly. Boron will be an important alloying element. The increased demand for stainless and heat-resisting steels will tax our capacity to produce them. New types will be de- veloped and better technology should make more chromium available, as through the use of low-grade ores. Cold working will be utilized to a far greater extent as a means of strengthening steel not hardenable by heat treating. Every indication points to the conclusion that we can look ahead to the next 25 years of steelmaking with confidence and optimism. References 1. Ess, T. J. "The Modern Blast Furnace," Iron and Steel Engineer, April, 1946, p. BF-17. 2. Slater, J. H. Report to AISI Meeting, May 21, 1947. 3. Gumz, W. "Gas Producers and Blast Furnaces," Wiley & Sons, 1950, p. 259, figure 56. 4. Ameen, Einar. "Swedish Sponge Iron," The Iron Age, January 27, 1944, pp. 56-65. 5. Harter, Isaac. "Babcock & Wilcox Tube Company Develops Con- tinuous Castings," Iron and Steel Engineer, vol. 29, December, 1950, pp. 57-62; "Interest in Continuous Steel Casting Gains Momentum," Steel, vol. 127, December 25, 1950, pp. 68, 70, 72. 6. The process is well described in a series of papers in the Technical Symposium of the Pressed Metal Institute, March 16, 17, 1950. References Elsewhere in This Report This volume: The Technology of Iron Ore. Vol. II: The Outlook for Key Commodities. Reserves and Potential Resources. Iron and Steel. Production and Consumption Measures. Projection of 1975 Materials Demand. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Case, S. L. "Role of Technology in the Future of Scrap as a Raw Material in Steelmaking." Dahle, F. B. "Waste Suppression—Role of Technology in the Future of Metallic Production Wastes." DuMont, C. S. "The Role of Technology in the Future of Chromium." Holmes, R. E. "Role of Technology in the Future of Fluorspar." Pray, H. A., and Fink, F. W. "Role of Technology in the Future of Corrosion Control." Renken, H. C. "Waste Suppression—Role of Technology in the Future of Smelting and Refined Wastes." Simmons, W. F. "Role of Technology in the Future of Columbium." , and Gonser, B. W. "Role of Technology in the Future of Vanadium." The Technology of Iron Ore Known sources of iron ore—domestic and foreign—may be said to be "adequate" for many years. This simply means that concentrations of iron compounds in various parts of the earth's crust are known to exist in such quantity and grade of iron con- tent that they can continue to supply the iron and steel industry for a long time, using the technology of production and utiliza- tion known today. Consequently, an analysis of the role of technology in the pic- ture of the iron ore supply is concerned primarily with the rela- *By B. D. Thomas, Battelle Memorial Institute. tive merits—economic and technological—of alternative sources of supply. Geography is one of the most important fac- tors in this analysis. The question of how much ore is needed and where must be answered before one can say it may be sup- plied in specific quantity from a specific source. This necessarily makes the problem complex, since growth and shift of popula- tion and corresponding expansion and change in the steel in- dustry will have inevitable effects on the availability of ore from a given source. On the other hand, the enormous investment in existing iron and steel operations and the even more important Page 40 industrial, social, and political structures associated with them will result in a tremendous inertia opposing sudden and drastic change in the pattern of production and use. The prospect for the future iron ore supply of the United States has been changed greatly in the past five years by three important developments: a) The confirmed evaluation of extensive deposits of high- grade ore along the Quebec-Labrador border, some 350 miles north of the St. Lawrence River. b) The discovery of very large deposits in Venezuela. c) The development and partial commercial evaluation of processes for concentrating taconites, low-grade forma- tion material containing about 3 0 percent of iron. . CHIEF SOURCES OF IRON ORE The role of technology and other factors in the utilization of ores from various sources can best be discussed in relation to the various steel-producing districts. These districts are shown, together with their ore sources and potential quantities of ore, in table 1. It should be noted that the figures used are a po- tential annual supply. They do not necessarily reflect either current production or the production that might be achieved in a national emergency, but rather ordinary commercial de- velopment. Some factors affecting development will be touched on in the discussion which follows. HIGH-GRADE ORES FROM LAKE SUPERIOR In spite of the fact that over 2,500 million tons of high-grade ores have been taken from the ranges of the Lake Superior region, they still remain one of the largest reserves in the world. The quantity of ore remaining has been estimated vari- ously. A conservative estimate by Gruner [/] places the remain- ing reserves of direct-shipping ore and ore recoverable by simple beneficiation processes at 1,646 million tons, including 550 million as yet undiscovered or unproved. The reserves are still large in comparison with other deposits throughout the world. It is nevertheless true that they are not so large that the country need not be concerned over their depletion. One of the most important aspects of the depletion of the reserves of high-grade ore will be the increasing difficulty of maintaining a high rate of production. As the more massive deposits are worked out, the smaller and less efficient ones will be relied upon. This loss in efficiency will be offset in some measure by improvements in mining methods—specifically, in drilling and blasting [2], greater use of belt conveyors, etc. As large, easily recoverable deposits are worked out, there will probably be a change to more underground mining opera- tions. Mining and beneficiating costs, which were of the order of $1 per ton for open-pit operations in 1949, were $3.12 per ton for underground mines. Underground operating cost per ton has consistently averaged about three times the cost of open-pit operations. In table 1, Lake Superior direct-shipping ore and ore con- centrate is listed with a potential supply of 80 million long tons per year for the 5-year period 1950-55; 65 million tons per Table 1.— -Projected iron ore sources for U. S. steel-producing areas [Potential annual supply in thousands of long tons] Steel-producing area 1950-1955 Cen- East- West- South- Gulf Total 1. Lake Superior—di- 75, 000 5, 000 5, 000 .80, 000 5, 000 2. Lake Superior— 8, 000 8, 000 4. Adirondack ores 5, 000 1,000 3,000 6^ 000 5. Eastern Pennsylva- nia, New Jersey 3, 000 3, 000 3, 000 10, 000 4,000 7. Labrador-Quebec 5, 000 5, 000 9. Other South Ameri- 1, 000 1,000 1,000 1,000 3, 000 2, 000 1,000 5,000 13, 000 5, 000 5, 000 2, 000 Total 95, 000 23, 000 7, 000 11, 000 1,000 137, 000 1955-1965 1. Lake Superior—di- 60, 000 5, 000 65,000 2. Lake Superior— trateslte concen" 15, 000 15, 000 5. Eastern Pennsylva- 5, 000 10, 000 10, 000 6. Western ores 5, 000 5, 000 5, 000 5,000 20, 000 7. Labrador-Quebec 10, 000 5, 000 10, 000 9. Other South Arneri- 5, 000 5, 000 5, 000 5, 000 5, 000 5, 000 14, 000 10. Other foreign 5, 0Q0 5, 000 1,000 2,000 1,000 Total 100, 000 35, 000 11, 000 17, 000 6, 000 169, 000 1965-1975 1. Lake Superior—di- 50, 000 50, 000 2. Lake Superior— taconite concen- 20, 000 10, 000 20, 000 10, 000 5, 000 4. Adirondack ores 5, 000 5. Eastern Pennsylva- nia, New Jersey. .. 5, 000 8, 000 13, 000 5, 000 6. Western ores 5, 000 7. Labrador-Quebec 20, 000 10, 000 20, 000 10, 000 '5,'666 '"7,'666 '8,'666 40, 000 40, 000 8. Venezuela 9. Other South Ameri- 1,000 5, 000 3,000 1,000 9, 000 10. Other foreign 5, 000 5, 000 2,000 1,000 14, 000 Total 116, 000 48, 000 14, 000 19, 000 9, 000 211,000 year for the decade 1955-65; and 50 million long tons per year for the decade 1965-75. These figures can, of course, be nothing more than estimates of what may be sound operating practice. Peak shipments from Lake Superior occurred in 1942 and totaled 93.5 million tons and have averaged 75 million tons in the past 3 years [3]. Potential shipments in the decades subsequent to 1955 are reduced by 15 million tons each 10-year period, reflecting in part increased production difficulties and wise conservation of a wasting resource. Page 41 Favorable factors: (a) High-grade ore, easily minable by open-pit methods—or wash ores—concentratable by simple washing processes. Most accessible source of iron ore for the Central Area of the steel industry; Pittsburgh, Youngstown, Lake Erie, western New York, Detroit, Chicago. (b) Low-cost transportation on Great Lakes waterway, (c) Tremendous existing investment in mining, handling, transportation equip- ment, and docking facilities. Unfavorable factors: (a) A gradual exhaustion of high- grade open-pit ores and an increase in use of underground mining methods. Wash ores gradually becoming less amenable .to simple washing processes, although continued progress in concentrating methods will tend to offset this. Consequent gradual increase in cost offset in part by improvements in mining methods [2]. (Production per man-hour has remained remarkably constant over the period 1939-47) [4]. Use of high-production methods in underground operations, such as "glory-holing," may help to maintain lower costs, (b) Increas- ing transportation costs, (c) Increasing development costs in mining operations. Vulnerability of locks at Sault Ste. Marie. TACONITE ORES FROM SUPERIOR REGION The Lake Superior region has, in addition to its reserves of high-grade ores, an immense tonnage of low-grade iron- bearing rock containing from 25 to 40 percent of iron. This material, known as taconite, has long been looked upon as a future source of iron. The taconite is classed as magnetic and nonmagnetic. In the magnetic material, the important mineral is magnetite—easily removed by a simple crushing and mag- netic-concentration process. The hematitic taconites are amen- able in some cases to a flotation process and in more cases to reduction to magnetite and subsequent separation on a mag- netic separator. Since a larger tonnage of a taconite, perhaps 3 tons per ton of concentrates, must be mined for a given amount of iron value, as compared with a high-grade ore, mining costs will be higher for taconites than for direct-shipping ore. On the other hand, taconite mining will be done consistently by open-pit operations, and technical developments in drilling, blasting, etc., will probably help to keep the cost of mining down. The iron minerals in taconite are very finely disseminated through the rock. Consequently, any concentration process pro- duces a very fine concentrate which must be agglomerated in order that it may be used in the blast furnace without being blown out as dust by the blast. This agglomeration step is ex- pensive. Research work may be expected to result in improved methods which will reduce costs and produce a more satisfactory product. The costs of beneficiating taconite and agglomerating the concentrates are partially offset by the improved performance of the blast furnace using the product. The iron content of the concentr ates may be of the order of 65 percent iron, as com- pared with direct-shipping Lake Superior ore, which will aver- age about 51 percent iron. Furthermore, the agglomerated par- ticles may be porous and offer a ready passage to the reducing gases in the blast furnace; they are more readily reduced, and consequently increase the output of the furnace. In view of the large capital investment in a blast furnace, this item may be very important. In table 1, the potential annual supply of Lake Superior taco- nite concentrates is estimated at 5 million long tons for the period 1950-55 [5]; 15 million tons for 1955-65; and 20 mil- lion tons for 1965-75. These estimates are based, m the first instance, on capacities actually contemplated by the mining companies, and for later decades, on a studied analysis of per- sonal opinions of iron ore mining operators. Favorable factors: (a) Suitably agglomerated taconite concentrates make a very desirable blast-furnace feed, and blast-furnace output may be increased as much as 10 percent by their use. Economic importance of this is discussed m the following paragraph, (b) Blast-furnace construction costs are currently of the order of $100 per ton-year [6]. If the use of taconite concentrate agglomerate increases blast-furnace output by 10 percent, a reduced investment in blast furnaces for a given output becomes possible. For the tonnages of taconite concen- trates estimated in table 1, assuming 65 percent iron, these savings may be estimated as follows: 1950-55, 32 million dollars; 1955-65, 65 million dollars; 1965-75, 32 million dollars. These items may be considered as credits against the capital outlay for beneficiation plants, (c) Transportation will be on the Great Lakes using present dock facilities and trans- portation equipment. Unfavorable factors: (a) Taconite is an extremely vari- able material, necessitating beneficiating processes capable of handling this diversity in composition. Concentration ratios (tons mined to tons of concentrate produced) are high (3 to 1). Agglomeration costs are high (around $2 per ton), but there is a probability they may be reduced by research. Alumina is low in concentrates, and it may become necessary to compensate for this deficiency in subsequent blast-furnace reduction processes, (b) Capital costs for beneficiating plants are high—of the order of $20 per ton-year [6]. For the tonnages estimated for the three periods in table 1, this will represent capital expenditures as follows: 1950-55, 100 million dollars; 1955-65, 200 million dollars; 1965-75, 100 million dollars, (c) Transportation is vulnerable in the same way cited under Lake Superior high-grade ores, above. SOUTHERN ORES AIDED BY FAVORABLE FACTORS The Birmingham steel district operates on very large local deposits of iron ore which are high in calcium and which con- sequently have at least partial self-fluxing properties. The additional limestone needed is available locally—frequently in the same mine—so these deposits are roughly equivalent to high-grade ores plus the additions of limestone used in the northern furnaces. The existence of large amounts of coking coal in adjacent areas makes the Birmingham district a thor- oughly sound and self-sufficient operation. Nevertheless, bene- ficiation processes will become more widely used, not only to make possible the utilization of lower grade ores, but to im- prove furnace feed, obtain greater uniformity, and increase furnace production. No great change is estimated for the three periods in table 1. Favorable factors: Ample reserve, adjacent to furnaces; transportation cannot be permanently interrupted by military action. No great capital additions required except for blast- furnace capacity. Page 42 Unfavorable factors: Some variability in ores; thin ore beds create a mining problem. Sinter and cement bonding are used for agglomeration of fine ores but are expensive. The Adirondack area in New York State is a producer of iron ore concentrates derived from extensive deposits of magnetite. These ores are typically concentrated in a magnetic separator and sintered to produce a blast-furnace feed that is shipped to such diverse points as Ohio, Pennsylvania, New York, and Massachusetts. In table 1, no increase in production is shown over the three periods, though in case of necessity some expansion could be achieved. The sinter is of high grade and produces good blast- furnace feed [7]. Favorable factors: Extensive reserves. Easily concentrated. Sinter is excellent furnace feed. All-rail transportation not easily interrupted. Stable supply. Unfavorable factors: All-rail transportation to' consuming centers is expensive. Grinding, concentrating, and agglomera- tion costs are high. Eastern Pennsylvania and New Jersey ores are largely used locally, and the technological and economic factors in their utilization are not greatly different from those previously described. The ores of Utah, Wyoming, and California are important to the western steel industry and undoubtedly will be used at an increasing rate as the western steel industry grows. The technical problems associated with their use are similar to those already discussed. CHIEF FOREIGN SOURCES OF IRON ORE The Central steel-producing area is isolated from supplies of foreign ore by mountain barriers and lack of a direct con- nection with the sea. This has accounted for its great depend- ence on Lake Superior ores in the past and its future dependence on taconite concentrates. A possible alternative source of high-grade ore is found in the Quebec-Labrador de- posits, which recently have been shown to be very extensive [8]. Future production from this region is shown in Table 1 as 5 million; 10 million; and 20 million tons annually for the three periods. Favorable factors: High-grade ores in reserves proved to be very large [8]. Some manganiferous ores and a generally high manganese content. This factor may prove to be of great im- portance in the solution of the manganese problem (see report on manganese). Development of the St. Lawrence Seaway would make ore available to Lake Erie and Chicago areas. Unfavorable factors: Ores are remote from consuming areas. Railroad 360 miles to Seven Islands on St. Lawrence. Transshipment to Montreal and by rail to Pittsburgh area or by water in event St. Lawrence Seaway is constructed. Capital cost of railroad may be of the order of 200 million dollars [8]. Cost of boats for use of St. Lawrence and Seaway must be added. Rail haul from Montreal will be expensive. Seaway and ore boats subject to attack. Unfavorable weather mav shorten shipping season. The iron ore deposits of Venezuela represent the most re- cent addition to potential sources of ore for the United States. The principal ore body is located about 70 miles south of the Orinoco River, which, with dredging, can be used to transport the ore to tidewater for transshipment in large ocean-going carriers. Shipping distances to blast furnaces in the United States are of the order of 2,400 miles. An alternative route would move the ore by rail to a deep-water port on the north coast of Venezuela—distance of nearly 300 miles—then by ore carrier to United States ports. The ore is a direct-shipping, high-grade material. Mining of the largest property—Cerro Bolivar—is expected to be facili- tated by the fact that the ore body is on a hill of sufficient elevation that the ore can be handled on belt conveyors by gravity. In fact, it has been suggested that the fall of the ore may be used to generate sufficient electric power for the entire operation. The principal ore concessions in the region are held by the United States Steel Corp. The estimates in table 1 reflect that the Venezuelan ores are expected to play an important part in the future ore supply of the United States. It may be estimated that annual production will be 1 million tons by 1955, and this can be increased to 10 million tons for the period 1955-65 and to 25 million for 1965-75. Favorable factors: (a) Large reserve of high-grade, direct- shipping ore. Mining development costs should be low. (b) Ore accessible by water transport to expanding steel-producing areas, particularly Eastern, Southern, and Gulf areas and, to some extent, Western. Unfavorable factors: Great distance from consuming cen- ters, (b) Transportation difficulties, high costs of developing and maintaining a river channel or, alternatively, of building a railroad 275 miles at a cost approximating 120 million dol- lars [9]. Ocean-going ores carriers to move 10 million tons per year will cost on the order of 200 million dollars [5]. Transpor- tation is vulnerable to military action. While Venezuela ap- pears to have a more stable government than many South American countries, expropriation, confiscatory taxes, and similar devices can threaten continuity of operation if a change in policy occurs. The largest production of iron ore in South America comes from Chile, which shipped 2.5 million long tons to the United States in 1950. This ore is used by Bethlehem Steel Corp. at Sparrows Point near Baltimore. Another large deposit is in Brazil. At one time, Minas Gerais was considered to be the most important potential source in South America. It has, however, been replaced by the Vene- zuelan as the No. 1 source. Brazilian ore is almost 6,000 miles from consuming centers in the United States. Sweden is a larger exporter of iron to the United States. Much of this comes in as sponge iron. In Africa, Liberia has a deposit which is being developed by Republic Steel Corp., which plans to ship about 1 million tons per year. CENTRAL AREA IS KEY The Central Area of the steel industry of the United States produces 80 percent of the pig iron in the country. The ore supply for this geographically isolated area is consequently the most important single factor in the iron ore industry. The re- placement cost of the blast furnaces, coke plants, steel mills, and auxiliary installations associated with this vast steel-pro- ducing entity would probably be in excess of 20 billion dollars. Page 43 The dependent industries and the related human activities which stem in large measure from the steel industry account for a very sizable part of the total wealth and economic power of the country. Rebuilding this enormous industry to accommodate it to a changing pattern of ore supply would seem to be a far more complex undertaking than to build the concentrating plants and transportation systems involved in assuring a continuing supply of ore to an already existing industry. Capital expendi- tures for benefkiating Lake Superior taconites, and for the mining development and transportation system for Quebec- Labrador ores, including the St. Lawrence Seaway, and for the transportation and development costs of foreign ores, prin- cipally Venezuelan, may total 5 billion dollars in the next 25 years. In that time, the steel industry of the United States will consume 4 billion tons of iron ore to produce steel ingots worth 200 billion dollars. This sum would appear to justify the capital outlay required. The other producing areas—the Eastern with 10 percent of the total, the Southern with 6 percent, the Western with 3 percent and the Gulf area with 1 percent—are certain to be- come of greater relative importance. Of these areas, only the Southern can be said to be self-sufficient in its dependence on local ores. The others must depend on remote sources and the ingenuity of suppliers to keep the ore coming for expanding furnace demands. The possibility of new discoveries of iron ore within the boundaries of the United States itself cannot be dismissed. OTHER SOURCES OF IRON Other sources of iron oxide exist and a substantial amount may be derived as a byproduct from other operations. An example is pyrite. The recovery of sulfur from pyrite, if carried out on a large scale, would produce correspondingly large amounts of iron oxide. However, development of a major contribution of sulfur supplies would comprise only a very minor contribution to total iron ore supplies. The growing importance of titanium compounds and metal may make the treatment processes for winning titanium ores a significant but minor source of iron oxide. The laterite ores of Cuba, the Philippines, and elsewhere in the world constitute an enormous tonnage of chromium-nickel- iron-bearing materials that have long been a challenge to metal- lurgists. The exploitation of these ores is prevented largely by the metallurgical complications of handling the small percent- age of chromium in the basic open-hearth furnace. Since sup- plies of chromium and nickel are short, iron oxide may even- tually be an important byproduct of processes designed to recover these metals from the laterite ores. No commercially profitable process is known at present for effecting this. See reports on nickel and chromium. References 1. "An Appraisal of the Iron-Ore Resources of the World." American Institute of Mining & Metallurgical Engineers Blast Furnace, Coke Oven, and Raw Material Conference, April 1950. 2. "Production Jet-Piercing of Blastholes in Magnetic Taconite," Mining Engineering, July 1951, p. 585. 3. "Mining Directory of Minnesota," 1951, Henry H. Wade, Bulletin of the University of Minnesota. 4. "Productivity and Unit Labor Cost in the Iron Mining Industry," U. S. Department of Labor, June 1948. 5. "Mesabi Taconite Quandary," Mining World, Sept. 1947. 6. "What Price Process Plants?" Chemical Engineering, May 1951, p. 164. 7. Elmer Riddle. "Use of Adirondack Sinter in Blast Furnaces," Blast Furnace, Coke Oven, and Raw Materials Conference, April 1950, American Institute of Mining & Metallurgical Engineers. 8. U. S. Bureau of Mixes. "Quebec-Labrador as a Future Supply of Iron Ore for the United States," Mineral Trade Notes, vol. 27, No. 4, Suppl. 29. 9. T. W. Lippert. "Cerro Bolivar," Mining Engineering, Feb. 1950, p. 178. 10. "Lake Superior Iron Ores, Season 1950," Lake Superior Iron Ore Assn., Cleveland. 11. C. M. White. "Iron Ore and the Steel Industry," American Institute of Mining & Metallurgical Engineers, 75th Anniversary, March 17, 1947. 12. Harry M. Mikami. "World Iron-Ore Map," Economic Geology, vol. 39, p. 1, 1944. 13. "Directory of Iron & Steel Works," American Iron & Steel Institute, New York. 14. Elton Hoyt. "Iron Ore in an Expanding Steel Industry," American Iron & Steel Institute, May 1951. References Elsewhere in This Report This volume: Improved Exploration for Minerals. Vol. II: The Outlook for Key Commodities. Reserves and Potential Resources. Iron and Steel. Production and Consumption Measures. Projection of 1975 Materials Demand. U. S. Bureau of Mines Tables—Iron Ore. Vol. V: Selected Reports to the Commission. Venezuela "Sows the Petroleum." Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Hodge, W., and Thompson, A. J. "Role of Technology in the Future of Copper." Renken, H. C. "Waste Suppression—Role of Technology in the Future of Smelting and Refined Wastes," Richardson, A. C. "Waste Suppression—Role of Technology in Increasing Mineral Supplies by Suppression of Waste in Bene- ficiation." Page 44 The Promise of Technology Chapter 4 The Technology of Manganese* In comparison with smelting of pig iron, ferromanganese smelting is a very wasteful process. Under present practice of blast-furnace smelting of ferromanganese, about 8 percent of the manganese in the furnace charge is lost to the slag and roughly the same amount is lost to the stack gases. In contrast, in furnaces smelting iron ores, the loss of iron in the blast- furnace slag is generally less than 1 percent, while stack losses in flue dust are under 5 percent: The comparison is even more unfavorable than indicated by these figures because iron in blast-furnace flue dust is now completely recovered under nor- mal practice and returned to the furnace as sinter, while in fer- romanganese smelting, the flue dust is extremely fine and can- not be agglomerated as readily as iron flue dust. Only during the past year has the recovery of fines from ferromanganese flue dust become a subject of concentrated research, due to air pollu- tion restrictions. This research may eventually lead to improved methods of cleaning furnace gases and full recovery of man- ganese lost in the stack gases, but under present practice, little, if any, of manganese flue dust can be recovered economically, and the loss is considered as normal waste inherent in the process. Taking into consideration both the manganese losses in the slag and losses as flue dust, smelting losses of manganese under present practice approach 15 percent. The difference in operation of blast furnaces used for reduc- tion of iron ores and those employed in smelting manganese ores is explained by the higher affinity of manganese for oxygen. Schenck [/] shows that at normal pressure, reduction of MnO by carbon monoxide cannot proceed in the presence of even very small concentrations of carbon dioxide. As an example, at 1,700 degrees Fahrenheit, the reduction of MnO requires a CO atmosphere practically free from C02 while, on the other hand, FeO can be reduced to the metallic state in a GO-CO2 gas mix- ture relatively rich in C02. Ferromanganese smelting differs, therefore, from iron smelting in that it is attained almost ex- clusively by GO in contact with solid carbon in the hearth of the furnace, while iron smelting depends predominantly on the reduction by furnace gases in the stack, where the CO/C02 ratio exceeds roughly 2 to 1. According to Gumz [2], the reduction of MnO in the hearth of the furnace (where the C02 is reduced to CO by incandes- *By S. L. Case and John W. Clegg, Battelle Memorial Institute. cent carbon) is an endothermic reaction consuming 2,289 B. t. u. (British thermal units) per pound of metallic manga- nese. On the other hand, the reduction of FeO by CO in the stack of the furnace is an exothermic reaction liberating 53 B. t. u. per pound of iron. Thus, the coke consumption of the ferromanganese furnace is much greater than in pig-iron practice—in excess of 2 tons of coke per ton of ferromanganese, as compared with three-fourths of a ton of coke per ton of pig iron. BLAST-FURNACE GASES In line with the greatly increased coke consumption, the volume of blast-furnace gases is also greatly increased when smelting ferromanganese (roughly 300,000 to 350,000 cubic feet per ton of metal, as compared with approximately 125,000 to 150,000 cubic feet of blast-furnace gas per ton of pig iron). The larger volume of furnace gases in ferromanganese smelting results in a much higher temperature of exit gases, because the gases ascending the stack are not cooled by the descending charge to the same extent as in pig iron smelting. The higher volume of furnace gases also leads directly to a higher velocity of gases through the stock line and a greater tendency to carry over fines. The dust content of exit gases in blast-furnace smelting of ferromanganese is extremely high. There are two basic causes: (1) The high volatilization losses of manganese, and (2) high volume and velocity of furnace gases. At about 2,800 degrees Fahrenheit, the vapor pressure of manganese is about 80 times higher than that of iron, and the rate of fuming varies directly with the vapor pressure. The dust loading of furnace gases often reaches 10 grams per cubic foot of gas. For a gas volume of 350,000 cubic feet per ton of ferromanganese, the loss of manganese in the flue dust may reach 250 pounds per ton of metal. The difficulty of cleaning this gas is increased by the extreme fineness of the solid particles, since much of the dust is the result of condensation of volatilized manganese. Such particles are extremely fine in comparison with the flue dust of pig-iron furnaces. Even when electrostatic precipitation or wet cleaning methods are employed, the extreme fineness of the dust presents a difficult problem of disposal because this material does not lend itself readily to agglomeration. Page 45 BLAST-FURNACE SLAGS Clements [3] states that in order to assure greater manganese recovery in the blast furnace, it is essential that ferromanganese blast-furnace slags be appreciably more basic than those em- ployed in pig-iron smelting. The older studies of ferroman- ganese smelting by Royster [4] show that there is no significant difference in the basicity of ferromanganese and pig iron slags in American blast-furnace practice. The weight of blast-fur- nace slag per ton of ferromanganese in American practice as reported by Royster is nearly double the weight of blast-furnace slags under English practice, as given by Clements. The values of slag-to-metal ratios given by Royster were based on data obtained about 30 years ago and may not correctly reflect the current American practice. No up-to-date references on this subject can be found in technical literature, but contacts with blast-furnace operators indicate that current American practice appears to approach the British practice as described by Clements, and that the current siag-to-metal ratios in American smelting practice approach 2,000 pounds per gross ton of ferro- manganese, with a manganese content of approximately 8 per- cent in the blast-furnace slag. The high slag-to-metal ratio in ferromanganese smelting is one of the important contributing factors to the high fuel ratio in the furnace charge and to the concomitant high manganese losses in the flue dust. "SLAG LOSS" VERSUS "STACK LOSS" Generally speaking, present practice of ferromanganese smelting is a compromise between excessive "slag loss" and ex- cessive "stack loss." Ferromanganese slags may be regarded as consisting of manganese silicate (MnOSi02) dissolved in a matrix of calcium, magnesium, and aluminum silicates. In the presence of incandescent carbon, manganese silicate dissociates into its constituent oxides (MnO and SiOa), and both tend to be reduced, the reduction of manganese oxide proceeding at a somewhat higher rate than reduction of silica. This reduction stimulates, therefore, further dissociation of manganese silicate, tending to approach equilibrium value for the reaction tempera- ture. The amount of dissociation increases with rising temperature; the amount of manganese lost to the slag is lowered, therefore, as the hearth temperature is raised but, at the same time, the silicon content of the metal tends to become unduly high. This may be counteracted to a certain degree by increasing the basicity of the slag, so that the silica resulting from dissociation of manganese silicate tends to form stable silicates of calcium and magnesium. The manganese content of the furnace slag may thus be lowered (1) by increasing the hearth temperature, and (2) by increasing the basicity of the slag. Both of these steps lead, however, to high stack losses, because they require a high fuel ratio which, in turn, leads to: 1) A high temperature of exit gases—several hundred degrees Fahrenheit higher than in pig-iron smelting. 2) A larger volume of furnace gases—more than twice that of pig-iron smelting. 3) Higher volatilization losses of manganese due to higher operating temperatures and large volume of stack gases. If available information on operation of ferromanganese' blast furnaces can be accepted as authoritative, 2,300 degreed Fahrenheit is about the lowest temperature at which MnO is reducible by carbon monoxide in contact with solid carbon. The zone of manganese reduction in a blast furnace is, there- fore, much narrower than the zone of iron reduction in pig- iron smelting, since no reduction of manganese oxide in the upper half of the furnace shaft takes place. It may be, in fact, seriously questioned whether the conventional blast-furnace design is suitable for ferromanganese smelting. Work done on electric smelting of ferromanganese [5, 6] seems to lend sup- port to the belief that our present views on ferromanganese smelting are based on insufficient technical information. It is quite possible that use of oxygen-enriched air, or much higher blast temperatures than now employed, may be particularly, applicable to ferromanganese smelting, because such practices would tend to broaden the high-temperature zone in which direct reduction of MnO may occur. High top pressures may also prove highly effective in reducing velocity of furnace gases and the amount of flue dust carried by these gases. Basic information on the metallurgy of manganese smelting and economical recovery of manganese from flue dust is a timely subject for research as a manganese conserva- tion measure. Accepting a figure of 700,000 tons of manganese for the annual requirements of the steel industry in the United States, the complete recovery of manganese wasted in the flue dust would furnish annually roughly 60,000 tons of metal1; manganese. Another 60,000 tons of manganese would still lost annually in the ferromanganese slags, and future researcl could no doubt lower materially this source of waste. RECOVERY FROM MANGANIFEROUS ORES According to the Minerals Yearbook, the most important domestic sources of manganese are Cuyuna ores in Minnesota. Of secondary importance are other deposits of low-grade manganese ores at Artillery Peak in Arizona, the Three Kids in Nevada, and Chamberlain in South Dakota. These are all low-grade ores with a manganese content averaging, as an example, slightly under 5 percent in Cuyuna ores. Other low- grade manganese ores can be concentrated at a relatively low cost to a product containing 15 to 20 percent manganese. Higher grade manganese ores containing more than 35 percent manganese are found in Montana and these are economically concentrated, nodulized, and smelted into a standard 80 per- cent ferromanganese in electric furnaces. However, the total available tonnage of these richer ores is small and it cannot serve as a very important domestic source of manganese. The Lake Superior Iron Ore Association reports that, in 1950, 2.36 million tons of Cuyuna ores were fed to the blast furnaces in the United States. These ores averaged 42 percent iron, 4.6 percent manganese, and 0.250 percent phosphorus; they were used as part of the burden in the manufacture of basic pig iron containing up to 2.5 percent managanese. The approximately 100,000 tons of manganese reduced in the blast furnaces from the Cuyuna ores did not contribute, however, to our stockpile of ferromanganese for use as a deoxidizer and alloying element in steel. This manganese served some useful, but not essential, purpose in the open hearth, and eventually Page 46 cound its way to the slag dump as a flush-off open-hearth slag iter recirculating once more through the blast furnace. Pyrometallurgical Methods For smelting ferromanganese it is essential to have an ore containing at least 50 percent of manganese with an Mn:Fe ratio of about 8 to 1. Direct blast-furnace smelting of manganif- erous-ore concentrates containing about 20 percent of man- ganese does not offer any promise because the resultant ferro- alloy would be a spiegel, the demand for which is very light. The economics of such a process would be very unfavorable on account of the very high slag losses of manganese. The only method of pyrometallurgical recovery of manganese from such nanganiferous concentrates that seems to offer any promise /ould involve two-step smelting. In the first step, the concen- trate would be beneficiated in a blast furnace by smelting it in a manner intended to produce a manganiferous pig iron and a slag containing in excess of 50 percent of manganese. In the second step, the high-manganese slag would be smelted in either a blast furnace or electric furnace, to produce a standard 80 percent ferromanganese. In 1941, a series of four patents was issued to P. H. Royster [7] on a process of this type. These patents deal with two-stage blast-furnace smelting of low-grade manganiferous ores. In the first step, Royster proposes to burden the blast furnace with manganiferous ore and coke, without using any limestone as a 'x. Under such conditions, most of the iron but very little .anganese will, it is claimed, be reduced, thus producing a low- 'silicon iron containing about 2 percent manganese and a slag chat is essentially a manganese silicate with an MnO content slightly in excess of 50 percent. In the second step, the man- ganese-rich slag would be smelted in a blast furnace with suffi- cient coke and limestone to produce a standard 80 percent fer- romanganese. In the Royster process, the upgrading of manganiferous ores in the first smelting operation is accomplished by using a de- ficiency of coke in the charge and a compensating increase in the blast temperature. Since this process has not as yet been given a large-scale trial, some reservations must be held as to whether a blast furnace will operate satisfactorily under such conditions. If this were established, the process would appear to be economically attractive, assuming, of course, that sufficient blast-furnace capacity is available for the two-step smelting of manganiferous ores. In an example cited by Royster, a manganiferous iron ore, containing 33 percent Fe, 11.6 per cent Mn, and about 10 percent SIO2+AI2O3, was smelted with coke at an ore-to-coke ratio of 4 to 1. Assuming, as claimed by Royster, that in the first smelting the slag weight will be 0.75 ton per ton of pig iron and that the slag composition will be 52 percent MnO and 40 precent Si02+Al203, then, under current conditions of blast-furnace operations (labor—4 man-hours per ton of metal; maintenance, amortization, and interest—$15 per ton; and general expense—$5 per ton), the cost of producing manga- nese-rich slag should be about $5 per ton over and above the cost of the manganiferous ore. This assumes a credit of $50 per ton of iron produced in the first smelting step. The second smelting step would require about 2 tons of coke and 1 ton of limestone per ton of ferroalloy produced. Considering the same fixed charges as in the first smelting, and assuming a manganese recovery of 80 percent, the cost of ferromanganese produced in the second smelting should be almost $80 over and above the cost of manganiferous ore used in the first smelting step. It is calculated that about 10 tons of ore, of the composition cited by Royster, will be required to produce 1 ton of ferromanganese in the second smelting operation. The process thus appears to be economically sound for useful recovery of manganese from manganiferous ores, but its appli- cation would be predicated on the availability of excess blast- furnace capacity since it requires the use of one blast furnace for upgrading the ore and another for smelting ferromanganese. Another approach to pyrometallurgical recovery of manga- nese from low-grade ores could be based on the following steps: 1) Beneficiation of these ores by relatively inexpensive wash- ing methods to produce a concentrate containing about 20 percent manganese, and 2) Direct smelting of this concentrate in a blast furnace to produce a silicomanganese. This process would require less blast-furnace capacity for its operation, but the slag volume and manganese losses in the slag would be very high, and, considering the low furnace output and high fuel consumption, the process would not ap- pear to be economically sound. Chemical Recovery Methods No appreciable quantity of ferromanganese or manganese metal is produced from domestic ores by chemical processes today (except a small amount produced electrolytically). However, several of the presently known techniques are almost competitive, economically, with the direct smelting of high- grade foreign ores to ferromanganese. For some of these, exten- sive pilot-plant studies have been made, and enough is known of the technology to start building large-scale plants immedi- ately, if the foreign supply were cut off or increased somewhat in price. The manganese contained in most domestic manganese ores is soluble in a water solution of sulfur dioxide (that is, dilute sulfurous acid), dilute sulfuric acid, or a mixture of the two. Generally, weathered ores (manganese present largely as Mn02) are soluble in sulfur dioxide, and unoxidized ores (manganese present as lower oxides) in sulfuric acid. Hydrated silicates are soluble in sulfuric acid; monohydrates, such as natural rhodonite, are not. The manganese of carbonate ores may be made soluble in sulfur dioxide by roasting. The first extensive study of the sulfur dioxide processes was made in 1918 by the Phelps Dodge Corporation at Douglas, Ariz. [8]. The 10-ton-per-day experimental plant employed the Leaver drum leaching process, in which a slurry of man- ganiferous ore in water was treated with a hot furnace gas containing 2 to 6 percent sulfur dioxide. The manganese sulfate (and thionate) solution formed was filtered from the gangue, evaporated, and calcined without recovery of the sulfur dioxide to produce an oxide product containing 60 to 64 percent of manganese. This process would not be economical without re- covery of the sulfur dioxide, except where waste smelter gas is available. Even with recovery and recycling of the gas, it would be inferior to more recently devised techniques. Page 47 In 1943, the Manganese Ore Co. opened a plant at the Three Kids deposit to produce 300 tons per day of manganese oxide (60 percent manganese) by the sulfur dioxide process [9]. Previous pilot planting had been carried out at Berkeley, Calif., on a 1.5-ton-per-day scale. After a year the plant was closed because of high costs and a favorable foreign ore supply situa- tion. The process consisted of a sulfur dioxide leach, evaporation to crystallize manganese sulfate and thionates from the pregnant liquor, and calcination to produce a manganese oxide, which subsequently was nodulized, and sulfur dioxide foe recycling. Several operating difficulties were encountered: (1) alkali sul- fates and thionates in the feed to the calcining kiln made the mass easily fusible and "ringed" the kiln, necessitating continu- ous clean-outs; (2) calcium sulfate scale caused trouble in the leaching towers; and (3) the leaching and calcining stages often got out of balance, necessitating a plant shutdown. In 1945, the Anaconda Copper Mining Co. built a pilot plant at Perth Amboy, N. J., to test a similar scheme for Cuyuna ores [10]. The ore was ground and agitated with dilute sulfuric acid to decompose carbonates, and then leached with sulfur dioxide. The resulting pregnant solution was separated from the gangue, and evaporated to produce manganese sulfate crystals. The crystals were roasted to yield manganese oxide, with recovery of some of the sulfur dioxide. What appears to be a practical embodiment of the sulfur dioxide process is the Chemico process recently (1950) studied in the laboratory by the Chemical Construction Corp., particularly as applied to Cuyuna and Cuban ores. In the Chemico process, the ore is ground, slurried with water, and treated with dilute sulfur dioxide. The slurry of ore and sulfurous acid is then sent to an autoclave, where it is heated at elevated temperature and pressure. The autoclaving step eliminates difficulties with dithionates previously encoun- tered in sulfur dioxide processes and rejects almost all of the phosphorous and most of the iron (presumably as iron oxide) from solution. The pregnant solution is filtered from the gangue and evaporated by submerged combustion to produce manga- nese sulfate crystals. These are then sintered on a Dwight- Lloyd sintering machine to produce a 60 percent manganese oxide sinter, with recovery of the sulfur dioxide for recycling to the process. The Chemical Construction Corp. has estimated that a plant to produce 60 percent oxide equivalent to 200 tons of manga- nese metal per 24 hours, starting from a Cuyuna concentrate containing 20 percent manganese, would cost $12,000,000. Estimated operating and amortization costs are as follows: Per long ton of manganese Operating labor $8. 70 Supervision and overhead 2. 95 Sulfur (0.15 long ton at $30) 4.50 Coai or coke breeze (0.55 long ton at $15) 8. 25 Fuel as gas or oil (22 million B. t. u. at $40) 8. 80 Electricity (725 kw.-hr. at 0.8 cent) 5. 80 Cooling water (18 thousand gallons at 1.0 cent) 0. 18 Repair and maintenance labor and materials 8. 00 Subtotal 47. 18 Amortization, taxes, insurance, royalty, and general expense 44. 35 Total cost per. long ton manganese (exclusive of mining and concentrating costs) 91. 53 To this cost must be added the cost of concentrates. In the case of Cuyuna ores, this has been estimated at $31 per long ton of manganese. Cuban ores could probably be mined and concentrated to 20 percent manganese for considerably less. No credit has been taken for byproduct iron. The leach residues (in the case of Cuyuna ore containing 25 to 30 percent iron) could be roasted to put the iron in a magnetic condition. Mag- netic separation and sintering should produce an iron product containing 55 to 60 percent iron, for blast-furnace feed, with some credit to the process. For comparison purposes, the Chemical Construction Corp. has also estimated the cost and operating expense of a plant based on the Manganese Ore Co. process, but modified to over- come operating difficulties previously experienced. For pro- ducing sinter equivalent to 200 tons of manganese metal per day, the investment cost would be the same as the Chemico process—$12,000,000. The operating cost would be about the same, but the process involves several untested engineering steps and more places where sulfur could be lost than in the Chemico process. Battelle personnel have studied the details of these cost esti- mates and believe them to be sound. Based on a Cuyuna ore, the cost of $122.53, equivalent to $1.23 per long-ton unit, compares with current (Aug. 1, 1951) market prices [//] of: Spot Indian ore 46-^8 percent Mn $1.31 per long-ton unit. Old long-term contracts $0.85 to $0.87 per long- ton unit (duty of 5.6 cents per long-ton unit included). This process, the details of which are private property, is in the borderline of making sulfur dioxide-extracted domestic manganese economically competitive with current world prices. It is probable that, except for inflation, the price of the chemical product would recede slowly for several years after a plant was built. The ultimate cost might be 75 percent of the initial price. Such a recession would be due to almost certain improvements in yield and throughput. It would be almost inevitable that the world price of high-grade ore would also decrease to maintain a competitive position with the domestic product. Major new discoveries of high-grade domestic ores or new developments in the chemistry of sulfur dioxide processes are unlikely to affect the picture markedly. AMMONIA PROCESSES In the Bradley-Fitch process [8, 12, 13, 14], covered by patents issued in 1933 and later, the ore is given a reducing roast to convert the manganese to MnO and the iron to Fe304. The roasted ore is leached with an ammonium sulfate solution, releasing ammonia which is recovered, and changing the manganese to manganous sulfate. Dissolution of iron is minimized by using a two-stage leach, iron dissolved in the first being reprecipitated in the second. The pregnant leach liquor is treated with ammonia (released in the leaching step) to precipitate the manganese as the hydrous oxide and regenerate the leach liquor. Some evaporation is required to maintain the required concentration of ammonium sulfate. Filtering the slimy hydrous oxide precipitate is a disad- vantage of this process. A 4-ton-per-day pilot plant was operated at the Minnesota School of Mines. The process was Page 48 also piloted by the Anaconda Copper Mining Co. in 1945 [10], As a result of their studies, they recommended a modification to precipitate the manganese as carbonate by blowing carbon dioxide and ammonia into the pregnant solution. Because of the shortage of ammonium sulfate during the Second World War, the War Production Board would not entertain a pro- posal to erect a plant to produce 100,000 long tons per year of manganese oxide (60-percent manganese) by this process. The Dean process [15] is superficially similar to the Bradley- Fitch process, although the chemistry is considerably different. It is probably the most feasible of the ammonia processes. Work to date has included piloting on a scale of 500-pound batches. In this process, the ore is given a reducing roast and leached with a water solution of ammonia and carbon dioxide, present substantially as ammonium carbamate, NH4OCONH2. This leach may be performed at atmospheric pressure, or at a few pounds above atmospheric pressure. The leaching solution contains 14 to 18 moles of ammonia and 2.5 to 4 moles of car- bon dioxide per liter. The gangue is filtered off, and the man- ganese carbonate is precipitated by pressure autoclaving, or by driving off the ammonia. Pregnant solutions contain 60 to 80 grams per liter of manganese; precipitation reduces this amount to about 6 grams per liter. The precipitated manganese car- bonate is easy to filter and wash. It is calcined to produce an extremely high-grade oxide sinter. Detailed cost estimates for constructing and operating a plant using this process are not yet available. At this stage of its development, it appears to have the inherent advantages of (1) an easily filterable precipitate, and (2) no costly evapora- tion of water. Its first cost and operating cost should be no more than those which have been estimated for the best sulfur dioxide process, and may be somewhat less. It also requires fewer critical materials of construction. Experimental work on this process is now in progress at Manganese Chemicals, Inc., Minneapolis, Minn., which has acquired rights to the Dean patents. The Bureau of Mines is studying the process combining the Sylvester process as a first step, for the treatment of open-hearth flush-off slags and sili- cate ores, at its College Park, Md., Station. Other private laboratories are doing some work. Electrolytic Recovery The electrolytic recovery of manganese from manganese Dres involves roasting, leaching, solution purification, and elec- trolysis steps. The process, as now applied at the Eiectromanga- nese Corp. plant at Knoxville, Tenn., is adaptable to high-grade imported ores, or to concentrates from domestic ores. Imported ores carry less troublesome impurities than the domestic ores. The ore or concentrate is ground to about 35 mesh and given a reducing roast. In the roast, the quadrivalent manganese is :onverted to the divalent state. The roasted product is leached with spent electrolyte from the electrolysis cells. The spent elec- trolyte is essentially a solution of sulfuric acid, manganese sul- fate, and ammonium sulfate. The divalent manganese oxide is soluble in sulfuric acid. Various impurities, such as copper, zinc, arsenic, molybdenum, nickel, cobalt, and magnesium, are also dissolved in the leaching operations. These impurities are re- noved by precipitation as sulfides. The purified leach liquor Is then ready for electrolysis. The electrolysis cells are so designed that the purified feed solution enters a cathode compartment where between 50 and 75 percent of the contained manganese is electrodeposited on the cathode. The solution then passes through a diaphragm into the anode compartment where it is acidified by anodic action and overflows as spent electrolyte. The feed solution is approximately neutral (pH 6.5 to 7) and the spent electrolyte contains approximately 5 percent sulfuric acid. In addition to the desired electrolysis products, which are manganese and sulfuric acid, hydrogen is produced at the cathode and manga- nese dioxide is produced at the anode. The hydrogen is lost. The manganese dioxide is recovered from the bottoms of the cells and returned to the circuit in the reducing roast operation. The electrolysis cell voltage is between 5 and 6 volts and the current efficiency of manganese deposition is approximately 65 percent. About 3.5 to 4 kilowatt-hours of electricity are required to deposit a pound of manganese. The market price of electrolytic manganese has been from 28 to 32 cents per pound since the Second World War. Tech- nologically, an increase in efficiency of manganese deposition is a good possibility, and the cell voltage might be lowered considerably. However, since electric power for electrolysis accounts for only 8 to 12 percent of the production cost of the metal, there are very limited possibilities for a reduction in price by any change in efficiency of electrolysis. The costs of grinding, roasting, leaching, and solution puri- fication are similar to electrolysis costs when taken separately: each item is a small part of the whole cost. It appears that any major cost cut will be through enlarging and integrating the operation, taking advantage of minor changes in equipment and practice to achieve a lowered cost per unit of product. Electrolytic recovery of manganese is more costly than pyrometallurgical methods. It is not believed that electrolytic manganese will in the predictable future compete with standard ferromanganese on a cost basis. Its use will be limited to appli- cations requiring pure manganese, regardless of cost. RECOVERY FROM WASTE PRODUCTS According to Vignos [16] the total consumption of manga- nese in the form of ores and scrap residuals is roughly three times the actual needs of the industry for manganese as a deoxidizer and alloying element in steel. The reason for this extraordinary waste lies in the manganese losses in open-hearth slags. As a general rule, basic iron contains in excess of 2 percent of manganese. This manganese is oxidized in the basic open hearth, and passes into the slag. Some of this slag is charged back into the blast furnace while the rest finds its way to the slag dump. The manganese recovered from the open-hearth slags charged into the blast furnace repeats the open-hearth cycle and is lost in the slag. High-manganese iron serves a useful purpose in the open hearth in controlling the sulfur in the steel, but it is not in- dispensable. It is seriously questioned by many operators whether or not a manganese content in excess of 0.8 percent in basic iron is essential to the open-hearth process. In the 1949 Open-Hearth Proceedings, G. B. McMeans, General Superin- tendent of Kaiser Steel Corp., stated: "Contrary to what has been said, we see no advantage in higher manganese in hot metal. Hot metal at our plant aver- Page 49 ages 0.45 to 0.5 manganese with an average melt sulfur of approximately 0.055 percent. Finished ladle sulfurs average about 0.029 percent." This view was supported by data given in the 1950 McCune Award Paper [17]: ANNUAL WASTE EXCEEDS A MILLION TONS The amount of manganese wasted annually by the steel industry in the blast-furnace, open-hearth cycles may be judged from results of a questionnaire sent out by the American Iron and Steel Institute's Committee on Conservation of Manga- nese [18]. This survey covered a segment of the industry pro- ducing about 65 million tons of ingots annually and can there- fore be considered as representative for the industry as a whole. For this tonnage of steel, the flush-off slags totaled 4,472,400 net tons and averaged a manganese content of 9.13 percent; the finishing slags totaled 7,226,300 net tons and averaged 5.04 percent manganese. About 400,000 tons of metallic manganese were thus lost in the flush-off slags and about 360,000 tons were lost in the finishing slags, or a total of 760,000 tons of metallic manganese. While some of the flush-off slag is recycled again through the blast furnace, this does not represent useful re- covery of manganese, since it is lost again on the next open- hearth cycle and ends up in the slag dump. If the figures quoted by Vignos are accepted as representative for the entire steel industry, the annual waste of metallic manganese in the United States is considerably in excess of a million tons, and exceeds our total manganese requirements in the form of ferroalloys. One way of avoiding this waste is to recover the manganese from open-hearth slags in the form of useful ferroalloys, and considerable research is now being done on this subject. An- other approach to which considerable thought has been given at Battelle and elsewhere is based on the recovery of manganese from the liquid pig iron before it reaches the open hearth. THE BUREAU OF MINES RECOVERY PROCESS Of the various suggested processes for manganese recovery from flush-off open-hearth slags, the method which is now being evaluated by the Bureau of Mines for the American Iron and Steel Institute has received the most attention. This method is pyrometallurgical and consists of three steps. In the first step, open-hearth slag is to be smelted in a blast furnace designed to operate under a blast preheated to ex- tremely high temperatures (up to 3,000 degrees Fahrenheit). This step is expected to produce a high-phosphorus spiegel containing 2 to 4 percent of phosphorus and up to 20 percent of manganese. In the second step, the spiegel will be partially blown in a Bessemer converter, producing a high-manganese slag and a grade of iron suitable for the so-called Thomas or basic Bessemer process commonly used in European countries. In the third step, the high-manganese slag will then be smelted in a blast furnace to produce standard 80 percent ferro- manganese. The Bureau of Mines process thus bears a certain similarity to the Royster process for manganese recovery from low-grade ores. It also was used in Germany during the Second World War. In the Bureau of Mines process, two steps (blast-furnace smelting and bessemerizing) are substituted for Royster's pre- liminary smelting of low-grade ore in a blast furnace under conditions which would reduce most of the iron without any significant reduction of manganese. Present experiments on the first smelting step in the Bureau of Mines process are being made in a small specially designed blast furnace, the height of which is 10 feet from the tuyere to the stock line. No results have as yet been reported and, until actual operation establishes its feasibility, no reliable appraisal of the economics of this process can be made. Con- sidering the fact that blast-furnace slags in conventional smelt- ing of ferromanganese contain about 8 percent manganese, the difficulties of obtaining efficient recovery of manganese from an open-hearth slag that contains only little more than 8 percent manganese can be fully appreciated. If research now being conducted on this step of the process should really establish the fact that, by operating the blast furnace at ex- tremely high blast temperatures, the manganese recovery in blast furnace smelting of manganese ore could be greatly im- proved, this research would indirectly prove to be an important contribution to the art of ferromanganese smelting. Assuming it were shown that a full-scale blast furnace can be designed to operate at such high blast temperatures, the slag losses which now cost the industry about 60,000 tons of manganese annually, could be greatly reduced. ASSUMPTIONS AND APPRAISALS Of the three steps in the Bureau of Mines process, the first is the most speculative. The bessemerizing of the spiegel which it is claimed will be produced in the first step and the final smelting of the Bessemer slag are fairly straightforward. The operation of the Bureau of Mines process thus hinges entirely on the first step. For the sake of making some kind of appraisal of the economics of this process, the following assumptions will be made: 1) The manganese recovery in smelting flush-off slags will be 60 percent. 2) Three and a half tons of open-hearth slag will produce 1 ton of spiegel. 3) Coke consumption will approximate 2 tons per ton of spiegel containing 20 percent Mn. 4) In the bessemerizing stage, 75 to 80 percent of the manga- nese will pass into the slag, which will contain 50-percent manganese. Five to ten percent will remain in the blown metal; 2 to 4 percent will pass into the flue gas. 5) Eighty percent of the manganese in the Bessemer slag will be recovered in the final smelting operation. These assumptions may or may not be valid. If they are ac- cepted, then the calculated total recovery of manganese will approach 40 to 50 percent of that originally contained in the flush-off slags. The process can thus conceivably produce about 300,000 tons of ferromanganese annually, if it were proved economically sound. If fixed charges in the blast-furnace smelting were to be as- sumed the same as in the evaluation of the Royster process (direct labor—4 man-hours; maintenance and depreciation— $15; general expense—$5 per ton of metal), then allowing a Page 50 credit of $50 a ton for the Thomas iron produced as a byprod- uct, the economic balance sheet of the process can be shown in the following table. According to the values shown on this table, the manufacturing cost of standard 80 percent ferro- manganese produced by the Bureau of Mines process should approximate $220 to $225 over and above the cost of flush-off slags delivered to the blast furnace. This figure may be ma- terially lowered if maintenance and depreciation costs should prove to be much lower than indicated in the table. Since these slags should average about 25 percent Fe and 10 percent Mn, they have an economic value of roughly $4 per ton when used as blast-furnace burden. If due allowance is made, therefore, for the cost of the flush-ofT slags, the manufacturing cost of ferro- manganese produced by the Bureau of Mines process will approach $300 per ton. Economic balance sheet of the Bureau of Mines process for managnese recovery from flush-off slags First Step 350 tons of flush-off slag 200 tons of coke 150 tons of limestone Labor (At 4 man-hours per ton of metal). Maintenance and depreciation General expense Second Step Bessemerizing (At $1 per ton). 50 tons of Thomas iron Third Step >6 tons of slag (50% Mn) $6 tons of coke [ 8 tons of limestone ^abor (At 4 man-hours per ton of metal). . Maintenance and depreciation (At $15 per ton) General expense Met cost of 18 tons of 80% ferromanganese Debits $3, 200 750 800 *1, 500 500 100 576 90 144 270 90 8, 020 Credits 100 tons Spiegel 36 tons of slag (50% Mn) $4, 000 4, 020 8, 020 Note. The manufacturing cost of standard 80 percent ferromanganese >roduced by this process is, therefore, or $223.00 over and above the 18 ost of flush-off slags delivered to the blast furnace. *This item may prove to be considerably lower in large-scale plant oper- tion. This will correspondingly reduce the cost figure of $223 per ton. 'lit? cvt TrDCTCTi.TM? aat r>ot?oc Another method for recovery of managnese from flush-off lags is suggested by a combination of the Sylvester and Dean >rocess. Experimental work on this process is now in progress t the College Park, Md., Station of the U. S. Bureau of Mines. So far, the Sylvester-Dean process has been a laboratory xperiment and insufficient data are available for an appraisal f the yields and other cost items. Recovery of manganese from flush-off slags can also be ccomplished by any of the chemical processes that have been [iscussed earlier in this report, but due to the fact that these lags may have an appreciable CaO content, much of the acids sed in these processes would be wasted. Flush-off slags could ot compete, therefore, with manganiferous ores in any of the hemical processes for manganese recovery. PLAN FOR RECOVERING MANGANESE FROM IRON It was stated earlier that for every pound of manganese used by the steel industry in the form of ferroalloys, the industry wastes about 2 pounds in the "blast-furnace to open-hearth to blast-furnace" cycle. In this cycle, the manganese contained in basic iron is oxidized in the open hearth, some of the open- hearth slag is then returned to the blast furnace to be oxidized again in the open hearth, etc. Since only part of the open-hearth slags is returned to the blast furnace, there is a continuous waste of manganese as the open-hearth slags find their way to the dump. The suggested plan for reducing manganese waste and inci- dentally expand the economic use of domestic manganiferous ores is based on two important facts: 1) A manganese content above 0.5 to 0.8 percent in basic iron is not essential to good open-hearth practice. 2) Desiliconization of molten iron, as a preliminary step to its use in the open hearth, speeds up furnace operation and lowers operating costs. Desiliconization of iron is such an important adjunct to the suggested manganese-recovery process that it merits discussion in some detail. The silicon content of the hot-metal charge in the basic open-hearth furnace has a strong effect on the economics of the open-hearth process. In "Basic Open-Hearth Steelmaking," published by the American Institute of Mining and Metal- lurgical Engineers, the effects of high silicon in basic iron are summarized as follows: "If the silicon content of basic iron were to be reduced below the prevailing range of 0.75 to 1.25 percent without any other changes in the iron, the open-hearth process would be affected favorably as follows: less limestone would be required, the slag volume would be smaller, production rate would be in- creased, refractory costs would be lower, yield would be increased, there would be a saving in fluorspar, iron ore con- sumption would be less, and residual manganese would be increased." Each pound of silicon added to the open-hearth charge by the pig iron produces about 2 pounds of silica, which in turn requires about 10 pounds of limestone in order to produce an open-hearth slag of desirable characteristics. As a concrete example, each 0.1 percent of silicon in a hot-metal charge of 100 tons represents 200 pounds of silicon, which upon oxi- dation will form 428 pounds of silica. Assuming that the open- hearth slag has a V-ratio CaO SiQ2 of 3, this amount of silica will require about 2,300 pounds of limestone. If the silica in the open-hearth slag averages about 15 percent, the decrease in slag volume caused by a decrease of 0.1 percent in the silicon content of the hot metal will approximate 2,850 pounds. Actual experiments have demonstrated that, when the silicon content of the hot metal was lowered to about 0.7 percent, the steel output of the open-hearth furnaces was raised by more than 20 percent in comparison with a corresponding period when the silicon in the hot metal was kept at a 1.00 to 1.25 percent level. In view of the importance of having a low silicon content in the hot-metal charge of the open hearth, many steps have been Page 51 taken from time to time to desiliconize iron. Of these, one gen- erally known method is based on treatment of the iron by mill- scale additions to the stream of metal at the blast furnace. The experience of a few steel producers, as reported in the 1940-41 Proceedings of the Open-Hearth Conference, shows that each 1 percent of mill-scale additions lowers the silicon content of ron by about 0.075 percent. The manganese content of the is also reduced simultaneously with that of silicon. As an llustration, results of 49 iron casts treated at one of the steel plants are summarized below: Analyses of iron before and after mill-scale additions [130 pounds of mill scale added per ton of iron] As cast After treat- charge Net 0. 96 0. 49 -0. 47 1. 89 1.04 -0. 85 This practice, while effectively desiliconizing iron, is frowned upon by operating men because it produces a large volume of foamy slags which have no commercial value and the removal of which is a serious operating inconvenience. Another approach to the problem of lowering the silicon content of iron is offered by a change in the blast-furnace flux burden, raising the basicity of the furnace slag. As an illustra- tion, the effect of such a change in furnace practice is shown in the following table: Slag composition: Si02, percent A1203, percent CaO, percent MgO, percent Ratio: CaO + MgO Si02 Slag volume, pounds per ton of iron Average silicon content of iron, percent. Daily iron output of furnace, tons 75% dolo- mite, 25% limestone 34. 60 9. 30 34. 70 18. 50 The change in furnace practice raised the coke consumption about 40 pounds per ton of iron and reduced the daily iron output of the furnace about 40 tons. At the current price of iron and coke, the total cost of this change from conventional practice is in excess of $1 per ton of iron produced under high- basicity slags. Such a practice cannot be employed, therefore, except under unusual circumstances. MANGANESE RECOVERY FROM BASIC IRON It is suggested that down to 0.8 percent of the manganese and much of the silicon contained in the hot metal can be fairly rapidly removed from the iron at an oxidation station located at some convenient place between the blast furnace and the open hearth. In its simplest form, the installation for this station would be provided with movable tuyeres designed to deliver oxygen or compressed air and steam at a pressure of 4 to 6 pounds. On its way from the blast furnace to the open hearth, a train of ladles carrying the blast-furnace cast would be stopped for a short time at the oxidation station, positioned, and subjected to surface or submerged blowing by oxygen air, or air and steam. All ladles would be blown simultaneously, and since oxidation of manganese and silicon is an exothermic reaction, there would be no cooling effect, and, hence, no time pressure. Blowing would be continued for a fixed time interval established empirically. By furnishing a sufficient oxygen or air volume, it should be possible to reach the desired degree of oxidation in a matter of minutes. Only a negligible amount of carbon would be removed at this stage of oxidation. In its more effective form, the oxidation station of the sug- gested process would comprise an active mixer provided with tuyeres for side blowing. This mixer should be of sufficient capacity to hold an entire cast of hot metal. In either case, upon completion of the oxidation treatment, as suggested in the process, the slag should be essentially a manganese silicate, with a manganese content of over 30 percent. That such is the case was demonstrated in the side- blowing experiments described by Sims and Toy in the April 1950 issue of the Journal of Metals. It was also demonstrated in laboratory tests at Battelle in which iron was surface blown in an induction-furnace crucible. In the Special Report No. 42 prepared by the British Iron and Steel Research Association may also be found supporting evidence giving the composition of slag from partially blown high-manganese iron. The resulting slag contained about 33 percent of MnO and about 53 percent of Si02. A similar approach to the problem of manganese recovery is also suggested by E. C. Wright in a paper appearing in the March 1951 issue of Metal Progress. Wright demonstrated that, by blowing iron of a sufficiently high manganese content, acid slags containing up to 50 percent metallic manganese may be obtained. C. D. King (U. S. Patent 2162437, June 13, 1939) also claims that when a pig iron containing 6.5 percent manga- nese is blown in a converter, the slag will contain over 58 per- cent MnO, equivalent to 45 percent of metallic manganese. If the initial manganese content in the liquid iron is not high enough to result in a manganese content of at least 30 percent in the slag produced at the oxidation station, it may be eco- nomically advantageous to recirculate this slag through the blast furnace and thus raise the manganese content of the iron to the desired level. The slag obtained from oxidation of high-manganese basic iron in the suggested process is skimmed off and granulated by blasts of air, steam, and water, as in the Kinney-Osborne method used for treating blast-furnace slag. By direct smelting of this slag in a blast furnace or in an electric furnace, a high- manganese spiegel could be produced. From a manganese- conservation viewpoint, it is more advantageous, however, to convert the manganese silicate slag to an oxide as a preliminary step to smelting it into standard f erromanganese. BENEFICIATION AND RECOVERY OF IRON-OXIDATION SLAG The iron-oxidation slag should lend itself quite readily to one of several treatments. The Sylvester-Dean process consisting of a pyrometallurgical phase (which converts the manganese- iron silicates to oxides) and of a chemical phase (leaching Page 52 with ammonia and carbon dioxide, then recovering manganese as Mn02) appears to offer promise in the treatment of flush-off open-hearth slags containing about 10 percent manganese. If such is the case, the Sylvester-Dean process should prove even more advantageous on slags containing more than 30 percent manganese—the expected level of manganese in iron-oxidation slags. The granulated slag produced at the manganese-oxidation station lends itself quite readily to recovery of manganese by the chemical processes discussed earlier in this report. One method, the economics of which have already been established reasonably well, is covered by the so-called Chem- ico process developed for extraction of manganese from low- grade manganese ores and concentrates. In this process, as explained in more detail earlier in this report, manganese is dissolved and converted into manganese sulfate, under the action of sulfuric acid and/or sulfur dioxide. Recoveries of contained manganese in the order of 90 to 95 percent are indi- cated by tests run at Battelle on this process. The manganese sulfate is separated from solution, mixed with coal or coke breeze, and sintered to produce manganese oxide, with re- covery of sulfur dioxide for recycling in the process. A special autoclaving step is employed in order to attain a high efficiency in the separation of manganese sulfate from the silica and iron. According to an estimate given by the Chemical Construc- tion Corp., the capital outlay for a plant designed for a daily production of about 250 tons of manganese oxide sinter con- taining 60 percent metallic manganese would approach 12 million dollars. The operating costs, before capital charges and not including cost of the slag, are estimated at $50 to $60 per long ton of manganese. Amortization, insurance, and gen- eral expense are expected to add about $45 per ton, so that the total cost of converting the iron-oxidation slag into manga- nese oxide sinter by the Chemico process should roughly approach $100 per long ton of contained manganese. ECONOMICS OF RECOVERY FROM BASIC IRON The manganese oxide produced by either the Sylvester-Dean or alternate leaching processes for treating iron-oxidation slags can be used for production of standard 80 percent ferro- manganese, by blending it with manganiferous ores and smelt- ing the mixture in conventional blast furnaces. As an alternative procedure, the manganese oxide can be smelted in an electric furnace with sufficient scrap to produce standard ferro- manganese. Assuming that the annual production of high-manganese basic iron in the United States is approximately 50 million tons, the suggested method for manganese recovery in a pre- liminary oxidation treatment of the iron could prove to be a potential source of more than half of our estimated annual manganese requirements of 700,000 tons. Furthermore, it would seem logical to augment this source by using increasing quantities of native low-grade manganese ores or of man- ganiferous iron ores in the blast-furnace burden. In this manner, the manganese content of basic iron could be increased to 3 or 4 percent without reducing significantly the iron output of existing blast furnaces, or adding materially to the cost of production. Under such conditions, the steel industry would become self-sustaining, so far as manganese is concerned, and imports of manganese ore would not be necessary. An appraisal of the economics of the suggested process is shown in the accompanying balance sheet based on application of this process in the operation of a 200-ton open-hearth furnace. These calculations are based on the following premises: 1) The cost of oxidation treatment of liquid iron is $ 1 per ton. 2) Preliminary desiliconization of the iron to about 0.5 per- cent silicon will reduce open-hearth furnace time at least 1 hour per heat. 3) Operating costs of the open-hearth are about $ 1, per hour, per ton of ingots. 4) The initial manganese content of the iron is high enough, so that 2.5 percent of manganese will pass into the slag at the oxidation treatment. The calculations assume that the iron-oxidation slag will be beneficiated by the Chemico process which will recover 95 percent of the manganese contained in the slag. The Chemico process was selected for these calculations not because it is definitely more economical than the Sylvester-Dean process, but because there is sufficient background on this process to give a fairly reliable estimate of operating costs. It is believed Economic balance sheet of recovery from basic iron per ton) 4,750 pounds of metallic manganese, as manga- nese oxide sinter (at SO.92 per long-ton unit of manganese) Smelting-conversion costs for 4,000 pounds of me- tallic manganese (a1 SO.75 per long-ton uni< of manganese) Total. . Saving operati open hearth SI per heat Saving "in flux (at 2,300 pounds of limestone for each 0.1 percent of sili- con reduction) Total savings >fet cost of 4,000 pounds of metallic manganese, equivalent to 2.2 long tons of standard 80 per- cent ferromanganese Total 221. 50 430. 00 Note. The from domestic ost of standard 8 :s by this method is thus —~ long ton, if due allowance is made for the benefits of desiliconization em- bodied in this process. This compares with present prices for standard 80 percent ferromanganese of $185 per gross ton. that the Sylvester-Dean process may beneficiate the iron-oxida- tion slag at a somewhat lower cost than the Chemico process, but the experimental work on this process has not been con- clusive enough to make a clear-cut comparison. The Chemico beneficiation treatment is used, therefore, as an illustration in the balance sheet. It is assumed that in the smelting of manga- nese oxide sinter in a blast furnace, 90 percent of the manga- nese will be recovered in the ferroalloy. DOWNGRADING AND SUBSTITUTION In considering the possible role of substitution in establishing future needs for standard 80 percent ferromanganese, it is important to distinguish two types of substitution: Substitution of alternate manganese alloys, such as down- graded ferromanganese, silicomanganese, silico-spiegel, and spiegeleisen for standard 80 percent ferromanganese. Page 53 Substitution of other deoxidizers or alloying elements for manganese. The primary functions of manganese in steelmaking are (1) control of hot shortness caused by sulfur, (2) deoxidation, and (3) alloying effects. Summarizing the experience of steelmakers on this subject, it is possible to state that substitution of alter- nate, lower grade manganese alloys for standard 80 percent ferromanganese is metallurgically feasible but economically wasteful. The only advantage in such substitution appears to be in the fact that spiegel, and similar low-grade manganese alloys, can be made from domestic manganiferrous ore without the need of extensive beneficiation. However, when these alloys are used, the efficiency of their performance is sharply lowered and more manganese is wasted. Such alloys cannot be added to the ladle, therefore greater quantities must be added to the furnace with resultant decrease in manganese recovery. In producing down-graded ferromanganese, the output of the furnace in terms of manganese decreased, so the increased use of low-grade manganese alloys would require a correspond- ing increase in blast-furnace capacity. It appears, therefore, that research tending to develop improved techniques in utili- zation of low-grade manganese sources in the manufacture of standard 80 percent ferromanganese offers greater promise of economic rewards than the increased utilizations of these ores in the manufacture of down-grade manganese alloys. The substitution of other deoxidizers or alloying elements is a subject which has been fairly thoroughly covered in reports prepared by the War Metallurgy Committee of the War Pro- duction Board. As a general statement, there are no effective substitutes for manganese so far as amelioration of sulfur effects on hot shortness are concerned. As regards the effects of manganese on hardenability and mechanical properties of steel, other elements, such as chromium, molybdenum, etc., which could replace manganese effectively, are limited in supply and strategically are in as great or greater need of substitutes than manganese. Fortuitously, manganese happens to be an element which is more abundant than its so-called substitutes, its effec- tiveness is more foolproof, and it is less costly to produce. Improved technology should tend toward making this coun- try self-sufficient in manganese. Rather than decrease the use of manganese as a final addition to steel, future efforts should be devoted to decreasing the waste of manganese in steel- making processes. In the past, the waste has been economi- cally justified because the circulation of manganese in the blast-furnace, open-hearth cycle was believed to be essential in order to keep the sulfur content of the steel within specifications. This opinion is no longer universally held. It is conceded that high manganese in the iron makes the task of desulfurization somewhat simpler but while useful, manganese is not indis- pensable for this purpose. The only function of manganese that appears to be truly indispensable is in the amelioration of the red-shortness effect of residual sulfur in steel. This use of man- ganese cannot be considered as waste; it is historically its oldest and, as yet, its basic function of manganese in steelmaking. References 1. Schenk, Herman. "Introduction to the Physical Chemistry of Steelmaking," Translated from the German Goldschmidt. The British Iron and Steel Research Association, London, England, 1945. 2. Gumz, Wilhelm. "Gas Producers and Blast Furnaces," John Wiley & Sons, Inc., New York, 1950. 3. Clements, Fred. "Blast Furnace Practice," 3 volumes, Ernest Benn Limited, London, England, 1929. 4. Royster, P. H. "Manganese, Use, Preparation, Mining Costs and the Production of Ferroalloys," U. S. Bureau of Mines, Bulletin 173, 1920. 5. Gillett, H. W., and Williams, C. E. "Electric Smelting of Ferro- manganese," U. S. Bureau of Mines, Bulletin 173, 1920. 6. Maksimenko, M. S. "Direct and Indirect Reduction of Ferro- manganese in the Electric Furnace," Metallurgy, 1933, No. 8, p. 4. 7. U. S. Patent 2265863. "Blast-Furnace Treatment of Low-Grade Manganese Ore," December 9, 1941. U. S. Patent 2265864. "Process for Utilization of Manganese-Iron Ores," December 9, 1941. U. S. Patent 2265865. "Process for Reducing Manganese Ores," December 9, 1941. U. S. Patent 2265866. "Smelting Manganese Ore," December 9, 1941. 8. Dean, R. S., Leaver, E. S., and Joseph, T. L. "Manganese: Its Occurrence, Milling, and Metallurgy. Part III," U. S. Bureau of Mines, I. C. 6770, May 1934, pp. 172-173. 9. Vendensky, D. N., "How the S02 Process Worked on Three Kids Manganese Ore," Eng. & Mining Journal, vol. 147, No. 7, July 1946, pp 58-64. 10. "Report on Activities of Advisory Committee on Metals and Minerals of the War Metallurgical Committee, National Academy of Sciences, National Research Council; 1940-1945," Report of the Chairman to the National Academy of Sciences, June 27, 1946. 11. "Metal and Mineral Markets," Eng. & Mining Journal, August 2, 1951, p. 7. 12. U. S. Patent 1937508 to Wilson Bradley, December 5, 1933. 13. U. S. Patent 1951342 to Wilson Bradley, March 20, 1934. 14. U. S. Patent 1951341 to Wilson Bradley, March 20, 1934. 15. Dean, R. S., "Ammonia Complexes of Manganese With Manganese in the Anion and Their Use in Extracting Manganese From Ores," Manuscript Submitted for Publication to the American Institute of Mining and Metallurgical Engineers, 1951. 16. Nossen, E. S., "Manganese Concentration From Low-Grade Domes- tic Ore: Nossen Nitric Acid Cycle," Ind. Eng. Chem., vol. 43, 1951, pp. 1695-1700. 17. Vignos, J. C, "How To Conserve Manganese," Journal of Metals, November 1949, p. 20. 18. Green, William A., "Effect of Hot Metal on Open-Hearth Pro- duction," Open Hearth Proceedings, 1950, p. 13. References Elsewhere in This Report This volume: The Technology of Iron and Steel. Vol. II: The Outlook for Key Commodities. Reserves and Potential Resources. Iron and Steel. Manganese. Production and Consumption Measures. Projection of 1975 Materials Demand. U. S. Bureau of Mines Tables—Manganese Ore. Page 54 The Promise of Technology The Technology of Tin* Chapter 5 Most of the important uses of tin extend back through cen- turies. What was done with it in the Bronze Age may not in- fluence applications in the next 25 years, but it is important to note that uses of tin in bronze, solders, bearing alloys, and tin plate are old, well-established applications. These are the result of a long growth in adjusting the unique properties of tin to those metallurgical needs that could not be met very well by anything else. It has had, and continues to have, a lot of compe- tition from other metals. This has been intensified in recent years by occasional periods of scarcity, as in wartime, and by a relatively high cost compared with such metals as iron, zinc, lead, copper, aluminum, magnesium, and nickel, and because practically no tin is mined in the United States. The desire to be less dependent on tin, which must be im- ported over vulnerable lines of transportation from southeastern Asia, Africa, Bolivia, and European smelters, has led to much attention to substitutes. It is possible to get along with almost no tin, as Germany found during the Second World War. We in the United States could do likewise in an emergency, but many of the substitute measures would be more costly, less ef- ficient, and less effective than when using tin. However, some of the present or recent applications can be satisfactorily sup- planted by substitute measures, even under peacetime condi- tions of a plentiful supply of tin at a reasonable price. Likewise, a number of new applications for tin may be expected for the future. It is the purpose of this report to aid in evaluating the tech- nological position of tin and foresee technical developments which may affect its uses in the next 25 years. In doing this, it is assumed that general statistical data concerning the metal, and a general knowledge of the problems affecting the future of tin are known. SOURCES OF TIN Having been sought for many centuries, the easily dis- covered, high-grade ores of tin have long since been worked out. The trend now is strongly toward working alluvial and lode deposits of lower and lower quality and in more inacces- sible localities. However, the total world ore resources, on the basis of years of supply, are still impressive, certainly as com- □ared with those of lead and zinc. *By Bruce W. Gonser, Battelle Memorial Institute. Accurate calculations on resources cannot be made, of course. Estimates on the future of tin production are so hedged by qualifying factors as to be almost meaningless, usually because only definitely known, assured deposits are considered, but new discoveries constantly change the picture. As an indication only, from estimates given at the Fourth Empire Mining and Metal- lurgical Congress [1] supplemented by personal communica- tions, the following reserves are listed for some of the producing countries: Long tons Malaya 1, 300, 000 Belgian Congo [2] 600,000 Nigeria 100,000 Australia [3] 100, 000 These do not include various other important tin-producing areas, such as the Netherlands East Indies, Bolivia, and Thailand. Discussion with English tin-mining engineers, and com- ments in company reports, indicate that there are many areas in Malaya that have not yet been adequately prospected for tin. Aid in the form of geological surveys and reorganization of the Mines Department has been planned for Malaya to determine mineralized areas, insure conservation, and help mines increase their recovery of tin [4]. One new area that has been reported as possibly becoming one of the richest ore fields in Malaya is a large swampland near the coast that contains tin in submerged valleys [5]. Statements on probable ore resources in the Netherlands East Indies have been optimistic. It is considered that tin mining there has scarcely reached full growth, and the increase in pro- duction during the last two decades tends to support this view. In addition to dredging the lower valleys, dredges are working offshore on some of the islands [6]. These tin-bearing valleys can be traced for up to 100 miles as they extend out in the com- paratively shallow ocean floor. It is the opinion of at least one mining engineer that deep-sea dredging will be a logical de- velopment of the future to exploit these and possibly other off- shore alluvial deposits. This may greatly extend the tin-ore resources—although possibly at a substantially higher mining cost. There seems to be little hope of finding vast new sources of tin, as by extraction from sea water or in deposits such as the porphyry coppers. However, where extensive alluvial deposits Page 55 are found, particularly in Malaya, there is considerable hope that lode deposits will be located far in the interior [7]. There is at least one such mine now. Difficulties in jungle prospecting by standard methods are obvious. The general observation may be made that leaders in the tin industry are much more opti- mistic concerning the continued discovery of new deposits than are the producers of lead and zinc. There seems little probability that the world will lack tin over the next 25 years, and many years more, if demand does not vastly exceed the general trend of the past. This applies to the worldwide situation, outside of Soviet Russia, her satellites, and China. How Technology Can Add to Primary Supply Larger dredges that are seaworthy and equipped for working farther off shore are a distinct possibility for recovering cassi- terite, the chief source of metallic tin, from sunken valleys. Economical use of large-scale mechanized equipment, such as in open-pit mining, so far has had little opportunity, but if prospective exploration in the Malayan jungle should find some of the lode deposits which served to supply the alluvial cas- siterite in the valleys now being dredged, such methods might find application and give low-cost tin. This applies largely to southeastern Asia. Bolivian hard-rock mining is receiving the attention of modern mining engineers and only normal moder- ate improvement should be expected. Recoveries by dredge from alluvial deposits, which frequently contain less than a pound of cassiterite per cubic yard, are high, and there is only modest room for improvement. Recovery from low-grade Bolivian ores is notoriously poor, sometimes being only 35 to 45 percent. There is considerable opportunity for improvement here, and in the next 25 years new treatments should nearly double the recovery from this type of ore. This might make an over-all increase of 20 to 30 percent in tin recovered by concentration in Bolivia. Considerable research is in progress in this field. Of the several methods of concentration, as by notation, sulfide roast- ing, and hydrometallurgical treatment, none at present seems to be the complete answer, but sufficient symptoms of improve- ment have been shown to justify mild optimism that this goal will be reached. This is particularly important, since an in- creased supply of accessible, higher grade Bolivian tin would be of great value to the Texas tin smelter. The large smelters, including the one at Texas City, are doing a good job. Total recoveries are high, usually in the range of 95 to 98 percent. Dust losses have been practically eliminated by use of Cottrell precipitators, the slag runs only about 1 percent of tin, and the various drosses are being worked up into salable products. Modest improvements that are possible may increase recoveries slightly, but the margin here is not important from the supply standpoint. Eliminating Waste in Production and Use Frequently tin ores contain some tungsten, columbium, or tantalum or other metals of value. Unless readily separated in concentrating, the tendency has been for the accompanying metals to go into the slag and be discarded. Thus, slag from the Panang smelter in Malaya has contained as high as 5 to 8 percent of tantalum and several percent of columbium. An average of 3 percent of Ta206 was found in Malayan slag dumps [8]. Some Belgian Congo slag was transported by air to the Fansteel Metallurgical Corp. plant during the Second World War because of its tantalum-columbium content. Tung- sten is frequently found in Bolivian tin ores. By giving more attention to the separation of these valuable accessory metals, it is possible that they will not only be saved, but their value may help pay the cost of recovering the tin. Thus, in mining the tin pegmatites in Belgian Congo, Geomines has been able to produce some tantalite concentrates during concentration of the tin, rather than trying to recover the tantalum from the slag after smelting. Tantalite also occurs with tin in Nigeria and its recovery as a byproduct will help make it profitable to mine lower grade ore. The value of such byproducts in making available tin ore that otherwise might be wasted is substantial, but there is insufficient information available to give a quantitative estimate. As with most metals, there is a relative abundance of low- grade tin ore that cannot be economically mined at prices that have prevailed over the past decade. A higher price for tin, after discounting changes in general mining costs, would help utilize such marginal ores. Although the apparent supply of ores of present standard is reasonably good, the chances are that demands in the next 25 years will compel increasing use of these lower grade deposits at a higher comparative cost. filtration of molten tin One of the most interesting and potentially useful develop- ments in refining tin recently has been the filtering of molten tin through glass-fiber mats, asbestos, or other moderately high-melting, inert media. This is particularly effective in removing iron, since iron is almost insoluble in tin at the melting point. The method was first developed and used by Consolidated Mining and Smelting Co. at Trail, British Co- lumbia. It is believed to be used also by the Texas City smelter. The effectiveness of removal of iron to below 0.01 percent was confirmed in tests at Battelle. This process makes it rela- tively easy to secure tin having an iron content so low that it meets all normal commercial requirements, and without having to oxidize a proportionately large amount of tin by slow settling and drossing. This procedure is not effective in removing soluble impuri- ties, like antimony and lead, or in removing those impurities that form a eutectic alloy, as copper. However, copper can be removed down to about 1.1 percent. processes to recover tin from tin-plate scrap The recovery of tin from unused hot-dipped or electrolytic tin-plate scrap is an effective, efficient operation. Such scrap amounts to about 12 percent of the tin plate produced, and from 96 to 98 percent of the tin is removed. Although, with the advent of thinly coated electrolytic tin plate, the amount of tin to be recovered per ton of scrap has dropped substan- tially, the return from both the tin and high-grade steel scrap easily pays for the operation and leaves a good margin. There is little room for improvement here. Tin recovered from tin- plate scrap is sold either as high-grade metal (electrolytic), or in the form of tin salts. Page % Detinning used cans is an entirely different problem. The cost of collection is exorbitant and can be justified only under conditions of the gravest emergency when the saving of tin and steel justifies an uneconomic operation. Results in building and attempting operation of detinning plants for used cans in several cities during the Second World War are well known. None proved economically successful, even under the emer- gency conditions of wartime. The only exception was the de- tinning of cans in the San Francisco area, where the cans, after detinning, were shredded and sold as fine steel scrap for such applications as precipitating copper from mine waters. Recovery of tin from used cans is not so effective as from clean tin-plate scrap, partly because of lapped side seams, end seams, and solder in the side seams. As a consequence, the value of such detinned scrap for reuse is not high. Also, the lesser amount of tin on cans made from electrolytic tin plate has decreased the income from recoverable tin. Reuse of tin-containing scrap in bronze and solders, particu- larly, has been well developed. Old automobile radiators are efficiently "sweated" to remove solder and recover both solder and brass. Losses are not high, and the secondary smelters in this country have a reasonably efficient system of reworking tin-containing scrap into useful tin alloys. As shown in table 1, the secondary tin run-around amounts to from 25 to 50 percent of the primary tin required. Since no secondary tin is used in making tin plate, which normally accounts for at least half of the primary tin used, the amount of secondary tin for other applications may at times equal or exceed the primary tin needed for these uses. Improvements in control have increased the quality of alloys made from secondary tin until in many instances they are equal to, or even exceed, the purity of alloys made from primary metals. Electrolytic tin-lead solder is an example. There are some losses in failure to remove tin-bearing sec- tions from scrapped machinery, such as complete motor blocks which are sometimes charged as steel scrap to cupolas for making cast iron. This is due to the high cost of labor to dis- assemble such equipment. In general, however, the value of tin scrap is so well recognized and so amply repays segregation that avoidable losses are minor. ECONOMY IN USE OF TIN THROUGH STANDARDIZATION Some economy in the use of tin may be effected by better standardization of pig tin. An effort is being made to do this by a committee of the American Society for Testing Materials in the proposal to establish several grades of tin to fit uses, as well as to meet the producers' problems. Thus, for one grade of tin content, two different subdivisions would be made to allow for a wide divergency in impurity tolerance to fit the different needs of solders and bearing metals. Tin with relatively high lead content would fall into the solder division; one with high antimony, copper, and iron would be unharmed for babbitt use, yet both types would come under the same grade and presumably sell at the same price. This should permit some relaxation in tin-refinery requirements without injuring the value of the tin for the end use. Table l.—U.S.A. tin c [Long tons] mptio, 1950 1949 1937-40 4-year average Percent of total (pri- mary) Percent of total (pri- Percent of total (pri- mary) Secondary Secondary Secondary Primary Tin plate 37, 388 19, 985 5, 302 3, 986 49 26 30, 243 8, 150 2, 360 2, 030 1, 916 833 1, 979 35, 900 9, 850 3, 700 3, 900 2, 200 5, 400 5, 000 Solder 7, 234 14. 368 2, 024 57 121 2, 289 26, 093 7, 206 12, 103 2, 515 158 81 2, 832 24, 886 17 5 7, 400 4,200 2, 100 135 15 Babbitt 5 5 2 6 I* Collapsible tubes and foil 3, 661 1, 417 4 2 3% 8 4, 291 76, 030 2, 600 16,436 m 47, 511 65, 950 Statistical Bulletin, international JL in Study Group, July 1951, p. 28 (quoting U. S. Bureau of Mines). SUBSTITUTES FOR TIN There is a strong tendency at present in the United States to seek substitutes for tin. This is largely an outgrowth of the real shortage in tin supply during the Second World War and the artificial shortage of the past few years while rebuilding the stockpile. It is also caused by the fear, of impending shortage in case the present sources of tin are curtailed or eliminated. This feeling is exemplified in the extreme by American Can Go.'s vigorous research program, "Operation Survival," to eliminate tin from the entire manufacture of cans so far as possible. Such substitution must be considered from the standpoints both of how far it can go in an emergency and how far it can go economically under conditions when an ample supply of tin is available, as should be the case in peace time. DEVELOPMENTS IN THE USE OF TIN FOR COATING METALS Tin plate is used for many articles other than making tin cans: as top closures for glass jars, bottle crowns, kitchen utensils, toys, novelties, and merchandising displays, in equip- ment for handling or manufacturing food products, and for export. However, the volume of tin plate used for domestic cans of various types so dominates the use field that this deserves major attention. About 80 percent of the tin used for tin plate Page 57 and terne plate in the United States is used in tin plate for containers in this country. Some 16 percent has been exported. The coating of black plate with tin electrolytically, rather than by hot dipping, was a prewar development that was ex- tremely timely in reducing the amount of tin needed for making tin plate during the war. In 1950, 62.5 percent of all tin plate produced was made electrolytically. This trend in replacing the hot-dip method is continuing, but at a greatly reduced rate. The heavy investment in new electrolytic lines is being at least partially balanced by the saving in tin cost that can be effected, as well as use of automatic equipment, and pressure is strong to convert entirely to electrolytic tin. This probably will be accomplished in the United States within the next 25 years, although a small amount of hot-dipped plate may continue to be made for a few heavy coating applications. Since the minimum practical thickness for hot-dip coating is about 1.25 lb./base box pot yield, whereas electrolytic coat- ings can be of almost any thickness, it has been logical for the electrolytic lines to be used first on thinly coated tin plate. As heavier coatings are made, the tonnage handled by a given line is proportionately reduced per day; hence, the cost goes up much more rapidly than for the extra tin used. This slows the replacement of the present hot-dip tin-plating method by electrolytic lines for relatively heavy coatings. The saving in tin by making electrolytic tin plate is exempli- fied by the following comparison of tin used in 1950 with that used in 1941 when nearly all the tin plate was hot-dipped. U. S. consump- tion of tin in tin plate, long tons U. S. tin-plate production, Pounds of tin used per long ton of tin plate 1941 44, 854 *37, 000 2, 877, 207 4, 243, 005 35 1950 19.5 *Estimatcd after correction for tin in terneplate. Source: (International Tin Study Group, Statistical Bulletin, July 1951.) By practically complete conversion to electrolytic tin plate, as is expected within the next 25 years, a further reduction of about 2.2 pounds of tin per long ton of tin plate may be possible. This is on the basis of normal present electrolytic practice of an equal coating on both sides, and a saving of about 0.25 lb./bb in replacing the remaining hot-dip plate. An increase from 62.5 percent of the tin plate to 95 percent should not be expected to yield tlie same rate of savings as was accomplished between 1941 and 1950, since a heavier electrolytic coating will be needed to replace the remainder of the hot-dipped product. The saving between those years was caused partially also by a moderate reduction in the average amount of tin coating on the hot-dip plate. ELEGTROCOATING ON ONE SIDE In the past year, the Weirton Steel Co. has announced the production of electrolytic tin plate having one side much more heavily coated than the other side. This development was the result of encouragement and cooperation by the American Can Co. and by its purchase of rather large commercial trial shipments for the packing of various products. At present, tin plate having coatings of 0.25-0.75; 0.25— 1.00; and 0.50-1.00 pound base box is being made. The first figure is for the thinly coated side that forms the can exterior; the second coating weight is for the interior side of the can. The greatest savings are made, of course, by replacing com- paratively heavily coated tin plate. The weights mentioned are to replace 1.25 lb./bb hot dipped, and 1 lb./bb electrolytic tin plate. For example, rather large lots of this new type of tin plate are being used to pack tomato juice. No attempt is being made at present to eliminate tin entirely from one side, except for experimental lots, since 0.25 lb./bb is close to the minimum weight that gives fair protection and good solderability on present commercial can lines. The feeling expressed by men in the American Can Co. Research Division is that, as the side- seam joining problem is worked out (discussed later) it will be possible to use tin plate having no tin on one side. The idea of plating on one side is old, and no difficulty is anticipated with a patent situation that would handicap growth of this process. Several companies other than Weirton are now making this type of tin plate, including the U. S. Steel Co. and Bethlehem Steel Co. There is no strong technical reason why all of the electro- lytic-tin-plate producers cannot use the method, since re- arrangement of tin anodes or mechanical barriers can reduce, or even prevent entirely, deposition on one side. The difficulty is that, to get the relatively heavy coating on one side, it is necessary to reduce the speed to the same degree as when plating heavily on both sides. This means loss of production capacity, as compared with that attained in thinly coating both sides. The processes used by some companies are more adapt- able to high speeds and this production-capacity loss is less serious than with others. The only economy gained at present in plating selectively on one side is the saving in tin. To overcome this economic drawback to the use of electro- lytic tin plate for comparatively heavy coatings needed for corrosive wet packs, it should be possible to pass two strands of steel through the electrotinning equipment simultaneously. This would double capacity and save nearly half of the tin. Such an improvement would hasten the growth of electro- plating to replace hot-dipped tin plate, as well as making selectively coated tin plate more attractive economically. In case present lines cannot be adopted to such a mechanical arrangement, and difficulties do not seem insurmountable for some installations, such construction probably could be used advantageously in building new lines. POTENTIAL SAVING IN TIN Summarizing, electrotinning selectively is sound technically and can be adopted widely, as now practised, without any ma- jor equipment change. It is a particularly useful method of saving tin by replacement of the most heavily coated grades. Tests are in progress in practical commercial packs. Assuming that these will be successful, since chances are very strong that they will be, the potential saving in tin is estimated to be about 25 to 30 percent on the present basis of coating both sides, but with only a minimum coating of 0.15 to 0.25 lb./bb on the exterior can side. This would effect a saving of about 4 pounds of tin per ton of tin plate used for containers. By going to the extreme condition of a complete conversion to electrolytic tin- Page 58 ning on one side only, a saving of substantially half the tin, or nearly 8 pounds of tin per ton of tin plate, would be possible. This may be the most practical procedure if the soldering prob- lem is solved satisfactorily and two strands of steel strip can be electrolyzed simultaneously to maintain high capacity. Tin savings then would be: Pounds* 1) Tin used per long ton of tin plate for containers 19. 5 2) Tin used, same basis, but nearly all electrolytic 17.3 3) Tin used, as in (2) but one side reduced to 0.20 lb./bb 12.. 6 4) Tin used, nearly all electrolytic, one side only 8. 8 *Assuming the same coating for containers as for tin-plate production as a whole. In reality, heavier coatings are more common on tin plate used for other purposes, so this figure may be somewhat high for containers. This goal will not be attained quickly, but much of it may be attained in the next 10 years and the use of plate heavily tinned (i. e., 0.50 lb./bb) on both sides should drop to a negligible amount in that time. USE OF UNTINNED BLACK PLATE Many can ends are now made from untinned black plate and some can bodies are being made from the same untinned but coated black plate. This is a promising field, although sol- dering difficulties have not been overcome sufficiently to use coated black plate for purposes where acid flux residue would be harmful. Economically, the cost of protecting the bare steel by bonder- izing, then following with at least one coating of an enamel or plastic base coating for both inside and outside protection, amounts to fully as much as the use of 0.50-lb./bb electrolytic tin plate. It appears, therefore, that such a coated black-plate can will be used only in times of emergency to save tin, or for those applications where the can is going to be coated anyway, but it cannot at present compete with unlined cans of 0.50-lb./bb coating or less. The subject of can-lining lacquers, enamels, and plastic-base materials is complicated and undoubtedly is adequately covered in Roger Lueck's [9] report on future developments in can making. Likewise, his comments on "Operation Survival" should be adequate without repetition. This includes observa- tions on use of untinned black plate and its future. There is little hope of developing a successful plastic that can stand the rough treatment and have the properties desired in a food can at a price competitive with that of normal tin cans. Although tests are in progress on sterilization by radiation, so that heat sterilization may not be essential in the future, plastic cans show no economic promise, except possibly for some specialty items. Technically, they could be made. METAL SUBSTITUTES FOR TIN The most promising metal substitute for tin is aluminum. Although solid aluminum cans have been used successfully for some food products, they are generally unsatisfactory for wide use because of pinhole-corrosion problems and expense. How- ever, aluminum-coated steel has excellent possibilities of over- coming objections to the solid aluminum cans and of becoming a strong competitor of tin plate on an economic basis. There would still be difficulty in soldering side seams, but, as discussed later, progress in sealing by means other than soldering appears to be practically assured. Recent work on hot-dip aluminum coating steel products has demonstrated the effectiveness of alloying to reduce drastically the brittle alloy formation and assure excellent adherence and coverage. Hot-dipped steel sheet of tin-plate grade can be bent repeatedly until the steel fractures, without flaking of the aluminum coating. Thus, one of the most important factors that have hindered the use of aluminium-coated steel has been overcome. Much remains to be done in assuring well-bonded side seams and in testing cans so made, but in the next 25 years such an aluminum plate may well supplant tin plate for dry packs and possibly some wet food packs. This could mean the replacement of fully half of the tin plate now being produced, if other substitute measures were unsuccessful. It is our opinion that an aluminum-coated steel can, if shown by test to be effective in protecting the contents of the can, would be accepted by the public in general. The color of the aluminum-coated steel is good, protection against exterior rust- ing would be better than that in tin plate, and decorative or lining "enamels" still could be applied. Although aluminum has a specific gravity advantage of 3 to 1, the greater thickness of aluminum that probably would be used, at least in early stages of replacement, would nullify this advantage. To replace 15,000 tons of tin in tin plate, possibly 50,000 tons of aluminum would be used under the present coating basis. Present hot-dip aluminum coatings are comparatively heavy, since they have been made to compete with galvanizing and heavy hand- dipped tinned articles. Economies in making a thinner alumi- num coating would be expected to diminish this amount drasti- cally as the need for thinner coatings was established. Other than aluminum, the use of nickel, silver, titanium, and some other metals has been suggested for can use. Tests on nickel coatings have not been satisfactory from a corrosion standpoint in some packs, nor on a cost basis. Likewise, silver, even in extremely thin coatings, does not look promising. Titanium, like stainless steel, should make an excellent can, but the solid metal would be far too costly, and titanium-coated steel not only needs much development, but gives no indication of being so effective or inexpensive as tin plate. TERNEPLATE The amount of hot-dipped terneplate is small compared with total tin-plate production, i. e., an average of 100,000 short tons in the past 5 years, or about 2 percent of the tin-plate pro- duction. Tin used for this purpose in recent years has amounted to about 7 pounds per net ton. During the war, the amount of tin used in terneplate was reduced drastically. There has been some relaxation to a higher tin content for a few applications, but generally the new low-tin compositions have persisted. Terneplate could be replaced largely by a practically tin-free lead coating if it were necessary to conserve tin to the utmost. Economically, it is easier to hot dip with some tin present. An electrolytic lead coating might prove to be a good substitute, although this is not yet a thriving commercial operation. Much of the short terneplate has been used for making cans for lubri- cating oil and similar noncorrosive products, and in so doing tin plate has been conserved. This market can be, and is being, replaced by coated black iron tin-free cans. Aluminum-coated steel could replace much of the terneplate market it it were not for present difficulties in soldering and, Page 59 sometimes, in welding. Work to overcome these difficulties is progressing and chances are good that they will be overcome within the next few years. Indications are, then, that the use of terneplate, which has been decreasing since 1945, is not a vital one and it can be replaced by a combination of very thinly coated electrolytic tin plate, by coated black plate, by lead coating, or by aluminum-coated steel. MISCELLANEOUS TIN-PLATE APPLICATIONS Miscellaneous tin-plate applications, other than for cans and export, cover a wide range. The biggest single outlet is through jobbers and distributors for various construction and tinsmith applications of tin plate, next is domestic, and then come com- mercial appliances and utensils. Most of this type of tin plate is more heavily coated than for container use. Thus, the jobbers and distributors have been buying more than twice as much hot-dipped tin plate as electrolytic plate over the past several years. Appliances are still made preponderantly from hot-dipped tin plate, whereas the automotive industry uses mostly electro- lytic tin plate. Some decrease in the amount of tin used for this group of users can be expected as the trend continues toward use of electrolytic tin plate and some, but not all, of the econo- mies that result in plating one side more heavily will apply. However, much of this miscellaneous field for tin plate is likely to continue unless different material is substituted—as plastic kitchenware, stainless steel, aluminum, aluminum-coated steel, and coated black plate. Again, tin could be removed almost entirely from this field if necessary but, if readily available at a reasonable price, tin plate probably will continue to be made for these applications in the future. Use probably will show a comparative downward trend because of the press of more recent competing materials. Tin plate for bottle caps (crowns) and glass or fiber con- tainer closures follows the same conditions as tin plate for cans. Electrocoating on one side only, very thin tin coatings, or coated black plate are suitable, depending on the application. Plastic bottle caps were made experimentally at Battelle during the Second World War and tested satisfactorily, but they are more expensive than thin electrolytic tin plate. Some are being produced now commercially as novelty replacement caps. POSSIBLE SUBSTITUTES FOR TIN IN SOLDERING Tin-lead soft solders are so widely and easily used that sub- stituting other materials is probably more difficult than for any other general application of tin. CAN MAKING The tin in solder for side seams of cans has been decreased from about 40 percent before the war to about 2 percent. As one phase of "Operation Survival," experimental work appar- ently has been successful in eliminating even this small amount, and tin-free solder is claimed to be satisfactory. Its composition has not been released, except that it has a lead base. This is used on normal can lines. A more dramatic and much-sought goal has been the de- velopment of adhesives or cements that will effectively seal the side seam. Considerable success has been claimed. Judging from general progress in this field, there is reason for optimism that, in the next year or two, black plate, and probably alumi- num-coated steel, cans will be sealed successfully in this manner. At present, nine can lines are being operating by the American Can Co. with cemented side seams. No drastic change is needed in the can-making machinery; in fact, some simplification is obtained by eliminating the fluxing and solder bath. Thus, it appears possible to increase the body-maker can speed by up to 50 percent by using cements. Black plate (untinned cans) is now being soldered success- fully at full can-line speed, but an acid flux has been necessary and some difficulty has been encountered with residual flux which causes rusting at the side seam. Elimination of flux residue is one of the important problems now under study. By either developing a better fluxing procedure or using a cemented side seam, the growing use of coated black plate containers seems assured. Here again caution is urged not to consider the black plate can as displacing a thinly coated electrolytic tin plate if an internal coating is not needed. The cost of a coated black plate can is at least equal to that of an uncoated tin plate of not over 0.50-lb../bb weight. A minimum of about 0.15 Ib./bb of tin is needed now for solderability, unless an acid flux with its attendant troubles is used, as is done on black plate. The welding of black plate is a possibility that is over- shadowed at present by the success being obtained with side- seam cements. One method has been devised of continuously welding steel strip into a tubular form with a slight lap seam, and subsequently subdividing it continuously into can lengths [10]. Welding at high speeds was demonstrated as feasible and effective, but no successful mechanical device has yet been demonstrated for subdivision as fast as can lengths are formed. This problem may be solved in the future, but one cannot count on it. Work on welding side seams of cans after forming in can lengths was demonstrated successfully in Germany during the war and was used commercially. Some machines made 40 to 50 cans per minute. One machine was built that welded 110 to 120 cans per minute. Maier [12] considered that this ma- chine probably could operate two or three times as fast, but tests along similar lines in this country did not indicate such promise. However, the welding of individual can bodies has progressed in this country well beyond what was done in Ger- many, and there is still hope of success in attaining full can-line speed of 300 to 350 No. 2 can bodies per minute. Aside from saving tin and lead in solder, welding saves steel, since only a narrow side seam is needed, in place of a heavy lap seam. The joint is stronger and ends are more easily crimped over the side-seam joint. Although the elimination of solder in can-body seams will not effect the major saving that was made when the tin content of the solder was lowered to 2 percent, this still accounts for about 1 percent of the total primary tin used in solder. Solder is still used for sealing the ends of some canned-milk containers and in filling the filler hole of some cans for mik. If the Ameri- can Can Co. has been able to use tin-free solder for side seams, it seems logical that such a solder would serve for similar applications. Page 60 GENERAL SOLDER SUBSTITUTES Although tin-bearing solders undoubtedly can and will be largely eliminated from use in can making in the next few years for reasons of economy, as well as to effect tin savings, the pic- ture for other applications is not so good. During the last war, various solder substitutes were used [12]. The amount of tin used in solders dropped substantially from 28,225 long tons of tin in 1941 to 13,627 long tons in 1944, but this was about as far down as substitution could go then. The situation has not changed materially since then in that no new substitutes have been demonstrated commercially, and by drastic economy the same low figure probably could be attained. However, from the economic standpoint, higher tin solders were used, as their use was permitted, and the consumption of tin in solder rose to 27,219 long tons in 1950. One of the largest uses for solder is in making automobile radiators and various heat exchangers, although much of this is recovered by salvaging and is recirculated. A strong move is afoot to use aluminum radiators in place of copper and brass. This application appears to be feasible, except for finding a suitable solder and flux. Some tin-free solders have been used with some success, as 30 zinc-70 cadmium; 60 zinc-40 cad- mium; or 30 zinc-65 cadmium-5 aluminum. Most of the alu- minum solders that contain tin use a lot of it. Thus, from 70 to 80 percent of tin and 20 to 30 percent of zinc are among those that have been highly favored. Since cadmium is usually much more scarce and expensive than tin, the cadmium-zinc type of solder offers little hope as a successful tin-base solder substitute. The situation on aluminum soldering is by no means settled, and until research in progress is completed, no definite comments can be made on how the use of aluminum will affect the tin-in-solder picture. For electrical connections, it has been found to be false econ- omy to use a low-tin solder. More solder is used to get proper bonding, fluxing is more difficult, and there is less assurance of a permanent tight connection. With growth in the use of elec- trical controls and equipment, this use of tin in solder would be expected to increase. However, with aluminum displacing copper for many such applications, welded and other solderless connections are being made which may fully compensate for the present rapid growth in the need for more joints. A new rosin-type solder flux, announced recently by the Kes- ter Solder Co., permits direct soldering of wire connections to galvanized parts. This eliminates the need for using tin plate or a tinned part of better solderability. Indium can be used in place of tin in solders, and it has the added advantage of permitting the soldering of glass or ceramic parts or of making metal-to-glass seals. It is still too expensive to replace tin economically for normal soldering, but it remains an emergency substitute. Gallium likewise aids in promoting the wettability of solders but is too expensive for wide use. The use of such metals in minor amounts as metal "wetting agents" is not being overlooked, and they may have a future value in soft solders. Adhesives have a field to replace tin-lead solders beyond can making, and this probably constitutes the best substitute for soft solders where electrical conductivity or maximum strength is not paramount. In making fillet-wiped soldered joints, the Bell Telephone Laboratories [13] demonstrated that very substantial savings in tin can be effected merely by changing the design of the joint. More than 60 percent of the solder was saved by so doing, and field experience seems to have upheld the early predictions in savings. This method is being adopted more widely in this coun- try and, by education, probably will gradually be adopted in other countries. Tin-base babbitt alloys have a very limited use in automobile bearings because of low fatigue resistance. They are still used for many miscellaneous machinery applications, because of cus- tom and ease of manufacture, but these are becoming of little importance. Most of the tin now used in bearing liners is in the form of a lead-base bearing containing from 1 to 10 percent of tin. A steel-backed, sintered lead-base alloy that gives a porous lining is popular for some automobile engine bearings. It appears probable that aluminum alloys, containing 6 percent of tin, will be used rather extensively in the future as some of the manufacturing problems in these applications are worked out. In general, the trend toward using tin only in small amounts in alloys is expected to continue, with plastics, roller bearings, and lead-base alloys making it necessary to use even less tin for bearings than is the case now. Tin in babbitt amounted to less than 6 percent of the total tin used in the United States in 1950. VARIOUS SAVINGS IN USE OF TIN Tin for collapsible tubes has become a very minor applica- tion. Aluminum and lead tubes have been found to be adaptable to practically all applications, except for a few medicinal products. Such metals are, in general, less expensive than tin and their use has persisted after tin restrictions have been removed. There is slight possibility that plastics can be used for col- lapsible tubes, but so far they do not collapse well, irreversibly. Also, difficulty has been experienced in maintaining essential oils and complete freedom from change in the contents on stor- age in some very thin collapsible tubes. Tubes fabricated from plastic-coated aluminum foil have been reasonably effective, but manufacturing costs so far have not been competitive with solid-metal tubes. Tin foil, once an important use, has been largely displaced by aluminum foil. Only a few special applications of minor im- portance remain. Most of the tin used in bronze is secondary or recovered tin. In 1949, 84 percent of the bronze made was from secondary tin; in 1950, bronze from secondary tin was 73 percent of the total. The most logical substitute for bronze for marine service is titanium or titanium-clad or -coated base metals. Such substitu- tion is to be expected in substantial amounts in the next 10 to 15 years. For bronze plaques, cemetery markers, and statuary, it is possible to use practically tin-free bronze. The return of scrap from such uses is very high. Tin-bearing bronzes for gears, valves, pump parts, and steam fittings constitute well-established uses for which no effective substitutes are apparent on an economic basis. Page 61 Solid tin in tubing or sheet form seldom is used now and sub- stitute metals can be used for all applications. Aluminum is the most used substitute for distilled-water lines. Stainless steel is also a popular substitute. Practical elimination of the use of massive tin is expected in the future. PROSPECTS FOR TIN IN MISCELLANEOUS USES General hot dipping of base metals in tin is expected to con- tinue because of the convenience, economy, good appearance, and nontoxic nature of the coating. Increased competition from plastics, stainless steel, aluminum, aluminum-coated steel, and titanium is expected. This is for such applications as dairy and food-handling equipment. Such substitutes or alternative ma- terials could eliminate tin for these applications in times of scarcity, but, because of the well-established position of tinned equipment and ease of manufacture, at least a substantial por- tion of this market should persist for several decades. Tin salts are produced largely from detinning scrap tin plate, since it is more lucrative to convert the dissolved tin to salable compounds than to electrolyze to high-purity metal. Very little tin oxide is now used as an enamel opacifier, since other metal oxides, including titanium oxide, have been found to be more effective and cheaper for most purposes. There are a few appli- cations of organic chemicals for pharmaceutical uses and in lubricating and textile oils which may be expected to continue. However, the largest and still-growing field of use for tin salts is for forming electrolytes for electrodeposition of tin. This application is expected to grow substantially, because of its economy, controlled coverage, and other advantages. NEW USES FOR TIN As with nearly all metals, some applications may diminish or disappear entirely, while new ones are being found. Tin is no exception. Partly to encourage the finding of new uses where unique properties of tin may give a competitive economic ad- vantage over other materials, the Tin Research Institute is de- voting the efforts of a research laboratory in England and the services of trained men in several other countries to working out technical problems that concern tin-bearing materials. Little new research is done by the Tin Research Institute in this country, although three men are currently devoting full time to answering technical inquiries and aiding American industry in overcoming difficulties associated with tin. This involves some research sponsored at Battelle Memorial Institute. Partly from the efforts of the Tin Research Institute and partly from normal growth through general experimental activ- ities elsewhere, some new uses are being developed to replace at least part of expected losses in old applications. Most promis- ing of these is the coating of various products by electrodeposi- tion with tin, or with a tin-copper alloy, or with a tin-zinc alloy, or with a tin-nickel alloy. Coating electrolytically with tin alone is scarcely new, but some improvements have been made to make control easier and results more dependable. This is replacing heavier hot- dipped coatings in some instances, but putting tin coating on a firmer competitive basis. Once established, there is a tendency to use electro-tin coatings for some products not previously tinned. Thus, it offers an advantage over chromium plating by having far better throwing power in electrodeposition, and over zinc by being nontoxic and nonchalking. TIN-ALLOY COATINGS Tin-copper or speculum plating makes possible red bronze coatings, as well as white bronze or speculum surfaces. The latter is a white metal containing about 45 percent of tin that probably comes closer, in appearance, to a silver coating than any other metal. Its use in the future will not be large, but for decorative interior use, a reasonably good future seems logical. Until recently, use of this process was handicapped in the United States, not only by tin restrictions, but by the need to buff the coating after plating. An improved process of bright speculum plating now has been worked out and the savings in labor costs are expected to make it fully competitive with other metal surfaces for similar applications. A tin-zinc coating of around 80 percent of tin and 20 percent of zinc is being used industrially in England and to a lesser extent in Holland, Belgium, and Sweden for protection against corrosion and because of good appearance. It has many ad- vantages over galvanizing, including very good solderability, but its greatest potential application is to replace cadmium plat- ing. Use of this alloy coating in the United States is expanding as its advantages are realized. However, fear of a tin shortage is serving as a handicap, at present, to those who would like to use this coating. Tin-nickel alloy coatings are being viewed in England with considerable enthusiasm. This alloy contains about 65 percent of tin and is bright as deposited. The faint rose-pink color is considered to be particularly attractive for decorative purposes, and the resistance of the alloy to atmospheric corrosion makes it suitable for both indoor and outdoor use. The alloy coating is hard and abrasion resistant, and resists weathering, attack by cold mineral acids, and hot concentrated nitric acid. Experi- mental installations are in England, Holland, and the United States. (Battelle Memorial Institute, and Metal and Thermit Research Laboratories). Tin-cadmium alloy plating containing 25 percent of tin has been developed by the Wright Aeronautical Corp. It has better corrosion resistance than cadmium or tin alone. Tin-lead elec- trodeposits have shown some promise for obtaining surfaces having easy solderability. Other tin-alloy coatings are being investigated. TIN AS A SEMICONDUCTOR Tin is unique in having an alpha phase (gray tin) that trans- forms at a comparatively low temperature, 13 degrees Centi- grade. Heretofore, this has been merely a curious phenomenon with only nuisance value in causing users to worry about find- ing their tin supply converted to a heap of grey powder some cold winter morning. With the growth in interest by physicists in semiconductors, of which gray tin is one, possibilities of put- ting this to practical use arise. The other semiconductors—silicon, germanium, tellurium, selenium, and some forms of phosphorus and carbon—have drawbacks in some potential uses, as the scarcity and lack of ductility of germanium, tellurium, and selenium, and the diffi- Page 62 culty in getting silicon sufficiently pure. Gray tin also is not adapted for some applications, but it can be made available in relative abundance, and a frigid metallurgy may be worked out whereby it can be made in a solid, and possibly even in a ductile, form. This may not take many tons of tin in the future, and no estimate can be made now, but it is the type of develop- ment that could change the picture for tin drastically. CONCLUSIONS Emphasis has been given to substitutes for tin. In view of this discussion, which indicates that heavy inroads will be made into many present applications of tin in this country, one should not assume that tin is a dying metal. That is not the case. Its many excellent properties are such that it still will be a very useful and much-used metal in the future. However, the trend in the United States is to render it a noncritical metal so we can get along without it when necessary. This hope is being realized rapidly. We soon should be in the position where we can take it or leave it, according to the economic desirability and available supply. The most important present need for tin has been as tin plate, that is, 49 percent of the total 76,030 long tons of primary tin consumed in 1950. Most of this (more than 96 percent) is being used for can making or export. Under the impact of many measures—extension of electrolytic tin for tin plate, use of electrolytic tin on one side only (or only sufficient for minimum external protection and solderability), use of coated black plate, elimination of solder by welding or side-seam cements, and sub- stitution of aluminum-coated steel—this tin may be expected to be reduced drastically. This reduction will probably amount to at least one-third of the present requirement of tin for can making in the next 20 or 25 years, from economic considera- tions. Almost complete elimination of tin for tin plate would be possible if cost were a minor consideration. This is still a possi- bility with ample tin supplies, by using aluminum-coated steel, but too little information is available on the production and behavior of very thinly coated aluminum plate to judge the ex- tent of its replacement of tin plate. Note that this heavy reduc- tion in the need for tin is for an application where there is little recovery of secondary tin. Some substitution is likely to replace part of the tin now used for solder, and increased use of aluminum in place of copper and brass may play an important part in this. Although the amount of tin in solder could be curtailed to possibly a third of its present volume, if necessary to do so, it will not be feasible economically to reduce the total more than a few percent in the foreseeable future. This is largely because of the desirability of soldered electrical connections and miscellaneous applications where soft, tin-lead solders are the easiest to apply. Tin for collapsible tubes and foil is likely to be reduced in volume, rather than increased; tin for babbitt is likely to be reduced somewhat; tin in bronze probably will be reduced gradually as titanium takes over some applications. Thus, the tendency for these applications, as well as tin plate, is to demand less tin proportionately in the future than is being used now. Electrotinning and alloy coatings are expected to require more tin in the future. New applications are expected to rise. Research is under way to find new uses, just as research is in progress to eliminate or reduce the tin for present applications. Reduction in the use of tin in tin plate and some other appli- cations is going to be slower in Europe than it has been here. Particularly in England, tin has not been regarded as a critical metal, since almost all metals are critical there, but as economic savings are demonstrated here they undoubtedly will be adopted eventually elsewhere. Tin-ore reserves appear to be adequate for at least 25 years' production at the present or a moderately enhanced rate. Chances for increasing these reserves are fair, through con- tinued exploration and improved technology of mining and concentration. Tin does not have the bright future ahead that some of the metals like aluminum, magnesium, titanium, and molybdenum may have, but neither has it a dark outlook. It soon may not be regarded as a critical metal because of known alternative ma- terials. Under conditions of no artificial restraint, there should be a modest growth in the total use of tin in the next 25 years, but it probably will be slightly under the average growth in the use of other metals. References 1. London, 1949. 2. J. P. Gustin, Tin Research Institute Representative for Belgium and France, Communication, October 1949. 3. Bur. of Mineral Resources (Australia), Quarterly Bulletin, No. 3, 1949. 4. Draft Development Plan of Malayan Federation, Tin, May 1951, p. 2. 5. Report of Malayan Geological Survey Dept., 1948, Tin, September 1949, p. 21. 6. Illustration, "A Dutch View of the Mining Industry," Tin, August 1951, pp. 3-4. 7. Victor A. Lowinger, Former Chairman, International Tin Research and Development Council, formerly in civil service of Malayan Government. 8. J. S. Baker. "World Survey of Tantalum Ore," I. C, 7319, U. S. Bureau of Mines, March 1945, p. 504. 9. Lueck, Roger, Director of Research, American Can Co., Report on Operation Survival, August 31, 1951. (Unpublished.) 10. Gonser, Bruce W., U. S. Patent 2177104. 11. Maier, Curtis, "A Survey of the German Can Industry During the Second World War," PB 547, Combined Intelligence Objectives Subcommittee. 12. Reichelderfer, C. A., and Gonser, B. W. "Tin-Free and Low-Tin Solders," Steel, February 26, 1945. 13. Schumacher, E. E., Bonton, G. M., and Phipps, G. S. Trans. Aime, vol. 152, 1943, p. 291. References Elsewhere in This Report This volume: Tasks and Opportunities. Vol. II: The Outlook for Key Commodities. Projection of 1975 Materials Demand. Reserves and Potential Resources. Tin. U. S. Bureau of Mines Tables—Tin. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Hodge, W., and Thompson, A. J. "Role of Technology in the Future of Copper." 995554°—52 6 Page 63 Hie Promise of Technology Chapter 6 The Technology of Titanium* Unlike the economic situation for many of the older metals, he economy of titanium is an expanding one. Here is a metal which has superlative free world resources. Furthermore, it has :hree unbeatable characteristics which insure its place as a najor metal. These are high strength, light weight, and good :orrosion resistance. Momentarily we are very short of titanium. This is not the 'ault of production rates, but is only a natural condition in /iew of the infancy of the industry. Since the modern history of dtanium started in 1946, production rates can be considered to 3e phenomenal if they are considered in relation to each other md not to the leveled-ofT production rates of the older metals. Consider that before 1946 annual titanium production was measured in tens of pounds. In 1946-47, it was measured in mndreds of pounds; 1947-49, in tons; 1949-50, in tens of :ons; and 1950—51, in hundreds of tons. Every year or so from 1946, production jumped 10 times. Estimated production from nidsummer 1951 through 1952 is about at this amazing rate. Considering the infancy of the titanium industry, production is accelerating at a very satisfactory rate. This rate of expan- sion can be expected to continue for a few years, and then slow down. It cannot continue indefinitely. Geometric progressions get out of hand after about 10 sequences. However satisfactory the present rate of expansion of pro- duction, technology has to solve many important problems, for which solutions are at present tacitly assumed, before the expansion may be realized. How to expand production from now on is the problem for technology so far as titanium is con- cerned. Enough is known about the properties and potential uses for titanium to assure that if production can keep on expanding so as to produce, eventually, hundreds of thousands of tons of titanium annually at a fair competitive price, the consumption of the metal will take care of itself. Other tech- nological problems exist that will tend to retard large-scale consumption of titanium, but these are of second order in com- parison with the problem of production, and adequate solutions to them are probable within a few years. It is not the intent of this report to discuss titanium resources in any detail. The United States has large ilmenite deposits in Florida, New York State, the Carolinas, and Idaho which would be adequate to handle even expanded titanium-metal *By Robert I. Jaffee and John M. Blocher, Jr., Battelle Memorial Institute. Here we are considering only cold-ductile titanium. production as well as pigment titanium dioxide requirements, assuming only domestic reserves are utilized. Canadian reserves are much larger than those in the United States, and can be counted on to continue to bolster the already very satisfactory ore-reserves situation. Rutile deposits, although not so im- portant as ilmenite at the present time, are not discounted in the picture of future titanium reserves. Rutile has the advan- tage of being able to be chlorinated directly to TiCL, an important starting point for both titanium sponge and titanium dioxide production. Also, rutile can be used directly in making ferrotitanium. Once titanium production reaches large-scale tonnage fig- ures and the cost comes down from its present high figure of $5 per pound for sponge, the payoff with respect to substitution of less favorably disposed metals will be realized. For normal peacetime applications, substitution by titanium can be ex- pected to take hold only after the heavy armed forces demand for the metal has been satisfied. Meanwhile, it can be con- sidered that the introduction of military requirements into the titanium-production picture is very healthy for the titanium industry. It affords the support for immediate expansion at high cost levels, so that production can be increased to the point where the real cost of titanium will be lowered to levels wThere it can compete with other common metals. EXTRACTIVE PROCESSES At the present state of development of the titanium industry, it appears that a disproportionate effort is being expended in fields other than that of extractive metallurgy. This is true in general for research and development programs sponsored by governmental and industrial agencies alike, although indus- trially sponsored research places the greater emphasis on devel- opment of new processes. The only extractive process that has reached a commercial scale is that proposed by Kroll [1,2] and further developed at the U. S. Bureau of Mines [3, 4, 5], involving the reduction of titanium tetrachloride with magnesium. Some fundamental limitations of the process, which will be discussed later, require that it be carried out as a multiple of small production units, rather than in a few large units, resulting in expensive operation. Thus, there is a reluctance among those in industry to expand production by this method in the fear that a new process will Page 65 evolve for producing the metal more cheaply. This fear has not been matched by appropriate expenditures for developing other processes, however. This situation is further enhanced by the fact that despite the cry for more titanium, the actual de- mand for titanium metal is a potential one and still uncertain. Industrial firms are hesitating to expand production by the Ki oil process in the face of uncertain demand, while potential con- sumers hesitate to make commitments in the face of uncertain supply. The Titanium-Zirconium Panel of the Metallurgical Ad- visory Board, National Research Council, National Academy of Sciences, has made recommendations designed to break this deadlock and at the same time to promote the development of new processes for the production of cheaper titanium metal. The panel has also recognized the need for research of a fundamental nature, and has recommended the expenditure of Government funds for support. Government support of the infant titanium industry, if prop- erly handled, will result in the rapid expansion of production, from which will come a large amount of technical "know-how." More important, in view of the present picture, will be the accelerated development of new processes for the extractive metallurgy of titanium. Where this will lead is difficult to deter- mine. One can but analyze the "bottlenecks" in known proc- esses and point out where improved technology will serve to break them. The role of technology in the future of new proc- esses can be analyzed only generally as it applies to certain conditions which will be met in all titanium-production processes. DUCTILITY OF TITANIUM DEPENDENT ON PURITY The future of processes for titanium depends to a large extent, upon the ductility of the metal produced. Titanium is exces- sively embrittled by small percentages of oxygen and nitrogen [6] which are readily absorbed from air at elevated tempera- tures. It is this characteristic which, for many years, obscured the true physical properties of the pure metal. The avidity of titanium for oxygen and nitrogen has defined all attempts to remove these impurities, once absorbed. Thus, it is generally necessary to exclude air carefully in extractive processes. This may be accomplished by supplying an inert-gas blanket at a slight positive pressure to reduce diffusion of air through small leaks or openings in the equipment. The exclu- sion of air may be accomplished also through the maintenance of a positive pressure of a gaseous reactant where such pro- cedure is feasible. In other processes, vacuum-tight equipment is required. There is some evidence that at least partial success has been attained in using a fused fluoride slag as a blanket. Although the exclusion of air from the reaction zone requires some care, specialized equipment, and moderate added cost, this factor is not now, and probably will not be, a bottleneck in titanium production. Aside from the exclusion of air to prevent pickup of oxygen and nitrogen, attention must be given to the elimination of these elements as impurities in the reactants used in most extractive processes. In some instances, as will be discussed in detail with reference to existing processes, this becomes difficult and hence constitutes a large factor in the cost of the final product. Whether the requirement of extreme purity of reactants will be a limiting factor in processes unknown at present is difficult to predict. However, it will certainly constitute an ever-present contribution to the cost of titanium production. The above comments with respect to oxygen and nitrogen apply equally well to other common contaminants, carbon, silicon, aluminum, and iron, although relatively higher per- centages of these impurities may be tolerated without drasti- cally impairing the mechanical properties of the product. Whereas only about 0.3 percent of nitrogen or 0.5 percent of oxygen are tolerable, though by no means desirable, 1 percent of carbon, 1 percent of silicon, 5 percent of aluminum, or 5 percent of iron may be present without reducing the ductility of the metal too drastically. It should be emphasized that these limits of impurities are for individual contaminants. In gen- eral, they cannot be tolerated together in useful metal. For example, to be useful in making high-titanium alloys, the tita- nium should contain less than 0.2 percent of oxygen and nitrogen combined. It would be convenient to be able to carry on some reduction processes at temperatures in excess of the melting point of titanium (3,140 degrees Fahrenheit). However, in addition to the pickup of the impurities listed above, titanium tends to alloy with most of the common metals. Thus, it has been impossible up to the present to develop a crucible to hold molten titanium for extended periods. This fact is discouraging, not only because it constitutes a temperature limitation in reduction processes, but because it poses a barrier to devising continuous processes for handling titanium metal, as well as making it difficult to cast titanium into varied forms. It is extremely doubtful that a completely inert material will be developed for prolonged contact with liquid titanium; how- ever, if the contact time can be sufficiently reduced, melting, pouring, and casting may be accomplished before excessive contamination results. Some progress in this direction has been made in rapidly melting titanium in carbon crucibles, and further progress is expected. It is possible that other relatively stable refractories may be developed for this purpose. It is the writers5 purpose to outline briefly the salient points of known extractive processes in this section, and to analyze these processes with the purpose of predicting the possible effect of future technological developments on the production of low-cost titanium. SODIUM REDUCTION OF TITANIUM TETRACHLORIDE The reduction of titanium tetrachloride by sodium is of his- torical importance, since it was the process used by Hunter [7] in producing the first ductile titanium. Through his work, Hunter demonstrated the inherent ductility of titanium metal, and although he did not discuss the effect of impurities on the relative lack of cold ductility in the metal he produced, he realized that the presence of oxygen and nitrogen in the metal prepared by previous workers masked the true properties of the pure metal. Hunter's reduction was carried out in a bomb and, in such a form, the process would not be feasible for commercial produc- tion of low-cost metal. Freudenberg [8] modified the process to decrease the rate of heat evolution and resultant high pressure Page 66 by bubbling titanium tetrachloride through fused potassium chloride covered with molten sodium. The use of potassium chloride, which serves as a solvent for the sodium chloride pro- duced, is necessitated by the narrow operating temperature range between the melting point of sodium chloride (801 de- grees Centigrade) and the boiling point of sodium metal (880 degrees Centigrade). The objectionable use of the potassium chloride was overcome by Kroll, et aj [9] , in producing a flux in place by reducing with a mixture of sodium and magnesium. The metal is obtained in the form of sponge, together with objectionable amounts of pyrophoric powder resulting from vapor-phase reduction. The sponge must be leached free of unreacted reducing agent and chloride flux before melting or consolidating by powder-metallurgy techniques. The leaching process is laborious and has the added objection of contaminat- ing the titanium with absorbed hydrogen, which is particularly troublesome in subsequent melting. The reducing agent and flux could be volatilized from the sponge, as is practiced in the Kroll magnesium-reduction process; however, sodium chloride has a lower vapor pressure than magnesium chloride, requiring that a somewhat higher temperature be used for an equivalent rate of volatilization. In addition, much of the sodium condensed is a pyrophoric powder. Although technological advances would undoubtedly reduce the cost of producing titanium by sodium or sodium- magnesium reduction, the fundamental objection to the forma- tion of pyrophoric titaniuln through vapor-phase reduction has discouraged research on the process. In most other aspects, the problems are equivalent to those encountered in the Kroll magnesium-reduction process. These will be discussed later with reference to that process. It will suffice to state here that there are many more disadvantages than advantages in the use of sodium as compared with the use of magnesium alone. MAGNESIUM REDUCTION OF TITANIUM TETRACHLORIDE The Kroll process [10] for the production of titanium by the magnesium reduction of titanium tetrachloride is currently practiced on a moderate industrial scale to produce a good grade of titanium metal from which useful alloys may be made. In general, the current procedure is to feed liquid titanium tetrachloride at a controlled rate into an iron reaction vessel containing molten magnesium. The titanium in the form of a sponge tends to settle to the bottom of the molten magnesium chloride formed, while the unreacted magnesium floats on top. Part of the magnesium chloride may be tapped from the reactor as the run progresses to increase the capacity of the unit. After the reaction is essentially complete, the reactor is cooled and all but a peripheral layer of the product is machined from the reactor in a dehumidified room. This product, containing oc- clusions of unreacted magnesium together with magnesium chloride and some lower chlorides of titanium, is placed in a vacuum retort where all but about a residual 0.3 percent of magnesium and magnesium chloride are volatilized. The rel- atively pure sponge is consolidated preferably by arc melting or induction melting in carbon, whereupon the residual volatile impurities are removed. The reduction of titanium tetrachloride with magnesium results in a considerable evolution of heat which is difficult to dissipate in a large reactor due to the low thermal con- ductivity of magnesium chloride. The temperature of the iron reactor must be kept below about 960 degrees Centigrade to avoid alloying of titanium with the iron, resulting in the fusion of the reactor at the point of contact. These facts limit the size of the reactor to 100 to 200 pounds per batch, depending on the individual design. Details of current reactors are not available. It is understood that they have considerably larger capacities than the original Kroll-type reactor. These larger capacities may be accomplished by a semicontinuous operation of multishaft reactors, in that the feed is added and magnesium chloride is extracted continuously. Although work is being done in devising a reaction pot other than iron that will per- mit higher temperatures, the size limitation found in batch-type operation will be overcome best by the development of a process in which the reaction products are continuously with- drawn from a relatively small reactor. Maddex [11] has proposed a method of continuously feed- ing the reaction product of a magnesium reduction unit into an arc where the magnesium chloride, unreacted magnesium, and other volatile impurities are volatilized while the arc- melted titanium ingot is being formed. It is proposed to with- draw continuously the ingot from the arc unit. This com- bination, together with recycling of the magnesium and chlo- rine, combined with a magnesium electrolytic cell and ore chlorinator, has all the aspects of a truly continuous process. The continuous addition of magnesium and titanium tetra- chloride to the reactor has been worked out on a small scale, as has the arc melting of the reaction product. However, the two have not been combined, nor has the recovery of con- densed magnesium and magnesium chloride been demon- strated. All other aspects of the process are in a relatively high state of development. Although some details of this continuous method are some- what tricky, there is reason to believe that the principle may prove practical as further technological advances are made. Kroll [12] points out that this continuous process would require the use of a direct-current arc to give reasonable life to the electrode, but that the use of such an arc would result in the undesirable electrolysis of the magnesium chloride. While this may be true, it should be realized that this does not alter the fundamental concept of volatilizing all but the titanium. It does, however, introduce complications in the re- covery of the volatile materials. Considerable research and development work is in progress at Battelle Memorial Institute, the U. S. Bureau of Mines, and elsewhere in an effort to devise a continuous Kroll process. It is only through the success of such a process that magnesium reduction of the tetrachloride will be competitive in the future with new processes now in earlier stages of development. LARGE-SCALE PRODUCTION OF TITANIUM TETRACHLORIDE Since titanium tetrachloride is a starting material in several possible reduction processes, its production on a large scale deserves some comment. Titanium tetrachloride has been prepared on a large scale for many years by the chlorination of titanium carbonitride or titanium oxide-carbon mixtures. Titanium tetrachloride for Page 67 chemical-warfare use in smoke screens need not be of high purity. However, the production of pigment-grade titanium oxide by oxidizing the chloride requires that higher purity chloride be used to prevent discoloration of the pigment. When the use of titanium tetrachloride as a source of titanium is con- templated, additional purification may be required. Although preparing titanium tetrachloride from rutile for metal production is feasible for small-scale production, the large-tonnage metal of the future must be extracted from the relatively vast deposits of ilmenite. As an ore, rutile has the advantage of low iron content. However, the supply is limited, and future large-scale production must be considered on the basis of chlorinating ilmenite directly or chlorinating the elec- tric-furnace slags of the type now produced at Sorel [73] as a coproduct of pig-iron production. Whereas the ilmenite ore con- tains 32 percent of Ti02 and 36 percent of Fe, the slag may contain 72 percent of Ti02 and 6 percent of Fe. Thus, with the bulk of the iron having been removed, this material constitutes an attractive starting point in the production of titanium tetra- chloride. The technique of producing crude titanium tetrachloride is well in hand [14, 15]. Further advances may be made in devis- ing a more continuous process. Most of the progress will come, however, in reducing the cost of purification. The impurities found in titanium tetrachloride produced by chlorinating a mixture of the slag with coke are free chlorine, FeCL, COCU, TiCU, VCL, VOCl3, HC1, chlorohydrates of titanium, and sulfur chlorides. All but the vanadium com- pounds may be separated by fractional distillation. Vanadium is conveniently separated by reducing to a less volatile form with copper. As the titanium industry becomes more stabilized, short cuts will be made in the purification process. Since iron, carbon, vanadium, and even oxygen are useful alloying agents, it may be possible to leave some of these impurities in the tetrachloride going into titanium alloys. It appears that, as long as the reduction processes are batch- wise with high labor cost, the production of titanium tetrachlo- ride will not constitute a cost bottleneck. When significant econ- omies are effected in the reduction process, the cost of produc- ing titanium tetrachloride will be a significant factor in the price of the metal. It should perhaps be noted that readily available materials are used, for the most part, in the construction of titanium tetra- chloride plants. Hence, large-scale production will not put much of a strain on our structural-materials economy. HYDROGEN REDUCTION OF THE HALIDES The chlorides and bromides of titanium may be reduced with hydrogen at high temperature to yield ductile titanium metal if extreme precautions are taken to purify the large vol- umes of hydrogen gas required. The tetrabromide reduction on hot filaments was used by the Germans at Osram [16] to produce titanium for their electronics industry. Although the hydrogen reduction of halides offers some possibilities, the need for purification and recovery of large volumes of hydrogen makes this process unattractive. It should be noted that the hydrogen reduction of titanium tetraiodide is not feasible, since the product, hydrogen iodide, is very unstable. The attempt to use hydrogen as a reducing agent is practically equivalent to introducing an inert gas into the thermal dissociation of titanium tetraiodide. Under suitable reducing conditions, the lower halides of titanium TiX2 or TiX3 may be formed. At higher temperatures, these compounds undergo a disproportionation reaction: 2 TiX2-VTiX4+Ti, or 4 TiX3-*3 TiX4+Ti. The tetrahalide is, in all cases, relatively volatile, and its re- moval from the reaction zone results in the progressive for- mation of titanium metal. Although this process has not been investigated extensively in the United States in the case of titanium, research is in progress on the corresponding production of aluminum by subhalide disproportionation. Aluminum subhalide distillation is the subject of British Patent No. 635318, and U. S. Patents Nos. 2184705, 2470305, and 2470306. It is well known that titanium mirrors are formed on the inside of de Boer bulbs in which the thermal dissociation of titanium iodide is being carried out at a bulb temperature of 500 degrees Centigrade, resulting from the disproportionation of titanium diiodide. It is felt that this potential process is worthy of considerably more thought and experimental work than it has received in the past. The principal disadvantage lies in the fact that a high-temperature reaction train must be employed in an in- tensely corrosive atmosphere. THERMAL DISSOCIATION OF TITANIUM TETRAIODIDE The de Boer (or Van Arkel) process [17] has been the source of the purest titanium metal available for research pur- poses. In general, the process consists of sealing crude titanium metal and a small amount of iodine into an evacuated container provided with electrical leads used to supply heating current to a starting filament. The container is heated to 150 to 200 degrees Centigrade whereupon the iodine reacts with the crude metal to form volatile titanium tetraiodide. The iodide diffuses to the filament (maintained at about 1,400 to 1,500 degrees Centigrade), where it dissociates, depositing titanium metal. Elemental iodine released in the dissociation diffuses to the crude metal to react and complete the cycle. Titanium is thus produced in the form of a compact bar of ductile (60 to 100 Vickers) metal, and is relatively free of oxygen and nitrogen, because these elements are not liberated in the reaction of iodine with the crude metal. The advantages of the iodide process lie in the fact that a high-purity product is produced in a compact form suitable for direct cold working or for arc-melting stock where alloying is desired. It is, however, a slow process batch-wise, requiring the use of an expensive ($5 to $7 per pound) starting material. Consequently, the de Boer process cannot be considered suitable for large-scale commercial production, and commercial produc- tion of titanium from the iodide must await the development of a cheaper source of titanium, and preferably of a continuous, or at least semicontinuous, process. Research is proceeding along this line, and an efficient, practical process appears to be pos- Page 68 sible. However, too little is known of the fundamental diffi- culties to predict how this method will compete with mag- nesium reduction. Because of the high cost of iodine, its recovery must be held at a high value. It is felt that technology will advance to the point that such high recovery will be economically feasible in large-scale production with a completely cyclical system. Other potential sources of trouble are: the necessity of operating at reduced pressure, irregularities leading to "burn-out" of the resistance-heated deposition element, and the corrosive nature of iodine and iodides. These should be reduced in importance as technology advances. The iodide process has the following advantages over the magnesium reduction of titanium tetra- chloride: the metal produced is of higher purity, the metal is in a compact form suitable for direct processing, the metal is sufficiently ductile to be cold worked, and only one element, i. e., iodine, need be recycled, as opposed to the need for re- cycling both magnesium and chlorine in the Kroll process. The reduction of titanium tetrafluoride can be accomplished with sodium, magnesium, or calcium. There are several disad- vantages in the reduction of the fluoride, as compared with the chloride, which will not be discussed here. The most important drawbacks are the toxicity of fluorine and high cost of recovery. It is felt that reduction of titanium tetrafluoride holds little promise as a commercial process. ELECTROLYTIC PROCESSES TO PRODUCE TITANIUM In general, electrolytic processes for the production of ti- .anium result in the formation of a powdery deposit highly contaminated with oxide. The fused-salt electrolysis of lower titanium halides dissolved in a relatively stable salt, e. g., sodium, potassium, or magnesium halides, holds some promise of eventually becoming a commercial contender, since oxide contamination can be avoided in the electrolysis step. However, as long as it is only possible to produce a powdery deposit, the titanium will be oxide contaminated in subsequent handling by presently known consolidation techniques. Application of the arc volatilization of the carrier salt similar to the continuous handling of the magnesium-reduced titanium proposed by Maddex [//] may be applicable here. However, the complete success of a fused-salt electrolytic process involves a better fun- damental understanding of the mechanism of electrodeposition to avoid powder formation or "treeing." It will be only through the production of smooth adherent deposits of sizable crystals, or pellets, of titanium that electrolytic processes will become competitive with the Kroll process. It is understood that prog- ress is being made in this direction. However, the findings of current research programs are closely guarded. Titanium dioxide may be reduced by carbon, but the product invariably contains either residual oxide or carbide in amounts sufficient to render the metal brittle. It is impossible to remove the last traces of oxygen by hydrogen reduction. Silicon reduction, if carried far enough to remove the oxygen or silicon monoxide, results in the retention of considerable silicon as silicides. With the exception of calcium, other reducing agents are too expensive to be considered. The calcium reduction of titanium oxide, as carried out by Dominion Magnesium, Ltd., of Canada [18], produces a metal of low ductility, even when extreme precautions are taken to free the calcium of nitrogen which, if present, is carried over into the titanium. The titanium produced by this method shows limited hot ductility, which may be somewhat improved as technological advances are made. However, it is felt that, because of the high cost of nitrogen-free calcium, this product will not be competitive even with the Kroll process, particularly if the latter can be placed on a continuous basis, and the pre- dicted cost reduction of titanium tetrachloride can be accomplished. COSTS OF PROCESS WILL DETERMINE CHOICE It is obvious that an analysis of the effect of technological advances in the titanium industry must be paralleled by a con- sideration of economic factors. On the basis of technology alone, it would be possible to improve and expand many of the processes outlined. However, where fundamental economic disadvantages exist in a given process, it would be unwise to direct any effort toward advancing the technology. On the other hand, as technological advances are made in economi- cally feasible processes, previously discarded processes should be reviewed in the light of improved technology. At the present time, at least two of the processes considered appear to be economically sound. The Kroll process titanium sponge carries a price of $5 per pound, to which must be added the cost of consolidation into workable form. A large share of the sponge production cost lies in the labor involved in the current batchwise process. This will most certainly be reduced with the evolution of a continuous Kroll process. It is estimated that the future economics of large- scale continuous production may reduce the cost of the sponge to somewhere in the range of $ 1 to $2 per pound. Estimates on the cost of compact metal rods produced by a continuous iodide process are closely guarded, but it is under- stood that they lie in the same range. These estimates are based on the premise that the technological barriers will be overcome. If such be the case, the iodide process metal would have the distinct advantages of compact form, high purity, and cold ductility. It is too early to predict how the iodide process will fit into the future picture, since the Kroll process has the tempo- rary advantage of a more advanced technology. Of the other processes discussed, two hold potential promise in the distant future. These are (1) the subhalide process and (2) fused-salt electrolysis. In the normal course of develop- ment, it will be some time before the subhalide process can be evaluated. Although a successful fused-salt electrolyte process appears at present to be far distant, it is always possible that someone may stumble onto the answer to the problem of obtain- ing coherent deposits of metal from such a medium. When, if ever, this advance is made, fused-salt electrolysis will definitely be a competive process. POWER CONSUMPTION HIGH It is interesting to compare the requirements for large-scale titanium production with those of other large-scale industries. A production level of 100,000 tons per year is chosen as a con- Page 69 venient basis of discussion. It is somewhat in excess of the 30,000 tons per year estimated to meet military requirements, but is in line with the present thinking regarding the future total requirements for low-cost titanium. Comparisons can be made fairly well on the basis of the Kroll process, and with some uncertainty on the basis of the iodide process. The Kroll process at present requires about 20 kilowatt-hours of electrical energy per pound of titanium produced. On this basis, the 100,000-ton production level would require that 4,000,000,000 kw.-hr, per year be made available. This corre- sponds to 25 percent of the power used by the present aluminum industry. Some over-all power economies may be obtained in future development of the Kroll process. However, its require- ments are not expected to go below 15 kw.-hr. per pound of titanium produced. To the basic power requirement of 8 kw.-hr. per pound of magnesium (equivalent to 1 pound of titanium) must be added heating and processing requirements. It is in the latter that some economies may be effected. The power requirements for the iodide process are somewhat indefinite, but it is understood that they are contemplated as being in the same range. Either process would consume roughly 340,000 tons per year of ilmenite, or 60 percent of the 1948 (peak year) consumption. The Kroll process would require chlorine-regeneration facil- ities of 450,000 tons per year, or 22.5 percent of the total annual chlorine-producing capacity in this country. The magnesium-production facilities required to produce 100,000 tons of titanium per year by the Kroll process would amount to 110,000 tons per year, nearly equal to the present total operating plant capacity of 126,000 tons. (During the Second World War, a nominal magnesium capacity of 293,000 tons per year was available; many of the plants are on a stand-by basis at the present time. Others have been converted or would require extensive reconditioning before operations could be resumed.) While the iodide process would consume ilmenite and coke, the only other element required is iodine. Since it would be introduced into the plant as elemental iodine and recycled, the consumption would be equal to the losses. The level of allow- able loss will be based on economic factors, i. e., a balance of the cost of recovery versus the initial cost of the iodine. An iodine-consumption cost of 2 cents per pound of titanium would be not at all unreasonable, even when the metal sells at $ 1 per pound. At the present price of iodine, $1.85 per pound, this would correspond to an iodine consumption of 0.0108 pound of iodine per pound of titanium, or 1,080 tons per year. This level corresponds roughly to the present production capacity of the Chilean interests. However, it is believed that this source, together with domestic brine sources, can be developed to meet the anticipated needs. Construction of titanium plants of 100,000 tons per year total capacity will involve the use of corrosion-resistant metals and alloys, regardless of which of the presently contending processes is used. While this will involve some development and redistri- bution, it is not considered to be a bottleneck to expansion of the titanium industry. While the development of power-, magnesium-, chlorine-, and/or iodine-producing facilities for a titanium production of 100,000 tons per year would be a sizable task, it is felt that the problem is not insurmountable and that such development can keep pace with that of the reduction facilities. LOWERING PROCESS COSTS The melting of titanium is a field where improved tech- nology is definitely needed. Furthermore, it is fairly certain that the present problems in this field can be solved by im- proved technology. The following sections will point out the problems and indicate the forms of the probable solutions. TITANIUM INGOTS BY ARC MELTING At the present time, the production of titanium ingots by arc melting in water-cooled copper molds is fairly satisfactory for unalloyed titanium but not for titanium alloys. The most highly refined ingot furnace based on this process is the con- tinuous-casting arc furnace developed by du Pont [79], This furnace utilizes the principle of a metered feed of titanium sponge (or tumbled titanium-alloy charge of sponge plus alloy components) added in an inert atmosphere to a water-cooled copper sleeve while a revolving electrode of carbon or tungsten maintains a d. c arc between itself and the melt pool. Distance between the electrode and the melt is controlled automatically by the voltage drop. An ingot retractor continuously withdraws the ingot as it is formed. This method works rather well for unalloyed titanium, although there are some minor drawbacks, such as attack of the electrode when the melt spatters, pooi ingot surface, etc. However, the general consensus is that alloys afford special problems, chief among which is nonhomogeneity of compo- sition in the ingot. This may be the result of imperfect dis- tribution of the alloy constituents in the charge. Considerable research effort is being made to improve the homogeneity oi alloy ingots made by continuous arc melting. Best chances foi success appear to reside in a modification of this method whereby the electrode is made consumable. A successful method along this line of consumable-electrode furnaces is the electric ingot process developed by M. W. Kellogg Co. [20], This method has been used for producing high-quality stainless steel and heat-resisting alloy ingots. Skelp is fed into a tube mill which forms an iron tube continuously. This is then fed into a water-cooled ingot mold, where it serves as a consumable electrode for a submerged arc. Alloy additions and flux are fed in powder form by a metering device through the con- sumable iron-tube electrode. In contrast with the experience with the continuous casting of titanium alloys, the Kellogg electric ingot furnace is reputed virtually to eliminate segre- gation. Since basically they are the same process, the titanium alloys should also be producible in homogeneous form. Furthei experience and development should bear this out. SIZE OF INGOTS The largest titanium ingots produced by arc melting (con- tinuous cast) thus far have been reported to be of the order oi 1,000 pounds. Word-of-mouth reports have it that the diametei of these ingots is 12 inches. The length then would be of the Page 70 order of 4 to 5 feet, in order to make 1,000 pounds. Many more ingots have been made in 6-inch-diameter and 9-inch-diameter sizes, which weigh on the order of 200 and 400 pounds, respectively. It is instructive to compare the 1,000-pound titanium ingot with the weight of equivalent-size ingots of other metals: 3.6-cu. ft. ingot Pounds Titanium 1,000 Copper 2,000 Steel' 1,750 Aluminum 600 Magnesium 400 It is apparent that the present largest titanium-ingot size is of the same order of magnitude as that used commercially for other metals. Thus, copper ingots usually weigh less than 1,000 pounds (wire bars 230 to 275 lb., cakes up to 1,350 lb., and billets up to 850 lb.). The largest brass ingots are 1 ton. Steel ingots run from 1 to 10 tons in size, and generally are larger than the 1,000-pound titanium ingot, but ingots of special steels, heat-resisting alloys, stainless steels, tool steels, etc., fre- quently run about 1,500 to 2,000 pounds, the same size as the titanium ingot. Aluminum-alloy ingots have been of the same magnitude, although there is a trend to go to much larger ingots of aluminum. Magnesium ingots generally run smaller than the equivalent of 1,000 pounds of titanium, although here, also, there is a trend to much larger ingots. For most metal industries, the size of the ingot used is dic- tated by the capacity of the fabrication plant. Were titanium ingots to be processed primarily in brass mills, the 1,000-pound ingot size would be adequate. However, if, as is apparent now, titanium ingots are to be processed chiefly in steel mills, the use of ingots larger than 1,000 pounds certainly would be more economical and, therefore, more desirable. The production of large ingots by arc melting necessitates the use of multielectrode furnaces. The maximum diameter of ingot that can be melted by a single electrode is about 6 inches. In a multielectrode arc furnace, each electrode has its own power supply and current. Therefore, there is no "a priori" reason to limit the size of ingot that can be produced. It has taken much effort to attain the 1,000-pound ingot, but it is readily apparent that improved technology will provide continuous-casting arc- furnace designs which will be able to produce appreciably larger ingots. TITANIUM INGOTS BY INDUCTION AND RESISTANCE MELTING Given a satisfactory crucible material, there is little doubt that most, if not all, titanium ingots would be induction melted. The advantages of being able completely to melt and stir the metal by induction heating, and then pour the ingot into molds, are real and undeniable. Furthermore, the problems of ingot- size scale-up are less with induction melting. However, as is well known, there is no truly satisfactory crucible for titanium. Graphite is the closest we have come to a crucible material, and it has serious limitations. About 0.4 to 0.8 percent of carbon is picked up in induction melting in graphite crucibles [21]. This amount of carbon is detrimental to ductility in the wrought condition, interfering with the bend properties of sheet and so forth. More serious, the presence of carbon promotes brittleness in weldments and causes a major reduction in toughness. Lastly, this amount of carbon pickup cannot be tolerated in many titanium alloys. Under special conditions, it is possible that graphite-melted titanium and titanium alloys will be useful. This is in very large ingots, on the order of several tons, which cannot be made con- veniently by the arc-melting process. Such ingots, processed as heavy forgings, could be used in many instances without serious detriment from the contained carbon. The possibilities for a successful ceramic crucible are bleak. It is the writers' personal opinion that technology will not de- velop this desired result in its complete form. The high reactivity of titanium and mass action are against it. Furthermore, prac- tically all types of ceramic materials have been tested as crucible materials, with no successful ones forthcoming. However, there are certain procedural dodges which can be used. These will probably make the use of ceramic crucibles possible in a modi- fied form.One of these, the so-called skull melting method, is discussed below. TITANIUM INGOTS BY SKULL MELTING Practically all the melting methods which avoid pickup from the melting container embody a crucible shell of titanium itself. This is the basis on which arc melting in water-cooled copper is successful. Next to the copper wall is a skin of solidified titanium-rich metal, and it is this which holds the molten pool of metal. Following logically from this scheme is the melting method called skull melting. Here, the crucible is nonmetallic and is not so drastically cooled as the copper. Consequently, there is a larger molten pool, and casting of the melt becomes possible. Induction melting appears to be impossible for main- taining a skull, since the metal on the outside is melted first. However, through the use of the arc, or through some other method of top-side heating, an appreciable pool of metal can be built up while still maintaining a shell or skull of solidified titanium-rich metal next to the crucible. Crucibles may be graphite or some other refractory nonmetallic material. Most of the experience on skull melting to date has been with graphite crucibles. Carbon pickup is reduced, compared with that found with induction melting, but is still appreciable. Melts under 25 pounds absorb about 0.1 percent of carbon. Those of the order of 100 pounds pick up 0.3 percent of carbon. Improved tech- niques can, and probably will, reduce carbon pickup below this figure. The best chances appear to be with ceramic cru- cibles. Little work has been done with ceramic crucibles, but it is probable that a ceramic will be found which will be espe- cially suitable for skull melting. Resistance to thermal stresses will be especially desirable in such a crucible. Skull melting and casting can be used to obtain either ingots or castings. Most probably this method, or a variation of this method, will be the one used eventually for the production of both large and small castings of titanium. Whether or not skull melting in ceramic crucibles will be dominant over continu- ous-casting arc melts'for the production of large ingots for mill fabrication is a tossup. One thing is sure—large ingots will be made, most likely by one of these two methods. Page 71 POWER CONSIDERATIONS IN MELTING TITANIUM Induction melting is considerably more efficient than arc melting in water-cooled crucibles. On a 450-pound-ingot scale, it has been estimated that 0.6 kw.-hr. per pound of metal is required in induction melting [21]. Du Pont also reports that sponge can be melted in a 6-inch-diameter continuous-casting arc furnace at a rate of 0.6 to 1 pound per minute at a power input of 64 to 100 kilowatts [19]. This corresponds to a power requirement of 1.6 kw.-hr. per pound, over twice that for in- duction melting. Since there are 384 calories per gram (0.2 kw.-hr. per pound) of energy in molten titanium at its melting point [22], the thermal efficiencies are 33 and 12.5 percent for induction melting and arc melting, respectively. Appreciable amounts of power will be consumed in melting titanium when it becomes a tonnage metal. Using an energy consumption of 0.6 kw.-hr. per pound for induction melting and 1.6 kw.-hr. per pound for arc melting, the amounts of energy for melting various large-scale tonnages of titanium are shown below: Yearly production of tita- nium, tons Energy consumed kw.-hr in melting, Induction Arc melting 100.000 120, 000, 000 320, 000, 000 500,000 600, 000, 000 1.600, 000, 000 1,000,000 1,200, 000, 000 3, 200, 000, 000 For tonnage appreciably greater than 100,000 tons per year, this amount of power would be of major magnitude, consider- ing that the entire 800,000-ton-per-year aluminum industry consumes about 16 billion kilowatt hours of energy per year. Therefore, improvements in the efficiency of melting titanium must not be overlooked in the forthcoming tasks for titanium technology. SCRAP USE DEPENDS ON CLEANING SYSTEM There is no technical reason why clean, noncontaminated titanium scrap cannot be remelted and used again. As a matter of fact, scrap of this sort makes much better melting stock than sponge, because it does not spatter in melting. However, several economic reasons argue against the use of scrap. It costs too much at present to do the clean-up job sufficiently well to pay its way, even against $5-per-pound sponge. Because titanium picks up oxygen, nitrogen, and carbon irreversibly, it is neces- sary to grind or pickle off all of the surface scale, grease, etc., and then cut up the metal into pieces small enough to be fed into the arc furnace. At the present time, both the Titanium Metals Corp. and Rem-Cru Titanium, Inc., are repurchasing scrap, from metal originating in their own plant, for $2 per pound. There is no information on how they use this metal, but it is possible that some of it is being remelted. It appears clear that eventually, perhaps in the not too distant future, cheap ways of cleaning and comminuting titanium scrap will be devised, so that it can be remelted economically. It is also possible that future developments in titanium-melting fur- naces will be such that the need for comminution will be eliminated. Problems of Fabrication Heating titanium-rich metal in air up to fabrication tem- perature usually involves some diffusion of oxygen and nitrogen contaminants into the metal. The higher the temperature and the longer the time of exposure, the greater is the diffusion of contaminants into the metal. For example, heating for 1 hour at 2,200 degrees Fahrenheit contaminates almost 0.1 inch of metal, whereas heating for 1 hour at 1,700 degrees contami- nates only about 0.01 inch of metal. At temperatures of 1,500 degrees and below, contamination of the underlying metal is negligible for reasonable heating times. This contaminated metal has to be removed by conditioning operations (scalp- ing, scarfing, grinding, etc.), and entails relatively high expenditures of labor and material. Two expedients appear to be possible. The first is improved fabrication procedures. For example, the heat-up time of billets for forging might be cut down considerably by the use of more efficient heat-transfer methods. Those methods that occur at once, although they may not be the best that could be worked out, are the use of induction heating to working temperature or the use of salt or metal baths. Also, fabrication schedules might be modified to include the best combination of time at temperature and fabrication temperature to effect the minimum contamination. The second expedient is to develop alloys that are resistant to contamination. There are no references to such alloys, but it is reasonable to expect that improved technology over the next several decades might develop them. Increasing permissible working temperatures, while avoid- ing contamination, is needed for the primary breakdown fabrication of large ingots. Contamination-resistant alloys, if such were possible, would enable this to be done. Improve- ments in furnace atmosphere in which the large ingots are soaked before fabrication would also serve toward increasing- present fabrication temperature ceilings. OVERCOMING DIFFICULTIES IN MACHINING TITANIUM ALLOYS The present outlook on machining titanium alloys is not good. Unalloyed titanium has been compared with stainless steel with respect to over-all machinability. Were this also the case with titanium alloys, machining would not be a serious problem. However, all indications are that the strong titanium alloys machine with much more difficulty than titanium itself. When large tonnages of titanium alloys are to be machined, as they will have to be, the tie-up of metal- working equipment may well be staggering. Several things will have to be done to improve this situation. 1) More efficient cutting-tool materials for titanium alloys will be developed. 2) Machining procedures will be improved. 3) Alloys particularly suitable for machining will be developed. Page 72 1) Heat treatments and structural conditions for titanium alloys that will promote improved machinability will be determined. Weldability is a necessary attribute of a tonnage structural material. It is unfortunate, therefore, that the present com- mercial alloys of titanium are not particularly weldable. It is not that the welding characteristics of these alloys are poor; the trouble is that the welds are brittle. All of the present com- mercial alloys are characterized by major amounts of the beta stabilizing elements, and it is probable that this is the key factor in promoting brittle welds. These alloys become brittle after rapid cooling from the beta field. Also, it is probable that the large as-cast beta grains are intrinsically brittle, and need hot working to break up the as-cast structure before ductility is attained. The weldability picture for titanium alloys will be improved markedly by technological developments. One may look for the following accomplishments: 1) Titanium alloys especially suitable for welding will be developed. Unalloyed titanium can be welded (under noncontaminating conditions) so that sound, ductile weldments are produced. Similarly, single-phase alpha titanium alloys that are ductile after welding will be avail- able. These alloys will have satisfactorily high strength, which will be insensitive to heat treatment and structure. Thus, their mechanical properties will be almost as good in the as-cast condition as they are in the wrought con- dition. Further, since the heat-affected zone will afford no trouble from heat-treatment-induced brittleness, the weldments will be ductile in both the weld metal and in the heat-affected zone. 2) Heat-treatable alloys containing beta stabilizers will always be troublesome to weld. However, post-welding heat treatments, such as beta annealing followed by slow cooling, will be developed that will improve the ductility of weldments made with these alloys. \NTISEIZING LUBRICANTS FOR WORKING TITANIUM Deep drawing, wire drawing, and other fabrication opera- tions involving sliding friction on titanium are hampered by the galling and seizing properties of the metal. Some partial solu- tions to this problem are already available, and it appears safe to predict that a complete solut satisfactory lubricants will result from improved technology. IMPROVING PERFORMANCE At the present time, we recognize the following capabilities for titanium and its alloys: High strength-weight ratio. Although commercial titanium itself is only fair in strength-weight ratio, by means of alloying we have been able to attain strength-weight ratios of about 300,000 (150,000 pounds per square inch divided by 0.17 Dound per cubic inch), while maintaining good all-around ductility. This value is significantly higher than the value of ibout 800,000 for the highest strength aluminum alloys. Good mechanical properties in the intermediate temperature range from 400 to 800 degrees Fahrenheit. At lower tempera- tures, competition from aluminum and magnesium alloys is too strong, while, at higher temperatures, the strength properties and oxidation resistance of titanium alloys are too low to match those of conventional heat-resisting alloys. Good corrosion resistance. The resistance of titanium to many corrosive reagents is sufficiently good to warrant its classifica- tion as a corrosion-resistant metal. In particular, the resistance of titanium to marine corrosion is superlative. Corrosive attack of titanium is general, and the pitting or crevice type of corro- sion is not found. Good ballistic (armor) properties. Good toughness. For some titanium-rich materials, toughness is exceptional. High melting and boiling points, medium-high elastic modu- lus, low temperature coefficient of expansion, and other desir- able physical properties usually associated with the transition metals. It is on the basis of these desirable characteristics, plus abundant reserves, that titanium has reached the position of promise it occupies today. Technology will find how to en- hance and add to this list of capabilities, so that the per- formance of metallic titanium-rich materials will be improved even over that which is presently available. Some of those technological advances we may expect in the future are dis- cussed in the following sections. DIFFERENT TITANIUM ALLOYS FULFILL DIFFERENT FUNCTIONS The first 3 years of intensive alloy development in titanium alloys were culminated in the production of several commercial alpha-beta alloys with a strength level of about 150,000 p. s. i., approximately twice that of unalloyed titanium. Higher strength levels were found to be possible, but at the expense of too great a loss in ductility. Lower strength levels were not considered to be great enough an improvement to warrant much attention. In the future, we may expect the trends in strength level to go both upward and downward from 150,000 p. s. i. The high-strength alpha-beta alloys have proved to have disappointing weldability. Single-phase alpha alloys, which generally have a lower level of strength, but have potentially good weldability, may be expected to take over the alloy stage to an increasing extent. Also, the alpha-beta alloys, with lower contents of beta-stabilizing additions, so that they are pre- dominantly alpha and have negligible heat-treatment effects, should become of more importance. These alloys will have lower strength levels than alpha-beta alloys with higher con- tents of beta stabilizers, but in the welded condition, they will be more ductile. In other words, in future alloy development there should be a trend toward what might be termed the "brasses" of the titanium-alloy field, predominantly single- phase alloys with intermediate strength, excellent ductility, and good welding characteristics. The strong alpha-beta alloys will continue to be of much importance, but primarily in the form of large forgings which are not intended for welding. Good alloys at the level of 175,000 p. s. i., or possibly 200,000 p. s. i., strength can be expected to be forthcoming commercially in the future. The hardening heat treatments of titanium alloys are of two types: formation of martensitic alpha during quenching from Page 73 the beta field, and transformation of unstable beta phase by heating in the alpha-beta field. In order to obtain a hardening response by formation of alpha martensite, it is necessary to have a considerably larger solubility in the beta phase than in the equilibrium alpha phase. This corresponds to a requirement that the system be a beta- stabilized one. For systems with alpha-stabilizing elements, which includes the interstitial elements carbon, oxygen, and nitrogen, the equilibrium alpha solubility is greater than the beta solubility. Hence, there is no strain set up from super- saturation of the quenched martensite, and no hardening results. It has been found that the hardness increase from formation of martensitic alpha is relatively small, a maximum of 100 Brinell or lower. This comes about because, as the beta-stabilizing alloy content is increased and the hardness of alpha martensite in- creases accordingly, the amount of softer retained beta increases until the quenched alloys become completely retained beta phase. A balance is reached between the hardening action from formation of harder alpha martensite and the softening action from formation of increasing amounts of soft retained beta phase. This balance occurs at the composition corresponding to maximum hardening. Despite the fact that the increase in hardness on quenching is only mild, it would be very welcome, indeed, were it not that it is accompanied by a disproportionate loss in ductility. The hardening action by transformation of unstable beta phase to alpha in the alpha-beta field is much more pronounced than the increase in hardness resulting from quenching. Often the two are confused. If the cooling rate during the quench is not very rapid, some of the unstable beta can transform to alpha by nucleation processes, giving rise to a type of coherency hardening that may amount to several hundred Brinell in hard- ness. More often, the unstable beta transforms on subsequent heating in the alpha-beta field. This heat treatment, which cor- responds to age hardening, can result in a major increase in hardness. As high as 500-600 Brinell may be reached. Unfortu- nately, as in the case with quench-hardened alloys of titanium with beta-stabilizing elements, the reduction of ductility as a result of age hardening is of major magnitude, disproportionate to the increase in hardness and strength. Thus, at present, quench-hardening and age-hardening heat treatments of titanium alloys are of uncertain value. The phenomena are recognized, and much work is being conducted in an attempt to exploit them if possible. It appears probable that means will be found to use the quench hardenability of beta-stabilized titanium alloys, but it is also probable that this form of heat treatment will never reach the importance it has in steel. The potentialities of aging heat treatments, whereby unstable beta phase is transformed partially to alpha, are con- siderably better. By control of composition and aging treatment, useful aging heat treatments will be developed eventually. HIGH-TEMPERATURE TITANIUM ALLOYS Available information indicates that all room-temperature- ductile titanium alloys maintain useful strength only up to about 800 degrees Fahrenheit. Furthermore, the oxidation re- sistance of titanium is so poor above 1,200 degrees Fahrenheit that, even if titanium alloys did have adequate strength at these temperatures, they could not be used for service in air. Yet, there is a real need for titanium alloys that can be used at higher temperatures. Were such titanium alloys available, they could be used in many places in gas turbines, whereas now,, titanium is useful chiefly in the compressor stage. The characteristics desired in a high-temperature alloy are high strength at elevated temperature and good corrosion re- sistance in the service medium (mostly air). Given one or the other of these characteristics, the field of usefulness of titanium alloys at elevated temperatures would be expanded consider- ably. Given both characteristics, titanium alloys would even- tually take over the high-temperature field to a large extent. One solution to the high-temperature titanium-alloy prob- lem was offered by Brace, Hurford, and Gray of Westing- house [23]. These workers presented high-temperature strength data on a series of titanium alloys containing major additions of the beta-stabilizing elements, chromium, molybdenum, and tungsten. These alloys were melted in thoria crucibles, either in vacuum or under argon, and were cast into preheated graphite molds. The amounts of the alloying additions were of such magnitude that the alloys might more properly be called intermediate titanium alloys, rather than titanium-rich alloys. Alloys with exceptional high-temperature strength and oxidation resistance were found in the range of 30 to 60 per- cent Ti, 25 to 60 percent Cr, 10 to 20 percent (Mo + W). Strength at 1,750 degrees Fahrenheit of the better alloys was in the neighborhood of 20,000 p. s. i. Creep-rupture data indicated, to use Brace's words "that it is possible to produce an alloy that, as compared with No. 31 Stellite, has approxi- mately the same hot ductility, only two-thirds the creep rate, nearly 50 percent better strength-weight quotient (ratio), and more than 30 times the rupture life—and that from as-cast material." It was noted in this work that, although consider- able ductility was exhibited at elevated temperature, none of the alloys showed ductility at room temperature. This may partly be caused by absorption of oxygen from the thoria melting refractory, as suspected by the authors. Another pos- sible cause of brittleness (and high-temperature strength) is the unusually high content of chromium. This might lead to a structure predominantly that of the reported phase, Ti-Cr2, containing 68 percent Cr. It was also found that the alloys on the titanium-rich end of the range investigated had low strength at 1,750 degrees Fahrenheit. This is in line with the generally accepted observation that the strengths of titanium- rich alloys drop to low values at 1,000 degrees Fahrenheit and above. What, then, are the prospects for titanium-rich alloys that have high strength and oxidation resistance at elevated tempera- tures? It is easy enough at this stage of titanium-alloy develop- ment to be optimistic and assume that improved technology will solve any problem. However, the high-temperature titanium- alloy problem is indeed a tough one, and it is not expected that a complete solution ever will be worked out. Several partial solu- tions should be available: 1) The high-temperature strength of cold-ductile titanium alloys may be improved so that they might equal the spe- cial heat-resistant alloys on an equal-weight basis at tem- peratures up to perhaps 1,350 degrees Fahrenheit as an outside limit, but not the desired 1,550 to 1,600 degrees Fahrenheit. 2) The high-temperature strength of cold-brittle titanium- bearing alloys may be improved so that they will equal the Page 74 special heat-resistant alloys on an equal-weight basis at temperatures up to perhaps 1,800 degrees Fahrenheit (e. g., the Brace-Hurford-Gray type of alloy). 3) Major improvements may be made in the oxidation re- sistance of titanium alloys, either by alloying or by special coatings, so that the material can be used in air up to 1,600 to 1,800 degrees Fahrenheit. In other words, improved technology should enable titanium alloys to be very useful in the high-temperature field. However, the improvements probably will not be so extensive as to remove the need for the types of heat-resisting alloys that are now being used. The medium-temperature range from 400 to 1,000 degrees Fahrenheit is where titanium alloys are finding their chief appli- cation in aircraft. It is expected that major improvements will b)e made soon in the medium-temperature strength of titanium alloys. The present alpha-beta alloys lose strength rapidly as the temperature increases because of the presence of the relatively soft beta phase. Alpha alloys, which are expected to have a lower temperature coefficient of loss in strength, are the chief hope for this improvement in titanium technology, although high-strength alpha-beta titanium alloys will continue to be of much interest in the medium-temperature field. HIGH-TOUGHNESS TITANIUM ALLOYS One of the most promising future developments in titanium alloys appears to be high-strength, high-toughness alloys. At the Watertown Arsenal symposium on titanium, April 12, 1951, the following data obtained by Watertown Arsenal and Alle- gheny-Ludlum were reported on alloys made with high-purity sponge (100 BHN): 105, ooo 115, 000 173, 000 These data show that not only can high toughness be ob- tained when the interstitial alloy content is kept low, but it can be combined with high strength also. The factors governing the toughness of titanium alloys are being actively investigated at the present time. Present indica- tions are that the interstitial alloy content is chiefly responsible for impairment of toughness. Thus, with metal of 100 BHN hardness, notch-bar Charpy impact values of 50 foot-pounds, or above, have been obtained down to —200 degrees Centi- grade. Ordinary commercial titanium has a notch-bar Charpy value of only about 15 foot-pounds at room temperature. Some mystery seems to be attached to the toughness problem. When the high-toughness, low-hardness sponge titanium is further alloyed with interstitial oxygen or nitrogen to the same hardness level as that of ordinary sponge titanium, the toughness remains high. Also, alloys made with high-toughness, low-hardness sponge have high toughness. The factors causing this effect will undoubtedly be ascertained. Most important, this behavior in- dicates that titanium alloys with superior toughness-strength combinations, comparable with those of the best steels, will eventually be forthcoming. Titanium either corrodes at an appreciable rate, or it is prac- tically unaffected. Furthermore, the corrosion takes the form of a general uniform attack, rather than localized pitting or inter- granular attack. The excellent corrosion resistance of titanium is the result of a passive surface film. Thus, the corrosion of titanium is less in hydrochloric and sulfuric acids to which addi- tions of oxidizing agents, like nitric acid, manganese dioxide, or oxygen, have been made. Stress corrosion of titanium is not a problem. Annealed and cold-rolled titanium corrode in similar fashions, although cold-rolled titanium will show an end-grain attack, typical of other rolled metals, when subjected to severely corrosive conditions. So far as is known now, weldments of titanium and titanium alloys are equal in corrosion resistance to the wrought material. Corrosion where abrasion is also found is pretty much an unexplored field. The corrosion data of Hutchinson and Permar [24] on com- mercially pure titanium in selected reagents are reproduced in table 1. These data are from beaker-type laboratory tests, and cannot be used for predicting service performance with any certainty. An example of this is cited in the Titanium Metals Corporation of America "Handbook on Titanium." De- spite the relatively poor corrosion resistance indicated for ti- tanium in hot, dilute sulfuric acid, tests by a large chemical concern with process equipment involving concentrations of sulfuric acid up to 22 percent, at high temperature and pres- sure, showed titanium to be unaffected. This company is re- ported to be constructing a large unit entirely of titanium. The ability of titanium to be passivated under strongly oxidizing conditions accounts for its outstanding resistance to nitric acid, wet chlorine and chlorine water, mixed sulfuric and nitric acids, etc., and is a key to improving its corrosion performance in solutions where its resistance is not outstanding. The corrosion-resistance properties of titanium under marine conditions have been investigated more thoroughly than under any other corrosion condition. The upshot of all this testing was that titanium was completely unaffected by any of the tests tried. It is now generally accepted that the marine cor- rosion resistance of titanium is unsurpassed and is equalled only by that of the precious metals and Hastelloy C. In con- nection with marine corrosion, it should be pointed out that titanium is not antifouling. On an over-all basis, the corrosion resistance of titanium is very good. Yet, by alloying, even more outstanding corrosion resistance is possible. In attempting to estimate the potential market for titanium, one titanium company circularized various attainable properties of titanium alloys. Among the information circularized was the following list of corrosion- resistance properties for an acid-resistant titanium alloy, whose composition was not disclosed: Reagent Approximate corrosion rate Less than 5 mils per year. Less than 5 mils per year. Nil to 10 mils per year. Similar to commjercially pure Ti. Hydrochloric acid (all up to boiling). Sulfuric acid (all boiling). Nitric acid (all boiling). Other reagents- Page 75 Table 1.—Resistance of commercially pure titanium to selected chemical reagents Concn. Reagent by wt., percent Acetic acid, glacial. . 99 Acetic anhydride. . . . 99 Ammonium hydrox- 28 ide. Calcium chloride.... 28 Carbon tetrachlo- 100 ride plus 1 percent water. Chloracetic acid.... 30 Chlorine gas 3 (water 100 sat'd). Chlorine gas, dry 100 (water 0.005 per- cent). Chlorine water2 (Cl2 sat'd). Chromic acid 10 Cupric chloride 40 j Ferric chloride 10 Formaldehyde 37 Formic acid 50 H2S-sat'd water Hydrochloric acid.. . 5 10 20 37 1 3 5 Hydrofluoric acid. . . 1 Anhydrous hydro- 100 fluoric acid. Lactic acid 85! Nitric acid 65 98 | Boil.. Room 2. Room. Boil... Boil... 80. 75. 30. 75.. Boil. Boil. Boil. Boil. Boil. Room. Room. Room. Room. Room. Boil... Boil.... Boil.... Room.. Room.. Boil.... Boil.... NiP. Nil. . Nil. . Nil. . Nil. . 0.0008. Nil. . . Ignites and burns. Nil. . . . Nil Nil Nil Nil (Nil to 0. 2) ^ Nil Nil (Nil to 0.02)1 0. 02. . . 0. 6... . (Nil to 0.08)4 0. 2. . . a 6... 2. 5. . . . 0. 02. . . 0. 0002 0. 009 Bright, no wt. loss. Bright, no wt. loss. Bright, no wt. loss. Bright, Bright, no wt. no wt. loss, loss. Room.. I Nil. Bright. Bright, light brown stain. Violent exothermic re- action using finely divided Ti. Bright, light brown stain. Transparent yellow film. Bright, no wt. loss. Red deposit, bright underneath. Bright. Colored transparent film on nil speci- mens, gray etch on active sample. Bright. Bright. Bright-to-gray etch. Uniform gray etch. Uniform gray etch. Transparent brown film on nil specimens, gray etch on active specimens. Uniform gray etch. Uniform gray etch. Black etch. Gray etch with large crater. Bright. Brown-to-blue trans- parent film. Bright, no wt. loss. 1 Nil—Corrosion rate of less than 0.0001 in. per yr. 2 Room temperature = 20 to 25 C. These corrosion rates are substantially better than those of unalloyed titanium for the same reagents, and are comparable with those of other very corrosion-resistant metals and alloys. They illustrate the improvements that are possible in the corrosion field through alloying. Advantages of Strength-Weight Factor Information on the military applications of titanium is re- stricted. However, it is readily apparent that the natural field of application for titanium is in aircraft. The advantages de- rived from decreased weight and increased payload are so great that, even at present prices, titanium has many applications in aircraft. These applications may be divided into two groups, structural and nonstructural. In the nonstructural group, com- mercially pure titanium is being substituted in applications where stainless steel has been used. These are in places where stress is not too great, but the temperatures are beyond the limits of aluminum or magnesium alloys. Thus, in such component parts as engine firewalls, engine mount-struts, ducting, and Reagent ■ Concn. by wt., percent Temp., C. corro- si on 1 rate, in. per yr. Phosphoric acid 10 80 0. 07. . 1 85 Room.. .0. 008. Sodium chloride. . . . | Sat'd Boil... . Nil Sodium hypochlorite '5-6 per- Room.. i Nil. . . cent i Cl2. i 1 Sodium hydroxide. . 10 | Boil.... 0.0008. 40 80 0.005.. Sodium sulfide 10 l Boil.... 0.001.. Stearic acid 100 180.... Nil. . . . Sulfur dioxide-sat'd j Room. . Nil.... water. Sulfuric acid 1 Room. . Nil. . . . 5 Room. . (Nil to 0.009)4 10 Room. . 0.007. . 40 Room. . 0.06... 65 Room. . 0.07... 78 Room. . 0.6... . 95 Room. . 0.1. .. . 104 Room. . 0.2.... 1 Boil. . . . 0.3.. . . 5 Boil. . . . 0.9.... Sulfuric acid plus 0.5 40 Room. . (Nil to percent Mn02. 0.06)4 Sulfuric acid plus 52 per- Room. . 0.001.. nitric acid. cent H2S04, 14 per- cent H,S04 + 3 Room. . 0. 0008. percent H20 Trichlorethylene 100 Boil.... Nil (unstab. -j- 1 percent H20). Tr i chlorethy lene 100 Boil. . . . Nil (stable + 1 percent H20). Zinc chloride 10 Boil. . . . Nil Sulfur, molten 100 240.... Nil Sulfur, plus water. . . Room.. Nil Remarks Uniform gray etch. Uniform gray etch. Bright, no wt. loss. Bright, no wt. loss. Brown-green iridescen film. Light gray etch. Blue-grav iridescen film. Bright, no wt. loss. Bright-to-yellow film. Bright. Bright-to-light gra) etch. Gray etch. Grey etch. Gray etch. Gray etch. Gray etch. Gray etch. Gray etch. Gray etch. Bright to gray etch. Slight iridescence. Iridescent film. Bright, no wt. loss. Bright, no wt. loss. Bright, no wt. loss. Thin blue film. Bright, no wt. loss. 3 Plant test, 30 days in addition to laboratory test. 4 "Borderline passivity." miscellaneous brackets and fittings around the engine or ex- haust system, titanium is finding ready application. In jet en- gines, titanium can replace stainless steel in the outer shell oi the combustion chamber. Structural applications for titanium in aircraft are chief!) met by titanium alloys, because unalloyed titanium is insuffi- ciently strong to equal competitive materials on an equal-weighi basis. Table 2 presents a comparison between titanium, a tita- nium alloy, and representative structural alloys of other types The commercial alloy, RC-130B, which contains 4 percent oi aluminum and 4 percent of manganese as principal alloying ele- ments, was chosen as representative of titanium alloys. On the basis of the general structural design factors, it is apparenl that unalloyed titanium does not come up to the strength levels of the structural alloys of other metals and that the titaniurc alloy exceeds them by an appreciable margin. A yield-strength figure frequently quoted as the minimum which would be oi interest for titanium alloys in structural applications in aircraft is 130,000 p. s. i. This is approximately the yield strength re- Page 76 quired by a titanium alloy in order to exceed aluminum 75S-T on an equal-weight basis. The advantages of titanium in strength-weight considerations over those of the light aluminum and magnesium alloys are not fully realized until temperatures over 400 degrees Fahrenheit are reached. The quantities of metal involved in structural application in aircraft are relatively large. Hence, great savings in weight without sacrifice of strength can be effected by titanium. Such applications are in landing gear, control cables, main structural members, engine nacelle covering, bolts and fasteners, and armor. In jet engines, the compressor disks, compressor blades, and stator blades and baffles come in the category of structural applications. Advanced aeronautical design is developing other applica- tions that are sure to require much titanium. Elevated surface temperatures of the skins of supersonic aircraft and rockets, the leading edges of wings and fins of very high-speed aircraft, and other places in high-speed aircraft and guided missiles that get too hot for aluminum alloys all are potential applications for titanium and its alloys. importanc: F WEIGHT SAVINGS Weight savings in aircraft are cumulative, as pointed out in a recent article in American Metal Market [25]. One pound of weight saved in an airframe will save many pounds in total airplane weight, since increased power, greater engine weight, more fuel, etc., are required for the same range and payload. Design engineers estimate that every pound of weight saved in the construction of a commercial airplane corresponds to $200 of additional yearly revenue. These factors make titanium attractive to the aircraft industry, even at present prices. The actual amount of titanium production earmarked for military aircraft is classified information. However, rough esti- mates of the amount required per airplane can be made. As much as 5,500 pounds of titanium would be required in the B-52 if the stainless steel in only the duct linings and firewalls were replaced. If titanium were used extensively in the jet en- gines and accessories of fighter planes, as much as 500 to 1,000 pounds of titanium per plane could be used. Total tonnages of titanium for use in military aircraft during the next 2 years are very roughly estimated at 15,000 to 20,000 tons. Were more titanium available, 30,000 tons could probably be used. In a peacetime economy, aircraft applications will be the mainstay of the titanium industry, but at a greatly reduced level. It is the only tonnage outlet that can support titanium at the higher price levels, and would use much more metal at lower prices. With the eventual commercialization of jet-pro- pelled aircraft, the amount of titanium going into aircraft appli- cations will be even greater. Table 2.—Compai of titanium and a titanium alloy with other structural metals on the basis of design factors Commer- cially Titanium alloy [(4Mn-4Al) 24S-T 75S-T Density, lb. per in.3 Modulus of elasticity (E), p. s. i. W Tensile strength, p. s. i. To3 Yield strength (0.2% offset), p. s 103 Tensile strength, p. s. i. Density X 103' Yield strength, p. s Density X 103 E Density X 10" VE General. eral. Structural, general. Structural, general. Beams, transverse loading. Slender columns, compre: Wide colur TITANIUM IS IDEAL FOR USE IN ORDNANCE Titanium is, of course, a superb ordnance material, being light, strong, and corrosion resistant. Uses will depend on price and supply. Even at present prices, the Ordnance Department of the Army is interested in titanium for applications having to do with airborne equipment and weapons that are man-carried. First priority is being given to the applications in the man- carried category. A typical and oft-quoted example is the 81- millimeter mortar base plate. By substitution of titanium for steel, the weight is cut from 47 to 24 pounds, enough to make it possible for one man to carry the base plate, cutting the crew of the mortar to two men, and making for a 50 percent increase in fire power per man. There are other ordnance uses besides airborne and man-carried equipment where weight saving is very important. One of these is in projectiles. It is estimated that titanium might improve combat efficiency so that the Page 77 range of certain shells might be increased by up to 35 percent. With lower prices and larger production, very extensive ord- nance use of titanium will be made. Application of titanium for such uses as military bridging, large-caliber-weapon firing tubes, and armor plate of ground-combat vehicles would prove feasible. So many military applications of titanium will evolve when prices become appreciably lower (and availability cor- respondingly high) that it is probable that more titanium than steel will be used for hand-carried and mobile combat equip- ment. Corrosion Resistance Aids Performance Because of its unsurpassed marine corrosion resistance, tita- nium will become a most important material for marine applications. The schedule of application will be very cost de- pendent, however, much more so than in aircraft applications. Typical of the numerous possibilities for the use of titanium in ships are those listed below: Piping systems handling salt water. Condenser tubes with high water velocity, for use in purify- ing sea water. Plumbing fixtures exposed to sea water. Parts in pump rods or rotor shafts exposed to salt water. Numerous shipboard auxiliaries exposed to marine atmos- phere, such as antenna wires, small propellers, Snorkel tubes, and outboard shafting exposed to salt water. Very little field data on the corrosion resistance of titanium are available. Prognostications on the basis of laboratory test data are unreliable. However, it appears certain now that titanium will be a major corrosion-resistant material of con- struction for the chemical industry. In particular, it will be used to handle strongly oxidizing solutions like nitric acid and chlorine water. Some unexpected results, like the aforemen- tioned application of titanium in a plant handling up to 20 percent concentration of sulfuric acid at high temperature and pressure, are sure to crop up and further increase the usefulness of titanium to the chemical industries. TITANIUM AS A SUBSTITUTE The economies of substitution of titanium for other mate- rials are exceedingly complex, being dependent on many variables, some of which are interrelated and some of which are independent. The chief item on which substitution is based is the price of the metal. Once past the plant-amortization stage, production and price of the metal should be related in a nor- mal fashion. Hence, availability is assumed to be sufficient to satisfy demand at a given price. Very rough estimates of price, demand, and time, which will be broken down later, are: At this price per pound Estimated minimum demand Hot-rolled rod and forging stock $6 $3 Under $1 Sheet short tons I $12 to $15. . . .1 3,000-6,000 ! $5 I 15,000-30,000. . ! $1 i 100,000-200,000 year 1952-53 1954-55 1960-70 The pattern of end-item uses for titanium is discussed in the sections below, which relate the market with prices (based on those for forging stock). AT $6 PER POUND FOR FORGINGS This price corresponds to where the industry stands today. Since September 1948, when the Pigments Department of E. I. du Pont de Nemours and Co. first announced the commercial availability of titanium sponge at $5 per pound, the price has remained substantially constant. The price list of the Titanium Metals Corp. on fabricated shapes of commercially pure and alloy grades of titanium is shown in table 3 [26]. These prices were set in October 1950 and have remained unchanged. The metal is sold by a method very similar to that used in the steel industry. Base prices are quoted on a per-pound basis for various fabricated forms, in orders of 10,000 pounds or more. Extras are added on a dollars-per-pound basis for lesser quantities of the metal, special finishes, treatment, etc. The size of the titanium market at present prices is very de- pendent on the "hotness" of the cold war. To a large extent, this is special demand, artificially stimulated, and corresponds to what responsible citizens hope is a temporary situation. Civilian demands for titanium at present prices in our cold- war economy have been almost completely frozen out. Except for commercial aircraft, the potential demand is small, probably on the order of 10 to 50 tons per year. In a real peacetime economy, the greatly reduced demand for titanium at present prices would be dominated by aircraft uses. Military aircraft demands would slack off markedly, but commercial aircraft would use substantial amounts, particularly if commercialization of jet propulsion takes place. Total demand might be as much as 3,000 tons per year, the lion's share of which would be taken up by aircraft uses. Table 3.—Prices of titanium1 (Titanium Metals Corporation oj America) [Commercially pure and alloy grades] Quantity Base price per pound (10,000 pounds and and over) Extras, order size: 5,000 to 9,999 pounds. 1,000 to 4,999 pounds. 500 to 999 pounds 200 to 499 pounds 50 to 199 pounds 1 to 49 pounds Sheared Forg- ing Stock 6 Sheets 2 Mill Plate 3 Strip 4 Wire 5 Bars 7 $15. 00 SI 2. 00 $15.00 $10. 00 $6. 00 $6. 0C 1.00 1.00 1.00 . 20 . 50 .5C 2. 00 2. 00 2. 00 .50 1.00 1.0C 3. 00 3. 00 3. 00 1. 50 2. 00 2. 0C 4. 00 s 5.00 4. 00 3. 00 3. 00 3. 0C 5. 00 5. 00 4. 50 4. 00 4. 0C 6. 00 6. 00 6. 00 5.00 5.0C 1 F. o. b. producing mill. 2 Hot rolled and cold rolled. 3 Hot rolled only. 4 Cold rolled only. 5 Rolled and/or cold-drawn round bar. 6 Rounds, discs, and round-corned squares and rectangles. 7 Hot-rolled and forged rounds, flats, and squares. 8 Orders under 500 pounds. AT $3 PER POUND FOR FORGINGS Here again it is necessary to separate the cold-war market from the peacetime market. Under a lingering cold-war econ- omy, the present situation of greater military demand than sup- ply can be expected to continue. Thus, there would be an ex- Page 78 tension of the usage of titanium in aircraft, and many of the price-dependent uses of the x\rmy and Navy would be imple- mented. It is entirely possible that with unlimited titanium, the military demand under these circumstances would be of the order of 100,000 tons per year. At half the present price, and continuing cold war, it is probable that most of the steel and stainless steel in military aircraft would be replaced by titanium. Naval uses undoubtedly would expand also. This would chiefly be in marine accessories of relatively small size. The price differential between steel and titanium, even at half the present price, is too large to permit the use of titanium in large structural components such as hulls, heavy armor, main propulsion machinery, etc. Army uses for titanium would expand considerably, although they would still be chiefly in the airborne and man-carried categories. Under a peacetime economy, the market for titanium still would be dominated by aircraft, although corrosion-resistance applications would be important also. The estimated market of half-present-price titanium is about 15,000 tons per year. AT $1 OR LESS PER POUND FOR FORGINGS Between the time of availability of $3-per-pound and $1- per-pound metal, perhaps in the next 25 years, a very large percentage gain in the titanium market is certain. By this time, aircraft applications will be firmly established and expanding. Miscellaneous and specialty applications, constituting hundreds of places where small quantities of titanium can be used, col- lectively would constitute a "tonnage" market. It is at the lower end of the range between $3 and $1 that the total market for aircraft uses, although much larger than previously, would decrease percentage-wise, considering the total market. At sheet prices of $1 per pound, or less, titanium would be on the threshold of entry into the present group of commercial metals. The market would be, as a minimum estimate, 100,000 tons per year, and would be expected to increase as new uses for the metal developed. The paper industry, with its severe corrosion problems, probably would consume a few thousand tons per year. The oil industry and steam turbines undoubtedly would consume similar amounts. The food-processing industry could consume about a thousand tons per year. At prices below $1 per pound, the transportation industry will start getting interested in titanium. In passenger cars, as a replacement for stainless steel trim, large tonnages could be con- sumed. Other applications are in fuel tanks in passenger busses and for firewalls between engine and passenger compartments. At prices much lower than $1 per pound, the market for titanium would approach that of stainless steel, which is 800,- 000 tons of ingot annually. The pattern of uses would expand enormously. One would expect large-scale adoption of titanium in all sorts of transportation equipment, chemical-process equipment, containers, hand tools, household appliances, etc. POSSIBILITIES OF SUBSTITUTION FOR ALUMINUM AND MAGNESIUM Substitution of titanium for aluminum and magnesium can be expected to take place chiefly for applications at tempera- tures above room temperature. In particular, substitution will occur in those applications at the high end of the temperature range for which aluminum and magnesium alloys are fitted, say 300 to 400 degrees Fahrenheit. At room temperature, sub- stitution of high-strength aluminum alloys by still-higher- strength titanium alloys (on an equal-weight base) can be expected. For all aluminum-rich and magnesium-rich metallic materials, substitution by titanium can be expected in applica- tions where corrosion is a factor. The corrosion resistance of titanium is so superior to that of aluminum and magnesium that its substitution can be expected under these conditions. No substitution can be expected in applications where the electrical and thermal conductivities of aluminum and its alloys are prime factors. Also, where the effect of low density out- weighs that of strength-weight factor, as it does in the design of columns, substitution for aluminum and magnesium prob- ably will not take place. It is apparent that eventually the uses of stainless steels in aircraft applications largely will be taken over by titanium. These include both structural and non-structural applications at temperatures up to 800 degrees Fahrenheit. The marine appli- cations of stainless steel, nickel, and Monel metal also will probably be met by titanium and titanium alloys, and extensive substitution can be made. Handling of strongly oxidizing acids and organic acids, now being done with stainless steel, will be done with titanium only if the prices become comparable. In the electrical industry, cable armor braid, now made chiefly of stainless steel braid, can be made of strong titanium- alloy braid. This braid must be nonmagnetic, besides being strong, and the titanium alloys meet this requirement perfectly. Extensive substitution of the bronzes used in marine applica- tions by titanium will be made when prices are comparable. Electrical and thermal applications of copper and copper alloys, based on high conductivity, cannot be met by titanium, which is a poor conductor. Substitution for copper and copper alloys in the chemical and petroleum industries can be made extensively. In practically all cases, except where thermal conductivity, as well as corro- sion resistance, is required, titanium can do a better job than copper. There probably will not be much substitution of titanium alloys for copper alloys in spring applications. Little is known about the spring properties of titanium. Even so, since copper alloys usually conduct electric current in most of their spring applications, the titanium alloys would not be substituted. Substitution by titanium in miscellaneous applications of copper-alloys, such as in bearings, cartridge cases, fasteners, hardware, architectural trim, hot water tubing, etc., are all definite possibilities. Development work on such end-item uses is needed before feasibility can be definitely established. Also, cost would have to come down to the "less than $1 per pound" class before such substitution would be economical. TITANIUM SUBSTITUTES FOR OTHER MATERIALS Corrosion resistance is the only field in which substitution for the precious metals by titanium appears feasible. Here the corrosive media of possible interest are strong nitric acid and aqua regia. Unalloyed titanium does not have outstanding resistance to aqua regia, but some titanium alloys have been observed to possess such resistance. In the corrosion-resistance field, the resistance of tantalum to acids (except HF) is outstanding. Titanium does not have Page 79 nearly so good acid resistance as tantalum, but recent develop- ments in titanium-base alloys definitely offer possibilities for partial substitution. No possibilities for substitution of titanium appear for tin, lead, zinc, or cadmium in metallic form. Substitution of Ti02 for white lead in pigments has, of course, been extensive. The fields of application of molybdenum-rich and tungsten- rich materials are such that there are few places in which substitution by titanium can take place. In the vacuum-tube industry, more widespread utilization of titanium is probable, which would result, on an over-all basis, in less percentage consumption of molybdenum and tungsten. The field of cemented carbides is one where complete or partial replace- ment of tungsten carbide by titanium carbide can3 and is, taking place. Titanium Dioxide Industry In good peacetime years, the consumption of titanium di- oxide in the United States is about 250,000 tons annually. An estimated breakdown of this tonnage market is shown below: Market Short tons Paint, Enamel, Lacquer, etc 170, 000 Paper 50, 000 Rubber 10,000 Ceramics 15,000 Others (linoleum, textiles, ink, leather, etc) 20,000 265, 000 The titanium contained in the total of titanium dioxide shown in the foregoing breakdown is about 160,000 tons. Ton- nages of this magnitude are what the titanium-metal industry is pointing toward. It took the titanium dioxide industry about 30 years to reach this scale of operation, but it is expected that the metal industry should be able to do it in half that time, or less. The titania industry is well established and, while it is still expanding, its use pattern is pretty well known and should not be drastically different 25 years from now. Considerably more titania will be available. For example, the projected output of the Sorel smelter in contained Ti02 is about equal to that of the rest of the North American industry combined. This will mean that the availability of Ti02 will be much greater than it has been in the past. Future technological factors in the utiliza- tion of titanium will be discussed briefly in the following section. The most outstanding properties of titanium dioxide in pig- ments are its extreme hiding power and tinting strength, as compared with the other pigments. These properties are shown in table 4. Another important property of Ti02 in paints is chemical inertness. This is a mixed blessing. An advantage is that it enables titanium dioxide to be used with practically all vehicles without "livering,55 that is, without excessive viscosity or body increase during shelf life. A disadvantage is the in- ability of titanium dioxide to react with the vehicle. This results in a paint film that is less tough and less durable, as compared with wrhite lead paints. Chalking of paints containing titanium dioxide has also been disadvantageous in many cases. Recently, chalk-resistant and nonchalking types of titanium pigments have been developed to eliminate this disadvantage. The non- chalking types are mainly of the rutile form and have the added advantage of a 25 to 30 percent increase in hiding power over the anatase form. In the future, technology will be concerned with converting the titanium dioxide in pigments over to the rutile form. Ana- tase titanium dioxide is chiefly recovered from ilmenite at pres- ent. Rutile can be formed from anatase, but this entails added processing and expense. Therefore, improved methods for this conversion or for recovering rutile directly without going through the anatase stage will be a major aim. Work will also be done in attempting to improve the toughness and durability of titanium pigments by finding methods for making TiO_ interact with the paint vehicle. Blending of 20 to 25 percent of white lead with the Ti02 will do this, but it would be desirable to obtain interaction in the absence of white lead or basic lead sulfate. Table 4.—Tinting strength and hiding power of white pigments 1 Pigment Carbonate white lead, Dutch Process Carbonate white lead, Carter Process Carbonate white lead, Precipitation Process. Basic lead sulfate Zinc oxide Lithopone Titanox "B" (titanium-barium composite) . . Lithopone, high strength Titanated lithopone Titanox "C" (titanium-calcium composite) . Zinc sulfide Titanium oxide (anatase) Titanium oxide (rutile) 2 Hiding power (sq.ft./lb.) Tinting strength 100 15 110 15 85 12 85 13 200 20 260 27 380 40 400 44 400 44 450 48 540 48 1, 150 115 1,600 1 Hallett's data. Physical and Chemical Examination—Paints, Varnishes, Lacquers, Colors. Tenth edition, 1946, p. 36, Gardner-Sward. 2 J. J. Mattiello, Protective and Decorative Coatings, vol II, chapter 1. About 10 percent of the pigment-grade Ti02 is consumed by the paper industry, where it is used as an opacifier and brightener. The addition of fillers to paper fiber results in weakening the strength of the finished paper. Titania, by accomplishing the desired results with much smaller amounts, gives a stronger paper of a given opacity. The brightening power of Ti02 in paper permits a masking of the discoloration in paper from the other constituents, such as fiber, sizing, etc. The use of Ti02 in paper should remain of major im- portance and consumption should increase with greater avail- ability and lower cost (say, 10 cents per pound or less). Potential consumption of 30,000 to 50,000 tons is probable. It is doubtful if consumption of Ti02 in the paper industry will ever equal that in the paint industry, but both industries will continue to make increasing use of Ti02. Titanium dioxide is used in the rubber industry as a pigment for making white or tinted rubber. It is used alone or in con- junction with calcium or barium sulfate for this purpose. The rubber industry consumes about 5,000 to 6,000 tons per year, but, if white-sidewall tires become and stay popular, con- sumption may go to 10,000 tons. The use of Ti02 in rubber is rather small, and, despite future technological advances in Ti02 pigments, probably will not increase much in the future. In weld-rod coatings and vitreous enamels, Ti02 has be- come increasingly important. Continued and expanded use of Page 80 Ti02 in vitreous enamels is expected because of its excellence as an opacifier. In the vitreous-enamel field, there is no pref- erence for either the anatase or rutile forms. Hence, the ex- pected technological advances in the production of the rutile form will have little effect on this field. The weld-rod-coating field uses natural rutile principally. With cheaper, more-avail- able Ti02 from ilmenite, the consumption of Ti02 in this field may increase, but probably won't, because the natural rutile is used without further processing at present. THE FUTURE OF TITANIUM 1. In the future, the titanium-metal industry should advance to the point where it becomes a tonnage-type industry of about the magnitude of the present stainless steel industry. Further advances in the already-tonnage titanium dioxide industry are expected. 2. The chief task for technology is finding cheap methods of extracting ductile titanium metal from ilmenite. Best chances for doing this now appear to be with continuous Kroll-type or iodide-type methods. If a way is found to produce coherent, ductile, electrolytic deposits from fused-salt electrolysis, this method, too, would be in the running. 3. Attainment of substantial tonnage production of titanium will make a tremendous drain on our energy resources, because, in terms of energy per pound, titanium costs more to produce than any other of our present tonnage metals. However, attain- ment of tonnage status for titanium will reduce the need for many other of our metals, so that the total additional energy required for titanium production will be less than it would be on a straight addition basis. 4. Technological advances will be made in the production of large-size titanium ingots, which will result in economies in fabrication cost per pound of titanium. Also, improved methods of handling and fabrication are expected. 5. Welding and machining are present knotty problems in titanium-alloy technology, but it is expected that adequate solutions will be available for them. 6. The capabilities of titanium will be enhanced much fur- ther by continued advances in titanium-alloy technology. 7. Large-scale replacement of other materials by titanium and its alloys will be dependent on cost reduction and substan- tial increases in production, both of which will take time. Chief substitutions will be made for stainless steel and aluminum alloys in medium-temperature aircraft applications up to 800 degrees Fahrenheit, for steel in airborne and man-carried ord^ nance equipment, and for copper-base and nickel-base alloys in marine corrosion applications. References 1. Kroll, W. J. Trans. Electrochem. Soc, vol. 78, 1937, pp. 35-37. 2. Kroll, W. J. U. S. Patent 2205854, 1940. 3. Dean, R. S., Long, J. R., Wartman, F. S., and Anderson, E. L. Trans. Am. Inst. Mining Met. Engr., Inst. Metals Div., vol. 166, 1946, pp. 369-81. 4. Wartman, F. S. "Ttanium Symposium," ONR, Dept. of Navy, Washington, D. C, December 1948, pp. 20-66. 5. Wartman, F. S., Walker, J. P., Fuller, H. C, Cook, M. A., and Anderson, E. L. U. S. Bureau of Mines, Repts. Invest. 4516, 1949. 6. Jaffee, R. I., Ogden, H. R., and Maykuth, D. J. /. Metals, vol. 188, 1950, pp. 1261-1266. 7. Hunter, M. A. /. Am. Chem. Soc, vol. 32, 1910, pp. 330-6. 8. See Smatko, J. S. FIAT Final Report 798, May 15, 1946, and U. S. Patent 2148345. 9. Kroll, W. J., Hergert, W. F., and Yerkes, L. A. /. Electrochem. Soc, vol. 97, 1950, pp. 305-310. 10. U. S. Patent No. 2205854, 1940. 11. Maddex, P. J., and Eastwood, L. W. /. Metals, vol. 188, 1950, pp. 634^0. 12. Kroll, W. J., "Titanium Monograph" (Lecture before ASM on Oct. 25, 1950). Unpublished. 13. Anon. Chem. Ind., vol. 66, 1950, p. 24. 14. FIAT Final Report No. 774, P. B./22, 1946, p. 626. 15. Westcott, E. W. U.S. Patent 1552786, 1925. 16. FIAT Final Report No. 798, 1946. 17. Campbell, Jaffee, Blocher, Gurland, and Gonser. /. Electro- chem. Soc, vol. 93, 1950, pp. 249-51. 18. Anon. Engr. and Mining Journ., vol. 152, 1951, pp. 76-78; Cana- dian Patent 475345. 19. Radtke, S. F., Scriver, R. M., and Snyder, J. A. /. Metals, vol. 3, August 1951, pp. 620-624. 20. Clausner, H. R. Materials and Methods, vol. 27, January 1948, pp. 57-61. 21. Sutton, J. B., Gee, E. A., and De Long, W. B. Metal Progress, vol. 58, 1950, pp. 716-20. 22. Jaeger, Rosenbohm, and Fonteyne. Rec. Trav. Chim., vol. 55, 1936, pp. 615-654. 23. Brace, P. H., Hurford, W. J., and Gray, T. H. Westinghouse Re- search Laboratories, Scientific Paper No. 1466, Ind. Engr. Chem., vol. 42, 1950, pp. 227-236. 24. Hutchinson, C, and Permar, P. Corrosion, vol. 5, October 1949, pp. 319-325. 25. Anon, "Salient Attractive Characteristics of Titanium Are Outlined," American Metal Market, Jan. 20, 1951. 26. Handbook on Titanium Metal. Titanium Metals Corporation of America, 3d printing, March 15, 1951. References Elsewhere in This Report This volume: Tasks and Opportunities. The Technology of Iron and Steel. The Technology of Tin. The Technology of Uncommon Metals. Vol. II: The Outlook for Key Commodities. The Additive Metals. Aluminum. Cadmium. Chemicals. Fluorspar. Iron and Steel. Magnesium. Titanium. Unpublished President's Material Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Sullivan, J. D. "Role of Technology in the Future of Magnesium." Page 81 The Promise of Technology Chapter 7 The Technology of Zirconium* Since the first world war, the industrial utilization of zirconium has been largely made up of nonmetallic uses. Blumenthal of the Titanium Alloy Manufacturing Co. reports the following disposition of the 20,555 tons of zircon shipped to consumers in 1946: Percent Refractories 28 Vitreous enamels 25 Electric and chemical porcelains 19 Metals and alloys 16 Pottery glazes 10 Miscellaneous 2 Total 100 Recently a trend has started toward expanded use of zir- conium metal and zirconium-rich alloys. The impetus behind this trend is the Atomic Energy Commission interest in zir- conium metal as a material of construction for certain nuclear reactors. Zirconium has excellent corrosion resistance and has a low thermal neutron absorption cross-section (i. e., perme- ability to slow neutrons). Hence, it is an interesting metal for nuclear energy applications. Unlike uranium and thorium, zirconium does not undergo fission, and is of no interest as an atomic fuel. Therefore, there is no reason why zirconium cannot be an "open" metal, avail- able to industry as a whole. As a matter of fact, the A. E. C. would prefer to have the zirconium metal industry stand on its own feet, without subsidization. Then, the A. E. G. could act as a good customer to an industry capable of existing without its support. A chief aim of technology is to expand the uses of zirconium metal and its alloys so that the nonnuclear uses are capable of supporting the industry. There are good chances for doing this, based primarily on the outstanding corrosion-resistance of zirconium metal. However, the existence of a self-sufficient zirconium metal industry of appreciable size demands the pro- duction of an amount of zirconium metal over and above A. E. C. demands, and a substantial reduction in price to levels competitive with other metals. The position of zirconium in the nonmetallic field is a firm one and, despite ups and downs resulting from technological *By Robert I. Jaffee and Ivor E. Campbell, Battelle Memorial Institute. developments in competitive materials, is expected to be an expanding one. Free world zirconium resources are good and are capable of adequately supplying the industry in the foreseeable future. Foreign imports have been high, but this is the result of the excellence of the foreign ores, rather than unavailability in this country. Almost half of the United States consumption comes from the Florida beach sand deposits. Important foreign sources of zircon are Australia and (Travancore) India. Baddeleyite (zirconium dioxide) is imported entirely from Brazil. PRODUCTION PROBLEMS Current production of zirconium falls into three classifica- tions: (1) crystal-bar, made by the deBoer iodide process; (2) sponge, made by the Kroll process, i. e., magnesium reduction of the tetrachloride; and (3) crude zirconium, usually in the form of lumps or powder, made by calcium or calcium hydride reduction of the oxide. Crude zirconium is produced only in limited quantities for special applications and, being nonductile, is not of interest for applications involving fabrication. Zirconium sponge can be processed, by powder-metallurgy techniques or by special melt- ing procedures, into massive zirconium that has good cold ductility and can be fabricated satisfactorily. However, the demand for sponge as a feed material for the preparation of crystal-bar exceeds the supply, and virtually all of the sponge produced is used for that purpose, and no sponge is available for general industrial use. Almost all of the current domestic crystal-bar production is consumed by the A. E. C. which has been instrumental in con- verting crystal-bar production from a small-scale, high-cost operation to a well-integrated commercial operation with re- sultant substantial cost reductions. A small amount of reject crystal-bar, entirely satisfactory for most industrial uses, but not acceptable for A. E. C. requirements, is available at prices quoted from $17 to $50 per pound. The amount of crystal-bar available at this price is limited, however, and it is uncertain what price would be charged for quantity commercial produc- tion if and when it is available. Estimates range from $15 to $150 per pound, with $25 to $50 being the most probable fig- ure. Even $15 per pound for the crystal-bar is sufficiently high, Page 83 however, to limit its application, and general industrial accept- ance of zirconium will depend largely on the success of tech- nological advances in reducing the cost of massive metal. All zirconium ore contains small amounts of hafnium com- pounds, which, because of their marked similarity in properties to the analogous zirconium compounds, can be separated only by special techniques, such as ion exchange, fractional distilla- tion of complex compounds, or fractional crystallization. If the hafnium compounds are not removed during the processing, the hafnium ends up in the metal in virtually the same Zr-Hf ratio as found in the original ore, regardless of the method followed in the preparation. For most nuclear applications, low-hafnium material is re- quired, but for nonnuclear applications, no reduction in the hafnium content, which normally comprises up to 2 percent by weight of metal produced, is required. The hafnium separation comprises only a small fraction of the cost of producing low- hafnium material, however, and elimination of this step in processing material for nonnuclear applications would effect only a minor saving. FOR HIGH TEMPERATURE ALLOY AND ANTICORROSION USE The major commercial application of a low-cost zirconium metal would be in the construction of corrosion-resistant equip- ment, and perhaps as an alloying addition in high-temperature materials. If the price of massive zirconium can be reduced to $5 or $10 per pound, a figure which does not seem to be alto- gether impossible, substantial quantities of the metal could be used with resultant savings in critical materials. It is difficult to estimate the quantity of metal for which there would be a de- mand at such a price because of the fact that industrial applica- tions have, to date, been severely restricted by its high cost, the price as late as 1948 being as high as $200 per pound, and more, in the form of sheet and wire, and by the limited sizes of sheet and tubing available. The picture is further complicated by the marked advances in commercial utilization of titanium metal, which, though in general somewhat inferior to zirconium in corrosion resistance, is regarded as a potentially valuable material for many applications in chemical-process industries. A low-cost zirconium could be expected to supplant tantalum in many applications, since the pure metal compares favorably with tantalum in corrosion resistance. It may also be used in applications where stainless steel is now used, but where both stainless and titanium, a potential substitute, are considered inadequate. At present, the sole producer of zirconium sponge is the U. S. Bureau of Mines, with substantially all of the output going to the A. E. C. for use as a feed material in the preparation of crystal-bar. Zirconium sponge has also been produced by the Foote Mineral Co., both by the Kroll process and by sodium reduction of the tetrachloride, but it is reported that production of sponge at Foote has been discontinued. To date, A. E. C. needs have been met largely by crystal-bar, but it seems not unlikely that future needs will be met, in part, by massive metal processed from sponge rather than by crystal- bar. The Foote Mineral Co. makes a limited amount of crude zirconium, primarily for vacuum-tube applications, by calcium or calcium hydride reduction of the oxide. The Metal Hydrides Co. and the Titanium Alloy Manufacturing Co., a division of the National Lead Co. have also produced limited amounts of crude metal. The crude metal produced by these companies has been used as a crude for the de Boer iodide process, but Kroll process material is generally preferred since it yields a purer crystal-bar and produces a smoother and more rapid reaction in the iodide process. Until recently, the entire production of iodide zirconium in this country was centered at the Foote Mineral Co. which produced crystal-bar from 0.25 to 0.4 inch in diameter in lengths up to 24 inches. In late 1950, however, a de Boer plant capable of producing longer crystal-bar of larger diameter was constructed by the Westinghouse Atomic Power Division at Pittsburgh. The Foote facilities were simultaneously increased. Crystal-bar hairpins up to 1.7 inch in diameter and 12 feet in over-all length have been produced for the A. E. C. in experimental units at the Battelle Memorial Institute, but the necessity for lower power costs, and heat-dissipation prob- lem, make it likely that commercial development will be directed toward the production of longer lengths of smaller diameter crystal-bar, i. e., less than 1 inch in diameter, rather than toward the production of short lengths of large-diameter crystal-bar. It now appears that facilities for producing crystal-bar ex- ceed or at least strongly tax facilities for producing the feed material. Hence, in meeting needs for increased production, the expansion of sponge production is of paramount im- portance, because it is a necessary preliminary to expansion of de Boer crystal-bar production, and it is a potentially useful material for processing to massive zirconium for commercial applications. Since sponge is an intermediate in the production of iodide zirconium, unless and until a commercial process is developed for producing iodide zirconium from the ores, with- out the intermediate preparation of a relatively high-grade metal feed, the most likely source of a low-cost zirconium metal for nonnuclear applications is an improved method for pro- ducing and processing sponge. ABSORBENT PROPERTIES CREATE PROBLEMS Zirconium, like titanium, has a strong affinity for the non- metallic elements and particularly for oxygen and nitrogen, which are absorbed irreversibly with resultant embrittlement of the metal. Although removal of oxygen and nitrogen from thin sheet zirconium has been demonstrated, on a small scale, no practical method of removing oxygen and nitrogen from the metal has been developed. It is therefore generally considered imperative that the metal be prepared free of these impurities, i. e., at least as free as required in the finished product, rather than to rely on any method of removing these elements from the metal. Elimination of these impurities in the preparation of high- purity zirconium is doubly important, in that the purity strongly influences its corrosion resistance as well as its ductility. Zirconium, particularly in the finely divided state, is ex- tremely reactive when pure, hence it must be agglomerated without exposure to the atmosphere if high purity is desired. Page 84 The requirement for material low in nonmetallic impurities has caused investigations to avoid the use of oxide as a starting material in the metal reduction process and has focused atten- tion on the use of the halides—for example, the chloride in the Kroll process and the iodide in the de Boer process. The necessity for avoiding contamination of the finely divided material places special requirements on the processing to avoid the preparation of too fine material, and has prompted efforts to procure a massive material directly as in the prepara- tion of crystal-bar. The same considerations have also prompted the use of arc melting in water-cooled crucibles to avoid con- tamination during melting. Induction melting in graphite crucibles and melting in graphite resistor furnaces have been proposed, but the carbon pick-up is too high for many purposes. Molten zirconium, like molten titanium, is almost a universal solvent, and normal crucible melting has proved, in general, unsatisfactory to date. Processes in Development Substantial improvements in the preparation of zirconium sponge have been made in the past few years by the U.S. Bureau of Mines, but further improvements to reduce the cost of sponge from its present value of $15 to $18 per pound (depending on whether or not it is hafnium-free) will be required if reason- ably large-scale commercial applications are to follow. At present the Kroll process is a batch process, with the size of reduction units limited by the ability to dissipate the high heat of reaction from the units. Recovery of the sponge from the units is a high-cost operation, and involves special precau- tions to reduce hazards due to the extreme reactivity of finely divided zirconium which is inevitably present along with the sponge. A major improvement in the magnesium reduction process would be the development of a continuous process, with con- tinuous withdrawal of arc-melted sponge and recovery of the magnesium chloride produced by reaction of the magnesium with the zirconium tetrachloride, and subsequently of the magnesium. This poses numerous technical problems, but if solved would be a promising step toward low-cost zirconium. Further economies in the production of zirconium tetra- chloride would also aid in reducing the cost of the sponge. Some economies are to be expected, of course, in larger scale operations. At the present time, magnesium-reduced zirconium is an intermediate in the de Boer process and is in a more advanced state of development than any other process. It must therefore be considered the most promising source of low-cost zirconium, [n addition to reduction in operating costs, further improve- ments in purity of the sponge and of the arc-melted material will greatly contribute to the development of the process since it can be expected to supplant crystal-bar in some applications, both nuclear and otherwise. DE BOER PROCESS WITH ZIRCONIUM IODIDE Substantial improvements in the de Boer process for produc- ing crystal-bar by the hot-wire decomposition of zirconium iodide have been effected at the Westinghouse Atomic Power Laboratories, at the Foote Mineral Co., and at Battelle Memo- rial Institute, the Battelle work having been under a research contract with the A. E. C. during the past 2 years. These include the preparation of larger diameter crystal-bar, and increasing the capacity and production rates of individual de Boer units. An excellent job has been done at Westinghouse in increasing the manipulative efficiency of the operation, and reducing the labor costs, and it is doubtful if any further substantial econ- omies can be produced. The cost of processing the sponge at the Bureau of Mines has been reduced to approximately $20 per pound and it has been predicted that this will be still further reduced. However, if a low-cost iodide zirconium is to be produced, the development of a low-cost feed material to replace the zirconium sponge is obviously essential since the iodide-processing price is additive to the sponge prices at present. Although it is not impossible that vacuum tubes capable of operating at 700—900 degrees Centigrade could be designed, it is likely that any new feed material would have to be sufficiently reactive to permit the operation of the bulb at a wall tempera- ture of under 600 degrees Centigrade. This, of course, limits the availability of feed materials. It is known, however, that the feed temperature in de Boer operation may exceed 800 degrees Centigrade, and with proper design it may be possible to main- tain a high feed temperature and a low wall temperature, and thus permit the use of less reactive feeds than zirconium sponge. However, the feed must not liberate excessive amounts of vapors containing nonmetallic elements at the high temperatures; hence, carbonitride would not be a suitable substitute for sponge. Zirconium carbide might be a possibility. Although consideration should be given to the development of a less expensive feed material which would reduce the cost of the crystal-bar and diminish the burden on sponge-producing facilities, it appears that a more promising approach would be to resort to the straight-flow iodide process discussed below. STRAIGHT-FLOW IODIDE PROCESS The de Boer process for making iodide zirconium is subject to limitations imposed by the fact that the iodination and de- composition reactions are carried out in the same vessel, at low pressures unfavorable to the iodination reaction. In addi- tion, further development of the process is handicapped by the fact that the possibilities of making the de Boer process even semicontinuous are remote. If the iodination and decomposition reactions are carried out separately, the possibilities of developing a semicontinuous process appear promising, as do the possibilities of utilizing a less expensive feed material such as zirconium carbide or zir- conium carbonitride. Under the sponsorship of the A. E. C, there is being developed at Battelle Memorial Institute a semi- continuous process in which zirconium iodide is prepared by iodination of sponge which then, after purification by fractional condensation and evaporation, is passed through decomposition bulbs similar to an ordinary de Boer bulb. Tests are also in progress on the substitution of zirconium carbide or carboni- tride for sponge as a feed material in the process. It is too early to appraise this process, but although consider- able developmental work is required, a semicontinuous process for producing iodide zirconium from a low-cost feed material Page 85 appears possible. The cost of metal produced by such a process would be dependent primarily on the cost of the feed material and the extent to which continuous operation can be achieved, primarily on the latter. A low-cost crystal-bar can be considered a possibility. NEW PROCESSES FOR PRODUCING ZIRCONIUM Numerous other methods for producing zirconium have been tried at the experimental level, and some have been tried on a small scale commercially. These include the reduction of alkali double fluorides with sodium or aluminum, reduction of the chloride with calcium, reduction of the oxide with carbon or the carbide, f used-salt electrolysis of the alkali double halides, and reduction of the halides with hydrogen. The reduction of zirconium tetrabromide with hydrogen has been carried out by Kroll and others, but it appears to offer no substantial advantages over the iodide process, and is sub- ject to certain difficulties. These include the difficulty of handling bromine, the added cost of the hydrogen, and the difficulty of recovering the bromine. A definite advantage, if feasible, would be the operation at atmospheric pressure, but operation at atmopheric pressure has resulted in low efficiencies and does not appear feasible. This might be accomplished under careful control. Carbon reduction of the oxide would, of course, be an ex- cellent goal, but attempts to obtain ductile metal by this method have consistently resulted in failure. A practical method for making pure metal by this process will probably never be developed, although a crude metal can be obtained. Fused-salt electrolysis has been advocated by some investi- gators, but two factors have been primarily responsible for lack of development along these lines. Thus far, the method has not yielded a high-purity product, and attempts to obtain massive deposits have been unsuccessful, a powder being ob- tained in every case. The difficulty of agglomerating the powder without contamination presents a serious drawback to development of an electrolytic process. Any discovery lead- ing to a method for obtaining massive deposits might bring this method back into the picture. Arc dissociation or arc reduction of the halides comprises variations of other processes which may prove of potential im- portance. Arc reduction of the tetraiodide has been investi- gated by the National Research Corporation for the A. E. C, and although, to our knowledge, no work is being carried out along these lines at the present time, the use of arc dissociation in place of hot-wire reduction in the straight-flow iodide process described above is a definite possibility. Much develop- mental work would be required to bring such a process to a commercial stage, but, if successful, a low-cost process might result. Other reduction processes described above seem to offer no advantage over the Kroll or magnesium-reduction process. SOME DIFFICULTIES IN HANDLING METAL Of the two sources of zirconium melting stock, crystal-bar and sponge zirconium, only the latter has caused difficulty in melting. Spattering and wildness in melting zirconium have been so bad that the untreated sponge has been virtually un- meltable. The trouble originates in the residual magnesium chloride, hydrogen, and other volatiles in the sponge. Pre- treatment of the sponge, as by the use of a methanol leach, vacuum heating, etc., proves beneficial. Proper selection of sponge from the reaction pot so as to avoid magnesium chloride accretions is also helpful. Murex, Ltd., in England, reports no trouble from volatility in melting sponge. Presumably this re- sults from improved reduction practice. It appears very probable that any difficulties originating from volatility which are presently encountered in melting zir- conium sponge will be overcome by improved technology such as that mentioned above. Zirconium scrap, properly cleaned and comminuted, makes an excellent charge for melting. In large-scale arc-melting pro- cedure, it is usually not economical to do this using present methods for cleaning and comminuting the scrap. It might be feasible for graphite melting, however, since the charge need only be cleaned and cut up into relatively large pieces. It is probable that improved methods for preparing zirconium scrap for melting will be worked out and put into practice. When this is done, the scrap value of zirconium will be increased and the costs of zirconium reduced. Present requirements call for relatively small ingots of zir- conium on the order of 50 pounds or less. However, consider- ably larger ingots are entirely feasible, and can be made when required. The scaled-up furnaces built for large titanium ingots are entirely suitable for producing zirconium ingots. Of course, ingots of zirconium will weigh considerably more than those of titanium of comparable size because of the difference in density of the two metals. Induction or resistance melting in graphite will be more satisfactory for producing large zirconium ingots than for producing large titanium ingots. The maximum amount of carbon pick-up in melting zirconium is only 0.3 percent, whereas, under the same melting conditions, titanium will pick up 1.5 to 2 percent carbon. Since induction or resist- ance melting is simpler than arc melting, it is apparent thai this type of melting will be an important factor in the future of zirconium. In fabrication for nuclear applications, special techniques are utilized. However, for general commercial applications hot fabrication in air, as in current titanium fabrication prac- tice, would undoubtedly prove to be a satisfactory process foi most purposes. IMPROVING PERFORMANCE Private-industry capitalization of zirconium production fa- cilities is discouraged by the rapidly changing technology ir nuclear-reactor design. Since substantially all of the currenl production is utilized in nuclear applications, a switch to some other material would eliminate the present market, a factoi whch is obviously a strong deterrent to private plant expansion In addition, there is much uncertainty over the future oi nuclear energy as a source of power, making the demand foi zirconium for this use doubly uncertain. Were nuclear powei to be considered unfeasible for technical or political reasons at some future time, this important application for zirconium would be ended. However, assuming that nuclear power and propulsion are here to stay, it is very probable that zirconium will always have an important outlet in that field as a corrosion-resistanl Page 86 metal of low neutron cross section. There are no materials with thermal neutron absorption cross section equivalent to zirconium that can match it in general corrosion resistance. Table 1, a list of the elements in order of increasing cross section, amply illustrates this point. Table 1.—Thermal neutron absorptio [Arranged in order of increasing cross sectior The cross section per gram of an alloy is t] the constituents each multiplied by its crc ;s section for elements* n square centimeters per gram. : sum of the weight per cents of section per gram.] ). 000038 ). 000043 ). 00022 ). 00032 ). 00032 ). 00055 ). 00060 ). 00090 ). 0013 ). 0015 ). 0022 ). 0029 ). 0029 ). 0043 ). 0048 ). 0049 ). 0049 ). 0061 ). 0072 ). 0091 I. 0092 I. 0095 0. 001 0. 015 0. 0045 0.01 0. 045 0. 19 0. 58 0. 15 0. 80 0. 038 0. 046 0. 047 0. 048 0. 048 0. 055 0. 059 0. 070 0.073 0. 080 0. 092 0.13 0. 13 0.14 0. 150 0. 15 0.16 0. 17 0.19 0. 24 0. 28 0. 29 0. 34 0. 35 0. 35 0. 37 0. 42 0. 56 0. 60 e by H. W. Russell of Battelle Table 2.—Bureau of Mines data on the corrosion of graphit melted sponge zirconium in hydrochloric acid—6-day tests Acid concentra- tion, weight percent Corrosion rate, mils per year Air-saturated Nonaerated 35° C. 60° C. 100° C. 35° C. 60° C. 100° C. 5 0. 06 ,0. 41 0. 37 0. 52 0. 09 0. 10 0. 58 0. 69 0. 02 <0. 01 0. 06 0. 04 0. 07 0. 10 0. 11 0. 10 » 39.0 0. 03 0. 01 0. 06 0. 06 0. 05 10 15 o!o7 20 37 3. 02 In Corrosion-Resistance Applications The hopes for an expanded zirconium metal industry are based on the excellent corrosion resistance of zirconium. If the promise shown by laboratory test data is borne out in field and plant tests, there are good possibilities for a tonnage outlet for zirconium in this field. The most extensive data on the corrosion resistance of zir- conium metal are those of the Bureau of Mines, on graphite- melted, magnesium-reduced sponge zirconium. Fewer data are available on the general corrosion resistance of the higher purity crystal-bar zirconium. This is unfortunate, because the corrosion resistance of zirconium is known to be markedly affected by the presence of impurities. Hence, the Bureau of Mines data, while perfectly reliable, probably do not present the ultimate possible corrosion resistance of zirconium. For example, crystal-bar zirconium, which had shown good resist- ance to attack by aqua regia, was tested after remelting in graphite. Attack by aqua regia was then as bad as that on graphite-melted Bureau of Mines material. Table 3.—Bureau of Mines data on the corrosion of graphite- melted sponge zirconium in sulfuric acid—6-day tests Corrosion rate mils per year Acid concentration, weight percent Air-saturated Nitrogen- saturated 35° C. 60° C. 100° C. 35° C. 10 0. 05 0. 11 20 0. 08 0. 17 30 0. 34 0. 15 40 0. 41 0.12 50 0. 37 0. 51 0. 09 60 0. 42 6.'53 0. 60 0. 08 70 0. 34 0. 76 0. 07 75 1. 11 3.7 21.6 80 56. 3 210 6.'41 82.5 242 i 5, 500 11.6 85 865 2 3, 060 303. 0 90 1, 620 96.5 752 ''i,' 707 104.5 98.5 Table 4.—Bureau of Mines data on the corrosion of graphite- melted sponge zirconium in nitric acid—6-day tests Acid Concentration Average Corrosion Rate, mils per year* weight percent R. T. 35° C. 60° C. 100° C. Boiling 10 0.01 0.01 0.02 20 30 so.';;;;'..'!!;;;.'!;;;;;! "'6.' 87' 0. 83 0. 69 "'i.'68' 60 "'o.'oi' 69.5 '6.O3' 0. 33 70.4 95( white fuming) '6.O2' 1 0. 05 92 + 6.5 percent N02 (red fuming) 1 Sealed in glass tube under pressure. 995554"—52 -7 Table 5.—Bureau of Mines data on the melted sponge zirconium in mixed sulfi 6-day tests of graphite- nitric acids— Table 6.—Bureau of Mines data on the corrosion of graphite- melted sponge zirconium in phosphoric acid—6-day tests Acid concentration, weight percent Average co rrosionrate.m lis per year Aerated Nonaerated H2S04 HN03 35° C. 35° C. 60 0 C. 99 0 00 2. 5 92.5 0 00 5 95 0 00 10 90 0 00 20 80 25 2 25 75 50 0 30 70 49 0 35 65 6.66 55 2 40 60 9 05 45 55 o.'o 0.71 10 50 50 0. 63 2 6 55 45 6. 20 19 3 60 40 70.4 280 65 35 245 695 70 30 458;' 614 75 25 261 80 20 256 85 15 448 397 90 10 447 420 95 5 620 97.5 2. 5 1930 99 1 2780 100 0 925 Average corrosion rate, mils per year, aerated solutions Acid concentration, weight percent 35° C. 60° C. 100° C. 5. . 0. 03 0. 21 0. 63 10... . 0. 05 0. 23 0. 37 0. 44 0. 49 20 .... 30 0. 86 40. . 1. 16 1.68 50 0. 46 55 2. 38 60 0.49 0. 46 3. 84 7. 37 9. 27 65. 70 0. 53 75 0. 74 18.0 24. 8 43. 3 80 0. 56 0. 05 85. 1.56 Despite its probable lower order of corrosion resistance as compared with that of crystal-bar zirconium, the resistance of graphite-melted sponge zirconium is outstanding. Tables 2 to 9 give the rates of corrosion of cold-rolled, graphite-melted Bureau of Mines zirconium in various acids, bases, salt solu- tions, and organic compounds. (Taken from monthly reports on "Corrosion Studies on Titanium and Zirconium," Bureau of Mines, College Park Station, 1950-51.) The limited data on the corrosion resistance of crystal-bar zirconium are sum- marized in table 10. (Chiefly data from Foote Mineral Co., "Corrosion Handbook," J. Wiley & Sons, 1948. ) On an over-all basis, the corrosion resistance of zirconium is very good. However, before extensive utilization of high- price zirconium can be made on the basis of corrosion-resistance properties, the corrosion resistance of competitive materials must be considered. In the following sections, the corrosion resistance of zirconium in various media is discussed in that light. Table 7.—Bureau of Mines data on the corrosion of graphite-melted sponge zirconium in organic acids—6-day tests in aerated solutions Acid concentration, weight percent Acetic acid Average corrosion rate, mils per year Formic acid Citric acid 60° G. 100° c. 35° C. 60° C. 100° C. Boiling 35° C. 60° C. 100° c. 10 0. 00 0. 04 0. 05 10. 03 0. 00 0. 00 3 0. 00 0. 02 0. 02 0. 00 0. 00 0. 09 0. 19 0. 00 0. 00 0. 23 0. 04 0. 09 0. 06 0.00 25 0. 00 0. 03 0. 03 0. 00 5 0. 06. 50 0. 00 2 0. 12 * 0. 04 0. 05 0.16 0. 00 1 :! I Oxalic acid Lactic acid Tartaric acid 35° C. 60° C. 100° C. 35° G. 60° C. 100° C. Boiling 35° C. 60° C. 100° c. 0. 13 0. 29 0. 48 0. 20 0. 30 0. 66 0. 24 0. 25 0. 28 0. 51 0. 29 5 O.06' 0. 03 0. 00 0. 00 0. 02 0. 00 0. 00 o.oi' ""6.'66' 0. 00 ""o.'oo 6.04 10 O.OO' • 0. 07 0. 00 0.00 0. 05 25 '6.06' '"'6.O4' 50 75 ""0. 00' 85 90 99.5 Page 88 Table 8.—U. S. Bureau of Mines data on the corrosion of graphite-melted sponge zirconium in inorganic salt solutions—6-day tests in aerated solutions Average Corrosion Rate, mils per year Salt solution, weight % FeCl3 HgCl2 1 CuGl2 d d d CaCl2 d A1C13 d ZnCl2 U U o d d o d d d d o d d 0 d d 0 o o O O O o o o o o to o o o o o O O 0 0 0 0 0 0 0 LO CO LO CO o \o O LO CO O \0 10 0 LO CO 0 0 NO T—1 CO vO CO SO vO 1 0. 10 0. 30 1.04 0. 19 0. 44 0. 67 0. 35 2. 27 30.7 0. 00 0. 00 0. 19 5. 42 4. 65 16. 1 19. 2 397 670 0. 91 41.8 18.2 17. 5 149.0 167.0 2.5 5 0. 07 0. 00 0. 00 0. 06 0. 03 0. 01 0. 00 0. 01 0.02 0. 01 0. 08 0. 04 7.5 10 3. 90 5. 42 114. 5 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 0.00 12.5 15 14.0 27.0 319 462 (*) 17.5 20 27.2 498 (*) (*) 0. 05 0. 00 0. 00 25 0. 02 0. 00 0. 00 0. 24 30 42 Sat'd ! i MgCl2 Salt solution, weight % o o o BaCl2 SnCl4 MnCl2 u o o o NiCl2 Q FeCl3+10%NaCl o NaCi 1 U o O 1. . . . 2.5. . . 5. . . . 7.5. . . 10. . . 12.5. . 15. . . 17.5. . 20. . . 25. . . 30. . . 42. . . Sat'd. 0. 02 0. 00 0. 00 0. 02 0. 02 0. 05 0. 09 0. 01 0. 00 0. 05 0. 00 0. 05 0. 01 0. 00 0. 12 5. 98 2. 34 1. 33 0. 00 0. 03 0. 06 0. 15 0. 00 0. 08 0. 04 0. 00 0. 07 0. 05 0. 00 0. 09 0. 04 0. 00 0. 00 0. 00 0. 00 0. 02 0. 02 ♦Completely embrittled. 1 10 percent boiling—433 mils per year. ACID RESISTANCE Excepting the precious metals, only one metallic material, tantalum, has the same class of hydrochloric acid resistance as zirconium. Titanium has relatively poor hydrochloric acid resistance, and the Hastelloys, although superior to titanium, are inferior to zirconium. It is generally conceded that tantalum is slightly superior in hydrochloric acid resistance to zirconium, according to present data. However, the data on graphite- melted sponge zirconium indicate excellent corrosion resistance in all concentrations except hot concentrated HC1. Higher purity crystal-bar zirconium has excellent resistance, even in hot concentrated HC1, as shown in table 10. Despite uncer- tainty as to degree of excellence of the resistance of zirconium to HC1, it is apparent that the metal has real possibilities for usefulness in this important field. Tantalum is roughly 2^2 times heavier and is more costly than zirconium on a pound- for-pound basis. It is evident that there is a potential market for zirconium if hydrochloric acid resistance is required. Most of the applications will be where good heat transfer is required, such as in condensers, boilers, etc. For storage and pipelines, chemical stoneware and carbon are more economical to use and are perfectly adequate. The corrosion resistance of zirconium in sulfuric acid is ex- cellent in relatively dilute solutions, but becomes very poor in concentrations above about 70 percent. There are many cheaper materials which have equivalent corrosion resistance in the dilute-to-medium H2S04 concentration range. There- fore, there appears to be little hope for application of zirconium in sulfuric acid-resistance equipment. Like titanium, zirconium has excellent nitric acid resistance in all concentrations and temperatures. This makes zirconium of interest as a container for rocket fuels which contain fuming nitric acid. Strong competition from titanium, aluminum, and high-silicon cast iron would be expected. Therefore, the appli- cation of zirconium as a container for nitric acid would be limited. Mixed nitric-sulfuric is used as a nitrating acid and a rocket fuel. Zirconium has only fair corrosion resistance in these mixed acids. Hence, it would have only limited appli- cations here, if any, particularly in view of the good resistance of aluminium in this medium. Except in hot concentrated acid, the resistance of zirconium to phosphoric acid is good. Cheap materials such as high- silicon cast iron and stainless steel, which have the edge, even for holding the dilute acid, would preclude the use of higher cost zirconium. Page 89 Table 9.—Bureau of mines data on the corrosion of graphite-melted sponge zirconium in various media riot included in previous tables Media and concentration, weight percent H2S03 Aqua regia Dakin's soln 10% NaOH Chlorine water Wet chlorine 5%Na3P04 20%Na3PO4 2% Ca(CIO)2 6% Ca(CIO)2. . . . . . Monochloroacetic Acid Acetic Anhydride 5% Aniline Hydrochloride. 20% Aniline Hydrochloride. Test 6-day, aerated. Overnight. . . . 6-day, aerated. 6-day, aerated. 172 hours.... 172 hours 6-day aerated. 6-day, aerated. 6-day 6-day 6-day static. 6-day static. Corrosion rate, mils per year Room 0.04 Dissolved. . . 0. 56 192 35° C. 0. 17 0. 09 0. 11 0. 12 0. 03 0. 01 0. 00 60° C. 0. 03 0.01 0. 00 0. 00 100° c. 0. 02 0. 06 0. 00 Boiling 0.00 (189.5° C.) 0.03 (139.6° C). Zirconium is very good in organic acids, but so are titanium, stainless steel, and many other materials. The outlook for using high-cost zirconium as a container for organic acids is not good, but special applications may develop in this field. Available test data indicate that zirconium exhibits erratic corrosion behavior in aqua regia, indicative of a borderline passivity. A controlling factor appears to be the purity of the metal. Graphite-melted sponge zirconium dissolves readily in cold aqua regia. Crystal-bar zirconium dissolves either slowly or not at all. This points up the fact that the corrosion resist- ance of zirconium is sensitive to impurities. Improved technology will undoubtedly lead to a better under- standing of the erratic corrosion resistance of zirconium in aqua regia and other industrially important acids. Thus, we may expect future technology to lead to the development of metal of still better corrosion resistance. ALKALI RESISTANCE In the field of corrosion by alkalis, there is no clear-cut gap, like that in materials resistant to HC1, which the good alkali resistance of zirconium can fill. Nickel and silver both have excellent resistance to alkalis, and, at the present time, both are cheaper than zirconium. However, with increasing produc- tion and decreasing cost, zirconium might overtake silver in not too many years. This leaves nickel as the chief future competitor for zirconium for handling alkalis. It is known that nickel is not the complete answer for handling strong caustic liquors and fused caustics. If future investigation shows that zirconium is superior to nickel in resistance to alkalis, this field will be an important outlet for the metal at a price less than that of silver, or around $10 per pound. SALT CORROSION Zirconium has not been tested nearly so extensively as has titanium against marine corrosion. The preliminary tests indi- cate that its resistance to sodium chloride is excellent. Hence, we might expect zirconium to have marine corrosion resistance equivalent to that of titanium. However, there is little chance that zirconium could compete with titanium in this field, ex- cept where nuclear considerations are present. Table 10.—Corrosion data on crystal-bar zirconium in various media— 14-day tests except where noted HC1. . . H2S04. HN03. Aqua Regia. HF H3PO4 NaOH*. KOH NH4OH Chlorine water. FeCl.3 soln NaCl Media Concentration 5 % concentrated. . 10% concentrated. 10% concentrated. 10% concentrated. 10%. 50%. 10%. 28%. 20%. Average Corrosion Rate, mils per year 20° C. No attack. 0.1 0.2 0.01 0.01 Slow attack > . Rapid Attack. 0.02 0.04 No attack 1. . . 0.02 0.03 Attacked. Attacked. 100° C. No attack. 0.2. 0.7. Attacked. 0.03. 0.05. Attacked. 0.05. Attacked. 0.02.1 0.17.1 No attack. Gained weight. Embrittled. Embrittled. Slight tarnish.2 *In fused NaOH—no attack. 1 4 days. 2 5 days. Page 90 There is evidence that the over-all chloride resistance of zirconium is inferior to that of titanium. This is shown by the following comparative figures: In Other Fields GLASS-SEALING Ferric chloride, 10% boiling. . Cupric chloride, 15%, 35° C. Cupric chloride, 40% boiling. Chlorine water Wet chlorine Corrosion rate, mils per year Zirconium 433 670 0. 56 192 Titanium* Nil. Nil. Nil. Nil. ♦Hutchinson and Permar, "Corrosion," vol. 5, October 1949, pp 319-325. Therefore, although the resistance of zirconium to many of the chlorides is excellent, as shown in table 8, it does not appear that zirconium will excel titanium in this field. Since titanium itself will have to come down markedly in price to compete as a container material in the salt corrosion field, it is very un- likely that zirconium will be in the picture at all. However, the picture may be altered by improvements in the corrosion resist- ance of zirconium by alloying, or by eliminating harmful impurities. In Structural Applications The potentialities for developing high strength in zirconium by alloying are identical with those for titanium, despite the fact that much less work has been done on high-strength zir- conium alloys. However, it will be difficult for a structural zirco- nium alloy to compete with a structural titanium alloy for the following reasons: (1) zirconium appears to have no advan- tage in structural properties; (2) zirconium alloys will in all probability be more expensive; (3) the density of zirconium is almost 50 percent greater than titanium. Other considerations being equal, these factors would rule zirconium out for any structural application for which the two metals were consid- ered. Also, arguing against structural applications of zirconium is its relatively low modulus of elasticity. Titanium has a mod- ulus of 16 to 17 million pounds per square inch, whereas the modulus of zirconium is only 11 to 12 million pounds per square inch. Since all structural designs favor high elastic moduli as well as low density, zirconium will not fare well in comparison with titanium. On the positive side, zirconium has good potentialities for applications where both strength and corrosion resistance are required. The two factors that favor structural application of titanium are high strength and low density. Conversely, the structural applications of zirconium will depend primarily on high strength and excellent corrosion resistance. A third factor favoring zirconium in structural applications is its low neutron cross section. This is important for its use as a material of con- struction in nuclear power and propulsion plants. Major improvements in the strength of zirconium alloys can be expected. This is practically an untouched field. Atomic En- ergy Commission interest has been centered on high-purity zir- conium and on alloys with improved corrosion resistance. Using the experience and know-how gained in titanium alloy tech- nology, the development of zirconium alloys should proceed at a rapid pace. Zirconium has a low linear coefficient of thermal expansion, about 5 X 10"6 per Centigrade. This is lower than that of soda- lime glasses. It suggests the possibility that, by alloying, the expansion characteristics of zirconium might be altered to match those of many types of glass. The chief task for tech- nology in this field appears to be in improving the glass-to-metal bond, which is believed to be rather poor as a result of the loosely adherent oxide formed on zirconium at elevated tem- perature in the presence of air. It is believed that the adjust- ment of the expansion characteristics to match those of glass can be done readily, and special sealing techniques may over- come the oxide problem. ELECTROLYTIC CONDENSERS A small, but very important, field that zirconium might enter is the electrolytic condenser field. High-purity aluminum metal foil is used extensively for electrolytic condensers. How- ever, for low-temperature operation, a new condenser made from tantalum was developed. The potentialities of zirconium as a replacement for tantalum in electrolytic foil condensers are good, but practically no work has been done in evaluating them. For this purpose, the metal must have excellent corrosion resistance so that strong low-freezing-point electrolytes can be used. The metal should also be able to form a stable, adherent, high-resistivity, high-dielectric-constant oxide film. Zirconium has excellent possibilities for fulfilling all of these requirements. ELECTRONICS The exceptionally good gettering properties of ductile zir- conium make the electronics industry an important customer for the ductile metal. The usage in the electronic field has been principally in the more expensive power (transmitting) tubes, in which the zirconium is used either in sheet form or sprayed on the grid as the hydride. The metal in sheet form is frequently attached to tube parts as "flags" to accomplish the gettering action. Also, some thin zirconium foil is used in spot- and seam-welding tungsten to tungsten. The foil is interspersed between the pieces to be joined and acts as a braze-weld filler. The use of zirconium as a getter for electronic tubes is well established, and may be expected to increase in volume when the price of the metal comes down. Really extensive use of zirconium in electronic tubes will not be realized, regardless of the price of the metal, until zirconium alloys with improved high-temperature strength properties are developed. High- purity zirconium loses strength rapidly with increasing tempera- ture. Considerable improvement in high-temperature strength properties can be expected from alloying with other refractory transition metals such as tungsten, molybdenum, tantalum, titanium, etc. The alloy of zirconium with 35 percent titanium has been shown by workers at the Albany, Oreg., station of the U. S. Bureau of Mines to be an even better getter than zirco- nium alone or titanium alone. The presence of the titanium as an alloying addition should also help high-temperature strength considerably. Tantalum is somewhat soft to use for structural parts and springs in electronic tubes, but 7.5 percent of tungsten Page 91 added as an alloy addition results in an excellent electronic tube alloy (Fansteel TaW Metal). Tungsten may provide a similar function for zirconium. The use of zirconium as filaments in electronic tubes is ex- tremely dubious. Its melting point, approximately 1,800 degrees Centigrade, is too low for this application. ZIRCONIUM AS SUBSTITUTE The cost and availability picture for zirconium metal today is indeed an unusual one. In the days before improved nuclear technology discovered that zirconium was one of our all too few low-cross-section metals, ductile zirconium was a rare metal produced in small quantities by the de Boer process, and sold for $300 per pound. Later, in this early period, the price was reduced to $150 per pound. The fields of application for ductile zirconium were speculative rather than actualities. Zirconium was fairly useful in electronic tubes because of its excellent get- tering capabilities. However, nonductile zirconium powder sprayed on the surface of vacuum tube parts was equally effi- cient in cleaning up residual gases. Actually, the powder was more efficient because it had more surface area than the con- solidated metal and was effective at lower temperatures. It was thought that $300-per-pound zirconium might compete with tantalum in the hydrochloric acid field, despite the fact that tantalum was much cheaper. Cost-for-equal-volume compari- sons were helpful here. Another projected field was as a sub- stitute for precious metal spinnerets used in the synthetic fiber industry. Even assuming that the acid resistance of zirconium was as good as that of the precious metals (which it is not for sulfuric acid), the low scrap value of zirconium as compared to the high scrap value of the precious metals made this appli- cation of $300-per-pound zirconium unfeasible. The market for $300-per-pound crystal-bar zirconium was measured by hundreds of pounds, and this metal was used mainly for experimental purposes. By sponsoring research on improved production methods and by financing production facilities, the A. E. C. has substantially increased the production of ductile zirconium. Consequent to the increased production, the price of crystal-bar zirconium has been reduced to the order of $50 per pound. Magnesium- reduced sponge, an intermediate in the process for crystal bar, costs $15 to $20 per pound. The increment of market over A. E. C. requirements at the present price of zirconium is difficult to. estimate since the metal is not generally available, and industry has not had the chance to experiment with zirconium for end-item use. The main field of application at present prices would be as a sub- stitute for tantalum for use in resisting HC1 corrosion. Per- haps 5 to 10 tons per year might be used in this application. Another few tons could be used in the electronics field and in the surgical field for instruments and bone surgery. To increase substantially the incremental tonnage of zirco- nium over the fixed A. E. C. block, the price of the metal must be decreased markedly. As was pointed out in the section of this report on extractive metallurgy, the best chances for doing this are through a continuous Kroll process or through a straight-flow iodide process. If such processes were successful in bringing the cost of the metal down to, say, $8 per pound in ingot form, a considerable increase in the nonnuclear utili- zation of the metal might be expected. It would not be un- reasonable to expect a consumption of at least 100 tons per year by the chemical industry. In addition to replacement of, tantalum, in certain applications, limited substitutes for special corrosion-resistant alloys like Hastelloy, Duriron, Worthite, etc., might be expected. Also, some replacement of stainless steel in critical corrosion applications would take place. Use of $8-per-pound zirconium in fields other than corrosion would be relatively small, tonnage-wise. The electronics industry would use more zirconium for gettering purposes, but prob- ably not more than 5 tons. The surgical field applications might possibly increase its utilization to perhaps 10 tons, chiefly replacing Vitallium-type alloys and tantalum. A few more tons of zirconium might be expected to be used in laboratory equip- ment, jewelry, etc. SUBSTITUTION AT $2.50 PER POUND A tenfold increase over the uses of $8-per-pound metal might be expected if improved technology brought the cost down to about $2.50 per pound for ingot. The chief consumer again would be the chemical industry, which would begin to use zir- conium in other corrosive media besides HC1. Estimated chem- ical industry consumption of $2.50-per-pound zirconium would be about 1,000 tons annually. Other consumers such as the air- craft industry (for rocket applications), the surgical instrument and supply field, electronics, jewelry, glass-sealing, etc., might collectively add another 500 tons. DEMAND AT VARIOUS PRICES The estimated total consumption of ductile zirconium for nonnuclear applications at various prices is shown below: Total nonnuclear Price per pound for ingot zirconium: demand $25 10 $8 120 $2.50 1500 The chief area of substitution is for the materials now being used to resist severe acid and alkali corrosion. These demands are for presently foreseeable applications. If technological ad- vances in zirconium produce something unexpected, demands for the metal might be much larger at the given price figures. IMPROVED TECHNOLOGY Zircon (zirconium silicate) has a well-established and stable market in refractories. It cannot compete in cost with the com- mon heavy-duty refractories, but its stability and refractoriness are so superior that it has a definite place in ceramic technology. Zircon refractories soften at about 2,000 degrees Centigrade (3,650 degrees Fahrenheit), and have a considerable margin of service-temperature range over silica, alumina, magnesia, mullite, etc. Zircon refractories are used in glass tanks for criti- cal areas and are especially good in aluminum-melting fur- naces. The future outlook for zircon refractories is good, and the market should expand considerably. This expanded market will still be for special applications, but collectively they will constitute a tonnage market of 6,000 to 10,000 tons or more. Zircon has no future as an opacifier in the vitreous enamel field. About 10 years ago, before the Second World War, the Page 92 future of zircon in this field appeared to be especially bright. Zircon opacifiers were taking over the field from antimony oxide. However, during the war, when the production of en- ameled steel stopped, titania opacifiers were developed. They have better hiding power than zircon opacifiers and thus permit a thinner enamel. The titania-opacified enamels are acid re- sistant, whereas zircon-opacified enamels are not. These factors were sufficient to remove zircon from the field almost entirely, particularly because the industry never had a chance to get under way, due to the war. STABILIZED ZIRCONIA Even better than zircon refractories are the stabilized zirconia refractories. They suffer from the same handicap: they are bet- ter than the refractory industry demands for the bulk of its applications. Furthermore, they are heavy and expensive. A good part of this cost originates in the raw material. A brick of stabilized zirconia weighs 16 pounds. With refractory-grade Zr02 selling at 63 cents per pound, a brick would cost $10 even without the molding and firing costs. The cheapest grade of Zr02 is about 44 cents per pound, and the most expensive grade, which is electric-furnace melted and ground, is about $1.50 per pound. Stabilization is accomplished with additions of lime, and this process adds approximately 20 cents per pound to the cost of zirconium. The best, most stable grades of stabilized zirconia are made by fusion arc melting and casting. Zirconia fired with,the stabi- lizing oxide addition has proved to be erratic in performance, and is not so desirable. Electric-furnace melting adds consid- erably to the cost of the material, as is indicated by the price data given before. The high cost of zirconia originates in the process for making it from zircon. Carbon is added to the zircon and fired in elec- tric arc furnaces. This converts the zircon to zirconium carbide, and volatilizes the silicon (presumably as silicon monoxide). Heating the zirconium carbide in air converts it to the oxide. All this processing is expensive. Hence, it is clear that if the zirconia industry is to expand in the future, technology will have to find less expensive ways of converting zircon to zirco- nium dioxide. Baddeleyite, the zirconium dioxide ore, which is imported from Brazil, is another source of the dioxide. However, this ore is not of high purity and is used primarily in making ferrozirco- nium. Consequently, as a source of zirconium dioxide, the ceramic industry is largely dependent upon zircon. Some zirconia is utilized in an electric-furnace product which is a mixture of zirconium oxide and mullite. The cast product is used in the glass industry, and is one of the most satisfactory glass refractories available. Such means as this for extending the desirable refractory properties of zirconium dioxide are definitely in the province where improved technology can do much good. CARBIDES AND NITRIDES Zirconium carbide and nitride have not been of much im- portance in the field of cemented carbides and nitrides. ZrC is not so stable in air as titanium carbide. Hence, its potentialities as a high-temperature carbide material are not so good as its titanium analog. Also, in the cutting tool industry, zirconium carbide is known to be inferior to tungsten carbide or the vari- ous combinations of tungsten carbide, tantalum carbide, and titanium carbide. FUTURE OF ZIRCONIUM Zirconium is another of our new metals which promise ex- panded usefulness in the future, but only in limited tonnages for highly specialized applications. As with the titanium indus- try, the nonmetallic uses of zirconium are well established, and the metal industry is just getting under way. The chief role for technology in the future of the zirconium metal industry is in finding ways to increase production and de- crease the cost of the metal. Best chances for doing this appear to be with a continuous Kroll-type reduction process or a straight-line iodide process. The nuclear energy use for zirconium is expected to remain firm, because zirconium has the best combination of corrosion resistance and thermal neutron absorption cross section avail- able to the industry. Best chances for expanded nonnuclear utilization reside in zirconium's excellent corrosion resistance, chiefly with respect to hydrochloric acid. The zircon refractory industry is expected to continue the expansion into the special refractories field, but not to overtake the high-tonnage lighter refractories." Before stabilized zirconia will attain its full stature as per- haps our most outstanding refractory, the cost of producing Zr02 from zircon will have to be reduced sharply by improved technology. Outstanding promise as a heat-resisting intermetalHc com- pound for extreme high-temperature use is being shown by zirconium boride. The next role for technology in this field is that of scale-up, both in production and in testing. References Elsewhere in This Report This volume: Tasks and Opportunities. The Technology of Titanium. Vol. II: The Outlook for Key Commodities. Iron and Steel. U. S. Bureau of Mines Tables—Petroleum and Refined Products. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Pray, H. A., and Fink, F. W. "Role of Technology in the Future of Corrosion Control." Page 93 The Promise of Technology Chapter 8 The Technology of Uncommon Metals* Most of the work of the world is concerned with only a few of the available metals. The remaining metals may be loosely termed the uncommon metals. They are uncommon because they are really fundamentally rare, or because technology has not yet advanced to the point where their latent usefulness is recognized. They do form a valuable group, however. It is with these metals that much of the progress of the future will be made in devising new and improved metallic products. They form a reserve storehouse of tools for the metallurgist, physicist, and chemist, and supplement an excellent foundation of more familiar metals. In considering these minor metals, it is impractical to go into the detail necessary with important industrial metals. Rather, each metal or group of metals will be discussed briefly to show its probable future technological development and how it may affect the supply or usefulness of other metals. Some metal elements of apparently little importance, now or in the near future, are included for completeness. ALKALI METALS The alkali metals, as a class, would be among our most useful metals because of their abundance and light weight, were it not for their extreme reactivity. Their avid reaction with moisture has been an insurmountable handicap so far to the use of these unalloyed metals as structural materials. Lithium As the lightest of the metals, with a weight less than a third that of magnesium, lithium continues to be regarded with inter- est and some hope for aeronautical applications. The pure metal is soft and easily formed, as by rolling or extrusion. It can be welded, and can be easily melted and cast in an inert atmos- phere. By alloying, a lithium-base alloy very probably could be developed that would have reasonably good strength with duc- tility for structural purposes, even though it is a low-melting metal. Its inter-atomic distance is about that of tin or cad- mium; hence, solid-solution alloying by substitution with many metals is favorable. *By Bruce W. Gonser and others. Battelle Memorial Institute. Unfortunately, lithium reacts with moisture in the air or on immersion with sufficient zest to make this metal unsuitable for use except in an inert atmosphere or in dry air. Various suggestions have been made to protect lithium by cladding or plating, but no practical means has been found as yet to use the pure metal in this form. Alloying to give atmospheric cor- rosion resistance is unpromising but not hopeless. For example, in a series of alloys with beryllium containing 65 to 26 percent lithium, those "of lower lithium content" were said to corrode no more rapidly than iron [1]. One certainly cannot say that a stabilized or protected lithium, or lithium-rich alloy, will never be developed, but no definite possibility is on the horizon now. The prospect for using lithium as a minor alloying element is much brighter. Although its use as a deoxidizing agent shows little or no advantage over other cheaper deoxidizers, and its use as a controlled-atmosphere constituent in heat-treating fur- naces borders on the occult, some of the applications in alloying are potentially very useful. Chief of these is the addition of from 1 to 16 percent lithium to magnesium. On adding 5.3 percent lithium to magnesium, the hexagonal structure starts to change to the more ductile cubic form, and with 10.7 percent lithium the change is complete. High ductility is consequently imparted. Such alloys are still in the development stage, but are considered to be promising. Lithium-magnesium and lithium- cerium alloys have been used to produce nodular cast iron [2], but nickel-magnesium seems to be preferred for this purpose. In the well-known application of lithium as a 0.04 percent addi- tion to lead in Bahnmetall, the German lead-base railway- bearing metal, the lithium imparts hardness which is retained at a relatively high temperature. Since lithium actively alloys with so many metals, and is also a good deoxidizer, metallurgists are doing considerable research with it, and a number of alloys containing lithium in minor amounts may be expected in the future. The chief interest at present in lithium, of course, is in its compounds. It may be used in producing aluminum borohy- dride, and, as is well known, the hydride has been used as a convenient source of hydrogen to inflate antennae balloons. This is the most concentrated method of transporting hydrogen. Some work was done during the Second World War in using 995554°—52 8 Page 95 the hydride as a submarine fuel by burning with tank oxygen. The hydroxide in powder form absorbs large volumes of carbon dioxide; therefore, it has been used as an air purifier in sub- marines and has been an ingredient in respirators for military- plane pilots. Lithium fluoride and chloride are in demand for aluminum-welding fluxes, and the chloride is used in Cathabar air-conditioning units to control humidity. Several lithium com- pounds, and the metal itself, are being used in organic syn- thesis work. Lithium greases, developed during the war for efficient lubri- cation at temperatures from ~ 60 to 120 degrees Fahrenheit, have found wide peacetime use as a multipurpose grease for automotive and other applications. [3]. They are said to have exceptional water-resisting properties. As an indication of the importance of this application, some 150,000 pounds of lithium hydroxide will be needed to supply one current order for "lith- ium-based multipurpose grease" issued by the Armed Services Petroleum Procurement Agency. Lithium waxes likewise show promise. The ceramic industry may use lithium oxide for get- ting low-melting ceramics in place of lead compounds, as well as to promote adherence of the enamel to the iron base. The A. E. C. has been known to be interested in lithium com- pounds in connection with the manufacture of a thermonuclear atomic weapon (hydrogen bomb). The extent of this potential need is not known, but it may be a factor in the future demand for lithium-bearing material. As to sources, lithium is a fairly abundant element in the earth's crust, and deposits are so concentrated that the mining costs can be relatively low. Deposits of spodumene carrying about 6 percent of lithium oxide in the Kings Mountain district in North Carolina are said to be sufficient "to serve industry for several hundred years, even if all of the wildest dreams about the future tonnage demand for lithium became reality" [5]. Searles Lake is estimated to contain nearly 100,000 tons of lithium chloride. Present supplies appear to be adequate for nonmilitary uses, but production facilities will need heavy expansion for some of the possible military and A. E. C. applications. As an indication of expected growth in the demand for lith- ium products, the Foote Mineral Co. is undertaking a major expansion program for lithium. This includes doubling of the capacitv of their Exton, Pa., plant [4], Lithium metal has some chance of usefulness in the future if alloying can produce a self-healing mixed-oxide protective skin. Usefulness as a minor constituent in various alloys prob- ably will grow moderately. Numerous uses seem to be-growing for lithium compounds and a manifold increase in demand for lithium ore may be expected in the next few years. Resources seem adequate for all uses visualized during the next 25 years. Production facilities are adequate for peacetime uses, but they may be strained for some military-propellant and A. E. C. needs. Sodium Sodium is one of the world's most abundant elements. Easily available sources—from the ocean, brines, and salt deposits, as well as various minerals—make a convenient, cheap source of raw material. This, and the pressing need for chlorine which is produced simultaneously on electrolysis of fused sodium chloride, has resulted in a very low production cost. In fact, pure sodium is the cheapest metal obtainable now on a cents- per-unit-volume basis. Chances for extensive use of the pure metal or of a sodium- base alloy as a material of construction are very poor, although the combination of ready availability, low cost, and lightness will continue to tax the ingenuity of metallurgists to overcome its handicaps of low melting point (97.5 degrees Centigrade), low strength, and extreme reactivity with moisture. Its handi- caps are much greater than those of lithium. The interatomic distance of sodium is unfavorable to solid-solution alloying, either interstitially or by substitution. The melting point is too low and softness too extreme to expect a dramatically strong, useful, structural metal. However, these very properties, modi- fied by alloying, could lead to many uses—such as a replace- ment for lead in some applications—were it not for the present insurmountable trouble with corrosion. One possibility, for ex- ample, is the eventual need for very light metals, such as lithium and sodium, for use at extremely low temperatures and in the absence of air or moisture in stratosphere, satellite, or even interplanetary transportation. Temporary protection from atmospheric corrosion might be sufficient to make such metals useful for these very unusual conditions. Protected from contact with air, sodium, or more properly sodium vapor, has been used successfully for cooling valves. It was used less successfully as a molten-metal conductor of electricity. There are only a few unimportant applications where sodium has found usefulness as a minor alloying addition to other metals—such as in Bahmetall, as a modifier in 13 percent silicon aluminum-base alloys, and in a 25 percent sodium-lead alloy (Hydrone) for generating hydrogen [5]. The large present and potential use for metallic sodium is as a raw material for making other products. Thus, the largest use has been for making tetraethyl lead. Some 120 million pounds of metallic sodium were used for this purpose in 1950. Even larger amounts may be needed in the next few years. Use of sodium to make sodium peroxide for the paper industry appeared to be the application having greatest possibilities of future expansion. Possibilities of using sodium in producing titanium are cov- ered in the report on titanium. Considerable research is in prog- ress which may be fruitful in expanding the uses of sodium, particularly as a reducing agent for the refractory metals. The need for more plants to produce chlorine which will give sodium as a coproduct, rather than more caustic soda, has put pressure on those interested in finding new uses for sodium. There is believed to be a rather large margin between actual cost of pro- duction and the present selling price of 16 cents per pound for sodium. The future for metallic sodium, then, is expected to be a rather rapidly expanding one, because of the low net cost of manufacture (with chlorine bearing much of the cost), and because of expanded and new applications. There is little reason to hope for much U6e of sodium directly as the metal in normal metallurgical work. • However, the future needs for very light metals for use at low temperature and in virtual absence of air conceivably might change the picture. Page 96 Potassium As with sodium, and to a lesser extent with lithium, the future of potassium does not suffer for lack of raw material. It constitutes more than 2 percent of the earth's crust and is available in reasonably concentrated brines. Production of metallic potassium is not important, amount- ing to less than 2 tons per year in the United States, and chances are not good that there will be need for increasing this substantially in the future. Potassium does many things well, but sodium usually does at least as good a job for only a small fraction of the cost. The most important uses for potassium have been in the preparation of potassium tetroxide and some minor applications in organic chemistry. The metal is readily made, and production facilities can be easily increased if any in- creased demand for the metal arises. Of course, salts of potas- sium are of great industrial importance. Rubidium and Cesium Rubidium and cesium are relatively unimportant metals at present, with a very small market. They have interesting and unique properties, however, which is a favorable factor in their future growth. As with the other alkali metals, their handicap is lack of resistance to corrosion; in fact, both metals react vigor- ously on exposure to water or to air. Cesium has a melting point of only 28.5 degrees Centigrade, or slightly less than gallium. It has the largest atomic diameter of the known elements and is considered to be the most active of all metals and the most electropositive [6]. Metallic cesium is of importance at present largely because of its photoelectric properties. The range of sensitivity is particularly strong in the range of visible light; hence, the cesium-containing cells are useful in showing accurately the intensity of light that is of widest practical interest. An inert atmosphere or vacuum must be used, and ingenious procedures are used to coat the cell cathode with metallic cesium and keep it sealed. In another ap- plication, the cesium-vapor rectifier is considered to be superior to a mercury-vapor rectifier for some purposes. Cesium differs from sodium and potassium in the properties of various double and complex salts which it forms. Because of the unusual properties of cesium and of many of its compounds, probably more cesium would be used in the future, in spite of its reactivity to air, if it were not for its scarcity and high cost. The price was $3 per gram in sealed glass am- pules the last time some was purchased at Bat telle (1948). Although rated as being no scarcer than beryllium or boron in the earth's crust, minerals containing cesium in small amounts (as the lepidolites) are widely scattered, and the cost of finding, mining, and extracting the metal from such minerals as pollu- cite in Maine is high. Much of the cesium and rubidium now comes practically as a byproduct in the treatment of lithium ores and in purifying sodium and potassium solutions. An assured and growing market would probably stimulate a more thriving production industry, but buying pressure is now not strong enough to expect more than a normal, gradual expansion as research shows advantages of using cesium over more common materials. Rubidium is far more common among minerals than cesium; in fact, it rates in general mineral abundance far above copper. However, it is not found in rich deposits, and the cost of extrac- tion is high because of the small quantities handled. The metal in sealed glass ampules sold for $4 per gram in 1948. Being closely associated with cesium and with many similar properties (including those of electron emission on exposure to light, X-rays, etc.), rubidium and cesium mixtures are frequently sold commercially as "cesium." Rubidium is radioactive, but no commercial use has been made of this property. Although potentially available in reasonably large quantities because of the abundance of rubidium-containing minerals, there is little reason to expect abnormal growth in commercial usage. Both cesium and rubidium may be expected to profit from increased research into their radioactivity, and photoelectric and other properties that particularly interest the physicist. Growth may be expected more through research, because so little is known about these metals and their compounds, and through reduction of the rather artificially high present cost, than through expanding definitely known applications. ALKALINE-EARTH METALS Four of the alkaline-earth metals will be discussed here. They are beryllium, calcium, strontium, and barium. Beryllium Beryllium is a thriving minor metal which is handicapped more by scarcity of ores and cost than by present and pending uses. Its chief assets are lightness (specific gravity—1.82), a moderately high melting point, a modulus of elasticity of 37 mil- lion pounds per square inch (higher than that of chromium or of any other metal except some of the platinum group), useful- ness as an alloying addition in other metals, good resistance to atmospheric and hydrochloric acid corrosion, and a remarkably low absorption cross-section for neutrons and X-rays. Beryllium has been handicapped in the past because of brittle- ness and unworkability of the "pure" metal, but that has been overcome recently, and the metal now can be hot worked rather readily. Although it does not yet have the softness and ductility for cold working that is desired, there is still reason to believe that extreme high purity will give a metal of adequate ductility at room temperature. Means to improve cold-working properties are still being sought. Meanwhile, sufficient cold- forming as well as hot-forming operations can be given the metal to make it a useful structural metal. Large beryllium cast- ings have been made successfully at Battelle [7]. Much of the recent progress in the metallurgy of beryllium has been made through efforts of the A. E. C. Applications de- veloped by the A. E. C. account for much of the beryllium used and for the scarcity that now exists and may continue to exist in the future. Promising methods are being investigated for simplifying the extractive metallurgy of beryllium and effecting higher- re- coveries [9]. Numerous uses have been developed for beryllium in the past 20 years [9]. Chief among them have been the copper-base beryllium alloys for hard nonsparking tools, springs of remark- able resistance to fatigue failure, alloys of unusually high tensile strength and hardness, and age-hardening alloys, and for wear- resistant, heat-resistant, and corrosion-resistant parts. Without detailing each specific use, it has been found that, although Page 97 extremely useful, beryllium in nearly all these applications could be replaced entirely or partially by other materials with- out serious harm. Not only will this replacement be successful for 50 percent of the copper-beryllium used, but the cost is reduced substantially. In aircraft instruments, such as altimeters, Z-nickel and other alloys have shown that beryllium-copper is not essential. Phosphor bronze is regaining considerable ground lost previously to beryllium-copper. Several satisfactory substi- tutes for beryllium-copper nonsparking tools have been sug- gested and probably now are being used. In general, it appears that around 80 percent of the beryllium used in beryllium- copper several years ago can be replaced with reasonable satis- faction by substitute materials. The same can be said for the use of beryllium in other alloys, as in the zinc-base alloy Zncube (like 70-30 cold-rolled brass in properties), in some aluminum alloys, in stainless steel for strength at high temperatures, and as Ticonium for surgical and dental alloys. Because of the toxicity danger in making beryllium-copper and other alloys containing beryllium, some companies have ceased to manufacture such alloys. The toxicity of beryllium oxide and its salts is a definite drawback to use of the metal and adds to the cost. There is not much opportunity to make the limited supply of beryllium go farther, except by substitution. However, some work done in 1946 at Battelle has indicated that beryllium might be successfully coated onto some base metals by reduc- tion of some of its volatilized compounds. Thus, as in chromiz- ing, a diffused surface alloy of beryllium may be formed which would give the effect of a solid alloy but only using a minimum amount of beryllium. This has not been pushed because of a fairly high cost for small-scale work, the toxicity danger, and the fact that so many applications of beryllium depend on fatigue resistance, or a property other than that of the surface. Most of the beryl now used in producing beryllium comes from Brazil. Compared with the 3,811 tons of beryl imported in 1949, the United States' record production of 475 tons seems very minor and indicates the need of the trend toward stock- piling and discouraging nonessential uses. Since most substitution is being forced by scarcity of beryl- lium, it is probable that if the supply should be increased through availability of more ores or decrease in military-equip- ment activity, the trend would go in the other direction. Prop- erties of beryllium are sufficiently unique and valuable to indicate a continued, strong peacetime demand, even at the present high price. Calcium Calcium is more typical of alkaline-earth metals than beryl- lium and magnesium in that it is readily attacked by moisture and has generally poor resistance to corrosion. This removes the unprotected metal from possibility as a structural material, regardless of its lightness (sp. gr., 1.54), ductility, and prac- tically unlimited availability. The tensile strength of 99.5 percent calcium is about 7,000 pounds per square inch, giving a strength-weight ratio higher than that of pure iron or copper or 99.5 percent aluminum. Calcium is readily cast in an inert atmosphere, and the ingots can be fabricated by any method, as by rolling and extrusion. Thus, irregular porous crowns of distilled calcium have been extruded into a 1 J/^-inch rod and then cold rolled without inter- mediate annealing. Cost of production of calcium ingot has not been unreasonably high, being on the order of 50 or 60 cents per pound for large production units. (A cost as low as 25 cents per pound was attained in at least one plant in 1945.) It is now selling at around $2.40 per pound at a relatively low production rate. These considerations, and the fact that its melting point exceeds that of aluminum, led to a survey of calcium to see if there were a possibility that it, or its alloys, could be used in construction of aircraft and guided missiles [10]. This survey has covered in some detail the production, fabrication, and properties of calcium, and a thorough consideration of various alloying possibilities. Unfortunately, because of its unfavorably large interatomic distance, and other theoretical considerations, alloying appeared to be most favorable with such metals as the alkali metals, lead, thorium, and the rare earths. Little promise was held for development of a high-calcium alloy that would be stable in air or water. Although calcium has many good attributes, the possibilities of using the metal as such, or as a calcium-rich alloy, for struc- tural purposes are very poor. As with sodium and lithium, mechanical protection is needed, or the metal must be used under special moisture-free conditions. These conclusions are based largely on theoretical considerations, but experimental work so far has shown no promising calcium-rich alloys. The big field for calcium has been, and apparently will con- tinue to be, that of a reducing material or an intermediate in the production of other materials. However, even here it meets serious competition from sodium, which is lighter and cheaper but monovalent, and from divalent magnesium and trivalent aluminum. A potentially large field of usefulness in making ductile titanium by reduction of the oxide now appears to be unfavorable economically and problematical technically in se- curing ductile metal of high quality. Calcium has many minor applications, alone or combined with hydrogen as the hydride: for desulfurizing petroleum, as a drying agent, as a reducing agent for organic chemicals, to reduce oxides or chlorides of various difficulty reducible metals, in making some hardened lead alloys, in debismuthizing lead, etc. The hydride was used as a source of hydrogen during the Second World War, as well as for a reducing agent. As a chemical reducing agent, calcium is frequently preferred to sodium, even if the latter is cheaper, since the high boiling point of calcium (1,440 degrees Centi- grade) prevents accumulation of explosive flue dusts, as is fre- quently the case when sodium is used. Considerable calcium- silicon alloy is used as a reducing agent in both ferrous and non- ferrous metallurgy. In general, these various applications may increase normally, but nothing dramatic to take large quantities of calcium is evident at this time. Under wartime metal scarcities, calcium does show promise of being of some service as a substitute material. Thus, it can be used to harden lead in place of antimony for some applica- tions, and such calcium-lead is greatly preferred for cable sheathing where much better fatigue resistance is imparted by the calcium. Sodium or calcium can be used effectively in place of nickel to prevent lead segregation in lead-copper bearing bronzes. Aside from production of calcium by electrolysis of fused calcium chloride or by thermal reduction of lime (CaO) with Page 98 aluminum in vacuum, considerable and increasing amounts of calcium are being produced as a byproduct from the pro- duction of sodium. Finding uses for this has been an industrial problem. A mixed calcium-sodium alloy bears a very low price and forms a potentially desirable product where a use does not require the pure metal. Since supplies of raw materials are plentiful for instant use and facilities for producing calcium have been well tested and are not elaborate, there should be little difficulty in keeping up with the moderately increased demand for the metal in the future. Strontium Pure strontium metal, like calcium, is too poor in corrosion resistance and too poor in alloying ability with nobler metals to be of importance structurally. Moreover, it is relatively scarce and expensive ($7 to $35 in 1948, depending on purity). It has a few special uses, including that of a getter in vacuum tubes, and its salts are used commercially, as in producing red flares for both civilian and military applications, and tracer bullets. Strontium is a good electron emitter. The most com- mon thermionic emitter is a coating of barium-strontium oxide solid solution on a suitable nickel base [11]. Photoelectric cells made with strontium are particularly sensitive in the blue-to- green section of the spectrum. Very little work has been done on strontium alloys. So far, no outstanding properties have been noted to recommend it for intensive research. No new applications are in sight and only normal growth can be foreseen. Supplies of strontium-bearing minerals are adequate for substantial expansion in use of the metal or its compounds. Barium Like strontium and calcium, barium has many good metal properties but is too reactive to water and a moist atmosphere to be commonly useful. Also, like so many reactive metals at elevated temperatures, it is a good getter for vacuum tubes; in fact, it is the most common getter, and this is its principal use. It is also a low-temperature electron emitter, and the oxide can be used in photoelectric cells of limited wavelength sensitivity. There has been little work on alloys. In Germany, lead projectile wires in the Second World War contained 0.08 percent of Ba and 0.05 percent of Ca; some Bahnmetall (railroad bearing metal) substitutes contained 0.4 percent of Ba with calcium, sodium, and magnesium [12]. Both barium and strontium can be produced in the same type of equipment as used for the ferrosilicon reduction of mag- nesium or aluminum reduction of CaO. Supplies of barite are plentiful. No new uses are on the horizon, and no phenomenal growth in demand need be ex- pected until research uncovers more unusual properties. THE POSITION OF ANTIMONY The weaknesses of antimony have been a growing scarcity of good ores and shortcomings in properties of the metal. Being an old, well-established metal, antimony has its extractive metallurgy well worked out. High-grade metal is available at a reasonable price (42 to 50 cents per pound), although scar- city of ores has forced the price upward recently at a more rapid rate than for most metals. With antimony and antimony products from China becom- ing practically unavailable to the United States and countries friendly to us, we have had to get along largely with very limited domestic ores and those from Mexico and South America. Some South American ores soon will be smelted in Peru, since Cerro de Pasco is putting in a plant to produce antimony metal. Mexican ores, which have been the basis for the Laredo, Tex., smelter, have been scattered and increasingly difficult to mine effectively, since extensive deposits that warrant modern large- scale mining methods have not developed. Moreover, much of the ore that is available is oxidized or partly oxidized mate- rial that is difficult to handle because of the ease with which it crushes to powder. This has made .concentration difficult and wasteful. It has increased smelting losses somewhat, although briquetting has solved the problem fairly well. There is some possibility of improvement in concentration of these friable ores, although the arid country discourages use of wet methods, and transportation is by no means good. Antimony entering lead smelters in this country as a minor constituent in lead concentrates is recovered rather effectively as antimonial lead or antimony oxide or sodium antimonate. Likewise, the new Bradley antimony plant [13], with a capacity of 6,000 tons per year of premium-grade oxide and 1,000 tons per year of metal, is obtaining a satisfactory recovery with little opportunity for savings by improved technology in smelting and refining. The drawback to supplies is definitely in finding sizable ore deposits and in concentration. Practically no metallic antimony is used as such alone, although it has rather good corrosion-resistant properties. It is brittle and cannot be formed, hot or cold. Increasing the purity by redistillation to 99.975 percent has given no indication of overcoming this handicap. A few small parts of massive metallic antimony have been cast and ground at Battelle for plates or holding rings that required no ductility, for use against hydro- chloric acid or dilute sulfuric acid, but this field appears to be unpromising because of the competition of cheaper materials. Work has been done, also, on coating base metals with anti- mony, either electrolytically or by "stibnizing"—decomposition of a volatilized antimony halide on the surface to be coated. Such coatings, or diffused alloy surfaces, are interesting and can be made technically, but so far the properties from the stand- points of appearance and corrosion resistance have not been sufficiently outstanding to suggest wide future use. AN ALLOYING CONSTITUENT WITH LEAD Use of the metal, then, is largely limited to the making of alloys. Antimony maintains a strong position as a major alloy- ing constituent with lead. The chief use, of course, is as a 7 to 9 percent antimonial lead for battery plates. In spite of repeated ■threats by nickel-cadmium batteries, and others, the anti- monial lead battery continues to be standard for automotive and other common uses. This is largely because of the high scrap value of the lead batteries, rather complete recovery of metals in reprocessing, and the simplicity or well-established procedure in making and handling these batteries on a large scale. A market survey by one of the large dealers in batteries recently indicated that, regardless of the weight and rather short Page 99 life of the lead battery, it was economically better than com- petitors, and attention should be given to improvement rather than replacement. Lighter, more efficient, and more durable batteries may be developed eventually, but it looks as though the antimonial lead-base battery would still be used for at least the next 5 to 10 years and replacement is likely to be gradual. The many uses for antimony in lead alloys extend through hard lead for structural and chemical applications, type metals, some bearing metals, some solders, lead foil, lead collapsible tubes, and some cable coverings. In many of these applications, effective substitutes are known for the antimony. Calcium and tellurium may impart better properties to lead than antimony, as calcium-lead for cable sheathing or tellurium-lead for cor- rosion and fatigue resistance. In type metals, the property of antimony to expand on solidification aids in making a lead-base alloy that gives sharp detail and shrinks only slightly—but it does shrink, contrary to popular fancy. Substitution would not be easy and should be necessary only under great stress, since practically all of the lead and antimony is recovered in re- working old type. Likewise, in lead-base and tin-base bearing metals, antimony is an essential constituent. Usually the anti- mony in solder in this country exists as a tolerated impurity from use of secondary solder, but some is added for applica- tions where enhanced strength is needed. These applications have all evolved over many years and in competition with other materials. By research, additional substitutes undoubtedly could be found for at least part of the antimony, but in general the metal uses for antimony would be expected to follow the trend in the use of lead for these lead-base applications. Antimony alloyed with metals other than lead and tin is of no importance now. ANTIMONY OXIDE AND OTHER COMPOUNDS Of approximately equal importance commercially to the antimony used in lead alloys is that of its oxide and other com- pounds used in flameproofing cloth, in paints and lacquers, glass and pottery, ceramic enamels, plastics, and miscellaneous chemicals and nonmetal products. The use of antimony oxide in making wet-process sheet steel enamels has been disappear- ing rapidly because of the greater opacifying power and econ- omy in using titanium dioxide. This trend is expected to con- tinue, making this a very minor application. The same can be said for the use of antimony oxide in paints and lacquers, except where flameproofing is a factor. For glass, pottery, sanitary- ware glazes, and dry-process enamels, no substitute material is in sight and the present rate of use may be expected to continue. Use of antimony trichloride in flame proofing fabrics, plastics, and possibly paper seems to be a growing field that is not only rather well established now, but may become much larger. An- timony is not an essential ingredient in flameproofing materials, but by its use economy is realized in both cost and amount of total material needed. Antimony and its compounds have sufficiently good prop- ierties to keep them active as useful raw materials, but the lim- ited ore supply and the lack of ductility of the metal are serious handicaps. The future of the metal applications is rather closely tied to that of lead. Considerable research has been done in the last few years to find new applications or to expand present uses for antimony, but the results have been generally discouraging. The future for antimony appears to be less bright than for most of the metals, but a diversity of well-entrenched applica- tions will continue to keep it a much-needed metal. OUTLETS FOR ARSENIC Although not a common or an abundant element, the pro- duction of arsenic (oxide) as a byproduct from copper, lead, and nickel smelting has been of such magnitude that the supply has been embarrassing in some localities. The Boliden smelter in Sweden has long sought means to dispose of excess arsenic. A fellowship at Mellon Institute has been established by the Amer- ican Smelting and Refining Co. to find new applications for arsenic or any of its compounds. Applications of arsenic trioxide as the base for making insecti- cides, weed killers, etc., are well known. These account for most of the 10,000 to 20,000 tons of "arsenic" consumed yearly in the United States. The sulfides of arsenic have some applica- tions, also, particularly as paint pigments. With the price low and an abundance of raw material, use of these compounds is encouraged. The metal as such has no applications. The mechanical properties are poor, since it is a brittle, unworkable metal, and its association with poisons has made working with the metal unpopular. Although the present price of the metal is around 85 cents per pound, the price of the oxide is only 4 cents per pound. Cost of reduction of the oxide to metal on a large scale is relatively low, since the oxide reduces easily and the metal is readily volatilized and condensed. Precautions against toxicity are one of the main costs. A metal cost of less than 12 cents per pound for large-scale operation very probably could be attained. Some work has been done at Battelle on arsenic coating steel, brass, copper, nickel, and some other metals, or rather im- pregnating the surface of the base metal, by passing arsenic (metal) vapor over the surface to be coated. This produced hard, rather brittle, but adherent heavy coatings of intermetallic compounds having rather good resistance to some acids, alkalis, and salts. Such results, along with exploratory work on various arsenic-containing alloys, have indicated that arsenic may have a field of usefulness as a rather inexpensive addition and surfac- ing metal. Arsenic powder incorporated in a paint vehicle and painted over steel appeared to protect it in weathering much more effectively than aluminum paint. Additions of arsenic definitely increase the resistance of cast iron and of steel to some acids, but the action is not sufficiently outstanding to find man) uses. There are a number of applications in which arsenic is now used as a minor addition in lead alloys. Without discussing each of these, the generalization can be made that, because oi the abundant supply of arsenic and pressure to find new uses and because of some rather useful present and potential prop- erties in alloying, one can expect a moderate growth in the use of metallic arsenic in the next two decades. BISMUTH USES The recovery of bismuth from lead-containing ores is high Bismuth follows the lead in processing, is separated in refining and is recovered as a high-grade metal. Likewise, bismuth ii flue dust from copper smelters normally reaches the lead refin Page 100 ery eventually and is recovered. All the bismuth produced in this country is byproduct material. However, the Cerro de Pasco Corp., which is by far the largest producer in the Western Hemisphere, can regulate its bismuth output to some extent by choice of ores mined in Peru [14]. Normally the supply has exceeded demand, and Cerro de Pasco has sought new uses for bismuth. The metal bismuth has always been regarded as very brittle and unworkable. There have consequently been only a few minor applications for the pure metal—a few small castings for some special electrical instruments, some electrolytic bismuth coatings, and a few applications of powdered bismuth. Re- cently [75] the drawing of bismuth into wire form has been developed successfully so that it does not become nonductile on aging. Bismuth has also been produced in ductile strip form at Battelle. This is a real milestone in the development of bis- muth, since it opens the way to many applications in physics and electrical engineering. Metallurgically, the very easily bent bismuth wire or strip is of interest in demonstrating the impor- tance of rate of deformation, because the wire has practically no impact or sudden-blow resistance. Bismuth has many valuable properties other than its rather low melting point (271 degrees Centigrade), its expansion on freezing, resistance to atmospheric corrosion, and ability to be drawn to wire by special means. It has an exceptionally low thermal conductivity, and it is the most diamagnetic of all the metals. Of particular interest is the fact that the electrical and the thermal conductivities drop with increase in intensity of a magnetic field. This makes it valuable as a regulator for elec- trical control instruments and measuring instruments. The high thermoelectric power obtained with some couples made with bismuth indicates possible usefulness in building thermopiles and thermocouples. The electrical resistance changes with pres- sure, so it can be used in measuring tension or compression forces. Bismuth is nearly as good as beryllium for such measur- ing purposes because it has an exceptionally low thermal neutron-absorption cross section. In view of these unusual properties, many applications for ductile bismuth undoubtedly will be developed commercially in the next few years. This can easily change bismuth from an ample supply metal to one of scarcity, since ore resources are not large. There are many applications of bismuth as an alloying con- stituent, as in low-melting "fusible" alloys and low-melting solders. There was a very heavy demand for bismuth during the Second World War for use in a low-melting, nonadhering alloy, to fill thin-walled aluminum-alloy tubing so it could be bent easily in aircraft fabrication and easily removed by warm- ing the tube afterward. A more dramatic application of a low- melting bismuth alloy has been in the making of dies for tem- porary use in forming experimental parts. The low-melting alloy is readily cast into a wooden or easily machinable metal mold where its slight expansion, or lack of shrinkage, gives sharp definition, then it is refrigerated to develop high hardness and compressive strength for use as a die. Matrix alloys and low-melting casting alloys for toys, statuary, and ornamentation are other applications. Bismuth added to stainless steel aids machinability. These uses probably will continue to grow in im- portance, since they are adapted to automatic, labor-saving operations. Pharmaceutical uses for bismuth are important in taking a large portion of the production, but a discussion of continued use or substitution is outside the scope of this report. Altogether, then, the demand for bismuth appears to be growing at a rapid pace, and the future is likely to be governed more by the amount available than by the need for it. EXPANSION IN BORON Like silicon, boron is frequently accused of being a nonmetal. It all depends on the definition. However, it finds many applica- tions among metals and seems justifiably to deserve a rather prominent position among them. Although a really scarce element in the earth's crust, boron has fortunately been concentrated to such an extent in a few favored localities, as in the Death Valley region of California, that it is commercially available in quantities well beyond im- mediate demand. The largest uses at present are for borax and boric acid for chemical, ceramic, medical, and cleaning applica- tions and as a flux in welding, brazing, and some melting opera- tions. In addition, there may be large military demands for diborane, pentaborane, and aluminum borohydride for propellants. Boron as such or in alloys, including ferroboron, is entering a rapidly expanding sphere of usefulness. It is finding many ap- plications as a substitute for more scarce metals. Much of this increased activity appears to be permanent, since boron in many instances does a better job more cheaply. There are no present uses for massive boron by itself, although the powder is used to some extent in making alloys and compounds and as a deoxidizer. It is a light metal (specific gravity, 2.3), having a high melting point (2,300 degrees Centi- grade), exceptionally high electrical resistance at room temper- ature when pure, and good resistance to atmospheric and many corroding media, but it lacks workability. This lack of good mechanical properties is probably inherent and not just caused by impurities, since the crystal structure (thought to be ortho- rhombic) does not seem to favor ductility. However, in un- published work at Battelle, massive rods of boron were found to bend even under their own weight at temperatures above 1,200 degrees Centigrade. This indicates the possibility of hot forming. In work for the A. E. C. [76], resistance couples of boron and tantalum or tungsten were prepared by coating in- dividual wires with a thick layer of boron, twisting the wires together, and cementing the joint with another deposit of boron. This indicates some cold ductility with very pure boron. Future research in preparing the pure metal and handling it may develop at least some hot-forming operations, and some cold deformation. This should make available for limited struc- tural purposes a very valuable material. Boron appears to have a promising future as a coating mate- rial. Work on coating both metallic and nonmetallic materials with boron or with borides [17] indicates that this can be done technically to give surfaces of value for heat, corrosion, and wear resistance. Many of the coatings are exceptionally hard, since boron, boron carbide, or boron nitride usually can be formed in place. These have Knoop hardnesses above 2,000. Depending on the base material, various other borides (such as silicon, zirconium, vanadium, tantalum, and tungsten) can be formed as coatings to give a wide range of chemical-, wear-, Page 101 and heat-resistant properties. Boron and most of the borides re- sist oxidation up to 1,200-1,300 degrees Centigrade; hence, bo- ronizing has possibilities of great usefulness in protecting some of the high-melting metals that have poor resistance to oxidation. Another phase of boron coating is to apply boron-containing alloys as a fused layer on the surface of a base metal. The nickel-base Colmonoy [18] hard-facing alloys contain from 1 to 4.75 percent of boron. Fortunately, the boron addition re- duces the melting point so these wear-resisting coatings are not difficult to apply by metal-spraying and welding techniques. The use of boron carbide and boron nitride products for wear-resistant applications is well known. The Norton Co., which has pioneered in the development of such products, re- mains optimistic about future expansion. The carbide, B4C, has been claimed to have the highest hardness of any known mate- rial except the diamond. Unfortunately, the tendency is for sharp cutting edges to become rounded by wear, rather than chipping ofT to give a constantly renewed sharp edge. For this reason, the substitution of boron carbide or nitride for cutting tools has not been promising. An investigation of the use of boron in steel has been made recently by the Metallurgical Advisory Board's Panel on Sub- stitution of Alloying Elements in Engineering Steels, in cooper- ation with Division VIII of the Society of American Engineers, and various steel manufacturers and governmental agencies [19, 20]. Some attention was given to the use of boron during the war for increasing the capacity of low- and medium-carbon steels to harden on heat treatment, so that some alloying addi- tions could be curtailed or eliminated, but interest has now been greatly increased because of the proved effectiveness of the boron treatment. It not only substitutes for, or makes savings in, the use of such critical materials as nickel and molybdenum, but effects a saving in production costs. Details are given in the references as to the types of steel that can be successfully boron- treated and the metals saved. The amount of boron added to steel is remarkably small— from about 0.001 to 0.006 percent. This is done by adding from 0.4 to 6 pounds of a boron-containing agent (ferroman- ganese containing 17 percent boron, ferroboron containing 12 percent boron, or various proprietary agents containing deoxi- dizers and as little as 0.2 percent of boron) per ton of thoroughly deoxidized steel in the ladle. A minimum of 0.0007 percent of boron should be retained by the steel, with up to 0.003 percent being desirable. An indication of savings in steel-alloying constituents by using boron is given by the experience of three companies pro- ducing a total of about 30,000 tons per year of ingot steel for tools, heavy-duty gears, shafts, bolts, studs, etc. By boron treat- ment, estimated as amounting to about 1,800 pounds of boron per year, the net saving per year was 656,000 pounds of nickel, 119,000 pounds of chromium, 52,000 pounds of molybdenum, and 9,100 pounds of manganese. It is predicted by the M. A. B. Panel that 10,000,000 ingot tons of alloy steel will be required per year soon, nearly all of which would be amenable to boron treatment—and which probably could not be produced with- out it, because of scarcities in nickel and molybdenum. This would require possibly around 600,000 pounds of boron. It is believed that sufficient boron is available to meet this potential demand, but producing facilities to make the ferroboron or other boron addition agent will be strained to exceed this demand. In addition to the low-alloy steels, boron may find usefulness in replacing some of the manganese in intermediate-carbon steels. This conceivably could require another 300,000 pounds of boron to treat 5 million tons of carbon steel in the near future. This would very definitely require major expansion in ferro- boron-alloy-producing facilities. In turn, this would mean more electric furnaces and additional electric-power demands. To the already very substantial market for borax and boric acid, there is being added an assured increasing demand for ferroboron alloys. In addition, the possibilities are excellent for a substantial and increasing demand for boron as a coating material, applied as the metal or as a lower melting alloy, and possibly for applications of the metal itself as a material of limited construction. Research on boron-base alloys is just start- ing. Military demands for boron compounds may be very sub- stantial, sufficient to require drastic increase in mining capacity. CADMIUM APPLICATIONS There are no cadmium ores. All the production comes as a byproduct from the roasting, sintering, and hydrometallurgy of zinc, lead, and copper concentrates, with emphasis on associa- tion with zinc. As a consequence, the production of cadmium is tied rather firmly to the production of zinc. In general, nearly all the cadmium that enters an electrolytic zinc plant is recov- ered. That which is not caught in baghouses, Cottrells, or flue systems, and treated separately, is recovered in purification of the zinc sulfate solution. In pyrometallurgical zinc plants, losses occur in varying degree. It must be remembered that although the value of recoverable cadmium is a factor, it is not necessarily a vital one. Avoidable losses may occur because it is not eco- nomically feasible to install a better dust-collecting system or make a major plant conversion. Most of the pyrometallurgical plants now catch dust from both roasters and sintering machines, a few from only the latter. Some plants add salt to the sintering-machine charge, which assures elimination of over 90 percent of the cadmium. Nearly all the smelters in this country lose any cadmium that remains in the sinter, either through ventilator fume from the retorts that is not caught, or as an impurity in the zinc. In 1935 only about half of the cadmium available in western and southwest- ern zinc ores (including Mexican ores processed in United States controlled smelters) was recovered. Now this has prob- ably risen to about 80 percent, due partially to the larger per- centage of zinc produced electrolytically and partially to salt sintering, double sintering, and more use of dust-catching equipment. By recovering dust from all roasting operations and using salt in sintering, it is possible that cadmium recovery could be increased by another 10 percent in the next few years. Chances of finding ores richer in cadmium are remote. Most of the cadmium produced is used for cadmium plating. This ranges from inexpensive tableware (knives, forks, spoons, etc.), to marine applications where its resistance to sea-atmos- phere corrosion is an important factor. It is not used as the massive metal, although it has reasonably good mechanical and physical properties, since other cheaper metals serve equally well. Cadmium is a constituent of many low-melting metals and of some intermediate-melting solders. Some of the best solders Page 102 for aluminum contain a relatively large percentage of cadmium. A promising application as a base for bearing-liner alloys has dwindled because the supply of metal is far too small to warrant wide usage of such a bearing metal. An old well-established product has been cadmium sulfide pigments. Cadmium has some military applications, including use in atomic energy production equipment. About 100 pounds of cadmium has been estimated as needed for controls in each 100,000-kilowatt output nuclear power plant [21]. The scarcity of cadmium for all its potential applications has stimulated the development of substitutes. Bright nickel, zinc, and silver have shown possibilities of replacement in some ap- plications. The development of tin-zinc, an alloy electrocoating that contains about 80 percent of tin, has been particularly effective in replacing cadmium plating in Great Britain. It may be expected to serve at least to some extent in that capacity in the United States in the future, if tin remains more available than cadmium. There is little hope of increasing recovery of secondary cadmium, since most applications, as in plating, are not amenable to recovery of scrap. Likewise, there is little chance of augmenting our supplies from other countries. In 1949, for example, production in the United States was 75 percent of the known world production. The future of cadmium, then, appears to be one of having more needs than supply. However, most needs are not so critical but that we could do with a curtailed supply if necessary. GALLIUM, THE NEWCOMER Only recently has gallium been recognized as being more than a scientific curiosity. Commercial production was initiated a few years ago in this country by the Eagle-Picher Mining Co., and later the Aluminum Co. of America started production. It still sells on a gram basis (about $3 per gram), and total pro- duction is only one or two hundred pounds per year in this country. Most of it has been used in experimental work, rather than in commercial applications. Potential production is far above the grams and ounces classi- fication. Goldschmidt [22] rates gallium in the earth's crust in the same degree of abundance as columbium and molybdenum. However, it is not concentrated in any ores now known to the extent of suggesting an enterprise with gallium as the main product. It -exists in this country in very small amounts in some zinc ores of the Tri-State district, in some bauxite deposits, par- ticularly those in Arkansas, and in some scattered minerals and coal deposits. As an indication of possible future availability, the following is cited: a) One company estimates that a recovery of 25,000 pounds per year could be made from their operations. Another is known to be working on extraction methods for recovery of gallium from some of its ores, and a second company is getting ores from the Arkansas area where gallium is known to exist in the bauxite. Ralph Sherwin [23] of Reynolds Metals Co. mentioned that a normal bauxite might contain up to 0.01 percent of gallium. This indicates a gallium content of some 400 tons in aluminum ores now being processed in the United States and Canada. How- ever, the variations of gallium content between bauxite of different localities and the difficulty of getting high effici- ency in extraction suggest that this should be taken as a very qualitative maximum figure. b) In zinc ores of the Tri-State area, an average of 0.005 percent of gallium has been reported [24]. Although there may be some 10,000 to 20,000 pounds of gallium mined yearly in these ores, the recovery from this source at present is less than 1 percent. c) Numerous sources of gallium in other ores have been re- ported from time to time, and, if there were a real demand, at least some of these might add to the potential supply. Thus, an aluminum ore in Utah is claimed to contain from 300 to 500 grams of gallium per ton, or about 0.03 to 0.05 percent of gallium [25]. The Varcoloid Chemical Co., in making a gallium market survey in 1946, stated that its source, if it started production, would be a mineral deposit in this country containing 0.010 to 0.015 percent of gal- lium. Ores containing gallium in varying amounts have been reported from the Rio Del Monte mine in Yuma County, Ariz., from the Silver Bell Mining Co. in Colo- rado, and from mines in California, Idaho, Alaska, and elsewhere. In most places, the gallium was noted in spec- troscopic examination of ores, and claims are open to doubt, but these miscellaneous sources cannot be dis- regarded. d) Gallium in flue dust and ash from burning coal in various parts of the world is fairly well known. In England, a sur- vey showed all dusts from gas works contained gallium in amounts ranging from 0.04 to 0.55 percent [26]. In a later publication, the average flue dust from British gas works has been reported as containing 0.5 percent of gallium [27]. Surveys in this country have shown some gallium to be concentrated in dusts from the burning of coal, but nothing that is in nearly so strong a concentration as that from certain British coals. The efficient extraction of gallium from sources where it ex- ists in only a small fraction of a percent has not been worked out satisfactorily. Considerable work has been done on gallium extraction from bauxite during processing for aluminum recov- ery, from purification residues in making lithopone and in an electrolytic zinc plant, and from flue dusts from some British gas works. The chemical methods have been expensive, and the lots treated have been very small. If an assured market existed so large scale work would be justified, the cost of extraction probably could be drastically decreased and the production in- creased a least several hundredfold. This is particularly true in handling zinc ores and flue dusts where gallium, germanium, and indium can be largely removed as the oxides or chlorides by volatilization. Because of the unusual properties of gallium, such as its very low melting point (29.8 degrees Centigrade) and high boiling point (2,071 degrees Centigrade), and expansion on freezing, one would expect a number of useful applications. Unfortu- nately, it is too reactive for use in metal containers at high temperature, and the liquid metal rapidly forms an oxide film (like aluminum) at elevated temperatures which makes the liquid more difficult to handle than mercury. The freezing point is rather meaningless, practically, since gallium undercook strongly. Page 103 The tendency for liquid gallium to react with or wet almost everything makes it potentially of value in low-melting solders, particularly those for the joining of glass or nonmetals to metals. Its usefulness in making low-melting metals may be extended in the future because of its property of expanding on cooling. Thus, as a constituent of low-melting alloys, it can help make sharp castings for use as dies at low temperature. Various other applications that have been tried or suggested are listed in re- cent articles [24, 28, 29]. Radioactive gallium has given some promise for treatment of bone cancer, as reported by the Navy Medical Corps. Gallium is in no position to substitute for other metals, nor are any of its uses developed to the point where other metals need substitute for it. It looks as though the future of gallium will be one of fairly rapid development as research shows unique properties, and increased production makes more metal available at a lower cost. From the indications of sources of the metal and potential extraction economies, it should be available within the next 25 years in North America alone in amounts on the order of 10,000 to 100,000 pounds yearly at a small fraction of the present cost. New uses are needed. GERMANIUM IN HIGH DEMAND At present, all the germanium used in this country comes from the Eagle-Picher Co., which recovers it as a byproduct in the treatment of zinc ores from the Joplin district. With discovery of a comparatively substantial percentage of germanium in the residue from its electrolytic zinc plant at Corpus Christi, Tex., the American Smelting and Refining Co. is working out an extraction procedure which may increase the available supply by another 1,000 to 2,000 pounds per year. The same is true of the American Zinc Lead and Smelting Co. at St. Louis. A new deposit of zinc ore that runs 0.05 percent and which, at 75 percent recovery, will make available 5,000 to 6,000 pounds of germanium per year for the next 6 or 7 years is now being mined to augment the supply further. Several other companies are being stimulated by this activity to look into their ability to recover germanium from byproducts where concentration can be made most easily. It is probable that pro- duction will amount to 5,000 to 10,000 pounds within 2 years in this country if demand continues. The next most promising source of supply is the Belgian Congo, where zinc ores that are being encountered at depth run several hundreths of a percent in germanium. Since germanium can be recovered commercially from concentrates containing as little as 0.010 percent, this represents material that is comparatively high grade. No quantitative estimates of potential production can be given now, but with completion of a new zinc plant now started, it is probable that in 2 years the production from this source would nearly equal that in this country. There has been no report on the germanium con- tent of zinc ores in Morocco and South Africa. In England, work is in progress on extraction of germanium from coal ash and flue dust [27]. So far this has not been equal to desired quality, and the price has been higher than that in this country, but with expected improvement this should be an important source. The germanium content of flue dust from British gas works is said to average 0.75 percent, with occasional samples containing up to 2 percent each of ger- manium and gallium. Some investigations for a similar source of germanium—from the burning of coal in this country—have not been encouraging, although this possibility should by no means be dismissed. The U. S. Geological Survey has been making a survey on metals in coal and should be consulted for current results which may change this picture. There are many literature references to the mineral ger- manite and its occurrence in Africa. Although samples of this mineral have been found and at least one small shipment was made to this country in the past few years, it plays a very minor part in the germanium picture today. The present source of germanium is far from adequate for the demand, even at $210 per pound for the metal. Users in the communications industry have indicated an immediate need for around 5,000 pounds per year, and if a supply were assured several applications of interest to the Signal Corps and to in- dividual companies would be developed which would take much larger amounts. Since most of the applications in the electronics industry require very small amounts of metal per produced unit, the cost of the germanium is a minor factor, and the market probably will be one of reasonable stability until production eventually exceeds demand. Germanium is a brittle metal, with many properties similar to those of silicon. Thus, it is a semiconductor, it has a very high thermoelectric power, and the purer it is the higher the electri- cal resistivity rises. It makes an excellent high-back-voltage rec- tifier or transistor, or may be used for other applications where the surface rectification and semiconductor and photoconduc- tive properties of germanium can be utilized. These and other applications are covered rather adequately in recent publica- tions [30, 31, 32,33]. Germanium glass has an unusually high index of refraction, which may eventually bring new applications. Likewise, the ease with which germanium hydride can be handled and the metal deposited from this gas by thermal decomposition is a favorable factor toward use as a coating. Because of the lack of good mechanical properties, germanium, as the metal, is used only as a thin film or coating or when well supported, and not as a structural material. Few useful alloys have been de- veloped, since its behavior is much like that of silicon, which is obviously much cheaper. However, the 12 percent germanium eutectic alloy with gold, having a melting point of only 356 degrees Centigrade, offers interesting possibilities for future use. It is particularly well suited as a dental casting, since the property of germanium to expand slightly on solidifying per- sists even in this 12 percent germanium alloy. This gives sharp castings, and the low melting point assures a minimum of shrink- age after casting. A germanium crystal rectifier can be used with ultra-high frequencies in such a small size that it can be used in miniature or portable equipment, and can replace bulkier tubes. As a rectifier or detector, it not only replaces the normal vacuum diode, but uses less energy, since it does not depend on a hot cathode surface. Likewise, as a transistor, less power is used, and the normal vacuum tube (triode) can be replaced. The amount of various metals used in vacuum tube construction that may be released for other purposes by substitution of the germanium-containing devices cannot now be estimated, but it undoubtedly will be very substantial. Page 104 Because of the importance of this field of development in electronics work, efforts are being made to find substitutes for germanium. Silicon is the most promising substitute material, but it has definite shortcomings for some of the applications that have been developed. Research is continuing, and it is possible that high-purity silicon can be used to some extent as a replacement. The demand for germanium far outstrips present produc- tion, but a several-fold increase in production is to be expected in the next 2 years and a further increase is probable beyond that time, even with existing known resources. New sources can be expected as awareness of the need for germanium and familiarity with it become widespread. It is playing a leading role in semiconductor research. This new field is so promising that a rapidly increasing demand for germanium seems prob- able, even though some other materials may be found to be suitable for some of the many applications. HAFNIUM'S POTENTIAL Not only has hafnium been scarce theoretically because of the small amount existing in the earth's crust, but practically as well. Few people have seen the relatively pure metal until the last 2 years, when separation from zirconium became a semicommercial operation and the raw material was available for making the metal. It.is still very scarce, although some 350 tons per year accom- panies the zirconium metal, oxide, and other compounds that are being currently used in this country [34]. A separation is made only when making pure zirconium. The average zirco- nium ores contain hafnium to the extent of about 1.7 percent of the zirconium content. There are no ores in which hafnium is the major element, and the source in the future, as at present, undoubtedly will come as a byproduct in the processing of zirconium. Since zir- conium resources of the world are large compared with those of many of our common metals,, hafnium resources are con- sidered to be substantial. At least it can be considered as being potentially in the tons class, rather than being measured in pounds or grams. The separation of hafnium from zirconium, once consid- ered to be very tedious, incomplete, and expensive, now is be- ing done with reasonable efficiency and completeness, and at a cost that is not excessive for commercial work, that is, on the order of a few dollars per pound, even when handling small quantities. Purification of the hafnium-rich separation mate- rial and reduction to the comparatively pure metal by the ■iodide method are still laborious and expensive. Only a few pounds have been so made at this time [35, 36]. This is not a fundamental handicap, however, and as the need grows or larger quantities can be handled, it is confidently predicted that the cost of producing hafnium will be no more than double that for producing hafnium-free zirconium by the same process. A magnesium-reduced hafnium sponge of somewhat lesser purity could be produced at less expense. For the next few years, material for making nearly a ton of hafnium per year probably will be available, and more could be made available by removing the hafnium from zirconium compound. This would involve extra cost, since such separa- tion would have to be assessed against the hafnium unless ex- perimental work shows the removal of hafnium to be of some benefit to the zirconium product. As a metal, hafnium has strong metal properties and can stand on its own feet as a material of construction. Many of its properties are similar to those of zirconium, but it is nearly twice as heavy, has a slightly higher melting point, and higher electron emission. It is in the unfortunate position of having an excellent combination of strength and corrosion resistance, yet nearly everything it can do zirconium or titanium can do as well and at lower cost. Insufficient material has been avail- able so far to discover all the potentially unique properties that it may possess which will give it a place in the field of valuable metals. This can be expected in the future, as much research is planned to evaluate its alloying and other properties. So far there has been more interest in its electron-emission properties, which suggest uses as a coating or as the solid mate- rial in electronic applications, than for its general structural or chemical properties. Likewise, much attention is expected to be given to hafnium compounds. Hafnium carbide, for example, is said to have a higher melting point than do carbides of the other high-melting metals. Moreover, the mixed carbide of hafnium and tantalum is reported to have the highest melt- ing point recorded for any substance [37]. Hafnium is one of the potentially important unusual metals. It will be available in the future in fair amounts, it has ex- cellent metal properties, and it has the promise of a number of unusual or distinctive properties which will give it value over such competing metals as titanium, zirconium, molyb- denum, and tungsten. Future growth in a moderate degree is very promising. INDIUM'S FUTURE The development of indium from a metal of great rarity to one of fair abundance and ample supply has all taken place in the last 16 or 17 years. Indium emerged into the company of much-sought metals, was used temporarily in a few com- mercial applications, and is still used to a minor extent in others, but at present it is reluctantly staying in the background while awaiting a call for useful work. There is a good chance that such a call will come, because it does have some unique prop- erties that appear to be potentially useful as an industrial material. Indium is produced entirely as a byproduct metal, and it originates almost entirely in zinc ores. The electrolytic zinc producers are the most important producers of indium, but some comes from the treatment of cadmium dust volatilized in roasting and sintering zinc ore for pyrometallurgical reduc- tion. As with cadmium, the extraction of indium can be rea- sonably efficient in the electrolytic zinc plant, but the recovery from the retort zinc smelters depends on the practice being followed, and it may be very inefficient. At present the demand for indium is so small that most producers are stockpiling the residue from which indium can be recovered later, if needed. Some are making no attempt to recover it. Considering the potential producers in this country, Canada, Mexico (not including ores exported to Europe), and Cerro de Pasco in Peru, a production rate of 75,000 pounds yearly prob- ably could be attained without undue difficulty, although not all producers are equipped to extract indium efficiently from Page 105 the concentrates entering their plants. This amount probably could be increased temporarily by 50 percent through utilizing present stocks of accumulated raw material and making a de- termined effort to secure a high efficiency in recovery even from those plants not now recovering it in any form. Consolidated Mining and Smelting Co., in Canada, and Cerro de Pasco Corp., in Peru, are major producers, and there are others in Australia and Europe. The outstanding properties of indium are its softness and smeariness, or ease of rubbing onto, and adherence to other materials, its rather low melting point (155 degrees Centi- grade), and its reasonably good resistance to atmospheric and alkaline corrosion. These have led to a number of applications, or to trial for different uses, as described in various publica- tions [38,39,40,41]. Indium's potential usefulness as an antifriction material still exists strongly, although the use of a diffused indium coating in silver-lead aircraft engine bearings, which was its most im- portant use during the war, is no longer considered to be a well- established application. Tin appears to serve at least equally well to give resistance to corrosion of the bearing linings by acids formed in the lubricating oils and is, of course, much cheaper. Some indium still is used for bearing-liner applica- tions, but a greater field of usefulness appears to exist as a solid lubricant. Thus, when a layer of pure indium is coated over deep-drawing dies, a general die-life increase of 50 percent has been claimed, as well as fewer draws being required and much faster operation [42]. Inclusion of indium powder in lubricating oils has been suggested and apparently has given some success when used to lubricate nonferrous parts. Indium does not adhere as readily to ferrous surfaces. Indium as a metal is too soft and weak to serve as a structural material. However, there may be some applications as a gasket or seal where its extreme softness and ductility are an asset. The competition from lead, tin, and other readily available mate- rials has indicated no important promise for unsupported in- dium, even though its ease of fabrication and generally good resistance to normal corrosion are assets. By alloying, greater hardness and strength can be attained. After a research survey of alloying possibilities, however, no indium-base alloy of out- standing improvement over existing materials has been found, and optimism must be tempered with caution in considering the indium-base alloy field. In general, many indium-contain- ing alloys are good, but not good enough to supplant other well- established materials, except possibly for a few special con- ditions. This situation, however, does not hold for indium as a minor constituent in other alloys. Here there are several very promising fields of application [43]. In soft solders, for ex- ample, not only can indium replace tin effectively (although economically it is normally the other way around), but it does permit lowering of the melting point, and it does add adherence to glass. The tendency of indium to adhere to or wet glass or ceramics ware, particularly when rubbed onto the surface, is a unique characteristic that may be of considerable future importance in joining ceramic or glass parts, in sealing glass joints, and in repairing defects in glass linings where corrosion conditions are not too severe. As little as 5 percent of indium in alloys with lead, cadmium, or bismuth will im- part glass-wetting ability. By proper composition choice, fairly high-melting lead-base alloys or very low-melting eutectic alloys can be used. Indium additions of 1 or 2 percent to tin-free lead-base solders give a marked strength increase. A solder containing 25 percent of indium, 37.5 percent of lead, and 37.5 percent of tin may be of some future importance in manu- facture of cadmium-nickel batteries because of its resistance to strong alkaline solutions. A new field of usefulness that is in the early research stage is the application of indium oxide, sulfides, and other com- pounds in the electrical industry. This is largely because of the fluorescence and photoconductivity of these compounds. Sufficient information is available to indicate that these are of more than ordinary interest. Indium is not being substituted for other scarce materials as yet, although its use in solders and low-melting alloys could supplant some tin, bismuth, and cadmium, if it were eco- nomically feasible. The use of some of its compounds in fluorescent and photoconductive or thermistor applications may release scarce metals in the field, but the development is still too new to suggest even qualitatively the importance of such replacement. In its applications as an antifriction mate- rial, tin and graphite are among the materials that can replace it in some applications. The position of indium is one of present abundant supply, of potentially rather good resources as a byproduct metal used in pound lots rather than in tons, and with sufficient known and unexplored properties to indicate a gradually ex- panded growth in the next 25 years. GROWTH IN MERCURY Mercury is an old, well-established metal with many diversi- fied applications. Domestic production under present condi- tions furnishes only a fraction of our yearly needs, but there is no need of depleting further our low-grade resources as long as an abundance is available from Spain and Italy. Although no domestic resources survey has been made recently, indi- cations are that low-grade or high-cost mercury mining opera- tions could be increased in an emergency sufficiently to meet essential requirements for at least a few years. The outstanding characteristics of mercury, metallurgically, are that it is a liquid at room temperature, boils at 375 degrees Centigrade, and alloys with many metals at room temperature to form a pattern and is frozen, removed, and used as the mercury in metallurgy has been in the Mercast process, whereby the liquid metal is poured into a suitable, easily machined mold to form a pattern, and is frozen, removed, and used as the pattern around which a refractory mold is formed, and from which it is readily removed by warming to room temperature and pouring. This requires a rather large inventory of mercury for large-scale production, but losses are very low. Use of mercury in boilers is well known. Very little mercury is needed after the initial installation is made, and new instal- lations have been very few in recent years. A growing use of mercury as a means of reclaiming metals from mixtures has been recognized by the designation "amalgam metallurgy" [44, 45]. Among the separations claimed by forming a liquid amalgam with one or more constituents and recovering them by distilling off the mercury are separation of bismuth from lead, refining of thallium, treatment of zinc scrap, extraction Page 106 of aluminum from aluminum-iron-silicon alloys and scrap, making pure manganese alloys, etc. A corollary application is the use of mercury cathodes for recovery of many metals as metal powder or sponge, and for forming metal alcoholates by ■decomposition of the amalgam with a suitable anhydrous alcohol. Some amalgams are useful for organic reductions, as to produce hydrazotoluene which can be used cyclically to produce hydrogen peroxide [46]. Undoubtedly, the use of mercury in process metallurgy and in the treatment of scrap lias not been fully exploited. This general field of application can conceivably grow into a major use in the future. In the construction of nuclear power plants, some 5 tons of mercury may be needed as a coolant per 100,000-kilowatt- capacity reactor when using enriched fuels [21]. Gallium may eventually replace mercury in some dental preparations and in other applications where a low-melting- point metal is of paramount importance, but this it not a known or early threat. On the strength of these two promising fields—amalgam metallurgy and precision casting—as well as firm establish- ment in most of the existing applications, it appears that the demand for mercury will grow in the future somewhat more than for metals in general. THE PLATINUM-GROUP METALS* Despite a marked fluctuation in price, the demand for plat- inum and the platinum-group metals has remained remark- ably firm. This is largely because of the indispensable position that these metals hold in many of their industrial applications. World production of platinum-group metals has been about 500,000 to 600,000 ounces annually. When it is considered that practically none of this metal is ever lost and much of it is reprocessed over and over again, it is apparent that the world is becoming progressively richer in its supply of the platinum- group metals. With International Nickel's Canadian operation the princi- pal world source, the United States can rest fairly comfortably, with supplementary supplies from the Goodnews Bay, Alaska, placer operation. The demand for platinum for jewelry and decorative pur- poses is a large one. In 1949, more than half of the $75-per- ounce consumption of platinum in the United States was for this outlet. Yet, it is clear that using platinum for jewelry pur- poses is an expensive luxury that the national well-being can ill afford. The metal is too useful to industry to permit this to last in the future. Therefore, it is expected that, as the indus- trial demand for the available platinum increases, the con- sumption in jewelry and decorative applications will decrease. This readjustment may have to be by Government regulations and subsidy in order to avoid unduly inflated prices for plat- inum. Because of the unique stability, high-temperature oxidation resistance, catalytic behavior, and electrical properties pos- sessed by platinum, industry is turning to it in an increasing number of applications for which it and no other metal is fitted. The high initial cost and relative scarcity of platinum tends to discourage many industrial applications, but the high recovery *By R. I. Jaffee. and scrap value of the metal tend to counterbalance this in many cases. A good example is the glass-fiber industry. With- out platinum for "bushings" used to form the glass fibers, this industry would be almost nonexistent. However, with a sizable inventory of millions of dollars' worth of platinum which is recovered and reworked as the "bushings" wear out, this in- dustry is able to flourish. In order to expand, additional plat- inum inventory is required but once acquired, the industry can go on at the expanded rate of production with only minor additions of platinum required to replenish losses. Another ex- ample is the oil industry. Its use of platinum as a catalyst for producing high-octane gasoline is increasing constantly. Here, too, the used platinum is recoverable. Platinum is also used as a catalyst in making sulfuric acid. Higher production requires additional platinum, but, once in use, this platinum becomes almost the equivalent of capital equipment with little deprecia- tion apart from the costs of recovery and refining. Thus, plat- inum and platinum-group metals serve an important role in the productivity of industry. The conservation of our platinum- group metals and their diversion to the critical industrial appli- cations is most important in maintaining high industrial pro- ductivity. In considering the platinum-group metals as a whole, the classification in the Periodic Table is most useful: Platinum-group metals Light (Ruthenium group) Ruthenium Rhodium Palladium Heavy (Osmium group) Osmium Iridium Platinum Besides the classification by light and heavy groups, the plati- num metals can be considered in pairs. Ruthenium and osmium are hard, unworkable metals and are the least useful of the whole group, finding application only in hard wear-resistant alloys for pen-nib tips, phonograph needles, etc. Rhodium and iridium are hard, but are not workable. They are useful chiefly as alloying additions for the most important pair, platinum and palladium. The "queen bee" of the platinum group is platinum itself. It is very ductile and easily worked, it has the lowest loss from volatilization and oxidation on heating in air, and it is not attacked by any single acid (but is dissolved by aqua regia). The other metals in the platinum group may match platinum in one or more characteristics, but none equals it on an over-all basis. As a result, there is a greater demand for platinum, parti- cularly when the price is down. At inflated or black market prices, the industrial demand for platinum reduces sharply but bobs up again when the price comes down. This is largely caused by the reusable nature of platinum. Palladium is much less in demand than platinum since its technical properties are not equivalent. Consequently, there is much palladium avail- able at a cost of only about a quarter that of platinum, even though seven or eight times as much platinum is produced as palladium. An excellent classification of the uses of the platinum-group metals, taken from "The Platinum Metals and Their Alloys" by Vines and Wise (International Nickel Co. 1941), is shown in table 1. It shows the multitude of special uses to which these metals are put. It is also useful in picking out those uses which will have to be foregone when increased industrial consumption in indispensable application results in the expected shortage of platinum. Page 107 STRETCHING PLATINUM METAL SUPPLIES When the pinch for platinum-group metals comes, it is clear that jewelry and decorative uses will be the first to go. This occurred during the Second World War, when the use of platinum for jewelry was prohibited. Next to go will be those uses in other lines for which adequate substitutes are available. These include all the dental applications and some of the chemical applications. For example, it is not necessary to use platinum-rhodium or platinum-gold alloy in spinnerets for rayon. The palladium-gold spinneret is satisfactory, and com- plete substitution of palladium alloys for platinum alloys in this application would release much platinum for more critical applications. Also, it is possible that corrosion-resistant base- metal alloys could be developed for this purpose. Much platinum could be released for critical applications by substitution of palladium. Palladium and its alloys are fussier to melt and fabricate, but satisfactory techniques for doing this are available. A much more difficult substitution problem is the use of platinum in the glass industry. The chief hope for substitution here is through the use of refractory base metals like molyb- denum in inert atmospheres. Great resistance from the glass industry could be expected, and only a very serious platinum shortage would force them into it. However, such substitution is possible and has been demonstrated on a small scale with molybdenum furnace-heating elements as replacements for platinum furnace-heating elements. Cladding to obtain the advantages of platinum at lower cost has been used for many years. Much platinum-clad chemical- processing equipment is in use. As the need becomes greater to stretch the supply of platinum-group metals, increasing use will be made of cladding and other coating methods. Table 1.—Uses of the platinum metals Pt Pt- Pt. Pt- Pt- Pt- Pd Pd- Ru Pd- Pd- Ag x Rh Ru Au Au X X X x x x x x x x x I x x I x x x X x x x x x x x x I x X Other platinum metals, alloys, o Electrical and physical: Contacts for communication and other relays, magnetos, thermostats, voltage regulators, and control devices Spark plug electrodes Resistors Furnace-heating resistors Resistance thermometers Thermocouples Temperature-limiting fuses Overload electrical fuses Detonator fuses Thermionic cathodes Metal-to-glass seals Reflectors Light filters. . .! Chemical: Corrosion-resistant equipment, solid or clad. Crucibles Safety (bursting or frangible) disks Anodes for "per salts," halogens, or- ganic oxidations, electroplating, and electroanalysis. Cathodes for electroanalysis Spinnerets for rayon Surfaced glass joints to prevent sticking. Feeder dies for glass lamp bases and spinnerets for glass fiber. Crucibles for oxide fusions, including glass, and synthetic crystals foi opti- cal parts. Gas meters and orifices Catalysts: Oxidation of; Rhodium. PtPdAu. for n Oxidation of sulfur dioxiue for sulfuric acid production. Automatic gas lighters and flameless cigarette lighters. Hydrogenation of numerous organic compounds. Dehydrogenation of numerous or- ganic compounds. Jewelry and decorative: Diamond and other gem mountings. . . Ring blanks Decoration in conjunction with gold. . Spectacle frames Watch cases Nontarnishing leaf for signs, bookbind- ing, leather goods, etc. Metallized glass and ceramic ware.... Medals, trophies, objects of art, etc . . . Electroplates Platinum solders PtPdAu. "Liquid" plat PtlrNi. PdRuRh. PdRuRh. PdRuRh and PdPtAg. PdPtAg. PdRuRh and PdPtAg. "Liquid" Platinum. PtRuRh. Rhodium. PtPdAuAg, also Au. Page 108 Table 1.—Uses of the platinum metals—Continued Use Pt Pt- Ir Pt- Rh Pt- Ru Pt- Pt- Pd Pd- Ru Pd- Au Pd- Other platinum metals, alloys, or Dental: Au Ag Ag PtPdAuAgCu. PtPdAuAgCu, PdRhRu, and PdPt- Ag. Porcelain matrices PtPdAuAg, PdPtAu, and PdAuAg. Reinforcement for dental porcelain . . Miscellaneous: Hydrogen purification by diffusion .... Photographic papers Color-responsive CO detectors Palladium chloride. Ru or Os compounds. Finger-print detection and biological Grain refiners for gold- and silver-base Iridium and ruthenium. dental alloys. Tips for fountain pens and phonograph RuOs With Ir, Pt, W, Co, or Ni. THE PROMISE OF RHENIUM It is surprising that a high-melting metal with the good metal properties of rhenium should resist commercial usage for such a long time. The explanation, of course, is that it has not been available in interesting quantities and at a price that would encourage use, and its properties have been largely unknown. So far, the production of rhenium in the United States has been the pilot-plant-scale production of very small lots of potas- sium perrhenate and of the metal powder by Prof. A. D. Melaven of the department of chemistry of the University of Tennessee. This material is obtained from fumes from the roasting of molybdenum sulfide by the Miami Copper Co. In Germany, an annual production rate of about 200 kilograms of rhenium was attained just prior to the Second World War. Recently rhenium has been found in the molybdenum con- centrates from several of the copper mines in the United States. Since rhenium oxide is volatile at roasting temperatures, the concentration of rhenium in Cottrell dust is not difficult, al- though complete elimination and recovery are not . normally attained. As the need for the metal appears, it is probable that the extraction technology can be worked out to give a reason- ably high efficiency of recovery. The potential supply in this country alone may be on the order of 20,000 to 30,000 pounds per year. With a melting point of about 3,160 degrees Centigrade and a specific gravity of 21.04, rhenium is nearly the highest melting and nearly the heaviest of the metals. By powder metallurgy, rods of metal can be obtained that can be hot forged, hammered, and rolled. Massive metal formed by thermal decomposition of a volatilized halide is said to be cold ductile and to resemble closely tungsten in appearance and resistance to atmospheric and water-vapor corrosion. Unlike tungsten, however, the massive metal is more easily drawn to wire, and there is less need to be concerned about a fibrous workable structure. It is unattacked by nitrogen, but. readily oxidizes at elevated temperatures like tungsten, and the oxide is volatile..In this respect, at least, it resembles osmium. The field for rhenium appears to lie between that of tungsten and the platinum group of metals. Some research is in progress on emission characteristics of rhenium and thoriated rhenium and on additions of rhenium to tungsten, both as a coating and as an alloy. There is some possibility that rhenium could replace tungsten in vacuum tube filaments. In Germany rhenium was used during the war largely to replace metals of the platinum group [47]. Thus, platinum-base electrodes for electrochemistry work were 95 Pt-5 Re; a thermocouple alloy for Pt-Rh thermocouples contained 5.4 percent of Re and 3.5 percent of Rh. Pen-point alloys contained as high as 90 per- cent of Re, with the most popular composition being 60 Re, 15 Ni, 15 Pt, and 10 W. The alloy containing 90 percent of rhenium was considered to be extremely wear-resistant and was suitable for pivot bearings. An addition of 5 percent of rhenium was considered to harden platinum as much as a 10 percent addition of iridium. Various applications are expected from research now in progress and certain to be started as the supply of crude oxide becomes available for larger scale work. The present price of about $1.75 per gram probably can be reduced as a larger volume of material is handled. Conditions seem very promising for the starting of a new rhenium industry in the United States. A rather good byprod- uct supply is in prospect, considerable research is getting started, unusual metal properties are obtainable, and the need for platinum and tungsten substitutes is great. Certainly the next 25 years will see a big change in the rhenium market. THE INCREASING USE OF SELENIUM* Selenium is another byproduct metal. The supply comes from the anode sludge left in electrolytically refining copper.. Demand has been high because of uses developed to utilize the unique properties of selenium, and a critical shortage now exists. The price of selenium has increased markedly during the past year. Total production in the United States and Can- ada is estimated at approximately a million pounds per year, but the present demand is considerably in excess of this amount. Selenium stocks are reported to be at their lowest level since selenium was first refined on a commercial scale. It is reported further that one of the largest users of selenium, the glass in- dustry, is now receiving only about 15 percent of its demand. *By Ray E. Hciks and Bruce W. Gonser. Page 109 In view of the increasing demand for selenium, new sources of the material should be considered. Several of these are: 1. Recovering selenium from smelting operations in plants which are not now equipped to refine the material. (One pos- sible minor example of this is the Tennessee Copper Co. at Copper Hill, Tenn. It is reported that this company, as it now operates, does not recover selenium from the 3,000 tons per day of ore processed and not electrolytic ally refined.) 2. Better recovery in plants now producing selenium un- doubtedly could be obtained. It has been reliably reported that one of the largest producers of selenium in the United States and Canada is actually obtaining only about one-third of the selenium present in the ores. The remaining two-thirds is lost during the smelting operations because of the inherent char- acteristics of the operation. Modification of existing equipment and processes could undoubtedly result in a recovery of a sub- stantial percentage of the additional two-thirds. It is estimated that this one company alone could increase its selenium pro- duction by about 300,000 pounds per year. 3. The Noranda Mines, Ltd., is at present operating a pilot plant for the roasting of pyrites in preparation for building a commercial plant to roast about 350 tons of pyrite daily. This plant will produce 60 tons of sulfur daily containing about 0.10 percent of selenium and 0.06 percent of tellurium. Re- covery of the selenium and tellurium from this material would result in the production of about 40,000 pounds of selenium per year and perhaps 25,000 pounds of tellurium. If a method could be found for recovering the selenium from the sulfur thus produced, a considerable increase in the production capacity of selenium would be realized. However, at this time there is no known means to remove the selenium from the sulfur economically. 4. Newly developed copper deposits in the West are expected to be in production in the near future. It is quite likely that these copper ores will be found to contain some selenium. Selenium-recovery plants in connection with the refining of such copper ores would increase selenium production, but the total amount expected from this source cannot be deduced at this time. 5. It is well known that many areas in the West, especially in the Dakotas, have seleniferous soils. It is also well known that plants grown on these soils absorb relatively large amounts of selenium, so much so, in fact, that animals grazing on the grasses in these areas suffer to a considerable extent from sele- nium poisoning. It is also known that certain plants have a greater capacity for absorbing selenium from the soil than others. With the present price of selenium at $3.50 per pound and the supply short, and the likelihood that the demand will increase rather than decrease in the future, the feasibility of "farming" for selenium in these areas should be given serious consideration. This would involve a process of growing and har- vesting crops, and then processing these crops to obtain the absorbed selenium. Various selenium-accumulator plants are known and others may be developed. These average 800 parts per million of selenium, with up to 15,000 p. p. m. or 1.5 percent selenium present as a maximum. By special selection of those plants that are best at accumulating selenium and cal- culating conservatively on a yield of 1 to 2 tons per acre, some 20 to 40 pounds of selenium probably could be obtained in an ash concentrate even after allowing liberally for the selenium extraction cost. This appears to be a reasonable economic possibility. It is confidently predicted that the uses for selenium are increasing and will increase in the coming years. For example, with the advent of television much larger amounts are used in the electrical industry than in previous years. In addition to this, there is an intensified interest in research involving sele- nium, and this research is leading to new uses for the material [48]. Many of the new uses of selenium which have been consid- ered in the past are now dormant because of the very great increase in cost since the original work was initiated. Many of these uses are still potential and are only awaiting the time when economic factors are suitable for their development. In the electrical field, there do not appear to be any substitutes on the horizon which can replace selenium, although some may be developed from among other photosensitive and semicon- ductor materials. In the glass industry, substitutes for decolor- izing selenium can be found, but most have undesirable char- acteristics. However, the glass industry is not receiving any substantial amount of selenium at this time. The demand for selenium in the future, and at present, can be, and is, controlled to a considerable extent by artificial pric- ing. It has such unique properties which have found such im- portant uses in so many different industries that it will always have a valuable place in industry, provided the economic fac- tors are not entirely adverse. ABUNDANCE OF SILICON The most abundant metal in the earth's crust is silicon. Moreover, it is not only widespread, but concentrated with easily accessible, high-grade deposits. At the present price of 20 cents per pound for 97 percent metal, it is one of the cheapest metals, figured on a volume basis, since its specific gravity is between those of aluminum and magnesium. Aside from lightness and a rather high melting point, 1,420 degrees Centigrade, silicon is immune to atmospheric corrosion, is unattacked by acid (except a mixture of nitric and hydro- fluoric acids) and salt solutions, and is heat resistant. In other words, it would be an answer to many prayers if it just had sufficient ductility to be formed and would withstand normal impact and stresses. Considerable work has been done in an effort to make ductile silicon. There have been rumors from time to time of slight hot ductility when the metal was suffi- ciently pure [49], but they have been groundless so far. Chances of developing some ductility are extremely slight. However, in view of recent work in making ductile titanium, beryllium, and chromium by increasing the purity, one hesitates to state that some ductility in silicon is impossible to attain, even though the diamond cubic lattice structure is very much against it. Silicon of high purity has been prepared for semiconductor studies. One method has been to reduce volatilized purified silicon tetrachloride with high-purity zinc vapor [50]. Attempts have been made to use powder metallurgy methods to make useful products from silicon powder. These have not been successful in that the parts formed were fragile. Improvement is possible, but probably not to the point of making a strong, impact-resistant product. Use of a strong, ductile binder has been suggested, also, but preliminary tests have indicated little Page 110 hope of obtaining a useful product. This is by no means a hopeless field, however, and better binders may be developed that will add some impact strength without ruining some of the desired corrosion- or heat-resistant properties. The most promising immediate field for silicon as a metal is in protecting other metal products where the coating need not be ductile. Siliconizing various ferrous products is the most obvious and best-known method. However, in place of using a pack method or rolling the product to be coated in a silicon- containing medium, in the presence of a chloride (Ihrigizing), a completely gaseous method has many advantages and may gain more wide adoption in the future. In this method, silicon tetrachloride and hydrogen are passed over the ferrous material to be coated at about 950 degrees Centigrade. The silicon is largely deposited in a replacement reaction which releases fer- rous chloride, but some silicon is deposited by reduction to form some hydrogen chloride. The ferrous chloride, in turn, is deposited in a separate section of equipment, where it is reduced by the hydrogen, forming iron powder as a removable byprod- uct, and releasing the chloride content as hydrogen chloride. The resultant hydrogen chloride reacts with ferrosilicon to re- plenish the silicon tetrachloride supply for recycling. This gives an effective coating of more than 14 percent silicon which has the acid resistance of Duriron and can be used for both corro- sion-resistant and heat-resistant applications. When properly done, the coating has some ductility, particularly while hot. Siliconizing molybdenum has led to a dramatic improvement in heat resistance. Molybdenum oxidizes rapidly in air at high temperatures, as is well known. By siliconizing to form an Mo2Si type of intermetallic compound on the surface, oxidation is effectively stopped. By modifying the coating with other con- stituents to raise the melting point, molybdenum has been heated in air for hours at temperatures in excess of 2100 degrees Centigrade, and for hundreds to thousands of hours at lower temperatures where molybdenum alone would still be destroyed quickly in air. The coatings are hot ductile for forming and will withstand some cold bending, but not sharp bends. The advantages of such coatings in using molybdenum alloys hav- ing good strength at extremely high temperatures are obvious. Silicon also gives some protection to tungsten and tantalum, but not as much as to molybdenum. Solid bodies of high-silicon alloys in general have been un- satisfactory because of cold brittleness. Thus, castings of molyb- denum disilicide have excellent heat resistance, but are difficult to prepare and lack impact resistance. The use of silicon as a minor constituent in alloys of the common metals is generally well known. Likewise, the use of silicon in making silicones and other chemical compounds, in making Duriron, transformer sheet, and in various ferrosilicon alloys for the iron and steel industry is considered outside the scope of this discussion. In summarizing, silicon is not only abundant and rather readily recovered as the metal, but it has heat-resistant, cor- rosion-resistant, and semiconductor or electrical properties that should make it one of our most useful metals. It is not being utilized to its fullest extent. As a substitute or replacement for platinum furnace windings, for example, siliconized molyb- denum should serve excellently. Siliconized steel conceivably could replace some high-alloy-steel castings or parts that re- quire little impact strength. TELLURIUM UNDER STUDY* For the most part, tellurium is a drug on the market. It is estimated that total production capacity in the United States and Canada is in the vicinity of 100,000 pounds per year. One of the largest tellurium producers, Canadian Copper Refiners, Ltd., has stated that it has not operated a tellurium plant for 10 years. As a matter of fact, 10 years ago it pro- duced enough tellurium and stored it to last to the present time, and it still has some stocks available. However, the com- pany is at present contemplating setting up another plant and again going into production. In the meantime, large quantities of tellurium sludges have accumulated and apparently these could be processed if the demand were great enough. Aside from the uses listed in readily available literature, research now under way indicates that tellurium has very desirable semiconductor properties, and future uses in volume are likely to appear in the electrical field. In fact, it can be confidently predicted that utilization in this field will increase many times in the next 10 years. Although the present stocks and potential producing capacity appear to be overwhelming in view of present uses, considerable concern is expressed by those in development work over having sufficient tellurium to supply these new needs that have not yet emerged from the research stage. THALLIUM RESOURCES Excellent reviews of thallium technology and uses have been made recently [51, 52]. Resources of thallium appear to be substantial for a minor metal. Aside from accumulations of thallium-containing resi- dues as a byproduct from refining other metals, some ores have very appreciable amounts that could be extracted if the demand warranted such a move. The U. S. Bureau of Mines (Minerals Yearbook, 1949) cites the old cyanide tailings dumps at Mercur, Utah, which are estimated to contain more than 2,000 tons of thallium, with more than 20,000 tons in untreated ore. It has been estimated that at least 15,000 pounds of thallium could be produced as a byproduct metal if there were sufficient demand. Although present uses for thallium are minor in volume and importance, research is constantly uncovering new possibilities, and some may eventually mean considerable usage. The vicious cycle of a low volume of processing forcing a high cost, which discourages new uses, which keeps down production, has been strongly in action with thallium. There are several interesting alloys of thallium, such as the addition of thallium to mercury to lower its freezing point to — 60 degrees Centigrade, and the addition of thallium to lead to confer a higher melting point than has either metal alone. However, the more unique prop- erties of thallium are more likely to cause interest in physics and electrical-engineering circles than in metallurgy. These are exemplified in the use of thallium compounds in photosen- sitive cells and as a semiconductor that changes electrical re- sistance with intensity of radiation, and in making phosphors. While no bright future can be painted for thallium, the sup- ply situation and properties of the metal favor a moderate increase in use in years ahead. *By Ray Heiks and Bruce W. Gonser. Page 111 THORIUM, CERIUM, AND THE RARE EARTHS* The rare earths and cerium can be best discussed in the same group with thorium, since they are largely associated together. Likewise, yttrium and scandium are often attached to the rare-earth group because of their close relationship in the Periodic Table, in some minerals, and in some properties. Although called "rare," and certainly they are not well known, the rare-earth group as a whole is fairly common and widely distributed among minerals in the earth's crust. In fact, the rare earths rate higher than either copper or nickel in abundance. Practically, the chief source for the entire group and thorium has been monazite. This is a phosphate of the rare-earth elements and thorium, with usually some zirconium and iron and other metals. Although interest in metals from monazite sands used to be centered in thorium (or the oxide thoria) and the rare earths were byproduct, in recent years ceria and its related rare-earth oxides have been the main objective, and thoria has been the less important byproduct. For many years, monazite sand was obtained from India and Brazil until the governments of those countries imposed em- bargoes on the exportation of the mineral with the apparent intention, not yet fully realized, of setting up rare-earth-process- ing operations for the sale of more profitable finished products and possibly to establish political bargaining power. Use of thorium in place of uranium for atomic-energy applications may have been a consideration also. The price of monazite soared from $60 to $300 per ton as old domestic sources were reopened and the search for new sources was slowly inaug- urated. In many instances, other minerals in the monazite— gold, rutile, ilmenite, garnet, etc.—help carry the cost of recov- ery by dredging and beneficiation. It is quite probable that the rare-earth industry has remained as small as it is—3,000 to 4,000 tons of monazite produced and used per year—because the supply has been generally consid- ered as being so limited, and the prices so subject to rapid change (even when supplied from India and Brazil), that new uses were discouraged before they were seriously considered in any but highly specialized fields. The current activity in search of United States independence in the rare-earth-supply situation has produced some startling and gratifying results, with discoveries of sizable monazite deposits in Idaho and of large bastnasite deposits in New Mex- ico and California. These deposits of bastnasite, a fluocarbonate of the rare earths, could supply all the rare-earth elements re- quired for present uses and new tonnage uses for years to come. As a result, the monazite mining efforts could be abandoned in a few years, if it were not that bastnasite contains practically no thorium. Reserves of thorium and the rare earths in this country are rather widely scattered in the West and Southeast. They are normally expressed in terms of monazite, which is of variable composition but in general contains about 5 percent of thorium oxide, 25 to 35 percent of cerium oxide, 25 to 32 percent of oxides of other rare earths of the cerium group (lanthanum, dysprosium, etc..), 0.5 to 2 percent of rare-earth oxides of the yttrium group, 25 to 30 percent of P2O5, and 5 percent of iron, alumina, silica, and lime (CaO). *By Robert E. Holmes and Bruce W. Gonser. A recent survey has indicated very promising tonnages of monazite in Idaho where areas have been explored systemati- cally and production has developed on monazite alone. From a carload or two in 1949 and 1950, production has jumped to about 400 tons of monazite in the first 6 months of 1951, and it was expected to be more than 1,000 tons in the last 6 months of 1951. For 1952 to 1955, the average annual production from Idaho probably will be from 3,000 to 5,000 tons if prices stay at present levels of $300 per ton. Monazite reserves in the Carolinas may be fairly large, but the deposits are scattered and so located in populous areas that recovery conditions are discouraging. In New Mexico and California, probably several million tons of bastnasite ore con- taining from 10 to 20 percent of rare-earth oxide equivalent has been estimated in newly discovered deposits. At an annual output rate of 3,000 tons, which may develop by 1953, this should supply the rare-earth demand for more than 70 years, unless the rate of usage greatly expands. Reserves of monazite in other parts of the world are discussed by R. D. Parks, [53], as well as its importance in atomic-energy work. Some of the monazite reserve is closely associated with worked- over gold dredging areas. The opportunity to recover monazite as a byproduct in gold dredging is now largely lost. However, reworking these placer sands by deep dredging might recover sufficient gold, rutile, ilmenite, or garnet in some cases to help defray some of the expense. Operators are alert to these by- product possibilities. Much of the monazite is in very fine grains which are not recovered in dredges equipped only with jigs. Conservation calls for installation of proper equipment to elimi- nate wastes now running probably 25 to 30 percent of the monazite in the gravels. In working the new bastnasite deposits, much development work needs to be done to get efficient concentration. Methods worked out for monazite do not apply here. There is some fear that, in the expediency of quickly attaining high production volume, wasteful scalping of the deposits and burial of mar- ginal mineral areas may result. To avoid wasteful reworking for overlooked minerals, as has happened so many times in the past, it is to be hoped that operators in recovering rare metals from the new bastnasite deposits will segregate any byproducts of any possible future value. Thorium Use Limited by Supply Most of the rare earths can be considered as a group with cerium from a use standpoint. However, thorium must be con- sidered separately. No longer used as the oxide in making gas mantles, except to a minor extent, thorium has come into prominence in recent years as a possible raw material for atomic energy generators. This is described elsewhere. However, this is a largely potential use at present, although one of extreme importance, and tho- rium is available to a limited extent for applications other than those associated with its radioactivity. Pure thorium has been produced in this country in massive form recently. It is remarkably soft and ductile, is formed easily, and has practically the same specific gravity as lead. Otherwise, it is more like the other members of the III B Group of elements—titanium, zirconium, and hafnium—in having a Page 112 high melting point of around 1,845 degrees Centigrade. It is unattacked by alkalis or concentrated nitric acid, and alloys readily with copper, nickel, aluminum, tungsten, zirconium, titanium, etc. Too little of the massive metal has been made for adequate exploration of possible uses. The combination of softness, high melting point, and resistance to alkalis is unusual and may lead to some applications, even though thorium is attacked by oxygen and nitrogen at high temperatures. Unlike titanium, zirconium, and hafnium., however, it is not em- brittled by these gases by absorbing them in solid solution. Thorium powder has been produced for a number of years. Although used rather extensively in Europe during the war as a sintered coating on vacuum tube plates as a getter, little is now so used in this country. It can be deposited as the solid metal by decomposition of the volatilized iodide, and this could form the basis for coating some high-melting metals with thorium. However, little work on coating with thorium in this manner has been done so far. Considerable work has been done on using thorium as a minor alloying constituent with other metals. Additions to steel have indicated moderate success [54], but a high price and, at times, unavailability have limited this use, and this applica- tion is by no means pressing. Small additions to aluminum are said to increase corrosion resistance and to have been so used in Germany [55]. Addition of around 3 percent of thorium to magnesium alloys gives increased room-temperature tensile properties, and a significant increase in creep strength at ele- vated temperatures (as at 600 degrees Fahrenheit). Use of thoria in electrical resistance wire to prolong life at high temperatures has been a noteworthy discoyery [56], This, with the older application of adding thoria (which may be at least partially reduced later in sintering) to tungsten lamp- filament wire are among the most important present and future metallurgical applications. The thoria at grain boundaries pre- vents grain growth, and the use of thorium or thoria for grain- growth prevention is being tried or considered whenever this problem arises. Some thoria is used in making special refrac- tories, but this is not a large application. The future of thorium in this country is handicapped by re- serves of monazite sands that are costly to produce for monazite alone. Sale of byproducts—especially ilmenite—may lower the selling price somewhat. Recovery of thorium from bastnasite is out of the question except possibly at prices at least 10 times those presently paid for thorium compounds. Possible atomic energy applications are paramount and will have first call on the supply. This makes it difficult to plan on using excess tho- rium for other purposes. Properties of thorium are such that some new metallurgical applications undoubtedly would be developed if a supply were assured. These, with the established uses, particularly in the electrical industry, indicate a con- tinuing strong demand for thorium in the future, aside from atomic-energy requirements. Cerium and the Rare Earths Most of the cerium that is sold is the product of reduction of mixed rare-earth oxides produced from monazite. Thus, the composition of this product, mischmetal, is in about the ratio of the rare-earth metals existing in the mineral. Mischmetal is usually considered to average around 50 percent of cerium, 46.5 percent of lanthanum and other members of the cerium sub- group, 2 percent of yttrium and members of its subgroup, and not over 1.5 percent of impurities, such as iron, silicon, and carbon. Sometimes this mixture of rare earths is sold as cerium, in place of the more accurate designation of mischmetal. Present uses of mischmetal are rather well covered in readily available literature [57]. Among miscellaneous uses are covered applications in catalysts, textile treatment, leather trimming, etc. Ferrocerium is the most important alloy because of its use in sparking flints. Cerium can be separated from the other rare earths and is produced to a very small extent as a 98 percent commercially pure metal. Likewise, the other metals can be separated, usually with considerable difficulty. However, there has not been much demand for the individual metals. This has been largely be- cause so little is known about their individual properties and so little of each has been available at a reasonably low cost. In using mischmetal in magnesium, for example, it has been found that by separation of constituents and substituting didymium for the mixed group, a significant improvement in room-tem- perature properties is obtained, as well as releasing cerium, lanthanum, and the other constituents for other applications. Didymium glass (Corning No. 512) utilizes the special prop- erties conferred by a mixture of neodymium and praseody- mium oxides. Gadolinium has the highest neutron-absorption cross-section of any element—about 10 times that of cadmium. This has led to interest in gadolinium from the atomic energy standpoint, which may eventually mean considerable demand. The prices of thorium and the rare earths are such that waste in processing the monazite and preparing end uses is held to a minimum. The slag from electrolytic reduction of rare-earth chlorides is utilized for production of rare-earth chemicals which can be extracted from it. Over-all efficiency in getting the metals is high. There may be waste, however, in using a group of metals, as mischmetal, where only one or two of the constituents do the work and the rest ride along. The tendency in the future probably will be to split the rare earths into indi- vidual components, or at least smaller groups, and use each where it does the most good. The example of using didymium in place of mischmetal for alloying with magnesium has been cited. Fortunately, ion-exchange techniques, though costly, have been, or are being, developed which make this separation less arduous than formerly. Most of the uses of the rare earths were developed because of their unique properties, and substitution is not easy. The application in arcing carbon cores used in motion-picture pro- jectors and searchlights appears to be unique, as are the ophthal- mic effects of lanthanum, cerium, etc., as used in optical and camera lenses. Other sparking mechanisms may be developed for cigarette lighters and the like to replace the use of misch- metal in ferrocerium flints. In glass polishing and the metal- lurgical applications, the rare earths are not indispensable, but possible lower costs by recovery from bastnasite may consoli- date their position in these applications. Although useful as an addition to cast iron to give malleability, nickel-magnesium is preferred in this country. Page 113 References 1. B. Smith Hopkins. "Lithium," Chapters in the Chemistry of the Less Familiar Elements, vol. 1, 1939, p. 9. 2. A. L. DeSy. "Nodular Cast Iron Produced with Li, Ca, Ba, Sr, and Na," Metal Progress, vol. 58, No. 3, September 1950, p. 357. 3. Foote Mineral Co., Philadelphia, Pennsylvania. "Lithium," Foote Prints,vol 21, No. 1, 1949, pp. 15-19. 4. Chemical and Engineering News, May .14, 1951, p. 1916. 5. H. N. Gilbert. "Some Unique Properties of Sodium and Potas- sium," Chemical and Engineering News, vol. 26, 1948, p. 2604. 6. B. Smith Hopkins. "Rubidium, Cesium, and Elements 85 and 87," Chapters in the Chemistry of the Less Familiar Elements, vol. 1, 1939, p. 7. 7. J. G. Kura, H. H. Jackson, M. C. Udy, and L. W. Eastwood. Journal of Metals, vol. 1, October 1949, pp. 779-784. 8. A. R. Kaufmann, P. Gordon, and D. W. Lillie. Trans. ASM, vol. 42, 1950, p. 785. 9. John T. Richards. "A Review of Beryllium and Beryllium Alloys," Journal of Metals, May 1951, p.. 379. 10. W. Hodge, R. I. Jaffee, and B. W. Gonser. "Calcium and Cal- cium Base Alloys," Report No. 123, The Rand Corporation, Santa Monica, Calif., January 1, 1949. 11. D. A., Wright. "Rare Metals in Electron Tubes." A paper presented at the 1951 Convention of the British Institution of Radio Engi- neers. Available from Research Laboratories, General Electric Co., Ltd., Wembley, England. 12. "Rare and Minor Metals" (in Germany), Metal Industry, December 12, 1947, p. 483 . 13. R. J. McRae. "Bradley Mining Company's New Antimony Smelter at Stibnite, Idaho." A paper presented at the Extractive Metallurgy Division session of AIME, February 1951. 14. See Walter C. Smith, Chief Metallurgist, Cerro de Pasco Mining Corp., New York, for information on available supplies and poten- tial reserves of bismuth in Peru. 15. Chemical and Engineering News, April 23, 1951, p. 1673. 16. Schlesinger, Schaeffer, Barbaras, and Wartik (Argonne Na- tional Laboratory), Deposition of Pure Boron, II. "A Flow Method for Deposition of Boron on Wires," Tech. Inf. Branch, Oak Ridge, Tennessee, MDDC-1339, August 14, 1944. Declassified Septem- ber 25, 1947, p. 16. 17. C. F. Powell, I. E. Campbell, and B. W. Gonser. "The Formation of Refractory Coatings by Vapor-Deposition Methods." The Rand Corp., Santa Monica, Calif., R-137. March 25, 1949, pp. 80-85. 18. Wall Colmonoy Corporation, 19, 345, John R. Street, Detroit 3, Michigan. 19. Harry B. Knowlton. "ISTC Division Reports on Boron's Steels," S. A. E. Journal,.vol 59, August 1951, pp. 17-31, M. A. B. Report 4-m, July 16, 1951; M. A. B. Report 6-m. 20. "Boron Steels." Metal Progress, vol. 60, February 1951, pp. 81-92. 21. The Science and Engineering of Nuclear Power, vol. II (Addison Wesley Press, Inc), 1949, p. 15. 22. Goldschmidt, J. Chem. Soc, Pt. 1, 1937, pp. 655-673. 23. Unpublished discussion of paper on "Extractive Metallurgy of Alumi- num," Trans. AIME,vo\. 188, 1950, p. 661. 24. A. P. Thompson and H. R. Harner. "Gallium, A By-Product Metal," Journal of Metals, vol. 191, February 1951, pp. 91-94. 25. Private communication, Alumina Development Corp., Price, Utah. 26. Gibson and Elvig. "Rare and Uncommon Chemical Elements in Coal," U. S. Bureau of Mines Technical Paper, 669, 1944. 27. Chemistry and Industry, February 10, 1951, pp. 108-110. 28. John P. Dennis, J. Hugh Hamilton, and John R. Lewis. "Gal- lium Forms Unique Alloys," Research Reviews (ONR), Novem- ber, 1949, pp. 13-19. 29. "Gallium; Rare Metal Now Ready for Industry," Modern Industry, vol. 19, February 15, 1950, pp. 70-71. 30. R. I. Jaffee, E. W. McMullen, and Bruce W. Gonser. "Tech- nology of Germanium," Trans. Electrochem. Soc, vol. 89, 1946, pp. 277-290. 31. "Electronic Applications of Germanium," Nature, vol. 162, Decem- ber 25, 1948, pp. 982-983. 32. W. C. Dunlap. "Germanium, Important New Semi-Conductor," General Electric Review, vol. 52, 1950, pp. 9-17. 33. Recorder. "Germanium Research Progress," Metal Industry, vol. 78, February 23, 1951, pp. 151, 153. 34. D. R. Martin. "Hafnium," Foote Prints, vol. 21, 1949, pp. 8-12. 35. F. B. Litton. "Preparation and Some Properties of Hafnium Metal," Paper given at April 1951 meeting of Electrochemical Society. 36. "Pure Hafnium Arrives," Chemical Industries Week, March 3, 1951, p. 19. 37. B. Smith Hopkins Chapters in "The Chemistry of the Less Familiar Elements," Stipes Publishing Co., 1939, vol. 11, p. 8. 38. M. L. Ludwick. "Indium," Pub. by Indium Corp. of America, 60 E. 42d St., New York, 1950, pp. 276. 39. J. DeMent and H. C. Dake. "Rarer Metals," Chemical Publishing Co., 1946, pp. 29-^2. 40. "Three Job Hungry Metals Now Report for Duty," Modern Industry, May 15, 1951, pp. 48-51. 41. W. S. Murray. "Indium," Modern Metals, vol. VI, July 1945, pp. 6-9. 42. E. E. Hall. "Indium Plating Aids Drawing of Aluminum Alloys," Metallurgia, vol. 33, 1949, p. 243. 43. R. I. Jaffee, and M. S. Weiss. "Properties of the Alloys of Indium. with Lead, Tin, Bismuth and Cadmium," Paper presented at April 1951 Meeting of Electrochem. Soc. 44. H. Holm.' "Applications of Amalgam Metallurgy," Research, vol. 3, September 1950, pp. 407-417 45. E. Kuss. "An Economic Method for Development of a New Tech- nique, Development of Amalgam Chemistry," Angewandte Chemie, vol. 62, November 21, 1950, pp. 519-526. 46. R. B. MacMullen. Chem. Engineering Progress (Engineering Lect.), vol. 46, September 1950, pp. 440^55. 47. Materials and Methods, May 1947, page 8; F. R. Hensel. Report PB-18779, Field Information Agency, "Rare and Minor Metals." 48. S. R. Waitkins, A. E. Bearse, and R. Shutt. "Industrial Utiliza- tion of Selenium and Tellurium," Ind. and Eng. Chem., vol. 34, August 1942, p. 899. 49. J. S. Smatko. "Experiments To Produce Ductile Silicon," FIAT Report No. 789, British Intelligence Objectives Sub-Committee, April 3, 1946. 50. D. W. Lyon, C. M. Olsen, and E. D. Lewis. "Preparation of High Priority Silicon," /. Electrochem. Soc, vol. 96, December 1949, p. 359. 51. H. E. Howe and A. A. Smith, Jr. "Properties and Uses of Thal- lium," Journal of Electrochem. Soc, vol. 97, August 1950, pp. 167c-170c. 52. W. H. Waggaman, G. G. Heffner, and E. A. Gee. "Thallium, Properties, Sources Recovery and Uses of the Element and its Com- pounds," U. S. Bureau of Mines, Inf. Cir. 7553, March 1950, p. 50. 53. The Science and Engineering of Nuclear Power, vol. II, ch. 1, "Source of Material for Nuclear Power," 1949, pp. 1-14. 54. "Properties of Thorium-Bearing Heat Treatable Steels," Iron Age, vol. 155, March 29, 1945, p. 55. 55. W. Schulenburg. "Thorium," FIAT Review of German Science; Nonferrous Metals, 1948, pp. 33-35. 56. K. W. Frolich and A. Bauthel. "The Effect of Thorium on Re- sistance Heating Alloys," Metalwirtschaft, vol. 21, 1942, pp. 103-105. 57. H. E. Kremer. "The Rare Earth Industry," /. Electrochem. Soc, vol. 96, September 1949, pp. 152-157. References Elsewhere in This Report This volume: Tasks and Opportunities. Improved Exploration for Minerals. Vol. II: The Outlook for Key Commodities. Antimony. Bismuth. Cadmium. Special Strategic Materials. U. S. Bureau of Mines Tables—Chrome Ore. Page 114 The Promise The of Technology Chapter 9 Technology of Ocean Resources* The mineral wealth of the ocean and its basins need not be stressed here. Let it suffice to say that a cubic mile of sea water weighs about 4,000 million tons and contains 166 million tons of dissolved salts. There are approximately 300 million cubic miles of sea water which cover 71 percent of the surface of the earth [/, 2, 3, 4}. Around the borders of the ocean are extensive sea beaches which contain minerals such as gold, ilmenite, magnetite, mon- azite, rutile, garnet, diamond, zircon, and quartz. The sea bottom has extensive deposits of iron-bearing minerals, man- ganese ores, and phosphate rock, to mention only a few. Under the Arctic and Antarctic ices lie unexplored mineral deposits. In the surface of the sea and along its coasts grows an enor- mous population of submicroscopic to giant plants, which fur- nish food and shelter for the immense population of fish, shell- fish, mammals, and other life which inhabit the ocean. The plants, fish, and animals extract minerals from the water. Some- times the concentration in the organism is many thousand times the concentration of the same mineral in the water. Only a small part of this wealth is recovered and put to use by man. The obstacles in the way of utilizing it are not tech- nological, except possibly for some of the deep-sea deposits. Technology and economics just have not been brought together. Except for fishing and solar salt, thinking has always been in terms of the land. Only recently has man sunk his oil wells into the ocean bottom to extract petroleum and dipped the intake hose of his pumps into sea water to circulate it through bromine- and magnesium-extraction plants. There are two reasons for failure to exploit the resources of the ocean basins in the past. They are lack of extensive explora- tion and the inability of past technology to compete economi- cally with the technology applied to land resources. Most of the exploration has stemmed from scientific curiosity, and only a little from search for minerals, except in times of emergency. During the First World War, when costs were secondary, an intensive investigation of iodine and potash from seaweed re- sulted in a temporary industry on the Pacific Coast. After the war, the industry died because it was not economical. The technology was inadequate to compete with iodine and potas- sium production from other sources. The development of anti- *By Iver Igelsrud Battelle Memorial Institute. knock gasolines spurred the development of methods for the large scale recovery of bromine from sea water (1934), and the needs of the Second World War sparked the application of bittern and brine technology to the recovery of magnesium from sea water (1941). The recovery of bromine and mag- nesium from sea water is economic. The most extensive and best integrated research on the resources of the sea probably has been that of the fisheries industry for the obvious reason that the sea is the only large source of fish. The sea is not the only large source of minerals. This report will discuss the resources of the ocean and the significant technological developments which can and may alter the present economic exploitation of these resources dur- ing the next 25 years. The resources of the ocean are discussed with respect to (1) sea water, (2) marine life, and (3) ocean bottom, including its beaches. Under each of these heads, sig- nificant trends in exploration techniques and technology will be discussed. The report will attempt to appraise technological success and, where possible, cost. Existing technology will not be described, except for illustrative purposes. SEA WATER AS A RESOURCE Sea water probably contains, in solution, all the elements contained in the earth's crust. Many of the more insoluble ones and the ones difficult to detect by analysis, when present in low concentration, have not yet been shown to be present. Elements not previously detected are, however, continually being added to the list. Many not yet detected chemically are found concentrated in the bodies of marine plants and animals. They could have come only from the sea water in which this life grew and thus, by inference, may be said to be present in sea water. The total salt concentration of sea water lies between about 3.2 and 3.7 percent. It is usually given in round figures as 3.5 percent. Typical ranges of salinities in various oceans, and of contiguous salt seas, are given in table 1. They show that the salt concentration of sea water is not entirely constant from ocean to ocean, as it is influenced by precipitation, runoff from the land, melting of Arctic ice, evaporation, mixing with more dilute or more concentrated water from other parts of the ocean, etc. Page 115 The surface waters of the Atlantic are more dilute near the Arctic ice front than at the Equator. The Mediterranean Sea, the Gulf of Lower California, and the Red Sea are more con- centrated than the Atlantic Ocean, the Pacific Ocean, and the Indian Ocean, respectively, because of evaporation. The sur- face waters of the Black Sea and of the Baltic Sea are diluted by precipitation and runoff from the land. In general, the salinity of the deeper water is more constant, but even the salinity of this water is changed by the sinking of colder, more dilute water, and by mixing with water brought in from other parts of the ocean by currents. Table 1.—Typical salinities of surface water fro and contiguous water bodies i the o Water body Salinity, percent Atlantic Ocean 3. 28-3. 70 Indian Ocean 3.42-3.54 Pacific Ocean 3.17-3.54 Mediterranean Sea 3.84-4.12 Gulf of Mexico 3. 50-3. 63 Baltic Sea 0. 10-1. 60 Red Sea 3.88-4. 10 Persian Gulf 3. 80 Gulf of Lower California 3. 51-3. 55 Black Sea 1. 60-3. 50 The composition of a typical sea water, of salinity 3.4325 percent, is given in table 2. Sea water is alkaline and has a pH ranging from about 7.6 in deep water to about 8.2 in surface water. The salts dissolved in it occur in the same ionic form as in other water solutions of like pH. The elements Na, Mg, Ca, K, and Sr occur as the simple elemental ions. S occurs as sulfate, and carbon as car- bonate, bicarbonate, and dissolved C02. The nature of the ions of other elements, where known, is indicated in table 2. Because of the variation in the salinity of sea water, it might be supposed that the water would also vary with respect to the relative concentrations of the individual dissolved salts. This is not the case. The ratios between the relative concentrations of the major ions (Na+, K+, CI", SO~4, Ca++, Mg++) have been shown to be constant, except for diluted surface waters near the edges of ice packs and at the mouths of large rivers. Even in the latter areas, fluctuations are minor. The constancy of relative composition is maintained by constant circulation and mixing. There are many elements, of course, which are used (see, for example, nitrogen and phosphorus in table 2) as plant nu- trients, and these show fluctuations in relative concentrations. For the major elements, the variation is not detectable. Because of this situation, if the composition of a water of given salinity is given, the composition of sea water of a different salinity may be computed nearly enough for purposes of esti- mation by multiplying by the ratio of the two salinities. In table 3 are listed the elements which have not yet been found in measurable quantities in sea water. Those which have been detected qualitatively are indicated. Sea-water exploration techniques consist simply in taking water samples and analyzing them chemically. The sampling- technique in deep-sea operation consists of attaching metal sampling bottles in series to a wire rope and lowering them to the desired depths. Because of the pressure in deep water, the bottles are sent down empty, and are closed at depth. Temperatures are measured by reversing thermometers at- Table 2.—Composition of sea water (not including gaees)*' [Salinity 3.4325 percent] Concentration Water * Chlorine (chloride) 1 Sodium 1 Magnesium * Sulfur (sulfate) 1 Calcium 1 •Bromine (bromide) 1 Carbon (inorganic) %. . . Carbon (organic) 1 Strontium 1 Silicon (dissolved and colloidal Si02) 1 Boron (borate) 1 Aluminum 1 Fluorine %' Nitrogen (nitrate) Nitrogen (nitrite) Nitrogen, (organic) 1 Nitrogen, (ammonia) Rubidium 1 Lithium 1 Phosphorus (phosphate) 1 Phosphorus (organic) 1 Arsenic (total) Iron (in solution and colloidal) 1 Manganese 1 965, 575 Lead 1 18, 980 Selenium *. 10, 561 Tin * 1,272 884 Cesium 1. . Uranium* .' 400 Molybdenun 380 Gallium. . . 65 Nickel "... 28 Thorium. . 1.2-3.0 Cerium.... 13 Vanadium x 0. 005-4. 0 Lanthanum 4. 3-4. 9 Yttrium. . . 0.16-1.9 Mercury 1. Silver 0.001-0.7 Bismuth *. . 0. 001-0. 05 Cobalt 0. 03-0. 2 Scandium. . <0. 005-0. 05 Gold * 0.2 Radium* . 0. 1 Germanium <0. 001-0. 10 Titanium x. 0-0. 016 Tungsten . . 0. 05 Cadmium 1 0. 05 Chromium 1 0. 015-0. 04 Thallium *. 0. 002-0. 02 Antimony % 0. 005-0. 014 0. 001-0. 09 Platinum x. 0. 001-0. 01 Beryllium 1 0.004-0.005 0. 004 0.003 0. 002 0. 00015, 0. 0003-0. 002 0. 0005 0. 0001-0. 0005 <0. 0005 0. 0004 0. 0003 0. 0003 0. 0003 0. 0003 0. 00015-0. 0003 0. 0002 0. 0001 0. 00004 0. 000004-0. 000008 2 x 10-"-3 x 10-w Present Present Not yet detected Not yet detected Not yet detected Not yet detected Not yet detected Not yet detected Not yet detected **Partly based on material from the following sources: Geochemistry by Kalervo Rankama, and Th. G. Sahama, 1950. The University of Chicago Press, >. 290-291. T/k CWw, by H. U. Sverdrup, M. W.Johnson, and R.H.Fleming, 1942. Prentice-Hall, Inc., pp. 176-771. 1 Identified in marine plants and animals. ♦Inferred from sediments. Page 116 tached to the bottles. The bottle thermometer assembly is reversed by dropping a metal messenger down the cable. The messenger actuates a tripping mechanism which causes the assembly to up-end. Each bottle carries a metal messenger which is released by the up-ending and slides down to the next lower bottle. The up-ending reverses the thermometer and closes the bottle valves. The string of bottles is then drawn to the surface and the water analyzed. Rapid methods of chemical analysis for the major, as well as for many of the minor, elements are available. In general, it may be said that present sea-water exploration techniques are satisfactory. They are defective only in that rapid and accurate methods of analysis for many of the minor elements are not available. Such methods will be developed as need arises. VARIOUS PROCESSES ISOLATE ELEMENTS Sea water contains approximately 96.5 percent of water and 3.5 percent of dissolved salt. Both water and dissolved salts are natural resources. The recovery of water from sea water, except on a small scale, such as on ships at sea or in lifeboats, never has been adequately explored. Production of solar salt, NaCl, has been an industry for hundred of years, but only a beginning has been made in the recovery of other salts and elements from sea water. Sea water may be processed for dissolved materials in several ways: 1) By demineralization (combined cation and anion ex- change) to produce soft water and byproduct recovery of salts. 2) By distillation of water and byproduct recovery of salts. 3) By selective removal of various minerals from sea water by ion exchange, chemical precipitation, fractional crys- tallization, etc., and recovery of water as the byproduct. 4) Combinations of the foregoing processes. Descriptions of technology will be confined to what is new and promising for sea water. Water From Sea Water There are two ways to obtain water from sea water. They are demineralization, or ion exchange, and distillation. Demin- eralization of natural waters usually is not used for water purification on waters with a high salt content because the costs rise in proportion to the concentration of dissolved salt. Water is usually classed as saline when the total amount of dissolved solids exceeds 500 parts per million. Such water is relatively soft when compared with sea water, which contains about 35,000 parts per million. The chief cost in demineralization is for regenerants for the ion exchangers. The regenerant solutions, after they have ex- tracted the salts from the exchangers, are run into the sewer. This could not be done in a sea-water demineralization plant. The regenerant salts would have to be recovered. The prospect of recovering water from sea water by distilla- tion has been greatly enhanced by the development of the vapor-compression still. It is estimated that distilled water may be produced by this still with about 20 percent of the fuel Table 3.—Elements not yet found in measurable quantities in- sea water Atomic No. Element Detected in Found in marine life 4 Beryllium x 22 Titanium 24 Chromium 32 Germanium 36 Krypton 40 Zirconium 41 Columbium 43 Technetium 44 Ruthenium 45 Rhodium. . . ;".. . 46 Palladium 48 Cadmium x 49 Indium 51 Antimony 52 Tellurium 54 59 Praseodymium 60 Neodymium 61-71 Rare Earths 72 Hafnium 73 Tantalum 74 Tungsten 75 Rhenium. 76 Osmium 77 Iridium 78 Platinum x 81 Thallium 84 Polonium 85 Astatine 86 Radon 87 89 Actinium 91 Protactinium 93-96 Trans-Uranium elements consumption of an equivalent quadruple-effect still or with about 6 percent of that consumed by a single-effect still. Even so, in order to make it economical for sea-water distillation,, the salts in the residual brine must be recovered as byproducts- DEMINERALIZATION The demineralizing process would work about as follows: the water is first put through a cation exchanger to remove calcium, magnesium, sodium, potassium, and heavy metals, and through an anion exchanger to remove sulfuric, hydro- chloric, and hydrobromic acids. The water would then be free of salts. The ion exchangers would be regenerated with acid, possibly hydrochloric (sulfuric might be unsuitable because of danger of clogging the exchanger with precipitated calcium sulfate). The effluent from the regenerated exchanger would be a solu- tion containing all of the calcium, magnesium, sodium, potas- sium, and heavy metals as chlorides. The anion exchanger would be regenerated with a solution of sodium carbonate. The effluent from this operation would be a solution of sodium sulfate, chloride, and bromide. Because of the high salinity of sea water, it would probably be necessary, in order to keep the plant to a reasonable size, to circulate the water repeatedly through the plant, with alternate exchange and regeneration. The net result of these operations would be a volume of pure water about equal to the volume of the original sea water and two concentrated salt solutions whose combined volumes might be as high as 35 to 40 percent of the volume of the original sea water. Page 117 In the complete process, the ion exchangers are used over and over. The regenerants are consumed. The cost of the operation at this point, based on extra- polation from fresh-water costs [7], would be about $17 per 1,000 gallons.* In an effort to reduce this cost to a reasonable amount, recovery of the minerals from the concentrated efflu- ents must be attempted. The mineral-recovery operation must absorb more than $16 of the estimated water cost. The concentrated effluents, based on the salt content of 1,000 gallons of sea water (plus the HC1 and Na2C03 added in the regeneration), will contain the amounts of salts, with the values, shown in table 4. The difference between the value of the salts and $17 is $13.12, which apparently is not recoverable. Table 4.—Salt content of effluent and market value, per 1,000 gallons of sea water Market peflb. Salt Weight, lb. Total NaCli 484 42 6 9 17 0. 25 5.2 $1.21 2. 19 0. 07 0. 05 0. 14 0. 22 MgCl2 2 KC1 3: 1. 2 .6 CaCl2 * Na,S04 5 . 85 32.0 NaBr6 . 7 3.88 1 Minerals Yearbook, p. 1084, 1948. Undried stack-run salt, c. 1., fob plant at San Francisco, S5.30 per short ton. 2 Minerals Yearbook, p. 757. Mg metal at 20.5 cents per pound. 3 Minerals Yearbook, p. 1062. Muriate of potash at 37.5 cents per unit 4 Minerals Yearbook, p. 1068. Estimate from value of product. 5 Oil, Paint, and Drug Reporter, Aug. 13, 1951, p. 30. Salt cake, 100 percent Na2S04 basis, $17.00 per short ton. 6 Oil, Paint, and Drug Reporter, p. 14. Bromine at 25 cents per pound. A part of the cost of demineralization lies in what is called "slippage" of various ions through the exchanger as this be- comes higher and higher in adsorbed ions. Slippage makes it necessary to recirculate the effluent, sometimes many times, through the exchanger in order to obtain water that is suffi- ciently pure. The only remedy is to develop exchangers with higher capacities and higher selectivity. One approach to the problem would be the development of selective exchangers, i. e., exchangers that would remove, one at a time, the various ions, such as calcium, magnesium, potas- sium, sodium, chloride, etc. This would have the advantage that the various minerals would be separated and concentrated and, at the same time, water would be recovered. A beginning on this has been made, for example, with potassium and other elements, and will be discussed in greater detail later in this report. The largest single cost is for regenerants. The regenerants are (1) an acid, which in the present instance probably would be hydrochloric, although sulfuric is not entirely out of the ques- tion, and (2) an alkali, such as soda ash. It is improbable that these materials can be recovered except as sodium chloride, or sulfate, both of which are low-value products. *The extrapolation is optimistic, because sea water, with its much greater salt concentration, would probably be more difficult to demineralize than raw fresh water. This analysis does not present a very hopeful picture for de- mineralization as an economical process to produce water as the primary product from sea water. DISTILLATION Recovery of water from sea water by distillation depends on: (1) An available cheap source of heat. (2) An efficient distillation plant. (3) Byproduct recovery of salts from the distillation concentrate. The alternative is water as a byproduct from other operations. The present common fuels are coal, oil, and gas. Other energy sources are: (1) Waste heat from other operations of the same plant or obtained by integration with other plants, such as, for example, atomic breeder piles. (2) Nuclear energy. (3) Geothermic energy. (4) Tidal energy. (5) Degraded energy by way of the heat pump. (6) Solar energy. Two types of distillation plants are available. They are steam-fired single- or multiple-effect evaporators, and vapor- compression evaporators. A comparison [8] of the amounts of water produced per 1,000 B. t. u. of fuel consumed in various types of distillation plants is given in table 5. The advantage appears to be on the side of vapor-compression stills, because they recover and use a large proportion of the latent heat of evaporation. Table 5 Fuel consumption in sea water distillation plants [8] Water produced 1,000 g. p. h. Fuel oil 18,500 B. t. u. per lb. Efficiency: Boiler 80 percent. Turbogenerator 45 percent. Motor 90 percent. Diesel engine 0.555 lb. per brake-horsepower. Fuel Water Amount of steam fired, produced Type of plant 1,000 per 1,000 evaporators B.t.u./ B. t. u./ hr. lb. Oil-fired boilers, single-effect 1 lb. steam per 0.9 lb. 12, 730 0. 655 Oil-fired boilers, double-effect 1 lb. steam per 1.6 lb. 7, 150 1. 150 evaporators. Oil-fired boilers, triple-effect 1 lb. steam per 2.2 lb. 5, 220 1. 590 evaporators. Oil-fired boilers, quadruple- 1 lb. steam per 3.2 lb. 3, 590 2. 320 effect evaporators. Oil-fired boilers, condensing lOOkw.-hr. per 1,000 1,050 7. 930 turbo-generator, motor-driven gallons water. vapor-compression evapora- Diesel-driven vapor-compres- 76 hp.-hr. per 1,000 770 10. 810 sion evaporators. gallons water. Estimates for sea-water distillation using diesel fuel range from 24 to 48 cents per 1,000 gallons of distillate [8, 9]. Steam cost is assumed as 30 cents per 1,000 pounds and electric power at 3 mills per kw.-hr. Another estimate, with fuel unspecified, is 20 to 30 cents per 1,000 gallons [10]. This takes no account of labor and investment costs, which would raise the above cost to 70 cents to $ 1 per 1,000 gallons. This cost is not out of line with costs of making distilled water from raw fresh water. The costs [7] of distilled water vary over a fairly wide range, roughly from less than $1 to well Page 118 over $10 per 1,000 gallons, depending on the fuel and the type and size of plant. The larger and more efficient the distillation plant, the lower are the costs. The cost of water obtained by distillation from sea water is, however, materially higher than the present cost of water that is available for municipal and industrial use. Median figures for water rates [11] in the United States run from about $1.90 per 1,000 cu. ft. for 1,000-cu. ft. consumption per month to 75 cents per 1,000 cu. ft. for 1,000,000-cu. ft. con- sumption per month. This is 27 cents and 10 cents per 1,000 gallons, respectively. If water from sea water is to compete with present water sup- plies, the mineral salts in the distillation brine must be recov- ered. Byproduct processes are used on brines from solar evapo- ration of sea water in California [12], on brines from the Dead Sea [4], and other areas. The products recovered are mag- nesium and potassium salts, epsom salt, magnesia, bromine, potassium salts, and ordinary salt. Unfortunately, very little information has been published on the costs of production. The brine from 1,000 gallons of sea water contains the amounts of salts, with the market values that are indicated in table 6. Table 6.—Salt content of distillation brine and market value Weight, lb. Market value, Total Salt NaCl 197 42 0. 25 5.2 1.2 0.6 0. 85 34.0 $0. 49 2. 19 0. 07 0. 05 0. 28 0. 27 6 9 33 Total 0.8 3. 35 * See table 4. When the distilling costs are subtracted from the value of the salt in the brine, it appears that the salt-recovery process will have to bear a surcharge of 43 to 90 cents (assuming a distilled-water cost of 70 cents to $1) per 1,000 gallons. The margin between this and the market value of $3.35 is about $2.45 to $2.90 for salt-recovery costs and possible profits. The prospect for distilling sea water economically appears decidedly brighter than does the possibility of demineralizing water at a reasonable cost. Minerals From Sea Water In recent years, there have been a number of significant de- velopments in methods for recovering minerals from sea water. Unfortunately, very little about costs has been made public, so that it is difficult to judge the economic factors. Some of the developments in the field of mineral extraction have been ap- plied industrially and are in operation today so that, at least locally, they may be presumed to be profitable. So much de- pends on locally available supplies of raw materials (other than sea water), power, fuels, and other items that comparisons are difficult to make. USE OF ION EXCHANGE TO EXTRACT MINERALS One of the most important developments which may make sea water a potent raw material is ion exchange. Cation ex- change is currently used to recover potassium [13, 14] and sodium [15, 16] from sea water. Sea water is used as a regener- ant in ion-exchange plants for softening municipal water. The costs are reported to be less than 1 cent per 1,000 gallons of softened water. The sodium chloride of the sea water is the regenerant. A process for recovering magnesium from sea water has been patented [17]. A process has been reported for remov- ing gold [18] from sea water. An anion-exchange process for removing chloride from sea water has been patented in Japan [19]. The only major constituents of sea water for which no processes have been proposed are bromine, calcium, and sul- fate. Nothing appears to have been done with reference to the minor elements except for gold. POTASSIUM The ion-exchange process of the Norsk Hydro-Elektrisk Kvaelstofaktieselskab was developed from earlier work with calcium dipicrylamine, which was used for precipitating potas- sium from sea water. Nothing has been published about the process except in the three patents [14] and in the thesis by Skogseid [13]. The patents describe the preparation of the ion-exchange material, and the thesis gives theoretical and experimental data on the preparation of various resins and on the utility of the products as cation exchangers. According to the thesis, poly (4'-vinyl-2,4,6,2,'6'-pentanitrodiphenylamine)* was found to be highly potassium selective in sea water. A table [13, table 10] gives the ratios of potassium in the ex- changer to potassium in the original sea water at equilibrium. The portion of the table which refers to the aforementioned compound is reproduced in table 7. Table 7.—Equilibrium of poly (4-vinyl-2>4,6>2>f6'-pentanitrodi- phenylamine) with sea water Distribution ratio of chemical equivalents, ion - in exchanger Ion in sea water Na+ 0. 65 6. 00 K+ Mg++ 1. 62 3. 04 Ca++ The ion-equivalent concentration of sea water in percent is given in table 8. In the third column are shown the ion concen- trations on the exchanger after the sea water has passed through it, as computed from table 7 and the second column of table 8. It is evident from this that multiple passage of the water, with intermediate regeneration of the exchanger, is necessary in order to achieve a high concentration of potassium in compari- son with the other elements in the final effluent. No data were *Prepared by condensing para-aminopolystyrene with picryl chloride and nitrating the product. Page 119 given on distribution ratios, after the first passage of the sea water through the exchanger, so that no further estimates may be made on the efficiency of the complete process. The nature of the regenerant has not yet been disclosed, but it is probably a mineral acid. Production of sodium from sea water by ion exchange is another process developed by the Norsk Hydro-Elektrisk Kvael- stofaktieselskab [15]. The process is integrated with their plant for the manufacture of nitrogen compounds from the air. The nitric oxides are converted to calcium nitrate and this, in turn, by an ion-exchange process, to sodium nitrate and calcium chloride. In the early development of the process, a 52 percent calcium nitrate solution was fed into the ion exchanger. The regenerant was a 26 percent sodium chloride solution. The solutions were passed repeatedly through the exchanger in the following suc- cession: (1) Calcium nitrate solution. (2) Water. (3) Sodium chloride solution. (4) Water. The liquids could contain a small amount of soluble silicate but had to be freed of air by evacuation. Later, the water wash- ing steps were omitted. Sea water was substituted for the sodium chloride solution, and the sodium of the sea water is now recov- ered as sodium nitrate. In this Norwegian process the ratio of recovery of nitrate from the calcium nitrate is reported to be 70 percent. Table 8.—Cation composition of sea water and of ion exchanger after passage of sea water The ion-exchange material is described as a silico-aluminate, or a silico-chromite, with a mol ratio of Si02/Al203, or Si02/Cr203, of 2.5 to 5.5. The silico-aluminate one is prepared from aqueous sodium aluminate and water glass. The gel is dried to a water content of 40 percent before crushing, sifting, and washing. No details of the processes used in the industrial operation have been published. The Japanese have also patented a process whereby elec- trolysis of aqueous sodium sulfate to make sodium hydroxide and sulfuric acid is combined with extraction of sodium from sea water [16]. Sea water is passed through a hydrogen ion exchanger to remove sodium ion from the water. The ex- changer is regenerated with sulfuric acid, with the production of sodium sulfate. The aqueous sodium sulfate solution is elec- trolyzed to produce sulfuric acid for the regeneration process and sodium hydroxide for sale. The nature of the cation-ex- change resin is not given. MAGNESIUM Another ion-exchange process developed by Norsk Hydro- Elektrisk Kvaelstofaktieselskab recovers magnesium from sea water [17]. Sea water is passed through a resin polymer of (2, 6-dinitro-4-vinyl phenyl) picrylamine. The resin is then treated with C02 under a pressure of 50 to 60 atmospheres. (Presum- ably) magnesium bi-carbonate is formed and is washed out with water. Magnesium carbonate is formed by aeration. The now acid resin is regenerated with a weak Ca(OH)2 solution before it is reused. Several patents have been issued for ion-exchange resins reported to be capable of removing gold from sea water [18]. No data are available. In a Japanese process, an ion exchange is applied to sea water to secure sodium chloride for chlorine manufacture [19]. The resin is treated with a resin-bearing sodium hydroxide to convert it to the hydroxyl form. The hydroxyl form is treated with sea water to exchange the hydroxyl ion for the chloride ion. The chloride ion is extracted from the resin with sodium hydroxide to produce sodium chloride and regenerate the resin. The process is repeated. The sodium chloride is electro- lyzed to produce sodium hydroxide, for the process, and elementary chlorine. No details on the nature of the resin or the operation of the process are available. In the absence of more specific data or operational details, the economic feasibility of many of these processes is difficult to judge. One detail stands out, however. Most of the ion- exchange operations, except possibly that for potassium, are an integral part of a larger operation. Sea water may be the only raw material, or it may be only one of the raw materials. An example is the Norwegian process, which combines nitrogen from the air with sodium from the ocean and limestone from the land to produce sodium nitrate and calcium chloride. Ion exchange is integrated with other processes to exploit sea water. In view of the large amount of research on ion exchange and its application to sea water, it appears that it is considered very promising. Certainly it points the way to new means for producing caustic soda, chlorine, magnesium and magnesium salts, sea-water magnesite, potassium salts, and possibly many other materials contained in the sea. Ion-exchange methods for recovering bromine and sulfur from sea water are needed. TRACE ELEMENTS When the concentration of an element in a solution is of the order of 10 parts per million or less, it becomes very difficult to secure nearly quantitative removal of the element by ion exchange. Demineralized waters generally will retain at least 2 to 3 parts per million of dissolved salts. Most of the minor elements in sea water occur in concentrations of less than 1 part per million. Therefore, it will be necessary to develop much more sensitive and selective ion exchangers than are available at present before these elements will be recovered from sea water by ion exchange. Page 120 DYES USED TO SPEED EVAPORATION PROCESS The solar salt industry produced 766,183 tons of salt, or nearly one-fourth of the evaporative salt produced in the United States, in 1949 [12]. Except for better control of the process to prevent contamination with magnesium and calcium salts and to eliminate other impurities, the solar salt industry operates much as it has for many hundreds of years. Recently, however, a new method for accelerating evaporation [20] was developed by Palestine Potash, Ltd., in operation on Dead Sea water. Greater absorption of the heat of the sun's rays was achieved by adding dyes to the evaporating brine to make it evaporate faster. Evaporation, except by solar heat, is uneconomical for salt production and cannot compete with production of the same salts and elements by other methods and from sources other than sea water, such as well brines and mineral deposits. The bitterns from solar evaporation are processed minerals. At the Leslie Salt Co. plant in California, for example, bromine, gypsum, and MgO are produced from bitterns in an integrated operation [12]. Potassium salts go to waste. They could possibly be recovered by ion exchange [13, 14]. Chlorine is available at the plant to make hydrochloric acid for regeneration of the resin and the manufacture of potassium chloride. Potash salts, and other salts, are recovered from brines at Searles Lake in California and the Dead Sea, and from well brines in Michigan and other States. The technology is old and subject to but small improvement, except where it can be integrated with different processes, such as ion exchange. The process is one of evaporation and fractional crystallization. The principles are well known for the salts involved, and therefore no marked changes in technology are expected. Precipitation usually involves the addition of a precipitating agent to sea water. An example of precipitation is the recovery of magnesium from sea water by addition of calcium hydroxide. Its chief limitation is the permissible loss of the precipitant in the waste solution. At present, only two of the elements in sea water are recov- ered directly from the water by precipitation. They are mag- nesium and potassium. The precipitant for magnesium is com- paratively cheap, while the one for potassium, dipicrylamine, is expensive and losses must be carefully avoided. There are no known precipitants that are economically feasible for removing sodium, calcium, chloride, sulfate, and bromide from sea water. Except for calcium and sulfate, this is also true for precipitation from brines and bitterns. It is unlikely that reagents especially designed for precipi- tating sodium, calcium, sulfate, and chloride will be developed. These substances do not warrant expensive reagents. Bromide might warrant it. Magnesium is precipitated directly from sea water by treat- ing the water with slaked lime or slaked dolomite. The products are magnesium hydroxide and a somewhat alkaline sea water. The latter is passed back to the ocean. This is essentially the process at the Dow Chemical Co. plant at Freeport, Tex. [21], at the Marine Magnesium Products Co. plant at San Francisco [12], and others. The recovery is 85 to 90 percent. No attempt is made to recover other elements from the spent sea water, except that bromine is recovered at Freeport. Although ion exchange could be applied, it would be uneco- nomical to make potassium salts in competition with the New Mexico deposits, and to compete with sodium chloride. In an emergency, or for plants far from potash and salt deposits, this situation might not apply. Calcined and slaked dolomite is frequently used as a sub- stitute for high-calcium lime. It has the disadvantage that it contains more impurities and is more difficult to burn properly. The use of dolomite is attractive because half the magnesium would come from the dolomite. The result, other things being equal, is that the magnesium plant would need to be only half as big. Much research on dolomite has been done and is continuing [22]. The alkali metals usually form soluble salts. The appearance of a precipitant for potassium that could be used on a com- mercial scale, on a solution as dilute as sea water, was, there- fore, an unexpected development in the alkali-metal field. The process is sponsored by Norsk Hydro-Elektrisk Kvaelsto- faktieselskab in Norway. Its development may be followed in a series of patents, two of which will be mentioned [23]. Sea water is treated with a soluble calcium salt of dipicryl- amine. The amine is again converted to the calcium salt with milk-of-lime and the process is repeated. The recovery of potas- sium is about 70 percent. The potassium salt of dipicrylamine is slightly soluble in sea water and dipicrylamine is expensive. To guard against loss of valuable reagent, the sea water must be acidified slightly to recover the dissolved amine. The necessity for this extra step may be one of the reasons for developing the ion-exchange process referred to previously [13, 14]. Precipitation is likely to be more expensive than ion exchange for any particular process if the precipitant is an expensive one. The precipitant must be more soluble than the compound to be precipitated. This is not true of ion-exchange materials, so that solubility loss is minimized. Furthermore, an excess of a precipitant is usually necessary and this excess is often lost. Nevertheless, the development of precipitants is desirable be- cause, as in the instance of the potassium process, they are often the intermediate clue to the final successful process. In a Japanese process, precipitation of potassium with di- picrylamine is followed by recovery of bromine from the filtrate [24]. The latter is treated with chlorine and the bromine volatilized, substantially as is done in the Dow bromine process. The products of this operation are potassium nitrate and bromine. WASTE NO PROBLEM WITH ONE-PRODUCT PROCESS The ocean is so vast and sea water is so rapidly available that the matter of wasting it or wasting solutions from plants operating on sea water has hardly been considered. For ex- ample, the waste solution from a Dow magnesium plant is sea water unchanged except for the fact that it has a somewhat higher pH and has lost 80 to 85 percent of its magnesium. Similar statements may be made of effluents from other plants. The plants operating on sea water at the present time are essentially single-product plants. The magnesium plants make magnesium hydroxide, the potassium plants make a potassium salt, and the bromine plants make bromine. The solutions Page 121 from these operations, which contain all of the remaining salts of sea water and whatever went into solution from the opera- tion, are returned to the sea. They are waste solutions which contain valuable salts. The consideration of waste may enter the picture when more than one product is made from sea water in the same plant, and the operation becomes integrated. At present, it is of no great concern because there is no lack of sea water. Solar bitterns are another matter. The bitterns are concen- trated solutions of magnesium, potassium, sodium, and calcium sulfates, chlorides, and bromides. They represent, to some ex- tent at least, an investment. About the only products made in the United States from solar bitterns (from sea water) are bromine, magnesia, and gypsum [12]. The other salts go to waste. It has proved unprofitable, for example, to recover potassium salts by the conventional crystallization processes. Integration of the processes with an ion-exchange process might make potassium salts profitable. SIGNIFICANT TRENDS IN SEA-WATER TECHNOLOGY The composition and properties of sea water are well known. No new exploration techniques need to be developed. The two most significant new technological developments applicable to sea water are ion exchange and vapor-compres- sion distillation. Ion exchange is a versatile process which may be integrated readily with other operations. Ion-exchange ma- terials may be tailored to extract selectively the various ions that occur in sea water. This process should see marked devel- opment in its application to sea water during the next 25 years. The fact that processes have already been developed, at least on the laboratory scale, for potassium, sodium, magnesium, and chlorine reinforces this opinion. How long it will be before the minor trace elements also become recoverable is uncer- tain. Surely some of them, like bromine, boron, strontium, aluminum fluorine, and possibly rubidium and lithium, may be so recovered, at least on the laboratory scale, within the coming quarter century. Vapor-compression distillation makes it possible to obtain pure water and high-concentration brines from sea water at a low cost. In this process, the latent heat of water is used to heat the still. This is accomplished by compressing the vapor, thus raising its temperature. The compressed and heated vapor is circulated through the heating tubes. It is estimated that up to 25 times as much water may be obtained per pound of fuel by vapor-compression distillation as can be obtained by single- effect evaporation. The estimated cost lies between about 3 and 10 times the present cost of municipal water without recovery of sea-water salts. When salts are recovered, and the salt- recovery process bears some of the cost, the ratio becomes much less. SEA LIFE AS RESOURCE This section of the report will be concerned mainly with products of the plant, or algal, life of the sea; but some of the products from animal life, such as fish oils, fish liver oils, and others will be discussed. The classical seaweed industry, which, among other things, manufactured iodine and potash from seaweed, no longer exists [12, 25]. Potash and iodine from seaweed could not com- pete with those obtained from other sources. The reasons were poor technology and lack of economical mechanical means foi harvesting. To replace the old industry, a new one has grown up, based almost entirely on the manufacture of extractives, such as agar, carrageen, and algin. These are colloid products which are used in the medicine, food, and other industries. An idea of the size of the industry may be gained from the amount of seaweed harvested [26]. In 1945, about 59,000 tons of wet kelp was harvested on the Pacific Coast and about 4,00C tons on the Atlantic Coast, for a total of 63,000 tons. The amount of algin recovered from it was between 2 and 3 million pounds. The algin industry accounts for about 95 percent oi the seaweed processed. The industry is not so large as the one which, in 1917-18, consumed more than 40,000 tons of sea- weed per month. ALGAE THE MOST PROFITABLE SEAWEEDS The seaweeds of importance to industry are the algae. Eel grass, which is not a true seaweed, finds some use in mattress manufacture. The algae are usually classified by color. There are five classes: (1) Blue-green algae; (2) green algae; (3) brown algae; (4) red algae; and (5) yellow-green algae. In general, the colors are closely related to the properties oi the classes, but the classes differ in characteristics of cell struc- ture and life history, and for this reason it is important to distinguish them. The algae of the first four classes are, with few exceptions, attached plants, i. e., they anchor themselves to loose rocks on the bottom, to rock faces, and even to other plants, by means of an organ called the hold-fast. The hold-fast is a structure usually resembling a root but merely serving the purpose of anchorage. The plants range in size from submicroscopic to giant. Some live within the bodies of other plants, and others, such as the giant kelp, live in 30 to 75 feet of water and reach a length of nearly 200 feet and weigh up to 100 pounds per plant. The method of reproduction is by some form of sexual or asexual cell fission. The process is complicated and cannot be discussed in detail here. The products of the fission, in most cases, are gametes and zoospores. The gametes unite in pairs, become attached, and grow to form a new plant. The zoo- spores, on the other hand, become attached and grow into an inconspicuous plant which produces more gametes. This process is called alternation of generations and is quite general. The problem of "seeding" is thus seen to be more complicated than for land plants and must be understood if cultivation should be considered. The "seed" are an important source of food for marine life. The yellow-green algae are the microscopic floating-plant portion of the plankton of the sea. The plankton includes both microscopic plants and animals, together with larvae and eggs. Plankton is the food of water-filtering sea life. Seaweeds are peculiar as an industrial raw material because their chemical content does not remain constant. The algin content of Laminaria, for example, is less than 1 percent in March and rises to nearly 20 percent during October [25]. Page 122 The same is true, to varying extents, for other chemicals. Furthermore, the chemical contents of different portions of the plant differ. This makes necessary careful chemical control and seasonal harvesting. Usually the chemical content, except for iodine, is highest during the season of greatest photosyn- thesis. The iodine content is highest in the winter months. EXPLORATION TECHNIQUES FOR SEAWEEDS Exploration techniques for seaweeds must locate beds that (1) reappear year after year, (2) are sufficiently large to war- rant the cost of harvesting, (3) are accessible to harvesting machinery, and (4) contain the varieties of weeds desired. Exploration techniques for seaweed beds are described by Chapman [25]. Most of those described are based on visual observation or sampling. The most rapid one is aerial photog- raphy. Pictures are taken on clear sunny days with a yellow filter from an altitude of 1,500 to 2,000 feet. This method is rapid, successful, and accurate for depths down to 35 to 50 feet. Because of its rapidity and because it provides a visible record of the extent of the beds, it is desirable to develop the aerial- survey method. To use it to the best advantage, however, the photographic technique must be improved. Special cameras and film will be necessary. For example, by the use of high-speed film, with emulsions sensitized to the wavelengths for which sea water is most transparent, it should be possible to penetrate to greater depths. Such emulsions are available [27]. Sea water is most transparent to wavelengths lying between 4,500 and 5,500 Angstroms, [/], and this is precisely the wave- length range in which the sun's light has its greatest in- tensity [28]. Another method of penetrating to greater depth is by the use of polarized light (obtained with a polarizing filter) in con- junction with high-speed color-sensitive film. This would reduce reflection from the water and make greater penetration possible. In order to increase exposure time, and thus get a photograph with greater detail, an aerial camera in which the film is moved to compensate for movement of the image can be used [28]. This also should permit greater penetration into the sea water. The seaweed kingdom should be explored for weeds that con- centrate minerals. Not enough is known about variation of chemical content with season and geographical location; for instance, kelp concentrates potassium chloride and bromine. The ash content of some seaweeds examined ranged from 27 to 42 percent of the dry weight [5]. The chloride content of the ash was 30 to 39 percent. This indicated high alkali-salt content. Corals may contain up to 3 percent of strontium oxide. It is not unlikely that many seaweeds concentrate the rarer ele- ments in the sea. The adsorption of elements on living organ- isms is shown by the higher concentrations of Cu, Ag, Au, Ra, and U in water rich in plankton. The weeds of greatest industrial importance are the red and brown algae. The brown algae are the most important industrially be- cause of their great abundance. The present known beds on the Pacific Coast produce between 30 and 40 million tons per year, of which less than 20 percent is harvested. Very little is known about the seaweed resources on the Atlantic Coast and the Gulf of Mexico. HARVESTING BY HAND AND MACHINE Until the advent of the Pacific Coast industry in 1917, har- vesting was done entirely by hand [25]. Mechanical seagoing harvesters were designed for the tall Pacific kelp. These are now used to harvest kelp for the algin industry. On the Atlantic Coast, seaweeds are still harvested by hand. Mechanical harvesting is limited at present to the giant kelp on the Pacific Coast, which grow tall enough so that un- evenness of the bottom does not affect the harvester. A level bottom is a necessity for mechanical harvesting of low-growing weeds. Unfortunately, weeds need rocky bottoms for anchorage and such bottoms are usually not level. Before mechanical harvesting of small weeds becomes practical, it will be neces- sary to grow them in specially selected estuaries with rock- strewn level bottoms (compare section on fertilization of sea water). The technology of the recovery of agar, carrageenin, irido- phycin, and algin from the algae is very simple. It consists essentially of leaching the dried weeds. Subsequently operations consist merely of working the extracts of the red algae and the residue of the brown algae into the final marketable form. The only waste solution is a salt solution, from the algin process, which contains alkali salts and iodine. Potash and iodine might be recovered from it by ion exchange. The methods employed in this industry are so simple that there does not seem to be much chance for materially improved technology. The industry, although growing, is so small yet that improved technology would not contribute greatly to ex- ploitation of the ocean in general. This might change, how- ever, if technology were improved so that extraction of iodine, potash, and other products were profitable. Before suggesting improved technology, an estimate of the industry potential might be worth while. The Pacific Coast kelp beds have been estimated to produce annually about 35,000,- 000 tons of wet kelp. On the basis of the 1917—18 production of potash, about 100 tons of wet kelp was required to produce 1 ton of recovered potash [25]. With improved technology, it might be possible to increase the recovery to 1.5 tons. On this basis, the beds now produce annually about 525,000 tons of recoverable potash. But many of the beds are not accessible for harvesting because of natural reasons. If it is assumed that 25 percent of the area of the beds is accessible, the potential potash production would be about 130,000 tons per year. If bromine were also recovered, its recovery would amount to about 25 tons. The kelp beds from which recovery is proposed are scattered along the Pacific Coast from southern California to the western part of Alaska. It is evident that all of the harvest could not be processed in one plant because of cost of transporting the wet kelp. However, if four plants could be conveniently located, the annual production would average about 30,000 tons of potash and 6 tons of bromine per plant. A 30,000-ton plant is large enough to operate economically if the recovery processes are simple and inexpensive. Steps which consume large amounts of fuel must be avoided. A cer- tain sacrifice in over-all recovery might be economic with simple technology. Page 123 The two most expensive operations in the extraction of potash and iodine are the drying of the wet kelp and the subsequent ashing. So far as the literature is concerned, no mention is made of extracting the contained salts from the wet kelp by, for example, hot lixiviation with water or acid. There are numer- ous reports [25] to the effect that, when kelp is dried in the open, rain will wash out the salts. It would seem obvious that extraction without drying and ashing should have been tried, but no such experiments have been reported as far as can be determined. If it is possible to leach wet kelp which has been finely macerated and shredded, a leaching process followed by an ion-exchange operation to recover potash and iodine would appear attractive. The possibility exists of introducing fertilizers into sea water to stimulate the growth of plants and thus, indirectly, that of fish. Experiments both in the laboratory and in the sea have been made. Walker and Smith [29], working under the spon- sorship of the Scottish Seaweed Research Association, added a mixture of disodium hydrogen phosphate, sodium nitrate, and sodium bicarbonate to sea water in aquaria. The mixture greatly hastened the development of zoospores from Laminaria Cloustoni, in comparison with control experiments in which nothing was added. Fertilization on a larger scale was attempted in Loch Craiglin in Scotland [30]. The loch has an area of about 18 acres and a maximum depth of about 15 feet. The narrow channel leading to it from the sea was partly closed by a dam which allowed a limited tidal interchange. Sodium nitrate and super- phosphate were added in amounts sufficient to bring the loch up to concentrations 5 times and 10 times, respectively, the normal concentration found in sea water. The experiments had continued for 3 years at the time of reporting. During that time, plankton, algae, and fish in the loch had shown an unprecendented growth. Flounders transplanted into the loch grew about 4 times as fast in length and 16 times as fast in weight as those not transplanted. The technical feasibility of increasing both plant and fish production by fertilization is thus demonstrated. Obviously, it can be done only in protected arms of the sea, so that the fertilizer would not be dissipated into the open sea. Water bodies with near-shore currents across their mouths probably should be avoided because the currents would favor inter- change of water with the sea. Such experiments will have to be repeated under carefully controlled conditions in selected bays and estuaries in order to arrive at the best types of fertilizers, best times of the year to do the fertilizing, gain in plant growth, gain in growth of fish, permissible water interchange, and, above all, costs. ANIMAL PRODUCTS OF SEA INCLUDE FISH OILS Fish oils and fish-liver oils are byproducts of the fish industry. Fish oils are drying oils which are used in paints and varnishes to replace linseed oil. Many fish-liver oils contain high con- centrations of Vitamins A and D. Fish oils are slightly inferior to linseed oil because they do not dry to quite so hard a surface. This becomes more noticeable in humid weather. Nevertheless, they are in demand as a substitute for linseed oil. They may be produced more cheaply than the latter. Fish oils contain saturated acids and glycerides (mostly stearine) which contribute to their film defects and inferior drying. They also usually retain some odors which often return after the oils have been deodorized. Research on better methods for removing the saturated acids is needed. Solvent extraction, steam distillation, and similar techniques have improved the oils. Tressler and Lemon [12] list some 120 fish whose livers and organs have been assayed for Vitamin A. Of these, some 60 varieties showed liver oils with 10,000 or more U. S. Pharma- copia units per gram of oil. Most of these outranked cod-liver oil. The viscera of many fish contain oil with Vitamin A con- centrations higher than that of the livers. A waste product of the fish-liver-oil industry is the partially digested protein which remains after Vitamin A is recovered. The bile acid of the gall bladder also is not recovered, although bile acid is in demand. The seaweed industry has declined since the First World War, primarily because technology did not advance enough to produce iodine and potash from this source in competition with other sources. The industry should regain lost ground in the next 25 years if advances in technology are properly utilized. Research on extraction of not only algin, but other chemicals, from sea water should develop processes that can use wet sea- weed and that can extract, for example, potash and iodine with- out ashing the weeds. The old processes required evaporation and fractional crys- tallization to recover potash. Ion exchange will probably re- place that method. Iodine will again be recovered, possibly by ion exchange and possibly by chlorine volatilization. Iodine can pay its way if it does not have to carry part of the cost of recovering potash by the old inefficient methods. THE OCEAN BOTTOM The ocean bottom is covered with unconsolidated sediments. For convenience, they are termed pelagic if they are found in deep water far from shore, and terrigenous if they occur in shal- low water near the shore. Actually, the one sediment grades imperceptibly into the other. The pelagic sediments are red clay and ooze. The term "red clay" applies to all deposits with less than 30 percent or- ganic matter, and the term "ooze" to those which contain more than 30 percent of organic matter. Again, the division is arbitrary. From a mineral standpoint, red clay is more important than ooze. It is found in large deposits that, together, cover about half the area of the ocean bottom. Red clay contains about 8 percent of Fe203 and 1 percent of Mn02. But of greater interest, manganese and iron oxides are also found in red clay in the form of nodules. The nodules are abundant, although no estimate of their abundance has ever been made. The average Mn02 content of nodules is 29 percent; the average Fe203 content is 21.5 percent. The no- dules generally show laminations of different shades and tex- Page 124 tures. They have a concentric structure with a nucleus of foreign material which may be a shark's tooth or a small piece of rock. Nodules occasionally weight several hundred pounds. Red clay and manganese nodules occur in water deeper than about 3,000 feet. For this reason, it is unlikely that they will be a source of iron or manganese within the next 25 years. The extent of rich deposits should, however, be determined. Mineral beds of interest in the terrigenous deposits are phos- phorite, barite, glauconite, and cassiterite. Phosphorite is wide- spread and has been found in many coastal regions on the edge of the continental shelf and on topographic highs. Off the coast of southern California it is the rock collected most abundantly in dredging. The nodules range in size from small oolites to masses weighing more than 100 pounds. The calcium phos- phate content is about 67 percent, with the remainder mostly calcium carbonate. No estimate of the magnitude of the de- posits has been made. Barite concretions have been found in terrigenous deposits off Catalina Island [33], near Ceylon, and in the Dutch East Indies. They range in size from a few grams to several pounds, and they contain 62 to 77 percent BaSO*. Very little is yet known about marine barite deposits. Glauconite [/, 2, 3] is a green to brown potassium-iron sili- cate. It occurs as irregular grains between 0.1 and 1 millimeter in diameter. Glauconite is generally found on the continental shelf, but it is abundant only in rather restricted localities where it may be formed from plutonic and metamorphic rocks. Glau- conite contains 12 to 24 percent of Fe203, 1 to 10 percent of FeO, 3.5 to 10 percent of K20, and small amounts of other oxides. Its Si02 content is near 50 percent. Cassiterite is being dredged from the shallow water among the islands .of the Dutch East Indies. Tin deposits can be traced for a hundred miles off shore [34]. Although the manganese, iron, phosphate, barite, and tin deposits are known, their limits and thicknesses are not. Present methods of bottom sampling are not satisfactory. Loose material on the bottom, or material which is easily bitten into, may be sampled by dredges or snapper-type samplers. Unconsolidated material can be sampled with a Piggot tube or core sampler [35] which is lowered to the bottom and then driven into the bottom by an explosive charge contained in its head. The sampler is withdrawn with the core samples. This sampler, however, will not cut into rock satisfactorily. Only the core sampler will go into the bottom beyond about 20 feet. It is, however, too time-consuming for locating the boundaries of an ore body that may be exposed on the ocean bottom. Geophysical methods of exploration [36, 37] are well de- veloped and can possibly be used. There are four main tech- niques: the seismic, gravitational, magnetic, and electrical. A bed of ore with as much iron and manganese in it as is con- tained in manganese nodules, for example, should show anom- alies in the seismic and magnetic methods. The refraction tech- niques of the seismic method probably would be the most effec- tive. The depth of water is no hindrance, so that the shallow- water deposits as well as the deep-sea ones can be explored. The under-water deposits, except for tin, probably will not be mined during the next 25 years. Much of them, however, may be explored. References 1. Sverdrup, H. U., Johnson, M. W., and Fleming, R. H. "The Oceans." New York, Prentice Hall, Inc., 1942. 2. Clarke, F. W. "The Data of Geochemistry." Bull. 770, U. S. Geol. Survey, 1924. 3. Rankama, K., and Sahama, Th. G. "Geochemistry." Chicago, Uni- versity of Chicago Press, 1950. 4. Armstrong, E. F., and Miall, L. M. "Raw Materials from the Sea." Chemical Publishing Co., 1946. 5. Igelsrud, I., Thompson, T. G., and Zwicker, B. M. "The Boron Content of Sea Water and of Marine Organisms." Am. J. of Science, vol. 35, pp. 47-63, 1938. 6. Gorgy, S., Rakestraw, N. W., and Fox, D. L. "Arsenic in the Sea." /. Marine Research, vol. 7, pp. 22-23, 1948. 7. Nordell, E. "Water Treatment for Industrial and Other Uses." Reinhold Publishing Corp., 1950. 8. Campobasso, J. J. "Distillation of Sea Water by the Vapor-Com- pression Method." J. Am. Water Works Assoc., vol. 40, pp. 547- 552, 1948. 9. "Compression Distillation." Cleaver-Brooks Co., Milwaukee, Wis. 10. Chapman, O. L. "Our Water Supply—A National Problem." Columbus (Ohio) Dispatch, August 23, 1951. 11. Schraepfer, G. J., Johnson, A. S., Seidel, H. F., and Al-Hakim, B. L. "A Statistical Analysis of Water Works Data for 1945." /. Am Water Works Assoc., vol. 40, pp. 1067-1098, 1948. 12. Tressler, D. K., and Lemon, J. M. "Marine Products of Com- merce." Reinhold Publication Corp., 1951. 13. Skogseid, Anders. "Noen Derivater av Polystyrol og deres An- vendelse ved Studium as Ion-utvekslingsreaksjoner." Norges Tek- niske Hjskole, Ph. D. Thesis No. 25. Oslo, 1948. 14. Norsk Hydro-Elektrisk Kvaelstofaktieselskab. Norwegian Patents Nos. 72582 and 72583, September 29, 1947. 15. Same patentee. Norwegian Patents No. 56010, January 6, 1936; No. 59035, February 28, 1938; and No. 65071, October 18, 1948. 16. Mitsubishi Kaseikogyo K. K. Japanese Patent No. 175044, July 15, 1948. 17. Norsk Hydro-Elektrisk Kvaelstofaktieselskab. Norwegian Patent No. 74138, October 25, 1948. 18. Jack Thurston (American Cyanamid Co.). U. S. Patents No. 2440669, June 21, 1944; No. 2455282, November 30, 1948; and No. 2468471, April 26, 1949. 19. Mitsubishi Kaseikogyo K. K. Japanese Patent No. 175043, July 15, 1948. 20. Halperin, Z. "Chemicals from the Dead Sea." Chemical Engi- neering,vol. 54, pp. 94-96, June 1947. 21. Shigley, C. M. "Minerals from the Sea." Journal of Metals, vol. 3, January 1951. 22. Gloss, G. H. (Marine Magnesium Products Corp.), U. S. Patent No. 2458847, January 11, 1949. 23. Norsk Hydro-Elektrisk Kvaelstofaktieselskab. U. S. Patent No. 2258381, October 7, 1942; and British Patent No. 605694, July 29, 1948. 24. Noguchi Research Institute, Inc. Japanese Patent No. 174663, July 29, 1947. 25. Chapman, V. J. "Sea Weeds and Their Uses." London, Methuen and Co., Ltd., 1950. 26. Tseng, C. K. "Sea Weed Resources of North America and Their Utilization." Economic Botany, vol. 1, pp. 69-97, 1947. 27. Baker, T. T. "Photographic Emulsion Technique." American Photographic Publishing Co., Boston, 1948. 28. Clark, W. "Photograph by Infrared." New York, John Wiley and Sons, Inc., 2d ed., 1946. 29. Walker, F. T., and Smith, M. M. "Sea Weed Culture." Nature, vol. 162, pp. 31-32, 1948. 30. Gross, F., Raymont, J. E. G., Marshall, S. M., and Orr, A. P. "A Fish Farming Experiment in a Sea Loch." Nature, vol. 153, pp. 583-485, 1944. Page 125 31. Chatfield, H. W. "Varnish Constituents." London, Leonard Hill, Ltd., 1947. 32. Kirschenbauer, H. G. "Fats and Oils." Reinhold Publishing Corp., 1944. 33. Revelle, R., and Emery, K. O. "Barite Concretion from the Ocean Floor." Bull. Geol. Soc. Am., vol. 62, pp. 707-723, 1951. 34. Gonser, B. W. "The Role of Technology in the Future of Tin." Columbus, Ohio, Battelle Memorial Institute, pp. 3-4, 1951. 35. Piggot, C. S. "Apparatus to Secure Core Samples from the Ocean Bottom." Bull. Geol. Soc. Amer., vol. 47, pp. 675-684, 1936. 36. Dunstan, A. E., Nash, A. W., Brooks, B. T., and Tizard, Sir H. T. The Science of Petroleum, vol. 1, pp. 315-397. Oxford, Oxford University Press, 1938. 37. Bateman, A. M. "Economic Mineral Deposits." 2d ed. New York, John Wiley and Sons, Inc., 1950. References Elsewhere in This Report This volume: Improved Exploration for Minerals. Tasks and Opportunities. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Brison, R. J., and Carter, J. N. "Role of Technology in the Future of Potash Supplies." Sullivan, J. D., and Dehlinger, P. "Role of Technology in the Development of Discovery Techniques." Page 126 The Promise of Technology Chapter 10 The Technology of Forest Products* Intensified application of technology holds much promise for utilizing the present enormous volume of wood annually avail- able in the United States in the form of offal from logging and milling operations. Estimates of the volume of such material necessarily are crude and incomplete, but in 1944 the Forest Service figured that this volume amounted to some 6 billion cubic feet of wood—half of the total drain upon the forests for commodity use. Economic use of this entire volume is, of course, impossible. Nevertheless, developing every possible means of either reducing the offal or using it presents a continuing chal- lenge to technology. LOGGING AND SAWMILLING Technological problems and progress in timber harvesting, log transportation, and sawmilling are closely related to the timber supply situation. Operations in virgin timber present a different set of problems than operations in second-growth for- ests. This is primarily because of differences in the size of timber to be handled and the kind and quality of products yielded. But other factors bearing largely on the economic aspects of operation are also involved. The remaining virgin forests are relatively small in area but they are still frontier forests. They are for the most part in mountainous regions which have not yet been opened up for commercial operation. Second-growth forests are chiefly in sections where transportation and com- munity facilities are well established. Most of them are in small holdings, and timber of merchantable size is often in scattered or light stands. All these differences influence the size and char- acter of operations and the kind of equipment which may be used. Because timber standing in the forest does not lend itself readily to handling in flowable form, as is the case with oil or ore from a mine, mechanization has its limitations and a large amount of manual labor will always be required. Further than this, the large areas and the difficult terrain from which heavy products must be taken create serious engineering problems. These are magnified by the great variety of the timber itself. All these factors call for a high degree of specialized skill and *A summary of a report submitted to the Commission by the Forest Service, U. S. Department of Agriculture, July 1, 1951. sound judgment to avoid costly mistakes in the use of mecha- nical equipment. Equipment for timber harvesting and log transportation must have flexibility to a degree not equalled in most other industries. The savings in the use of equipment designed to handle large logs may be offset if small logs cannot also be handled efficiently. This is especially serious from a timber supply viewpoint when taking out the big stuff precludes recovery of the small. In the sawmills also the variety of species, size, and quality of logs create special engineering problems which make mechani- zation difficult. The value of the products cut from a log de- pends in no small degree on the manner in which it is sawed. At every stage of the process from the initial determination of log lengths through the turning of the log on the headsaw carriage, the thicknesses of the products cut, how they are han- dled in edging and trimming, and the care exercised in seasoning and storing, human judgment and action are as important as the mechanical processes. The many obstacles and limitations to mechanization in logging and sawmilling, however, emphasize the importance of technological progress to enable lumber to hold its position in competition with other materials. The search for means of reducing costs by improved methods of operation helps extend operations to forests hitherto economically inaccessible. It also helps open the market for small trees, inferior species, and low grade material. Reduced costs mean a reduction of waste. But by the same token the means for closer utilization may mean more complete liquidation of forest growing stock and more difficult problems of forest restoration. SPECIAL PROBLEMS FOR TECHNOLOGY The preceding discussion has pointed to a number of special problems which present a challenge to technology in timber harvesting, log transportation, and sawmilling. One set of problems relates to operations in the virgin timber of the West, particularly to the Douglas-fir, redwood, and pine types in which the trees are of large size. Inaccessibility is a major factor for much of the remaining virgin timber. Inaccessibility is not simply a question of dis- 995554°—52 10 Page 127 tance to market, but, perhaps even more importantly, of rough topography and expensive road construction. Another problem is the high proportion of defect in the over-mature timber. Segregation and recovery of usable mate- rial from this defective timber requires almost entirely new methods. This problem has long been an obstacle to forestry in the white pine region of north Idaho. The presence of defective timber has been a source of enormous waste. It looms as a critical factor for profitable operations in much of the remain- ing virgin forests of the Douglas-fir region in southwestern Oregon. Related to both inaccessibility and defect, perhaps the most important problem in virgin forest operations is the reduction of woods waste. The volume of intrinsically usable wood left in the forest after clear-cutting operations in the Douglas-fir region commonly averages 2,500 cubic feet per acre. Because the possi- bilities of reducing this waste seemed so remote, much of the material left after logging has not even been included in timber inventories. As means of using such material become feasible, estimates of available timber supply can be revised upward. Forest survey criteria now embrace practically all potentially usable material. Accordingly, new inventory data for the West interpret the timber supply in terms of widespread technological progress rather than prevalent standards of utilization. SECOND-GROWTH OPERATIONS Another set of problems is involved in second-growth forest operations. Most far-reaching in its implications is that of the small size of the great bulk of the forest land holdings wherever second-growth timber is predominant. Fifty-seven percent of all our commercial forest land is in holdings of less than 5,000 acres each. These holdings number almost 4% million. They average only 62 acres each. Mechanization—often dependent upon a large output for successful application—must be especially oriented to serve these small holdings. Speed and mobility of equipment for logging must be combined with ways and means of concentrating sufficient volume at fixed locations for efficient processing. Small size of timber in second-growth operations also calls for a special technology. This important field of work has been largely neglected but in recent years has been receiving increas- ing attention, especially in eastern pulpwood operations. Im- provement of methods for handling small timber can greatly aid intensive forest management by facilitating the use of trees cut in thinning and other cultural operations. Related to the problem of small size is that of poor form and poor quality. Large acreages of cut-over land particularly in the hardwood types now support trees unsuited for sawlogs or other products where straightness and freedom from serious defect are important. Such lands can be restored to economic productivity only by finding practical ways and means of util- izing this inferior growth. In some types the problem is an- alogous to that of defective virgin timber—creaming of the best timber in the past has left much of the land in possession of cull and presently worthless trees which preclude satisfactory growth of a new timber crop. In other types the problem in- volves crooked, bushy, or otherwise deformed trees of small size or weed species which have either come in after clear- cutting and fire or sprung up on abandoned fields and pastures. Another special problem in second-growth operations is that of the small sawmill. Because the available timber is scattered and so largely in small holdings, a large part of the output in second-growth regions is from portable mills. While there has been some improvement in their operations, the portable mills are, as a rule, wasteful. Equipment is frequently inadequate or poorly handled. Thick saws are used and sawing is often inac- curate. Seldom is any provision made for grading or finishing, and unnecessary losses occur in seasoning. Technology can con- tribute to efficient processing of second-growth timber by im- proving portable mill design and operating practices and by developing equipment and practices for permanent mills which will do the job better and serve the community better than portable mills. THE ROLE OF FOREST MANAGEMENT The technology of timber harvesting, log transportation and sawmilling has been greatly influenced by the transition from a virgin timber economy to major dependence upon second growth for timber supply. In regions and localities where the virgin timber was cut out, the industry had to adapt itself to the use of small trees and to woods operations of small size. The modern small portable mill is in itself a technological response to this need. It gained its present place as a practical device for harvesting timber under conditions which would not sustain the larger mills and under which the larger mills could no longer maintain a cost advantage. The transition was made in region after region with little or no regard for the needs of timber growing and no consideration of the potential impact of good forest management on the industry. Now, however, the situation is changing. Recognition that the future of the industry depends upon timber grown as a crop focuses attention on how technological progress and prospect affect forestry practice and, in turn, how good forest manage- ment may influence the trend in technology. Looking backward, the major result of technological progress in timber harvesting, log transportation, and sawmilling may be summed up as better utilization. Profitable harvesting of mate- rial not previously usable is important to forestry whether in second-growth or virgin forest areas. It makes possible partial cutting operations for stand improvement. It means that felling areas may be left in better condition for restocking than might otherwise be possible. It means that fire hazard on cut-over areas may be greatly reduced. Perhaps more importantly, tech- nological improvements have been a big factor in changing the attitude of commercial timber owners and operators toward forestry. Such developments have pointed the way toward less costly methods and less dependence on manual labor. Linked with higher prices they have given assurance that adequate margins can be maintained in the industry when timber is grown as a crop. Looking forward, we need to ask how forestry will affect technology. What kind of timber will the industry have? What kind of products will be produced? What kind of mills will be needed? All these questions will influence the trend in tech- nology for the future. They cannot be answered with finality but a number of things seem clear. Widespread application of good forest management will tend to reduce the distance over which logs will have to be hauled. Page 128 Mill capacity will be increasingly geared to the productive capacity of tributary forests. This will tend to assure adequate timber supplies within easy hauling distance. Another long-range result of the widespread application of good forest management will be the possibility of confining harvesting operations pretty largely to the more accessible lands, the better sites and the terrain that is easy to log. This is so because, with intensive management of the more productive lands, the nation can grow all the timber it is likely to use with- out taking much from the poorest land or the land that is most difficult to operate. This means a reversal of the spiral of in- creasing costs which has plagued the industry as it has pushed the margin of available timber further and further back into the mountains and into the regions which have been last to attract development. Forest management will also influence future technology in that it implies control over the size of timber which will be grown. The benefits of technology have been partly offset in the past by increasing unit costs inherent in the rapid decline of average size of the trees and logs handled as big timber in any locality became scarce. In long-range forest management timber will be grown to optimum size for both technical and economic recovery. Harvesting and conversion will not be shackled to timber of marginal size and quality but will be geared to material of better and more uniform size and quality than has been generally available in second-growth operations to date. Technology will be directed more to control of quality than it is now. Reduction of costs will receive less emphasis. The stability of timber supply under good forest management will permit the application of more intensive methods in the planning of timber harvesting. This in turn will involve many engineering problems and offer wider horizons for technology. An assured timber supply also points toward permanent mill installations rather than toward dominant use of portable mills. An assured timber supply permits lar^e investment in mills and equipment. Here too, the result is to broaden the horizons for technological progress. PORTABLE MILLS AS A LOGGING TOOL The portable mills are adapted primarily to the production of standard items of ungraded sheathing and framing lumber. They are not suited to much grade separation nor to the pro- duction of finish or factory-quality lumber. The small mills operate at a good profit when lumber prices are high; they are the first to shut down when prices decline. From the consumer's point of view, the intermittent charac- ter of small-mill production acts as a flywheel on short-term fluctuations of prices and supplies. But from the point of view of forest management for a sustained timber supply, the trend will undoubtedly be to limit the role of the portable mill in favor of larger establishments at fixed locations where the best in new technological developments can be brought in to facili- tate getting the most out of the timber and putting each class of material to its best use. Such permanent establishments, however, need not be large in terms of the units which have characterized operations of the past 50 years in virgin timber. They will be geared to the productive capacity of tributary forest lands, locality by locality, and will be a strong and stable element in the economy of many rural communities. The small mills will be used more than at present as a logging tool—to break down at the logging area logs which are partially good and partially defective so that the good portion can be taken to the permanent plant at the main conversion point for finishing, and the cull, too costly to trans- port, left in the woods. They will also continue to have a place in second-growth operations used increasingly, as in the South at present, as feeders for concentration yards handling suf- ficient quantities of lumber to permit grading, sorting, season- ing, kiln drying, and finishing with the most modern equipment and technological practices. As forestry becomes generally applied, timber harvesting and manufacturing practices will be developed to serve good forest management rather than simply to facilitate the liquidation of a resource. And, as timber growing becomes the basic objective of forest land ownership, we will get away from the tendency— all too prevalent in the past—for technological developments to be used as a means of speeding up or intensifying the liqui- dation of our forest capital or growing stock. Because of the increasing importance of timber harvested from the millions of small holdings and from publicly owned forests, public-agency leadership and help is needed more than in the past to give proper orientation and stimulation to tech- nological progress in these fields. Some progress has already been made and more is on the way. Trucks and tractors, power chain saws and mobile loaders are already in fairly common use. Mobile small mills, electric and hydraulic controls for feeding logs through the headsaw, and other sawing improvements—such as the duo-kerf saw- tooth design—already permit more efficient, more profitable operations. In our larger mills, valuable savings already result from the integration of productive processes. Sawmills, pulp- mills, veneer-wood and plywood plants, wood distillation plants, and other productive manufacturing operations (such as fuel briquetting and small-dimension stock making) are linked together to take advantage of the coordinated use of supplies and of the possibilities of utilizing byproducts that otherwise would be wasted. PROCESSING AND USE OF PRODUCTS There is still much room for improvement in the processing and utilization of forest products. Technology has already had—and surely will continue to have—its impact on lumber cutting, lumber seasoning, secondary manufacturing, wood gluing and laminating, wood preservation, wood modification, wood distillation, and on obtaining wood derivatives from wood components. Seasoning of wood—drying it to bring its moisture content into harmony with the atmospheric conditions under which it will be used—is normally accomplished either by open-air or kiln-drying processes. Various types of kilns for wood sea- soning exist. These have been classified as compartment and progressive kilns; as natural-circulation and force-circulation kilns; and as furnace-type dry kilns with or without humidifica- tion systems. Wood can be seasoned by submergence in hydrophobic liq- uids or vapors, in super-heated steam, or in water-miscible sol- Page 129 vents. Seasoning also can be accomplished by subjecting woods alternately to a heating medium and a vacuum, or by electrical processes, such as infrared radiation and dielectric heating. Thus far, only the air- and kiln-drying processes are used com- mercially for lumber but vapor seasoning is being used for crossties. Correct commercial seasoning requires proper segregation of lumber according to variations in the drying characteristics of the lumber. It requires proper piling of lumber to minimize both warping and interference with air circulation. It calls for proper technology to control or avert such common seasoning defects as end-splits, and end- and surface-checks, honey- combing, collapse, and chemical stain. SECONDARY MANUFACTURING AND FABRICATION As the remaining virgin forests give way to new forest crops throughout the nation, fullest structural utilization of avail- able timber becomes increasingly important. Only in this way can conservation of material be practiced and forest resources made to go farther and serve mankind better. Proper utili- zation of wood as an engineering material depends on a knowledge of its properties. Thus, it is apparent that before any timber supplies can be used intelligently, the mechanical and related physical properties of these woods must be deter- mined. In recognition of this fact, a fundamental precept in timber-mechanics research is the evaluation of the basic- strength properties and factors that affect these properties for small clear specimens of native woods. Based on the results obtained in such investigations, it is possible to select a species for any specific-purpose use; for example, one that is strong and stiff to provide structural elements as joists, beams, and columns; one that is hard and abrasion resistant for use in floors or where mechanical wear is a factor; or one that is strong for its weight as a basic source of wood to be made into structural elements for gliders and aircraft. The fundamental strength data are also the basis for the establishment of working stresses for structural elements wherein they must be combined with information on the effect of defects, rate and duration of load and factor of safety. They serve as the foundation for establishing design loads for fastenings, allowable stresses in plywood and laminated wood, and as a base of comparison for the effect of subsequent treat- ments or conditions of loading. Research to the present has resulted in evaluation of the strength properties of some 175 of the commercially important tree species of the 800 tree species in the United States. As the supplies of old growth or preferred species diminish, it becomes necessary to extend the investigations to ascertain the prop- erties of lesser used or less prominent woods and second-growth species to serve as substitute materials. In many of these in- stances the data obtained has resulted in refutation of previously conceived opinions and prejudices on the value of a species and a true evaluation of its characteristics that makes it equal in value or perhaps even superior to the species for which it is proposed as a substitute. Such research and investigations of the basic strength properties must continue if each wood is to find its proper place in the national economy. TESTING PROCEDURES Testing procedures are under continuous scrutiny to deter- mine wherein they may be improved, to determine more ac- curately the desired properties, or to reduce required manpower and testing time. This not only involves improvements in test- ing equipment but development of newer types of specimens as well. As an example of the latter, a new type of specimen has been developed to determine the tensile strength of wood; it permits a reduction in testing time from 15 to 3 minutes per test without loss in accuracy of results or type of data obtained. In addition, new testing procedures are being developed to de- termine the effects of particular loading procedures or condi- tions of treatment and for new evaluation of a particular prop- erty of the material. In the last few decades, this has included development of methods to determine the strength of wood under repeated load- ings, such as in the structural elements of railroad trestles and bridges, of which there are more than 2,000 miles on class I railroads alone; development of a simple method to determine modulus of elasticity or stiffness in shear, which is an important criterion in plywood design; the development of a machine to measure the toughness or shock resistance of wood as a device to aid in the selection of high-strength wood for specific-purpose use from matches to aircraft spars; a method by which a soap film can be used to evaluate the torsional or twisting strength of structural elements; and the development of special sim- ulated sendee tests to measure performance of various wood items from doors to skis and from cargo-aircraft floors to air- craft-carrier decking. Presently under way are tests to evaluate wood's character- istics under conditions from — 70 to 180 degrees Fahrenheit within a wide range of moisture content. Results of these tests may help predict the performance of wood under extremes of arctic cold or tropic heat as may be required for the Nation's security. Studies also are being made on methods of nondestruc- tive testing whereby the properties of individual members could be quickly determined as a method of more satisfactorily se- lecting wood for its maximum capabilities. New metalectric gages and automatic-recording, stress- and strain-measuring in- struments are being used and studied to determine their value in the wood-testing field. STANDARDIZATION EFFORTS Competent selection of wood for specific-purpose uses or substitution of one species for another is possible only if the properties obtained through test can be compared directly. This means that the testing procedures and test specimens used to obtain the basic properties of wood must be standardized throughout the wood-testing field. Much has been accomplished in the way of standardization in the United States through the work of producers, consumers, and other interested groups that has resulted in specifications for methods of testing wood, plywood, and wood-base and fiber-base materials. These speci- fications are published by the American Society for Testing Materials. Standardization upon an international level is progressing through work of the Subcommittee on Mechanical Wood Tech- nology of the Food and Agriculture Organization of the United Page 130 Nations. Such standardization will greatly facilitate the proper and economical use of data collected in other countries on for- eign species and reduce the amount of testing that would have to be done on foreign woods before they could be economically used to supplement native species that are in short supply. PHOTOELASTIC ANALYSIS Photoelastic analysis is a new research tool for evaluating the effect of stress concentrations and defects in wood. Such analysis makes use of models that are constructed of suitable transparent plastics and are loaded in a manner similar to their wood counterparts. As the models are being loaded and the plastic material of which they are made is strained, polarized light is passed through the model. The polarized light is sepa- rated into components by the strains in the plastic model and emerges from the model in a pattern of light and dark bands when light of one color is used and as a series of bands colored like rainbows when white light is used. The pattern location and number of the light and dark bands furnish the data by which the stresses may be calculated. Normally the model is photographed so that the light pattern can be analyzed in more detail. The plastics of which the models are made have the same properties in all directions and are like metals in this respect. They differ from wood whose properties differ in the tangential, radial, and longitudinal directions, and this has retarded use of the photoelastic method of analysis of models of wood ele- ments to some extent. Nevertheless, the photoelastic technique has been successfully applied to the solution of specific prob- lems in forest products research. For example, in timber struc- tures the fastenings used to connect the components cause a concentration of stress on the bearing surfaces. These stresses cannot be measured by means of ordinary gages, nor can they be measured in wood by photoelastic methods. By making use of an elementary principle of physics that states every force has an equal and oppositely directed reaction, the strains in a plastic model of the fastening, loaded as when used in a wood member, can be determined, and the forces in contact with the wood surfaces can be obtained. "sandwich construction" There has been a growing interest in the possibilities of lightweight composite or sandwich constructions for many applications. The name "sandwich construction" is given to a great variety of lightweight products constructed by gluing relatively strong facings over low-density cores. While sand- wich construction embraces the use of a wide variety of mate- rials, there are many possible applications involving wood and wood-base materials for both facings and cores, and of combining them with other materials to obtain constructions with special properties and applications. As with laminated-wood construction, it is the great improve- ments in adhesives that have opened sandwich construction to not yet fully realized possibilities. Available as well as essential also for this development are a great variety of materials suitable for facings and cores, and the results of research to pro- vide the necessary design criteria. Among materials that may be used for facings are wood, plywood, modified wood, fiber prod- ucts, and fabrics; and for cores, wood, plywood, fiberboard, and paper honeycomb. The possibility of bonding these and other materials in unlimited combinations enables the designer to employ a sandwich construction to take advantage of the par- ticular properties of each material and use it in its most efficient form. One of the early types of sandwich construction used was the combination of metal facings over a plywood core. Already well known is the success obtained with sandwich construction tech- nique in the all-wood Mosquito bomber developed by the Brit- ish during the Second World War. In this airplane birch ply- wood facings were glued to a low-density balsa wood core to afford a lightweight construction of considerable thickness and of relatively high strength and stiffness. Metal-covered balsa, comprising aluminum facings bonded to an end-grain balsa core, is being currently employed in air- craft design. Still another type of sandwich consists of a paper cellular honeycomb core with facings of plywood, fiberboard, wood, or other materials. Low cost, lightness, and excellent strength and stiffness are attained. Much developmental work is under way on applications of this type of sandwich. Impreg- nating the paper for cellular honeycomb cores with resin greatly increases strength and water resistance, and greatly broadens the possibilities of use under adverse conditions of exposure. Present and potential uses for sandwich construction include airplane fuselages and wings, airplane flooring, doors, bulk- heads, ailerons, and flaps; walls, ceilings, and partitions in railway cars; hatches, partitions, and bulkheads in boats; and doors, frames, wall panels, and floor panels in houses. It is obvious that it costs money to transport excess weight, and it would appear that the transport industries should be among the first to take advantage of the possibilities of sand- wich construction. The aircraft industry was among the first to explore and develop structural sandwich applications and the principles of stressed-skin construction. The principal advantages of sandwich construction are the efficient and economical use of materials, the substitution of materials, and savings in weight that are often important. For example, paper cellular honeycomb cores employing but a small amount of material may be used to replace solid wood in the cores of flush doors. Comparable applications are the use of paper honeycomb cores for prefabricated wall panels for building construction with saving in material and weight. BUILDING FIBERBOARDS Production of building fiberboards in the United States has increased by more than 10 times during the past 10 years. Not only have new products been developed, but old ones have been improved to the point where they are extensively used in the building of homes and for specialized uses in the manufacturing and construction fields. The boards are manufactured in a wide range of sizes and densities with each product tailored to a specific end utilization. These fiberboards range in density from about 2 to 90 pounds per cubic foot. The lightest ones, semirigid insulation boards, have no strength requirement beyond that necessary to sustain their form. Rigid or structural insulation boards weighing from 15 to 25 pounds per cubic foot find uses as plaster base, roof insulation, and sheating for houses. The latter may be impreg- nated or coated to provide for higher strength when wet and for Page 131 greater moisture resistance. Boards in this weight category are also used in interiors as wall and ceiling coverings. Those used for the latter purpose may be specially fabricated to give supe- rior acoustical properties. Interior finish boards also may be obtained in densities rang- ing from 25 to 55 pounds per cubic foot, which provide for greater resistance to scuffing and other surface damage. Hard- boards or super hardboards are the dense fiberboards. They are manufactured in thicknesses of one-eighth to five-sixteenths inch, normally with one smooth surface which may be em- bossed or scored to provide a particular architectural effect. They find use as wall and floor coverings, door panels, counter tops, in the furniture industry, and in the heaviest grades as diestock and electric panel materials. Most of the boards are composed of fibers of vegetable origin to which sizing, impregnants, and binders may be added in the process of manufacture. Most of the wood fibers come from logs cut for the purpose, although fibers from edgings, cull logs, and certain sawmill wastes can also be used. These boards are formed by paper-making methods and are classed as wet-formed boards. A recent development that uses sawdust, shavings, and other millwork waste as its major components is the so-called dry- formed particle board. In this type of board, the waste mate- rials, which otherwise may have been burned, are bonded together under heat and pressure with a synthetic resin adhesive. The boards are in the intermediate or hardboard class and exhibit many excellent properties. The greatest present deterrent to their greater production is the high cost and short supply of synthetic resin adhesives. One of the factors that has limited the use of interior fiber- boards to some extent has been their relatively low fire resist- ance and their high flame-spread potential. In the past few years, boards have been produced that are more fire-resistant and are markedly effective in retarding flame spread. Surface coatings are also available that can be used to retard flame spread and therefore stimulate the more widespread use of interior fiberboards. Of recent development also is the decay- resistant board to be used where conditions favorable to decay are encountered. While these two boards are relatively new and need to be tested in service, it is very likely that boards embodying these desired characteristics will be readily avail- able in the near future. BENDING Bending is an important method for producing curved parts from wood and is employed in the manufacture of chairs; furniture; boats and ships; agricultural implements; sporting goods; and handles for tools, canes, and umbrellas. The process consists essentially in treating a straight piece of wood so that it becomes softened or limber, bending it to the curved shape, and drying it so that it retains its curved shape. Curved parts can be produced by sawing from solid wood, but bending is probably cheaper, less wasteful of material, and is more efficient from the standpoint of the strength of the finished part. There is considerable breakage in commercial bending operations, however, resulting in much loss of material. Since bending stock is of high quality and is obtained from a limited number of species, the loss from breakage causes an unnecessary drain on the supply of certain types of timber. The softening or plasticizing treatment, given prior to actus bending, consists generally of steaming or soaking the wooi in boiling water. The steaming is often done at high pressur in expensive retorts. Recent studies at the U. S. Forest Product Laboratory demonstrated that steaming at atmospheric pres sure was a better plasticizing treatment than steaming at hig pressures. The Laboratory also investigated treatment wit certain chemicals, but found it to be generally less effectiv than steaming or boiling. Waste develops in bending chiefly through breakage durin actual bending or checking and splitting during the drying an< fixing process. It can be largely eliminated by proper selectior seasoning, preparing, and plasticizing of the bending stock, th use of good bending technique, and a suitable drying proces after bending. Of prime importance is the application of sui ficient end pressure during bending. THE ART OF GLUING Gluing progressively is playing a more important part in th utilization of wood and its fabrication into useful product The transition from a supply of virgin timber to second growt has increased the proportion of small sizes and low-grade mate rial with which the fabricator must work and from which h must produce pieces of desired size. The use of lower grade requires the elimination of more defects and subsequentl more gluing of the smaller material. Gluing is an important step in most of the secondary wooc using industries, comprising several thousand individual plant and is finding a place in the production of even the primar products such as boards and dimensions. One large lumbe manufacturer is presently gluing pieces end to end to produc siding and 2 by 4 dimension stock and gluing narrow piece side by side to produce wider boards. Gluing has also increase substantially in the assembly of parts into finished product Gluing is the most efficient method available for makin most joints in wood. With glues of suitable quality and prope gluing techniques, joints are readily produced equal in strengt to that of the wood. Within the past few years, marked advances have been mad in the development of adhesives for gluing wood to metal, woo to plastics, metal to metal, and plastics to plastics. Many c these glues are essentially combinations of thermosetting resini such as phenol-resin, and thermo-plastic resins or elastomer: such as vinyl resins and synthetic rubber. These adhesive have made possible the development of new and importar types of structures and products. Among these new producl are metal-faced plywood panels, which have found use in sue applications as truck and bus bodies. Each major development in the field of woodworking glue: therefore, has had an effect upon the utilization of wood. I 1900, glue was used mainly in non-water-resistant panels, la) ing of figured veneer, and furniture joinery. By 1950, a ver large and important plywood industry had developed, pr marily because the advances in the formulation of wood-worl ing adhesives made possible the production of structural an all-purpose plywood, suitable for use either in the interior c on the exteriors in any climate. The same advances in glue have made possible a growing laminating industry in whic the length, width, and thickness of members are limited onl by practical and economic considerations, and which are irr Page 132 possible to fabricate from solid lumber; and sandwich, wood- plastic-metal combinations that promise to find growing and increasing use in many fields of application. GLUING TECHNIQUE The successful fabrication of acceptable glued wood products depends both upon the availability of suitable glues and upon the knowledge of how to use them. In the daily commercial production of glued wood items, defective and unserviceable glue bonds result more often from faulty gluing technique than from definite defects in the glue itself. Requirements for a high degree of reliability in the glue joints of laminated propellers and spars for aircraft were responsible for initiating some of the early work on gluing technique. From this work the fundamental principles of good gluing were developed for animal, casein, and starch glues. The im- portance of uniform and properly selected moisture content of stock was developed. The smoothness of surfacing required and the importance of good mechanical fit of the faying surfaces were demonstrated. The relation of grain direction to warping tendencies was investigated. Fundamental relations between viscosity of glue and the gluing pressure were developed. Systems were developed by which the causes of defects in glue joints could often be detected by examination of a broken-joint specimen. As each new type of glue was offered to the woodworking industry, studies of the use characteristics were initiated so that the woodworker could make full use of the desirable character- istics of the glue and avoid unnecessary waste of material because of faulty products. The introduction of synthetic-resin glues offered new prob- lems and opportunities in gluing techniques. Since the setting of the synthetic-resin glues can be accelerated by heat, very short curing cycles were permissible whenever the glue line could be heated conveniently. For thin plywood, the hot presses serve admirably because the glue line is close to the source of heat. In certain gluing operations as in the edge gluing of core stock, curing synthetic resins by means of high-frequency cir- cuits has provided a method of maintaining high production rates. For the bonding of heavy laminated timbers for use in weather exposure the most satisfactory technique at present seems to involve the use of a resorcinol or phenol-resorcinol glue and the curing of the joints while gluing presure is maintained in kilns where temperature, humidity, and circulation are under good control. GLUED-LAMINATED CONSTRUCTION Glued-laminated construction had its origin in Europe some decades ago; its advent in the United States directed atten- tion of architects and engineers to a new product admirably adapted to a wide variety of building and construction uses and in effect launched a new industry. Factors that favored the ready acceptance of laminated construction, aside from its unlimited architectural possibilities, were the significant im- provements in water-resistant and waterproof glues and the development through research of the necessary engineering design data. The term "glued-laminated construction" is applied to members glued up from smaller pieces of wood, either straight or in curved form, with the grain of all the laminations in the direction of the length of the member. It is thus basically different from plywood in which the grain direction of adjacent plies is usually at right angles. The lamination may be of any thickness or length, of narrow pieces glued edge to edge to make wide ones, of the same or different wood species, or of pieces bent to curved form during gluing—all of which afford infinite choice in design, subject only to economic factors in- volved in production and use. The first research centered around the development of suit- able laminating techniques and of engineering design data for glued-laminated arches. It included tests of structural units to check such factors as design formulas and working stresses and the effect on strength of curvature, scarf joints, and the presence of knots in the inner laminations. It also included the develop- ment of suitable gluing techniques, of information on the effect of moisture content, surfacing, grain direction, species, and density upon the quality of the glue bonds, and of information on the effect of storage and use conditions on the stability of the members. The results of this research were presented in part in U. S. Department of Agriculture Technical Bulletin No. 691, "The Glued Laminated Wooden Arch," which pro- vided the technical data necessary for use of laminated arches on a sound engineering basis. METHODS AND MATERIALS OF WOOD PRESERVATION Wood preservation becomes more and more desirable as our forest resources become depleted and degraded. Preservation involves counteracting wood-deteriorating factors such as the decay fungi, the molding-and-staining fungi, and wood-boring insects, and the wood-boring marine organisms. It involves also coping with weathering, mechanical wear, breakage, and fire. Continuous research is improving protective materials and methods. Numerous preservative chemicals have been devel- oped. In addition to coal tar creosote—the principal preserva- tive used to protect wood from destroying fungi, insects, and marine borers—there are also other oil-borne and several water-borne preservatives. These include pentachlorophenol, chromated zinc chloride, copperized chromated zinc chloride, Wolman salts (Tanalith), Celcure, Chemonite, Greensalt, and Osmose preservative. There are fire-retarding chemicals containing substantial amounts of ammonium salts (which are especially effective in resisting fire) and stain-control chemicals, such as sodium pentachlorophenate and ethyl-mercury-phosphate. To retard mechanical wear on floors, there are resins and floor seals, waxes, and varnishes. The use of treated wood by public utilities, a common prac- tice since 1900, extended the life of railway ties and poles five- fold. Savings during the past half-century have approximated 1 billion cubic feet of wood products annually. In 1950 alone, the wood-preserving industry treated almost 284 million cubic feet of wood products, of which crossties (38.6 percent) and poles (37.2 percent) accounted for three-fourths of the total. Lumber (9.3 percent), piles (4.3 percent), switch ties (3.2 percent), fence posts (2.9 percent), timbers (2 percent), wood blocks (0.9 percent), cross arms (0.6 percent) and other items accounted for the rest. Page 133 Railroads, telephone companies, and power companies thus far have benefited most from wood-preservation activities which have reflected themselves in generous savings of money as well as of materials to these large companies. There is, however, the need for further progress by opening the channels of distribu- tion of treated woods so that they can become available at reasonable prices to home-owners and farmers. ECONOMICS OF WOOD PRESERVATION In the early years of railroading and pole-line construction, dependence was placed on the use of naturally durable wood without preservative treatment. Such material was plentiful and costs were low. With the wide extension of the railroads and pole lines, naturally durable wood became less available and costs increased, while the amounts of wood required expanded rapidly. Some practical method of extending the life of railway ties, bridges, pole lines, and other structures involving large amounts of wood exposed to rapid deterioration became im- perative. The use of wood preservatives began in a small way early in the nineteenth century. By 1900, considerable quanti- ties of wood were being treated, mostly for railroad use. Since 1900, the use of treated wood by public utilities has become common practice, although many examples of the use of un- treated or poorly treated wood can be found. It is only by the use of preservative treatments that the rail- roads and other public utilities have been able to continue the use of wood. Without these treatments, the short life of the un- treated wood now generally available would require complete renewal of the ties, poles, and wood bridges in the country every few years. This would require more wood than could be provided, under present conditions, and the cost of such fre- quent renewals would be far too high to be borne. Preservative treatment, by extending the life of railway ties from 5 or 6 years to 30 years or more and of poles from 5 or 10 years to more than 30 years, makes possible the operation of railways and pole lines with one-fourth or less of the amount of wood that would be required if used untreated. A practical illustration of the effectiveness of wood preser- vation in saving timber is the fact that an average of 262 new ties per mile of railway track was required for the 136,000 miles of track reported on in 1911. In 1949, with 330,000 miles reported on> an average of only 91 ties per mile was re- quired, and for the 5 years ending in 1949 the average was only 112 ties per mile per year. This figure can be bettered by further improvements in tie treatment and protection practices. Putting it another way, the total amount of wood reported treated from 1909 to 1950 inclusive was equivalent to about 9y2 billion cubic feet, thus having its serviceable life increased by three to five times. Assuming that the average wood lasted or will last four times as long as it would under the same con- ditions without preservative treatment, the treated wood has given or will give the service that would have required some 38 billion cubic feet of untreated wood. This is equivalent to an annual saving of approximately 1 billion cubic feet of wood products. The saving in money through wood preservation has been of a magnitude similar to that in timber savings. The Atchison, Topeka & Santa Fe R. R., for example, over a 52-year period that it has used treated crossties has reduced annual renewals from 336 per mile to 85 per mile. This has resulted in an esti- mated total saving of 444 million ties, equivalent to 16.56 bil- lion board feet of lumber, valued at $414,000,000 on the basis of $25 per thousand board feet (assumed as an average cost for the 52-year period). On an assumed average wage basis of 50 cents per hour, the total saving in labor costs on crosstie re- placements, through the use of treated crossties, is estimated to be $222,000,000. This single railroad, with only approximately 5 percent of the total United States mileage of maintained track, has shown a total estimated 52-year saving of $636,000,000, equivalent to $33,500 per day, through the use of treated cross- ties. On the basis of current lumber and labor costs, these figures on saving would be substantially greater. The wood-preserving industry is well equipped with plant capacity to treat considerably more wood than has ever been treated in a single year. The 213 pressure-treating plants of the United States in 1950 were estimated to have a total cylinder treating capacity of approximately 1 million cubic feet. De- pending on the kind of wood and its condition, some plants treat several charges a day in their cylinders, while others may require more than a day to treat a single charge. On the basis of only one charge per day per pressure cylinder, this would indicate a total pressure-plant capacity of 365 million cubic feet per year. This is a greater quantity of material than has been treated in any single year by pressure and nonpressure plants in the United States. The wood-preserving industry has experienced temporary shortages of preservatives, particularly during periods of the First and Second World Wars when imports of coal-tar creosote were cut off. New preservatives have been developed in recent years that, for many uses, can be substituted for coal-tar creo- sote when adequate supplies of that preservative are not avail- able. These new preservatives, however, contain such com- pounds as those of copper, zinc, and chromium, which may or may not be in short supply in time of war. Likewise penta- chlorophenol, the manufacture of which is dependent upon chlorine and benzene, may also be in short supply in wartime. The general supply of preservatives for peacetime requirements, however, appears adequate for some time to come. MODIFYING WOOD FOR SPECIAL USES To the problems of wood-treatment involved in developing resistance to decay and fire, technology has additional problems of treatment to modify other properties. Changes in the dimen- sions of wood resulting from seasonal changes in relative hu- midity—in other words, wood swelling and shrinking—create problems for timber technology. External chemical coatings have reduced the rate but do not prevent changes in size. Swell- ing and shrinking can be reduced by depositing bulking agents within the wood-cells to keep them in a permanently swollen state. Another method involves chemically replacing the hydroxyl groups of the cellulose and the lignin of woods with other groups less likely to absorb water. Or chemical cross- bridges may be formed between the wood's structural units. Resins are deposited within cell walls by using water-soluble phenol-formaldehyde-resin-forming systems, which are both effective and economical. Other systems of urea-formaldehyde- dimethylolurea, resorcinol-formaldehyde, and malamine-form- Page 134 aldehyde, as well as furfural-aniline and furfuryl-alcohol sys- tems, are also possible, but they are either less effective or more expensive. STABILIZING DIMENSIONS Since dimension-stabilizing treatments require that all the fibers of a wood be treated in order to be really effective, large pieces of solid wood cannot be treated advantageously. Most resin treatments of wood have been confined to the veneers from which thicker parallel- or cross-laminated panels are fabricated. Wood treated with water-soluble phenolic resins and dried and set without applying pressure is known as impreg. When phenolic-resin-treated wood is compressed and the resin is almost simultaneously set in a hot press, the product is known as compreg. Pressures of about 1,000 pounds per square inch are required to make fully compressed compreg. This pressure reduces the thickness of the wood to one-half or one-third of its original value, with such a resultant hardness that subsequent machining of compreg requires metal-working tools. During its formation, however, compreg can be molded to shape or pressed into flat sheets. It has been used for airplane propellers, antenna masts, spar and connector plates, refrigerator blocks for ships, and tooling dies and jigs. As dies for the fabrication of metal parts of aluminum, compreg has proven superior to metals or other plastics. Impreg, too, has been, used for ship decking and has proven to be highly splinter-resistant. A com- pressed wood containing no resin has also been developed, known as staypak, which is twice as tough as compreg and has higher tensile and flexual properties. It is inferior to compreg, however, under weathering conditions for outdoor use and under exposure to water. The highest dimensional stabilization thus far attained by any treatment has been with acetylated wood. This wood, com- bining lightness, toughness, and high dimensional stability, was developed toward the close of the Second World War. It is still waiting for commercial manufacture which may well be antici- pated as it, and other modified woods, prove their suitability for several exacting industrial and military uses. Other treatments for stabilizing the dimensions of wood have been experimented with to reduce the large amounts of chem- icals involved in the previous methods. Formaldehyde vapor, generated from paraformaldehyde in the presence of a volatile mineral-acid-catalyst, was found to reduce the swelling and shinking of wood to one-third of normal with as little as 3 per- cent of take-up of the chemical in a formaldehyde cross-bridg- ing reaction. Unfortunately, high acidity, which is needed to catalyze the reaction, causes hydrolysis of the wood fiber and severe embrittlement of the wood. This brittleness has discour- aged extensive commercial use. THE PULP AND PAPER INDUSTRY The fiber in wood is the base of the Nation's sixth largest in- dustry from the standpoint of capital invested—the pulp, paper, and fiberboard industry. All previous production records in the industry were shat- tered in 1950. Consumption of wood pulp rose from 10.8 in 1945 to 16.5 million tons, about 15 percent of the total volume of timber cut. Imports increased from 1.8 to 2.4 million tons. New semi-chemical processes for pulping wood will make possible the greater economical use of hardwoods. Recent de- velopments in bleaching semi-chemical pulps and the accumu- lation of information on a wide variety of hardwoods will facil- itate the use of the semi-chemical processes for making higher grades of paper like book, bond, glassine, and specialty papers. Cold-soda-semichemical-pulping will permit a yield equal in quantity and stronger in quality than the groundwood pulping process. Pretreatment of hardwood chemically before ground- wood pulping cannot only increase the strength of the pulp, but can save much energy now consumed in grinding. This is of particular interest in any region where an established ground- wood-pulping industry is confronted with a rapidly diminishing softwood supply. Traditional sulfite pulping processes discharge waste liquors which create water pollution problems. There are other proc- esses available, using recoverable bases, such as magnesia, soda, and ammonia. These are currently expensive, however, and their commercial use under present economic conditions is slow in spreading. A changed economic situation may stimulate sig- nificant improvements in pulping procedures in which the newer bases will be more extensively used. Moreover, the dis- solved solids in spent liquor are a storehouse of undeveloped products. The enormous amounts of chemical raw materials in pulp- mill spent liquors that is now wasted or consumed as fuel should stimulate a broad and basic research effort to utilize the re- source now being lost. Such an effort can result in minimizing waste pollution, in providing a much greater economic return from available wood resources, and in providing a large num- ber of chemicals and products. Already, the list of byproducts from spent liquors, made on a commercial or experimental basis, includes plastics, molding powders, vanillin, tanning agents, water treatment chemicals, dispersing agents, linoleum adhesives, binder for foundry cores or briquets, ethyl alcohol and yeast. Purified wood pulp is the basic raw material for the manu- facture of rayon, cellophane, photographic film, sausage cas- ings, lacquers, plastics, smokeless powder, and other less widely known derivatives. Already the normal demand amounts to about 1,000,000 tons a year. In the event of war, military re- quirements will double this demand. To anticipate this in- creased demand and its implications for the future use of hard- woods, extensive work—which promises to be successful—is now being done in governmental and academic laboratories. THE VENEER AND PLYWOOD INDUSTRY The veneer and plywood industry has grown phenomenally during the past half century. It consumed almost 2^2 billion board feet of logs in 1950. Softwood veneers and plywoods are produced mainly in Washington, Oregon, and. northern Cali- fornia. Hardwood veneer and plywood manufacture is scat- tered throughout the eastern half of the country. On the West Coast a high degree of mechanization already exists in the soft- wood-plywood industry. In 1944, the western industry pro- duced more than half the country's plywood. Recent technological emphasis has been on machinery that will conserve and retrieve materials. The scraper-head de- Page 135 barker, which is beginning to replace the cutter-head machine, breaks the bark off clean at the wood surface without removing any wood. Core-lathes have been introduced in some mills to cut to smaller diameters the cores dropped from the larger lathes. Changes in lathe design, new special electronically con- trolled electric motor drives, and new veneer-off-bearing con- veyors have resulted in operation economies. Mechanized storage conveyors, veneer-reeling equipment for handling green veneer, and shook slicers for box shooks are becoming common. Veneer-drying equipment is constantly be- ing modified and improved. Veneer-patching and veneer-edge- gluing equipment is becoming common. Shallow cutting saws, routers, and chisels are used to remove defects in plywood so that patches can be more easily inserted. Lumber-patching equipment may become much more important in the future production of lumber cores from defective hardwood stock. Plywood surface can now be mechanically modified to hide checks and defects and to create other surface patterns by striating, by wire brushing, or by stamping artificial patterns on the surface. Overlays have been applied to plywood to modify surface and other properties, to mask defects, or to increase service- ability under severe usages. Although the development of overlaid plywood products is still in its infancy, production in the softwood industry alone has risen from Ql/2 to 33 million square feet in 1 year, 1949 to 1950. Shortages of high-quality veneer and plywood logs already exist in every part of the United States. Plywood pro- ducers can no longer rely on buying veneer logs on the open market; they have been forced to line up specific sources of logs, to acquire timber lands, and to trade logs with sawmills and pulp companies. Some operators have been forced to import Canadian birch logs of lower quality than our native logs at a cost of 10 to 15 percent higher. RESEARCH ADDS TO NEED FOR COMPONENT MATERIALS Decreased quality of logs going to the industry is offset some- what by mechanical improvements in the manufacturing proc- ess and by improved wood-harvesting practices. Technology is contributing by expanding the species which the industry may use. Such species not now used, or used only to a minor extent for plywood, include more than a score of different trees: red- wood, true firs, hemlock and western larch; red cedar, white cedar, and spruce; tan oak, red alder, laurel, madrone, chin- quapin and the western oaks; the aspen, beach, red maple, black gum, and several eastern oaks and the hickories. Technically sound veneer-log grades are being developed, based on a study of various species5 characteristics and defects and on the yields obtainable from the different kinds of logs. Sound, standard grading will permit the proper segregation of logs into veneer, sawmill, and pulp logs. Tropical hardwoods for veneer production enter the United States from west Africa, tropical America and the Philippines. In the East and South, tropical hardwoods are brought in for use as crossbanding veneer. On the West Coast, they are con- verted into plywood for door and panel stock. Mainly, however, they have thus far been used for the production of face veneers. For the most part (87 percent), the foreign face veneers come from the following woods: avodire, limba, mahogany, paldeo primavera, sapeli, satin wood, tigerwood, and zebrawood. Th< end uses of all tropical hardwood veneers used in the Unitec States in 1948 were for furniture (54 percent), radios (14 per cent), professional and scientific instruments (9 percent), mill work (7 percent), fixtures (6 percent), and miscellaneou; uses (10 percent). Recent developments in logging equipment and techniques— particularly those enabling logging during the rainy season— will improve the future availability of tropical hardwood logs Current research studies are already broadening the factua information about tropical woods and pointing out new spe- cies which show possibilities for future veneer and plywooc production. There is a definite interest in importing also utility- grade veneer woods such as cative, gaboon, hura, banak, orey and others. But for the immediate future, the tropical hard- woods for high-grade or fancy veneers are in greater demand. WOOD COMPONENTS AND DERIVED PRODUCTS The specific components of wood and their derivatives arc also important raw materials whose values technology will continue to enhance. Wood, made up of cellulose, hemicellulose, lignin, and ex- tractives, can be converted by various mechanical and chemical means into fibrous products and chemicals. Cellulose deriva- tives make rayon and acetate regenerated-fibers, films, lacquers, and plastics. Hemicelluloses, because of their gelling and dis- persion properties, are used in pulps for making paper and as cheap bonding agents. Lignin may be used as an additive: to the negative plates of storage batteries to improve their efficiency at low tempera- tures; to portland cement to improve its flow properties before setting; and to plastics, plastic-laminates, and rubber. It may be used as an adhesive for linoleum; a binder for sand in foun- dry molds; a binder and stabilizer for dirt roads; an antiscaling agent for boilers; a tanning agent; a fuel (in powdered or briquetted form); a soil conditioner; and a raw material for the production of hydrogenated products and vanillin. The possible extractives of wood are water-soluble sugars and gums, tannins and phlobaphenes, certain acids, aldehydes, alcohols and hydrocarbons, chiefly terpenes, and certain fats, fatty acids, phytosterol, resins, resin acids, and waxes. The chief wood-exudate of commercial importance is rubber latex. Oleoresin-exudates from the longleaf and slash pines in the United States are also of considerable importance, pri- marily as "naval stores." Tar, pitch, turpentine, dipentene, and rosin fractions are naval stores that are becoming of increasing importance. The possibilities of making a wood preservative from rosin have recently been investigated but none competitive with creosote has as yet been developed. Maple sugar is another exudate of commercial value. The collection of tree exudates is simple, but requires a great deal of manpower, and is profitable only where labor costs are low. Extractives, isolated from various species and from specific parts of trees, vary in amount extracted from a few tenths of 1 percent to about 30 percent of the weight of the wood. The oleoresin obtained from the decayed stumps of longleaf and slash pines is, from an industrial point of view, the most im- portant extractive of wood. In 1947 plants processed over l1^ Page 136 million tons of stumpwood from which they produced 12 mil- lion gallons of turpentine and over 750,000 barrels of rosin (close to 400 million pounds). At the current rate of production, it is now estimated that all accessible stumpwood will be used up in another 20 years. This spurs the search for economical methods of extracting mill residues. Hydrolysis of spent chips following extraction looks promising under present conditions and is being seriously con- sidered by several of the oleoresin-extraction plants. The rapid disappearance of the chestnut tree in the United States, as a result of chestnut blight, has cut off our major domestic source of tannin. Tannin may be extracted also from the bark of our western hemlock, but at present transportation of the logs to the mills by floating in the salt water of Puget Sound creates a technological problem. The salt taken up by the bark is concentrated in the extract and interferes with its use. Douglas-fir, especially second growth, yields a high grade of tannin. When combined with wax recovering, this operation promises to be commercially important. Water-soluble gums and essential oils may be extracted from various trees. The recovery of these oils is not a very profitable industry because of the collection problem, but if, in the future, the extraction were followed by a hydrolysis of the residue to sugars, as is technologically possible, the essential oil extraction industry might become larger and enjoy increased profits. There has been an expanded demand for charcoal during and since the Second World War. At least two foreign processes involving the use of internal gas-heated retorts are suitable for utilizing inferior species of wood to make charcoal. One do- mestic process, the Stafford process, has been in operation a number of years. Others have recently been developed. These may again make wood distillation an important means of chem- ically processing inferior woods and mill residues. The destructive distillation of hardwood yields, besides char- coal, such combustible volatiles as acetic acid, acetones, methyl alcohol, and wood tars. Softwood (Southern pine) distillations yield chiefly turpentine, pine oils, and tar. Unfortunately, the present tendency, because of the small profit from refining them, is to use the volatiles for fuel or heat energy in plant operations. DEVELOPMENT OF NEW PROCESSES FOR HYDROLYSIS AND FERMENTATION Several processes of hydrolysis and fermentation, which have already been developed, can in the future prove economically profitable. They can produce alcohol, yeast, acetic-, butyric-, and lactic-acids, acetone, butanol, 2-3 butylene, glycol, glyc- erine, and molasses. Wood molasses has been proved equal to blackstrap molasses in food value for animal feeding. If it were used to feed cattle and dairy cows in the United States at the rate of 3 pounds per day per head, present consumption would increase 75 times and would require utilization of all mill resi- dues and about two-thirds of all wood residues occurring in the country. Wood-molasses production should be profitable for plants processing 30 to 50 tons of wood a day. Farm coopera- tives would establish plants to which a farmer could haul sev- eral tons of low-quality wood from his wood lot and take home an equivalent amount of molasses containing 50 percent sugar. Wood hydrolysis should be of considerable military interest because of the versatility of the process. In time of war, the demands for ethyl alcohol and other fermentation products capable of being produced from wood sugar far exceed peace- time demands. It is extremely expensive to maintain complete standby equipment for the exclusive manufacture of these products. If, however, a number of small plants were built and operated primarily as wood-molasses or yeast plants for the production of animal feed, their product could readily be diverted in time of need to a few standby fermentation and dis- tillation plants. Or if the woods were only partially hydrolyzed to sugars, the residue of lignin, together with the more stable part of the cellulose could be used for making plastics. If phenol resins should ever become more critical, such plastics—which save in their use of phenol resins—may become of commercial importance. At present the profitable utilization of the soluble-lignin residue in pulpmill effluent and the solid-lignin residue remain- ing when the carbohydrate portion of wood is completely hydro- lyzed to sugar is an acute problem. Research on the hydrogena- tion of lignin in continuous-hydrogenation equipment has just begun, and there are possibilities of commercial production of neutral oils, cyclic alcohols, phenolics, and a high-boiling tar- like residue. The neutral oils seem suitable for fuels or lubricat- ing. The cyclic alcohols, when added to gasoline for use in internal combustion engines, have high antiknock properties. The phenolics of both resin-forming and nonresin-forming types may or may not be useful in plastics. If petroleum short- ages should ever occur, 1 ton of wood residue could be converted into 110 gallons of liquid fuel by hydrolyzing and hydrogenat- ing processes. A number of valuable partial-oxidation products are also obtainable from wood and wood-components. These include oxalic acid, mucic acid, vanillin, and other products. Levulinic acid, formic acid, and furfural can be obtained from wood sugars. New wood hydrolysis processes for production of special lignin products may make lig nin the primary product and sugar the byproduct. References Elsewhere in This Report This volume: Tasks and Opportunities. Technology in the Building Industry. Vol. II: The Outlook for Key Commodities. U. S. Bureau of Mines Tables—Petroleum and Refined Products. Vol. V: Selected Reports to the Commission. Domestic Timber Resources. The Free World's Forest Resources. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Snavely, C. A. "Waste Suppression—Waste Going into Streams." Page 137 The Promise of Technology Chapter 11 Technology in the Building Industry* The object of this study is to report and appraise the technical changes occurring and likely to occur in construction which offer possibilities of lowering the real cost of building, main- taining, and operating structures. Appraisal has been as quan- titative as possible in order that specific savings may be indi- cated for attainable optimum conditions. The study has taken account of building construction of single- and multi-family residential, commercial and indus- trial, and educational and institutional structures. Certain ac- count has had to be taken of climatic factors and the public taste differences in the several regional sectors of the United States. By and large, the same materials are used, in varying propor- tions, in all of the above building categories; and technical advances in fabrication or use of a given class of building ma- terials in any one category may find their way into others. Con- sequently, the basic divisions of this study will be those of the different classes of structural materials: lumber and wood prod- ucts, metals, non-metallic mineral products, and organics. These will be considered in the various forms used and for the various purposes. WOOD AND WOOD PRODUCTS Lumber Nothing on the technological horizon points toward a long- term downward trend in lumber prices. Various developments in the use of wood, however, can be expected to have significant application in construction over the next quarter century. One major trend is toward more and more fabrication at the mill of such items as doors, windows, door and window frames, shelving, cabinets, built-in furniture, and precut houses. Another trend is for the establishment of more widespread wholesale and retail outlets by the major lumber manufacturers. Such practice benefits the consumer in both quality and price. The building materials manufactured by bonding of very small wood particles such as sawdust, shavings, and scrap into large and useful shapes through use of resin binders is rapidly being commercialized. Already practiced to some extent, the cutting and shredding of trees especially for the manufacture *By Arthur D. Little, Inc. of synthetic lumber will make possible more widespread utiliza- tion of forest trees as a crop to be replaced, instead of the consumption of a heritage of the past. Despite the support of several trade associations such as the National Lumber Manufacturers Association, technological progress in the industry has been disappointingly slow. There appear to be substantial opportunities for developing lumber products geared to the modernization of construction techniques. Some progress may be noted. Thus, some years ago lumber was brought out cut to exact dimensions with square, finished ends. This has been followed by end-matched boards which are tongue-and-groove not only on the edges but also on the ends, permitting joints anywhere along the course without the need for break joints over studs, joists, or rafters. However, no material changes have occurred and no de- velopments have been announced that are directed toward wood economy in the dissection of a tree into finished lumber. The initial sawing operation on the logs is performed with fast- cutting saws designed for speed rather than economy of wood. Then the rough cut surface left by the saws must be planed smooth by removal of more wood. While it is obviously im- possible to convert saw logs into 100 percent of lumber, there appears to be room for substantial improvement over present methods. Of course, conversion of sawdust and shavings into resin-bonded pressed wood—synthetic lumber—will materially increase the proportion of useful building material obtainable from saw logs; however, the more than 100 million tons of waste wood produced annually could be materially reduced without endangering the raw material supply of the new resin- bonded pressed wood. The further centralization of wood waste at lumber mills by the trend toward mill-fabricated building units will provide added help toward greater utilization of our timber reserves. STRUCTURAL In nonresidential construction, standard lumber is expected to diminish in favor of metal beams and structural masonry. Glue-laminated wood has received considerable attention aimed at further development for use in arches, beams, and other structural members, but obstacles have been encountered in competition with steel largely because of costs due to the labor Page 139 requirements of fabrication and to well-established construc- tion practices with older materials. Stressed-skin panel construction in residential building is ex- pected to constitute more and more competition for standard construction using joists, studs, and beams. However, such panels are expected to be based primarily on wood also. Thus, it will be largely the shape and form in which the wood is used that will be affected rather than the relative volume. EXTERIOR FINISH Lumber is meeting increasing competition from composition boards like cement-asbestos in residential construction and from sheet aluminum when available for farm construction. Advantages offered by such competitive surfaces are in the nature of reduced maintenance and repairs. Neither cement- asbestos nor aluminum, in most climates, requires any painting for upkeep and neither is subject to fungal or insecticidal attack. FLOORING While there is a distinct trend toward the use of organic resilient floor covering which may be supported by plywood, hardboard, or pressed wood sheets because of the relative costs compared with fine wood flooring, wood will continue in de- mand for middle- to high-priced residential construction. Thus, it is expected that wood flooring will by no means disappear during the next 25 years but will probably hold a considerable share of the flooring market. Since the desire for fine wooden flooring in residential con- struction is based on traditional and artistic appeal, the recently developed resin laminated floor tiling with thin veneers of fine, expensive woods, possibly resin impregnated and finished, may be expected to find architectural uses in houses which otherwise would use standard hardwood flooring. On-grade flooring as in houses without basements is almost exclusively concrete faced with linoleum, asphalt, or plastic tile. Wood has had little application in recent years in com- mercial, institutional, and educational structures. These are to a large degree based on resilient floor covering laid on con- crete or the equivalent. It is not expected that this picture will change except with regard to the nature of the resilient coverings, discussed elsewhere. Industrial flooring ranges from stabilized earth to special wood block products and includes concrete, magnesite, rolled asphalt, sand, crushed stone, steel grating, and so on. The kind of flooring installed in an industrial structure is based on functionality together with ultimate cost. For such structures as machine shops and heavy metal fabrication, treated wood block flooring has received a good rating and appears to be increasingly popular. Ease of replacement of worn or damaged areas is an important maintenance consideration that favors such flooring. INTERIOR FINISH In recent years there has been a definite trend in residential construction and design of interior trim around door and win- dow openings away from the broad, massive wood framing toward narrow and inconspicuous trim. Interior trim had been primarily artistic and only partly functional, and trends in fashions are impossible to predict with any assurance. How- ever, the general guess is that there will not be a return to the former lavish use of wood trim and moldings in residential construction. In nonresidential construction and in apartment dwellings, wood trim has already been much less used than formerly. Many instances of metal corners and metal shielding are to be found. CABINET WORK Painted or enameled steel cabinets have made considerable inroads in this field, particularly in postwar years. One factor contributing to this picture has been the desire on the part oi sheet metal fabricators, who had good war products businesses, to keep their business operations at high levels. Many of these, including some very large manufacturers who had made air- plane components, got into the metal cabinet manufacturing business and promoted their products vigorously. One new development which may attain important com- mercial development that will affect the use of wood in cabinet is the possibility that cabinets can be made by molding from synthetic resins. Plywood and Related Products The plywood industry as of late 1949 substantially reachec its peak. At that time, all plants were operating and there were plenty of logs. Appreciable further growth is in prospect. As use of inferior peeler logs increases, the industry will in- creasingly depend upon structural and industrial grades for ifr market. Such grades are satisfactory for many purposes, sucr as refrigerator bases. The factors tending to limit plywood industry development are mainly: lack of suitable peeler logs, and a declining markel based on increasing competition from hardboards. hardboards As lighter colored hardboards are developed, the use of hard- boards will increase at the expense of plywood due to thei] lower cost. The dark color and poor appearance of the pioneei Masonite product has ruled it out for many uses, but it is sat isfactorily used as drawer bottoms, counter tops, etc., items stil largely supplied by plywood. The absence of a wood appear ance is also a deterrent to sales. Plywood will maintain ar advantage as a base for overlays, ranging from resin-impreg nated paper to fine veneers. Hardboard is due for a great growth. A large part of th< market held by plywood seems likely to be taken over by hard board as in Europe. In the United States, hardboard still meet! a lot of sales resistance for many uses which it will ultimately dominate. It takes a long time to get people accustomed to new products with certain limitations, even though these limita- tions may not be barriers for the new use. Plywood will retain i large market based primarily on its structural strength, light- weight, and (for exterior grade) weather resistance. There are a number of developments of hardboards and o low-grade plywood with overlays of composition board or krafi Page 140 paper. Practically all of these depend upon resins as binders. Some development effort is being made in the direction of com- bining hardboard in a plywood assembly by sandwiching a filling of low-grade plywood between two facing layers of hard- board. RESIN-BONDED PRESSED WOOD The Plywood Research Foundation has developed a hard- board process which is being pushed to commercialization. This product is light-colored. Some boards, somewhat resem- bling hardboard, made from resin-bonded waste-wood or wood fibers have been developed. All of these new hardboards and related products are expected to use synthetic resins as binders. Resin-bonded, waste-wood boards are made from wood with particle sizes in the range of 0.05 to 0.25 inch in diameter and resin contents which range up to 25 percent. Better strength and water-resistance result from the higher resin content. Facings of resin-impregnated paper or wood veneer improve appearance and strength and are under active development. By the end of 1949, resin requirements for pressed wood manufacture were estimated to be one-third million pounds per month; present requirements are estimated as high as 3 million pounds per month or a nine-fold increase in 18 months. At the more optimistic, estimates of potential volume resin re- quirements would approximate 30 million pounds per month, a requirement not possible to be met by present raw material supplies. Resin demands of these proportions will impose severe strains on the resin raw material supply since they come on top of an already high demand. If production of pressed-wood board approaches the poten- tial annual volume of 700 to 1,000 million board feet forecast by reliable trade sources, the demands imposed upon the resin industry will be impressive indeed. On the basis of resin additions of 3 to 25 percent, or an approximate average of 7 percent of dry resin (phenol-formaldehyde, melamine- or urea-formaldehyde), formaldehyde requirements, for instance, would approximate some 180 million pounds per year. Large increases in demand created by wholly new developments would exhaust the supply even from capacity operation of installed plants. The capital requirements for the rapidly expanding plastics industry has already been huge, and further large expansions which would be needed to meet newly created major markets would constitute a problem to many of the present producers. It is not expected that this will impose any severe limitations on such growth, however. Engineering Laminates A relatively new class of material consists of plastic surfaced plywood, of which millions of square feet of both hardwood and softwood have been produced. This is a specialty product of hot press manufacturing and is produced by laying up mul- tiple sheets of resin-impregnated paper with glue-spread wood veneers, and curing-both the plastic facing and internal glue bonds in hot-plate presses, usually in the same pressing operation. SANDWICH-TYPE BUILDING BOARDS Sandwich assemblies with low-density insulating cores are laminated from one or more layers of cemented insulating board as core, with higher density face materials. Face mate- rials like hardboard, plastic, cement-asbestos sheet, and sheet metal have been used. Sheet metal is less successful because of tendency to peel due to poor adhesion. The development of new adhesives will permit this difficulty to be overcome in a satisfactory manner. Cement-asbestos faced boards have been widely and successfully used, requiring no painting either inte- rior or exterior. Structural sandwich assemblies have been developed during the past 5 to 10 years for application in construction of aircraft, housing, boats, truck bodies, freight cars, and so on. Core ma- terials of the following materials have been used: cellular plastic, thermosetting or thermoplastic; cellular synthetic or natural rubber; expanded wood or other fibers; natural low- density woods like balsa; mechanically constructed cells using high-density structural materials for walls; and porous inor- ganic materials like foam glass, fiber mats, porous calcium silicate boards. This type of product presents the building trade with single thickness exterior wall material replacing separately applied layers of siding, sheathing, building paper, insulation, lath, and plaster, and offers advantages in fundamental design and fabri- cation resulting from the relatively large integral structural parts provided. The inherent stiffness and strength permits elimination of strengthening members and of fastening mate- rials and provides a ready-made smooth surface. Thus, a prod- uct made at a mill with specialized equipment and by trained labor eliminates considerable field work and saves materials. Various technical problems exist both in production and in application. Among these may be noted the practical impossi- bility of suitable inspection of bonding between facing and sandwich core and the difficulty of securing good bonding. In use, it is hard to transfer structural loads to the sandwich with full effectiveness. Experimental houses using sandwiches of aluminum sheet facing with paper honeycomb core 2 inches thick for walls and 3 inches thick for roof have been built. Tremendous reduction in weight of structural material is reported. Thus, for a five- room house, material requirement is about 1 ton against 40 tons for conventional construction. An outstanding example of the use of this type of product is the Chrysler Corporation plant at Indianapolis completed in the summer of 1951. Walls of this plant are made of 60,000 square feet of aluminum-faced paper honeycomb sandwich panels 2 inches thick by 4 feet by 12 feet. GLASS COMPOSITE STRUCTURES Assemblies made by "bonding two or more sheets of glass at the edges with an air space between have received considerable acceptance as an insulating window material by the public as well as by construction engineers and builders. Elimination of moisture from the air space and avoidance of moisture entrance is necessary to prevent fogging in cold weather. This product, while still relatively expensive, has found good public accept- ance for use in "picture" windows. In the case of large, semi- wall size picture windows of this glass composite, the corre- sponding amount of wall structure otherwise present is replaced. Page 141 NONMETALLIC MINERAL PRODUCTS The dollar value of inorganic materials in building construc- tion is estimated to be from 10 to 20 percent of the total dollar value exclusive of site erection labor. However, this tends to underemphasize their importance, since the value is derived from the total value of the goods as delivered to the construc- tion site including such items as heating plants, plumbing fix- tures, light fixtures, etc., for which the ratio of manufacturing cost to raw materials cost is several magnitudes greater. The importance of these materials becomes rather obvious, however, when the volume of their consumption for structural purposes is considered. By and large the nonmetallic inorganic building materials are unique in that the raw materials resources appear to be abundant, with the possible exception of asbestos. Also, con- sidering their importance, the drain on the national fuel bill for converting them into useful building materials is modest. Some of the materials along with wood are among the oldest construction materials known to man. Most of them in one form or another considerably antedate the industrial era. Technologi- cal advances in their manufacture and end use are indeed mod- est as compared with other materials. However, in view of this fact and of the abundance of raw materials, the challenge for future development appears to be particularly great. Even at the present state of technology these materials, whenever necessary, could be used almost completely to replace structural lumber, significantly reduce structural steel requirements, replace in many cases metal ducts, etc., without any sacrifice in structural soundness or durability. In most cases, the over-all soundness of construction may be improved by the use of these materials. They have made significant inroads into the fields of interior partitions, siding materials, sheathing, and similar uses where wood used to be predominant. Cement and Concrete About 50 percent of all cement produced goes into the build- ing construction industry, but materials and engineering re- search applicable to the building industry is rather modest. Especially end-use research and research for integrating mate- rials, engineering, and over-all requirements, as in most of the related industries, is rather lacking. It is perhaps typical that one of the most spectacular developments of the last few decades was the introduction of concrete block, achieved by an industry consisting of a large number of small, and frequently rather primitive, plants serving limited local areas. Thus, while the potential of development is rather untapped, there are a number of approaches in an early stage of investi- gation which may be of major importance, especially when steel shortages exist. PRESTRESSED CONCRETE Prestressed concrete is finding increased attention in this country. By using prestressing procedures for concrete, it be- comes possible to utilize fully the high compressive strength properties of this material without being limited by its relatively poor tensile strength. Prestressed concrete permits designing members which for a given cross-section and depth have about four times the strength of reinforced concrete. Steel, especially where it can be used without fireproofing, still has a consider- able weight advantage, weighing about one-sixth to one-eighth of the corresponding prestressed concrete member, such as a beam or girder. Potential steel savings, however, are spectacular and can amount to about 90 percent as compared with con- ventional steel and up to 70 percent as compared with re- inforced concrete construction. The first applications to which this construction method will be applied in this country appear to be restricted, mostly to posts, beams, and girders. There appears to be little endeavor to introduce continuous prestressed concrete design as has been most successfully developed in France, Belgium, and Sweden. Potentially, these continuous design methods may lead to even greater savings and over-all lighter construction. However, comparative figures are not available at this time. Some inroads have been made into the construction of lighter design such as in prestressed joists from precast, cored blocks of structural clay tile. It is believed that as American designers become more famil- iar with prestressed concrete, this construction method will find increased application, and that techniques will be improved. There is little doubt that no other construction method has been developed which is more suited for relieving acute steel shortages. Prestressed concrete permits sound construction methods capable of meeting most stringent heavy construction requirements. It is believed that this method will be particu- larly successful in replacing reinforced concrete. Disadvantages are heavier loads to be transported to the construction site where precasting techniques are used, less flexibility in erection procedure or in future additions and changes, and training of erection crews. CONCRETE SLABS The trend toward the basementless residential home and the use of concrete slabs on grade is well established, growing, and favored by its compatibility with radiant floor heating. As compared with conventional wood joist construction, the total cost per floor is slightly lowered, and the saving in lumber only slightly offset by the use of a small amount of inexpensive reinforcing steel mesh. REINFORCED PRECAST CONCRETE Reinforced precast concrete joists, posts, arches, lintels, etc., with or without the use of clay tile, meet severe competition from structural steel in spite of steel shortages and steel cost. Steel frame, steel joists, and trusses permit greater flexibility and, in conjunction with curtain walls, permit faster enclosing during construction and greatly facilitate later reconversion, particularly in industrial buildings. LIGHTWEIGHT CONCRETE The future of lightweight concrete is as yet difficult to assess. Cinder block, or concrete blocks using 40- to 60-pound per cubic foot aggregates like expanded clays and shales or slags, are well established in conservative building methods. The use is growing of foamed extremely lightweight concretes or con- cretes using extremely lightweight aggregates (10 to 20 pounds per cubic foot) such as Perlite or expanded Vermiculite in uses more similar to on-the-site or precast large units as are typical Page 142 for heavyweight concretes. Such lightweight concretes are typically and unavoidably associated with lower compressive strength. Proper reinforcing, and possible improved bending strength, mechanical shock resistance, and built-in heat insula- tion may offset such disadvantages. Thus for the Thermo-Con system for a 45-pound per square foot material, more than twice the racking and nearly 10 times the transverse bending load at failure of concrete block is claimed. Of course, substantial sav- ings in steel structures can be obtained by lightweight concrete floor fills and roof decks, and where fireproofing is required by lightweight fireproofing concrete and plaster. As yet, however, little is known about how these savings in structural uses would compare with those possible by using extremely thin structural prestressed concrete, especially where heat insulation is not required; ASBESTOS CEMENT The importance of cement in board and curtain wall mate- rials is steadily growing and is particularly favored by the in- creasing demands for more fireproof building. Asbestos cement products for siding, shingles, etc., in residential construction are becoming increasingly popular. Sandwich materials with in- sulating cores for industrial buildings gain in acceptance, as insulation comfort in this type of building becomes more recog- nized. However, this field is highly competitive, and improved metal sandwiches, such as honeycomb, paper cored aluminum panels, etc., may prove a major competition when materials are freely available. The somewhat limited supplies of asbestos may offer a further deterrent, although glass fiber materials may offer adequate substitutes. Clay and Shale In present-day construction little use is made of the inherent strength properties of clay products, such as brick and tile; mainly their weather- and fire-resistance and attractive appear- ance are taken advantage of. Brick, for example, is used now mostly as a veneer and outside finish. Only about 20 percent of residential housing built now is actual masonry construction using the load-bearing characteristics of brick. Even in such homes, other materials are used for interior partitions, floor joists, etc. High site-erection labor costs, competition by light panel materials, underestimation of reduced fire insurance and maintenance costs, and many other factors are blamed for the regressive trends in the brick and structural tile industry. Structural clay products, as now made and used, will not dis- appear from the construction field but appear to be headed for a relative decline compared to other building materials. Aside from shortages of bricklayers and often of clay products, the main reasons for the relative decline appear to be specifi- cally: (a) excessive on-site labor costs estimated to be as much as two-thirds of the cost of a masonry wall, and the tendency to develop competitive construction materials, which while sometimes more expensive, require less job-site labor; (b) tech- nical developments by other branches of the building materials industry and by unrelated industries aiming at the enormous construction field; (c)development of products for particular structural or architectural purposes by industries not previously in building materials leading to some materials having some substantial advantages over brick and tile; and (d) techno- logical problems such as the seasonal aspect of bricklaying in northern climates add to costs. Materials-handling techniques all the way from clay pit to wall are too often crude and costly, but under present labor conditions it seems improbable that a satisfactory and acceptable automatic bricklaying machine, for example, will be adopted. However, recently it was recognized that only consideration of modern requirements of the building industry and proper adaptation of the product to modern construction methods can reverse the trend. The industry set up its own research group which centers its efforts on end-use research. The aggressive spirit and the well-founded research program should help to reintroduce structural clay products to structural uses and to make available this material for which unlimited raw material resources and a large production capacity exist. Glass and Porcelain Enamel The glass industry has shown some growth during recent years because of expanding uses of sheet glass in modern archi- tecture and automobiles, as well as the development of such new products as glass fiber, electrical glass, and insulating glass (foam as well as sandwich). There appear no developments of sufficient magnitude to offset the glass industry's dependence on the national economy, particularly automobile and building construction and maintenance. Currently, glass fiber accounts for less than 10 percent of tonnage, while flat glass accounts for about a quarter of the total glass volume. an expanding use— glass fiber However, the current 150 million pounds glass fiber annual production capacity is believed capable of a very large expan- sion. This segment of the industry may grow to become the second most important, dollarwise, next to containers, or even the most important if certain use areas develop, as they show promise of doing. At present, the major uses of glass fiber are for thermal in- sulation of buildings, air filters, and acoustical surfaces. Over 50 percent of the glass fiber now produced is used for home in- sulation but volume is dependent upon rate of construction, and this ratio is expected to decline from recent highs. Substan- tial quantities are used for the insulation of trucks, freight cars, ships, airplanes, and so on. Newest and most interesting commercial development using glass fibers is in conjunction with polyester resins, the combina- tion being cured at room temperature and low pressures in or on inexpensive molds to form such objects as boats, washing machine baskets, corrugated translucent roof section for porches, fishing rods, boxes, and so on. Production of glass fiber for these uses is now at a rate of over 7 million pounds per year with the expectation that production can reach 14 or over million pounds in 1952. As an example of cost reduction, replacement of aluminum and porcelain enamel in an automatic washing machine con- struction with a polyester resin-glass fiber basket resulted in a cost reduction of 50 percent and cut the weight of this part in half. It is too early in this development to forecast the savings in cost and materials to be expected by replacement of porcelain-enameled steel stampings and cast-iron bathroom Page 143 and kitchen equipment with polyester resin-glass fiber products, and raw material supplies will need to be substantially increased before any significant inroads will be made in the standard plumbing fixture market. Examples of other possible replace- ments include: sheet steel in heating oil storage tanks; cast iron in soil and water pipe; galvanized and enameled sheet steel in buckets, tubs, pans, etc.; metal in various appliance housings; etc. The entire field is relatively in its infancy, and no satisfactory forecast can be made of ultimate volume or nature of uses in construction. However, a large growth may be anticipated, particularly if lower cost resins are developed. The basic raw materials used in present resins include styrene, glycerin, glycol, and polybasic acids. PROSPECTIVE USES Methods of fabrication of the glass fiber-resin compositions are being developed by several different groups. It is possible that resin-impregnated glass fiber mats, sheets, or preforms be supplied to users in an uncured condition essen- tially ready for on-the-job fabrication of built-in features of construction by use of low-cost molds or flexible molds. Such elements of housing construction as shower stalls, kitchen sink splash shields, built-in dressing table tops, and the like might conceivably be molded on the job from such low-temperature low-pressure curing assemblies. Active commercial promotion of such things as tubs and sinks will likely be dependent upon adaptation and promotion by firms now manufacturing these items because of the tremen- dous importance of distribution channels, merchandizing tech- niques, and trade acceptance of the established manufacturer's products. There are several significant areas of use for glass fiber in the construction industry which are not as yet fully developed; for example, a reinforcing fiber to substitute for asbestos in cement-asbestos roofing, siding, conduits, drain pipe, and the like. Another potential volume use is glass fiber for reinforcing concrete and prestressed concrete in place of steel rod and wire. Obviously, the capacity of the glass industry would have to be enormously increased to satisfy established requirements, to meet the rapidly growing demand of the resin bonded fiber development, and, in addition, to supply any new requirements which might develop from creation of demands as an asbestos substitute and as a concrete reinforcing material—not to men- tion other uses which are not directly related to construction. Limiting factors in glass manufacture would probably not be glass sand but rather the soda ash required for process of glass making. The soda ash demand-supply relationship is under- going some long-range changes which should result in the re- lease of more soda ash for uses other than chemical caustic. PLATE GLASS VOLUME EXCEEDS SHEET PRODUCTION In the two decades from 1930 to 1950, plate glass showed over a tenfold increase in volume to 324 million square feet in 1950, as against a threefold increase in volume to 1,200 million square feet for sheet (window) glass. Only a portion of this increase in plate glass may be attributed to demand for "picture windows" in residences, and the large expanse of glass fre- quently incorporated in the newer commercial and institutional buildings. The automobile industry's postwar expansion has accounted for a substantial portion of recent gain. In modern design, the glass area becomes an increasingly larger percentage of the exterior wall area of residential, com- mercial and office structures. This tendency is, of course, helped by the decreased use of load-bearing walls. In some industrial design, the completely windowless, air-conditioned, and arti- ficially lighted structure has advantages. Viewed as a wall material, conventional double glazing is comparable in price with such luxury construction as insulated brick veneer frame construction, or insulated aluminum panel. Sealed double glazing is nearly twice as expensive and, while it offers better insulation than conventional types, the insulative properties still are only about one-fifth as effective as a well- insulated wall. Nevertheless, the emphasis on good lighting, in addition to the merely aesthetic aspects, will certainly uphold this trend. Development of heat-absorbing and glare-reducing glasses will reduce disadvantages. While the fuel-saving fea- tures of solar houses are perhaps overrated, large window areas can help in increased living comfort when the house is properly oriented, and when eaves or louvres help to reduce sun intensity during the hot season. Glass which has been sponged into a rigid foam is a light- weight insulation material available in block form. Despite its higher original cost over several other insulation materials, it is finding increasing use as a base in roof decks and concrete slab construction for basementless houses. One interesting re- cent application for this glass has been in a concrete structural panel in which concrete is poured under pressure around a 2-inch thick core of the material. The result is an integral masonry unit with high strength and built-in insulation that can be manipulated at a cost of $1.65 to $2 per square foot of interior wall surface. Methods of fabrication of glass block have not been satisfac- torily advanced to bring about substantial reduction in costs and until this can be done, construction uses will remain com- paratively small. Fluorescent and indirect lighting have reduced the use of glass shades, and lightweight plastics have frequently replaced the glass diflfusers in flush ceiling lighting. The possibility of lumi- nescent glass (activated by low voltages) has been mentioned in the recent literature, but the intensities achieved as yet do not promise their use for general illumination, but rather for signs, etc., or perhaps for special lighting effects in theaters, night clubs, and so on. Radiant heating glass panels also will find application as auxiliary units in comfort heating systems as demands for such systems increase. AUTOCLAVED PRODUCTS Important developments have been made in autoclaved lime- silica reaction products with asbestos reinforcement. Light- weight (10 and 20 pounds per cubic foot) calcium hydro- silicate blocks, asbestos reinforced, have been recently intro- duced on a large scale and form perhaps the most important structural insulation material. Uses are for roof decks and, even more important, as noncombustible cores for curtain walls (e. g., asbestos-cement faced), and door partition cores (e. g.5 plywood faced). Page 144 METALLIC PRODUCTS Structural Framing In general, the future use of steel, and to some extent alumi- num, will increase substantially in the light and residential con- struction fields. This trend might be temporarily delayed in case of war or mobilization but will no doubt continue more strongly in normal times. It should be noted, however, that adverse building codes can delay use of metal for light framing. Some technical problems can be expected since light structural shapes offer a smaller safety margin against collapse in fires than does the present timber construction method. In heavy construction, riveting will tend to disappear in com- petition with welding and with bolts. The welding method has inherent flexibility and offers substantial reductions in weight, but field techniques need improvement. High-strength bolts, also replacing riveting, have the ad- vantages that they require less skill and less labor than riveting, and offer higher resistance to fatigue than welding. In many cases, absence of welding equipment provides desired safety against fires during construction. High-strength bolts do not offer any savings in the bulk of steel, as does welding, and the quality of the steel in the bolt has to be of a higher grade than for a comparable rivet. There is also the notch effect which is potentially dangerous, but the danger of local weakness is even greater when welding is employed. While welding is also quiet and requires less weight, it does not offer as easy a demount- ability as the use of high-strength bolts does. As building codes are relaxed, ordinary bolts also get more into the picture. They are cheap but their use is not advisable in the presence of any vibration. INFLUENCE OF DESIGN ON SAVING METALS New construction methods and engineering design both af- fect the use of metals in construction. Design is to some extent dependent on the progress of structural knowledge at any given moment. The method of designing structures with continuous frames is becoming more popular and can be expected to yield some saving of steel. This development has been made possible through the use of welding which permits design of a truly continuous structure. Further advances can be expected as soon as welding techniques improve. Welding of structural alumi- num shapes has not become accepted practice yet so that design would have to follow traditional methods. So far practically no structural aluminum shapes have found their way into building construction. Extensive tests have been carried out lately to evaluate bolted and riveted connections as "semi-rigid." On the basis of these tests structural design can be carried out, using at least part of the rigidity of the connection to reduce the sizes of the various members. It can be expected that further improvement will be made in this design method, which is also applicable to alumi- num structural shapes which are riveted. For large spans the use of shell and dome roofs is becoming increasingly popular. While this method makes use of less steel than otherwise would be necessary, its small over-all application will probably cause no great difference in the usage of frame metals. Further design refinements may easily bring concrete floors and other concrete members of the structure into the structural system. However, more work will have to be done before design can be sufficiently changed to affect the usage of steel in this respect. The A. S. T. M. A—305 bars will save appreciable quantities in reinforcing steel through higher bond stresses and the elimi- nation of most hooks. Also, because they result in better crack distribution, an eventual substantial increase in the allowable stresses in beam and slab reinforcing steel is inevitable. This will accomplish a major saving. New A. S. T. M. Regulation A-305 allows in most cases the elimination of hooks and also higher bond stress for the new deformed bars in spread foundations. This is of some conse- quence since these foundations are usually heavily reinforced. The over-all effect of the new regulation will be a substantial decrease of reinforcing steel used for a given amount of con- struction work. The use of heavy steel grillages for foundation work is also on the decrease. Latest trends in floor systems are toward lighter weight. Cor- rugated diaphragm panel type and stressed-skin steel flooring are finding increasing use. Flexibility of partitions requires the incorporation of provisions for electric and telephone lines to be picked up at any desired spot. Increasing use is made of one- and two-way, reinforced con- crete slabs, cast on removable metal forms. In the case of flat slabs, substitution of additional steel in place of the column capitals is becoming prevalent. Further developments depend on future revisions of local building codes. Here again prestressing techniques will probably mean reduc- tion in the amount of steel used, but will increase volume of concrete construction. ROOFING AND SHEET METAL WORK Copper, aluminum, and sheet steel are now in competition with nonmetallic products for use in roofing. Aluminum at this moment is still less ductile than copper, less easily joined and after some corrosion has a less pleasant color, but has good thermal reflectivity. Further technological developments may change this picture. It should be noted here that all roofing is subjected to violent temperature changes in the course of the day. Since aluminum is more subject to fatigue failure than copper, the use of the latter will still yield much better results for roofing. Unclad or galvanized steel in corrugated form, enamel- covered steel, and asbestos-covered corrugated metal are not used too efficiently, and it is quite possible that they will in time be replaced by corrugated cement-asbestos and new plastic materials, for roofing and the like. Sheet zinc, tinned sheet steel, copper, and lead are now very popular as flashing materials, the need for which depends upon architectural trends. War shortages might develop new tar- impregnated fabrics which could easily replace metals for flashing purposes. Roofing papers will also improve in quality as use of plastics becomes more efficient and will become more Page 145 competitive. For this reason the tendency will probably be away from metals in the field of roof covering with the possible exception of aluminum. In general, however, it appears that nonmetallic materials are better suited for roofing purposes than are metals. Many types of precast panels, a few of them prestressed, are now being used; metal-edged gypsum boards and similar mate- rials are now being offered to cover the roof. It can be assumed that larger use will be made of precasting and prestressing techniques. On residential roofing, nonmetallic covers will prob- ably remain the standard. Aluminum, copper, stainless steel, special alloys, and, to some extent, galvanized steel are now in strong competition. Great temperature differences require high structural strength of ma- terial which is exposed to sun and water. It is impossible to predict which of these metals will eventually win out, but it is not believed that plastics will make an immediate inroad into this field. Resistance to corrosion, ductility, watertightness and ease of working are of prime importance, and any metal which will be used in the future will have to fulfill these conditions. The progress which aluminum has made in this field is note- worthy and may be indicative of future trends if adequate metal is available. Piping and Duct Work Copper and brass pipes with soldered and brazed connections have been used increasingly, and, in the recent past, the use of iron and steel pipes for water supply has almost disappeared. A considerable elimination of fittings has reduced use of materials. It is quite possible that in the foreseeable future plastic pipes will come into general usage for cold water and gas. There is also a trend toward more efficient architectural planning which saves piping because of layout of bathrooms and kitchens around the same core. Galvanized steel in water heaters is increasing at present. Copper, while popular, is not in too much demand because of its price. Special alloy heating tanks are becoming established. However, glass-lined steel tanks appear to have the greatest future, and can be expected to make further gains as cheaper manufacturing methods are developed. Trim, Hardware, Windows Replacement of expensive stone and terra cotta trim on buildings is needed because of costs, dead weight, and needless waterproofing problems. Bronze and other metals are now being used. Most of it is in skin form. In general, the use of decorations in modern buildings has declined considerably. New use has been made of decorative frieze at the Fitchburg Youth Library, Fitchburg, Mass. This frieze is made of a col- ored enamel design, baked to sheet metal. It is light, colorful and easily installed as well as cleaned. It may be expected that metals will not be an important factor for interior finishes and trim. The trend is rather toward plastics. To a small extent, metal tiles are being used but are basically at a disadvantage with plastics, glass, and ceramic materials. At the moment, noncorrosive metals and glass are used to a great extent for hardware, but aluminum is becoming better established because of its relatively low cost and good perform- ance. Metals requiring plated finishes have not performed well and are disappearing. Better designs are effecting economies in the quantity of metal used. Increasing use of sliding and folding doors requires additional hardware. In lighting fixtures, the trend is toward area, instead of spot, lighting; concealed lighting is also popular. Egg-crate ceilings as well as a new metal coating glass area lighting are good ex- amples of the future use to which steel, aluminum, and a few other metals will be put in this field. Greater use of metals for suspension systems and decorative units will probably lead to an increased use of aluminum. To some extent it can be ex- pected that plastics will replace metals in some lighting fixtures. In general, however, increasing use of metals, especially alumi- num, in the lighting fixture field can be expected. The use of metal for windows is increasing rapidly because of inherent advantages. At the moment, there is a choice among bronze, steel, stainless steel, and aluminum. A trend toward storm windows, especially those combined with permanent screens, are giving further impetus toward the use of metal, and a more extensive use of some metal can be expected. Aluminum will eventually be very popular because it is light in weight and its price may decline in the next few years. General and Miscellaneous Aluminium may be expected to replace some copper in electric wiring. Technically this development is entirely feasible. The future will decide the competition between aluminum and copper in this field mainly on the basis of availability of copper. A substantial advance in the electric wiring field may be expected from the use of low-voltage control units, based on control relays which switch on lights and electric machinery, with very light low voltage wiring. While the relays will con- sume some metal, a substantial reduction in weight consumed for building wiring may be expected as this method becomes more popular. This development may be of major importance for the building industry and will leave its imprint in the electric wiring field for many years to come. heating and ventilating The heating field is changing rapidly and developments are difficult to forecast. Substantially larger amounts of steel, aluminum, and non- corrodable metals can be expected to be utilized in the heating, ventilating, and air-conditioning fields. Radiant panel heating is quite popular and requires increased use of metal pipes, especially wrought iron or copper. On the other hand, con- gested areas will probably soon be serviced from central heat- ing stations, thus obsoleting individual power units. The trend is toward fewer and larger units, with better thermal efficiency, particularly for commercial structures. Central atomic heating plants might play a role in this respect in the distant future. The trend in heating systems is to forced propulsion of the heating medium through smaller ducts and pipes. While gal- vanized iron ducts have been used in the past for ventilating and hot-air heating systems, aluminum has started to compete strongly. However, the use of higher speed air is leading to em- ployment of much smaller pipes instead of ducts. Suitable dif- fusers must, of course, be provided. The use of air-conditioning Page 146 equipment is also increasing. This requires more ducts, pipes, and machinery and uses up an appreciable amount of metal. Further increase in the use of air conditioning can be expected with an appreciable increase in the amount of metals required. Should solar heating ever be developed to the point where it is employed on a mass scale, the use of more pipes, tanks, and control units must be expected. A recent development is the replacement of traditional re- fractories with stainless steel fireboxes, so as to effect a faster and more efficient transfer of heat. This has been made possible through the advent of oil and gas heating. Additional advan- tages of the stainless steel fireboxes are compactness, lighter weight, easier manufacturing, and smaller labor and installa- tion costs. The disadvantages of a stainless steel firebox are that it is less permanent than refractories, and that troubles can develop from imperfections in the metal. The stainless steel firebox is only one example of how basic efficient nonmetallic units can be replaced in the future with metallic components for the single reason of reducing weight and labor costs. While it is debatable whether this development is desirable, there is no doubt that it offers one form of economy and has to be reckoned with when the future of the use of metal in the heating field is being considered. The trend in transportation in commercial and institutional buildings is toward faster elevators and more efficiently used escalators. As these units continue to be improved, a reduction in the use of all metals can be expected. There is no indication that significant changes will occur in this field within the next 25 years. Cheaper magnesium is a definite probability, and in certain applications this light metal may compete with aluminum. Its use has been suggested for cranes and elevators where some reduction in power requirements would be effected. However, the use of magnesium is retarded because welding causes undesirable changes in properties. Light Metals Aluminum in construction has shown a very substantial gain in tonnage since 1939 and if normal conditions had prevailed during the past 2 years further gains would have resulted. Aluminum has had an opportunity to create a place for itself. After previously scarce materials had again become available, such as galvanized sheet iron, the market for aluminum for such items as roofing, siding, and duct work became increas- ingly competitive. At recent prices for galvanized sheet iron, aluminum was directly competitive being only slightly higher in cost and having a decided sales advantage in greater resist- ance to atmospheric corrosion. However, the relative price and more attractive appearance of these two competitive materials in this field of use will have a distinct bearing on the use in the building industry. The Aluminum Co. of America has constructed in Iowa a 4/2 -story building using aluminum slabs in the exterior con- struction. The success of this building has led Alcoa to con- struct a similar building of 30 stories in Pittsburgh. This type of construction involves laying up from the inside cast aluminum slabs about one-fourth inch thick on the exterior of the build- ing, placing formed insulation adjacent to the slabs and pro- ceeding with the interior finish. This obviates the necessity of exterior scaffolding and results in a wall which is some 7 inches thick in contrast to the 18 to 24 inches thickness usual in masonry-type wall construction. The construction schedule can be speeded, construction costs lowered, and more space made available in the interior per unit of ground space occupied. Considerable care has been taken to insure that the building conforms to building codes in all of the major cities in the United States. If the new 30-story building lives up to expecta- tions, this type of construction may find extensive adoption and could thus account for very large tonnages of aluminum metal. Aluminum is beginning to substitute for copper in electrical wiring. Aluminum has been used for transmission lines and power conductors for some time, but has only recently been approved by Underwriters Laboratories for home and building wiring. One of the nation's largest manufacturers of electrical equipment has begun the practice of designing equipment for aluminum wiring instead of for copper on the basis that copper is likely to remain in the scarce category for the foreseeable future. It is generally considered that aluminum wiring is likely to grow to important proportions. Postwar development of welding techniques for thick sec- tions of aluminum, stainless steel, copper-base alloys, and others, have opened new fields of use for these metals in equip- ment for chemical processing, in truck bodies, railroad cars, and in construction. One process is an inert-gas-shielded arc with continuously fed consumable electrode filler rod. Argon and helium are employed as inert gases and are relatively avail- able by extraction from the atmosphere and certain natural gas deposits. Aluminum flake pigment in priming coat paints has demon- strated considerable utility as a sealer for wood surfaces, and as a reflecting paint pigment for painting industrial structures. Aluminum pigmented paint is being used widely for such structures as oil storage tanks, oil refinery equipment, chemical process equipment, industrial structures, and so on because it not only has good sealing properties, but because it offers ex- cellent light- and heat-reflecting properties. Stability against many atmospheric corrosive agents is another asset. Tonnage requirements for these uses, however, are comparatively minor. Aluminum finds many other applications in construction, some so hidden as not to be ordinarily recognized. Aluminum foil has been widely used for wall insulation. Aluminum alloy- clad steel pipe is being used for water service in industrial installations and where ground corrosion is too severe for wrought iron or steel pipe. Another is for the fabrication of heating radiators by brazing together corrugated sheets of aluminum. Such radiators with forced draft have become widely adopted for industrial installations. In both latter appli- cations aluminum is displacing scarce copper. TITANIUM, A PROMISING BUT EXPERIMENTAL METAL Only during the past few postwar years have commercial quantities of pure, ductile titanium metal been produced. Its properties are such that intense interest has been created in its future, possible large-scale production, and use. The supply available still is largely consumed in experimental develop- ments aimed at more intensive exploration of use properties. Page 147 The present method of production is based on the Kroll process by which titanium tetrachloride is reduced to the metal by reaction with magnesium metal, used at a ratio of about pound per pound. It is generally realized that a new practical approach to manufacture of titanium metal will need to be developed before prices can be reduced to a level which will open the larger areas of use. Intensive efforts are being made by several companies, combinations of companies, and branches of the Government to find a better and cheaper process and to locate new ore sources. Prices for the metal from present-scale pilot plant production range around $4 per pound in ingot form. Present methods may permit reducing of prices to $1 per pound in larger scale units now being established. Volume for volume substitution of $1 titanium for steel would become competitive when the price for the variety of steel being replaced exceeds about 55 cents per pound. Reduction in price to about 65 cents for titanium would be required to bring it into competition with stainless steel selling for about 35 cents per pound. The potential market for titanium can be visualized when it is considered that stain- less steel production by one specialty steel company approxi- mates 100,000 tons annually, valued at around 70 to 75 million dollars. One current producer has predicted that even at a price of $2.50 per pound for titanium metal, annual production at a rate of 100,000 tons is possible within the next decade. This would represent a sales value for the metal of 500 million dollars. Widespread substitution of titanium for ordinary steel at 5 cents per pound seems hardly likely, since the price of titanium metal would have to drop to about 9 cents per pound. No really cheap method has yet been developed and large-scale demand would furthermore necessitate the concentration or beneficia- tion of lower grades of ore than are now considered economic, with resultant higher raw material costs. The utilization of titanium in the construction industry seems to be years ahead, and it is worth comparing this situation with that of aluminum metal where it was not, until the recent war demands had permitted plant expansion to a point where the better established uses had been more than satisfied before ex- tensive application to construction became feasible. Commer- cial exploitation of titanium will occur first in those use areas taking most advantage of the unique properties of the metal, i. e., lightness, strength, corrosion-resistance, and high tempera- ture stability. Thus, titanium is of extreme interest for military uses, as in the construction of both surface and airborne mari- time equipment, weapons, and various items of transportation equipment. PLASTICS AND OTHER SYNTHETICS Plastic Pipe Plastic pipe made from synthetic plastic material has been available commercially for 2 to 3 years. It reached in 1950 a market volume of 5.25 million pounds valued at approximately 7 million dollars. It is believed that substantially more plastic pipe would have been installed in 1950 had materials supply permitted manufacture. On the basis essentially of only those uses to which it is cur- rently being put, it is estimated the market for plastic pipe will increase to some 75 million pounds by 1960. Plastic pipe has found industrial acceptance because of its light weight, corrosion-resistance, and ease of handling. The 1950 market distribution was estimated to be about half for handling corrosive coal mine water, over a third for handling brines and very sour crude oil, and the remainder used in food handling and processing plants and farm water wells. Other industrial uses include water-conditioning systems, handling liquid sugar, and a variety of chemical plant and laboratory uses. In industrial, commercial, and residential construction, maintenance repair and operation, there are literally hundreds of potential areas of use. Plastic pipe has already had trial application in residential construction as domestic gas lead-in pipe from street mains, and is embedded in concrete flooring for hot-water floor-heating systems. Thus, the new building of Bjorksten Research Labo- ratories in Madison, Wis., contains an experiment in the use of three types of plastic pipe embedded in concrete floors for radiant heating purposes. Water at a temperature of 135 degrees Fahrenheit is circulated. After 3 months of use, the ad- vantages of the use of plastic pipe in this way are said to be complete freedom from corrosion and lower initial and in- stallation costs. At present, plastic pipe of 2-inch diameter accounts for about half of the market, with the size range from 1 to 4 inches accounting for about 90 percent of the market. Diameters up to 16 inches have been fabricated. Extrusion of the larger diameters requires very heavy, expensive equipment, and this factor limits the number of fabricators of the larger sizes. TWO TYPES OF PLASTICS MAKE UP BULK OF USE By far the most popular material for plastic pipe is polyethyl- ene, which, in 1950, accounted for over half of the plastic pipe manufactured. It is believed that 10 years from now this will still be the most popular material, if sufficient amounts are made available to the fabricators, and is expected to account for two- thirds of the plastic pipe made. Ten years from now, polyethyl- ene pipe is expected to have its greatest application for farm irrigation, where it will replace iron pipe, which is subject to rust and is considerably heavier. Modified polystyrene pipe forms a semirigid pipe with greater bursting strength than polyethylene pipe. This pipe is readily threaded or cemented for easy coupling. Major uses of this pipe have been for oil field and coal mine use. It has found use also on farms for water handling. Modified polystyrene pipe in 1950 amounted to only half that made from polyethylene and is ex- pected to hold that ratio or possibly decrease slightly in the next 10 years, assuming no new factors in the picture. Cellulose acetate-butyrate competes with modified poly- styrene for the semirigid pipe market and also finds general use in the handling of beverages during manufacture and sale. Present volume of pipe from this material is small, and future volume will depend on supply and relative costs. Southern Cali- fornia Gas Co. has installed some 150,000 linear feet of 1-inch cellulose acetate-butyrate plastic pipe to carry domestic gas at Page 148 a pressure of 30 pounds per square inch from street mains to residences. Other companies are reported to be making ex- perimental tests. The plastic pipe has proven highly satisfactory since it does not corrode and is very easily installed. The in- stalled cost of this pipe is competitive with that of either wrapped steel or bare copper pipe. METAL PIPES LINED WITH PLASTIC Plastic-lined metal pipe competes with plastic pipe where corrosive materials are used at high temperatures and high pressures. It is roughly four times as expensive as extruded plastic pipe and is bulky and expensive to install. Laminated glass cloth formed into plastic piping represents another variety of plastic-containing pipe. This laminated pipe generally made from glass cloth combined with polyester resin is considerably more expensive than extruded plastic pipe, but it has the advantage of withstanding high temperatures and pressures as well as being chemically inert. This material is being appraised by oil refineries where temperatures of 200-250 degrees Fahrenheit are encountered; it is being considered for air conditioning systems, drainage pipes, ventilating ducts, and for other conduit uses. Laminated phenolic resin tubing and pipe have been manu- factured primarily for use in the chemical industry and is not expected to find application for ordinary uses in construction, maintenance, and repairs of residences and commercial buildings. Recent prices (1951) of 2-inch pipe made of different commercial materials as are follows: Price, Weight, Material . 4/ft. lbs./ft. Stainless steel 432 (3.65) Brass '225 4. 12 Rigid vinyl 165 1.38 Flexible vinyl chloride plastic 120 1. 09 Cellulose acetate-butyrate 70 0.45 Polyethylene 66 0.44 Modified polystyrene 62 0. 45 Galvanized iron 40 3. 66 Black iron 29 3. 66 It is probable that increased volume of manufacture, greater competition, and better distribution will-tend to lower the price to the user of plastic pipe. The prices already come close to that for galvanized iron pipe, and the economies in use are more than sufficient to pay for the differential, as witness the present demand level. Plastic pipe for indoor plumbing has received some interest in the East, and the Housing and Home Finance Agency of the Federal Government is amenable to its inclusion in plumb- ing codes. It is generally considered, however, that some diffi- culty will be encountered in changing the present restrictive local plumbing codes to allow the use of plastic pipe. Polyester Resin Laminates Combinations of resins and fibrous materials such as wood, paper, glass cloth, chopped fiber, and so on, have shown strong growth. It is believed that these materials will maintain a rapid rate of growth for at least the next several years and will be subject to promotion by major plastics companies in the field. The combination of polyester resins with a reinforcing mate- rial such as glass cloth produces molded structural parts of high strength and rigidity. Since this type of resin does not require high pressure or high temperature to form, there is essentially no limitation to the size or shape of articles which can be made. Large units such as 36-foot naval craft have been produced. Development after the war was hampered by the relatively high cost of the materials involved, especially glass cloth, and by difficulties in the handling technique. Production, therefore, dropped sharply as military requirements disappeared. How- ever, production rose from about 2 million to 9 million pounds of resin in 1950 due to the use of low-cost chopped glass fiber and improved methods of handling. Major applications of the material have been for tote boxes in manufacturing plants, corrugated sky lights, battery boxes, one-piece sailboats, fishing- rods, etc. Application in construction will depend upon the relative cost with respect to other building materials which will be com- petitive in properties. Complex structures in panel form made from resin-bonded glass cloth or glass fiber honeycomb cored laminates, faced with either metal, cloth, paper, or wood, have been made and may increase in use as they become more gen- erally available and more generally known. Resin Molding Developments Developments in the molding of thermoplastic resins by the injection technique are permitting the fabrication of larger and larger items. Thus, pre-plasticization, whereby the resin to be injection molded is preheated to just short of molding tempera- ture, permits the capacity of injection machines to be greatly increased without requiring machines of exorbitant size. The general availability to the molding business of larger and larger capacity machines is permitting the molding of larger items. Thus, possible future applications, now being considered by the plastics industry, include such items as one- piece kitchen cabinets complete with molded-in racks, handles, and shelves, one-piece refrigerator interiors with molded-in shelf supports, colorful and light weight wash basins, colorful covers for hot and cold water inlet controls for basins and sinks, and so on. Monofilament made from a copolymer of vinyl chloride and vinylidene chloride has been used for the past 3 or 4 years for weaving into screen cloth. First developed when metals were in short supply and proved in the field, these screens hit the domestic market in 1945. Windows in the Bell Telephone Laboratories at Murray Hill, N. J., were built in 1949 with this plastic screening. Figures for volume and general order of prices of screening are as follows: 1947 Price Material volume, sq. ft. 0/sq. ft. Galvanized steel (black) 336,200, 000 7 Bronze (copper) 195, 200,000 15 Aluminum 62, 000, 000 14 Vinyl chloride plastic 118,000,000 11-12 Total 711,400,000 It is doubtful that this volume of 700 million square feet of screen represents a normal demand picture, and industry- estimates are that 600 million square feet is a more likely Page 149 volume. The pent-up demand for maintenance purposes re- sulting from wartime shortages gave rise to the somewhat distorted picture of both total and plastic volume. The market for vinyl chloride plastic screen comes partially from all segments of the screen market. However, the superior ability of the plastic product to stand up to salt air and chemical attack gives it some preference in coastal and industrial areas. Deficiencies of the plastic screening are a tendency to sag when frequently pushed against and to melt holes when exposed to lighted cigarettes, matches, or other heated objects. Total annual market for plastic screen has not expanded notably during periods when metals were generally available and in 1950 there was only one manufacturer. All indications point toward an expanding demand for paints in their present stage of development. While new resins and better drying oils and pigments are expected to improve products as these materials become more available, it is gen- erally believed that there will not be any major revolutionary developments in paint products. The success of the water emulsion paints is significant. The alkyd resins may become increasingly important, both in water emulsions and with oil. It is believed that these paints will grow in popularity for use on inside surfaces, and the alkyds in oil paints may come into significant demand for outside trim. Regardless of the success of new materials, it does not appear likely that the paint business replaced will total more than an almost negligible percentage. New applications for paints, brought about by such products as the water-thinnable paints, may obtain new markets more rapidly than other types of surfacing will take markets away. Pigments The wide use in the last two decades of pigments based on titanium dioxide comprises an interesting record of the intro- duction of a relatively new and desirable material into an ancient and highly evolved segment of industry. Titanium dioxide has the highest hiding power of any white pigments, but the cost of raw material and the complexities of manufacture make it high priced. Because of this, pigments based on titanium dioxide met with considerable sales resist- ance, and an intensive educational program was required to convince paint manufacturers that prices were low on the basis of cost per unit of hiding power as used in paint mixtures, New developments include such pigments as 30 titanium dioxide-70 magnesium silicate, which give a high hiding power pigment with less vehicle sensitivity than older pigments. Today the titanium-based pigments are the backbone of the white pigment segment of the paint industry. Demand has more than kept up with constantly increasing manufacturing capacity, It is probable that future demand will be substan- tially greater. Several factors have served to hold down the rate at which the titanium pigments production has grown in the past. Among these may be noted: patent situations which prevented an "outsider" from becoming a manufacturer, very high cap- ital requirements for suitable plant facilities, and the limited availability of suitable ore raw material. Plant investment re- mains high, but the other obstacles to pigment production are no longer important. Being a large consumer of sulfuric acid by present processes, the titanium pigment manufacturer is concerned about the sulfur supply. It is possible for the titanium pigment manu- facturer to recover much of the acid required in the process, and recycling would be instituted when economies warrant. Processes are available. Other demands for titanium ore are likely to develop as a result of the progress in production of ductile metal. If the cost of producing titanium metal can be brought low enough for it to compete with even the more special grades of stainless steel, the demand for ore would greatly exceed that for pigments alone. Competition between metal and pigment may ensue. Resilient Floor Covering The market for resilient floor covering has developed largely within the past 20 years. Estimates show that resilient floor coverings were used for only 11 percent of all commercial floor surfaces in 1927 but had increased to 47 percent by 1940 and still further by 1950. During this period, residential use developed, principally in kitchens and bathrooms. The recent growth of the field is shown by the following estimated quantities, exclusive of data on enameled felt. Estimated annual production—Major types of resilient floe [Figures millions of sq. yds.] 1935 1939 1941 1948 Asphalt tile Linoleum Enameled felt-base floor covering dominates the field in volume because of its relatively low cost. Thus, 1948 volume was 280 million square yards or approximately 70 percent of the yardage sold. The price is less than half that of standard linoleum and life in use considerably less than half. Little fur- ther development is believed likely to occur in this product. ASPHALT TILE During the war and postwar period many commercial users installed asphalt tile, due to unavailability of preferred mate- rials. Restrictions on manufacture created product shortages which severely curtailed normal residential and commercial consumption. Today, however, with other materials generally available, asphalt tile still captures over half of the commercial yardage sales. The increases in asphalt tile usage has been largely at the expense of commercial-grade linoleum which was the prewar leader. Asphalt tile properties are quite satis- factory in many uses, and it has appealed to architects and other building professionals seeking to meet high building cost budgets. Despite this cost consciousness, luxury goods such as rubber, cork, and vinyl have made certain inroads against Page 150 middle-priced products, but as yet they account for only a minor portion of commercial sales. It is likely that in the commercial field asphalt tile will con- tinue to have the largest yardage sales, with commercial-grade Y&-inch linoleum a close second. The proportion of the market which the higher priced new materials, such as vinyl, can hope to capture in the future will depend upon demonstrated per- formance and effectiveness of promotional effort. Prejudices held by architects and other building professionals will continue to influence their choice of materials. Initial and long-run cost of materials will undoubtedly continue as the major factor in most commercial installations. There is high expectation for what the newer plastic mate- rials can offer, but it is expected that a large share of confidence will still be placed in standard gage linoleum for the inde- terminate future. A recent major technological development in resilient floor covering has been the introduction of polyvinyl chloride resin as a base material. The success of this newer type of vinyl floor covering has been limited partly by costs to the consumer, partly by volume of resin available, and partly by the usual difficulties attending the commercial introduction of a new product in a field dominated by old, well-established, satisfactory products. Other than low-priced enameled felt rugs, the bulk of the resilient floor covering sales to the residential market is of %2- inch inlaid linoleum, for use in kitchens and bathrooms. Asphalt tile has become increasingly popular for basements and game rooms. Linoleum, asphalt tile, and rubber tile are being used to a larger extent today than before the war in living rooms, bed- rooms, dining rooms, entrance halls, and dens, but this tendency is apparently due in considerable part to the high cost of good wood flooring and textile carpets, rather than to any substantial change in consumer preference. Low-priced asphalt tile has grown rapidly in popularity, pri- marily for use where a moisture-resistant floor covering is re- quired as in below- or on-grade floors. Shortcomings are several, including relatively poor elastic recovery, relatively poor durability, and sensitivity to grease and solvents. VINYL FLOOR COVERING Vinyl floor covering has had to overcome difficulties in color and styling which had to be developed to resemble the older types of material. Another problem has been to justify higher installed costs for a product which to the consumer looked rather thin and light for the price. Because of its higher per pound raw material cost, vinyl floor covering tended to be made in light gages which by test, however, exceeded the wear life of heavier gage linoleum. It was necessary to convince the consumer that the thinner vinyl covering would exceed the wear from standard inlaid linoleum. Maintenance of vinyl floor covering is far less of a problem than in the case of linseed oil linoleum, because of the much harder surface of vinyl products. However, maintenance is apparently a factor of secondary importance in the selection of a resilient floor covering. Thus, whether the expected life of the floor covering with "average" maintenance care is 10 years or 20 years appears to make little difference in the original choice of the material to be installed. Appraisal of the future for vinyl floor covering indicates that in the commercial markets, groups most likely to use the vinyl veneer flooring are schools, hospitals, restaurants, and concerns making or maintaining public transportation vehicles. In each . of these areas, maintenance, durability and continuing good appearance are important requirements. Such usage will to some extent represent a replacement by the vinyl covering of other materials, primarily rubber tile flooring and heavy or so-called battleship linoleum. Likewise, in the residential field of use the consumers most likely to be converted to vinyl floor covering are those building or maintaining the relatively more expensive housing. In the long-range picture, it is probable that vinyl- or related-type floor covering material will command a larger portion of the medium-priced range of resilient floor covering than is true today. If so, the major displacement would be linoleum and a portion of the market now supplied by rubber flooring. The cost of vinyl floor covering has not reached a repre- sentative stabilized level, since progress is still being made in manufacturing techniques, compounding, mixtures with other materials, veneering, and on costs of the primary raw material. Cost to the consumer is probably the biggest problem for this material to overcome; but it is reasonably expected that costs will be reduced and that volume will increase. It may be of interest to compare some recent prices in eastern United States. Comparative floor covering prices [Dollars per sq. yd.l Standard linoleum: % 2-inch. . Asphalt floe Rubber floor coveri: %2-inch sheet. . %2-inch tile. . . Vinyl floor covering Less vs. linoleum. S4.00-S6.75. S6.75-S8.00. Less vs. rubber. In both residential and commercial markets, the advent of radiant heating may have a decided effect on the resilient floor covering market. Some recent installations of asphalt tile on radiant panel heating have given poor results, primarily be- cause of faulty adhesives. Features needed with panel heating are dimensional stability and durability at prolonged high temperatures, heat conductivity, relatively high rates of heat transfer, and proper adhesion. It is worth noting, however, that current volume of radiant heating panel construction repre- sents only a small portion of new construction. TEMPERATURE REGULATION Fuels and Furnaces With very extensive natural gas pipe lines installed and pro- posed, increases in the number of gas-heated homes are in prospect. The present great wave of pipe-line building will be substantially complete by 1953, by which time most parts of Page 151 this country will be served with natural gas. It is anticipated that new installations of gas central heating will increase as follows: Homes 1950 770,000 1951 792,000 1952 523, 000 1953 225, 000 Total 2,310,000 Most of this growth is either in new homes, or in conversion from coal. The petroleum industry expects that gas heating will displace some now-installed fuel oil heating, but that this would be gradual. Coal is definitely losing out. It is estimated that in 1949 only 7 percent of new homes had heating equipment using solid fuels. Where natural gas is available at reasonable cost, as in the Pittsburgh area, practically 100 percent of the new homes were equipped for gas heating. The Anthracite Institute has devoted research to improving the convenience of coal burning. Automatic stokers, with every effort directed toward easy ash disposal, have been developed. The dust handling and ash problem remain, however, and while progress has been made, no solution is in sight which would make coal equal liquid fuel's convenience. For example, attempts at automatic ash disposal by flushing down the sewer with water encounter so many objections from town engineers because of settling and clogging of sewers that this alternative seems impractical. The use of liquefied petroleum gas is also expanding. The primary domestic use is in cooking, it being estimated that, while almost all of the roughly 7 million domestic customers use liquefied petroleum gas for cooking, only 25 percent use it for another purpose, such as water heating, refrigeration, or space heating. On the other hand, space heating is very definitely growing; for example, 25 percent of the 2,100,000 direct gas heaters sold in 1950 were for liquefied petroleum gas, and similarly, 12 percent of the 650,000 floor and wall furnaces sold in 1950 were for liquefied petroleum gas. It has been estimated that the domestic liquefied petroleum gas sales will be up 65 percent by 1955. It appears evident, however, that liquefied petroleum gas can never claim any very sig- nificant share of the space heating market because of its relatively high delivered cost. COST AND CONVENIENCE INFLUENCE FUEL CHOICES Representative costs of fuel used for heat introduced into a dwelling may be considered. The following table shows the number of British thermal units purchasable for 1 cent from the various fuels at a representative set of prices. Energy Type Electric. Oil Gas. . Coal. Resistance devices. Heat pump Air, steam, water. . Air, steam, water . . Air, steam, water . . Unit Kw.-hr.. Kw.-hr.. Gal M cu. ft Ton . . . . Heat equiv- alent/unit B.t.u. Eff. per- cent Price unit 3, 413 141, 000 1, 000, 000 24, 000, 000 100 300 70 75 55 ISO. 02 0. 14 0. 50 1. 00 10. 00 20. 00 B. t. u. per 1£ 1, 700 5, 100 7, 000 15, 000 7, 500 13, 200 6, 600 Second to price, the factor of convenience and ease of use is an important consideration in fuel selection. Coal is up against a serious disadvantage, and no technical development appears in view which will change this situation. It seems very unlikely that the next two decades will see a sufficient change in the relative price of coal to overcome the inconveniences of use. Gas is more convenient to use than oil, although the relative advantage is not nearly as striking as between liquid fuels and coal. Gas has the advantage of eliminating storage facilities, and the need for investing in stored fuel. Gas furnaces require far less maintenance than oil-fired installations. Electricity is of course the ideal fuel, in that it is easier to control than any other, and is more convenient. It is inherently a very wasteful source of heat, however, and from the viewpoint of social benefit and economy, should be used only for power purposes. Moreover, electricity is usually a relatively costh form of heat. There are, of course, regions where electricity is so cheap that it can be used extensively for residential heating (as in the T. V. A. area), but it is not anticipated that many more such regions will be developed. Radiant electric heating panels have recently been promoted by several companies as a means of house heating. These arc typically panels having a surface area of several square feet, sel into the walls of the rooms to be heated. Such radiant electric heating is costlier than other fuels. Comfort intangibles arc claimed for this type of heat, such as temperature uniformity etc., as well as the advantages of compactness, ease of control, low first cost, etc. It seems very unlikely that these advantages will offset the operating cost disadvantages of the method. Unconventional Heat Sources The engineering problems involved in collecting, storinc and transferring solar energy are formidable. In almost all in- habited regions the energy falling upon the ground area oc- cupied by an average dwelling is, easily, enough to heat the house, providing the summer heat can be stored for winter use Unfortunately, no such storage method exists today. Even the problems of storing heat received in a week of bright sunshine for use in a subsequent week of cloudy weather are not satis- factorily solved. As a result, very bulky equipment and seven architectural treatment are needed to provide the larger radia- tion areas necessary for satisfactory performance in regions oi the latitude of Washington, D. C, and north thereof. It seems clear that solar energy will be more extensively usee as a source of house heating in the southern parts of the countr) with reasonable sunshine hours during the winter months Indeed, solar heating is already being used extensively in Flor- ida and Texas for domestic water heating. It is quite likely thai new housing in the Southern States will see the installation oi solar heating. Such a development is contingent, however, upor development of successful heat storage. heat pump expensive and needs power also The heat pump appears to be the only other important heat ing development in view. This device was proposed over i century ago, and a large number of trial installations have beer made during the past decade. It is still a rarity and more wide spread adoption awaits solution to a number of problems. Page 152 The heat pump is a device whereby heat can be taken at a "-datively low temperature level and raised to temperatures iigh enough to provide adequate warmth. A heat pump in- :alled in a house has three important parts: (a) heat absorb- ng coils outside the house; (b) radiator coils for discharging heat inside the house; and (c) a compressor for cycling the heat-carrying fluid within these coils. From an engineering point of view, these units are identical with any household refrigerator, in that the heat taken from the cold box (or heat sink) is pumped out at an elevated temperature in the cooling coils (heaters). An electrically powered heat pump requires only about half as much power for a given heat delivery as does direct electric resistance heating. This economy, however, is offset by the -datively high first cost of equipment and subsequent main- enance. The heat pump unit must be large enough to handle :he maximum load placed upon it on the coldest day of the /ear. Even in a small five-room house, this requires a 7-kilo- vatt connected load in a climate like Boston. Many dwellings are not equipped with wiring adequate to this purpose, nor are most distributing systems equal to the load which would result from a widespread adoption of the heat pump. A reasonably satisfactory technical solution exists today to all aspects of the heat pump problem, although design of a single device capable of operating in all climates has not been developed. For this reason, many companies, and especially the refrigeration equipment companies, will give this device much development attention. Some dozen or so commercial enterprises are active in heat pump developments, and include some of the major electrical and mechanical equipment man- ufacturers. It has been estimated that industry expenditures for this development have amounted to the order of 10 million dollars. HIGH FIRST COST Unfortunately, the first cost of the installations is very high, running two and three times the investment usually required in heating facilities. The problem of reducing the first cost of these units represents a very difficult task of making cost reductions in devices which have already received considerable develop- ment attention in other applications. The high-cost disadvan- tage can be partly overcome by using the device for summer cooling as well as winter heating. Most people, however, espe- cially in the densely populated Northern States, are unwilling to make so great an expenditure to gain summer conditioning of their buildings, when it is really needed on only a very few days in the year. Another economic obstacle faced by the heat pump is the fact that replacement of costly parts of the heating system will be necessary much more frequently than with the orthodox combustion furnaces. A shorter operating life will increase very seriously the costs of maintaining a heat pump. Finally, at normal prices, costs of electric power with a heat pump are about ecjjal to the costs of fuel for an oil-fired furnace in the same house. Thus, the heat pump really appears to offer no economic advantage for the general case of residential heat- ing. It has been reported that the heat pump operated electri- cally can compete with other fuels in many locations when the power cost is 2 cents per kilowatt-hour. The recommendation has been made that engine-driven compressors be used to in- crease the useful heat from a given fuel consumption. In other words, instead of burning oil in a furnace heater, more efficient use, thermally, could be made by running an engine which operated a compressor in a heat pump system. Some of the problems of designing, selling, and maintaining such systems are fairly obvious, and it appears unlikely that for general appli- cation such systems will be promoted to the same degree as electrically driven ones. Considerable thought is being given to the possibility of combining solar heating and a heat pump. Such a combination promises to reduce considerably the size of the heat pump needed in a given installation, providing the storage problem can be reasonably solved. However, the complications of co- ordinating a solar system with the heat pump appear such that no widespread adoption of such a system that combines the two methods seems likely. Commercial and industrial establishments represent a much more promising market for the heat pump's application. Here summer cooling is economically advantageous, and since the installations are large enough to warrant individual engineering attention, there is often a real advantage in installing a heat pump. PRESENT USE OF HEAT PUMP By the end of 1950 there were an estimated 600 heat pump installations in the United States ranging in size from 0.5 to 300 horsepower, practically all electrically driven. Of these, about half were in residential installations, almost half in com- mercial buildings, and a small proportion in industrial use. It seems apparent that over a period of time heat-pump in- stallations will become increasingly important in heating and air conditioning. In periods of normal economic conditions, it is to be expected that wider acceptance will occur, particularly where combinations of relatively cheap and abundant power and moderate climatic conditions prevail. Because of their electric power requirements, these installa- tions will have an unusual effect on the demand curve of the power generating facilities of the nation. Already the growth of the heat pump principle has been sufficiently impressive to have caused power companies to give serious study to the load effect that may be expected. It has thus been estimated that if only 10 percent of the residential customers of any one power system were to use heat pumps at the level now thought possible, a load increase of approximately 17 percent of the peak of all classes of service now supplied by the system would occur. Heating Systems The transfer of heat between the furnace and the space within the dwelling is now accomplished by one of the following four principal methods: Hot air. This involves passing air by natural convection or blowers directly over or through the heated furnace surfaces. Hot Water. Water heated in a furnace is circulated to radi- ators or connectors and air within the building then moved by natural convection over these radiators or connectors. Page 153 Steam. This system is like hot water, except that steam is generated in the furnace instead of hot water. Radiant Heating. Radiant heating involves maintaining the entire ceiling, floor, or walls of a building at some definite temperature, usually well under 100 degrees Fahrenheit, by means of hot water, steam, electricity, or hot air. By such a concentration, more uniform temperatures and reduced con- vection currents can be maintained, thus giving the inhabitants a feeling of comfort at a lower air temperature than with other types of heating systems. There is no indication that any other variety of heating system will be developed. Similarly, while fluids other than water and steam could be used to transport heat, none has superior properties. Moreover, heating techniques are quite highly evolved, and it appears that changes will be relatively minor. HEATED AIR On the domestic front, the trend toward smaller, inexpensive dwellings has had its influence upon the type of heating plants selected. This is especially so since often no cellars are pro- vided, or else only a utility cellar is installed large enough to accommodate a furnace and fuel tank. As a result of this em- phasis on economy, increasing interesf in the most inexpensive type of heating equipment has become apparent, namely hot air. It has been stated that over three-quarters of the central heating installations of 1950 were hot air, with steam and hot water sharing the remainder. In warm air heating, the notable development recently has been toward use of forced circulation through relatively small ducts. This trend has reduced duct metal requirements by 50 percent and more. Aluminum has been extensively used in place of galvanized duct work largely because aluminum has become cheaper. This price relationship is not expected to be permanent, and it is anticipated that galvanized metal will again be used almost exclusively when "normal" price relations return. It is expected that this trend toward hot air will con- tinue, not only because of its low cost, but because it lends itself readily to central air conditioning of some kind. It is expected that the disadvantage of blower noise in such systems will be overcome. HOT WATER AND STEAM Some work has been done on the use of relatively high temperature water (240 degrees Fahrenheit) circulating under pressure at relatively high velocity. Such a development would very markedly reduce the size of the pipe and convectors re- quired in a system, and thus reduce metal requirements. It seems unlikely that such systems will be widely adopted in dwellings,, because of the hazard and control problems. On the other hand, it represents an interesting possible trend of de- velopment in industrial and commercial installations, where professional supervision would make the use of such a system more practicable. A significant new development, which normally utilizes steam or hot water, has been base-board heating. This system has claimed advantage of more uniform heat than hot air at lower cost. RADIANT HEATING In more expensive homes, radiant heating from floor or ceil- ing is being used. This trend has been especially noticeable in houses without basements. Heating is done almost entirely with hot water, although some research is going on in steam and even hot air. Since piping is usually inaccessible, high quality ma- terial is used to minimize chances of failure. Copper is almost invariably used in ceilings, while either copper or wrought iron is used in floors. In the New England climate, the tubing used averages perhaps 1 pound of tubing per square foot of ceiling (or floor) area, while wrought iron pipe runs perhaps 2Vo pounds per square foot. It is not clear whether the floor or ceil- ing panel will be most widely adopted. A variety of "combination" schemes is being investigated. For example, the combination of radiant heat and hot air is being explored, in that duct work for transporting air is being buried in floors in certain experimental dwellings. Success here would apparently mean materials consumption midway be- tween that of hot air systems and radiant heating systems. One problem of radiant heating, which will, however, prob- ably be solved, is that panels (when large, as in the case of pipes buried in a concrete floor) respond very slowly to changes in demand, because of their high heat capacity. In other words, a sudden change in heat demand can be accommodated only slowly, since at best it takes time for the heat output of these large heavy panels to be increased or decreased. NEW DEVICES A number of new devices have been proposed, or are con- ceivable in the heating field: Air Filters. In the costlier hot air systems, air filters are gen- erally standard today. These inexpensive coated fiber filters will probably remain standard. Odor Control. The average householder is not interested in any odor removing device unless much cheaper than the schemes proposed. No inexpensive device is in prospect. Air Circulation. Use of heat exchangers whereby cold air could be drawn in and heated by stale air being exhausted from the house has been proposed. However, no solution to the prob- lem of building a sufficiently inexpensive exchanger is in sight. INSULATION USED TO HELP TEMPERATURE CONTROL Four general types of insulation are used on dwellings and industrial establishments to conserve heat: Loose Fill. Materials are powdered, granulated, cellular, or fibrous like rock-wool, slag-wool, glass-wool, crushed gypsum plaster, vermiculite, and shredded redwood bark. The advan- tage of loose fill materials is that they can be used in existing structures, where they are applied either by pouring or blow- ing. However, since they "settle," and also "bridge over," thus forming empty pockets in the walls, these materials are not used in new houses except sometimes in ceilings. It is expected that new products based on glass-wool will come into use, which will overcome the disadvantage of settling characteristic of products in current, use. Page 154 Fiber Batts and Blankets. These are made of such sizes that they will fit into standard stud spaces, consist of fiber mats enclosed between sheets of paper, cloth or wire. Blanket types are available for house insulation, as follows: mineral wools, balsam or cotton wool between sheets of paper, eelgrass stitched between paper or cloth, macerated paper between paper sheets, thin crepe paper stitched together, hair felt between paper or cloths. Rigid Board Insulation. This usually consists of glass, wood, or sugarcane fibers, processed with an adhesive, making sheets 4 feet by 8 feet, and about one-half inch thick. This material has some structural strength and is used under roofs, for ceil- ings, etc., where such strength is desirable. It is also being used increasingly for walls, where it supplies the cheapest (and least satisfactory) form of insulation. A house constructed with fiber- board insulation qualifies for a Federal Housing Administra- tion loan, hence such insulation may be used increasingly. Reflective Insulation. This material dates from 1925, when Schmidt and Dykerhoff filed patents in Germany for the use of crumbled aluminum foil, less than 0.0005 inch thick, for commercial insulation. It operates on a principle basically dif- ferent from the preceding types of insulation, in that it depends upon the reflection of the heat, rather than upon the presence of a barrier of low conductivity. In practice, the only material which has proved practicable for use in this fashion is aluminum, either in thin foil form, or coated onto paper. Blankets containing foil, which are primarily labor-saving devices, also exist, which consist of combinations of paper and foil so arranged that they pull out somewhat like an accordion to give properly spaced reflecting surfaces. Com- binations of foil and fiber mats, as well as plasterboards coated with foil, have also appeared on the market. Reflective insulation, if properly installed, should last as long as the building in which it is applied, but since alkalies attack aluminum, foil must always be protected from wet plaster. More care is needed to install reflective-type insulation than fibrous insulation. Properly installed, 1 inch of fiber in- sulation is the equivalent of one layer of reflective material, and a typical domestic installation involves two layers. One interesting advantage of reflective insulation over fibrous insulation is its relatively small bulk before assembly; rolls of aluminum foil occupy less than one-twentieth the volume of fibrous materials of equal insulating value. On the other hand, the space occupied by assembled insulation of the reflective type within a dwelling wall is roughly the same as that of fibrous insulation. No new developments in insulation appear to be in prospect as far as new materials are concerned. That is, no new in- expensive fibrous and reflective materials which could be used here seem in sight. It seems likely that developments to come might be in the direction of making finer-fibered glass-, rock-, and slag-wool more cheaply. If this becomes possible, then extensive displacement of other types of insulation appears likely. Some mention should also be made of the possibility of increasing use of a honeycomb type of corrugated cardboard for insulation purposes. Glass is a poor insulator and up to 10 times as much heat is lost through single-pane glass as is through an equal area of insulated wall. Since about 10 percent of the vertical area of an average house is glass, the heat loss is obviously considerable. It has been estimated that, in a climate like New York City's, each square foot of single pane window space is responsible for the combustion of 15 pounds of coal, or 1.5 gallons of oil during the winter. Insulation of glass areas is accomplished by double glazing to provide an insulating air pocket. In practice, use is made either of storm windows, or of the new developed double glass panes. Heat-loss reductions amount to about 40 percent with double glazing spaced one-quarter inch apart and 50 percent with one-half inch spacing. Wider spacing results in no further economies and gives results equivalent to normal storm windows. With the trend toward picture windows, double glazing of this type will almost certainly grow in importance in spite of high costs. A further factor which would favor the use of double glazing would be the further adoption of the "solar" type house. Moreover, it seems probable that some manufacturing econo- mies can be looked for which will reduce prices and make its use possible even in ordinary windows, where the permanence of the installation, and absence of the inconvenience of storm windows, makes its use attractive. Air Conditioning A major problem faced by the rapidly growing home air con- ditioning business is that of adapting equipment to existing present-day houses. Most existing houses are ill-suited for cen- tral air conditioning, and the costs of installation are quite heavy. The only type heating system in current use adaptable to year-round air conditioning is forced air-draft circulation in which the existing air ducts may be easily connected to the refrigeration unit. It has been estimated that nearly 7 million centrally heated homes in the United States employ warm air systems which may readily be converted for air conditioning in the summer. In the Northeast there is presently insufficient demand for home air conditioning to support suitable dealer organizations for proper distribution. In the Southwest, where natural gas is cheap and the heating load frequently less than the cooling load, several commercial types of central automatic all-season equipment for moderately priced houses are available in the new construction field. The trend toward public, institutional, and insurance com- pany financed housing indicates an increased use of central heating and air conditioning. The trade feeling is that this developing market is most likely to expand first in the South- west. It is expected that many sales will result in this region in efforts to combat dust storm air pollution, a problem more or less unique in the Southwestern dust bowl region. Office building and factory air conditioning are now widely considered as profitable efficiency measures, especially in sec- tions of the country which suffer from prolonged hot, humid weather. The field of application of air conditioning is expand- ing also as a result of development of new and improved types of equipment by manufacturers, affording economies in per- formance which bring the cost within the range of more and more enterprises. One very real and troublesome problem, however, confronts the manufacturers of air-conditioning equipment for central operation. This is the problem of dealing with the contractors Page 155 who design and install the conditioning system. A substantial portion of the air-conditioning equipment is simply sold as such by the manufacturers, who may then be wrongfully criticized for poor performance when the real problem is that of improper engineering and design of the system. Frequently, there may be substantial differences in installed costs where the same equipment is used for different but comparable in- stallations. This is generally due to variations brought about by lack of standardization in design and layout of duct work, outlets, heat load balancing, and so on. Duct work for transferring the processed air from equip- ment to the space being controlled is most generally made of sheet iron or steel suitably insulated to reduce heat leakage and protect woodwork when hot air is transferred during the heat- ing season. Cement-asbestos fabricated ducts are also used but are more difficult and more costly to fabricate and install than other types of ducts. Air filters used in conjunction with conditioned atmosphere installations are, in general, fabricated from glass-wool batts, the glass fibers being cemented into a fixed mass by means of phenolic resins, and coated with a nonvolatile, sticky substance such as tricresyl phosphate to cause adherence of dust particles. Such filter application in building operation has been one of the initial large-volume uses and continues to account for a signifi- cant proportion of the market for glass fibers. An ever-increasing market for the window-type room unit is predicted and as industry capacity and production increase, it is expected that selling prices will drop. This type of air con- ditioning has become quite popular because of the much lower expense involved relative to converting to a self-contained, year- round air-conditioning unit in the average home. Total indus- try sales were 175,000 units in 1950, more than double the 1949 volume. Power requirements vary with the heat load, the average room-size unit air cooler being designed for continuous operation at about 1 horsepower power input, equivalent to the consumption of 9 kilowatt-hours of electricity for 12 hours of operation. At this level of power requirement, no special wiring is needed in the majority of residential installations. Modern, portable room air conditioners do not require water cooling and function much as electric refrigerators do. CONSTRUCTION METHODS The discussion of trends in building materials may be ap- proached from a number of different standpoints, such as basic categories of materials, types of buildings, and component parts of buildings. None of these is completely independent of the other, and each is in turn strongly influenced by outside factors including changing public taste, changing sociological conditions, technological developments, labor practices, and, reflecting all of these, changing public policy. In the discussions some subdivisions are herein devoted to broad categories of ma- terials, and others are devoted to portions of the building. This more or less dual approach seemed necessary if a reason- ably well-rounded picture was to be obtained. If there is one general trend which appears to be developing in all phases of the building field, it is the trend toward the reduction of field labor by supplying more and more packaged units which can be incorporated into the building with a mini- mum of time and effort. The overworked and abused term, prefabrication, is hardly correct for this trend because it in- cludes such diverse elements as prefitted and prefmished door units, walls of houses, nonresidential curtain panels, large fabricated frame sections, preassembled plumbing stacks, and the casting of concrete wall slabs on the flat ready to be up- ended into place in the building. All of these diverse develop- ments have the common aim of reducing the need for high- priced field labor. Some involve new materials, some merely involve different techniques. A factor of some importance in impeding the adoption of new materials is the lack of an absolutely reliable means of making accelerated tests. Many devices and techniques exist for testing materials, but in the long run it is actual service testing which determines whether a material is satisfactory or not. Owners are naturally reluctant to invest heavily in mate- rials which have not proved themselves over a long period of years and whose performance is therefore doubtful. Construction Techniques Welding of structural steel is almost certain to move ahead fast, resulting in stronger, lighter structures and saving on the order of 10 percent of steel. Better and closer engineering design can effect savings in the weight of materials, particularly steel where design can be based on specific materials specifications. The incorporation of floors and walls into the structure design as stiffening diaphragms can receive greater attention than heretofore, in order to reduce materials requirements. Reduction in the total weight of walls and floors by better design and use of newer techniques would result in over-all reduction in materials weight requirements. The increased use of glued-laminated timber structures, especially for large spans, is to be noted and may become significant. Prestressed concrete is to be looked for increasingly, par- ticularly if development is promoted because of continuing restrictions on steel availability. Advance of the technique of full-span roof framing of houses should be assisted since the technique reduces the need of load-bearing partitions and gives flexibility of interior arrange- ment with lighter partitions, movable if desired. BUILDING BOARDS There is a strong trend to dry-wall construction by use of sheet materials or building boards because of resulting savings in building time, on-site labor, and facility of use in remodeling or maintenance. Exterior use is developing toward replacement of wood sheathing in residences with large area sheet materials. Plaster boards made of paper-faced gypsum are used for: (a) finished walls either with plain edges covered with battents or moldings, or with depressed edges smoothed with patching plaster and tape; (b) sheathing, in which case the edges are V-grooved or otherwise matched and the paper covering treated with asphalt for moisture resistance; (c) plaster base, special absorbent paper covering and rounded edges are used except for large ceiling areas and backing for wall tile where metal lath is generally applied. Page 156 COMPOSITION BOARDS Boards made of resin- or plaster-bonded organic fibers are well established and growing rapidly in volume of use for build- ing purposes. Almost any kind of fiber is usable depending upon the economics of gathering and preparing the raw material. Raw materials in general are plentiful or can be produced as a crop, e. g., bagasse, wood pulp, waste newspapers, and so on. This type of product is available in sheets or blocks and is used for sheathing, finished walls, ceilings, and acoustical purposes. Hardboard is already widely used and is rapidly expanding in building, furniture, and other applications. One of the largest manufacturers, using southern pine, operates on a 20- year timber cropping cycle with reforestation well developed. Pressed wood made by hot pressing waste wood bonded with resin binders is an actively growing new development. The future volume of use will depend upon economics and com- petition with plywood, hardboard, and composition board products. Where the structural strength of plywood is not needed, this product appears likely to displace plywood from various building uses. Cement-asbestos board has a strong position and is expected to grow as a building material. Adaptation of fibers other than asbestos, such as glass fibers, plus additions of other materials, such as synthetic resins, to the cement are expected to result in improved products. At present, this product is lacking in tough- ness and resilience. It is used widely in industrial construction in the form of corrugated sheet for exterior and interior wall construction. PANEL CONSTRUCTION There are various categories of panel construction, including stressed-skin panels and structural sandwich construction either load-bearing panels or curtain walls. Principal developmental emphasis at present is being directed toward residential con- struction but there exists considerable actual use for industrial construction with active interest in commercial buildings. Com- pletely or partially prefabricated construction is visualized as a future technique. Much of the active development has been in the fabrication of aircraft, and the construction industry has borrowed substantially from the aircraft industry. Some of the older and more successful sandwich construction, however, antedates aircraft uses. The trend to use of engineered laminates is vigorous and promising but costs are still high. The industry needs to find a means for obtaining high volume of sales to reduce costs of manufacture. An excellent sample is the aluminum-faced, paper-honeycomb sandwich used in the Chrysler Corporation's 60,000 square foot area building in Indianapolis. Stressed-skin panels have been in general use for about 20 years. Originally borrowed from aircraft, this device makes skin help support load, instead of depending exclusively on studs, joists, or rafters, and results in lighter, more rigid con- struction. The idea has been largely used by prefabricators, and is almost exclusively plywood glued to wooden ribs, with insulation placed between ribs. Plywood may constitute finished surface of panel or be finished with clapboards, shingles, or floor covering. It allows rapid erection of large shop-built panels, transferring labor largely to shops. Structural sandwich construction also uses stressed skins or facings, but differs from stressed-skin panels in having con- tinuous or virtually continuous cores instead of ribs. Ribs are usually used at edges to make connections to adjacent panels or other members. MODULAR PRINCIPLE The principles of dimensional standardization and the modu- lar principle in design and construction, exemplified by the 4-inch modular basis of American Standards Association A62 Committees have had surprisingly little use and are making little or no net progress in the home building industry. A com- bination of several immediate reasons and more basic causes are believed responsible for this. Modular construction together with other aspects of engi- neered construction represent factors acting toward greater standardization of construction practices. In the hands of builders with adequately trained workmen provided with modular detailed plans and suitable modular materials, modu- lar design may be expected to result in reduced building costs. It is not now apparent how much cost reduction can be achieved. This chain of circumstances, however, has been real- ized only infrequently in practice, and careful coordination will be necessary before significant lasting progress is made. Tradi- tional losses have appeared at all portions of the chain and constitute effective barriers to progress. References Elsewhere in This Report This volume: Coal Products and Chemicals. Forecasts for Petroleum Chemicals. Oil and Gas as Industrial Raw Materials. Possibilities of Solar Energy. The Technology of Forest Products. The Technology of Titanium. Vol. II: The Outlook for Key Commodities. Chemicals. Projection of 1975 Materials Demand. Titanium. U. S. Bureau of Mines Tables—Petroleum and Refined Products. Vol. V: Selected Reports to the Commission. Domestic Timber Resources. Page 157 The Promise of Technology Chapter 12 Coal Products and Chemicals On the invitation of the President's Materials Policy Com- mission, the management of the Koppers Co., Inc., has assigned members of its staff to study and report on coal, coke, and by- products as raw materials for the chemical industry (nonenergy uses). Specifically, requirements for and availability of these essential materials over the next 25 years were to be analyzed, taking into account any technological developments that might significantly affect the outcome; the findings would be used as reference material from which the Commission would compose its own report. The report has been prepared as a public service, at no cost to the Government. It is not a Koppers Co. report, and the company is not responsible for any data or opinions expressed. It does, however, present the best opinions of the study group, both collectively and individually, on this difficult assignment and is believed to be a reasonable compromise between di- vergent data and opinions. The group as a whole believes that 25-year projections are apt to be quite unreliable due to many unpredictable factors, but, nevertheless, such projections have been made in this report on the basis of present trends modified by such evident technical and economic factors as might affect these trends. The so-called coal chemicals come solely from the carboni- zation of coal. About 20 percent of the bituminous coal pro- duced in the United States is so processed to make coke, gas, and coal chemicals. The rest, with insignificant exception, is burned for heat and power, no chemicals being recovered. Coal is carbonized with the primary objective of making coke, and plants can be built and operated economically only when the coke constitutes a premium fuel. The plants cannot be operated to make coal chemicals as the primary products. As a *The following members of the Koppers organization served as members of the study group, covering the subjects as listed: E. E. Donath (synthetic fuels, miscellaneous processing of coal) ; G. V. McGurl (coal and coke gasification, coke-oven gas) ; A. R. Powell, Chair- man (light oil, ammonia and miscellaneous products from coal carbon- ization, synthetic ammonia and methanol) ; E. O. Rhodes (tar from coal carbonization); C. C. Russell (technology of coal carbonization, carbon products); E.. W. Shand (end-products, coal-chemical requirements); W. E. Simmat (synthetic fuels); and C. D. Ulmer (coal and coke carbon- result, production of coal chemicals is geared to the demand for coke. The subject of carbonization is covered in Part A of this report. During the next 25 years several other methods of processing coal will probably be introduced. Two that are expected to be- come major industries in that period are hydrogenation and direct gasification. Coal will be hydrogenated primarily for syn- thetic liquid fuel, but the process will also produce large quan- tities of chemicals of the same type as now secured from coal carbonization. Direct gasification is the first step in another synthetic liquid fuel process (the gas-synthesis process) that also produces byproduct chemicals. The subject of synthetic fuels is discussed in Part B. Three different processes are considered: (1) coal hydrogenation, (2) gas synthesis, and (3) oil shale. Oil shale, it is true, does not involve the use of coal as a raw material, but has been included at the request of the Commission. Coal gasification is discussed in Part C. The chief appli- cation of this process is in manufacture of synthetic fuel, as mentioned above, but synthesis gas is also used to make syn- thetic ammonia and methanol. Also included in Part C are several minor methods of coal processing that might find some application for production of chemicals over the next 25 years. Part D discusses the requirements of coal chemicals during the period under study, for comparison with the production of these chemicals as estimated in the first three parts. A lack of balance between demand and supply appears in some cases, but no attempts have been made by our group to analyze the production from industries outside our assignment in order to determine how the lack of balance might be corrected. The qualitative relationships between the products from the various coal-processing industries and the various end-products are shown in the flow diagram on the following page. SUMMARY Up to now in this country, the so-called coal chemicals have come only from the carbonization of coal. Hydrogenation and direct gasification will probably develop into major industries over the next 25 years. These two new methods, plus the Page 159 COAL RAW MATERIAL FOR CHEMICAL AND RELATED INDUSTRIES ~+ GENERAL END-USE - Method of Primary Products Specific Products Processing BITUMINOUS COAL (All ranks, including peat)! CARBONIZATION COKE Metallurgical IBIast-Furnace, Foundry, Etc.) Water Gos Other Industrial Domestic ^FueT GAS! r Carbon Black Hydrogen ^ Ethylene TAR 1 < (Coke-oven tor,including i tar from low-temperature i carbonization) i Fuel f Road Tar Creosote Refined Tar Di+ . /Pitch Products Pltcn\.PitchCoke Naphthalene Tar Acids Tcr Bases LIGHT OIL (AROMATICS) I Fuel ^Benzene Toluene Xylenes Solvent Naphtha ^ Naphthalene AMMONIA | « Ammonium Sulfate Cmer Forms of Ammonia COMPLETE GASIFICATION HYDROGENATION- OTHER CHEMICALS WATER'GAS (SYNTHESIS GAS)i CHEMICALS AND OILS GAS OXIDATION ^CHEMICALS EXTRACTION ^ (CHLORINATION C Iron and Steel J Blost-Furnace Gas ] Iron Castings (^Carbon Electrodes (Hydrogen Carbon Monoxide Fuel Gas rFuel •j Calcium Carbide L Silicon Carbide Fuel > Naphthalene Cyanogen Compounds c.-ifur (Elemental Sulfur bu,Tur (.Sulfuric Acid Pyridine Gas Syn.Process Chemicals Synthetic Ammonia Methanol c Fuei Hydrogen Carbon Monoxide Gasoline Benzene Toluene Xylenes Mixed Aromatics Phenol Cresols Fuel L.P.G.(Butane,Etc.) Carboxylic Acids,Etc. Bituminous Material Electrode Carbon Coal Resins c { Various Products Plastics Syn. Rubber Solvents Detergents Pharmaceuticals! Insecticides Dyestuffs.Etc.l Synthetic Liquid Fuels Carbon Products |Bituminous Products recovery of oil from oil shale, will form the basis for a huge synthetic oil and byproduct-chemical industry. In addition, direct gasification of coal will be the first step in manufacture of synthetic ammonia and methanol. Steel and petroleum are major factors in determining the future of the various coal processing industries. The more im- portant data* for the coal processing and related industries are given in the tabulation on the following page. *In both "Forecasts for Petroleum Chemicals," by Standard Oil De- velopment Co., and "Oil and Gas as Industrial Raw Materials," by Dr. Gustav EglofT, the assumption has been made that any increases over present requirements for the raw materials to make the various end- products projected in each of these reports would come from petroleum or natural gas. In the case of "Coal Products and Chemicals," by the Koppers group, however, estimates are given showing how much of certain of these raw materials could be expected to be produced as byproducts from coke production, and how much more could be obtained if coal hydrogena- tion developed to a stated extent during the next 25 years. The petroleum and natural gas requirements, therefore, represent the extreme quantities that would be needed should no additional material come from the coke industry. The actual quantities which will be produced from the petro- leum and natural gas industry on the one hand, and the byproduct coke and coal hydrogenation industry on the other, will be determined by the cost factors which are not presently predictable. Page 160 Principal data for the coal-processing and related industries Coal carbonization: Steel production (million ingot tons) Coal carbonized (byproduct only) (million tons). Coke produced (byproduct only) (million tons)... Tar produced (million gal.) Crude light oil (million gal.) Ammonium sulfate (million lb.) Synthetic liquid fuels: Demand, total liquid fuels (million bbl. per day). . , Domestic petroleum production (million bbl. per day) Petroleum imports (net) (million bbl. per day) Synthetic liquid fuel (million bbl. per day) , Shale oil: Shale consumption (million tons per yr.) Liquid fuel produced (thousand bbl. per day) Ammonia produced (thousand tons per yr.) .' Sulfur produced (thousand tons per yr.)., Coal hydrogenation: Coal consumption (million tons per yr.). Liquid fuel produced (thousand bbl. per day) Phenol produced (million lb. per yr.) Cresol produced (million lb. per yr.) Ammonia produced (thousand tons per yr.).. Sulfur produced (thousand tons per yr.)... Benzene 2 produced (million gal. per yr.) Toluene 2 produced (million gal. per yr.).. Xylenes 2 produced (million gal. per yr.). Naphthalene2 produced (million lb. per yr.) Gas synthesis (Fischer-Tropsch): Coal consumption (million tons per yr.).. . Liquid fuel produced (thousand bbl. per day) Sulfur produced (thousand tons per yr.)... Ethyl alcohol produced (million gal. per yr.) Synthetic ammonia: Production (thousand tons per yr.) Percent from direct coal gasification Coal consumed for gasification (million tons per yr) Synthetic methanol: Production (million gal. per yr.) Percent from direct coal gasification Coal consumed for gasification (million tons per yr-) Coal gasification (included above in those industries that will gasify coal directly in the future and re- peated here as a summary) Coal consumed for gasification (million tons per yr.): Gas synthesis process for synthetic fuel Synthetic ammonia Synthetic methanol Total Total raw coal consumed (million tons per yr.) 1950 1955 1975 \2, 970 11.0 1 7 million tons beehive coke also produced. 2 Production of these chemicals provided only in first coal hydrogenation plant built. This plant provides only 2 percent of total liquid fuel from coal hydrogenation in 1975, so that production of these chemicals could be decidedly increased by providing the same special equipment in other coal hydrogenation plants, if desirable. Three chemicals show lack of balance between requirements and production. At present and in the near future the growing gap between supplies and requirements of benzene can be bridged by imports and production from petroleum, but un- doubtedly major new sources must be developed. Coal hydro- genation appears to promise a long-range correction. The naphthalene picture is substantially the same and, similarly, coal hydrogenation appears to be a good answer. Cresols (as well as cresylic acids) apparently will be produced by coal hydrogenation considerably in excess of future requirements. Better means must be developed to use these phenol homologs in place of phenol for manufacture of phenolic resins. This would also relieve the benzene situation to some extent, since manufacture of synthetic phenol uses considerable benzene. Most of the chemicals produced by coal carbonization and coal hydrogenation are, chemically, aromatic, or cyclic. Esti- mated demand for the end-products that require these chem- icals in their manufacture is as follows: Cyclic plastics (million lb. per yr.) Synthetic rubber (GR-S) (million lb. per yr.) , Insecticides (million lb. per yr.) , Surfactants (million lb. per yr.) Plasticizers (million lb. per yr.) Solvents (million lb. per yr.) Others (million lb. per yr.) , Total cyclic end-products (million lb. per yr.) 1950 1955 1975 1,284 2, 690 12, 800 802 1, 900 9, 000 210 325 2,100 373 936 1,865 180 300 1,800 679 787 1,244 398 472 1, 025 3, 926 7,410 29, 834 The most important cyclic intermediates required are phenol, styrene, and phthalic anhydride, the estimated require- ments and sources of which are as follows: Phenol, million lb. per yr.: 1950 1955 1975 331 600 2, 806 20 28 40 0 50 1, 350 Production—synthetic 311 522 1,416 Production-—total 331 600 2,806 Styrene, million lb. per yr.: 540 1,000 3, 935 Production—synthetic 540 1,000 3, 935 Phthalic anhydride, million lb. per year.: Requirements 240 400 2,192 Cresols, million lb. per yr.: 240 400 2,192 90 135 448 Production—coal carbonization 19 27 38 0 49 1,290- 19 76 1, 328 1 Requirements include cresylic acids—production is for cresols only. The cyclic prime chemicals required most are benzene and naphthalene as follows: Benzene, million gal. per yr.: 1950 1955 1975 Requirements 187 308 957 154 203 234 0 34 « Production—total 154 237 Napthalene, million lb. per yr.: 455 700 3,120 387 529 705 Production—coal hydrogenation 0 114 « 387 643 0) Page 161 In addition to the above cyclic end-products, intermediates, and prime chemicals, other chemicals also come from coal or oil shale, either directly or indirectly. The more important are (1) acetylene, made from calcium carbide, which in turn is made from coke, (2) ammonia, which is a byproduct of both coal carbonization and the synthetic fuel industry, and in addi- tion may be made synthetically from coal, and (3) sulfur, which is a byproduct of the synthetic fuel industry and, to a minor extent, of coal carbonization. The following tabulation shows the estimated requirements and sources of these three chemicals. Acetylene, million lb. per yr.: 1950 1955 1975 300 550 3,000 300 0 425 125 1,000 2, 000 Production—total '. 300 1,751 550 3, 235 3, 000 6, 710 Ammonia, thousand tons per yr.: Production—from coal carbonization 231 0 300 55 2, 880 370 1, 880 4,460 Production—synthetic 1,520 Production—total 1, 751 3, 235 6,710 Sulfur, thousand tons per yr.: Requirements (1)5 0 % (») 35 150 1,700 Production—total 5 65 1, 850 1 Not estimated. Despite the increase in coal demand indicated, reserves of the types needed for production of coal products and chemicals are more than sufficient. Probable changes in technology and estimated requirements of investment capital and energy are discussed in the main body of this report. Coal Carbonization (Part A) Carbonization or coking is the indirect heating of bituminous coal at high (1,650-2,150 degrees Fahrenheit), medium (1,380-1,650 degrees Fahrenheit), or low (930-1,380 degrees Fahrenheit) temperature out of contact with air in closed ovens or retorts. The vapors driven off by baking the coal are the primary source of coal chemicals. They are piped from the ovens, cooled, and then further processed to recover the pri- mary products or crudes: gas, tar, ammonia, and light oil. The lump-form residue is called coke; the fine material is called coke breeze. All coke used as blast-furnace fuel is produced by high- temperature carbonization. House-heating, industrial, and some foundry coke is also carbonized in this temperature range. In 1950 approximately 85 percent of the total coke produced in the United States was consumed in the steel industry. Since 1930 more than 90 percent of the country's coke has come from byproduct ovens, in which the gas, tar, ammonia, and light oil result in important credits to reduce the cost of the coke manu- factured. Chemicals cannot be recovered from beehive ovens. American byproduct coke ovens are built in groups (bat- teries) of ovens having common walls, and heat is supplied to them through flues located within the walls. Part of the gas produced is usually burned in the flues to supply the heat. Coke capacity depends on the dimensions of the oven, the bulk density of the coal, and the time of carbonization. The coal throughput per oven per day varies from about 18 tons to about 30 tons, being greatest in ovens of most recent design. The plant throughput ranges from a few hundred tons of coal per day to more than 30,000 tons per day, depending on the number of ovens and their capacity. Coke is made from a blend of various ranks of bituminous coal. The average blend in 1949 was 65 percent high-volatile coal, 12 percent medium-volatile coal, and 23 percent low- volatile coal. The proportion of low-volatile coal will probably decline during the next 25 years due to a decrease in quality and possibly higher prices. Lesser proportions of low-volatile coal mean weaker coke and smaller fragments; they result also in a decrease in coke yield and higher yield of gas, tar, ammonia and light oil. Breeze yield is somewhat increased. The decrease in yields of these byproducts in recent years has been due probably to an increase of moisture and ash in the coal used. The increased moisture content results from the increasing practice of washing the coal before carbonization. This trend in coal washing will undoubtedly continue due to depletion of coal reserves of low ash-content until all coal charged into coke ovens will be washed. Whether this will result in further decrease in yields depends upon the extent to which drying equipment is installed along with washing equipment. The increased ash content of coal in recent years is due to the rapid introduction of mechanical mining methods. A high ash content, however, increases the coke yield. The large number of over-age ovens probably has con- tributed to the declining yields, a factor that will be balanced out as new ovens replace old ones. On the other hand, more cracking of the liquid products and ammonia in the new ovens may result in more gas and less tar, ammonia and light oil. Increasing the yield of tar and light oil by changing the design of the ovens has been extensively investigated, especially in Europe, but the design of byproduct coke ovens is now so good that important changes during the next 25 years are not anticipated. Recovery of byproducts, material-handling equip- ment, and other auxiliary apparatus have all improved over the years. The recovery of miscellaneous products from coke-oven operations—such as sulfur and various cyanogen products—is covered in another section of this report. Coal carbonization in the United States is so closely asso- ciated with iron smelting that any important changes in the making of pig iron would affect the technology of coke manu- facture. At this time no process that can compete with the blast furnace is in sight; the use of byproduct ovens for the pro- duction of blast-furnace coke appears, therefore, to be assured at least until 1975. Although some foundry coke is manufactured in the United States within the medium-temperature range, the term medium-temperature carbonization generally refers to manu- facture of coke for house heating. In this restricted sense, there is no medium-temperature carbonization in the United States. The advantages claimed for medium-temperature carboni- zation include improved combustion characteristics of the coke, Page 162 a higher yield of tar and light oil, and a lower yield of gas of high heating value. Oven throughput, however, is greatly reduced. Future utilization of the process will depend on the demand for solid fuels for house heating. Depletion of natural ^as reserves may compel homes now heated with gaseous and liquid fuels to turn to solid fuel, but only a small increase in medium-temperature carbonization can be expected by 1975. BYPRODUCTS AND THEIR USES Low-temperature carbonization (930-1,380 degrees Fahren- heit) is generally carried out in metal retorts or receptacles rather than in conventional byproduct coke ovens. At present, there are only two installations in the United States, and only one has been in continuous operation over a period of years. Only a small amount of coal—a little over 200,000 tons a year—is carbonized at low temperatures in the United States. Noncoking coals and lignites work better than the strongly coking coals. One or more processes include a step in the operation to destroy the coking properties of coal before carbonization. The tar yield is generally three or four times the yield ob- tained by high-temperature coking. This fact, together with a high yield of tar acids, makes low-temperature carbonization appear attractive. On the other hand, the coke produced is not always usable, although the one commercial process now in operation does produce usable coke. Processes that require an upgrading of the coke, such as briquetting, have little chance of economic success. Most of the gas produced is required to support the process, so that credits are available only for the coke and tar. Low-temperature coke is used chiefly for house heating. Because of the economics of production, such usage will not increase appreciably in the future despite the increasing re- quirements for smokeless household fuels. Low-temperature coke is not used in iron blast furnaces mainly because it is subject to large carbon losses at the top of the furnace. It is usable in direct reduction of iron ore to sponge iron, but this process is still in the experimental stage, and there is no indi- cation that it will be widely adopted in the near future. There are a few possible chemical uses for low-temperature coke, but the quantities involved would be unimportant. The use of low-temperature coke as a substitute for low- volatile coal in coke-oven plants has been experimented with for a number of years. Low-temperature coke can be blended with high-volatile coal to produce blast-furnace coke having better physical properties than that from high-volatile coal alone. Coke-oven plants located in areas where low-volatile coal is not available or is expensive may turn to the production of low-temperature coke as a substitute for low-volatile coal. Low-temperature-carbonization plants in conjunction with power-generating stations have been frequently proposed, on the thesis that coke would be used as the boiler fuel and the tar processed into important chemicals. The conclusion has been expressed in some quarters that it will be necessary soon to convert noncoking coals into coking coals for carbonization. Elsewhere in this report it is shown, however, that there is no question of ample supply of high- volatile coking coal for the next 25 years, and that the low- volatile coals are sufficient for all purposes for perhaps 100 years. The noncoking coals evidently will not be converted into coking coals for carbonization within the 25 years with which this report is concerned. This conclusion assumes that the coal required for production of synthetic liquid fuels will be derived chiefly from noncoking coals. CHEMICALS FROM COKING Excluding coal-gas retorts (which occupy a trivial position) the coke industry in the United States was composed of 89 establishments in 1947 situated in 22 different States and employing 35,838 persons. The record of production from 1900 to 1950 is shown in figures Al [/] and A2. The annual production of primary chemicals from the cok- ing of coals from 1907 to 1950 is shown in figure A3 [2, 3, 4, 5]. The recovery of tar, ammonia, light oil, and surplus gas is affected by the quality of the coal coked, processing techniques employed, and markets. The dominant factor, outweighing all others combined and showing no prospect of change, is the huge demand for coke to smelt iron ore. For this reason, mainly, the future course of chemicals from coal by coking is tied to the future demands for iron and steel, the production history of which is shown in figure A \4, 6, 7, 8, 9, 70].. The market for iron and steel has fluctuated regularly with the general level of business activity. Shown also in figure A4 are projections to 1975, though the period 1950-55 is left blank because of the uncertain require- ments for defense and the contingency of war. Competition THE COKE INDUSTRY OF THE UNITED STATES Figure A I. Total Coal Carbonized, Total Coke Produced, and Total Value at Plant of Products Produced 1500 2 £ O 1000 900 800 700 600 500 o J3 ^ o "O 8 ~o o ^ o a> O CL °£ TD 4- a> a> n c c c o o Si o o o 400 300 200 I 00 90 80 70 60 50 40 30 20 / t i Aaa ( A 1/ A! r \ N \ V i if Total Value at Plant yvco 3l Carb onized —f V —^- / V "/V \ A I It/ \ A: * \ i , V • 'Nl 1 M \; r ii / / \ / > Af f i X \J Cok( 5 Produ ced 101 1900 10 20 30 40 Year 50 60 70 Page 163 THE COKE INDUSTRY OF THE UNITED STATES Figure A2. Production of Byproduct and Beehive Coke in the United States 100 90 80 70 60 — 50 c o 40 £ 30 CL C' c o o v. o o TJ O CL 03 20 15 I0| 9 8 7 6 5 4 i-2 O £ 2 a. 1900 j f i • h ''.;! i t ' 1 ! V'.' r «» i i i ! V !/ i it i" 1 !l , i i • * ii' i • 1 » ■! i ii :! •!; 10 20 Year y 0.8 0.7 50 60 70 from aluminum and plastics will tend to repress the per capita domestic consumption of steel during 1955 to 1975, but the principal competitor of steel will be steel itself, for it will be made stronger and will last longer. Exports will be reduced as former customer countries develop and expand their own domestic production. It is our considered opinion at this time, however, that future production in the United States of steel and of coal chemicals from coking will be more influenced by national policy—as for example, future taxation—than by any technological changes that now can be foreseen. Figure A4 postulates that 115 million ingot tons of steel will be produced by 1955, and 130 million ingot tons by 1975. These figures are basic to all subsequent computation and discussion in this report. There will, of course, be short-term oscillations. Figure A5 [6, 7, 8, 9, 10] shows the relation be- tween pig-iron and ingot-steel production. Since 1938, the ratio between the two has varied only between 0.67 and 0.70 to 1. For 1955, it is assumed that scrap will be scarcer than in the past, that more pig iron will be used, and that the ratio will then be 0.72; at that ratio the pig iron required will be 82.8 million tons. For 1975, it is assumed that scrap will again be more plentiful and that the ratio will be 0.67, giving—at a steel rate of 130 million ingot tons—a pig-iron requirement of 87 million tons. THE COKE INDUSTRY OF THE UNITED STATES Figure A3. Growth in the Production of the Primary Products of Coking 0> CO 2000 1000 o — ■ H7 11^ CO — _ o ° — 3- a> c — C JO O Q) 3 o o ° f- > c 3.2 cr— w\5 i 2- CO o o — o 3 go f> 3 E £ < 5 00 200 100 50 20 10 Amm SuM onium 'ate V ir i '\ i \/ j \ Jri K J 1 / / / Surpk is Gas / / / / \ I' / \l \»' / / 7 / ' i 1 / / J / / I / / / ' / / ' / / ' / ^^^^ V ! } Ligh t Oil // j| VJ 1 1900 10 20 30 40 50 60 70 7 Year Figure A4. Population, Per Capita Production of Steel Ingots, and Hypothetical Total Production of Steel Ingots, 1955and 1975 c to •I § o, Ho °!° a.E 0 o — o a> *- +- O 0.2 200 0.1 100 90 CO c o 80 CD 70 C 60 ^ c CO o CL -JZ 50 o — 40 Is 30 t: -o O o opul s Pr 20 CP c a> CO 10 Ste el Ingots-Per Capita V YV r I X J \r Popula ion^^- — Steel Ingots-Total A V /V AT] \\ \r I f 1900 10 20 30 40 Year 50 60 70 75 Page 164 Blast-furnace coke consumption is shown in figure A6. Two 3f the principal reasons for variations shown are the percentage oi metallic iron in the furnace burden and the percentage of carbon in the coke. Richer ores require less coke, and more coke is required when the coke is ashy. It is assumed that in 1955 3re (or sinter) and coke will have about the same quality as today. Since some ferro-alloys will then continue to be produced in blast furnaces and such alloys require more coke per ton of product than pig iron, it is assumed that the coke rate will be 3.96 net tons of pig-iron and ferro-alloys produced in 1955. The total amount of blast-furnace coke required would then be 79.5 million net tons. By 1975 it is assumed that the ores will be richer in iron (due to imports of high-grade ores and the use of concentrates From taconite), that the coke will be higher in ash, that ferro- alloys will be made exclusively in electric furnaces, that there will be technological improvements in furnace technique, and that as a result the coke rate will be reduced to 0.85. The amount of blast-furnace coke required would then be 74 million tons. Substantial tonnages of coke are also used by foundries: for making producer gas; for making water gas; by other indus- tries; and for house heating. Foreign trade is relatively small and is not herein considered. In light of the economic and tech- nologic factors influencing these uses, the following tonnages probably will be required or will be available for consumption: Figure A5. Relationship between Steel- Ingot and Pig-iron Production in the United States, 1926-1950 Million net tons Foundry coke Water gas coke Producer gas coke. . . Other industrial coke House-heating coke. . Total Since blast-furnace use will amount to 88 percent of the total by 1955 and 80 percent by 1975, any gross errors in the minor uses would not influence greatly the totals, which add up to 91 million tons for 1955 and 88 million tons for 1975. Additional Coke-Oven Capacity Needed Of the 91 million tons needed for 1955, it is assumed that chemical-recovery ovens will produce 84 million tons. Capacity on December 31, 1949, was about 73.7 million [/]. It will therefore be necessary to get an additional 10.3 million net tons. Assuming the ovens to operate at 90 percent capacity, it 10.3 will be necessary to build coke-oven capacity of 0.9 11.4 million tons. Moreover, 36.3 percent of the capacity existing as of December 31, 1949, was more than 25 years old and should be replaced. This would be an additional 26.7 million tons. At a rated capacity of 5,650 net tons of coke per oven per year a total of 6,743 new ovens would be needed. This total, however, cannot be built by 1955 because of lack of production capacity for the special brick, other materials, and manpower 20 30 40 50 60 Pig Iron (million nettons per year) 70 to design and construct the ovens. What must be done prac- tically is to operate and possibly expand existing beehive ovens; build new ovens as is possible; and defer retirements as long as necessary. The estimated demand of 88 million tons for 1975 will be made in chemical-recovery ovens. Assuming an annual oper- ating rate of 90 percent as before, the increased capacity re- quired will be —qq * = 15.9 million net tons. Since the average actual life of coke ovens is not more than 25 years, the entire existing coke capacity really would have to be replaced. Total coke-oven capacity to be built—1950 through 1975 Number , of ovens Replacement of entire capacity as of December 31, 1949 Accelerated replacement capacity to reduce over- age ovens in 1975 Additional new capacity required for expansion and replacing beehive ovens Total 18, 870 However, if the ovens are replaced only as they become over- age in 1975, the nation would find itself in the same undesirable Page 165 situation that exists now; namely, 36.3 percent of the December 31, 1949, capacity (or 26.7 million tons) would be obsolete. To overcome this there should be an accelerated replacement. The total capacity to be built during 1950 to 1975 together with the equivalent number of coke ovens is shown in the tabulation that follows. Because the coke yield for 1975 is estimated to be slightly less than at present, coke capacity per oven per year for 1975 will be reduced to 5,480 net tons. It is estimated that construction of these 18,870 ovens would require 3.4 million tons of brick, a million barrels of portland cement, 84 million board feet of lumber, 45 thousand tons of reinforcing steel, and 1.5 million tons of structural steel and other ferrous metal products. At 1950 prices, capital invest- ment required would be about 1.75 billion dollars. It is further assumed that all beehive ovens will gradually be replaced by chemical-recovery ovens until they disappear about 1970. The total investment would be 278 thousand tons of silica and fire brick, 129 thousand barrels of portland cement, 10.8 million board feet of lumber, 5.8 thousand tons of rein- forcing steel, and 193 thousand tons of structural steel and other ferrous metal products at a cost of 228 million dollars (1950 prices). The annual savings that would result from the change- over would be about 0.8 million tons of coking coal, 108 billion cubic feet of surplus gas, 93 million gallons of tar, 237 million pounds of ammonium sulfate equivalent, and 30 million gallons of light oil. The amount of coal that will be required to produce the coke estimated previously is calculated to be: Million net tons 1955 1975 Total coking-coal requirements for beehive ovens. . Total coking-coal requirements for byproduct ovens. 11. 1 120.0 0. 0 129. 0 Total 131. 1 129. 0 The accumulated demand for coal for coking for the 25-year period will thus be about 3,250 million net tons. The U. S. Geological Survey [11] estimates that the reserves of low-volatile coal as of January 1, 1950, was no more than 10,413 million tons. About 50 percent, or 5,200 million tons, is estimated to be recoverable. Assuming that the total uses for low-volatile coal will amount to 100 million tons per year, these reserves would last 52 years. It appears that the reserves of low-volatile coal are ample for the period in question (1951 to 1975). Reserves of high-volatile coking coal are enormous. Thus, there is no impending shortage of good coking coals in the United States, although the best grades having the lowest delivered prices are not as plentiful as they once were. The yields of total gas, tar, ammonia and light oil obtained per net ton of coal carbonized depend principally on the com- position of the coal (especially volatile matter, ash and mois- ture), the temperature at which it is coked, the outdoor temperature, the type, size, and age of the ovens, the operating techniques employed, and the technical efficiency of the re- covery equipment. To these variables must be added the eco- nomics of recovering residual quantities. 0.98 0.9 6 0.94 .92 Figure A6. Net Tons of Coke Consumed per Net Ton of Pig Iron,etc. Produced T5 O 0 90 o O 0.8 8 o O 0.86 0.84 Pi Alloys / Pig Iron a Ferro- N \ A Pig Iron 1925 30 35 40 Year 45 50 55 Although volatile matter in coal carbonized in 1955 may be somewhat less than today, the national yield of surplus gas will be more because then more ovens will be heated by gases other than coke-oven gas. By 1975 the coal carbonized will contain more volatile matter, somewhat more ash, and probably less moisture. All coal will be carbonized in improved, chemical- recovery ovens. The ovens will be operated at slightly lower temperatures and none will be heated with coke-oven gas, so that the yield of surplus gas will be the total gas produced. On these assumptions, national production of primary chemi- cals are estimated as follows: Tons of coal carbonized in byproduct ovens. f Unit yield—cubic feet Surplus gasl Total production—billion [ cubic feet ^, f Unit yield—gallons ai\ Production—million gallons a • ir * fUnit yield—pounds. . . Ammonium sulfate Tota/ du(ftion_ equivalent j million pounds Light oil (all f Unit yield—gallons plants re-< Total production—million covering) [ gallons 1955 1975 120, 000, 000 6, 500 129, 000, 000 10, 500 780 1, 355 7.7 924 20. 0 9. C 1, 160 23. C 2, 400 2. 7 2, 970 2. S 324 374 Despite the present unpopularity of low-temperature car- bonization, there may be some construction and operation oi plants of moderate size for low-temperature carbonization ol bitmuinous coals and lignites before 1975. The additional quantities of primary chemicals to be produced by low-tempera- ture carbonization are estimated as follows: Page 166 1975 (Unit yield—cubic feet (800 B. t. u. per Surplus gas ... . - cubic foot 3, 000 [Total production—billion cubic feet .... 11. 7 Tar /Unit yield—gallons 15 ITotal production—million gallons 58 Ammonium sulfate /Unit yield—pounds . .# 5 ITotal production—million pounds 20 Light oil (Unit yield—gallons 2 ITotal production—million gallons 7. 8 COKE-OVEN GAS AND COAL TAR Coke-oven gas is normally the gaseous product of the carbon- ization of bituminous coal in coke ovens of the byproduct type operated at high temperatures. Its characteristics depend on the coal used and the conditions of carbonization. A typical analysis is as follows: Percent by volume Carbon dioxide (CO,) 1. 8 Illuminants (CnHm) 3. 3 Oxygen (02) 0.2 Carbon monoxide (CO) 4. 5 B. t. u. per cubic foot 567 Percent by volume Specific gravity 0. 36 Hydrogen (H2) 56. 9 Methane (CH4) 29. 3 Nitrogen (N2) 4. 0 The "illuminants" in coke-oven gas consist of: Percent by volume of total gas Ethylene (C2H) 2.5 Propylene (C3H6) 0.29 Butylene (CM.) 0., 18 Acetylene (C2H2) 0.05 Light oil 0. 15 3. 17 About 10,500 cubic feet are produced per ton of typical coking coal. Low-temperature carbonization yields a much smaller volume of gas, and a large part of it is used as fuel in the process now operating. Most coke-oven gas produced in the United States is used as fuel either by private companies or distributed by the gas utility companies. Coal Tar Coal tar is the heavy, black liquid that condenses from the volatile constituents resulting from the carbonization of coal. It consists of a very small proportion of light oil made up of small amounts of benzene and toluene together with larger amounts of coumarone, indene and xylenes; middle and heavy oils consisting chiefly of naphthalene and naphthalene homo- logues; anthracene oil; phenol and phenol homologs; tar bases consisting mostly of pyridine, picolines, and quinoline; and various heavy materials classified under the general heading of pitch. These materials are first separated by distillation and other processes into "cuts" from which more refined materials are produced. Substantially all the crude coal tar now produced in the United States is derived from high-temperature carboni- zation in byproduct coke ovens. A very small amount is derived from low-temperature carbonization. At one time, most of the crude coal tar was used as fuel for open-hearth furnaces. However, as markets for coal-tar prod- ucts developed, the burning of crude coal tar diminished and the tar thus released was processed by tar distilling companies. Some producers began partially to distill or "top" their tars and this practice has continued. Some distill only far enough to remove the lower boiling distillates that contain the tar acids and naphthalene. The residues are soft pitches which are trans- ferred to the open-hearth furnaces where they are burned in liquid form. Other coke-oven operators distill their tars to pitches of medium hardness and then flux such pitches with crude tar or highly aromatic petroleum fuel oils. The distillates in such cases contain more creosote in addition to the tar acids and naphthalene contained in the distillates from the softer resi- dues. At other plants the tar is distilled to hard pitch, and the latter is added to the coal charged into the coke ovens. Tar now burned and topped represents a large reservoir of coal-tar products which would be made available for com- mercial use if all open-hearth furnaces were heated with fuels other than crude or topped coal tar. In fact, the quantities of pitch and other products potentially available from this source may be as great as the quantities that can be made from the additional production of coal tar that has been estimated for 1975. TYPES OF COAL-TAR PRODUCTS Coal-tar creosote is a traditional preservative of wood, pro- tecting it against destruction by fungi, marine borers and ter- mites. It is the portion of the total distillate recovered from coal tar when the latter is distilled to medium and hard grades of pitch. Its use in this country has increased steadily to more than 200 million gallons per year. Tar-acid oils are solutions of tar acids in coal-tar oils. The proportions of tar acids vary from about 10 to 55 percent, depending upon the purposes for which the oils are to be used. They are employed mainly in disinfectants, insecticides, heavy- duty cleaners, and for the concentration of ores by flotation processes. Production of tar-acid oils for the past 10 years has averaged about 20 million gallons per year and probably will continue at about that rate in the future. Tar acids are constituents of coal-tar oils that are soluble in dilute solutions of caustic soda. Various grades of tar acids are used, principally in the manufacture of synthetic resins, water- soluble plywood, glues, disinfectants, plasticizers, dyes, medi- cines, and in petroleum refining. Present recovery of phenol from coal-tar oils amounts to about 20 million pounds per year. Further increases probably will be made during the next 25 years due to the production of greater quantities of coke-oven tar and the installation of more tar topping plants. Production of cresols and cresylic acids also is expected to increase for the same reasons. Much greater increases will take place particu- larly in the case of xylenols and higher boiling tar acids if large quantities of low-temperature tar are produced either from bituminous or sub-bituminous coals. Tar bases (or pyridine bases) are the nitrogen compounds in coal-tar oils. Pyridine and low-boiling mixtures containing this compound are sometimes shipped to other countries for denaturing alcohol. However, the principal markets for tar bases are the sulfa drugs, vitamins, antiseptics, water repellants, fungicides, and pickling inhibitors. Commercial use of tar bases has increased steadily during the past 20 years and further increases are expected. Increased coke-oven operations during the next 25 years are expected to make additional crudt tar bases available from tar oils and ammonia liquors in sufficient amount to take care of any foreseeable demands. Page 167 Crude naphthalene is recovered from coal-tar distillates at tar-topping plants and tar-distillation plants. Various grades having minimum freezing points of 74 degrees, 76 degrees, or 78 degrees Centigrade are produced. A portion of the crude naphthalene is refined to freezing points above 79 degrees Cen- tigrade for chemical and insecticide purposes, but the greater part of it is used in crude form in the manufacture of phthalic anhydride, in turn used for the manufacture of alkyd resins, plasticizers, and insect repellants. Naphthalene also is an im- portant raw material for dyes, rubber chemicals, beta naphthol and many other organic chemicals. Crude naphthalene pro- duction in this country has increased from about 40 million pounds in 1920 to about 290 million pounds in 1951. Further increases are expected which will need to be supplied by im- proved recoveries from present tar supplies and by the use of the new tar productions expected in future years. SPECIAL PITCH COMPOUNDS In addition to the distillation products mentioned above, various coal-tar oils are produced (particularly in the higher boiling ranges) that are used in special pitch compounds of various kinds. At present there is an increasing interest in road tars and coal-tar joint-sealing compounds because of their superior re- sistance to solution in and disintegration by jet fuels, lubricat- ing oils and other petroleum products. Skid-resistance and superior adhesion to aggregates also favor their use. Current consumption of road tars amounts to about 150 million gallons per year. However, changes in manufacturing procedures will need to be effected before there can be much increase because water gas tars that have been used in substantial quantities in the manufacture of road tars are diminishing in volume due to increased distribution and use of natural gas. Nevertheless, the production of road tars may increase to as much as 175 million gallons during the next 25 years. The so-called industrial pitches include coal-tar pitch for the construction of flat and steep roofs of the built-up or mem- brane type; pitch for waterproofing and dampproofing founda- tions and bridge abutments; hot-application enamels for the protection of pipe lines and other steel structures against cor- rosion; cold-application coatings for the corrosion protection of metal surfaces; saturants for fiber conduits, wallboard and roofing felt; pitch binders for carbon electrodes, blast-furnace linings, and other baked carbon products; and binders for clay pigeons and foundry cores. A major increase in the use of pitch is expected in the next few years particularly for carbon-elec- trode and fiber-conduit manufacture. Coal-tar pitch is carbonized by special procedures for the production of pitch coke suitable for the manufacture of carbon electrodes. Pitch coke produced in 1950 probably did not ex- ceed 50 thousand tons. A substantial increase is expected in the next 25 years. Low-temperature tar is being produced in one commercial operation. Its future is difficult to predict. Experience in this country has been much less favorable than in England and Germany. On the whole it appears that low-temperature car- bonization may increase materially in the next 25 years and that 50 to 100 million gallons of low-temperature tar may be produced. It is unlikely, however, that low-temperature tar production will increase more than 3 or 4 million gallons by 1955. The average yield of tar per ton of coal carbonized in the United States in chemical-recovery coke ovens in 1949 was 7.8 gallons. The total tar produced in coke ovens in the same year was 672.4 million gallons, and this, together with 8.7 million gallons of tar from horizontal and vertical gas retorts and 2.3 million gallons of low-temperature tar, made a total of 683.4 million gallons. FUTURE SUPPLIES OF COAL-TAR PRODUCTS In preceding parts of this report it has been estimated that 924 million gallons of crude tar will be produced in the United States in byproduct ovens in 1955 and 1,160 million gallons in 1975. No tar produced in gas retorts is projected for 1955 and 1975, but in 1975 there may be from 50 to 100 million gallons of low-temperature tar not included in this total. Based on these total production figures, it is estimated that the follow- ing quantities of tar products will be available in 1955 and 1975: Production of coal-tar products—1950, 1955, and 1975 '1950 1 19552I19752 -million Production of crude tar—million gallons. . Crude tar burned without processing- gallons Crude tar distilled to soft pitch for use as steel plant fuel—million gallons Crude tar distilled to all grades pitch—million gallons Pitch (other than road tar and steel plant fuels)— thousand tons Creosote and other coal-tar oils—million gallons Road tar Naphthalene (74 to 79 C. M. P.)—million pounds. . . Tar acids: Cresylic acids (refined)—million pounds . Cresols—million pounds Phenols—million pounds Total tar acids—million pounds. Tar bases: Pyridine (refined)—million pounds . . Picolines (refined)—million pounds. . Quinoline (refined)—million pounds. Total tar bases—million pounds. . . 749 924 1, 160 187 187 187 187 274 392 375 463 581 3 610 595 765 172 174 226 * 150 155 175 288 409 576 13 18 26 19 27 38 20 28 40 52 73 104 1. 8 2. 2 2. 8 0. 5 0. 6 1.0 0. 4 0. 5 0. 8 2. 7 3.3 4.6 1 U. S. Tariff Commission Reports; U. S. Bureau of Mines Reports. 2 Estimated. 3 Pitch tonnage includes any pitch which is converted into pitch coke. 4 Road tar shown in 1950 includes water gas tars which are absent in 1955 and 1975. AMMONIA FROM CARBONIZATION In the high-temperature carbonization of coal about 5 or 6 pounds of ammonia are produced per ton of coal. In general, the ammonia leaves the coke plant either as ammonium sulfate, a white salt almost exclusively used as a nitrogenous fertilizer, or as ammonia liquor, which is a relatively strong solution of ammonia in water, used for ammoniation of superphosphate, chemical manufacture, etc. One or two plants recover am- monium chloride, but production is trivial. Production of ammonium sulfate and ammonia liquor has been as follows: Page 168 Thousand tons per year Ammonia Ammonia liquor (sulfate equivalent) Ammonium sulfate liquor (ammonia content only) Total (sulfate equivalent) Year : 1940 718! 28 112 830 1945 764 28 112 876 1950 827 1 23 92 919 In another section of this report the future production of coke-plant ammonia has been estimated at 1,200,000 tons of ammonium sulfate for 1955 and 1,485,000 tons for 1975. Accordingly, coke-plant ammonia is expected to decrease in relative importance. Whereas today production of synthetic ammonia is about 7 times that from coal carbonization, by 1975 production of synthetic ammonia plus byproduct ammonia from synthetic oil plants will be about 17 times that from coal carbonization. It appears certain that the relatively small quan- tity of coke-plant ammonia can be readily absorbed by the market at prices competitive with that from the other sources. The major portion produced will probably be ammonium sul- fate, as in the past and irrespective of the fact that sulfuric acid will probably be somewhat more expensive in the future. Pro- duction of small amounts of ammonia liquor will probably continue at about the present rate. Future production can be summarized as follows: Thousand tons per year Ammonium sulfate Ammonia liquor Ammonia liquor (sulfate equivalent) Total (sulfate equivalent) Year (ammonia content only) 1955 1, 100 1, 385 25 25 100 100 1, 200 1, 485 1975 Ammonium sulfate will continue to be used almost exclu- sively for fertilizer purposes and ammonia liquor for various uses as at present. LIGHT OIL PRODUCTION The term "light oil" designates a mixture of products coming out of the carbonization process, the boiling points of which do not ordinarily exceed 200 degrees Centigrade. These various components, especially benzene, are major raw materials for the manufacture of synthetic chemicals and many important end products. About 90 percent of light oil production is from coal carbonization, the other 10 percent being from tar dis- tillation. The material is recovered by scrubbing the coke- oven gas, which has previously been freed of tar and ammonia, with an absorbent oil that is subsequently stripped with steam to yield the crude light oil. About 2.5 or 3 gallons of crude light oil is obtained from each ton of coal carbonized. Typical crude light oil is about 64 percent benzene by volume, 14 percent toluene, 5 percent xylenes, 8 percent other aromatic hydro- carbons and derivatives, and 9 percent contaminants, such as distillation forerunnings, unsaturated hydrocarbons, and ab- sorbent oil. Normally, the various marketable products are secured by distillation, since they have different boiling points. Contam- inants which are present in all fractions, are usually removed by treatment with sulfuric acid. Distillation and refining results in a loss of about 14 percent of the volume of the crude light oil. The products recovered vary somewhat from plant to plant, but the following proportions are typical. Percent by volume of crude light oil refined Year Motor benzol Chemical benzene Tolu- ene Xy- Solvent naphtha Other Loss lenes 1940 48. 8 15.4 12.7 2. 7 2.5 3.6 14. 3 1945 12. 3 53. 9 11.5 3.2 2.0 3. 3 13. 8 1948 3. 7 61.7 11.7 3.0 2.4 3. 3 14. 2 1949 9. 5 55. 6 12. 5 3. 3 2. 3 3.2 13.6 USES OF CRUDE LIGHT OIL PRODUCTS Motor benzol is an indefinite compound, mostly benzene with a small percentage of toluene and other constituents. Prior to the Second World War it was marketed as a motor fuel, either by itself or blended with gasoline. With increasing demand for benzine as raw material for the synthesis of styrene, phenol, and many other important chemicals that developed during and after the war, the percentage of the crude light oil converted into motor benzol decreased materially, while simul- taneously the percentage diverted to chemical benzene in- creased. The relatively small amount of product made today under the name of "motor benzol" is used as a solvent or as a source of chemical benzene when distilled and refined at some other plant. Chemical benzene is substantially pure benzene suitable for the synthesis of different chemicals and end products. Its use as one of our most important chemical "building blocks" is dis- cussed in another section of this report. Increasing amounts are coming from petroleum operations. Toluene finds use mainly as a raw material for synthesis of chemicals and as a solvent. Prior to the Second World War, toluene came almost entirely from coke-oven operations, but the greatly increased demand for trinitrotoluene (TNT) dur- ing the war led to production by the petroleum industry in a volume several times as great. The product designated as "xylenes" in the foregoing table represents only a portion of the potentially available xylenes that could be recovered in a more or less pure form. Mixtures of the three isomeric xylenes are recovered by many coke plants today, whereas some other plants include the xylenes in other mixed products. The "xylenes," especially after further separa- tion into the relatively pure isomers, are finding increasing application in the synthetic chemical industry, as is pointed out in another section of this report. Solvent naphtha is ordinarily the highest boiling product of the crude light oil and represents a mixture of many chemical compounds. Sometimes it is separated into two fractions, light and heavy solvent naphtha. Heavy solvent naphtha contains about 50 percent of coumarone, indene and dicyclopentadiene, which can be polymerized into salable resins. Otherwise, solvent naphtha is ordinarily marketed for solvent purposes. Page 169 Naphthalene is an important raw material for the synthesis of certain chemicals. The chief source is coal tar, but substantial quantities are recovered directly at the coke plant. Since more than 50 percent of coke-plant naphthalene is obtained from light oil, the present and future statistical position of the entire coke-plant naphthalene production is discussed along with the other light-oil derivatives. Naphthalene is usually recovered from the light oil by chilling the distillation residue, followed by separation of the naphthalene crystals. FUTURE PRODUCTION PATTERN The light-oil product pattern for several years past is given in the preceding table. The trend toward rather clean-cut sep- aration into products having only one chemical constituent of rather high purity will probably continue. Mixtures such as "motor benzol" will persist in small quantity only because of a limited demand for solvent purposes. Pure chemical benzene, toluene, and the xylenes will be recovered in quantities close to their content in the crude light oil. On the other hand, the complex mixture of chemicals in the solvent naphtha fraction and other mixtures makes further separation extremely difficult and expensive, and probably most of these chemicals can be synthesized more economically. The product over the next 25 years will probably be about 3 percent of motor benzol, 62 percent chemical benzene, 13 percent toluene, 5 percent xylenes, 2 percent solvent naphtha, and 1 percent other chemicals. On this basis future production will be as follows: Million gallons per year 1955 1975 Crude light oil 324 374 Motor benzol 10 11 Chemical benzene 201 232 Toluene 42 49 Xylenes 16 19 Solvent naphtha 6 7 'Other 3 4 Coke-plant naphthalene production would therefore be about as follows: 1955 1975 Coal carbonized (million tons) 120 129 Naphthalene produced (million pounds) 120 129 MISCELLANEOUS PRODUCTS Minor amounts of miscellaneous chemicals are produced at some plants. PYRIDINE AND ITS HOMOLOGS Pyridine and its homologs, such as the picolines, are present in small quantities in the volatile products leaving the coke oven. The heavier, higher boiling homologs are discussed un- der the heading "Coal Tar." They are weakly alkaline and are absorbed by the sulfuric acid of the saturator. Processes have been developed for withdrawing a portion of the saturator solution, neutralizing it with ammonia, and then distilling out the pyridine chemicals. Pyridine and its homologs find their chief use in the synthesis of vitamins, sulfa drugs, and other chemicals. Their recovery from coke plants is of comparatively recent origin. Recent production statistics (Bureau of Mines) show: Pyridine, Pyridine, Picoline (thousand gallons) crude (thousand gallons) refined (thousand pounds) 1945 481 870 62 1950 391 1, 164 \ At about 0.1 pound of pyridine bases per ton of coal, the universal recovery from all plants today could be about 10 million pounds per year. Actually, only about 3 million pounds are recovered. In response to increased demand, by 1975 sub- stantially all coke plants will be recovering the pyridine chemi- cals; production will probably be about 4 million pounds by 1955 and 12 million pounds by 1975. About half of this produc- tion will be pyridine. SULFUR AND SULFURIC ACID About 1 percent or less by volume of coke-oven gas is hydro- gen sulfide. There is an increasing tendency today to consider recovering the sulfur, either as elemental sulfur or sulfuric acid. Several processes have been used, some of them recovering elemental sulfur and others hydrogen sulfide gas; 6,845,000 pounds of sulfur was recovered in 1948, and 8,227,000 pounds in 1949. One of the processes probably best adapted to coke- oven gas is the Vacuum Carbonate process (Chem. Eng. News, p. 2470, June 18, 1951). The off-gas resulting from this treat- ment contains not only hydrogen sulfide but also hydrogen cyanide, which is discussed elsewhere herein. After these two components have been separated, the hydrogen sulfide is dis- charged to the burner of a conventional contact sulfuric acid plant. Or, if desired, special equipment is available to convert the hydrogen sulfide gas into elemental sulfur. The latest installation of the Vacuum Carbonate process, not included in the foregoing statistics, produces about 6 million pounds per y*ar, and it is quite probable that production of sulfur from coke-oven gas in the very near future will total 20 million pounds or 10,000 tons per year. If all the coke-oven gas produced at the present time were treated, about 300,000 tons of sulfur could be recovered. Since sulfur recovery from coke-oven gas averages about 0.003 ton per ton of coal coked, the maximum possible recovery in 1955 would be 360,000 tons and in 1975, 390,000 tons. Probably only the larger coke plants could economically install and operate the necessary equipment. Furthermore, adoption of such processes is slow. Actual production is expected to be about 30,000 tons in 1955, and 150,000 tons in 1975, mostly as sulfuric acid. CYANOGEN CHEMICALS Coke-oven gas contains about one-fourth as much hydro- gen cyanide as hydrogen sulfide. Many years ago processes were devised to convert this hydrogen cyanide (or "cyanogen") into salable chemicals. Most of the early processes yielded sodium Page 170 ferrocyanide and other derivatives. This type of process is still in operation in one or two plants, but production of these chem- icals is insignificantly small. Another process, at use in one or two coke plants, recovers cyanogen in the form of ammonium thiocyanate, which has a small market. The latest process is the Vacuum Carbonate process men- tioned in connection with sulfur recovery. The hydrogen cya- nide is marketed either as liquefied hydrogen cyanide or is converted into sodium cyanide or whatever other cyanogen chemical is desired [72]. Production statistics are practically nonexistent. The Vac- uum Carbonate process will recover on the average about 0.6 pound of hydrogen cyanide per ton of coal coked. If recovery processes were in use in all the country's coke plants today, 30,000 tons of hydrogen cyanide could be produced per year, but actual future production is uncertain. Recovery will prob- ably not be undertaken where simultaneous recovery of sulfur is not practiced, so that the upper limit of coke-plant cyanogen is set by the extent of coke-plant sulfur production. Undoubt- edly many coke plants that recover sulfur will not wish to com- plicate their operation. Probably as good a prediction as any is that one-half of the sulfur-producing capacity will also re- cover hydrogen cyanide. Accordingly, it is possible to estimate that production of hydrogen cyanide at coke plants will be about 3 million pounds in 1955 and 15 million pounds in 1975. Synthetic Fuels (Part B) Oil shale and coal are the two chief raw materials for syn- thetic liquid fuels. The main deposits of oil shale are in Colo- rado, Utah, and Wyoming. Deposits of coal suitable for con- version into liquid fuels are available throughout large parts of the country. Reserves of oil shale, at an oil content of 30 gallons per ton, are estimated by the Bureau of Mines to contain 100 billion barrels of shale oil. Leaner shale is available in even greater quantity. The potential oil supply from coal is still greater by far. In comparison, proved oil reserves in this country are about 30 billion barrels and the consumption in 1950 about 2.4 billion barrels. LIQUID FUELS SUPPLY AND DEMAND Figure B—1 indicates petroleum production and demand [13, 14] from 1937 to 1951 and also various forecasts [15, 16, 17]. These data together with population and gross national product forecasts given by the President's Materials Policy Commission are the basis for the forecast in this report. The defense buildup during the next years is not taken into account. Demand in 1975 has been obtained by increasing 1950 demand by 70 percent, which is approximately half way between the PETROLEUM PRODUCTIO^AND DEMAND, 1937 to 1950, AND FORECASTS TO 1975 i Si °i v. | « I \~ O CD c o o Domestic Production U.S. Bureau of Mines x Domestic Demand U.S.Bureau of Mines □ Domestic Production Forecast McCollum Petr.Eng. July 1949, P.437 a Domestic Production Forecast Stanolind Oil a Gas J. Oct 20,1949, P 86_ Production Demand 0o- ----^Slonolind Forecast. Demand —4- Domestic Production esf'C PrrT*"* 'on Fo faco«Vm Rep orH Domestic Demand I937 4 0 45 50 55 Year 60 '65 70 75 Page 171 Commission's forecast of 27 percent increase in population and 100 percent increase in gross national product. This gives a petroleum demand in 1975 of about 11,000,000 barrels per day. This figure is higher than Stanolind's [16], but lower than that of the Bureau of Mines [15]. A comparison of forecasts is given in the following table. Increase, percent Petroleum demand, million barrels per day: This report Bureau of Mines—low Bureau of Mines—high Stanolind P. M. P. G. forecasts: Population, million Gross national product, billion dollars. . The McCollum forecasts shown in figure B-l contains data until 1953 and estimates that the production until 1958 will remain at this level. For this report McCollum's data until 1958 were connected with the further extrapolation by Stanolind. The total amount of petroleum potentially available in this country appears to be in fair agreement with figures given by Levorsen. [18] The consumption trend of the main petroleum fuels obtained by the refining of crude oil is shown in figure B-2. Consump- tion of motor fuel, residual fuel, and distillate fuel are reported by the Bureau of Mines (Petroleum Facts and Figures); for L. P. G.* data given by Alden [19] were used. It has been as- sumed that the increase in distillate fuels and L. P. G. con- sumption will continue into the future. Reasons for this are the increased use of diesel motors and jet engines and the large unused potential of L. P. G. production. [79] Figure B-3 shows the same data in terms of daily production. The motor fuel production of 3.8 million barrels per day forecast for 1975 is in agreement with Stanolind's forecast. Total demand and domestic production forecast from figure B-l and the petroleum imports assumed by Stanolind were used to determine the size of the synthetic fuels industry as shown in figure B-4. Higher crude oil production in this coun- try or in Canada might decrease estimated synthetic produc- tion. Yet, strategic considerations might make it desirable to increase synthetic production in order to decrease imports which are estimated to be 25 percent of total domestic production in 1960 and about 45 percent in 1970. Figure B-5 shows the assumed subdivision of synthetic fuels production as to raw materials and processes. The total syn- *L. P. G. (liquefied petroleum gas) is abbreviation used for mixtures of propane and butane. Figure B2 PRINCIPAL PETROLEUM FUELS PERCENT OF TOTAL DEMAND --\ Moto r Fuel Re sidual Fi jel - Distillate Fuel ^ —' .—-• * —" L.RG. . • 60 50 •o c o E o t_ 7 a> t 6 a m 5 c I 4 i 3 2 1950 55 60 65 70 75 Year tillate are of low quality. Catalytic hydrogenation of shale oil permits removal of impurities and gives high yields of fuels that meet petroleum fuel specifications. The process requires pressure between 1,000 and 10,000 pounds per square inch. For this report, data for the high pressure hydrogenation process are used because of its greater flexibility and because data with similar oils in commercial plants using the higher pressures are available. The process assumed consists of coking of shale oil into distillate oil, which is then converted by high pressure hydrogenation into gasoline and diesel fuel. Retort- ing plants will be at the mine location. Refining plants can be located elsewhere since slight treatment of shale oil (viscosity breaking) makes it suitable for pipeline transportation. LIQUID FUELS FROM COAL For the conversion of coal into synthetic liquid fuels two processes are available: direct hydrogenation of coal and gas synthesis or Fischer-Tropsch process. Both processes are suitable for the production of gasoline, distillate fuels, L. P. G., and residual fuel. The coal hydrogenation process is suitable for the production of high-grade aviation and motor gasoline and distillates of low-pour-point as jet fuel or diesel fuel. The chief byproducts are phenols and also, if desired, relatively large yields of aromatic hydrocarbons, such as benzene. The main products from Fischer-Tropsch synthesis are motor gaso- line and high quality diesel fuel. The byproduct chemicals are aliphatic alcohols, aldehydes, and acids. Because of these products, the two processes are supplementary, not competitive. In direct hydogenation, coal is converted into liquid fuels by addition of hydrogen under pressure and in the presence of catalysts. The plants projected in this report use liquid-phase hydrogenation of coal paste and vapor-phase hydrogenation of the primary oil. Coal mining costs, transportation of products, water supply and housing would influence plant site selection. In general all coals and lignites except very high rank bitumi- nous coals and anthracites are suitable raw materials. Gaseous hydrocarbons constitute one of the byproducts. The process used in this report produces 1.5 million B. t. u. of off-gas per barrel of liquid fuel, which is largely used for hydrogen production. Hydrogen and fuel gas produced from off-gas and also from coal and coke are kept in balance with requirements within the plant. In the future, if natural gas price should in- crease or in case of a scarcity of gas, it might be economical to produce more hydrogen by coal gasification and sell the off-gas (e. g., as high B. t. u. city gas). Page 174 A possible modification of direct hydrogenation process is the low-temperature carbonization of coals and the hydrogena- tion of the tar so obtained. The coke obtained in carbonization is in excess of the fuel requirements of the tar hydrogenation plant. It could be used, for example, for additional power generation. This modification of the hydrogenation process is economical only for coals with a high tar content. Therefore, in Germany low-temperature carbonization and tar hydrogena- tion was used in general only for cheap lignites with a tar content above about 25 gallons per ton of coal. Since such coals are only a small part of our reserves, it has been assumed that use of this modification of the process, even where advantage- ous, would not materially change the general picture. Work on improving German experience in coal hydrogena- tion has shown results, and there should be further improve- ments. Development work on a demonstration plant scale is being done successfully at the Bureau of Mines Station in Louisiana, Mo. The Fischer-Tropsch or gas synthesis process converts carbon monoxide-hydrogen mixtures, called synthesis gas, catalytically into hydrocarbons. For the synthesis gas production, direct coal gasification with oxygen is assumed. Pilot and demonstration plant data for such processes are available. Further improve- ments (for example, the use of pressure gasification) are as- sumed for the future. Development work in this field is under way, but none of the processes under study has been proved commercially. For the Fischer-Tropsch unit itself, iron catalyst in a slurry- type reactor is assumed for the conversion of synthesis gas, with a H2:GO ratio of 0.8:1, into liquid fuels. One commercial plant using natural gas as raw material and a fluidized iron catalyst is nearly ready in this country. The Bureau of Mines demonstration plant, using synthesis gas made from coke or coal, is also about ready. PRODUCTION REQUIREMENTS For the production of synthetic fuels from shale oil two plant sizes with a production of 25,000 and 50,000 barrels per day of liquid fuels have been investigated. For coal hydrogenation and gas synthesis plants a daily production of 30,000 barrels per day was selected. Approximate calculations show that coal hydrogenation plants of larger size would be somewhat more economical. These plant costs include costs of mine, process units, and auxiliary facilities as steam and power generation, plant water and sewer systems, workshops, laboratories, fire protection, administration buildings, railroads, and rolling stock. Not in- cluded are cost of plant site, coal or oil shale mining rights, finished products transportation, and housing. All estimates are based mainly on experience or available equipment costs. 3.0 2.5 Figure B5 FORECAST OF SYNTHETIC-FUEL PRODUCTION FROM OIL SHALE AND COAL / / / / / / / S / / / • • • • • • J? ,' .•• ^^^^^ • / y / / / • 2.0 o Q \_ CD CL u> a CD o - 1.0 0.5 1950 55 60 Year 65 70 75 Page 175 Future cost will probably be less than those for 1950 because of expected improvements in the process. Past experience and such expected improvements are the basis of the cost reduc- tions shown in figure B-6. The following table shows the plant cost on a 1950 basis: . Other operating cost: a) Direct labor (for shift work 4.5 men provided for 3 shifts/day Direct supervision corresponds to_ Maintenance labor corresponds to_ Maintenance material amounts to_ Payroll overhead b) e) 1) Process Coal Gas Oil shale 'hydro- syn- genation thesis Plant capacity liquid fuels, barrels/day. 25, 000 50? 000 30. 000 30, 000 Plant cost inch mine (million dollars). . Interest during erection(million dollars). Starting up costs (million dollars).... 123. 0 6. 5 4.0 220. 0 12. 0 6.0 281. 0 16. 0 9.0 371. 5 20. 5 5.0 Total first cost (million dollars). . Total first cost (dollars per daily bbl.). . Plant steel requirements (tons) 133. 5 238.0 4, 750 143, 000 306. 0 10, 200 184. 000 397.0 13, 200 239, 000 5, 350 80, 000 Operating supplies Indirect labor cost plus overhead h) Insurance and taxes- i) Interest on working capital- The production costs in this table are based on shale oil at $2 per bbl. and coal at $3 per ton. Chemicals and catalyst con- sumption are included. Other expenses were calculated on the following basis: $1.75/hour: 15% of labor cost. 2% of the total plant cost/year. 1% of the total plant cost/year. 15% of items a, b, and c. 20% of items c and d. 50% of items a, b, c, d, and f. 2% of the total plant cost/year. 4% of estimated work- ing capital. 2. Credits: L. P. G 4.0 cents per gal. Phenol 11.5 cents per lb. m-p-Cresol 10.5 cents per lb. Alcohols 7.6 cents per lb. Aldehydes 10.0 cents per lb. Ammonia $74.50 per ton Sulfur $18.00 per ton 3. Fixed charges: a) Depreciation in 10 years or 10 percent of the total initial cost per year. b) Interest 4 percent of unamortized investment, or during 10 years average interest 2.2 percent of the total initial cost per year. Products, raw material and labor requirements, and produc- tion costs (1950 basis) for the aforementioned plants are shown in the following table. Figure B6 INITIAL COST OF SYNTHETIC-FUEL PLANTS IN DOLLARS PER BARREL DAILY CAPACITY PRICE BASIS 1950 o O CL O 13 \ o I2 Q. O O 10 o Q I I G^Synthesis 30,000 BBL/D- r.s\r, i Li..j * "I * *—•—• 9 8 o CD 7 Cl 6 I 5 ~o 4 ~° c o o 3 2 O £ i 1950 Coal Hydrogenation 30,000 BBL/D Hydrogenation 25,000BBL/D Sha e~01' Hydrogenation 50^)00 BBL/D 55 60 Year 65 70 75 Page 176 Raw material, products, and production costs Process Oil shale Plant capacity, liquid fuels (barrels per j day) 125,000 150,000 Products Liquid fuels: Gasoline barrels per day. Diesel fuel do. . . Fuel oil do. . . L. P. G do. . . 16, 100 6, 900 2, 000 Total fuels Chemicals: Phenol lbs. per day. m-p-Cresol do. . . Alcohols do. . Aldehydes .do. . . Ammonia (100%).. .tons per day. Sulfur do. . . Raw Materials 25, 000 32, 200 13, 800 4, 000 50, 000 53 26 106 52 Oil shale tons per dav. . '44, 000 188, 000 Coal (11,000 B. t. u. per lb.)..do... Labor Hourly employees.. Salaried employees. 700 | 2, 950 340 J 590 Total employees I 2, 040 Production cost for gasoline or gasoline j equivalent 1 (cents per gallon): j Raw materials 6.15 Catalyst and chemicals 0. 63 Other operating costs '3. 23 Byproduct credits j — 0. 41 Production cost: Without fixed charges. Fixed charges Total production cost. 3, 440 6. 15 0. 61 2. 13 -0. 41 9.60! 8.48 3. 00 i 2. 67 12. 60 11. 15 Coal | Gas hydro- 1 syn- gena- I the- tion sis 30, 000 30, 000 23, 900 6, 100 30, 000 138, 000 132, 000 82 60 22, 800 3, 700 1, 400 2, 100 30, 000 53, 000 13, 000 70 16, 500 P 22, 800 3, 500 3, 800 700! 760 4, 200 4. 90 0. 48 7. 12 -4. 60 7. 90 9. 40 17. 30 4, 560 6. 22 0. 60 8. 95 -0. 81 14. 96 11. 64 26. 60 1 To obtain comparable figures for processes producing diesel fuel and fuel oil in addition to gasoline, the quantities of diesel fuel and fuel oil have been multiplied by 0.80 and 0,71 respectively and added to the gasoline to obtain "gasoline equivalent." 3 The coal consumption is based on present day results of a semi-plant size coal gasification unit. It will decrease in the future as indicated by figure B-10 and the operating costs in figure B-7. The assumed decrease in production cost in the future is shown in figure B-7. This figure shows also the influence of different shale oil or coai prices on the cost of synthetic fuels. The coal hydrogenation process can be used for the pro- duction of aromatic hydrocarbons and other chemicals in addi- tion to phenol and cresol, with a corresponding decrease in liquid fuels production. A 30,000-barrel-per-day plant pro- vided with additional equipment could produce the following products: Aviation gasoline—barrels per day 3, 200 Motor gasoline—barrels per day 4,600 LPG—barrels per day 6, 400 Benzene—gallons per day 80, 000 Toluene—gallons per day 143,000 Xylenes—gallons per day 164,000 Mixed aromatics—gallons per day 65, 000 Ethylbenzenes—gallons per day 28, 000 Naphthalene—lb. per day 270, 000 Phenol—lb. per day 138, 000 m-p-Cresol—lb. per day 132, 000 1,3,5-Xylenol—lb. per day 30, 000 Ammonia (100%)—tons per day 82 Sulfur—tons per day 60 Summary The total anticipated production of the synthetic fuel plants in 1975 is summarized in the following table. The first coal hydrogeneration plant is assumed to contain equipment for the production of benzene and other aromatic chemicals. If necessary, more plants could be similarly equipped. Anticipated production by synthetic fuel plants in 1975 Source Oil l,c°al shale hydtr.°- genation Motor gasoline (thousand barrels per day) . 905 L. P. G do 111 Diesel fuel do j 384 Fuel oil do....! Total liquid fuels do. . . Phenol (thousand lb. per day). Cresol do. . . Ammonia (tons per day). Sulfur do. . . Benzene (thousand gal. per day). Toluene do. . . Xylene do. . . Ethylbenzene do. . . Naphthalene. . .(thousand lb. per day). Ethylalcohol. . .(thousand gal. per day). Propylalcohol do. . . Aldehydes (thousand lb. per day). 1,400 633 167 800 2, 960 1,450 3, 700 3, 540 2, 200 1,600 i 92 i 164 i 185 i 32 i 312 Gas j synthe- Total sis | 532 49 31 I 2. 070 327 472 31 700 i 2,900 1, 600 i 5 140 30 280 700 540 160 650 92 164 185 32 312 140 35 280 1 Production assumed in only 1 coal hydrogenation plant. The distribution of the different kinds of liquid fuel does not correspond to the demand distribution in figure B—2. This is because cost estimates for the synthetics production were already prepared, and new estimates could not be prepared in the available time. The synthetic industry could be adapted, however, to the product distribution shown in figure B—2 with only slight changes and somewhat decreased plant costs. A synthetic liquid fuels industry according to figure B-5 requires annual investments as shown in figure B-8. The total amount required over the period from 1952 to 1975 would be 5.62 billion dollars for shale oil, 7.04 billion dollars for coal hydrogenation, and 6.80 billion dollars for Fischer-Tropsch gas synthesis, or a total of 19.46 billion dollars. Corresponding steel requirements for construction are shown in figure B—9. The oil shale and coal required are shown in figure B-10 and the labor force in figure B—11. The bulk of plant construction is assumed for the years from 1960 on. One large- scale plant of each type for the production of liquid fuels from oil shale and coal is essential in order to obtain experience in construction, operation, and design. The construction program set up in this report is dependent on plants being erected within the next few years. Page 177 Figure B 7 TOTAL PRODUCTION COST OF SYNTHETIC FUELS GASOLINE OR GASOLINE EQUIVALENT FROM SHALE-OIL OR COAL c cr c o o. (/> +- c CD O |_ Liquid Fuels From Shale-Oil S^/BBL^ = *2-00/BBL o7s^r^7 J 1950 55 60 Year 65 70 75 Coal Gasification (Part C) Synthetic liquid fuels, ammonia, methanol, and other prod- ucts can be made by catalytic synthesis from carbon monoxide and hydrogen, or nitrogen and hydrogen, and by hydrogena- tion of coal or other materials. The synthesis gas, having carbon monoxide, hydrogen, and nitrogen in the correct ratio, can be made from coal or coke in various processes or by cracking gaseous or liquid hydrocarbons such as natural gas and pro- pane. This section of the report will consider only those processes of gas manufacture which consume coal or coke. Producer gas [20] is made by blowing air, with or without a little steam, through a fuel bed of coke, bituminous coal, or anthracite. The process is continuous, the ratio of steam to air being carefully controlled in order to balance the endothermic and exothermic reactions involved. Because of the use of air, the resultant gas has a high proportion of nitrogen, low heating value, and high specific gravity. Producer gas is generally burned as fuel. Blue gas (water gas) [21] (called "synthesis gas" when used as the raw material for manufacture of synthetic liquid fuel, synthetic ammonia, or synthetic methanol), is made in a cyclic process in which a fuel bed of coke, or coal, is alternately subjected to blasts of air and steam. During the air blast the fuel bed is raised to incandescence by combustion of the fuel. The air is then shut off and steam is passed through the hot fuel bed to form a mixture of carbon monoxide, hydrogen, and carbon dioxide. This latter reaction is endothermic so that the temperature must be restored periodically by blasting with air. Blue gas from coke contains about 85 percent of carbon monoxide and hydrogen in about equal proportions, the re- mainder being largely incombustible gases. Many attempts have been made to use bituminous coal instead of coke and considerable quantities of coal are so used, although generally the coal is mixed with coke, not used alone. The use of coal generally results in reduced capacity of the gas-making appa- ratus since the coal tends to soften and interfere with the passage of air and steam through the fuel bed. Recently, blue gas machines have been operated continu- ously using oxygen and steam in carefully controlled quantities. If a gas producer is operated with oxygen rather than air, it becomes a blue gas generator. Page 178 Figure B 8 INVESTMENT REQUIREMENTS FOR SYNTHETIC-FUEL PLANTS 1300 1200 1100 o 1000 >- 900 ^_ Q_ 800 v> v. 700 a Dol 600 UOI 500 — 400 300 200 100 Total Capital Requirement (until 1975) Shale Oil $ 5,620 Million Hydrogenation & 7,040 Million Gas-Synthesis $ 6,800 Million Total $!9,460Million Gas-Synthesis I Plants(F-T) Coal- Hydrogenation Plants 1950 Year The Lurgi process [22] has been operated in Germany using oxygen and brown coal. Brown coal is noncoking and highly reactive. Difficulty would be encountered if coking coals were used. Steam and oxygen are introduced simultane- ously to a fixed bed of brown coal in a generator which is maintained under pressures as high as 300 pounds per square inch. The gas produced varies with the pressure employed, high pressure favoring methane. Ordinarily, the gas contains 15 or 20 percent methane in addition to hydrogen and carbon monoxide. The Winkler process [22] has also been employed in Ger- many. This process comprises the gasification of solid fuel in a finely divided fluidized state in a specially designed confining generator. Temperatures are controlled by regulation of the proportions of steam and oxygen introduced into the generator. After purification, the resulting gas is similar to blue gas made from coke. In the Leuna type gas producer [22] as used in Germany, steam and oxygen are admitted to a solid bed of selected fuels. Flux may be added so that the ash may be removed as liquid slag. Proportions of steam and oxygen are adjusted to provide a fuel bed temperature of 1,700 degrees Centigrade (3,092 degrees Fahrenheit). The gas is predominantly carbon mon- oxide and hydrogen, but with carbon monoxide considerably in excess. The Thyssen Galocsy (German) gas generator [23] uses oxygen and coke, with ash removed as liquid slag. Reliable operating results are not available. GAS FROM POWDERED COAL At present there is considerable interest in the United States in processes for making gas from powdered coal, generally with the use of oxygen. The principal interest lies in having an eco- nomical method for the preparation of large volumes of carbon monoxide and hydrogen for production of synthetic liquid fuels. While these processes have not yet reached the commer- cial stage, they will probably be the source of most of the synthesis gas made in future years. The U. S. Bureau of Mines [24] placed a Koppers-Totzek coal-dust gasifier in operation at Louisiana, Mo., in 1949. This gasifier is a horizontal, refractory-lined, cylindrical unit fed at both ends with a mixture of powdered coal and oxygen. Steam enters as an envelope around this mixture. Operating pressures are only slightly above atmospheric. One run using coal pul- verized to about 90 percent through 200 mesh gave the follow- ing results: Coal used 2,297 lbs. per hr. Oxygen 9.0 cu. ft. per lb. coal. Steam at 1,700° F 0.80 lb. per lb. coal. Carbon conversion 83.4 percent. Materials required per M cu. ft. CO-j-Ha: Coal 38.8 lb. Oxygen 349 cu. ft. Steam 30.4 lb. Page 179 The Bureau of Mines has in operation at Morgantown, W. Va., a pilot-plant coal-dust gasifier designed by its own engi- neers [25]. This machine is a vertical gasifier having a capacity of some 400 pounds of coal per hour and operating at essentially atmospheric pressure. In this process steam and mixed coal and oxygen are admitted tangentially near the base of the gasifier. Gaseous products are removed from the top of the gasifier, and ash is removed from the base as liquid slag. Three series of tests in which bituminous coal and steam were used gave the follow- ing results: Carbon conversion, percent Requirements per M cu. ft. CO + H2 Steam temp ° F. Coal, lb. Oxygen, cu. ft. Steam, lb. 2, 904 1,900 238 82. 5 87.7 86.9 33.4 37.3 42. 3 167 326 394 81.2 44. 7 29.0 The Bureau of Mines [24] has now erected a pilot plant gasi- fier to operate at a pressure of 450 pounds per square inch with a capacity of 400 to 500 pounds of coal per hour. Results are not yet available. The Panindco (Kurt Baum) process is offered by the Pan- European Industrial Plants Co., Paris, France [26, 27]. Coal dust is pneumatically introduced into the upper part of the gasifier and a mixture of oxygen and steam at 1,250 degrees Centigrade (2,282 degrees Fahrenheit) from regenerators is fed to the gasifier simultaneously with the coal dust. A pilot plant to gasify 6 or 7 tons of coal per day has been built by Panindco at the Grand Paroisse metallurgical plant at Rouen, France. The Institute of Gas Technology in Chicago has a small- scale gasifier [28] in which bituminous coal (transferred with some air) is passed to a cyclonizer wherein oxygen and super- heated steam are combined with the mixture and the entire suspension thence moved into the hot gasifier. The cyclonizer achieves further grinding of the coal and is part of the flash pulverizer-cyclonizer for grinding coal developed by the Insti- tute of Gas Technology. A larger pilot-plant-scale unit has been constructed. It will gasify from 500 to 1,000 pounds of coal per hour under pressures ranging from 1 to 5 atmospheres. Ash will be removed as liquid slag. MISCELLANEOUS PROCESSES Many miscellaneous processes for the gasification of coal with and without oxygen in fluidized beds, either at atmos- pheric or elevated pressure, have been patented. Some informa- tion about these processes, such as that of Pittsburgh Consoli- dation Coal Co. and that of the Texas Co., has been pub- lished, but is too scanty to allow detailed description. There Page 180 900 800 700 - 600 0) £L 500 c o Figure B 10 OIL SHALE AND COAL REQUIREMENTS FOR SYNTHETIC-FUEL PLANTS INCLUDING FUEL FOR STEAM AND POWER t / • / • / • / / • / • \ / / /y • / • • / • . • • / - .J1-:'jI---"c"oal'For Hydroger nation Process • ^r.S-CTw — 1 i c o 400 300 200 100 1950 55 60 Year 65 70 75 have been numerous attempts in the United States and Europe at underground gasification of coal. The gas so obtained is so diluted with nitrogen as to be suitable only for fuel purposes, so no further attention is given the process here. The question naturally arises as to why direct gasification of coal by the processes just described is not now in commercial operation in this country, especially since some of them have been extensively used in Europe. There are two answers: first, when manufacture of synthetic ammonia and methanol started in this country, the blue gas process using coke as raw material was well established, whereas the European coal gasification processes were more or less experimental. Second, within the [ast several years natural gas has become decidedly the least expensive raw material for manufacture of synthesis gas. In the future, it is practically certain that natural gas will become more expensive and less available for large-scale use, especially with the growing demand for house heating with gas. \s this situation develops, and as direct coal gasification proc- esses in this country are further improved, coal will gradually displace both natural gas and the more expensive coke in com- mercial manufacture of synthesis gas, as outlined in more detail later. SYNTHESIS GAS REQUIREMENTS Prediction of the amount of synthesis gas to be made directly from coal requires prior estimates of the growth of industries using synthesis gas as a raw material. These industries are syn- thetic liquid fuel (gas synthesis process), synthetic ammonia, and synthetic methanol. The following table shows estimated projections of Fischer^ Tropsch synthetic liquid fuel production, and also the corre- sponding production rates of synthesis gas, and the coal re- quired to make this synthesis gas. Coal requirements for synthesis gas for synthetic liquid fuel (gas synthesis process) Barrels, liquid products per day Synthesis gas Total coal used,, tons per year Year (CO+EQ, M. c. f. per day 1955 10, 000 40, 000 250, 000 500, 000 700, 000 0) 1960 900, 000 6, 900, 000 13, 500, 000 18, 000, 000 8, 300, 000 51, 000, 000 1965 1970 106, ooo, ooa 1975 155, 000, 000 1 Synthesis gas made from natural gas in 1955. Page 181 250,000 » 3 150,000 o 100,000 50,000 1950 Figure Bll OPERATING AND MAINTENANCE LABOR REQUIRED FOR SYNTHETIC FUELS, INCLUDING MINERS c Summary for 197 5 Honrl y employees 21 ied employees 4 employees zi ? r>nr> Solar Tota -3,000 >5,000 y4 y s s y s y y s y y y -< 0 ^ s s ^ _ • """^ ^ . • ■ Sha\e _ - • *^ o\\- ——•-rv v? rz • • • ,. _ •" / 55 60 65 70 75 year In synthetic ammonia manufacture, nitrogen and hydrogen in a l-to-3 ratio by volume react catalytically at 200 to 1,000 atmospheres pressure and about 500 degrees Centigrade. The first step is the preparation of synthesis gas containing nitrogen and hydrogen in the proper proportions. The gas may be made from coal or coke by means of the water gas reaction plus subsequent steps to cause carbon monoxide to react with steam to form carbon dioxide and hydrogen, followed by removal of the carbon dioxide. Past and future estimated production of synthetic ammonia in the United States (exclusive of production from Govern- ment-operated plants whose product went into military explo- sives) are shown in figure C—1. Following the war most of these Government plants were transferred to private industry, and much of the upsurge in production after 1945 is due to the transfer of these plants to manufacture of ammonia for fer- tilizer or industrial uses. Estimated future production has been formulated from a speech by Charles F. Brannan, Secretary of Agriculture, before the American Plant Food Council at Hot Springs, Va., in June 1951, and from a comprehensive end-use pattern for ammonia prepared for the years 1941 and 1949 [29]. Projection for 1975 has been placed at the high level of 6,300,000 tons because of the constantly increasing demand for fertilizer nitrogen and because plastics, textiles (including synthetic textiles), and some chemicals are demanding in- dustrial ammonia at rapidly increasing rates. To increase pro- duction from 1.8 million tons annually in 1951 to this high level would require new production facilities for 4.5 million tons in addition to any replacement of older plants. However, about 2.2 million tons of facilities can be provided by reacti- vation of inactive plants such as the Morgantown Ordnance Works and by synthetic oil plants to be built as described in Part B of this report. In synthetic methanol manufacture [30, 31] carbon mon- oxide and hydrogen in a l-to-2 ratio by volume react cata- lytically at 200 to 1,000 atmospheres pressure and about 300 degrees Centigrade. The first step is the preparation of syn- thesis gas containing carbon monoxide and hydrogen in the proper proportions. As in ammonia synthesis, this gas may be made from coal or coke by means of the water gas reaction, but avoiding nitrogen as much as possible and taking the neces- sary steps to build up the necessary l-to-2 ratio. Past and future estimated production of synthetic methanol in the United States are shown in figure C-2. A major factor in estimating future requirements is the quantity of methanol that will be required to manufacture formaldehyde. The con- version of methanol into formaldehyde is usually carried on in the methanol plant. By far the largest consumer of formalde- hyde is synthetic resin, particularly the phenolic, urea, and melamine resins. The phenolic resins are of more than ordinary future importance, as indicated in Part D of this report. It is Page 182 concluded that demand for formaldehyde in the United States will increase from 718 million pounds in 1950 to 8,000 million pounds in 1975. In contrast to the formaldehyde requirement, a relatively moderate increase for the other uses of methanol has been projected to 1975, mostly based on new chemical uses for methanol. To increase synthetic methanol to the 875 million gallons in 1975 shown in figure C-2 would require 715 million gallons of new production capacity, in addition to any replacement of older plants. This means a total investment of 360 million dollars. About 240,000 tons of steel would be required, and power requirements in 1975 would total about 430,000 kilowatt. The manufacturing processes require 75,000 SCF of CO+H2 per ton of ammonia and 280 SCF of CO+H2 per gallon of methanol. The unit "SCF" means cubic feet of gas under standard conditions of temperature and pressure. "CO+H2" means that only the carbon monoxide and hydro- gen in the gas are considered in determining the volume of synthesis gas. The following table, based on these unit quantities, gives the estimated volume of synthesis gas required for future pro- duction of ammonia and methanol. It shows also the esti- mated distribution of the gas according to raw materials used, and the annual tonnages of coke and coal that will be gasified in these processes. Synthesis gas for ammonia and methanol manufacture Total synthesi gas M.c.f. per year 428 million. . 508 million. . 580 million. . Percent made fror 1, 250, 000 1, 375, 000 1, 500, 000 1, 550, 000 1, 560, 000 1, 560, 000 \2, 900, 1, 800, ;, 400, Figure CI PRODUCTION OF SYNTHETIC AMMONIA AND BY-PRODUCT AMMONIA FROM SYNTHETIC-OIL PLANTS (PAST PRODUCTION FROM PRIVATE PLANTS ONLY) Figure C 2 PRODUCTION OF METHANOL These estimates assume that natural gas will be increasingly used until 1955 and then decreasingly until the usage fades out completely about 1965, and that coke will show only small increases or else remain static. Direct coal gasification must then take up the slack, which means a considerable number of coal gasification installations to reach the rate of almost 10 million tons of coal per year in 1975. Figure C—3 shows past and estimated future coal require- ments for gas synthesis. The figures are the sums of (1) coal used to make synthesis gas for synthetic liquid fuel (gas synthesis process), (2) coal used to make synthesis gas for ammonia and methanol manufacture, and (3) coal used to make coke from which in turn synthesis gas is made. Up to now, of course, there has been no direct gasification of coal. Item (1), by f ar the largest component, has also been included in the tonnages shown in figure B-10 for the synthetic liquid fuel industry. The huge quantity of about 165 million tons per year of coal will be subjected to direct gasification in 1975 as compared to Page 183 200,000,000 100,000,000 £ 10,000,000 o o o 1,000,000 100,000 Figure C 3 TOTAL COAL REQUIREMENTS FOR SYNTHESIS GAS FOR CHEMICAL MANUFACTURE . Actual .Projected 1935 40 45 50 55 Year 60 65 70 75 none today, and as compared to a much lesser quantity for coal carbonization in 1975 (see Part A). In addition to bitumi- nous coal, considerable lignite and subbituminous coal will probably be used, but there is now no way of even approxi- mating the extent of such use. Capital investment, steel, and energy required for gas pro- duction plants and operations are included in the synthetic fuel or chemical plants which the gas-making units serve, as given in other parts of this report. OTHER METHODS OF GOAL PROCESSING In addition to carbonization, hydrogenation, and gasifica- tion, there are several other methods of processing coal, some now of only academic interest and all of only minor commer- cial interest. Some, however, might later become important. Two—coal oxidation and coal extraction—justify specific comment. Goal oxidation can be used to influence coking properties of coals and for the production of chemicals. The former use, if needed, probably would be integrated with carbonization plants; the second has not yet been used commercially. Labora- tory and pilot-plant experiments have yielded humic acids, polycarboxylic aromatic acids, and solid insoluble products. The solid insoluble material is not expected to be competitive within the period of this survey. The humic acids are alkali- soluble and, combined with 6 to 8 percent of ammonia, offer a possibility as fertilizer, but widespread commercial development is not anticipated. The polycarboxylic aromatic acids are water soluble and could be used for several purposes, e, g., as a sub- stitute for phthaHc acid; the production of, say, 100,000,000 pounds per year by 1975 is a definite possibility in view of th expected large expansion of the plastics industry. The mos probable use is as ester plasticizers and resins of the alkyd type One advantage of such esters is their high resistance to saponifi cation. The following table gives estimated plant cost and raw ma terial requirements for the production of 100,000,000 pound per year of polycarboxylic acids by coal oxidation, based oi data from the Carnegie Institute of Technology Coal Researd Laboratory. Costs for smaller plants would be higher. The com plex product requires fractionation to obtain products of uni form quality suitable for specific uses. Plant cost $15,000,000. 9,000 tons. $7.00/100 lb.of product. Materials and energy requirements Steel requirements. Operating cost (in- cluding 10% de- preciation, 4% interest). Power 8,000 kw. 90,000 tons per yr 13,000 tons per y; 40,000 tons per y Goal Caustic (NaOH) Sulfuric acid (H2S04). VARIED PRODUCTS FROM GOAL Coal extraction gives a variety of products, depending oi the nature of the coal, the solvent used, and temperature ant pressure applied. The main products are montan wax, specia pitches, ash-free coal and coke, and coking coals made fron noncoking coals. Production of special pitches by coal-extrac tion processes needs no further mention because of the com paratively small material requirement. The production of ash free coal has been in commercial operation for several years i] Germany. The product is suitable for carbon electrodes but i more expensive than pitch. Similar materials can also be ob tained by coal hydrogenation. It is probable that these tw< processes will be used in a small way for electrode carbon pro duction. In view of the relative abundance of coking coals ii this country and other simpler and less expensive methods o improving coking coals, production of coking coals by coal extraction processes should not have widespread commercia application before 1975. Production of montan wax is an existing commercial process Montan wax is obtained by extraction of lignites of a higl bitumen content with low-boiling solvents like benzol or benzol alcohol mixtures at temperatures below 100 degrees Centigrade Commercial crude montan wax is a high-melting, hard, brittl* wax used in polishes, electrical insulating compounds, leathe: dressings, inks, and the like. In many uses it replaces vegetable and animal waxes, such as carnauba and ouricury wax. Ger many and Czechoslovakia are the centers of production. Pre war German capacity was about 40 million pounds per year Montan wax is used in Germanly largely as raw material fo] the production of chemically converted "synthetic" waxes. Present price quotations are about as follows: Per lb Montan wax, domestic, raw $0. 21 Montan wax, domestic, refined 0. Vi Montan wax, imported, raw 0, 14 Carnauba wax 1. 1( CandeliEa wax 0. T* Page 184 Domestic production of montan wax began during the Second World War in Arkansas but was suspended shortly afterward. A plant using Amador County, Calif., lignite was erected after the war, and production is now about 1,000,000 pounds of crude montan wax per year. Substantial increase of this capacity is said to be in progress. Assuming domestic demand near the prewar level of 7 million pounds a year and imports of 2 million pounds a year, as in 1950, about 25,000 tons of lignite a year would be re- quired. Availability of suitable lignites in this country and possi- bility of imports of montan wax will largely determine the development of domestic montan wax production. Future de- velopment is expected in conversion of montan wax by oxida- tion into carnauba wax substitutes and other wax products for specific uses. Synthetic waxes obtained from paraffin wax, especially from the gas synthesis, for example, might also enter this field as have already some other synthetic waxes and silicones. Coal-Chemical Future CPart D) These pages consider future demands for coal chemicals in the form of finished chemical products, without regard to availability. The term "finished chemical products55 means the chemicals in the form prior to their use in or as industrial or consumer goods. The finished chemicals consist of cyclic and acyclic products, with a few exceptions. Cyclic chemical prod- ucts are now largely derived from coal. Acyclic chemicals, with some exceptions, are derived from petroleum, natural gas, and agricultural products, but are considered herein for comparative purposes. 12000 10000 8000 6000 5000 40 00 3000 2000 (/> 1000 C Z> 800 o 600 Cl 500 o 400 c 300 o — 200 ii 100 80 60 50 40 30 Figure D I PRODUCTION OF SOME CYCLIC CHEMICAL FINISHED PRODUCTS Page 18S PAST AND PRESENT TRENDS IN CYCLIC FINISHED PRODUCTS Figures D—1 and D-2 show the production record for cyclic finished products, including GR-S rubber. Notable are (1) the slow, steady rate of increase in the production of dyes and color lakes and toners, resulting from expanding use in plastics; (2) the rapid increase in production of medicinals and flavor and perfume materials during the Second World War, and the steady rate of production in the postwar years; (3) the im- mense production of synthetic rubber (GR-S) brought about by the Second World War, and the decline and recent revival of this production; and its effect on the demand for rubber- processing chemicals; (4) the rapid rise in the production of synthetic insecticides and synthetic detergents of cyclic origin during and since the war; (5) the rapid, steady rise in the pro- duction rate of synthetic resins and plastics, mainly the cyclic intermediates (phenol, phthalic anhydride, and styrene) throughout the entire period; (6) the rise in production of cyclic plasticizers during the Second World War and, following a decline, another rise during the past few years for the cellulose acetate and vinyl plastics. The production of cyclic chemical products (which we may take to be synonymous with coal or coal-tar chemicals) did not become important in the United States until imports of syn- thetic dyes and medicinals was cut off by the First World War. Other types of cyclic chemical products were either unknown or nearly so. The First World War created a large demand for phenol for the manufacture of picric acid (trinitrophenol) for military purposes. The large (for that time) capacity created an incentive to the production of phenolic resins, particularly the hard thermosetting resins useful as molded plastics. The glycerol-phthalate resins, now known also as phthalic alkyd resins, were introduced in 1926 and soon attained large usage in paints, enamels, and lacquers, especially in the automotive industry. The thermoplastics, polystyrene and other resins con- taining styrene were the last of the important cyclic resins to develop. Styrene plastics were a direct result of the Second World War. The capacity for styrene monomer, originally needed to make up 20 to 25 percent of GR-S type synthetic rubber, was available after the war to a large extent for pro duction of polystyrene and styrenated resins of various types The demand for cyclic plasticizers has developed with th< plastics and has changed in detail as new plastics have becom< important. The vinyl plastics, comparatively recent but now th( largest group of plastic materials, require large amounts o: plasticizer (30 to 50 percent of the resin content). The coumarone-indene resins are thermoplastics and an derived from the light oil of coal carbonization. (See Part A.) Production was only about 100 million pounds in 1950 bui could be increased since not all coke-oven light oil is treatec for these resins at present. Among the alcyclic chemicals are synthetic fibers, such as viscose rayon, cellulose acetate rayon, and nylon. A number oi new fibers are in the first stage of commercial development: Orion (polyacrylonitrile), Dynel (60 percent vinyl chloride and 40 percent acrylonitrile copolymerized), and Saran (polyvinyli- dene chloride). Although these fibers are now made from ethylene, they will, to some extent, be made from acetylene in the future; acetylene or ethylene oxide reacted with hydrogen cyanide can yield acrylonitrile. The only new cyclic synthetic fiber is Dacron, which requires para-xylene or other para- dialkylated benzene. A comparatively recent development is cyclic surface-active agents, variously called "surfactants55 and (according to their end-use) detergents, wetting agents, emulsi- fiers or dispersing agents. Production of cyclic surface-active agents has risen rapidly. The largest group is the alkyd benze- noids which make up over three-fourths of the total production. About 10 percent of the total cyclic surfactants are derived from phenol. These are known as "non-ionic" surfactants. The production of organic insecticides in large volumes is likewise comparatively new. Seventy percent of production is shared quite equally by DDT and benzene hexachloride, both derived from benzene. THE GROWTH OF PLASTICS Figure D2 PRODUCTION OF ADDITIONAL CYCLIC CHEMICAL FINISHED PRODUCTS 1950 Solvents Estimated Surface-Active Agents Plasticizers Rubber-Processing Chemicals - Medicinals—i I A I9IO 20 30 40 50 60 Year The uses and potentialities of plastics are well enough recog- nized in a general way so as not to require specific description herein. Their growth in recent years, as compared with produc- tion of competitive materials, is shown in figure D-3. The trend of the industry as it affects the coal chemicals industry is shown in figures D-l and D-2. The 1950 production of plastics ob- tained from cyclic chemicals as intermediates is as follows: Millions of Pounds Total phenolic and other tar resins (with filler content 55%) 451 Total phthalic alkyd resins (practically no filler) 333 Total styrene resins: Polystyrene 261 Other styrene derivative or styrene copolymer resins 94 Coumaronc-indene resins (estimated) 100 Total cyclic resins (originating in benzene or naphthalene) (plus coumarone-indenes) 1, 239 Current plans anticipate a doubling of production within the next 3 years. Projection of past growth (figure D-l) will give a total of 80 billion pounds per year at the end of 25 years. Total plastics, now at approximately 2 billion pounds per year, Page 186 have increased in the past at almost the same rate (14 percent per year), and if projected at this rate to 1975 would give a usage figure of 200 billion pounds per year. Assuming a popula- tion of 200 million in 1975, this would require a yearly per capita consumption of 1,000 pounds. Nonindustrial usage would amount to 800 pounds per year for a family of four for such semidurable items as furniture, appliances, and automo- biles, and durable items such as windowframes, doors, wall panels, piping, electrical fixtures, plumbing fixtures, flooring, roofing and gutters. Industrial usage is estimated at 60 percent of the total and will be both durable and nondurable goods. A TENFOLD INCREASE IN PLASTICS BY 1 975 In 1951 dollars and at 30 cents per pound, this level of usage would entail a direct consumer expenditure of 240 dollars per year per family, and an indirect expense of 360 dollars per year. It is not believed that even if raw materials are sufficient for free expansion, the purchasing power of the public would be sufficient for such astronomical quantities. Therefore, a pro- jection on a tenfold increase for 25 years has been made for plastics and their related compounds, as follows: [Millions of pounds] 1950 1955 1975 316 650 3, 160 333 560 3, 330 355 890 3, 560 1, 284 2, 690 12, 800 1 Molding phenolics have approximately 55 percent filler as marketed. Figure D3 PRODUCTION OF PLASTICS VS. COMPETITIVE MATERIALS 100 80 60 40 30 20 ^S.y-yi^Steel S"'^-'f= Lumber c/> JO 10 _J 8 O o 6 4 c/> c 3 o 1- 2 o V) c o 1 0.8 0.6 0.4 0.3 0.2 Glass Zinc 8t Copper Rubber Leather Plastics" 1910 15 20 25 30 35 40 45 Year 50 55 60 65 70 75 Page 187 The phenolic resins listed would require the following materials: 1950 1955 1975 Phenol (millions of lb.) 195 400 1, 950 Derived from: Benzene (million of lb.) 195 27 400 55 1, 950 276 Benzene (million of gal.) The phthalic alkyd listed would require the following materials: 1950 1955 1975 1; Phthalic anhydride (millions of lb.) 120 335 200 550 1, 200 Derived from: Crude napthalene (millions of lb.) 2, 310 There is a process for the manufacture of phthalic anhydride from ortho-xylene, but it is difficult to control; with sufficient supplies of naphthalene available, it is believed that naphtha- lene will be preferred. Ortho-xylene is currently produced from petroleum, although it will be available in the future in quantity from coal processing, if required. The amount now available is 15 to 20 million pounds per year, and 1 pound produces ap- proximately 1 pound of phthalic anhydride. The 1975 projection for plastics and resins containing styrene is more difficult, since materials of this type were commercially unknown in this country until about 10 years ago. Polystyrene is at present the chief component of such materials. It is the cheapest plastic available, and so, despite its resistance to mod- erately high temperatures and its low scratch resistance and impact strength, it will continue to be used in large amounts. Improved styrene copolymer resins will find increased usage, despite their higher prices, in place of polystyrene. The following figures show present and expected consump- tion and raw material requirements: [Millions of pounds] 1950 1955 1975 Total styrene resins 355 890 3, 550 Polystyrene 261 350 715 Styrene copolymer resins 1 94 540 2,835 Total styrene required 355 620 2, 135 For polystyrene 262 350 715 93 270 1,420 Benzene required 310 539 1, 850 1 Includes styrene butadiene resins (not elastomers), styrene-acrylonitrile resins, styrenated alkyd resins, and styrene polyester resins. NONRESIN CYCLIC CHEMICALS PROVIDE MANY PRODUCTS In addition to the resins, two other classes of materials are also growing rapidly in new uses and by substitution for older materials: (1) synthetic cyclic surface-active agents, and (2) synthetic cyclic insecticides. Total cyclic surface-active agents for 1950 amounted to 373 million pounds, of which 310 million pounds were derived from coal-chemical sources. The surface-active agents for the household trade, as a replacement for soap, account for about 50 percent of the total usage at present and are largely of the cyclic type. Unless cheaper new acyclic compounds enter the field, which seems unlikely, we may take the expected increase in this use to come largely from cyclic chemicals, derivable most economically from coal-chemicals processes. This would amount to about a fivefold increase in the present production of synthetic detergents of the alkyl benzenoid type, or 1.2 billion pounds, and would require 230 million pounds of benzene (32 million gallons) and 140 million pounds of toluene (19 million gallons). Insecticides, fungicides, nematocides, and weed killers are included under the general classification of insecticides. The largest item in 1950 for this class was dichlorodiphenyl tri- chloroethane (DDT), with a production of 62 million pounds. It is manufactured from chloral and monochlorobenzene, which is made directly from benzene. Benzene hexachloride is also rapidly growing in use in the control of some agricultural pests; production in 1950 was 57 million pounds. The principal organic herbicide (2,4-dichlorophenoxyacetic acid [2,4—D]) is of cyclic origin. Control of weeds in pasture land and brush, such as mesquite and secondary growths in timberland, will require increasing amounts of 2,4-D and its esters and salts; a tenfold expansion to about 300 million pounds in 25 years is considered conservative. In addition to the surface-active agents and the insecticides, there are a variety of other nonresin cyclic chemicals. GR-S rubber, the principal synthetic rubber, is made from a syn- thetic elastomer derived from a coal chemical. The coal chemical is styrene monomer, 32 percent of which goes to GR-S rubber and 68 percent to plastics. Demands for rubber in 25 years are estimated at five times present demand, 85 percent coming from synthetic rubber. Increase in GR-S rub- ber will be proportionate to total synthetics, production and requirements being as follows: 1950 1955 1975 GR-S rubber (millions of lb.) 802 1, 900 9, 000 Styrene (millions of lb.) 175 380 1, 800 Benzene (millions of gal.) 21 32 226 Only nominal increase in the usage of dyes is expected. Present production of 200 million pounds should increase by 1975 to about 350 million pounds. Color lakes (the colorants for paints, printing inks, rubber, paper, and plastics) will in- crease more rapidly, largely due to their use in plastics; present production of 50 million pounds is expected to increase to about 130 million pounds in 1975. Cyclic medicinals have had only a nominal growth, for the trend is toward antibiotics, hormones, and vitamins, which are mainly available from natural sources. Production in 1950 was 39 million pounds, of which half was for the salicylates and acetyl salicylic acid (aspirin) from phenol, and an eighth was for sulfa drugs, derived largely from aniline and pyridine. Production in 1975 will be about 80 million pounds. Production of cyclic flavoring and perfume agents also will increase only nominally, from 11 million pounds in 1950 to 22 million pounds by 1975. The largest item is methyl salicylate (synthetic oil of wintergreen), the intermediate for which is phenol. A twofold increase is expected also for cyclic solvents (benzene, toluene, xylenes, solvent naphtha, phenol, cresols, chlorobenzenes, nitrobenzenes, and aniline) in their solvent uses, from 679 million pounds in 1950 to 1,244 million pounds Page 188 by 1975. The trend in production of cyclic plasticizers is de- pendent on technological changes in plastics and resins pro- duction. Vinyl resins require large amounts of the phthalate plasticizers, which are of the cyclic type. The expected tenfold increase for vinyl resins necessitates a similar increase of phthal- ate plasticizers, from 143 million pounds in 1950 to 1,430 million pounds in 1975, requiring (in 1975) 830 million pounds of phthalic anhydride. Approximately a fivefold increase is expected for cyclic rub- ber processing chemicals, to 450 million pounds in 1975. The expectation is based on expected production of synthetic rubber, which requires larger amounts of rubber chemicals than does natural rubber. The cyclic intermediates used in greater volume are aniline and (to a lesser extent) beta-naphthylamine, the prime chemicals being benzene and naphthalene. EXPECTED PRODUCTION AND REQUIREMENTS The following tables summarize the projected production of cyclic finished products, solvents, and elastometers, for 1975, and for the intermediate chemicals required in making these end products. Cyclic finished chemicals [Millions of pounds] Benzene 1950 1955 1975 Total cyclic fin ished products Dyes Color lakes and toners Medicals • Flavor and perfume materials.... Resins and plastics Rubber chemicals Plasticizers Surfactants Insecticides Cyclic elastomers (GR-S) Solvents Total all cyclic end-use chemicals 2, 445 4, 723 19, 590 202 232 352 48 65 133 39 45 69 11 13 21 1, 284 2, 690 12, 800 98 117 450 180 300 1, 800 373 936 1,865 210 325 2, 100 802 1, 900 9, 000 679 787 1, 244 3, 926 7, 410 29, 834 Phenol [Millions of pounds] 1950 1955 1975 For phenolic resins For chemicals For solvent refining For export Miscellaneous uses Total 195 400 1,950 70 148 780 15 18 30 14 14 14 17 20 32 311 600 2, 806 Styrene [see figure D-4) [Millions of pounds] • 1950 1955 1975 355 620 2, 135 For GR-S rubber 175 380 1, 800 Total 540 1,000 3,935 1950 1955 1975 Millions Percent Millions Millions of gallons of total of pounds of pounds Phenol Styrene Aniline Nylon DDT Diphenyls Maleic anhydride Synthetic detergents Dichlorobenzenes Monochlorobenzene (other than DDT, phenol, and ani- line) Nitrobenzene (other than ani- line) Miscellaneous chemicals and solvents Total 41 29. 1 82 385 65 34.7 107 476 14 7. 5 18 27 20 10.7 30 30 5 2.7 7 50 3 1. 6 5 10 3 1. 6 5 30 10 5. 3 25 50 5 2. 7 7 10 5 2. 7 7 10 4 2. 1 6 9 12 6. 4 20 62 187 100. 0 i 319 1, 149 1 No account is taken of benzene requirements for aviation gasoline for military purposes which are beyond the scope of this report. Naphthalene (see figure D-5) [Millions of pounds] 1950 1955 1975 455 700 3, 120 335 550 3, 060 120 150 260 100 125 216 64 80 150 19 24 30 6 8 16 6 8 10 5 8 10 Figure D4 PRODUCTION 8 CONSUMPTION OF STYRENE 500 400 o Q_ 300 200 100 Page 189 Phthalic anhydride [Millions of pounds] Total phthalic anhydride For alkyd resins.... For phthalate esters. For dyestuffs For food and drugs. . Miscellaneous 1955' 1950 1975 240 400; 2, 192 120 200 1,200 83 138 830 15 25 , 65 7 12! 32 15 25 | 65 The present and projected total production (plus imports) and end-usage of total cresylic acid (crude and refined) and cresols (production plus imports) is shown in the following table: Cresols [Millions of pounds] 1950 Total cresols and cresylic acid For phenolic resins Plasticizer (tricresyl phosphate) Ore flotation Disinfectants Carbon removal (engine cleaning com pounds) Lubricating oil refining Lubricating oil additives Textile processing Miscellaneous uses in chemicals, medici- nals and dyes 90 34 16 10 1955 135 68 17 12 9 1975 448 340 21 20 13 11 16 15 7 The investment costs 3 for the principal intermediates and finished products discussed in this report are estimated as fol- lows in dollars per annual ton: Phenol from benzene 12 400 Phthalic anhydride from naphthalene 310 Phthalic anhydride from o-xylcne 560 Styrene from benzene 550 Phenolic resins 48 Phthalic alkyd resins 55 Polystyrene 3 75 GR-S copolymers 280 Phthalate plasticizers 110 1 Average of four processes in current use. 2 Not including investment requirements of raw materials plants to be built to supply phenol demands, such as caustic, sulfuric acid and chlorine plants. 3 Chemical Engineering, May 1951, p. 165, except polystyrene which is estimate of author of this part of report. CHEMICALS FROM ACETYLENE A number of important chemicals are made wholly or in part from acetylene. They are, therefore, coal chemicals, be- cause up to this time all acetylene in this country has been made from coal coke. Acetylene not being a cyclic chemical, however, it is discussed separately. Acetylene will be made to some extent in the future from natural gas and petroleum hydrocarbons, and it is reported that some chemical companies are now in- stalling commercial units for this purpose. The manufacture of chemicals in 1950 consumed 300 million pounds of acetylene (out of a total of 414 million pounds), Figure D5 SUPPLY 8 CONSUMPTION OF CRUDE NAPHTHALENE 400 C O CL 300 200 100 ✓ / Tot< Crud 3l Si ippiy of ^ 3lene / i e Na phth< Misc c :.Use >urpk sane 1 i 4 • f V - i Re :ined / ***** 1 * y *••»• !*■ 1 Phth alic / ^nhyc ride 1940 41 42 43 44 45 46 47 48 49 50 Year requiring 300 thousand tons of coke. The picture is too complex for a breakdown by usage for each kind of chemical, but the production of various chemicals involved for 1950 is as follows: Production of acetylene chemicals [Millions of pounds] Pentaerythritol Acetic acid (100% synthetic) Acetic anhydride Cellulose acetate Vinyl resins Neoprene rubbers Acrylo-type rubbers 4 Acrylo-type fibers (capacity by 1951 )4. Trichloroethylene, etc. (estimated). . . Total. Produced Estimated acetylene usage (if all made from acetylene) 25 350 650 366 381 112 27 11 ,000 1 6 1 2 230 l 2 s 48o 4 190 70 220 1, 196 1 1,240 pounds acetylene per 2,000 pounds acetaldehyde. 2 2,200 pounds acetaldehyde per 2,000 pounds acetic acid. 3 2,400 pounds acetaldehyde per 2,000 pounds acetic anhydride. 4 Basis that vinyl resins are all polyvinyl chloride. Processes are in development for making acrylonitrile from acetylene. Acrylonitrile will be used in increasing amounts for synthetic fibers, for Buna N (GR-A) synthetic rubber, and for neoprene-type synthetic rubber. It appears that only one-fourth of the potential for acetylene in the compounds in the above table is being met. Acetic acid and acetic anhydride are probably made from other sources to a great extent. A further complication is the fact that Canada exports a large amount of acetylene chemicals, especially vinyl resins, to the United States. If one assumes a tenfold increase Page 190 in the use of acetylene for chemicals by 1975, but that new production up to 1955 is only half from carbide, the other half from hydrocarbons, and that by 1975 only one-third of the total is from carbide, the following projections are shown: Chemical acetylene production 1950 1955 1975 Total acetylene (millions of lb.) 300 550 3, 000 Acetylene from carbide (millions of lb.) 300 425 1, 000 Calcium carbide usage (millions of lb.) 935 1, 320 3, 120 Coke usage (thousands of tons) 300 425 1, 000 Conclusions The rate of growth of the chemical industry compared with that of all industry is shown in figure D-6 [32]. The chemical industry, and in particular the synthetic organic chemical in- dustry, is increasing at a rate approximately four times that of all industry. Cyclic chemicals have grown at about the same rate as acyclic chemicals. The volume of acyclic chemicals is approximately 1times that of cyclic chemicals. Coal has been the raw material for most cyclic chemicals until recently, when defense programs required additional ben- zene to come from petroleum operations, despite higher cost. Coal hydrogenation processes will make available a further large supply of aromatic prime chemicals, such as benzene and its homologs, naphthalene, phenol, and cresols. The coal gas-synthesis process will also give large amounts of aromatic and aliphatic hydrocarbons and substantial quantities of oxy- genated aliphatic compounds now derived chiefly from petro- leum and agricultural sources. Such chemicals as acetic acid, acetaldehyde, and acetone, and the higher homologs of each of these, will be produced in large amounts from gas-synthesis operations. Sources of raw materials will govern in the future. The supply of petroleum and natural gas is limited in comparison with coal. The supply of agricultural products is limited as far as cyclic chemicals are concerned, furfural being about the only cyclic chemical of large volume so obtained. A tenfold increase in the use of cyclic plastics and resins and in insecticides seems reasonable, together with a nominal in- Figure D6 CHEMICAL PRODUCTION INDICES ■ nic C\ lemicc lie wryQ IIS — <*-Pm (1935-39=100) _ n nf ( \ S->'J* 1 I l Industrial Production • • • • • • • • ( 935- 39=IOi 0) K / • *f \ —» vj.:-// / -xylene has been isolated for conversion to phthalic anhydride and p-xylene is being separated for use in the new fiber, Dacron. These compounds hold promise as chemical raw materials. Potential quantities available are much greater than foreseeable future requirements. Intensive work on separation techniques is in progress. Polycyclic aromatics are present in small quantities in petro- leum and can be produced from it. The entire United States production comes from coal tar. In England, the Catarole process has been put into operation to make naphthalene, methyl naphthalene, anthracene and other aromatics. This method is not at present in use in the United States. Naphthalene, the most important of the polycyclics, was produced from coal tar to the extent of 300 million pounds in 1950. Present demand is 450 million pounds and is being met by importing the difference. Although phthalic anhydride is a large naphthalene consumer and is sure to grow, it may be more advantageous to produce it by the pertoleum o-xylene route than by producing naphthalene from petroleum. Cresylic acids are recovered from heavy cracked petroleum distillates by alkaline extraction. They are present in amounts up to 2 percent. They consist of alkyl phenols, chiefly cresols and xylenols. More than two-thirds of 1950 production was from coal tar, and imports have supplied a large portion of United States demand in the past. Total production in 1950 was 67.7 million pounds, of which 16 million came from pe- troleum. Largest use is in phenolic-formaldehyde resins and tricresyl-phosphate plasticizers. No serious problem of supply exists here. CARBON BLACK YIELD BETTER FROM OIL In 1950, 1,382 million pounds of carbon black was produced in the United States, 93 percent of which was used in rubber. Carbon black requirements for 1975, as shown in table II, will nearly double 1950 production. Both natural gas and oil are used to produce the carbon black. Yields from the gas are much lower than those from oil, and the use of oil is gaining ground. The present yield from 1 gallon of oil is 2.85 pounds, and by 1975 it may be expected to reach at least 3.4 pounds as shown in table III. The furnace black process utilizing oil will undoubtedly supersede processes using natural gas. Oil blacks are superior for many uses. The price is higher but will drop as the process is developed further. In calculations leading to data in table III, it is assumed that by 1975, 80 percent of United States carbon black production will be from oil by the furnace process. SULFUR RECOVERY FROM GASES Sulfur is being produced from natural and refining gases at a rate of more than 200,000 tons per year. New capacity for recovery will add 100,000 tons per year to this total by the end of 1952. Economics will determine the additional sulfur recov- ery from these sources. Natural gasoline plants in the vicinity of Odessa, Tex., alone burn 500 tons of recoverable sulfur per day. Page 197 Table IL—Rubber and carbon black consumption Year Rubber Carbon black requirements 1,000 pounds Long tons 1,000 pounds 1955. 1, 500, 000 3, 300, 000 3, 960, 000 5, 500, 000 1, 227, 000 I960 1, 800, 000 1, 472, 000 1975 2, 500, 000 2, 045, 000 Present and projected plants range from 10 to 300 tons per day in size. Units as low as 5 tons per day may be economically sound when integrated with natural gas plants. A freak well, which was shut down because of unprecedented corrosiveness of the gas was found to contain 42 percent of hydrogen sulfide and 45 tons per day of sulfur could be recovered from this well alone. There is little doubt that this and many other technical problems can be solved to increase sulfur recovery from these sources. IMPORTANT END-PRODUCTS Detergents Detergents in the past 5 years increased from about 6 per- cent to 47 percent of the total soap-detergent market. Pro- duction in 1950 was 1.66 million pounds. The active com- pounds in detergents, L e., the surface active agents, comprise 40 percent of the total weight. Sulfated or sulfonated cyclic compounds, largely from petroleum, are by far the largest class. They are principally derived from benzene and long chain aliphatic compounds and from selected aromatic gas-oil frac- tions. Some alkyl naphthalene sulfonates are also made. The nonsurfonated nitrogen containing compounds come from non- petroleum sources except for their ethanolamine content. The polyhydric alcohol esters and ethers are based on animal and vegetable oils and on glycol made from petroleum. The use of detergents is sure to increase greatly. They will replace a higher proportion of the soap market. Detergent production should be raised to 2 billion pounds by 1955, 2.5 billion pounds by 1960, and possibly 4 billion by 1975. These quantities would require 800 million pounds of surface active agents in 1955, 1 billion in 1960, and 1.6 billion in 1975. Present estimates are that petrochemicals comprise over half the total surface active agents. This will be higher as more benzene is derived from petroleum. Taking benzene, propylene, sulfur, ethylene and tetradecane as the major petrochemical source materials (though some others will undoubtedly come into the picture), we arrive at the estimate in table IV. Insecticides and Weed-Killers Chemicals used in insecticides and weed killers come in large part from petroleum and natural gas. Carriers for these chemicals also require large amounts of petroleum oil fractions. The most important consumers of petrochemicals are the two insecticides, DDT and benzene hexachloride, and the plant hormone weed killer 2,4-D (2,4-dichlorophenoxyacetic acid). Production of DDT in 1952 is expected to be 105 million pounds and qf benzene hexachloride about 160 million pounds. Production of 2,4-D and derivatives was 28 million pounds in 1950. The future demand for DDT may rise to 125, 150, and 200 million pounds in the years 1955, 1960, and 1975, respectively, The demand for benzene hexachloride for those years may be 170, 200, and 225 million pounds; for 2,4-D and derivatives, the figures may be 40, 50, and 80 million pounds, respectively. Chemical requirements for these products would then be 162, 194, and 251 million pounds of benzene and 25, 31, and 44 million pounds of ethylene in the years 1955, 1960, and 1975, respectively. Plastics Plastics are one of the largest consumers of petrochemicals. As coal tar reaches maximum production, petroleum and natural gas will be relied on for expansion. Plastics have grown from an initial production of less than 6 million pounds in 1922 to 2.28 billion pounds in 1950. Their chemical compo- nents are similar to those used for synthetic rubber and fibers. Plastics production in 1950 was as follows (millions of pounds): phthalic alkyds, 333; nonaromatic alkyds, 69; phenolics, 451; styrene, 356; rosin and rosin esters, 75; urea melamine, 219; vinyls, 381; cellulose acetate, 110; other cellu- lose, 20; miscellaneous, 267. Some classes of plastics are growing rapidly and others are leveling off, but as a whole the industry can be expected to increase to many times its present size. A total production of 3.5 billion pounds in 1955, 4.8 billion in 1960, and 9 billion in 1975, is probable. Table III.—Carbon black requirements and estimated yields from natural gas and oil Total carbon Natural gas Oil black require- ments, million lb. Year Con- sump, million cu. ft. Carbon black million lb. Yield, lb./ 1,000 cu. ft. Oil con- sumed, 1,000 gal. Carbon black, million lb. Yield, lb. per gal. 1955.. 1960.. 1975.. 2,000 498, 000 479, 000 269, 000 1, 300 1, 270 715 2. 61 233, 000 353, 000 842, 000 700 1,130 3,00 3.20 3.40 2, 400 2, 65 2. 75 3, 575 2, 860 The alkyds are used mainly in paints, varnishes, and allied finishes, and are based chiefly on phthalic anhydride and glyc- erol. They are growing in volume but not spectacularly. A total of 530 million pounds may be produced in 1953, 670 mil- lion in 1960, and 1,330 million in 1975. This would require (in millions of pounds) 192, 240, and 480 of phthalic anhydride for each of these years, respectively, and 80, 100, and 200 of glycerol. Table IV.—Petrochemical requirements for surface active agents [Millions of pounds] Total surface active agents Tetra- decane Year Benzene Propylene Sulfur Ethylene 1955 800 132 317 82 14 33 1960 1,000 177 422 105 18 40 1975 1, 600 304 726 179 22 68 Page 198 The phenolic plastics have their largest use in molding struc- tural materials, but are used also for laminating, adhesives, protective coatings, etc. Demand for 1955 is estimated at 850 million pounds, about double the 1950 production. The 1960 demand may be 950 million pounds. Chemical requirements for the phenol and formaldehyde required and for the benzene and methane from which these would be produced are shown in table V. Table V.—Chemical requirements for phenolic plastics [Millions of pounds] Formalde- hyde1 Year Phenol Benzene Methane 1955 375 346 265 175 1960 475 438 285 224 1975 825 761 495 328 On a 100 percent basis. Polystrene is used principally for molding materials. It is one of the most rapidly growing plastics. Production in 1950 was 50 times as great as in 1942. Because of synthetic rubber requirements, the supply of styrene was insufficient to meet the demand in 1951, but capacity is being rapidly increased and should reach 750 million pounds in 1952. This would be about 400 million pounds above rubber requirements. Total styrene requirements for 1955 have been estimated at over 1 billion pounds. It is estimated that styrene requirements for polystyrene plastics alone will be (in millions of pounds) 500 for 1955, 700 for 1960, and 1,500 for 1975. The benzene re- quired for styrene production would be (in millions of pounds) 417 for 1955, 583 for 1960, and 1,250 for 1975; and ethylene required would be 135, 188, and 404 respectively. Urea and melamine resins, useful for adhesives, laminating, molding, textile, and paper treatment, have grown steadily but not spectacularly. A production (in millions of pounds) of 265 in 1955, 340 in 1960, and 570 in 1975, can be predicted. Table VI shows the chemical requirements for this production. Table VI.—Chemical requirements for urea and melamine plastics [Million of pounds] Formal- dehyde 1 Year Urea Ammonia Methane 2 1955 99 99 169 135 1960 143 142 216 175 1975. . 245 243 363 299 1 On a 100 percent basis. 2 Includes methane for formaldehyde and carbon dioxide only for urea; does not include methane for ammonia. VINYL PLASTICS IN CONSUMER GOODS The vinyl plastics are used for raincoats, draperies, up- holstery, garden hose, phonograph records, electrical insulation, etc., and they have had a phenomenal growth. Basic raw ma- terials are ethylene or acetylene. Production could reach (in millions of pounds) 700 by 1955, 1,200 by 1960, and 2,000 by 1975. Chemical requirements (in millions of pounds) are for acetylene 323, 554, and 924 respectively for these years; or for ethylene, 387, 664, and 1,106. The cellulose plastics have declined in importance. They may not increase appreciably. A total production (in millions of pounds) of 135 in 1955, 150 in 1960, and 175 in 1975 would seem reasonable. Chemicals required would be small in amount. Among the miscellaneous plastics, the cumarone-indenes, polyethylene and acrylates, are the most important. Cumarone- indenes are used largely as a binder in asphalt floor tile. The acrylates (lucite, Plexiglass) are small in volume, but impor- tant in use. Polyethylene is probably the most important of these plastics. Production of miscellaneous plastics should total (in millions of pounds) at least 480 by 1955, 720 by 1960, and 1,700 by 1975. New plastics will, of couse, be developed in this period. The cumarone-indene plastics are not made from petroleum sources and are not here considered. Polyethylene production will probably increase (in millions of pounds) to 200 in 1955, 500 in 1960, and 1,000 in 1975. Rough estimates of chemical requirements for these miscellaneous plastics are given in table VII. Table VII.—Chemical requirements for miscellaneous plastics [Millions of pounds] Miscel- laneous plastics Year Ethylene Acetylene Propylene Methane 1955 480 225 25 80 30 1960 720 525 40 100 40 1975 1, 700 1, 100 100 170 75 Petrochemical Requirements for Major Plastics A comprehensive estimate of petrochemical requirements for important plastics is listed in table VIII. These are only part of the total requirements. They are sub- ject to a number of limitations which must be carefully con- sidered in evaluating the estimates. Table VIII.—Petrochemical requirements for major plastics [Millions of pounds] Year Ethylene Acety- lene 1 Propy- lene Methane Benzene m- Ammo- nia Xylene 1955.. 747 348 129 340 763 196 99 1960.. 1, 377 594 161 439 1,011 246 142 1975.. 2, 610 1,024 292 702 2, 011 491 243 1 Partially alternative raw material with ethylene. Plasticizers Total plasticizer requirements have been projected as 350, 480, and 900 million pounds for 1955, 1960, and 1975. Chemi- cal requirements have been projected for only the largest class of plasticizers—namely, the phthalic anhydride esters. At present other derivatives are produced in greater quantity, but Page 199 the di-iso-octyl phthalates will probably become most impor- tant. Assuming the latter represent the total production, re- quirements for them will be 210, 288, and 540 million pounds in 1955, 1960, and 1975. To produce these requirements, 70, 95, and 180 million pounds of n-heptene will be needed; and if the phthalic anhydride is made from o-xylene, 76, 103, and 195 million pounds will be needed. Solvents Solvents are among the most important end uses of petro- chemicals. Very few statistics are available, however, on the quantities used. Probably 100 or more different compounds of petrochemical origin are used for this purpose. Many of them are used both as solvents and as intermediates for other solvents. Although a number of the solvents are among the highest tonnage chemicals, the major portion of the production of these chemicals is utilized for other purposes. Requirements, therefore, will be estimated in discussions of major chemical requirements not included in other end product classifications. The expected use of ethyl alcohol (the only important solvent on which data are available) as a solvent is projected only to 1962, when requirements are set at 71 millions of pounds. Synthetic Rubber Synthetic rubber projections are discussed for GR-S, butyl, neoprene, nitrile-type rubber, and specialty rubbers. Because the chemical constitution of the "true" synthetic rubbers will doubtless be altered somewhat by 1975 to provide better prod- ucts, only rough generalizations were made about chemical requirements. It was assumed that synthetics in 1975 would be derived principally from normal and isobutylene, acetylene, ethylene, and aromatics. A total of 2 million long tons (4.48 billion pounds) of synthetic rubber is predicted for 1975. It was assumed that about 85 percent of the requirements would be for normal or isobutylene, 10 percent for acetylene or ethyl- ene, and 5 percent for aromatics. Quantitatively, in millions of pounds, the figures would be 4,231 for normal or isobutylene, 498 for acetylene and ethylene, and 249 for aromatics. Aromatics requirements, principally benzene, for all syn- thetic rubbers would run to 319, 355, and 249 millions of pounds in 1955, 1960, and 1975, respectively. C2 hydrocarbons would run to 193 (for ethylene) and 203 (acetylene) millions in 1955; to 299 (for ethylene) and 262 (acetylene) millions in 1960; and to 706 millions (for the C2 group) in 1975. (In these estimates, ethylene and acetylene are alternative re- quirements in some cases.) The butylenes would run to 1,746 (normal) and 232 (iso-) in 1955; to 1,834 (normal) and 417 (iso-) in 1960; and to 4,234 (total) in 1975. Synthetic Fibers Synthetic fiber production (exclusive of rayon) for 1960 is estimated at 975 million pounds. By 1975 the estimate rises to 4 billion pounds. A breakdown of the estimate for individual fibers to 1960 is shown in table IX. The breakdown for 1975 is as follows (in millions of pounds): polyamides (Nylon), 800; acrylonitrile and copoly- mers (Dynel), 1,200; polyesters (Dacron), 1,000; miscellane- ous, 1,000. Table IX.—Synthetic fiber production {excluding rayon) [Millions of pounds] Fiber Nylon Orion Acrilan Dynel Dacron Miscellaneous. Total. 1950 1953 1960 100 240 300 6. 5 37 125 None 30 100 5 30 100 C1) 35 150 45 115 200 487 975 1 Experimental quantities. The basic chemical requirements for these synthetic fibers (not including processing chemicals) were estimated in table X. Table X.—Chemical requirements for synthetic fibers {excluding rayon) [Millions of pounds] Year 1950.. 1953.. 1960.. 1975 6. u 8'S 2 "S o e < 0) 21. 5 102 285 , 252 (2) ■ • - 30 200 20 71' 2481 1, 104 9. 86 288 1,000 5. 3 49 163 566 26. 6 89 183 578 $3 147 353 441 1, 176 26. 5 114 756 J3 3. 5 32 108 373 1 Ethylene in this column is alternative with acetylene. 2 Ethylene in this column is not alternative with acetylene. 3 Acetylene is alternative with ethylene. 4 Acrylonitrile and hydrogen cyanide are not additional requirements. Quantities of raw materials for these compounds are included under the totals for ethylene, acetylene, ammonia, and methane. 5 Methane does not include requirements for making hydrogen for ammonia. 6 All 1975 estimates should be considered to represent a class of materials rather than specific compounds. RAYON Rayon production will rise to 3 billion pounds by 1975. The chemical requirements for rayon, assuming its production to be 70 percent viscose and 30 percent acetate, have been calculated in table XI. Table XI.—Chemical requirements for rayon [Millions of pounds] Carbon bisulfide Sulfuric 1 acid Acetic 2 anhy- dride Acetic 2 acid Year Acetone 2 Sulfur Methane 1953.. 1960.. 1975.. 404 505 798 1,616 912 1, 140 1,800 1, 596 1,995 3, 150 91 114 180 963 1,214 1,901 94 118 187 2, 020 3, 198 1 For both viscose and acetate rayon; calculated for 100 percent sulfuric acid. 2 Ethylene, propylene, and other requirements for these products are included in other calculations Page 200 Other Chemical Requirements Table XII gives additional major chemical requirements for 1955, I960, and 1975 not included in previous end- product classifications. These include additional requirements for methanol and formaldehyde, for methyl chloride, methyl- ene dichloride, ammonia, acetylene, sulfur, ethylene glycol, ethanolamines, ethylene oxide, ethyl alcohol, ethyl chloride, ethylene dichloride, ethylene dibromide, and other ethylene requirements; for propylene, butylenes, higher olefins, benzene, toluene, xylenes, cresylic acids, and naphthenic acids. The table gives a condensed picture of the quantities estimated for the specific items listed. SUMMARY Tables XIII-XVII include requirements for chemical con- version of all basic materials that can be derived from petro- leum or natural gas by recovery or refining processes. With only a few exceptions, which have been specified, these re- quirements are the quantities of basic materials which would be necessary to satisfy demands for all end products which can be derived therefrom. Inasmuch as some demands will be ful- filled from other sources, actual requirements for a number of the basic materials will be lower than those estimated herein. These estimates are subject to a number of limitations which must be carefully considered. Some small but nevertheless highly important requirements have been excluded. Even though availability of hydrocarbons is greatly in excess of de- mands, these small requirements present the important prob- lem of additional plant construction. For example, isoprene, which comprises 2 percent of the butyl rubber requirements has been omitted inasmuch as total quantities of raw materials are insignificant compared to the whole. At the same time, greater quantities of some of the large volume raw materials than will actually be needed have been estimated. For example, benzene includes aromatic require ments for which mixtures or other compounds such as toluene and xylenes may be used. From a practical standpoint, these differences are important because in some cases, purification units and plants for producing individual compounds will not be necessary. Possible requirements of alternative materials which are a different type of compound, such as butadiene and acetylene to replace benzene for nylon, have also been omitted. Another example of basing requirements on a type com- pound is the estimation of phthalate plasticizers on the basis of di-iso-octyl phthalate which utilizes iso-octyl alcohol from hep- tenes. At present di-2-ethylhexyl phthalate, prepared from 2-ethylhexyl alcohol from synthesis gas, is the derivative in highest production. Large volumes of diethyl and dibutyl phthalates are also produced, but the di-iso-octyl compound seems to have greatest promise for the future and hence re- quirements have been estimated on that basis. In basing requirements on end products such as plastics, textiles, etc., many of the smaller volume chemicals have been omitted. For example, maleic anhydride was not included in calculations of basic materials for alkyds. Estimates for alkyds were made entirely on the basis of 100 percent use of phthalic anhydride. Total maleic anhydride requirements for all pur- poses, however, have been included in the final estimate of benzene by projecting present consumption of benzene in maleic anhydride. This type of estimate involves some pyramid- ing of figures, e. g., in this instance, some o-xylene would be alternative with benzene. The total estimates, however, are relatively free from this type of error. The numerical calculation of estimates is only very rough at best. With few exceptions, quantities had to be calculated arbitrarily on the basis of 90 percent of theoretical yields per each chemical conversion. Actual percentage yields were used in those few cases for which they were available. Furthermore, Table XII.—Major chemical requirements not included in other end-product classifications [Millions of pounds, unless otherwise indicated] Formaldehyde (100% basis) Methanol Methane Methyl chloride Methylene dichloride Ammonia Acetylene Sulfur Ethylene glycol Ethylene polyglycols and ethers Ethanolamines Ethylene oxides Ethyl alcohol (millions of gallons) Ethyl chloride Ethylene dichloride Ethylene dibromide Ethylene (miscellaneous purposes) Propylene Butylenes and isobutylene Higher olefins Benzene Toluene (exclusive of military requirements) Xylenes Cresylic acids Naphthenic acids 1955 675 1,500 580 a 55 (19) « 60 (14) 5,200 (4, 100) 859 13, 884 b 558 (457) 61 b 50 (42) b (46) h 285 (1, 375) b (230) 6 (81) h (38) 115 1, 115 204 30 1, 152 495 400 90 35 1960 810 1,800 720 « 80 (28) a 75 (18) ■ 6, 400 r(70) 275 2, 545 466 200 2, 660 1, 060 900 175 75 ° Methane requirements in millions of pounds in parentheses. b Ethylene requirements in millions of pounds in parentheses. Page 201 Table XIII.—Requirements for methane and natural gas: [Millions of pounds] Year Methane J Acetylene 2 Ammonia 2 Pentanes A B C D E F 1 1955 2, 019 2, 413 4, 830 24, 800 23, 850 12, 950 1,046 1,846 4,764 1, 481 5,200 (2.6 X 10 6 tons) 6,400 (3.2 X 10 6 tons) 10,400 (5.2 X 10 6 tons). . . . 35 5C 75 1960 3, 104 6, 628 3, 806 8, 427 5, 968 9, 452 2, 629 6, 748 1975 vuv .iu^aw uuivtu iiuiu pivyaii^: ui uuwnc 111 nmwrai gas, ana nyarogen ana carbon black derived from natural gas have been calculated as derivatives of methane. 2 These are not additional requirements. Basic source material is included under methane. A. Requirements for all chemicals except ammonia, carbon black and that part of acetylene which may be used for chemicals derivable from ethylene. B. Requirements for maximum usage of acetylene are included. C. Requirements for ammonia only. These quantities are not entirely in addition to A or B. Some products in addition to hydrogen for ammonia can be produced from these quantities of methane. D. Requirements for carbon black only. E. Excludes acetylene requirements for chemicals which are also derivable from ethylene. F. Includes aectylene requirements for chemicals which are also derivable from ethylene. these calculations have been based on the principal product and have not taken the byproducts into account. As a hypo- thetical example, a quantity of hydrocarbon A would be cal- culated on the basis of a known 80 percent yield of compound B. However, the entire requirements of hydrocarbon A for compounds C and D, which are produced both simultaneously as a byproduct of B and as major products of other processes would be calculated on the basis of the processes which do not produce B. Thus there would be some duplication in total esti- mated requirements of A. The prediction of future requirements represents a summary of a number of factors. Known projected increases and predic- tions of other authors quoted herein were given primary con- sideration. Growth in population was always considered, and finally, the estimates were revised in whatever direction seemed logical on the basis of quality and demand for known products. In some instances, demand will either level off or accelerate to a greater extent than was assumed in these estimates. However, production of the estimated quantities of raw materials will in all probability be necessary. It is assumed that research will be carried on at a high tempo to develop new products which will be based on these same raw materials. The new products and resulting new demands from this research will also equalize any lower material requirements which may be brought about by increased efficiency of processes. This summary does not give quantities of derivative products which will be required. Some insight into the amounts of specific chemical derivatives can be found under the more de- tailed discussions of individual basic materials (methane, ethylene, benzene, etc.) and end products (textiles, rubber, detergents, etc.). For example, the major portion of hydrogen cyanide requirements are given under textiles while its raw material requirements have been given in quantities of methane in the final summary. GAS-BASED MATERIALS Table XIII includes estimates of basic materials derived from natural gas. Although large quantities of propane and butane are present in natural gas, they are used for much the same purposes as methane which is the major constituent. Since they are present in small percentages compared to methane, all requirements have been calculated on the basis of methane. Pentanes have been listed separately as they are used for different purposes. Total requirements of acetylene and am- monia, both of which are produced from either methane or total natural gas, have been listed also. These are not additional requirements. Acetylene is used for a number of purposes for which ethylene is an alternative basic material. The listing under column E excludes acetylene requirements for derivatives which can also be produced from ethylene, and column A gives the methane necessary for the quantity of acetylene in column E. The methane requirements under C and D are principally additional to that under A or B. The quantities in column C, which gives requirements of methane for ammonia, would, however, supply some materials that could be used to replace quantities under A or B. For the purposes of simple comparison, B+C-j-D will be regarded as the maximum possible require- ments of methane. Thus a maximum production of 32 billion pounds of methane in 1955, 33.6 billion in 1960, and 30.8 billion in 1975 would be sufficient. From a comparison with availability* from natural gas of 110 billion pounds in 1955, 121.8 billion in 1960, and 217.5 billion in 1975, it is evident that the raw material position in relation to methane-derived products is secure. Availability of pentanes has not been calculated since they are utilized largely in gasolines. However, more than adequate quantities are available for the comparatively small require- ments for chemical conversion. MATERIALS FROM CRACKING. PROCESSES Table XIV includes estimates of basic olefin materials. Ethylene, propylene, and butylenes are derived as byprod- ucts from cracking of petroleum fractions and from special processes in which ethane, propane, butanes or mixtures thereof are cracked. The higher olefins such as the heptenes are derived from liquid fractions obtained by the cracking of petroleum. Maximum requirements of ethylene are listed in column A. These requirements are based on calculations of the total *As used here and in subsequent discussions, availability signifies amounts of a material present in petroleum, natural gas or refinery prod- ucts. It does not necessarily mean that there is present or projected plant capacity for production or recovery. Page 202 needed to make all end products which can be derived from ethylene. Many of these products are derived from other sources. In column B, allowance is made for those products which are also derived from acetylene and for ethyl alcohol which is assumed to be derived from other sources to the extent of 40 percent. Actual requirements will probably be greater than the quantities under B, but somewhat less than those under A. Assuming the maximum possible requirements given in col- umn A, only 3.55 billion pounds would be required in 1955 compared to an availability of 24.3 billion pounds from cracked gases and the cracking of ethane. For 1960 a demand of 5.7 billion pounds is far less than availability of 26.9 billion pounds, and for 1975, a demand of 10.4 billion compares favorably with availability of 34 billion pounds. Actually much greater quan- tities of ethylene could be made available. The cracking of pro- pane is one of the major sources, and availability of propane from cracked gases alone will be about 16 billion pounds in 1955 and 1960 and 12 billion in 1975. Propylene requirements total 1.56 billion pounds in 1955 compared with availability of 28.6 billion pounds from cracked gases. Supplies continue to be more than adequate in 1960 when requirements are 2.04 billion pounds against availability of 32.1 billion pounds and in 1975 when requirements are 3.56 billion and availability 42.5 billion pounds. The availability of butylenes is also far greater than require- ments. A total of 30.7 billion pounds will be available as com- pared with requirements of 2.18 billion pounds in 1955, 36.2 billion compared with requirements of 2.47 billion in 1960, and 52.8 billion compared with requirements of 4.7 billion in 1975. The availability of higher olefins from cracked petroleum fractions has not been estimated but is known to be almost un- limited compared to requirements. Table XIV.—Requirements for olefins [Millions of pounds] Year Ethylene Pro- pylene Butylene Higher olefins (hep- tenes etc.) A B normal- iso- 955 3, 550 2, 550 1, 561 1, 940 242 100 .960 5, 200 3, 700 2, 043 2, 040 434 190 .975 10, 400 7, 000 3, 563 '4,700 380 A. Maximum requirements if ethylene were used as sole source material or its derivatives, B. Excludes ethylene replaceable by acetylene and assumes 40 percent :thyl alcohol production from other sources. AROMATICS FROM HYDROCARBONS Table XV gives estimated requirements of benzene, tol- lene, and xylene for chemical conversion and for direct use is solvents. The naphthenes used for chemical conversion are :onsumed principally in the preparation of aromatics. There- ore, estimates of requirements will not be made. The benzene equirements, particularly for 1960 and 1975, have included i number of uses for which toluene or xylenes, and in some :ases, aromatic mixtures, can be used. Toluene requirements lo not include the large tonnages necessary for TNT. The juantities of o-xylene have been estimated on the basis of all phthalic anhydride being derived therefrom. Actually, the principal phthalic production comes from naphthalene and will continue to be so produced for a number of years. Esti- mates of jfr-xylene are entirely for synthetic fibers. It is highly probable that m-xylene will also be used for this purpose and the 1975 estimate, at least, may be partially supplied by the meta isomer. The "other xylene" column includes some quan- tities of ethylbenzene, which is obtained in mixtures of 8-carbon atom aromatics along with the xylenes. As soon as proper puri- fication and separation procedures have been worked out, ethylbenzene will supplant some of the benzene and ethylene required for styrene. Table XV.—Requirements for aromatic hydrocarbons [Millions of pounds] Year Benzene Toluene1 Xylenes Para Others, in- cluding mixtures Ortho 1955 2, 881 495 272 27 400 1960 3, 630 635 349 114 550 1975 6, 651 1,060 686 756 900 1 Includes only solvents and chemicals exclusive of TNT. Availability of aromatics from petroleum fractions is far in excess of requirements. Requirements of benzene are estimated at 2.88 billion pounds for 1955 compared with availability of 9.35 billion pounds, for 1960, 3.63 billion compared with 11.76 available, and for 1975, 6.65 billion compared with 18.95 avail- able. Toluene requirements are only 495 million pounds in con- trast to availability of 18.34 billion pounds in 1955, 635 mil- lion in contrast to availability of 22.98 billion in 1960, and 1.06 billion in contrast to availability of 36.9 billion pounds in 1975. Even greater amounts of xylenes are available. In 1955, a total of 23.47 billion pounds could be produced from petro- leum, while requirements should not exceed 700 million. In 1960, requirements will be about 1.01 billion in contrast to 28.52 billion pounds available, and about 2.34 billion in con- trast to 42.26 billion pounds in 1975. OTHER HYDROCARBON CHEMICALS Table XVI includes other basic chemical source materials from petroleum and natural gas. Higher paraffins are de- rived from a kerosene fraction of petroleum. The require- ments herein are principally for detergents and are calculated on the basis of tetradecane as a representative compound. These estimates may be considered low (see Detergents). Al- though availability of this fraction has not been estimated in the foregoing text the large quantities of petroleum gives assur- ance that far more than adequate supplies are available. The sulfur produced from petroleum and natural gas is derived principally from hydrogen sulfide present in natural and refinery gas. Quantities herein are for total United States requirements. It is not expected that the major sulfur require- ments will be supplied from petroleum and natural gas because other large scale sources are cheaper. However, more than 4 percent of the present total demand is being supplied from natural and cracked gases, and the amount can be increased up to approximately 10 percent if necessary. A total of 464 Page 203 Table XVI.—Requirements for miscellaneous petroleum materials [Millions of pounds] Year 1955 1960 1975 Kerosene1 fractions 33 40 68 Sulfur 14,929 (6.7 million long tons). 18,700 (8.3 million long tons). 29,714 (13.3 million long tons) Cresylic acids 90 115 175 Naphthenic acids 35 45 75 Liquid2 Petroleum 1, 54 2, 33 5, 56 1 Includes material for detergents only; calculated on the basis of tetradecane. 2 For carbon black only. thousand long tons of sulfur could be derived from the present natural gas and petroleum production, 780 thousand from projected 1955 production, 905 thousand from 1960 produc- tion, and 1.27 million from 1975 production. Cresylic acids are recovered from heavy cracked petroleum distillates. No calculations of availability have been made. However, it is known that the cresylics could be produced in much greater quantities than at present if the price structure warranted construction of facilities. The projected require- ments in table XVI can be met very easily if additional facil- ities are installed. Table XVII.—Chemical requirements from hydrocarbon sources NATURAL GAS 1955 1960 1975 Total natural gas: 32. 866 34. 654 32. 454 Billion lb 460 9. 2 7. 14 570 900 18 3. 61 PETROLEUM 11.4 - 6.08 Chemical requirements (billion lb.) 14. 126 18. 764 36. 280 Total petroleum: Billion lb 695 2. 5 2. 03 834 3 1,251 4. 5 2. 90 Billion bbl Percent required for chemicals 2. 25 Naphthenic acids are obtained directly from petroleum. No calculations of availability have been made in previous dis- cussion. Although military requirements for flame throwers, jelly bombs, and mildewproofing agents may cause a tempo- rary shortage, there are more than adequate quantities in petro- leum to meet the requirements estimated in table XVI. The percentages of the total natural gas and petroleum pro duction which the requirements given in summary tables XIII- XVI would utilize have been calculated. In making these calcu lations it has been assumed that all the methane and pentane; come from natural gas and that all the olefins, cyclic compound and liquid hydrocarbon fractions come from petroleum. Sulfu: has been assumed to come from both sources; the quantities o sulfur used in this calculation are availability figures noi requirements. The results given in table XVII show that the chemical re- quirements can be met through the allocation of small per- centages of petroleum and natural gas to that purpose. References Elsewhere in This Report This volume: Coal Products and Chemicals. Forecasts for Petroleum Chemicals. Tasks and Opportunities. Vol. II: The Outlook for Key Commodities. Reserves and Potential Resources. Projection of 1975 Materials Demand. Vol. Ill: The Outlook for Energy Sources. Coal. Natural Gas. Oil. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Foster, J. F. "Role of Technology in the Future Supply of Natural Gas." Lyons, C. J., and Nelson, H. W. "The Role of Technology in the Future of Coal." Moore, D. D. "Role of Technology in the Future of Petroleum." Nelson, H. W. "Role of Technology in the Future of Coking Coals." Snaveley, C. A., "Waste Suppression—Waste Going into Streams.': Swager, W. L. "Role of Technology in the Future of Sulfur, Sulfides, and Sulfuric Acid." Page 204 The Promise of Technology Chapter 14 Forecasts for Petroleum Chemicals* At the request of the President's Materials Policy Commis- sion, Standard Oil Development Co., in cooperation with the Chemical Products Department of Esso Standard Oil Co., has made a long-range, Nation-wide survey of the petroleum chemi- cal industry. In accordance with the request of the Commission, this survey has attempted to establish the trends and require- ments of the entire petrochemical industry at 5-year intervals from 1955 through 1975. Specifically, these requirements em- brace (a) petroleum and natural gas raw materials, (b) invest- ments for new petrochemical plants, (c) utilities and fuel, and (d) steel and other metals for new plant construction. SUMMARY As a basis for the long-range forecasts of petrochemicals re- quirements, it has been assumed that the industry will develop under an "armed peacetime" economy, but without an open war. And it is also assumed that the industry's growth will be commensurate with an expanding population and an increas- ing standard of living. No allowance has been made for any serious economic recession. Furthermore, it is assumed that petroleum will continue to increase in importance as a source of energy requirements. Also no allowance has been made for any byproduct chemicals from synthetic liquid fuels manufac- ture. In the event of a crude oil shortage it is believed that, from a strictly economic standpoint, the use of shale oil would pre- cede truly synthetic fuel. The results of this survey are applica- *By Standard Oil Development Co. tin both "Forecasts for Petroleum Chemicals," by Standard Oil De- velopment Co., and "Oil and Gas as Industrial Raw Materials," by Dr. Gustav Egloff, the assumption has been made that any increases over present requirements for the raw materials to make the various end- products projected in each of these reports would come from petroleum or natural gas. In the case of "Coal Products and Chemicals," by the Koppers Co., however, estimates are given showing how much of certain of these raw materials could be expected to be produced as byproducts from coke production, and how much more could be obtained if coal hydrogenation developed to a stated extent during the next 25 years. The petroleum and natural gas requirements, therefore, represent the extreme quantities that would be needed should no additional material come from the coke industry. The actual quantities which will be pro- duced from the petroleum and natural gas industry on the one hand, and the byproduct coke and coal hydrogenation industry on the other, will be determined by the cost factors which are not presently predictable. ble if shale is used to augment crude oil supplies, excepting that byproduct ammonia from shale processing would reduce the amount required from natural gas. In reporting the results of this survey, it has seemed inad- visable to present figures on individual petroleum chemicals. Forecasts on the requirements for a particular chemical 25 years hence are unavoidably controversial. While the estimate of one may be low, for another it may be high. By grouping these together the reliability of the study is greatly strength- ened. Furthermore, this reduces the danger of erroneous inter- pretations being drawn. Eight such groupings, covering end -uses of petrochemicals, have been chosen. Forecasts on two of the groups, namely, plastics and synthetic fibers, were furnished by the Commission. The important observation which may be made from the survey is that petrochemicals, even in 1975, probably will be a relatively minor consumer of petroleum and natural gas.f It will be noted from table I that the petroleum hydrocarbon raw material consumed in producing petrochemicals in 1975 is equivalent to only 2 percent by weight of the probable domestic petroleum and natural gas requirements. It is only 2.7 percent by weight when including liquid hydrocarbons degraded to fuel gas. When including all fuel for the operation of the petrochemicals plants, the total hydrocarbon require- ments are only 5.5 percent of the petroleum and natural gas requirements. The comparable 1950 figures are estimated to be about 0.7 percent and 1.9 percent by weight. The 1975 requirements allow for a phenomenal growth of the plastics industry based on the forecasts of demand supplied by the Commission. Table II summarizes the hydrocarbon raw materials require- ments and the investments for the eight end-use groups. Plas- tics is outstanding among the groups as the large volume con- sumer of petrochemicals. Benzene and ethylene, required for phenol, styrene, and polyethylene, account for nearly 80 per- cent of the hydrocarbon raw materials needed for plastics in 1975. By that year, nearly 50 percent of the hydrocarbons used in making chemicals from petroleum will be required by the plastics industry alone. Thus it follows that the reliability of this survey depends in a large measure on the accuracy of the plastics forecast. Page 205 Table I.—Estimated petroleum and natural gas requirements for the petrochemical industry in the United States Hydroc arbon going into prod- Hydrocarbon going into product Hydrocarbon raw material and uct i and liquid degraded to fuel gas2 fuel requirements3 Percent of total petroleum and natural gas re- Percent of total petroleum and natural gas re- quirements 4 1950 1955 1960 1965 1970 1975 9, 900 20, 240 29, 240 37, 470 45, 610 54, 180 6, 900 15, 040 21, 310 27, 080 32, 860 38, 780 7, 400 18, 920 27, 850 36, 280 44, 700 53, 230 19,100 41,540 58, 610 74, 580 90, 060 1 Cumulative requirements for both new and existing capacity—represents hydrocarbon going into products, byproducts, and losses. 2 This includes butane and heavier hydrocarbons which are degraded to fuel gas. 3 Includes direct fuel+fuel for utilities. 4 Percent computed on basis of weight. Requirements based on unofficial estimates of domestic requirements for petroleum and nat imported petroleum and petroleum products. Table II.—Raw materials and investment requirements for petrochemical end-uses Millions of pounds per year Hydrocarbon raw materials to products and losses: 1 1955 1960 1965 1970 1975 | 1, 560 1, 810 2,010 2, 330 2, 540 1, 980 2,270 2, 590 2, 790 3,130 3, 410 6,910 10, 440 13, 920 17,540 1,150 1, 510 1, 830 2,180 2,530 1,300 1,490 1, 670 1,820 1, 930 1,430 2,220 2, 830 3,430 4,040 580 750 860 970 1,020 3,630 4,350 4,850 5,420 6, 050 15, 040 21,310 27, 080 32, 860 38, 780 3, 880 6, 540 9, 200 11,840 14, 450 Total hydrocarbon raw materials 18, 920 27, 850 36, 280 44, 700 53, 230 Millions of dollars Investments (including offsites and utilities 4 for 5-year periods ending. 1955 1960 1965 ■ 1970 1975 Total 1. Synthetic fibers 83.6 51.5 34.7 46.6 26.7 243. 1 2. Synthetic rubbers 176.1 135.9 114.2 94.4 113.9 634.5 3. Plastics 323.7 497.9 519.0 556.1 572.8 2, 469. 5 4. Surface coatings 48.7 38.9 36.3 37.1 38.3 199.3 5. Automotive chemicals 135.0 101.0 81.9 77.5 69.2 464.6 6. Nitrogen products 12.4 131.9 121.5 122.4 123.4 511.6 7. Detergents 14.7 9. 5 8.0 4. 8 6. 8 43. 8 8. Miscellaneous 2 148. 5 151.4 116.1 115.4 103.7 635.1 Total 942. 7 1,118.0 1,031.7 1, 054. 3 1, 054. 8 5, 201. 5 1 Cumulative requirements for both new and existing capacity—represents hydrocarbon going into products, byproducts and losses. 2 Includes insecticides, herbicides, dyes, miscellaneous solvents, etc. 3 This represents butane and heavier hydrocarbons which are degraded to fuel gas. 4 Investments are for June 1950 construction costs. A breakdown between onsite, offsite, and utilities is given in table IV attached. The investment coverage is about 89 percent for primary products and ethylene. No investments are included for any end products excepting synthetic rubber. The investments shown in table II provide for new plants required after 1950 to meet the requirements scheduled for succeeding 5-year periods. It is considered that such plants would be added in economic-sized units. Investments have been based on June 1950 construction costs. Money is included for offsites and steam and power generation. The investment cov- erage in this survey is 89 percent based on tonnages of hydro- carbon intermediates and primary petrochemical products. In- formation was not available to permit 100 percent coverage. From a long-range standpoint, the supply picture for olefins and aromatics is encouraging. Butylenes are perhaps in tight- est supply. Here petrochemicals must compete with aviation gasoline which requires butylene alkylate. However, in the long run, the increasing use of jet fuel is expected to ease the situa- tion. A comfortable surplus of butylenes is indicated by 1975. The natural gas requirements excluding fuel needs, for such chemicals as ammonia, methanol, ethylene, acetylene, etc., amounts to only 2.3 percent of the probable 1975 consumption. Page 206 Basic Assumptions Before proceeding to a more detailed discussion of the pre- dicted long range picture of the petrochemical industry, it is important that a clear understanding be obtained of the general basis. Certain assumptions have been made which limit the scope of this survey, but which allow the results to be presented in a reasonably clear cut fashion. Needless to say, several alternative bases might have been chosen, each of which would have resulted in a somewhat different picture.,However, it is believed that the conclusions drawn would not have differed from those presented herein. No major war. It is assumed that the petrochemical indus- try will develop under the conditions of armed peacetime econ- omy which prevail today. It is further assumed that this coun- try's major rearmament effort will be completed by 1955. Synthetic fuel not a major factor. It is assumed that there will be no major construction of a synthetic fuels industry. Con- sequently, no allowance has been made for any significant quantity of byproduct petrochemicals being derived from syn- thetic fuels manufacture. In the event of a crude oil shortage it is believed that the next most likely step in meeting the Nation's increasing energy needs would be the use of shale oil. The major known effect of such a step on the petroleum chemi- cal industry would result from the byproduct ammonia ob- tained in processing shale. This would reduce the requirements of natural gas for ammonia. DISCUSSION Type of raw materials from refining operations unchanged. Petroleum products have been considered as derived from existing refining processes. Increased and more severe cata- lytic cracking plus catalytic reforming of heavy virgin naphtha will provide for the higher octane gasoline requirements of future automotive vehicles. Thus, increased supplies of hydro- carbon raw materials such as propylene and butylenes will become available as gasoline requirements increase. Present-type petroleum products. No allowance has been made for the development of radically new types of automotive fuel which might render existing processes obsolete, e. g., the use of jet fuel or liquefied petroleum gases. Furthermore, it is assumed that the use of synthetic lubricants will not be a major factor. Present energy sources. It is assumed that the use of atomic, solar and tidal energy will not be a major factor affecting the consumption of petroleum and natural gas. No severe economic depression. It is assumed that the re- quirements for petroleum, and the end-use products derived from petrochemicals, will enjoy a normal growth as determined by an expanding population and the increasing standard of liv- ing of the people. A population of 193 million persons in the United States is anticipated by 1975. No allowance has been made for any interruption of the Nation's economic growth by a major financial crisis. Unforeseen technological developments would not alter con- clusions. About 10 years on the average is required to translate an embryonic idea from the test tube to commercial importance. Obviously, one cannot predict what new petro- chemicals, petrochemical processes or new end-uses may evolve by 1975. However, it is assumed that such technological de- velopments would not affect the requirements of petroleum for petrochemicals nor the predicted investments within the ac- curacy of these figures. END-USES OF PETROCHEMICALS Petrochemicals have been classified according to end-use into eight groups. It has appeared unwise to consider them in any more detail because of the unreliability in forecasting a particular petrochemical. Considered in aggregate, the errors in the individual forecasts tend to offset each other. The end- use groups are listed below together with some of the major products included therein. Synthetic fibers. Nylon, Dacron, acrylic, other synthetics, and cellulosics (acetate rayon). Synthetic rubbers. Buna-S types, butyl, neoprene, and nitrile (Buna-N). Plastics, resins, and plasticizers. Polyethylene, alkyds, vin- yls, polystyrene, phenolics (urea and melamine), cellulosics, and other. Protective coatings (including solvents). Aromatics, alco- hols, ketones, glycerine, and other. Automotive chemicals. Tetraethyl lead fluid and other additives, antifreezes, and hydraulic fluids. Nitrogen products {including fertilizer), detergents, and miscellaneous items. Insecticides, herbicides, dyes, and mis- cellaneous solvents. All of the aforementioned end-products may be derived from a relatively small number of hydrocarbon intermediates and primary products. These are listed in table III together with the principal source of each. Hydrocarbon intermediates are those reactive petroleum derivatives, such as acetylene, ethylene, propylene, butylenes, etc., which normally are not considered as petrochemicals. Primary products, or petrochemicals, have been defined, for the purposes of this survey, as those chemi- cals which are derived directly from {a) the hydrocarbon intermediates, (b) natural gas, or from (c) selected petroleum fractions. In most cases the primary products selected represent those petroleum derivatives which usually are or could be con- sidered as natural adjuncts to a petroleum company's business. This may involve carrying the process steps beyond the true primary product. For example, in table III both ethylene oxide and ethylene glycol are listed as primary products. Naturally, it is logical for the same manufacturer to make both the glycol and the oxide. Requirements of natural gas and petroleum for chemicals are detailed in table IV. The supply picture in 1975 for these major hydrocarbon raw materials and hydrocarbon intermediates would appear to be as follows: Natural gas. Some 14.3 billion pounds annually of meth- ane, ethane, and higher paraffins will be needed for the manu- facture of ammonia, methanol, ethylene, acetylene, etc., in 1975. This represents only 2.3 percent of the probable domestic consumption of natural gas by then. Ethylene. Ethylene is a byproduct of refinery cracking oper- ations, notably catalytic cracking. Some ethylene is produced by destructive liquid cracking processes. However, the greater Page 207 Table III.—Primary petrochemical products and hydrocarbon intermediates, petrochemical industry—U. S. A.—1955 to 1975 Primary products and hyrdocarbon intermediates Acetic acid.1 Acetylene. * Ammonia.* Amyl alcohol. Benzene.* Normal butylene.** Butadiene.* Secondary-butyl alcohol.* Cresols and cresylic acid. Cumene (for oxidation to phenol). Cyclohexane.* Cyclopentadiene. Chloroethane. Ethan ol.* Ethyl acetate. 3 Ethyl chloride.* Ethylene dichloride.* Ethylene dibromide.* Ethylene oxide.4* Ethylene glycol.* Ethylene.* Glycerine.* Hydrogen cyanide. Isobutylene.* Isoprene. Isopropanol.* Methanol.* Methyl chloride. Methylene chloride. Naphthalene. * Naphthenic acids.** Nitroparaffins. Polyethylene. Polypropylene. Propylene.** Styrene.* Toluene.* Xylenes. * Other aromatics.** Vinyl chloride.* Principal source Natural gas (by direct oxidation). Natural gas. Natural gas. Cracked naphtha. Virgin naphtha. Refinery cracking operations. Normal butylenes. Normal butylenes. Certain virgin and cracked naph- thas. Propylene-benzene. Virgin naphtha. Severe thermal cracking of oils. Natural gas. Ethylene. Ethylene. Ethylene. Ethylene. Ethylene. Ethylene. Ethylene. Refinery cracking operations plus natural gas.2 Propylene. Natural gas. Refinery cracking operations. Severe thermal cracking of oils. Propylene. Natural gas. Natural gas. Natural gas. Heavy naphtha. Heavy naphtha (certain crudes). Natural gas. Ethylene. Propylene. Refinery cracking operations. Ethylene-benzene. Virgin naphtha. Virgin naphtha. Refinery cracking operations. Ethylene. investments have been included. **No investments are required. 1 Exclusive of acetic acid made from ethanol. 2 Some ethylene will be recovered from catalytic cracking gas and from high temperature severe thermal cracking of oils; most of it will be produced by cracking ethane obtained from refinery gases and natural gas. 3 Exclusive of ethyl acetate made from ethanol. 4 Primary product for uses other than ethylene glycol. part of the 8 billion pounds a year of ethylene required in 1975 probably will be supplied by thermally cracking ethane. A large part of the ethane required can be obtained from re- finery fuel gases while additional supplies, as will be noted from table IV, must be recovered from natural gas. Conservatively allowing 5 percent of ethane in natural gas, it is estimated that less than 10 percent of the potential ethane would be required, based on the probable 1975 domestic natural gas consumption. Propylene, This is obtained entirely as a byproduct from refinery cracking operations, mainly catalytic cracking. It is roughly estimated that 2.8 billion pounds a year will be required in 1975. This compares with a predicted production of around 25 billion pounds a year. The competing fuel products uses of propylene are catalytic polymer for motor gasoline and alkylate for aviation gasoline. As the requirements of propylene for chemicals consume only 11 percent of the potential produc- tion, the supply outlook is considered to be very favorable. Butylenes. Like propylene, butylenes are a byproduct of refinery cracking processes. In contrast to predicted 1975 re- quirements for butylenes of about 3.4 billion pounds (16 million barrels) including about 0.4 billion pounds degraded to fuel gas, the probable production is about 28 billion pounds (132 million barrels). Alkylate requirements for aviation gaso- line, when making allowances for the use of jet fuel in the larger part of the military and commercial aircraft by 1975, are estimated to require from 20 to 25 percent of the butylenes produced. Butylenes requirements for alkylate can be reduced by alkylating propylene and pentenes. And butylenes require- ments for synthetic rubber can be reduced by manufacture of butadiene from normal butane. With this flexibility, the butyl- enes supply situation in 1975 is believed to be quite satisfactory. The situation will be somewhat tighter over the next few years because of the growing military needs for aviation gasoline. However, for 1955-60, the butylenes required for aviation alkylate would appear to require only 30 to 40 percent of the probable production. Aromatics. There appears to be more than ample raw materials to produce the tremendous demand for aromatics predicted by 1975. The major share of this is benzene, most of which will be required for plastics. Toluene, xylenes, and naphthalene likewise will increase in demand several-fold Table IV.—Classified petroleum and natural gas requirements for chemicals [Millions of pounds annually] Natural gas.1 1955 1960 1965 1970 1975 Uses other then ethylene 2. . Ethylene from natural gas. . 4,830 1, 510 6, 640 2, 070 8, 100 2, 500 9, 680 2, 880 11,150 3, 120 Petroleum: 1 Ethylene: 6, 340 8, 710 10, 600 12, 560 14, 270 To product and losses. . Degraded to fuel gas 3. . 1,510 490 2, 380 620 3, 230 760 4, 020 890 4, 940 1,020 Total consumed 2, 000 1, 640 3, 000 1, 980 3, 990 2, 280 4, 910 2, 580 5, 960 2, 820 Propylene Butylenes and butanes: To product and losses. . . Degraded to fuel gas.... 1, 880 390 2, 140 420 2, 450 420 2, 680 390 3, 040 380 Total consumed 2, 270 540 2, 560 650 2, 870 740 3, 070 900 3, 420 1, 060 Pentenes, pentanes and higher Aromatics: To product and losses. . . Degraded to fuel gas.... 3, 130 3, 000 5, 450 5, 500 7, 780 10, 120 10, 560 12, 650 8, 020 13, 050 Total consumed 6, 130 10, 950 15, 800 20, 680 25, 700 Summary: Natural gas consumed. . Petroleum to product and losses 6, 340 8, 700 8, 710 12, 600 10, 600 16, 480 12, 560 20, 300 14, 270 24, 510 Total natural gas and petroleum to prod- uct and losses 15, 040 3, 880 21,310 6, 540 27, 080 9, 200 32, 860 11, 840 38, 780 14, 450 Petroleum degraded to Total hydrocarbons consumed 18, 920 27, 850 36, 280 44, 700 53, 230 1 Cumulative requirements for both existing and new petrochemicals production. 2 Includes some higher paraffins than methane and ethane. 3 Associated with destructive cracking of liquid petroleum fractions. Page 208 within the next quarter century. Surface coatings will be the principal consumer of these aromatic chemicals. The lower aromatics may be synthesized in several different ways and from various petroleum components. It is outside the scope of this study to forecast the utilization of aromatics raw materials from the standpoint of economics. However, the most important method today is dehydrogenation of naph- thenes by catalytic reforming of selected virgin naphtha frac- tions. Isomerization to convert methylcyclopentane to cyclo- hexane may be integrated with low-pressure catalytic reforming to maximize benzene. Similarly, in producing toluene, the dimethylcyclopentane must be isomerized first to methyl- cyclohexane. Isomerization and dehydrogenation can be made to proceed simultaneously. This is done by the "hydroforming process" under relatively high pressures and in the presence of recycled hydrogen. Supported molybdenum, tungsten, chromium, or platinum catalysts are employed. Two process improvements in hydroforming are (a) "platforming," which uses a platinum catalyst at high pressure, and (b) "fluid" hydroforming, which uses powdered catalysts containing molybdenum or other metals at lower pressure. Both "platforming" and two-step isomerization-hydroforming are used commercially today. Based on potential raw material, catalytic cyclization of normal hexane to benzene and normal heptane to toluene may be important processes in the future. Another possible synthesis is dealkylation of alkylated aromatics. Some aromatics are available as byproducts from severe high-temperature crack- ing of oils for the production of unsaturates. Catalytic naphtha contains only small amounts of benzene and toluene and has not been of much interest. Also crude oils contain benzene and toluene in small amounts. Benzene contents range from 0.001 to 0.4 percent. Special recovery of these lower aromatics from crudes are likely to be of economic interest only when com- bined with aromatics synthesis operations. All of the above syntheses require a further processing step to purify the aromatics for use as chemicals. The contaminants may be saturated hydrocarbons or they may be olefins and diolefins. Extractive distillation, solvent extraction, and silica gel adsorption are the present commercially available techniques. Returning to the question of aromatics supply, it would appear that the potential benzene supply, through the various routes described, could be four- or five-fold the predicted 1975 demand. In the case of toluene and xylenes, aviation gasoline will require a share. However, after satisfying probable aviation requirements it is estimated that chemicals will require less than 10 percent of the remainder. This is an important con- sideration from the standpoint of meeting future motor gasoline quality. FORECASTS The estimated hydrocarbon raw-material requirements for petrochemicals have been based on forecasts of petrochemicals, together with end-use patterns, which were prepared by the Chemical Products Department of the Esso Standard Oil Co. These are summarized in table V. Estimated future require- ments of synthetic fibers and plastics were supplied by N. M. Elias of the President's Materials Policy Commission and are understood to represent a concensus of industry. These two end-use groups have determined the forecasts of many of the major petrochemicals. Notably, ethylene and benzene require- ments are markedly sensitive to changes in the plastics picture. Approximately one-half of the hydrocarbon raw materials re- quirements in 1975 are for resins and plastics. Referring to table V, it should be appreciated that the quantity of primary products shown for a particular end-use group is not the quantity of end-use products. Also it should be understood that these primary products represent only those derived from petroleum and natural gas. It will be noted that for most end-use groups the weight of the primary products is greater than the weight of the hydro- carbon raw material. The general explanation of this, which applies to all groups excepting synthetic rubber, lies in the fact that many of the primary products are formed by the addition of nonhydrocarbon material to the hydrocarbon. As examples, the various alcohols, ethylene oxide, ethylene glycol and glycer- ine, all include oxygen; other products include chlorine or bromine. Ammonia is largely nitrogen, with the hydrogen only being derived from hydrocarbons. In the case of synthetic rubber, inclusion of nonhydrocarbon material in the primary Table V.—End-use requirements of primary products and hydrocarbon raw materials, petrochemical industry—U. S. A.—1955 to 1975 [Millions of pounds annually] 1955 P. P. H. G. 1960 P. P. H. C. 1965 P. P. H. G. 1970 P. P. H. G. 1975 P. P. H. C. I. Synthetic fibers I, Synthetic rubbers 3. Plastics and plasticizers \. Protective coatings 5. Automotive chemicals S. Nitrogen products 1. Detergents 3. Miscellaneous Primary products Hydrocarbon to products and losses. . Liquid hydrocarbons degraded to fuel Total hydrocarbons consumed 530 290 510 1, 180 2, 180 2, 720 660 5, 170 1, 560 1, 980 3, 410 1, 150 1, 300 1,430 580 3, 630 1,820 2, 600 9, 450 1, 560 2, 550 4, 210 830 6, 220 20, 240 29, 240 1,810 2, 270 6,910 1, 510 1,490 2, 220 750 4, 350 2, 100 2, 960 14, 460 1, 870 2, 890 5, 370 940 6, 880 37, 470 2, 010 2, 590 10, 440 1, 830 1,670 2, 830 860 4, 850 2, 470 3, 180 19, 320 2, 230 3, 150 6, 500 1, 060 7, 700 45, 610 2, 330 2, 790 13, 920 2,180 1,820 3, 430 970 5, 420 2, 740 3,510 24, 670 2, 590 3, 400 7, 670 1, 100 8, 500 2, 540 3, 130 17, 540 2, 530 1,930 4,040 1,020 6, 050 54, 180 15, 040 3, 880 18, 920 21, 310 6, 540 27, 850 27, 080 9, 200 36, 280 32, 860 11,840 44, 700 38, 780 14, 450 53, 230 P. P. = Primary petrochemical products. H. C. = Hydrocarbon raw material consumed (includes normally liquid petroleum fractions which are degraded to fuel gas). Page 209 product is a minor factor. Here the primary products include an unavoidable duplication arising through consideration of both benzene derived from petroleum and all of the styrene as pri- mary products. Styrene is considered as a primary product of ethylene. However, the benzene going into styrene includes a proportionate share of coal tar benzene. The only other duplication in primary products occurs in the case of cumene, which is made by alkylating benzene with propylene. Both cumene and benzene are primary products. However, there are no duplications in hydrocarbon raw materials. In addition to the general assumptions which were made to establish the over-all pattern of this survey, certain other con- ditions have been defined to limit the scope of the forecasts and to set the course of future trends. a) The forecasts have been restricted to nonfuel uses of petro- leum raw materials. Thus, aromatics for use in aviation gasoline have been excluded. b) Abnormal requirements of chemicals (e. g., toluene and ammonia) for explosives have been excluded. c) Petroleum byproducts such as sulfur and helium have not been included. d) Excluded also are requirements of heavy oils and natural gas for the manufacture of carbon black. e) Gradual eclipse of fermentation ethanol by synthetics has been assumed. /) Virtually all increases in aromatics are assumed to come from petroleum. g) It has been assumed that natural gas will gradually sup- plant coke as a source of synthesis gas for methanol and ammonia. h) Additional rubber requirements will be mainly synthetic and probably the new capacity will be largely for improved types over Buna-S. i) Due consideration has been given to the critical shortages of sulfur and chlorine. Thus, it has been assumed that manu- facture of phenol by the cumene hydroperoxide synthesis will become increasingly important as compared to the benzene chlorination and sulfonation methods. ;) It is visualized that the detergents industry will continue to enjoy a vigorous growth. This will limit the availability of byproduct glycerine from soap manufacture and require increasing production of synthetic glycerine from petro- leum. k) Acetylene is expected to become an important petrochemi- cal raw material. Petroleum acetylene by partial oxidation of methane or regenerative cracking of propane now offers a potentially cheaper source of supply than calcium carbide. It is assumed that future increases in acetylene requirements for chemical synthesis will be largely from petroleum sources. Very approximate investment figures for new petrochemical plants have been prepared. These are summarized in table VI. They are presented for 5-year periods ending in 1955, 1960, etc. The 1955 investments include many new plants now under construction or for which construction has been approved. Tables VII and VIII summarize the utilities and fuel require- ments, respectively, for the end-use groups. The figures shown represent the total requirements for both existing and new- plants at the end of 1955, 1960, etc. For each of these years, the distribution was made in accordance with the end-use pat- tern which was established for the apportionment of hydro- carbon raw materials and investments. Approximately 89 per- cent of the petrochemical production is represented. The utilities requirements allow for about 37 percent capac- ity above the predicted normal stream day demands. This pro- vides an allowance for uncertainties in the demand plus such spare capacity as may be required to insure an uninterrupted supply of utilities to the operating units. This is consistent with good manufacturing practice. The electricity requirements in- clude power for pumping cooling water. In the case of fuel, a breakdown is given between direct and indirect fuel. Direct fuel is that consumed in furnaces or for the operation of gas engine driven compressors. Indirect fuel is that required for the generation of steam and power. Fuel has been expressed as millions of British thermal units per calen- dar day. Fuel has not been included for the spare steam and power generating capacity. Fuel requirements may be con- verted to equivalent fuel oil on the basis of 6.3 million B. t. u.'s per barrel (42 gallons) of fuel oil or to equivalent natural gas by allowing 1,080 B. t. u.'s per standard cubic foot of natural gas. Table IX presents a very rough estimate of the metals re- quired for the construction of petrochemical plants covering about 89 percent of the petrochemical operations. This is based on experience within this company and includes representative types of plants. The metals are grouped into four broad classes as follows: (a) steel, (b) cast iron, (c) ferrous alloys (includ- ing stainless steels and the like), and (d) nonferrous metab (e. g., copper, lead, bronzes, etc.). The requirements shown provide for onsite, ofTsite, and utilities sections of the plants. Also they include machinery (pumps, compressors, motors, etc.) as well as towers, reactors, piping, structural steel, and such. Although the nonferrous metals represent a very broad group, it has not been feasible to make a more detailed breakdown. References Elsewhere in This Report This volume: Coal Products and Chemicals. Oil and Gas as Industrial Raw Materials. Tasks and Opportunities. Technology in the Building Industry. Vol. II: The Outlook for Key Commodities. Reserves and Potential Resources. Projection of 1975 Materials Demand. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Foster, J. F. "Role of Technology- in the Future Supply of Natural Gas." Snavely, C. A. "Waste Suppression—Waste Going Into Streams/' Page 210 Table VI.—Summary of new investments, petrochemical industry— U. S. A.—7955 to 19751 [Millions of dollars] 1 2 3 5 6 7 8 End-use group Synthetic Synthetic rubbers Plastics Protective coatings Automotive chemicals Nitrogen products 2 Detergents Miscel- laneous Total 5 years ending 1955: 46.8 22.5 14.3 97.1 48.7 30.3 176.1 87.7 59.9 25.8 12.9 10.0 73.0 36.4 25.6 6.9 3.5 2.0 7.8 4.0 2.9 81.2 40.7 26.6 514.7 256.4 171.6 Offsites 83.6 176.1 323.7 48.7 135.0 12.4 14.7 148.5 942.7 5 years ending I960: 28.6 14.3 8.6 75.6 37.8 22. 5 268.3 134.3 95.3 2a 5 10.2 8.2 54.3 27.3 19.4 73.5 36.8 21.6 5.0 2.6 1.9 82.8 41.5 27.1 608.6 304.8 204.6 Offsites Utilities 51.5 135.9 497.9 38.9 101.0 131.9 9.5 151.4 1, 118.0 5 years ending 1965: 19.2 9. 6 5.9 63.2 31. 8 19.2 280.5 140.0 18.7 9.3 8. 3 44.2 22.2 15.5 67.7 33.9 19.9 4.2 2.2 1.6 63.6 31.7 20.8 561.3 280.7 189.7 98.5 5 years ending 1970: 34.7 114.2 519.0 36.3 81.9 121.5 8.0 116.1 1,031.7 Onsite 26.1 13.2 7.3 52.4 26.2 298.1 149.2 108.8 18.3 9.2 9.6 42.0 21.0 14.5 68.2 34.1 20.1 2.5 1.3 1.0 62.9 31.4 21.1 570.5 285.6 198.2 Utilities 46.6 94.4 556.1 37.1 77.5 122.4 4.8 115.4 1, 054. 3 5 years ending 1975: 14.7 7. 3 4.7 63.7 31.9 18.3 308. 5 154.2 110.1 20.2 10.0 8.1 37.5 18. 8 12.9 68.8 34.4 20.2 3.6 1.9 1.3 56.7 28.3 18.7 573.7 286.8 194.3 Offsites 26.7 113. 9 572. 8 38. 3 69.2 123.4 6.8 103.7 1, 054. 8 Total 1950-75: 135.4 66.9 40.8 352.0 176.4 106.1 1, 331. 5 665.4 472.6 103.5 51. 6 44.2 251.0 125.7 87.9 285. 1 142.7 83.8 23.1 12.0 8.7 347.2 173.6 114.3 2, 828. 8 1,414.3 958.4 Offsites Total 243. 1 634.5 2, 469. 5 199. 3 464. 6 511. 6 43.8 635.1 5, 201.5 1 June 1950 construction costs. Covers only about 89 percent of new petrochemical products. 2 Since many plants are not currently operating at capacity, it is assumed that little construction will be needed before 1960. Table VII.—Summary of utilities requirements, petrochemical indus try—U. S. A.-—1955 to 1975, in terms of thousands of pounds per hour for steam boiler capacity and kilowatt rating of electric generators 2 3 5 6 8 End-use group Synthetic Synthetic rubbers Plastics Protective coatings Automotive chemicals Nitrogen products Detergents Miscella- Total By the end of 1955: Steam, M lb./H 1,900 16,000 14, 200 79, 000 6, 100 90, 000 1, 400 42, 000 5, 800 54, 000 2, 300 32, 000 300 5, 300 66, 000 37, 300 381, 200 Electricity, kw 2, 200 By the end of 1960: Steam, M lb./H 2, 300 21, 000 15, 700 89, 000 14, 000 180, 000 1, 800 60, 000 6, 700 63, 000 3, 500 50, 000 , 500 6,300 132, 000 50, 800 598, 800 Electricity, kw 3, 800 By the end of 1965: Steam, M lb./H 2, 700 26, 000 17, 200 100, 000 22, 100 276, 000 2,200 81, 000 7, 500 71, 000 4,500 63, 000 560 4,200 7, 100 89, 000 63, 860 710, 200 Electricity, kw By the end of 1975: 3, 200 31, 000 17, 800 107, 000 30, 000 372, 000 2, 500 102, 000 8, 200 77, 000 5, 500 77, 000 630 4,800 8, 000 104, 000 75, 830 874, 800 By the end of 1975: Steam, M lb./H 3, 500 37, 000 18, 700 119, 000 38, 500 463, 000 2, 900 124, 000 8, 800 75, 000 6, 500 90, 000 680 5,200 8, 700 115, 000 88, 280 1, 028, 200 Notes: Steam requirements are for process uses. Steam is assumed available at 150 pounds per square inch gage (pressure). Electricity requirements include power for pumping cooling water. Both steam and electricity figures include about 37 percent over estimated normal operating requirements to provide necessary operating flexibility. Utilities shown above include requirements for existing plants plus predicted new plants through 1975 for about 89 percent of the petrochemical production. Page 211 Table VIII.—Summary of fuel requirements, petrochemical industry—U. S. A.—1955 to 1975 [Millions of B. t. u. per day] 1 2 3 4 5 ■ 6 Nitrogen 7 8 End-use group Synthetic Synthetic Plastics Protective coatings Automotive chemicals Detergents Miscel- laneous Total By the end of 1955: 32, 000 49, 000 143, 000 375, 000 108, 000 178, 000 32, 000 38, 000 60, 000 110, 000 111,000 83, 000 3, 000 7, 000 123, 000 140, 000 612, 000 980, 000 Indirect fuel Total fuel 81, 000 518, 000 286, 000 70,000 170, 000 194, 000 10, 000 263,000 1,592,000 By the end of 1960: Direct fuel 42, 000 61, 000 158, 000 418, 000 232, 000 401, 000 49, 000 52, 000 69, 000 127, 000 171, 000 128, 000 5, 000 13, 000 153, 000 879, 000 168, 000 1, 368, 000 Total fuel 103, 000 576, 000 633, 000 101, 000 196, 000 299, 000 18, 000 321, 000 | 2, 247, 000 By the end of 1965: 49, 000 72, 000 173, 000 462, 000 358, 000 629, 000 64, 000 64, 000 77, 000 144, 000 218,'000 164, 000 6, 000 14, 000 173, 000 189, 000 1, 118, 000 1, 738, 000 Indirect fuel Total fuel 121, 000 635, 000 987, 000 128, 000 221, 000 382, 000 20, 000 362, 000 2, 856, 000 By the end of 1970: 59, 000 85, 000 182, 000 486, 000 486, 000 855, 000 81, 000 76, 000 84, 000 157, 000 263, 000 198, 000 7, 000 16, 000 200, 000 214, 000 1, 362, 000 2, 087, 000 Total fuel 144, 000 668, 000 1, 341, 000 157, 000 241, 000 461, 000 23, 000 414,000 3, 449, 000 By the end of 1975: 67, 000 95, 000 196, 000 528, 000 647, 000 1, 168, 000 97, 000 88, 000 90, 000 189, 000 311, 000 234, 000 8, 000 17, 000 221, 000 236, 000 1, 637, 000 2, 555, 000 Total fuel 162, 000 724, 000 1, 815, 000 185, 000 279, 000 545, 000 25, 000 457, 000 4, 192, 000 Notes: Indirect fuel is for utilities. This has been calculated on the basis of calendar day utilities requirements, without any allowance for spare steam and electrical power generating capacity. The fuel requirements provide for both existing plants and new plants through 1975 for about 89 percent of the petrochemical production. Table IX.—Summary of metals requirements, petrochemical industry—U.S.A.—1955 to 1975 x 1 2 3 4 5 6 7 8 End-use group Synthetic Synthetic rubbers Plastics Protective coatings chemicals Nitrogen products Detergents Miscel- laneous Total 5 years ending 1955: - Tons Tons Tons Tons Tons Tons Tons Tons Tons Steel 70, 000 146, 000 269, 000 41, 000 112, 000 10, 000 12, 000 124, 000 784, ooa Cast iron 2,200 4,600 8,400 1,300 3, 500 320 380 3, 900 24, 600 4,000 8, 500 15, 500 2, 300 6, 500' 600 700 7, 100 45, 200 5 years ending 1960: 830 1, 760 3, 240 490 1, 350 120 150 1, 500 9,440 Steel 43, 000 113, 000 415, 000 32, 000 ■ 84,000 110, 000 8, 000 126, 000 931, ooa Cast iron 1,300 3, 500 13, 000 1,000 2, 600 3,400 250 3, 900 28, 950 2, 500 6, 500 24, 000 1, 900 4, 900 6, 300 460 7, 300 53, 860 Nonferrous metals 510 1, 360 5, 000 390 1, 000 1, 300 90 1, 500 11,150 5 years ending 1965: Steel 29, 000 95, 000 431, 000 30, 000 68, 000 101, 000 7,000 97, 000 858, 000 Cast iron 900 3, 000 13, 500 940 2, 100 3, 200 210 3,000 26, 850 1,700 5, 500 25, 000 1, 700 3, 900 5, 800 380 5, 600 49, 580 Nonferrous metals 350 1, 140 5, 200 360 820 1, 200 80 1,200 10, 350 5 years ending 1970: Steel 39, 000 79, 000 463, 000 31, 000 65, 000 102, 000 4,000 96, 000 879, 000 Cast iron 1, 200 2,500 14, 500 960 2,000 3, 200 130 3, 000 27, 490 Ferro-alloys 2, 200 4, 500 27, 000 1,800 3,700 5, 900 230 5,400 50, 730 5 years ending 1975: 470 940 5, 600 370 780 1,200 50 1,200 10, 610 Steel 23, 000 95, 000 477, 000 32, 000 58, 000 103, 000 6, 000 86, 000 880, 000 Cast iron 700 3, 000 15, 000 1, 000 1,800 3, 200 180 2,700 27, 580 1,300 5, 500 27, 500 li-800 3, 300 5, 900 330 5, 000 50, 630 Nonferrous metals 270 1, 140 5,700 380 690 1, 200 70 1, 040 10,490 Total (1950-75): Steel 204, 000 528, 000 2, 055, 000 166, 000 387, 000 426, 000 37, 000 529, 000 4, 332, 000 Cast iron 6, 300 16, 600 64,400 5,200 12, 000 13, 320 1, 150 16, 500 135, 470 11,700 30, 500 119, 000 9, 500 22, 300 24, 500 2,100 30, 400 250, 000 2,430 6, 340 24, 740 1, 990 4,640 5,020 440 6,440 52, 040 Covers about 89 percent of the petrochemical production. Page 212 The Promise of Technology Chapter 15 The Possibilities of Solar Energy* In the first 18*/> centuries of this era, the total input to the energy system of the world was about 6Q,f equivalent to some 225 billion short tons of bituminous coal. In the next century, ending in 1950, we burned up 4Q—more than half as much. In 1850 the annual input was at the rate of about 1.0Q a cen- tury. In 1950 the rate had multiplied 10 times—to some 380 billion tons of coal equivalent a century. The requirements per capita for the output of energy at the various points of end-use—as, for example, the draw-bar of a locomotive—have been growing strongly. The world growth-rate has averaged about 2.2 percent a year compounded since 1860. It has tended to increase quite steadily. During the past 15 years its growth has been at the rate of about 3 percent. The rate is probably continuing to increase. In the United States the per capita requirements for the output of energy has grown a little more swiftly than has the average world rate. The growth-rate has averaged about 3.4 percent since 1897. During the past 15 years it has averaged nearly 4 percent. The rate is probably continuing to increase. Estimates of the trends in three quantities are necessary to an estimate of future over-all requirements for input of energy. The three quantities are: The per capita demand for the out- put of energy; the efficiency with which energy is used; the population. A discussion of over-all energy demands will be found in "Projection of 1975 Materials Demand," in volume II. If we are to avoid the risk of seriously increased real unit costs of energy in the United States, then new low-cost sources should be made ready to pick up some of the load by 1975. ENERGY FROM THE SUN The intensity of solar radiation, measured outside the earth's atmosphere, at mean solar distance, is 7.15 British thermal units per square foot per minute, or the equivalent of seven- tenths of a ton of bituminous coal per acre per hour. The sun- light intercepted by the earth at the outer boundaries of the atmosphere in 1 year has an energy content of about 5,300Q— more than 200,000 billion short tons of bituminous coal. ♦This paper, condensed by the Commission's staff, is based on a draft memorandum prepared for the Commission by Palmer Putnam, former consultant to the Atomic Energy Commission. It is included in this volume to indicate the limits of present knowledge of solar energy as well as the Frontiers for future technology. tl.0Q= 1.0x10" B. t. u., equivalent to some 38 billion short tons of bituminous coal. A thick cloud reflects about three-fourths of the sunlight that strikes it. The water vapor and the other ingredients of the atmosphere absorb and reflect up to one-fourth of the incoming sunlight. Some measurements of that fraction of solar energy which actually reaches the ground are recapitulated in table L Table I.—Quantity of solar energy reaching surface of earth [2] Degrees B. t. u. per sq. ft. Equiva- lent in short tons of bit. coal per acre Location north latitude Daily Dec. June Yearly aver- age Yearly total San Juan, P. R 18 21 25 33 36 1, 540 2, 000 1, 450 2, 400 1, 100 2, 200 1, 000 1, 900 560 2, 800 1, 940 1, 900 1, 500 1, 540 1, 720 710, 000 690, 000 550, 000 560, 000 630, 000 1, ua Honolulu, T. H 1, 05O 880 900 Miami, Fla La Jolla, Calif 1, 000 In general, the solar energy that reaches horizontal surfaces in the lower middle latitudes is equivalent to about 1,000 tons of coal per acre per year—about 2.75 tons per day. In summer, in the arid sub-tropics, the average daily rate is equivalent to about 3.7 tons of coal per acre per day. The maximum rate may reach 5 tons on a clear, dry day in June. The average for the United States is about 800 tons of coal per acre per year. These are convenient yardsticks for evaluating proposals for harnessing sunlight. The area of the United States is about 2 billion acres, on which there falls, in an average year, sunlight with an energy content equal to that of about 1,900 billion tons of bituminous coal. The input to the energy system of the United States in 1947 was equivalent to about 1,300 million tons of bituminous coal. So, the United States supply of solar energy is about 1,500 times the present requirement. In middle latitudes, the natural conversion of sunlight by biological photosynthesis operates with an average annual effi- ciency of the order of 0.1 percent. The total carbon fixed in the United States in 1947 by photosynthesis would, if burned, have yielded less than the equivalent of 1,900 million tons of bi- turninous coal, or about 1.4 times our total energy requirements in 1947. Page 21$ If our expanding energy system is ever to be largely de- pendent upon photosynthesis, we must devise great improve- ments over nature's method of harnessing sunlight. METHODS NOW IN USE There are various designs for solar hot-water heaters. One design, which illustrates the principle, consists of a system of pipes, backed by a black surface, the whole enclosed under glass, and mounted on a slanting roof that faces south. There are 4 to 5 lineal feet of three-fourths-inch pipe per square foot of glass area. Rule of thumb indicates that about 1 square foot of the pipe- absorber-glass area will produce a gallon of 180 degree Fahren- heit water daily during 7 or 8 months of the year in Miami, Fla. Each gallon-day of capacity represents a heat absorption of about 1,000 B. t. u. per day. The claim that 1,000 B. t. u. are absorbed per square foot daily implies an efficiency in Miami, Fla., or La Jolla, Calif., of over 45 percent, to be compared with efficiencies of 30 to 50 percent reported by Hottel and Telkes in the case of the solar houses designed at the Massa- chusetts Institute of Technology. In rural areas where there are no washing machines, aver- age demands for hot water are about 100 gallons a day for a family of five. Automatic clothes-washing and dish-washing demand greater quantities of hot water. In 1939, nonfreeze commercial solar water heaters could be installed for about $8 per gallon-day of capacity. The non- freeze type can be assumed to be fully operative about 270 days a year. The indicated cost is about $1.70 per million B. t. u. [2]. INDIRECT COLLECTION BY MEANS OF HEAT PUMP A heat pump is a device for collecting heat at a low tempera- ture—from well-water, the earth, or the air—and delivering it at a higher temperature. One collection and concentration is usually done by an electrically operated pump. The ratio of usefulness is the rates of energy spent in "pump- ing" to energy in the heat delivered. Among the 500 heat pumps now in operation in the United States—25 industrial, 260 commercial and 215 residential— many are operating at ratios of 4 to 1 and some at ratios of 6 to 1. The energy that is "mined" by the heat pump may be used for heating in winter, or for air-conditioning in summer. Both are accomplished without combustion, and so without odors, dirt, soot, or chimney. The heat pump may also be used for making hot water, or for industrial processes such as drying, evaporation, and distillation. The long mild winters and warm, humid summers of the South and Far West are most favorable for heat-pump installations. Solar energy may be used directly as the heat source for a heat pump. There is a technical reason why such a combination is attractive. It permits a low temperature in the solar collector, leading to a higher efficiency. Chemical storage of heat may also be used in partnership with the heat-pump. Experimental installations reported by Telkes indicate important savings in the combined first investment, The first investment cost of a heat-pump is estimated to be about three times that of a conventional heating unit. Its eco- nomic justification rests on the availability of cheap electric power, in an area where fuel costs are high. Its thermodynamic cycle perhaps limits its application to uncongested areas. For example, the entire requirements of New York City for comfort heating and hot-water heating could hardly be taken from the water supply; or from the ground without lowering the frost line; or from the air without affecting the local climate. Table II illustrates the competitive position in 1949. Table II.—Competitive costs of heating methods Methods of heating Electrical resistance Electrical resistance Heat-pump cp-4 Heat pump cp-4 Heat pump cp-5 Heat pump cp-5 Heat pump cp-6 Heat pump cp-6 Coal, 12,000 B. t. u./lb Coal, 12,000 B. t. u./lb Oil, 140,000 B. t. u./lb Oil, 140,000 B. t. u./lb Natural gas, 900 B. t. u./cu. ft. Artificial gas, 500 B. t. u./cu. ft Cost per unit per kw.-hr. . . 2^ per kw.-hr 1 ]/2$ Per kw.-hr. . . 2y Navy and Air Force, 15. — segregation of, 15. — "synthetic" defined, 7. Sea, the (see also Ocean resources), 22. — life, animal products of the sea include use- ful fish oils, 124. artificial fertilization of seas for improved fish food, 124. fish-liver oils for vitamins, 124. for drying purpose, 124. products of (see also Seaweed), 12C. — water, 23. composition of (not including gas), table, 116. demineralization and distillation, 117— 119. distillation, vapor-compression, 122. evaporation to produce salts, 120. exploration techniques, 116-117. gold from, 120. ion-equivalent concentration of, 119. ion exchanger, cation composition of after passage of, 120. magnesium from, 120-121. mineral wealth in, 115. plants operating on single-product proc- esses, 121-122. potassium from, 121. — processes to isolate dissolved materials, 117. production of sodium from, 119-120. recovery of minerals from, technological advances in, 23. salinities of surface water from oceans, seas and gulfs, table, 116. salt concentration of, 115-116. salt content of distillation brine and mar- ket value, table, 119. salts, 118, 122. Page 225 Sea water, sodium chloride for chlorine manu- facture, from, 120. solar energy bitterns from, 122. technology, significant trends in, 122. trace elements, 120. Seaweeds, 122-124. — exploration techniques for, 123. — harvesting by hand and machine, 123. — industry, future of, 23, 123. present, extracts colloid products, 122. — kelp distribution and potential, 123. — resources, 123. — technology of extraction and use, 123. Seismic methods, geophysical exploration, 29, 30. Selenium, 21. — a byproduct metal from copper, 109. — "farming" for, 110. — new sources and uses of, 110. — recovery plants, 110. Shale oil (see also Oil, Petroleum), 173. Silicon, 20, 51-52, 110-111. — coating on molybdenum wires and on steel, 20. — content of hot iron metal charge in the basic open-hearth furnace, 51—52. — ductility in, 110. — metal, use in coating steel or molybdenum, 20. Silicones, development of, 20. Siliconizing molybdenum and other metals, 111. Skull melting in ceramic and graphite crucibles, 71. Slag, from oxidation of high-manganese basic iron, 52. Slag-to-metal ratio in ferromanganese smelt- ing, 46. Smelting of manganiferous-ore concentrates, 47. Soderberg continuous electrode, application of, aluminum process, 8. Sodium, 20, 96. — applications, 96. — metallic, for making tetraethyl lead, 96, — peroxide for paper industry, 96. — vapor for cooling valves, 96. Solar energy, 152, 213-220. annual supply of, table, 220. conversion of, for distilling fresh water, 217. direct concentration of, for power, 217. for comfort heating, costs and market, 214, 216-217. for heating water, direct collection, 214. heat storage, 216. Glauber's salt, heat required to raise, 216. means of harnessing, summarized, 220. methods of collection now in use, 214. phosphors, storage of light in, 220. possibilities of, 213. values of, at which net collection of heat begins, table, 215. — heating, chemical heat storage, advantages and disadvantages of, 216. — hot-water heaters, 214-215. — power collectors, 217-218. from photo-voltaic cells, 220. Solder flux, new rosin-type, 61. Solvents, 200. Spectro-chemical methods, to determine min- eral traces, 26. Spectrographic equipment, Geological Survey to provide, 26. Steel (see also Iron and Steel), 6-7, 10-11, 20, 36-40, 41. — alloys in construction and building indus- try, 10. in tool steels, die steels and permanent magnet steels, 11. — Bessemer converter process, 36. — cladding of, with other metals, 7. — cold extrusion, 39. — corrosion prevention, 39. — hot-dipped with aluminum, substitute for galvanized steel, 7. — hot extrusion, 39. — Ingots, Population, Per Capita Production of and Hypothetical Total Production of Steel Ingots, 1955 and 1975, 164. — making processes and problems, 6. — producing areas, projected iron ore sources for United States, 41, 44. — production, 35-38. acid open-hearth and electric furnaces, dependent on steel scrap, 35, 37. basic electric furnace, possible major steel producer, 36. ■ Bessemer converter process, decreasing importance of, 36. desulfurization difficulty in the basic open-hearth furnace, 35. oxygen in the electric furnace, 38. in open-hearth furnace, 37. purchased scrap for, 7. raw materials for, 6. surface-blown basic converter (Turbo- hearth), promise of, 36. Thomas converter process, not suitable for American basic pig iron, 36. — replacement of, by stainless, and by alu- minum, 7, 39. — Requirements for Synthetic-Fuel Plants— Figure B9, 180. — savings through technology, 38. — silicon coating on, 20. — substitution for, not necessary, 39. — wear prevention, 39. Strontium metal, poor in corrosion resistance, 99. Styrene, production and consumption of, 189 Sulfur, 4-6, 8, 34, 197. — content of coking coals, 34. — dioxide-extracted domestic manganese, 48. — eliminated by catalytic cracking, 16. — emission control in England and U. S., 5. — extraction of, from waste products, 4. — in gypsum, 4. — in pig iron and fuels, 6. — lowest cost acid, 4. — recovery from natural and refining gases, 197. possibilities and practices, 4—5. — sources, old and new, 4. — U. S. consumption, 4. Sulfuric acid, cost of, and wastes in streams, 4,5. United States sources of supply, 4. Superphosphate manufacture, 10. Surface active agents, petrochemical require- ments for, 198, 199. Sylvester-Dean process, for recovery of man- ganese, 9, 51. Synthetic ammonia and by-product ammonia from synthetic-oil plants (past production from private plants only), 183. manufacture, 182. — fiber production, 200. and plastics, estimated future require- ments of, 209. — fuel plants, anticipated production of, 177. erection of prototype, 173. — initial cost of, in dollars per barrel daily capacity price basis 1950, 176. Fischer-Tropsch synthesis, 173. process, 173-178. forecast of production from oil shale and coal, 175. Operating and Maintenance Labor Re- quired for, including Miners, 182. production, raw materials and processes, 173. — liquid fuels, chief raw materials for, 171. conversion of coal into, 174. costs, materials requirements, and products, 175-178. from oil shale, 173. industry, annual investments of, 177. steel requirements for construction, 178. — manganese ore, 9. — methanol manufacture, 183. — rubber-projections, 200. Synthesis gas from coal, requirements for, 181— 184. production rates of, 182. — of ammonia from nitrogen and hydrogen, 3. T Taconite, magnetic and nonmagnetic, 42. — ores, source of iron for blast furnaces, 6. Tantalite concentrates in processing tin, 14. Tantalum, 22. — in tin ores, 56. Tax policies, penalizing mining industry for increasing reserves, 25. Technology, demands which the materials problem places upon, 1-2. — drilling, 28. — of building industry, 139-158. — of forest products, 127-138. — of iron and steel, 31-44. — of manganese, 45—53. — of mineral exploration, reasons for lag in development of, 25. — of ocean resources, 115-126. — of problem metals, technical jobs listed, 15. — of tin, 55-64. — of titanium, 65-81. — of uncommon metals, 95-114. — of zirconium, 83-94. — tasks and opportunities, 1-24. Tellurium, 21. Tetraethyl lead, unique problem in substitu- tion, 14. Thallium, 21. — alloys, resources and uses, 111. Thermal methods, geophysical exploration, 29. Thoria, for grain-growth prevention, 113. — in electrical resistance wire, 113. Thorium, 20, 22, 112-113. — cerium, and the rare earths, 112. — chief sources for monazite, 112. — minor alloying constituent, 113. Page 226 Thorium, powder, 113. — reserves, 112. Timber growth in prospect for 1975, 17. Tin, 14-15, 55-64. :— advantages as a semiconductor, 62. — alloys made from secondary, 57. aluminum containing, 61. ■ coatings, new applications for, 57, 62. — aluminum, metal substitutes for3 59. — base babbit alloys, use of in bearing metals, 61. — bearing bronzes, 61. — block, substitutes possible in all uses, 61. — bearing solders, substitutes, 61. — cadmium alloy plating, 62. — can making, 60. — consumption, U. S. A. (table), 57. — containing scrap in bronze and solders, reuse of, 57. — copper or speculum plating, 62. — electrocoating, 58, 62. — electrolytic plate, 58. — filtration of molten, 56. — foil, 61. ■— future trends in U. S., 63. — hot dipping of base metals in, 58, 62. — in Bolivia, Malaya and Nigeria, 14. — in collapsible tubes and foil, displacement of, 61. — lead soft solders, possibilities of substitutes. 60-61. — methods of concentration, 56. — new uses and needs for, 62-63. — nickel alloy coatings, 59, 62. — ore, contain other metals of value, 56. reserves, 63. — pig, economy in use of, through better standardization, 57. — plate applications, miscellaneous, 60. for bottle caps, 60. for containers, 58. tin in, long tons, U. S. consumption of, 58. — possibility of finding new sources, 56. — processes to recover from tin-plate scrap, 56. — recoveries, by dredge from alluvial deposits, 56. from low-grade Bolivian ores, 56. from used cans, 57. of cassiterite, 56. — reductions in use of, 63. — research, sponsored at Battelle Memorial Institute, 62. — reserves, Australia, 55. Belgian Congo, Malaya, Netherlands East Indies, and Nigeria, 55. — salts, production and uses, 57, 62. — savings, in various uses, 58, 61. — smelters, 56. — smelting, recovery of byproducts from, 14. — solder, 60-61. ■ gallium and indium in place of, 61. — sources of, 55. — substitutes for, 57. — tantalite concentrates in processing, 14. — the technology of, 55-63. — titanium-coated steel, 59. — untinned black plate, use of, 59. — used in bronze, possible savings, 61. — uses of, 14. — zinc coatings, 62. Titanium, 65-81. — alloy, 273-77. Brace, Hurford, and Gray of Westing- house, study summarized, 74. comparisons of, with other structural metals on the basis of design factors, table, 77. strength-weight factor, advantages of, 76. yield-strength figure, 76. — alloys, corrosion resistance, 75. — alloys, creep-rupture date of, 74. factors governing the toughness of, 75. functions of3 73. graphite-melted, 71. hardening heat treatments of, 73. high-temperature, 74-75. high toughness, 75-76. intermediate, 74. medium-temperature, 75. overcoming difficulties in machining, 72-73. « quench-hardening and age-hardening heat treatments of, 74. weldability improved by technological developments, 73. — alpha-beta alloys, 73. — amount required per airplane, 77. — as a substitute, 78-80. — avidity of, for oxygen and nitrogen, 66. — and zirconium, 19. — better methods of extracting from ore needed, 19. — building materials, 147. — ceramic crucibles for, 71. — characteristics, 73. — chlorides and bromides, reduction of, 68. — civilian demands for at present prices, 78. — contaminants of, 66. — corrosion data of Hutchinson and Permar, 75. •— corrosion resistance, marine, 78. properties, 75. — development of a continuous Kroll proc- ess, 19. — dioxide, industry and market, 79-80. in pigments, 79. in rubber, 80. in weld-rod coatings and vitreous enam- els, 81. — ductility of dependent on purity, 66. — electrolytic processes to produce, 69. — extractive metallurgy of, 65—66. — extractive processes, 65-70. — fabrication problems, 72. — fluoride, reduction of not commercially promising, 69. — formation of pyrophoric through vapor- phase reduction, 67. — Freudenberg process, 67. — future of, summary and conclusions, 81. — future technological factors in, 79. — Hunter's reduction process, 67. — industry, Government support of, 66. — ingot, weight compared with other metals, 71. — ingots, produced by arc melting, size of, 70. produced by induction and resistance melting, 71. production of by arc melting, 70. by skull melting, 71. — Kellogg electric ingot furnace, 70. Titanium, Knoll extractive process, 19, 66. magnesium-reduction process, 67. — lubricants for working, 73. — Maddex proposed continuous magnesium process, 67. — market, 78-79. at half the present price, and continuing cold war, 79. at $1 or less per pound for forgings, 79. at present prices, 78. size of at present prices, 78. — material of construction for chemical in- dustry, 78. — materials, improving performance of, 73. — metal, formation of by subhalide dispropor- tionation, 68. source of the purest, de Boer (or Van Arkel) process, 68. — melting and fabrication, lowering costs of, 70. energy requirements for large scale ton- nages, 72. in crucibles, 66. — military demand for, 78, 79. — Ordnance Department of the Army, inter- est in, 77. — oxide, calcium reduction of, 69. methods of reducing, 69. — pattern of demand dependent on price level, 78. — pattern of end-item uses for, 78. -— performance, improving, 73-78. — plants, construction of, 70. — possible uses in ships, 78. — power considerations in induction melting, 71. — power requirements for iodide process, 70. of Kroll process, 70. — price, 148. — prices of (Titanium Metals Corporation of America), 78. — problem of contaminated metal, 72. — problems of melting, 70. — process costs, lowering of, 70—73. •— production, 65. facilities for, 70. military requirements and, 65. . rates, 65. requirements, for large-scale, 69. of Kroll and iodide processes compared, 70. in military aircraft, estimated, 77. — resistance of commercially pure, to selected chemical reagents, table, 76. — rise of, 65. — reduction, economic factors of reduction processes, 69. — resources, 65. — scrap, remelting and reuse, 72. — sources of, 19. — structural applications for in aircraft, 76. — substitutes for precious and other metals, 79. — substitution by, 65, 78, 79. — technology of, 65-82. — tetrachloride, cost of production, 68. impurities found in, 68. large-scale production of, 67. magnesium reduction of, 67. plants, construction of, 68. from rutile or ilmenite, 68. sodium reduction of, 66. Page 227 Titanium tetrachloride, thermal dissociation of, 68. — uses in the construction industry, 148. — Watertown Arsenal symposium on, 75. — Zirconium Panel, Metallurgical Advisory Board, National Research Council, Na- tional Academy of Sciences, recommen- dations of, 66. Trace analysis, as an exploration method, 27. of water, for critical elements, 26. — metal analysis in prospecting, 26. Tungsten carbide, cutting'tools, concentrates, and in ammunition cores, 12. — exploration and discovery of new sources, 12. — found in Bolivian tin ores, 56. — physical properties of, 12. Turbo-Hearth surface-blown basic converter, 7. u Uncommon metals, the technology of, 95-114. Uranium, Thorium, Plutonium, 20-21 V Vanadium, 10, 12. Venezuelan iron ore, 43. w Waste products, need for recovering, 8. Water, for critical elements, trace analysis of, 26. — for energy, photochemical decomposition of, 220. Winds, extraction of energy from, 218. Wood (see also: Forest products, Forest re- sources), 17-18, 127, 139-141. — hydrolysis of, to produce sugars, 18. — processing operations, integration of, 18. Y Yttrium, 22. z Zinc, 13-14. — reserves, United States, 13. — substitutes for and uses of, 14. Zircon (zirconium silicate) in refractories, 92. — shipped to consumers in 1946, 83. Zirconia refractories, stabilized, 93. Zirconium, 83-94. — absorbent properties of, 84. — alloys, in structural applications, 91. — anticorrosion value of, 84. — A. E. C. needs, 84. — carbide and nitride, 93. — carbide, possibility, 85. — carbon reduction of oxide, 86. — corrosion resistance, 88-90. in aqua regia, 90. in nitric acid, 89. in sulfuric acids, 89. to alkalis, 90. to marine salt, 90. — crude, producing companies for, 84. — current position, 83. — crystal-bar, consumed by the A. E. C, 83. — demand at various prices, 92. — estimated total consumption of ductile, 92. — fabricating techniques, for nuclear energy applications, 86. — forms of, 83. — free world resources, 83. — fused-salt electrolysis, 86. — in various media, corrosion data on crystal- bar—14-day tests except where noted (table), 90. — improving performance with, 86. — in corrosion-resistance applications, 87. — in electrolytic condenser field, electronic tubes and glass sealing, 91. — in hydrochloric acid, Bureau of Mines data on the corrosion of graphite-melted sponge (table), 87. — in inorganic salt solutions—6-day tests in aerated solutions, U. S. Bureau of Mines data on the corrosion of graphite-melted sponge, 89. O Zirconium, in mixed sulfuric and nitric acids, Bureau of Mines data on the corrosion of graphite-melted sponge, 88. — in nitric acid, Bureau of Mines data on the corrosion of graphite-melted sponge (table), 87. — in phosphoric acid, Bureau of Mines data on the corrosion of graphite-melted sponge (table), 88. — in sulfuric acid, Bureau of Mines data on the corrosion of graphite-melted sponge, (table), 87. — in various media, Bureau of Mines data on the corrosion of graphite-melted sponge (table), 90. — ingots, production of, 86. — iodide production process, 85. — metal, Atomic Energy Commission interest in, 83. — ore, contains hafnium compounds, 84. — organic acids—6-day tests in aerated solu- tions, Bureau of Mines data on the cor- rosion of graphite-melted sponge (table), 88. — oxide, important as a refractory, 19. — processes in development, 83, 85-86. — production problems, 83-86. — scrap, for melting, 86. — sponge, 84, 85, 86. problems of melting, 86. U. S. Bureau of Mines producer of, 84. — substitution of, for other materials, 92. — summary and conclusions, 93. — technology of, 83-93. improved nonmetallic, 92, 93. — tetrabromide, reduction of with hydrogen, 86. — tetrachloride, magnesium reduction of, 85. — tetraiodide, Arc reduction of, 86. — thermal neutron absorption cross section of 87. — titanium processes useful for, 19. — uses, 19. — U. S. production of iodide, 84. Page 228 RESOURCES for FREEDOM Selected RepWjr to the Commission A Report to the President by THE PRESIDENT'S MATERIALS POLICY COMMISSION June 1952 IN FIVE VOLUMES Volume I—Foundations for Growth and Security Volume II—The Outlook lor Key Commodities Volume III—The Outlook for Energy Sources Volume IV—The Promise of Technology Volume V—Selected Reports to the Commission Tfr- UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1952 DEPOSITED BY THE UNITED STATES OF AMERICA RESOURCES for FREEDOM Volume V—Selected Reports to the Commission The Commission William S. Paley, Chairman George R. Brown Arthur H. Bunker Eric Hodgins Edward S. Mason The Executive Staff Philip H. Coombs Executive Director William C. Ackerman Executive Secretary Max Isenbergh General Counsel Editorial Director Norvell W. Page Letter of Transmittal June 2, 1952. Dear Mr. President: We take pleasure in presenting herewith the fifth and final volume of our Report, "Resources for Freedom." Volume V, "Selected Reports to the Commis- sion," brings together a number of studies on key aspects of materials problems and on programs and policies currently in use. The papers making up this volume survey the present policy of the United States and Canada toward the minerals industry; analyze the current condition and the future prospects of renewable resources, principally those of the United States, and look into the many ramifications of the existing United States policy toward the development and acquisition of materials abroad. The analyses con- tained here served as bases for a number of the conclusions and recommendations which the Commission presented in its first volume. Respectfully submitted, The President, The White House. Foreword and Acknowledgment This volume presents a selected number of studies prepared at the request of the Commission as part of its research into aspects of the materials problem. In particular, the papers assembled here examine the policies of the United States and Canada toward the mineral industries, as reflected in Government programs and existing laws; they appraise renewable resources, particularly those of the United States, and they examine the measures being taken to permit or encourage the procurement of materials abroad, and to stockpile those materials which would be critical in the event the security of the United States were threatened. These papers contain a wealth of information, much of it not previously as- sembled, which it seemed desirable to make readily available to all concerned with materials problems and with the necessary continuation of review and analyses which this Commission could only begin. The papers represent a portion of the background against which the Commission considered its recommendations; how- ever, the views expressed in the reports are not always the same as those held by the Commission. The Commission gratefully acknowledges the assistance given by many officers and agencies of the Federal Government and by various State governments, with- out which most of these reports would not have been possible. With the exception of those papers prepared by members of the Commission staff, the authorship, whether individual or by a Government agency, is given with each paper. The Commission wishes to express its thanks for the wholehearted cooperation given by many experts outside Government, particularly in the academic world and in private industry. Contents Letter of Transmittal Foreword and Acknowledgment SELECTED REPORTS TO THE COMMISSION Report 1 Government Exploration for Minerals, p. I Report 2 Mining Laws and Mineral Leas- ing Acts, p. 4 The Mining Laws Transfers Hinder Development Programs The Mineral Leasing Acts Report 3 Incentives for Minerals Indus- tries, p. 10 Incentives Under Federal Tax Law Percentage Depletion Expensing and Accelerated Amor- tization Some Nontax Incentives The Bonus for Successful Recovery Domestic Loan Programs Loan Programs Assist Procure- ment Abroad Price Stabilization Devices The Premium Price Plan Report 4 Taxation of Canadian Minerals Industries, p. 26 Provisions for the Mineral Industries General Provisions of Unusual Interest Recapitulation of Tax Differences Report 5 Domestic Timber Resources, p. 33 Long-Range Timber Requirements Individual Commodity Require- ments Forest Drain and Growth Goals The Timber Resource Forest Land Area Is Ample Growing Stock Is the Problem Timber Depletion Trend Un- checked Increase in Annual Growth pected Adequacy of Existing Programs Private Forest Practices Public Forestry Policies The Role of Public Forests Page 10 10 15 18 19 19 22 23 24 26 30 31 Ex- 33 33 36 37 37 38 39 40 41 41 43 44 Report 6 The Free World's Forest Resources, p. 47 The Situation in Brief Wood Products Trade Forest Resources Outside the U. S. Canada Free Europe Latin America Central and South Africa North Africa and Near East Southeast Asia Oceania Japan Industrial Wood Supply Expanding Industrial Wood Output Report 7 Future Demands on Land Prod- uctivity, p. 63 Consumption and Demand Potential Production Summary Land Uses Some Input Factors Projection and Equilibrium Conclusion Report 8 United States Fertilizer Resources, p. 76 Fertilizer Increases Farm Production United States Production of Ferti- lizer Materials How to Increase Use of Fertilizer Report 9 Water for United States Industry, p. S3 Supply and Use of Water Water for Industry Water Pollution a Nation-Wide Problem Regional Water Problems Government and Water Management Outlook for the Future Report 10 Venezuela "Sows the Petroleum/' p. 99 Benefits to the Venezuelan Nation Benefits to the Free World Growth of the Oil Industry Progress in Production and Ex- ploration Venezuela Aids World Security Economic and Social Progress Financial Position Foreign Trade Page 47 48 52 53 54 54 55 56 57 57 58 59 60 63 65 70 70 72 73 74 76 79 81 84 86 87 88 91 93 99 99 100 100 100 101 101 101 Economic and Social Progress—Con. Page Industrial Growth 101 Public Services 102 Health and Social Welfare 103 Terms of the Partnership 103 The Petroleum Law 104 Taxation Under the Petroleum Law 104 Labor Laws 105 Significance of Venezuela's Develop- ment 105 Report 11 United States Private Invest- ment Abroad, p. 107 Report 12 Guaranties for Foreign Invest- ment, p. 110 The E. C. A. Guaranty Program 110 The M. S. A. Guaranty Authority 113 Assessing Investment Guaranties 114 Report 13 The IRBD and Materials Devel- opment, p. 116 Loans Directly Affecting Production 116 Loans Indirectly Affecting Production 117 Limitations on Bank Financing 118 Report 14 Export-Import Loans for Devel- opment, p. 120 Trends in Financing 120 Evaluation of Projects 123 Report 15 Counterpart Funds for Raw Materials, p. 125 Purchases and Advances 125 Program Criteria 126 Report 16 Government and Management Contracts, p. 129 The Nicaro Nickel Project 129 The Greene Cananea Project 132 Miscellaneous 133 Conclusions 135 Report 17 Stockpiling Materials for Security, p. 137 Stockpiling and Alternative Policies 137 The Efficiency of Stockpiling 142 Stockpile Objectives 143 Stockpile Acquisitions 145 Materials Stockpiling and Distribution 147 Summary 149 206060—52 2 Selected Reports to the Commission Report 1 Government Exploration for Minerals* Mineral exploration involves two steps: (1) Geologic study, aimed toward determining where ore may be found, and (2) the digging of holes, designed first to test for the presence of ore, and second to gain information for estimating the general size and quality of the ore body. The digging of holes—some- times called physical exploration—includes the digging of pits and trenches as well as the various kinds of drilling. This paper discusses physical exploration, reference being made to geologic exploration only as needed. WHY THE GOVERNMENT EXPLORES There are three reasons why the Federal Government ex- plores for mineral deposits: (1) during time of emergency the mining industry may not be able to produce at the rate needed, because not enough deposits are available for mining; (2) the Government may wish to enlarge the reserve base, in order to support future economic growth and security; and (3) the Government may wish information about its resource position. The first contingency is currently represented by the demand for uranium. The need is so urgent that there has been no ques- tion of the desirability of Government exploration. The period of the last war is a second example. In general, industry was concentrating its effort on the production of ore from known reserves; it had little time, men, or money left for exploration so that the Government itself set out to search. In order to enlarge the reserve base in the light of future needs for economic growth and security, Government itself may have to carry out physical exploration that industry, basing its decision primarily on narrower considerations of market out- look, cannot reasonably be expected to undertake. This is a kind of national insurance, the burden of which only Government is in a position to assume. The third contingency is the need for information to be used in appraising the Nation's mineral resources. Broadly speaking, appraisals of this kind are made from data derived from phys- ical exploration, interpreted on a foundation of geologic knowl- edge. Such appraisals are much more dependent on skill and geologic experience and judgment than on small increments *By S. G. Lasky, Minerals and Fuels Division, U. S. Department of the Interior. of fact. Data derived from physical exploration are already abundantly, even if not completely, available from industry; and ordinarily additional information attainable by any prac- ticable Government program of physical exploration would not be great enough materially to influence the accuracy of national appraisals. With respect to submarginal deposits, however, abundant data are not ordinarily available from industry. If appraisals are to be made of these resources, which may in due course become a basis for production, the Government itself must undertake physical exploration in order to get the neces- sary data. The first Federal prospecting in the United States was churn- drilling for potash in California, Nevada, and Texas from 1911 to 1917. The work was done by the Geological Survey, with funds appropriated by Congress expressly for the purpose. The results were disappointing insofar as discovering minable potash was concerned, but in another sense they were highly successful. When in 1925 a wildcat oil well near Carlsbad, N. Mex., re- vealed potash minerals, the geologic knowledge derived from the Government drilling made the significance of this discovery so apparent that industry undertook further drilling and found important commercial deposits. In 1926, the Bureau of Mines and the Geological Survey began, again under express Congres- sional authority, a 5-year program of core-drilling 23 holes in New Mexico and Texas and 1 hole in Utah. All the potash drilling, whether by the Government or industry, received close Federal geologic study. Sixteen additional holes were drilled in 1944 by the Bureau of Mines for the purpose of delineating an ore body on the potash reserve in New Mexico. The information derived from the early drilling and related geologic studies was made available to the public by means of press releases and official bulletins of the Geological Survey and of the Texas Bureau of Economic Geology. ACTIVITIES DURING THE SECOND WORLD WAR The Stockpiling Act of June 7, 1939 (53 Stat. 811) author- ized and directed the Bureau of Mines and the Geological Sur- vey ". . . to explore, on public lands and on privately owned lands, with the consent of the owner, deposits of [strategic and critical] minerals ... as may be necessary to determine the extent and quality of such deposits. . . Work began im- Page 1 mediately after approval of the act and continued until June 30, 1945. Initially only seven materials were covered: anti- mony, chrome, mercury, nickel, tungsten, manganese, and tin. In 1941 the work was extended by specific legislation to inclftde western iron deposits, and in 1942 to include virtually all min- eral commodities. Actual physical exploration was done under the direction of the Bureau of Mines; the background geologic work and the geologic guidance to the physical exploration was done by the Geological Survey. Several hundred individual deposits were tested, at a total cost of some 25 million dollars. With two exceptions, all projects were on private lands under express agreement with the owners thereof. The two exceptions were the phosphate explorations in Idaho and Wyoming, and the vanadium explorations on the Colorado Plateau. The phos- phate explorations were by the Homestake Mining Co. acting as agent for the Federal Government, the geologic work being done by the Geological Survey. On request, the owner of a property was permitted access to any factual information derived, such as drill records and assay data. If authorization was given by the property owner, fac- tual engineering information, and geologic information both factual and interpretative, were made available to the public at large by means of official bulletins and other publications of the Geological Survey and the Bureau of Mines. Reserve esti- mates derived from physical exploration were not made avail- able either to the owner or to the public. On the other hand, estimates of reserves made by the Geological Survey on the basis of its geologic studies (i. e., unaccompanied by Federal physical exploration) were published in its bulletins. In instances where formal bulletin publication was not justified, the Geological Survey publicized the information by means of press releases or by placing manuscript reports on file at various field offices where they could be examined by any one interested. The existence of such open-file reports was announced by means of press releases. A similar technique was used with respect to the work of the Geological Survey on public lands, although at fairly early stage secrecy was clamped on the vanadium and uranium explorations on the Colorado Plateau. The exploration work during these years had three outstand- ing results: (1) The discovery in Idaho of a tungsten deposit that became one of the Nation's major sources during the war, and the discovery in Arizona of a large copper deposit that is now being prepared for production by commercial interests. Both discoveries were on private property. (2) The extension of some known deposits and the creation of a greater certainty regarding known reserves. (3) The acquisition of a great bulk of new information on the geology of mineral deposits. It is difficult to say which of these results will be the most important in the long run. For example, the new knowledge on the geology of uranium has had a marked effect on the subsequent success of the program of the Atomic Energy Commission. CURRENT ACTIVITIES EXCLUSIVE OF URANIUM EXPLORATION Current exploration by the Federal Government—exclusive of the search for uranium—is done under authority of the Stockpiling Act as amended by the Act of July 26, 1946 (60 Stat. 596). The wording of the 1946 act with respect to exploration is virtually identical with that of the 1939 act quoted above, and in this respect the current program is but a continuation of the old one. During the war, however, the emphasis was on finding ore for immediate production, whereas the new program is oriented toward long-term results. In the current program, wholly under the direction of the Geological Survey, the emphasis is more on geologic study than on physical exploration. It is impossible to specify how many exploration projects have been undertaken since enactment of the 1946 amend- ments because it is impossible to draw a sharp line between long-term geologic studies of mining districts, designed pri- marily to determine how nature created ore deposits, and studies oriented specifically toward finding ore. Every geologic field study in a mineral region has aspects of both. About 15 projects have included diamond-drilling or trenching. One project specifically oriented toward finding ore has been dramatically successful, namely, the geologic study of the bastnasite area in the Mohave Desert, as a result of which the United States may shortly become independent of foreign sources for its supply of rare earths, now obtained from monazite from Brazil and India. The bastnasite explorations were on private lands. A press release was issued as soon as the significance of the results was apparent; mapping was continued until enough additional in- formation had been gathered to satisfy the Government's need for an appraisal of the area's potentialities. The Molybdenum Corporation of America is now actively developing the bast- nasite area. URANIUM EXPLORATIONS The search for uranium on the Colorado Plateau and else- where is done in part by the Geological Survey under contract to the Atomic Energy Commission and in part by the Atomic Energy Commission itself. It consists of both geologic study and physical exploration. The Atomic Energy Commission reports that the greater part of A. E. C. drilling is on public lands that have been with- drawn from mineral entry specifically for this purpose.* Land on which further exploration is not anticipated by the A. E. C. will be released from the withdrawal orders and reopened for private entry. In general, withdrawn lands found to contain uranium will not be released but will be available for develop- ment and mining by private interests under arrangements with A. E. C. When it is necessary to drill on private lands in order to obtain more complete information on the ore potentialities of a specific area, permission is obtained from the owner of the mineral rights and he is provided with whatever information results from the drilling on his property. WHAT CONSTITUTES FEDERAL DISCOVERY? Discovery is usually interpreted as meaning that mineral has been found at a place where it was not known before, the size, grade, or general value being undetermined. The dis- covery may turn out to be insignificant or it may have tre- *"Major Activities in the Atomic Energy Programs." Tenth Semiannual Report of the Atomic Energy Commission, January-June 1951, p. 11. Page 2 mendous commercial value. Even in this restricted sense the exploration work of the Federal Government rarely leads to discovery. There have been some actual discoveries—the tungsten deposit at Stibnite, Idaho, and the San Manuel copper deposit in Arizona. Usually the real contribution made by Fed- eral exploration is the uncovering of new information that en- courages industry to begin active physical exploration on its own. The fact that industry will not undertake a piece of ex- ploration means that the geologic chances of finding ore are not considered great enough to justify the gamble. The cost must be trimmed down, or the chances of success raised, to a point where some one of many sources of finance thinks the gamble is justified. For example, a Federal geologic map of the Gouverneur talc district of New York published in 1945 led to new explorations by one of the talc companies. As a result, new deposits were found and a 2 million dollar plant has been built. Similarly, new iron deposits are being found in Michigan and New York. In some instances drilling may be needed, but the drilling need do no more than bring to light information that supports the soundness of a geologic conclusion. In other instances it may be necessary for the drilling to prove the existence of geologic features that are presumptive of the presence of ore, or even to prove the pres- ence of ore minerals, but rarely will it be necessary to carry the Federal work to the point where, by Federal effort alone, the size and grade of the deposits are fully determined and the economic feasibility demonstrated. GOVERNMENT PUBLICIZES ITS ^DISCOVERIES^ Specific examples of how the results of Federal prospecting are passed on to industry and to the public in general, as a step toward getting development, have already been cited. Basic- ally, the practice has always been the same—that is, the publi- cation of the results in the form of official reports. The act of publication seeks to make the information available simul- taneously to all elements of the public, without favor. Sometimes the information is considered so startling or so immediately useful that its release cannot wait upon the lengthy process of formal publication. In that event, it is either pub- lished in the form of press releases or is placed on open file at various places throughout the country. When a report or other form of data is placed in open file, the fact is made known by means of a press release. These practices are used whether the information refers to private lands, to public domain open to mineral entry, or to public domain to which the Mineral Leasing Acts apply. In addition, however, the owner of a piece of private property is usually kept informed as fast as information becomes available, on the theory that the information is really his property. With regard to leasable lands the Government itself is the owner, and it may publicize the information only as desirable to suit its purposes, either by press release, formal bulletin, open file, or as part of the advertisement for leasing bids. Page 3 Report 2 Mining Laws and Mineral Leasing Acts* the nation's publicly owned mineral resources are governed by two methods of disposition: location and leasing. Location is a system of transfer of ownership of relatively small tracts of mineral lands to the private enterprises who discover their min- eral value. Leasing is no less a system of private exploration, development, and extraction, but under it the Federal Govern- ment continues in the role of landlord of its estate. Leasing is applicable to a group of nonmetals—oil and gas, coal, oil shale, phosphates, sodium, potassium, and sulfur; location to all other nonmetal as well as to the metalliferous minerals. Except for four of Canada's eight provinces, where there is a similar appli- cation of both systems, the location system is unique to the United States, leasing or some variant of it being the typical mode throughout the free world of making governmentally owned mineral deposits available for private operations. ORIGIN AND EVOLUTION OF FEDERAL LEGISLATION Until the California Gold Rush of 1848, the problem of disposing of federally owned minerals had been of limited im- portance. For the territory in the region of the Great Lakes, Congress had enacted a leasing law in 1807, and a law pro- viding for the sale of copper, lead, and iron lands in 1846. viding for the sale of copper, lead, and iron lands in 1846.1 There was no general legislation on the subject, however, since most mining operations up to then had been in States in which the United States had never acquired any public domain. To fill the vacuum, the Forty-Niners developed a common-law system of their own—essentially a system of appropriation of mineral lands as a rewrard for discovery. The Mining Law of 1872, which remains in force to date, basically unchanged, was a general legalization of the de facto ownership mining pioneers had established up to that time and an endorsement of the future of the principle of encouraging prospectors by offering ownership of mineral lands to those who found them. (30 U.S. C. 22-49.) WITHDRAWALS OF PUBLIC LANDS By the turn of the century, the basic principle of the Alining Laws, that the mineral wealth of the public domain should be transferred without qualification to private owners, came to be *A brief sketch of certain United States laws on minerals resources bear- ing upon the Commission's recommendations. 1 Lindley, C. H. A Treatise on the American Law Relating to Mines and Mineral Lands. 3d ed., vol. I. San Francisco, Bancroft-Whitney Co., 1914, p. 69. widely questioned, particularly in connection with wrhat were then called the "public utility" minerals, oil and coal. In 1900, the Land Office of the Department of the Interior with- drewr two townships in California, believed to be oil lands, from location under the Mining Laws, and thereafter until 1910, several million acres of oil and coal lands (and some lands containing phosphate deposits as well) were similarly with- drawn by Executive authority alone. The validity of these Executive withdrawals was contested, but ultimately upheld by the Supreme Court. {United States v. Midwest Oil Co. (1915) 236 U. S. 459.) In 1910, Congress specifically authorized the President to withdraw any public lands of the United States and Alaska "from settlement, location, sale, or entry," except for lands containing "minerals other than coal, oil, gas, and phosphates" which, despite any withdrawal order, were to remain open for location under the Mining Laws. (36 Stat. 847.) In 1912, the area exempted for continued application of the mining laws was narrowed to lands containing "metalliferous minerals." (37 Stat. 497.) Thus, on unwithdrawn lands, the Mining Laws continued to be applicable as before. On lands withdrawn pursuant to the statutory scheme enacted in 1910 and amended in 1912, the right to locate under the Mining Laws continued unim- paired in the case of metals, but nonmetals could be located only if the terms of the withdrawal order permitted it. And if the withdrawal were made pursuant to the inherent Executive authority sustained in the Midwest Oil Co. case, it lay within the range of Executive discretion to bar location of all min- erals, metal or nonmetal. The main effect of withdrawals, therefore, was to remove the nonmetal deposits of the with- drawn lands (and to some extent the metal deposits as well) from the application of the Mining Laws, at the time the only method of disposing of federally owned mineral resources. Hence, for the minerals in withdrawn lands, some alternative method of disposition was needed. It was provided by the Mineral Leasing Acts, enacted in 1920. (41 Stat. 450.) COMPLICATED LEGAL PATTERN The Mineral Leasing Acts made leasing the exclusive method of disposition for oil and gas, coal, phosphate, sodium, potas- sium, and oil shale in the public lands, thus providing affirma- tively for the disposition of these major nonmetals and foreclosing any further location of them under the Mining Laws. In 1926, these acts were extended to sulfur in public Page 4 lands within the borders of Louisiana and New Mexico. (44 Stat. 236.) Together, the Mining Laws and the Mineral Leasing Acts produce a complicated legal pattern for the development of federally owned mineral deposits. If, for example, land con- tains any of the nonmetals enumerated in the Mineral Leasing Acts, it can be leased for their extraction only, but there is no provision for development of any other minerals it may contain. Thus far, however, cases falling in the hiatus between the leasing and location systems have not proved to be of great economic significance, since, in general, commercial prospects for the enumerated nonmetals, on the one hand, and for the other nonmetals and the metals on the other, have tended to be in different areas. It is estimated on the basis of information received from the Bureau of Land Management that there are about 300 million acres of federally owned lands within continental United States and about the same acreage in Alaska open to prospecting under the Mining Laws. In general, these areas are also open to prospecting under the Mineral Leasing Acts. In addition, there are in continental United States about 60 million acres sub- ject to the Mineral Leasing Acts only, because of withdrawals or other reservations from the operation of the Mining Laws- THE MINING LAWS Anyone who discovers a mineral deposit in the public domain or the national forests may appropriate the tract of land containing it simply by marking the location on the ground. If State law provides for it, he also may be obliged to meet the further requisite of recording the location at a local land recording office; but there is no provision for notifying any Federal agency of the existence, position, or size of his claim. Each discovery permits the appropriation of a tract of about 20 acres. In addition to the minerals within the surface boundaries, the locator of a lode claim acquires "extralateral rights"; i. e., any vein or lode which has its apex within his location belongs to him no matter how far it extends past the side (but not the end) boundaries of his location. A claim established by discovery and location is something less than the unqualified property of the discoverer. As a matter of law, Federal Government is empowered to invalidate the claim if there has not been a discovery—defined by the Su- preme Court in Chrisman v. Miller (197 U. S. 313, 321 (1905)), as the finding of a deposit sufficient "to have quali- fied a prudent person in the expenditure of money and labor in exploitation." In practice, funds have never been appro- priated to permit the setting up of the administrative machinery that would be needed to exercise this power systematically, and the cases of actual invalidation on this ground have been few. The holder of a mining claim is also under the obligation to make $100 worth of improvements on his location each year. (30 U. S. C. 36.) Modest as this requirement is, it has been excused by act of Congress in 14 of the last 19 years. More- over, failure to perform the prescribed assessment work during a year in which there has been no statutory moratorium does not authorize the Federal Government to terminate the locator's interest. The claim merely becomes subject to relocation by other private persons, and such relocation can be effective only if it is accomplished before the locator in default resumes work on the property. LOCATOR OBTAINS OWNERSHIP The locator of a valid claim has the right, but no obligation, to obtain a patent, i. e., unqualified transfer of ownership from the Federal Government, upon satisfaction of a few modest requirements. He must spend a total of $500 on improving the location and he must have the claim surveyed, except that in the case of placer claims conforming to legal subdivisions of the public land survey, no further survey is required. He must also establish that there has been a discovery, and he must pay a fee of $5 per acre for lode land, or $2.50 per acre for placer land. (30 U. S. C. 29, 37.) After he obtains a patent, the locator is freed of any further assessment obligations. His dominion over the property is abso- lute. He may extract the minerals or not as he chooses; he may make whatever use he wishes of the surface; he is the owner of any timber growing on the land; he may use the land for agri- culture, grazing, a summer home, or anything else it is suited for. But even if the locator never applies for a patent, he acquires as a claimholder a complex of property rights that are only slightly less than those of a patentee. Except for the small possibility of invalidation of his claim by the Government for nondiscovery, and the easily surmounted jeopardy of relocation by another on failure to perform the modest assessment require- ment, he has all the legal and economic attributes of ownership. He, too, can use the property for mining or not as he chooses, can hold others answerable for violation of his extralateral rights, can sell the claim to another, and can recover just com- pensation in the event his tract is taken by eminent domain. EFFECTS ON NONMINERAL RESOURCES Since patents and claims on mineral lands carry with them a comprehensive complex of nonmineral rights, it is not sur- prising that the mining laws have been widely used as a device to acquire lands for nonmineral purposes. As already noted, a claimant is under no obligation to apply for a patent, and until he does, the legal foundation of his claim—discovery— may never be put to proof. As a practical matter, invalidation proceedings initiated by the Government for lack of discovery are rare and private persons ordinarily would have no motive to challenge the validity of the claim on this ground. It has been possible, therefore, for fraudulent claimants under the Mining Laws, claimants who stake out claims without any mineral discovery at all, to preempt public lands and to con- tinue indefinitely in exclusive possession and enjoyment despite the fundamental illegality of their position. Exploitation of this possibility has been frequent. Moreover, since the discovery requirement is satisfied by a slight showing of mineral deposits, many claims and patents, although established in meticulous legality, have served their owners mainly for nonmineral uses. Sometimes they have been used for summer homes, hotels, timber cutting, or grazing; sometimes they have merely lain idle, their owners retaining them for speculative sale. The Forest Service has informed the President's Materials Policy Commission that less than 3 percent of the unpatented mining claims (aggregating 1,845,795 acres) on the national forests Page 5 produce minerals in commercial quantities, and that of the patented claims (aggregating 915,688 acres) less than 15 percent have ever been developed as commercially successful mines. Comprehensive estimates of the number of legally invalid but practically effective claims and of claims and patents which, although legal, are primarily valuable for nonmineral uses, are not available. On the basis of the estimates for the national forests, there can be no doubt that the aggregate of such claims and patents in all public lands to which the Mining Laws apply would run into the millions of acres. Transfers Hinder Development Programs Transfers of publicly owned nonmineral resources to private persons as an incident of the operation of the Mining Laws, extensive enough in themselves to be of national significance, have had another important consequence for the Nation's natural resources. To a considerable extent, they have ob- structed the development of resources in surrounding lands under programs prescribed by Congess. For example, the ap- propriation of a tract containing a strategic watering place may reduce the utility of a large range for grazing. Or a tract pro- ducing little or no minerals may lie in the path of a needed road, thus making construction more expensive. Or it may bar access to timber lands or interfere with the development of an area for recreation or as a power site. Here again there is no method of measuring the cost to the Nation, but it is clearly substantial. It must be conceded that the Mining Laws in operation have resulted in private appropriations at once irrelevant to the Na- tion's minerals position and prejudicial to the best use of other resources. Have they compensated for this incidental effect by their effectiveness in encouraging the development of the pub- licly owned mineral resources to which they apply? The inducements to exploration and development provided by the Mining Laws are simple and straightforward. As out- lined above, the Mining Laws offer the bona fide seeker of opportunities in the minerals industry the reward of complete ownership of the minerals he discovers as well as the land con- taining them; in his search, he is free to go anywhere on the lands to which the laws apply without any license or other form of approval from the Federal Government, and his pros- pecting operations are subject to no governmental supervision or control; he can establish a claim with a minimum of formal- ity; and he can maintain it indefinitely at nominal cost. It is thus that the Mining Laws encourage the private enter- priser. Unfortunately, they also discourage him by adding to the risks and uncertainties inherent in prospecting and mining. The following are the principal features which tend to neu- tralize the incentives just outlined. inadequate recording of claims Under the Mining Laws, a locator of a mining claim has no obligation to record it unless the law of the State in which the location lies so requires. While all the mining States have some recording requirement, the typical provision merely calls upon the locator to file a location certificate in a county land-records office. For this purpose, identification of the tract by local land- marks is sufficient; there is no requirement that a survey be made or that the relationship of the tract to public survey lines be indicated. No plats of the territory with existing claims marked are prepared. As a practical matter, it is ordinarily ex- tremely difficult and expensive, sometimes virtually impossible, for the prospector to obtain a working knowledge in advance of the state of title of an area he might wish to explore. Hence, embarking upon a prospecting venture, he must face the possi- bility that if he is lucky enough to make a discovery it may be on land previously claimed by someone else. Sometimes an as- serted prior claim may be invalid, but in view of the difficulties of proving that there has been no prior discovery or that assess- ment requirements have not been met or that the ambiguous or inadequate recorded description does not comprehend the tract in question, litigation to vindicate the discoverer's rights may be prohibitively expensive, and he may have the hard choice of paying to settle the dispute or retiring from the field. inadequate protection against competing prospectors Even where there are no problems arising from the possible existence of prior claims, the prospector cannot escape a dis- couraging measure of uncertainty above and beyond that inherent in the vagaries of geologic occurrence. Under the Mining Laws, until he makes a discovery, the prospector is entitled to exclusive possession of any area only while he is diligently conducting exploration activities on it, and of only that part of the area to which his current exploration activities relate. The courts are not in agreement as to the precise for- mula for determining this area of temporarily protected possession, but no decision has extended it beyond the size of one full claim. (See Ball, M. W., Petroleum Withdrawals and Restorations, U. S. G. S. Bulletin 623, p. 47.) Hence, a pros- pector who sets out to explore a large area intensively may find, after a large investment in time and work has led him to what he thinks is a promising tract, that another prospector has taken possession of it and perhaps stumbled upon the discovery to which his systematic efforts had been aimed. inadequate size of claims With the exception of placer claims, for which there is a special provision that an association of persons may establish a claim for as much as 160 acres on the basis of a single dis- covery (30 U. S. C. 35, 36), tracts claimed under the Mining Laws may not exceed 900,000 square feet, slightly more than 20 acres. There is no limit to the number of lode claims a prospector may make, but the validity of each claim depends upon a separate discovery within its surface boundaries. Use of efficient extraction techniques requires, for most minerals, a larger scale of operations than can be carried out economi- cally in a 20-acre tract. Hence, the prospector who makes a discovery will often have to do a substantial amount of drilling in adjoining tracts to establish that they contain minerals, in order to stake out enough 20-acre claims to assure a working area that will permit an economic operation. While geologic inference from his discovery will ordinarily help him in his exploration of the adjoining tracts, if, as is typically the case, deep drilling is required, the expense will be high. Moreover, since the area in which he can be assured of exclusive pos- Page 6 session at any one time is extremely small, he runs the risk that competing prospectors will win the race for discovery in the surrounding tracts. EXTRALATERAL RIGHTS A valid lode claim carries with it the right to all ores in veins which have their apex within the claim, no matter how far those veins may extend beyond the claim's lateral boundaries. Espe- cially in the case of deep mining, the position of the apex of a vein being mined may be uncertain for years, and a miner who has extracted ores from a validly claimed or patented tract may find himself answerable to an adjoining or even fairly remote tract holder. (See Flagstaff Silver Mining Co. v. Tarbet (1879) 98 U. S. 463.) There are practical methods for cop- ing with the uncertainties arising from extralateral rights. A prospector may, for example, limit his efforts to searching for veins which have surface outcrops and whose apices are readily ascertainable. Or a miner may postpone extraction until he can acquire the mineral rights over a sufficiently large area to assure that the apices of the veins he wishes to work are in- cluded. Or the holders of claims and patents in a large area can enter into agreements waiving extralateral rights. All of these devices are either a restriction on exploration and develop- ment, on the one hand, or involve burdensome negotiations or high costs, on the other, or both. ASSESSING EFFECTS OF LOCATION SYSTEM It is generally conceded, in the case of minerals subject to the Mining Laws, that during the past 40 years the trend of ex- ploration and discovery has been sharply downward. While statistical confirmation of the decline and its extent is not avail- able, some verification is afforded by the data on mineral patents issued under the Mining Laws as shown in table I. After reaching a crest in 1892-3 (242 patents were issued in that year), patents continued to be issued at an annual rate ranging from 905 to 2,504 for more than 20 years. During the decade 1914-24, the annual range was from 422 to 925; in 1924-33, it was from 194 to 505; in 1934-43, it was from 29 to 170; and in 1944-51, it was from 22 to 100. Although the holder of a valid location may maintain it indefinitely with- out proceeding to obtain a patent, the number of patents issued is a rough index of the rate of discovery, since it may be assumed that ordinarily a claim will be patented if the mineral deposits it contains are of significant commercial value. It should be noted also that because there is usually a lapse of several years between staking a claim and patenting it, the figures on patents issued are related to the rate of discovery several years earlier. Since we are here concerned with the trend over a long period of time, this lag does not modify the inferences to be drawn from the figures in table I. It is possible, although this is quite conjectural, that explora- tion of known deposits continued at a high rate during the period of decline in patenting and that this period was actually one of increasing "discovery55 in the form of establishing that previously discovered deposits were of far greater dimensions than originally believed to be. At the least, however, the figures indicate that during a period when the demand for almost every kind of mineral increased enormously, the rate of new discovery, on which the Nation's minerals position ultimately depends, suffered an alarming decline. The major cause of this decline was the fact that the process of combing the surface of the public lands open for mineral location had been completed. By and large, surface outcrop- pings had been preempted, and new discovery had come to depend upon subsurface exploration. Table I.— Total number of mineral patents issued, 1872-1951 Fiscal year 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 Num- ber 362 639 365 423 443 514 542 343 876 727 1, 298 1,750 1, 661 510 675 1,489 1, 034 913 1,407 1,792 3, 242 1, 623 1, 363 1,242 1, 476 1,085 1, 259 1, 712 Fiscal year 1900.. 1901.. 1902.. 1903.. 1904.. 1905.. 1906.. 1907.. 1908.. 1909.. 1910.. 1911 . . 1912. . 1913. . 1914. . 1915. . 1916.. 1917. . 1918. . 1919. . 1920.. 1921.. 1922. . 1923. . 1924. . 1925.. 1926. . 1927. . Num- ber 1, 415 1, 388 1, 559 1, 104 2, 504 2, 461 1,239 1, 341 1,667 999 1, 608 905 1, 039 1,053 691 925 833 561 514 462 422 481 574 789 482 505 403 475 Fiscal year 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 Total Num- ber 365 359 235 222 301 194 110 102 108 29 53 152 133 118 89 170 100 58 77 22 45 98 94 87 61, 954 Source: Bureau of Land Management. SUBSURFACE PROSPECTING DISCOURAGED In these changed circumstances, the weaknesses of the Min- ing Laws are intensified. Subsurface prospecting is expensive. It cannot be conducted economically except on a large scale. And in the event of discovery below the surface, both the prior invest- ment in exploration and the technology of deep mining call for large-scale development. The Mining Laws give the prospector freedom to prospect in unappropriated areas whenever he wants to, but since his competitors have the same freedom, exclusive possession of a tract large enough for subsurface exploration on an economic scale is impossible. The Mining Laws make the first preemption of mineral lands easy and informal, but since the prospector cannot readily assure himself that someone else has not claimed a particular tract, he is discouraged from making the investment in geophysical work and drilling which sub- surface exploration requires. The Mining Laws offer outright ownership if the other obstacles are overcome, but knowledge that no more than 20 acres can be acquired for a single lode discovery dims the hope of developing an operation large enough to sustain itself and repay exploration costs. The Min- ing Laws give the discoverer extralateral rights, but since they give them to his neighbor also, anyone who mines a deep vein of uncertain dip without acquiring surrounding tracts may find Page 7 himself answerable to another for all his efforts on the claim. In the case of minerals that have only recently come into commercial use, there doubtless remain unappropriated surface outcroppings passed over by prospectors of an earlier era to whom they had no value. Moreover, some of these may tend to occur in small deposits capable of economic development on a small scale. With respect to these minerals, the Mining Laws may continue to provide powerful incentives to explora- tion and development; and with amendments to reduce uncer- tainties of title and careless disposition of nonmineral rights, may continue to promote the vigorous and orderly development of the Nation's resources. With respect to those minerals for which subsurface prospecting and large-scale extractions are required, however, the Mining Laws, even with extensive revision, offer small promise of stimulating the development the Nation needs. THE MINERAL LEASING ACTS The details of operations under the Mineral Leasing Acts vary with the different minerals within their scope. In general, the Department of the Interior grants leases on competitive bids, but in the case of lands not within the known geologic structure of a producing oil or gas field, and in the case of lands not known to be valuable for the other leasable minerals, noncompetitive leases may be obtained. A brief outline of certain other fundamental features com- mon to the leasing system as a whole—those relating to issues discussed above in connection with the Mining Laws—follows. EXCLUSIVE PROSPECTING RIGHTS Under the Mineral Leasing Acts, a prospector can acquire the exclusive right to explore a specified area for a limited period of time, and the areas designated for this purpose are large enough to permit economic use of advanced exploration techniques. In the case of oil and gas, for example, this is accomplished by granting leases of up to 2,560 acres on lands not within the known geologic structure of a producing field. (43 C. F. R. 192.40.) By paying an annual rental fee of 25 or 50 cents an acre, the lessee can have the sole right to explore the area for as much as 5 years (and under certain conditions, he may get an extension). If a discovery is made, the lease is transformed into a production lease on a royalty basis for as long as oil or gas is produced in paying quantities. (43 C. F. R. 192.81.) In the case of coal, potassium, sodium, and sulfur, 2-year exclusive prospecting permits for 2,560 acre tracts (ex- cept sulfur where the maximum acreage is 640) may be ob- tained, and in the event of a discovery, the permit holder is entitled to a production lease. (30 U. S. C. 201, 251, 261, 271.) SCALE OF OPERATIONS For most of the leasable minerals, competitive leases are granted in units of 640 acres, although as just pointed out, 2,560-acre tracts may be acquired for exclusive prospecting, and in the event of discovery, the discoverer may acquire de- velopment rights for the entire tract. There are, on the other hand, limitations on the total acreage obtainable by any indi- vidual lessee, but they leave ample room for development on an economic scale. In the case of oil and gas, for example, the limit is 15,360 acres in any one State, although an individual may hold short-term options to acquire leases, when taken for geological or geophysical exploration, on up to 100,000 acres in any one State. (43 C. F. R. 192.3, 192.4.) A further general limitation exists in the provision for forfeiture of any leases held in furtherance of a conspiracy in restraint of trade or agree- ment to control price and output. (30 U. S. C. 184.) PROTECTION OF NONMINERAL RESOURCES Leases give the lessee rights to use the surface only as needed for his minerals operations and in such a way as to minimize interference with other uses of the land. The standard form of oil and gas leases, for example, includes provisions for the pre- vention of soil erosion, damage to crops and timber, interfer- ence with forage, and pollution of water; and on conclusion of his operations, the lessee must restore the surface. (See Form 4-1158, 1st ed., sec. 2 (c).) The lessor reserves the right to issue permits and leases for other minerals, and to lease, sell, or otherwise dispose of the surface. (30 U. S. C. 186.) LESSEE'S OBLIGATIONS TO DEVELOP All leases must contain provisions to assure reasonable dili- gence, skill, and care in the operation of the property, and compliance with rules prescribed by the Secretary of Interior for the prevention of undue waste. (30 U. S. C. 187.) Typically, leases (other than those for oil and gas) specify mini- mum development and production requirements. Potash leases, for example, prescribe a required minimum amount of investment for each of the first 3 years, and a minimum royalty payable each year thereafter even if the royalty computed on the bases of production is less. (43 C. F. R. 194.17 (a) (6), Form 4-126, sees. 2 (a) and (b).) Such provisions are not applied inflexibly. When necessary in the interest of conser- vation, or when a lease cannot otherwise be successfully operated, royalty payments may be waived or reduced, and operations may be suspended. (30 U. S. C. 209.) Leases may contain provisions prohibiting excessive production on the one hand, as well as requiring a specified minimum production on the other. Oil and gas lessees, for example, may not be per- mitted to drill a well or extract more than a specified amount from a producing well if their operations do not conform with a system of well spacing or production allotments established for the area in question (30 C. F. R. 221.21 (b).) PROTECTION FOR LESSOR Oil and gas leases obligate the lessees to furnish statements of the amounts and quality of production; to submit a plot of development work and improvements; to keep and make avail- able to the lessor a daily drilling record, a log, and a record of well surveys and tests of all subsurface investigations; to keep open for inspection by the Department of the Interior the leased premises and all facilities and records. (Form 4-213, December 1949, sec. 2 (f) (g) (h); Form 4-1158, 1st ed. sec. 2 (g) (h) (i) ; Form 41097, January 1948, sec. 2 (f) (g) (h).) Similar provisions are included in the leases for other minerals under the acts. In addition, there are operating regulations for each Page 8 mineral, and a system of supervision by field offices of the Geological Survey. (See, e. g., 30 C. F. R. parts 211, 221, 231.) All leases are subject to forfeiture and cancellation by Federal court action for the lessee's failure to comply with the terms of the lease or the regulations. (30 U. S. C. 189.) In certain situations the lessor may formally order the lessee to carry out specific prospecting, development, or conservational measures, and on the lessee's failure to comply, the lessor may enter the property to perform the work and charge the costs to the lessee. See sec. 2 (j) of lease forms last cited. ASSESSING EFFECTS OF LEASING SYSTEM From the foregoing brief review of its operational details, the leasing system provided for in the Mineral Leasing Acts appears to avoid some of the major shortcomings of the Mining Laws. It permits exploration and development on an economic scale; it does not interfere with the orderly development of nonmineral resources in or near leased areas; and it does not permit appro- priation of public lands for nonmineral purposes. On the other hand, where the Mining Laws leave the development of the mineral resources to which they apply to the uncontrolled dis- cretion of private enterprisers, the leasing system retains a measure of managerial participation in development for the lessor, the Federal Government. Has this retention by the Fed- eral Government of the prerogatives of a lessor counterbal- anced the indicated advantages of the leasing system? Has pri- vate industry, fearing burdensome supervision and controls, been less willing to proceed under the Mineral Leasing Acts than under the Mining Laws? Three decades of experience with the Mineral Leasing Acts give clear answers to these questions. A potash industry has been founded and has flourished on leased lands. Despite the chronic economic ills of the coal industry, there has been a substantial amount of leasing of coal lands. There has been a steady increase in phosphate le^es, and a respectable number of sodium leases. For two of the minerals subject to the Mineral Leasing Acts, there are no leases outstanding. In the case of sulfur, this appears to be so because of lack of evidence that deposits in paying quantities exist in the Federal lands in Louisiana and New Mexico. In the case of oil shale, the feder- ally owned deposits were withdrawn from leasing by Executive Order 5327, April 15, 1930. The most persuasive evidence of the workability of the leas- ing system, however, is the success of its application to oil and gas. In the period from 1944 to 1951, when the total number of patents issued under the Mining Laws was 581 (see table I), almost 47,000 oil and gas leases were issued under the Mining Leasing Acts, as shown in table II. The high standards of con- servational practice prescribed by the lessor and the machinery of supervision have clearly not discouraged the oil and gas industry from undertaking exploration and development as lessees of the Federal Government. On the contrary they have been accepted as a matter of course, and administrative fric- tions have not been great. Forfeitures for noncompliance with the terms of leases are rare, and except in connection with certain abandonments of leases in the early thirties, there has been no occasion for the lessor to exercise its right to enter upon leased property to perform required operations upon the lessee's failure to carry them out. Table II.—Number of coal, oil and gas, phosphate, potash, and sodium leases issued under Mineral Leasing Acts, fiscal years 7927 through Fiscal year Coal leases Oil and gas leases Potash leases Phosphate leases Sodium leases 1921 7 24 58 78 55 43 25 37 39 29 34 33 35 31 28 25 31 82 27 15 23 25 25 13 190 116 60 30 35 79 52 40 53 74 95 53 23 37 50 58 122 159 402 2, 084 1 1 1922 1923 1924 1925 2 1 1 1926 1 1927 1928 1929 1930 3 1 3 3 1931 1 1932 1933 4 1 1934 1935 1 1 1936 1 2 1937 1938 1939 6 5 1 1940 1941 1, 181 434 623 1942 1 2 1 1 1943 1944 1,533 i; 950 1945 14 14 8 17 10 16 19 1946 2, 080 *2, 800 *3, 600 *9, 000 1 2 1 5 12 4 1947 3 1948 1949 1 1950 *11, 000 *15, 000 4 3 2 1951 * Estimated. Source: Bureau of Land Management. Page 9 Report 3 Incentives for Minerals Industries* Incentives provided for the mineral industries fall into two general categories: tax benefits, which usually involve a de- parture from the general rules applied under the Federal income tax law; and other financial benefits, such as grants-in- aid, unusually favorable credit terms, and various forms of price guaranties. INCENTIVES UNDER FEDERAL TAX LAW 1 The Federal income tax law contains two devices which provide an important special incentive for the mineral indus- tries.2 They are percentage depletion and the privilege of de- ducting as a current expenditure certain costs of exploration, discovery, and development which would otherwise be treated as capital outlays and recovered through the depletion charge. In addition the mineral industries participate in the incentives provided for industry generally by the privilege of accelerating the depreciation of emergency facilities, and of expensing re- search costs. The Federal income tax law of the United States does not provide a tax-exempt period for new mines of the type allowed under the income tax law of the Central Govern- ment in Canada. Percentage Depletion (1) THE NATURE OF DEPLETION The depletion deduction is a recognition of the gradual exhaustion of a depletable asset. A deduction for this purpose has been allowed under the Federal income tax law since 1913, although the formulas which could be used in computing the allowable deduction have varied from time to time. A number of these formulas are recognized under the existing law.3 The results obtainable under them vary in the speed with which the cost of the taxpayer's investment in the depletable property can be recovered and in the total amount which is deductible over the life of the property. *By Eugene E. Oakes of the National Security Resources Board. 1 The treatment under Federal income tax law of income earned abroad is discussed in vol. I. The discussion here is confined to tax incentives applicable to domestic minerals operations. 2 Temporary tax measures, such as the special treatment of the minerals industries under the excess profits tax, are not discussed in this paper. 3 U. S. Internal Revenue Code, sees. 23 (m) and 114 (b). (a) Cost depletion. The original formula used under the United States Federal income tax law 4 and which must still be used in those cases where no special provisions are available, is known as a cost depletion.5 Under it, the cost of the taxpayer's investment in the depletable property 6 is recovered tax-free by a series of deductions spread out over the life of the property. The rate of recovery is determined by the physical exhaustion of the property. Under cost depletion, the taxpayer determines the "basis" of the property, that is, the cost of the property to him, or if he w^as the owner on March 1, 1913, its fair market value on that date if it is larger than the cost. The number of units of recoverable minerals in the property is estimated and the basis of the property is divided by the number of units to obtain the depletion allowable per unit of output. This unit allowance times the number of units produced and sold in a taxable year determines the allowable depletion deduction for that year. For example: Units produced in first year 20, 000. Depletion deduction.. $10, 000. Cost of property $1, 000, 000. Number of recover- able units 2,000,000. Allowance per unit. . . 50 cents. In the second year of operations, the basis of computation will be the unrecovered cost—the original tax basis less the first year's depletion. This amount is divided by the number of the remaining units of recoverable reserves to determine the unit allowance. The unit allowance is then multiplied by the second year's production to determine the depletion deduction for that year. Thus, in the illustration used above the depletion deduction in the second year will be computed as follows: Remaining unrecovered cost $990,000. Remaining recoverable units 1,980,000. Unit allowance 50 cents. Units produced in year. 30, 000. Depletion deduction. . . $15, 000. If, as often happens, the estimated mineral content of the property changes during the year without an additional in- 4 For the legislative history of depletion allowance under the Federal income tax law, see Legislative History of Depletion Allowances, Staff of the Joint Committee on Internal Revenue Taxation, U. S. Congress, March 1950. 5 Cost depletion is treated here as synonymous with adjusted basis de- pletion. The technical distinction between the two formulae is discussed later in this paper. 6 The portion of investment attributable to depreciable assets is recovered through depreciation charges. Page 10 vestment, the number of remaining recoverable units is changed accordingly but there is no change in the basis or remaining unrecovered cost. Thus, if in the third year of operations in the case shown above, an additional 1,950,000 units are added to the estimated reserve, the third year's depletion deduction would be computed as follows: Remaining unrecovered cost $975,000. Remaining recoverable units 3, 900, 000. Unit allowance 25 cents. Units produced in year. 40, 000. Depletion deduction. . . $10, 000. When the aggregate of the depletion deductions equals the cost of the property, no further depletion can be claimed. In this respect the cost depletion formula resembles the usual depreciation allowance. (b) Percentage depletion. Under the existing law percent- age depletion, the most common alternative to cost depletion is permitted in the case of all metals and about 50 enumerated nonmetallic minerals. Under the latter formula the taxpayer deducts a flat percentage of the gross income from "the prop- erty," subject to the limitation that the deduction cannot ex- ceed 50 percent of the net income from the property. Such deductions continue throughout the life of the property even though the cost of the taxpayer's investment has already been recovered tax-free. In this respect percentage depletion differs from both the depreciation deduction and cost depletion. Existing law authorizes percentage depletion rates which range from 5 percent of gross income in the case of certain non- metallic minerals to 27I>4 percent for oil and gas.7 These per- centages are applied separately to the income from each "min- eral property." The latter is defined by the Regulations as "the mineral deposit, the development and plant necessary for its extraction, and so much of the surface of the land only as is necessary for purposes of mineral extraction." 8 Most operators will have several "properties" and will have to maintain a separate account of the gross and net income obtained from each. By this technique the income used in computing the percentage depletion deduction is restricted to income from assets actually used in extraction, and income resulting from manufacturing operations is excluded. The percentage depletion allowance is available not only to the actual producer but also to royalty owners and owners of other direct "interests" in a mineral property. On the other hand, it is not available to shareholders. In the minerals in- dustries as elsewhere, dividends paid to shareholders are tax- able as income to them unless the amount disbursed exceeds accumulated profits and earnings; if there is an excess, it is treated as a distribution of capital and not taxed as income. In computing profits and earnings for this purpose, the de- pletion deduction is limited to cost depletion, even though the corporation may have been allowed percentage depletion in computing its own taxable income. Hence, if distributions are made to shareholders from the excess of percentage over cost depletion, these are taxable as income to the recipients. Where percentage depletion is permitted, the taxpayer com- Dutes his depletion allowance under the cost depletion and per- :entage depletion formulas and claims the larger amount in lis tax return. (e) Adjusted basis depletion. Technically speaking, the choice available where percentage depletion is allowed under the existing law is not between percentage depletion and cost depletion, but between percentage depletion and adjusted basis depletion. The difference between cost and adjusted basis depletion is that under cost depletion the remaining taxable basis of the property is computed each year using the depletion allowances which would have been available under the cost-depletion formula in prior years, while under adjusted basis depletion the amount which remains to be depleted is computed with the depletion deductions actually allowed or allowable in prior years. A difference exists only because deductions are allowed under formulas which produce a more generous result than cost depletion. Thus, if percentage depletion exceeds cost de- pletion in any year of the property's life, the tax basis of the property and the depletion deduction in later years will be smaller under the adjusted basis formula than under pure cost depletion. The difference between the two systems may be illustrated as follows: FIRST YEAR Tax basis of property. .. Recoverable units Unit allowance Units produced in year. Cost depletion Adjusted basis depletion. Gross income Percentage depletion . . . Cost depletion $1, 1, 000, 000 000, 000 $1 50, 000 $50, 000 $500, 000 $75, 000 Adjusted basis depletion $1,000, 000 1,000, 000 $1 50, 000 $50, 000 $500, 000 $75,000 SECOND YEAR Tax basis of property. .. Recoverable units Unit allowance Units produced Cost depletion Adjusted basis depletion. Gross income Percentage depletion . . . $950, 000 950, 000 $1 50, 000 $50, 000 $500,000 $75, 000 $925, 000 950, 000 0) 50, 000 $48, 500 $500, 000 $75, 000 r The full schedule of rates is shown in table I. 8 Regs. Ill, sec. 29.23 (m)-l. "97 cents. In this case cost depletion and adjusted basis depletion are each $50,000 in the first year, but since percentage depletion in that year exceeded cost depletion by $25,000, the remaining tax basis used under the adjusted basis formula is smaller by a like amount than the one used under cost depletion. This reduces the unit allowance in the second year. As a result the adjusted basis depletion in that year is $48,500 as compared with $50,000 under straight cost depletion. The degree to which the deductions allowed by these two formulas differ will de- pend, of course, on the extent of the benefits conferred by percentage depletion in prior years. Under adjusted basis depletion as under cost depletion, the limit to the tax-free recovery is the cost of the actual investment in the property. When this amount has been recovered, no tax basis remains upon which an additional depletion deduction may be computed. The unavailability of further deductions under adjusted basis depletion does not bar the taxpayer from claiming percentage depletion throughout the remaining life of the property. Page 11 Under existing law the adjusted basis of the property calcu- lated in the manner described above is the basis for determining- gain or loss on sale or abandonment. Depletion computed on the adjusted basis formula must be used in computing the net operating loss for the purpose of the net operating loss carry- over and also for computing the income of the year in which the loss carried over is absorbed. (d) The circumstances which determine the use of per- centage depletion and adjusted basis depletion. Whether percentage depletion will be used instead of adjusted basis depletion depends on the relationships between net income, gross income, and the remaining depletable basis of the tax- payer's property. As the ratio of net to gross income decreases, the likelihood that adjusted basis depletion will exceed percentage depletion is increased. This is the result of the limitation of percentage depletion to 50 percent of the net income from the property. This may be illustrated as follows: Gross income 27J/> percent of gross.. Net income 50 percent of net Percentage depletion. S500, 000 137,500 80, 000 40, 000 40, 000 Adjusted basis of prop- erty St, 000, 000 Remaining recoverable units 1,000,000 Unit depletion allow- ance SI Units produced 50, 000 Adjusted basis deple- tion $50,000 Here adjusted basis depletion exceeds percentage depletion be- cause the 50 percent of net income limitation is effective and the ratio of net to gross income is relatively low. If the ratio of net to gross were higher, percentage depletion might exceed adjusted basis depletion even though the 50 per- cent of net income limitation were effective. This would occur in the following case: Adjusted basis SI, 000, 000 Remaining recoverable units 1,000,000 Unit depletion allow- ance si Units produced 50, 000 Adjusted basis deple- tion $50, 000 Gross income $500,000 21 Yz percent of gross 137, 500 Net income 200, 000 50 percent of net 100,000 Percentage depletion. . . . 100, 000 When gross income is low in relation to the adjusted basis of the property, adjusted basis depletion may exceed percentage depletion. This case may be illustrated as follows: Adjusted basis $1, 000, 000 Remaining recoverable units 1,000,000 Unit depletion allow- ance $1 Units produced 50, 000 Adjusted basis depletion.. $50, 000 Gross income $100,000 211/2 percent gross $27, 500 Here adjusted basis depletion will be used, irrespective of the 50 percent of net income limitation. Such cases occur more frequently in the early years of life of a property or immediately after a property has changed hands, since under these circumstances the unrecovered tax basis of the property is comparatively large. (e) Discovery value depletion. The existing law contains another formula called discovery value depletion, which ante- dates percentage depletion but has been almost entirely sup- planted by it. Discovery value depletion is now available only in the case of those few nonmetallic minerals which are not eligible for percentage depletion. Its use is restricted to prop- erties which continue in the ownership of the "discoverer'' and which have a discovery value substantially in excess of cost. Under this system, the total of the allowable deductions over the life of the property is limited to the value of the property at the time of discovery. While this is necessarily larger than the sum of the deductions allowable under adjusted basis deple- tion, the two systems are alike in that no further deductions may be claimed after the basis of the property has been recovered tax-free. Since discovery value depletion is now7 rarely used, it is of interest chiefly as the predecessor of percentage depletion. The substitution occurred gradually over a period of years and is now about complete. Chief among the reasons for this change are the administrative difficulties which arose under discover}7 value depletion. These included the determination whether the owner of a property was a discoverer, the identification of the property to which the discovery related, and the determination of the value of the property at the time of discovery. At the time of its adoption in 1918, discovery value depletion was justified as a special incentive for exploration and discover)7, the incentive being the right to recover tax-free the value of the property at the time of discovery rather than its cost. The 50 percent of net income restriction now used under percentage depletion was developed under the discovery value formula.9 Because of the small remaining importance of dis- covery value depletion, the discussion which follows will relate exclusively to percentage and adjusted basis depletion. (2) THE EVOLUTION OF PERCENTAGE DEPLETION SYSTEM Percentage depletion was introduced in the Revenue Act of 1926 which replaced discovery value depletion in the case of oil and gas by percentage depletion at the rate of 27 J/^ percent of gross income. The apparent objective was to provide a new method of com- puting depletion which would allow approximately the same aggregate deduction to the industry as a whole as was available under the then existing law and at the same time avoid the serious administrative problems which characterized discovery value depletion. The Committee on Finance which introduced the provision into the bill recommended a rate of 25 percent of gross. Alternative rates were suggested on the floor of the Sen- ate, ranging up to 40 percent of gross. The bill as passed by the Senate used 30 percent and this figure was cut to 27*/2 percent in conference.10 9 A 100 percent of net income limitation was provided under the Rev- enue Act of 1921. The report of the Committee on Finance which intro- duced this provision into the bill indicates that the intention was "to make certain that the depletion deduction when based upon discovery value shall not be permitted to offset or cancel profits derived by the taxpayer from a separate and distinct line of business.'' (Senate Report, No. 725, 67th Cong.. 1st sess.) The limit was cut to 50 percent in the Revenue Act of 1924. A state- ment made on the floor of the House by Chairman Green of the Commit- tee on Ways and Means indicated that the action was intended to eliminate the possibility that a corporation could distribute dividends and yet pay no corporate income tax because of the discovery value depletion privilege. (65 Cong. Record 2429, 68th Cong., 1st sess.) 10 Legislative History, pp. 8—11. Page 12 The 15 percent rate on metal mines was introduced in 1932. There is evidence that here too an attempt was made to equate the total depletion allowances of these industries under the new system with those previously available. The Congress had be- fore it a study which indicated that the ratio of depletion allow- ance to gross sales in the metal mining industry has been 14 percent in 1924 and 16.7 percent in 1925.11 There does not seem to have been any such statistical basis for the 23 percent rate on sulfur which was also introduced in 1932. In this case the industry representatives requested a rate of 27^4 percent of gross so as to provide equal treatment with oil and gas. Emphasis was placed on the similarity of the ex- ploration and production methods used in sulfur and oil and gas, as well as upon the ease with which the percentage deple- tion formula could be applied in the case of sulfur. The 27^2 percent rate was used in the House bill but a 23 percent rate was substituted by the Senate.12 The 5 percent rate on coal was introduced in 1932. In the Revenue Act of 1942 the 15 percent rate was ex- tended to fluorspar, rock asphalt, and ball and sagger clay, and in the Revenue Act of 1943, to flake graphite, vermiculite, potash, beryl, feldspar, mica, talc, lepidolite, spodumene, and barite. Apparently these actions were motivated primarily by a desire to encourage the production of minerals which were be- lieved to be scarce in terms of current emergency needs. Strong evidence of such motivation exists in the limitation of this extension of the percentage depletion system to the period of the emergency. The 15 percent rate appears to have been se- lected because it was the rate already allowed to the metals. When the 15 percent rate on nonmetallic minerals was about to expire in 1947, it was given permanent effect and extended to an additional group of minerals. These were bauxite, china clay, phosphate rock, trona, bentonite, gilsonite, and thenardite (from brines or mixtures of brines). The reasons given for this action were three: the scarcity of the materials; the fact that the mining problems involved in their production were similar to those encountered by producers of minerals already receiv- ing the 15 percent rate; and the general objective of encour- aging the discovery of new sources of supply. The Revenue Act of 1951 included a considerable extension of the percentage depletion system. The rate on coal was raised from 5 percent to 10 percent, and many minerals became eli- gible for percentage depletion for the first time. Borax, fuller's earth, tripoli, refractory and fire clay, quartzite, aplite, garnet, diatomaceous earth, and metallurgical- and chemical-grade limestones were added to the group of nonmetallic minerals receiving the 15 percent rate. A 10 percent rate was established for wollastonite, asbestos, perlite, calcium carbonates (other than marble and oyster and clam shell), and the magnesium compounds, dolomite, brucite, magnesite, and magnesium car- bonate; and a 5 percent rate was set up for sand, gravel, slate, stone (including pumice and scoria), brick and tile clay, shale, oyster shell, clam shell, granite, marble, sodium chloride, and, if from brine wells, calcium chloride, magnesium chloride, and bromine. The rates of percentage depletion allowable under existing law are shown in table I. 11 Preliminary Report on Depletion, Staff of the Joint Committee on Internal Revenue Taxation, 1929, pp. 11 and 68. 13 Legislative History, pp. 16-17. Table I.—Existing rates of percentage depletion established by section 114 (b) of the Internal Revenue Code as amended by Section 319 of the Revenue Act of 1951 27 J/2 percent Oil and gas wells 23 percent Sulfur 15 percent Metal mines China clay Aplite* Phosphate rock Bauxite Bentonite Fluorspar Rock asphalt Flake graphite Trona Vermiculite Gilsonite Beryl Thenardite Garnet* Borax* Feldspar Fuller's earth* Mica Tripoli* Talc (including pyrophfylite) Refractory and fire clay* Lepidolite Quartzite* Spodumene Diatomaceous earth* Barite Metallurgical-grade limestone* Ball clay Chemical-grade limestone* Sagger clay Potash 10 percent Coalf Perlite* Asbestos* Wollastonite* Brucite* Calcium Dolomite* Calcium carbonates 1 * Magnesite* Magnesium carbonates* 5 percent Sand* Clam shell* Gravel* Granite* Slate* Marble* Stone (including pumice and Sodium chloride* scoria) * Calcium chloride 2 * Brick and tile clay* Magnesium: Shale* Chloride 2 * Oyster shell* Bromide 2 * * Added by Revenue Act of 1951. f Raised from 5 percent by Revenue Act of 1951. 1 Other than marble, oyster and clam shell, and metallurgical- and chemical-grade limestone. 2 If from brine wells. (3) REVENUE EFFECTS OF PERCENTAGE DEPLETION SYSTEM The total depletion deductions claimed by corporations on mineral properties in 1948 were reported in the Bureau of Internal Revenue's Statistics of Income to be 1.6 billion dollars. The deductions claimed by individuals are not separately re- ported, but are estimated to be about one-fifth of those claimed by corporations. This would produce a combined total of about 1.9 billion dollars for 1948. Table II shows the depletion deductions claimed by corpora- tions in that year by industry groups. Between 75 and 80 per- cent of the total was claimed by producers of oil and gas, some- thing over 10 percent by the metals, and about 6 percent by coal. The Treasury Department has made available to this Com- mission a summary of an unpublished study based on tax returns and related reports for 1948 and 1949 13 of 260 selected 13 A similar study for 1946 and 1947 was submitted to Congressional tax committees in connection with the Revenue Act of 1950. See Hear- ings, Committee on Ways and Means, 81st Cong., 2d sess., vol. I, pp. 49-60. The data submitted in 1950 are interpreted in "Tax Incentives for Mineral Enterprise," by Dr. Douglas H. Eldrige, journal of Political Economy, June 1950, pp. 222-240. Page 13 Table II.—Distribution of total corporation mineral depletion deduc- tions by major industry groups in 1948 1 Depletion Industry group deductions Percent of (millions) total All industrial groups $1, 611 100. 0 554 34. 4 Metal mining 105 6. 5 Coal 102 6. 3 Crude oil and natural gas 324 20. 1 Nonmetallics 22 1. 4 Manufacturing 960 59. 6 Chemical and allied products 18 1. 1 Petroleum refining 871 54. 1 63 3. 9 Stone, glass and clay products 2 . 1 Other manufacturing 5 . 3 34 2. 1 Trade 16 1. 0 Finance and real estate lessors 45 2. 8 Other groups 2 . 1 1 Totals are rounded numbers. Source: Statistics of Income, 1948, Bureau of Internal Revenue. The published data have been adjusted by the deletion of those industries where the depletion appeared to be primarily related to timber. corporations. In order to account for as large a portion as possible of the total depletion claimed with a sample of work- able size, the corporations selected were the larger and more profitable ones. Hence, the results shown tend to be more favorable than for the industry as a whole. The corporations in the sample account for 80 percent of the aggregate depletion deductions claimed by corporations in 1948. Table III, drawn from the Treasury's summary compares the depletion allowable under existing law with that allow- able under the adjusted-basis formula for major groups of mineral products. The difference, which we shall call "the de- pletion differential," represents the additional tax-free return imputable to percentage depletion. With the 38 percent com- bined corporate normal and surtax rates then in effect, these corporations paid 425 million dollars less in taxes than they would have had to pay, other things being equal, if percentage depletion were unavailable to them. It is estimated that for the entire minerals industries, including individuals, partnerships, and royalty recipients as well as all corporations, the reduction in tax liability in 1948 arising from percentage depletion was at least 530 million dollars. Since 1948, tax rates have gone up, particularly the com- bined corporate normal and surtax rate, which has been raised from 38 to 52 percent, and an excess profits tax has been added. Moreover, the percentage depletion system has been extended to new minerals and the percentage of gross income allowed for coal has been increased.14 Furthermore, there has been an increase in production in most of the industries to which per- centage depletion applies, and in the case of oil and gas which accounts for the bulk of the additional depletion allowance imputable to percentage depletion, the increase has been large. 14 The Senate Committee on Finance estimated that this extension would result in an annual additional tax saving of 76 million dollars. Report of Committee on Finance to Accompany H. R. 4473, Senate Report 781, 82d Cong., 1st sess., page 38. Hence, although more recent data than those supplied by the Treasuiy are not available, it is clear that a current estimate corresponding to that made for 1948, would be substantially higher. Such an estimate would merely afford a rough approxima- tion of the savings to taxpayers attributable to percentage depletion and of its "cost" to the Government in revenues lost. It assumes that there would be the same volume of activity in the minerals industries without percentage depletion as with it; it makes no allowance for the offset to revenue losses arising from the fact that where percentage depletion results in higher dividends, the taxes paid by shareholders will be higher; and it makes no allowance for the fact that adjusted basis depletion in any year is smaller (and hence the depletion differential larger) than it would have been if there had been no percentage depletion in previous years. Data are not available on the basis of which an estimate could be connected for such factors. Views on their significance vary greatly: at one extreme, it is contended that they may be dismissed as negligible; at the other, it is contended that with- out percentage depletion, there would have been so much less investment in the minerals industries as to result in a net decline in the absolute amount of taxes received from them by the Government. Table III.—Relation between allowable and excess of allowable over adjusted basis depletion, 260 corporations, by principal mineral prod- ucts, 1948 and 1949 1 [Dollar figures in millions] Depletion differential (col. 1 minus col. 2) Depletion dif- ferential as a Adjusted percent of allowable de- pletion (col. 3 Principal mineral products Allowable depletion basis depletion divided by col. 1) A. 1948 (1) (2) (3) (4) All product classes. . . SI, 290. 5 $77. 0 $1,213.5 94.0 Metals 136. 9 21. 7 115. 2 84. 1 Iron 41. 4 3. 0 38.4 92. 7 Copper 66. 3 15. 2 51. 1 77. 0 Lead and zinc. . . 16. 1 3. 1 13. 0 80. 8 Other metals.... 13.2 . 4 12. 8 96. 7 Coal 48. 4 10. 1 38. 4 79. 2 Oil and gas 1, 075. 2 44. 2 1,031.0 95. 9 Sulfur 16. 2 (*) 16. 2 99. 9 Other nonmetallics. . . 13. 7 1. 0 12. 7 92. 4 B. 1949 All product classes. . . 1, 120. 1 60. 7 1,059.4 94. 6 Metals 106. 8 14. 5 92. 3 86. 4 Iron 39. 0 2. 0 37. 1 95. 0 Copper 46. 6 10. 0 36. 6 78. 6 Lead and zinc. . . 11. 1 2. 1 9. 1 81. 4 Other metals.... 10. 0 . 5 9. 6 95. 4 Coal 30. 0 953.4 16. 8 13. 1 7. 4 22. 7 915. 6 16. 7 12. 0 75. 5 96. 0 99. 9 91. 6 Oil and gas 37. 8 Sulfur (*) 1. 1 Other nonmetallics. . . 1 Totals are rounded numbers. *Less than SI00,000. Source: Treasury Department. Page 14 Another measure of the importance of percentage depletion to minerals producers is the ratio of the depletion differential to net income. This ratio is given for various groups of minerals in table IV. Table IV.—Depletion differential expressed as a percentage of net in- come* before taxes, 260 corporations^ 1948 and 1949 Class of product All product classes Metals Iron Copper Lead and zinc Other metals Coal. . Oil and gas Sulfur Other nonmetallics entitled to percentage depletion *Net income after (1) operating costs, (2) depreciation, (3) expensed exploration and development costs, (4) losses, and (5) adjusted basis depletion. Source: Treasury Department. (4) THE NATURE OF THE INCENTIVE PROVIDED BY PERCENTAGE DEPLETION Percentage depletion operates as an incentive primarily by holding out a big prize to the successful producers. Its use enables a taxpayer to claim larger deductions from gross income than would otherwise be available. The amount of these addi- tional deductions and their value to the taxpayer depends largely upon the amount of the gross and net income obtained from the property which is being depleted. Hence, the tax benefits tend to concentrate very heavily in the hands of the relatively successful members of the industries in which per- centage depletion is used. The increased profits after taxes which remain in the hands of such relatively successful pro- ducers increase the attractiveness of the industry to new investment. Expensing and Accelerated Amortization (1) EXPENSING, ACCELERATED AMORTIZATION AND DE- FERRED EXPENSE "Expensing" is the privilege of claiming as a deduction in a single year the full amount of an outlay which might otherwise have been written off over a period of years. This privilege may relate to outlays which would have been recoverable through depletion, such as the costs of discovery, exploration and development of mineral properties, or those recoverable through depreciation, such as the cost of research expenditures. Accelerated amortization permits the tax-free recovery of an outlay over a comparatively short period of time. In a sense the simple expensing privilege is the extreme form of ac- celerated amortization. Ordinarily, however, accelerated amortization means the concentration of recovery in the first few years of an asset's life. Under the existing Federal income tax law it is a temporary device applied only to the portion of the cost of emergency facilities which is "attributable to de- fense purposes." Only depreciable assets are eligible and the write-off period is 60 months.15 As used by the mineral industries under the Federal income tax law 16 the deferred expense is a device by which outlays which would otherwise be recoverable through depletion are set up in a separate account and written off over the life of the asset in much the same way as outlays on depreciable assets. (See p. 40, infra.) The deferred expense is not designed to speed up the tax-free recovery but merely to remove the outlay from the depletion account. (2) EFFECT OF A RAPID TAX-FREE RECOVERY ON THE TAXPAYER (a) Without percentage depletion. The effect of a quick write-off appears in its simplest form when an outlay is ex- pensed which is made on a depreciable or depletable asset that is being written off under the adjusted basis depletion formula. The effect is quite different when percentage depletion is also in the picture and the results obtained in this case will be reserved for separate discussion. Generally, the expensing of a capital outlay increases the deductions which can be used to offset income in the early years of an asset's life and reduces the deductions in later years by a corresponding amount. To illustrate, assume that two taxpayers spend $50,000 on research in a single year. Under existing administrative practices such items may be treated as current expenditures or written off as capital outlays depending on the circumstances of the individual case. The circumstances under which research expenditures may be expensed are dis- cussed later in this paper. Assume that taxpayer "A" is allowed to deduct his cost currently while taxpayer "B" is required to write his cost off in equal annual amounts over a period of 5 years. Their records of deductions will then be: Current year 2d year 3d year 4th year 5th year Total Taxpayer "A". . . Taxpayer UB" . . . $50, 000 10, 000 $50, OOD 50, 000 $10, 000 $10, 000 $10, 000 $10, 000 The total recovery is the same in each case; the time when the deductions are claimed is different. The same type of result appears under accelerated amortiza- tion. To illustrate, assume that two taxpayers buy equipment costing 1 million dollars. Taxpayer "A" writes off his invest- ment in equal annual deductions over the normal life of the equipment—10 years. Taxpayer "B" is allowed to write off the cost of similar equipment in 5 years. Again, the total of deductions is the same in each case, but the rate at which the deductions are taken is different. Hence, the advantages of accelerated amortization differ only in degree from those which accrue under the simple expensing privilege. Their record of deductions will then be as follows: 15 Internal Revenue Code. Section 124A. 16 Internal Revenue Code. Sections 23 (cc) and (ff). Page 15 Taxpayer V'A" Taxpayer 'B': Cost of asset _ Deductions: Current year 2d year 3d year! 4th year | 5th year 1 6th year 7 th year 8th year 9th year , 10th year ( Total deductions 1, 000, 000 SI, 000, 000 100,000 200,000 100, 000 200, 000 ioo, ooo; 200,000 100, 000! 200, 000 100,000 200,000 100,000 100,000 100,000 100.000 i 100,000; 1,000,000; 1,000,000 Since the program of accelerated amortization applies only to depreciable assets, the consequences of the percentage depletion system need be discussed only with reference to the portions of the tax law which permit the expensing of outlays, such as the cost of exploration, discovery, and development, which are recoverable through depletion. The effect of the expensing privilege in such cases may be illustrated as follows: Assume that two properties have a 5-year life, that the owner of each is able to take full advantage of a 27/2 percent deple- tion rate, and that the gross income from the property is in each case $200,000. The deductions allowed taxpayer "A," who capitalizes a $50,000 outlay on the property, and taxpayer "B," who expenses a similar outlay, will then be: In the absence of a change in tax rates the privilege of claim- ing a larger deduction currently will, if the taxpayer has suffi- cient income to absorb the deduction, reduce his current tax liability. This improves his working capital position and results in a saving of the interest on the funds which he would other- wise have used to pay taxes. The risk of loss due to unanticipated changes in general business conditions is reduced. In addition during periods of rising prices a quick tax-free recovery makes it possible for the taxpayer to protect himself to a greater extent against the consequences of a growing spread between the cost of replacing his assets and the original cost, which is the usual basis for the computation of net income for both tax and gen- eral business purposes. The value of the expensing privilege and of accelerated amortization varies with the taxpayer's expectations concern- ing the future course of tax rates. The privileges are most highly prized when current tax rates are regarded as unusually high and are expected to decline. Under these circumstances expens- ing and acceleration have the effect of moving deductions from years in which the resulting tax benefits are comparatively low to years in which they are comparatively high. For this reason the potentialities of expensing and accelerated amortization as incentive devices are maximized during a period of national emergency when unusual, and presumably temporary, taxes are being imposed. The tax advantages which such devices provide are neces- sarily less when tax rates are expected to remain at current levels but are still substantial. When, however, tax rates are expected to rise, such privileges may have little or no net incen- tive effect since the advantages of a reduced current tax liability, an improved working capital position and the reduction of business risks, may be more than offset by the fact that the taxpayer's deductions are being moved from years when tax rates are expected to be comparatively high to years in which the rates are believed to be comparatively low. The value of additional current deductions is, of course, dependent upon the existence of sufficient net income against which they may be offset. However, the importance of this fac- tor is reduced by the privilege of carrying over net operating losses.17 (b) With percentage depletion. As had been indicated, the results of a quick tax-free recovery of capital outlays are some- times affected by the existence and use of percentage depletion. 17 Sec. 122 of the Internal Revenue Code allows such losses to be carried back 1 year and forward for 5 years. Deductions Current year 2d year 3d year 4th year 5th year Total Taxpayer C*A". . Taxpayer "B". . $55, 000 105, 000 $55, 000 55, 000 $55, 000 55, 000 $55, 000 55, 000 $55, 000 55, 000 $275,000 325, 000 In this case the additional advantage from expensing is equal to the full tax on the $50,000 outlay recovered in the first year, since there is no difference between the allowable depletion charges of the two taxpayers in the later years of the asset's life. The advantages enjoyed by a taxpayer on percentage depletion are not limited as they are when the taxpayer is on adjusted basis depletion to mere changes in the timing of his deductions. For the taxpayer on percentage depletion, expensing means an absolute increase in the amounts of permitted deductions. In short, expensing permits a taxpayer on percentage deple- tion to take a deduction not otherwise available to him; a tax- payer on adjusted basis depletion, on the other hand, is merely permitted to take a deduction in one bite which he could other- wise take in annual installments. Hence, the force of expensing as an incentive is much greater for taxpayers able to avail them- selves of percentage depletion than for taxpayers who are limited to adjusted basis depletion. (3) EFFECT OF THE DEFERRED EXPENSE While simple expensing and accelerated amortization are of at least potential value to all taxpayers in the mineral indus- tries, the deferred expense technique is of interest primarily, if not exclusively, to taxpayers using percentage depletion. The division of outlays on a depletable asset into two separate ac- counts, one of which is written off through depletion and the other under the deferred expense formula, is of minor im- portance to a taxpayer using adjusted basis depletion since the additional deductions on account of the deferred expense are offset by a reduced depletion charge, the basis for depletion being smaller by the amount of the outlays allocated to the deferred expense account. When, however, the taxpayer uses percentage depletion, the deductions on account of the deferred expense are not matched by a reduced depletion charge since the latter is not related to the tax basis of the property. Under the deferred expense technique such a taxpayer receives a de- duction not otherwise available to him just as he does under simple expensing. Page 16 (4) EXPENSING OF EXPLORATION AND DEVELOPMENT (a) Oil and gas. The expensing of costs which might otherwise have been treated as capital outlays occurs in the case of oil and gas under the regulations dealing with intangible drilling and development costs,18 and through the deduction of the costs of geological and geophysical exploration.19 The intangible drilling and development costs which may be deducted as current expenses at the election of the taxpayer include all amounts paid for labor, fuel, repairs, hauling or supplies used in clearing ground, draining, roadmaking, survey- ing, geological work, construction of derricks, tanks, pipelines, and other structures necessary for the drilling of wells and the ^preparation of wells for the production of oil and gas, as well as all amounts used in the drilling, shooting, and cleaning of wells. The cost of assets which have a salvage value, such as the drilling apparatus itself, is not included. It is estimated that the intangible drilling and development costs account for about 75 percent of the costs incurred in bringing in a well. The election to deduct such costs currently is made sepa- rately for successful wells and dry holes. Each election applies to all the taxpayer's properties and is irrevocable when made, although in the past taxpayers have been given an opportunity to reconsider their elections. The last such opportunity was offered in 1942. The deduction based on expenditures for intangible drilling and development costs may be offset against income from all sources. It is not restricted to income derived from the proper- ties on which the expenditures were made or to income from the oil and gas properties of the taxpayer taken as a group. The costs of geological and geophysical exploration programs and related exploratory activity may be deducted only when the activity does not result in the acquisition or retention of poten- tially productive properties. Otherwise such costs must be capitalized. (b) Mining. The rules governing the tax treatment of outlays on depletable assets in the mining industries are sub- stantially different from those which apply to oil and gas. However, the difference in treatment has been reduced ma- terially by the Revenue Act of 1951. Prior to that legislation outlays made before the property reached the "production" stage received different treatment than those made during the production stage itself. A prop- erty reaches the production stage when "the major portion of the mineral production is obtained from workings other than those opened for the purpose of development, or when the principal activity of the mine becomes the production of de- veloped ore rather than the development of additional ores for mining." 20 In the preproduction stage the excess of outlays for the development of the property, such as the cost of shafts, tunnels, galleries, etc., over the current net income from the property had to be capitalized. With such exceptions as strip coal mines, where there may be a substantial amount of income during the development stage, this rule resulted in the capitali- zation of the bulk of outlays for development, with reliance lsRegs. Ill, sec. 29.23 (m)-16. 19 IT 4006, CB 1950 (I) p. 48. 20 Regulations 111, Sec. 29.23 (m) (15) (a). upon the depletion allowance to recover them. When the prop- erty reached the production stage, additional development costs were deductible currently unless they were extraordinary in scope, in which case they were given deferred expense treatment. The rule governing the deductability of the cost of general exploratory activity was the same as in oil and gas. Such costs were deductible only when the activity did not result in the acquisition or retention of a potentially productive property. Under the Revenue Act of 1951,21 the pre-production costs of a mine are divided into development costs and exploration costs with separate rules governing each.22 Development costs, whether made when the mine is in the development or the production stage, may at the taxpayer's election be deducted currently or treated as a deferred expense and written off ratably over the life of the property as the ore or mineral is sold. This election is made each year for each of the taxpayer's mines. The rule governing exploration costs also permits the tax- payer to elect to deduct such costs currently or to treat them as a deferred expense recoverable over the period during which the resulting ores or minerals are sold. This election is also made annually with respect to each individual mine. However, the amount which the taxpayer may expense is limited to $75,000 in each of four taxable years. This permits each tax- payer to expense a total of $300,000 of such costs. All outlays in excess of this amount are capitalized and recovered through the depletion allowance. Within the $75,000 and $300,000 limitations, costs of geo- logical and geophysical exploration may be expensed in the same manner as other exploration costs. Costs of geological and geophysical exploration not so expensed are governed by the same rule as is applicable to geological and geophysical exploration in the case of oil and gas. In the case of both development and exploration costs the expensing privilege is not available if the outlay is for a de- preciable asset. This is analagous to the restriction of the expensing privilege in the case of oil and wells to the "in- tangible" drilling and development costs. The limitation on the amount of the exploration cost which may be expensed is obviously designed to tailor the incentive to fit the needs of comparatively small taxpayers. One result of this restriction may be the separate incorporation of each of a group of mining properties since each such corporation would then be a taxpayer. Much more fundamental is the fact that exploration expenditures are given considerably less gen- erous treatment than development costs, which is difficult to reconcile with the comparative importance of these two types of expenditures for the long-run supply problem. If the limit on the amount of exploration costs which may be expensed were removed, the scope of permissible expensing in the mining industries would be somewhat broader than in oil and gas. Expensing of geological and geophysical explora- tion costs which result in the acquisition or retention of 21 P. L. 138, 82d Cong., 1st sess., sees. 309 and 342. 22 Exploration costs were defined as expenditures "for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral," which are "paid or incurred prior to the beginning of the development stage of the mine or deposit." Page 17 potentially productive properties and expensing of tangible de- velopment costs—neither of which is available to the oil and gas industry—would be available without limit to the mining industry. (5) ACCELERATED AMORTIZATION OF DEPRECIABLE ASSETS While the depreciation practices of the mineral industries are unusual in some respects, they do not result, generally speaking, in a more rapid tax-free recovery than the practices followed in other industries. (a) Ordinary facilities. Except in those cases where the investment is eligible for special treatment as an emergency facility, depreciation in the mineral industries is governed by the general authorization of a "reasonable allowance" for exhaustion, wear and tear and obsolescence which appears in the Internal Revenue Code23 and the administrative rules set out in the Bureau of Internal Revenue publication known as Bulletin F. These rules provide a good deal of latitude for the selection of the particular formula which is to be used by the taxpayer in determining the portion of the cost of a depreciable asset which is to be deducted in a particular year. Taxpayers in most industries ordinarily use what is known as straight-line depreciation which divides the total deductible amount equally among the years of the assets' estimated life. In the mineral industries, the general practice appears to be to relate the de- preciation deduction to "the current exhaustion of the mineral" on the property to which the depreciable asset is committed. This is a variant of what is known as the unit of production method of depreciation and produces a deduction computed in much the same way as adjusted basis depletion. The portion of the cost of the asset written off in a particular year is deter- mined by dividing the mineral production from the property in that year by the estimated total mineral content of the property. When the depreciable asset is of the type which would not ordinarily be moved to another property if the one on which it is used currently were exhausted prior to the time the depreci- able asset is worn out, virtually the entire cost of the asset will be written off in this way. Where, however, the asset is movable and is expected to outlast the mineral property on which it is being used currently, as in the case of movable equipment used on a short-term oil lease, the asset has a substantial "salvage value" and the procedure used is somewhat more complex. While the unit of production formula is still available, the total amount written off during the period the asset is used on a given property is reduced by the value which will remain when the mineral content of the property is economically exhausted. The reduced amount is written off according to the rate of physical exhaustion of the property. When the asset is moved to another property, a new salvage value is determined and the remaining unrecovered cost is written off according to the rate of physical exhaustion of the second property. The result is a reasonable allocation of the depreciation deductions between the income from the two properties, which is important for, among other reasons, the purposes of determining the allowable depletion charge on each.24 23 Sec. 23 (1). 24 Williams, D. H., "Engineering Aspects of Depreciation," Second An- nual Institute on Oil and Gas Law and Taxation. New York, Southwestern Legal Foundation, 1951, pp. 415-423. This version of the unit of production depreciation formula has the effect of matching up deductions and income in a more satisfactory manner than would be the case under the straight- line formula. It does not necessarily result in a more rapid tax-free recovery of the investment except in those cases where the asset is irrevocably committed to a mineral property that will be exhausted before the depreciable asset is physically worn out.25 (b) Emergency facilities. Under section 124A of the In- ternal Revenue Code taxpayers may write off over a period of 60 months a portion of their investment in depre- ciable assets which are certified "as necessary in the interest of national defense during the emergency period" by the Defense Production Administration. In this case the straight-line method' must be used. The privilege is restricted to that portion of the cost of the emergency facility which is certified by the Defense Production Administration as "attributable to defense pur- poses." Taxpayers in the mineral industries are eligible for this privilege and have in fact made substantial use of it. The Defense Production Administration reports that in the period through February 25, 1952, a total of 223 certificates of necessity were approved for mining projects. The proposed investment aggregated about $760,000,000 or about 5 percent of the total for all the projects approved through that date.26 TAX TREATMENT OF RESEARCH EXPENDITURES Since there is no specific reference to research and experi- mentation costs in the existing Federal income tax law, the deductibility of such costs is governed by the general provision authorizing the deduction of "the ordinary and necessary ex- penses paid or incurred during the taxable year in carrying on any trade of business." 27 The law itself does not determine whether, if research expenditures qualify as "ordinary and nec- essary" costs of doing business, they are to be deducted cur- rently or capitalized and recovered through depreciation. The trend of judicial opinion is that such costs are to be capitalized. This is also the tenor of the Treasury Regulations. In practice, however, the Bureau of Internal Revenue generally permits research costs to be treated as a current expense when the taxpayer consistently treats them in this manner. This is par- ticularly apt to occur if the taxpayer is engaged in a continuing research program. SOME NONTAX INCENTIVES A considerable variety of financial incentives other than tax deductions has been used or proposed to achieve particular objectives or correct specific problems in the mineral industries. K The diminishing balance method of depreciation under which the annual charge is a percentage of the unrecovered balance of the cost of the investment is also available in the mineral industries, as it is to industry generally. However, the percentages which the Bureau of Internal Rev- enue will allow to be used under this formula are comparatively small which makes the formula generally unattractive. With high percentages such as those allowed under the income tax law in Canada the diminishing balance method is an effective method of accelerating depreciation since a substantial portion of the cost of the asset is recovered tax free during the first few years of the asset's life. 20 Defense Programs: Federal Aids for Facilities Expansion, Mar. 31, 1952. 27 Sec. 23 (a) of the Internal Revenue Code. Page 18 The discussion which follows includes a description and anal- ysis of the prize or bonus for the successful discovery of new mineral properties, various forms of loans and credit guaranties, price guaranties, and the premium price plan. The use of buffer stocks as a price stabilization device is discussed in volume I of this Report. The Bonus for Successful Recovery The most straightforward of the available stimuli to explora- tion and discovery is the prize or bonus for bringing in a new property. This device has been used abroad to stimulate the search for minerals and by certain American states to stimulate exploration for oil. It is used currently by the Atomic Energy Commission. The first A. E. C. bonus was offered in 1948 28 for the an- nounced purpose of stimulating "prospecting for, discovery of, and production from new high-grade domestic uranium deposits." The bonus payment was $10,000 and was to be made after the delivery of the first 20 short tons of uranium ores or mechanical concentrates extracted from a source which had not previously been worked for uranium. The bonus payment was in addition to the regular price paid by the A. E. C. as the sole purchaser of uranium in this country. There have been no applicants for the bonus, the test used to determine qualifying ore having been set far above the grade actually obtained in the United States.29 A second bonus plan was announced in June 1951.30 In this case the bonus took the form of the payment of twice the regu- lar price on the first 10,000 pounds of contained uranium oxide delivered from an eligible mining property. The maximum bonus payable is $35,000. The qualifying grade of ore is very much lower than that specified in the original offer.31 Eligibility is determined by the A. E. C. Specific rules are set out in the regulations which are intended to prevent the payment of the bonus on deliveries made prior to the effective date of the program, and to forestall the subdivision of properties in order to increase the aggregate amount of the bonus payable. Through the end of November 1951 a number of applica- tions had been received under this program, about half of the properties to which they relate had been certified as eligible, and some disbursements had been authorized. Neither of the A. E. C.'s offers is a pure example of a prize for exploration and discovery since in both cases payment is conditioned upon production. Moreover, the bonus is payable Dn properties which were known but not proved up, as well as those upon which production had begun or was about to begin when the bonus plan was announced. It will be some time, :herefore, before this bonus is actually confined to exploration and discovery. 25 U. S. Atomic Energy Commission, Domestic Uranium Program. Circu- lar No. 2, Apr. 9, 1948. 20 To qualify the ore had to assay 20 percent U3Oa by weight. Carnotite md roscoelite type ores of the Colorado Plateau were specifically excluded rom the plan. 30 U. S. Atomic Energy Commission, Domestic Uranium Program. Circu- ar No. 6, June 27, 1951. 31The minimum grade ore on which the bonus is payable assays 0.10 percent of U308 as compared with 20 percent under the original offer. The lew bonus also extends to the ores of the Colorado Plateau. The bonus or prize has the advantage of avoiding a deter- mination by a Government official of the operators best fitted to receive Government funds, or the projects on which they are to work. These responsibilities are left to the operators themselves and those who provide the "grubstake." Since the bonus is paid only in the event of a successful ven- ture, the cost to the Government should be much smaller than that of a comparable program of grants or loans. Whatever its merits as an element in the atomic energy pro- gram, it is difficult to envisage the use of the bonus as a prin- cipal tool for the stimulation of exploration and discovery of new reserves of scarce materials generally. In a great many cases the prize or bonus will be an ineffective instrument be- cause it makes no contribution to the prospector's chief problem, the financing of his venture up to the time it has proven to be a success. Domestic Loan Programs (1) GRUBSTAKE LOANS The current Grubstake Loan Program of the Defense Min- erals Exploration Administration (formerly the Defense Minerals Administration) operates under section 303 of the Defense Production Act,32 which authorizes the President to provide for the encouragement of "exploration, development, and mining of critical materials and metals." The program is based upon an "exploration project contract" which commits the borrower to begin work on a specific project for a particular mineral or minerals within a stated period of time, and to bring the project to completion within a period specified in the contract, which is not to exceed 2 years. The Government undertakes to make a contribution toward the "allowable costs" of the project in the form of a loan repayable without interest from the net proceeds of the sale of ore, concentrates, or metal obtained from the property within a period of 10 years following the date of the contract. At the end of 10 years the obligation to repay terminates whether or not the full amount of the loan has been repaid. The "allowable costs" toward which the Government will make a contribution are limited to the direct costs, such as the cost of materials, supplies, labor, direct supervision, engineer- ing, power, water, and utilities, the cost of rehabilitation and maintenance of existing facilities, and depreciation of new facilities installed for the purposes of the project. Indirect costs, such as general overhead, are not allowable, nor is de- preciation on the existing improvements or facilities which the explorer will use in the project. The operator may count his own salary as a part of his contribution to the costs. The proportion of the allowable costs which will be covered by the loan varies according to the mineral with which the project is concerned. The regulations33 indicate that the Government's contribution is: a) 50 percent of allowable costs in the case of chromium, copper, fluorspar, crucible flake graphite, iron ore, lead, molybdenum, sulfur, catalytic-grade halloysite, bauxite, zinc, and cadmium. 32 Public Law 774, 81st Cong., 2d sess., amending Public Law 89, 81st Cong., 1st sess. D. M. E. A. Order—1, March 7, 1952. Page 19 b) 75 percent for antimony, manganese, mercury, tungsten, rutile, and brookite. c) 90 percent for chrysotile and amorite, asbestos, beryl, cobalt, columbium-tantalum, corundum, cryolite, indus- trial diamonds, strategic kyanite, strategic mica, monazite, uranium, rare earth ores, nickel, platinum group metals, piezoelectric quartz crystals, block steatite talc, and tin. The regulations indicate that an application for a loan will be approved when, in the opinion of the Defense Minerals Ad- ministration, (1) there is a geologic probability of a significant discovery of a strategic mineral; (2) manpower, equipment, supplies, water, and power, are available; (3) the project is accessible, and (4) the experience and background of the appli- cant are satisfactory. The Government's interest under the loan is protected by a number of devices. One of these is a monthly progress report which is the basis for the advances made by the Government under the contract. This report includes, in addition to the record of allowable expenditures, a fairly complex cost break- down which is a potential tool for analysis of the effectiveness of the operator's work. The contracts also authorize the Government to inspect the work at "all reasonable times" and to terminate the contract in the event the operator fails to provide his share of the money necessary to carry on the project or work the project, or when in the opinion of the Government the operations no longer indicate that there is a probability of a worthwhile discovery. The Government is given a specific interest in facilities, equipment, etc., purchased in part out of Government funds, provided these items have any salvage value. In the event a contract is terminated such facilities are to be disposed of for the joint account of the Government and the operator. How- ever, the Government may waive its interest. Finally, the operator is required to make a "comprehensive geologic and engineering report, including an estimate of ore reserves," at the conclusion of the project or the termination of the contract. The repayment of the loan is initiated by a finding on the part of the Government, made upon the completion or termina- tion of the project, that discovery or development has resulted from which commercial production of ore is possible. When such a finding occurs, the Government certifies this fact to the operator within 6 months. Thereafter, as ore is produced from the property, repayment is required in the from of a percentage royalty on the net smelter returns or other net proceeds. If the net proceeds are not in excess of $8 per ton of ore, this royalty is 11/2 percent. If the proceeds are in excess of such amount, an additional l/i percent is added for each 50 cents in excess of $8 per ton up to a maximum rate of 5 percent. Table V shows the number of loans and the total amount of the Government's contribution approved between April 11, 1951, the date on which the program was announced, and the end of October, classified according to the mineral which is the object of the undertaking. During this period, 194 projects were approved, calling for a Government contribution of $6,245,344, or roughly 60 percent of the anticipated total expenditures. Through the first quarter of 1952, the number of approved projects increased to 246.34 31 Strength for the Long Run. Quarterly Report to the President, No. 5. Washington, D. C, Government Printing Office, Apr. 1, 1952, p. 19. There has been a heavy concentration of both the number of projects and the total amount of the Government's commit- ment in copper, lead, and zinc. Other minerals which account for a substantial share of the total are tungsten, mercury, and asbestos. There has been a considerable range in the size of the Gov- ernment's commitment on the individual contracts. In one con- tract dealing writh lead and zinc, the Government's commitment was only $300. In another involving a mica project, the Gov- ernment's contribution was limited to $450. In over 25 cases the amount involved was less than $5,000. The largest contract was with the Calumet and Hecla Consolidated Copper Co. and called for a Government contribution of $274,097. As of October 31, 1951, the average size of the Government's commitment on all the contracts combined was about $32,000, indicating that by and large the program has concentrated upon small, marginal projects! Table \ —Grubstake loans affirmed by the Defense Minerals Admin- istration through Oct. 31, 1951, by principal mineral product Class of product Number of loans Government contri- bution Total amount Average size A. 90 percent group: Asbestos Mica, strategic Uranium Beryl-mica Tin Nickel, cobalt Cobalt Monazite Tantalum Steatite talc Subtotal B. 70 percent mixed group: Lead, copper, cobalt, nickel C. 75 percent group: Antimony Manganese Mercury Tungsten Subtotal D. 50 percent group: Lead, zinc and copper Copper Sulfur Fluorspar Subtotal Grand Total 6 21 6 10 1 2 1 1 1 1 50 1 6 5 5 24 40 S357, 812 64, 084 145, 489 101, 578 54, 000 108, 000 6, 768 12, 647 90, 000 29, 267 969, 645 274, 078 140, 000 147, 452 312, 803 709, 844 1, 310, 009 88 3, 004, 677 34, 144 11 544, 828 49', 530 3 138, 120 46, 040 1 3, 897 3, 897 103 3, 691, 522 35, 840 194 6, 245, 344 32, 192 $59, 635 3, 052 24, 248 10, 158 54, 000 54, 000 6, 768 12, 647 90, 000 29, 267 19, 393 274, 078 23, 333 29, 490 62, 561 29, 577 32, 750 Source: D. M. A., Production Expansion Division. The regulations dealing with the current program define an "exploration" project so as to include the search for "unde- veloped" as well as "unknown" sources of supply, and the press release accompanying the regulations states that the "geologic probability of making a significant discovery" will be one of the major tests applied in determining the acceptability of a proposed contract. Heavy emphasis on such evidence would destroy the usefulness of the program as a stimulus to explora- Page 20 tion and discovery and would limit its impact primarily to the development of known deposits. From the point of view of a short-run emergency program, such emphasis on development is acceptable, but this is not the case if a primary object of policy is enlargement of mineral reserves through discovery of new deposits. If the program is to be concentrated on projects which in- volve true exploration and discovery, primary emphasis must be placed upon the personal capacities of the prospective con- tractor. The test of eligibility applied to the property itself may have to be reduced from a probability to a mere possibility of success. This will convert the contract into a sort of character loan and place a very severe responsibility upon the adminis- trative authorities who will be called upon to justify decisions which will appear to be highly arbitrary. However, any attempt to reduce this degree of responsibility by insisting upon tangible evidence of the probable existence of the minerals which are being sought has a definite tendency to divert the program from exploration to development activity. (2) THE RECONSTRUCTION FINANCE CORPORATION LOAN PROGRAMS Section 302 of the Defense Production Act authorizes "loans" (including participation in, or guaranties of, loans) to private business enterprises . . . for the expansion of capacity, the development of technological processes, or the production of essential materials, including the exploration, development, and mining of strategic and critical materials and minerals. Such loans may be made without regard to the limitations of existing law and on such terms and conditions as the President deems necessary, except that financial assistance may be ex- tended only to the extent that it is not otherwise available on reasonable terms." Under Executive Order 10281, dated August 28, 1951, the administration of direct loans for domestic purposes under this authority was placed primarily in the Reconstruction Finance Corporation, which had previously been acting as a fiscal agent for the Defense Production Administration. Table VI.—Loan authorizations by the Reconstruction Finance Cor- poration to the mining industries, fiscal year 1951 [By principal mineral product] Defense loans Other loans Total Mineral Num- ber Num- ber Num- ber Amount Amount Amount Iron ore 1 1 $90, 000 425, 000 1 1 $90, 000 425, 000 Milling of lead, zinc and silver 1 1 1 1 35, 000 75, 000 97, 000 90, 000 1 4 1 1 1 35, 000 215, 000 97, 000 90, 000 35, 000 Bituminous coal 3 $140,000 Fluorspar Graphite Mica 1 1 35, 000 Total 6 812, 000 4 175, 000 10 987, 000 Note: This table does not include loans for limestone and sand and gravel. Source: Reconstruction Finance Corporation, Office of the Controller. Table VI summarizes the R. F. C. loans made in the fiscal year 1951 both under the defense loan program and the R. F. C.'s regular powers. The emphasis in both the R. F. C.'s current programs is on the construction of facilities and the de- velopment of known properties rather than exploration. The loans shown in the table are limited in number and compara- tively small in size. In November 1951, however, a loan of 57 million dollars for the development of a copper mine in northern Michigan was announced. Table VII summarizes the loans made to the mineral indus- tries by the R. F. C. between the date of its establishment and June 30, 1950. The loans are divided into two categories, na- tional defense loans made during the Second World War under emergency powers and "Other Authorizations" which were made under the ordinary powers of this agency. Most of the "Other Authorizations" were made prior to the Second World War or between the close of that war and the beginning of hostilities in Korea. The national defense loans of the Second World War aggre- gated nearly $21,700,000. Of this amount, over 16 million dollars was accounted for by loans for copper, lead, zinc, and iron. The average size of the national defense loans was compara- tively small except in the case of those for iron mining. This reflects the importance of the so-called development loans which were made in amounts up to $30,000 for the purpose of developing properties that had been explored sufficiently to permit some preliminary appraisal of the probable success of the venture. About 700 of the 945 national defense loans made by the R. F. C. were development loans of this type and the aggregate amount authorized for this purpose was in the neighborhood of 5 million dollars. The development loans were evidenced by notes which bore interest at the rate of 4 percent and came due over a term of 3 to 5 years. They did not constitute a general obligation of the borrower but were secured by the proceeds of production on the property and the assets purchased with the loan. While the re- sulting claim on the property was limited in nature, in most cases where the venture was a failure and the owner subse- quently wished to sell the property, he made a nominal pay- ment to the R. F. C. to clear the title. The 10-year limitation on the borrower's liability under the current grubstake loan program of the Defense Materials Exploration Administration is intended to eliminate the need for such closing agreements. In cases where the potential recipient of a development loan had a property that was not fully explored, or on which he could not guarantee access to the ore, special preliminary loans were sometimes made up to a maximum of $5,000. These also bore interest at 4 percent, but were not evidenced by a note and hence had no fixed term. The security of the Government was the same as under the development loan proper, i. e., recov- ery from the proceeds of production on the property and from the sale of assets purchased with the proceeds of the loan. When the recipient of such a preliminary loan was later given a de- velopment loan, the latter was reduced by the amount of the preliminary loan. While the development and the preliminary loans resemble the current grubstake loans in some respects, the R. F. C. loans were not intended to finance any substantial amount of ex- ploratory activity. Page 21 Table VII.—Cumulative summary of loan authorizations by the Reconstruction Finance Corporation to the mining industries, Feb. 2, 1932, through June 30, 7950, by principal mineral product National Defense authorizations Other Authorizations Mineral No. Amount Average size No. Amount Average size Total authorizations No. Amount Average size Iron ore Copper ore Lead and zinc Gold and silver Bauxite Mercury Manganese Chromium, molybdenum and vanadium Tungsten Miscellaneous: Metallic ores and metal services Anthracite coal Bituminous coal and lignite 16 166 460 mining contract 5 47 55 34 109 17 2 34 Total. 945 $8, 605, 550 3, 563, 950 4, 574, 339 $537, 847 21, 470 9, 944 113,750 433, 500 428, 550 1, 345, 550 1, 138, 900 224, 100 125, 000 1, 104, 901 22, 750 9, 223 7, 792 39, 575 10, 449 13, 182 62, 500 32, 497 5 6 23 178 1 2 1 7 24 245 21, 658, 090 22, 919 494 $277, 500 10, 775, 000 634, 750 14, 200, 800 50, 000 15, 000 225, 000 $55, 500 , 795,833 27, 598 79, 780 50, 000 7, 500 225, 000 57,750 931,050 12, 347, 984 18, 351,292 28, 875 133, 007 514, 499 74, 903 21 172 483 178 6 49 56 34 111 24 26 279 57, 866, 126 117, 138 1, 439 $8, 883, 050 14, 338, 950 5, 209, 089 14, 200, 800 163,750 448, 500 653, 550 1, 345, 550 1, 196, 650 1, 155, 150 12, 472, 984 19, 456, 193 $423, 002 83, 366 10, 785 79, 780 27, 292 9, 153 11, 671 39, 575 10, 781 48, 131 479, 730 69, 735 79, 524, 216 55, 264 Note: This table does not include a considerable number of loans for non-metallic minerals. Source: Reconstruction Finance Corporation, Office of the Controller. The loans made under the R. F. C.'s ordinary powers, which are designated as "other authorizations" in table VII, are smaller in number but considerably larger in average size than the national defense loans of the Second World War. Of a total of nearly 58 million, over 30 million dollars was for coal mining, 14 million for gold and silver, and nearly 10 million for copper. The loans for anthracite and for gold and silver were concen- trated largely in the period prior to the Second World War. The total for copper is dominated by a single loan made early in 1950 to finance construction and facilities. The loans for bituminous coal were distributed about equally between the period before the Second World War and that between the close of the war and the outbreak of the Korean hostilities. (3) LOAN GUARANTIES Section 301 (a) of the Defense Production Act of 1950 au- thorizes certain Government agencies to guarantee against loss of principal or interest of loans, discounts, advances, etc., for the purpose of financing operations "deemed by the guarantee- ing agency to be necessary to expedite production and deliv- eries or services under Government contracts for the procure- ment of materials or the performance of services for the national defense." The Federal Reserve Banks are the fiscal agents under this program. There are a number of guaranteeing agencies, the one which acts in this capacity for the mineral industries being the Defense Materials Procurement Agency. The guaranties apply primarily to loans for working capital. At the end of April 1952, a total of five guaranties, aggregating less than 6 million dollars, had been made in the mineral industries. The Federal Reserve Bank operated a similar program dur- ing the Second World War. Loan guaranties were made in 8,961 cases, of which only 31 were in the mining industries and 11 for petroleum and petroleum products. Out of a total guaranty of $10,797,800,000, loans to the mining industries accounted for $3,700,000 and to producers of petroleum and petroleum products $15,300,000. (4) APPRAISAL The small participation of the mineral industries in the pro- gram of loan guaranties for working capital indicates that there is no great need for this type of financial assistance. In this field, it does not appear to be an important incentive device. The facilities and development loans which the R. F. C. has made to larger producers are more significant, but the incen- tive provided is essentially for an expansion of production on known properties. The small loan to marginal operators exemplified by the R. F. C.'s development loans in the Second World War and the current grubstake loan program of the D. M. A. are the most promising of these credit incentives. Although they may have been made largely to help finance the development of known properties, they provide a mechanism which can also be used to stimulate exploration and discovery. Loan Programs Assist Procurement Abroad Until August 28, 1951, the stimulation of mineral procure- ment overseas by the extension of credit was carried out very largely by the Export-Import Bank and the Economic Coopera- tion Administration. Under Executive Order 10281 of that date, establishing the Defense Materials Procurement Agency, the work of the E. C. A. was transferred to the new agency, and the potential scope of Export-Import Bank loans was extended. (1) EXPORT-IMPORT BANK LOANS Prior to August 28, 1951, Export-Import Bank loans were made exclusively out of its own funds. Executive Order 10281 made it possible for the bank, upon receipt of certificates of essentiality, to make loans also out of funds made available to it by the Defense Production Administration. For minerals pro- duction, the Defense Minerals Procurement Agency is the certifying agency. While a number of loans have been made to finance so-called mineral development projects out of the bank's own funds, Page 22 most of these loans have been for the purpose of expanding production on known properties. In a few instances real de- velopment work was involved. However, the speculative char- acter of exploratory activity would be a serious obstacle to qualifying a prospective loan under the bank's ordinary pro- cedures. Greater latitude and more emphasis on security con- siderations may be possible when the loans are made with Defense Production Administration funds. Whenever possible, the bank's loans are accompanied by a contract under which the General Service Administration agrees to buy at least a portion of the minerals produced on the property. Repayment of the loan may take the form of a deduction from the purchase price of each unit delivered under the contract. The same technique of repayment is used in cases where the minerals are to be delivered directly to industrial users in the United States. (2) DEFENSE MATERIALS PROCUREMENT AGENCY ADVANCES A more aggressive use of credit as an instrument for increas- ing the supply of minerals is the advance against production under a long-term development contract. This technique is used in a program initially administered by the Economic Co- operation Administration, and transferred to the Defense Ma- terials Procurement Agency by Executive Order 10281. The basis for the program is a so-called exploration and development contract, a contract of 3 to 20 year's duration, committing the United States Government to purchase a stated amount of a specific mineral or minerals. The sponsor of the project, usually a private corporation but sometimes a foreign government, is committed to deliver a certain percent- age of output. In connection with most of these contracts the United States Government makes an advance against produc- tion, which is released piecemeal to the contractor rather than in a lump sum. This advance is the fundamental incentive used under the program. When the program was administered by the E. C. A., the advance was made primarily out of counterpart funds, 5 per- cent of which were made available for the procurement of strategic materials by the legislation establishing the agency. However, the E. C. A. also made advances of dollar funds when these were needed for the purchase of equipment and supplies in the United States. It has been reported that through December 31, 1951, the E. G. A. committed a total of 109.2 million dollars for development projects, of which 83.9 million dollars represented the equivalent dollar value of counterpart commitments, and 25.3 million dollars represented commit- ments from the E. C. A. dollar funds.35 Some uncommitted counterpart funds are available to D. M. P. A. but the bulk of the advances made by this agency are to come from funds allocated to it by the D. P. A. Under the E. C. A. repayments were in kind, and so far as possible this continues to be the rule under D. M. P. A. De- liveries in the United States are required in the amount of the advance plus interest. Up to June 12, 1951, the rate charged 35 Munitions Board. "Stockpile Report to the Congress," Jan. 23, 1952, p. 5. was 4 percent on advances to non-governmental agencies and 23/2 percent on advances to governments. After June 12 the rates were increased to 5 percent and 4 percent, respectively. The period of repayment ordinarily concides with that of the contract. Typically, current market price is the basis for valua- tion of deliveries. It is customary to insist upon a substantial contribution of capital by the contractor, usually 25 percent to 40 percent of the cost of this project. No mortgage or other lien is imposed on the property, but restrictions are placed upon the contrac- tor's dividend distributions, his borrowing from others, and his freedom to make changes in the ownership of the enterprise. The program includes advances on projects for the develop- ment of bauxite production in Jamaica; manganese in Greece; lead and zinc in Germany, Greece, and French Morocco; cop- per in Northern Rhodesia; asbestos in Southern Rhodesia; chrome in Turkey and New Caledonia; industrial diamonds in French Equatorial Africa; and tin in the Belgian Congo. The advance against production has in the past proved to be an effective instrument for obtaining additional production and development of mineral resources abroad. It has also been used to finance some exploration activity, but the amount which can be used for such purposes is ordinarily limited. Price Stabilization Devices Price stabilization in the form of a guaranty against sub- stantial price declines can also make a contribution to explora- tion, discovery, and development in the mining industries. The risk of a price decline is an important determinant of in- vestment decisions, particularly when the amount of the com- mitment is large and the period over which the investment is to be recovered is comparatively long. The reduction of the price risk would be a substantial stimulus to investment in the mining industries. Two devices of this type are now being operated under section 303 of the Defense Production Act. (1) SIMPLE PRICE GUARANTIES In the case of three metals—chrome, manganese, and tung- sten—the Government has made a standing offer to purchase ore or concentrates delivered to particular depots at a stated price. The offer, restricted to domestic producers, runs for 5 years from July 1, 1951, or until a specified amount has been delivered. Purchases at the stated price are restricted to those holding certificates of participation, but such certificates were issued freely to anyone signifying an intention to participate in the program before an announced date. Provision is made for the establishment of maximum fees charged by concentration plants in order to make sure that the incentive provided by the Government's program actually reaches down to the producers of the minerals. (2) DEVELOPMENT CONTRACTS The development contract is usually negotiated with com- paratively large companies in cases where substantial additional output can be obtained from particular properties by making a sizeable outlay. Typically these contracts are used where a considerable quantity of marginal production is possible if ap- 206060—52 3 Page 23 propriate facilities are constructed. The characteristic provision of domestic development contracts is an undertaking by the Government to purchase at a guarantied price which will pro- tect the operator from loss on his investment in the facilities which are necessary to fulfill his production commitment. Prior to the establishment of the D. M. P. A., the negotiation of the domestic development contract involved the D. M. A., the D. P. A., and the G. S. A. The work of negotiation is now concentrated in D. M. P. A. While a number of these contracts have been let or are in the process of negotiation, the great variety of underlying circum- stance has prevented emergence of a standardized set of con- tract terms or a standardized pricing formula. Generally, the contract commits the producer to the construction of certain facilities and their use for the production of a stated amount of additional output. The Government is given the option to purchase this output and guarantees to accept so much of it as the contractor has not disposed of elsewhere at a price which is stated in the contract. The pricing formulas used in these contracts vary widely. In the contract with the Aluminum Co. of America, the price at which the Government is required to take aluminum is the lowest of the published prices in effect at the time of delivery of the Aluminum Co. of America, the Reynolds Metal Co., and the Kaiser Aluminum and Chemical Corp. In other con- tracts, price formulas are used which consist of a stated dollar and cents price plus escalation based on changes in the direct costs of production in the industry. To be effective, the price guaranty must be sufficiently gen- erous to offset the peculiar hazard involved in such investment. This means that the price may be well in excess of either the domestic or world market price. It does not necessarily mean that the price must guarantee the recovery of the investment in the facilities over the life of the contract, with or without a profit. Presumably an effort is made to adjust the price for the probable value of the facilities to the contractor at the close of the contract, as is done in connection with the tax amortiza- tion of emergency facilities. Generally, development contracts, like the guaranteed price, are primarily an incentive for additional production from known properties. Their effect on exploration and discovery is secondary and incidental. The Premium Price Plan The premium price plan is a method of differential pricing which was used to provide a stimulus to production during and immediately after the Second World War. The essential feature of the plan is the payment of a comparatively high price for high-cost marginal output. During the greater portion of the life of wartime plans, the ordinary price was a controlled ceiling price. The premium price plan allowed this ceiling price to remain unchanged while a price in excess of the ceiling was paid for a portion of the output. (1) THE PLAN AS APPLIED TO COPPER, LEAD, AND ZING The application of the premium price plan to copper, lead, and zinc was introduced and administered during the greater part of its life by the Office of Price Administration, the War Production Board, and the Metals Reserve Corp. The plan was in operation from January 1942 through 1947.36 The mechanism used was based upon a distinction between what was called the quota output and the output in excess of this quota. The quota output had to be sold at the ceiling price; the excess was either purchased by the Metals Reserve Corp. at a higher price and resold at the ceiling, or the pre- mium was separately paid to the producer. For larger mines, the quota was initially established on the basis of the maximum output that might reasonably have been expected in 1941, with the existing facilities and labor, if the mine were operating at full capacity. Small mines received preferential treatment, their initial quotas being set at less than their actual 1941 production. The administrative authorities were empowered to adjust the quotas and in fact did so to a substantial degree. In general, quotas were decreased as costs went up during the war, and premiums were paid on progressively larger amounts of total production. Since the payment of premiums became less and less related to 1941 production and more and more related to current costs, the plan took on the aspect of a method of achieving an appropriate return on investment. After July 1, 1946, the prices of copper, lead, and zinc, along with most other commodities, were no longer subject to control. During the next year the prices of these metals rose above the old ceilings and two important changes were made in the operation of the plan. The first of these was merely an adjustment for the dis- appearance of the ceiling prices upon which premium calcu- lations had previously been based. Beginning July 15, 1946, the excess of the going market price over the old ceiling price was substracted from the premium payment. This had the effect of "freezing" the total price, i. e., the market price plus the premium receivable under the plan. In a period of rising prices, the premium paid per pound of premium metal would decline. If the price rise was sufficiently large, the plan would become inactive. The second change made in 1946 involved the introduction of a new principle. Previously the plan had been designed solely to encourage production. However, under Public Law 548, Seventy-ninth Congress, provision was made for adjust- ments in premiums for the purpose of encouraging exploration and development work. This authority was translated into (1) an exploration premium of 1 cent per pound of metal produced, up to a maximum of $1,000 per month, which was paid to operators of small mines who agreed to spend the money for exploration within 2 months after its receipt; and (2) a specific project premium for exploration activity in larger mines. Several important conditions were attached to these payments: (1) The new premiums were to be paid only on copper, lead, and zinc ores obtained from producing mines; (2) they were to be allowed only on projects from which there 30 For the history of this plan see: Olund, H. E. and Gustavson, S. A. "The Premium Price Plan—Its Costs and Its Results," Engineering and Mining Journal, December 1948, pp. 72-78; Olund and Gustavson, His- tory of Premium Price Plan for Copper, Lead, and Zinc, 1942-47. Bureau of Mines Information Circular 7536, January 1950; and Premium Price Plan for Copper, Lead, and Zinc, Report of the Subcommittee of Minins and Minerals Industry to the Special Committee to Study and Survey Problems of American Small Business, U. S. Senate, 79th Cong., 2d sess. Senate Subcommittee Print No. 8. Page 24 was a "reasonable expectation" of production by December 31, 1947; (3) they were available only for domestic exploration; and (4) the exploration was in general limited to properties which were "a part of, or contiguous to" properties already receiving premium payments.37 The last of these restrictions is particularly significant since it indicates that the purpose of the additional payments was to finance the further development of properties from which production was already being ob- tained rather than the search for new sources of supply. Total disbursements for the premium price plan for copper, lead, and zinc were about 353 million dollars over the 5/2- year duration of the plan. Of this amount 345 million dollars was for production premiums, 6 million dollars for exploration premiums, and about 2 million dollars for administrative ex- penses. About 31 percent of the total payments were made for copper, 19 percent for lead, and 50 percent for zinc. Premiums were paid on about 20 percent of the copper produced domes- tically during the life of the plan, 40 percent of the lead, and 70 percent of the zinc. Premiums for copper, lead, and zinc ended on June 30, 1947, as the result of a Presidential veto of a bill that would have continued the plan for another 2-year period and extended it to manganese. In justification of the veto it was argued that (1) with the high prices then current, the plan would not produce a substantial increase in production; (2) the cost of the plan was excessive; and (3) that it had adverse "conservation ef- fects," i. e., it tended to encourage premature production espe- cially from dumps and tailings. (2) PLAN AS APPLIED TO "STRIPPER" OIL WELLS A simpler version of the premium price plan was introduced in August 1944 in an effort to stimulate the production of oil from so-called stripper wells.3S In the previous October, a pro- posal for a general increase of 35 cents per barrel in the ceiling price of crude oil had been rejected on the ground that it would interfere with the stabilization program, and the Office of Economic Stabilization had instructed the O. P. A. to de- velop a program for stimulating the production of crude oil without a general rise in the ceiling price. It was believed at the time that in view of existing shortages of labor and critical ma- terials, the most likely source of additional domestic production was from high-cost marginal wells. The premium price plan recommended by O. P. A., which went into effect in August 1944 was designed to keep such stripper wells in operation, to encourage the reopening and cleaning out of oil wells, and to stimulate the application of secondary recovery methods. At the time the plan was initiated the payment of a premium in excess of the ceiling price depended on whether the average production during the month of December 1943 in the pool 87 Office of Economic Stabilization, Directive 137, par. (1) (a) (ii) and (iii). 38 R. M. P. R. 436 (O. P. A.) Amendment No. 2, July 10, 1944, and Amendment No. 4, Aug. 1, 1944. from which the crude oil was obtained was less than nine bar- rels per well per day. If the average was less than five barrels, the premium on all the oil obtained from the pool was 35 cents per barrel. When the average was five barrels or more, but less than seven barrels, the premium was 25 cents. If the average was seven or more, but less than nine, the premium was 20 cents per barrel. A special premium of 75 cents applied to the pools producing Pennsylvania grade oil. Provision was made for the subsequent extension of the premium payments to additional pools when it could be demonstrated that the average produc- tion per well in the pool was less than nine barrels per day during the year preceding the date on which an application for such certification was made. It was estimated at the time the plan went into operation that premiums would be payable on the production of about 278,000 wells out of an estimated total of approximately 293,000 so-called stripper wells. The premium price was paid by the first purchaser of the crude oil, usually the refineries. The purchaser was then re- imbursed for his additional outlay by an R. F. C. subsidiary, the Defense Supplies Corp. One result of this arrangement was to reduce very much the number of individuals with whom the Government had to deal in administering the program. There were in all only 349 claimants for reimbursement as com- pared with 35,000 producers who qualified for a premium price. Another result was to delegate a large portion of the record making which the plan required to the refineries which purchased the premium oil. The premiums paid were a substantial percentage of the existing ceiling prices. The 75 cents premium on Pennsylvania grade crude compares with a ceiling price of $3 per barrel. The maximum premium of 35 cents per barrel payable in other pools compares with ceiling prices which ranged from about $ 1.15 to $ 1.50 per barrel. It follows that the plan provided a substantial stimulus to production in the pools where premium prices were available. The amount of the premium which an operator could obtain wrould, of course, expand with his production and could be greatly increased by the application of secondary recovery techniques without endangering his status as a claimant for the premium price. It is believed that the plan had an appre- ciable effect on the volume of production obtained from mar- ginal sources of supply. The plan continued in operation after ceiling prices were removed on July 1, 1946, under an arrangement by which the premiums were reduced as the market price rose above the previous ceiling price. This mechanism automatically elimi- nated the premium when a price was reached equal to the previous ceiling plus the allowable premium. This had occurred by December 1, 1946, in all cases except the Pennsylvania grade pools. Premium payments for the latter terminated in early 1947. Over the life of the plan the premium payments totaled $121,779,000 on 369,282,000 barrels of crude oil. The latter is in the neighborhood of 10 percent of the average domestic production during the period when the plan was in operation. Page 25 Report 4 Taxation of Canadian Minerals Industries While the provisions of the income tax law of the Central Government of Canada (Income Tax Act, 11-12 Geo. VI chapter 52 (1948) as amended) affecting the mineral indus- tries are, in general outline, similar to those of the Federal income tax law of the United States,1 there are several important differences. Both percentage depletion and the privilege of deducting, as a current expense, outlays for exploration, discovery, and development, which are the principal tax incentives provided for these industries under the United States law, are used in the Canadian law, but the rules governing their application are different. The Canadian law also contains two special incentive devices which have no counterpart in the United States law: a 3-year exemption for "new" mines and a tax credit for expenditures incurred in the unsuccessful drilling of certain deep test wells for oil and gas. The rules governing depreciation, research expenditures, and capital gains are also very different from those under the United States law. PROVISIONS FOR THE MINERAL INDUSTRIES PERCENTAGE DEPLETION ALLOWANCES Under the Canadian law and regulations 2 percentage de- pletion is a prescribed fraction of the net profits attributable to the production of the mineral. Under the United States law the deducion is determined primarily on the basis of the gross income from the mineral property, although it is limited to 50 percent of the net income from that property.3 The calcula- tion of the deduction on the basis of net rather than gross income tends to accentuate the concentration of the benefits of per- centange depletion among the investors in relatively profitable properties. The depletion rate allowed under the Canadian regulations *This memorandum by Eugene E. Oakes, of the National Security Re- sources Board, is based principally upon the Commerce Clearing House Canadian Tax Service; a publication of the Canadian Department of Mines and Technical Surveys, Summary Review of Dominion Tax and Other Legislation Affecting Mining Enterprises in Canada (June 1950); a memorandum prepared by Mr. Joseph Lerner of the Bureau of Mines, Canadian Taxation of Natural Resources Income; correspondence with Ottawa; and an interview with Mr. George Bateman, Consulting Engineer, formerly Metal Controller, Canadian Department of Ammunitions and Supply. 1 Subsequent references of the "Canadian law" are to the income tax law of the Central Government of Canada. References to the "United States Law" are to the Federal Internal Revenue Code. is 33/3 percent of net income in the case of operating interests in oil and gas wells, metal mines (other than gold), and certain nonbedded minerals. A reduced rate of 25 percent is allowed on nonoperating interests in oil and gas wells. Gold receives preferential treatment. When 70 percent or more of the value of the output of the mine is gold, the deple- tion deduction is 40 percent of the net income from the prop- erty or $4 per ounce of the gold produced, whichever is the larger.4 When percentage depletion is available, it is the sole method which the taxpayer may use in computing his deduction. The Canadian law, unlike the United States law, does not permit the taxpayer to use the adjusted basis formula when the deduc- tion so computed would be larger than under the percentage formula. The Canadian law does not allow percentage depletion on coal. In this case the depletion allowance is a flat 10 cents per ton. The eligibility of the other nonmetallic minerals for percent- age depletion depends upon whether they can qualify as "non- bedded" deposits. "Bedded" deposits receive cost depletion, while nonbedded deposits receive percentage depletion at the 33/3 percent rate. No similar rule has been used in selecting the nonmetallics eligible for percentage depletion under the United States law. The distinction between bedded and nonbedded deposits is based upon the origin of the deposit rather than its present form. The following have been determined to be nonbedded deposits: asbestos, feldspar, fluorspar, mica, soapstone, pyrites, and nepheline syenite. Bedded deposits include sand, gypsum, clay, gravel, building stone, and peat. Limestone may be either bedded or nonbedded. Since no native sulfur deposits have been found in Canada, the question whether they would be regarded as bedded or nonbedded for the purpose of the de- pletion allowance has not yet arisen. If raised, the issue would be settled by the chief geologist of the Department of Mines and Technical Surveys. Table I compares the depletion provisions of the Canadian law with the percentage depletion rates allowed under the United States law. 2 Sec. 11 (1) (b) of the law authorizes a depletion deduction. The specific formula and the rates are prescribed by regulation. 3 For a discussion of the mechanics of percentage, cost, and adjusted basis depletion, see report 3, Incentives for Minerals Industries. * The special treatment of gold is part of a program designed to compen- sate the gold mining industry for its inability to adjust the sales price of its product for changes in costs and to provide relief for the communities whose economic life is heavily dependent on the fortunes of this industry. Page 26 Table I.—Comparison between the depletion allowed under the income tax laws of the Central Government of Canada and the Federal Government of the United States Mineral Canadian law (percentages shown relate to net income) Oil and gas: i (a) Operating interests I 33^ percent. (b) Nonoperating interests Gold Other metals Sulfur Coal . . Other nonmetallic minerals: (a) Bedded deposits (b) Nonbedded deposits. . 25 percent. 40 percent of net income from the sale of metals or $4 per ounce of gold produced. 33^/3 percent Undetermined 10 cents per ton percent. U. S. law (percentages shown relate to gross income*) 27}{ percent. 21percent. 15 percent. 15 percent. 23 percent. 10 percent. |f5, 10, or 15 percent for the minerals listed in N law. the *But not more than 50 percent of net. DEDUCTIONS FROM DIVIDENDS ALLOWED In addition to the depletion deduction allowed to the re- cipient of income from a direct investment in a producing mineral property, the Canadian law permits a deduction to be claimed under certain conditions against dividends received by shareholders resident in Canada from a corporation carry- ing on business in Canada.5 This deduction is a percentage of the dividend received which varies with the proportion of the income of the paying corporation derived from mineral production in the taxable year immediately preceding the one in which the dividend was declared. The schedule of percentages used in computing this de- duction follows: a) If income from mineral production exceeds 25 percent, but is less than 50 percent of the total income of the corporation, 10 percent of the dividend received may be deducted by the shareholder. b) If income from mineral production is more than 50 per- cent, but less than 75 percent of the income of the corpo- ration, the shareholder's depletion deduction is 15 percent of the dividend received. c) If income from mineral production is more than 75 per- cent of the income of the corporation, the shareholder's depletion deduction is 20 percent of the dividend. When the corporation does not do business in Canada, but 50 percent or more of its income is from mineral production, a shareholder resident in Canada may deduct 15 percent of the dividend as a depletion allowance. The United States law allows no such deduction to the share- holder, although it does make the percentage depletion deduction available to a taxpayer holding a royalty or other nonoperating interest in a specific property or properties. NET TAXABLE INCOMES COMPARED The amount of taxable income resulting from operations on a particular mineral property will be materially different under the depletion provisions of the United States and Canadian laws. This is due to the difference in the scope of percentage depletion and in the percentages used, to the fact that in one case the rates are applied to gross and in the other to net in- 5 This deduction is authorized by sec. 11 (2). The deductible amounts are set by regulation. come, to the absence under the Canadian law of the privilege of using a deduction computed from the adjusted basis of the property when it is larger than the deduction available under the percentage formula, and to the allowance under the Canadian law of a special deduction to the recipient of a dividend from a corporation engaged in mineral production. If the deduction allowed to the dividend recipient is left out of account, the following conclusions can be drawn: a) The rate of 27percent of gross income allowed on oil and gas in the United States results in a larger deduction and hence a smaller taxable net income than the rate of 33 J/3 percent of net income allowed in Canada so long as the operator's net income is less than 82.5 percent of his gross. This means that the cases in which the deduction is larger under the Canadian formula are extremely rare. The 27 ^4 percent of gross is also larger than the 25 percent of net allowed under the Canadian law to nonoperating interests in oil and gas properties, since in these cases net and gross income are approximately equal. b) The 15 percent of gross allowed to metal mines in the United States produces a larger deduction than the 33^3 percent of net allowed under the Canadian law so long as net income is less than 45 percent of gross. The size of this percentage indicates that the allowance in the United States is somewhat more generous for the metal mining industries. c) In view of current prices, the 10 percent of gross allowed on coal in the United States is much larger in those cases where the full benefits of percentage depletion can be claimed than the 10 cents per ton allowed under the Ca- nadian law. With coal selling at $4 to $5 a ton at the mine, 10 percent of gross would provide a deduction of 40 to« 50 cents a ton. In many cases, the adjusted basis depletion deduction available as an alternative under the United States law would be larger than a deduction of 10 cents per ton. d) Where the nonmetallic minerals receive 15 percent of gross under the United States law and 33/3 percent of net under the Canadian law, the results are the same as those obtained in the case of metal mines. In these cases the United States formula should produce a larger total de- duction for the industry as a whole. This will also occur when 5 percent or 10 percent of gross is allowed under the Page 27 United States law and only cost depletion is available under the Canadian law. Where the deduction is based on cost depletion under both laws, the deduction in the United States should be larger because the cost of the mineral rights themselves does not enter into the tax basis of the property under the Canadian law. The foregoing conclusions apply when the mineral property is operated by a partnership, an individual enterpriser, a corpo- ration which is not distributing dividends, or a corporation which obtains less than 25 percent of its income from mineral production. When the operation is conducted by a corporation which receives 25 percent or more of its income from mineral production and makes a dividend distribution, the special de- duction permitted the dividend recipient under the Canadian law must also be taken into account. In such cases the comparative size of the depletion deduc- tions allowed to a particular industry under the United States and Canadian laws will depend upon the ratio of net to gross income in the industry, the division of the industry's earnings between dividends and retained earnings and the corporate tax rate, as well as the rates of depletion allowed to the corpora- tion and the dividend recipient. STATISTICAL STUDY OF DEPLETION DEDUCTIONS A study submitted to the Commission by the United States Bureau of Mines attempts to determine statistically the relative size of the combined depletion deductions available to corpora- tions and dividend recipients under the Canadian law and the deductions allowed the corporation under the United States law. This is done for the oil and gas and the metal mining industries. For purposes of comparison the deduction permit- ted to the dividend recipient under the Canadian law is trans- lated into an equivalent deduction at the corporate level which is added to the deduction which may be claimed by the corpo- ration itself. The sum is then compared with the deduction allowable to the corporation under the United States law.6 The Bureau of Mines study assumes a corporate tax rate of 33% percent, which is the rate applied by Canada just prior to the current emergency to corporate income in excess of $10,000. With this rate, it is estimated that the deduction allowed the dividend recipient under the Canadian law is approximately equal to an additional 16 percent of net income at the corporate level, provided dividends are paid out equal to the entire net income of the corporation after taxes plus the amount of its depletion allowance. This is the limiting case. The percentage would, of course, decline as the proportion of the corporation's income paid out as dividends is reduced. DEDUCTIONS IN OIL AND GAS INDUSTRIES For the oil and gas industries in Canada, data taken from the Canadian Statistics of Income for the years 1944 through 1948 indicate that about 40 percent of net income after taxes, but before depletion, was distributed as dividends. With this 6 This comparison is at best a crude one since it is based on the implicit assumption that a deduction at the corporate level and a deduction at the individual level are of equivalent value. This is the same thing as assum- ing that the rate of tax imposed on corporations equals the rate imposed on individuals. percentage the deduction allowed the dividend recipient is the equivalent of a deduction of about 6.4 percent of net income before taxes and depletion at the corporate level as compared with a deduction of 16 percent if the full amount of the net income plus the depletion allowance had been distributed. The combined deduction at the corporate level is then about 40 percent of net income before depletion and taxes; that is 33% percent deducted at the corporate level plus 6.4 percent which is the value at the corporate level of the deduction allowed the dividend recipient. Forty percent of net income before deple- tion and taxes is less than 27*/> percent of gross so long as the net income before depletion and taxes is less than 68 percent of gross. The size of this percentage indicates that the single deduction at the corporate level allowed under the United States formula is more valuable to the oil and gas industries than the combined deductions allowed under the Canadian law. The use of a higher corporate tax rate such as the 52 percent rate now applied both in Canada 7 and in the United States would tend to increase the relative generosity of the United States depletion formula. DEDUCTIONS IN METAL INDUSTRIES In the case of the metal mining industries (other than gold mining), the Bureau of Mines estimated that in the years 1944 through 1948 dividends paid out were equal to roughly 80 per- cent of net income after taxes, but before depletion. This means that the deduction allowed the dividend recipient under the Canadian law is the equivalent of an extra deduction of 12.8 percent at the corporate level. When added to the 33/3 percent allowed to the corporation itself, this produces a combined de- pletion deduction of about 46 percent of net income. Such a deduction is larger than that available under the 15 percerit of gross allowable under the United States law so long as the net income before taxes and depletion is more than 33/3 percent of gross income. The United States Treasury Department has submitted to this Commission data on the incomes and deductions of a group of 260 comparatively large corporations for 1948 and 1949. On the basis of this data, it is estimated that for those years, net income before taxes and depletion in the metal mining industry in the United States was about 39 percent of gross in- come. Since this is larger than the 33/3 percent ratio at which the depletion deductions under the Canadian and United States laws would be approximately equal, the implication is that the deductions available to the metal mining industries in Canada are somewhat larger than they would be under the United States formula. However, the Treasury sample is heavily weighted by large successful corporations and relates to two comparatively good years. This builds up the dividend dis- bursements and increases the value of the deduction allowed the dividend recipient under the Canadian law. Moreover, the Bu- reau of Mines computation is based on the assumption of a comparatively low corporate income tax rate (33/ percent) which also tends to build up the dividend disbursement and thus enhance the value of the deduction allowed to the share- 7 The Canadian rate on corporate net income in excess of $10,000 was recently raised from 45.6 to 50 percent. See Budget Message of April 8, 1952. An additional tax of 2 percent is levied for old-age security payments. Page 28 holder. For these reasons it is difficult to conclude that over an extended period of time the depletion deductions permitted the metal mining industries under the Canadian law will be very much different from those allowable under the United States law. DEDUCTION OF EXPLORATION, DISCOVERY, DEVELOPMENT COSTS Under Canadian legislation which expires in 1955 (Chapter 25, Statutes of 1949 (as amended) sec. 53, (l)-(3)) drilling and exploration costs, including general geological and geo- physical costs, may be deducted currently by certain classes of taxpayers. The privilege is restricted to corporations whose principal business is the production, refining, or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas and to associations, part- nerships, or syndicates formed for the purpose of exploring or drilling for oil or natural gas. The privilege is not available to individual taxpayers. The deduction applies both to the cost of exploratory drill- ing and drilling on proven territory. If the amount expended in a given year is in excess of the income for that year the balance is carried forward and de- ducted from the income of future years until the total deduc- tions equal the amount of the expenditure. In some respects this deduction resembles the expensing of intangible drilling and development costs in the oil and gas industries under the United States law and regulations.8 How- ever, the Canadian deduction is broader in its scope, since it includes the costs of geological and geophysical exploration, and is not limited to "intangible" costs. Moreover, the carry- forward of the amounts which are not absorbed by current income is accomplished without the use of the net operating loss carryover and, hence, is not affected by any restrictions imposed on the latter. On the other hand, the deduction allowed under the Cana- dian law is not available to individuals as is the privilege of expensing intangible drilling and development costs. The Canadian deduction cannot, therefore, be used directly by individuals who wish to establish deductions which may be offset against income from other sources by making outlays on exploratory or developmental activity in the oil and gas industries. CREDITS FOR DEEP TEST WELLS The Canadian law also includes a tax credit equal to 30 percent of expenditures, other than general geological and geo- physical expenditures, incurred in the drilling of certain deep test wells or the testing of a significant stratigraphic trap by a group of test wells. (Chapter 25, Statutes of 1949 (as amended), sec. 53 (5).) This tax credit is available only when a specific project approved by Order in Council on the recommendation of the Minister of Mines and Technical Sur- veys has proven unsuccessful. The costs which are the basis for this credit may also be deducted from income. 8 Far a description of this deduction see report 3, Incentives for Minerals Industries. The 30 percent credit was introduced in 1950 and, unless the existing legislation is extended, will expire in 1953. Up to March 31, 1951 the credit had been allowed on 40 occasions. PREPRODUCTION COSTS The regulations issued under the Canadian law permit the operators of coal, base metal, or precious metal mines, and in- dustrial mineral mines with nonbedded deposits to write off their so-called preproduction costs after the mine "comes into production." The operator himself determines the rate at which the write-off occurs, subject to the limitation that the deduction in any one year may not exceed 25 percent of the total prepro- duction cost of the mine. The cost of the property itself or of option payments on the property are not eligible for this treatment. In addition, legislation which expires in 1955 (chapter 25, Statutes of 1949 (as amended), Sec. 53 (4)) permits corpora- tions whose chief business is that of mining or exploring for minerals to deduct currently all expenditures made in "searching" for minerals in Canada, provided the corporation is able to satisfy the administrative authorities that it has been actively engaged in exploratory work and that this work has been done by qualified persons. The effect is to authorize de- ductions in cases where the privilege of writing off preproduc- tion expenses is of no value because the mining property is not brought into actual production. This deduction, in combination with the deduction of pre- production expenses, provides a more liberal treatment of true exploration costs than is available under the United States law. The latter limits the privilege of treating as a current or deferred expense the costs of exploring for and proving up a mine to $75,000 in each of 4 years, a total deduction of $300,000 per taxpayer. The excess not so deductible is, of course, capitalized and may be recovered through depletion. The preproduction expense provision of the Canadian law appears to apply also to development costs incurred up to the time the mine goes into commercial production. Under the United States law the taxpayer may deduct all development costs currently or write them off ratably over the life of the property. This treatment is more generous than that available under the Canadian law because the latter does not permit the expensing of development costs incurred after the property goes into commercial production. NEW MINES EXEMPT FROM TAXATION Another portion of the Canadian law (Income Tax Act, Sec. 74 (1)) which expires in 1955 authorizes the exemption from income tax for a period of 36 months of income derived from the operation of a metalliferous or industrial mineral mine of the nonbedded variety that "comes into production of ore in reasonable commercial quantities." During the period of the exemption, the taxpayer is not required to charge depreciation on his investment. The practice appears to be to treat a mine as "coming into production" 6 months after the date when milling operations start at the mine or when the company commences shipment of the ore, thus extending the exemption period to 3 3/2 years. Page 29 To obtain the benefit of this provision, certification by the Minister of Mines and Technical Surveys was required through August 1951. Certificates had been issued in 74 cases. This exemption is of unusual interest because it provides a type of incentive which is not now used under the United States law and which is reported to act as a powerful incentive to exploration and discovery in Canada. ADMINISTRATIVE PROBLEMS While the intent of the legislation appears to have been to encourage the development of new mines, the exemption is not specifically limited to such cases. For some years the administra- tive authorities granted the exemption on the reopening of a mine which had not been operated during the previous 10 years. Apparently this practice is no longer generally followed and the conditions under which a reopened mine may qualify are somewhat uncertain. Administrative difficulties have also arisen (1) when there has been an extension of a mining operation to new ore bodies on the same property; (2) when new properties are acquired adjacent to a previously existing property which itself had been given an exemption; and (3) when there has been a drastic change in mining methods, such as the initiation of below ground operations in what had previously been an open pit mine. The identification of a "mine5' and the determination of "coming into production" also cause some trouble. These administrative difficulties resemble in some respects those experienced under discovery value depletion in the United States.9 The problem of identifying a "new" mine is similar to that of identifying a discovery; the difficulty of defining the limits of a new mine is similar to that of establishing the extent of a discovery. However, the exemption does not require the valuation of the property which was the most serious of the ad- ministrative difficulties encountered under the discovery value depletion system. The administrative problems which arise under this exemp- tion in Canada were minimized by a policy of giving the ex- emption a very liberal interpretation so as to maximize its incentive effect. This adjustment was facilitated by the general flexibility of the Canadian tax administration. The interpreta- tion and administration of such an exemption would be far more difficult in the United States because of the comparatively rigid methods used in administering the Federal income tax law and the relatively formal working relations which exist be- tween the taxpayer and the administrative authorities. GENERAL PROVISIONS OF UNUSUAL INTEREST The depreciation deductions allowed under the Canadian income tax law and regulations just prior to the current emer- gency were substantially more generous than those allowed under the then existing Federal law in the United States. This was due to a more general recognition and a more liberal application of the so-called declining balance depreciation formula which permits a flat percentage of the remaining un- recovered cost of the investment to be written off each year. If the percentage used is substantial, this formula will produce 9 For a description of discovery value depletion see report 3, Incentives for Minerals Industries. a heavy concentration of the tax-free recovery in the first few years of the asset's life, thus approximating the effects of accelerated amortization. The percentage of the unrecovered balance which may be written off yearly under the Canadian regulations varies with the type of asset. Gas- or oil-well equipment normally used above ground, mining machinery and equipment, and build- ings acquired in connection with the operation of a mine can all be depreciated at a 30-percent rate which means that about two-thirds of the outlay can be written off in a 3-year period. Under the law and regulations normally applied by the Federal Government in the United States, the general practice is to spread the depreciation of such assets over the life of the mineral property to which they are committed in proportions which reflect the rate of exhaustion of the mineral property. Consequently, the rate of recovery usually will be much slower than under the Canadian regulations. The difference between the depreciation allowances per- mitted under the Canadian and United States regulations has been reduced at least temporarily by the special rules adopted since the outbreak of hostilities in Korea. On February 28, 1951, by Order in Council (PC 816), the Canadian Minister of Trade and Commerce was authorized to allow unusually high rates of depreciation on certain types of buildings and equipment which were needed for defense purposes. However, this power has been treated as an adjunct to a program of direct Government procurement of emergency facilities, and the certificates authorizing unusually rapid amortization have been issued sparingly. Only about 30 applications for the privilege had been approved through September 1951. Moreover, in the Canadian Budget Message of April 1951 it was announced that the depreciation allowances on new investments in nonemergency facilities were to be postponed for a period of 4 years. This postponement applies to capital assets acquired after April 10, 1951, which do not fall in certain specifically exempt categories or qualify for certificates which waive postponements. The general effect is to discour- age additional capital investment except in those cases where such investment is regarded as desirable in the emergency sit- uation. However, because of the nature of the exceptions, the effect on the mineral industries is small. Pipe lines and gas- and oil-well equipment are specifically exempt, and the cases in which certificates waiving the postponement may be issued include not only the purchase of assets for defense purposes, but also for the production and distribution of primary prod- ucts in the mining and petroleum industries generally. On the other hand the Revenue Act of 1950 (Public Law 814, 81st Cong., 2d sess., Sec. 216) introduced into the United States law a modified version of the system of accelerated amortization of emergency facilities used during the Second World War. (Sec. 124 of the Internal Revenue Code.) When certificates of necessity are issued, a major portion of the cost of such facilities can be written off over a 5-year period. Sub- stantial use has been made of this privilege by the mineral in- dustries.10 Hence, the over-all effect of the emergency depreciation policies has been to reduce temporarily the extent to which 10 See report 3, Incentives for Minerals Industries. Page 30 the Canadian law permits a more rapid tax-free recovery of the cost of depreciable assets than is possible under the United States law. DEDUCTIONS FOR RESEARCH EXPENSE The Canadian law (Income Tax Act, sec. 65) distinguishes between research expenditures of a current nature and those which are capital outlays. The former are deducted currently as they usually are under the United States law. Capital outlays are written off under a special formula which permits an amount to be deducted in each taxable year equal to a third of the sum of such outlays in the taxable year and the 2 years immediately preceding or, if the amount is smaller, the unre- covered cost of such property at the beginning of the taxable year. For isolated outlays of the type which are most apt to be capitalized and written off over their full useful life under the United States law, the Canadian formula amounts to a 3-year depreciation period. This is clearly a compromise between the policy of expensing outlays for scientific research purposes and recovering the cost through the ordinary depreciation formula. However, under the Canadian law the deduction of re- search costs in any given year in excess of 5 percent of the taxpayer's income for the preceding year is conditioned upon approval by the Canadian National Research Council of the research program "in respect of which the expenditures were made." CAPITAL GAINS AND LOSSES EXCLUDED FROM INCOME TAX Legislation enacted in 1950 specifically excludes from the income tax amounts received in consideration for mining prop- erties by taxpayers, whether individuals or corporations, who prospected, explored, or developed the properties as well as the gains of individuals or companies who grubstaked the actual prospector. (Income Tax Act, sec. 73 (B).) This is a specific application of a general policy of excluding capital gains and losses from the computation of net income and confirms a long-standing administrative practice. Apparently the 1950 legislation was precipitated by the fear that a person regularly engaged in exploration might be held to receive income when he sold his successful properties on the theory that his gains were the ordinary result of his regular business operations. This is the logic which leads to the taxation of the gains of stock market speculators as income even though such gains are not usually taken into account for the purposes of the tax. Because of the exclusion of capital gains and losses from the income tax base, the effect of the various expensing pro- visions, exemptions, and special depletion deductions described above upon the gain realized in a subsequent sale is not an important consideration. This prevents the partial recapture of such benefits which occurs when a capital gains tax is im- posed at the time of sale in the United States. There does not appear to be a specific allowance in the Canadian law for losses realized on the abandonment of unsuc- :essful ventures. Such losses are, of course, deductible under the Federal income tax law in the United States, although it has been pointed out that the necessity for actual abandonment seriously reduces the value of the privilege in the mining indus- tries. The absence of such a deduction under the Canadian law is consistent with the theory of income upon which the tax is based; losses on abandonment are capital losses. Moreover, in view of the very general nature of the expensing privileges which are allowed under the Canadian law, the omission of a deduction for losses in abandonment should have compara- tively small tax consequences. CARRY OVER FOR NET OPERATING LOSSES The Canadian income tax law, like the Federal law in the United States, provides a 1-year carryback and a 5-year carry-forward of net operating losses. (Income Tax Act, sec. 26 (d).) RECAPITULATION OF TAX DIFFERENCES The treatment accorded the mineral industries under the Canadian income tax law differs from that received under the Federal income tax law in the United States in the following respects: a) The percentage depletion deduction is based on net rather than gross income. A preferential rate is allowed on gold rather than oil, gas, and sulfur. No percentage depletion is available on coal, and the availability of percentage de- pletion in the case of nonmetallic minerals depends on whether the deposits are of the "bedded" or "nonbedded" variety. b) Cost or adjusted basis depletion is not allowed as an alternative to percentage depletion. c) A depletion deduction is allowed to resident taxpayers on the basis of dividends received from corporations carrying on a business in Canada, which obtained a substantial portion of their income from mining operations. d) The total depletion available to corporations and to the recipients of their dividend disbursements is difficult to compare with the depletion available under the United States law. However, there is some basis for concluding that, taking the industries as a whole, the deductions re- ceived by the oil and gas industries are smaller and those received by the metals industries approximately the same as those that they would receive under the United States law. e) Generous expensing privileges are available for the costs of exploration, discovery, and development of oil, gas, coal, metal, and industrial minerals found in nonbedded de- posits. Exploration costs are more generously treated in this respect than under the United States law. /) What amounts to a 3 /2 -year tax-free period is available to new metal and nonbedded industrial mineral mines. g) A tax credit is allowed equal to 30 percent of the costs in- curred in the unsuccessful drilling of selected deep test oil and gas wells. The cost of such wells may also be taken as a deduction from gross income. 206060—52 4 Page 31 h) Depreciation can be taken at a more rapid rate than un- der the United States law although the difference has been reduced somewhat under the current emergency legisla- tion in the United States. i) Capital oudays for research purposes may, generally speak- ing, be written off over a 3-year period. However, research costs in excess of 5 percent of the taxpayer's income during the preceding year are deductible only if the program for which the expenditures were made was approved by the National Research Council. ;) The general rule of excluding capital gains from taxable income applies specifically to gains realized by those who prospected and explored for or developed mining prop- erties, as well as to those who advanced the grubstake for such ventures. k) There appears to be no deduction for losses on abandon- ment, but the significance of this omission is reduced very much by the large portion of the capital costs of explora- tion, discovery, and development which may be deducted as a current expense. /) On balance, considering all the aspects of the income taxes as they apply to the mineral industries, it appears that the oil and gas industries receive more generous treatment under the United States than under the Canadian law. The metal mining industries seem to receive more gen- erous treatment under the Canadian law whenever the 3-year exemption of new mines is available. In other cases the results of the comparison are not clear. Page 32 Report 5 Domestic Timber Resources" Wood, an extremely adaptable material with literally thou- sands of uses, is contributing to our way of life in many new ways. Cellulose and lignin, the principal fractions of wood, are promising in chemical utilization possibilities. Their exploita- tion is still in its infancy. Lavish use of wood was the rule in the development of this country. Wood production requirements are high in the present emergency. Further development of our economy, continued in- crease in population, acceptance of our responsibilities as leader among the free nations, and the desire for national and inter- national security all point toward the need to safeguard and enhance forest productivity. To maintain a stable, high-level economy with jobs for all implies, among other things, making good use of the productive capacity of our forests which occupy one-third of our land area. LONG-RANGE TIMBER REQUIREMENTS An estimate of future requirements for timber products pro- vides a basis for appraising the forest situation in the United States and for establishing the annual timber growth goals that the Nation should aim to achieve. Estimates of 1950 consumption, and 1975 requirements for timber products, are shown in table I. For some products, no- tably fuel wood, cooperage, hewn ties, and piling, consumption is declining. The downward trend is expected to continue despite a generally higher level of economic activity. For other products like lumber, plywood and veneer, and pulpwood, past consumption has been up or down largely in response to the general economic conditions of the country. Since the depres- sion years, consumption of these products has been increasing. A generally higher level of requirements for these is forecast on the basis of predicted increases in population and gross national product. Individual Commodity Requirements Requirements for several classes of timber products have been considered separately, both because of their diversity and because of varying, and in some cases divergent, trends in consumption. Lumber. The 1975 requirement for lumber, shown in table II, is estimated to be 45 billion board feet annually, or 10 percent more than consumption in 1950. In this estimate ^Prepared by the Forest Service of the Department of Agriculture, at the request of the Commission. This paper has been edited by the Com- mission's staff. an anticipated 1.6 billion board feet decline in use of lumber for nonfarm residential construction is more than offset by increases in farm, railroad, and other construction, and in lumber used for factory products and for shipping. Table I.—Estimated consumption of forest products in the United States in 7950, and estimated requirements in 1975 Product Lumber Pulpwood Veneer logs and bolts. . . Fuel wood Cooperage logs and bolts Mine timbers Hewn ties Poles Piling Fence posts Miscellaneous Estimated 1950 con- sumption Estimated 1975 require- ments Unit of measure Million Million Board feet.... 40, 850 44, 950' Cords i 34 i 51 Board feet2.... 2, 730 3, 900' Cords 49 40' Board feet2. . . . 690 650 Cubic feet.... 100 110 Pieces 12 8 Pieces 7 6 Linear feet.. . . 32 30' Pieces 230 250' Cubic feet.... 250 280. 1 Includes the equivalent of about 12 million cords of net imports of paper, wood pulp, and pulpwood in 1950. It is estimated that the same equivalent net volume may be imported in 1975. 2 International J4~hich rule. A decline in use of lumber for nonfarm residential construc- tion, which accounted for about 40 percent of all lumber use in 1950, is predicated on an average use of 8,500 board feet per dwelling unit as compared to about 9,500 board feet in 1950 and some 15,000 board feet in the early 1930's. The average number of dwelling units required annually in the dec- ade 1970-79 is estimated at 1,300,000/ a level that was. achieved for the first time in 1950. Table II.—Domestic consumption of lumber in 1950 and estimated re- quirements in 1975 Use Consumption 1950 Requirements 1975 For construction: Million boardfeet 15, 920 5, 240 2, 150 7, 120 Million boardfeet 14, 300 6, 000 2, 650 8, 800 Nonfarm residential Farm Railroad . . Other All construction 30, 430 4, 190 6, 230 31, 750 5, 500 7, 700 For factory products For shipping uses Total 40, 850 44, 950 'Estimates vary from 1,300,000 to 1,600,000. Page 33 On this basis the indicated 1975 lumber requirement for new nonfarm housing is about 11.0 billion board feet. Another 3.3 billion board feet might be required for major additions and alterations and for repair and maintenance of the increased number of dwellings then in use. Thus total 1975 lumber requirement for new nonfarm residential construction is about 14.3 billion board feet. The estimated requirement of 6 billion board feet of lumber for farm construction in 1975 is about 15 percent above con- sumption in 1950. In this estimate farm population was as- sumed to be about the same as at present, but an increase of construction would result from an anticipated increase in agri- cultural production and in farm income. The 1975 requirement of 2,650 million board feet for rail- road construction and maintenance represents an increase of more than 23 percent over the low rate of consumption in 1950. It seems likely that the railroads will use about the same quan- tity of cross ties that have been needed annually in the decade prior to 1950, or about 50 million ties annually. An increasing percentage of the total number of ties used will be sawn ties. Total sawn tie requirement in 1975 is estimated at 1.7 billion board feet. Use of lumber for bridges, buildings, and other rail- road installations—estimated at 740 million board feet an- nually in the decade 1939-48—is likely to decline because of further substitution of steel and concrete. The 1975 require- ment is placed at 450 million board feet. Similarly the require- ment for lumber for railroad cars is placed at 500 million board feet, somewhat less than recent consumption. Requirements for lumber in other types of construction, and for maintenance, including industrial, commercial, institu- tional, recreational, public utility, mining, and military struc- tures, have been roughly estimated at 8.8 billion board feet in 1975. The indicated increase of 24 percent over 1950 reflects the assumption that the United States will continue to build up and maintain its military and industrial strength. Use of lumber for factory products in 1948 (other than rail- road cars, millwork, flooring, prefabricated structures, pallets, grain doors, reels, and containers) amounted to about 4.2 billion board feet. The estimate of 1950 consumption is about the same. Under the basic assumptions as to population, and industrial and agricultural output, requirements for factory products are placed at 5.5 billion board feet. Use of lumber for furniture and fixtures, which comprised half of the amount used for factory products in 1948, was about 50 percent greater in 1948 than in 1940. Use of lumber for shipping takes the form of boxes, crates, and cases; pallets and skids; grain doors; reels for shipment of rope, wire, and cable, and dunnage used as blocking or bracing in freight cars or ship holds to prevent cargo from shifting. In 1950 these uses accounted for an estimated 6.2 billion board feet of lumber. Lumber used for these purposes mush- roomed to 14 billion board feet a year during the Second World War. After considering trends in the use of other mate- rials and changes in shipping practices which reduce the need for lumber, it is believed that increased industrial and agri- cultural output in 1975 will still require more lumber than was used for shipping in 1950. The estimate for 1975 is placed at 7.7 billion board feet. Pulpwood. Production of the pulp and paper industry in- cludes a wide range of products differing in percentage of new wood pulp required. Wood pulp for the various products, in turn, is produced by several processes, differing in species used and in yields per cord of wood. Analysis of domestic wood re- quirements is further complicated by a significant volume of imports at each stage of manufacture, i. e., as paper, as pulp, and as wood. The industry has been characterized by rapid technological progress; it is still growing. Consumption of paper and paper- board increased from 2.2 million tons in 1899 to 28.9 million tons in 1950. Paper and paperboard requirements for 1975, as presented in table III, are estimated at 51.7 million tons, 45 million of which represent domestic output. Table III.—Domestic consumption of paper and paperboard in 7950, and estimated requirements in 1975 1950 consumption 1975 requirement Kind of paper and paperboard From domestic production: Millwn tons Million tons Newsprint 1.0 2. 0 Other groundwood .7 1. 5 Book, fine and absorbent 3. 9 6.0 Coarse and industrial 3.7 7. 5 Sanitary and tissue 1. 3 2. 5 Building paper 1. 4 2. 5 Total paper 12. 0 22. 0 Container board 5. 6 10. 0 Boxboard 3. 1 6. 0 Building paperboard 1. 3 2. 5 All other paperboard 2.2 4. 5 Total paperboard 12.2 23. 0 All paper and paperboard 24. 2 45. 0 Net imports i 4. 7 6. 7 Total 28. 9 51.7 1 Net imports of newsprint were 4.9 million tons. The difference repre- sents an export balance with respect to other paper and paperboard. Newsprint paper is in a class by itself in that the United States depends upon imports—chiefly from Canada—for the bulk of its requirements. Domestic production of newsprint in 1950 was only about 1 million tons. Per capita consumption of newsprint paper has gone up 50 percent in the past 25 years. Although the rate of per capita increase is likely to taper off, total consumption of newsprint, reported as 5.9 million tons in 1950, is estimated to reach 8.7 million tons by 1975. Domestic production is credited with only 2 million tons of this, leaving 6.7 million tons for imports— almost 2 million tons more than in 1950. It is believed that such an increase in newsprint imports may be obtained from Ca- nadian sources. Consumption of paper other than newsprint has increased during the past 30 years from about 3 million tons a year to 11 million tons a year. In the same period paperboard consump- tion rose from 2 million tons a year to 12 million tons a year. Consumption of these two groups of products has been greatly stimulated by technological progress. The development of strong paperboard containers and paper bags has greatly ex- panded the use of these products in the shipment and distribution of a wide variety of industrial and consumer goods. Consumption of paper other than newsprint, and of paper- board products, is closely related to the gross national product. Page 34 A doubling of the gross national product in the next 25 years, as assumed in this study, would mean a commensurate increase in the demand for items such as coarse wrapping paper, container board, and other paper and paperboard used in connection with the production, transportation, and distribution of goods. Demands for some other paper items would expand in response to a rising standard of living. By 1975 requirements are likely to reach 20 million tons of paper other than newsprint and 23 million tons of paperboard. Translation of estimated paper and paperboard requirements into domestic pulp wood requirements calls for consideration of the percentage of new wood pulp required for each class of paper and paperboard, the tonnage of required pulp that will be produced by each of the major pulping processes, and the amount of imports at each stage of manufacture. The new wood pulp required for the various kinds of paper and paperboard varies from less than 20 percent to 100 percent. As technology improves, it can be expected that there will be some increase in the use of fibrous materials other than new wood pulp—waste paper, straw, etc. Prospective changes in the use of new wood pulp are shown in table IV. Table IV.—Prospective changes in the use of new pulp-wood Table V.—7975 requirements of new wood pulp for paper, paperboard, and other pulp products Class of paper or paperboard Newsprint and other groundwood papers. Book, fine and absorbent Coarse and industrial Sanitary and tissue Building paper Container board Boxboard Building paperboard All other paperboard New wood pulp content, 1947 Probable new wood pulp con- tent, 1975 Percent i 100 70 100 90 25 50 20 75 15 1 Weight of wood pulp required actually exceeds weight of paper produced because of loss in paper-making process. In addition to the wood pulp required for the manufacture of paper and paperboards, an increasing quantity is being used as basic raw material for rayon, cellophane, lacquers, explo- sives, plastics, and other chemical products. Wood pulp con- sumption for these purposes amounted to about 600,000 tons in 1950. Two million tons is a conservative estimate of 1975 requirements for these products. Various papers call for different kinds of wood pulp and these, in turn, differ in yield per cord of wood and species which can be used. Technological trends indicate the probabil- ity of increased importance of groundwood, sulfate, and semi- chemical pulps. All of these give a higher yield of pulp per cord of wood than do the sulfite and soda processes. In addition the sulfate and semichemical processes permit the pulping of a wider range of timber species than do other processes. Domestic production of 45 million tons of paper and paper- board and 2 million tons of other pulp products in 1975 is estimated to require 28.8 million tons of new wood pulp (see table V). The next 25 years will, no doubt, bring a large increase in the use of the dense hardwoods for semichemical, sulfate, and perhaps groundwood pulps. This will also result in higher average yields of pulp per cord of wood. The improvements indicated in table VI are believed to be conservative. Type of pulp Used in 1950 Required in 1975 Million tons 2. 5 3.9 8. 4 . 6 1. 7 Million tons Groundwood 5. 1 4. S 15.2 . 6 3. 4 Sulfite Sulfate Soda Semichemical and other Total 17. 1 28. 8 If these rates of pulp yield are attained, the domestic require- ments of 28.8 million tons of wood pulp could be produced from 43.3 million cords of pulpwood. If 7.5 million cords—the pulpwood equivalent of estimated imports of newsprint are included, the total United States pulpwood requirement will be of almost 51 million cords. This estimate is 50 percent more than was consumed in 1950. If the anticipated increase in im- ports of newsprint is offset by decreases in net imports of pulp- wood, wood pulp, and paper other than newsprint, the indicated cut of domestic pulpwood would be about 39 million cords. Veneer and Plywood. Consumption of logs for the produc- tion of veneer and plywood totaled about 2.7 billion board feet in 1950 (see table I). About 1.4 billion board feet consisted of softwood logs, chiefly Douglas-fir, and 1.3 billion board feet hardwood logs. The use of softwood plywood has been expanding rapidly. In 1950 production was twice the 1940 output. Considerable additional plant capacity is being installed to meet anticipated further expansion in demand. It is estimated that by 1975 log requirements for softwood plywood and veneer will approxi- mate 2.2 billion board feet, or an increase of 57 percent over 1950. Production of hardwood plywood and veneer has increased slowly during the past two decades. With the high level of economic activity assumed for 1975, it is estimated that require- ments might reach 1.7 billion board feet of logs, an increase of 30 percent over 1950. Total requirements for both softwood and hardwood ply- wood and veneer are placed at 3.9 billion board feet of logs and bolts, more than 40 percent above consumption in 1950. Veneer and plywood are for the most part produced from large, high-grade logs of a few preferred species. The indicated re- quirement is predicated in part on ability to use a wider variety of species, and to make commercial veneer from smaller and Table VI.—Projected yield of pulp Cords of wood per ton of pulp— Type of pulp Probable in 1975 As of 1947 0. 98 0. 90 Sulfite 2. 01 2. 00 Sulfate 1. 77 1. 65 Soda 1. 95 1. 95 Semichemical and other 1. 13 1. 00 Page 35 ductive and more inaccessible forest lands will tend to be given the least attention in timber management. To get 400 million acres under the kind of management that would be needed will be difficult. If we assume that the man- agement of all public lands is adequate, it would mean apply- ing reasonably good management to more than 80 percent of the private forest lands. Probably not over one-third of these lands is given any management other than fire protection today. The distribution of the forest lands of the United States is important to a clear understanding of the situation. One-third of the country's land area is forest land. But only 460 million of the 622 million acres of all forest land is suitable to timber grow- ing and available for that purpose. The remainder, 162 million acres, chiefly in the semiarid portions of the West, is classified as noncommercial because it is not suitable for growing mer- chantable timber or, to a lesser extent, because it is set aside for parks and preserves. More than three-fourths of the com- mercial forest land lies east of the Great Plains, as shown in table X. Table X.—Distribution of forest land of the United States, 1945 1 Total forest land Commer- cial 2 Noncommer- cial 3 Section Million acres 208.4 188. 3 225. 3 Million acres 167. 1 184. 9 107. 5 Million acres 41. 3 3.4 117. 8 North (including Plains) South West United States 622.0 459. 5 162.5 1 From Basic Forest Statistics for the United States as of January 7945, revised 1950, U. S. Forest Service. Comprehensive estimates of later date not available. 2 Land capable of producing timber of commercial quantity and quality, and available now or prospectively for commercial use. 3 Land considered unsuited for timber production because of low produc- tivity or extreme inaccessibility and commercially valuable land withdrawn from timber use in parks, preserves, etc. Also important is the acreage of land in public ownership and its distribution. Public ownership—Federal, State, and local—must play a permanent part in our forest economy be- cause watershed protection or other public values may call for restrictions which private owners should not be asked to bear. Moreover, such factors as long-deferred or very small returns often make good management in private ownership uncertain or unattractive. But only about one-fourth of the commercial forest area is in public ownership and most of this, as shown in table XI, is in the West. Public ownership embraces 64 per- cent of all commercial forest land in the West, but only 9 percent in the South and 18 percent in the North. This focuses attention on a third aspect of the forest land situation—the distribution of the private forest land among various classes of owners, as shown in table XII. Only one- fourth of the private commercial forest land is in holdings of more than 5,000 acres. Three-fourths of it (almost 260 million acres) is in 4^4 million small holdings, which average only 62 acres each. During recent years many large lumber and pulp and paper companies have been adding to their forest land holdings, particularly in the South and the Pacific Northwest. Much of this has been by transfer from other large owners. However, Table XL—Ownership of commercial forest land, 1945 1 Section All ownership Private Public 2 Million acres Million acres Million acres North 167. 1 136. 3 30.8 184. 9 168. 5 16.4 West 107. 5 38. 4 69. 1 United States 459. 5 343. 2 116. 3 1 From Basic Forest Statistics for the United States as of January 1945, revised 1950, U. S. Forest Service. 2 The acreage in public ownership in 1951 is believed to be 3 or 4 million acres greater than in 1945. Commercial forest acreage in national forests has been increased some 2.3 million acres and in State forests more than 1 million acres. the forest industries now control no more than 12 percent of the Nation's total commercial forest land. These facts should dispel the notions that the Nation's timber supply is primarily a western problem, that the Nation's future timber needs can be met by the public forests, and that the solution is largely in the hands of the big lumber and pulp companies. Growing Stock Is the Problem Since the productive capacity of the available forest land is substantially above prospective annual requirements and the suggested growth goals, present timber stand conditions must be examined to learn what needs to be done to achieve the desired annual growth and, particularly, to double saw timber growth. Table XII.—Pattern of commercial forest land ownership, 1945 [Percent of area] United States Kind of ownership North South West Private: 57 7 11 69 4 9 66 12 13 20 5 11 Medium (5,000 to 50,000 acres). Large (over 50,000 acres) Total private 75 25 82 18 91 9 36 64 Public 100 100 100 100 As of 1945 our timber stand was estimated at 469 billion cubic feet, including 1,617 billion board feet of timber large enough for sawlogs, as shown in table XIII. Two-thirds of the cubic-foot volume and four-fifths of the saw timber is in softwoods. About 65 percent of the saw timber is in the West. Almost one-third of it is concentrated in the Douglas-fir subregion of western Washington and Oregon, which has only 6 percent of the commercial forest area. The North and South, with over three-fourths of the acreage, have only 35 percent of the saw timber. Half of the saw timber in the United States is of three soft- wood species: Douglas-fir (430 billion board feet); Southern Page 38 Table XIII.— Timber volume, United States, 1945 Section All timber (billion cubic feet) Saw timber (billion board feet) Total Soft- wood Hard- wood Total Soft- wood Hard- wood North 102 26 76 234 68 166 South 128 59 69 340 196 144 West 239 236 3 1,043 1,037 6 United States 469 321 148 1, 617 1, 301 316 Source: Basic Forest Statistics for the United States as of Jane 7945, revised 1950. U. S. Forest Service. yellow pine (189 billion board feet); Ponderosa pine (185 billion board feet); a total of 804 billion board feet. Of the hardwoods, about equally divided between the North and South, oak is the leading species, with 100 billion board feet—one-third of the hardwood total. Ownership of the timber, as of the land, varies greatly between East and West. In the West almost one-half of the timber is in national forests and 14 percent is in other public ownership. But the 38 percent in private ownership, mostly in the Pacific Northwest and California, is generally more accessible and of better quality than the public timber. In the East 92 percent of the saw timber is privately owned. It is important that timber stands be thought of as growing stock or forest capital on which the annual crop accrues as interest, rather than as an inventory or a "reserve" awaiting utilization. To maintain an annual crop of timber of merchant- able size there must be a succession of age classes from seedlings up to full-grown timber, so that as merchantable trees are cut each year new ones will be ready to take their places. Ideally, with such a balance in age classes and until the productive capacity of the land is reached, the more growing stock or standing timber there is, the greater the annual growth and hence the greater the crop available for cutting each year. This does not apply to virgin forests, because in them death and decay in the long run tend to offset current growth. In its 1945 reappraisal the Forest Service estimated that 1,700 billion board feet of forest growing stock would be needed to yield 72 billion board feet of annual growth, allocated as in table XIV. Table XIV.—Growth goals and required growing stock Growth goal Required growing stock Section (billion board feet) Billion Multiple of board feet present stand 17. 6 406 1. 85 37. 4 621 1. 84 17.0 673 .65 United States 72.0 1,700 1.06 The North and South have little more than half enough saw-timber growing stock to sustain their suggested share of the growth goal. Because a substantial part of the virgin forest has not yet been worked over, the volume of timber in the West is still about 50 percent greater than the volume needed as active growing stock. The present stand of second growth in the West, however, is only about 35 percent of what will need to be developed by judicious selective cutting in the virgin stands and by establishing new stands on clear-cut areas. Similiarly, the cubic-foot volume of all timber in the East will need to be increased about 35 percent to help sustain a national drain of 18 billion cubic feet annually under the as- sumptions upon which the reappraisal estimates were made. Timber Depletion Trend Unchecked The need to build up productive growing stock focuses at- tention on the trend of depletion which has characterized the Nation's forest history. The 1945 estimate of 1,617 billion board feet of saw timber is 43 percent less than the volume reported in 1909 by the Bureau of Corporations of the Depart- ment of Commerce, which was little more than a guess. The 1945 estimate is 9 percent less than Forest Service estimates for 1938. While there is no doubt that saw-timber volume is declin- ing, it is not safe to project a trend based on comparison of pre- vious estimates. For one thing the difference between past estimates probably understates the actual decline. The 1909 estimates, for example, did not fully recognize the smaller properties, and many species which are now merchantable were disregarded. Futhermore, trees of much smaller size are now counted as saw timber. A trend based on comparison of previous estimates of volume would probably not disclose the favorable effects of progress in forestry since the last estimates were made. For this reason a comparison of drain and growth is commonly used as an indicator of current trend. Because of the inadequacy of earlier estimates and particularly because recent estimates of current growth include elements not taken into account in earlier estimates, it is not wise to use differences in drain- growth ratios from past analyses as an indication of how soon the trend of forest depletion may be reversed. The fact that the gap between drain and growth is less than previously esti- mated is encouraging. But the vital question today is what the present ratios mean in relation to future needs. Caution is needed in the interpretation of drain-growth re- lations. An over-all national comparison of growth and drain may be misleading, because it lumps drain from virgin stands, where a reduction of long-accumulated timber volume is needed before current growth can be effective, with drain from second-growth stands, where a reduction of timber volume usually means a reduction of annual growth. Furthermore, consideration must be given to the level and composition of growth and drain as well as to a balance between them. Ac- cordingly, table XV show growth and drain per acre by regions and separately for softwoods and hardwoods. Data for 1944 from the Forest Service reappraisal are shown because com- parable estimates for a more recent year are not available. However, since the volume of saw timber cut for commodity use in 1950 was some 3 billion board feet (6 percent) higher than in 1944, it does not seem likely that drain-growth ratios for the major regions are significantly more favorable now than in 1944, even though recent surveys show increases in annual growth in some localities. In table XV, figures on rate of drain per acre are based on the total commercial forest area, whereas the acreage of virgin timber, on which no growth is credited, was excluded from Page 39 Table XV.—Comparison of timber drain and growth, 1944 Section and kind of wood North: Softwood . Hardwood Total. . . South: Softwood . Hardwood Total. . . West: Softwood . Hardwood Total. . . All timber Saw timber Drain as a per- centage Drain as a per- centage Drain Growth Drain Growth of growth of growth Cubic feet per acre 1 5. 6 16. 4 Cubic feet per acre 2 5. 9 22. 4 Board feet per acre 1 17. 9 36. 1 Board feet per 95 73 acre 2 12. 1 38. 5 148 94 22. 0 28. 3 78 54. 0 50. 6 107 20. 0 14. 9 19. 1 15. 6 105 97 85. 4 50. 1 70. 1 38. 1 121 132 34. 9 34. 7 101 134. 6 108. 2 124 32. 7 . 1 34. 2 . 8 96 13 185.2 . 5 104. 8 1. 2 177 42 32. 8 35. 0 94 185. 7 106. 0 175 1 Based on acreage of commercial forest land. 2 Based on acreage of commercial forest land exclusive of acreage in virgin timber. the computations of annual growth per acre. This is of par- ticular significance in the West. It brings out the fact that current saw-timber drain is at a rate averaging 7.5 percent higher than the current rate of saw-timber growth on the second-growth stands there. Cubic-foot growth of all timber in second-growth stands, however, is slightly above the average rate of cubic-foot drain for all stands. The disparity in saw timber will doubtless be reduced as more of the second growth reaches saw-timber size, but this will not have much effect in the near future. Only a small part of the new second growth coming in after logging is over 40 years old. It is worth noting, however, that the rate of growth on second-growth stands in the West is about the same as the average rate currently re- ported in the South, both for saw timber and for all timber. It is thus clear that the present rate of saw-timber drain in the West cannot be sustained after the virgin timber plays out unless we achieve a rate of growth substantially higher than the 106-board-feet-per-acre average now found on the area not classed as virgin timber. In the North, cubic-foot growth of all timber was estimated as of 1944 to be in excess of the comparable drain. Saw-timber drain, however, was estimated to be greater than saw-timber growth but there was no deficit for hardwood saw timber. Although the over-all drain-growth relations are relatively favorable in the North, the level at which this is achieved is far below the productive capacity of the land. In fact the forest situation is perhaps more acute in the North than elsewhere. Saw-timber growth averages only 50 board feet per acre—less than half of what it is in the South. Drain per acre has likewise been reduced to a low level because the advanced stage of forest depletion and deterioration has forced many wood-using industries out of business and the shortage of good timber hampers other operations and makes it difficult for new plants to start. Much of the growth is on timber of such inferior quality and small size that it is a doubtful asset. In fact, the excess of all-timber growth over drain is partly a reflection of inability to market this small and low-grade timber. The in- sistent demand for the more desirable timber is shown by the continued excess of drain over growth in softwood saw timber. Although all-timber growth is greater than drain in the North, it is doubtful that the trend of depletion there has been effectively turned. Rather, it appears that the demand is such that timber of merchantable size and quality will be cut as fast as it becomes available. This will tend to hold the volume of desirable growing stock down and to preclude any significant improvement in average annual growth per acre. In the South, all-timber drain is approximately in balance with growth. It is at a rate almost 60 percent higher than in the North. But the excess of drain over growth for both soft- wood and hardwood saw timber indicates that depletion and deterioration of southern forests is still in progress. Evidence is found in resurveys for Mississippi, South Carolina, and Florida. These States are the only ones for which reasonably comparable data from two successive surveys are available. The resurveys show that in a period of 11 to 14 years prior to 1947-49 the acreage of pine forest in these States fell off while the area in the generally less desirable hardwoods in- creased; that total cubic-foot volume dropped 0.7 percent per year and saw-timber volume twice as fast; that the decline was, in general, greater in softwoods than in hardwoods; that the average size of the timber is smaller, that it is predominantly of low grade, and that the volume of standing cull trees has increased. The resurveys and subsequent forecasts indicate that in some areas progress in fire protection and other forestry measures either already has or soon may reverse this trend of depletion. However, for the South as a whole the drain-growth situation is far from satisfactory and the strong demand for merchantable timber will tend to retard any sustained region- wide build-up of growing stock, just as in parts of the North. Deterioration in kind and quality of timber which has char- acterized forest depletion in all regions is fully as important as the decline in timber volume. But it is more difficult to measure and is often concealed or masked by over-all forest statistics. The effects of such deterioration are felt in lower-grade prod- ucts, higher production costs, and lower forest income. Increase in Annual Growth Expected While the continued depletion and deterioration of our standing timber resources are disturbing and difficult to deal with, a number of factors are operating to increase annual growth in the future. Of long-range significance, although limited in its effect on usable growth during the next 25 years, is forest planting. Planting reached a significant level in the 1930Js, averaging over 450,000 acres a year from 1937 to 1941. It dropped below 150,000 acres a year during the war, but has rebounded and is currently at a rate of almost 500,000 acres a year. The rate may be expected to advance still further in the years ahead. With almost 75 million acres of forest land classified as poorly stocked with seedlings and saplings or denuded, and additional millions of acres of other land in need of tree planting, the possibilities of increasing future timber supplies by planting will not be exhausted for many decades. Earliest returns will come in the South where over 60 percent of the private planting is taking place. Page 40 Of more immediate benefit is steady progress in extending forest-fire protection to lands in need of it and making pro- tection adequate. In 1950 all Federal lands and almost 85 percent of the private and State lands in need of protection from fire were afforded some organized protection. In the period between 1944 and 1949 expenditures for protection of Federal lands were increased about 40 percent and those for protection of State and private forests more than doubled. Comparable to protection from fire in its effect on annual growth is protection from insects and disease, which, with wind, ice, etc., take a heavier toll each year than fire. Progress in protection from insects and disease, however, is not so readily measured. The possible reduction of timber inventory losses from fire, insects, disease, etc., has been taken into account in the estimate of future drain and in the growth goals. In addition, better pro- tection will contribute to increased annual growth by the sav- ing of millions of seedlings, saplings, and poles on previously burned areas. Young growth on cut-over lands is, in fact, the most obvious result of organized protection, especially in the South. Better cutting practices and better forest management are also helping to increase annual timber growth. In the virgin ponderosa pine forests of the West, for example, the substitu- tion of selective cutting practices for indiscriminate clear cut- ting leaves growing stock which makes an immediate contribu- tion to net annual saw-timber growth. Similarly, net annual growth will eventually be increased as young growth becomes established and reaches usable size on virgin areas that are clear cut. In the second-growth forests better management is increas- ing annual growth by reducing the premature cutting of young stands and building up the growing stock, especially in the gen- erally understocked pine forests of the South. Judging by cur- rent trends, the area under management, estimated at 165 million acres in 1945, will be increased to perhaps 300 million acres by 1975. Offsetting these favorable trends is the effect of the continued depletion of saw timber growing stock on the unmanaged for- est lands. This is especially significant in the South. It is of less significance in the North because forest depletion and deteriora- tion are already so far advanced there. It was not considered in the West because current growth is not adversely affected by cutting in virgin stands and because so much of the area is in public forest or large industrial holdings which are likely to be under management. Another negative factor, previously alluded to, is that hard- woods, often of inferior quality, are increasing at the expense of the generally more useful softwoods. Finally, as an offsetting factor, we should not lose sight of the possibility that large-scale outbreaks of insects and disease may at any time destroy growing stock upon which current growth estimates are based. Within recent years we have the example of the Engelmann spruce bark beetle, which has killed over 4 billion board feet of timber in Colorado, and the "little leaf" disease causing widespread mortality of shortleaf pine in the South. We also have the threat of pole blight to young stands of western white pine and of oak wilt in eastern hardwood for- ests. No method of control is yet known for these diseases. Estimating the effects of these factors, but without making allowance for unpredictable inroads of insects and disease, it is possible that in 1975 annual saw-timber growth might be about 42 billion board feet and all-timber growth between 16 and 17 billion cubic feet. Thus, under the assumptions made, annual growth of all timber, without regard to species, quality, or size, may exceed the estimated 15.5 billion cubic feet of domestic requirements plus unavoidable losses in 1975 (see page 37). But it would be perhaps 10 percent short of the goal of 18 billion cubic feet which allows for export, security, etc. The growth of timber suitable for sawlogs—the size and quality which make up about 80 percent of present consumption—would be little more than 60 percent of domestic requirement plus unavoid- able losses in 1975 (totaling 66.1 billion board feet). The esti- mated saw-timber growth in 1975 would still need to be in- creased 70 percent to achieve the suggested growth goal of 72 billion board feet. Clearly our forest situation still presents a major challenge. ADEQUACY OF EXISTING PROGRAMS Facing the deficiencies in timber growth and the unsatisfac- tory forest conditions, it is appropriate to examine the adequacy of existing forest programs and practices. These can best be considered in three groups: what private forest landowners are doing, what public agencies are doing to encourage and assist private owners, and what the public forests are contributing. Private Forest Practices During the last few years there has been a great upsurge of forest tree planting on private lands, due in part to the intro- duction of mechanical tree planters. Only a few such machines were in existence in 1944; by 1949 there were more than 600 in use. In the South tree-planting machines are made available for the use of farmers and other small owners by soil conserva- tion districts, banks serving rural people, and some of the railroads. Planting by farmers and other small owners in the year end- ing June 30, 1950, reached 227 million trees—a level far above any previous accomplishment. Federal and State aid is avail- able to help farmers and other small owners in tree planting. Planting stock grown in State nurseries is distributed at nominal cost. The forest industries, principally pulp and paper and large lumber companies, planted over 150 million trees in fiscal year 1950. This was more than one-third of the number they had planted in all previous years together. About one-sixth of this planting was in Washington and Oregon. Almost all the rest was in the South. Although thus concentrated in two forest regions, this activity in forest planting is perhaps our best assur- ance that timber growing is being adopted as a permanent policy by many of the larger owners and operators. Progress in Forest Management, Substantial progress has been made in private forest management since the Forest Serv- ice reappraisal survey in 1945. However, this can be only partially evaluated. No new comprehensive statistics are available. Page 41 The effectiveness of forest management depends largely upon timber-cutting practices. In 1945 only about one-third of all the cutting on private lands was considered fair enough to maintain on the land any reasonable stock of growing tim- ber in species that are desirable and marketable. For the very large holdings (over 50,000 acres each), two-thirds of the cutting was given such a rating and only one-third was rated poor or destructive. But for the small holdings (under 5,000 acres) only 4 percent of the cutting was rated good and 25 percent fair. The remaining 71 percent wras poor or destructive. Aims and policies of forest landowners may also be judged from the acreage under planned forest management. The 1945 reappraisal estimated that only 23 percent of the private forest land wras under either extensive or intensive forest management, and reports to the American Forestry Association from 25 States for 1949 showed 36 percent under management. The propor- tion of acreage under management is much greater for the large holdings than for the medium and small ownerships. Both the actual acreage under management and the 5-year increase reported to the American Forestry Association are greater for the farm and other small holdings, taken together, than for the industrial holdings (see table XVI). Table XVI.—Area under management in 25 States [Million acres] Type of holding 1944 1949 Increase 24. 2 35. 9 11. 7 31. 6 46.7 15. 1 Source: The Progress of Forestry 1945-49. American Forestry Association, 1951, p. 58. Some indication of progress among the larger owners is given by fragmentary data on expenditures for forestry and the number of foresters employed. One incomplete survey, involv- ing some 13 million acres of industrial forests, showed expendi- tures for forestry increasing from 24 cents per acre in 1944 to 48 cents per acre in 1948, and number of foresters employed rising from 152 to 440.* The total number of foresters engaged in private forestry work in 1949 is estimated at 3,675, of which 3,100 were em- ployed by industry (more than half in forest management), 400 were self-employed, mostly as private consultants, and 175 worked for associations. A decade earlier the number of foresters in private work was probably not over 1,000. The number of foresters now engaged as consultants reflects the growing interest of medium and small landowners in good forest management. Another private forestry development is the employment of foresters by certain railroad companies to encourage tree planting and good forest practice in the terri- tories served by their lines as a means of sustaining freight traffic and revenue. Also of interest are the organized efforts of the forest in- dustries to promote good forest practice generally. Some recent industry association activities of this sort reported by the American Forestry Association include: the adoption by the Western Pine Association of a set of forest practice rules; estab- *Survey of Western Forestry and Conservation Association as reported in The Progress of Forestry 1945-49, American Forestry Association, 1951, p. 58. lishment of a permanent forestry division by the Appalachian Hardwood Manufacturers Association; expansion of the forestry program of the American Paper and Pulp Association; an aggressive program of aiding small owners by the Southern Pulpwood Conservation Association; and a campaign for the planting of walnut trees by the American Walnut Manufac- turers Association. Also mentioned was "Trees for Tomorrow," an organization sponsored by 10 paper mills in northern Wis- consin to stimulate tree planting and otherwise promote the practice of forestry on private lands. The forest industries, however, have been most articulate through a joint national organization known as American Forest Products Industries, Inc. Probably the most widely pub- licized of its activities is the "Keep America Green" campaign. This has undoubtedly strengthened the efforts of State and Federal agencies in forest fire prevention and control. Also significant is the "Tree Farm" program. Started in the Pacific Northwest in 1941 and spreading to all parts of the country, this program had enrolled some 23 million acres in certified tree farms by the end of 1950. Certificates are given any property, dedicated to timber growing by its owners, on which certain standards of protection and other forest practices are maintained. A third program sponsored by American Forest Products Industries, Inc., is "Cash Crops From Your Woods." This effort to accelerate good forest practice on private land by an intensive and coordinated educational and publicity campaign by all interested agencies, has been organized in six States: Virginia, Alabama, New Hampshire, Vermont, Washington, and South Carolina, in the order named. Besides such industry-sponsored programs, there have been a number of independent local efforts to provide technical assistance and marketing and operating service to enable small forest land owners to manage their woodland more effectively. For example: The New England Forestry Foundation and the West Virginia Forest Products Association furnish manage- ment service to forest landowners; "Connwood, Inc.," a Con- necticut association, is primarily concerned with providing market outlets for small, low-grade timber; and at Coopers- town, N. Y., the Otsego Forest Products Cooperative Associa- tion, Inc., with over 1,000 woodland owners as members, owns and operates its own sawmill, thus giving its members fuller control of, and larger returns from, their woodland operations than is ordinarily possible. There is a growing realization that the obstacles to good forest practice by the small owners can often be overcome by organized group action. Cooperative associations or quasi- public nonprofit organizations seem to have much to offer. In summary, activity in private forestry is greater than at any time in the past. The new interest appears to be soundly based and well supported. Accomplishments are significant. The proportion of large owners putting their lands under manage- ment and adopting good forest practices is greater than it is for the small owners who control the bulk of the private forest land. When the available facts on cutting practices, planned forest management, and industry efforts to encourage or facili- tate good forestry are considered in relation to all private forest land, they do not add up to assurance that future timber requirements will be met. This shortcoming has been and still is an important factor in public forestry programs. Page 42 Public Forestry Policies The establishment of national forests in 1897 recognized the need to stop forest destruction and put forest lands under management which would provide timber supplies for future generations. But, with the bulk of the Nation's commercial forest land in private ownership, early public programs were also directed toward protecting private lands from fire, pre- paring management plans for individual properties, and en- couraging tree planting. Much of the early effort originated with the States. The Weeks Law of 1911, with its provision for Federal cooperation with the States in forest fire protection, gave real impetus to Federal programs on behalf of private forestry. This was cooperation strengthened by the Clarke- McNary Act of 1924, the Norris-Doxey Act of 1937, and more recently by the Forest Pest Control Act in 1947 and the Coop- erative Forest Management Act in 1950. The McSweeney- McNary Forest Research Act of 1928 was also important for private forestry. Paralleling these Federal programs, the States have greatly expanded and strengthened their forestry programs. Protection From Fire. Organized fire protection is basic to successful long-range forest management. Primarily the re- sponsibility of the States, its advance has been held back in some sections by long-established custom of annual burning to improve range forage, inadequate appropriations, or too much dependence on local units of governments not capable of deal- ing effectively with the job. In the 41-year period since the Federal-State cooperative program was started, about 85 per- cent of the 427 million acres of State and private land need- ing protection has been put under protection. Some 66 million acres were still without organized protection at the end of 1950. The bulk of this unprotected area is in the South, where small holdings predominate. More intensive protection is needed on much of the area already organized. The cost of basic protection for the entire area of private and State land in need of it is estimated at 48 million dollars annu- ally. For fiscal year 1951 annual expenditures aggregate about 33 million dollars, of which $9,480,000 is contributed by the Federal Government. Thus, although expenditures for coopera- tive forest fire protection have more than doubled in each dec- ade, the amount spent still falls 30 percent short of the need. This cooperative protection is administered by the State for- estry departments aided by the Forest Service, which furnishes over-all inspection. Protection From Insects and Disease. Epidemic outbreaks of destructive forest insects and diseases are largely a matter for public attention. Individual property owners, especially when holdings are small, are generally unable to cope with such problems alone. Either the cost is too great, the necessary detec- tion and control operations are too specialized, or what they may do on their own land may be nullified by failure of adja- cent owners to take similar action. Prior to 1947 the Federal Government dealt only with in- dividual outbreaks as they occurred. Most of its efforts in the preceding decade had been directed toward control of the pine bark beetles, the white pine blister rust, and the gypsy moth. The Forest Pest Control Act of 1947, however, provides flexi- ble authority for both direct Federal action and cooperation with States and other agencies. It sets the stage for an adequate system, on a par with that provided in cooperative fire control, to detect incipient outbreaks and suppress them promptly. Not the least of obstacles is the deficiency of technical in- formation on which to base control action. More research in this field is bound to pay big dividends. With some notable exceptions, it appears that good forest practices can be expected to hold the incidence of insects and diseases at a minimum. Much greater attention must be given to prevention and control of insects and diseases. Losses from these sources are now much greater than those from forest fire. Research. Well-organized and continuing research on all phases of forestry and forest products is a basic means of aiding good forest management and improving wood utilization. Small forest landowners, like farmers, are not in a position to under- take the sustained and specialized research needed to develop the technical foundation for sound operation. Most of this must be done by public or quasi-public agencies. Many States con- duct research in forestry and forest products chiefly through the agricultural experiment stations and schools of forestry. The Federal Government has also taken an important role in such research through the Department of Agriculture. This work is conducted primarily at 12 regional forest and range experiment stations and the Forest Products Laboratory at Madison, Wis. Federal expenditures in fiscal year 1951 for all Forest Serv- ice research, including that in range management, watershed management, and forest economics, as well as that in forest management, forest fire control, and forest products, total about $5,250,000. This sum is less than the expenditures of States and other agencies. It is small in relation to the magni- tude and importance of our forest problems and the oppor- tunity for sound economic growth based on our forest resources. Education and Demonstration. Forestry was specifically added to the educational program of the Agricultural Ex- tension Service by the Clarke-McNary Act of 1924. At present some 65 extension foresters at the land-grant colleges develop State-wide educational programs which are conducted through the county agricultural agents. Federal expenditures in fiscal year 1951 were $106,000 and State expenditures $312,000. The program in which the Forest Service cooperates uses all the channels employed by the Extension Service to bring the results of research in all pertinent aspects of forestry and wood utilization to rural people. Aid in Forest Planting. Early in the century several of the States undertook the growing of forest planting stock for dis- tribution to farmers and other forest landowners. In 1924 the Clarke-McNary Act authorized the Federal Government to cooperate with the States in this activity. Since that time 1 % billion trees have been distributed at nominal cost under this program. State appropriations for this purpose and receipts from the sale of stock are far in excess of the Federal partici- pation. In fiscal year 1950 the Federal Government contributed only $189,000 toward total expenditures of $1,503,000. The agricultural conservation program of the Production and Marketing Administration, activities of the Soil Conservation Service and Extension Service, and programs of other State and Federal agencies have all helped increase enormously the demand for forest planting stock. But it is unlikely that farmers or other small owners will, without more public aid, accomplish Page 43 the huge job of planting forest trees on the millions of open or deforested acres unsuited for other than forest crops. Technical Services. Newest of programs to aid farmers and other small owners in forestry is the technical service in cutting practice, woodland management, and marketing of- fered on a limited scale since 1940. In 10 years, 100,000 owners have been given direct in-the-woods assistance. Almost 10% million acres of woodland have been benefited. In fiscal year 1950 there were some 230 cooperative forest management projects in 36 States, each covering from 3 to 5 counties and each served by a resident forester. Combined State and Federal expenditures were $1,266,000, with the Federal Government contributing $539,000. These projects are administered by the States with Federal financial assistance. Where the size and character of the job warrant, the work is referred to private consulting foresters. The program is small in relation to the need. It will take some 2,000 foresters to extend adequate sendee to all counties with a significant acreage of private forest land in small holdings. Technical service is also made available to farmers through soil conservation districts. The Soil Conservation Service works with farmers in setting up and operating soil conservation districts under State laws. Farm conservation plans which the Soil Conservation Service helps develop and apply in the dis- tricts recognize needs for forest protection, tree planting, and woodland management. The Forest Service and State forestry agencies participate in preparation of handbooks and technical guides for applying simple forestry measures in farm plans. Where more specialized technical service is required, assistance is channeled through the cooperative forest management for- esters, if available. Conservation Payments. Payments to farmers under the Agricultural Conservation Program are another means of en- couraging good forest practices. Payments have been offered for tree planting, fencing of woodlands against livestock, tim- ber stand improvement, constructing firebreaks, and certain naval stores practices. The Forest Sendee establishes standards for measures to be applied on forest lands and checks com- pliance with these standards. It administers the Naval Stores Program by delegation of authority from the Secretary of Agriculture. Payments for forestry practices, exclusive of the Naval Stores Program, aggregating about $733,000 in 1949, account for less than one-half of 1 percent of the total expended for agricultural conservation payments. As interest in forestry grows and administration is facilitated by an increasing num- ber of cooperative forest management service foresters, conser- vation payments may assume a more important part in the application of good forest practices by small owners. The avail- ability of conservation payments should enable the service foresters to get results in a greater variety of desirable practices than would otherwise be possible. Forest Credit. Forest landowners often need credit to finance consolidation of holdings for more efficient manage- ment and protection, to facilitate stand improvement, to pro- vide facilities for sustained-yield operation, to pay costs for carrying immature timber to maturity, or to refund unduly burdensome outstanding loans. But existing credit facilities are not adequate to provide comprehensive forest credit service to small owners. Forest Taxation. Many States have enacted special forest tax laws. Most of these are optional yield tax laws which have had only limited application. A majority of the yield tax laws require some degree of good forest practice in return for special tax treatment. Actually, the management of less than half the private land is likely to be influenced by property taxes. The most recently adopted law, that of New Hampshire (1949), applies to all forest land and provides substantial tax reduction to owners meeting certain standards of forest practice on their lands. State Forest Practice Legislation. Recognizing that the public interest suffers when indiscriminate cutting impairs fu- ture forest productivity or increases the threat of floods and erosion, several States have enacted laws directly aimed at bringing private forest practices up to specified standards. Public regulation is needed to prevent clear cutting without provision for restocking, to stop unnecessary destruction of young growth, and to require reasonable safeguards with re- spect to fire, grazing, and logging. Some 16 States have such legislation—mostly enacted in the period 1941—45—and efforts have been made to obtain regulatory laws in several others. Some of these laws specify definite rules of practice—such as the leaving of seed trees or not cutting below a certain diameter limit—and impose a penalty for violations. The con- stitutionality of such a law in the State of Washington has been upheld by the courts. Some of the laws leave the rules of prac- tice to be determined by committees of forest owners and operators. Some, although nominally mandatory, do not pro- vide adequately for enforcement. Others are not mandatory but simply provide incentive for compliance such as tax rebate in New Hampshire or access to technical service in New York. In some States the law is to all intents dead. In summary, State and Federal programs bearing on private forestry have, to a large extent, reduced the risk of loss from fire, improved technical knowledge, and otherwise offered as- sistance and encouragement so that timber growing should offer prudent landowners in most sections of the country reasonable prospects of success. Yet even in the present extremely favorable economic climate and outlook for forest products, the total impact of all public and private efforts has not brought good forest management to more than a fraction of the private forest land. Public programs will have to be much stronger if future growth goals, needed to meet the country's demands, are to be achieved. The Role of Public Forests Federally owned and managed forest lands in the continental United States aggregate some 186 million acres; chiefly in the West. Development of watershed, recreational, wildlife, and range forage resources and functions must be taken into ac- count, along with timber, in any consideration of policies and programs for federally owned and managed forest lands, but this report deals only with commercial timber resources. Some 90 million acres of the federally owned and managed land are classified as commercial forest land devoted to the production of timber. This area is one-fifth of the commercial forest land in the United States. On these lands, however, Page 44 stand almost two-fifths of the saw timber in the entire coun- try—some 616 billion board feet. The federally owned and managed land and timber are administered by various agencies (see table XVII). Table XVII.—Administration of federally owned land by Government agencies All forest and wood- land Commercial forest Agency Saw timber Million acres 125 31 16 14 Million acres 76 6 6 2 Billion board feet Forest Service 522 59 30 10 Bureau of Land Management. . Bureau of Indian Affairs Other United States 186 90 621 From the standpoint of timber production, the national for- ests, administered by the Forest Service in the Department of Agriculture, are the dominant component of the federally owned and managed forest lands. On a par with the most heavily timbered national forest land are the 2 million acres of revested Oregon and California railroad land grants ad- ministered by the Bureau of Land Management in the Depart- ment of the Interior. Indeed, these "O & C," as they are called, lands account for the bulk of the saw-timber volume on lands administered by the Bureau of Land Management. Next in importance from the standpoint of timber production are the Indian lands managed by the Bureau of Indian Affairs. Com- mercial timber values are not of much importance on other Federal holdings. Timber from the federally owned and managed forests is cut in conformity with the principles of sustained yield under management plans prepared for each unit. Timber to be cut is marked or otherwise designated before operations begin, and provision is made to safeguard the residual stand and obtain regeneration. On the national forests, each sale of more than $500 worth of timber is advertised and sold at competitive bid. S. 1517, 82d Congress, would authorize sales up to $2,000 without advertisement. Sales from the public domain must be advertised when the amount involved is over $1,000. The great majority of the sales are small, unadvertised sales for the bene- fit of local people. Although the objectives in management of Indian lands are much the same as those for federally owned lands, much greater flexibility in long-term plans is required to meet the immediate financial needs of individual Indians or to facilitate the educational and industrial advancement of the tribes. The Sustained Yield Unit Act of 1944 authorizes coopera- tive management of federaly owned and private forest lands. One such cooperative sustained-yield unit has been established by the Forest Service. The private owner agrees to manage his lands in coordination with national forest lands, and as directed by the Forest Service. In return, national forest timber is offered the cooperator at appraised value, without competi- tive bidding. The 1944 Act also provides for Federal units consisting wholly of federally owned or administered forest land. Five such units are in operation on the national forests. These units are designated to stabilize communities which are primarily dependent on national forest timber. The Bureau of Land Management has established no sus- tained-yield units under the Act of 1944, but has established "Master Units" for the "O & C" lands under authority con- tained in the Act of August 28,1937. In fiscal year 1950 some 4.7 billion board feet of timber were cut from the federally owned and managed forests (see table XVII). Table XVIII.—Timber cut in 1950 from federally owned and managed forests. Timber cut in fiscal year 1950 National forests 3.5 Indian lands 0. 6 "O&C" lands and public domain 0. 6 Total 4.7 The 1950 output of forest products from the federally owned and managed lands was about 9 percent of the Nation's total output of 52 billion board feet. The trend of output from the Federal lands has been sharply upward in recent years. Cutting on the national forests, for example, will have exceeded 4*/2 billion board feet in 1951. The increased demand is directly related to the shortage of other timber available for operation. Because the Federal forests have a disproportionate share of the Nation's present saw-timber stand, they are destined to supply a substantially larger proportion of national needs in the next several decades. This will require a large investment in roads to open up bodies of timber not now accessible. Eventually the proportionate output of the Federal lands over a period of years should average out at a percentage some- what below their proportionate acreage (19 percent). The potential sustained annual cut from the national forests alone when fully developed is about 10 billion board feet annually. Output of the Federal lands in continental United States may be supplemented by the large acreage of undeveloped forest in Alaska. Much of the huge acreage of public domain in Alaska is unknown. There are perhaps 40 million acres of commercial forest. Further exploration and surveys are needed to determine the possibilities of economic use of this timber. In southeastern Alaska, where climatic conditions are reason- ably favorable, there are 2 national forests with about 5 million acres of commercial forest land. Present annual output is about 75 million board feet of lumber, chiefly for local use. After supplying local needs for lumber, timber on these forests is to be managed primarily for pulp production. A large sale re- cently consummated assures the construction of the first pulp mill in Alaska. The possibilities of establishing additional mills are now being studied by prospective purchasers of national forest timber. The potential sustained-yield output of the Tongass National Forest is about 1 million tons of pulp plus substantial quantities of lumber, plywood, and shingles. STATE AND LOCAL FORESTS There are 27 million acres of State and local government forests in the United States. They represent nearly one-fourth of the publicly owned or managed commercial forest land, but less than 6 percent of all (both public and private) com- mercial forest land in the United States. Page 45 The volume of saw timber in these forests totals 65 billion board feet, less than 10 percent of all publicly owned saw tim- ber and only 4 percent of the total saw-timber volume on all commercial forest land in the United States. Although most of the State and local government forest acreage (80 percent) is located in the East, the bulk (78 percent) of the saw-timber volume in these forests is in the West. State forests have been established on lands received by the various States through Federal grants, tax reversion, gift, ex- change, purchase, and lease from the Federal Government. The total area of these State forests is 16.6 million acres, not including about 1.3 million acres of State-owned lands, such as game areas, forest parks, or forest lands not under any type of management. They are maintained for various purposes— including timber production, recreational and esthetic values, and sometimes grazing—depending upon location, vegetative cover, and character of acquisition. Because so much of the State forest lands were acquired in run-down condition, fire protection and reforestation consti- tute a large part of present management. However, in several States sale of timber is an important activity. Cutting practices are for the most part good or better. Local government forests comprise somewhat over 9 million acres of commercial forest land. Included in this acreage are some three thousand community forests totaling 4.4 million acres. Recreation, education, and the protection of municipal water supplies are dominant purposes in the use of these com- munity forests. Timber production is generally of secondary importance. In summary, federally owned and managed forests are a vital element in the Nation's timber supply. They will be called upon for an increasing proportion of the total timber cut in the next few decades as the forest industries strive to hold the output of timber products up to the prospective high level of demand. Present policy in the administration of the federally owned and managed forests aims, within the limit of available funds, to develop their full productive capacity as rapidly as possible. Sustained-yield principles are followed in their man- agement so as to assure that full productivity will be available for future generations. The economic contribution of State and local government forests will be on a smaller scale. Many of these forests have been acquired in depleted condition. With some exceptions their chief contribution for many years will be in social values such as pleasure, health, and improved living standards. References Elsewhere in This Report This volume: The Free World's Forest Resources. Vol. IV: The Promise of Technology. Tasks and Opportunities. The Technology of Forest Products. Page 46 Report 6 The Free World's Forest Resources The Situation in Brief The United States, though ranking first among the nations of the entire world as a producer of timber products, is also one of the world's leading net importers of timber products. Of the principal forest products moving in international trade—softwood and hardwood lumber, wood pulp, and news- print paper—the United States is the world's largest importer of all except hardwood lumber. Canada is the free world's largest exporter of softwood lumber, wood pulp, and newsprint, for all three of which the United States has become increasingly dependent on Canada. Heavy reliance upon softwood for these leading products puts a severe strain on the free world's softwood forests, a large part of which is located in North America. The free world is getting along with comparatively small timber imports from the Soviet sphere. Such timber-deficient areas as Western Europe, which formerly imported large quantities from European Russia and other eastern European sources, have been compelled to reduce consumption of timber products below prewar levels. However, the timber exports from East to West are increasing. The United States and other free world areas in the Tem- perate Zone are dependent upon the Tropics for imports of a number of specialty woods of strategic importance, including mahogany, balsa, teak, and lignum vitae. There are extreme differences in extent of forest resources among the free world areas. The leading timber-deficient areas are North Africa and the Near East, Japan, and western portion of Southeast Asia, and free Europe. The leading timber-surplus areas are Canada, Alaska, Latin America, and Equatorial Africa. With the exception of Canada and Alaska, whose unexploited forests contain mainly softwoods, the free world's undeveloped forests are composed largely of tropical hardwoods. About half the entire productive forest areas of the free world's timber-surplus countries is now classed as economically inaccessible, an indication of the magnitude of the problem involved in making these resources available on a large scale. Estimated free world requirements for industrial wood (all wood except fuel wood) in 1970-79 show an increase of about 40 percent over consumption in 1947-^9, owing largely to an anticipated 47 percent increase in total free world population. * Prepared by the Forest Service of the Department of Agriculture, at the request of the Commission. This paper has been edited by the Com- mission's staff. On the other hand, it is estimated that free world output of in- dustrial wood in 1970-79 will be only 4 percent above output in 1948, unless extraordinary measures are taken to build up forest productivity in the more advanced countries and to expand production in the underdeveloped countries. The development of the forest resources of the underde- veloped countries at a rate commensurate with the increasing requirements of the free world requires technical and economic aid from the more advanced countries. Such aid can raise in- dustrial wood consumption and standards of living in the underdeveloped countries and also provide increased timber exports to timber-deficient countries. The inclusion of the U. S. S. R.'s vast timber resources, especially of softwood, in the world picture would permit nar- rowing of the gap between world supply and requirements, but the Soviet orbit's own requirements are growing rapidly, and, quite apart from strategic considerations, Russia cannot be depended upon for timber exports greatly in excess of those of prewar years. Review of the free world's present and prospective timber supply situation strongly indicates the advisability of the United States placing greater dependence on its own timber resources in the future, particularly with respect to softwood. The free world's softwood resources are proving inadequate, in their largely unmanaged condition, to meet current require- ments without continued overcutting. Canada is now supplying the great bulk of United States requirements in excess of the domestic supply, but Canada's own needs are growing, and other free world countries must also depend in part on Canada as a source of softwood imports. Prompt and effective measures to build up United States softwood growing stocks would not only assure meeting do- mestic requirements some decades hence, but would make possible the resumption of substantial exports to needy friendly nations. But such measures could not appreciably alleviate a short-term pinch in the softwood supply, particularly in lumber and other products from trees of saw-timber size. The outlook for softwood pulpwood is somewhat better, as there are ex- tensive areas in northern Canada and Alaska that can yield quantities of small-sized material. The future role of the United States in the free world's forest economy should clearly be one reflecting its generous share of the world's natural forest wealth, its great productive capacity, and its position of leadership among free world countries. Ranking fourth among all countries of the world in productive forest area and leading all countries in the output of industrial wood, the United States should be expected to take the neces- Page 47 sary steps to assure an adequate future supply of timber for its own use with some surplus to help meet the import require- ments of timber-deficient countries. WOOD PRODUCTS TRADE The United States has long been dependent upon imports of wood, although it possesses the fourth largest forest area among the nations of the world and is a leading producer of forest products. At one time, imports were limited chiefly to foreign cabinet woods like mahogany and rosewood. In the last 50 years the rapid growth of population and industrial wood 1 requirements together with a decline in readily accessible do- mestic commercial timber, have brought a steady increase in imports of lumber, pulp and paper, and other products. In recent emergencies, United States exports of forest products have been sharply restricted and special efforts have been made to increase both production and imports. The growing depend- ence of the United States upon foreign sources of timber sup- ply to maintain its high rate of industrial wood consumption comes at a time when other nations in the free world are look- ing to North America to provide a larger share of their import requirements. The principal forest products moving in international trade are softwood lumber, hardwood lumber, wood pulp, and news- print paper. The United States and Canada are in an outstand- ing position in free world forest products trade. The United States is the world's largest producer of softwood lumber (52 percent of free world total) and wood pulp (43 percent), and second largest producer of hardwood lumber (26 percent); it is by far the largest consumer and net importer of softwood lumber, wood pulp, and newsprint paper [/]. Canada is the free world's largest exporter of each of the four products, again excepting hardwood lumber, in which it ranks second to Southeast Asia. While Canada produces only 11 percent of the free world's softwood lumber, it exports 31 percent of the free world's export total. For hardwood lumber, the percentages are 4 and 15, respectively. In wood pulp, Can- ada's shares of free world production (28 percent) and export trade (30 percent) are nearly equal. Canada produces 63 percent and exports 80 percent of free world newsprint paper [1]. It is the world's great source of forest products exports. Free Europe's production of the four major forest products is largely absorbed in satisfying its own requirements. This area is a net importer of softwood and hardwood lumber— leading the world in imports of the latter—but a small net exporter of wood pulp and newsprint paper. The rest of the free world is on a net importing basis, the main exception being small export balances in hardwood lumber for the tropical areas. While the Tropics contain much exploitable timber, their industrial development is not yet advanced enough to contribute substantially to the world supply of manufactured wood products. The impact of the Second World War and its aftermath brought about changes in the normal pattern of timber trade, particularly in Europe. As a result of the greatly reduced flow of forest products from east Europe to west Europe in the early 1 "Industrial wood" includes all primary wood products other than fuel wood. postwar years, the timber-deficit countries of the latter area turned toward North America as an alternative source, par- ticularly of softwood lumber. Dollar shortages subsequently discouraged purchases of North American timber products and forced free Europe to reduce its consumption still further. In the United Kingdom this situation necessitated the con- tinuation of wartime timber consumption controls and prompted renewed efforts to increase timber imports from the Soviet bloc and to develop new sources of hardwood supplies in tropical areas. Some of the decline in forest products trade between eastern and western Europe is the result of decreased postwar pro- duction in some of the Soviet satellite countries. A further cause is the increasing domestic demand within the Soviet sphere, particularly in the U. S. S. R., to meet both military and civilian requirements. However, the timber imports of the free world, chiefly free Europe, from the Soviet bloc have been on the increase since 1948. In 1950-51, the United Kingdom increased its contracts for U. S. S. R. softwood lumber [2]. The United States could supply the residual timber import needs of the rest of the free world, but only by a drastic change in domestic production or consumption levels. In the face of a declining timber resource and an expanding home economy, there is little prospect of the United States increasing its exports in the near future. So also are there limits to Canada's capacity to continue lumber exports at the present level, although its large pulpwood resources can continue to supply large quan- tities of wood pulp and newsprint. There has never been any large volume of forest products trade between the United States and the Soviet bloc, hence the "cold war" has had little effect on the United States supply position. Similarly, the timber imports of Latin America and some other free world areas have not been seriously affected. But in the case of western Europe and Japan, requirements for timber products have been greatly increased by the destruc- tion of both forests and structures of all types during the Second World War. Meeting these needs without substantial de- pendence on the Soviet bloc is indeed difficult. PULP MATERIALS AND PRODUCTS United States requirements for pulp, paper, and paperboard products have grown enormously during the past half century. The steadily increasing number of everyday uses for paper and paperboard and the rapid growth of the synthetic fibei industry have resulted in large increases in both domestic pro- duction and imports of these products. Of the total tonnage of pulp materials and products moving in international trade in 1948, about 26 percent was pulpwood, 32 percent pulp, and 42 percent, paper and board [/]. Pulpwood consumption in the entire world totals about 47 million cords (120 million cubic meters) of roundwood' annually. More than 90 percent of this wood is from softwood species. In terms of converted pulp and paper products, pei capita consumption is equivalent to 26 pounds of pulp annu- ally. This average, however, covers a range from a minimurr of less than 2 pounds in some Far Eastern and Latin American countries to a maximum of 264 pounds in the United States. [3] 2 One cord equals 2.55 cubic meters of roundwood. Page 48 About 44 percent of the free world's pulpwood output in 1948 was cut in the United States; 29 percent, in Canada; 26 percent, in Europe; and only 1 percent, in all other regions. In that year, there were five leading pulpwood producers in the free world [1]. (See table I.) Table I.-—Pulpwood production in the free world Cords (thousands) Cubic meters, roundwood (thousands) Percent of free world production Country United States 17, 969 45, 822 44 Canada 11. 798 30, 085 29 Sweden 4, 863 12, 400 12 Finland 2, 435 6, 210 6 Norway 1, 231 3, 140 3 All other 2, 448 6, 243 6 Free world total 44, 744 103, 900 . 100 In 1948, only about 7 percent of the total quantity of pulp- wood produced in the entire world moved across national boundaries, and slightly over three-fourths of this small frac- tion—roughly 2.3 million cords—were imported by the United States from Canada. The annual volume of United States pulpwood imports has ranged from a low of 648,000 cords in 1932 to 2.3 million cords in 1948 (rough wood basis). The average for the past decade is about 1.9 million cords. During this decade, United States consumption increased from 16.6 million cords in 1941 to 23.7 million cords in 1950. In 1950, imported pulpwood amounted to 7.8 percent of total United States consumption, compared with 13.7 percent 10 years previously [4, 5]. Exports of pulpwood by the United States have been ex- tremely small, amounting during the past 40 years to only some 4 percent of imports. Like exports of fuel wood, they rep- resent border trade with Canada conducted for local convenience [4]. The heavy reliance upon softwood species for pulp and paper production, together with the probability of increasing demand for pulp and paper products for many years to come, directs attention to the heavy drain on the free world's softwood forests and to the need for expanding the utilization of hard- wood species. Hardwoods are in greater abundance in most parts of the world, but for most grades of pulp they are, under present production technology, generally less desirable than softwoods. Outside the Scandinavian countries and Finland, whose combined softwood forest area is only one-fourth that ol the United States, over 80 percent of the free world's soft- wood forests are located in North America [6]. Wood pulp, in contrast to pulpwood, is actively traded in world markets and represents one of the more important United States imports. Entire world pulp production in 1949 is estimated at 31.3 million short tons (28.4 million metric tons), approximately 18 percent of which entered the export trade. There were six leading free world producers [/]. (See table II.) United States production of wood pulp in 1950 reached an all-time high of 14.8 million short (13.4 million metric) tons [5]. Imports reached 2.4 million short (2.2 million metric) tons—a record high, except for 1937—which amounted to about 14 percent of total domestic consumption. United States pulp imports in 1950 were obtained from the four major sources [5]. (See table III.) Immediately prior to the Second World War, Sweden was the principal supplier of wood pulp to the United States, fol- lowed by Canada and Finland. Swedish pulp production showed a continuous growth in the decade preceding the Sec- ond World War, reaching a peak of 3.9 million short (3.5 mil- lion metric) tons in 1937. In the postwar period, however, production in Sweden failed to reach the prewar level, averag- ing about 3.1 million short tons. No substantial increase in pulp exports from Scandinavia and Finland is in prospect. The current rate of timber drain is in approximate balance with growth, and overcutting is looked upon with disfavor. Canadian production and exports of wrood pulp have steadily increased, so that Canada is now the world's leading exporter of wood pulp, as well as of pulpwood and newsprint. The pro- portion of softwood timber volume in the Canadian forests is larger than in the United States, and Canadian forests are particularly well suited to pulpwood production. Such good pulping species as spruce, balsam fir, jack and lodgepole pine, and aspen, constitute about 70 percent of the total stand of accessible timber [7]. Table II.— Wood pulp production in free world Short tons (thousands) Metric tons (thousands) Percent of free world production Country United States 12, 157 7, 818 3, 164 1, 778 993 803 1, 519 11, 029 7, 092 2, 870 1, 613 901 729 1, 378 43 28 11 6 4 3 5 Canada Sweden Finland Norway Western Germany All other' Free world total 28, 232 25, 612 100 United States exports of wood pulp are comparatively insig- nificant. Wood pulp exports of the Soviet sphere nations averaged 300,000 short (272,000 metric) tons in 1935-38. Czechoslo- vakia, Estonia, and Lithuania together shipped 91 percent of the total. [8] These exports went mainly to western Europe. In Table III.—United States imports of wood pulp Short tons (thousands) Metric tons (thousands) Country Percent Canada 1, 711 397 205 30 34 1, 552 360 186 27 31 72 17 9 1 1 Sweden Norway All other Total 2, 377 2, 156 100 1948-49, however, total west European imports of Soviet wood pulp averaged only 45,000 short (41,000 metric) tons, or 15 percent of the total prewar Soviet exports. Minor amounts were shipped to the United States, Japan, and Latin Amer- ica [/]. Page 49 Paper and paperboard 3 production in the free world in 1949 totaled nearly 40 million short (36 million metric) tons. United States production in 1950 was about 24 million short (22 million metric) tons. Imports amounted to about 5 million short (4.5 million metric) tons, practically all of which repre- sented newsprint paper, with 96 percent originating in Canada. The remaining small fraction was supplied by Finland and Sweden [5]. United States exports of paper and board are relatively unimportant, amounting to only 7 percent of imports in 1950 [5]. The production of newsprint has not kept pace with that of paper as a whole. World production in 1949 totaled 8.1 million short tons, as compared with 8.6 million in 1937. Consump- tion in the United States in this period increased from 4.0 to 5.5 million short tons. In the United States, total paper and board production increased about eightfold in the past 50 years, but newsprint production reached its peak in 1926 (1.6 million short tons), thereafter declining to an average level of around 1 million short tons. [4] The United States depends on Canada for over 80 percent of its newsprint paper. Canada's own needs for pulp and paper are growing, as are those of other nations with which it may be advantageous for Canada to maintain trade relations. The acute shortage of material for paper making in west Europe, all the countries of which must rely in part on imports to supply paper and paperboard requirements, assures continuing European de- mands against the Canadian pulp and paper supply. The United States cannot safely look to Canada as a source of steadily increasing pulp and paper imports. As in the case of pulp and paper generally, United States exports of newsprint have been very small, amounting to only 44,000 short (40,000 metric) tons in 1950. There has been no significant change in such exports during the past decade. The only Soviet export of newsprint paper in 1948-49 was 10,000 short tons shipped from the U. S. S. R. to unspecified countries. No information on prewar shipments is available, but so far as is known Soviet Russia exported no newsprint in that period. LUMBER Entire world production of lumber in 1949 is estimated at about 84 billion board feet (197 million cubic meters) .4 Total output of the countries reporting to United Nations Food and Agriculture Organization was about 65 billion board feet (154 million cubic meters), of which about 78 percent was softwood, roughly half accounted for by the United States [/]. United States foreign trade in lumber has been marked dur- ing the past decade by a change from a long-time net export position to one of net import, with 1941 the turning point. Around the beginning of the century, exports were about 1.5 billion board feet. They rose to 3 billion board feet in 1913, or nearly 9 percent of total production, declined during the First World War to about 1 billion feet, then gradually increased to 3.2 billion feet in 1928, the all-time peak. Thereafter they dropped steadily to 1.1 billion board feet in 1932, and exceeded that figure only in 1937 and 1947. In 1950, United States 3Fiberboard (building boards) not included. 4 One cubic meter equals 424 board feet. lumber exports were only 517 million board feet. Twenty years ago they were approximately 7 percent of total produc- tion; in 1950, less than 1.4 percent [4]. United States imports of lumber, on the other hand, never exceeded 2 billion board feet in any year until 1950 when they reached the all-time high of 3.4 billion feet, nearly 9 percent of total consumption. In the years leading up to the First World War, they averaged slightly less than 1 billion board feet annually; between 1918 and the beginning of the economic depression of the 1930's, about 1.4 billion; between the latter date and the start of the Second World War, about 0.5 billion; during the war years, 1.1 billion; and in the 5 post- war years, some 1.9 billion board feet [4]. The history of United States foreign trade in lumber has differed markedly as between softwood and hardwood. Soft- wood imports have always been much greater than those of hardwood, in recent years amounting to about 85 percent of total imports. They have been almost entirely for construction, boxing and crating, and other general purposes. They have consisted of species such as spruce, Douglas-fir, pine, and hemlock, nearly all coming from Canada. Hardwood lumber imports have included general utility woods such as birch, beech, and maple from Canada, and cabinet and specialty woods like mahogany, teak, balsa, and lignum vitae from the Tropics. In 1949, imports of general utility hardwood lumber amounted to about 100 million board feet and specialty and cabinet hardwoods to about 37 million board feet [4]. Imports of hardwood logs in some years are nearly as great as those of lumber. In the case of the cabinet woods which are used to produce fine cabinet veneers in this country, they are larger. The principal foreign sources of hard- wood lumber and logs, aside from Canada, are the Central American countries, west Africa, and the Philippines. Softwood lumber exports, like imports, have also been several times greater than those of hardwood, amounting to about 80 percent of total lumber exports in 1949; in that year, they were about 2 percent of total softwood production, whereas hardwood exports were 2.3 percent of total hardwood pro- duction. Douglas-fir and southern yellow pine far outrank all other softwoods in United States export trade, with the former in recent years exceeding the latter by a ratio of about 3 to 1. The principal importers have been the United Kingdom, Canada, the Netherlands, Union of South Africa, Australia, Puerto Rico, and Cuba [4]. In 1947, United States softwood lumber exports, largely to Western Europe, were roughly double those of any of the previous 6 years. Subsequent dollar shortages sharply curtailed the European trade, however, and exports leveled off at less than one-half billion board feet. Oak is the principal hardwood exported, and the United Kingdom generally has been the principal importer. Prior to the Second World War, United States hardwood lumber ex- ports to the United Kingdom were four to five times greater than to any other country. After the war, however, the United Kingdom sharply reduced purchases from the United States; in 1949, Canada was the leading importer of United States hardwood lumber. Throughout the world, hardwoods have a much wider range of properties than softwoods. The forests of the United States contain a number of hardwoods having properties which peculiarly fit them for certain highly exacting uses, e. g., hickory Page 50 for tool handles, picker sticks for looms, and shunt poles used by the British railroads; tough white ash for tool handles, boat oars, and athletic equipment; dogwood and persimmon for shuttles; black walnut for gun stocks; and yellow birch for air- craft veneer. These woods have been in demand by foreign countries, but the domestic supply of a number of them is be- coming increasingly limited. The outlook for lumber imports by the United States is for a continuation of the relatively high level of recent years, though not at the peak rate of 3.4 billion board feet attained in 1950. Since Canada is the best free world source of large imports of softwood lumber, much depends upon future levels of Cana- dian production and on demands from other importing coun- tries. Canada holds much less promise as a lumber exporter than as a supplier of pulp and paper. Canada possesses a rather small area suitable for saw timber production, compared with the United States, much of the country being too far north to produce trees of the larger sizes. Furthermore, with the con- tinued growth of Canada's population and industrial plant, Canadian requirements for lumber may be expected gradually to increase and export availabilities to decline. The outlook for lumber exports from the United States in the near future is a continuation of the present comparatively low level. The United States can no longer offer the export market large quantities of high-grade lumber and other timber products at comparatively low prices. Changes in the normal pattern of international timber trade resulting from the Second World War and the subsequent "cold war" are of particular significance in the case of trade in lumber. Total exports of softwood lumber in the prewar period of 1935-38 from countries now within the Soviet sphere aver- aged about 3 billion board feet (7.1 million cubic meters) annually, or almost 30 percent of total world export [8]. Of this total, the U. S. S. R. furnished more than half, with Poland and Rumania the next most important suppliers. Much of this export went to western Europe, particularly to the United Kingdom, some to the United States. In contrast to prewar, the free world's average annual import of softwood lumber from Soviet countries in 1948-49 was 0.5 billion board feet (1.2 million cubic meters)—only 17 percent of the average annual total exports of the present Soviet bloc countries in 1935-38 [1]. The principal importer is still the United King- dom, but its 1948-49 receipts from these sources were only about 35 percent of the prewar average. In the case of hardwood lumber, the 1935 -38 average an- nual export of present Soviet bloc countries was about 135 million board feet (318,000 cubic meters), mostly from Poland, Rumania, and Czechoslovakia [8]. The U. S. S. R. supplied less than 2 percent of the total. Again, western Europe was the principal destination. In 1948-49, total free world imports of hardwood lumber from the Soviet sphere averaged 22 mil- lion board feet (52,000 cubic meters) annually, only one-sixth of the prewar total exports. Principal importers were the United Kingdom and the Netherlands. There were no exports from the Soviet sphere to areas other than western Europe [/]. There are certain imported foreign woods possessing char- acteristics not found in the same combination in any domestic woods, outstanding examples being mahogany, balsa, teak, and lignum vitae—all hardwoods which are imported in the form of logs or lumber. Mahogany, though ordinarily consumed chiefly in furniture manufacture, has peculiar qualities which give it high priority for military use in boat and aircraft construction. Military re- quirements during the Second World War were met by restrict- ing nonmilitary uses and making special procurement efforts. The raw material supply situation has since deteriorated to some degree. True mahogany (Swietenia) is found only in Mexico, Cen- tral America, the West Indies, Colombia, Venezuela, and the upper Amazon basin. African mahogany, chiefly Khaya, is widely distributed throughout tropical Africa, from the Gambia to Angola and across central Africa to the Egyptian Sudan, East Africa, Northern and Southern Rhodesia, and Mozam- bique. In the Philippines, certain species of Shorea, better known as tanguile and red and white lauans, and called Philip- pine mahogany in the export trade, also bear a sufficient resem- blance to some grades of true mahogany to be used extensively as a substitute for similar purposes. The natural distribution of Shorea extends over southern Malaya, Sumatra, Java, Borneo, and the Philippines [9]. Mahogany is imported as both logs and lumber. Most of the logs currently imported by the United States come from British Honduras and the Gold Coast, and Mexico and the Gold Coast are the principal suppliers of mahogany lumber. Total United States imports of American and African mahog- any logs and lumber in 1950 were about 85 million board feet. This compares with a peak annual consumption during the Second World War of 52.3 million board feet. United States imports of so-called Philippine mahogany are estimated at about 25 million board feet in 1950. If the United States were forced, in an emergency, to draw its entire supply of mahogany from the Western Hemisphere, a critical shortage probably would develop. The largest quan- tity ever brought in from Latin America was 45 million board feet in 1944, in part the result of a special procurement effort. Throughout the most accessible forests of the Caribbean area, the supply of mahogany timber has been greatly reduced. Such countries as Mexico, Cuba, Haiti, the Dominican Re- public, Honduras, Nicaragua, and Guatemala must be con- sidered declining sources. It is believed, however, that large volumes of mahogany remain in Colombia, Venezuela, Brazil, Peru, and Ecuador, but in comparatively remote areas difficult of access. Since mahogany trees occur as widely scattered in- dividuals, it would require extensive operations to bring out large quantities from such areas as the upper reaches of the Amazon and Orinoco. During the Second World War, British Honduras and West Africa were the most dependable suppliers. In West Africa, the coastal areas where mahogany occurs in commercial quantities have been heavily exploited during the past 50 years; the remaining supply is not expected to last more than two decades. In the lower Congo basin, which is believed to contain the bulk of the remaining mahogany supply, ex- ploitation for mahogany and other cabinet woods has been undertaken on a large scale since the war. This large area may yield increasing quantities of mahogany for several decades. The Philippine woods that are accepted as substitutes for mahogany have been exploited for export for the past half century, but large volumes still remain in the less accessible areas. The lauans are very widely distributed throughout the islands and are among the most abundant timbers found there. Page 51 Balsa (Ochroma), the recognized peer of all light-weight woods, occurs in the West Indies, Mexico, Central America, and northwestern South America as far south as Bolivia. Prior to the Second World War, more than 90 percent of the total world supply came from Ecuador, and that country con- tinues to be the leading exporter. During the war, United States imports of balsa logs and lumber, very largely the latter, rose to 33.7 million board feet, as compared with an average of about 4 million board feet before the war. Imports in 1950 were 8.1 million, nearly all from Ecuador. Its extreme buoyancy makes it highly suitable for life rafts, life preservers, mine floats, buoys, and similar marine uses. It has also been used very effectively as a core material in sandwich-type aircraft plywood. There are lighter woods, but they lack the strength of balsa and are not available in com- mercial quantities. Various synthetic materials have been tested, but none possesses all the desirable characteristics of balsa. Balsa trees 2 feet or more in diameter can be grown in plan- tations in rich soil in only 5 to 6 years. But the wider fluctuation between peacetime and wartime requirements is conducive to a "boom and bust" situation in the principal supplying countries and there is little incentive to manage balsa forests to provide continuous yields. There has been no organized replacement of stands since the war, and in recent years young trees of second growth have been cleared for planting rice. The doubling or tripling of United States peacetime consumption of balsa would have a highly desirable effect on stabilizing the supply situation. Under present conditions, a sudden emergency would probably reveal a shortage of balsa of the desired grades. Teak (Tectona) grows chiefly in India, Ceylon, Burma, Thailand, French Indo-China, Malaya, and Indonesia. It pro- duces the finest wood for ship decking and planking of any known species, being noted for high resistance to decay, sta- bility under a wide range of moisture conditions, uniform grain, a natural oiliness that permits contact with steel without corrosion, and general suitability for marine construction. United States imports of teak averaged about 1.4 million board feet before the Second World War, thereafter declining sharply until the end of the war. Postwar imports have averaged about 435,000 board feet annually, principally from Thailand and Burma. Estimated annual requirements of the Navy for teak during the war were about 1.8 million board feet. Immediately before the war and during its early stages, the United States obtained most of its teak from Burma. The Burmese teak industry was efficiently organized under British control. Following occupation of Burma by the Japanese and its subsequent independence, teak production was disrupted, logs were stolen by insurgents, and the industry was generally disorganized. In early 1949 the new Burmese Government completed nationalization of the forests, and the Teak Con- sortium, composed of European firms operating in the teak forests, was dissolved. During the past few years a large per- centage of available Navy specification teak has been taken up by the British Admiralty, leaving comparatively little to meet United States requirements. The United States turned to Thailand as a main source, and since 1948 almost all United States teak imports have come from there. As in Burma, the teak industry of Thailand has been well organized and the teak forests conservatively managed. Some degree of overcut- ting has been reported but it is not believed to be serious. Because of its excellent qualities for many exacting purposes, teak has been widely introduced by planting. There are planta- tions in the West Indies, Central America, northern South America, and along the west coast of Africa. Most of the stands in the Western Hemisphere are too young to serve as an imme- diate source of supply for high specification lumber. The teak forests of southeast Asia contain sufficient raw material to permit a continuation of the present level of exports for many years. However, the possibility of repetition of a situation similar to that which developed in the Second World War encourages additional planting of teak in the Tropics of the Western Hemisphere. Mahogany, balsa, and teak are the most important of the foreign woods, but there are others having unusual properties, including lignum vitae for propeller shaft bearings, Australian ironbark for ship prow sheathing, rattan for ship fenders, and boxwood for scales and rulers. Other forest products are of relatively limited importance in United States import or export trade. Imports of sawlogs and veneer logs, for example, amounted to only 268 million board feet in 1950, or approximately 0.7 percent of domestic consumption, including tropical specialty hardwood logs. United States exports of logs have declined in the last half century from about 200 million board feet in the early 1900's to an average of about 50 million feet in the 1940's. In 1950, total exports of sawlogs and veneer logs amounted to 51 million board feet, of which 29 million feet was softwoods and 22 mil- lion hardwoods. Most log exports went to Canada. FOREST RESOURCES OUTSIDE THE U. S. There are large variations in the abundance of timber re- sources throughout the world and in such factors as availability and usefulness for industrial products. The forests of the free world are very unevenly divided among the major geographical areas, as shown in table IV. In keeping with the unequal division of land masses between the Northern and Southern Hemispheres, about 70 percent of the world's forests are found in the Northern Hemisphere. It is north of the Equator, moreover, that practically all of the earth's temperate forests are found. These contain such conifers as pine, spruce, and fir, the sources of the softwood timber on which the world's wood economy is largely based, as well as a variety of general utility hardwoods. The Southern Hemisphere, in contrast, contains almost no temperate forests. The only sizable body of natural softwood timber south of the Equator is the Parana pine (an araucaria) of southern Brazil. Elsewhere in the Hemisphere, hardwood predominates. Of the four largest bodies of timber in the world—in North America, northern Eurasia, Equatorial Africa, and northern South America—only the first two consist predominantly of general utility softwood and hardwood timber of the sort that makes up over three-fourths of present world consumption of industrial wood. The forests of South America and Equatorial Africa are composed almost entirely of tropical hardwoods. The greatest expanse of temperate forest is in the Soviet Union which leads the world in area of forest land. The degree of economic accessibility of the world's forests varies widely among the major geographical areas. In the United States, free Europe, and Japan, roughly 90 percent of Page 52 the total productive forest area is accessible, as compared with slightly less than 50 percent in the case of Latin America, Cen- tral and South Africa, and Oceania [6]. For the free world as a whole, the proportion of presently accessible forest is esti- mated to be slightly more than half the total. Table IV.—Productive forest area of the free world: 79481 Million Percent Hectares Region hectares of total per capita United States and Alaska 240 12 1. 6 Canada 214 11 16. 2 Free Europe 98 5 . 3 Latin America 715 37 4. 7 Central and South Africa 350 18 2. 3 North Africa and Near East 20 1 . 2 Southeast Asia 225 12 . 4 Oceania 50 3 4. 2 Japan 22 1 . 3 Totals and average 21, 934 100 3 1. 2 1 Forest area capable of producing trees suitable for industrial wood prod- ucts, as distinguished from fuel wood only, a more inclusive classification, however, than commercial forest area. 2 4,779 million acres. 3 3.0 acres. The temperate forests of Eurasia and North America have been much more heavily exploited than the tropical forests of Latin America, Africa, Oceania, and Southeast Asia. While the degree of forest depletion in a given country can in many cases be directly related to the density of population or the length of time the country has been occupied, there are other cases where a densely populated and long-settled country main- tains its forests at a high level of productivity, e. g., Germany, France, Austria, and Switzerland. In general, the western European countries, including Scan- dinavia and Finland, are much more advanced in the practical application of forestry than other parts of the world. The United States and Canada are in the early stages of forest management and do not as yet control the over-all rate of cut- ting or by other means assure perpetuation of the resource at a level commensurate with future national requirements. In Latin America and Africa, forest management, with few ex- ceptions, is barely in the beginning stage. In Oceania and Southeast Asia, there are examples of a high order of forest management in some places, such as in the teak forests of Burma and Java and in parts of India, Malaya, Australia, and New Zealand, but, for the most part, forest conditions reflect a lack of systematic care and protection of the resource. Canada Canada's productive forest area is approximately 11 percent greater than that of the United States, but about 45 percent of it is presently inaccessible, as compared with slightly over 10 percent in the United States. Total timber volume on accessible forest lands is only about 45 percent as great as in the United States [6]. Canada's total timber stand, on accessi- ble and inaccessible land, is estimated to be about 8.8 billion cubic meters, some two-thirds that of the United States. Average growth rates and tree sizes in Canadian forests are also less than in the forests of the United States, and Canada possesses comparatively little saw timber. The volume of ac- cessible saw timber was reported in 1947 to be only about 25 percent of total timber volume, as compared with nearly 70 percent in the United States [10]. The bulk of the Canadian saw timber is in southern Canada, the portion which is most accessible and therefore most subject to heavy exploitation. The species composition of the Canadian forests is well suited to supplying the needs of the timber industries. The predominance of spruce, balsam fir, jack and lodgepole pine, aspen, and white birch—all of them softwoods or light-colored, low-density hardwoods suited to pulping—is especially ad- vantageous to the pulp and paper industry. These are species which are in greatest demand for general utility lumber, pit props, pulpwood, poles, and many other products. Though Canadian Douglas-fir logs and lumber have gained prominence in world trade because of their quality, as well as the past high rate of production and export, the total remaining stand is comparatively small, amounting to less than one-tenth that of spruce. Similarly, the stand of high-density hardwoods, in- cluding yellow birch—highly prized for aircraft veneer—beech, hard maple, and ash, is very small compared with the volume represented by the low-density hardwoods such as aspen. While the average annual growth rate has not been accu- rately determined, it is estimated, probably conservatively, that the accessible productive forests are growing at a rate of about 0.8 cubic meters per hectare, equivalent to a total of about 87 million cubic meters per year [6]. Offsetting this is the drain from fellings, amounting to nearly 90 million cubic meters in 1949, plus the drain caused by losses from fire, insects, diseases, etc., estimated roughly at 25 million cubic meters annually. Thus it appears that Canada is overcutting to a substantial de- gree. It should be pointed out, however, that the actual growth rate remains to be determined and that Canadian old growth stands show little net growth. The growth rate of the Russian forests, which are similar in many respects to those of Canada, has been estimated to be about 1 cubic meter per hectare. Canada has by no means attained the maximum sustained output of forest products of which its forest lands are capable. Losses of growing stock from forest fires, insects, and disease are heavy. During the decade ending in 1949, over 20 million acres (8.1 million hectares) were burned. Fire has destroyed, on the average, about half as much merchantable timber each year as is used by the entire pulp and paper industry [11]. Logging operations are often conducted without adequate re- gard for restocking, and thus many cut-over areas are lightly stocked. Furthermore, there is a large area of unexploited forest that could be brought into production. Better control over forest fires and other natural causes of timber loss, the application of better forest management, and the extension of the system of permanent forest roads would materially improve the forest situation. The future productiveness of Canada's forests depends in a large measure on the extent to which these improvements can be effected. It has been estimated that the Canadian forests, if well managed and fully developed, could sustain in perpetuity an output of forest products of approxi- mately twice the present volume [12]. For the present, Canada is in a strong position as measured by forest wealth and the output of forest products. With a timber production of some 90 million cubic meters and an average domestic consumption of about 54 million (for the period 1947-49), Canada is not only currently self-sufficient in timber supply but is the world's leading timber exporter [1]. Page 53 Only in some of the specialty woods from the Tropics and in heavy hardwoods, such as oak, is Canada dependent upon outside sources of supply. Free Europe Although the productive forests of free Europe represent only 5 percent of the free world total, they are of special sig- nificance from several standpoints. Their degree of accessibility (98 percent) exceeds that of any other free world area. Within them lie nearly 30 percent of the free world's northern soft- wood forests. Of the total volume of standing timber in free Europe today, about 65 percent is softwood. Also within this region are forests with a longer history of management and reg- ulated yield than those of any other world area. Prior to the Second World War, Europe was considered very nearly self-sufficient in timber products, with annual timber growth and drain in approximate balance, though for some years before the war the yield from continental forests appeared to be on the decline. The war substantially increased the rate of cutting and caused heavy depletion in some instances. The for- ests of the leading timber-surplus, countries—Sweden, Finland, Norway, and Austria—all suffered from overcutting, particu- larly the Austrian forests [13]. However, the decline in total timber availabilities for western Europe has been brought about less by overcutting than by the shrinkage in exports from the U. S. S. R., which accounted for approximately one-third of total prewar European timber exports, and from other eastern European countries [13]. There is little possibility of the timber-deficient countries in Europe being able to increase substantially the rate of fellings in their own forests for many years to come, without suffering the consequences of prolonged overcutting. The forests of western Europe need rebuilding. It has recently been reported that growth in Sweden [14] is satisfactory in the south, but much less so in the north, where it falls far short of equalling the annual drain. This deficiency is caused in part by failure to reforest promptly following cut- ting. One Swedish authority estimates that cutover land not yet reforested is 16 times greater in extent than the current an- nual felling area. Thus the forests of southern Sweden are yield- ing a relatively larger output than those of the north, where the timber industries are concentrated. The comparatively small forest resource of Norway—less than one-third that of Sweden in area—is now producing close to the maximum possible without overcutting. Finland, with a forest area nearly equalling that of Sweden, is once more work- ing its forests on a sustained yield basis, and it is improbable that the annual cut will be substantially increased [15]. Yugo- slavia, a traditional timber exporting country, is overcutting its forests at an excessive rate and exports may be expected to decline. Yugoslavia's 5-year plan calls for a reduction in annual fellings to the level of growth. Austria's forests have been rather heavily overcut, and the level of lumber production must be reduced accordingly in order to avoid depleting the forest capital. Austrian officials estimate that a decrease of some 20 percent in annual cut will be necessary for about 50 years [16]. If the improvement in free Europe's over-all economy con- tinues and the effective demand is raised to a level correspond- ing to prewar, there will be a widening gap between its lumber needs and actual production—a gap which cannot be filled from internal sources alone [3]. Europe has been forced to compromise conservative man- agement in drawing upon its forests in this period of shortages. Although the exact relation between timber growth and timber drain for free Europe as a whole is unknown, it is generally held that drain exceeds growth by a considerable margin. Under existing circumstances, including foreign exchange difficulties, the timber-deficit countries of western Europe have tried to restore timber imports from traditional sources. They have achieved a fair measure of success, but the question of future timber supplies still remains highly unsettled. The United Kingdom, Europe's largest timber importer, like a number of other European timber-deficit countries, has not been able to resume its customary rate of timber consumption. It is making both ends meet by curtailing domestic consump- tion. Aside from seeking increased timber imports from the Russian sphere, western Europe is doing what it can to en- courage the development of new and more plentiful sources of supply in Africa, Latin America, and the Far East. The prospects of ultimate increases in timber output in these areas appear favorable, but such increases would be almost entirely in hardwoods rather than softwoods. Latin America The total area of the productive forests of Latin America is about 75 percent greater than that of the United States and Canada combined [3]. The forests of Latin America fall largely within the Tropics, where forest composition is characterized by an extremely large variety of hardwood species, most of them unlike the hardwoods occurring in the Temperate forests. The Parana pine region of Brazil supports the only con- siderable body of natural softwood timber in the Southern Hemisphere. Latin America exhibits the extremes of complete forest de- struction near centers of population and, on the other hand, vast stretches of unexploited "jungle" in the more remote areas. Timber operations have generally been conducted without regard for restocking, there being few countries that have forest conservation laws in force [3]. Ordinarily, only a few of the choicest timber species have been cut. The type of culling commonly practiced has served to reduce greatly the supply of such choice woods as mahogany and Spanish cedar (cedro) in the most convenient locations, with resulting deterioration in forest composition. Outright forest destruction is associated more often with clear cutting for fuel wood, which is estimated to comprise roughly 80 percent of the total wood consumption of Latin America, and with a shifting or roving type of agriculture based on utilizing the comparatively fertile virgin forest soils. This system of primitive farming, practiced in many parts of the Tropics, involves clearing a patch of jungle, growing food crops for a few years, until the land runs out, then clearing a new patch and abandoning the old one. The vast unexploited forests of such regions as the upper Amazon and upper Orinoco are known to contain a great variety of hardwood species, many of which have commercial potentialities, but years of forest products research work and timber surveying will be required to appraise with any degree of Page 54 reliability the wealth of the tropical forests of Latin America. Progress is being made in testing the properties of the more promising species and determining their adaptability to various uses, but none, it is certain, possesses the properties common to the pine, spruce, and fir of the North Temperate forests. The pine forests of Mexico and the Parana pine (araucaria) forests of Brazil, both of which lie mainly outside the Tropics, should not be ignored, but both are limited in area. Chile also has some softwood forests, but no more than required for do- mestic use. None of the softwood forest areas of Latin America is sufficiently large to perrriit substantial exports without over- cutting or ignoring future local softwood timber needs. The Parana pine forests could be exploited at a much faster rate in order to increase exports for a period of years, but only to the detriment of Brazil's own growing requirements for industrial wood. Food and Agricultural Organization has expressed the view that: "Although limited overseas exports may be possible for some time, the rate of increase in population in Latin America makes it probable that ultimately, with the progress of industrialization, most of the supplies of softwood obtainable from the region's forests will be needed within the region. To supplement these supplies, local industries will have to learn to use hardwood species for purposes which, in the North Temperate Zone, are met by softwoods" [3]. At present, only about 9 percent of Latin-American timber production is lumber, 2 percent wood pulp, and 9 percent all other industrial wood uses [3], in contrast to nearly 80 percent industrial wood output in the United States and Canada [1, 3]. This striking contrast reflects the relatively undeveloped state of industry in Latin America and the widespread use of wood in place of coal, oil, and other fuels for domestic and industrial purposes. Latin Americans consume more fuel wood per capita than the inhabitants of any other major region in the world, while their per capita lumber consumption is only a small fraction of that in Canada and the United States. Wood pulp consumption, like lumber's, is low in Latin America, amounting to half the world average per inhabitant [3]. Increasing the output of the presently undeveloped tropical hardwood forests will require the removal of many obstacles, among which are economic inaccessibility, a shortage of skilled labor and technicians, lack of adequate market outlets for all but a few choice species, unstable governments in some coun- tries, and frequently imperfect and uncertain administra- tion of public laws and regulations. Probably the greatest single obstacle to profitable timber operations is the great number of species growing together of which only a very few are now commercially acceptable. To overcome this obstacle would require the development of uses and markets for many species new in world trade. Interest centers especially on the use of mixtures of woods for pulp as a means of utilizing trees of all kinds. The French have had some success pulping mixed tropi- cal hardwoods from the forests of West Africa and further progress along this line may be expected. As expressed at the meeting of the Latin-American Commission for Forestry and Forest Products at Santiago, Chile, 1950: "It is . . . essential that the largest possible number of species be utilized, and, consequently, that improved processing techniques be evolved and new uses discovered. ... It will ... be necessary to undertake long-time research to perfect techniques for the wood chemistry industries . . . [77]. Direct national assistance, intergovernmental cooperation, and the assistance of international organizations will generally be necessary to bring about a rational development of the forest resources and wood using industries of the Latin-American countries. Private enterprise unaided may, for the most part, be unable to finance the necessary heavy investments required to build plants and transportation facilities, import labor and technicians, provide satisfactory living conditions, conduct re- search in the properties and uses of woods, promote new market outlets, and otherwise undertake the opening up of remote and as yet unsurveyed bodies of timber in sparsely settled areas where conditions for industrial operations are unfavorable. Central and South Africa Often thought of as a tropical timber storehouse compara- ble to Latin America, Central and South Africa have a produc- tive forest area actually only half as large. Although the total forest area of this region exceeds that of Latin America, only 40 percent is covered with productive forests. These forests, moreover, are presently 60 percent inaccessible, so that the area which can now be tapped for industrial wood is but one-sixth of the total forest area [1,6,18]. The region is dominated by a relatively narrow zone of tropi- cal rain forests [79] limited to areas within 10 degrees of the Equator and extending from Sierra Leone eastward to French Equatorial Africa, thence up the Congo basin to the vicinity of Lake Tanganyika. Characterized by an extremely complex and variable composition involving hundreds of tree species, all of them hardwoods, the rain forests occur only in areas having heavy rainfall and a short dry season. Coupled with high temperature and humidity, such climatic factors have greatly impeded forest exploitation. An even greater exploitation problem has been the failure to develop regional or world markets for more than a few of the timber species composing the rain forests. True African mahogany alone supported the first logging operations in the early twentieth century. Cutting gradually spread to other mahoganies, okoume, and limba, but less than 20 species were of established commercial value by the outbreak of the Second World War. Under wartime pressure, markets for additional timbers were developed, particularly in Europe. Despite con- tinuing efforts along this line, however, most of the more com- mon rain forest species are still commercially unknown. Inabil- ity to market more than a fraction of the timber volume per acre has greatly restricted utilization and impoverished the cut areas by removal of the most desirable species. Forest technicians have concentrated their efforts on timber cutting and the problem of correcting the injurious practice of shifting cultivation. The latter, involving annual clearing and burning of patches of forest, is a threat to the future timber supply which increases in seriousness as the population expands. Forestry practices have been crude at best, and accumulation of the knowledge needed for sound forest management has barely begun. Generally similar to the rain forests are the mountain forests, confined to elevated areas of heavy rainfall [19]. The most extensive of these occur in eastern Africa and the eastern portion of the Union of South Africa. The native conifers of the region are minor components of the mountain forests. Rain and moun- 206000—52 5 Page 55 tain forests together comprise the closed canopy or dense forests which contain practically all of Africa's important timber supplies. With the equatorial rain forests considered as a central core, zones of progressively inferior forests extend outward to the north and south over the rest of the continent [19]. Adjacent to the rain forests are the deciduous forests in which fewer species occur and stands are less heavily stocked. These forests are included in the productive forest area but are highly in- accessible. The next zone is that of the tree savannahs, typically open and parklike, beyond which lie zones of shrub and thorny savannahs, and finally the deserts and steppes of the extreme northern and southwestern portions of the region. There is no adequate basis for comparing forest growth and drain in the region, nor is it possible to make realistic estimates of the wood volume presently or potentially available. In the case of drain, it is probable that the annual cut of wood in all forms does not exceed 50 million cubic meters, of which about 90 percent is fuel wood, 5 percent logs, and 5 percent other industrial wood. The apparent consumption of wood in all forms is about 0.33 cubic meters per capita, or roughly one-third of the average world rate [1] and the indicated wood output of about 0.14 cubic meters per hectare of productive forest is probably the lowest of any world region. The region was a net importer of forest products before the Second World War but has since become a small net exporter. Hardwood log and lumber exports approach 1 million cubic meters annually and are slowly increasing. There is no signifi- cant foreign trade in other forest products. Under the present standard of living and level of industrialization, the region is essentially self-sufficient with respect to all its wood needs. Supplies of softwoods are negligible, but many of the native hardwoods may be used as substitutes. Plantations of exotic conifers are being established in mountain forest areas and their yield will eventually ease this shortage. Obstacles to a greatly expanded African timber output are many and formidable. It is improbable that technological, economic, and other deterrents to full utilization of the highly heterogeneous forest stocking can be removed other than over a long period of time. The only prospect to the contrary lies in the French experiments currently being conducted in pulping mix- tures of rain forest hardwoods. If these should prove commer- cially practicable, many more species than at present can be utilized, and significant progress will have been made. The population is actually expanding rapidly and economic development is beginning to increase wood demand, conse- quently there is little prospect of the region becoming a major exporter of forest products.•During the next decade or two, the output of modernized forest industries centered in the rain forest zone will probably permit moderate increases in exports of hardwood lumber and plywood. Internal markets, today largely confined to coastal towns and the Union of South Africa, will eventually absorb most of the industrial wood output [3]. North Africa and Near East This region is the most timber deficient of the free world. Its productive forests are not only smaller in area than those of any other region, on both a total and a per capital basis, but also generally inferior in terms of quantity and quality of wood yield. Forests cover only 4 percent of the regional area, and less than one-quarter of their total area is both productive and accessible. The African countries account for 54 percent of the region's total land area, 43 percent of its population, and 19 percent of its total forest area. The accessible productive forests are about evenly divided between the two regions [1, 6, 18]. Soil and climatic factors unfavorable for tree growth, espe- cially low rainfall, are prevalent and much of the region is entirely devoid of forests. Where they do occur, the forests are typically composed of small scattered trees of poor form, both softwood and hardwood, which are rarely suitable for products other than fuel wood. Several species of palm are found outside the limited forest areas of the region, particularly adjacent to oases and on other sites providing some ground water. In the vast arid portions of the region, the date palm is the most com- mon and most valuable tree; it is used for many purposes. Turkey and Iran together account for two-thirds of the total productive forest area which, on a per capita basis, ranges from 0.51 hectares in Turkey and 0.22 in Iran to 0.03 hectares in Syria, 0.02 in Saudi Arabia, 0.01 in Israel, and nearly none in Egypt [7, 6, 18]. Throughout the region, ancient abuses of the land and vegetative cover, continued and ac- centuated in modern times, have reduced once extensive forests to poorly stocked remnants. Excessive grazing by roving herds, uncontrolled cutting for fuel wood, and widespread fires have combined to make this region's forest resources poorer than those of any other. The over-all inferiority of the forest cover is relieved only by limited areas of mountain forests of good quality found in portions of Iran and Turkey. Forest depletion is but one product of mismanagement of natural resources. Underlying the region's complex economic development problems are basic weaknesses in the control and use of water, as reflected in floods, erosion, and inadequate irrigation. These are directly traceable to the largely denuded watersheds and resulting uncontrolled runoff. Although some progress has been made in the improvement of remaining for- ests and the planting of new ones, there is little prospect of a major betterment of the forest situation in the foreseeable future. Nothing short of an intensive program of forest rehabili- tation and soil conservation carried on over many years could serve to remedy the effects of past abuses of the land [3]. There are no regional data covering forest volume, growth, and drain. It is reasonably certain, however, that drain consid- erably exceeds growth in all accessible areas and that the region as a whole is steadily depleting its meager forest resources. Total wood output probably approximates 10 million cubic meters annually, equivalent to an output of about 1.1 cubic meters per hectare of accessible productive forest. At least 90 percent of the total consumption of wood produced in the region is in the form of fuel [/]. Despite a very low rate of wood production, the region is but a minor wood importer. The poorly developed and little industrialized regional economy along with extremely low liv- ing standards results in a bare minimum of wood consumption. Use of wood as fuel has as yet been little affected by the abund- ance of oil in some parts of the region. Industrial wood con- sumption is negligible on the whole. Iran and Turkey are cur- rently small net exporters of forest products, but neither coun- try should be considered a surplus area. Page 56 There can be little doubt that this region will long remain the most seriously deficient in timber supplies of any region of the free world. A substantial increase in the consumption of wood, such as should accompany expanded economic activity and improved living standards, could be achieved in the near future only through increased wood imports from other regions. Southeast Asia The countries comprising Southeast Asia present striking contrasts in size and density of population, forest wealth, and ability to meet their needs for forest products. While complete forest resource surveys have not been made for any of the countries, available estimates indicate that the total productive forest area of the region is roughly 225 million hectares [6, 20]. This figure applied to the extremely large regional popula- tion—617 million people, gives an average productive forest area of only 0.36 hectares per capita. By countries, it ranges from only 0.1 hectares per capita in India and Pakistan to almost 1.8 hectares in Sarawak [6]. The average slightly ex- ceeds that of free Europe, but this comparison does not afford a true indication of the forest resources now available to the people of Southeast Asia. Owing to the lack of transport facili- ties in much of the forested area, only a little more than half of it can be considered accessible for exploitation [6]. The situation is most acute in India and Pakistan, where the great mass of the people live in areas far removed from the forests [21]. The forests of the region are composed predominantly of hardwood species. Softwood forests, covering hardly 5 percent of the total area, are confined chiefly to the mountainous areas of India, Pakistan, and the northern Philippines [22]. Forest conditions vary greatly, ranging from dense tropical rain forests, comprising a large portion of the total productive area, to the coniferous forests of the Himalayas and the relatively open pine forests of the Philippines. The hardwoods are mostly diptero- carps, occurring in stands made up of a great variety of species comparatively few of which have commercial value at the present time. In the forests of Burma, India, Indo-China, Java, Malaya, and Thailand are located the world's principal sup- plies of teak, one of the world's most valued hardwoods. Exploitation of much of the area is rendered difficult by precipitous mountains, swampy terrain, and torrential streams. While a large part has not been exploited, the forests of almost all of the countries have suffered in some degree from land misuse: overcutting, roving agriculture, repeated burning, and heavy grazing [22]. The situation is most aggravated in India and Pakistan, where the extreme population pressure for crop- land and a supply of fuel wood has denuded vast areas and caused deterioration of much remaining forest [21]. All of the countries in the region except Afghanistan, India, and Pakistan have sufficient timber resources to meet their needs. Most have little indigenous softwood, but this is more than offset by extensive areas of hardwood, sufficiently in excess of present domestic timber needs to permit substantial exports of industrial wood. There is an acute shortage of all kinds of wood in India and Pakistan. India, with more than half of the population of the region, has an annual wood consump- tion of only 0.03 cubic meters per capita, of which industrial wood constitutes only one-third [/]. In contrast, Burma has a per capita wood consumption nine times as great. The wood shortage in the former countries, however, is overcome in part by the extensive use of bamboo in rural construction and for numerous other purposes. The availability of bamboo and the ease with which it can be worked, using only simple tools, make it a ready substitute for construction wood throughout the rural areas of Southeast Asia. The region as a whole has the forest resources to meet re- gional needs for timber without overcutting, but at present there is no way of effectively drawing upon the surplus areas to meet the requirements of the deficit areas. The removal of this obstacle would require opening up presently inaccessible areas, construction of processing plants, and channeling wood prod- ucts from the timber-surplus countries to the timber-deficit countries, such as India and Pakistan [23]. In all probability, the industrial development of the region and increased con- sumption of industrial wood will be very gradual. For many years to come, the timber-surplus areas may be expected to continue exporting to destinations outside the region, particu- larly such commodities as teak, Philippine "mahogany," rose- wood, and other cabinet and specialty woods. As in the case of Africa and Latin America, increasing interest is being shown in the tropical forests of Southeast Asia, particularly those of the Philippines and Indonesia, as sources of timber supply to supplement diminishing resources in the industrialized countries of the Northern Hemisphere. As ways and means are developed for economically utilizing the many species which are now considered second class or which as yet have no established commercial value, a considerable increase in forest output may be expected. Oceania Oceania includes Australia, New Zealand, eastern New Guinea, and islands of the South Pacific. Of the total produc- tive forest area, Australia accounts for about 40 percent and New Zealand 4 percent [3]. The per capita productive forest area of x\ustralia is com- paratively small in view of the large size of the continent and the small population. Only 4 percent of the land area is covered with productive forests, confined to a narrow fringe on less than half of the coast line. More than two-thirds of the total productive forest is considered accessible [21]. Nearly 90 per- cent of Australia's forest area is in hardwoods, chiefly euca- lyptus, of which there are several hundred species. A large and thriving paper industry is based on the eucalyptus [24]b and one species, known as ironbark, is noted for its extreme durability and special adaptability for use as ship prow sheathing on ice breakers. Two other species, jarrah and karri, wrhich make up the bulk of Australian timber exports, are especially desirable for railroad ties and dock timber [21]. Because they produce so many useful products, the eucalyptus forests have been heavily exploited and their condition has been rendered still more unsatisfactory by repeated forest fires. The comparatively small area in coniferous forests in Austra- lia is in much better condition, with annual growth exceeding the annual cut. The indigenous conifers, chiefly hoop pine and cypress pine, have been supplemented by extensive plantations of exotic conifers, principally Monterey pine, a native of the United States [6,21]. Page 57 The per capita productive forest area of New Zealand is 1.1 hectares, compared with 2.7 hectares for Australia. Only 40 percent of New Zealand's forest area is considered accessi- ble at the present time, but it has the advantage of being largely in coniferous species, whereas the inaccesible forests are chiefly hardwood [6]. The principal native softwoods are kauri, rimu, and podocarps. Almost half of the accessible forest land has been planted in exotic conifers, principally Monterey pine [21]. Annual fellings in New Zealand forests exceed the estimated annual growth, and the long-continued heavy cutting of the indigenous softwood stands is resulting in their deterioration. The increase in population also poses a problem of land use, through increased demand for the conversion of forest land to farms and sheep ranches [21]. The forests of Australia and New Zealand complement each other to a large degree, Australia supplying hardwoods to New Zealand and receiving softwoods in return [21]. Both, how- ever, are currently net importers of wood products. Their com- bined production of industrial wood in 1948 was reported as 9 million cubic meters (roundwood), which is about 35 per- cent of that of Sweden for the same year. Total consumption in that year exceeded production by almost 20 percent [1]. Neither country can be expected to become exporters of any substantial quantities of timber to other regions of the world. Eastern New Guinea (Papua and Territory of New Guinea) is about two-thirds forested, but data are not available as to how much of the 30-odd million hectares of forest might prop- erly be considered productive and accesssible. With a popula- tion of only about 1 million, however, the per capita productive forest area may be assumed to be very high [21]. As in other tropical areas of the world where there are vast forests inhabited by a primitive people, one of the forest problems is the control of the common practice of shifting cultivation [21]. The great variety of species found here, including some.softwoods, is char- acteristic of Indonesia and northeastern Australia. Although its area and volume have not been accurately determined, the stand of hoop and klinkii pine is considered by the Australian Government as a most valuable national asset [25]. During the Second World War, United States Army sawmills produced considerable lumber, but timber production currently is insig- nificant. The Australian Government is now preparing plans for the exploitation of the New Guinea forests under a policy of sustained yield, and it is expected that the output will meet not only the needs of the territory but contribute both hard- woods and softwoods for Commonwealth use [6, 21]. The other principal island groups of Oceania—Fiji, Solo- mons, and New Caledonia—have a total productive forest area of almost 1.5 million hectares, of which about 60 percent is considered accessible. Total population is estimated at approxi- mately one-half million, indicating a per capita forest area of about 3 hectares. Although there are some softwood species, such as demmarpine and podocarps, the forests are made up largely of tropical hardwoods, many of them of little or no commercial importance at present. In these island groups, also, shifting cultivation is a common practice which has resulted in the destruction of large areas of forest. Sandalwood was an important factor in the settlement of Fiji, but careless exploita- tion has led to its almost complete extinction [21]. Present timber production is very low in the smaller island groups, and a considerable part of whose rquirements is filled by imports. Although now relying heavily on outside sources, it would appear that the island groups should be able to meet their own requirements through increased production based on proper management of their forests and contribute to the hardwood exports of the region. While Oceania as a whole may remain a small net exporter of hardwood timber, the large and growing requirements for softwoods by Australia and New Zealand leave the region dependent on other areas of the world for a considerable part of its softwood supply. In the case of wood pulp, for example, it is estimated that Australia will need 60,000 to 75,000 tons of imported pulp by 1955-60 to supplement its home production [26]. Future dependency will be influenced largely by the extent to which Australia and New Zealand expand and prop- erly manage their coniferous forests. Japan One of the most critical forest resource situations in the free world exists in Japan, where the daily life of the people prob- ably is more intimately dependent upon wood than that of any other nation in the world. Next to food itself, wood plays the dominant role among the raw materials—for domestic fuel, for the coastal fishing fleet, and for 99 percent of all house construction [27]. Because of the lack of other fuels, Japan depends almost entirely on wood and charcoal for heating and cooking. Productive forests cover 59 percent of the total land area, and 88 percent of this forest area is accessible to exploitation [6]. The per capita forest area is 0.3 hectare, approximately the same as in France, a country that is essentially self-sufficient in forest products. Hardwood stands occupy 51 percent of the forest area, soft- wood 28 percent (mostly plantations), and mixed hardwood and softwood the remaining 21 percent [6]. Cedar, cypress, pine, fir, hemlock, larch, and spruce are the principal soft- woods, while hardwood forests contain oak, beech, chestnut, maple, ash, and birch, resembling in composition the forests of the northeastern United States. More than half of the hard- wood area consists, however, of sprout forest (coppice). The urgent demand for large quantities of wood for fuel and char- coal induces the owners to clear cut their coppice stands on a rotation often as short as 7 years, a practice which depletes the sprouting capacity of the parent stump and removes the forest growing-stock capital long before it achieves its best growth. While for a mature country with a stable or slowly growing population, such as France, a per capita forest area of 0.3 hectares provides approximate self-sufficiency, Japan, because of its rapid rate of industralization and growth of population, has become a timber-deficient country since the turn of the century. In spite of ever-increasing imports, the heavy demand for timber has led to severe overcutting of the dwindling timber reserves. This overcutting has been particularly heavy in the softwood forests, which supply 85 percent of the sawlogs cut annually [28]. Only the national forests, which consist mainly of hardwoods and are located in the less accessible portions of the Islands, are managed on a conservative basis and are generally in good condition. Since 1938, the drain on the softwood forests had been especially heavy7, and is now about three times greater than Page 58 the annual growth. The situation is very acute on private land, which includes 78 percent of the softwood area. The average stand in the private softwood forests is a mere 32 cubic meters per hectare, compared with 177 cubic meters in the national forests. At the present rate of cutting, softwood of saw timber size will be virtually eliminated from the private holdings within 15 years [28]. In 1947, the drain on the nation's forests as a whole was more than two and one-half times the growth [27]. Reforesta- tion has not kept pace with cutting operations, with the result that about 3 million hectares of cutover lands remain in need of restocking [27]. Cutting of softwood forests is adding 275,000 hectares annually to areas in need of planting [28]. The loss of the southern part of the Island of Sakhalin has deprived Japan of an important source of softwood supply, formerly drawn upon for pulp and newsprint, and has in- creased the burden on the home islands. Severe corrective measures will be necessary if Japan is to gain self-sufficiency in timber. Not only must consumption be drastically curtailed, but intensive forest management must be more generally applied. Private and communal forests, which together comprise more than half the total forest area and which are approximately only one-third stocked, should be built up to a much higher level of productiveness. The extreme panel- lation of private land (there are more than 5 million forest owners whose average holding is about 5 acres) will make progress difficult [27]. Forest conservation is also vitally important to Japan be- cause the security of its agriculture depends on the maintenance of a forest cover on the mountain sides, in order to prevent the loss of the precious arable land by floods and erosion. Stringent forestry legislation, based partly on the study and advice of American experts, was passed by the Diet early in 1951. If this is effectively enforced, it will result eventually in a greatly improved forest situation in Japan. INDUSTRIAL WOOD SUPPLY In this section an attempt has been made, first, to determine present forest output and consumption of industrial wood by free world areas, and, second, to estimate probable output and requirements in the period 1970-79. Estimates of present in- dustrial wood output and consumption are supported by data covering 70 percent of the countries comprising the free world, but these data are of a low order of reliability for many coun- tries. The industrial wood basis was chosen because industrial wood, rather than fuel wood, is the more significant measure of a country's economic status and progress. Although fuel wood now makes up the bulk of the world's total wood consumption, it is the quantity of sawlogs and veneer logs, pulpwood, pit- props, poles and piling, and other products consumed that reflects the industrial growth and development of a country and its economic strength in comparison with other countries. In forecasting output for 1970-79, the extent of a given area's timber resources and past trends in the rate of timber cutting or forest resource development were given greatest weight. However, in all cases, estimates of future output reflect, insofar as available information permits, a policy of adhering to a rate of cutting that would assure maintenance of forest productivity and avoid severe depletion of the forest resource. Future requirements for areas consisting of a number of coun- tries were estimated by, first, raising the per capita consump- tion of industrial wood of the more backward countries to the average level of the more advanced countries in the area, using present consumption rates as the criteria for such grouping; and, second, by applying a population-increase factor to pro- vide for the larger number of future consumers. In the case of free Europe, for example, Austria, Belguim, and France were among the countries selected in establishing a future norm. Greece and Italy were among those whose average per capita consumption was raised to this norm. For all free Europe, the forecasted increase in 1970-79, population over 1948 was 10 percent. As concerns estimates of future requirements in free world areas involving individual countries, those for the United States proper was based on specific assumptions of population and national income, while those for Canada and Japan were based on a continuation of present per capita rates of consump- tion. It should be clearly understood that the estimate of future United States requirements reflects an analysis far more detaiLed than is possible for any other free world country or area. As indicated in table V, the free world faces the prospect of a worsening industrial wood supply position. In 1948 it was nearly self-sufficient, with consumption exceeding output by only 3 percent. This small gap was closed by imports from the Soviet sphere. Estimates of the 1970-79 supply position, how- ever, indicate industrial wood requirements which are 39 per- cent higher than the output considered probable in the absence of special measures to increase production. To close such a gap, the free world would require Soviet sphere imports at a level some 13 times higher than in 1948. The largest prospective increases in output of industrial wood are in the tropical hardwood areas. Such increases will not be a net gain, however, since nearly 60 percent of the increase in production from tropical areas and North America will be offset by expected reduction in yield in free Europe and Japan. Future free world output will continue to be greatly influences by the contributions of North America and free Europe, areas that have been providing about 85 percent of total free world output and where the most modern production techniques are employed under conditions favoring high levels of output. The small (4 percent) over-all net increase in free world yield of industrial wood by 1970-79, results chiefly from gains in some areas which hitherto have been minor timber producers, such as Alaska, Latin America, Central and South Africa, and Southeast Asia. The estimated total free world requirement for industrial wood in 1970-79 reflects changes in both population and in per capita rates of consumption. Anticipated population in- creases exert the greatest influence on future requirements. Despite the fact that estimated future per capita requirements are as high as 1947-49 per capita consumption for all free world areas, or higher, the future free world average per capita requirements is estimated at slightly below average per capita consumption in 1947-49. This results from the increasing weight of expanding populations in areas of low requirements: Southeast Asia, Africa, and Latin America. It will be noted that the estimated requirements of the United States and Alaska in 1970-79 equal nearly 50 percent of those of the entire free world; and those of the United States, Alaska, and free Europe combined, almost 75 percent. This Page 59 Table V.—Free world's present and prospective supply position in industrial wood 1 Output: Free world area 1970-79; Percent I average] change 1948 Consump- tion 3 1947-49 average Require- ments 4 1970-79 average Percent change Output balance 5 1970-79 Per capita consump- tion 1947- 49 average Per capita require- ments 1970-79 average Population in thousands 1970-79 average 6 Percent change Thousands of cubic meters, roundwood United States and Alaska. . 233, 476 245, 200 + 5 248, 762 332, 450 + 34 -87, 250 1. 69 1. 72 147, 083 193, 565 + 32 Canada 68, 879 75, 800 + 10 31. 740 42, 960 + 35 + 32, 840 2 40 2. 40 13, 200 17, 900 + 36 Free Europe 117. 278 105, 021 -10 140, 396 174, 530 + 24 -69, 509 48 54 294, 400 323, 800 + 10 Latin America 21, 013 34, 320 + 63 22, 311 52, 450 + 135 -18, 130 15 19 153, 000 282, 000 + 84 Central and South Africa . . 5, 102 7, 983 + 56 5, 009 8. 470 + 69 -487 03 04 149, 000 229, 000 + 54 North Africa and Near East. 1, 157 1, 007 -13 7, 188 11, 480 + 60 -10, 473 07 08 97, 000 140, 000 + 44 Southeast Asia 9, 187 15, 697 + 71 11, 646 26. 680 + 129 -10, 983 02 03 617, 000 988, 000 + 60 Oceania 9, 120 10, 166 + 11 13, 216 21, 340 + 61 -11, 174 1* 10 l' 12 12, 000 19, 000 + 58 Japan 19, 955 7, 500 -62 19, 368 26, 640 + 38 -19, 140 24 24 80, 700 111, 000 + 38 Free world total and average 485, 167 502, 694 + 4 499, 636 697, 000 + 40 -194, 306 32 30 1, 563, 383 2, 304, 265 + 47 Cubic meters, roundwood 1 Includes all primary wood products except fuel wood and wood for charcoal and distillation. 2 Data for 1948 largely taken from F. A. O. Yearbook of Forest Products Statistics, 1950; those for 1970-79 are estimated based on available forest resources, current trends in rate of cutting or forest resource developments and a continuing high effective demand. 3 Data are largely 3-year averages from F. A. O. Yearbook of Forest Products Statistics, 1950. 4 Estimate for United States based on specific P. M. P. C. assumptions of may appear to be far out of balance in the light of the free world's total population and the efforts now being made to raise per capita consumption in those parts of the world suf- fering from wood shortages. However, it will also be noted that the percentage increase in estimated requirements in 1970-79 over consumption in 1947-49 for all the under- developed areas is considerably greater than for the United States, Alaska, and free Europe. For example, the estimated "percent change" for Latin America is 135 percent; for South- east xAsia, 129 percent; and for Central and South Africa, 69 percent. These compare with 34 percent for the United States and Alaska, and 24 percent for free Europe. If the free world cannot draw on outside areas for industrial wood in 1970-79, it is obvious that it will be worse off than at present. Unless per capita consumption in the more indus- trially advanced countries were to be reduced, the rate of consumption in the underdeveloped countries would neces- sarily be even lower than it is today. Per capita requirements for industrial wood 25 years hence could be lowered if large- scale substitutions of other materials for wood were in prospect. In the more highly industrialized countries there appears to be a trend in this direction, but for the world as a whole it does not appear likely that substitutes will markedly affect re- quirements for forest products within the next quarter century. If, by 1970-79, there should be a free flow of trade through- out the world and full participation by the Soviet orbit in meeting world timber import demands, the- outlook would be materially changed. The U. S. S. R. has, by latest estimates, about 628 million hectares of productive forest land (24 per- cent of the world total) containing some 59 billion cubic meters of standing timber. These predominantly softwood forests (78 percent by area, 85 percent by volume) might be developed eventually to sustain an output two or three times greater than at present. The U. S. S. R. might again become the world's leading exporter of such wood. However, the volume which might be exported under the most favorable world conditions population and national income; those for Canada and Japan assume continuation of present per capita consumption rates; those for all other areas based on raising average per capita consumption in entire area to level of present average consumption in the more advanced countries in the area. 5 Shortage ( —) or surplus (+) of estimated output as compared with estimated requirements. 6 Based on regional population indices (1975 over 1950) as estimated by P. M. P. C. would not be expected to exceed some 50 million cubic meters, or nearly five times the prewar peak of about 11 million cubic meters, in 1935. Other countries of the present Soviet sphere will not be in a position to export more than minor quantities of industrial wood to present free world areas. Thus, the gap of about 195 million cubic meters between estimated 1970-79 requirements and supply for the present free world would still remain far from closed. EXPANDING INDUSTRIAL WOOD OUTPUT Bridging the gap between the free world's prospective sup- ply and requirements of industrial wood should be accom- plished largely by increasing supplies, rather than by decreasing consumption. There are a number of extraordinary means, not part of the basis for forecasting output in 1970-79, by which the free world's production of industrial wood could be in- creased over and above the levels shown in table V. Some of these involve departures from policies and practices commonly followed in the past. For example, a marked increase in the rate of forest resource development in the Tropics, without excessive and destructive cutting, calls for new or revised forest policies and laws, new governmental instrumentalities, and new programs in which Government and private industry co- operate in large-scale timber operations. The forest resources of the free world are potentially capable of supplying its total wood requirements. Nearly 73 percent of the entire world's total productive forest land is situated within the free world. There are about 1.2 hectares (3 acres) of pro- ductive forest per capita in the free world, compared with 1.3 hectares per capita for the United States alone, and about 1.0 hectares for the Soviet sphere, including China. The two main lines of action which might be taken to im- prove the future supply situation for timber products are: 1. Application of better forest management. By means of effective silvicultural and protective measures forest growing Page 60 stocks can be built up, idle land made to produce timber crops, and growth and yield greatly increased. The imbalance be- tween growth and drain in the free world's forests results chiefly from the excessive cutting of softwoods. Thus, softwood re- sources especially need to be rebuilt and expanded. Since the world's softwood forests are situated very largely in the North Temperate zone, the United States, Canada, and free Europe are particularly concerned in meeting this need. A greatly expanded and intensified application of scientific forest management is essential to permanent alleviation of the developing shortage of timber products in the free world. 2. Opening up the forest resources of less developed countries and extending operations in undeveloped forest areas. There are certain large forest areas in the free world which are not now contributing their full share of production to meet the free world's timber requirements, see table VI. Table VI.—Output of industrial wood in free world production forest in 1948 Cubic meters Free world area: per hectare United States 1.2 Free Europe 1.2 Japan 9 Canada 3 Oceania 2 Cubic meters Free would area: per hectare North Africa and Near East 0.06 Southeast Asia 04 Latin America 04 Central and South Africa « .01 On this basis, it is evident that the forests of the first three areas listed—the United States, free Europe, and Japan—are being cut relatively heavily. On the other hand, the last three areas—Southeast Asia, Latin America, and Central and South Africa—are comparatively the least productive, or, in other words, the least developed with respect to the production of industrial wood. As part of the development of new sources of timber supply, chiefly in the Tropics, it will also be necessary to find profitable market outlets for the great variety of little-known hardwoods found in the tropical forests. This involves testing properties and determining the most suitable uses for a large number of woods from Latin America, Africa, Southeast Asia, and Oceania now having no established commercial value. Also associated with this measure is the promotion of the more general use of hardwoods in place of softwoods. This could be furthered by special research and promotion aimed at discovering and demonstrating the adaptability of hardwoods, Temperate as well as tropical, to meet requirements customar- ily filled by softwoods. AID TO UNDERDEVELOPED COUNTRIES It is well recognized that the development of the forest re- sources of the underdeveloped countries at a materially in- creased rate would require technical assistance and various other forms of aid from the more advanced countries. By mak- ing technical and economic aid available for the mutual bene- fit of both the people receiving and those supplying such aid, levels of wood consumption and standards of living can be raised in the underdeveloped countries and increased timber exports provided other free world areas. Technical assistance is undertaken upon the request of and in cooperation with the country receiving it. Requests for pre- liminary forest-resource and economic surveys should be con- sidered especially desirable, since these provide a means of guiding the formulation of plans for orderly forest develop- ment. Later on, more specialized assistance would be in order, such as can be given by logging and industrial engineers. A great deal of preliminary work will be required before forest-resource development can safely be undertaken on a large scale. Forest maps and cruises have been made only for comparatively few areas. The properties and potential uses of most tropical woods have not been thoroughly tested and determined. Little is known about the methods of regenerating tropical forests, particularly following the heavier types of cut- ting. The most economical methods of extracting and trans- porting primary products from the less accessible areas have yet to be worked out. Logging methods and types of cutting introduced at the outset may later prove improper from the standpoint of forest maintenance and regeneration. For this reason it is important at the outset also to offer aid in research and in the development of policies and programs that will avoid destructive types of exploitation and promote proper conservation and management of the forest resource. The present shortage of technically trained persons in the underdeveloped countries prompts them to turn for assistance to the more advanced countries, but in the longer view it will be preferable for the former to train technicians from among their own people and to depend upon them to supervise the development of their own resources. Forestry schools and ex- periment stations should be established in the underdeveloped areas and competent and efficient public forestry services grad- ually built up. There is urgent need for a central forest products laboratory in each of the three major tropical forest areas— Latin America, Central Africa, and Southeast Asia—to carry on research in the field of wood utilization. The public should be educated in the importance of forests to human welfare. The United States can give assistance in these undertakings as well as in the techniques of timber exploitation. In the interim, the United States can offer training to foreign students in American forestry schools and undertake coopera- tive experimental work. However, there are limits to the effec- tiveness of training tropical forest specialists in the United States, where instruction is based very largely on forest con- ditions in the Temperate Zone. Only the establishment of adequate educational and research facilities in the Tropics will provide the corps of forest administrators, technicians, and scientists necessary for the development of a sound forest economy in those areas. Interim assistance also can be given by the United States in testing the properties of foreign woods at the U. S. Forest Products Laboratory at Madison, Wis., and at private laboratories such as the Yale School of Forestry. The forest situation in underdeveloped areas is generally such that only through the close cooperation of both public and private agencies can there be any hope for a balanced economic development. Before any large forest products de- velopment project is undertaken, the details should be care- fully worked out so that prospective public and private in- vestors, both United States and foreign, will know exactly the conditions under which they can operate. Page 61 References 1. Food and Agriculture Organization. Yearbook of Forest Products Statistics. Washington, D. C, 1950. 2. Foreign Service. "Report No. 4627, London." Washington, D. C, Department of State, March 30, 1951. 3. Economic and Social Council. "Forest Resources and Their Utiliza- ton." E/CN.l/sub.3/28. New York, United Nations, March 15, 1950. 4. Forest Service. "Timber Consumption Trends in the United States." Washington, D. C, Department of Agriculture, Dec. 15, 1950. 5. National Production Authority. "Pulp, Paper and Board Industry Report." Washington, D. C, Department of Commerce, March 195L 6. Food and Agriculture Organization. "Forest Resources of the World." Unasylva, July-Aug. Washington, D. C, 1948. 7. Forest Service. Josephson, H. R. "Statement of Use of Domestic Timber Resources for Newsprint." Washington, D. C, Depart- ment of Agriculture, June 20, 1950. 8. International Institute of Agriculture. "International Trade of Wood." Rome, 1944. 9. Department of Scientific and Industrial Research. "Commercial Mahoganies and Allied Timbers." Bulletin No. 18. London, His Majesty's Stationers Office, 1938. 10. Department of Mines and Resources. Statistical Record of the For- ests and Forest Industries, 1947, and following years. Ottawa, The Dominion of Canada, 194$. 11. Food and Agriculture Organization. "Forestry Situation in Canada." Preparatory Conference on World Pulp Problems. Publ. F 49/P Misc. 7. Washington, D. C, April 25, 1949. 12. . "Pulpwood, Current Consumption and Future Outlook." Washington, D. C, April 20, 1949. 13. . "Europe's Timber Problem." Unasylva, Sept.-Oct. Wash- ington, D. C, 1948. 14. Foreign Service. "Report No. 1004, Stockholm." Washington, D. C, Department of State, April 9, 1951. 15. Food and Agriculture Organization. "Statement by the Delegation of Finland." Preparatory Conference on World Pulp Problems. Publ. F 49/P Misc. 12. Washington, D. C, April 26, 1949. 16. Economic Recovery Program. "The Austrian Investment Program, 1950-52." Vienna, Carl Ueberreuter, September, 1950. 17. Food and Agriculture Organization. "Possibilities of Forest Develop- ment—a New Concept." Summary of the Santiago Conference, Latin-American Commission for Forestry and Forest Products, Dec. 1950. Rome, 1951. 18. . "Forest Resources of the World—Supplementary Data." Unasylva, Nov-Dec. Washington, D. C, 1948. 19. . "Forest Problems of Africa." Unasylva, Mar.-Apr. Wash- ington, D. C, 1949. 20. Empire Forestry Association. The Empire Forestry Handbook. Lon- don, The Association. 1946. 21. Food and Agriculture Organization. "National Situation." Una- sylva, Nov.-Dec. Washington, D. C, 1948. 22. . "Forestry in Asia and the Pacific." Unasylva, Nov.-Dec. Washington, D. C, 1948. 23. . "Report of the Forestry and Timber Utilization Conference for Asia and the Pacific." Mysore, India, United Nations, 1949. 24. . "Pulp and Paper from Australian Eucalyptus." Unasylva, Nov.-Dec. Washington, D. C, 1948. 25. Foreign Service. "Report No. 240, Canberra, Australia." Wash- ington, D. C, Department of State, January 16, 1951. 26. Food and Agriculture Organization. "Statement by Australian Dele- gation." Preparatory Conference on World Pulp Problems. Publ. F 49/P Misc. 16. Washington, D. C, April 27, 1949. 27. Gill, T. "Forest Policy and Legislation for Japan." Preliminary Study No. 49. Tokyo, Supreme Commander for Allied Powers, General Headquarters, Natural Resources Section, May 1951. 28. Kircher, J. C , and Dexter, A. K. "Management of Private Conif- erous Forests of Japan." Preliminary Study No. 43. Tokyo. Supreme Commander for Allied Powers, General Headquarters, Natural Resources Section, January 1951. References Elsewhere in This Report This volume: Domestic Timber Resources. Vol. IV: The Promise of Technology. Tasks and Opportunities. Page 62 Report 7 Future Demands on Land Productivity* Land is the essential base for the production of most of our renewable resources—both food and nonfood. Increasing pop- ulation and better standards of living in the next quarter cen- tury and greater industrial requirements for agricultural raw materials will impose a heavier burden on this land base and on agriculture. Thus, it is important to ask whether farmers in the United States will be able to meet these combined require- ments and what steps the Government should take to help farmers achieve the necessary results. Over the next 25 years, agricultural products must feed and clothe 28 percent more people (193.4 million by 1975) and satisfy the complex requirements of an industrial economy whose gross product will double (547 billion dollars by 1975 in 1950 dollars).x These taken together mean that the disposa- ble income of the average person will increase from about $1,300 in 1950 to $2,000 in 1975—a 54 percent increase.2 These basic assumptions set the framework for this study. Based on them and the further assumption that the general 1950 price relationships between agriculture and other sectors of the economy will continue to 1975, we have projected the consumption and the likely increases in production of each major commodity over the next 25 years. Then the supply and demand analyses for each major product are brought together to determine what amounts of each will be produced at equi- librium prices. These projections do more than indicate adequacy of our land resources. They also indicate the alternative courses which agricultural developments might take to provide additional farm products as the economy expands between now and 1975. CONSUMPTION AND DEMAND The Bureau of Agricultural Economics of the Department of Agriculture has developed an index of per capita food con- sumption. This index excludes military food consumption from 1941 to 1948 (see table I). Clearly this series indicates erratic consumption behavior in some years. The high consumption in 1946 can be attributed to the release of controls in that year, coupled with a drawing *This paper was prepared by John D. Black, Henry Lee Professor of Economics, Harvard University, and Arthur Maass, Assistant Professor of Government, Harvard University. 1 The assumptions in this report are the same as those in vol. II, chap- ter 22, Projections of 1975 Materials Demand. 2 Disposable personal income is figured as 73 percent of gross national product for 1950; 75 percent for 1975. upon accumulated savings, consumer credit, and a shortage of competing consumer goods.3 Consumption in the years 1948 to 1950 has probably been three points abnormally low because of the shortages of meats and related food. According to this analysis, an index of 115 would be about normal for 1950. Table I.—Index of per capita food consumption 1929 102 1946 1935-39. 100 1947 1941-43 109 1948 1944 112 1949 1945 114 1950 Projections of this index to 1975 by agricultural economists vary from 118 to 130. Some of these estimates, it should be noted, are based on assumptions which differ in some respects from those of the President's Materials Policy Commission. For our purposes the most useful and, we believe, the most correct estimate is based on the past relationship between food consumption and disposable income. For every 1 percent in- crease in disposable income per capita in the recent past, there has been an increase of 0.2 percent in the food consumption index. Thus, the projected increase from $1,300 to $2,000 in disposable income per capita by 1975, a 54 percent rise, would mean a 10.8 percent increase in per capita food con- sumption. And such an increase would raise the per capita index of physical food consumption from 115 in 1950 to 127 in 1975. An index of 127 for 1975, combined with an estimated 28 percent increase in population, gives a 41 percent increase in total food consumption (see table II). Table II.—Projected increase in food consumption Index of per capita food consumption Population (millions) Index of Percent increase over 1950 Year total food consumption 1950 115 127 151. 7 193. 4 174 246 1975 41 The 41 percent increase relates to food consumed and not to consumer expenditures on food. The latter are likely to increase about 47 percent, the difference between this and 41 percent representing increased costs of marketing services, processing 3 See article by Marguerite C. Burk, "Changes in the Demand for Food 1941 to 1950," Journal of Farm Economics, August 1951. 206060—52 6 Page 63 of food away from home, and eating away from home. As we are interested in demands on products of the land, however, the measure of physical consumption is of greater significance than that of food expenditures. Similarly the 10.8 percent in- crease in per capita food consumption is to be distinguished from per capita food expenditures on food. These, according to our estimates, will decrease relatively from 26 percent to about 20 percent of disposable personal income, though it must be remembered that these incomes will rise about 54 percent. But here again it is the consumption, not the expendi- ture, which is of first interest. NONFOOD FARM PRODUCTS Together, nonfood farm products, principally wool, cotton, tobacco, and some of the oils and fats used industrially in soaps and paints, represent about a fifth of the agricultural output of the country.4 Data and analysis of consumption and demand for nonfood products are much less adequate than those for foods. A Bureau of Agricultural Economics aggregate index of per capita nonfood consumption stands at 118 for 1950 and is unofficially projected to 107 for 1975.5 This notable decline is due to anticipated substitutions of synthetic materials for fibers and to some extent for oils, but is partly offset by an expected increase in tobacco. If we multiply this per capita decrease by a 28 percent increase in population, we obtain a 15 percent total increase in consumption of nonfood farm products. However, improvements in technology of cotton production, set out later in this study, indicate an equilibrium price below that of 1950. At this price synthetics are not likely to replace cotton to the extent anticipated in the B. A. E. projection—a 14.5 percent decline in per capita cotton consumption. An 8 percent decline, therefore, seems more reasonable. This and certain other minor departures from the B. A. E. estimates indicate a 25 percent, rather than 15 percent, increase of con- sumption in all nonfood farm products. Combining the 41 percent increase in food consumption in 1975 with the 25 percent in the nonfoods gives an increase of 38 percent for all farm products. New industrial uses for farm products, not counted in the estimates, might raise the increase to somewhat above this level, possibly to 40 percent by 1975. For two reasons, the increase in consumption of different farm products will depart importantly from the aggregate in- crease just estimated. One is the varying income elasticities of the different products. The other is that certain historical trends, not at all associated with income changes, are likely to be carried into the future. These consumption increases are projected in table III. EXPORTS AND IMPORTS This demand for farm products is not likely to be revised significantly by export and import requirements. As a matter of fact, it is predicted on the basis of adjustments in world trade that farm exports will decline in the next 25 years from 13 percent to 9 percent of total United States farms marketings. 4 Nonfood farm products as used in this study do not include wood products. 5 Analysis by Rex F. Daly of B. A. E.} U. S. Department of Agriculture. At the same time imports are likely to rise from 10 percent to 15 percent of the same base figure. Some representative import and export projections are found in table IV. Table III.—Per capita and total food and nonfood consumption in 1950 and 1915* Per capita Per- Total consumption Per- Commodity Phy 3- Amounts cent in- Physical amounts (millions) cent in- ical 1 07 C crease crease 1950 I V / 0 1950 1950 to to 1975 1950 1975 1975 Foods—index f 115 127 11 41 Meats (lb.) 146. 0 171. 1 17. 2 22, 148 33, 090 49. 4 Beef 64. 1 71.2 11. 1 9, 724 13, 770 41. 6 Pork 68. 8 83. 7 21. 6 10,437 16, 187 55. 1 Lamb 4. 2 5. 0 19. 2 637 967 51. 8 Poultry: Chickens and tur- keys (lb.) 30. 2 39. 4 30. 6 4, 581 7, 620 66. 3 Eggs (number).... 370. 8 380. 4 2. 6 56, 250 73, 569 30. 8 Dairy products (lb.): Fats and solids. . . . 763. 3 803. 0 5. 2 115, 793 155, 300 34. 1 Milk 389. 2 439. 0 12. 8 59, 042 84, 902 43. 8 Butter 10. 3 9. 3 -9. 7 1, 562 1, 798 15. 1 Fats and oils; includ- ing butter (lb.). . . 43. 3 45. 5 5. 0 6, 569 8, 800 34. 0 Fruits (lb.): Apples 45. 2 43. 4 -3. 9 6,857 8, 394 22. 4 Citrus 88. 4 132. 6 50. 0 13, 410 25, 645 91. 2 Other 106. 6 114. 7 7. 6 16, 171 22, 183 37. 2 Vegetables (lb.): Fresh 254. 3 294. 5 15. 8 38, 577 56, 956 47. 6 Processed 46. 1 58. 8 27. 6 6, 993 11, 372 62. 6 Potatoes (lb.) 104. 5 89. 9 -14. 0 15, 853 17, 387 9. 7 Sugar (lb.) 95. 2 93. 5 -1. 8 14, 442 18, 083 25. 2 Grains (lb.): Wheat 194. 0 187.0 -3. 4 29, 430 36, 166 22. 9 Corn 50. 4 55.7 10. 5 7, 646 10, 772 40. 9 Nonfoods—index f . . . . Cotton (lb.) 118 115 -2 25 24. 8 22. 8 -8. 0 3, 762 4, 410 17. 2 Wool (lb.) 2. 4 2. 2 -8. 3 364 425 16.8 Tobacco (lb.) 9. 9 11. 4 15. 0 1, 502 2, 185 45. 5 *The projections are based upon those of Daly. They have been adjusted however, to an index of 127 and to certain other factors for individual products. fl 935-1939 = 100. For weights used in determining percentage increases or total foods and total nonfoods, see col. 1 of table III. The general trend downward in exports is predicated on continuing efforts of the rest of the world to provide its own food stuffs and fibers, or to get them in exchange from countries closer to them economically and geographically. The figure for wheat exports is predicated upon the continuance of an international wheat agreement. The upward trend in complementary imports is not due to any general domestic shortage of foods and fibers, but to the fact that consumers with larger incomes will want more variety in their consumption, including products not grown com- petitively in this country. As for the supplementary imports, this country could produce all of them, even wool, in adequate quantities by shifting to these lines of production. But it would be better economy not to do this in most cases. The larger projected imports of dairy products projected assume freer imports of foreign cheeses, dairy byproducts, and the like; the larger imports of grain and feed assume that more Canadian grain will be used to feed our livestock and also more tropical feed stuffs. 4 Page 64 POTENTIAL PRODUCTION The potential agricultural output of a country is determined by its agricultural resources, broadly defined to include the following: land, both its acreage and its potential yield per acre; the capital goods used with land—machinery, buildings, workstock, "productive" livestock, fertilizers, seed, and other supplies; and the amount and skill of labor and management applied to it. Included under these three heads is what is re- ferred to as the technology of the production process. Improved technology may have the effect of making advantageous a larger input of capital goods and a general intensification of farming. When it does, it increases the output per acre and it may so reduce the inputs that it makes advantageous the farm- ing of land theretofore considered "submarginal" for a par- ticular agricultural use. Thus, the combine-harvester converted much Western grazing land into wheat land. Table IV.-—Selected agricultural exports and imports* Commodity Volume Volume Index* 1949 1949 (million dollars) Index** 1975 1975 (million dollars) All exports 708 J, 576 72 2,384 61 874 59 847 Wheat and flour 227 1, 002 120 529 Tobacco 102 252 108 265 Oils and oilseed products 78 211 45 122 All imports 700 2, 896 746 4,228 All supplementary imports.... 87 1,453 130 2, 171 Sugar, molasses, and syrups 86 395 108 496 Wool 186 165 240 213 Dairy products 31 22 154 109 Grains and feed 173 93 204 110 All complementary imports.. . . 110 1, 443 158 2, 073 Excess of imports over exports -680 + 1, 844 *This table is adapted to fit the 1975 assumptions from an estimate of exports and imports projected to 1970 by the USDA in a report in 1950 to Gordon Gray, Special Assistant to the President. **1924-1929 = 100. In order to determine the possible increase in crop and live- stock production resulting from technology, two estimates of yields per acre and per animal unit have been prepared to cover a wide range of possibilities and probabilities. These esti- mates are based on judgments of leading scientists in the U. S. Department of Agriculture—those in the Bureaus of Dairy In- dustry; Animal Industry; Plant Industry, Soils and Agricul- tural Engineering; and Agricultural Economics; and of scientists in the State agricultural experiment stations and land grant colleges. Information from the latter sources was ac- quired directly from the scientists and from an analysis of agricultural productive capacity in 1955 by the States, in cooperation with the U. S. Department of Agriculture. The A estimates that follow are the yields of individual crops which will result by 1975 from the full, efficient, and economic application of available technology to the current acreage of crop and grazing land, and similarly the yields of the livestock which utilize the feed and forage crops. Thus, the A estimates are based on the assumption that all the commercial agriculture of the United States is organized and managed so as to make full use of all available technology where such use would add more to farm receipts than to ex- penses. The term "available technology" needs special defini- tion in this use. It means technology which is now fully avail- able, or which, it is predicted with some assurance, will be available to farmers for ready application to their farms in 1975. Most of the technological practices taken into account in these projections of yields are already well beyond the ex- perimental stage. These practices include a much greater use of fertilizers with closer and better spacing of plants, breeding for larger yields and faster growth, in both plants and animals, breeding plants for disease resistance, and insect control, artifi- cial insemination, and accompanying these, a large amount of pasture and other land improvement. The projections do not take into account the more revolutionary types of technological change that are discussed often these days. Artificially induced rain, for example, if it proves successful on a large scale, could increase greatly the output of the semiarid regions, and dis- tillation of potable water from the sea could release fresh water elsewhere for irrigation. Experimentation with photosynthesis could lead to a revolution in plant life culture. Although agricultural output could be increased by the amounts indicated in the A estimates, no one expects adop- tions of technology at these rates. In any production field there is always the natural reluctance to put a lot of money and time into practices which have been tried out only under controlled conditions. And in agriculture, where the results of new tech- nology must be made known to over 5 million independent farmers, delays in adoption are easily understandable. Finally, full adoption assumes that the necessary materials, equipment, and capital are available to all farmers. This is seldom, if ever, the case. Thus, the B estimates which follow are based on a projection to 1975 of the yield likely to come from such appli- cation of available techniques as can reasonably be expected on the basis of past experience. The projections for each major crop have been assembled in table V, together with the 1975 projection of consumption for each product, taken from table III. The important crops have been selected for more detailed treatment to point out the nature of the yield increases, regional differentiations, and the tech- nology and management practices which are expected to bring about increased production. CORN Yields of corn harvested per acre in 1948-50 average 40 bushels. The North Central States averaged 45 bushels in 1949 and the South Atlantic States, 26. Virginia, however, averaged 47 and North Carolina 36; Illinois averaged 56 and Iowa 49. The A estimates for 1975 range from around 80 to 90 bushels per acre for the Corn Belt, from 60 to 100 for the South, and 85 to 90 for the Northeast. The average of these yields repre- sents an increase of about 100 percent over the years 1948-50. Increases in corn production are expected to come from a combination of improved and especially adapted hybrids, with closer spacing, heavier fertilization, and disease and insect control. New technologies other than these have not been considered. B estimates for the Corn Belt run about 60 bushels per acre and for the South, around 40 bushels per acre. The Depart- ment of Agriculture at the Beltsville, Md., Experiment Station Page 65 Table V.—Estimates of increases in production and consumption of agricultural products, by commodities and commodity groups, from 1948-50 average to 1975* Commodity Weight (percent of 1948-49 i_ value of j agricultural! products) j Production increases (percent) A esti- mate B esti- mate Consump- tion increases (from table in) (percent) All agricultural products Food crops—total Wheat Corn Potatoes Sugar Fruits: Apples Citrus Other Vegetables: Fresh Processed Peanuts Livestock, including feed and forage** Nonfoods—total Cotton Wool Tobacco 100 < 86 33 38 24. 1 56 27 34 9. 0 50 20 23 4. 8 100 40 41 2. 3 70 25 10 ■ 5 25 25 . 7 15 22 1.2 60 91 1. 8 15 37 2.2 25 48 .8 25 63 . 8 75 25 62. 2 103 36 43 13. 7 61 32 25 9. 8 75 40 17 . 4 20 10 17 3. 5 25 10 46 estimates production at 55 bushels per acre for the entire Nation, or a 40 percent increase over 1948-50. These estimates are generally projections of past long-run rates of adoption of new technology. COTTON Yields of cotton harvested in 1948-50 averaged 287 pounds per acre. The California irrigated crop averaged 660 pounds per acre in 1949; the Alabama crop, 235; the North Carolina crop, 270; and the Texas crop, 275. The A estimate for 1975 is 550 pounds of lint per acre for the Southeast and also for the humid areas of the Southwest and the irrigated lands of Texas. The drier lands of the South- west are not expected to exceed 250 pounds; whereas the irri- gated lands of California and Arizona may reach 1,500 pounds. Together these projections represent an increase over 1948-50 of about 75 percent. Increased yields by 1975 will come largely from the use of pre- and post-emergence chemical weed control, improved disease- and drought-resistant plant varieties, increased fertili- zation, precision planting, and greatly improved insect control. The B estimates indicate a 40 percent increase by 1975 for the Nation. This is based in part on expected yields up to 400 pounds per acre in the Southeast. WHEAT Commodity Weight (percent of 1948-49 value of agricultural products) Production increases (percent) A esti- mate B esti- mate Feed and forage products total Feed crops—total 36. 3 19. 0 74 85 32 34 *The totals in this table are based on the assumption that the acreage for each crop remains constant. **Supporting data on individual feed and livestock products in table VI. Yields of all wheat averaged 16.5 bushels per harvested acre Table VI.— Estimates of increases in production and consumption of in 1948-50, 17.4 for winter wheat and 14.2 for spring wheat. feed, forage, and livestock products, from 1948-50 average to 1975 The range in an ordinary year is from 10 to 12 bushels in the Great Plains to 25 bushels in the Northeast. Consump- The A estimates by regions are as follows: for the arid increases regions of the Great Plains, 20 bushels per acre; for the irri- (from table gated and humid parts of the inter-Mountain region, 25 (percent) bushels on nonirrigated wheat, and 40 bushels on irrigated spring wheat; for the North Central States, 30 bushels; for the Northeast, 32 bushels; and for the South, 25 bushels. A weighted average of these estimates would approach 25 bushels per acre, or a 50 percent increase over 1948-50. These increases in yields will result primarily from the de- velopment of more disease-resistant varieties and the selection of varieties for resistance to heat and drought, though the "111111 latter is in early stages of experimentation and development. Some of the increase will come from improved fertilizer and soil practices. It has been found profitable, for example, to apply superphosphatic fertilizers to prairie soils used for wheat in the Great Plains. 43 B estimates, obtained largely from the States, indicate aver- 42 age increased yields of less than 4 bushels per acre, 3 bushels 55 per acre for the spring wheat areas and 5 for the winter wheat. 66 This represents an increase of roughly 20 percent over 1948-50. 31 34 Corn.... Oats.... Barley. . . Sorghum. Soybeans. Forage crops—total. Hay and pasture. . Rangeland Livestock products per animal unit—total Beef Pork Lamb and mutton . . . Chickens and turkeys. Eggs Dairy products 11. 9 3. 7 0. 6 1. 0 1. 8 17. 3 13. 5 3. 8 100 70 40 50 50 62 70 35 62.2 15. 1 15. 1 1. 1 3. 7 8. 1 19. 1 48 30 50 30 45 25 70 40 25 20 25 20 31 35 15 24 Livestock output per unit of feed 16 15 25 10 30 20 30 OATS Beef Pork Lamb and mutton . . . Chickens and turkeys. Eggs Dairy products 10 20 10 20 10 20 5 10 5 10 5 10 The national average yield in 1948-50 was 35 bushels; the range was from 25 bushels in some Southern States to 40 in some of the North Central States. The average of the A estimates is about 60 bushels per acre, or 70 percent in excess of 1948-50. One of the Lake States estimates 80 bushels per acre; several of the Southern States, Page 66 about 45 bushels. Breeding for disease resistance and fertili- zation promised the largest gains. Recent fertilizer trials in the South are encouraging. The average of the B estimates is less than 45 bushels per acre, or an increase of 25 percent. BARLEY The national average yield 1948-50 was 25 bushels. The two largest producing States, North Dakota and California, averaged 19 bushels and 29 bushels, respectively, in 1948-49. Potential yields for 1975 are estimated at 50 bushels for irrigated land in the West, 30 bushels in the Midwest, and 22 bushels in the semiarid Great Plains. The A estimate average is an increase of 40 percent in yield; the B estimate, 20 percent. POTATOES Average national yields 1948-50 were 223 bushels. The range is from an average yield in Maine of 450 bushels to a Midwest average of 160 bushels. A estimates for 1975 average from 500 to 700 bushels in the Northeast, around 300 bushels for the Midwest, and 400 to 450 for Western irrigated areas. Some A estimates, however, run as high as 1,000 bushels in the Northeast and areas of sup- plemental irrigation elsewhere. A reasonable national average of A estimates is a 70 percent increase over 1948-50. Increases in potato yields will come from more intensive use of fertilizers, supplemental irrigation, the breeding of better adapted varieties, and the production of disease-free stock. The B estimate for potatoes is a 25 percent increase in yield. SORGHUM GRAIN Average national yield for 1948-50 was 21.3 bushels. Texas, which grows more than half the crop, produced 24 bushels per acre in 1949. The yield in any single year varies considerably with rainfall. Experts at the U. S. Department of Agriculture Beltsville Station estimate 1975 A yields at around 35 bushels per acre. This is based on yields of 33 bushels in the Southwest, 30 in the Southeast, and 60-65 in the irrigated areas of Arizona and California. Estimates of a few of the States are somewhat lower. A reasonable weighting of the State and U. S. Department of Agriculture judgments give a 50 percent increase over 1948-50. It is not believed that fertilization will contribute significantly to increased yields. Though geneticists are working now on hy- brid sorghum, the grain presents more difficult problems than corn. The major part of yield increases is expected to come from improving the present poor practices that arise from the fact that sorghum producers are usually cotton or wheat growers primarily, and are concerned with sorghum only secondarily. The B estimate for sorghum is a 25 percent increase in yields per acre by 1975. SOYBEANS Average yields for 1948-50 were 21.9 bushels per acre. In the central corn belt where most of the soybeans are grown, yields have risen from 19 bushels in 1938-47 to 24 in 1949. A estimates of agriculture experts at Beltsville are 30 bushels per acre. The maximum States estimates call for an increase in production by 1975 of about 40 percent for the Midwest and 60 percent for the South. The oil content of the beans is ex- pected to increase by breeding from its present 20 percent of dry weight to 27 or 28 percent by 1975. This increase in oil content represents an additional increase in yields from the point of view of oil production. All told, a 50 percent in produc- tion per acre over 1948-50 is the A estimate. The increase in yields is expected from the development of superior varieties and improved use of fertilizers, especially phosphorus and potassium. The disease problem in soybeans will increase by 1975, especially in the South, but it is hoped that the development of disease-resistant strains will keep pace. B estimates run about 20 percent higher than production in 1948-50. PEANUTS The average national production for 1948-50 was 797 pounds per acre. In the principal peanut growing States, the average yield in 1949 was as follows: Georgia, 765 pounds per acre; Alabama, 830; North Carolina, 1,031; Virginia, 1,420; Texas, 650. The yields have increased 100 pounds over the 1938—47 average in the Southeast, and 112 pounds in the Southwest. At Beltsville the A estimate of the 1975 yield is 1,400 pounds per acre, a 75 percent increase over 1948-50. For the Southwest this is expected to be 1,000 pounds; for the South- east generally, 1,600; and for the Virginia-North Carolina area, 2,000 pounds. The State estimates are in agreement with these projections. The increased yields will be derived primarily from the breeding of improved varieties, including hybrids, the more intensive use of better balanced fertilizers, and improved prac- tices such as increased rate of seeding and the treatment of seeds. Increased yields will also come from more complete insect control. The lack of moisture in the southwestern region of Texas and Oklahoma is a severely limiting factor on in- creased yields. TOBACCO The national average for all types in 1948-50 was 1,253 pounds per acre. The yields ran around 1,400 pounds in the cigar leaf areas, and 1,200 to 1,300 in the flue cured areas. At Beltsville estimates of the protcntial yields for 1975 are estimated at 1,500-1,600 pounds per acre. From the Southern States have come similar estimates of 1,400 and 1,500 pounds and from cigar leaf areas in the Northeast and North Central States estimates of 1,600 and 1,700 pounds. Thus, the A esti- mate for 1975 is a 25 percent increase over 1948-50. The increase in potential yield by 1975 will come primarily from better varieties, particularly in the form of increased resistance to such diseases as black root-rot, black shank, and nematodes. Another potential source of increased yields is greater fertilization, though this is accompanied by a lowering of the quality of the tobacco. In general, however, the use of fertilizer for increased production has already become as inten- sive as is practical in most major tobacco areas. The B estimates for tobacco indicate a 10 percent increase in production. Page 67 SUGAR BEETS Average yields for 1948-50 were 14.2 tons of beets per acre. California produced 15.7 tons in 1949, Colorado 16, and Michigan 9.7. The Department of Agriculture estimates a possible 25-27 percent increase in yields by 1975. In the nonirrigated region of the North Central and Midwest States yields could reach 20 tons per acre; and in the irrigated regions of the West, 25 tons. Disease control, especially for leaf spot and black root, and breeding for high sugar content are expected to provide most of the gain. CITRUS FRUITS The agriculture experts at the Beltsville station project a possible increase in production of 20 percent by 1975; for Florida it would be 25 percent. This production increase will be due primarily to three things; greater use of fertilizers, im- proved insect control, and in some regions of Florida greater use of irrigation. But this estimate does not allow for the probable increase in production from the maturing of present trees, estimated at 50 percent or more in a Bureau of Agricultural Economics report. On the negative side is the possibility of an invasion of cer- tain viruses which have nearly wiped out a large part of the South American industry. Much of the California and Florida citrus is of the same root stock as the South American varieties. In sum, the A estimate is 60 percent above 1948-50 production. PASTURE AND HAY Agricultural research workers have become so fully con- vinced of the high productive potential of grass and legumes that their reports and estimates are uniformly optimistic. The Southeast exemplifies this most clearly. Experiments in Georgia have increased beef production from 183 pounds per acre to 540 pounds per acre with fertilization and liming of the pasture. Experiments in both Mississippi and Georgia in- dicate that winter grazing of beef, generally on small grain, can produce almost as much growth per animal as dry-lot feeding for the same period of time. Experiments in Beauregard Parish, La., resulted in production of 93 pounds of beef per acre on unimproved pasture, but 358 pounds per acre for pasture on which 400 pounds of 0-14-7 fertilizer and lime had been applied. Pasture experiments in the Northeast—Maine, Connecticut, and Pennsylvania—have shown a doubling of the carrying capacity from pasture improvements such as reseeding with improved grasses and liming. One Midwest State estimates permanent pasture potential in 1975 at 3,000 total digestible nutrients per acre as com- pared to an average of 1,000 total digestible nutrients per acre for 1939-48, and a potential for rotation pasture of 3,200 total digestible nutrients per acre in 1975 as compared to 1,600 for 1939-48. In the Plains region large potential increases are to be found in brush control, the use of seeded pasture to supplement native range, the development of legumes such as alfalfa for native dry range, the development of various mixtures of grasses adapted to different soil conditions, and the development of water sources. The "maximums'' reported by the States are separated into "rotation pasture*5 and "permanent pasture.'' Production in- creases over 1948-50 average about 75 percent for the South and 50 percent for the rest of the country for the rotation pas- ture, and 100 percent and 75 percent respectively for the permanent pasture. Combined, these make an A estimate of 70 percent. A corresponding B estimate, based upon the re- turns from the States, is about 35 percent. The foregoing can be summarized by saying that by planting no more than present grass lands to improve grasses, legumes and mixtures, and by fertilization, the United States could realize by 1975 or earlier a 70 percent increase in the carrying capacity of its pasture and hay land. RANGE LANDS Since public lands are a source of forage for animals, the Commission asked several public agencies to prepare estimates of potential improvements which can be effected on these lands. These estimates also are used as a guide for possible improve- ments on privately owned grazing land in the same general areas. The Bureau of Land Management reports that with com- plete development of all land under its administration, amount- ing to some 184 million acres, an increased carrying capacity of 30 percent (19.5 million animal-unit-months to 25.4 mil- lion animal-unit-months) can be achieved. Such an increase would be approximately equivalent to 2.7 million tons of avail- able forage, sufficient to produce nearly 200 million pounds of beef or its equivalent in wool and mutton. Reporting on the 45 million acres of Indian grazing lands, the Department of the Interior estimates that the grazing capac- ity can be raised from approximately 9 million to 13.5 million animal-unit-months, an increase of 50 percent. Such an increase would be equivalent to 0.9 million tons of available forage sufficient to produce nearly 65 million pounds of beef or its equivalent in wool and mutton. The best opportunities for increasing productivity lie in improved range practices, such as better livestock distribution, proper seasonal use, rotation, deferred grazing, more range facilities such as fences and water for stock; and better con- servation and treatment of range land, by such means as re- vegetation. These improvements would cost from $2 to $3 of private and public funds per acre. The Forest Service estimates that the carrying capacity of its public range lands can be raised before 1975 from its present 7.7 million to 10 million animal-unit-months—a little more than a 30 percent increase. Present carrying capacity is likely to decline, however, from 7.7 million to 6 million animal-unit- months unless, according to the Forest Service, range manage- ment is intensified by improvements costing 51 million dollars. To raise the carrying capacity to the projected 10 million ani- mal-unit-months will require in addition a reseeding program on 4 million acres at a cost of 40 million dollars. The combined total costs of improving Forest Service lands thus would be 90 million dollars. The Bureau of Land Management and Forest Service esti- mates for improvements involve a total investment of from Page 68 35 dollars to 50 dollars per animal-unit-month, and an over- all outlay of 450-640 million dollars. If Indian service lands are combined with those under Bureau of Land Management, one obtains a somewhat higher cost for improving all grazing lands under Department of the Interior management. Based on this analysis, we have projected an increase of 35 percent in carrying capacity of range lands as an A estimate; and 15 percent as a B estimate. LIVESTOCK PRODUCTS The production of feed and forage does not become actual agricultural output until it has been converted into meat, milk, eggs, and wool. The efficiency of this conversion process may therefore be as important as the primary production. The in- creases which follow represent partly the results of feeding at a higher rate and partly an increase in output of livestock products or gain in weight per unit of feed. DAIRY PRODUCTION National average production in 1949 was 5,240 pounds of 4 percent milk per animal. By 1975, one North Central State estimated 11,400 pounds; several Middle Atlantic States, be- tween 10,000 and 10,200 pounds; two New England States, between 8,000 and 9,500. Dairy experts of the Department of Agriculture have estimated a national average of about 8,000 pounds by 1975. On the basis of these several estimates we project a possible increase of 70 percent in output per cow by 1975. This increase is predicated on improvements in breeding, including the combination of artificial insemination and use of hybrids, and in the South, the development of breeds that will produce milk in hot weather. This latter alone should increase output per cow in the South by 30 percent. Artificial insemina- tion will reduce the amount of culling as well as feed input per herd. The increased output per cow will reduce importantly the maintenance fraction of the dairy ration and hence of feed per hundredweight of milk. Of the 70 percent increase in out- put, roughly 20 percent represents more output per unit of feed input. The B estimate for dairy production is an increase of 30 percent. BEEF National average production in 1949 was 235 pounds of beef per head. The reports from the States on A estimates for 1975 are quite erratic. Department of Agriculture experts expect anywhere from a 21 percent to 37 percent improve- ment. These gains wilj come in major part from improved breeding practices—artificial insemination, hybrid vigor, se- lecting faster growing types. With artificial insemination it is possible to get up to 1,000 calves per year per bull where normally 25 to 50 per year per bull is the expectancy. This, of course, reduces the number of bulls needed for breeding and releases their pasture for direct beef production. Progress in genetics of breeding is much slower with cattle than with chickens and hogs, however. It is expected that hybridization (including rotational 3-way crossing of Hereford, Shorthorn, and Angus), breeding for adaptation to climate, and the de- velopment of the dual-purpose cow will be about all that genetics can contribute to increased production by 1975. Some gains will come from improving the quality of forage and winter pasture. A reasonable A estimate for 1975 is a 30 percent increase in output per animal unit of which two-thirds represents more feed per animal unit and one-third a gain in output per unit of feed per input. The B estimate is 15 percent. HOGS The Department of Agriculture expects larger gains in out- put of pork per feed unit than of beef cattle. In the past 10 years feed input per 100 pounds of pork has decreased 53 pounds, and gains at this rate and more are expected in the next 10 years because of the recent success achieved with antibiotics or the feeding of more high protein feeds and less grains. Other gains are possible from decreased mortality of suckling pigs and the universal adoption of vaccination of hogs against cholera and erysipelas. Reports from the States match estimates of the Department of Agriculture and indicate an A estimate of 50 percent of increase in production by 1975. Of this, 30 percent is from more feed per animal unit and 20 percent, increased output per unit of feed input. The B estimate for increased production is 25 percent. eggs • Production of eggs per layer per year in 1949 was 165. There has been an increase of 20 percent in the efficiency of egg production over the last 10 years, representing a saving of a half pound of feed per dozen eggs, or 10 percent in effi- ciency of feed use. Some expect to see another 25 percent increase per layer by 1975, which will give 206 eggs per layer per year. Three New England States estimated potential egg pro- duction per bird in 1975 as 200, 225, and 250 respectively. In many of the Midwestern and Western States with farm flocks, present production is placed at around 150 eggs per bird and forecast 1975 production at 165 to 190 eggs per bird. A Middle Atlantic State places the figure at 220 compared with 177 in 1949. A reasonable A estimate for egg production is 25 percent per layer of which 10 percent is gain in output per unit per feed input. The B estimate, derived from the State reports mainly, is set at 20 percent. The principal factors in these projected increases are the full use of antibiotics and B-l 2 in feeding, and the continued breed- ing of improved chicken strains, coupled with hybridization. BROILERS In 1949 before the use of B-l 2 and antibiotics, commercial raisers in Delaware were feeding an average of 12 pounds of feed for a 3-pound bird. The general average for the United States in 1950 was just more than 3/2 pounds of feed for 1 pound of broiler meat, and this is expected to drop to less than 2/2 pounds by 1975. For turkeys, the Department of Agricul- ture expects that by 1975 a ration of 15 pounds of feed will produce a 5-pound broiler in 10 to 12 weeks. The A estimate Page 69 of gains by 1975 is 45 percent per animal unit, of which roughly 20 percent is for more efficient use of feed. Along with the improved feeding will come further improve- ment in breeding, hybridization, and control of disease and parasites. In turkey broiler production, a major improvement will come from lowering the cost of producing the poult. The B estimate is 30 percent. SHEEP The Department of Agriculture expects wool production per animal to increase 20 percent by 1975. This means an increase in the weight of the fleece to 9.7 pounds from 8 pounds. They also estimate that mutton production will increase 20 percent per animal. The State returns run somewhat higher than this; and we have adopted 30 percent as the A estimate, of which half can be assigned to more efficient use of feed. The B estimate is 10 percent. These potential increases are based on breeding, including hybridization and selection, and improved disease control. Hybridization is in its early stages with sheep. In the sheep husbandry investigations at Beltsville, a 23 percent increase in wool and mutton resulted from single crosses over purebred strains. Mortality of the lambs was reduced almost one-half. Summary The production estimates for 1975 are summarized in tables V and VI. The relative importance in total agricultural pro- duction of individual crop and livestock outputs has been gaged by the relative values of these items produced in 1948-49. In combining individual projections to get average A and B estimates, it is necessary to avoid double counting of the feed and forage which would result if it were all included in live- stock over again. The most satisfactory statistical method for this is*to multiply the feed and forage increases by the increased efficiency with which livestock will utilize the feed. This latter figure, however, is one on which there has been considerable variation in the estimates submitted by the several State and Federal technicians. We believe a reasonable A estimate for all livestock to be about 16 percent, and a B estimate, 8 percent. If, then, we multiply the A estimate for increased feed and forage, 75 percent, by the A estimate for improved livestock efficiency, we get a combined A estimate for livestock, including feed and forage, of 103 percent. We run into more difficulties, however, in applying this method to the B estimate—to what we believe likely to occur under present programs, rather than what could possibly occur if all techniques were applied by all farmers. The method as- sumes that farmers will in all cases increase the number of animals to the optimum required to consume efficiently all of the increased feed that can be produced efficiently. Thus, for the B estimates it assumes that farmers will adjust their total livestock populations so as to consume, with 8 percent greater efficiency, the 32 percent more feed that is likely to be pro- duced. This would mean a 43 percent increase in livestock, in- cluding feed and forage. However, experience proves that farmers do not adjust livestock populations to feed in this way. If the farmer who grows his own feed finds that by improved methods he can grow 56, rather than 40, bushels of corn per acre, he will not necessarily increase his livestock count to con- sume the increased feed at maximum efficiency. He is likely instead to plant somewhat fewer acres of corn. Or in the case of increased grazing capacity, he is likely to fail to increase his livestock to utilize the forage at maximum efficiency. This will be the case especially in the short run, but to some extent also in the longer run. Taking this factor and others into account, we have concluded that a reasonable B estimate for livestock, including feed and forage, is 36 percent. This means, in effect, that if farmers realize the rough B estimate of 8 percent increase in efficiency of feed utilization, they are likely to increase feed production by only 26 percent, rather than the B estimate of 32 percent which was arrived at tentatively and without refer- ence to the relationship between feed and livestock production in farm operations. An increase of 33 percent in yield and production per unit by 1975 will not meet the expected increased demands of 38 percent. Of course, the balance of anticipated increase in sup- ply and demand varies a good deal by commodities. Thus the demand for cotton is expected to increase only 17 percent and the yields per acre are expected to increase by 40 percent. Comparable figures for potatoes are 10 and 25 percent. On the other hand, the meats, dairy, and poultry products are expected to have a larger increase of demand than will be met by increasing the output per animal unit. Similarly, for most fruits and vegetables and tobacco, increased production from the acres now planted to these crops will not equal increased demands. And even if maximum adoption of available technol- ogy were attained for most fruits and vegetables, and tobacco, the increased production would not meet demand. Thus for these products and likely for certain others, the differences must be met by devoting more land to their production—by shifting agricultural land from a surplus to a deficient crop, from cotton to tobacco, for example, or possibly by converting new land to agricultural use. It should be remembered that this discussion assumes no change in farm and nonfarm price relations. LAND USES There are now 478 million acres in cropland and pasture in rotation with crops, as shown in table VII.6 About 40 million of these acres are unsuitable for cropland, mainly because of high erosion hazards; and before 1975 most of them should be Table VII.—U. S. land by uses [In millions of acres] Land use Land not in farms Cropland harvested Cropland used only for pastures Cropland not harvested and not pastured Open pasture and grazing lands Woodland pasture and forest land grazed Woodland and forests not grazed Other uses Total Source: U. S. Bureau of the Census, 1950 Census of Agriculture; pre- liminary figures. 6 Most of material on present land use is derived from U. S. Department of Agriculture, Inventory of Major Land Use, Miscellaneous Publication 663, especially tables 1, 20, 21. Page 70 converted to grassland. Also, we can expect that about 15 million acres of cropland will be used to meet the expanding needs of cities, roads, and airports. On the other hand, there are about 285 million acres now in grass and woodland that could be planted to crops. Of these 150 million acres are open grassland, nearly all in farms. One hundred thirty-five million acres of potential cropland are now woodland, of which 45 million are now in farms. A major portion of the remaining 90 million acres was once in farms but has been allowed to return to woodland in various stages because of competition of newer lands. Table VIII illustrates these potential shifts in major land use by regions and classes of land. The land classes are defined as follows: a) Land suited for cultivation: Class I. Very good land which can be cultivated safely by ordinary competent farming methods with mod- erate to high yields. It is nearly level and easily tilled. Some areas need clearing or fertilization. Usually there is little or no erosion. Class II. Good land that can be safely cultivated with simple practices, such as contouring and protective cover crops. Common requirements are rotation and fertiliza- tion. Moderate erosion is common. Class III. Moderately fertile land that can be culti- vated safely with such intensive treatment as terracing and strip-cropping. Usually a combination of practices is needed. b) Land suited for limited cultivation: Class IV. Land that is so steep, so severely eroded, or so poor that it is best used for hay or pasture and should be cultivated only occasionally. c) Land suitable for grazing or forestry but not for culti- vation: Class V. Suited for grazing or forestry, and subject to little erosion under those uses. Can be grazed to full capacity; forests can be cut without special practices to protect the land. Class VI. Suited for grazing or forestry but needs protective measures—rotation grazing, logging with special location of trails, and other practices to protect the soil. Class VII. Suitable for grazing or forestry with severe restrictions on use. Land highly susceptible to deteriora- tion. If range, only occasional grazing; if forests, only highly selective logging. d) Wildlife land not suitable for cultivation, pasture, or woodland: Class VIII. Suited only for wildlife, recreation, or as a watershed. This land is steep, rough, stony, sandy, wet, or highly erodible. Most of these 285 million acres of grass and woodland would indeed be planted to crops if they were in Western Europe. But the conclusions reached in this analysis indicate that very few are likely to be converted in the United States by 1975. Taking into account the increases in production likely to come from raising the productivity of present crop and range lands, we estimate that agricultural requirements can be met by 1975 without adding in any significant way to the total of 1,142 million acres of land now in farms. This can be done by improv- ing or upgrading the use of much of the land now in farms, and by bringing in new land only to offset any farm acres that will be taken out for urban and other uses. Table VIII.—Potential shifts in major land use, United States [Thousands of acres] A. SHIFTS TO MORE INTENSIVE USE* Woodland to crops Grassland to crops Area Class CI as: I II Class III Class ■ Class IV I Region 1 . . . . Region 2. . . . Region 3. . . . Region 4. . . . Region 5. . . . Region 6. .. . Region 7. . . . 531! 5, 468' 6, 909! 7, 946 2, 930.18, 469,30, 902 14, 252 United States. 2, 177 1. 278 581 7, 509 3, 8901 6, 178 5, 331 15, 210: 424 69 33, 652 498 620 60, 316 5, 201 3, 403 312 2, 281 34, 395 311 524 3, 343 4. 465 1, 745 Class II Class III Class IV 275 429 50 10, 438 7, 385 16, 096 8, 247 6 784 38, 222 3, 523' 2, 448 5, 417 9, 673 22, 555 15, 097 155 2, 644 59, 062 6, 373 9, 045 7, 030 9, 813 944 6, 010 41, 662 B. SHIFTS TO LESS INTENSIVE USE Cropland to grassland (and a little wood- land) Cropland to wildlife, rec- reation, and Grassland to wildlife, rec- reation, and Area watershed, class VIII watershed, class VIII Class V Class VI Class VII ! Region 1 Region 2 1 611 Region 3 1,278 Region 4 1,018 Region 5 1 920 Region 6 Region 7 j 3 United States k 830 1 2, 015 4, 686 2, 025 7, 814 2, 093 612 20, 651 511 2, 604 4. 721 4, 557 1, 512 486 12 14, 405 0. 9 415 416 0. 9 109 78 4, 889 552 5, 629 *These estimates are the full potential based on physical capability of the land. The Soil Conservation Service does not recommend that all of the land physically suitable for cultivation should be used for cultivated crops, since a balanced enterprise on most existing farms requires use of some land in classes I, II, or III for pasture and woodland. Little if any conversion of class IV land to crops is recommended. As for improving the use of land now in farms, it is estimated that 80 million acres of open pasture and 10 million of wood- land pasture should be improved so that they can be used in a rotation of crops and pasture. This will increase from 478 million to 568 million the farm acres devoted to cropland and rotation pasture. At the same time, however, more of the present cropland will be used in rotation with pasture, so that little if any more land in the aggregate will be in harvested crops in any 1 year. By increasing their acreage in rotation in this way, and by improving their pasture through liming, fer- tilization, and seeding with improved types of grasses and legumes, farmers can provide grazing for twice as many animal units as now, whenever this is needed, and the yields of the feed and forage crops in the crop years of the rotation will be doubled at the same time. Also, it should be pointed out that this type of land management protects the land from most forms of erosion. To improve the 80 million acres of grass and 10 million acres of farm woodland will require mostly fertilization and seeding. Other improvements will include the clearing of some Page 71 woodland; the removal of brush, especially from lands in the Southwest; the removal of stones in other areas; contour ridging on the steeper slopes to conserve rainfall and check erosion; drainage; and supplemental irrigation for 5 to 10 million acres by 1975. As for new land brought in to offset the 15 million acres likely to be taken out of farms for urban and other uses, this will come largely from present forest land. In addition, some new farm acres will come from grazing land, including what- ever new irrigated acres are brought in by Federal reclamation projects. Much of the woodland to be converted was once in farms, has a high capacity for the economic use of fertilizers under modern methods, and is located in farming areas where labor and other facilities are available. For these reasons it has been estimated that the major part of new land require- ments will be met by restoring to cultivation land that once was farms and has been allowed to revert to nonfarm woodland. It should be noted here that this projection differs from that contained in the Report of the President's Water Resources Policy Commission (1950). We expect considerably more rec- lamation than the Water Policy Commission, but most of this would take place on present farm lands. In fact, while the Re- port of the Water Policy Commission calls for reclamation by 1975 of 30 million acres outside of present farms, this Report projects only 15 million acres. Furthermore, this report antici- pates no increase in land in crops in any one year, but the Water Commission expects an increase of 30 million acres by 1975. In- stead, this Report calls for a large increase in land in grazing within farms due to an increase in crop and pasture rotation. This is in keeping with the relatively large anticipated increase in the demand for beef and dairy products. It must be remem- bered that foods of animal origin make a large demand upon land resources. The increased efficiency in use of crop and pasture land is expected to provide the major part of the feed and forage that will be required for the increase in consump- tion of such foods. SOME INPUT FACTORS Increased agricultural output by 1975, both from technol- ogy and improved land use, will require a very large increase in commercial fertilizers and a moderate increase in farm equipment and buildings. FERTILIZERS About 2^4 times the 4 million tons of plant nutrients used in 1950 will be needed to bring about the 40 percent more agri- cultural production by 1975 if we assume that other practices are improved along with increased fertilizer use in about the same proportion as in the past two decades.7 The gains from fertilizer use are so striking, however, and call for so little addi- tional labor, that fertilizer may well play a larger role in at- taining higher yields in the future than in the past. If the rate of use were to increase 10 percent each year to 1975, as it has in more recent years, fertilizer alone would boost yields by 75 percent. And this is by no means the limit. But such sustained increases in rates of application are not to be expected, although a few of the more progressive farmers may go well 7 See report 8, United States Fertilizer Resources. beyond a doubling of current use. If very many did so, how- ever, the decline in prices of farm products that would follow would tend to check further increases in fertilizer use. The use of lime must be considered in relation to fertilizers. Present use is 25-30 million tons a year, or more than 8 times that of 1935. It is estimated that this should rise to about 75-80 million tons by 1975. Reserves of the three fertilizer materials and of lime are ade- quate for the new needs, although difficulties in obtaining sul- furic or other acids for converting phosphate rock to fertilizer may lead to somewhat higher cost of this material. A large part of the big Western deposits of phosphate may require electric furnace processing, the costs of which are likely to be reduced in due time. MACHINERY AND EQUIPMENT The needs of agriculture for machinery and equipment over the next 25 years are in the main for replacements. The new types of machines that will be used for replacements will prob- ably require no more steel than the present types. However, old machines will tend to be replaced by new ones before they are worn out, so that obsolescence as well as depreciation is involved. In addition, the agriculture of the next quarter century will continue to substitute machines for hand labor. This means an increasing use of mechanical cotton pickers, field hay bailers and field hay choppers and other harvesting machinery, and also new types of tillage equipment to replace hoeing, chop- ping, and the like. Perhaps the biggest demand for new equip- ment will be for fertilizer distribution machinery. Although the raw materials, particularly steel, for the pro- duction of certain types of farm machinery and equipment are now in short supply, it is estimated that adequate supplies, and in some few cases substitutes, will be available in 4 to 6 years and remain so until 1975. The most serious long-range supply problem for farmers is lumber for building materials. Lumber is likely to be so high-priced as to force a greater use of substitutes by farmers in common with others. MANPOWER An increase of 40 percent in total agricultural production almost certainly will call for an even greater gain in produc- tion per agricultural worker. Between 1939 and 1949 the num- ber of persons employed in agriculture dropped nearly 10 per- cent to 10,756,000 in the latter year. In 1950 alone, 400,000 people left the farms. A further drop of at least 10 percent in the next 25 years appears likely, because of the greater finan- cial attractiveness of nonfarm jobs to many people now on farms, particularly smaller and less productive farms; and the figure may well be higher than this. Such a decline not only would be in line with past trends, but would fit into the income pattern projected for 1975. One of the general assumptions made by the Commission is an increase of about 55 percent in the $1,300 average (1950) disposable income of all citizens, farm and nonfarm alike. If there occurs no striking change in the relationship of farm and nonfarm prices, a 40 percent increase in farm production will bring about a 40 percent in- crease in average farm income if the farm population remains the same. Thus, the income of the farmer which today averages Page 72 about $1,000, would increase to only about $1,400, whereas the average income throughout the Nation would rise from $1,300 to $2,000. But gains in individual farm income would be larger, and therefore more in line with the national average, if the gain in total farm production were made by fewer people handling more acres per worker, and, with the aid of more power and machinery, earning higher profit margins per bushel or hundredweight. As long as there are more attractive employment opportunities in cities, more workers will leave farms. Under some circumstances this could cause painful fluctuation in farm production and prices, and short-term movements of workers on and off farms. The problem is to facilitate an orderly transition and to help the people who re- main in agriculture to increase their production to offset the loss in manpower. PROJECTION AND EQUILIBRIUM We have come now to the point of balancing the estimates of consumption against the estimates of potential output in order to determine the likely pattern of agriculture production in 1975. The foundation for this was laid in the discussion of potential production. Other aspects that need to be brought into focus at this juncture are prices, and the potential shift in land use which has already been discussed. The 1975 projections of consumption and yields for major groups of products have been assembled in table V.s What sort of a price equilibrium is suggested by these figures? Unfortu- nately, this question cannot be answered without first consider- ing some aspects of parity, since the structure of commodity prices is strongly affected by the way in which parity is calcu- lated. Before passage of the Agricultural Acts of 1948 and 1949, the base upon which parity was figured was the average prices prevailing in 1910-14. For tobacco, potatoes, and a few- other crops, the average of 1919-28 was used instead. Parity prices for commodities were derived by multiplying these base prices by the current index number of prices paid by farmers. This index number of prices paid now includes interest, taxes, and wages of hired labor. The act of 1948 provided for "modernized" parity prices. These average the same as the old base parity prices, but vary- by commodities according to changes in the relative level of prices for the different commodities since 1910-14 or since 1919-28. A moving average of prices in the last 10 years is used to measure these relative changes. "Modernized" parity has meant that most of the crops have lower adjusted bases, the principal exceptions being rice, soybeans, and cotton seed; and most of the livestock products, higher adjusted bases, the principal exceptions being chickens and eggs. Differences in technological advances and in demand account in large part for the disparity between old and adjusted base prices. The parity prices we are concerned with in this analysis are those of 1975. Base prices for 1975 have been projected on the assumption that the average annual rate of change between the 1910-14 old base and the 1951 adjusted base (based on 8 Except for a few crops, export-import balances are not expected to have any important effect on these projections. It is true that exports are ex- pected to decline by 1975 from 13 percent to 9 percent of farmers' cash receipts from marketings; and imports, to rise from 10 percent to 15 per- cent of the same figure. But these are not due to the influence of any general failure of domestic production to meet food and fiber needs. 1941-50 averages) will continue to 1975. This would mean, for example, that the downward trend for wheat from 88 to 74 cents between 1910-14 and 1941-50 will be* continued to 66 cents in 1975. An exception has been made for potatoes and citrus fruits for which such projections appear unreason- able due to the nature and timing of advances in technology. In these cases the 1951 adjusted base is projected instead. Column 1 of table IX gives the 1975 base prices for selected commodities. Column 2 of this table estimates full parity prices for 1975. These are derived by multiplying the base prices by an index of prices paid by farmers in the first half of 1950. Table IX.—Projected prices in 1975 compared with current prices 0) (2) (3) (4) Commodity Unit Base price 1975 Full 1975 parity price* Price Dec. 15, 1951 Probable relationship of 1975 price to col- umn 3 price Corn Bu... 0. 530 $1. 34 $1. 69 Moderately lower. Wheat Bu... . 663 1. 68 2. 22 Moderately lower. Potatoes Bu . . . 570 1. 44 1. 93 Considerably lower. Peanuts Lb... . 036 .09 . 104 Moderately lower. Beef Cwt . 8. 884 22. 48 27. 50 Moderately lower. Pork Cwt . 7. 629 19. 30 17. 60 Slightly higher. Lamb Cwt . 9. 845 24. 91 28. 50 A litde lower. Eggs Doz . . 134 . 34 44 Moderately lower. Chickens Lb . . . 110 . 28 234 A little higher. Milk, wholesale.. Cwt . 1. 731 4. 38 **4t 77 A little lower. Cotton Lb... . 113 . 29 .40 Moderately lower. Tobacco Lb... . 180 . 46 . 51 A little lower. *Base price times index of prices paid in first half of 1950 = 2.53. **Adjusted for seasonal variation. In order to estimate the 1975 price of each major agricul- ture commodity which will be associated with the required production for that commodity in 1975 a series of supply-price equilibrium analyses have been made. In these analyses, pre- sented in table IX, the probable prices are expressed in per- centages of the projected 1975 parity prices. And in column 4 of the table, these probable prices are compared with those prevailing in mid-December 1951. WHEAT The B estimates of a 20 percent increase in wheat yields by 1975 will not quite equal the projected 23 percent increase in consumption, but the adoption of only a little more of the 50 percent A estimate would accomplish this. Production is likely to expand as much as needed to meet 1975 demand at a price around 195 percent of 1975 parity. COTTON In view of the expected 17 percent increase in consumption by 1975, the 40 percent B estimate will supply much more cotton than is needed, to say nothing of the 75 percent A esti- mate. One would expect prices as low as 80 percent of parity under these circumstances. However, considerable land will probably be transferred out of cotton in view of the prospective yield increases, and in addition farm wages will rise relatively more in the South than elsewhere. Therefore, an equilibrium of around 90-95 percent of 1975 parity is projected. Page 73 POTATOES With the consumption estimate of 10 percent increase, B estimates of 25 percent, and a production potential of 70 per- cent, prices are likely to drop to levels of 80 to 85 percent of 1975 parity. SUGAR The increased sugar consumption of 25 percent projected in 1975 would appear to tax present acreage and known tech- nology to the limit. (The A estimate is 25 percent.) There is, however, a large acreage in present irrigation projects in the West that can be shifted to sugarbeets any year that the sugar- beet quotas are raised, as well as large possibilities of expansion of sugarcane in Puerto Rico and Cuba. The new technology will lower costs somewhat, but foreign and Puerto Rican pro- duction will meet these reduced costs. The price will in fact be determined by the sugar quotas that are set. TOBACCO To meet the 48 percent increase in tobacco consumption es- timated for 1975 will call for planting tobacco on more acres. The A estimates indicate that about half of the increase—25 percent—could be met by raising yields, but it is highly likely that the major portion of the increase will come simply from enlarging the tobacco quotas. There is an abundance of suitable land in most areas now growing tobacco. The most important factor in prices will be the labor supply in the tobacco growing areas. It is likely to decline, and most of the operations cannot be mechanized. Prices around 100 percent of 1975 parity can be expected, therefore. VEGETABLES It is clear from the projected increases of 48 and 63 percent in demand for fresh and processed vegetables, respectively, and from the 25 percent A estimate that more land will have to be shifted to vegetables in the next 25 years. There is plenty of it available in most sections, but the vegetables will call for much hired labor. Vegetable prices can be expected to range around 95 to 100 percent of 1975 parity. FRUITS Citrus fruits will call for a large expansion of acreage by 1975 if the estimated 91 percent increase in consumption is to be realized. The land is available, and prices at 100 percent of the 1975 parity should suffice. For other fruits, a proportionately smaller expansion will suffice, but prices will be at about the same level because of labor requirements. FEED AND FORAGE CROPS The demand for feed crops and forage is determined by the demand for livestock products and meat. The demand for different livestock products will increase by about 50 percent as an average. This increased demand could, according to the A estimates, be just about met by heavier feeding of present livestock herds and flocks, combined with adoption of the new technologies of breeding and sanitation. We may be sure that these feeding and other practices will not be adopted at the rate that will achieve this. Accordingly, more livestock will need to be kept. As indicated, the A estimate for feed and forage crops, if combined with the A estimate for increased efficiency in use of feed, will produce 103 percent more livestock prod- ucts. This is obviously in excess of needs. On the other hand, the combined B estimate, 36 percent, is somewhat less than the needs. This estimate, however, does not contemplate full use of feed and forage production under the B estimates be- cause farmers often fail to increase livestock numbers in pro- portion to increased feed and forage production. If feed and forage crops were produced and consumed at B estimate effi- ciency, the resulting increased meat and livestock, 43 percent, would still fall short of needs. Therefore, the projected increase in demand will call for improvements in technology somewhat beyond the level of the B estimate and perhaps a small increase in crop acreage. Very largely, however, the feed and forage needed to produce beef, mutton, pork, dairy products, eggs, and poultry that the population of the United States will de- mand in 1975 can be produced by increasing the output of land now in feed and forage, particularly the pasture lands; and the feed and forage crops should be available at prices equivalent to about 95 percent of 1975 parity. LIVESTOCK Based on the estimates of availability of feed and forage, on the estimates for increasing the production of livestock per animal unit, and on expected demands, the prices for livestock products have been projected in terms of 1975 parity. (See table X.) Table X.—Projected prices for livestock products, in terms of percent of 1975 parity Approximate Approximate percent percent Beef 90- 95 Eggs 100 Pork 95 Chickens and turkeys 90- 95 Lamb 100 Dairy products 95-100 Conclusion If the percentages of 1975 parity projected in the foregoing are weighed according to the relative values of these products in 1948-49, the average parity ratio is only slightly higher than that which prevailed in 1950, before the Korean war—97 or 98 as compared with 96 percent. This conclusion conforms to one of the basic assumptions of this study, namely, that the general 1950 price relationship between agriculture and other sectors of the economy continue to 1975. The 1975 parity base has been projected from the base now in use. The parity prices of 1975 will average close to those of 1950, and somewhat less than those of December 1951, assuming no change in the gen- eral price level. But the parity prices of individual commodi- ties will vary as indicated in table IX. Two points should be emphasized in connection with this conclusion. First, the 1975 parity prices assume high level em- ployment and therefore a demand for farm products that will keep their prices close to the parity level. However, labor and materials will not be in as great demand and short supply as they were in December 1951, when the Nation was in the Page 74 midst of an all-out effort to increase its production potential. Thus, farm prices in 1975 will be somewhat lower than in 1951. Second, the 1975 parity prices assume that a vigorous program of research and extension, with supplemental credit and other aids, will be in operation. Without the first assump- tion, prices will fall and the intensification of agricultural pro- duction will be checked. Without the second, and with full employment, prices will run higher than indicated in table IX but net farm incomes will be lower. The agricultural sector of the economy is likely to attain its highest net return at the price levels indicated in this analysis and the volumes of out- put which accompany them. Thus farmers and producer groups who have heretofore put all emphasis on keeping parity prices at levels up to and exceeding 100 percent should begin to think instead in terms of income rather than prices. References Elsewhere in This Report This volume: United States Fertilizer Resources. Vol. II: The Outlook for Key Commodities. Production and Consumption Measures. Projection of 1975 Materials Demand. Page 75 Report 8 United States Fertilizer Resources* Looking beyond the immediate years ahead and into the fu- ture 25 years, the United States has the prospect of providing food and fiber for about 40 million more people than the 150 million of 1950. While continuation of record farm production is needed for the next several years to feed, clothe, and arm this growing Nation and to aid in attaining its security in a free world, the long-range prospects are for demands of even greater output than the records established in recent years. If the period through 1975 is peaceful, the United States will need much more food and fiber than it does today because of our growing population. Each year there are 2 to 2/2 million more people to feed and clothe. It is probable that by 1975 our population will have reached at least 190 million. If the next 25 years are years of international turmoil, our farm pro- duction requirements will be even greater. In years gone by, an increase in farm production normally meant an increase in acres planted. But new lands for the ex- tension of farm frontiers no longer exist. Relatively few new acres remain for the plow. The transition from horses and mules to machinery on farms is almost complete, therefore any addi- tional land freed from supporting work stock would be rela- tively negligible. More than 70 million acres formerly used to support farm work animals now are producing food and fiber. The bulk of future farm production—for the next 25 years or the next 100—must come from land already under cultivation. Fertilizer, applied scientifically and used with other fruitful farming practices, is a cornerstone of the welfare of the Nation. It is the one single method above all others that will permit our farmers to meet our bigger future needs. Without more of it, the job cannot be done. What are the long-range prospects for fertilizers? Do we have enough natural resources necessary to support fertilizer production expansion? Are our processing facilities in shape to expand? How can we encourage greater fertilizer use? These are but some of the questions this study attempts to answer— as a guide to the future. Fertilizer Increases Farm Production Judging by the amount of food and clothing required to support the 1950 population of 150 million, it will take about 40 percent more farm production to support 190 million Amer- *This paper is a condensation of a paper entitled "Fertilizer Resources and Requirements of the United States," which was prepared by the U. S. Department of Agriculture, the Tennessee Valley Authority, and the De- partment of the Interior. icans in 1975 at a high standard of living. Under the best con- ditions, in order to produce enough to meet the national need farmers will need by 1975 more than 2l/2 times the 4 million tons of the primary plant nutrients (nitrogen, phosphate, and potash) contained in the 18.5 million tons of commercial fer- tilizers which farmers used in the crop year 1950. The use of fertilizers for supplying plant nutrients to in- crease farm crop yields produces results. When used under suitable conditions and in conjunction with other desirable practices—provided moisture and other climatic conditions are favorable—fertilizer can bring about a greater increase in production of all crops than any other single influence. It is the key to the tremendous food and fiber production required in the future. Most crops in all areas of the United States do not get enough needed nutrients from the soil and other natural sources to permit them to grow into their full productive power. De- pending upon the type of ground in which they are planted, crops usually lack one or more of the three primary plant nutri- ents: nitrogen, phosphate, and potash (N, P2O5, and K20, respectively). Many also lack secondary nutrients, such as sulfur, calcium, and magnesium and so-called trace elements, like boron, copper, manganese, and zinc. Fertilizing the soil with these nutrients in scientifically determined proportions provides crops with well-balanced diets. In order to produce maximum results, the use of fertilizer must be supported by use of other beneficial farm production practices, such as rotation planting, contour plowing, and improved seed along with adequate manpower and machinery and pest control. But the best combination of other practices will not provide the necessary farm production unless enough fertilizer is supplied. The historical pattern of increased per-acre yields indicates that increased fertilization of crops and improvement in other practices are likely to take place more or less together. If past relationships between increases in farm output and increases in the use of fertilizer are projected toward a further increase of 40 percent in farm output, farmers would use more than 2j/o times as much tonnage of plant nutrients as they do at present. It should be noted that a large portion of an increase in ferti- lizer use will go to maintain present levels of yield alone. In recent years, farmers have increased their use of commer- cial plant nutrients at an annual rate of about 10 percent. If this rate is projected forward 20 years, the quantities used by that time would be four times those used now. Even with no improvement in other practices, such a level of use might result in nearly a 75 percent increase in farm output. Even though the Page 76 response were that great, if it develops that a healthy economic balance would be reached with a 40 percent increase in output, it appears unlikely that the use of fertilizer will reach that level. EFFECTS OF FERTILIZER ON CERTAIN CROPS In this look into future food and fiber needs of the Nation, the average response of four major crops, each in selected States, is used as the point of departure. These crops—corn, cotton, vegetables, and hay and pastures—received nearly 60 percent of the total farm use of the three primary plant nutri- ents in 1950. They are used as the basis for estimating the total quantities of plant nutrients required and the total pro- duction that would result from application of the most profit- able rates. Theoretically, if the other factors involved in in- creasing yields were improved commensurate to maximum practicable fertilizer use, current total farm production could be trebled. Obviously, such results are unattainable as national totals, although a few of the more progressive farmers may attain comparable results in special instances. Corn—a key crop in expanding meat production—is the outstanding example of how farm output can, through ferti- lizer, be pushed practicably up to the level of future food and fiber requirements. About one-fourth of all commercially pro- duced plant nutrients used on all crops in the United States is applied to the corn crop. And about 40 percent of that is used in the Corn Belt and Lake States. Preliminary estimates indi- cate that Iowa farmers could practically boost corn production per acre from the current average of 49 bushels to 60 bushels by doubling the amount of plant nutrients they now use and by improving other farming practices about 50 percent. They could increase production to an average of 75 bushels an acre by doubling once again their plant nutrient application and improving their good farming practices by another 50 percent. A similar situation is possible in cotton which uses about 10 percent of all fertilizer applied. Estimates thus far developed show that the average yield of seed cotton in North Carolina, for example, could be increased from the 1949 average of 729 pounds per acre to 1,250 pounds. This would be possible by increasing the amount of plant nutrients used on the crop from the 1949 average of 112 pounds to about 150 pounds together with about a 50 percent improvement in other prac- tices. Another 200 or 300 pounds could be added to the yield if fertilizer application were further increased to approximate more nearly the 50 percent increase in other practices. About 11 percent of all plant nutrients are applied on hay and pasture in the United States. Estimated response of legume- grass hay and pasture to fertilizer in New York State indicates that the current average yield is little more than one-third of the yield that could be obtained. The yield of these crops could be increased by going half way toward the most profitable rates of application and making about a 50 percent increase in other practices. This would mean an application of about 100 pounds of plant nutrients per acre. Production of vegetable crops, which also receive about 11 percent of all primary plant nu- trients used, could be increased about a fourth with more fertilizer. It is emphasized that the foregoing estimates of over-all use of plant nutrients and resulting production at different rates of application are preliminary and subject to substantial revision as continuing research dictates. The large increases in produc- tion that would result from much greater use of fertilizer un- derscores the need for encouragement of balanced production programs. Over a period of 25 years improvements will surely be made in other known practices and more important un- foreseen developments will no doubt occur. Therefore, the quantities of fertilizer needed to support estimated production levels 25 years hence will depend not only on the extent of further adoption of other known practices, but also on-new developments in farm technology. UNITED STATES USE OF FERTILIZER INCREASES Fertilizing the ground to encourage bigger and better crops dates back before the earliest colonial settlers touched the Atlantic shore, when certain American Indian tribes placed fish in hills of corn to increase yields. The colonists adopted this method of bettering crops along with other local sources of fertilizer such as animal and plant residues, lime, and marl. In the nineteenth century the foundation was laid for the United States commercial fertilizer industry upon then current funda- mental advances made in the science of plant nutrition. The production of commercial fertilizer in the United States grew from about 32,000 short tons in 1859 to nearly 3 million tons in 1899, and on to a new record high of about 19.8 million tons in 1950. This tremendous amount of commercial fertilizer, in addition to manure and lime and other soil-improving ma- terials, played a major role in the near-record 1951 all-crop production volume. During the last 50 years, the manufacturing processes and the characteristics and types of fertilizer materials and mixtures underwent important changes. Natural organic materials, for- merly the chief source of nitrogen for commercial fertilizers, were superseded largely by chemical products, and liquid fer- tilizers came into use. The primary plant-nutrients in the fer- tilizer materials and mixtures used in the country have doubled in the case of certain materials. Marked improvement was made in the physical condition of the materials, in mixtures, and in their packaging. The United States has become largely self-sufficient in the supply of the three primary plant nutrients, nitrogen, phos- phate, and potash. This country now leads in production of nitrogen and phosphate fertilizers. Production of potash is exceeded only by that of Germany. The 1950 consumption of fertilizer was 128 percent higher than in 1940 and over 7 times the consumption in 1900, while the total use of the 3 primary nutrients in 1950 was 150 percent more than in 1940 and over 11 times the use at the beginning of the century (see table I). The record 1950 use of commercial fertilizer was the twelfth consecutive year of increase. The production of nitrogen and potash each more than doubled in the last 7 years, while pro- duction of phosphate doubled in the last 10 years. Even so, supplies were short of demand in most of the years. Under the impetus of Government agricultural conserva- tion programs, great progress also has been made in the use of soil-liming materials. The total consumption of liming ma- terials in 1950 was 26.5 million tons, or more than 8 times that of 1935. (See table II.) A large tonnage of liming materials is required to maintain a satisfactory status of lands that have been limed. Holding existing gains and making further improvement of the lime Page 77 status of agricultural soils in this country would require an annual application of nearly 80 million tons of liming materials. But this level will not be attained without extraordinary edu- cational crop production campaigns. At the turn of the century, little or nothing was known of the plant requirements for the trace elements, boron, copper, manganese, and zinc. But the need for applying small quanti- ties of these elements to various crops in many parts of the country is now being recognized. Table I.-—Commercial fertilizers and primary plant nutrients consumed in the United States and Territories in selected years: 1900-1950 Plant-nutrient content Calendar year 1900 1910 1920 1930 1940 1950 7,000 short tons 2, 730 5, 547 7, 296 8, 425 8, 656 19, 758 Nitro- gen Avail- able phos- phoric oxide (P2O5) Total content Potash (K,0) i (N) Quan- Propor- tity j tion 7,000 7,000 7,000 7,000 short Ions short tons short tons shoyt tons Pei cent 62 246 86 394 14. 4 146 499 211 856 15. A 228 660 258 1, 146 15. 7 377 793 354 1, 524 18. 1 419 912 435 1, 766 20. 4 1, 126 2, 071 1. 215 4, 412 22. 3 Source: U. S. Department of Agriculture. The greatly accelerated increase in consumption of fertilizer and plant nutrients in recent years has been influenced by many factors. These include: (1) the urgent need for addi- tional food and fiber to meet domestic and export needs, (2) the greatly improved economic position of the American farmer, (3) the continued decline in the native fertility of large areas of the Nation's soils, and (4) a more general recognition of the potentialities of fertilizer in lowering production costs and increasing crop yields. Table II.—Consumption of agricultural liming materials on farms of the continental United States in selected years: 1930-50 7,000 short Calendar year: tons 1930 3,498 1935 3,292 1940 13,434 1945 22,357 1950 26,536 Sources: National Lime Association and Agricultural Limestone Institute. While it is not possible to make trustworthy estimates of the extent of the gap between fertilizer supply and quantities farmers would buy at prevailing prices, it is known that annual demand was not met during the last 10 years. Major reasons for failure to meet demand include: (1) lack of sufficient manu- facturing and processing facilities and the difficulty of expand- ing existing facilities, (2) necessity for shipping large quantities of plant nutrients to allies and to occupied countries, and (3) shortages of some chemicals essential for fertilizer manufacture. The greater proportion of the total annual consumption of commercial fertilizer in the United States is in the form of mix- tures—ranging from 67 to 70 percent of the total during the last 8 years. Of the primary nutrients, more than 90 percent of the potash, about 70 percent of the phosphate, and 50 to 60 percent of the nitrogen applied as commercial fertilizer are used in mixtures. In the 1950 crop year, the consumption of mixed fertilizers in the United States and Territories totaled 12,309,000 short tons, containing 2,861,000 tons of the primary nutrients. USE VARIES IN SECTIONS OF UNITED STATES As one would expect, the consumption of fertilizer varies considerably among the different regions of the country. For many years the South Atlantic and Gulf States, which generally are low in native soil fertility, have accounted for a large por- tion of the Nation's annual consumption of fertilizer. Con- sumption has greatly increased, however, in other regions, notably the North Central States where soil fertility originally was much higher than in the southerly regions. In 1933-34 the South Atlantic region used 50 percent of the fertilizer nitrogen used in the United States, while the North Central region used only 4 percent. In 1949-50, how- ever, the respective figures were 29 and 15 percent. The grow- ing need for nitrogen in the North Central region is indicated by the fact that the consumption of this nutrient in 1949-50 was 14 times the consumption in 1933-34. The proportionate increase in the Western region was even larger. The South Atlantic region also has yielded to the North Central region as the leader in potash consumption. The con- sumption in the latter region in 1949-50 was about 12.5 times that of 1933-34. For many years fertilizers were chiefly used on such cash crops as cotton, tobacco, potatoes, and vegetables. The need for a better balance in the production of food, feed, and fiber has been a major factor in alternating the distribution of fertilizer consumption by crops. (See table III.) Table III.—Distribution of commercial-fertilizer consumption in the continental United States by principal crops 1929, 1942, 1949, 1950 Crop 1929 1942 1950 1 20.7 22. 0 24. 8 28. 0 14. 6 9. 0 13. 8 14. 1 18. 4 6. 8 5. 3 4. 1 8. 5 7. 1 4. 2 2. 1 12. 9 12. 4 6. 7 10. 4 7. 6 4. 3 6.7 4. 2 9. 1 6. 9 15. 3 Percent of total fertilizer consumption 1 Year ended June 30. 2 Includes sweetpotatoes. Sources: National Fertilizer Association and U. S. Department of Agri- culture. The long-range shift in production is toward more grass- land farming, a development supported by the United States Department of Agriculture and the Land Grant Colleges. The continuing grassland program is designed to make better use of Page 78 soil resources and to improve their management so that each acre may contribute more fully to the Nation's agricultural production while building the soil for future output. Future trends with reference to grassland farming will have an in- fluence on total and regional use of fertilizer, and on the relative quantities of the different plant nutrients needed. Legume crops, stressed in grassland farming, add nitrogen to the soil and, because of their extensive root growth, also make native fertility more available. This grassland and other land-use and conservation pro- grams have caused changes in the pattern of fertilizer con- sumption by crops in recent years. FARMERS5 EXPENDITURES FOR FERTILIZER The farmer's choice of possible combinations of alterna- tives—combinations of fertilizer and other production prac- tices—is made largely on the basis of relative profitability. Comparative responses in yields and relative costs of the differ- ent combinations determine the final choice, provided the farmer is well-informed on these matters. While much progress has been made, too many farmers are still not aware of advan- tages to be gained from increased use of fertilizer. If adequate information on crop response to different rates of application of fertilizer at different levels of other practices were available to farmers, they would combine more extensive use of fertilizer with these other practices until they more nearly approached the most profitable combination. In 1949, farmers spent nearly 700 million dollars for ferti- lizer. That was 3.9 percent of the total agricultural production expense of farm operators in that year. In the past 38 years farmers spent for fertilizer an average proportion of 3.4 per- cent—ranging from 2.5 percent to 4.8 percent—of their total annual production expense. The 700 million dollars farmers spent for fertilizer in 1949 was 4.4 times as much as they spent in 1911. During the same period, their total production expenses increased 4.9 times. The proportion of the farmer's income spent for fertilizer varies greatly among the States and regions. It is generally much higher in the older fertilizer-consuming States than in the newer areas of use. United States Production of Fertilizer Materials Although our extensive resources of raw materials for fer- tilizer production have been supplying the Nation's require- ments plus export needs, they are not large enough to permit complacency. The future demands on these raw materials are so great that we must seek better methods of using our known resources and probe for additional sources as well. The only fertilizer raw material that is inexhaustible is nitro- gen, which exists in the atmosphere. While other sources of nitrogen for fertilizer exist—such as deposits of coal and other mineral fuels and natural organic materials—the fixation of nitrogen synthetically from the atmosphere is the most impor- tant source. Synthetic production of nitrogen materials now furnishes more than 65 percent of the annual consumption of commercial fertilizer nitrogen. This source of nitrogen is limited only by available production facilities and resources required in fixation. Facilities were inadequate to meet 1952 demand, but the long-term trend looks optimistic. The United States produces nearly half of the world output of phosphate rock, and the United States reserve of this basic fertilizer material is exceeded only by that of French Morocco. In the calendar year 1949, phosphate rock supplied more than 98 percent of the 1,884,000 short tons of the phosphate ferti- lizer used by farmers. The present economically minable reserve of phosphate rock in the United States totals about 4 billion long tons; potentially minable reserves total at least 9 billion tons. By virtue of the development of extensive potash deposits in New Mexico, this country has been substantially self- sufficient in supplies of this essential plant nutrient since 1940. The domestic use of potash is predominantly for fertilizer; 93 percent is used for fertilizer, 7 percent for chemicals. The Nation's proved reserves of potash economically re- coverable under present conditions are located in the New Mexico deposits and in the brines of Searles Lake in California and Salduro Marsh in Utah. While current estimates of minable potash indicate reserves of more than 200 million tons, future fertilizer demands for this material require a broad search for and development of potash resources and research on utiliza- tion of lower grade materials. The United States holds large resources of certain secondary fertilizer materials: calcium, magnesium, and sulfur-bearing materials are widely distributed over the country. California has the world's largest reserve of boron materials. And among the other trace-nutrient elements, the United States produces large tonnages of copper and zinc, but the position in man- ganese is less satisfactory. production must expand While the raw materials for plant nutrients are found in abundance within the confines of the United States, expansion of present manufacturing and processing facilities is vital to make plant nutrients available at increasing rates. Fuller use must be made of existing facilities. In the case of the primary nutrients, nitrogen, phosphate, and potash, even though ex- tensive facilities exist, generally the capacity for producing the various plant nutrients has not kept pace fully with the demand for such nutrients in recent years. A major problem is to increase nutrient-producing capacity to meet present demand and to insure continued expansion as needed in the future. This problem is the responsibility of all agencies and organizations, both public and private, concerned with the Nation's agricultural production. Although much progress has been made in manufacturing processes and techniques, there is room for great improvement. Research and development in this field must be expanded and accelerated—if farmers are to be supplied with adequate quantities of the most economical and efficient fertilizers to meet the increasingly exacting requirements of modern agri- culture. For the future, efforts should be directed toward production of a larger portion of the Nation's fertilizer nitrogen require- ments in the form of high-analysis, solid products, such as am- monium phosphate and especially urea. Urea is the most con- centrated of the solid nitrogen fertilizer materials. In addition to its use as a fertilizer, urea is valuable as a nitrogen supple- ment to feeds for ruminants and has important industrial and technical uses. Page 79 Lack of adequate supplies of concentrated phosphates is a major obstacle to expanded production of high-analysis fer- tilizers. The use of phosphates is for reducing the cost of plant nutrients to the farmer. More than 90 percent of the available phosphates used as fertilizer is produced by processes involving treatment of phos- phate rock with sulfuric acid. While plentiful supplies of sulfur have been available in recent years, a current serious shortage must be overcome to support increased phosphate fertilizer production. This can be done by discovery of new sources of sul- fur, but perhaps more practically by developing known methods of producing phosphate fertilizers without the use of sulfuric acid, or at least with less of it. Use of nitric acid for treatment of phosphate rock should be developed as one of these methods. Mixed fertilizers, which supplied 67 percent of all fertilizer and 70 percent of all primary nutrients used in 1949-50, are manufactured in about 1,200 plants. These plants, ranging in capacity from a few tons to more than 100,000 tons per year, are operated by more than 800 companies and individuals. Total capacity is estimated at about 21.5 million tons, compared with production of more than 12 million tons in 1949-50. FOREIGN SOURCES SUPPLEMENT UNITED STATES PRODUCTION Future increases in the use of fertilizer can be mostly inde- pendent of foreign sources of supply. A continuing increase in the domestic manufacture of plant nutrients will help guarantee the Nation plentiful food and fiber in the future. Out of the total domestic fertilizer nitrogen supply of 1,387,000 short tons in 1950-51, domestic sources supplied 1,098,000 tons, while imports totaled 289,000 tons. During the same period, the United States exported 102,000 tons. Expan- sion in nitrogen fertilizer production, especially by the synthetic ammonia process, can provide the United States with required supplies. The United States traditionally exports much more phos- phate rock than it imports. In 1950, exports totaled 1,832,000 long tons, compared with imports of 87,000 tons. During that year, the United States used about 8,509,000 tons of phosphate rock, mostly for fertilizer purposes. (See table IV.) In 1950 world production of phosphate rock totalled about 22.5 million tons, of which 49 percent was from United States deposits, 29 percent from North Africa, and the remainder scattered throughout the world. The world reserve of phosphate rock is estimated to total at least 46 billion tons—85 percent of it in free world countries. Since 1940 the annual imports of potash have been running at less than 30,000 short tons (except in 1950 when imports jumped to 200,000 tons) compared with average exports of approximately 65,000 tons. Apparent domestic consumption in 1950 amounted to 1,410,000 tons. (See table V.) Total world reserves of potash are conservatively estimated at 5.5 billion tons economically minable. World production of potash in 1950-51 is estimated at 4.7 million tons, of which 49 percent was in Germany (21 percent in Western Germany), 26 percent in the United States, 21 percent in France, and most of the remainder in Spain. SHIPPING COSTS CAN BE REDUCED A major concern to both farmers and manufacturers of com- mercial fertilizer is the problem of transportation costs. Be- tween 1939 and 1950 transportation costs accounted for 10 to 14 percent of the value of fertilizer at its destination. This does not include transportation costs of raw materials to fer- tilizer manufacturers. During the same period, transportation costs of phosphate rock, the raw material for phosphate fer- tilizer, accounted for 35 to 50 percent of its value at destination. Table IV.—Production and consumption of phosphate rock in the United States in selected years: 1900-1950 [Thousands of long tons] Marketed Apparent Calendar year produc- Imports Exports consump- tion 1 tion 2 1900 1,491 137 620 1, 008 1910 2, 655 22 1, 083 1, 594 1920 4, 104 (3) 1,070 3, 034 1930 3, 926 33 1,226 2, 733 1940 4, 003 3 751 < 3, 254 1950 10, 254 87 1, 832 8, 509 1 Sold or used by producers. 2 Marketed production plus imports minus exports. 3 Less than 500 tons. 4 Figure does not coincide with that derived directly from the data of columns 2, 3, and 4 because of the rounding of the figures to the nearest 1,000 tons. Source: U. S. Bureau of Mines. As one of the Nation's principal freight commodities, more than 33 million tons of fertilizer, fertilizer materials, and phos- phate rock were carried by the railroads in 1949. The total quantity of fertilizer and materials moving on inland and coastal waterways in that year amounted to more than 5 million tons. While similar statistics on truck movements are not available, trucks are virtually the only means of delivering fertilizer to the farm. Consequently, about 3 million for-hire and farm trucks haul the entire annual distribution of fertilizer to farms. One of the most promising opportunities for lowering the cost of plant nutrients to the farmer is by increasing the con- centration of mixed fertilizers, thereby reducing transportation, handling, storage, and bagging costs per unit of nutrients. It is Table V.—Production and consumption of potash in the United States in selected years: 1920-50 . [1,000 short tons KsO equivalent] Marketed production 1 (1,000 short tons of K20 equivalent) Imports (1,000 short tons of K20 equivalent) Exports (1,000 short tons of K20 equivalent) Apparent consumption 2 (1,000 short tons of K20 equivalent) Calendar year 1920. .■ 41 225 * 266 1930 57 342 5 9 5 390 1940 393 119 63 449 1950 1, 275 199 65 « 1, 410 1 Sold or used by producers. 2 Marketed production plus imports minus exports. 3 Figures not available in terms of K20; tonnage was small. 4 Included the small tonnage of exports. 5 Approximate. 6 The figure does not coincide with that derived directly from the data of columns 2, 3, and 4, because of the rounding of the figures to the nearest 1,000 tons. Source: U. S. Bureau of Mines. Page 80 estimated that a saving of at least $20 a ton of plant nutrients could be effected by increasing the concentration of the average mixture from 23 percent (the present level) to 30 percent. Higher concentrations would permit additional savings. The trend toward higher fertilizer concentrates promises eventually to cut transportation costs. The fertilizer industry anticipates a steady, substantial growth in production and use of the higher concentrations. In 1900, the average plant- nutrient content of mixed fertilizers consumed in the United States was 13.9 percent. By 1949, it had risen to 22.5 percent. The proportion of plant nutrients in mixed fertilizer is expected to rise to 27 or 28 percent by 1975—provided the trend con- tinues at the same rate of increase. The transportation advantages of higher concentrations spring from the fact that—with certain exceptions—the same scale of rail and motor rates usually applies to all types of fer- tilizer and fertilizer materials. The savings from shipping higher analysis fertilizers can create far-reaching economic benefits. The farmer would pay a lower delivered price for fertilizer per unit of plant nutrients. Less warehousing and storage space would be required. Less motor, water, and rail transportation equipment would be needed for hauling. It seems possible to increase the plant-nutrient content of mixed fertilizers from 22.5 to 28—a 24-percent increase—by 1975. If this is done transportation capacity would need to increase only 61 percent to have twice as many plant nutrients. How To Increase Use of Fertilizer Regardless of what is done to increase commercial fertilizer production, it of course will benefit the Nation little unless farmers use more of it. By the same token, no matter what de- vices are employed to encourage greater farm use, it is obvious that use can be delayed seriously by lack of sufficient fertilizer production. Assuming sufficient supplies, there are several important ways that greater use of fertilizer for increased food and fiber production can be encouraged. In general, these are: (1) pub- lic policy, (2) technological progress, (3) education, and (4) economic feasibility. Public policy, in the field of fertilizer use, favors efficient util- ization of our soil resources to contribute continually to the highest possible standard of living for the people of the United States. One example of public policy on the job is the materials furnished or Government payments made to farmers for using fertilizer in furthering conservation. This has been especially effective in the program to encourage farmers to adopt more and better grassland farming. Since the early days of the Nation, public policy has fur- thered the introduction, improvement, and distribution of plants to improve quality of agricultural products and increase their abundance. And under the influence of Government re- search, the advance of the science of the production and use of fertilizers has accelerated. Public and private research, un- doubtedly will continue to be the pioneering influence in this field. Technological progress-development of improved mate- rials—both from the standpoint of plant-nutrient content and ease of handling will have a marked effect on future use of fertilizer. Much progress has been made with respect to certain crops in determining the combinations of practices which give far greater results than when the practices are applied sep- arately. We appear to be on the threshold of outstanding prog- ress in this field. With improved materials and their optimum application under proper conditions, fertilizer use will go for- ward to meet the demands for agricultural products. Education, through the dissemination of knowledge and skills in the use of fertilizer and demonstration of its practical worth in farming, has also been supported by public policy. Educational activities on the part of Government and indus- try—through radio, television, publications, meetings, tours, and demonstrations—will provide the farmer information nec- essary for getting the most from fertilizer. Finally, there is economic feasibility—a real test for the in- troduction or continuation of specific farming practices. Whether it "pays," in the final analysis, will largely determine how much fertilizer is used. Public policy can play a part by encouraging demonstrations of soil-improving practices, prac- tices backed up by research to determine the most profitable rates of application in combination with stated levels of other practices. Public policy could also encourage use of credit pro- grams in which repayment of loans for investments in conserva- tion and soil improvement would be geared to the additional returns. As we look ahead at the possible influence on the use of fertilizer by technological progress, education, and economic feasibility—all supported by public policy and dependent on integration with successful farming—it is evident that due con- sideration must also be given to the cumulative effect of all the factors influencing crop production. The cumulative value of getting the most from land, labor, capital, and marketing opportunity—through sound land-use and planned farm management—is well recognized in applica- tion to the individual farm. Rapid progress has been made in recent years in experimentally testing the value of complemen- tary and integrated farm enterprises and in demonstrating their practicality on hundreds of privately operated farms. This method of cooperating with farmers will undoubtedly continue to have an important influence on use of fertilizer. The favorable influence of coordination of the research, edu- cational, and economic factors under the guidance of public policy is becoming increasingly evident since the close of the Second World War. The progress made indicates much greater opportunity in the future. It seems probable that integration of these larger influences should become an indirect but powerful factor toward the greater use of fertilizer on farms through gen- eral programs such as annual agricultural production guides, the full utilization of grasslands, soil testing, and the productive use and conservation of all agricultural lands, including wood- lands. Progress in these fields of endeavor inevitably results in the discovery of new opportunities. Some of these opportunities may lie in the direction of diverting more industrial and mu- nicipal wastes to fertilizer. Investigations of growth hormones and other factors affecting the capacity of plants to utilize nutrients, as well as new techniques in plant breeding, all offer interesting possibilities. Fertilizer in new forms and formulas and the application of fertilizers in combination with other field operations, such as seeding, tillage, and the use of herbicides and irrigation water, Page 81 point to areas of present research which may become more diverse and more extensive. The continuing integrated use of research, education, and related services are factors influencing the use of fertilizer in the future. The economic feasibility of greater use of fertilizer is indicated by the increasing food and fiber requirements of a steadily growing population accompanied by opportunity for expanding our capacity for agricultural production through further utilization and conservation of our total agricultural resources. References Elsewhere in This Report This volume: Future Demands on Land Productivity. Vol. II: The Outlook for Key Commodities. Sulfur. Unpublished President's Materials Policy Commission Studies (Files turned over to National Security Resources Board) Battelle Memorial Institute. Columbus, Ohio, 1951. Brison, R. J., and Carter, J. N. Role of Technology in the Future of Potash Supplies. Page 82 Report 9 Water for United States Industry* With the exception of the air he breathes, water is the most essential single material which man uses. Indispensable in di- rectly sustaining all plant and animal life, it is hardly less im- portant in its other myriad uses. Water is the master solvent and cleanser, and the most efficient medium for transfer of heat and energy, both solar and man-controlled. It is the vehicle which affords the cheapest transport of heavy and massive produce and the disposition and dilution of most man-made wastes. Water is readily available for use as a vapor, a liquid, or a solid. Its diverse and unique physical properties are constantly being exploited to add to man's comfort and well-being. Water was one of the first natural resources which man harnessed for use; the ancient Egyptians were using water from the Nile River for irrigating land at least 5,000 year ago [/]. Today water remains a universal requirement for our material needs and a keystone to our long-range security. OUR INVESTMENT IN WATER In most places the cost of water is essentially the cost of collecting, purifying, and transporting to the consumer; never- theless, in many arid water-short sections of the Nation, the meager water resources are the most prized assets. The aver- age city dweller pays only about $6.00 per capita for water delivered into his home for an entire year [2]. The comparable rural inhabitant, usually being supplied through an individual water system, must pay indirectly a much higher rate. Although pure water is commonly delivered into American homes at less than 5 cents per ton, the aggregate water bill for the Nation, including water for irrigation, industry, and domestic purposes is of the order of 3 billion dollars annually. This figure is for water supply only and does not include cost of treatment and disposition of waste water or expenditures for hydroelectric power, flood control, or drainage. It is estimated that 50 billion (1950) dollars is now invested by the American people in all types of water-management structures and facilities of which about one-fourth was financed by the Federal Government [3], The Federal Government alone has already visualized an investment of another 50 bil- lion dollars for future water development and control, of which about one-half has been given definite planning \4, 5]. If these plans are realized and the expanding requirements of *This paper was prepared by Jack R. Barnes, consulting ground-water hydrologist. private industry and local government are fulfilled, it is not unreasonable to forecast a total capital expenditure of 75 to 100 billion dollars for water management within the next half century. The United States, with its dynamic technology and emphasis on action, has made its principal contributions to water re- sources development by building great dams and water-control works, by drilling deep wells and by designing pumps that can literally dry up a river. This commendable technical advance in water development in general has not been accompanied by comparable knowledge of nature's complex hydraulic machin- ery. The harmonious blending of man's activities with the laws of nature will be in the long run of infinitely greater importance than analyzing the stress within a dam or increasing the effi- ciency of a pump. Without an adequate understanding of these vast and unceasing forces of nature the billions of dollars we have already spent and contemplate spending in the future cannot serve their maximum usefulness and indeed could event- ually seriously weaken our whole economy. Our knowledge of the factors of the supply and utilization of water are pitifully inadequate. We know relatively little of the intimate details of the hydrologic cycle whereby the sun daily extracts 4,300 billion gallons of pure water from the oceans and distributes it over the land mass of the United States. We know too little of the physical factors by which the sun's energy trans- forms salty ocean water into fresh vapor. We know only the barest details of the routes these clouds of vapor take in their complex travels over the earth. We only vaguely understand the process by which moisture condenses into drops and bom- bards the earth as rainfall. The remaining elements of the cycle are equally as little known in spite of all our scientific achieve- ments. There is more to be learned than has been learned in the many centuries of the past about infiltration of water into the earth, surface runoff, vegetative transpiration, erosion, sedimentation, ground water recharge and discharge, salt water instrusion into streams and aquifers, chemical changes, and many other physical processes which affect our water supply. Our climate has changed radically many times in geologic history, and there is ample evidence that such pulsing changes are still occurring, yet we cannot predict weather changes ac- curately more than a few hours or days into the future. A better understanding of the forces of the universe possibly might solve some of our weightiest problems in climate and water supply. The recent experimentation on artificially induced precipita- tion is an outstanding example of how technology might over- Page 83 come nature's erratic distribution of water. Before we could even hope for widespread use of artificial rainfall, however, we must know far more of the physics of meteorology and how man might alter these processes for his benefit. We are deficient not only in interpretation of natural laws. Further study also must be made of engineering, economic, and sociologic feasibility of proposed water developments. Before a good national water policy can be devised, we must know more accurately how much water we presently withdraw from our streams and aquifers, how the water is used, how much is consumed or destroyed for further use, how much more water can be developed, the costs of water development, and the values obtained from the use of the water. We can never hope to have complete information, but we must seek to have many more facts available than we now have before large-scale ex- penditures are made for future water development. Research programs must precede development and be in better balance with it. Supply and Use of Water The criterion most commonly used to describe the relative water situation of the various sections of the Nation is the average annual precipitation. This factor, though indicative of the availability of water, may be greatly misleading. The aver- age annual precipitation over the United States is about 30 inches [6], of which 21.5 [7] inches or about 70 percent returns to the atmosphere through evaporation or transpiration of veg- etation and is not available for further use by man. This leaves a runoff or water yield of 8.5 inches, which flows through the rivers to the ocean, or to inland saline basins. A part of the 8.5 inches is circuited through porous subterranean formations which eventually discharge into surface water bodies unless intercepted by wells. MALDISTRIBUTION, THE NO. 1 PROBLEM If a single word were used to sum up the water problems of the United States, that word would be maldistribution—mal- distribution in regard to time and geographic areas. For some sections of the midcontinent area, minimum annual discharge of streams is substantially less than 25 percent of the long-time average, but for the more humid areas of the East and Pacific Northwest the flow is better distributed and the minimum an- nual flows are generally not less than 50-75 percent of the average [8]. There is great disparity in the availability and use of water in the various States. The 17 westernmost States constitute about 60 percent of the land area of the United States yet they are endowed only with about one-fourth of the Nation's water supply [9]. These Western States average less than 4 inches of water yield or runoff per year while the 31 Eastern States (Minnesota to Louisiana eastward) average 16 inches. There is also great disparity between States and between sections of States, particularly in the West. Nearly one-third of the total area of the United States and over one-half of the area of the Western States, including nearly all of Nevada, Arizona, New Mexico, North Dakota, and South Dakota has a natural water yield of less than 1 inch or less than 12 percent of the Nation- wide average [7], Eastern Texas and northern California are well watered while other sections of those States are water short or potentially water short. The great diversity in the Nation's supply of water is well illustrated by comparing hydrologic characteristics of Maine, Ohio, and Arizona with the average for the Nation. Table I gives a better insight into regional variation in availability of water than does quantitative comparison of precipitation alone. Table I.— Variations in water availability Item Maine Ohio Arizona U. S. Average annual precipitation, inches [6], 40 38 14 30 Average annual water yield, inches [7]. . . 25 12 0. 7 8. 5 Percent of precipitation entering streams 60 30 5 30 Approximate minimum discharge as a percent of normal \8] 75 35 45 Ground-water supplies are also unequally distributed over the United States. In general, the arid areas which nature has slighted in its distribution of surface water, have the advantage of relatively ample and permeable bodies or rocks in which to store available water underground. Ground water bodies serve two principal functions in supply- ing the Nation with water. The first is the direct feeding of the millions of wells which dot the United States. The second, and no less important, is the function of regulating and equalizing the flow of the streams. The excessive rainfall of wet seasons and years infiltrates into the great underground storage reser- voirs and is slowly released so that in the long dry periods the stream discharge is made up principally of ground-water con- tributions. It is estimated that from 35 to 40 percent of total stream flow has passed through the porous earth mantle [10]. This clearly demonstrates the importance of subsurface water in our over-all water supply and especially in maintaining stream discharge during periods of low rainfall. USE OF WATER Per capita use of water would be indicative of the national standard of living if accurate information could be kept cur- rent. It is estimated that in 1900 we withdrew from our streams and wells about 500-600 gallons per day per capita [3]. By 1950 our population had doubled but the per capita with- drawal had grown to about 1,100 gallons per day [11] and so the total water use for the Nation had quadrupled. The total withdrawal of fresh water for all purposes in 1950 was about 170 [7/] billion gallons per day or an amount equal to about one-eighth of the total water yield of the Nation's streams and aquifers. A substantial part of this water was returned to the stream, however, and frequently was withdrawn more than Table II.—Source and use of fresh water in the U. S., 1950 [11] [Billion gallons per day] From wells From streams and lakes Percent of total use Use Total Rural 2. 8 0. 7 10. 0 3. 5 13. 5 65 88 2 8 38 52 3. 5 6 59 70 18 Total 30 140 170 100 Page 84 one time. In addition, an estimated 15 billion gallons per day of brackish water was withdrawn by industry for cooling pur- poses. Most of the water withdrawn was not actually consumed, but was returned to the streams and aquifers, oftentimes after being circulated through a water system several times and absorbing a substantial load of excess heat or sewage and industrial wastes. For the Nation as a whole probably as much as 60 percent of total water withdrawals is returned as waste water [3]. It is believed that on the average cities and indus- tries return as waste about 90 to 95 percent of the water withdrawn [3]. However, many industrial plants and some cities also evaporate a large proportion of their withdrawals. The discharge from city and industrial sewers is often seriously polluted with organic and chemical wastes and the temperature may be much higher than the intake water. Probably two- thirds of the water withdrawn for irrigation is evaporated or transpired. The irrigation water that escapes immediate evaporation may be added to ground water storage and usually becomes more highly mineralized owing to evaporation and to solution of soil salts. Domestic Use. Legal statutes and court judgments gen- erally have accorded the highest priority to use of water for sustaining human and animal life. Actually, as shown in table II, the amount of water used directly for this purpose is quite small. Only about 10 percent [11] of total water withdrawals pass through municipal and rural water systems (irrigation excluded). Usually a large part of municipal water supplies is used by small industries and commercial establishments, and for fighting fires, for flushing streets and sewers, etc. Of the part reaching individual homes a large proportion may be used for watering lawns and other uses which might be termed as luxuries rather than necessities. Today the average figure used as the standard for designing water systems for large cities with heavy water use is about 150 gallons per day per capita and in industrialized cities it may be as high as 200 or 300 gallons [2]. Undoubtedly, new uses for water in the home will develop in the future. Increased use of such devices as air-conditioning units and automatic washing machines may be only the be- ginning of increased water use. However, per capita use of water also fluctuates with economic activity and business cycles and predictions of future use must take these factors into consideration. Just as our large metropolitan areas must import milk or meat from vast rural production areas so must they import water from less heavily populated districts. The problems in- volved in such transport are of great magnitude; the costs are tremendous, rural satellite areas may be deprived of water, conflicts may arise with industrial and agricultural water users. Nevertheless, such projects are well within the financial capacity of single large cities or groups of smaller neighboring cities. In a great many cities, officials have found it convenient for the high revenue-producing water department to support the fire department, the police department, or other offices. Industrial Use. It is estimated that in 1950 the direct water withdrawals by industrial firms were about 80 billion gallons a day [77]. Of this amount at least 15 billion gallons a day is be- lieved to have been from brackish or salty sources which are essentially unlimited in supply. In addition, a part of the 13.5 billion gallons a day distributed through municipal systems was purchased by thousands of small industries located in or near the city environs. It is estimated that over 40 percent of indus- trial water requirements are used mainly for cooling and con- densing purposes in steam generation of electricity. Every industrial operation requires water in varying quan- tities and qualities. By far the greatest quantities of industrial water are used for cooling, a use for which quality requirements are generally low. For heat exchange, salt water is as efficient as fresh water, although corrosion of equipment may dictate that a water relatively free from corrosive salts be used. If fresh water becomes more costly than the replacement of corroded equipment or of provision of corrosion-resisting equipment, salt water can be substituted. Though there are roughly 250,000 industrial plants in the Nation [12], the bulk of the water use is by the relatively few large industries. A single large steel mill may require as much as 500 million gallons a day, enough water to supply all normal requirements of a city of several million population. A recent study pointed out that the top 5 percent of industrial plants in terms of size use probably over 75 percent of the water required in manufacturing [12]. Advances in our technology have added greatly to our indus- trial water requirements both in the quantity and quality of water needed. These new manufacturing processes create a water demand proportionately much greater than the increase in output of the basic product. Manufacturing of synthetic materials requires much more water for processing than natural materials for which they substitute. Rayon and nylon, for ex- ample, require very large quantities of water for processing compared with the cotton and wool which they replace. Each additional stage in the oil refining process requires additional water increasing the amount needed for a given amount of crude considerably above that needed by the earlier simpler stills. Synthetic rubber production requires large quantities of water not needed in production of natural rubber. Technologi- cal advances thus aggravate rather than alleviate industrial water problems. Use for Irrigation. Irrigation is the Nation's greatest user of fresh water. In 1950 the 26 million acres [73] of irrigated land received about 50 percent [77] of the fresh water withdrawn for use in the United States. Most of this water ultimately is evaporated and so is not available for reuse downstream; it is believed that irrigation accounts for over 80 percent of the total consumptive depletion of all water uses. Irrigation in the past has been confined mostly to the 17 Western States, but now tracts of land in the East are being subjected to supplemental irrigation to increase crop yields. Over 80 percent of the irrigated land in the United States is furnished water entirely by private enterprise although the Bu- reau of Reclamation has become increasingly active in this field, especially in construction of the more expensive projects. Although it is estimated that at least another 20 million acres of Western land arc of irrigable quality [14, 75], it may not ever be economical to bring water to the land. Probably only about 6 million acres of additional land will be irrigated by 1975 [4]. The costs of development will be extremely high, the water supply is inadequate in most areas and a large portion of the Page 85 available water will be needed to assure supplies for pres- ently irrigated land. In fact, the growing water needs of the Western cities and industries and the depletion of existing supplies may eventually force a reduction of irrigated acreage in some areas. Such reallocations of water use by the Western people would be wise if conflicts develop in the future. Relative to many other uses, irrigation is a very uneconomic user of water. In 1947, about 25 trillion gallons of water were used to produce irrigated crops in the West valued at about 2.4 billion dollars, of which over 50 percent was grown in the three Pacific States [75]. The value of the crops was equal to about 10 cents for each 1,000 gallons of water withdrawn. In comparison, about 15 trillion gallons of water were used nationally in 1947 in producing goods having a value added by manufacture of 74.4 billion dol- lars or about $5 for each 1,000 gallons of water withdrawn. In other words, manufacturing produced 50 times as many dollars of products with the same amount of water as did irrigation. Furthermore, the consumptive use of water by irrigation was 5 or 10 times as great as for manufacturing. If the water needs of Western cities and industries become more urgent, a great part of the crops now irrigated could be produced from lands in the East reclaimed by clearing and drainage in areas of adequate rainfall. Nonwithdrawal Uses. It must not be assumed only water actually withdrawn from streams and wells serves a useful pur- pose. In 1950 seven times as much water passed through tur- bines to generate electricity as was withdrawn for use [77]. The extraction of energy from falling water is, of course, a purely mechanical process and does not deteriorate the quality of the water. Inland waterways, exclusive of the Great Lakes, provided transport for 43 billion ton-miles of domestic freight in 1948 [4]. In some areas the river and lake regulation essen- tial to promote navigation limits the availability of water for other uses. Commercial and sport fishing in inland streams is a multi- million dollar industry providing livelihood or recreation for millions of Americans. Each year the capacity of streams to dilute, purify, and transport sewage and industrial wastes saves cities and industries many millions of dollars in treatment costs. Unfortunately, in many areas this practice has been so abused that the streams have become overburdened, and the savings incurred in the disposition of wastes is more than offset by the reduction of downstream water values. Another important non- withdrawal use of water is for swimming, boating, and other recreational purposes. The presence of clean, fresh water adds immeasurably to the economic and aesthetic value of property. In many resort areas the economic value of water for this purpose exceeds the value for all other purposes. We also must not begrudge nature's lavish use of water in promoting useful growth of vegetation along the banks of streams. The water in many streams also may be the principal means for recharging ground water bodies which in turn support vegetation and water supply for wells. The universal requirements for water make objective exami- nation of all uses essential before new uses are begun. Although direct economic benefits may resolve many conflicts in use, careful consideration must also be given to indirect and aes- thetic benefits. Water for Industry On the whole, information available on the use of water is sketchy, inconclusive, and inadequate. It is usually impossible by surveying one or two plants producing the same product to obtain an accurate estimate of water use for an entire industry. Water use per unit of product varies greatly depending upon plant design, degree of recirculation, and other factors. Water use depends to a large degree upon availability and quality requirements which are even more variable than quan- tities used. Dissolved gases, salts, or acids cause costly corro- sion, scale deposits, and may impair the quality of manufac- tured goods. major water using industries It is estimated that at least 40 percent of the water used for industrial purposes is withdrawn by steam electric generating plants [3], Although great quantities of high quality water are required for boiler feed and other purposes, probably over 80 percent of the water is used for condensing the spent steam [3]. The quality requirements for this latter purpose are relatively low. Other large water using industries are steel, petroleum refining, wood pulp and paper, and chemicals. Table III, pre- pared from several rough estimates, indicates the magnitude of use by these major water using industries [3, 11, 76]. Although the chemical industry also uses large quantities of water, sufficient information is not available to indicate the amount. By far the greatest use of industrial water is in cooling or heat exchange. Probably 75 percent of total industrial demand is for this single purpose. Large quantities of industrial water are also required for washing, grading, and manufacturing processes. The quantity of water used for other industrial pur- poses is small compared to these two major uses; however, the water generally must be of higher quality. Water for gen- erating steam in boilers, for example, must be of excellent quality to prevent corrosion and scale deposits. Of 3,343 industrial plants recently surveyed, 5 percent—the largest plants—used over 75 percent of the water [72]. It was also found that about 60 percent of the plants do not reuse any of their water and 25 percent reuse less than one-half of the water withdrawn. industrial location based on water supply Water supply has always had a significant effect on indus- trial location, but until recently most of this influence was exerted in an indirect manner. By 1975 water supply may be the most important factor affecting industrial location. Except for the Pacific Northwest, most of the economically available water of the Western States is allocated for irrigation and is not now available for large industrial requirements without costly acquisition of farm rights and properties. Most of the Western States accord irrigation priority over industry in the use of water. These standards developed by the States and encouraged by Federal water-development policies, have contributed to the perpetuation of a dominantly agricultural economy. There was justification at one time for using the limited water of the West for relatively low dollar- Page 86 Table III.—Estimated water use by major industries. 1950 Billion gallons per day Percent of total industrial use Industry 35 13 7 4 21 44 16 9 5 26 Steel Other Total *80 100 ^Includes an estimated 15 billion gallons per day of brackish water. producing irrigation, but the potential water requirements of new industry in the various regions indicate that the existing priority structure should be reevaluated with a view toward obtaining optimum economic utilization of water and related resources. Intelligent reappraisal and action should result in a strengthened economy for the West and the Nation as a whole. Some industries oriented toward a given area, such as po- tential oil-shale refineries, might find it almost impossible to operate except in the immediate vicinity of the raw material source. This type of industry may be severely handicapped in water-scarce areas unless local agencies extend cooperation in obtaining suitable plant sites. In the case of strategic industries of national importance, the Federal Government may be re- quired to intervene to assure that production of essential materials will not be retarded. These potential industries, for the most part, have not been given adequate consideration by Federal and local water planners. This Nation was extremely fortunate during the Second World War that the water supply was above average. If a major drought, similar to the one experienced in the 1930's, were superimposed upon a war period when peak industrial and agricultural production was essential, the results could be disastrous. The elimination of this threat will require stepped- up surveys of water resources and coordinated selection of industrial sites by industry and Government. The problem of pollution and waste treatment is of major importance to industries. It is becoming increasingly difficult to find new industrial sites where wastes can be safely dis- charged without treatment. Often the cost of abating industrial pollution is enough to give a nonabating competitor a decided advantage. This then forces a regional competition for new industries resulting in a general lowering of pollution standards. If States do not cooperate in establishing and maintaining fairly uniform and adequate pollution control measures, eventual Federal regulation may result. Industry can and should solve most of its own water prob- lems. Although water costs will increase as time goes on and cost of development in some cases may be beyond the financial ability of a single plant, almost every water problem can be solved by group action [17]. Federal, State and local Govern- ments should encourage the establishment of more regional and local groups to take care of their own water needs. Water Pollution a Nation-Wide Problem Stream pollution is closely associated with density of popula- tion and industrial concentration, but it is also related to quan- tity and regularity of stream flow. Although the Eastern States are 5 times more densely populated than the Western States and have perhaps 20 times more industrial pollution [13], the stream flows to dilute and transport these wastes are much greater and better distributed. Water pollution is, therefore, a Nation-wide problem even though industrialized and heavily populated areas are more seriously affected. According to the Public Health Service, there are some 22,000 major sources of pollution in the United States [78]. Approximately one-half of these sources are municipal sewer outlets and one-half are discharge outlets of private industries. Although increasing numbers of Americans are moving to cities and using municipal systems for sewage disposal, relatively few cities have kept pace with these increased demands by con- structing waste-treatment plants. However, there are indica- tions that many cities are moving forward to eliminate such nuisances as rapidly as materials and funds are available. The increasing population served by municipal sewers and waste treatment plants, is indicated in table IV. Table IV.—Population served by municipal sewers [2, 3] [In millions] Service available Service used Sewage treated Year 1900 25 15 1 1940 76 71 41 1950 (estimated) 92 90 55 Industries also contribute to the pollution of the Nation's streams. It is estimated that the waste originating in industrial plants accounts for from one-third to two-thirds of the total discharge through the municipal sewers of various cities [3]. In addition large industrial plants that have separate discharge outlets contribute in the aggregate about the same amount of pollution as do municipal sewer systems. Even though cities and industries have done much to prevent increase of stream pollution, filth and waste equivalent to the raw sewage of 150 million people are now being discharged into the Nation's water bodies [IS], The Public Health Service estimates that to clean up our streams to a reasonable degree within the next 10 years would cost some 9 to 12 billion dollars, of which about 4I/2 billion dollars would be required for municipal facilities [78]. The big question arises as to who will pay this bill and who will enforce pollution control. There can be no doubt that the primary responsibility for pollution abatement rests with the cities and industries dis- charging the wastes. Since the resulting nuisance more often affects downstream water users, effective control of pollution requires the action of broad public bodies. In the 1948 Water Pollution Control Act Congress has stated, "It is hereby de- clared to be the policy of the Congress to recognize, preserve, and protect the primary responsibilities and rights of the States in controlling water pollution." In the same act, Federal re- sponsibility was defined to cover principally research on pollu- tion and limited financial assistance to States and municipalities for surveys and abatement facilities. The Senate Committee on Public Works, 80th Congress, and the President's Water Resources Policy Commission have suggested that if the Federal-State cooperative program does not provide clean rivers in a relatively few years, much stronger and more direct Federal enforcement should be begun. Page 87 206060—52 7 SALT WATER INTRUSION Over a large part of the United States, and especially in the coastal plains, fresh ground water floats on, or is adjacent to, denser saline waters that remain as remnants of ancient oceans that once flooded the areas. The contact between these fresh and salt water bodies has been placed in delicate equilibrium by long-continued interaction of the forces of nature. The activities of man can so disturb this balance that the salt water invades the fresh-water aquifers and destroys their usefulness. So sensitive is this balance that lowering the level of the fresh water by 1 foot may cause underlying saline water of a density comparable to sea water eventually to rise 40 feet into the fresh-water zone. Any activity that substantially lowers the water table, such as pumping from wells, canal construction, and land drainage has the potential, under some conditions, of seriously impairing the quality of the ground water. If the operation is sufficiently near the coast, eventual direct intrusion of sea water may be possible. The invasion of salt water is usually slow; the rate of hori- zontal intrusion may be less than a foot per day. The long-range consequences are made even more serious by this snail's-pace progress, for if once an aquifer is contaminated, even though it requires generations or centuries, usually an even longer period must pass before the contaminant can be flushed out. The vertical movement of salt water is immeasurably hastened by poorly constructed deep wells and shafts which may permit undesirable water under high pressure to flow unimpeded into aquifers now yielding fresh water. BACTERIAL AND CHEMICAL POLLUTION Salt water is not the only hazard to ground water, though it is by far the most common contaminant. In many places surface waters polluted with bacterial and chemical wastes have been drawn into ground-water formations or into poorly con- structed wells with subsequent disease epidemics and abandon- ment of producing water wells. Undoubtedly the trends over the last few decades in which American streams have been transformed into carriers of raw sewage and industrial wastes, will have an increasingly adverse effect on underlying aquifers. Though the pollution in the streams may be abated in days or weeks, the pollution of aquifers may not be removed in decades. Fortunately, the slow filtering of water through several feet of fine-grained sand effectively removes pathogenic organ- isms; however, dissolved chemicals may travel underground for miles. Even disease germs may be carried long distances through cavernous or fissured rocks such as are common in limestone areas. USING WELLS FOR WASTE DISPOSAL The deliberate disposal of liquid wastes into wells is becom- ing more common as more industries and cities look for alterna- tive means of disposing of objectionable wastes which have previously been dumped into overburdened streams. This practice can be condoned only when the water being injected into the earth has been treated so as to be of quality comparable to the native ground water or where careful investigation shows that there is no danger of contaminating formations contain- ing usable water. If this rule is followed, then such artificial recharge may be of great benefit in raising water levels and re- pelling intruding salt water. Disposal of radioactive wastes will present many problems in the future. Injection of radioactive wastes into deep wells can be safely done only when preceded by thorough scientific evaluation of the areal geology and hy- drology. Simply stated, the problem is to equate the rate of migration of the contaminated waters with the rate of dissipa- tion of harmful radioactive rays, leaving an ample margin of safety before the wastes emerge into a usable reservoir of water. PREVENTION OF CONTAMINATION Protection of ground water is essentially a local problem, although it sometimes may be related to pollution and construc- tion on interstate streams. Many States and communities have regulations designed to prevent possible contamination. Most of these regulations are designed to safeguard public health and not to protect investments in water supply. Almost every State is in need of more comprehensive legislation for licensing ex- cavation and injections into the earth and abatement of stream pollution. A number of important aquifers in New Jersey, Maryland, Florida, Louisiana, Texas, California, and other States already have been destroyed or seriously impaired by salt water and waste contamination [19]. The solutions to these problems will usually be expensive and complicated. In cases of salt water contamination long- range solutions will involve reduction, redistribution, or elimi- nation of ground-water pumping, artificial recharge, or inter- ception of the intruding contaminant by pumping or diking. In cases of contamination by bacteria or industrial wastes, im- proved methods of well construction and pollution control laws will be required. It is important that the proper remedial meas- ures be recognized and instituted before the problems become unmanageable. The Federal Government can best participate in this conservation program by assisting State and local agen- cies in drafting adequate protective legislation properly, and in doing research on the physics of intruding contaminants and the best methods of keeping them out of usable ground-water reservoirs. Regional Water Problems The question is often asked if water supply may not eventu- ally limit the economic development of certain sections of the country. The answer is that the availability of water has already in the last century played a dominant role in the geographic distribution of agriculture and industry. For the long-range future the limitations on development are likely to become more severe, especially for new industries needing locations near raw materials. In 1950 industry used only about 40 percent [11] of total water withdrawn; by 1975 it likely will be the largest user and will probably require at least 60 percent of the expanded total needs. As use approaches the maximum available for withdrawal, water supply will become an increasingly im- portant element affecting industrial location and migration of population. Even during the Second World War, plans for at least 300 (and probably many more) proposed military or in- dustrial establishments had to be modified or abandoned be- cause water supplies were inadequate [5]. The patterns of in- dustrialization emerging in the next 25 years are likely to prevail more or less permanently. Page 88 It is significant that many water problems occur where the water supply is ample to meet normal requirements of the population. The 17 Western States, though supplied with only about one-fourth of the Nation's water runoff, actually have a larger water supply per capita than do the Eastern States. Table V which illustrates this point suggests that many water problems result primarily from poor utilization rather than inadequate supplies. Table VI shows how this water was used in 1950. Table V.—Regional and per capita water supply and use, 1950 Regional (billion gallons per day) Per capita (unit gallons per day) Item 17 West- ern States 31 East- ern States 17 West- ern States 31 East- ern States Runoff (long term average) Fresh water withdrawal. . . . Consumptive use Population (in millions).. . . 350 900 10, 000 8, 000 95 75 2, 700 650 60 7 1, 700 60 34. 4 117. 4 THE WATER SITUATION IN THE EAST The East (31 States eastward from the line from Louisiana to Minnesota) is well favored with a good water supply. On the average, about 900 billion gallons of water per day or three- fourths of the national water yield is accessible to the East [9] but, of course, only a fraction of this amount could be de- veloped. Considering the great volume of flood discharge of such rivers as the Ohio and the Mississippi and the relatively poor sites for building great dams and reservoirs as well as the desirability of uses within the stream itself, it is probable that no more than one-fourth of the total water yield could be made available for withdrawal [3]. In many places this withdrawal could be used several times before it is evaporated or the costs of reclamation become excessive. Although more water is likely to be used in the East for sup- plemental irrigation, the over-ail requirements likely will be small. However, in some local areas requirements for irrigation possibly may cause shortages. In spite of the demands of the large cities and great indus- tries, the water of the East is relatively undeveloped. Prob- ably 150 billion gallons per day—twice what has already been developed—can be developed in the future. Table VI.—How the East used its water, 1950 [11] Percent Withdrawn by domestic users 16 Withdrawn by private industries 81 Withdrawn by irrigators 3 Total 100 The major water problem of the East is not related to quantity of water but to maintaining a satisfactory quality of water. The population density of the East is about 100 per- sons per square mile, a density over 5 times that of the Western States. Industry is concentrated even more in the East. Of the 74.4 billion dollars of industrial capacity added in 1947, about 88 percent was built in the Eastern States [13]. Heavy water- using industry is overwhelmingly Eastern. Of the national total of 65 billion gallons per day of fresh water withdrawn by pri- vate industry in 1950, about 96 percent was in the 31 Eastern States [//]. These large industries and cities discharge every conceivable type of waste into nearby streams, from poisonous acids to mortuary disposals. The largest part of these wastes are dis- charged directly into bodies of water without receiving treat- ment. Completely aside from the destruction of aesthetic values, the pollution of streams kills valuable fish, creates serious haz- ards to public health, and greatly increases the water-treatment costs of downstream users. The East has had a number of ground-water problems, although not so serious as those that now face the West. A notable example was in Long Island, N. Y., where high- capacity wells once supplied a substantial quantity of water for New York City. When salt water began to encroach upon the fresh-water sands, the draft was reduced by further im- portation of surface water and by causing users of well water for air conditioning to drill another well into which the warm used water was recharged. By this practice the level of the water table was raised and the salt-water intrusion halted, although the warmer water being accumulated in the earth is not as efficient for cooling as it was previously. A number of other areas have had problems in depletion, contamination by wastes, or intrusion of salt water, but, in general, ample water to rectify mistakes in development or to replace completely the contaminated or inadequate supply has been found within a reasonable distance. In many cases the costs of remedying these mistakes has been excessive and unnecessary. Better knowledge of water resources and intelligent planning could have eliminated a large part of the costs. A technique which promises to multiply greatly the avail- ability of ground water in many areas has been developed by sinking wells in the permeable alluvium adjacent to per- ennial streams. The over-all effect is to combine the best features of both streams and aquifers. Such water will be kept more nearly uniform in temperature and cooler in the summer than the adjacent stream water, and free from sediment and bacteria. Since the stream flow recharges the aquifer, the water table can be maintained near a constant level and large sup- plies developed from a small area. THE WATER SITUATION IN THE WEST Although the 17 Western States have access to an average of about 350 billion gallons of water per day [9], two-thirds of the supply is discharged by the Columbia River and other streams in the Pacific Northwest. Unfortunately, the bulk of irrigable land needing a water supply is in the southern sections of the West> in Arizona, southern California, Nevada, New Mexfco and west Texas. As a result, these arid sections have generally overdeveloped their water supply while the Pacific Northwest has more water than it is possible to use. The Bureau of Reclamation estimates that the ultimate quantity of water that can be made available to the West for withdrawal will be only 120 billion gallons per day and of this quantity about 110 billion gallons per day will ultimately be used for irriga- tion [14]. See table VII. Under this program a surprisingly small quantity of water would remain for further expansion of industry and population unless radical changes are effected in techniques of multiple use of the same water. Page 89 Table VII.—Availability of water in the West Billion gallons per day Total withdrawals, 1950 [77] 95 Estimated consumptive use, 1950 60 Susceptible of development, including present use [74] 120 Ultimately planned for irrigation [14] 110 Ultimately available for industrial and domestic use [74] 10 Withdrawn for industrial and domestic use, 1950 [74] 7. 5 The picture presented in table VII may appear somewhat darker than is intended. If future demands for industrial and domestic water become strong enough, undoubtedly more water could be developed, even though it would be expensive and might necessitate location of water consumers in an otherwise undesirable area. The population of most of the West is growing at a per- centage rate much greater than that of the East. More and more industries are being born, not only to serve the increasing- needs of the West, but of the entire country. The West has gotten only a small percentage of existing industries, and may get an even smaller proportion of future expansion unless large quantities of cheap water can be made available for manufac- turing and other industrial uses. There is probably only one method by which this can be accomplished—curtailing a part of existing irrigation or plans for new irrigation when indus- trial needs develop. The decision as to how western water is to be used will be made, of course, by the people of the West, but the Federal Government in its current programs of water development exerts a great influence on water use. The degree to which the water is now used for irrigation, as presented in table VIII, suggests that very serious thought should be given to the manner in which new supplies are allocated. Table VIII.—How the West used its water, 7950 [77] Percent Withdrawn by domestic users 5 Withdrawn by private industries 3 Withdrawn by irrigators 92 Total 100 Because of its natural shortage, the West has been dili- gent in locating and developing its water resources. Never- theless, still more can be done, especially in proper utilization. Much of the water evaporated through irrigation might be salvaged by such practices as selecting early maturing and low water consuming crops, waterproofing distribution canals, and determining by research the optimum time for irrigating and the amounts of water to be applied. In some areas water can be used many times and for several purposes before the quality deterioration makes reuse impracticable. However, irrigation is in many cases the end point in recycling, as most of the withdrawal is then evaporated. There are also reasons why even low-consumptive users may make extensive recycling infeasible. Most streams of the arid West carry water that is highly mineralized, so that even slight evaporative use or pollution may have serious effects on the quality of the water. The most critical unsolved water problems of the West and the United States are in the area from west Texas to southern California. Rainfall upon this region is meager and the annual stream run-off averages only a fraction of an inch. But the desert soils are fertile and in a number of places prolific under- ground sand and gravel strata were found to yield large supplies of water to wells. Shortly after the turn of the century some of these aquifers began to be used, but it was not until the dry years of the 1930?s, followed by the Federal price-support pro- gram and the Second World War, that well drilling and irri- gation from ground water began to boom. With modern wells and pumps, irrigators were soon pumping water from the earth at rates exceeding nature's ability to replenish it. However, the slow trickle over past milleniums had accumulated tremendous storage in the porous sands, so that water users have been able to pump for many years by lowering the water level. The area outlined above withdrew in 1950 about 30 billion gallons of water per day, of which about one-half was from the ground and one-half from streams. This relatively small section of the Nation uses as much ground water as do all other sections of the country combined. One area alone, the San Joaquin Valley of California, accounts for over 6 billion gallons per day, or about one-fifth of the total ground water with- drawal of the Nation. It is believed that the overdraft in this basin amounts to about 20 percent of total withdrawals [10]. In addition to depletion of supply, there is also fear that salt accumulation from use of mineralized water may eventually cause retirement of crop land in some areas. Plans are now being prepared to lessen the overdraft by importation of sur- face water and by recharging aquifers with flood waters. The lower part of the Santa Cruz Basin in Arizona has even a more serious overdraft. Whereas withdrawals in 1949 were about 1 billion gallons per day, the average annual replenish- ment is estimated to be only one-eighth of a billion gallons per day [10]. In the High Plains area of west Texas about 1.4 billion gallons per day were pumped in 1950 from 14,000 wells. This is about 30 times the estimated rate of replenishment. The overdraft in this area will become especially serious, as there is no alternative source of water that could feasibly supply the great irrigation demands. As the present storage is exhausted, irrigation and its dependent economy will slowly decline. The water problems of the West are epitomized by the con- ditions in the State of Arizona. The average annual run-off or water yield of Arizona is only 0.7 inch [7]—less than 10 percent of the Nation-wide average. In 1950, water use was about 0.9 inch of water [7/j; this exceeded the quantity avail- able from interior streams and aquifers on a long-time natural basis. This overdraft was made possible by a combination of factors: (1) part of the water withdrawn was returned to the streams and aquifers and used a second time; (2) some water which was used had its origin outside the State; (3) a substantial quantity of water was mined from ground-water formations at a faster rate than it was being replenished; (4) a little water was salvaged by lowering the water table beyond the reach of roots of heavy water-consuming vegetation. Over 60 percent of total water withdrawals in 1950 (about 3 billion gallons per day) were from wells and a large pro- portion is in excess of recharge [10, 11]. Although Arizona hopes to divert water from the Colorado River to partially alleviate the ground-water overdraft, the outlook for sub- stantially expanding water use or even for sustaining existing needs is bleak, indeed. Page 90 In sum, the ground-water overdraft of the southwestern part of the United States amounts to probably 5 billion gallons per day or one-third the total ground-water withdrawals. Part of this overdraft may be offset by artificial recharge or replace- ment by imported surface water. Some of the problems can be solved only by eventual reduction or elimination of pumping. Whatever the solutions may be, they will become increasingly expensive. GOVERNMENT AND WATER MANAGEMENT The value of water for its many purposes can be determined with sufficient accuracy to show clearly the methods of optimum use. Before vast sums are invested by the Federal Government in developing water, such studies should be made on a Nation- wide scale to determine total requirements for major categories such as industrial and domestic water, irrigated land, and hydroelectric power. Then similar studies should be made of each river basin and subdivision including relevant details peculiar to the area, such as water requirements for processing raw materials, adaptability of land for irrigation, market for power, need for water transportation, and the importance of fish and wildlife. Each regional study should then be compared with studies of other regions and with the national requirements. Such studies cannot be confined to water use proper, but will require the broadest planning to assure best use of all resources at minimum cost. In general, water resources develop- ment should be subjected to the same critical economic analysis that a competent business organization would make before risking investment capital. This does not mean that Govern- ment must conduct its business on a pattern drawn by private industry. On the contrary, Government has obligations of na- tional defense and public welfare which exceed the economic responsibilities of private enterprise. In some cases these nor- mally subsidiary benefits may be of such importance that they will indicate water use which otherwise would not be justified. Whether or not such public benefits are outstanding, all water projects should be subjected to the same searching analysis to be certain that final plans will result in the best use of water and the most economic application of investment. In many places, water may be used a number of times and for multiple purposes before it is evaporated or becomes too contaminated to be reclaimed. Often it may be desirable to change the patterns of water use in a certain area as new factors corne into play. The timing of water development is important for many reasons. The mightiest dams cannot permanently solve the Nation's water problems. Concrete deteriorates and reservoirs eventually fill with sediment. The life of a reservoir may range from only a decade to several centuries. There has been no successful method devised to halt deposition of sediment or to remove it economically, and none is in sight. With competent study, reservoirs can more than repay their cost during their lifetime, but that is not the real long-range problem. Dam sites are scarce and when all available reservoirs are filled with sedi- ment, storage and control of water will be practically im- possible. This problem, as well as others of a similar nature, suggests that water development should not be an objective in itself. Present needs must be weighed in terms of long- range requirements and detriment to the stream regimen. As the demand for water approaches the maximum available supply, the costly errors of the past will become doubly pro- hibitive. A reappraisal of existing water use by each area of the Nation is now in order. The Federal Government should be in a position to lead the way in making a revitalized and objective analysis of existing and potential water use. FEDERAL WATER POLICY During the last half of the nineteenth century, after almost complete failure of the State and local groups to achieve a co- ordinated system of navigation channels and flood control works, Congress assigned the Corps of Engineers increasingly broader responsibilities in this field. In 1902 the Reclamation Act was passed by Congress, first giving the Federal Govern- ment authority to construct dams and canals for irrigating west- ern land. During the 1930's, large dam projects got under way and with their completion a new program was born—the gen- eration of hydroelectricity by the Federal Government. Among fundamental steps in the development of Federal water policy were allied measures to deal with soil conservation, forest and range management, collection of basic data, pollution control, protection of fish and wildlife, and recreation. Federal water policies have been laid out over a period of a century with little thought to over-all requirements in terms of organization, consistent reimbursement, and changing pat- terns of demand and use. Policy was developed by the process of legislative precedent and statutory additions to fit the limited requirements of a brief span of years, a single river, or even an individual project. A primary concept throughout the broader statutes has been one of regional development or of priming the resource pumps of the various regions. Control and development of water was rightly conceived to be the key to a strong and vigorous econ- omy. In the East with its bountiful water this Federal develop- ment took shape in the form of inland waterways to be the arteries of commerce, and levees and dams to protect cities, industries, and farms from flood waters. The arid West, with insufficient rainfall for agriculture, placed emphasis upon res- ervoirs and canals to irrigate the rich desert lands. In this philosophy of regional development it is implied that a point will be reached after which Federal assistance may be reduced. There is no indication now, however, that the de- mand for Federal water development is lessening. On the contrary, Federal agencies which have spent about 5 billion dol- lars for interior water projects in the past, contemplate at least 10 times that amount for the future, with about one-half already definitely planned [5]. One large project tentatively planned to benefit chiefly a single State is estimated to cost 3.3 billion dollars [20], or two-thirds as much as has been spent on all Federal water development in the past century. These future projects will be expensive, as the cheapest and best dam sites already are being used. Dams will be larger or more remote, and will not store as much water or generate as much electricity per dollar of cost. Canals will be longer, more costly diversion tunnels will be required, levees will be higher or will cost more compared to benefits obtained. Many projects must be classed as rescue operations to protect industries and cities that have knowingly built on river plains that are subject to flooding, and to import additional water for irrigating lands Page 91 that had formerly been supplied by willfully depleting ground- water reservoirs or extending existing surface waters over too many acres. No longer is Federal participation only a stimulus for regional development; in many aspects, it is also a gigantic relief program in which funds obtained from all citizens di- rectly benefit only a few. Clearly, we are now entering a new era in water manage- ment for which we are not prepared from a policy standpoint. As has been pointed out by the Hoover Commission, Federal organization for achieving coordinated planning and develop- ment is far from satisfactory. The recent Water Resources Pol- icy Commission emphasized the general need for increasing local and regional participation in financing water projects and for developing more uniform reimbursement policies. A lack of consistency in local participation exists in policies on reimburse- ment for major project beneficiaries. Also participation by Federal water agencies is varied. Navigation. As early as 1789, during the first session of the first Congress, an act was adopted declaring that the navigable waters leading into the Mississippi and St. Lawrence Rivers "shall be common highways, and forever free . . . without any tax, impost, or duty therefor' [4]. This policy declaration has been extended to all artificial and natural navigable waterways and results in almost 100 percent Federal subsidization for both construction and operation of navigation improvements. Flood Control. Following the floods of 1935-36, Congress enacted the 1936 Flood Control Act declaring, "It is hereby recognized that ... it is the sense of Congress that flood con- trol on navigable waters or their tributaries is a proper activity of the Federal Government in cooperation with States, their political subdivisions, and localities thereof . . [4]. Local cooperation has been directed principally toward aid in plan- ning and provision of some sites. Financial contributions are negligible so that flood control works are financed almost en- tirely from Federal funds without reimbursement. Irrigation. Although modern irrigation practice in the United States extends over a century, it was not until passage of the Reclamation Act of 1902 that the Federal Government stored or delivered water for this purpose. Reclamation activ- ities were limited by this and succeeding legislation to the 17 Western States and were intended primarily to foster settlement of the public domain. Initially, water users were obliged to repay the interest-free cost of constructing all facilities within 10 years. This time limit was periodically extended until today the time for repayment is generally 40 years, plus 10 years for development, but is sometimes longer for individual projects. The costs susceptible of reimbursement have been reduced, since a large part of present-day project costs are allocated to hydroelectric power, which helps to pay part of the cost allo- cated to irrigation. Flood control, fish and wildlife, and recre- ation also are often charged with some appropriate part of costs, which is borne by the Federal Government. The 1939 Reclamation Project Act introduced an entirely new concept into the reimbursement statutes. This act stipulates that the irrigator must pay only what he is able, the remainder to be paid by the Federal Government or by other beneficiaries, such as power users. As long as there is a national debt and the Federal Govern- ment must pay interest on the money it borrows, there can be no differentiation between capital costs and interest on Federal projects. In this light, the interest subsidization alone exceeds 50 percent of the total cost of irrigation projects repayable in 40 years or more. Hydroelectric Power. Initially, the sale of hydroelectricity by the Federal Government was regarded as the result of accumu- lated surplus power incidentally available at dams built for flood control, land reclamation, or other purposes. In recent years the production of hydroelectric power has often become the principal objective with only token benefits for other pur- poses. Reimbursement policy varies with the constructing agency. Under the Reclamation Project Act of 1939 the con- struction costs allocated to hydroelectric power, amortized over a 50-year period, with interest at a rate of 3 percent on the unamortized power investment provide the basis for power rates, although not necessarily for reimbursement to the Federal Government. The Secretary of the Interior, who is responsible for marketing most of Federal power, has interpreted the basic law as requiring the collection of the power interest, but not that it be paid into the U. S. Treasury [4]. This interest is thus applied toward repayment of charges assessed against irrigators and so results in an additional subsidization to that degree. Municipal and Industrial Water. Although no fixed policy has yet been established by the Congress, the usual practice requires that municipal and industrial water users repay with interest the portion of the project cost allocated to their func- tion. Subsidization would occur only where the interest rate paid by the water users is less than that paid by the Federal Government on its obligations. Watershed Management. Of the approximately 1 billion dollars spent on the cooperative soil and agriculture conserva- tion programs in the fiscal year 1949, the Federal Government furnished about 30 percent. It also contributed about one-third the total cost of the forestry watershed program and about 60 percent of the cost of measures undertaken for waterflow re- tardation and soil erosion prevention in aid of flood control [4]. Fish and Wildlife. With minor exceptions costs associated with Federal river-basin projects are borne by the Federal Gov- ernment; there is considerable variation in local participation. Recreation. Project costs allocated to recreational benefits are usually non-reimbursable. Operation and maintenance of recreational facilities are normally segregated from other project operations and supported by the National Park Sendee or by local agencies. Pollution Control. Under the Water Pollution Control Act of 1948, Congress states: "It is hereby declared to be the policy of the Congress to recognize, preserve, and protect the primary responsibilities and rights of the States in controlling water pol- lution . . .'' and "to support and aid technical research to devise and perfect methods of treatment of industrial wastes which are not susceptible to known effective methods of treatment, and to provide technical services to State and interstate agencies and to industries, and financial aid to State and interstate agencies and to municipalities. . . The financial aid to States, interstate agencies and municipalities authorized under this act is in three principal categories: (1) loans not exceed- ing $250,000 or one-third the estimated cost of sewage and waste treatment plants to be repaid with 2 percent interest, Page 92 (2) a grant-in-aid of 1 million dollars per year from 1948 to 1953 to be divided among the States for conduct of investiga- tions and research on industrial pollution, and (3) a grant-in- aid of 1 million dollars per year from 1948 to 1953 to permit engineering and economic studies by State and local agencies. In this category Federal participation with respect to any proj- ect may not exceed $20,000, or one-third of the total cost. Basic Data. In an 1894 statute Congress made funds avail- able to the Geological Survey for "gauging the streams and de- termining the water supply of the United States, including the investigation of underground currents and artesian wells in arid and semiarid sections." Funds for this program are largely transfers from Federal developmental agencies and funds sup- plied 50 percent by Congress and 50 percent by State and local groups. The activities of the Weather Bureau in weather and flood forecasting, meteorological and hydrological research, and col- lection of weather records are supported both by transfers from other Federal agencies and direct appropriations by the Congress. OUTLOOK FOR THE FUTURE Water is not distributed on a national basis; therefore, in making projections of water use it is essential to predict the geographic regions where future water users are likely to be located. The controlling assumptions used in this report for estimating future water demands are that population of the United States will have reached 193.4 millions by 1975, a 27.5 percent increase over 1950, and that the real gross na- tional product will be 100 percent greater in 1975 than in 1950. It is assumed that over-all industrial production will increase by about 90 percent. These estimates were developed in other sections of the Commission's staff. According to projections made by Hagood and Siegel based on past trends, the population of the West and the South is likely to grow at a faster rate than the national average, whereas the North and East are likely to grow at a slower rate [21]. Even though some areas like the Pacific States may grow twice as fast as the Nation as a whole, the relative population density of the Nation will not be significantly affected, at least not in regard to domestic water supply. Table IX shows the regional distribution of population in 1950 and the estimated distribu- tion of the increase from 1950 to 1975 as modified from Hagood and SiegeFs projections. Table IV.—Projected regional population of 1975, compared with 1950 Region Population (millions) Increase Percent of 1950 1975 Millions Percent national increase 151. 7 193. 4 41. 7 27. 5 100. 0 New England 9. 38 11. 04 1. 66 17. ~j 4. 0 Middle Atlantic 30. 38 36. 20 5. 82 19. 2 14. 0 East North Central 30. 62 39. 00 8. 38 27. 4 20. 1 West North Central 14.16 16. 12 1. 96 13. 8 4. 7 South Atlantic 21. 33 28. 15 6. 82 32. 0 16. 4 East South Central 11. 56 14. 73 3. 17 27. 4 7. 6 West South Central 14. 64 18. 68 4. 04 27. 6 9. 7 Mountain 5. 11 6. 83 1. 72 33' 7 4. 1 Pacific 14. 59 22. 70 8. 11 55. 6 19. 4 The extent to which many areas of the country can further develop may hinge on the adequacy of the water supply. It is significant that the 17 Western States have already developed an estimated 80 percent of the supply which can be developed, while the 31 Eastern States have only developed an estimated 33 percent. Clearly, the West cannot hope to maintain its present percentage of the expanding national wealth without fundamental revisions in its use of water. The Department of Commerce in a special study of economic development trends between 1939 and 1947 [22] has shown that although the Northeast remains the most highly developed section of the Nation, the South and the West are growing economically at a much greater rate than the national average and that the existing economic differentials between regions are steadily being narrowed. An analysis of certificates of necessity for constructing or expanding industrial facilities under the Federal accelerated amortization program [23] reveals several things. First, al- though the Northeast retained over 80 percent of proposed steel and iron expansion there is clearly an eastward movement within this area as reflected in the relatively high percentage of new steel facilities for the Middle Atlantic and New England regions. An even more notable movement is discernible in the relatively unindustrialized West South Central region. This region, which was responsible for only 3.9 percent of the value added by manufacture in 1947, was chosen for a higher pro- portion of new facilities in the nonferrous metals, chemicals, and gasoline products industries than any other region, and ac- counted for 17.5 percent of the total new manufacturing facil- ities approved. The Mountain States and the East South Cen- tral States also made good showings in receiving new plants. The locations of new industry authorized under the accel- erated amortization program are of special significance in determining where future industrial water demand will be the greatest. Plants now being constructed are designed to permit maximum peacetime utilization. Moreover, the industrial de- centralization trends evident in the accelerated amortization programs point to the probable location of the additional industrial capacity that will be on hand in 1975. TRENDS IN WATER DEMAND The total withdrawal of water in the United States since 1900 has doubled on the average about every 25 years [3], Though the rate of population growth during the next 25 years will likely decrease, it is believed that the constantly rising standard of living and the increasing per capita con- sumption of raw materials may require that the Nation's water supply be doubled again from 1950 to 1975. This would re- sult in a total withdrawal about equal to the estimated maxi- mum supply available for development under present condi- tions. As our existing supplies of high-grade materials are further exploited, more effort will be directed toward developing synthetics and marginal ores. There is every reason t© expect that these new processes will accelerate the presently increasing requirement for water. The great use of high-quality water in the chemical, rayon, and synthetic rubber industries can give us an excellent preview of future industrial water needs. About one-half of present industrial water demand is for production of energy, and already we can visualize greatly Page 93 increased requirements for new methods of producing energy— liquefying coal and shale and development of nuclear energy. By 1975 probably 65 percent of industrial water and 40 percent of total water withdrawals may be required to produce needed energy. This, of course, does not include the tremendous quantities of water that may be needed in the stream to generate hydroelectricity. A comparatively small quantity of water is consumed by humans and by livestock or incorporated in agricultural and industrial products. The great aggregate of water withdrawn is thus an accessory material, essential for production, but the demand is entirely dependent on the need for the primary com- modity. Therefore, the estimates of future water demand are based on the projected requirements of the increased population for domestic use, production of energy, steel and other manu- factured goods, and for irrigated agriculture as estimated by specialists in those particular fields. The projected water require- ments in table X are based on use per unit with consideration being given to reduced or increased unit use where it is believed justified. The estimates are of a crude nature and will need to be refined as more information on water use becomes available. Table X.—Estimated water requirements, 1950 and 1975 Use Billions of gallons per day Domestic: Municipal. Rural Subtotal. Industrial: Steam power Steel. Petroleum refining (including synthetic) . Paper and pulp Other Subtotal. Irrigation Total. 1950 1975 13. 5 20 3. 5 5 17 25 35 125 13 20 7 15 4 8 21 47 *80 215 88 110 *185 350 ^Includes an estimated 15 billion gallons per day of salt water. The present trend of industries moving south is in accord with the geography of available water supply. The movement to the Mountain States ore region is likely to be intensified by 1975 with water supply potentially being one of the most critical factors in plant location. Probably reallocation of water rights will be one of the most feasible solutions, but reallocation alone may not be adequate. A high percentage of the national water supply which can be withdrawn under existing energy-cost levels will likely be in use by 1975. More and more of future water needs must be solved by recirculation, reclamation, and better use of existing supplies. In particular, the West must soon decide whether its future must be sacrificed by its antiquated priorities system in water use. The East must make decisions as to the extent that cities and industries will be allowed to continue the wholesale defilement of streams by pollution. It is extremely important that we recognize now the shortcomings of our present water policy and begin measures to make certain that careless devia- tion from the most desirable course of action may not eventu- ally lead to problems that cannot be solved except at extreme costs, or perhaps cannot be solved at any cost. DEVELOPING NEW WATER SUPPLIES Some of the methods for making more water available cur- rently being used or being explored are briefly described below. Of the 170 billion gallons per day of fresh water presently being used in the United States, it is estimated that about 10C billion gallons per day or 60 percent [3] is returned to the streams, lakes, and aquifers. Most of this return flow is from cities and industries which have found water to be a convenient vehicle for disposing of all manner of industrial waste. Actu- ally most sewage and industrial waste is about 99.9 percent [24] water, but the minute residual is so filled with obnoxious chemi- cals and sewage wastes that it contaminates the 100 billion gallons per day of return flow which in turn partly destroys the value of the Nation's streams for other purposes. Reclamation of Used Water. Waste removal from used water has multipurpose benefits, one of the most remunerative being the addition to the usable supply of water through re- claiming the water presently withdrawn and abating the pollu- tion of natural waters. In many areas such reclamation prac- tices are now under way, but they are not yet widespread. When the costs of developing new supplies of water exceed the costs of reclaiming used water, greater acceptance of reclama- tion practices can be expected. For a number of years the Bethlehem Steel Co. has con- tracted with the city of Baltimore for large quantities of sewage effluent which is then further treated and used in producing steel at their Sparrows Point mill. The quality of the water is well within the desired specifications and costs less than water from alternative sources. About 60 million gallons per day are now supplied at a cost of less than 2 cents per 1,000 gallons [25]. The Kaiser Steel Plant at Fontana, Calif., is also making satis- factory use of municipal sewage for industrial operations [24], as does the Cosden Oil Refinery near Big Spring, Tex. [26]. Municipal sewage also can be used for other profitable pur- poses. In 1948 a survey showed 124 places where reclaimed effluent was used in agriculture [27]. Since 1932, effluent from the City of San Francisco has been partially used to supply several recreational lakes in Golden Gate Park [28]. Los An- geles County, Calif., has made studies that indicate that a large proportion of the more than 100 million gallons per day of waste water now discharged into the sea could be reclaimed for use or for recharging depleted ground-water reservoirs at a cost of 5 or 10 cents per 1,000 gallons [24]. Most industries circulate water through their plants only one time. Where large supplies of water are not available, indus- trial plants may use water many times before it is evaporated or becomes too mineralized for further use. The large Humble Oil Refining Plant at Baytown, Tex., for example, would re- quire about 600 million gallons of water per day if it were not for extensive recirculation which reduces withdrawals to 40 million gallons per day [29]. Although reclamation and recirculation could decrease the total withdrawal of water in the United States by many bil- lions of gallons per day, there are several limitations to such practice. First of all, there would be almost insurmountable Page 94 public prejudice against use of reclaimed sewage effluent for domestic purposes or for processing foods, and, indeed, there could be serious hazards involved in such use. Furthermore, many large water-using cities and industries are located on tidewater so that little opportunity is afforded for extensive reuse without considerable expense in pumping the water inland. Even if all water now discharged through municipal sewers were fully available, the supply would be less than 20 percent of present industrial requirements. In some sections of the Nation, particularly in New England, space is not available in existing plant sites to permit installation of water reclama- tion plants, or ponds or towers for cooling. Extensive recirculat- ing also evaporates water, increases the mineral concentration, and reduces the existing stream flow to the detriment of down- stream users. Regulation of Streams. The principal reason for building dams and reservoirs is to regulate or equalize the flow of streams. To spread excess water throughout the dry seasons, and perhaps even several dry years, requires an integrated system of man- made reservoirs to store and release water as it is needed. It is estimated that about 170 million acre-feet of ieservoir storage have been developed in the United States, enough to store 13 percent of the average annual run-off [30]. Not all of this stor- age space is available for conserving water for withdrawal. Nearly one-fifth (19 percent) must be kept empty in readiness for intercepting flood water and gradually releasing it so that the downstream channels will not overflow and damage adjacent property. Other important purposes served by reservoir storage are navigation (12 percent) and power generation (39 percent) which require uniform flow throughout the year. Recreational uses account for 2 percent. Only about 28 percent of this man- made storage is allocated for withdrawal to meet the needs for irrigation (22 percent), and for industrial and municipal use (6 percent). A much higher proportion of the runoff in the West is regu- lated by dams than in the East, where natural flows are more uniform. Complete control of our streams would require several times as much storage space as is now available. This additional storage would cost much more per unit of volume than does the existing storage. For example, the active storage space created on the Colorado River by the Hoover Dam costs about $6 per acre-foot, but the comparable storage behind 10 dams now pro- posed for the Upper Colorado by the Bureau of Reclamation would cost $30 per acre-foot. It probably will never become economical fully to control the Nation's streams. At any rate, it will not be economical or possible to do so within the next quarter century. Further regulation of streams will likely provide a large por- tion of expanded water needs in the next 25 years, but such regulation cannot fully or permanently solve our water prob- lems. It will not be practical to build storage dams on the lower Mississippi and many other streams. Sedimentation wiil become an increasingly serious problem as will evaporation from reser- voirs. It is estimated that each year the reservoir capacity of the United States is markedly reduced because of deposited sedi- ment. It is also estimated that several million acre-feet of stored water are evaporated [30]. The high rate of evaporation in some areas may eventually cause some reservoirs to lose more water than is conserved as deep storage becomes filled with sediment. Development of New Ground Water Reservoirs. About 30 billion gallons a day of water were pumped from wells in the United States during 1950 [11]. An even greater amount can be withdrawn in the future. Existing overdrafts are confined principally to the arid Southwest and to localized trouble spots over all of the United States. Between these trouble spots lie vast areas of undeveloped porous rocks that each day pour out into the Nation's streams some 400 to 500 billion gallons of fresh water [10]. Many of the rock beds are thin or relatively impermeable so great quantities of water cannot be obtained from wells. Also it would be impracticable to drill wells in scattered and isolated areas to intercept all of the water. However, if the more permeable and thicker strata are located, then great quantities of cheap high-quality water can be obtained. If de- veloped after thorough consideration of the local geology and hydrology, these supplies can be sustained. It is believed that water production from the ground may be sustained at a rate at least double and perhaps several times that of the existing withdrawal, provided that exploration for new aquifers is expedited, and that development is scientifically managed. Increased use of ground water is to be desired as an adjunct of over-all water management, but such use will likely decrease the base flow of adjacent streams to the extent that the water is evaporated during use or diverted to other streams. Further- more, the locations of these new supplies may not coincide with the most advantageous industrial locations. Artificial Recharge of Ground Water Reservoirs. It is esti- mated that at least 5 billion gallons a day are now being pumped from wells in excess of natural replenishment [10]. Slow natural recharge can often be aided by introducing sur- plus waters into the porous sands vacated by the pumped water. Such artificial recharge can be accomplished by spreading water over lands that will permit ready access to underground storage, or by pumping water into the ground through specially prepared wells. If the supply of water available for artificial recharge is dependable the year around or during the time of use, there is little object in putting it into the ground. Usually, however, the surplus water is available only in certain seasons. If the earth can be made to accept this surplus water, then underground storage may safely be used to equalize the supply during the drought seasons and years. A major problem is the source of the water for storage. Usually the reason for overdevelopment in the first place is the lack of surface water. In the most critical areas, water may have to be imported from hundreds of miles. The cost of such im- portation may be prohibitive, especially for smaller users. Many Eastern cities and industries have solved this problem by drilling their high-capacity wells in the alluvium alongside flowing streams. As the water table is lowered from pumping, the river water filters through its sandy bed, keeping the water table at a constant level. Ground water is insulated and usually remains at a nearly constant temperature. Large quantities of water can be pumped without the cost of constructing a storage dam to equalize the supply or constructing a filtration plant to remove suspended matter, turbidity, and organic material. Nature, in effect, performs the work of storing, cooling, and purifying. Though generally expensive, artificial recharge is being suc- cessfully practiced at Long Island, N. Y., and at El Paso, Tex., by injection into wells, at several places in California by surface 206000—52 S Page 95 spreading, and at other places throughout the Nation [9]. Careful location of new surface reservoirs may aid local areas by maintaining declining ground-water levels through seepage. Artificial recharge, though very promising as a method of augmenting our water supply, is not a cure-all. Flood waters cannot be injected into the ground in unlimited quantities. There must be enough pore spaces to accommodate the inflow, otherwise the reservoir will overflow at the surface, creating marshes, and other objectionable conditions. Thus, sustained artificial recharge is practicable only where subsurface condi- tions are suitable, where substantial quantities of water are being pumped from wells, and the benefits will exceed the costs. Reduction of Evapo-Transpiration Losses. About 70 percent of the rainfall in the United States is evaporated from the soil and through the leaves of vegetation \7]. In some arid sections the evaporation may be as great as 99 percent of the rainfall. Part of this "loss" serves a useful purpose in producing food, fibers, and timber, but a very large part returns to the atmos- phere without significant benefit to society. If evapo-transpira- tion over the United States could be reduced by only 5 percent, a supply of water could be obtained equivalent to total water use in 1950. It is only in the arid sections of the Nation, where water supply is critically short, that concerted effort has been made to evaluate and salvage nonbeneficial evapo-transpira- tion. The effort to obtain more water forecasts the direction which more bountifully watered areas may some day take. Man's activities in city and highway building, farming, ranching, mining, and forestry sometimes have significant effect upon the quantity and quality of water supply. Some activities such as resodding of range land are known to be beneficial, others, such as hvdraulic mining, are known to be detrimental; but the effects of most activities are either unknown or disputed. For example, it is believed that a heavy pine forest in some areas will transpire perhaps 3 feet of water each year. This knowledge considered alone would suggest that forestation is an enemy of water users. However, further investigation may show that the litter from the pine forest mulches the soil, retards runoff and soil erosion and, in some cases, permits more infiltra- tion to the water table. The net effect of the forest then may be to decrease water yield, but in most cases to improve the quality and to better distribute the supply throughout the year. Whether the benefits outweigh the detriments is controversial and diffi- cult to evaluate, but such evaluations will become increasingly important in all areas of the Nation. Fortunately, the current problems in reducing transpiration losses are of importance only in a few arid States where the water-using vegetation is of no economic benefit and has little value for watershed management. A chief offender is salt cedar—a small, scrubby tree which thrives along stream chan- nels, reservoirs, and areas where the water table is near the land surface. In the western part of the United States it is believed that some 15 million acres of land are infested with salt cedar and other worthless vegetation which consume each year something like 20 to 25 billion gallons per day of water [9]. It is estimated that in Arizona and Nevada alone the total water wasted by nonbeneficial vegetation in 1948 amounted to about 3 billion gallons per day [9], enough water to irrigate a million acres of land or to supply 3 cities the size of New York City. It is believed that it might be feasible to salvage perhaps 40 percent of the waste in these two States. Importation. Usually long-distance transport of water is not practical, unless a large city or group of industries is already flourishing. Los Angeles, for example, probably would never have been built if large supplies of water had not been available nearby. When the city expanded and the local water supply- became inadequate the existing wealthy economy was able to import a supplemental supply from over 300 miles away.' Importation of water is expensive. Long-distance transfer for irrigation is usually out of the question unless subsidized by the Federal Government. New industries nearly always find it cheaper to locate near am adequate source of water at the out- set. Mass transfer of water is then essentially a method of meet- ing the increased needs of groups of cities and industries that outgrow their local supply. The balance between supply and demand will so operate that water costs may determine whether a particular water-short area will grow or whether its potential population and industry will migrate elsewhere. An increasing proportion of Federal expenditures for river development are directed toward interbasin transfer of water, of which California is a major beneficiary. The latest reported proposal is a 3.3 billion dollar project to divert water from the Klamath River throughout the entire length of the State [20]. Actually, California streams carry more water than do those within any other State; its tremendous ground-water res- ervoirs now yield one-third of the total ground-water output of the Nation. California uses over twice as much fresh water as any other State with the exception of Idaho. It might be wondered why California should have any water problems in view of its great natural supply. Although maldistribution is partly responsible, the principal reason is that California, like many other Western States, uses 90 percent of its presently developed water for irrigation of desert land with a relatively low economic return per gallon of water consumed. Induced Rainfall. The artificial creation of rainfall, though long a dream of man, has been the object of scientific research for only about 5 years. It is now generally agreed that some precipitation can be produced from certain types of clouds by proper introduction of nuclei such as silver iodide or those created by dry ice [31]. There is not sufficient scientific evidence available to indi- cate the extent to which induced rainfall may be of economic importance. Further knowledge of the natural meteorological process, together with more experimentation on techniques of alteration, may result in many benefits to dry land agriculture as well as to all other users of water. The successful conclusion of present attempts to modify the weather and to create or re- distribute fresh water on the surface of the earth without dam- aging other areas would rank as one of the greatest scientific achievements of all time. Large-scale realization of such an objective probably is not possible with our existing knowledge of meteorology. Removal of Salt from Sea Water. The removal of salt from sea water by distillation or chemical treatment is an accom- plished fact. However, the question of whether freshening of sea water is economically feasible for ordinary use must be subjected to a very broad analysis involving not only existing and potential costs of removing salt, but also costs of trans- porting the water to place of use, and the economics of utili- zation of all naturally fresh waters. Also the possibilities must be considered of reclaiming valuable byproducts from the sea Page 96 water and of obtaining sea water distillate as a byproduct of power generation. In general, the chemical method is far more expensive and is practical only for uses such as on life rafts for ocean-going vessels. The least expensive method in commer- cial use, distillation, is stated by the most competent authorities to cost at least $1.50 per 1,000 gallons for even large-scale operating plants [31]. Comparable costs of treating the poorest grade of fresh water now used by cities and industries is prob- ably no greater than $0.05 per 1,000 gallons. In other words, the costs of commercial distillation are believed to be at least 30 times the cost of treating existing inland waters. The average cost of water applied for irrigation including storage and distribution is no more than 1 cent per 1,000 gallons [13] and the average value of the crops produced is only some 10 cents for each 1,000 gallons of water required. Obviously, sea water cannot be economically reclaimed for irrigation even if the cost were reduced to one-tenth of present costs. The same conclusion applies to the great percentage of water used by industry. The cost of industrial water of all quality grades averages only about 4 or 5 cents per 1,000 gallons; the great mass of low-quality water used in cooling and processing costs still less. In the very few areas where fresh water is inadequate for domestic use, ample supplies can be obtained far cheaper by long-distance importation or by re- appropriating water that is now used by irrigation or other low-order uses. The majority of water-short areas are located in mid- continent far removed from the oceans. Most of the cities, industries, and lands that have need for a supplemental water supply could not afford to pump water from the oceans even if the waters were already fresh. The contemplated expenditures on demonstration plants to freshen sea water could better be used to promote research on general hydrology, photosynthesis, hydroponics, induced rain- fall, possible new and cheap methods of desalting sea water (recently ion-exchange method of obtaining fresh water from the sea has aroused considerable interest), and better utiliza- tion of the large supplies of fresh water which we already have. Use of Substitutes for Fresh Water. In addition to the major problem of using water more efficiently for agricultural and industrial production, fresh water may be supplanted in much industrial cooling. It is believed that perhaps 75 percent of industrial water or 30 percent of the total water withdrawn in the United States is used for cooling in industrial plants. The largest proportion of this cooling water is used in generating electric power by steam. Although fresh water is admittedly the most desirable agent for heat transfer, salt water and perhaps other coolants can be substituted if the costs of fresh water become too great. It is believed that at least 15 billion gallons per day of salt or brack- ish water are already being used, and still more could be used if shortages develop. In areas where fresh water is inadequate, consideration should be given to locating more water-using industries near the sea even though the use of salt water raises costs of maintenance. Other coolants can be substituted for water. In many water- short areas air cooling is now practiced on a limited scale. In essence, air cooling is usually a large-scale version of an auto- mobile cooling system. Water is circulated through a closed system which releases heat to the air. The Sun Oil Plant in Coke County, Tex., requires only 16 gallons per minute of make-up water for its air-cooled system which performs 90 percent of the cooling [32]. A furnace-type carbon black plant at Borger, Tex., owned by Phillips Petroleum Co., by maximum air cool- ing, uses only gallon of water per pound of carbon black produced, whereas similar water-cooled plants average 4 to 14 gallons per pound [9]. Further use of closed circuits employing demineralized water or refrigerant solutions can be made if necessity demands. Re- search on this problem might increase the efficiency so that closed cooling systems could relieve a substantial part of present demand for industrial water. References 1. Warne, W. E. Address entitled "Water Resources for Agriculture." Department of Interior, March 1, 1951. 2. Public Health Service data. 3. Picton, Walter, N. S. R. B. and D. P. A. Address at Ohio Water Congress, May 1950. 4. President's Water Resources Policy Commission. A Water Policy for the American People, vol. I. Washington, D. C, Government Print- ing Office, 1950. 5. Mahoney, J. R. "National Resource Activities of the Federal Govern- ment." Library of Congress, Legislative Reference Service, 1950. 6. U. S. Weather Bureau data. 7. Annual Runoff in the United States. Geological Survey Circular 52, 1949. 8. Normals and Variations in Runoff, 1921-45. Water Resources Review, Suppl. no. 2. Geological Survey, 1949. 9. Geological Survey data. 10. The Water Situation in the United States with Special Reference to Ground Water. Geological Survey Circular 114, 1951. 11. Estimated Use of Water in the United States. Geological Survey, Circular 115, 1951 (and other information). 12. Water in Industry. National Association of Manufacturers and Con- servation Foundation, 1950. 13. Bureau of the Census data. 14. The Reclamation Program, 1948-54. Bureau of Reclamation, De- cember 1947. 15. Irrigation: Agriculture in the West. Department of Agriculture, 1948. 16. Powell, S. T., and Bacon, H. E. "Magnitude of Industrial De- mand for Process Water." Journal of the American Waterworks Association, August 1950. 17. Letter from Kaiser Steel Corporation, May 31, 1951. 18. Water Pollution in the United States.. Public Health Service, 1951, 19. Thomas, Harold. Conservation of Ground Water. New York, Mc- Graw-Hill Publishing Co., 1951. 20. Reported unofficially by Time Magazine, July 30, 1951. 21. Hagood, M. J., and Siegel, J. S. "Projections of the Regional Dis- tribution of the Population of the United States to 1975." Agri- cultural Economics Research, April 1951. 22. Economic Development Atlas. Department of Commerce, 1950. 23. "Regional Aspects of Industrial Expansion under the Accelerated Tax Amortization Program." Defense Programs Supplement. Defense Production Administration, July 31, 1951. 24. Report upon the Reclamation of Water from Sewage and Industrial Wastes in Los Angeles County, California. County Sanitation Dis- tricts of Los Angeles County, April 1949. 25. Wolman, Abel. Personal communication, May 1951. 26. Whitney, H. W. "Industrial Uses of Sewage Effluents." Water and Sewage Journal, October 1949. 27. Veatch, N. T. "Industrial Uses of Reclaimed Sewage Effluents." Sewage Works Journal, January 1948. Page 97 28. Hyde, G. G. "The Beautification and Irrigation of Golden Gate Park with Activated Sludge Effluent." Sewage Works Journal, 1937, pp. 9-929. 29. Department of the Interior. "A Brief Summary of the Over-all Water Situation in Ten Selected Areas." (Unpublished.) 1952. 30. A Summary of the Water Situation with Respect to the Annual Runoff in the United States. Geological Survey, 1951. 31. Subcommittees of the Committees on Interstate and Insular Affairs, Interstate and Foreign Commerce, Agriculture, and Forestry. Weather Control and Augmented Potable Water Supply. Joint Hearings on S. 5, S. 222, and S. 798, United States Senate, 82d Congress, 1st Session, 1951. 32. Stormont, D. H. "Water Conservation, A Prime Design Consideration in Sun's New West Texas Pressure-Maintenance Plant." Oil and Gas Journal, October 27, 1949. Page 98 Report lO Venezuela "Sows the Petroleum An almost classic example of economic cooperation between two free world nations, to the benefit of both, is afforded by Venezuela and the United States. By developing her rich ma- terials resources, mainly with the aid of private investment capital and technical know-how supplied by the United States, Venezuela has achieved in a short span of years an almost unparalleled record of economic and social advancement. The benefits of this United States-Venezuela collaboration extend beyond those accruing directly to the peoples of the two countries—they have an international significance. Not only have rising Venezuelan materials exports stimulated world trade, but the security of all free nations has been increased by Venezuela's immense and growing capacity to produce oil—an essential for peaceful production and for defense. In contributing to this development, businessmen of the United States have invested 2.5 billion dollars in Venezuela, more than in any other foreign country except Canada. As a result of these investments, and the far-sighted work- ing partnership that the Venezuelan Government has evolved with United States, British, and Dutch corporate investors over the last 34 years, Venezuela has traveled far and rapidly along the materials path to national progress: It has pushed its oil production steadily upward until it now ranks second in the world, and has proved reserves represent- ing more than 10 percent of the free world total. It has arranged similarly for the development of its iron deposits, with an anticipated production of 12 million tons of ore a year, the equivalent of about 12 percent of the annual United States requirement. It has achieved a balanced budget, with oil revenue supply- ing 60 percent of the income; a favorable balance of trade, with oil supplying over 90 percent of foreign exchange; a low income tax rate; enormous foreign trade; rapid industrial growth, and broad national development and social benefits. Benefits to the Venezuelan Nation The Venezuelan people and their Government have made wise and far-seeing use of their mounting income from oil. They have used it notably to promote agricultural develop- ment, to build roads, hospitals, and other public works, and to finance education and public health projects. While freeing themselves of foreign debts and reducing domestic debts to less than 1 percent of a balanced 585 million dollar budget, the Venezuelans, for example, have been able to: Invest more than 100 million dollars during the last decade in agricultural aid, stock breeding, and domestic industry such as new sugar mills. Build a 21 million dollar pier at Venezuela's chief port and a 45 million dollar highway connecting the port with Caracas, the inland capital. Build 12,125 units of moderate-cost housing, initiating in 1951 a 4-year program to double this total, of which 3,000 units have been completed in 15 cities. Budget 43 million dollars, chiefly to maintain primary and secondary schools, and 3 state-financed, tuition free univer- sities, the largest of which is putting up 14 new buildings, and a 1,200-bed hospital. Appropriate 42 million dollars for public health work by which malaria has been virtually eliminated and in which hospitals, some operated under Venezuela's social security sys- tem, cared for 123,000 patients free of charge in 1948 alone. Benefits to the Free World Considerable benefits have also accrued to other free nations as a result of Venezuela's materials development, both directly in the case of those which have invested in Venezuela and additionally in the case of the free world as a whole. For example: By virtue of her new prosperity, Venezuela was able to buy from other free nations, in 1949 alone, a total of 698 million dollars worth of goods, equipment, and machinery, of which 518 million was from the United States, making Venezuela the second largest dollar market in the world, exclusive of countries receiving financial aid through E. C. A. Free world needs for oil have been substantially supplied by Venezuela's output which, since 1918, has totaled 6 billion barrels; other free nations are consuming 95 percent of Venezuela's oil production, the United States taking 40 percent and Europe about 25 percent. During the Second World War, Venezuelan oil gave vital support to the armed forces of the allies and would provide even greater support to the free world in the event of another war. From a direct business standpoint, United States, British and Dutch investors in Venezuela's oil industry have derived substantial profits. For instance, the United States-owned Creole Petroleum Corp., which constitutes 45 percent of the Venezuelan oil industry and is one of the three companies making the larger profits, distributed 148.6 million dollars in dividends in 1951. Page 99 Venezuela thus presents an outstanding example of growth based on development of materials resources, to the advantage of her own people and other free nations. Furthermore, Vene- zuela and the investing corporations have worked together to develop a climate that assures mutual benefits, a sound working basis for operations, and a resulting incentive for additional foreign capital to make its contribution to the development of the country. This study primarilv review's the growth of oil development and production in Venezuela, the resulting economic and social progress that Venezuela has made, and the conditions and the exemplary laws under which all industry operates in Venezuela. GROWTH OF THE OIL INDUSTRY Venezuela's ascent in the past 34 years to the position of the world's second greatest producer of oil and the world's leading exporter of oil is traceable not only to the possession of immense oil deposits but especially to a far-seeing readiness to offer ade- quate incentives to others to provide the funds, equipment, and technology necessary for development of these deposits. As a measure of the richness of the deposits, the average rate of production per well over a period of years has been close to 200 barrels per day, compared with an average rate of 12 barrels per day in the United States. After the initial period of exploration and development (1913-22) , total daily production increased to 100,000 barrels in 1926, to 1,000,000 barrels in 1946, and, after the postwar period of expansion, to an average of 1,700,000 barrels in 1951. Progress in Production and Exploration While production has soared, the discovery of new deposits has mounted even higher. In the 14 years between 1913 and 1927, 14 oil fields were discovered; in the next 20 years, 40 new fields were located; and in the following 4 years, 33 new fields were discovered and brought into production. Even after the extraction of 6 billion barrels of oil, known reserves now stand at an all-time high of 9.7 billion barrels, representing 10.9 percent of the proved world reserves of ap- proximately 90 billion barrels outside the U. S. S. R. and its satellites. Meanwhile, in spite of record-breaking production, the level of proved reserves is rising steadily. Exploration, even with the use of the most modern tech- nological methods, has often been costly. Standard Oil Co. (New Jersey), for instance, spent 7 years (1921-28) and 45 million dollars in exploration and wildcatting in eastern Vene- zuela before it found a producing field. Nevertheless, costs of wildcat drilling have been reduced, and the success ratio of producing wells to dry holes increased from one out of eight in 1931-40, to one out of five in the following decade. The capital invested in permanent installations has risen from the few thousand dollars first gambled in wooden rigs to the 2.5 billion dollars, put up by United States investors alone, which has gone into equipping 10,000 producing wells, 7 major refineries, more than 50 oil camps, as well as an industrial com- plex of pipelines, storage facilities, loading terminals, power plants, and shipping. Technical difficulties of the most challenging nature have been confronted and overcome in getting Venezuela's richest known oil deposits into production and devising the necessary permanent installations. Two-thirds of total crude production is in western Venezuela, in the Lake Maracaibo basin, and the major portion of this production is from the Bolivar Coastal Field, on the eastern shores of the lake. Production from this field averaged 900,000 barrels per day in 1951, one of the most prolific sources of crude oil in the world; reserves are estimated at 6.2 billion barrels. Three companies worked concessions in this area, on shore and as far as 15 miles into the lake. Submarine drilling calls for special skills, equipment, and training. Twenty-five hun- dred wells have been sunk in the soft mud bottom of the lake, in depths of water up to 90 feet. The rows of producing wells run for 30 miles down the coast in regular lines like trees planted in an orchard. The rate of production from this field, almost without equal elsewhere in the world, indicates the efficiency of the Venezuelan oil industry's management, technicians, and workers. The job of transporting the oil has been well handled. On land, the oil is piped through 1,500 miles of trunk lines and lateral lines, ranging in size from 4- to 26-inch pipe, with a combined carrying capacity of 1,600,000 barrels per day. This capacity will be raised an additional 325,000 barrels per day in 1952. Water transportation out of Lake Maracaibo alone to deep water terminals requires a special fleet of 96 shallow draft tankers. Storage facilities have a present capacity of 50 million barrels of crude oil and products, almost equal to a month's production. Refining capacity in Venezuela has been rapidly increased in recent years. Between the years 1913 and 1945 refining was carried on mainly to meet Venezuela's domestic needs. How- ever, in accord with the desire of the Venezuelan Government to refine as large a percentage of the crude oil output as is economically feasible, a considerable construction of new refineries took place in the 5 years after the Second World War. The new facilities raised refinery capacity to 320,000 barrels per day. Further expansion to a capacity of 400,000 barrels per day will be completed in 1952. After satisfying domestic demands of 80,000 barrels per day, four-fifths of the output of the refineries will be available for export to other nations. The accomplishments of the oil industry in progressively in- creasing production, and the availability of 95 percent of the total output for export, have put Venezuela in first place among oil exporting countries. The major single market for Vene- zuelan oil is the United States which absorbs 40 percent of the export volume. Constituting three-fourths of United States petroleum imports and 10 percent of our national consump- tion, this Venezuelan oil—chiefly fuel oil and heavy crudes— helps to supply mounting requirements of United States in- dustry, power, transport, and shipping. Similarly, the 35 per- cent of Venezuelan exports going to the Eastern Hemisphere (mostly Europe) helps to meet vital energy needs of that area of the free world. Venezuela Aids World Security The strategic importance of Venezuela's oil capacity for the purposes of free world defense lies in the fact that modern mili- tary forces are primarily fueled by oil. During the Second World War Venezuela increased her oil production by 50 per- Page 100 cent as her major contribution to the Allied cause. Hence, the free nations which have aided Venezuela in the development of her oil resources have contributed to their own greater secu- rity and to the greater security of Venezuela and the free world as a whole. The growth of Venezuela's oil industry has accordingly been marked by many signal accomplishments, in helping to meet the raw materials needs of an expanding free world, in realiz- ing Venezuela's aspirations for industrial development, and in buttressing the collective defenses of free nations against poten- tial aggression. On a par with these impressive achievements, and largely explaining them, has been the enlightened attitude of the Vene- zuelan Government and the wise policy which has been fol- lowed by the oil companies. The Government and the com- panies have joined in seeking the best and most efficient facili- ties, methods, and practices. High among these aims is the conservation of Venezuela's oil reserves, to prevent their rapid depletion and to assure their productivity over the greatest possible span of years. For instance, the latest in efficient production practices have been employed in well-spacing, in setting production rates for the wells and in the use of gas injection facilities for pressure maintenance in the oil reservoirs. Moreover, to the extent warranted by the economics of oil pro- duction or by market demand, natural gas has been piped for use in the industry's own operations and for commercial and residential use in the city of Maracaibo. A major pipeline is nearing completion which will deliver natural gas from the oil fields of eastern Venezuela to the populous areas of Caracas, Maracay, and Valencia for industrial and residential use. ECONOMIC AND SOCIAL PROGRESS The Venezuelan Government's use of oil income for broad national development is reflected in the country's slogan, "Sow the Petroleum," which points toward plowing back the divi- dends into services for the benefit of its 5 million people and for improving the physical resources of the nation. As a result of this policy, improvement in financial health, foreign trade, industrial growth, and the development of public services has been particularly great during the past 10 years. The source of Venezuela's solvency and national progress is oil. The petroleum industry provides over 60 percent of all Government revenues and 90 percent of foreign exchange. Financial Position The 1952 budget of 585 million dollars is more than 100 million dollars above the preceding budget. It is the highest in Venezuelan history and almost equal to that of India, a nation also rich in natural resources but with a population 80 times as large. In recent years, Venezuelan Government expenditures have been approximately five times prewar levels. Yet, direct Gov- ernment debt has been all but eliminated, foreign exchange balance increased, and balanced budgets maintained. Fiscal operations in 1950 showed a 95 million dollar carry- over in the treasury cash balance. Gold reserves of the Central Bank increased from 29 million dollars in 1940 to 340 million in 1949, and money in circulation is more than 100 percent hacked by gold holdings. The Venezuelan currency has re- mained steady at 3.35 bolivars to the dollar since 1942, while other nations, with few exceptions, have been obliged to devalue. The Venezuelan monetary system is based on the gold stand- ard and its official gold parity has not been changed since 1879. Before devaluation of the dollar in 1934, the Venezuelan rate of exchange, based on this parity, was 5.18 bolivars to the dol- lar. Thus, at the current rate of 3.35, the dollar is devalued in relation to the bolivar. Even excluding the effect of recent in- flation on the purchasing power of the dollar, the exchange rate alone lowers the value of the United States dollar in Vene- zuela by 35 percent, partially explaining the difference between United States and Venezuelan costs. To the Venezuelan, his income is usually proportionate to the cost level, e. g., a cabinet minister's salary is $29,000 per year, more than double the United States cabinet member's after taxes. This extraordinary financial strength of Venezuela is main- tained in spite of very low taxation of individual personal in- comes, on which the basic tax rate is 2 J/l> percent and surtaxes from iy2 to 9 percent. Venezuela has no foreign exchange control, almost no restriction on foreign trade, and no hin- drance to the export of either capital or profits. Foreign Trade In 11 years, Venezuela imports and exports increased 750 percent. In 1938, total imports were valued at 92 million dollars and exports at 86 million; in 1949, imports were 698 million, exports 646 million. Venezuela bought almost three-quarters of the import total in the United States. This 518 million dollars expenditure made Venezuela the foremost purchaser of United States goods in Latin America and, on a cash basis, the second largest in the world, excluding E. C. A.-financed purchases by Great Britain and Western Germany. Able to buy in any world market, Venezuela can and does supply itself with the best machinery and equipment mod- ern technology can provide, not merely for the oil industry, but for electric power development, agriculture, and construction. Industrial Growth The financial health and foreign trade of Venezuela are geared to a unique industrial growth. A 1950 United Nations survey of Venezuela found that: "Venezuela has been in a boom condition for many years as a result of the stimulus provided by petroleum production, on which its balance of payments and monetary situation are closely dependent." Important as it is to Venezuela's development, the oil in- dustry employs only about 5 percent of the gainfully employed population. Nevertheless, the status of this fraction is a stimulus to the advancement of all labor. Similarly, the activity of the oil companies directly stimulates other industrial and commercial development, and their success is an incentive to the investment of other productive capital. In addition to providing a vast increase in national income and opening up the country with modern lines of transport and communications, the oil industry has provided a byproduct of enormous significance—natural gas. This cheap fuel is avail- able in such quantities that it is raising a problem of waste. The possession of this wealth of cheap fuel, together with a Page 101 wealth of mineral and other natural resources, provides a favorable basis for the continued growth of Venezuelan in- dustry. The concessions already granted from which it is planned to mine 12 million tons of iron ore annually have heightened the aspirations of the Venezuelans to have an iron industry able to mill pig and sponge iron. Whether the abundant natural gas can be used for this purpose instead of coal remains undetermined, but is among the many interesting possibilities now being investigated. Examples of foreign investments attracted by Venezuela's general progress are: two leading United States tire makers manufacture finished rubber products in Venezuela, and a third rubber plant is planned. Two automobile and truck as- sembly plants, two textile and rayon mills, several pharma- ceutical houses, a soap, and a cracker factory have been established in the past decade. Each represents an outstanding American enterprise in its field, and domestic capital has par- ticipated in many of these investments. OTHER SIGNS OF GROWTH There are other signs of industrial growth: production of electric energy, a key index of industrial growth, increased 20 percent from 245 to 294 million kilowatt-hours in the first 6 months of 1951 over the same period in 1950. This output of electric energy in 6 months was more than the record out- put of the entire year 1946, and almost triple the entire year 1938. Electric energy is now derived from fuel oil, but some plants will soon utilize the abundant cheap natural gas. Cement production (financed by Venezuelan capital), re- flecting demand for construction, gained 34 percent in the first 6 months of 1951, totalling 295,811 metric tons. Though Venezuela imported 53 percent of her needs in 1951, she ex- pects to produce all she needs by 1953. Consumption of gasoline, kerosene, diesel oil, fuel oil and asphalt, during the first 6 months of 1951, was 9,829,818 barrels, an increase of 10.7 percent over the same period in the preceding year. Sales of gasoline, essential to transporta- tion in a country lacking adequate railroads, jumped an average 30 percent in each of the post-war years. Vehicle registration at mid-year 1951 stood at 175,168 units, more than quadruple the number of vehicles on the road in 1946. Public Services Venezuela's progress in agriculture, health, education, com- munications, and transport facilities has been equally strong. The oil companies have made a major contribution, since they have repeatedly opened up interior regions not previously ac- cessible and have developed excellent communities there for their workers. IMPROVING AGRICULTURE Agriculture, which had seriously lagged behind progress in other areas of the economy, has become a particular object of government attention. Several experimental projects have been financed. The outstanding example is the 2-year-old colony at Turen, where 200 European immigrant families live among Venezuelan settlers, on adjoining tracts of 100 acres each. They are aided by a Government institute in learning new farming methods and the use of modern tools of production. Ultimately the farmers will purchase lands, buildings, and equipment through installment payments over a 25-year period. Immigra- tion of farm families from Europe has been encouraged; more than 25,000 immigrants have come in, sponsored by Venezu- elan Immigration Missions in Europe, or by the International Refugee Organization. Subsidies are paid to coffee growers in poor years to induce them to maintain crops for export. Irrigation and drainage projects seek to equalize the odds against the agriculturist from drought and floods. Sugarcane planting has been stimulated and new sugar mills, financed by the Government's National Development Corp., are rapidly reducing Venezuela's 50 per- cent dependence on imports for refined sugar. During the past decade the National Development Corp. has invested more than 100 million dollars in agricultural aid, stock breeding, and domestic industry. TRANSPORT AND COMMUNICATIONS The largest appropriation in the Federal Budget has been for many years to the Ministry of Public Works; in 1951-52, the amount is 157 million dollars or 27 percent of the total budget. These funds pay for such projects as the new port works at LaGuaira, where a deep break-water protects shipping, and a modern 21 million dollar pier solves the berthing problem that formerly held up ships as long as 2 weeks. A modern four- lane, toll-free, 10-mile long highway between the Port of La- Guaira and the mountain capital, Caracas, begun early in 1950, will be finished in 1953. Built straight up a twisting pass, its three tunnels of more than a mile in length and its three long bridges contrast with the 388 curves on the present narrow, mountainside road. Construction on this bold scale is expensive, costing an average of 4.5 million dollars per mile, compared with 1 million dollars per mile for the,.Pennsylvania Turnpike, and could be undertaken only by a Government possessing Venezuela's income. The oil companies have built their own roads when necessary. The roads total more than 1,500 miles of paved highways maintained by the companies, but used as public thorough- fares. Five of fifteen airfields built at camp sites are utilized by commercial lines and can handle 4-motor planes. EDUCATION Education receives the fourth largest amount in the Vene- zuelan budget. In 1951-52, 43 million dollars were allocated to maintain the public primary and secondary schools, whose modern buildings stand out in cities and towns as realization of the ideals of Bolivar, some of which are chiseled over their doors—"Morality and Enlightenment Are Our First Necessi- ties." Approximately 40 percent of all school-age children are attending schools. The Ministry of Education also supports the 3 tuition-free universities at Caracas, Maracaibo and Merida. Construction on the new Caracas University campus, far ad- vanced at the end of 1951 and including 14 new buildings, athletic fields, and a 1,200-bed hospital, will give the university physical equipment to rank among the finest educational in- stitutions in the Americas. The petroleum companies provide education of workers5 children at company expense. There were 53 schools with staffs Page 102 of 496 at the end of 1949. These provided classes for 12,622 children, and 1,841 workers were attending night school. The effectiveness of company-sponsored education for oil workers was demonstrated by a 1948 census which showed that literacy among them had been increased from 15 to 85 percent. In addition, the companies give scholarships to Venezuelan work- ers for study in trade schools and universities in Venezuela and abroad. In the past 4 years, scholarships have averaged 250 a year. Health and Social Welfare The Ministry of Health and Social Welfare with a 1951-52 budget of 42 million dollars has helped score outstanding suc- cess in combating tuberculosis, malaria, and venereal disease. Between 1944 and 1949, tuberculosis moved down from second to third place as cause of death, malaria from fifth to twenty- first. During the past 10 years, incidence of venereal disease dropped from 1 in 10 to 1 in 20. Government clinics for the detection and treatment of tuberculosis and venereal disease, and the effective work of the Government's Anti-Malariological Institute have attacked these problems directly. In addition, na- tional hospitals annually treat more than 150,000 patients free of charge and the Government operates out-patient clinics in interior regions where hospital facilities are lacking. The petroleum companies are making heavy investments in the health of their workers. At company camps workers are provided free medical care and hospitalization. Workers' fami- lies receive clinical attention free and hospitalization at nominal cost. In many areas lacking medical facilities, these hospitals serve nonemployees within the limit of their capacities. At the end of 1949, oil company medical facilities and personnel for workers included: Facilities Hospitals. . . Dispensaries. Pharmacies.. Laboratories. 24 59 41 36 Personnel Doctors 220 Graduate nurses 254 Nurses in training and aides. 555 Pharmacists and assistants. . . 102 Medical technicians and as- sistants 75 Other attendants 749 Total 1,955 During that year the 24 hospitals, containing 971 beds, cost the companies 12.5 million dollars to operate. HOUSING PROJECTS The problem of moderate-cost housing has been tackled in Venezuela through the Workers' Bank, created in 1928 as a public housing agency of the Federal Government. A total of 12,125 units have been completed; a 4-year housing program begun in 1951 will double this total, at a cost of 60 million dollars. In the first year alone it provided 3,000 units to low- income groups in 15 cities. To supplement the Government housing program, the oil camps at the beginning of 1950 made available 21,000 housing units for the industry's 43,000 workers and their families, representing an investment of 160 million dollars. Construction continues and where company houses are not yet available, a housing allowance is granted. These company communities, like other oil settlements, in- clude recreational facilities for workers and their families. Sports facilities include baseball, football, track, and swimming. There are 75 recreational clubs, which have 45 sports fields and 44 movies at their disposal. Most clubs contain game rooms, libraries, bar, and sports facilities. Once established by the company, their management is assigned to employee groups. Commissaries, on the pattern of United States super- markets, are maintained in more than 50 camps and supply fresh staples, meats, and groceries, and canned and frozen foods. Prices are fixed for articles of prime necessity, often below cost. On sales of 30 million dollars in 1949, the com- panies reported losses of 7 million dollars. A TYPICAL DEVELOPMENT Typical of the general contribution that the oil companies make to better living standards for Venezuelan workers is the development of settlements in the interior and areas never previously opened up to extensive habitation. The conditions in these communities serve often as pointers for Government programs. One such community was carved out of the barren lands of the Paraguana Peninsula, which juts northeast from Lake Maracaibo into the Caribbean. Before 1945, the penin- sula was a barren windswept desert, without water or culti- vation; the few scrub trees were bent horizontally westward by the steady 20 mile per hour trade winds. A few hundred scattered fishermen made a bare living from the sea. Today there are 30,000 people—oil workers and their families—living in 3 company camps on the peninsula. There is modern housing, drinking water piped from 65 miles inland, and the camps are the centers of modern communities growing up on the Penin- sula. This growth came on the heels of the post-war construc- tion of 2 refineries with a present capacity of 140,000 barrels per day, and 3 deepwater ports with complete storage facilities and loading terminals. TERMS OF THE PARTNERSHIP The working partnership between the Venezuelan Govern- ment and the foreign oil companies is obviously successful, and has an established record of substantial benefit to both parties. The partnership agreement merits examination. It has been Venezuela's policy, since the discovery of oil in 1918, to welcome the investment of foreign capital on a mu- tually advantageous basis. No matter how the Governments of Venezuela have differed in other respects during the past 34 years, they have been consistent in this progressive attitude toward the importation of foreign capital. Foreign corporations stand on an equal basis with domestic corporations in all relations with the Government. Once domi- ciled in Venezuela, the foreign corporations enjoy full juridical personality, equal taxation, equal rights of acquisition and dis- posal of property, including land, and are not subject to any kind of legal discrimination on the basis of their foreign charac- ter. They are required, of course, to conform in their activities in Venezuela to Venezuelan laws. Foreign nationals enjoy equality with Venezuelan citizens in all civil rights. This is guaranteed by the National Constitution and reaffirmed in the Civil Code and the Law of Foreigners. Page 103 The requirement that at least 75 percent of the employees of any commercial establishment be Venezuelan nationals is less high than in many large Latin American countries, some of which require 90 percent. Furthermore, exceptions may be made by administrative decision of the Venezuelan Ministry of Labor in cases involving the technical qualifications of em- ployees. In the case of the oil companies, starring exceeds the requirement. In 1951, they were 92 percent staffed by Vene- zuelan employees, and management positions are increasingly and progressively passing to Venezuelans instead of to foreigners. The mining and petroleum laws grant any person, whether national or alien, the right to acquire and exploit concessions. The lawr does not require corporations to have either Venezue- lan capital or directors, and management is not governed by restrictive legislation hindering subsoil development. Many Venezuelans have, of course, purchased stock in the oil com- panies and other enterprises established with foreign capital. The Venezuelan Government, careful to protect foreign in- vestors, is equally conscious of its corresponding function to pro- tect the national interest. This responsibility, which is of partic- ular concern in the case of unrenewable mineral wealth, is dis- charged through the administration of sound basic legislation on petroleum, taxation, and labor. The Petroleum Law In Venezuela the subsoil belongs to the nation and not to the owner of the surface land, who can only dispose of a right of access. This provision of the National Constitution is the basic premise of the successive Laws of Hydrocarbons, which culminated in the present Petroleum Law of 1943. The Petro- leum Law, the fruit of 25 years of experience and careful studies by Venezuelan and foreign experts, controls the terms under which the right to explore, exploit, refine, and transport pe- troleum may be exercised, and provides basic petroleum taxation. The exploration of hydrocarbons, their exploitation, trans- portation, and refining are regarded as a public utility. The Federal Government may exercise these rights, or may grant concessions to private persons to any of the rights reserved by law. Corporations, including those of foreign origin, are recog- nized as such legal persons, regardless of the nationality of their investors or directors. Controversies arising from the conces- sions shall be settled under the terms of Venezuelan laws and in its courts. Special advantages may be stipulated for the Government in such concessions, such as increasing the amount of legal taxes or obliging the corporation to refine in Venezuela. An exploration concession gives the exclusive right to ex- plore certain specified plots of an approximate area of 10,000 hectares for 3 years, and includes the inherent right to select up to one-half of the plot for exploitation; the free area re- maining then reverts to the national reserves. An exploitation concession, good for 40 years, may be granted independently of an exploration concession; sealed bids must be submitted for specified plots. Refining and transportation concessions may be accessory to, or independent of, those for exploration and exploitation; they are good for 50 years, and renewable at the holder's option for additional periods of 50 years. Taxation Under the Petroleum Law At each step of petroleum production, taxes are imposed on oil. An exploration tax of B2 per year per hectare is levied during the period the concession is in an exploratory stage.* An initial-development tax is collected at the time plots of the concession are selected for exploitation. The minimum amount is B8 per hectare. This may be considerably higher as a "special advantage to the state" and in some cases has been as high as B2,250 per hectare. A surface tax is charged on a graduated scale from the date of the granting of the exploitation concession, as follows: B5 per year per hectare during the first 10 years. B10 per year per hectare during the next 5 years. B15 per year per hectare during the next 5 years. B20 per year per hectare during the next 5 years. B25 per year per hectare during the next 5 years. B30 per year per hectare during the balance of the term of the concession. The amount of production tax (or royalty) in excess of Bl .25 per hectare is deductible from the surface tax. By this means, active exploitation is encouraged, as the increasing rate of tax- ation after 10 years motivates a laggard concessionaire to em- bark on production sufficient at least to pay his surface taxes by deducting this credit. The surface tax has another purpose: to eliminate the purchase of concessions for speculation by those who have no intention of exploiting the hydrocarbons. In any case, the surface tax assures that the Government will receive a minimum income of B5 per hectare, whether the con- cessionaire be slow or fast to develop his concession. A production tax (or royalty) is fixed at a minimum rate of 16% percent of the value of crude oil production. The tax is in effect for the life of the concession. Higher royalty rates are often offered by concession bidders, one in force today giving the Government 33V3 percent. The tax may be collected in kind, in which case the concessionaire must transport the oil to a port of embarkation, store it for 2 months, and deliver it upon request; and the Government can sell these crude oils at the best price obtainable, either to foreign purchasers or to the producing companies. The tax may also be collected in cash according to a formula, mutually agreed upon between the industry and the Government, for evaluating the mercantile value of crude oil. Excise taxes are imposed on refined products at the rate of 50 percent of the import duty which would have been charged on these products had they been imported. A transportation tax is levied on oil transporting concession- aires of 21/2 percent of the amount received for the transporting services. Income taxes are levied against corporation income on a graduated scale ranging up to 27 percent of profits. These are common to all business enterprises. In practice about half of the total income from oil is derived from royalty, one-quarter from income taxes, and the balance from the other taxes. *The bolivar is worth approximately $0.30. This system of payment in annual installments encourages the holder of the concession to shorten the exploratory period and bring the area into the production stages at which additional taxes are levied. Page 104 In addition to these basic provisions, which are designed to provide the fullest possible participation by the state in the benefits of oil production, in 1948 a special tax formula was voluntarily agreed upon by the Venezuelan Government and the companies. This so-called "50-50"' formula assures that the share of the Government is never less than that of the com- panies. The tax law requires that during any year in which the net profits of an oil company exceed the total payments it has made to the Government for all causes of taxation (including import duties), the amount of excess must be divided with the Government so as to equalize Government total receipts with the companies' net profits. The "50-50" law has served as a balance wheel between the profits of industry and the taxes of Government, and the formula has been adopted with modifica- tions as a model by other oil-producing countries, such as Saudi Arabia and Iraq. It is clear that the purpose of the Venezuelan oil tax legis- lation is to stimulate development of the subsoil with reasonable profit incentive to the producers, while seeking an equilibrium between advantages to both producer and Government. Labor Laws Venezuela's labor law was adopted in 1947. Its provisions bind employers and employees, and any provisions favorable to the employees may not be waived. IMPORTANT PROVISIONS Hours of work are limited to 48 per week for day work, not exceeding 8 hours per day, and to 40 per week for night work, not exceeding 7 hours per night. Fifty percent of transportation time from specified points to the place of work is counted as part of the working day. All days of the year are working days except Sunday and national or religious holidays but the petro- leum industry is specifically permitted to work on these holidays. Wages may be freely agreed upon but minimum wages may- be fixed by the Government. The law7 guarantees: a full day's pay for each day of work and for each of the 52 Sundays and 9 holidays, paid vacations of 15 days each year of uninterrupted work, a profit-sharing plan under which 10 percent of the net profits of the enterprise is divided among employees whose share, however, may not exceed 2 months' wages. Work by women and minors is carefully regulated as to hours, location, and conditions. Maternity leave is provided, with job protection. Detailed safety provisions for all workers are made. Labor contracts, whether individual or collective, are pro- tected and strict conditions imposed for their termination; in case of violation of these conditions, substantial severance com- pensation must be paid. The right to form labor unions is guarantied and union di- rectors are free from coercion on the part of employers. The directors may not be discharged without concurrence of the labor inspector. The law assures workers the right to join or not to join a union. Labor unions may be formed in any enter- prise if the union has 20 members. Unions may obtain legal recognition by registration with the Ministry of Labor and thus obtain special protection of the state. If a union represents 75 percent of the workers in a particular trade it may require an employer to sign a collective contract with it. The right to strike is recognized if all measures of concilia- tion have been tried without success in advance of the strike and 120 hours' notice of intention to strike has been given. The labor law also has provisions for compensation of acci- dent or death from industrial cause, for compulsory social security, for sickness and maternity insurance, and occupa- tional, accident, and disease insurance. LIBERAL COMPENSATION BY OIL COMPANIES Venezuela's labor legislation, which has been developed over a period of years, has been credited by international labor agencies to be among the most advanced social legis- lation in the world. It is noteworthy that the collective con- tract in the oil industry exceeds provisions of the labor law in many important details. For instance, minimum basic wage, in the oil industry, is fixed at $4.80 per day, the highest of any industry. Overtime is compensated at 50 percent over the established rate, while the law requires only 25 percent. Holiday pay is double regular pay per day and Sunday work receives 50 percent bonus. Several of the larger companies provide retirement pensions, paid for entirely by the company. Oil companies grant 22 days of annual leave with pay instead of the 15 provided by law. Oil workers incapacitated as a result of nonoccupational illness receive for a maximum of 26 weeks $2.10 per day when hospitalized at company expense and $2.70 per day when not hospitalized. Oil companies' practices have been a factor in development of the nation's labor laws, and their employees fare better than any other group in Venezuela. The United Nations 1950 sur- vey, for example, found the oil worker earning 10 times more than the agricultural worker. He receives not only a substantial daily wage and social benefits from the oil companies but paid vacations, bonus pay for Sunday and night work, and an annual profit-sharing bonus. All this pushes his total income to $15.13 daily, two-thirds of which is take-home pay. The Venezuelan oil worker, in fact, considering all the company-supplied serv- ices in addition to wages—is more highly paid than his brother oil worker in the United States. In 1950, for example, one oil company paid an average of $6,638 per employee in Venezuela as compared with $5,682 per employee in Texas. SIGNIFICANCE OF VENEZUELA'S DEVELOPMENT As an example to underdeveloped countries with aspirations for their own development, Venezuela affords some interesting and valuable lessons. Allowance must be made, of course, for the advantage Vene- zuela had in possessing a wealth of oil, for no other mineral is internationally traded in such great dollar volume or com- mands so steady a market. There is a lesson, however, in the results of Venezuela's creation of an attractive environment for foreign investment, and the beneficial effect of the advanced tax, labor, and other legislation which supports the productive effort of the foreign corporations. Other countries with rich petroleum reserves have, of course, attracted vast amounts of foreign capital and derived great profits from the resulting enterprises, but have failed to accomplish as much in the way of general economic and social progress. The Venezuelan case, accordingly, illustrates one point of overriding importance and significance. The social benefits—- Page 105 the rising standard of living, the industrial growth, the im- provement of agriculture, education, and public health—have not stemmed automatically from the vast income that foreign oil operations have produced. These benefits have come from the will to spend this income in socially valuable ways. The Venezuelan Government, in its determination to "Sow the Petroleum,55 and the Venezuelan people in supporting this policy, have set a worthy example for all others and have set the most persuasive example of all—that of success. References Elsewhere in This Report Vol. Ill: The Outlook for Energy Sources. Oil. Page 106 Report 11 United States Private Investment Abroad United States direct private investment in petroleum opera- tions abroad has been at record levels since the Second World War, but investment in mining operations has not been large. Despite our increasing dependence on foreign supplies of many metals and minerals, it was not until the end of 1949 that the value of United States investment in mining abroad regained the 1929 level of 1,200 million dollars from which it had de- clined in the thirties. During 1950 the value of our direct investments in mining and smelting increased to 1,300 million dollars. Direct investment in petroleum at the end of 1950 was 4 billion dollars. In 1949 investment in petroleum accounted for over half the new investment abroad while in 1950 it ac- counted for one-third of the new investment. DISTRIBUTION OF U. S. INVESTMENT ABROAD Most United States private investment abroad today is di- rect investment, i. e., investment by United States companies in foreign subsidiaries or in branch operations. Portfolio in- vestment—i. e., purchase of securities involving no controlling interest—which was the most important portion of United States foreign investment in the 19205s has declined to only minor significance largely as a result of the widespread defaults on foreign dollar bonds and does not seem likely to increase greatly in the near future. The only important exception is Canada where at the end of 1949 over 40 percent of United States private long-term investment was portfolio investment, including foreign dollar bonds, securities payable in local cur- rencies, and other long-term investments. Table I shows the changes in distribution of United States private direct investment abroad at the end of the years 1929, 1940 and the years 1945 through 1950. Of the total invest- ment of 13.6 billion dollars at the end of 1950, almost 30 per- cent was in petroleum and about 10 percent in mining and smelting. Some undetermined portion of the remaining 8.3 billion dollars was undoubtedly invested in enterprises pro- ducing pulp and paper, synthetic fibers, rubber, and other renewable industrial raw materials. Thus it is estimated that United States business has approximately about 6.0 billion dollars invested in enterprises producing raw materials in foreign countries. Table II shows the net additions to United States investment in 1949 and in 1950 in petroleum and in mining and smelting in various areas of the world and also the total value of the investment in each area at the end of 1950. It is significant that 67 percent of the new petroleum investment and 99 percent of new investment in mining and smelting in 1949 were in the American Republics and Canada. In 1950 the comparable percentages were 54 and 85. Cumulatively at the end of 1950, 54 percent of total United States private investment in petro- leum abroad and 83 percent of United States investment in mining and smelting were in this hemisphere. Of the total of 1,132 million dollars of net United States direct investment abroad during 1950, about 40 percent rep- resented reinvested earnings and the balance net capital move- ments during the year. Investment in mining and smelting consisted of about this same proportion of reinvested earnings, while petroleum investment was only about 11 percent reinvested earnings. Table I.— Value of private U. S. direct investment abroad by industry [Billions of dollars at year end] Industry 1929 1940 1945 1946 1947 1948 1949 1950 All industries 7. 7 7. 3 8. 4 8. 9 10. 0 11. 2 12. 5 13. 6 Petroleum 1. 1 1.3 1. 5 1. 8 2. 4 3. 0 3. 7 4. 1 Mining and smelting.. 1. 2 1.0 1. 1 1. 1 1. 1 1. 1 1. 2 1. 3 Agriculture (including fishing) . 9 . 5 . 5 . 5 . 6 . 6 . 6 . 7 Public utilities 1. 7 1.4 1. 4 1. 3 1. 3 1. 3 1. 3 1. 3 Manufacturing 1. 9 2. 0 2. 7 2. 9 3. 2 3. 6 3. 9 4. 2 Distribution . 4 . 5 . 7 . 7 . 8 . 9 1. 0 1. 1 Miscellaneous . 5 . 6 . 6 . 6 . 7 . 7 . 8 . 9 Notes 1. Detail will not necessarily add to totals because of rounding. 2. Value is the book value of the United States equity in direct invest- ments abroad and includes expropriated property for which compensation has not yet been received and other properties in Germany and Japan. Source: Through 1945—Survey of Current Business, January 1951. 1946- 50 figures from Survey of Current Business, December 1951. (U. S. Dept. of Commerce, Office of Business Economics.) POSTWAR PETROLEUM INVESTMENTS Several special postwar conditions influenced the investment in petroleum. Potential world demand increased above the wartime peak at the same time that large proven reserves of low-cost crude oil were available for development outside the United States. A modification of a Venezuelan law providing that 10 percent of the output of crude must be refined within the country required large investments in construction of re- fineries. New direct investments in petroleum abroad have not continued at the high rates of 1948 and 1949.* However, *Abelson, M. "Private United States Direct Investments Abroad." Survey of Current Business, Nov. 1949; Dernburg, H. J. "Prospects for Long-Term Foreign Investment." Harvard Business Review, July 1950. Page 107 substantial investments in the Middle East are expected to continue although perhaps at a diminished rate, and increasing investments are being made in Canada. INCREASED MINING AND SMELTING INVESTMENTS New investment in mining and smelting amounted to 78 million dollars in 1949. In 1950, however, when petroleum investment fell to 408 million, mining and smelting investment rose to 106 million. Although the total increase of 184 million dollars in invest- ment in mining and smelting enterprises abroad in 1949-50 may appear small when compared with the petroleum total of 1,091 million, it represented a considerable expansion as com- pared to previous years. As shown in table II, nearly all of this expansion took place in the Latin-American Republics and Canada. Table II. -U. S. direct private investment abroad in selected areas and industries [Millions of dollars] Area Total All areas: Additions to investment in Additions to investment in Value of investment at end Canada: Additions to investment in Additions to investment in Value of investment at end American republics: Additions to investment in Additions to investment in Value of investment at end E. R. P. Countries: Additions to investment in Additions to investment in Value of investment at end E. R. P. dependencies: 'Additions to investment in Additions to investment in Value of investment at end Other Europe: Additions to investment in Additions to investment in Value of investment at end All other countries: Additions to investment in Additions to investment in Value of investment at end 1949. . . 1950. . . of 1950. 1949. . . 1950. . . of 1950. 1949. . . 1950. . . of 1950. 1949. . . 1950. . . of 1950. 1949. . . 1950. . . of 1950. 1949. . . 1950. . . of 1950. 1949. . . 1950. . . of 1950. 683 78 451 1. 212 408 106 618 1, 132 4. 072 1. 324 8, 154 13, 550 75 31 157 263 169 61 261 491 518 580 2, 752 3, 850 384 46 135 565 51 29 187 267 1, 772 516 2, 777 5, 065 13 0 101 114 50 0 89 139 453 64 1. 755 2, 272 59 -1 7 65 - 12 3 6 -3 398 42 121 561 13 0 4 17 2 0 6 8 78 81 190 ] 349 139 2 47! 188 148 13 70 i 231 853 41 559 1,453 Source: Survey of Current Business-, December 1951. Based on table 9, p. 13. (From U. S. Dept. of Commerce, Office of Business Economics.) The low level of new American investment in mining out- side the Western Hemisphere is partly a reflection of the fact that European metropolitan powers have made most of the direct investment in Africa. It also reflects special restrictions on United States investments in some countries. During 1950 and 1951 a number of mining projects have been started or committed, largely in Africa, which, if carried out as planned, will equal the approximately 200 million dollars already invested by the mining industry outside the Western Hemisphere.* * Survey of Current Business, Jan. 1951, p. 23. INVESTMENT YIELDS AT HOME AND ABROAD Table III shows earnings for United States foreign direct investments as compared to earnings on domestic investments in like industries during the years 1945-48. While these figures have often been cited, they are subject to many qualifications. They appear to show high comparative earnings in United States petroleum operations abroad and low comparative earn- ings in foreign mining enterprises controlled by United States companies. Table III.—Ratio of earnings to book value. United States foreign direct investments as compared with domestic investments, 1945-48 Type of investment 1945 1946 1947 1948 Total investment: Percent Percent Percent Percent Foreign 9. 2 12. 2 15. 2 17. 1 Domestic /. / 9. 1 12. 0 13. 8 Mining and smelting: Foreign 6.8' 8. 5 11. 3 11. 9 Domestic 8.0 i 9. 6 15. 9 15. 6 Petroleum: Foreign 14. 2 1 19. 0 25. 3 27. 6 Domestic 8. 9 | 10. 8 16. 0 22. 7 Notes 1. Dernburg's figures for domestic investment are taken from the annual tabulation of the National City Bank of New York of approximately 3,000 companies. Those industries were excluded for which there were no com- parable United States direct investments abroad. 2. Foreign income data are before United States income taxes but after foreign taxes; domestic data are after LTnited States income taxes. This may not limit comparisons since the United States system of tax credit for foreign taxes results in a tendency for the bulk of the tax obligation to be discharged in the country in which the investment is made. 3. Foreign income includes total income receipts from foreign operations as reported in the balance of payments plus reinvested earnings of foreign- incorporated enterprises. 4. Both the foreign and domestic figures represent ratios of current earnings to net book values, and thus are affected by the postwar price rise. If the underlying assets were valued at replacement cost, the rates of return would be substantially lower. Sources: For foreign investments, U. S. Department of Commerce, The Balance of International Payments of the U. S., 7946-48, Table 23; for Linked States, H. J. Dernburg, "Prospects for Long-Term Foreign Investment/"' Harvard Business Review, July 1950, p. 44. In making comparisons based on the figures in table III, however, several qualifications must be taken into account in addition to those noted in the table itself. In the case of uncon- solidated foreign subsidiaries, there are possibilities for under- stating earnings on tax returns which may be reflected in the ratios in table III. This would probably have more bearing on the figures for mining and smelting than for petroleum. More- over, practically all private United States undertakings abroad in the raw materials field are part of vertically integrated operations with some of the later stages of refining and fabrica- tion carried on in the United States. Varying internal corporate accounting practices will, therefore, afTect the comparability of the earning figures. In the case of mining companies, for example, a considerable amount of the output may be sold to the United States parent companies at cost, thus resulting in an understatement of earnings. Finally, although the domestic ratios were in general corrected to exclude enterprises in which there were no comparable United States investments abroad, the industrial composition of the foreign and domestic figures is nevertheless quite different. This is particularly true of min- ing and smelting where many diverse types of activity are included. Page 108 INCREASE IN MINING AND SMELTING INVESTMENTS Whatever interpretation is placed on the figures in table III, however, the recent improvement in the demand and price of minerals suggests that the period 1945^18 may not be a guide to the future as far as earnings in mining and smelting are con- cerned. This thesis is supported by the rapid increase in new American foreign investment in mining and smelting in the last 2 years for which figures are shown in table IV. Table IV.—U. S. private foreign investment in mining and smelting, 1946-50 1946. 1947. 1948. 1949. [Millions of dollars] 1950 -2 47 31 78 106 Total 1946-50. 260 These figures do not reflect the increases which are believed to have taken place as a result of the accelerated defense pro- gram in 1951 and the general post-Korean reappraisal of long-run market prospects. Thus, increases in investment in 1949-50 may reasonably be expected to be exceeded by a sub- stantial margin in 1951 and the next few years. References Elsewhere in This Report This volume: Taxation of Canadian Minerals Industries. Venezuela "Sows the Petroleum." Vol. Ill: The Outlook for Energy Sources. Oil. Page 109 Report 12 Guaranties for Foreign Investment Since April 1948 the United States has engaged in a program of guaranteeing, for a fee, both equity and loan investments abroad by American citizens. Such guaranties can now cover the risks of inconvertibility and expropriation, the latter being broadly defined. Authority to issue such guaranties was, until October 1951, limited to the Marshall Plan countries of West- ern Europe and their overseas territories. Under that authority a relatively small number of convertibility guaranties have been issued for investments in Western Europe. Guaranties against expropriation have been available for about a year and only two such guaranties had been written as of March 1, 1952. The Mutual Security Act of 1951 continues the authority to is- sue such guaranties, and extends its geographic scope to include any area in which assistance is authorized by the Act. Thus Mutual Security Administration now has authority to issue guaranties against inconvertibility and expropriation in most parts of the free world. The E. C. A. Guaranty Program Guaranty provisions were included in the original E. C. A. Act of April 3, 1948 (sec. Ill (b) (3), 22 U.S. C. 1509 (b) (3) ) and in subsequent amendments, as one means of carrying out the act's basic objective of promoting European recovery. The 1950 amendments contain an express declaration of the "intent of the Congress that the guaranties herein authorized should be used to the maximum practicable extent and so administered as to increase the participation of private enter- prise in achieving the purposes'1 of the act.1 Two special types of guaranties issued by E. C. A. (1) guar- anties of investment in informational media, and (2) guaran- ties of conversion of sums paid for capital goods or services supplied in connection with E. C. A. programs, will not be dis- cussed in this paper. Under these provisions the E. C. A. Administrator was au- thorized, as one means of furnishing assistance to participating countries, to issue guaranties of investment in connection with projects approved by the Administrator and the participating country concerned as furthering the purposes of the E. C. A. Act. Thus, guaranties under the E. C. A. Act could be issued only for investments in E. C. A. countries of Western Europe and their overseas dependencies. The act requires that the guaranty must come within an approved program. E. C. A. 1 The functions of E. C. A. were transferred to the Mutual Security Agency effective December 30, 1951. Mutual Security Act (sec. 502 (b). 22 U. S. C. (Supp.) 1653 (b) ); Executive Order 10300: November 3, 1951, 16 Fed. Reg. 11203. accordingly requires the applicant to show that his investment has been approved by the foreign country involved, and that it will tend to promote the objectives of the act. The criteria for issuing guaranties, as established by the E. C. A. Act and as administratively developed by E. C. A., remain applicable to guaranties presently being issued by M. S. A. Guaranties can be issued only to United States citi- zens or to corporations or other business organizations or- ganized within the United States or its Territories and substantially owned by United States citizens. Guaranties must terminate not later than April 3, 1962. The scope of the risks against which guaranties can be is- sued has been substantially expanded since 1948. Initially the act authorized only a guaranty of conversion into dollars of an amount equivalent to the original investment. The 1949 act expanded this to authorize a guaranty of conversion of addi- tional amounts designed to cover actual earnings as well. The 1950 amendments added authority to issue a new type of guaranty, which would compensate the investor for loss of all or any part of his investment which was found to have been expropriated by the foreign country. GUARANTIES FOR NEW INVESTMENTS ONLY The legislative history indicates that Congress intended the guaranties to cover new investment only. Accordingly, the making of an investment prior to filing a guaranty application, or indeed prior to issuance of the guaranty, will normally be grounds for denying the application. The requirements can be waived under some circumstances to permit the investment to go ahead while the guaranty application is pending. New dollars invested in expansion, modernization, or development of an existing enterprise are regarded as a new investment eligible for guaranty. Because the statute requires a dollar in- vestment it may be difficult for an investor in an existing enter- prise to get a guaranty on reinvested earnings. However, an investment of funds which clearly could have been converted into dollars may be treated as a dollar investment. The 1950 amendments make it clear that the investment may consist entirely of patents or techniques. Thus, they allow a guaranty of conversion of income from patent licenses, un- accompanied by any hard investment. Although the statute contains no express restrictions on the length of the investment eligible for guaranty, E. C. A. has construed the word "investment" as meaning an investment of medium or long term. Its rule of thumb has been to require on loan investments an average life of 5 years (e. g., a 10-year Page 110 loan repayable in equal annual installments). The E. C. A. staff was willing to go down to 3 years, but did not have oc- casion to do so. On equity investments, if there is reason to believe that the intent of the investor is to withdraw his invest- ment within 5 years, a guaranty will be refused. Considerable interest has been expressed in guaranties of shorter term investments. M. S. A. does not believe it was the intention of Congress to authorize direct guaranties of short- term transactions. It suggests, however, that the result could be achieved indirectly by bank to bank loans. An American bank could make a 3- to 5-year loan of funds to a foreign bank, which M. S. A. would guarantee. The foreign bank could use the funds to make short-term loans. Such an arrangement might also meet a need for financing small business enterprises. This proposal has been considered in the abstract, but it contains unresolved legal and policy questions which will be worked out if a specific case comes up. The original act authorized issuance of guaranties in an amount not to exceed 300 million dollars. The 1949 amend- ment reduced this authorized amount to 150 million dollars and the 1950 act raised it to 200 million dollars. Guaranties are covered by a special fund created by the pur- chase by the Secretary of the Treasury of notes issued by the Administrator. Fees charged for guaranties also go into this fund. Sums allocated to a guaranty remain tied up as long as the guaranty is outstanding, but can be used again for guaranty purposes as the liability of the United States is reduced. In the event that a guaranty is used, the United States takes over the foreign exchange which the guarantied person had sought to convert (in the case of a convertibility guaranty) or the claim of the guarantied person against the foreign government (in the case of an expropriation guaranty). Dollars realized from either, of these sources cannot be used again for guaranty pur- poses but are applied to reduce the indebtedness of the Admin- istrator to the Secretary of the Treasury. The guaranty contract is executed and administered by the Export-Import Bank, in order to afford administrative conti- nuity after the expiration of the guaranty authority. EARNINGS CONVERTIBILITY LIMITED Guaranties of convertibility. The statute does not impose any explicit limit on the amount of earnings whose conversion can be guarantied. However, E. C. A.'s administrative rule was to limit the maximum amount of the guaranty to 175 percent of the dollar value of the cash or tangible property invested, plus additional profits (in an amount approved by E. C. A.) based on any techniques or processes made available to the for- eign enterprise by the applicant. This maximum is not avail- able at once; the top limit of the guaranty starts at the amount invested and increases 15 percent per year until 175 per- cent is reached (i. e., at the end of the sixth year). The investor can schedule the guaranty amounts available in any way he sees fit. The fee charged is based on this sched- ule; he pays 1 percent on the face amount of the guaranty for the ensuing year—i. e., the maximum amount whose con- version during the ensuing year is guarantied—and *4 percent on the difference between that and the total amount guarantied. Within the limits of his schedule, conversion at any time during the life of the guaranty, without regard to whether the currency offered for conversion was received as income, capital gains or liquidation of principal, is guarantied. Any conversion of receipts from the guarantied investment, whether or not the guaranty is called on, reduces the amount guarantied. The effect of this earnings limitation on different kinds of investment is somewhat complex, because of the fact that the amount converted may be either capital or earnings. In E. C. A.'s view it permitted a liberal return on equity invest- ment. This is based on the assumption that the equity investor whose investment proves profitable is interested in withdraw- ing earnings, not capital. Thus, on a 10-year guaranty of a $100,000 investment., he could withdraw dividends totalling $175,000, but conversion of his original investment would not thereafter be guarantied. On a loan investment, the maximum that can be guarantied is the amount, stated in dollars, of the principal plus interest at a rate considered reasonable in the light of prevailing rates in the foreign country. LIMITS JUSTIFIED The earnings limitation may be justified on several grounds: (1) When Congress in 1949 added authority to guaranty earn- ings several members of the House committee wanted to write in a specific earnings limitation. It would seem that the com- mittee, in rejecting this, merely wanted to avoid tying E. C. A.'s hands as to the precise limitations, and expected E. C. A. to impose some limitation. (2) Such a limitation may tend to avoid propaganda charges that the United States is engaging in imperialist exploitation by participating in the withdrawal of exorbitant profits. (3) M. S. A. feels that the earnings limitation has not deterred investmet or impaired the effective- ness of the guaranties. Although some equity investors expect to convert more than can be guaranteed, they apparently re- gard the guaranty as insurance which affords sufficient mini- mum protection, and are willing to take their chances on anything above the amount guaranteed. While complaints about the earnings limitation have not been frequent, there has been little experience in the extractive industries where such limitations may well be a serious impediment. If this should prove to be the case, exceptions from the earnings limitation might be possible. It will be noted that the amount of a convertibility guaranty is not increased by retained surplus. That is, while the E. C. A. procedure permits earnings to be retained and converted at any time during the life of the guaranty, it puts no premium on re- investment of earnings. (Possibly reinvested earnings could be the basis for writing a new guaranty.) In general, M. S. A. has felt incentives for reinvestment were unnecessary. One vexing problem in connection with convertibility guar- anties is the effect of multiple exchange rates, and of partial restrictions on convertibility. The present policy is to guarantee against any deterioration of the situation existing at the date the guaranty is written. Thus, if at the time the guaranty is is- sued the applicant could convert at 75 percent of the official ex- change rate, he can get a guaranty of conversion at 75 percent of the official exchange rate on the date when conversion is sought. Where there are multiple rates, M. S. A. will select a reference rate—such as the rate at which a central bank will buy from exporters, or the rate used for purposes of assessing cus- toms duties—and guarantee conversion at that rate. Consider- Page 111 ation has at various times been given to writing a guaranty which will reflect an anticipated improvement in exchange con- ditions—i. e., even though conversion in full is not possible when the guaranty is written, a guaranty of full conversion after some stated period of years could be written if it appeared reasonably likely that such conversion would then be permitted. To date no such guaranty has been written. GUARANTIES AGAINST EXPROPRIATION Although authorized in June 1950, the expropriation guar- anty program was slow in getting under way, largely because of the novel and difficult problems it presented. An advisory committee, set up to make recommendations as to howr to ad- minister it, made its report in January 1951; a press release announcing the availabilitv of such guaranties was issued in April 1951. In the case of equity investments, the guaranty will cover the dollar value of the cash or other property invested (including patents, processes, and techniques contributed in return for an equity interest in foreign enterprise), plus anticipated reinvested earnings in any amount which the investor can establish as a reasonable expectation and on which he is willing to pay a fee. On loans the guaranty will cover principal plus accrued interest at a reasonable rate (reasonableness being based primarily on the prevailing rate in the country). In either case a fee of 1 percent per annum of the amount of the guaranty is charged. (The statute permits a fee as high as 4 percent.) EXPROPRIATION DEFINED Expropriation is very broadly defined. In the case of equity investment, it is deemed to have occurred if the foreign govern- ment, for a period of 1 year, either (a) prevents the foreign concern from exercising control over the use and disposition of its property, or (b) prevents the guaranteed American in- vestor from exercising his rights to participate in the control of the foreign concern or to dispose of his interest in it. For example, regulatory action or taxation could be regarded as an expropriation if it appeared intended to destroy the invest- ment. One evidence of such an intent would be the discrimi- natory character of such action. The guaranty may be invoked regardless of whether the foreign government affords com- pensation. The investor has an option to retain whatever compensation is provided and not invoke the guaranty, or to invoke the guaranty and turn over to Mutual Security Agency any compensation received or claim to compensation. Expropriation of a sufficient part of the assets to destroy the value of the corporation as a going concern is treated as causing a total loss. Normally Mutual Security Agency will only guarantee against such a total loss. Under some circum- stances a guaranty against partial expropriation might be possible. Any act, meeting the foregoing test, of the government or governing authorities whether or not recognized, then in effec- tive control of the geographical area in which the investment is made, will be regarded as an act of expropriation. Thus, the expropriation guaranty would cover acts, not only of a duly elected government of a foreign country, but of one created by internal revolution or foreign conquest. In the event of expropriation the guaranteed investor can recover the value of his equity in the enterprise (dollars in- vested plus the investor's share of any undistributed earnings and capital gains, minus his share of operating losses, capital losses, and capital distribution—these being translated into dollars at the average rate of exchange in effect during the fiscal year in which they arise). In the case of loan investments, expropriation is deemed to occur if the foreign government prevents any due repayment of principal for a year or any due interest payment for 3 years. A denial of conversion, of the type which could be covered by a convertibility guaranty, is not regarded as creating liability under the expropriation guaranty. The measure of the loss is the unpaid principal plus the interest accrued and unpaid on the date of the first payment prevented (converted into dollars at the exchange rate prevailing on that date). If the borrower was insolvent, in the sense that his assets did not exceed liabili- ties by an amount prescribed in the guaranty contract, the amount paid or the guaranty is proportionately reduced. FUTURE EARNINGS NOT GUARANTEED It will be noted that the expropriation guaranty affords no protection against loss of future earnings. It covers only the amount invested, plus earnings which have already accrued at the date of expropriation. Expropriation guaranties will be written only in respect of countries which have entered into an exchange of notes with the United States agreeing to recognize the right of the United States to any property or claim against the foreign government which it acquired pursuant to the guaranty as the result of its payment to the investor, agreeing that any such amounts will be available to the United States Government for administrative expenditures, and agreeing to negotiate and arbitrate the claim of the United States against the foreign government. As of April 30, 1952, such agreements have been concluded with six countries in Europe and one in the Far East. GUARANTIES ISSUED SMALL IN NUMBER Although the convertibility program had been authorized for nearly 4 years, only 34 guaranties totalling 31.7 millions had been issued as of December 31, 1951. Of these, 4 guaranties totalling $855,300 had been cancelled, and other outstanding guaranties had been reduced in amount by receipts to the in- vestor of $590,043, and by reductions in face amount of $76,973 bringing the total amount of convertibility guaranties then out- standing to about 30 million dollars.2 Over three-fourths of the investments covered by guaranties were equity investments.3 No payments had been made on investment guaranties as of December 31, 1951. The extent of possible future interest in convertibility guar- anties is suggested in table I, showing guaranties issued and applications pending. M. S. A. says, however, that the figures for January 1951 and December 31, 1951, are not truly com- 'These figures do not represent the amount actually invested. They are the total amount of the guaranty, which equals investment plus earnings anticipated. 3 As of December 31, 1951, the amount of investment covered by guar- anties issued (not the amount of guaranties) was $23,343,631 of which $18,962,631 is equity investment and $4,651,000 is loan. Page 112 Table I.—Convertibility guaranties Convertibility guaran- ties issued* Applications pending Period Amount (millions) Amount (millions) Number Number Jan. 1, 1949 1 SO. 9 3. 9 24. 3 31. 7 12 27 . 41 34 $5. 0 29. 8 40. 0 28. 2 Jan. 1, 1950 14 26 34 Jan. 1, 1951 Dec. 31, 1951 *These figures are not corrected to reflect cancellations and reductions in amount. The figures submitted to Congress include also the amounts of capital goods guaranties. Those have been excluded from the figures given above. parative because they reflect a rigorous attempt in compiling statistics to weed out applications which were no longer alive. This is especially true of the December 31 figure. The guaranties issued involved only five countries—Ger- many, France, England, Italy, and the Netherlands. Most of them related to manufacturing plants, although one agricul- tural investment is included. Among those which may have had some effect on raw materials development are guaranties of capital investments in an oil pipeline in Italy, an oil refinery in Italy, a carbon black plant in England, and a refractories plant in France, and a guaranty of patent royalty payments from a plant in Germany manufacturing mining equipment. No guaranties for investments in extractive or smelting properties have been issued. Applications were made for lead and zinc mines in Nigeria, and for oil wells in Mozambique. In each case the project is still in an exploratory stage. The applicants decided they did not want guaranties now and requested de- ferment of action on their applications, but the M. S. A. staff thinks these companies may be very much interested in guaran- ties if and when they decide that the project warrants a sub- stantial investment. An application was also received for an investment in copper properties in Cyprus, but the company involved decided to make its investment in sterling instead of dollars. An application was pending for magnesite mines in Austria. Not only has the amount of convertibility guaranties issued been very small but the extent of their effect in inducing foreign investments is also uncertain. The M. S. A. staff feels that in some cases the investment would have been made without a guaranty. To date only two expropriation guaranties have been issued, for manufacturing investments in Germany amounting to $1,277,400. In these cases, however, it is fairly clear that the directors of the companies involved would not have approved the investments without guaranties. Numerous other requests for or expressions of interest in expropriation guaranties had been received. COST OF PROGRAM UNKNOWN The experience of E. C. A. and M. S. A. sheds little light on the cost of a guaranty program. Fees of $394,009.60 had been collected on convertibility guaranties as of December 31, 1951, and nothing had been paid out. The fee, when initially set, was not designed to assure that the program would be self- liquidating. The thought of both Congress and the adminis- tering agencies was that since guaranties were an inducement to private capital to supply the dollars that would otherwise be supplied by grant, it was not necessary that the program be self-liquidating. Some members of the M. S. A. staff feel that on the convertibility program fees may exceed losses. They point out that a total loss will seldom occur, since the govern- ment can be expected to use the foreign exchange turned over to it by the investor.4 The other element of cost involved in the program is the fact that under the existing act, 100 percent of the amount of guar- anties written is tied up in a special fund. If the amount of guaranties outstanding should become appreciably larger, it would be appropriate to consider whether only a percentage of the amount guaranteed should be held in reserve in the special fund. The M. S. A. Guaranty Authority The Mutual Security Act (act of Oct. 10, 1951, Public Law 165, 82d Cong., 1st sess., 22 U. S. C. Supp. 1651 et seq.) con- tinues the guaranty authority and enlarges its geographic scope. Section 520 of that act authorizes the making of guaranties of investments "in any area in which assistance is authorized by this act." The act authorizes assistance in Europe, the Near East and xAirica, Asia and the Pacific, and the American Republics, provided that the agreements called for by Section 511 have been entered into with the particular country involved. In thus extending the geographic scope of the guaranty authority Con- gress appears to have adopted the view that the guaranty pro- gram is an appropriate means of inducing a flow of private funds into any area eligible for governmental grant. Thus the program tends to further the objective of Section 516 of the Mutual Security Act to "provide the incentives for a steadily increased participation of free private enterprise in developing the resources of foreign countries consistent with the policies of this act." The Mutual Security Act does not increase the amount of 200 million dollars available for guaranties. As of April 30, 1952, about 44 million dollars had been used, leaving 156 mil- lion uncommitted, of which 70 million were earmarked for pending applications. E. C. A. POLICIES CONTINUE Guaranties are still issued in accordance with section 111 (b) (3) of the E. C. A. Act. The general policies developed by E. C. A. to govern the issuance of guaranties will continue to be applied by M. S. A. and the program is being administered by the same staff as under E. C. A. Guaranties will be avail- able to investments which further the purpose of developing economic and military strength in foreign countries receiving as- sistance from funds appropriated for the Mutual Security Pro- gram. The investments must be approved for this purpose by the foreign government as well as by M. S. A. In determining whether an investment project furthers the purposes of the legislation, M. S. A. will use criteria for ap- proval of guaranty applications which may vary with the nature 4 On the informational media program E. C. A. and M. S. A. have paid out $3,150,446.91 on guaranties. Of the corresponding amount of foreign currencies they have sold part to other government agencies for $1,585,000 and still hold the rest (mostly marks). The loss on the currency sold was only $35,921.61. Page 113 of the aid program in the country of investment. However, almost any investment in basic materials production would be eligible for a guaranty under these criteria. Assessing Investment Guaranties The theory underlying a Government program of guar- anteeing private foreign investment against certain risks seems sound. Such a program is intended to encourage private United States investments abroad by removing, not ordinary business risks, but certain special risks incident to foreign investment. Governmental intervention to remove those risks would appear to be peculiarly appropriate because they arise primarily from foreign governmental actions, the threat of which serves as a deterrent to investment. The guaranty program, although supported by some business groups, has on occasion been objected to by a number of others, notably the National Association of Manufacturers, the Na- tional Foreign Trade Council, and the United States Chamber of Commerce. Their objections appear to rest explicitly or implicitly on the following grounds: Existing enterprises having investments abroad do not wish to encourage competitive foreign investment. This position, while understandable, is not valid from the point of view of the public interest in increasing the production of materials abroad. Because the guaranty program would not apply to existing investments, it is criticized as discriminatory. There does not appear, however, to be any significant indication that the making of guaranteed investments impairs the opportunities of the nonguaranteed investor to obtain and convert the earn- ings and principal from his investment, or subject him to greater risks than he had previously been subject to. Moreover, to the extent that he makes new investments or expands his old investments, the existing investor is just as eligible for guaranties as any one else. The argument is made that a guaranty program involves undue interference by the United States Government with pri- vate investment and with the governmental affairs of the for- eign country. This objection may offer a psychological barrier in some cases. So far as the investor is concerned, however, the objection does not seem very realistic. The program is not, in form or in substance, regulatory. It requires some disclosure of plans, but so does a loan program or any other type of governmental incentive. In addition, in practice the guaranty officers have often been consulted at various stages during the development of plans for an investment abroad and thus have some opportunity for influencing the course of those plans. This occurs, however, only to the extent that the investor wishes it to occur, and in general such informal consultation has been mutually beneficial. Since legislation requires the applicant for a guaranty to show that the foreign government approves the investment sought to be guaranteed, it is difficult to find any basis for the suggestion that the program involves interference with the governmental affairs of the foreign country. Perhaps the most serious problem in this respect is raised by expropriation guar- anties, which may place a governmental agency of the United States in the position of appearing to pass judgment on a dis- pute between a private investor and a foreign government. For example, M. S. A. (or Export-Import Bank) may have to find, in an explosive political situation, that certain foreign acts constitute expropriation, and may thereafter have to be a claimant for compensation from the foreign government. To what extent this may complicate or embarrass the conduct of foreign relations is difficult to predict in the absence of any experience with the invocation of expropriation guaranties. M. S. A. has sought to minimize this, however, by writing expropriation guaranties only in those countries which have agreed to negotiate and arbitrate any claim against them ac- quired by the United States Government when payments are made under the guaranty. The guaranty program is said to remove the incentive to foreign countries to enter into investment treaties which will create a more favorable climate of investment. The argument is that it does this {a) by inducing investment of foreign capital without any concessions from the foreign government and (b) by giving apparent sanction by the United States Government to expropriation and exchange regulation by the foreign gov- ernment. The proponents of this view did not show any evidence that treaty-making was hindered or impeded by the guaranty program. In the absence of such evidence, there would not appear to be any good reason for delaying encouragement of foreign investment until the laborious and slow process of treaty-making has been concluded. Perhaps more serious than these objections in principle is the skepticism apparently held by many businessmen about the value of a guaranty. Their feeling is that what matters is a climate of investment in the foreign country, and that if that climate is unfavorable there will be innumerable ways, short of expropriation or denial of convertibility, by which the foreign investor in materials can be harassed and his investment made unprofitable—e. g., interpretation of concession terms, imposi- tion of burdensome regulations or charges, etc. Their feeling is that a legal contract can never hope to deal fully with the multiplicity of devices for harassment. This attitude may be of particular importance in the case of raw material producers, who are usually more dependent on foreign government action than other producers abroad. potentialities of enlarged program It is clear that to date, the results of the guaranty program have been highly disappointing. Only about one-fifth of the available funds have been committed to outstanding guaranties, and it would appear that in many cases the investment would have been made without a guaranty. No guaranties of invest- ment in extractive or smelting operations have been written. While the rate of issuance of convertibility guaranties has in- creased, there is nothing in the experience to date, to suggest any dramatic change in the demand for such guaranties. It is probable that this lack of demand is primarily attributable to the high domestic earnings rate, in the face of which any at- tempt to induce foreign investment has heavy going. Furthermore, in many areas the political risks (war, com- munist coup d'tat, etc.) have been so great that a guaranty against convertibility—which was all that could be offered until very recently—provided little inducement. The new ex- propriation guaranty program may be more effective from this Page 114 point of view. It may be noted, however, that these political risks would not appear to have been a major deterrent to invest- ment in Africa, and that there would seem little reason to anticipate that the expropriation guaranty program will have any more success in encouraging African investment than did the convertibility program. The foregoing observations indicate that the guaranty pro- gram has been one of limited usefulness. However, the con- vertibility program is still relatively new, and the expropriation program is wholly untried. Moreover, both have until recently been available only in a limited geographic area which pre- sents special problems for investors. At present no technique for encouraging foreign investment has shown conspicuous success. Accordingly it seems clear that, if we wish to encourage such investment, we should continue trying every available means of doing so. For these reasons, it appears advisable to continue the guaranty program. ONCE LIMITED, PROGRAM NOW HAS BROAD APPLICATION Until recently the guaranty program had a quite limited geographic scope. A proposal, made in the 81st Congress as part of the Point IV Program, to authorize the Export-Import Bank to issue investment guaranties in any foreign country, passed the House but was defeated in the Senate. The Mutual Security Act has removed most geographic limitations on the scope of the program. The theory of that act—that guaranties afford a means alternative to direct governmental aid for bring- ing dollars into an area and hence should be authorized wherever direct aid is authorized—seems sound. But while the guaranty program should be as extensive as the aid program, the question may be raised whether it should not be more extensive. In particular, where guaranties can be used to en- courage investment aiding the production of essential raw materials for the free world it would seem that they should be available regardless of whether the country involved is receiving direct aid, or of whether it is willing to enter into the agree- ments required by the Mutual Security Act. The Export-Import Bank has, since 1945, had authority to guaranty loan obligations of any kind, including bond issues. It has, however, used that authority as part of its general lending functions; thus in some cases it guarantees a private loan instead of becoming the lender, and in so doing assumes all the risks of a lender. It has not used this authority to issue limited guaranties against specific risks such as inconvertibility or expropriation. LIMITS ON RISKS PROGRAM WILL ACCEPT E. C. A.'s advisory committee on expropriation guaranties concluded its report by stating that "the loss chiefly feared from investment abroad is loss from exchange fluctuations and war damage" and that a guaranty program would give "relatively little inducement" to foreign investment until those risks were covered. It seems highly unlikely, however, that Congress would authorize, or that the administration would request, an extension of the program to cover those risks. The present provisions as to the scope of the guaranties were the result of a compromise between the House and the Senate. In both 1949 and 1950 the House Foreign Affairs Committee had proposed guaranties covering not only convertibility but also loss from expropriation, from destruction by riot, revolu- tion, or war and from any governmental action "which in the opinion of the Administrator prevents the further transaction of the business for which the guaranty was issued." These provisions were adopted by the House, but rejected by the Senate which limited the guaranty to that of convertibility. The conference Committee in 1950 finally arrived at the present compromise which does not guarantee against war damage or against all forms of political risks but which does cover not only expropriation in the strict sense but certain other kinds of governmental action which effectively destroy the value of the investment or the investor's control over it. The Government has no present intention of requesting extension of the guaranty program to cover war damage, at least until some program of war damage insurance for invest- ments within the United States is adopted. The chances of adoption of a guaranty program against exchange fluctuations would seem to be even less. Such guar- anties were not proposed by the House Committee and they would probably be opposed by the administration as involving too many risks and complexities of administration. Certainly for the present M. S. A. feels that it has bitten off all that it can chew. ADVISABILITY OF MODIFYING LIMITATIONS ON EARNINGS Experience thus far suggests that in general the earnings limitations on convertability guaranties have not discouraged the making of investments or the writing of guaranties. It would appear that the equity investor who is getting good earn- ings does not need a guaranty of conversion of the principal of his investment, and will be content to apply the whole amount of the guaranty to conversion of earnings. Mining and other extractive operations may be a special case, however. Those engaged in mining and other extractive operations say (a) that costs of exploration and risk of such undertakings are so great that they must get very high profits out of a successful mine to justify risking an investment, and (b) that because mining concessions tend to be of limited duration, they need coverage for conversion of capital as well as earnings. It would seem desirable to give further consideration to the need for a modification of the earnings limitations as applied to extrac- tive industries. It seems clear that this can be done administra- tively, without new legislation. References Elsewhere in This Report This volume: Counterpart Funds for Raw Materials. The IBRD and Materials Development. United States Private Investments Abroad. Page 115 Report 13 The IBRD and Materials Development The International Bank for Reconstruction and De- velopment is an international institution established to make or guarantee loans for projects which will increase production and raise living standards in its member countries and contrib- ute toward growing and better balanced world trade. The bank operates under the Articles of Agreement, a char- ter signed by the institution's 51 member governments. In organization, the bank is similar to a business corporation. The member governments are the owners of the bank's capital stock which now totals the equivalent of $8,453,500,000, of which the equivalent of $1,690,070,000 has been paid in. Major ac- tions of the bank must be approved by the executive directors who represent the governments and vote in proportion to the amount of stock held by the governments. The United States owns 37.5 percent of the stock now outstanding. The bank started operations in June 1946. On April 21, 1952, it had made 63 loans amounting to $1,326,183,000 in 28 countries. These loans were made to help finance projects for (a) directly increasing production in agriculture, manu- facturing, or minerals, or (b) providing services, such as electric power and transportation, essential to basic production and distribution. The bank makes loans either to its member governments or to other borrowers operating in the territories of the member governments. Under the Articles of Agreement, a loan of the latter kind must be guaranteed by the government concerned. Most of the bank's lending has been in United States dollars, but some loans have consisted of or included other currencies. The bank's loan funds are derived from (a) payments for capital stock, which the member governments make partly in gold or United States dollars and partly in their own currencies, and (b) the bank's sale of its own bonds to private investors for dollars and other currencies. In addition to United States dollars the bank has lent Belgian francs, British pounds, Cana- dian dollars, Danish kroner, French francs, Italian lire, Nor- wegian kroner, Swedish kroner, and Swiss francs. A loan by the bank is made only after a thorough investiga- tion into all factors bearing on the loan. These factors include: the economic and financial condition of the country concerned; the ability of the country to service the foreign debt being contracted; the urgency and the value of the project in relation to the economic needs of the country in which the project is located; the technical feasibility of the project or projects; and the ability of the borrower to provide the local capital required and to complete, operate and manage the project. Field missions composed of experts do much of the explora- tory work preliminary to the bank's loans. These missions in- vestigate conditions affecting a proposed loan and report to the bank and to the member countries concerned. After a loan is made, the bank carefully follows the progress of the projects it finances. Disbursements are made only on documentary evi- dence, such as invoices and bills of lading, to assure that funds will be used as stipulated in the loan contract. The bank re- ceives periodic reports from borrowers; and members of its staff make periodic visits to loan projects to check up on progress. The activities of field missions, both before and after the making of a loan, gives the bank an opportunity to offer technical advice to borrowers. In addition, the bank has ex- panded its field work to cover a wider range than that of specific loan studies. It has sent special technical assistance missions to 18 member countries. Included in this 18 were 8 general survey missions which helped members draw up over- all development programs and 2 missions—jointly sponsored by the United Nations Food and Agriculture Organization, which advised on agricultural development programs. The production of essential materials is of important con- tinuing value in economic development and can properly be supported by I. B. R. D. loan financing. Since the central ob- jective of the bank both in lending and in technical assistance is to promote healthy, long-range economic development in its member countries, the bank cannot appropriately assist in es- sential materials production when the projects involved are noneconomic. Though production which is submarginal, from the standpoint of operating efficiency or the quality of goods produced, may be profitable in times of emergency and abnor- mal demand, it is not likely to contribute to genuine economic development. In fact, if such production is permitted to divert available investment from projects of more durable worth, this may interfere with healthy development. In short, the bank cannot properly assist in essential materials production if that production is motivated primarily by short-term considerations, even though these considerations are strategic. Bank loans have been made for projects or programs to increase the output of essential materials when such produc- tion contributed to economic development. And loans have, in some cases, indirectly assisted such production by the develop- ment of electric power, transportation, and other services. LOANS DIRECTLY AFFECTING PRODUCTION Selected illustrations are given below of loans which directly affected the production of essential materials. Relatively few have been proposed to the bank, however; a full tabulation has not been attempted here. Page 116 RECONSTRUCTION LOAN TO FRANCE In May 1947, the bank lent $250 million to the Credit Na- tional of France for the import of many types of equipment and goods needed to strengthen the French economy. Of the total amount, $10.8 million was used for two projects to modernize steel production: a) Installation by the Usinor combine in its plant at Denain of a continuous hot rolling mill, with an annual capacity of 800,000 tons of hot strip. b) Installation by Usinor at Montataire of a continuous cold rolling mill, with an annual productive capacity of 300,000 tons high-grade steel sheets. These two plants are the most modern steel installations on the continent of Europe and are producing rolled steel products of a type basic to the industrial economy of Western Europe. RECONSTRUCTION LOAN TO LUXEMBOURG The bank lent Luxembourg 12 million dollars in August 1947. Of this, 7.5 million was used to pay the foreign exchange cost of the installation by the Arbed Co. of two steel mills at Dudelange: a hot rolling mill with an annual capacity of 400,000 tons and a cold rolling mill with an annual capacity of 180,000 tons. Both mills started industrial operations in the spring of 1951. STEEL AND POWER LOAN TO BELGIUM The bank lent Belgium 16 million dollars in March 1949 to meet import costs of three industrial projects: a) Installation of a cold rolling and tin plating mill by the Compagnie des Fers Blancs et Toles a Froid (Ferblatil) at Tilleur. This mill has an annual capacity of approxi- mately 60,000 tons of tin plate and 24,000 tons of steel sheets. b) Installation of a blooming mills, at Ougree, by the S. A. d'Ougree-Marihaye, with an annual capacity of 900,000 tons of slabs and billets. c) Construction of a thermal power plant, at Awirs, by the Union des Centrales Elecriques de Liege-Namur- Luxembourg (Linalux), with a generating capacity of 100,000 kw'. The Ferblatil project was completed in March 1951, and the project at Ougree in May 1950; both are now in operation. Completion of these projects helped modernize the Belgian steel industry and aided the shift to production appropriate to present world demand. The Linalux plant which was inaugu- rated in November 1951 is important to the steel industry because it supplies power to the mining industry in the Liege basin. WOOD-PRODUCTS LOAN TO FINLAND In August 1949, the International Bank lent the Bank of Finland 12.5 million dollars. Of this, 10.5 million was relent to wood-products companies for equipment which has enabled them to modernize and expand their production of pulp, paper, board, and other wood products. The other 2 million was relent to Government agencies for the expansion of electric power facilities in order to relieve seasonal power shortages which had caused diversions of electricity from the wood-products industries to residential use. TIMBER LOANS TO YUGOSLAVIA AND FINLAND In October 1949 the bank lent Finland 2.3 million dollars and Yugoslavia 2.7 million for the purchase of lumbering and sawmill equipment. The loans have resulted in substantial in- creases in the production of sawn soft wood (for construction) and pit props (for coal mines), both for domestic use and for export to Western Europe. DEVELOPMENT LOAN TO YUGOSLAVIA In October 1951 the bank lent Yugoslavia 28 million dollars worth of various currencies to provide equipment for pro- ductive undertakings in seven basic fields: electric power distribution; coal mining, extraction and processing of non- ferrous metals; manufacturing industries; use of forest re- sources; farm and fisheries production; and transportation. The bank's loan fits in with a much larger program of invest- ment already undertaken by the Yugoslav Government, and for the most part is supplying key components to projects or programs already well advanced. The bank loan will provide financing in the field of essential materials by: a) Modernization of equipment at seven coal mines which by 1954 are expected to add 5,200,000 tons to annual pro- duction. b) Supplying machinery and additional mine cars and loco- motives at the Bor copper mine; installation of equipment for the expansion of an ore flotation plant at Bor; and the erection of a new electrolytic zinc plant at Sabac. c) Supplying equipment needed in the expansion of an existing new pulp plant and in the construction of new plants for the manufacture of plywood, wall board, pulp and kraft paper. d) Supplying distributing equipment to bring additional supplies of electric power to industrial centers. LOANS INDIRECTLY AFFECTING PRODUCTION Many bank loans finance projects which stimulate materials production. But relatively few projects having the production of materials (other than agricultural products) as their direct purpose have been proposed to the Bank. For example, projects to increase the availability of electricity supply are vital to min- ing operations; adequate transportation facilities may result in the establishment of new production centers. Several bank- financed projects which may indirectly affect materials pro- duction are here discussed. These serve as illustrations, not as a catalogue of this aspect of bank lending. BELGIAN CONGO In September 1951 the bank made a loan of 40 million dol- lars to the Belgian Congo and a loan of 30 million to the King- dom of Belgium, both loans to aid in carrying out the Ten Year Development Plan of the Belgian Congo. The Congo produces more than half the world's supply of cobalt and in- Page 117 dustrial diamonds; it is a leading producer of uranium, a large producer of copper and tin, and produces considerable amounts of zinc and manganese. These products form a signifi- cant part of the Congo's exports, which in the last 20 years have tripled in tonnage and increased six times in value. The shortage of transport in the Congo is one of the chief hmitations on further economic development and materials production. The bank's loans will finance imports of equip- ment needed to improve and expand transportation of all kinds (seaports, inland waterways, railways, and highways). BRAZIL The bank has lent 90 million dollars to the Brazilian Trac- tion, Light and Power Co., Ltd., most of it to finance the expansion of the company's facilities for generating and dis- tributing hydroelectric power. This company provides about 65 percent of the electric energy produced in Brazil, and supplies an area which provides 75 percent of Brazil's industrial output. The company numbers among its customers not only the prin- cipal industries of Brazil but four of the country's most im- portant railways and the National Steel Mill at Volta Redonda. Hydroelectric power supplied by the company substitutes for tremendous demands for essential materials—500,000 tons of coal a year, or its equivalent in fuel oil. In May 1950 the bank lent 15 million dollars to the San Francisco Hydroelectric Co. to help finance (1) a hydroelectric project with a generating capacity of 120,000 kw., and (2) the attendant distribution system. Power supplied by the company is expected to facilitate industrial growth in the east coast cities of Recife and Salvador, and will supply power to an area which has potentialities for the development of sisal and jute indus- tries. Additionally hydroelectric power supplied by the project will replace thermal power and provide a net saving of fuel oil imports costing more than 3 million dollars a year. INDIA A bank loan of 32.8 million dollars, made in August 1949 financed the import of 454 railway locomotives in India. This equipment has made it possible for the Indian railways to reduce or eliminate substantial delays in the movement of essen- tial freight. This improvement of service has permitted such important commodities as manganese and iron ores, coal and coke, copper, pig iron and jute to move more freely in India's trade. Better freight service has been an important factor in increased production in most industrial and mineral fields. In April 1950 the bank lent India 18.5 million dollars to finance imports needed to construct a thermal power plant of 150,000 kw. capacity at Bokaro in the Damodar Valley. The plant will go into partial operation at the end of 1952, and will reach full capacity in 1954. It will supply electrical energy for the expansion of coal production from the extensive deposits in the Damodar Valley, and especially from the Bermo Seam, which contains an estimated 10 million tons of coal. TURKEY In July 1950 the bank lent Turkey 12.5 million dollars for the rehabilitation, improvement, and expansion of existing sea- port facilities, and for the construction of a new port at Sam- sun, on the Black Sea coast. The improvement of ports is neces- sary to effectuate present programs for an increase of exports of such vital commodities as chrome and coal. Chrome and other ores will be shipped particularly from Iskenderun, where ground storage for 50,000 tons of ore and special shore loading facilities are a part of the port project being financed by the bank. And the west coast port of Izmir is a potential outlet for a region in which there is some production of essential ores. UNION OF SOUTH AFRICA In January 1951 the bank lent the Union Government 20 million dollars for imports needed during the first 2 years of a Five Year Program for the expansion of rail, highway, and other transport facilities; at the same time, a group of private banks in the United States lent the Union an additional 10 million dollars for purposes related to the bank's transport loan. Transport facilities of all kinds have been inadequate to handle the enormous increase of traffic brought about by the heavy expansion of the Union's industries and the general development of the country during the war and postwar years. The Union's chief exports are gold and wool; other important exports are diamonds, hides and skins. South Africa has large reserves of many basic minerals, including manganese, chrome, platinum, and asbestos. With the elimination of present trans- port difficulties, the country would be able to produce and export these minerals in increasing quantities. The rates of production of both manganese and chrome ore could then be expected to reach annual levels of 1 million tons each. Still further increases in chrome ore production are possible, since potential reserves are very large. Improved transport will bene- fit the steel industry by facilitating the shipment of iron ore and coal to the mill, and coal exports, which have been increasing, may be stimulated. In January 1951 the bank lent 30 million dollars to the Electricity Supply Commission in South Africa. Purpose of this loan is to help pay for imported equipment needed during the first 2 years of E. S. C. O. M.'s 6-year program to expand facilities for generating and distributing electric power. The additional power produced will benefit the gold mining dis- tricts of the Rand, and also will benefit the producers of minerals such as manganese, chrome, platinum, and asbestos. LIMITATIONS ON BANK FINANCING Though it is desirable that private investment take the initiative in financing the production of essential materials, experience has shown that there are two principal obstacles to the bank's contributing substantially to the financing of privately owned industrial or mining enterprises—including those for the production of essential materials. NEED FOR GOVERNMENT GUARANTIES The first obstacle arises from the provisions of the bank's Articles of Agreement (Article III, section 4 (i)) which re- quire that, when the member in whose territories the project is located is not the direct borrower, the member or the central bank or some comparable agency of the member must guaran- tee payment of principal, interest, and other loan charges. This requirement has limited the bank's ability to make loans to Page 118 private enterprises in three respects: First, private businessmen investing in underdeveloped countries are normally reluctant to encourage the degree of governmental interest in their ven- tures which a guaranty implies. Second, it is politically difficult for the authorities of the underdeveloped countries to give preference to a few private enterprises over others by granting a government guaranty, especially where the governmental guaranty requires legislative authorization. Third, the process of obtaining a government guaranty is usually cumbersome. As a partial solution to this difficulty, the bank has, in several cases, utilized the technique of granting a credit, guaranteed by the Government, to a local credit institution, which can then relend the proceeds to private enterprises without government guaranties. This technique has been employed in the case of loans to the Netherlands Herstelbank, the Bank of Finland, the Industrial Development Bank of Turkey, the Ethiopian De- velopment Bank, and to a consortium of Mexican banks. EQUITY FINANCING BY BANK PRECLUDED The second limitation is the fact that the Articles of Agree- ment do not permit the bank to engage in equity financing. On occasion the bank has not been able to consider an industrial project which appeared to have good prospects of success and to promise substantial benefit to one of its members because the project required more equity capital in relation to loan capital than the promoter was able to offer. The typical proposal of this kind presents the bank or the guarantor with an excessive share of the risk if the project should prove unsuccessful and the promoter with a disproportionate share of the profits if the project should be a success. Lacking equity funds, the bank has no way to adapt its financing to meet such situations. Although the principal cases which have arisen so far have been industrial projects rather than projects for production of essen- tial materials, the same problems would arise for the latter as for the former. The proposal for the creation of an international finance corporation might be a solution to both of the problems. This proposed new instrumentality would not only provide some equity capital for productive private enterprises, including those for the production of essential materials, but direct par- ticipation in them might also induce increased investment by a greater number of private investors, both local and foreign. The proposed corporation would also presumably be author- ized to operate both on an equity and a loan basis, without the need for direct governmental guaranty of the project. In August 1951 the Economic and Social Council of the United Nations requested the International Bank to consider what contribution an international finance corporation might make to economic development and to report to the Council on the matter at its forthcoming 1952 meeting. References Elsewhere in This Report This volume: Guaranties for Foreign Investment. 206060—52 £ Page 119 Report 14 Export-Import Loans for Development Dollar loans from the United States Government required in connection with the production and development of essential materials outside the United States are made by the Export- Import Bank of Washington. In close cooperation with the Department of Agriculture, the Defense Production Admin- istration, the Defense Materials Procurement Agency, the General Services Administration, and other interested agencies of the Government, the bank establishes credits in favor of United States business enterprises, or foreign enterprises, gov- ernments, and government agencies, to finance the expansion of capacity and the production, treatment, and transportation in foreign countries of essential materials for the United States stockpile, or for use by industry in the United States and the free world. These loans are made by the bank either (1) pur- suant to the provisions of and with funds available under the Export-Import Bank Act of 1945, as amended, or (2) under certificates of essentiality pursuant to the provisions of and with funds made available under the Defense Production Act of 1950, as amended. In the latter case loans can be made only to private borrowers. TRENDS IN FINANCING Credits to assist in financing the production abroad of essential materials have been extended for a number of years by the bank as a part of its general lending for economic development. Credits for this purpose have amounted to 40 million dollars or more annually in 5 of the last 7 years. As a consequence of hostilities in Korea, however, the total of such loans in 1951 reached $91,025,000 or almost double the total of the preceding year. The essential data appear in table I. The figures shown for loans by years do not correspond to those appearing in the semiannual reports of the bank chiefly because cancellations, which actually may occur several years after establishment of particular credits, have here been de- ducted from loans authorized as of the year of authorization. The marked rise in the volume of loans for essential materials in 1951, particularly in relation to both development loans and total loans, reflected the increased market demand for these materials and the consequently increased development and investment activities in this field. It also reflected increased promotional activity on the part of the various United States Government agencies. In the 1 y2 years following the onset of the Korean conflict, the bank established 15 credits to assist in the production abroad of essential materials for purchase by the United States Govern- ment or for use in the free world. Fourteen of these credits totaling $137,405,000 were made under the provisions of and with funds made available under the Export-Import Bank Act of 1945, as amended, and one loan of $202,260 was made through a certificate of essentiality under the provisions of and with funds made available by the Defense Production Act of 1950, as amended. These credits are summarized in table II. Table I.—Bank loans authorized less cancellations, 1945-51 [Thousands of dollars] Lend- lease and General Essential ma- percent of— Calendar Essentia] Cotton exports Total opment and other Devel- opment and other Total 1945 $53, 800 $810, 000 $5, 000 $93, 807 $962, 607 57 6 1946 41, 500 674, 231 78, 000 75, 848 869, 579 55 5 1947 24, 917 6, 000 26, 000 137, 945 194, 862 18 13 1948 7, 200 63, 403 29, 000 45, 344 144, 947 16 5 1949 39, 917 198, 713 238, 630 20 17 1950 48, 540 91,025 350, 897 103, 389 399, 437 304, 414 14 12 30 1951 . . 110, 000 1 Credits to expand the extraction of coal, iron ore, manganese, sulfur tungsten, and uranium, and to expand the operations of ferromanganese and steel industries, and of zinc refineries. Table II.—Essential material credits established by the bank in the period July 1950 to January 1952 Year Amt. I. Loans with bank (000) 1950 (July-Dec). South America. .. Expansion of steel mill and produc- $45, 800 91,025 1951 (Jan.-Dec). Central and South America and Africa. Expansion of steel ganese mills and production of man- ganese, sulfur, tung- 1952 (Jan.) South America. . . Production of tung- 580 137,405 Subtotal II. Sec. 302 defense loan under cer- tificate: 1952 (Jan.) Central America.. Production of sisal. . . 202 137, 607 Total Page 120 Detailed information on a number of the credits for man- ganese, sulfur, tungsten, and uranium is not available for pub- lication either because of the nature of the material involved or because certain negotiations are still in progress and the credits are not yet operative. The following summary of in- formation on the remaining 11 credits, however, is reasonably typical of the entire group. All but the last were established under the amended Export-Import Bank Act of 1945. Companhia Siderurgica Nacional (Brazil)—July 1950— $25,000,000.—The credit, to assist in expanding the annual steel ingot capacity by 219,000 tons and the finished steel product potential of the Brazilian national steel company's in- tegrated steel mill, was for the purchase and transportation to Brazil of United States machinery, equipment, supplies, and services to be utilized at the mill at Volta Redonda. The entire cost of the expansion is estimated at the equivalent of 57 million dollars. The credit, bearing interest at 4 percent per annum, is to be repaid over a period of 20 years and carries the guaranty of the Bank of Brazil and the Government of Brazil. Cerro de Pasco Corp. (Peru)—August 1950—$20,800,- 000.—The credit, to assist this United States company in ex- panding by 200 tons per day the output of its zinc refinery and related facilities in Peru, was for the purchase and transporta- tion to Peru of United States equipment, materials, and serv- ices. The entire cost of the expansion was estimated at about 30 million dollars, and the borrower agreed to offer to the U. S. Government, subject to negotiation regarding price, the addi- tional zinc that will be produced. The credit, bearing interest at 4/2 percent per annum, is to be repaid over a period of 16 years. Mexican Gulf Sidfur Co. (U. S.) and its subsidiary, Mexican Sulfur Co. (Mexico)—April 1951— $1,875,000.—The credit, to assist in erection of a plant in Mexico to produce elemental sulfur for the free world by the "Frasch" process, was for the purchase and transportation to Mexico of United States ma- chinery, equipment, supplies, and services. The entire cost of the plant is estimated at the equivalent of $2,500,000. The credit, which bears interest at 5 percent per annum, is to be repaid over a period of 5^4 years. Fermin Malaga S.eHijos (Peru)—July 1951—$650,000.— The credit, to assist the Peruvian company in expanding the production of tungsten concentrates for sale under contract to the U. S. General Services Administration, was for the pur- chase and transportation to Peru of United States mining and milling machinery and equipment, power facilities, and ma- chine shop equipment and supplies, and to defray a portion of the cost of access road construction and other local expendi- tures in Peru. The entire cost of the expansion is estimated at the equivalent of $1,223,000. Repayment within 6 years with interest at 5 percent per annum has been unconditionally guranteed by Mauricio Hochschild y Cia., Peru; Mauricio Hochschild y Cia., Chile; and South American Mining Co., Argentina. The borrower has assigned to the bank a portion of the proceeds it will receive from the sale of tungsten con- centrates to G. S. A. until its entire obligation to the bank has been discharged. Compania Minera Fernandez, S. A. (Mexico)—August 1951—$350,000.—The credit, to assist the Mexican company in expanding the production of manganese ore for sale under contract to the U. S. General Services Administration, was for the purchase and transportation to Mexico of United States mining and milling machinery and equipment, and to defray a portion of the necessary development expenses in that country. The entire cost of the program is estimated to be in excess of the equivalent of $545,000. Repayment is required within 5 years with interest at 5 percent per annum. The borrower has assigned to the bank a portion of the proceeds it will receive from the sale of manganese to G. S. A. until its entire obligation to the bank has been discharged. Cia. de Acero del Pacifico (Chile)—August 1951—10 mil- lion dollars.—The credit, to assist in expanding the annual steel ingot capacity by 80,000 tons and the finished steel product capacity of the integrated steel mill near Concepcion by almost 30,000 tons, was for the purchase and transportation to Chile of United States machinery, equipment, supplies, and services to be utilized at the mill. The entire cost of the expansion was estimated at the equivalent of $14,517,000. The credit, which is in favor of Corporacion de Fomento de la Produccion for the benefit of Compania Acero del Pacifico and which bears interest at 4 percent per annum, is to be repaid over a period of 20 years and carries the guaranty of the Government of Chile. Fabric a Nacional de Carburo Y Metalurgia, S. A. (Chile) — August 1951—$1,150,000.—The credit, to assist in expanding the production of ferromanganese for use in Chile and for export to foreign markets, was for the purchase and transpor- tation to Chile of United States equipment, materials, and services to be utilized in expansion of a plant near the Com- pania Acero del Pacifico mill at Concepcion. The entire cost of the expansion was estimated at the equivalent of $1,965,000. The credit, which is in favor of Corporacion de Fomento de la Produccion for the benefit of Carburo and which bears interest at 4 percent per annum, is to be repaid over a period of 5 years. Mauricio Hochschild SAM I (Bolivia)—November 1951— $1,000,000.—The credit, to assist the company in expanding the production at its Bolsa Negra mine of tungsten concentrates for sale under contract to the U. S. General Services Admin- istration, was for the purchase and transportation to Bolivia of United States mining and milling machinery and equip- ment, and auxiliary buildings and equipment. The entire cost of the expansion is estimated at the equivalent of $1,757,000. Repayment is required within 7 years with interest at 5 percent per annum. The borrower has assigned to the bank a portion of the proceeds it will receive from the sale of tungsten con- centrates to G. S. A. until its entire obligation to the bank has been discharged. Bolivian Tin and Tungsten Mines Corp. (Bolivia)—Decem- ber 1951—$1,000,000.—The credit, to assist the company in expanding the production at its Kami and Araca mines of tungsten concentrates for sale under contract to the U. S. General Services Administration, was for the purchase and transportation to Bolivia of United States mining and milling machinery and equipment, power facilities, and transportation equipment, and in part to defray local costs in Bolivia of an exploration and development program at the mines. The 206060—52 10 Page 121 entire cost of the expansion is estimated at the equivalent of $1,651,000. Repayment is required within 7 years with interest at 5 percent per annum. The borrower has assigned to the bank a portion of the proceeds it will receive from the sale of tungsten concentrates to G. S. A. until its entire obligation to the bank has been discharged. Compagnie Aramayo de Mines en Bolivie (Bolivia)—Janu- ary 1952—$580,000.—The credit, to assist the company in expanding the production at its Pacuni mine of tungsten con- centrates for sale under contract to the U. S. General Services Administration, was for the purchase and transportation to Bolivia of United States mining and milling equipment, and in part to defray local costs in Bolivia of a development pro- gram at the mine. The entire cost of the expansion is estimated at the equivalent of approximately 1 million dollars. Repay- ment is required within 3]/o years with interest at 5 percent per annum. The borrower has assigned to the bank a portion of the monies it will receive from the sale of tungsten con- centrates to G. S. A. until its entire obligation to the bank has been discharged. Cotes de Fer Corp. (Haiti)—January 1952—$202,260.— This loan, under section 302 of the Defense Production Act, was made pursuant to a certificate of essentiality issued by the Defense Production Administration, to assist the United States company in acquiring and transporting to Haiti certain United States materials, equipment, and services required for the de- cortication of sisal fiber to be sold under contract to the General Services Administration. The total cost of the project is esti- mated at the equivalent of $342,323. Unless previously repaid, repayment is required within a period of 2^2 years with interest at 5 percent per annum. The borrower has assigned to the bank a portion of the monies it will receive from the sale of fiber to G. S. A. until its entire obligation has been discharged. THE INDIRECT EFFECT ON PRODUCTION OF MATERIALS The bank has made numerous loans to assist in financing the construction or expansion abroad of port facilities, railways, highways, thermal or hydroelectric power facilities, and com- munication facilities. In some instances, these facilities were directly required in the development and production of essen- tial materials and their financing was arranged as part of a materials development project. Examples are the port and rail- way facilities partly financed by credits to Companhia Vale do Rio Doce, S. A., in Brazil to assist in the production and expor- tation of iron ore from the Itabira deposits; the railway facil- ities in Chile partly financed by a credit making funds available to Compania de Acero del Pacifico through the Fomento Cor- poration to assist in the development of the Romeral iron ore deposit; and the railway facilities for the exportation of iron ore from Bomi Hills in Liberia partly financed by a credit to the Liberia Mining Co. In a larger number of instances, however, loans for the con- struction or improvement of such facilities were directed toward general economic development and were arranged independ- ently of any specific materials development project. Neverthe- less, these new transportation, communication, and power in- stallations have facilitated increased production and shipment of essential materials, and may even have made possible the development of entirely new production facilities. For example, the bank has in the past 10 years made loans aggregating ap- proximately 95 million dollars to the Mexican railways. The resulting improvement in the capacity of the railways to move freight has undoubtedly facilitated increased production of various minerals in Mexico. Similarly, the bank in the past 10 years has extended credits aggregating approximately 14 million dollars to the Chilean State Railways. These credits, too, are believed to have facilitated the development of in- creased production of minerals in Chile. Similarly, also, the bank has financed a number of electric power projects in Chile which have made possible subsequent development projects, including the Chilean steel mill, a ferro-manganese plant, a wire mill, and a cement plant, all at Concepcion. Both the steel mill and the ferro-manganese plant were partially financed by the bank. The wire mill and the cement plant were independ- ently financed in Chile. A bank credit in 1945 to the Corpora- cion Peruana del Santa in Peru assisted in financing the con- struction of a hydroelectric power plant near Chimbote. The provision of this power has made possible plans which are now being developed by the Peruvian Government for the produc- tion of steel and the refining of zinc at Chimbote. In Bolivia the bank is financing construction of the Cocha- bamba-Santa Cruz highway for the express purpose of making possible development of lumber, cotton, sugar, and other crop production in the Santa Cruz area of Bolivia. A lumber mill has already been established near Santa Cruz, financed by the Bolivian Government out of its own resources, and it is under- stood that substantial private investments are contemplated and are being prepared for in the Santa Cruz area, including investments in crop production and sugar mills. Similar devel- opments occurred in the Rio Doce Valley of Brazil as a result of the rehabilitation of the railway running through the valle\ from the port of Vitoria to the Itabira iron mines. Although the sole immediate purpose of the railway reconstruction job was to make possible the movement of ore, there has been a substantial development of agricultural and other production throughout the valley adjacent to the railway. These develop- ments all resulted directly from the fact that the railway was put in shape to move freight and also in some measure from the fact that a sizable antimalarial campaign was conducted in the valley by the Institute of Inter-American Affairs. These are merely illustrations and do not represent an ex- haustive review of the bank's activities of this type. In general, throughout Latin America and other areas where transport facilities are poorly developed, the construction of highways or railroads in appropriate locations has led to a rapid and in many cases substantially unanticipated development oi production of a great variety of materials. A substantial part of these developments has been financed entirely privately and fre- quently by comparatively small investors. It has, therefore, been an exceedingly healthy type of development in that, among other things, it has mobilized savings which might otherwise either have been dissipated or less productively invested. WORKING RELATIONS WITH OTHER AGENCIES The bank maintains close working relations with a number of defense agencies. Provision is made for exchange of infor- mation and consultation on matters of mutual interest, coordi- Page 122 nation of activities regarding development of and purchase contracts for essential materials abroad, and procedures with respect to certification for section 302 loans. The defense agencies most directly concerned in these matters are the De- fense Materials Procurement Agency, the General Services Administration, the Defense Production Administration, and the Department of Agriculture. In all cases, applications for loans for projects outside the United States are filed directly with the bank. Where discus- sion of a loan application indicates that an offer may be made to sell the material to the United States Government, the appli- cant is referred immediately to the appropriate defense agency. Similarly, when offers to sell materials are made to the defense agencies and discussion indicates that financing may be re- quired, the applicants are at once referred to the bank. As far as possible in all such cases, negotiations with the applicant then are conducted jointly by the various agencies concerned. The bank in its decision as to whether a loan application re- lating to materials production should be given consideration is guided by the defense agency's estimate of the importance to the defense program of the specific material and proposal in question. Defense agencies, such as Defense Material Procure- ment Agency, and the Department of Agriculture, which have or can obtain information which will assist in evaluating the technical feasibility of a project, make such information freely available to the bank. Where a loan is requested for the production of essential materials which will be sold under contract to the United States Government, the bank endeavors to arrange the credit terms in conformity with the provisions of the purchase contract. Insofar as possible, payments of bank loans are to be com- pleted within the life of purchase contracts and borrowers are asked if possible to provide for these payments by instructing the purchasing agency to assign to the bank an agreed amount due by that agency for each purchase made under the contract. In the case of each loan application involving production abroad of a defense material, the bank endeavors through negotiation with the applicant to work out financial arrange- ments which will permit establishment of the credit under the provisions of and with funds available under the Export-Import Bank Act of 1945, as amended. Where such arrangements cannot be consummated, however, and a finding is made by the bank that, because of the nature of the risks involved, the bank is not prepared to make the loan under its own act and from its own funds, the bank forwards the case to the relevant defense agency for consideration of the issuance of a certificate of essentiality as provided for in Executive Order No. 10281. If a certificate of essentiality is issued, the bank is thereby authorized to establish the credit in question under the pro- visions of section 302, and with funds made available to it pursuant to the provisions of section 304 of the Defense Pro- duction Act of 1950, as amended. In the event that the bank should determine that a duly certified loan application should be denied, it so advises the certifying agency. If, after consul- tation, agreement cannot be reached between the agency and the bank, the agency may submit the matter to the Director of Defense Mobilization for decision. The financial policies of the bank, like those of other agencies of the Government concerned with financial matters abroad,^ are subject to review by the National Advisory Council on International Monetary and Financial Problems. In connec- tion with Government financing for the development and pro- duction abroad of essential materials, the Council has recom- mended the use of certain uniform credit terms for advances by defense agencies as well as loans by the bank. EVALUATION OF PROJECTS Projects to be bankable must prove to be satisfactory in a number of respects, of which the following are merely illustra- tive. Using production of essential minerals as an example, the project should demonstrate that ore reserves have been proven up in an amount sufficient to justify the scale of operation con- templated. The proposed method of extraction and treatment should be an established one and the estimated costs involved should be reasonable. Of the estimate of total capital cost including work- ing capital, a reasonable proportion should be provided by equity investment and there should be evidence that the re- mainder, which is sought from the bank, cannot be obtained on reasonable terms from other sources. Active direction of construction and operation should be by persons or firms ex- perienced in the work. Pro forma financial statements should show that the project can be operated at a profit after depre- ciation, taxes, and amortization charges, and market informa- tion (e. g., Government or industrial purchase contracts, or general market forecasts) should support the revenue date util- ized in the pro forma financial statements and cash flow sheets. Where exchange or export restrictions are imposed by the government of the country concerned, evidence also should be furnished that exportation of the mineral will be permitted and that, if dollar exchange must be obtained for debt amor- tization, the relevant authorities would be prepared to assure its availability. Finally, if a guaranty of payment of interest and principal is to be offered, information showing the nature and financial responsibility of the guarantor should be supplied. SPECIAL PROBLEMS ABROAD Many problems arise in connection with attempts to finance the production of essential materials abroad. There are three major types of problems, namely, lack of equity capital, lack of assurance of a continuous market, and lack of cooperation by the governments concerned. Equity Capital. Undoubtedly many cases, in which the absence of adequate equity capital inhibited projects for ma- terials development, have failed to reach the bank, but a number of such cases have come to its attention. Several types of cases may be distinguished. In some instances the owners of the property or concessions on which the materials are located or on which they might be produced do not themselves have adequate funds for invest- ment and are unable to interest other investors in joining with them on an equity basis. As a general rule, potential investors will not choose foreign investment opportunities in preference to domestic ones where they believe rightly or wrongly that the risks are materially greater abroad unless the probable returns are demonstrably much more attractive than the relatively assured ones from the more widely understood domestic op- portunities. Page 123 In many instances the owners of the property or the sponsors of the project do not themselves have adequate capital but could interest other private investors in participating on an equity basis. This step the owners may be unwilling to take, however, because they would be required to surrender a con- siderable share of the anticipated profits or control of the project in return for the additional private investment. In some instances, sponsors have been willing to give up some share in the project but the various parties concerned could not negotiate an agreement which they all regarded as satisfactory. In a considerable number of cases the owners or sponsors have, or have access to, ample investment funds but are un- willing to invest them in the particular project. Many factors may be responsible for this situation. Among them is the risk which may be involved in establishing a new and untried enter- prise. Frequently, private investors are determined to limit the amount of their equity investment in relation to the amount which might be loaned by the bank because of their uncertainty regarding the treatment which may be accorded their invest- ment in the foreign country and their corollary feeling that the larger the U. S. Government stake in the project, the more their own equity capital investment will be protected. More- over, in some instances adequate equity capital is not offered simply because the equity investor is convinced that his bar- gaining position vis-a-vis the U. S. Government with respect to the production of essential materials is good enough to per- mit him to get by with a minimal equity investment. In the bank's experience this attitude has been somewhat more typical of large and established corporations than of relatively small or new enterprises. There are at least three reasons why lack of adequate equity capital presents a problem to the bank. Absence of equity investment may mean in practice that there is no suitable entity with which the bank can negotiate or to which it can extend a credit. More important is the interrelationship of equity invest- ment and adequate exploration of properties and development of processes. Insufficient preliminary exploration to prove the extent of reserves in the ground or of pilot plant operations to prove the feasibility of new processes may prohibit the making of development loans and indeed may make difficult the raising of additional equity capital on reasonable terms. Naturally, the sponors of projects are better able to command the attention of potential equity investors, as well as of the bank, if reserves are proven, methods are tested, and technical and economic feasibility have been demonstrated. To cut the Gordian knot which this situation sometimes presents, the Defense Materials Procurement Agency is authorized to provide funds under cer- tain conditions for exploration and preliminary development abroad. Finally, inadequate equity investment in a project may lead to the undersirable situation in which the losses in an unsuccessful project are almost solely for the Government's account, whereas if successful the profits for the investor are excessive. Continuous Market. Efforts to expand the production of essential materials in a period of emergency involve the financ- ing of projects wherein amortization may not be completed until after the emergency has passed. Since the currently high prices of essential materials may decline after termination of the emergency or as the result of establishment of new produc- tion facilities, and since some projects for such production are high-cost or marginal ones, large market risks may be involved in their financing. To the extent that U. S. Government pro- curement agencies are prepared to enter long-term purchase or floor-price contracts, these risks may be so reduced as to permit of the necessary loan financing. This sort of safeguard is not so readily available, however, where U. S. Government purchase contracts cannot be obtained, as in the case of ma- terials to be utilized outside the United States (e. g., copper, nickel, sulfur, or zinc to be produced abroad for sale to countries other than the United States). Government Attitudes. Efforts to finance particular proj- ects for the production abroad of essential materials may be unsuccessful because of attitudes taken by the government of the country in which the materials occur. Among such attitudes are embargoes on the exportation of specific materials, restric- tions upon the investment of foreign capital or the return of profits thereon which prove discouraging to equity investors, attempts through bargaining with the U. S. Government to obtain a quid pro quo in scarce materials, and labor or other laws which so increase the uncertainties of doing business or the cost of production as to discourage private investors from undertaking projects in the country. References Elsewhere in This Report This volume: Counterpart Funds for Raw Materials. Government and Management Contracts. The IBRD and Materials Development. Incentives for Minerals Industries. Guaranties for Foreign Investment. United States Private Investment Abroad. Page 124 Report 15 Counterpart Funds for Raw Materials This paper is concerned with the functions performed by the Economic Cooperation Administration in purchasing and stim- ulating the production abroad of industrial materials in which the United States is deficient or potentially deficient. From the beginning of 1952 these functions have been shifted to the De- fense Materials Procurement Agency and have been carried out together with the broader functions of that agency in the foreign materials field. Since the D. M. P. A. has only recently gotten under way the present account is limited to the program as carried on by E. C, A. up to the end of 1951. The objectives of the E. C. A. materials program were (1) in areas in which E. C. A. had statutory responsibilities, to in- crease the supply and production of materials in which the United States resources are deficient, and (2) to increase the United States supply of materials by acquisitions for the United States stockpile. This program, in operation for 3l/o years, had two distinct aspects: (1) short-term purchases of strategic ma- terials in E. C. A. countries and their dependent overseas terri- tories with 5 percent counterpart local currency, and (2) ex- ploration for and development of production of materials required by the United States as a result of deficiencies or poten- tial deficiencies of resources within the United States by means of advances of dollars and local currency to private producers and participating countries. Purchases and Advances E. C. A. had purchased, as of December 31, 1951, approxi- mately 103 million dollars worth of strategic materials for the stockpile, of which 81 million were paid for with counterpart funds. These purchases were made in close cooperation with the Munitions Board and with the Emergency Procurement Service of the General Services Administration and have in- cluded a wide variety of materials such as rubber, industrial diamonds, bauxite, fluorspar, and beryl. Such purchases were generally made only of materials high on the Munitions Board list of strategic materials in short supply. Tables I and II show in summary form E. C. A. 5-percent purchases of strategic materials through December 31, 1951. A detailed analysis of procurement methods, techniques, and purchase contracts is given subsequently. As of December 31, 1951, E. C. A. had executed exploration and development contracts in the aggregate amount of about 114 million dollars in dollars and local currency (of which 25 million dollars represents dollar advances). These contracts basically provided for advances by E. C. A. in dollars and local currency and for repayment of these advances by deliveries of the particular material to the Emergency Procurement Service. The basic purpose of this aspect of the E. C. A. Strategic Mate- rials Program was twofold: (1) to stimulate exploration for and development of strategic materials by making advances to Table I.—Purchases and projects [Contracts signed through Dec. 31, 1951, by countries] PURCHASES Country Dollars e. a a. Total counterpart United Kingdom $3, 437, 892 *EPS 16, 719, 020 *EPS 1, 524, 583 *EPS $41, 517, 926 7, 383, 556 $44, 955, 818 24, 102, 576 13, 663, 960 2, 273, 178 17, 885, 191 France Netherlands 12, 139, 377 2, 273, 178 Germany Other countries 80, 995 *EPS 17, 804, 196 Total—all purchases. 21, 762, 490 *EPS 81, 118,233 102, 880, 723 PROJECTS United Kingdom $13, 138, 599 ECA 7,923,025 ECA $32, 359, 600 18, 474, 251 $45, 498, 199 26, 397, 276 1, 263, 933 17, 423, 810 5, 435, 664 1, 700, 000 France Netherlands 1, 263, 933 17, 423, 810 Germany 222, 193 ECA 1, 700, 000 ECA 16, 105 ECA 134, 000 ECA 5,213, 471 Belgium 1, 100, 000 1, 116, 105 194, 714 60, 714 Italy 1, 804, 600 ECA 465, 000 ECA 2, 278, 180 174, 825 2, 278, 180 1, 979, 425 10, 000, 000 10, 465, 000 Total—all projects. 25, 403, 522 ECA 88, 348, 784 113, 752, 306 All E. R. P. coun- tries, total—pur- chases and proj- 47, 166, 012 169, 467, 017 216, 633, 029 "^Emergency Procurement Service. Table II.—E. C. A. purchases of strategic materials [Contracts signed through Dec. 31, 1951, by commodities] ECA 5 percent counterpart Commodity (in dollars) Alumina 1,049,880 Aluminum 2, 763^ 140 Bauxite 4, 291, 095 Beryl 112,922 Cobalt 997,017 Coconut oil 219,129 Cryolite 562, 446 Diamonds (ind.) 9, 428, 708 Feathers and down. . . . 728, 357 Fluorspar 1,160,500 Glass (optical) 432,460 Graphite 3, 258, 200 ECA 5 percent counterpart Commodity (in dollars) Lead 1,140,885 Magnesium 2, 688, 880 Mercury 10,208,890 Mica 534,188 Monazite (cone.) 22,429 Palm oil 3, 340, 141 Platinum 3, 066, 114 Quinidine 2,223,213 Rubber 24,319,387 Sperm oil 1, 413, 417 Sisal 6,156,479 Tantalite 10,969 Page 125 private companies and to participating countries for such pur- poses, and (2) to increase the United States stockpile of strategic materials by having these advances repaid by delivery to the Government of the materials themselves. Statistical summary of E. C. A. materials program, Dec. 31, 1951 [In United States dollar equivalents] (i) 5 percent purchases: Contracts signed 1 SI03, 000, 000 Pending contracts 7, 000, 000 (ii) Exploration and development projects: Contracts signed 2114, 000, 000 Pending projects 3105, 000, 000 122 million in dollars, 81 million dollars in local currency. 2 26 millions in dollars; 88 million dollars in local currency. 3 9 millions in dollars; 96 million dollars in local currency. Table III.-—E. C. A. advances on strategic material projects [Contracts signed through Dec. 31, 1951 by commodities] Totals EC A advances {in Commodity dollars) Aluminum 55, 947, 474 Asbestos 288,400 Beryl MT units BeO.. 142, 857 Chrome 4, 074, 572 Columbite (55 cone.) 265, 000 Copper 27,294, 600 Diamonds (ind.) 4, 809, 284 Fluorspar 142,857 Totals EC A advances {in Commodity dollars) Lead "] Zinc 13, 171, 558 Cadmium J Manganese 138,953 Mullite 112,000 Nickel 965,000 Tin 1,700,000 Tungsten 174,187 Other E. C. A. programs and functions have had a direct bearing on the materials program: a) As a "claimant agency" under the Defense Production Act, E. C. A. was able to expedite purchases of United States machinery and equipment required for materials projects. b) The Technical Assistance Program of E. C. A. has sponsored many types of surveys in participating countries and their dependencies the results of which have aided exploration for and development of materials in these areas. c) The Industry Aid Program has stimulated productivity of materials in participating countries (e. g., coal mining in Germany by supplying needed equipment). Program Criteria The basic objective of the Economic Cooperation Act of 1948, as amended, was, of course, the establishment in Euro- pean countries of a "healthy economy, independent of extraor- dinary outside assistance" including the expansion of produc- tion, increased foreign trade and internal financial stability. The Economic Cooperation Act, as amended, and the legis- lative history relating thereto indicate that one of the objec- tives of the act was the expansion of the production of materials required by the United States because of deficiencies or poten- tial deficiencies in its own resources (see sees. Ill (c) (1), 115 (b) (5) and (9), 115 (h) and (i), 117 (a)). The defense program, since Korea, has materially added to the previously high level of civilian consumption of basic raw materials in the United States and European participating countries. This obviously required increased production of such materials. It is difficult to evaluate the effect of the approximately 103 million dollars local currency counterpart and dollar purchases in the light of the above criteria. Insofar as such purchases in- volved additional demand for the materials purchases, they have contributed in some measure to the maintenance of pro- duction of the materials to the economic advantage of the pro- ducers in the participating countries. Insofar as such purchases may have represented substitution of local currency payment for normal dollar or other foreign exchange payment, they would not have been advantageous to the participating country, at least insofar as its balance of payments was concerned. Since the 5 percent counterpart purchases represented a supplemental contribution to the stockpile, they have clearly been beneficial to the United States in meeting stockpile require- ments, particularly as those requirements have been accelerated with the defense program. Development and exploration projects which involve a net increase in production of raw materials in the participating countries and their overseas dependencies meet each of the foregoing criteria. Since the portion of the increased produc- tion required to be delivered to the United States in repayment represents a small proportion of the net increase in production, the balance may be used by the producing country either for export or for domestic consumption. Since repayment is in materials rather than in dollars there is no drain on the coun- tries5 dollar resources by repayment. From the point of view of the vastly increased United States requirements for raw materials these projects should prove helpful not only because of the material repayment feature and the usual Emergency Procurement Service option pur- chase, but also because a substantial portion of the increased output will either be sold in the United States market or will relieve the drain on United States supplies. During 1948 and 1949, when there were accumulations of surplus materials in Europe awaiting buyers, E. C. A. was able to make almost all of its purchase contracts on the basis of early deliveries, that is, within 3 or 4 months. In 1950 and 1951 there was a tendency to buy forward for periods varying from 8 months to 2 years. For example, a cobalt contract called for deliveries over a 2-year period; a mercury purchase contem- plated deliveries running for 18 months. On the other hand, purchases for industrial diamonds were necessarily "spot" be- cause the diamonds had to be available for inspection before the purchase was made. A "spot" purchase is a purchase in which delivery and payment therefor is made within 2 or 3 months of the signing of the contract. An outstanding exception to the general rule of purchases was a group of contracts for graphite from Madagascar which run for a period of 7 years with an option to the producers for accelerated delivery. All E. C. A. purchases were made for the national stockpile and, therefore, stockpile specifications were set forth in E. C. A. procurement contracts. In several instances these contracts con- tained the "acceptance" specification of the stockpile authori- ties rather than the specification for purchase, the reason being that European practice often admits material of a grade slightly below the high grades required by the purchase specifications, and acceptance specifications have been written to admit such slightly subgraded material. Furthermore, E. C. A. purchase contracts often set forth penalty and bonus provisions for mate- rial falling below or above the required specifications. A point Page 126 at which E. C. A. had an absolute right of rejection was always set forth. The quantity of any commodity which E. C. A. would attempt to buy was controlled by the target amount set by the Munitions Board. In buying with counterpart funds, E. C. A. was essentially a European buyer using European currencies in the European market and had to be guided accordingly. However, the utmost care was taken to coordinate E. C. A. prices with those quoted in this country and those paid by E. P. S. The latter coordi- nation was considered especially important in order to avoid, among other things, setting a floor under a market at a time when E. P. S. was negotiating a dollar purchase. In general, E. C. A. would make a purchase for a needed material if there was an opportunity to do so with local currency; if not, E. P. S. would buy with dollars. Earlier E. C. A. purchases were almost all made at fixed prices, but later the trend was toward pur- chases over a 1- or 2-year period on a market basis. ADVANCES FOR EXPLORATION AND DEVELOPMENT This program was conducted on a case-by-case basis with E. C. A. financial assistance dependent upon a careful engineer- ing evaluation of each project. Advances in dollars or local currency, or both, were made by E. C. A. to private producers (often associated with United States companies) and occa- sionally to participating country governments to finance pur- chases of the necessary dollar or local currency equipment and facilities required to develop existing resources, to explore for new sources of the most urgently needed materials, or in some cases to provide necessary ancillary facilities for existing pro- ducers, such as port, power, or railroad improvements. For example, 21 million dollars were advanced to develop bauxite in Jamaica of which almost 12 million was advanced in the form of dollars and the balance came out of counterpart funds. In Southern Rhodesia 14 million dollars were advanced out of counterpart funds for railway improvements in order to facilitate transport of strategic materials. E. C. A. advances were to be repaid by deliveries of particular materials to E. P. S. for the stockpile. E. C. A. advances for exploration projects were limited to the most urgently needed materials, such as manganese, cobalt, industrial diamonds, and asbestos, and the greatest emphasis was placed on those projects assuring an early return. Such exploration, it should be noted, was re- stricted to fixed areas for which there existed a sound engineer- ing and geological estimate of the occurrence of materials. The amount of E. C. A. advances under these contracts varied from a high of the equivalent of 11 million dollars to a low of $13,000. The contractor (private or participating country government) was generally required to contribute about 25 percent of the total cost of the project. This 25 percent was either subscribed by the contractor before any E. C. A. advances were made, or was put up proportionately as E. C. A. advances were requested. Advances were made periodically, rather than in one lump sum, in accordance with the specific exploration or development program, the progress of which was reviewed by the Strategic Materials Division of E. C. A. It should be noted that many E. C. A. projects involved both American and foreign investors. In such cases, the American investor often supplied the dollar share of the contractor's con- tribution, while the foreign investor supplied the foreign cur- rency contribution. E. C. A. advances were made in the form of dollars, or local currency, or both. Dollars, in general, were advanced to pur- chase supplies and equipment in the United States; local currency was advanced to pay for machinery and equipment abroad and to take care of local operating expenditures. The uses for which E. G. A. advances were made were specified in detail in exhibits attached to the contracts. The proportion of dollars to local currency advanced depended upon the nature of the project and no over-all pattern could be developed. Prior to June 1951, E. G. A. contracts provided for simple interest on the principal of advances outstanding at the rate of 4 percent for private investors and 2 l/o percent for foreign gov- ernments. In accordance with the National Advisory Council directive of June 12, 1951, these interest rates were raised to 5 percent for private investors and 4 percent for foreign govern- ments. The period over which advances were to be repaid varied between 2 to 7 years, depending upon, primarily, the amount of advances and the type of project involved (e. g., it takes a longer time to get a new copper mine into production than to obtain additional production from an existing facility). In a few exceptional cases, repayment periods extended for more than 10 years. E. C. A.'s objective in negotiating the price to be credited for pay-back materials was to arrive at the fair market price of such materials at the time of delivery. Fixed prices for materials in repayment were avoided particularly in those contracts in which repayment stretched out over a period of years. Thus, in many contracts the price provision was on the basis of the United States market price at time of delivery (e. g., the price to be credited in repayment is the average of prices for such material quoted in the E. & J. Metal & Mineral Markets for the 30-day period prior to the delivery date). In certain cases where advances were made in local currency, the price at which the repaid material was credited was based on the local market price in efTect in the participating country. All materials delivered in repayment of E. C. A. advances were to be delivered to E. P. S. for the national stockpile. De- livery terms varied with the particular material involved. In general the contracts specified delivery f. o. b. foreign port. Exploration and development contracts generally contained a provision granting E. P. S. an option to buy in dollars, after repayment of advances is completed, either a specified amount of the material over a period of years or a specified percentage of the increased production of the material. These options in effect gave the United States Government a right of first re- fusal. The price of materials to be delivered under the option was based on the United States market price at the time of de- livery or on prices negotiated by E. P. S. at the time the option is exercised. A limited supervision of actual operations was exercised by E. C. A. Quarterly reports of progress as well as periodic ac- counting for the disposition of all E. G. A. advances were re- quired from the contractor and E. C. A. reserved the right to consider the contractor in default if there was any deviation (without prior E. C. A. approval) from the exploration or development program contemplated in the contract. On occa- sion a qualified person was sent to the scene of operations in order to review the progress made. These contracts did not provide for mortgages or other liens in favor of the Government on the contractor's real or personal Page 127 property in the event of default because (a) in the past the participating countries objected to such provisions; (b) any property obtained through foreclosure by the United States Government after difficult and lengthy litigation in foreign courts would be of dubious value to the Government; (c) it seemed politically undesirable for one sovereign government to attain title in this manner to real estate located in other countries. E. C. A. contracts generally contained, however, covenants by the contractor that he will not, until repayment of E. C. A. advances is completed, (a) make any dividend distributions, (b) borrow additional funds without prior E. C. A. approval, or (c) substantially alter the ownership of the enterprise. All E. C. A. exploration and development contracts were subject to the approval of the participating country prior to execution, as required by section 117 (a) of the E. C. A. Act. References Elsewhere in This Report This volume: Export-Import Loans for Development. Government Exploration for Minerals. Guaranties for Foreign Investment. Incentives for Minerals Industries. Stockpiling Materials for Security. United States Private Investment Abroad. Page 128 Report 16 Government and Management Contracts One means of development of foreign resources which may be usable in cases in which private capital is unwilling or unable to undertake the job is that of plant construction and operation at Government expense and for Government account under management contract or similar device. That technique was used very extensively within the United States during the war; it has been used much less extensively for foreign development. This paper discusses the authority under which operations of this type have been conducted, the experience with such opera- tions, and the conclusions to be drawn from that experience as to the desirability of such operations. During the war the Reconstruction Finance Corporation, through Defense Plants Corporation, engaged extensively in constructing new plants or additions to existing plants at Gov- ernment expense. Title to the facilities so constructed was taken by the Government. The facilities were either leased at a substantial rental to a private company which operated them for its own account or leased at a nominal rental and operated by the private company for Government account under man- agement contract. In the latter event the management and operation of the plant was handled, in the case of metals and minerals, through the Metals Reserve Corporation, another R. F. C. subsidiary. Under this program R. F. C. built 920 new plants, costing more than 6 billion dollars and built ex- pansions to 122 existing plants in the amount of 740 million dollars. Substantially all of this construction was within the United States. In a few cases, however, D. P. C. constructed foreign facilities along essentially the same pattern. Seven plants were so constructed in the Western Hemisphere for a total investment of about 61 million dollars.1 This device of Government construction and ownership of plant facilities was adopted toward the end of 1940 when it became apparent that there was much construction needed for war purposes which would very possibly be surplus at the end of the war and in which accordingly private capital was extremely reluctant to invest. One proposal was that such financing be handled through Government loans which would be repayable solely from production by the new plant and would not otherwise constitute an obligation of the borrower. As an alternative to this proposal, under which the private enterprise would have made no investment and incurred no risk but would receive the possibility of substantial profits, the idea of Government ownership of the facilities was evolved and 1 Report of Jesse H. Jones, Secretary of Commerce, to the President of the Senate, Jan. 15, 1945. The figure for foreign investments given in the last sentence is based on the total given in that report for D. P. C. invest- ments plus the amount of M. R. C.'s investment in the Greene Cananea project. finally won acceptance as affording greater protection to the public interest. In addition, it had the attraction to private interests that it eliminated many tax problems.2 D. P. C. was created by Public Law 664, 76th Congress, June 25, 1940. That act was repealed in 1947 and there is no comparable authority now existing. The amendments to the Defense Production Act proposed by the Administration in 1951 would have given like authority to the President to be exercised, presumably, through a Government corporation. This provision of the amendments did not pass. At present Government construction and operation of facil- ities for its own account either are authorized by special statute or have survived as a residual power to continue operating plants constructed during the war. The Tin Act (Joint Resolu- tion of June 28, 1947, 61 Stat. 190), authorized the Govern- ment to operate under management contract the tin smelter at Texas City, Tex., constructed under authority of the R. F. C. Act, as amended. The Abaca Production Act (51 U. S. C, 541), similarly authorizes R. F. C. to own and operate planta- tions in Central America for the production of abaca fiber. In addition six magnesium plants in the United States and the Nicaro Nickel Plant in Cuba, all of which were constructed by D. P. C. during the war are now being reopened by the General Services Administration for operation under manage- ment contract. The contracts, however, provide for such oper- ation only for a relatively short period—typically one year— after which it is contemplated that the facilities will be leased or sold. G. S. A. has no express power to operate the plants; it is proceeding on the theory that under its general powers to dispose of properties previously declared surplus it has im- plied power to operate the plants for Government account for a limited period in order to determine a reasonable selling price and to give a prospective purchaser necessary information. THE NICARO NICKEL PROJECT3 The Nicaro project at Oriente, Cuba, produced nickel from huge Iateritic ore deposits found there. The particular ores involved averaged 1.45 percent nickel, 36 percent iron, 1.5 2 Durr, C. J. The Early History of Defense Plants Corporation. Commit- tee on Public Administration Cases. Washington, D. C, 1950. 3 This section is based on (1) a typewritten report prepared for R. F. C. and now in G. S. A. files, entitled "Review of the Nicaro Nickel Project," Jan. 15, 1948, by Henry A. Tobelmann and Harry J. Morgan, (2) a fairly extensive examination of R. F. C. files, now held by G. S. A., (3) the underlying contracts, and (4) conversations with Messrs. Max Hersh, Herbert R. Rutland, and George W. Brodie of R. F. C, James H. Hart- well of G. S. A., and John J. Croston of National Security Resources Board. 206060—52—11 Page 129 percent chromium, 0.057 percent cobalt. The iron possibilities of these ores had been considered since 1908. In 1937 Pardners Mine Corp. began to investigate the possibilities of developing a process for recovering the nickel. In 1940 Freeport Sulphur Co. and other interests organized the Nicaro Nickel Co., a Delaware corporation, which purchased the ore bodies. Free- port owned one-third of Nicaro's shares and held options to buy enough additional shares to give it a 50 percent interest. By April 1941 Freeport had spent about $800,000 on explora- tion and on development of the processes. Freeport also owned and was operating some manganese mines in Cuba. In 1941 a serious nickel shortage was developing and it appeared that International Nickel Co. would require 2 years to expand its production. The Nicaro project was discussed by R."F. C. and Freeport on April 18, 1941. On July 28, 1941, an R. F. C. committee approved the construction and opera- tion at R. F. C. expense of a pilot concentrating plant in Texas. On January 17, 1942, the R. F. C. committee concluded that the process was technically and metallurgically sound. On March 12, 1942, contracts were entered into between Nicaro and R. F. C. for the construction of mining and concentrating facilities in Cuba at R. F. C. expense and operation of the facilities for R. F. C. account. A contract was also entered into for construction of a refining plant at Wilmington, Del. The decision to locate the refining plant in the United States was made because of existing tariffs on importation of nickel metal. TERMS OF THE CONTRACTS As a preliminary to the main contracts, The Metals Reserve Corporation agreed to pay Freeport Sulphur 1.1 million dollars for the entire issue of a new class of preferred stock to be issued by Nicaro, representing approximately eleven-eighteenths cap- ital interest in Nicaro. The money was to be used to finance the acquisition by Freeport of the outstanding common shares of Nicaro (then held by various private owners subject to pur- chase options held by Freeport) and to pay the balance of the purchase price on ore deposits owned by Nicaro in Cuba. D. P. C. acquired the plant site by purchase from United Fruit Co. It then entered into an agreement with Nicaro by which Nicaro leased the site at a nominal rental and undertook as D. P. C.'s agent to construct a plant. A Cuban corporation, Cuban Nickel Co., was created to take legal title. Nicro under- took to retain all the shares of that corporation throughout the life of the contract and to deliver those shares to D. P. C. on demand. It further agreed that title to the site and plant should be held for the benefit of D. P. C. and subject to D. P. C.'s directions. Nicaro agreed to pay all taxes and assess- ments against the plant and site, subject to reimbursement by D. P. C, and to comply with all applicable rules, orders, and regulations of Cuban authorities. Nicaro also entered into an operating contract with the Metals Reserve Corporation, by which it agreed to produce for M. R. C.'s account nickel oxide and refined nickel and to devote its best efforts to such production. For so doing it re- ceived a management fee equal to 3 percent of the value of the products delivered to M. R. C. Nicaro also undertook to act as selling and shipping agent to M. R. C.'s account at cost and without fee. It agreed to make the ore properties and tech- nological processes used in connection with the project avail- able without charge during the life of the operating contract. Subject to this obligation any processes developed by Freeport or Nicaro during the life of the contract became their property. In the event that the market value of products exceeded the costs paid by M. R. C. (including operating costs, the man- agement fee, depreciation on construction costs and interest on certain funds), M. R. C. was to pay to Nicaro the amount of such profits up to 2/2 cents per pounds of nickel delivered. The contracts had a 10-year term but could be terminated by either party at the end of the national emergency. Various options on termination were given. Nicaro had the option to acquire the plant and site at D. P. C.'s actual cost, less depre- ciation at 7 J/2 percent per year but in no event at less than 36% percent of such cost. If it failed to exercise that option within 6 months, D. P. C. could offer the properties for sale but for 30 days had to give Nicaro a right of first refusal on terms equal to the best offer received by D. P. C. If Nicaro exercised either of these privileges, it had to redeem at cost the preferred stock held by M. R. C. If Nicaro failed to exercise either of these privileges, the plant and site, or the entire stock of Cuban Nickel Co., became the property of D. P. C. In order to permit continued or re- newed Government operation the contracts provided that M. R. C. could acquire for 20 years the right to take ore from the ore properties and to use the processes in connection with the facilities on payment of 2/2 cents per pound of nickel con- tained in the ore taken from the properties. M. R. C. or its assignees were not required to use Nicaro's ore exclusively, but were required to pay a fee on a minimum of one-third of the ore treated in the plant. Nicaro could also use the ore but was required to leave enough in the deposit to permit operation of the facilities at full capacity for the period of 20 years. OPERATIONS UNDER THE CONTRACTS Construction began in the spring of 1942, and preliminary operations were begun in the last quarter of 1943. Operations continued until March 31, 1947, when M. R. C. directed that they be discontinued. During that period the plant processed 3,323,075 dry tons of ore from which it recovered 63,571,414 pounds of nickel plus, cobalt. The cobalt content averaged about 0.06 percent and it was concluded that it was uneco- nomic to extract it. The percentage of contained nickel re- covered was 69.32 percent. The very substantial amount of iron in the tailings was not recovered and could not then be recovered because a process for removing the chromium has not yet been developed. M. R. C. had the right to acquire title to the tailings; it did not do so, however, and a large part of the tailings was dumped in a nearby swamp. It was initially planned to produce nickel oxide in Cuba and refine it into nickel metal in the United States. The plant constructed with R. F. C. funds at Wilmington, Del., for this purpose operated only a few months and was unable to pro- duce metal at satisfactory costs. It was then discovered that the nickel oxide could be used directly for alloying, and that for some purposes it was preferable to the metal. The product was thereafter sold exclusively as oxide. The nickel and nickel oxide were sold by Nicaro as agent for M. R. C; the sale price for nickel was the same as International Nickel Co. price; oxide sold for 2 cents less a pound. Page 130 R. F. C.'s costs for the project were as follows: Texas pilot plant construction and operation (of a total cost of about $350,000) $210, 716. 76 Wilmington refinery construction 782, 284. 85 Cuban plant construction 31, 767, 552/08 Purchase of preferred stock of Nicaro Co 1, 100, 000. 00 Operating costs (of this $18,043,307.73 was spent in Cuba; the rest covers freight, selling costs, costs of operating the Wilmington refinery, etc.) 21,393,689.52 R. F. C. received metal and oxide containing 63,571,414 pounds of nickel plus cobalt, at an over-all operating cost to it of 32.56 cents per pound (exclusive of interest and deprecia- tion) , most of which was sold as oxide at prices in the neighbor- hood of 27^2 cents per pound. (Beginning with the second half of 1945, and until operations were terminated, operating costs were reduced to slightly less than sale price.) None of the in- vestment of over 33 million dollars has been recovered. Nicaro received operating fees aggregating $516,843.91. Costs proved about twice the original estimates for a number of reasons such as: changes in design which proved to be necessary as a result of experience; lower than expected recov- eries, and increases in labor costs and costs of materials and maintenance. After the Japanese surrender M. R. C. advised Nicaro that it might soon become necessary to terminate the contract, and inquired whether Nicaro wished to take over the plant for its own account. In December 1945 Nicaro declined to exercise its purchase options. Production continued until March 31, 1947, under authorizations from the Office of War Mobiliza- tion and Reconversion. Before the plant closed down, unsuc- cessful efforts were made to interest the steel companies in buy- ing it. After the shutdown, the plant was declared surplus and transferred to the War Assets Administration and thence to G. S. A., which also made a number of unsuccessful efforts to find a purchaser. REACTIVATION OF NICARO PROJECT In January 1951 an agreement was concluded with Mining Equipment Co., a New York corporation and a subsidiary of the Billiton Tin Co., a Dutch company, under which Mining Equipment Co. was to create a Delaware corporation to act as manager for a fee which starts at $20,000 a month and may reach $275,000 per annum. G. S. A. will rehabilitate and im- prove the plant at an estimated cost of $6,619,091. Present plans call for producing nickel at full scale and cobalt on a pilot scale. Eleven months after production of nickel is begun, Mining Equipment Co. is obligated to enter negotiations for a lease with purchase rights and, if within 12 months of the entry into production it has been unable to agree with G. S. A., the Government has an option to sell or lease to others. The new corporation undertakes to provide a United States sales agency. All patents, formulas, methods, plans, and proc- esses, relating to the processes used at the project, now owned by the manager, Mining Equipment Co. or Billiton or devel- oped by any of them while the agreement is in effect, are to be made available to the project without charge; but the Govern- ment undertakes not to disclose them to any third party other than a subsequent operator. A good deal of construction work has been done and opera- tions are under way. The plant was expected to be operating at full capacity by June 1952. RELATIONS WITH CUBAN GOVERNMENT AND LABOR At the outset, apparently both Nicaro and the United States Government negotiated with the Cuban Government, from whom various concessions and permits would be necessary. The Cuban Government advised the United States ambassador that it was sympathetic to the project, but would prefer to have the undertaking carried on by a company incorporated in Cuba so that there could be no direct "legal or administrative rela- tions" between official agencies of the Cuban Government and a United States agency. Such a corporation could be a D. P. C. subsidiary and D. P. C. could "naturally reserve the guaranties of an economic character that it considers convenient." The United States ambassador subsequently informed the Cuban Government that it was planned to operate the properties through Nicaro, an American corporation qualified to do business in Cuba. Apparently this was regarded as satisfactory. Many matters were negotiated with Cuban authorities: a) Permission to operate a subport at the plant was obtained and continued until operations ceased in 1947. b) Exemption from a special customs on materials imported for the project was obtained until April 22, 1944. There- after the project operated under a general exemption for mining companies to import machinery, equipment, sup- plies, and accessories. c) Exemption from consular fees was obtained. d) Exemption from the 2 percent export tax was obtained. e) Permits to construct a railway and to dump tailings in the bay were obtained. /) Difficulties were created when a local community tried to to incorporate the project into its territorial jurisdiction thereby raising the wage rate and taxing rents. g) Exemptions were sought from Cuban labor laws which imposed stringent requirements in cases of discharge of employees, which Nicaro felt to be a severe impediment. The problem continued to be a serious one in Nicaro's views. In addition, wage rates were increased during the life of the project. When Nicaro decided not to undertake private operation, the company issued a statement which indicated the relation of these local problems to the commercial feasibility of the project. On September 7, 1945, Nicaro wrote R. F. C. that it could not consider private operation until it had further information on three points: a) The operating performance of the plant. Nicaro felt that the plant was only just reaching the stage of normal opera- tions, and that it needed further cost experience. b) Labor problems. Nicaro felt that the Cuban regulations and procedures severely restricted its discretion in hiring and firing and its ability to maintain discipline and effi- ciency. In particular it felt that the payroll should be substantially reduced, and this could only be done with the cooperation of the Cuban Government and the union. Nicaro planned discussions with them. Page 131 c) Tax questions. Nicaro pointed out that during the war the project had enjoyed various tax exemptions and concessions. It planned to discuss with Cuban authorities whether these would be continued. A fuller statement of the problem from Nicaro's point of view is contained in an executive's report to Nicaro Nickel Co., dated February 1, 1946, which lists six factors adverse to opera- tions under private ownership: a) Anticipated difficulties in marketing nickel oxide, for which demand was thought to be still somewhat uncertain. b) Competition with International Nickel Co. which, because of valuable byproducts from its ore (copper, silver, and gold), was thought to be free to put whatever price it liked on nickel.4 c) Fear of reduction in the import duty on nickel metal which would reduce the competitive advantage of nickel oxide. d) The labor situation. The report pointed out that labor costs had been high and that sugar producers operating in the same part of Cuba were prospering and would probably pay even higher wages than those now prevail- ing. It added, "It is believed that these difficulties would be aggravated if Nicaro were operated by private capital." e) During the war the Cuban Government had given tax and other concessions. The report stated there was no assurance that these would be continued under private ownership for an indefinite period. /) The problem of dust control was serious both from the point of view of loss of nickel and from that of complaints by neighboring sugar plantations. THE GREENE CANANEA PROJECT 5 Operations of the Greene Cananea low-grade ore project in Sonora, Mexico, were conducted by the Cananea Consoli- dated Copper Co., S. A. ("Cananea"), a Mexican corporation. Cananea is a subsidiary of Greene Cananea Copper Co. ("Greene"), a Minnesota corporation, which is in turn a sub- sidiary of the Anaconda Copper Co. Cananea has, since the 1890's, owned ore bodies and operated mines and a smelter in Sonora, about 40 miles south of the United States border. In 1942 its existing mines contained relatively high-grade veins of copper ore which were mined by underground methods. The low-grade ore project involved an ore body owned by Cananea adjacent to the existing mines. The ore contained an estimated 1 percent copper content and lent itself to surface mining methods. In response to requests by the Office of Pro- 4 In this connection it may be noted that 2 days after Nicaro announced to the trade, in December 1945, that it was going to stop operations, International Nickel Co. announced (a) that it was raising the price of nickel metal from 29 l/i cents to 35 cents per lb. and (b) that it was building a plant to produce nickel oxide to be sold at 29 ^4 cents per lb. (2 cents above what Nicaro had been charging). At least one steel company wrote Nicaro that it thought the 5 l/i cents differential as unjustified, and that it would be prepared to pay 33 cents if metal sold for 35 cents. 5 This section is based on (1) the applicable contracts, copies of which are in R. F. C. files, (2) a printed pamphlet entitled "Chronological His- tory of Cananea Low-Grade Ore Project," Greene Cananea Copper Co., Jan. 1948, (3) "The Cananea Project," Mining World, December 1944, p. 17, and (4) conversations with Messrs. Hersh, Rutland, Brodie, and Chester S. Shade of R. F. C. and Croston of the N. S. R. B. duction Management as to means of expanding copper pro- duction, Anaconda and Greene discussed with Government officials during the fall of 1941 the prospects for developing this ore body. After making tests, Anaconda said in April 1942 that the ore body was capable of producing 300 million pounds of copper at an annual rate of 50 to 60 million pounds, but that under existing conditions the project would not be economic and Anaconda would not be justified in making the necessary investment, estimated at 12 million dollars. After further discussion, the Metals Reserve Corporation and Greene entered, on October 13, 1942, into a contract for the project, which was accompanied by a parallel contract between Greene and Cananea. CONTRACT PROVISIONS By this contract, Greene undertook to construct concentra- tion and other facilities, to mine and concentrate the ore, to smelt it at Cananea's Mexican smelter and to deliver blister copper (98.5 percent pure) to M. R. C. Greene made no undertaking as to the amount which it would deliver except to state its belief that approximately 54 million pounds could be delivered annually and to undertake to use its best efforts. M. R. C. agreed to buy all copper so delivered. It further agreed to pay Greene, as advance payments on copper to be delivered, all costs of development and plant construction (first limited to 12 million dollars; later increased to 18 million dollars) and all operating costs. On the construction program Greene was to charge nothing for the services of its officers, for office expense or overhead or for lawyers' fees. On the operation program Greene was to make available Cananea's smelter and other facilities at cost. Greene was to sell the copper at cost, receiving no management fee and making no charge for the use of its ore. The contract ran for 10 years but could be terminated by either party (a) at the end of the war emergency, or (b) after 300 million pounds of refined copper had been delivered. Greene could also terminate whenever the profit to M. R. C. (difference between Cananea's cost of production and the ex- port price for copper) equalled the amounts advanced for con- struction plus 3 percent per annum. On such termination M. R. C. would advance no further funds and was under no obligation to buy further copper, and Greene could get the use of the plant free of any control by M. R. C. by paying either a lump sum (not less than 25 percent of the sums advanced for the construction of plant and facilities) or an operating charge for the remainder of the 10-year term. The parties were free to agree on other terms. If Greene took none of these options then all facilities, materials, and equipment acquired or con- structed with M. R. C. funds were to be disposed of for M. R. C. account. M. R, C. could also terminate prior to entry into production for any cause, and after entry into production for default by Greene. On termination by M. R. C. all facilities, materials, and equipment were to be disposed of for its account. Greene exercised its option and terminated the contract on July 31, 1947, on terms arrived at by negotiation at the time of termination. Greene paid R. F. C. $4,500,000 and agreed further to pay, between August 1, 1947, and Novem- ber 28, 1954, an operating charge of 10 cents per net ton of material treated. This charge was payable whenever the Page 132 price of copper reached 18 cents per pound; an additional 1 cent per ton was payable for each 1 cent in price above 18 cents. In exchange for these payments Greene got the properties free and clear of any further obligation to M. R. C. To summarize the effect of the contract provisions, M. R. C.—through the device of advance payments of copper to be purchased—paid the entire cost of construction and opera- tion of the project. Though title to the plant facilities was ostensibly in Cananea, in reality it was in M. R. C. because on termination of the project these facilities would be disposed of for M. R. G.'s account unless Greene was willing to make substantial specified payments. Greene took no risks and in- curred no obligations other than to permit the use of its ore without charge and the use of the smelter and management activities at cost. It received no fee; its interest in the project lay in the fact that if the venture proved profitable, it had an option to acquire a valuable plant for a fraction of its cost. OPERATION UNDER THE CONTRACT Construction began in the fall of 1942 and first operations began in October 1944. Operations continued for R. F. C. account until July 31, 1947, after which Greene began opera- tions for its own account. The project involved the stripping of 27,742,980 tons of waste and the mining by surface methods of 10,320,000 tons of ore. The ore was crushed and concentrated at the plant built with R. F. C. funds and smelted at Cananea's smelter. No attempt was made to prevent comingling of ore from the project and from Cananea's other mines. Cananea simply undertook to deliver from the smelter blister copper with a copper content equal to that obtained from the project. The blister copper was then shipped to the International Smelting and Refining Co. at Perth Amboy, N. J., for electrolytic refining. R. F. C. took title in Mexico and refining and storage by the Inter- national Smelting and Refining Co. was under separate con- tract. R. F. C.'s costs for the project were as follows: cost of plant construction and mine development $18,184,585.59; operating costs (including freight, refining and contract termi- nation expenses) $17,315,166.31. R. F. C. received 120,433,480 pounds of electrolytic copper, at an average cost to it (after refining at Wilmington but ex- clusive of interest and depreciation) of 14.377 cents per pound. On termination it received $4,500,000 in lump sum pay- ment, and operating fees which aggregated $2,275,206.12, paid or accrued to May 31, 1951, and which will continue until November 1954. The cost figure of 14.377 cents per pound does not include United States duty of 4 cents per pound which a private com- pany would have had to pay but from which R. F. C. was exempted. During the period of the contract the O. P. A. maxi- mum domestic price was 12 cents and the R. F. C. premium price was 17 cents. The ore treated at the concentrator was less rich than expected; the average grade was 0.76 percent. RELATIONS WITH MEXICAN GOVERNMENT AND LABOR At the outset, the Anaconda people indicated that they would not be interested in the project until the Department of State had found out the attitude of the Mexican Government concerning (a) admission of supervisory and technical person- nel to Mexico; (b) agreements as to discharge of labor force at the end of the emergency; (c) elimination of Mexican im- port duties for plants and equipment; and (d) permission to build the necessary plant additions. At a conference between the President of the Cananea Co. and the Mexican authorities, the Mexican Government agreed (a) to grant the necessary entrance permits, (b) to eliminate from tax any interest on advances of money for construction, ■ (c) to facilitate quick importation of construction materials, and (d) to grant the company a subsidy equivalent to the im- port duties which might be levied on supplies and equipment. Apparently these undertakings were adhered to although there were some complaints of delay in getting entrance permits. The company also reached an agreement with the labor union which generally made applicable to the project the terms of the existing labor contract for Cananea's other mining operations. That agreement recognized the temporary char- acter of the project and provided for payments to be made to employees laid off on its termination or suspension. During its operation the project was faced with several demands for major wage increases and one major strike notice; these demands were typical of those facing other mining operations in Mexico. There was no significant interruption of work, though a few brief illegal stoppages did occur. MISCELLANEOUS A variety of other projects was similarly financed by D. P. C. to help meet critical materials requirements; for instance, a balsa project in Ecuador, a peat project in Canada; and D. P. C. furnished some machinery and equipment to the St. Lawrence Corp. which was engaged in producing fluor- spar in Newfoundland. Among larger D. P. C. ventures were the Vanadium Project at Jumasha, Peru, expansion of the Chile Exploration Co. copper-producing facilities at Chuqui- camata, Chile, and the production of abaca fiber in Central America. THE VANADIUM PROJECT The contract, entered into June 18, 1942, between D. P. C. and Vanadium Corp. of America (as amended October 28, 1942) recites that Vanadium Corp. of America already had facilities for mining and milling vanadium ore near Jumasha, Peru, and that it owned the site for the proposed plant. D. P. C. undertook to pay not more than 4 million dollars for the con- struction of a new plant having an expected annual capacity of 1,728,000 pounds of vanadium in concentrates. The plant was to be constructed by Vanadium at cost and without charge for general overhead. Title to the plant and site were vested in the corporation but were to be held for the benefit of and subject to the directions of D. P. C. If on termination of the contract the corporation had not purchased D. P. C.'s interest, it undertook to convey to D. P. C. title to the site and plant. (If such a transfer were prevented by Peruvian governmental authority, the corporation agreed not to operate without D. P. C.'s consent or, if obliged to operate by Peruvian gov- ernmental authority, agreed by pay D. P. C. a fee, the amount of which would be determined by negotiation or arbitration.) The contract had a 10-year term but could terminate prior to that time whenever either (a) commercial ore necessary Page 133 for its operation ceased to be readily available within a radius of 75 miles or (b) substantial use of the site and plant was no longer required to enable the corporation to furnish the Gov- ernment and Government contractors with products required by them. The project, unlike the two previously discussed, contem- plated that operation of the plant and sale of the product would be for the company's account. The company agreed, however, that during the life of the contract it would sell ore and con- centrates outside the United States only to instrumentalities of the United States Government. Sales within the United States were unrestricted. The company agreed to pay a use fee of 19.03 cents for each pound of contained vanadium in concentrates produced or treated in whole or in part by the plant. (Current prices were in the neighborhood of 30 cents per pound of contained vana- dium, although Metals Reserve bought some for as high as 50 cents.) Its obligation to pay such fees ceased when the fees paid (plus interest from the date of payment) equalled the amount expended by D. P. C. plus interest at 4 percent. Upon termination of the contract the company had a 90-day option to purchase D. P. C.'s interest on payment of the greater of the following: a) D. P. C.'s cost, plus interest, less fees already paid; b) D. P. C.'s cost, less an amount representing depreciation, obsolescence, and loss of value. If the company did not exercise this option, it had for an addi- tional 90 days a right of first refusal on terms equal to the best offer received by the Government. The contract expressly contemplated that the company would pay all tax assessments and similar charges and comply with all applicable Peruvian laws and regulations. In the event of material change in existing Peruvian rules and regulations relating to exchange, exchange control, taxes and other factors affecting the cost of operations and returns therefrom, the parties agreed to review the agreement in the light of such a change. Under this contract R. F. C. advanced $3,035,422.66. In 1946 the plant was declared surplus, and turned over to State Department's Foreign Liquidation Commission. State sold it to Vanadium Corp. Prior to the sale R. F. C. received fees and interest totalling $22,278.24. CHILE EXPLORATION COMPANY EXPANSION The April 16, 1942, agreement shows that Chile Exploration Co. had, at W. P. B.'s request, investigated the possibility of expanding copper production from its existing mining, concen- trating, smelting and refining facilities at Chuquicamata, Chile; the agreement also shows that the company had concluded an additional 50 million pounds of refined copper per year could be produced by an expenditure of approximately 5 million dol- lars and that its present facilities were more than sufficient to meet demands for copper during normal periods; therefore the company would not feel justified in making the investment for such expansion at its own expense but would, to meet war needs, be willing to do so with funds furnished by D. P. C, which accordingly undertook to advance funds necessary to make various expansions of the mining, processing, refining, transportation, power, and housing facilities at the plant and the company undertook to do the work at cost. The company was during the life of the agreement to hold title to the prop- erties supplied with D. P. C. funds for the benefit of D. P. C. and not to encumber or to dispose of those properties without D. P. C.'s consent. The company produced and sold copper for its own account. It agreed to pay D. P. C. an annual fee of 2 cents per pound on all copper produced by it in excess of 480,000,000 pounds per year (the rated capacity of its plant prior to the expansion) not exceeding a total additional production of 50,000,000 pounds. The fee was based on a price for electrolytic copper at Chile of 11J4 cents per pound and was to be adjusted on a sliding scale to variations from that price. At the end of 7 years the company agreed to pay the difference between fees paid and D. P. C.'s cost plus interest at 3 percent, or $950,000, whichever was less, upon which it received full title to the properties fur- nished with R. F. C; funds. The agreement contained a clause, like that in the Vanadium agreement, contemplating adjust- ments in the event of material change in Chilean law relating to exchange, exchange control, and taxes. Performance of the agreement was guaranteed by Anaconda Copper Co. Under this contract R. F. C. advanced $4,999,850. It re- ceived $2,890,360.97 in annual fees and $950,000 upon termi- nation. It thus recovered $3,840,360.97, or $1,159,489.03 less than it advanced. ABACA PROJECTS P.. F. C. has been engaged, since January 3, 1942, in pro- duction of abaca fiber in Central America. Those operations were initially conducted by Defense Supplies Corporation, an R. F. C. subsidiary. The Abaca Production Act of August 10, 1950, 50 U. S. C. 541-546, authorizes the continuation and expansion of these operations for a period not to exceed 10 years. The act expressly authorizes production of abaca by the United States Government and provides that abaca fiber not needed for stockpiling may be sold. It also authorizes the con- duct of research relating to abaca production. The present plantations are being operated in Panama, Guatemala, Costa Rica and northern Honduras. All of these operations are con- ducted under management contract with the United Fruit Co. The contract for Panama and Guatemala, made June 6, 1949, is typical. The projects are operated on lands owned or leased by the United Fruit Co. The company conducts the op- erations for R. F. C.'s account and transmits to R. F. C. the abaca produced. R. F. C. reimburses the company for all operating expenses including labor costs, taxes, rentals paid to the Government, and materials and supplies acquired in con- nection with the project. R. F. C. pays a pro rata part of the overhead expenses of certain facilities of the company and its engineering, accounting, and supervisory personnel, used in connection with the project. Capital equipment supplied by the company is also paid for by R. F. C. The company receives a management fee equal to 15 percent of the annual net earn- ings but in no event less than $ 1 per month per acre of land under cultivation. The agreement has a 5-year term but may be terminated by R. F. C. at any time, without cause. Upon termination the parties agree to determine the fair value of the project as a Page 134 whole, including installations and facilities furnished by the respective parties and the land furnished by the company, and to fix the proportionate interest of each party in the project. Thereupon the company has a 120-day option to buy R. F. G.'s interest. If it fails to do so, R. F. C. can direct the company to sell its interest to a private purchaser for a price equal to its fair value. Otherwise the project is liquidated; R. F. C. is en- titled to recover all equipment, machinery, etc., which is not purchased by the company, and the company, to keep the land. The effect of this agreement on the ownership of the land and other facilities used in the project is nowhere clearly stated. Ostensibly, and certainly insofar as relations with the local government are concerned, United Fruit Co. appears the owner or lessee of the land and equipment; it is responsible for paying local taxes and for adherence to local laws. Actually R. F. C. has a recognized ownership interest in both the land and the equipment. Thus on termination either party can buy out the other one's interest (R. F. C. doing this by requiring sale to some other person) and, failing this, the project is liquidated on the basis that R. F. C. gets all the equipment and the company takes the land. CONCLUSIONS The experience described above justifies the following conclusions: 1) Indirect Government operation of extractive proper- ties abroad through the management contract technique is feasible. Several operations of this sort have been conducted in the Western Hemisphere. In many instances, it would seem that objections a foreign government may have to direct ownership and operation by the United States Government will be with- drawn if the United States uses some variant of the manage- ment contract. Thus, in the Nicaro operation the Cuban Government did not want to have to deal directly with a United States Gov- ernment agency but was perfectly content to deal with a corporation whose entire capital R. F. C. had an option to acquire. The Greene Cananea project and the Abaca projects suggest other devices by which a private company can act as the owner for all purposes involving contact with the local government, while accepting obligations to the United States Government which give it in effect most of the rights and powers of ownership. The problem of protecting the interests of the United States on termination is complicated by the fact that in some jurisdictions there may be impediments to or prohibitions against a direct transfer of ownership to the Gov- ernment such as would normally occur on a foreclosure or liquidation. This problem did not actually arise in any of the cases studied, but the conclusion may be ventured that where the Government is dealing with an American corporation having assets in the United States it probably has adequate means of protecting its rights. This was the assumption on which R. F. C. went into these arrangements and it would appear, at least prima-facie, to be valid. 2) Management contracts permit great flexibility. This device has been used for everything from the construction of an entire new plant designed to apply a new process to a totally unexploited ore body, to the furnishing of relatively small amounts of additional machinery and equipment for an existing plant. The Government can undertake the entire cost of con- struction, leaving operation wholly in private hands and reim- bursing itself through rentals or their equivalent, or it can con- duct operations for its own account, being compensated, if at all, out of profits from a product which it sells. The financial arrangements can be tailor-made to fit any particular situation; the contracts described above reflect an ingenious variety of arrangements to compensate the company for its efforts and to dispose of the facilities upon termination of the project. DRAWBACKS OF MANAGEMENT CONTRACTS 3) The device presents serious administrative problems. It is difficult for a Government agency in Washington to oversee adequately the progress of construction and operations at a project overseas. In particular, R. F. C. appears to have been dissatisfied with the progress of construction and the cost of operations of at least one of the projects under management contract, and to have felt inadequately informed even when it had personnel resident at the plant. The best solution for this problem is to be able to rely on the self-interest and efficiency of the private company which is conducting the operations. This self-interest can be stimulated either by basing the com- pany's fee on profits, as in the Abaca contract, or by relying on the company's incentive to use the operation as a means of testing out a process or facilities which it plans to use commer- cially, as with the Greene Cananea project and the present Nicaro project. 4) It has been suggested that despite the relative lack of risk of management contracts, companies tend to prefer opera- tions of their own in which they would in any event be free of continuous governmental supervision and in the event of a lucky strike make profits far beyond the best hopes from man- agement fees. Whether the reluctance of companies to devote their personnel and know-how to anything but ventures of their own has in fact resulted in rejections of particular manage- ment contract proposals, is not clear from the evidence. Since the contract can permit acquisition by the operator on favorable terms, or give him a large share of any extra profits realized in a successful undertaking, or otherwise provide inducements to counteract the operator's preference for being on his own whenever that preference is encountered, the device would seem to be flexible enough to cope with this difficulty. It should be pointed out that in some circumstances a contrary tendency may exist. Operators may find in management con- tracts a welcome opportunity to test a new process without risk to themselves or to develop a corps of managerial personnel for subsequent use in other projects and hence prefer operating for an agreed fee to risking a substantial investment of their own. 5) The device may be a very expensive one. To date the Government has recovered none of its investment of over 33 million dollars in Nicaro and about one-third of its 18 million dollar investment in the Greene Cananea project. Operation through management contract has been used, and is appro- priate for use, only in those cases in which private companies do not feel that investment is commercially warranted. In such cases the Government is taking risks which a private investor is unwilling to take and it must contemplate the possibility of substantial losses. Page 135 6) The experience discussed above does not suggest that the management contract device has significant effects in eliminating obstacles existing in foreign law or attitudes. In none of the cases studied does it appear that such obstacles were a primary reason for private reluctance to engage in the enterprise. In all metals cases the operating company had exist- ing investments in the foreign country; its reason for not want- ing to go ahead was basically a feeling that the cost, price, and market situations were such that the enterprise was not commercially practicable. 7) The management contract device may afford a solu- tion to the reluctance of private interests to invest in foreign development in the sense that under it the Government can undertake financial risks which the private company is un- willing to undertake. It affords a means for getting done a job which the Government wants done and which private investors, for any of a number of reasons, are unwilling to do. But it seems reasonably clear that its use should be confined to those cases in which security needs or some other urgent National interest justify taking a serious risk of loss. References Elsewhere in This Report This volume: United States Private Investment Abroad. Page 136 Report 17 Stockpiling Materials for Security* Materials security policy is concerned with assuring a supply of basic materials sufficient to cover essential military and civilian needs in time of major military conflict. Strategic stockpiling is one of the means. Other means may accomplish the same end, wholly or in part, before or during the conflict. The first problem in this field is that of choosing between, and of combining, stockpiling and other means of materials security policy. The second problem of interest is the efficiency of stock- piling—of maximizing the security effect while minimizing the cost (economic, political, and military) of the operation. In pages to follow, stockpiling operations will be reviewed to throw light on this problem, and on whether scope or method of the operations should be changed. The sufficiency of current stockpiling also will be reviewed. The third problem is the interaction between strategic stock- piling operations and the distribution of raw materials. This is a problem of market experience and market policy. A large stock of basic commodities either accumulated or being accumulated becomes a factor in the markets for those commodities. Prior to the advent of conflict strategic stock- piling tends to compete with demands for other uses at home and abroad, to stimulate price increases—and possibly sup- plies, or to prevent the appearance of surpluses. Releases of materials from stockpile, as far as permitted, may then com- pete with supplies from other sources and relieve shortages of materials in current use. The problems posed by stockpile purchases and release during and after the conflict are not considered here. Although United States strategic stockpiling aims at com- pletion in the relatively near future, it is likely that the three problems will remain over a longer period of time. Their clarification is needed not only for the few years of stockpile accumulation that are now foreseen but for the longer run in which both further accumulations and stock disposals may be objects of public policy. STOCKPILING AND ALTERNATIVE POLICIES The Strategic and Critical Materials Stockpiling Act of July 23, 1946 (Stockpile Act, Public Law 520, 79th Cong.), a revi- sion of the Strategic Materials Act of June 7, 1939 (Public Law 117, 76th Cong.) provides for the formation of stocks of materials for which the natural resources of the United States *This paper was condensed from a report to the Commission prepared by Horst Mendershausen, economist of the Federal Reserve Bank of New York. are deficient or insufficiently developed to supply the needs of the country for common defense. The declared intent of the Stockpile Act "to decrease and prevent wherever possible a dangerous and costly dependence of the United States upon foreign nations ... in times of national emergency," rests on recognition of the calamity that hostile interference with raw material supplies could bring to an unprepared United States economy. THE MONETARY COST Strategic stockpiling can be one of the most economical forms of material security, although the costs of acquisition can be large. At March 1952 prices, the materials in a full stockpile would cost about 9.1 billion dollars. At that timer materials worth about 3.5 billion dollars were actually on hand, and additional materials worth about 2.2 billion dollars more had been ordered. The stockpile is destined to be sold to industry during the emergency, and sales income will offset purchase outlays. The question is, to what degree? The answer depends on the de- velopment of prices and on the timing of purchases. It is conceivable that the completed operation, from buying to selling, will bring the Government a monetary profit. Outlays on stockpile buying do not indicate the cost of stock- piling over time. They should not be considered current expenditures but investment outlays, and should be carried in a "capital budget." The direct current cost of stockpiling consists of the outlays on maintenance and administration of stocks. This includes costs of facilities, construction, repair, care and processing of materials, and net rotation. It is a small part of the total pro- gram. By mid-1951 it had reached an aggregate amount of 156 million dollars, 142 million dollars on account of Public Law 520 alone. (See table I.) Table I.—Outlays on stockpile maintenance and administration under- Public Laws 117 and 520 [Millions of dollars] Mainte- nance Adminis- tration Calendar years 1 Total Prior to 1949 cumulative i 14 2 16 1949 1 19 3 22 1950 45 2 47 1951: first half j « 67 3 70 Total: to mid-1951 b : 146 10 156 n Large expenditures on rotation of perishable materials appeared for the first time in 1951. 6 Differences from detail due to rounding. Page 137 Complete accounting would, of course, require an allowance for interest. At 3 percent, the interest charge on the cumulative investment outlay of 1,614 million dollars up to mid-1951 would come to about 50 million dollars per year. Present Government accounting, however, does not take account of this aspect. In the course of time, maintenance, administration and inter- est cost may rise to large totals. Still it appears that stockpiling is a cheap way of insuring materials security. For example, the provision of enough manganese sufficient for a 5-year war from low-grade domestic deposits would probably cost more than the carrying expenses of the total stockpile of all materials up to now. At the same time, there may be a number of specific excep- tions. Perishability and obsolescence of materials may prove expensive. Nor should any finding of monetary cost be consid- ered a measure of the full burden imposed by the program, in terms of economic and political impacts. If stockpiling causes prices and wages to rise, its contribution to inflation may be a most serious liability in times of general inflationary pressure. If stockpiling disturbs the international distribution of materials it may become a center of political friction. The economies of stockpiling in general do not justify stockpiling of everything, at any speed, and at the exclusion of other preparations. MILITARY PROTECTION OF SUPPLIES AND STOCKS Forms of "saving" resources or of strengthening the com- munity for the conflict, other than stockpiling, are relevant in different phases of the process. During actual war, military force may be used to safeguard production and transportation of materials supplies or to make new sources accessible. But since the destruction of the armed forces of the enemy is the dominant military objective in war, the defense or conquest of raw ma- terial sources tends to divert military power from its main task. Whenever this diversion can be made unnecessary but is not, materials security policy has failed. Still the use of military force in wartime must be expected to affect the materials position, and its effect must be estimated in order to make reasonable preparations by economic means. First, there are the irreducible minima of reliance on such forces: (a) The protection of domestic installations, ports, ware- houses, transport and processing facilities against enemy attack, and (b) The protection of shipping lanes and foreign supply points for materials that cannot be produced or have not been sufficiently stored in domestic areas. Second, there are the probable incidental effects of a suc- cessful defense of territories, oceans, and air spaces. A conserva- tive outlook requires discarding this factor beyond some reason- able degree of confidence in the capabilities of the free world. It is discarded in present stockpile planning to a high extent. The estimates of accessibility of foreign supply sources may of course change with political developments, but the irre- ducible minima cannot be evaded. Military force must be expected to safeguard those supply sources, lanes, and facili- ties that in the judgment of the Joint Chiefs of Staffs can be protected. In particular, military force must be expected to make provisions for the defense of the strategic stockpile itself. CURTAILING CONSUMPTION IN EMERGENCY Curtailing consumption during a war is an alternative to providing supplies from a stockpile. In large measure the pur- pose of the latter lies in the avoidance of the former, but the supply program should not be burdened with allowance for unnecessary, uneconomical and technologically backward uses. It is likely, as confirmed by experience of the Munitions Board, that closer scrutiny of curtailment possibilities for some ma- terials may allow lower estimates of wartime consumption and stockpile objectives without requiring real deprivations on the part of military or civilian, domestic or foreign users. It has been reported, for instance, that there is no real need for a stockpile of natural block talc since all users of talc except one are ready to accept synthetic block made from talc powder. The stockpile of natural block is said to be solely for the con- venience of the one user who is accustomed to importing the scarce block talc from abroad, while the material for syn- thetic block is easily available in this country. It is also reported that in the steel industry a slight change in specifications with regard to manganese content could save substantial amounts of manganese ore without detriment to quality. Improvements of technology have made it possible to cut twice as many quartz oscilators from each pound of quartz crystal as in 1942. DOMESTIC PRODUCTION: AN ALTERNATIVE Readily available domestic resources and facilities of raw materials production are an obvious alternative to stockpiles. Where they do not exist or are insufficient, the lack may be overcome by additional development or by substitution. This alternative combines the provision of materials security with the economic development of the country; it may furnish eco- nomic returns prior to as well as during the emergency. If the material can be stored, and if there are no difficult marketing problems, stockpiling may be a more economical security policy than expansion. The cost of taking materials for future use out of current markets and of holding them stands a considerable chance of being lower than the cost of getting them from marginal sources. To maintain the marginal production facilities in being over some number of years is likely to cost more in higher prices or subsidies than to keep a stockpile. The national economy may get saddled with a permanent high-cost industry that requires protection and tends to reduce the ad- vantages of international specialization. The relative economic advantages of stockpiling increase as the cost of marginal production climbs and the price differential widens between purchase time and emergency time. To this may be added the security advantage of certain possession. Manganese offers a case in point. According to a statement by Dr. James Boyd,* then Director of the Bureau of Mines, before the Stockpiling Subcommittee of the House Armed Services Committee, 115,000 tons annually of domestic man- ganese ore of ferro-grade could be produced economically at the price of 77 cents per unit, which was the price of imported material in May 1950, duty paid. At 80 cents, another 21,000 tons could be produced, at $1.02 another 70,000 tons, at $1.50 *Committee on Armed Services. Stockpiling of Strategic and Critical Materials. Hearings before the Stockpiling Subcommittee. House of Repre- sentatives, 81st Congress, 2d Sess., May 1950, pp. 7587 ff. Page 138 another 205,000 tons, and at $2 as much of the 900,000 tons as would be needed to complete a total national requirement of 1,300,000 per year. Prices have changed since that time, but the cost ladder probably has not. Roughly speaking, to raise United States self-sufficiency in manganese from the present approximate 10 percent to 100 percent would require at least a doubling of the price for the bulk, if not all, of domestic man- ganese, apart from the solution of some remaining technological problems. The cost of manganese self-sufficiency thus would be extremely great, incomparably higher than the cost of stock- piling sufficient amounts of ore. Considerable weight falls on the assumptions concerning the time rate at which stockpiling could be advanced to a point of satisfying emergency needs within the time available. Stockpiling alone might add up to too little. On the other hand, expansion would require time as well, and within that time constitute a much greater drain on resources than stockpiling. There are exceptions to this general view. First, additional materials production is not necessarily more costly, because it may go hand in hand with technological change or new and favorable resource discoveries. But the cost economies may be conjectural, expected rather than experienced. Undoubtedly the security factor itself may be the catalyst of a successful new production venture. It brought the synthetic rubber industry into existence at a time when it was uneconomical in market terms. But we should be on guard against costly expansion schemes of little economic value being offered by interested parties on security grounds. They may indeed weaken security by squandering resources. STOCKPILING AND DOMESTIC PRODUCTION MAY BE COORDINATE The Stockpile Act charges the Departments of the Interior and Agriculture with certain measures aiming at the develop- ment of additional domestic sources for strategic materials. The Departments are to make investigations of the occurrence and utilization of materials, look for new methods or substi- tutes and make explorations, demonstrations, and cost studies. But the ideas about the relation between stockpiling and de- velopment under the present law have been somewhat rigid and not necessarily consonant with the stockpile law. Until recently the Munitions Board considered the development func- tion as quite outside its own field. Testifying before a House committee in early 1950, its chairman stated: "The duties of the Munitions Board lie in the acquisition and retention of stocks of materials. . . . The Munitions Board does not con-^ strue the act as conferring upon it any specific duties with reference to conservation and development. . . . There is nothing as we see it in any present law which gives us the right or duty to spend the money appropriated for stockpiling pur- poses in the development of mineral properties." * And when asked whether the Board would wish to receive authority in this direction, the Chairman observed that "subsidy activities should be kept separate and apart from stockpiling." The Director of the Bureau of Mines expressed a parallel view at the same hearings. "The (conservation and develop- ment) program of the Bureau of Mines," he said, "is designed * Op. Cit. Testimony of Hubert E. Howard, Chairman of the Munitions Board, pp. 7504 ff. not so much to assist in stockpiling as to lessen the need for this measure."! While the agreed separation of the stockpiling and develop- ment functions is administratively convenient and logical up to a point, the statute may well be read to demand that stock- piling should "encourage conservation and development" and not only provide for the "acquisition and retention of stock." By no means does it bar development for the sake of stock- piling. Stockpiling and development could therefore be admin- istered as alternatives and in combination with each other, not in entirely separate and competing empires. In late 1950, the President gave some emphasis to this view. He reported to Congress that certain domestic projects of mineral develop- ment could and should be covered by contracts out of stockpile funds and the products go to the stockpile. In creating the Defense Materials Procurement Agency in August 1951 the President made it responsible for buying materials for the Government and for stimulating new development in the foreign and domestic field. There is, of course, an automatic positive relation between stockpile buying and market and development support and no reason why it should not be frankly acknowledged. Stock- pile purchases add to demand and thus tend to sustain pro- duction or create an incentive to expansion. In practice, the programs of Munitions Board and Interior may well have been in better harmony than the discussion between the agencies suggests. The acceleration of the defense production program in 1951 and the resulting shortages of many of the critical materials have helped to bring the stockpile and development functions in the Government closed together. Since the beginning of 1951, the stockpile procurement program has placed particular emphasis on the development and expansion of supply sources. General Services Administration has entered into a number of long-term contracts encouraging the expansion of supplies of aluminum, cobalt, manganese, magnesium, and other materials in the United States, and of chromite, columbite, nickel, quartz crystals, and tungsten abroad. Programs developed by Eco- nomic Cooperation Administration, and now taken over by Defense Materials Procurement Agency, go in the same direc- tion and will channel nonferrous metals and other materials into the stockpile. SUBSTITUTION IS ANOTHER ALTERNATIVE Undoubtedly, substitution and technological change hold out vast possibilities of overcoming materials bottlenecks. They have already reduced the stockpiling needs for some materials (rubber, tin, and copper) and may reduce them for others as well (e. g., feathers; silk, and palm oil). The advent of the emergency of 1950 and of the rearmament economy have ac- celerated this development and tended to shift attention to- ward production adaptations and away from stockpiling. The cold war period has brought about the possibility, not antici- pated in previous planning, of a relatively gradual adjustment to the requirements of war economy; and as the "national emergency with respect to common defense" continues, the national economy may come to resemble a war economy in t Ibid, p. 7587. Page 139 some important aspects of resource saving and substitution. Correspondingly, stockpiling may be expected to carry a rel- atively smaller weight in over-all materials security policy than at a time of general industrial unpreparedness. Wool presents an interesting example. In the latter part of 1950 wool was added to the list of stockpile materials, but as yet no wool has been purchased. The Commodity Credit Cor- poration did buy some raw7 wool for use in the Army's War Reserve in late 1950, but this is separate from the strategic stockpile. The War Reserve consists of finished military prod- ucts and is intended to fill the initial production cycle gap of the war emergency. Meanwhile, however, large programs of synthetic wool production were developed by various com- panies who envisaged synthetics as eventually supplying 30 per- cent of the Nation's wool consumption. The programs were approved by the Director of Defense Mobilization on July 26, 1951. While it does not appear that Government funds are to participate in the large investment outlay (half a billion dollars according to press reports), the decision assures the program of tax and other assistance. In time, the program may permit a reduction of stockpile objectives, although it may not make stockpiling entirely unnecessary; it has already led to at least a postponement of stockpiling in the Govern- ment's materials security policy. IN-GROUND STORAGE AND STOCKPILING Present stockpiling is concerned with materials that have been mined or processed to an extent that insures the greatest suitability for storage while still admitting of the greatest variety of possible uses. A general principle that has gradually emerged is to stockpile materials in their "highest homogeneous form." There are two other ways of storing materials. They could be "stored" in the ground prior to mining; or highly fabricated products could be stockpiled. It appears that the Munitions Board has not accepted either. It has barred in-ground storage for the stockpile through its interpretation of the Stockpile Act with regard to conservation; and the stockpiling of more highly fabricated products through its insistance on economy (the greatest mass of material for the dollars available) and on the general usefulness of the stored articles. In-ground storage is a job of exploration and conservation. The material must be found, measured, and kept in the ground. This function is indeed far removed from stockpiling, i. e., the buying of material. The situation differs from development in the important respect that development assistance may lead to stockpiles in hand, while exploration establishes only a conjectural potential. While outside the stockpile field proper, in-ground storage may be a desirable thing for a variety of materials, e. g., petro- leum, sulfur, potash, and other minerals. But it may not always be economical compared with stockpiling. Maintenance of the located deposits in easily exploitable form may be costly. Pre- vention of flooding, combustion, or other hazards may be expensive enough to make stockpiling of the mined product preferable, provided it can be stored. Moreover, in-ground storage would not follow the principle of maximum conser- vation of manpower and productive resources during a period of war. At the other extreme there is the stockpiling of highly fabri- cated products. This can be justified on the grounds of wartime resource economy, but encounters the objection that fabricated items stockpiled may be too specific to suit unpredictable war- time requirements, and that the expense of fabrication would absorb funds that could otherwise be spent on raw materials. In the past, the Munitions Board has accepted the opposing view. THE PRINCIPLE OF "HIGHEST HOMOGENEOUS FORM" The principle of stockpiling the "highest homogeneous form" of materials has evolved only slowly and has been overshadowed at times by the principle of amassing the largest volume of material at the lowest cost. This second principle has favored the lowest degree of fabrication. It seems that for the price of one unit of aluminum, four times as much aluminum could be obtained in the form of bauxite; for one unit of ferro- vanadium, 20 times as much in vanadium ore; for one unit of ferromanganese, 22 times as much in manganese ore. As late as in May 1950, the Munitions Board Chairman declared: "Generally, it has been our principle that we will buy the ore and not go through the process of refining, the expensive process. ... In other words, we are trying to make our money go as far as we can in building up our reserve."* Although the Department of the Interior, the Surplus Prop- erty Administrator, and the Aluminum Industry Advisory Committee recommended the forming of an aluminum metal stockpile repeatedly from 1945 to 1949, the Munitions Board defended its stockpiling of bauxite as dictated by reasons of economy. The resulting delay in aluminum stockpiling is un- fortunate in three respects. First, owing to their concentration in a few plants, the alumina and aluminum industries in the United States and Canada are vulnerable in wartime. Second, they consume great amounts of electric power that would be more available in peacetime than in wartime. The conversion of the bauxite stockpile into aluminum during the war is beset with strategic risks and economic costs. Third, the great in- crease in the current demand for aluminum under the new rearmament program has made it extremely difficult to direct aluminum to the stockpile in 1951. After the Second World War (when the Reconstruction Finance Corporation stock- pile of 180,000 tons of aluminum was sold to industry) and subsequently, there was aluminum but no money or intent to stockpile it. Today the intent and money are there, but there is too little aluminum. Metal-grade bauxite continues to be on the stockpile list and more of it is being added to inventory'. The Munitions Board hopes to see some of it processed in the future but it also reasons that there should be a stockpile of the ore to feed the alumina plants in wartime. Alumina itself cannot be stored. It should be recognized that the degree of homogeneity (or of versatility for subsequent processing) declines gradually as one proceeds to advanced products of processing. The most suitable degree of homogeneity depends on the existing range of applications of the material, including old and novel uses. In some cases it may well be that two or more forms of a material would be suitable. Accordingly, it could be argued *Ibid, p. 7513. Page 140 that it might be good to process part of the stockpiles of some ores into metals and part of the stockpile of metals into some common basic shapes. But the danger of obsolescence must not be overlooked, and stockpile specifications steer clear of forms that are highly susceptible to it. The experience of the Munitions Board with jewel bearings is instructive. In this case, the development of a new military watch by one firm made part of the stockpile of jewel bearings obsolete. the "buy American'" provision The development of foreign resources may offer alternatives to domestic stockpiling, possibly in the form of stockpiling on foreign soil, or it may feed into the United States stockpile. Up to now it has worked in the latter direction. The Economic Co- operation x\dministration endeavored to increase supplies of strategic materials to the United States from dependent overseas territories of European countries and from other places. A sub- stantial part of the deliveries that have been made so far have been sold to the stockpile. Up to July 1, 1951, E. C. A. pur- chases for the stockpile amounted to approximately 70 million dollars worth of strategic materials. About 56 million dollars in value of such materials had been delivered to the stockpile. Various exploration and development projects are under way. Materials of foreign origin necessarily play a major role in stockpiling. This follows directly from the use of the basic cri- teria of strategic scarcity. Even so, Congress wrote a "Buy American" provision into the Stockpile Act over the President's strong objections, and it has been the responsibility of the Munitions Board (a) to determine with respect to which ma- terials the application of the Buy American Act would be in the public interest, and (b) to set the maximum margin above market prices that could be paid to domestic producers. By May 1950, the stockpile had bought domestic manganese, beryl, and chrome ore at prices beyond the going world price. It was then following the rule of limiting the allowable price margin to 25 percent above world price, plus any tariff. This rule is no longer applied rigidly. The Board is now under instructions to judge the reasonableness of a price differential in each particular case and to exceed the 25 percent limit in exceptional cases justified by strategic urgency. By June 30, 1951, 77 percent of the materials purchase expenditures under Public Law 520 had gone for foreign materials. CONTROL OF PRIVATE INVENTORIES Control of private inventories offers a possible alternative to Government stockpiling. The Government might enjoin producers, traders, or consumers of specified materials to hold minimum strategic reserves as part of their inventories. Econ- omy and dispersal of storage would be conceivable advantages. The Munitions Board staff has considered a form of this alternative but rejected it for reasons of economy. It had re- ceived a proposal to set up a stockpile corporation that would borrow money from banks in order to buy and hold materials. The disadvantage seemed to lie in the fact that the corporation would have to pay interest on the money and would require price guaranties from the Government in order to obtain bank funds. CHOICES AND COMBINATIONS: LONG-RANGE POLICY Choosing between the various alternatives of materials se- curity policy and combining them is an important task of Government. It is a difficult task because of the complexity of the issues, the uncertainty of many factors, the changing con- ditions and the pressure of special interests. Since the stockpiling program has been the main arm of Government policy in this field for some time, and since it operates under a special statute, stockpiling has come to occupy a central position. The agencies in charge of it, in particular the Munitions Board and the Interdepartmental Stockpiling Committee, have been concerned primarily with the building up of the stockpiles. It has not been their function to chart alternative programs. Quite understandably, they have been partial to stockpiling. Various drawbacks to this one-form policy have become noticeable. As an adjunct to the Military Establishment, the Munitions Board has felt that certain form of materials security policy (e. g., development) are outside its field because they relate to the economy in general. Moreover, up to the passage of the Defense Production Act, the Government does not seem to have had sufficient authority to develop the production of critical materials either at home and, except for E. C. A. coun- tries, abroad. Since that time the Defense Production Admin- istration has authorized a domestic exploration and develop- ment program for vital materials. By August 27, 1951, 116 project contracts had been approved, with Government par- ticipation amounting to 50 to 90 percent of the cost. Nearly all the projects were concerned with materials on the strategic stockpile list. Effective administrative machinery has been developed in the Defense Production Administration in order to meet the short-run problems of coordinating stockpiling with related ac- tivities. In the fall of 1950, the stockpile programs collided with requirements of industry for raw materials, and as a result the Munitions Board was refused automatic access to stockpile acquisitions. The need for a closer dovetailing of stockpiling with other essential requirements was strongly felt, and the responsibility was given to the Vital Materials Coordinating Committee (later renamed Defense Materials Operating Com- mittee), an interdepartmental organization under D. P. A. chairmanship. Since early 1951, this Committee has labored to fit stockpiling needs to direct military procurement, indirect defense production, and civilian production and exports. In the process it often had to deny materials to the stockpile even if they had been ordered and bought for the stockpile. But this Committee is concerned with short-run outlook. It deals only with current acquisitions, and as a rule its planning does not reach beyond 12 months. The National Security Re- sources Board was established to assume the long-range respon- sibility, but a combination of events has interfered with full exercise of that function. Following the outbreak of the conflict in Korea, however, the Board experienced first a shift of its activity from long-range planning to short-range operation work, and then—with the creation of the defense agencies—a decline in its total activity and a considerable loss of staff. Now that the emergency has led to a broadening of govern- mental powers in the field of economic security preparations, it is desirable to find an effective instrument of long-range policy Page 141 making in this field. The cold war may last long and some choices and combinations of materials security policies have to be made for years ahead. THE EFFICIENCY OF STOCKPILING However desirable the accumulation of strategic stocks for emergency times, it should not be excessive. The country or the free world can incur unnecessary disturbance and expense in pushing stock accumulation too far. Conversely, however attractive the substitutes for stockpiling, the country should not go too slowly in its accumulation and spend too little. How can the proper balance be found, in general, and for particular materials? How has the balance been sought in practice? What improvements can be suggested? RATE OF ACCUMULATION HAS FLUCTUATED There have been critical statements about over-stockpiling and under-stockpiling of various materials at certain times. The Senate Preparedness Subcommittee (Johnson Committee) accused the Munitions Board of "dawdling idly over the tung- sten stockpile" since the Second World War, and of ''failing clearly and miserably" in its responsibilities for wool. On the other hand, excessive United States stockpiling was a target of British and other Allied criticism in later 1950; and economic observers remarked that light buying in slack markets and heavy buying in the boom showed the commercial ineptitude of the stockpilers. Undoubtedly the rate of stockpile acquisition has varied greatly. As shown in table II, obligations incurred have risen (in late 1948), fallen (early 1949), risen moderately (to the end of 1950), and then, very greatly (early 1951). Table II.—Obligations incurred under Public Law 520 a Million dollars Prior to June 1948 310 July to December 1948 402 January to June 1949 54 July to December 1949 279 January to June 1950 401 July to December 1950 430 January to June 1951 1, 645 Net total 6 3, 522 a Stockpile Report, July 23, 1951, p. 44. b Excluding receipts from rotation sales. An index of the physical volume of the stockpile, computed on the basis of June 30, 1951, prices rose by 40 points during the year 1949, and in the several following 6 months' periods by 7, 32, and 25 points respectively. (See table III.) Table III.—Physical volume index of strategic stockpile inventories0, [June 30, 1951 prices] Dec. 31, 1948 60 Dec. 31, 1949 100 June 30, 1950 107 Dec. 31, 1950 139 June 30, 1951 164 a Source: Stockpile Report, July 23, 1951, p. 11. These variations, in particular the slow rate of growth in the first half of 1950 and the fast rate in the following year, raise the question whether stockpiling was excessively slow at the beginning and too fast later. But there is a danger of misplaced criticism. Undoubtedly, the Korean outbreak created a sense of ur- gency lacking before. To strike an even pace of acquisitions over the years 1949, 1950, 1951, the Munitions Board would have had to foresee this condition, persuade the Budget Bureau of the need for larger appropriation requests—at times in the face of a low ceiling for defense expenditures—and persuade Congress to provide appropriations in time. Or else, to take better advantage of the trade recession in 1949, the Administra- tion would have had to ask for more money in time, the Muni- tions Board to commit its funds more judiciously, and Con- gress to pass the supplemental appropriation in early 1949, as requested, and not in June. It would have taken more foresight and cooperation at all these levels to make the trade record of the stockpile appear more even. The really difficult problem of efficiency in this program is to find the best balance at a given time and in advance. This would have been somewhat easier if appropriations and con- tract authorizations for the total contemplated stockpile had been asked for and obtained at an early time, although even then there would have been opportunity for misjudgments in use of funds. As it was, annual requests and appropriations helped to make stockpiling subject to changing political moods, today, and forced feeding tomorrow, have been a cause of waste in the program despite many efforts to make its detail efficient. For instance, instead of the approximately 550 million dollars that were spent in fiscal 1951 on acquisitions of mate- rials (raising the physical volume of the stockpile by about 54 percent) probably only about 300 million dollars would have had to be spent to obtain the same rise of volume at December 1949 prices. The simple prescription of setting the course and following it through would not be entirely realistic. A frozen program, even allowing some flexibility, is apt to become inefficient when goals change; and the goals of a stockpile program are apt to change owing to changes in strategic, economic, technological, and other factors and in assumptions about their future development. To illustrate, expansion of aluminum production may cut the aluminum objective, and a new electrolytic method of sharpening tools may reduce considerably the stockpile needs for industrial diamonds. Some of these changes were not fore- seeable, say, a year and a half before. Others still are uncertain. Still others should probably have been taken into account at an earlier time. In any event it is unlikely that any stockpile pro- gram will proceed over a number of years in the way it was originally charted. In planning stockpile objectives the Munitions Board has taken into account new developments in discovery, substitu- tion, and technology only to the extent that they had been put into practice. Delays in recalculating requirements in this regard have been considerable in some cases, although the Munitions Board does inquire frequently into the status of new developments and presses for final decisions by the armed services. Page 142 ADMINISTRATION OF THE STOCKPILE The process of stockpiling consists of four main parts: the formulation of objectives, and the acquisition, holding, and disposal of stocks of materials. The formulation of objectives is the business of the Munitions Board and the Department of the Interior; acquisition, storage, and disposal, that of the Emergency Procurement Service of the General Services Ad- \ ministration working under the general directives of the I Munitions Board. Since the beginning of 1951, the Vital Materials Coordinating Committee and its successor, the De- fense Materials Operating Committee, in D. P. A. has assumed a considerable degree of control over stockpile acquisition rates. Purchases abroad by E. C. A., and—in the earlier stages of the program, mainly prior to March 31, 1950—transfers of sur- plus Government stocks and of other Government holdings of strategic and critical materials also have been fed into the strategic stockpile at the discretion of the Munitions Board. , G. S. A. holds title to all stockpile materials however acquired. The Munitions Board is assisted by two sets of interdepart-" mental committees and by the advice of the Joint Chiefs of Staff. Fourteen interdepartmental commodity committees as- sist in the preparation of data sheets for stockpile planning. Since May 1949, the Interdepartmental Stockpiling Commit- tee has been assisting in reviewing and making decisions on objectives, purchase, storage, and disposal of materials; while the Interdepartmental Stockpile Storage Committee has been dealing with terms of leases, methods, and location of storage. All these committees are now chaired by Munitions Board per- sonnel. The Joint Chiefs of Staff give strategic guidance. The National Security Resources Board has general respon- sibility for coordination of the program and for recommenda- tions to the President on issues of policy. It has exercised the function of a review body until the beginning of 1951. Prior to the establishment of the Defense Production Administration, stockpiling led a life of its own as the sole economic arm of national security policy—besides such functions as provided in the Rubber Act of 1948, the Tin Act of 1947, and the Abaca Production Act of 1950. Beginning about February 1951, stock- piling became one segment of materials security policy, one pub- lic claimant among others for scarce resources. Since then, the review work has moved into the Defense Materials Operating Committee (D. M. O. C.) of the Defense Production Admin- istration and at the same time has become more operational in nature. Since a good part of N. S. R. B.'s personnel in charge of stockpile policy moved over to D. P. A., N. S. R. B.5s role in the stockpile program has diminished. The Defense Materials Operating Committee now is in the focal point for the formulation and coordination of policies and programs for materials that are essential for the defense effort. It holds the check reins on the stockpiling program, with au- thority in matters pertaining to current additions to and withdrawals from the stockpile. The membership of Defense Materials Operating Commit- tee includes representatives of Defense Production Administra- tion, National Production Authority, Defense Minerals Admin- istration, General Services Administration, Defense Materials Procurement Agency, Commodity Credit Corporation, Mutual Security Administration, Munitions Board, and State Depart- ment, National Security Resources Board, Budget Bureau, Re- construction Finance Corporation, and National Shipping Administration as observers. Nearly all member agencies are also represented on the Interdepartmental Stockpiling Commit- tee, usually by the same individuals. Stockpile Objectives Stockpile objectives for some materials have remained fairly constant. Others have changed more or less drastically over the years. The objectives for the various materials are not dated. For some materials the objectives had been reached by June 30, 1951. For others, objectives are expected to be reached vari- ously in fiscal 1952, 1953, 1954, and 1955. But these expecta- tions are not firm commitments. The original plan of an approximate 5-year span to completion seems to have moved forward with time. The achievement of any target is of course subject to market factors, controls and appropriations. In giving strategic guidance to the Munitions Board, the Joint Chiefs of Staff (JCS) have made assumptions as to the probable duration and general scope of future war and have assessed the military accessability of various areas in the world and the extent of transit losses. These assumptions are matters of opinion and it is well to realize that a change in them could have great effects. The Munitions Board has followed this guidance fairly strictly but not religiously. The details of the guidance cannot be judged here, but it should be noted that the availability of a material in wartime is not necessarily the same thing as the military accessability of a country or region. On the other hand, it should be fully recognized that militarily accessible countries with which the United States maintains friendly political relations (see discussion of factoring system below) are counted on to furnish basic supplies to the United States during the war. Stockpiling is not a device to assure national supply sufficiency in wartime. It was this consideration, among others, that kept the Munitions Board from putting wool on the stockpile list before the end of 1950. Other considerations were the relative expensiveness of a stockpile of raw wool (rotation cost), the inability of the Commodity Credit Cor- poration to transfer some of its large stocks to the Munitions Board without reimbursement, and the market situation.* setting stockpile objectives The determination of objectives has been refined since the beginning of the program. Before 1948 the assumptions about the availability of wartime supplies were quite incomplete, and up to September 1950, when the "factoring system" was adopted, the Munitions Board allowed merely for military ac- cessibility and transit losses as estimated by JCS. The present standard procedure is as follows: With the help of the commodity committees the Munitions Board prepares two sets of basic data sheets for each material, one for demand and the other for supply. The demand sheet lists first, by end products, the quantities of the material used for consumption ^Investigation of the Preparedness Program. Third Report of the Pre- paredness Subcommittee, 82d Cong., 1st Sess., Senate Doc. No. 3, 1951, pp. 8 and 21. Page 143 in the United States and for export during about a dozen years in the past, and second, the estimated requirements for the ma- terial during a possible future war. These requirements con- tain military needs as computed by the services, and civilian and export needs as estimated by the emergency committees. In making these estimates, the committees frequently use as a means of projection an expected wartime steel output and the Second World War relation of steel consumption to the con- sumption of other materials. Wartime substitution, where rele- vant, is assumed to be of approximately the same degree as in the Second World War. The supply sheet lists first, United States and foreign pro- duction and United States import supply of each material dur- ing recent years, and second, the estimated production and United States imports in a future war. The latest peacetime year usually forms the starting point for projections of domestic production. The wartime supply estimates are obtained with the help of the factoring system that will be discussed in the following section. The stockpile objective is the difference between wartime requirements and wartime supplies, unless the result of this analysis is modified or disregarded for various reasons. The example of manganese may be instructive. The statistical esti- mates of supply and requirements led to a small deficiency, probably owing to the assumption of large supplies coming from marginal domestic sources. The Munitions Board decided to fix the stockpile objective at a much higher level. It reasoned that the large share of imported supplies constituted a special risk for a material of so vital importance and that development of domestic sources, while expected, might take more time. THE FACTORING SYSTEM The Munitions Board generally assumes that in wartime do- mestic material supplies will become available in accordance with current production trends, from facilities operating under normal schedules, and with present technology. These assump- tions are conservative, except insofar as they imply the absence of hostile interference with domestic economic processes. The Board assumes that supplies from militarily accessible foreign sources will become available and that the United States will continue to import its share from them. The latter assumption is also conservative, partly in view of the fact that the United States is likely to carry an abnormal industrial supply load in a wartime alliance and to attract a corresponding share of materials. The factoring system, a method of discounting supply esti- mates, was introduced in mid-1950. It was corrected and its objective-boosting effect reduced at a time when the limited nature of the Korean War was more clearly seen. Over this period, from mid-1950 to 1951, many stockpile objectives fluctuated with the appraisal of the international danger. Still the causal connection between the political events and the change in techniques was not close. A review of the supply estimating technique had been in process since May 1949 and the adoption of the factoring system had been under discussion through most of 1950. For a while the discussion was dead- locked between the Munitions Board (which had been relying on JCS guidance alone with regard to accessibility and ship- ping losses and wished this guidance to encompass the elements of political reliability and supply concentration as well) and the Department of the Interior, which proposed complete dis- counting of all foreign supplies in wartime. Interior's proposal would have raised stockpile objectives and purchases drasti- cally. N. S. R. B. finally arbitrated the dispute in favor of the factoring system, which put responsibility for political assump- tions on the State Department and thus broke the exclusive dependence on JCS guidance. An appropriate additional factor might be the vulnerability of domestic, or better, North American materials supplies in wartime. Such vulnerability undoubtedly exists in a general way, through disruptions that enemy interference may produce here and there in the flow of supplies, and in a special way where supplies of some materials go through specific bottleneck facilities (e. g., alumina plants). Domestic or continental min- erals production facilities as such are probably not particularly vulnerable, but the flow of materials through the economy is vulnerable. The Munitions Board recently requested the In- terdepartmental Stockpile Committee to study the problems of balancing this vulnerability by better provisions regarding the nature of stockpiles, and by dispersal or duplication of bottle- neck facilities, including the storage of replacement parts and units. PERIL POINT OBJECTIVES The Munitions Board considers that the level of its stockpile objectives provides only a minimum insurance against wartime shortages. It has therefore been reluctant to formulate any set of lower "rock bottom" objectives. Nevertheless, when the scarcity of materials brought stockpile acquisitions under closer scrutiny in 1951 and purchase plans had to be defended before Defense Materials Operating Committee, the Chairman of the Munitions Board agreed to formulate "peril point" objectives besides the ordinary set of objectives. The Interdepartmental Stockpile Committee defined the peril point objective as an inventory level that should be at- tained promptly even though such action might require severe controls and entail market dislocation. The obvious purpose was to emphasize before the allocation authorities certain mini- mum requirements of the stockpile. By mid-1951 peril point levels had been determined for 52 of 73 materials then on the stockpile list. For 10 of these materials peril point levels were exceeded by present inventories and for 6 others they were to be equalled or exceeded before the end of the year. The peril point objectives were not determined by any kind of formula; guiding considerations have not been limited or defined. The objectives that have been specified therefore have no clear meaning and it is doubtful whether they can play a useful role in decisions on stockpile allocations. It might be more meaningful for the Munitions Board to spell out what a delay in acquisitions, or a shortfall of inventories below objec- tives, might mean in terms of supplies of a certain material, should war break out on a certain date. For purposes of per- suasion, this approach might be more effective than the presen- tation of an arbitrary peril point figure. Page 144 Stockpile Acquisitions Up to fiscal 1951, the appropriations of funds formed a major limitation of stockpile purchases. By the end of each fiscal year, the stockpile authorities had obligated all cash on hand but in no year did they spend the amount obligated. At the beginning of fiscal 1952, for the first time, stockpile fund ob- ligations lagged behind total obligational authority. This de- velopment indicates the increased scarcity of supplies, and the increased importance of advance contracting compared with spot purchases. In the future, the bulk of stockpile expenditures are expected to follow delivery schedules that are now fixed by contract. Stockpile appropriations in the various fiscal years are shown in table IV. In allocating stockpile funds the Munitions Board originally postulated different rates of acquisition for each material. In general, it followed the rule that at the beginning of the pro- gram domestic materials should have a slow rate of acquisition, later to be accelerated, while foreign materials should start with a fast rate and decelerate. The progressions for each ma- terial would depend on the relative importance of domestic and foreign supplies. Originally the Munitions Board projected these acquisition programs in 10 steps, each representing a procure- ment period of 6 months. Having come into use in 1946, this system assumed the completion of the stockpile by 1951. The Munitions Board budgeted on this basis and put in its requests for appropriations accordingly. When the appropriations ob- tained fell short of the request, current purchase plans were reduced across the board, and usually by a fixed percentage. This system was abandoned in 1950 when stockpile appro- priations became ample. From then on funds have been committed with the quantities of materials available on the market as the only limit, and the stockpile has acquired as much of the materials arriving under its contracts as was permitted by the Defense Materials Operating Committee. Table IV.—Appropriations for the stockpile [Millions of dollars] New cash (1) Total new obliga- Total (D+(3) thority (2) (1) + (2) (3) Total 3, 538. 5 920 4, 458. 5 565 4, 103. 5 Fiscal year: 100 100 225 40 275 100 100 100 300 40 525 « 75 » 300 « 270 250 -100 125 0 0 175 1949 525 75 310 1950' 525 -100 250 1951 365 598. 6 1, 834. 9 490 240 0 0 605 598. 6 1, 834. 9 1951 598. 6 1, 834. 9 1951 - All of 1948 and 1949 and 190 million dollars of 1949 supplemental con- tract authority have been liquidated. Total unliquidated contract au- thority is 355 million dollars. 'Rescission of previous 1950 authorization. Source: Stockpile Report, 23 July 1951, p. 4. PURCHASE POLICIES Domestic purchases for the stockpile have generally been made directly from producers, and foreign spot purchases have been made through United States dealers. Long-range contracts for foreign materials, however, have often been made with for- eign producers directly. These contracts provide for monthly or quarterly deliveries of materials at stipulated times, subject to force majeure and in at least one instance to price conditions. The general price policy followed in long-term stockpile con- tracts is for General Services Administration to agree to pay the published market price at the time of shipment. Specific prices, or floor and ceiling prices, have not been used generally in contracts since early 1950. There are, however, three im- portant general exceptions: (1) Some present contracts in- clude an option to refuse acceptance of deliveries priced above a stipulated ceiling price; (2) where there is no published price for the material, buyer and seller often agree in stockpile con- tracts to negotiate a fair price from time to time; (3) incentive contracts for future deliveries of some domestic and foreign sup- plies provide for fixed prices or bonuses. Stockpile contracts generally contain no penalty provisions for defaults in deliveries. It may be noted here that on June 30, 1951, stockpile in- ventories of 39 materials accumulated under Public Law 520, consisted entirely of stuff of foreign origin while only 4 stock- piles (sapphire and ruby, molybdenum, magnesium, and lubri- cant-grade-flake graphite) consisted of domestic materials only. Apart from the latter 4, the proportion of domestic materials in the total stockpile (expressed in terms of material purchase cost) exceeded 50 percent for only 6 materials: aluminum, 99 percent; cadmium, 93 percent; bismuth, 77 percent; zinc, 74 percent; vanadiaum, 67 percent; and lead, 66 percent. STORAGE WHERE, WHAT, AND HOW At present, mid-1951, strategic materials are stored at 210 locations in the United States, 54 more than at the beginning of 1951. They are: 70 military depots, 9 General Services Ad- ministration depots, 8 other Government storage sites for low- grade ores and metals in primary shapes, 5 permanent Treasury vaults for precious metals and stones, 3 temporary vaults, 62 commercial warehouses, 36 commercial locations for vegetable and sperm oils (tanks), 8 leased sites for ore storage, and 9 in- dustrial plant sites. Several Government-owned warehouses are under construction and destined to absorb materials now in commercial warehouses. Most of the stores are in Government facilities. The Muni- tions Board aims to locate them close to the sites of the process- ing plants for reasons of transport economy, but it has found it difficult to obtain enough suitable space at the plants them- selves. It seeks to avoid excessive concentration of the stockpile of particular materials in one locality, and follows the rule of not storing more than 5 percent of the total stockpile of a com- bustible matter at one storage site. It has been pointed out in this chapter that the Munitions Board has aimed to accumulate materials in specifications that are suitable for storage while admitting of the greatest variety of possible uses. Table V indicates the forms presently in storage. Page 145 Table V.—-Forms of materials in stockpile Material Form Aluminum Metal Antimony Metal liquated and ore Bauxite (metal grade) Ore Bauxite (refractory) Calcined ore Beryl Ore Bismuth Metal Cadmium Metal Castor oil Refined Celestite Ore Chromite (chemical) Ore Chromite (metallurgical) Ore, ferro Chromite (refractory) Ore Cobalt Metal Coconut oil Refined Columbite Ore Copper Metal Fluorspar (acid) Ore Fluorspar (metallurgical) Ore Kyanite Mullite, ore Lead Metal Magnesium Metal Manganese Ore, ferro Mercury Metal Molybdenum Oxide Nickel Metal Palm oil Refined Platinum metals Metal Rare earths Ore, oxides, etc. Shellac Refined Sperm oil Refined Tantalite Concentrates Tin Metal Tungsten Concentrates, ferro Vanadium Pentoxide Zinc Metal Further fabrication is possible in a number of cases and should be advantageous. In part this would require the acceptance of new specifications; but for some materials on the list, e. g., bauxite, that would not be necessary. Moreover, some of the surplus materials held outside the stockpile proper could be processed and beneficiated. The quantities of materials which, in their present form, do not meet stockpile specifications, are not negligible. STOCKPILE DISPOSALS In ordinary times, the Munitions Board may dispose of mate- rials in excess of needs as a result of a revised determination. But the disposal cannot take place until 6 months after publica- tion in the Federal Register and the transmittal of notice to Congress indicating the reasons, the amounts involved, the dis- position plan and the date when the material will become available. The disposal plan must be specifically authorized by Congress unless the revised determination is by reason of de- terioration or obsolescence of the material. For ordinary times, Congress obviously intended strategic stockpiling to be a one- way flow of materials. No disposals have been requested by the Munitions Board under these provisions. Disposal of stocks to prevent deterioration (called rotation) compensated for by an equivalent intake of stocks, is at discretion of stockpile authori- ties. It is beginning to play a large role. The Stockpile Act further provides that materials in the stockpile may be released for use, sale, or other distribution, when, in the judgment of the President, such release is required for the common defense, or in time of war or during a national defense emergency proclaimed by the President, on order of such agency as may be designated by the President. The President's powers under these provisions are broad. They have been used in four instances since the proclamation of the national emergency in December 1950. In May 1951 the President ordered the release of 370,000 pounds of tungsten powder, and in August 25,000 tons of copper for allocation and sale to industry. The copper was released with the understand- ing that an equal amount would be returned by June 30, 1952. The release was designed to offset strike losses. A second order released 30,000 tons. Release of 30,000 tons of lead was au- thorized late in 1951. Stockpile surpluses (or "overages") have resulted mainly from the taking over of the Second World War Government surpluses. They may also develop through the lowering of esti- mated waitime deficits. In principle, sizeable excesses of in- ventories over the latest accepted objectives should not be car- ried, since the funds invested in them could be put to better use. But in practice, the Munitions Board has adopted the policy not to declare any stockpiled material in excess unless it is perishable or subject to specially high shortage costs. In some cases the appearance of an "overage" has been prevented only by the stockpile authorities' refusal to lower objectives be- low inventory levels, although deficit calculations would have permitted that. The Munitions Board does not want to find itself in a position where it would have to request purchases of a material that had previously been found in excess and had been sold. STOCKPILE SUFFICIENCY An attempt to pass judgment on the sufficiency of the stra- tegic stockpile must deal with the sufficiency of objectives, with sufficiency of inventories, and with purchase and allocation plans. The sufficiency of objectives, i.e., the capacity of inventories of the calculated sizes to provide a reasonable degree of mate- rials security in wartime, rests on assumptions about the dura- tion and nature of a future war and on estimates of supplies and requirements. On the whole, the assumptions are conserva- tive. The stockpile by itself cannot guarantee victory in the field or a functioning of industry. Neither is it a substitute for good diplomacy. It can only guarantee the necessary materials base, and it appears to come very close to providing that guaranty. It is, of course, possible that at the beginning of the war, the enemy's success in interdicting import supplies will be greater than assumed, but it is unlikely that a crippling de- ficiency of materials would prevent the recovery of control over sea lanes and supply sources. The war may last longer than anticipated, but a deficiency in the stockpile is not likely to cause crippling shortages. It is doubtful whether a doubling or trebling of stockpile goals, and the corresponding withdrawals of materials from use over time, would double, treble, or even Page 146 raise at all the degree of free world security. It might even lower free world security by increasing economic and political strains in times of a high demand for materials. The stockpile alone provides no "security in depth." It must be accompanied by measures that enhance the reserve powers of domestic and free world materials production, the capacity to substitute one material for another, and the capacity to econ- omize in the consumption of materials, including the elimina- tion of waste. The stockpile is a static defense against shortage. The companion measures are dynamic defenses. The powers that have been given to the Government in the current emer- gency permit a full development of these dynamic defenses over the next few years. The most important shortcoming of the present stockpile is that it is not full. Since it is practically impossible to differen- tiate between strategic materials according to essentiality— apart from the determination of the size of specific objectives— the rule should be to fill all objectives as promptly as possible. At present there is considerable variation in the degree of their fulfillment. In mid-1951 the percentages varied between 0 and 184. The strategic stockpile inventory is not evenly balanced. The most important imbalances are the deficiencies but a few of these deficiencies will disappear as some objectives are revised downward. Other deficiencies may be lessened, for the same reason. In large measure this reflects the development of "se- curity in depth" that has begun in 1951 in the fields of substi- tution and expansion. The availability of materials—at the source and to the United States—may or may not allow the Munitions Board to reach its target date for completing all objectives. Allocations by D. P. A. may limit rate of progress but expansion of materials production may accelerate it perhaps enough to complete some objectives even sooner than the present stockpile program alone promises to do. But should the tapering off of the rearmament program fail to materialize in 1954 or thereabouts, the comple- tion of the program may be prolonged. Any development lead- ing to an increase in the expected wartime deficiencies, be it through new demands or through changes in the system of supply disallowances, will tend to set back the progress of stockpile completion. MATERIALS STOCKPILING AND DISTRIBUTION To put large quantities of materials into storage, over a period of time in which current demand for them is likely to run high, cannot help causing problems of distribution. In a few situations, perhaps in rubber and tin, stockpile demand may prevent surpluses for a few years; in many others it is likely to accentuate shortages, either on a national or world scale. The bulk of strategic stockpile acquisitions is still to come. The substantial deliveries that have been contracted for help forecast the impact of stockpile demands, encourage produc- tion, and tend to limit speculative excesses. Even so, future events may upset schedules and lead to a peaking of demand. Purchases for the strategic stockpile are but one element of United States Government buying of strategic materials. Pur- chases under section 303 of the Defense Production Act run alongside stockpile purchases and overlap with them. This section 303 empowers the President to make provisions "for purchases of or commitments to purchase metals, minerals, and other raw materials, including liquid fuels, for Government use or for resale" on liberal terms. (Public Law 744, 81st Cong., 2d sess.) Approximately 2 billion dollars have been authorized. By x\ugust 17, 1951, 1.7 billion dollars of that sum had been committed by Defense Production Administration. Materials bought under section 303 have gone and will go into industrial use, or into the strategic stockpile with reimbursement from stockpile funds. The potential buying power of the Government is farther from being exhausted, however, than these figures suggest. The Defense Production Act Amendments of 1951 specified that liabilities incurred in buying materials should be counted as an obligation "only to the extent of the probable ultimate net cost to the United States under such transaction."* Since this cost would be the excess of the purchase price over a future resale price and is likely to be negligible in most cases, the Govern- ment's borrowing power may finance virtually unlimited pur- chases, so long as the bulk of the outlays is being recouped by sales to stockpile and industry. It is therefore now anachro- nistic to consider the strategic stockpile operation an independ- ent cause of market impacts. In today's partly controlled econ- omy, stockpile and current consumption demand are so closely interwoven that a realistic discussion of market impacts must concern itself with the aggregate demand for materials at any given time. This development is underlined by the lifting of the provision in the Stockpile Act (sec. 3a) that stockpile purchases "shall be made, as far as is practicable, from supplies of materials in excess of the current industrial demand." Even before Korea, the National Security Resources Board ruled that this was no longer practicable. Today the intent of this provision can be met only through domestic and international allocations and the control of total United States demand. The changed connection between stockpiling and materials markets materialized about 9 months after the Korean inva- sion. The events of this period brought out the dangerous in- flationary impacts of active stockpiling in a noncontrolled economy. STOCKPILING AND THE 195 0 BOOM IN RAW MATERIALS In the first half of 1950 private inventories in the United States did not keep up with the expanding of economic activity. Manufacturers' inventories were recovering from the temporary low of late 1949; but the rise lagged behind sales so that in- ventory-sales ratios continued to decline. Reported stocks of important raw materials, including leading imports, were smaller in mid-1950 than in mid-1949. Since materials were being processed at a higher rate—the industrial production in- dex by 30 points over June 1949—stock reserves were relatively small when the Korean crisis occurred. The fears of impending war that arose led to expectations of shortages, to large Government expenditures and to stringent controls, and induced governmental and private stockpiling of vast amounts. The procurement authority for the stockpile in fiscal 1951, originally scheduled to provide a net amount of only 500 million dollars, was raised by 600 million dollars in September 1950, and by another 1,835 million dollars in Jan- *Public Law 96, 82d Cong., 1st Sess., sec. 103b. Page 147 uary 1951. The inflationary expectations created a readiness among businessmen to bid eagerly for materials. But actual stockpile contracting did not increase commen- surately with these expectations. In the second half of 1950 obligations rose only 7 percent. But the rate of contracting in the first half of 1950 had been well above 1949, and arrival of materials in the latter part of 1950 reflected this earlier rise. Thus, although new buying immediately after Korea was hardly more active than before, the value of the stocks on hand rose by 75 percent in the second half of 1950. The volume in- creased about one-third. Contract obligations rose to a peak in the first quarter of 1951, amounting to nearly a billion dollars in these 3 months as compared with 430 million dollars for the preceding 6 months. This large obligation of funds was more in line with the public discussion in the summer and fall of 1950 than were the actual contracts in the second half of 1950. If it had oc- curred in 1950, a major share of the price increases then occur- ring might have been correctly attributed directly to stockpile purchases. In the first quarter of 1951, however, most materials prices began to decline. During the second quarter, when the rate of contract placement fell to less than 700 million dollars, prices continued to decline or were steady. Probably more important than the direct impact of stockpile purchases on markets in the second half of 1950 was a wave of speculative purchases by domestic and foreign buyers, prob- ably exceeding Government stockpile buying. The physical increases in private stocks are difficult to estab- lish, because traders' and consumers' data often are incom- plete or unavailable. Sizable stock increases of semifabricated and fabricated products were probably hidden in the consump- tion statistics. The rise in materials inventories in manufactur- ers' hands was nearly three times as great as the rise in the monetary value of strategic stocks on hand during the second half of 1950. A substantial part of it was due to higher replace- ment costs, but the share of price inflation was probably smaller than for the strategic stockpile. It is safe to say that inventory building was many times greater than stockpile acquisitions. A major part of the increases of manufacturers' and traders' stocks is financed with bank credit. A British statement attribut- ing the boom in raw materials prices to United States monetary policies rather than to stockpile purchases, came close to the mark.* If the great expansion of private credit for inventory buying could have been prevented in this country, the prices of basic materials certainly would have risen less. While the effect of easy credit was unintended, there were ways in which the Government deliberately encouraged private accumulation of raw materials in the second half of 1950 and thus helped to create the price boom. Private imports of raw materials were in no way limited, although the Defense Pro- duction Act of September 8, 1950, provided full authority for such limitation. Traders were left free to bid against one an- other and against the Government. Only in December was new private contracting for rubber imports prohibited, and in March 1951 that for tin. The National Production Authority exempted from the inventory restrictions of September 1950 "any imported material acquired prior to landing" f and de- *0. R. Hobson, Lloyds Bank Review, April 1951, p. 38, fU. S. Department of Commerce, National Production Authority, Title 32-A National Defense, Appendix, Chapter X, Part 10, para. 10, 11. liberately refrained from applying the broader antihoarding provisions of the Defense Production Act (sec. 102), on the thesis that the ". . . international situation was such that it was wise to get this stuff into the country just as fast as we possibly could."J Thus credit, inventory control, and import policies combined in later 1950 to channel private demands for inven- tory building into raw materials. REVERSAL OF THE BOOM The establishment, in January 1951, of price ceilings in the United States worked in the opposite direction. Although the ceilings by themselves had no direct bearing on prices outside the United States, they had an indirect effect by curtailing United States import demands. As foreign prices rose, im- porters, particularly of nonferrous metals, found it uneconom- ical to continue purchases abroad. In July 1951 the ceiling on wool was raised to world market levels, and in August, price control was lifted for raw asbestos, beryl ores, cobalt ores and metal, columbite-tantalite ores, natural graphite, kyanite and related ores, manganese, acid-grade fluorspar, and domestic mercury. The ceiling price policy, together with the centralization of United States purchases of rubber and tin, marked a signifi- cant departure from the policy of all-out importation that pre- vailed in the second half of 1950. While further modifications are likely to be made when necessary, undoubtedly the new policy, together with the growing realization of the limited nature of the Korean war, reduced American demand for for- eign lead, copper, zinc, and other materials in the first half of the year, and checked the international raw materials price boom. But in the course of the year, foreign prices for non- ferrous metals began to rise again and the spread between American and foreign prices increased. The Government also came to look for means to counter the inflation in rubber and tin prices. General Services Administra- tion refused to enter into new contracts and to take delivery under existing tin contracts at prices inconsistent with the do- mestic selling price established by the Reconstruction Finance Corporation. The effect of the rubber and tin price policy was uneven however. In rubber it brought about a sufficient reduc- tion of price to assure fresh deliveries to the strategic stockpile. In tin, however, the decline of foreign prices came to a halt in August 1951, and active demand in Europe brought about a fresh rise. United States imports of tin accordingly fell short of current consumption in several months, and strategic stock- piling came to a halt late in the year. STOCKPILING OUTSIDE THE UNITED STATES The wave of raw material buying issuing from the United States released similar developments in other parts of the world. The effort to build stocks spread through continental Europe. China and the Soviet Union added heavy purchases of rubber and other materials to the high demands of Western countries. In the Western World outside the United States strategic stockpiling was of little significance in the second half of 1950, $ Manly Fleischmann, General Counsel, N. P. A. Testimony before Joint Committee on Defense Production, 81st Cong., 2d Sess., Dec. 20, 1951, Washington, D. C, 1951, p. 6. Page 148 but various countries encouraged private stockbuilding. Stra- tegic stock reserves began to be formed in the United Kingdom toward the end of the year, apparently aiming at the creation of a reserve equal to 1 year's consumption. Some British Gov- ernment stocks, e. g., tin, were transferred to the strategic stockpile. But the expenditures on stockpiling foreseen in the United Kingdom budget for 1951-52 could not do much more than offset the decline in the over-all volume of Government stocks in the previous year; and these expenditures did not materialize. Allocation plans for copper and zinc prepared by the International Materials Conference include allocations to several other free world countries for stockpile purposes. Strategic stockpiling has been a United States enterprise so far, and it will probably not become international in scope. Ex- cept for the United Kingdom, where it has been given formal recognition, stockpiling by free world countries has been han- dled through the enlargement of Government trade stocks. The strategic stocks of the United Kingdom are "frozen" by Ex- ecutive decision, but whatever stocks exist elsewhere under this name may be sold at any time. In the immediate future it is unlikely that Western European countries will find resources to spare for strategic stockpiling, beyond token amounts. Summary Strategic stockpiling has been developed into a first-rate in- strument of materials security policy. With the help of transfers of materials from Government surpluses and E. C. A., the Na- tion by mid-1951 had filled about one-third, on the average, of the estimated deficit of strategic and critical materials needed in a future major war. The stockpile has considerable economic merits, for the large acquisition cost will be recouped when the stockpile is used. The cost consists really of the outlay for main- tenance and administration. The most important deficiency of the present stockpile is that it is not full. For many important materials the fulfillment per- centage is above one-third, but for others it is below. Supply difficulties and competing essential demands may retard pur- chase activities and cause diversions of stockpile purchases to other uses and even withdrawals from stockpile inventories, but it must be expected that better purchase opportunities will appear when the output of various materials expands and de- fense production requirements level off. The stockpile objectives for the accumulation of materials rest on judgments of the nature and the duration of a future conflict. These judgments generally appear conservative. The objectives are revised repeatedly in the light of new facts and expectations, and more revisions are to come. Strategic and political guidance is given by the Joint Chiefs of Staff, the State Department, and the Central Intelligence Agency. Current stockpile planning does not make allowance for the vulner- ability of materials production and transportation facilities on the North American continent. This vulnerability may, of course, be reduced by protection, dispersal, or the duplication of plant and equipment, but stockpile planning could add its part to these measures by accumulating materials in forms that no longer depend for further handling on obvious strategic bot- tlenecks. Stockpiling of materials at somewhat higher stages of fabrication—consistent with wide usefulness—and accumula- tion of stocks of some essential materials that are not strategi- cally scarce in a foreign-trade sense would help to shift the expenditure of labor, electric power, and other general re- sources from a future war period into the present. When filled, the stockpile, consisting of carefully estimated amounts of the various materials, will provide a reasonable degree of materials security. But materials security cannot rest on the stockpile alone. It rests on wartime supplies from both domestic and foreign sources, and to an extent varying from material to material. Security in depth requires that these sources be held in readiness, developed or conserved at least to the degree in which current stockpile planning assumes them to contribute in wartime. Since the advent of the Korean emergency, the coordination of stockpile acquisitions with other current requirements for materials, domestic and for the free world, has made much progress, although this coordination has kept the strategic stock- pile from growing as fast as its financial resources would have permitted. The coordination has been chiefly on a short-term basis, with allocation of current materials supplies as its focus. The function of planning for security in depth has not been exercised vigorously. The large stockpiling program can have serious economic and political impacts. In particular it may contribute to general inflation, particularly if a sudden acceleration of the program is necessary. The latter part of 1950 and early 1951 offers a telling experience. Stockpiling authorities have the double task of steering a steady course, yet remaining able to maneuver as circumstances require. Price policies followed by stockpile buyers involve difficult decisions and require coordination with the policies followed in other parts of the Government. The Defense Materials Operating Committee is serving this pur- pose by controlling the allocation of current supplies to the stockpile and other users. Good coordination might help reduce the swings between overly cautious and overly daring Govern- ment buying, and improve the commercial record of stock- piling. It must be acknowledged, however, that in the past the swings in stockpile buying have resulted chiefly from changes in general political conditions and policies. Page 149 Index A Abaca Production Act, 137. Agricultural Acts of 1948 and 1949, 73. Agricultural input factors {See also Land productivity): fertilizers, 72. machinery and equipment, 72. manpower, 72. Agricultural production prices: 1975 parity, 73. base and full parity, in 1975, projected, compared with current prices; table, 73. cotton, 73. feed and forage crops, 74. fruits, 74. livestock, 74. livestock products, projected; table, 74. potatoes, 74. sugar, 74. tobacco, 74. vegetables, 74 Agricultural production projection 1975, and equilibrium, 73—74. American Forest Products Industries, Inc., "Keep America Green" campaign, "Tree Farm" program, "Gash Crops from your Woods" program, 42. B Bank loans authorized less cancellations, 1945— 51; table, 128. Benefits to free world from Venezuela's ma- terials development, 107. Bureau of Agricultural Economics: aggregate index of per capita nonfood consumption, 64. index of per capita food consumption, 63. Bureau of Mines and Stockpiling, 139. c Canada {See also Taxation, Canadian), as ex- porter of softwood lumber, wood pulp, and newsprint, 47, 49. Coal {See also Mineral leasing), 4. Convertibility guaranties, issued and applica- tions pending (table) {See also Guaranties, guaranty, U. S. private investments abroad), 121. Counterpart funds for raw materials, 133. D Defense Materials Procurement Agency, 133. Defense Plants Corporation foreign facilities construction during World War II, 137. Deferred expense, as used by the mineral in- dustries under the Federal income tax law, 15. Depletion: allowed under the income tax laws of the Central Government of Canada and the Federal Government in the United States, comparison between the, 27. Depletion—Continued adjusted basis, 11. cost, formula used under the United States Federal income tax law, 10. differential expressed as a percentage of net income before taxes, 260 corpora- tions, 1948 and 1949; table, 15. discovery value, formula for, 12. nature of, 10. Depletion percentage: and adjusted basis, circumstances which determine the use of, 12. and adjusted basis, difference between the two systems, 11. permitted in the case of all metals and about 50 enumerated nonmetallic min- erals, 11. Depletion provisions of the Canadian law com- pared with the percentage depletion rates allowed under the United States law; table, 26. Depletion, relation between allowable and ex- cess of allowable over adjusted basis, 260 corporations, by principal mineral products, 1948 and 1949; table, 14. Discovery, See Government exploration. Domestic timber resources, 33. E Economic Cooperation Administration: advances for exploration and development, 135. contracts, interest provisions, 135. exploration and development contracts, 136. as of December 31, 1951, 134. five-percent purchases of strategic mate- rials through December 31, 1951, 133. functions in foreign materials production, 133. guaranties: against expropriation, 120. convertibility, 119. earnings limitation, 119. issued, countries involved, 121. new investments, 118. number of, 120. program cost, 121. program criteria, 134. program goal European recovery, 118. policies under M. S. A., 121. program, materials, objectives of, 133-134. purchases and projects, contracts signed through December 31, 1951, by coun- tries; table, 133. ^ purchases for the national stockpile, 134. purchases of strategic materials, contracts signed through December 31, 1951, by commodities; table, 133. strategic materials program, December 31, 1951, statistical summary of, 134. Economic Cooperation Administration—Con strategic material projects, advances on, contracts signed through December 31, 1951, by commodities; table, 134. supervision of actual operations, 135. Economic cooperation in Venezuela, 107. Emergency procurement service option pur- chases, 134. Expensing: accelerated amortization and deferred ex- pense, 15. accelerated amortization of depreciable assets, emergency facilities, ordinary facilities, 18. effect of deferred expense, 16. effect of rapid taxfree recovery on the taxpayer with and without percentage depletion, 15. expensing of exploration and development mining, oil and gas, 17. Exploration and development, E. C. A. ad- vances for, 135. Explorations, history of Government, 1. Export-Import Bank: applications for loans for projects, 131. continuous market, problems of ensuring, 132. Credits: to Bolivian Tin and Tungsten Mines Corp. (Bolivia), 129. to Cerro de Pasco Corp. (Peru), 129. to Cia. de Acero del Pacifico (Chile), 129-130. to Compagnie Aramayo de Mines en Bolivie (Bolivia), 130. to Compania Minera Fernandez, S. A. (Mexico), 129. to Companhia Siderugica Nacional (Brazil), 129. to Companhia Vale do Rio Roce, S. A. in Brazil, 130. to Corporacion Peruana del Santa in Peru, 130. to Cotes de Fer Corp. (Haiti), 130. to Fabrica Nacionale de Carburo y Metalurgia, S. A. (Chile), 129. to Fermin Malaga S. e Hijos (Peru), 129. to Liberia Mining Co., 130. to Mauricio Hochschild SAMI (Bo- livia), 129. to Mexican Gulf Sulfur Co. (U. S.) and its subsidiary Mexican Sulfur Co., 129. laws, indirect effects of, on production materials, 130. loans: in Bolivia, 130. for materials development, 128. to Chilean state railways, 130. to Mexican railways, 130. material credits, essential, established by Export-Import Bank in the period July 1950 to January 1952; table, 128. Page 150 Export-Import Bank—Continued problem of foreign government attitudes, 132. problem of inadequate private, equity capital, 131. projects, evaluation of, 131. working relations with other U. S. defense agencies, 130. F Fact finding and analysis, Commission recom- mendation, 170. Federal mining legislation, origin and evolu- tion of (See also Mining laws, mineral leas- ing laws), 4. Federal water management (See also Water), 92. Federally owned land by Government agencies, administration of; table, 45. Fertilizer: commercial and primary plant nutrients consumed in the United States and Ter- ritories in certain years of the period 1900 to 1950; table, 78. concentrates and transportation costs, 81. consumption, distribution of, in the conti- nental United States by principal crops, 1929, 1942, 1949, 1950; table, 78. materials, United States production of, 79-80. nitrogen supply for U. S., 80. Fertilizer resources: agricultural liming materials, consump- tion of on farms of the continental United States in certain years of the period 1930 to 1950; table, 78. commercial fertilizer, transportation costs problem of, 80. effects of on certain crops, 77. farmers' expenditures, 79. increase farm production, 76. phosphate rock in the United States, sta- tistics of, in certain years of the period 1900 to 1950; table, 80. phosphate rock, world production, 80. potash in the United States, statistics of, in certain years of the period 1920 to 1950; table, 80. potash, world reserves, 80. public policy and increased use of, 81. United States, 76-78. Fish and wildlife, 92. Flood control, 92. Food consumption, index of per capita; table, 63. projected increase in; table, 63. Forest: land ownership of commercial, 1945; table, 38. land ownership, pattern of commercial, 1945; table, 38. management, effectiveness of, 42. products in the United States, estimated consumption in 1950, and estimated re- quirements in 1975 (table), 33. resources, the free world's, 47. Forest Service reappraisal project, annual tim- ber growth estimate, 37. Free world's forest resources, 47. changes in the normal pattern of inter- national timber trade, 51. free Europe's production of major forest products, 48. Free world's forest resources—Continued industrial wood output improvement, main lines of action for, 60. industrial wood supply, present forest out- put and consumption of industrial wood by free world areas, and probable out- put and requirements in the period 1970-79, 59. lumber, 50. productive forest areas: Canada, 53. Central and South America, 55. free Europe, 54. Japan, 58. Latin America, 54. North Africa and Near East, 56. Oceania, 57. Southeast Asia, 57. world; table, 53. pulpwood consumption; table, 49. outside the U. S., 52. sawlogs and veneer logs, 52. situation in brief, 47. specialty woods, 51. balsa, 52. mahogany, 51. teak, 52. underdeveloped countries, aid to, 61. United Kingdom, 48. United States and Canada position in free world forest products trade, 48. wood products trade, 48. wood pulp production; table, 49. present and prospective supply position in industrial wood; table, 60. Future demands on land productivity, 63. G Gas (See also Mineral leasing), 4. Government construction and ownership of plant facilities, 137. Government exploration for minerals, 1. activities during the second world war, 1. current activities, exclusive of uranium, 2. Federal "discoveries," definition and pub- lication of, 2-3. Potash, 3. Uranium, 2. Government management contracts, 137. abaca fiber projects in Central America, 142. advantages, 143. balsa, in Ecuador, 141. Chile Exploration Co. expansion, 142. conclusions as to and drawbacks of, 143. fluorspar in Newfoundland, 141. Greene Cananea project, 140-141. peat, in Canada, 141. Nicaro Nickel project at Oriente, Cuba, 137-139. vanadium project, 141. Government mineral resources, methods of dis- position, 4. Government and water management, 91. Guaranties for foreign investment (See also E. C, A. guaranties, U. S. private investment abroad, guaranties), 118. Guaranty program: grounds for objections to, 122. potentialities of, 122. scope and limitations of, 123. H Hydroelectric power, 92. i Incentives for mineral industries: accelerated amortization and expensing, 15. premium price plan, 24. price stabilization devices, 23. foreign: advances against production under a long-term development contract; Defense Materials Procurement Agency, 23. loan programs as aids to procurement abroad, 22. loans, Export Import Bank, 22. nontax, domestic: bonus for successful recovery, 19. appraisal, 22. grubstake loans, 19. loan guaranties, 22. loan programs, 19. loan programs, Reconstruction Fi- nance Corporation, 21. percentage depletion, 10. premium price plan, 24. price stabilization devices, 23. tax treatment of research expenditures, 18. under Federal tax law, 10. Investment abroad, United States private, 115. Index of per capita food consumption, Bureau of Agricultural Economics, 63. Index of per capita nonfood consumption, Bu- reau of Agricultural Economics, aggregate, 64. Industrial wood in free-world production for- ests in 1948 (table), 61. International Bank and materials development, 124. International Bank for Reconstruction and De- velopment: bank loans indirectly affecting essential materials production, 125. development loan to Yugoslavia, 125. equity-financing limitation, 127. field missions, 124. financing essential private materials proj- ects, limitations on, 126. loans: to Belgian Congo, 125. to Belgium for steel and power, 125. to Brazil, 126. to Finland, for timber and wood prod- ucts, 125. to France, for reconstruction, 125. to India, 126. to Luxembourg, for reconstruction, 125. to Turkey, 126. to Union of South Africa, 126. to Yugoslavia, for timber, 125. member government guaranties limitation, 126. purpose and organization, 124. Investment guaranties, evaluation of, 122. Irrigation, 92. Page 151 Land, improving the use of in farms, 71. Land productivity (See also Agricultural): agricultural exports and imports, 64. agricultural production estimates for 1975 summarized and evaluated, 70. agricultural products, estimates of in- creases in production and consumption: by commodities and commodity groups from 1948-50 average to 1975 (table), 66. of feed, forage, and livestock prod- ucts, from 1948-50 average to 1975; table, 66. estimated yields: for barley, 67. for beef, 69. for broilers, birds, 69. for citrus fruits, 68. for corn, 65. for cotton, 66. for eggs, 69. for oats, 66. for dairy production, 69. for hogs, 69. for livestock products, 69. for pasture and hay, 68. for peanuts, 67. for potatoes, 67. for range lands, 68. for sheep, 70. for sorghum grain, 67. for soybeans, 67. for sugar beets, 68. for tobacco, 67. for wheat, 66. exports and imports, selected agricultural; table, 65. food consumption and demand, 63. food and nonfood consumption per capita and total, in 1950 and 1975; table, 64. nonfood farm products, 64. production, agricultural, estimated on two bases, "A" estimates and "B" estimates, 65. Law providing for the sale of copper, lead, and iron lands in 1846, 4. Land uses, United States: classes, I—VIII, defined, 71. potential shifts by regions and classes of land, 71. potential shifts in major; table, 71. Land use report of President's Water Resources Policy Commission, 72. Leasing Law of 1807, 4. Leasing system, evidence of the workability, 9. Location, a system of transfer of ownership, 4. Lumber, domestic consumption of, in 1950 and estimated requirements for 1975; table, 33. Lumber: entire world production of, in 1949, 50. M Management contract, plant construction and operation at Government expense and for Government account under, 137. Manganese self-sufficiency, cost of and stock- piling, 139. Materials development: Export-Import loans for, 128. International Bank and, 124. Materials problems and future policy, prepa- ration for, 169-171. Metals Reserve Corporation, 137. Minerals leasing acts: and mining laws, 4. competitive and noncompetitive leases, 8. complicated legal pattern of, 4. enacted in 1920, 4. fundamental features, 8. nonmineral resources, protection of, 8. leasing system, assessing effects of, 9. lessee's obligations to develop, 8. lessor, piotection for, 8. number of coal, oil and gas, phosphate, potash, and sodium leases issued under, fiscal years 1921 through 1951; table, 9. prospecting rights, exclusive, 8. scale of operations, 8. Mineral patents issued, 1872-1951, total num- ber of; table, 7. Minerals, Government exploration for. See Government exploration. Minerals industries: Canadian, special taxation provisions for, 26. incentives for. See Incentives. taxation of Canadian, 26. Minerals investigation programs, 104. Mining laws, basic principles of, 4. claims established by discovery and loca- tion, 5-6. device to acquire lands for nonmineral purpose, 5. effects on development of mineral re- sources, 6. extralateral rights, 7. location system, assessing effects of, 7. locator obtains ownership, 5. and Mineral Leasing Acts, 4. Federally-owned land under, 5. Prospectors and prospecting under, 6-7. transfers of publicly-owned nonmineral resources to private persons, 6. Municipal and industrial water (See also Water), 92. Munitions Board and stockpiling, 139. N National Security Resources Board, Commis- sion recommendation, 171. Navigation, 92. Paper and paper board, domestic consump- tion of, in 1950, and estimated requirements in 1975; table, 34. Percentage depletion: claimed by corporations in 1948 by in- dustry groups; table, 13. introduced in the Revenue Act of 1926, 12. nature of the incentive provided by, 15. rates of, allowable under existing law; table, 13. Revenue acts of 1942 and 1951 and ex- tension of system of, 13. Treasury Department summary, selected corporations, 13. Phosphates {See also Mineral leasing), 4. Policy, steps toward coordinating, 170-171. Pollution control, 92. Potash industry and leased lands, 9. Potassium (See also Mineral leasing), 4. Premium price plan: as applied to copper, lead, and zinc, 24. as applied to "stripper" oil wells, 25. Price stabilization devices: development contracts, 23. price guaranties, simple, 23. Production of essential materials, special prob- lems abroad, 131. Public lands, withdrawals of, 4. R Raw materials, counteipart funds for, 133. Reconstruction finance corporation plant con- struction, 137. Recreation, 92. s Sodium (See also Mineral leasing), 4. Soviet export of newsprint paper, 50. Soviet sphere nations, wood pulp exports of the, 49. Stockpile Act, "Buy American" provision in, 141. Stockpile: acquisitions, 145. administration of the main parts of, 145. appropriations for the, table, 143. contracts, penalty provisions for defaults in deliveries, 145. current consumption demand and, 147. disposals, President's power for, 146. domestic purchases for, 145. forms of materials in, table, 146. funds allocation, 145. inventories of materials accumulated un- der Public Law 520, 145. important shortcoming of, 147. objectives, definition and determination of, 143. storage locations, 145. sufficiency, 146-147. surpluses, 146. Stockpiling Act of June 7, 1939, 1. Stockpiling: alternative choices and combinations in long-range policy, 137, 141. control of private inventories, 141. curtailing consumption in emergency, 138. domestic production, 138, 139. military protection of supplies and stocks, 138. aluminum metal versus bauxite, 140. and ceiling price policy, 145. and centralization of United States pur- chases of rubber and tin, 148. and development of mineral properties, 139. Defense Materials Operating Committee and, 143. fabricated products and in-ground stor- age, 140. factoring system in, 144. general price policy in long-term con- tracts, 145. inventories, physical volume index of stra- tegic, table, 142. Joint Chiefs of Staff, 143. maintenance and administration, outlays on, under Public Laws 117 and 520; table, 137. Page 152 Stockpiling—Continued materials of foreign origin, 141. materials for security, 137-149. Munitions Board, 139, 143, 144. National Security Resources Board, 143. objectives, Munitions Board planning of, 142. obligations incurred under Public Law 520—table, 142. outside the United States, 148-149. "Peril Point" objectives, 144. principle of the "highest homogenous form, 140. raw materials distribution and, 137. substitution as alternative to, 139. summary and evaluation, 148. strategic, monetary cost of, 137. Sulfur (See also Mineral leasing), 4. Sustained Yield Unit Act of 1944 and cooper- ative management of federally owned and private forest lands, 45. Sweden, supplier of wood pulp to the United States, 49. T Taxation, Canadian: administrative problems, 30. capital gains and losses excluded from income tax, 31. carry over for net operating losses, 31. credits for deep test wells, 29. deduction of exploration, discovery, and development costs, 29. deductions in metal industries, 28. deductions in oil and gas industries, 28. depreciation allowances, 30. general provisions of unusual interest, 30. minerals industries, 26. new mines exemptions, 29. preproduction costs, 29. research expense deductions, 31. Tax differences with United States, re- capitulation of, 31. Taxation: depletion deductions, dividends received by shareholders, Canadian and U. S. practices compared, 27. net taxable incomes compared, United States and Canadian laws, 27. statistical study of depletion deductions under Canadian law and under United States law. 28. Timber: growth, annual, United States, 1945; table, 37. imports, free world, from the Soviet sphere, 47. Timber products requirements, 33. consumption of paper other than news- print, 34. cooperage, 36. fence posts, 36. fuel wood, 36. hewn ties, 36. lumber, 33. mine timbers, 36. miscellaneous, 36. newsprint paper, 34. piling, 36. poles, 36. Timber products requirements—Continued pulpwood, prospective changes in the use of new; table, 35. pulp, projected yield of; table, 35. pulpwood, 34. pulpwood for paper, paperboard, and other pulp products, 1975 requirements of new, 35. veneer and plywood, 35. Timber requirements, domestic, long-range, 33. Timber resources, domestic, 33, 37. allowance for losses, 36. comparison of timber drain and growth, 1944; table, 41. consumption from domestic sources, 1950 and 1975 requirements for timber prod- ucts in terms of forest drain; table, 36. deterioration in kind and quality of, 40. federally owned and managed forests, timber cut in 1950, 45. forest drain and growth goals, 36. forest land areas, 37. of the United States, 1945 distribu- tion of by section and commercial or noncommercial; table, 38. forests, State and local, 45. growing stock, problem, 38. growth goals and required growing stock; table, 39. increase in annual growth expected, 40. margin for security, export, and unfore- seen needs, 37. ownership of timber and land, East and West, 39. programs: adequacy of existing, 41. private forest practices, 41. private management in 25 States, area under, 42. progress in private forest manage- ment, 41. Programs, public: aid in forest planting, 43. conservation payments, 44. education and demonstration, 43. forest credit, 44. forest taxation, 44. forestry policies, 43. protection from fire, 43. protection from insects and disease, 43. research, 43. State forest practice legislation, 44. technical services, 44. timber: depletion trend unchecked, 39. stand, volume, United States, 1945; table, 39. U. S. annual growth goal for; table, 37. Timber resources, U. S. S. R., 47. Tin Act, Joint Resolution of, 137. u United States: direct investment abroad by industry, value of private; table, 115. direct private investment abroad in se- lected areas and industries (table), 116. United States—Continued exports: of lumber, softwood, 50. of newsprint, 50. of paper and board, 50. of wood pulp, 49. fertilizer resources, 76. foreign direct investment as compared with domestic investments, 1945-48, ratio of earnings to book value8; table, 116. Government dollar loans for production and development of essential materials, 128. investment abroad, distribution of, 115. lumber, foreign trade in, 50. population, projected regional of 1975, compared with 1950; table, 93. private foreign investment in mining and smelting, 1946-50; table, 117. private investment abroad, 115. increased mining and smelting invest- ments, 116, 117. , postwar petroleum investments, 115. investment-yields at home and abroad, 116. requirements for pulp, paper, and paperboard products, 48. strategic stockpile problems of interest to the Commission, 137. vs. Midwest Oil Co. (1915) cited, 4. U. S. S. R. and the Soviet bloc, forest prod- ucts trade with U. S. and Latin America, 48. U. S. S. R. softwood lumber, United Kingdom increased contracts for, 48. Uranium, Government exploration for, 2. v Venezuela: and U. S. collaboration, benefits of, 107. and world security, 108. benefits to, from oil income, 107. economic cooperation in, 107. economic and social progress, 109. financial position, 109. foreign trade, 109. industrial growth, 109. labor law of 1947, important provisions, 113. oil companies' practices and the Nation's labor laws, 113. oil industry, growth and accomplishments of, 108. Petroleum Law of 1943, 112. taxation under the, 112. public services, 110—111. health and social welfare, 111. housing projects, 111. transport and communications, 110. significance of development, 113. w Water: availability in the western United States (table), 90. availability, variations in (table), 84. average annual precipitation, 84. contamination, prevention of, 88. demand, future and analysis of certificates of necessity for constructing or ex- panding industrial facilities under the Federal accelerated amortization pro- gram, 93. Page 153 Water—Continued demand, trends in, 93. development, philosophy of regional, 91. domestic use, 85. evapo-transpiration losses, reduction of, 96. fresh, use of substitutes for, 97. ground-water bodies, principal functions of, 84. industrial use, 85-86. irrigation use, 85. long-distance transportation of, 96. maldistribution, the No. 1 U. S. problem, 84. management: entering a new era, 92. estimated future capital expenditures for, 83. Government and, 91. structures and facilities, dollars in- vested in, 83. nonwithdrawal uses, 86. outlook for the future, 93. Water—Continued per capita use of, 84. policy, Federal, history of development, 91. pollution: a nation-wide problem, 87. bacterial and chemical, 88. salt water intrusion, 88. problems, regional, 88. rainfall, artificial creation of, 96. reclamation and recirculation, limitations to, 94. removal of salt from sea, 96. requirements, estimates, 1950 and 1975; table, 94. reservoirs, 95. resources development studies, 91. sewers, population served by municipal; table, 87. situation in the eastern United States, 89. situation in United States, 89. source and use of fresh, in the U. S., 1950; table, 84. streams, regulation of, 95. Water—Continued supplies: developing new, 94. industrial location based on, 86. present trend of industries moving south, and, 94. supply and use of, 84. supply and use, regional and per capita 1950 (table), 89. uses: by major industries, 1950, estimated; table, 87. change patterns of, 91. eastern United States, 1950; table, 89. western United States, 1950; table, 90. Water-using industries, major, 86. wells, using for waste disposal, 88. Watershed management, 92. Wood pulp, United States imports of; table (See also Timber products requirements), 49. Page 1H RESOURCES for FREEDOM Volume V SELECTED REPORTS TO THE COMMISSION A Report to the President by S MATERIALS POLICY COMMISSION June 1952 ARTES SCIENT1A VERITAS