foreign investment: private capital welcome

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Page 1: FOREIGN INVESTMENT: Private Capital Welcome

proposal made in an Interior Depart­ment study, "Prospects for Oil Shale Development," released in May 1968. The study proposed that a small amount of shale land be made avail­able to test the market and to make land available to those firms which believed that they had a workable technology for shale oil extraction but possessed no suitable land.

"I am disappointed," Secretary Udall said, "that no company or group of companies, in or out of the oil in­dustry, was willing to take the risks inherent in any first commercial plant constructed to utilize a never-before-used resource."

In Secretary UdalFs opinion, the lack of bidding interest shows that economic and technical factors, rather than the lack of availability of land, are the major barriers now holding back development of shale oil. "The principal conclusion to be drawn," he said, "is that industry apparently doubts that technology has reached the stage to support the large invest­ment needed for commercial develop­ment."

However, in a letter to Secretary Udall, TOSCO president Hein I. Koolsbergen explained why his firm's bid was so low. He said that a geolog­ical investigation of tract number 2 made by TOSCO "has tended to con­firm the existence of oil shale reserves of such quantity and quality as to justify a larger bid," but that other geological indications "raise serious questions of minability."

"Despite these uncertain condi­tions and lease-terms," Mr. Kools­bergen continued, "we have made an unconditional bid of $250,000. We acknowledge, however, that if the un­favorable geological conditions can be disproved, and if the indicated re­serves are confirmed, a $20 million delayed bonus bid on tract number 2 would not impose any actual cost, in excess of the high cost of royalty payments, on a successful developer."

Among the adverse conditions that Mr. Koolsbergen cites are:

• Water in substantial quantities and from unascertained sources is present in the formation above the oil shale horizon. This casts doubt on whether this water could be kept out of the mine at reasonable cost.

• Fluid hydrocarbons may be pres­ent which could add substantially to the mining cost.

Largely as a result of the Teapot Dome oil leasing scandals of the Hard­ing Administration, public lands have been closed to oil shale development for nearly 40 years. Any plans the new administration comes up with will be scrutinized extra severely by a group of Senators who have vowed to prevent a giveaway of public wealth.

Commerce Secretary Smith Center of controversy

OIL IMPORTS:

No Lull in the Flail There was no holiday lull in the con­tinuing flail over oil import policy. The subject of foreign trade zones remains the principal combat area— specifically, the foreign trade subzone which the state of Maine wants to establish at Machiasport to accommo­date Occidental Petroleum's plan to build a $145 million, 300,000 barrel-a-day refinery/petrochemical complex to be run entirely on low-cost foreign oil. But a new conflict is shaping up in the U.S. Senate over President-elect Nixon's nomination of Alaska Gov. Walter J. Hickel to be Secretary of Interior.

The Oxy plan apparently was laid to rest as far as the Johnson Adminis­tration was concerned on Dec. 13 when Commerce Secretary C. R. Smith announced that Commerce's Foreign Trade Zone Board would defer considering the Maine applica­tion in order to give the incoming administration "an opportunity to ex­amine the far-reaching policy implica­tions of this application."

But proponents of the plan—polit­ical leaders of the New England states, primarily, who feel they carry far more weight with the present administra­tion than they will with its successor— weren't about to let matters rest there. Maine immediately brought suit to force prompt action on its application. Sen. Edward Kennedy (D.-Mass.) asked the Justice Department to look into possible antitrust aspects of U.S. oil industry opposition to the plan.

Last week brought new develop­ments: Sen. Thomas J. Mclntyre (D.-N.H.) announced that 10 New England Senators have signed a letter urging President Johnson to overrule Secretary Smith and order a prompt decision on the Maine application. And Sen. William E. Proxmire (D.-Wis.) raised the spectre of possible conflict of interest in Secretary Smith's

THE CHEMICAL WORLD THIS WEEK

decision to defer action on the Maine proposal by noting that Secretary Smith is planning to join a New York banking firm which, the Senator says, is the investment banker for Royal Dutch Shell (Shell is among those opposing the Oxy proposal).

In a somewhat related development last week, a number of Senators stated openly that they have serious misgiv­ings about Secretary of Interior Des­ignate Hickel who, as governor of Alaska, led that state's fight against the Oxy trade zone proposal and, as Secretary Designate, has voiced public opposition to liberalizing curbs on crude and petrochemical feedstock imports. Their concern stems from the Secretary Designated views on such issues as conservation, water pol­lution, and oil import policy, on which major political decisions are pending before Interior (see page 14). Senate conservationists vow to make a fight of it when the Hickel nomination comes before them for confirmation.

FOREIGN INVESTMENT:

Private Capital Welcome The recent proposal by a business advisory council for a federally chart­ered corporation to spur private cap­ital investment in developing coun­tries " . . . will be looked upon with favor by the new administration," Sen. Jacob K. Javits (R.-N.Y.) predicted last week. The Senator said that he would introduce in the new Congress the appropriate legislation to imple­ment the proposal.

The proposed corporation, urged in a report to the Agency for Interna­tional Development, would take over and expand the investment guaranty and financing programs administered by AID's Office of Private Resources. This group likely would form the nucleus of the corporation.

In fiscal 1966, AID directly assisted and dealt with more than 300 private investment projects and took in $14.8 million in fees from insurance and guaranty programs. Also, the agency received $27.5 million in interest pay­ments from past loans. Currently outstanding agreements with U.S. firms total some 1500.

According to the International Pri­vate Investment Advisory Council (IPIAC), the new agency would bring about "greater administrative and fi­nancial flexibility" than do existing investment incentive programs. And it may not be subject to many of the restrictions generally incurred in spend­ing public money, the report explains. The investment council suggests that the corporation would perhaps gener-

JAN. 6, 1969 C&EN 15

Page 2: FOREIGN INVESTMENT: Private Capital Welcome

ate about $1.5 million in its first year. Despite the increasing importance

of overseas investments to the U.S., the report notes that, "no separate government organization comparable to the Export-Import Bank now sup­ports overseas investment."

AID would retain its responsibility to negotiate government-to-govern­ment assistance—such as building roads, schools, and health facilities— in developing countries. "The activi­ties of the corporation should com­plement—and not substitute" such assistance, IPIAC says. Private com­panies still will need roads and bridges explains an AID official.

IPIAC recommended that financial assistance from the proposed corpora­

tion be primarily in the form of in­vestment guarantees. But it could make some direct loans to promote "important" projects abroad.

The corporation will have the autho­rity to borrow from the U.S. Treasury and to issue its own securities. Initial capital likely would come from the principal and interest received from outstanding AID loans.

While the report deals with the "need for an independent U.S. organi­zation to promote, insure, and finance private investment and privately man­aged technical assistance programs in developing countries," it does not deal with such steps as relaxing for­eign direct investment controls and granting tax incentives.

Marblelike earth Plaster of Paris surface

Some Apollo 8 photographic dividends

Apollo 8's value to science questioned Successful completion 10 days ago of the record-smashing Apollo 8 voyage to the moon left most observers groping for superlatives to describe the event Space officials hailed man's first flight beyond earth's gravitational pull as a giant step in his conquest of the solar system.

But some prominent members of the scientific community, while quick to pay tribute to the technological genius that made the Apollo 8 mission possible, still seriously question the value of manned flights to society or science. Dr. George B. Kistiakowsky, Harvard professor of physical chem­istry and former science adviser to President Eisenhower, dubbed the Apollo space project a "spectator sport" and said the money spent on the manned flights program could be better put to use in solving problems on earth, like poverty and hunger. An unmanned flight package could have done the same job, "but wouldn't have been as exciting," he said in a recent interview on the CBS radio program, "The Wor/cf of Religion."

Dr. Kistiakowsky explained that "we as a society have to be terribly careful that the technical innovations that are put into effect are not only exciting and not only benefiting a few individuals, but are in the social interest for us as a society . . . J doubt whether, when these ambitious tech­nical projects are undertaken, the social impact of the new technologies is adequately taken into account."

Another prominent scientist who wasn't sent into orbit by the Apollo flight is Nobel Laureate Harold C. Drey, of the University of California, San Diego. "It [the Apollo 8 mission] was a great adventure for the benefit of the public," he told C&EN. "Although we will get better pictures from the moon than we've had before, I strongly suspect they won't add much new. Of course," he explained, "the principal objective of the space pro­gram has never been science. It's been politics, national prestige, and vicarious adventure . . . . "

DEFOLIATION:

Field Study Called For Dallas, Tex., was the site as "Opera­tion Ranch Hand," the controversial military defoliation program in Viet­nam, once again stirred the emotions of scientists. In separate moves at the American Association for the Ad­vancement of Science meeting, the AAAS board of directors set in motion machinery for an ecological field study in Vietnam, a scientist's committee called for support opposing herbicide use and chemical warfare in that country, and several scientists pre­sented divergent assessments of the ecological consequences of herbicide use. The current hassle took place over the anniversary of AAAS's of ficial entry into the defoliation debate (C&EN, Sept. 23, 1968, page 28) .

Most significant of these latest ac­tions in its impact is the statement adopted by the AAAS board after amendment by the association's council which gives the "sense" of the board and looks "not only to the effects of the wartime use of herbicides, but also to opportunities for the peacetime recon­struction of the agriculture and econ­omy of affected areas." In its state­ment the AAAS board:

"Determines that it shall be the purpose of the Association to bring into being the most effective possible field study of the potential long- and short-term ecological risks and bene­fits to the affected areas.

"Specifically directs the AAAS staff to convene, as soon as possible, an ad hoc group involving representation of interested national and international organizations to prepare specific plans for the conduct of such a field study and with the expectation that the AAAS would participate in such a study within the reasonable limits of its resources."

Acting independently of the AAAS board, a group of 12 scientists circu­lated a letter at the meeting with the heading, Scientist's Committee—End Chemical Warfare in Vietnam. The group asks help in forming an organi­zation "dedicated to ending the use of chemical agents in Vietnam and deter­mining as fully and accurately as pos­sible how biota has been affected by the military use of chemicals in that country."

One of the 12 scientists, Dr. Arthur W. Galston, professor of biology at Yale, took the position that military use of herbicides in Vietnam has vio­lated several safeguards. The safe­guards he names are nontoxicity, easy biodegradability, application to spe­cific targets in carefully specified amounts, and use under known cli­matic and soil conditions. The spe­cific chemical culprits he points to are

16 C&EN JAN. 6, 1969