Senator ANDERSON. That is very good and I am happy you are associated with this program. I trust things will come from it. I appreciate your appearance and you may go through this carefully and we may have questions to direct to you later on.

Mr. SANDLAND. Fine. I will be happy to answer them for you. (The prepared statement of Mr. Sandland follows:)

STATEMENT OF CLIFFORD M. SANDLAND, VICE PRESIDENT, C. F. BRAUN & Co.

Mr. Chairman, on behalf of C. F. Braun & Co., I would like to thank the committee for the opportunity of meeting with you today. Our particular discussion will concentrate on the historical development of three large-volume chemical products. Our purpose is to demonstrate that continued investigation by engineers usually results in better ways of reaching three objectives-lower capital investment, lower operating costs, and, finally, lower product cost.

Almost regardless of the chemical product selected for investigation, the history is about the same. A demand for the product of the plant creates a demand for lower cost plants and a lower cost product. Very few chemicals have failed to respond to efforts of many engineers vying with each other to produce better plants.

The saline water conversion process is still in the development stage. Right now the cost of the product is relatively high. What is the likelihood that the cost can be reduced? What are the factors that will contribute to reduced costs?

We can answer some of these questions directly, and others indirectly, by looking at the history of recent developments in three chemicals-ammonia, ethylene, and alkylate. In recent years all have had an increase in demand. All have responded to the efforts of the engineers.

Let's take a minute to review the factors that contribute to cost reductions. First, perhaps, is the demand for the product. Then there is competition. Competition can be between the organizations selling the product. And it can also be between the firms engineering the process plants. Usually it is both. Each process also requires equipment-furnaces, compressors, pressure vessels, instruments, and the like. Competition among the companies producing such apparatus and machinery can also help reduce both capital investment and operating costs.

Now we will touch upon the four main areas the engineer is best able to influence all of which affect the cost of the product. These areas are, first, the cost of the plant itself, especially material and equipment such as compressors, furnaces, pressure vessels, heat exchange equipment, piping, instruments, and electrical gear. Second is the energy requirement of the plant, usually in the form of electricity or fuel. Third is operating manpower and maintenance. And fourth is the raw material requirements of the plant, such as gas, oil, water, and the like. Many times the raw materials make up the major portion of the manufacturing cost, hence they can be quite important.

The engineer also works to improve process techniques. He will convert batch processes to continuous operation. He will combine separate operations, and apply better controls as they are developed. New techniques developed for one process will be applied to others. The engineer is continuously working on ways to handle higher temperature coupled with higher pressures. And beyond all of these developments, the sizes of the process plants are being pushed up and up.

To demonstrate how the application of these principles by the engineer can influence plant and product costs, let's take a look at the processes that produce the three chemicals mentioned earlier-ammonia, ethylene, and alkylate. There are several processing steps in the processes that produce each of these materials-just as there are several steps in the conversion of saline water to fresh water. We plan to go into some detail as to how the engineer's improvement on individual steps resulted in overall reduction in both capital investment and manufacturing costs.

AMMONIA

Ammonia is basic to the chemical fertilizer industry. Whether the fertilizer is applied as gaseous ammonia, liquid ammonia, or as ammonium nitrate, ammonium sulfate, urea, or a mixed fertilizer, the starting material is ammonia. In both ammonia and other fertilizers, we want the nitrogen in an easily available and controllable form. Ammonia gives the highest concentration of

nitrogen available-80 percent. By comparison, ammonium sulfate is 20 percent nitrogen; ammonium nitrate, 33 percent; and urea, 46 percent. Just as a reference point, the old-fashioned fertilizer that comes out of the farmer's barn contains 2 percent nitrogen.

The chemical composition of ammonia is NH-one atom of nitrogen combined with three atoms of hydrogen. So all we need to produce this important product is nitrogen, which we get from the air, and hydrogen, which we usually get from natural gas and steam. The major part of the ammonia plant itself is for the purification of nitrogen and hydrogen. Let's briefly discuss some of the reactions and see what happens.

Reformer furnace.-Hanging in this furnace are stainless tubes about 4 inches in diameter containing a catalyst. The tubes are heated to about 1.600° F., and a mixture of natural gas and steam is run through them. The product is the hydrogen we need plus carbon dioxide, carbon monoxide, and a small amount of unreacted natural gas.

Next, air is added to these gases and the mixture burns in the presence of a catalyst. Oxygen from the air provides the energy. The resulting products are more hydrogen, nitrogen, carbon monoxide, carbon dioxide, and steam. The remaining carbon monoxide is converted to carbon dioxide, and removed with the steam. We now have essentially pure hydrogen and pure nitrogen. But they aren't in combined form. The mixture of nitrogen and hydrogen is compressed to a pressure in the range of 2.000 to 6,000 pounds per square inch. This high-pressure gas is sent through still another catalyst where a portion of the nitrogen and hydrogen combine to give ammonia. The uncombined elemental gases are mixed with the fresh gases and recycled back through the catalyst. In this way, eventually, quite complete combining of the nitrogen and hydrogen to ammonia takes place.

Over the past few years, major improvements have been made in all the processing steps in ammonia manufacture. For example, we are able to use higher temperatures in the reformer furnace. This is the result of advances in metallurgy so the tubes are capable of withstanding such temperatures. Not only can we go to the higher temperatures. but we can also operate at the required higher pressures. This, in turn, permits smaller vessels, smaller piping, and less horsepower for compression.

We briefly outlined above the number of reactions that require catalysts. Many improvements also have been made in these catalysts so that the reactions can be carried out at temperature and pressure levels that reduce energy requirements and consequently costs. The catalysts are also more efficient. This results in higher conversion rates during the first pass through the catalyst, and reduces the amount of unconverted nitrogen and hydrogen that must be recycled. Here again, we realize the benefits in lower capital investment and operating costs.

Increasing the size of the plant usually means a reduction in unit costs. In ammonia plants, larger equipment is now being used rather than multiple items connected in parallel. Fewer items saves on the cost of the equipment itself. piping, foundations, plot space, maintenance, and usually saves on operating manpower.

Increased plant size also has permitted the use of centrifugal compressors in place of reciprocating. The centrifugal compressors are less expensive. require less space and smaller foundations, and in general. require less maintenance.

Now let's see what changes in costs have occurred in the last 10 to 12 years. Figure 1 shows how the capital cost per ton of ammonia has decreased since 1953. This chart shows relative costs with 1953 set at an index of 100. This reduction in cost per ton of ammonia has been effected despite constantly rising construction costs. Figure 2 shows how construction costs have increased since 1953.

Figure 3 shows how operating manpower per ton of ammonia has reduced. This resduction has taken place in spite of constantly rising labor costs. The operating labor index shows in figure 4.

The largest single item of cost is natural gas. This is used as a feed stock as well as a fuel. Figure 5 shows the increase in the cost of natural gas.

And what has happened to the price of ammonia? Despite increases in costs of construction, labor, and feed stock, the bulk price of anhydrous ammonia has constantly decreased (see fig. 6).

We estimate that about one-half of the reduction in investment in ammonia plants comes from the increase in size of the plants. The other one-half comes from improvements in processing schemes, materials of construction, and equipment design.

The reduction in manufacturing cost of ammonia is due primarily to improvements in the processing schemes, equipment design, and automatic controls.

So much for the story on ammonia. Now let's look at another type of chemical plant. This one produces ethylene that is widely used as a building block for petrochemicals. One of the largest consumers is the plastics industry. The most familiar plastic made from ethylene is polyethylene. It has many uses. For example, all cardboard milk containers are coated with a thin layer of polyethylene. It is also used in the manufacture of squeeze bottles.

Ethylene, like ammonia, is a fairly simple chemical whose manufacture requires many complicated processing steps. Again we start with a furnace. This time, the gases to the tubes in the furnace are steam and a hydrocarbon such as ethane, propane or neaphtha. The hydrocarbon breaks down and other compounds are formed including ethylene. To get the maximum amount of ethylene and the minimum amounts of undesirable compounds and coke, the reaction time must be closely controlled. The gas must be heated to about 1,500° F. and then cooled rapidly to about 1,000° F.

Next are the several steps for removing the undesirable compounds. First the gas is washed. Then it is compressed, washed with caustic, and dried. Final separation is by fractionation. In this process, the various components are separated by taking advantage of their different boiling points. The unusual feature in ethylene separation is that the temperatures for fractionation vary from minus 225° F. to plus 400° F.

The components that we labeled undesirable are undersirable only in that the main product is ethylene. However, an ethylene plant also produces a mixture of methane and hydrogen, ethane, propylene, and butadiene-all useful chemicals themselves.

In the past several years, considerable research has gone into the ethylene process. Most of this effort has been in the furnace where ethylene is produced. As the result of work on quench rates, reaction times and the other variables in cracking, the yield of ethylene for a given feed gas has been increased. A higher yield reduces the feed quantity for a given amount of ethylene, and it also permits a reduction in the size of the separation steps following the reaction.