Document MJked8X9gVvKdx90Q6x1YBVy9

SOUTHERN ALKALI CORPORATION Fifth Avenue At Bellefisld Pittsburgh 13, Pa- September 4, 1947 In re: Utilization of Power Plant No. 1, Plancor 64. Lake Charles. La. Mr. Paul L. Mather Acting Deputy Administrator Office of Real Property Disposal Rar Assets Administration Washington 25, D. C. Attt Mr. Hunwifiitt. Dear Mr. Mather: The purpose of this letter is to summarize this Company's present and prospective requirements of power to be generatsd in the leased power plant for its chlorine-caustic production operations and to submit, in outline form, for consideration by your Administration a proposal for a three-way contract for the sale of power between Southern, Cities Service and Gulf States Utilities which, in our opinion, will afford the only practical means of fully utilizing and economically dis posing of such power as it will be possible to generate in the leased power plant in excess of Southern's own prospective requirements. It is presently contemplated that Southern 7/ill commence opera tion of the leased plant on or about October 6 and that during the period October 6 to October 15, it will bring into production one string of cells having a daily chlorine production capacity of 60 tons. During the last half of October a second string of cells will be placed in operation; during the first half of November, a third string; end by the end of November the fourth end final string of cells will be placed in operation so that the full productive capacity of the present plant, estimated at 240 tons per day of chlorine, will be in operation on or before December 1, 1947. The following tabulation indicates the estimatet power require ments for the operation of Southern's plant based on the above starting-up schedule to which is added the maximum power load which may be `taken by kathieson Alkali Viorks, Inc. under the terms of the recent letter contract between Southern and Mathieson as authorized by your Administration. The tabulation also shows the power loan that may be taken by Gulf States Utilities Comnany until October 31, 1947, the expiration cate of the contract with RFC. Hr. Paul L. Mather --n September 4, 1947 Period (1947) Estimated Chlorine Production Sept. 1-30 0 Oct. 6-15 60 Oct. 15-31 120 Nov. 1-15 ISO Nov. 15-30 240 Southern Avg. Max. Load Load 1000 3000 12000 15000 19000 24000 27000 34000 34000 45000 Mathiegon Max. Load 2000 2000 2000 2000 2000 Gulf States Load 22000 22000 22000 9 ? Est. Max. Load 27000 39000 48000 36000 47000 It will be seen front the above tabulation that from and after the starting-up of the final string of chlorine cells, when the chlorinecaustic plant is operating at full capacity* there will be no firm power in the power plant in excess of Southern's requirements for its own opera tions on the leased premises which could be made available to your Administra tion for resale pursuant to the provisions of Paragraph NINLTEEM of the Agree ment of Lease dated March 22, 1946. However, in recognition of the extreme power shortage in the area, an effort has been made to devise some arrange ment that will permit the fullest utilisation of the generating capacity of the leased power plant for the mutual benefit of your Administration ss Lessor and of Southern as Lessee. fte have ascertained that Gulf States will have requirements for a period of at least two years for firm power to the extent o;' 10,000 to 15,000 KVi. Ve also learn that Cities Service has in its plant a generating capacity of 50,000 K.V, consisting of two 25,000 KV units, to cover ix-s normal power load ranging from 25,000 to 30,000 KW. However, in order that it may be protected in the event of an emergency breakdown of its power plant. Cities Service requires that sufficient power be available from outside sources to enable it to shut down its refinery operations in an orderly manner to avoid costly damage to its facilities and equipment. This would necessitate approximately 22,000 KTV from such outside source for a period not to exceed four hours. In addition, as a safeguard in event of such an emergency shut down, Cities Service will require standby power in the amour.t of 5,000 KTT to provi.de for maintenance requirements, fire protection etc., and to enable it to start up its own power plant at the dose of such emergency. t'e have had numerous discussions with representatives of both Cities Service and Gulf States and have tentatively concluded that the interests and requirements of both Gulf States and Cities Servi.ce could best be met, and the mutual interests of your Administration and of Southern with respect to the fullest practical utilization of the generating capacity of the leased power plant could best be served, by a three-one contract between Gulf States, Cities Service ana Southern that would provide in substance as follows:I I BB 0003290 I 5 Mr. Paul L. Mather -3- September 4, 1947 1. GULF STATES REUJIREMfcNTS: Southern and Cities Service would jointly agree to furnish to Gulf States 10,000 KYi of firm power for the term of the contract together with such additional power as may be available and scheduled by Gulf States cn a day-to-day basis. Southern and Cities Service would agree to so arrange their respective scheduled outages as to result in the maximum assurance the1: Gulf States contract demand can be supplied. Southern would supply Gulf States with its contract requirements of power to the extent that such power would be available from the leased power plant in excess of Southern1s own power require ments for its own operations, and Cities Service would agree to furnish to Gulf States all or part of its contract demand at such intervals and for such periods as Southern should be unable to supply such requirements. 2. CITIES SERVICE REQUIREAteNTS: Southern would agreo to furnish Cities Service with the power required by Cities Service to effect an orderly shut-down of its refinery operations in the event of an emergency breakdown of Cities Service's generating facilities, for a period of not to exceed four heirs. This would involve a maximum power load during such period of approximately 22,000 ICB, (the maximum capacity cf available transformers) and will necessitate a temporary cut-beck by Southern of its chlorine-caustic operations during such period to make such power available to Cities Service. Southern would also agree to furnish Cities Service standby power up to 5000 KK for the contract term. 3. RATES AND CHARGES! It is proposed that there will be an energy charge at the rate of two mills per KWH for all energy delivered under the contract to either Gulf States or Cities Service, end also demand charges at the rate of $1.50 per KW of firm demand or standby service for the respective quantities that could be required by either Gulf States or Cities Service under the contract. There would be a demand charge on all additional power delivered to either Gulf States or Cities Service over and above their respective firm or ftandty contract demands at the rate of five cents per day per KV according to daily demand scheduled or emergency service utilized. The demand KK would be besed on maximum fifteen minute integrated demand. Southern and Cities Service, respectively, would invoice Gulf States for the quantities of power supplied by them, respectively, during a given month at the average sale price for that month as determined accord ing to the above stated rates and charges. 4. TERM OF CONTRACT: In the light of Gulf States' recognized need, it is proposed that the contract run for a fixed term of two years from November 1, 1947, and that it continue thereafterl l BB 0003291 | Mr. Paul L. Matter Sej tember 4, 1947 unless or until cancelled by any party to.the coi tract on sixty (60) days' prior written notice t<} the ether two parties. Obviously such a three-way contractual arrangement can be operable only if there is the closest cooperation among ell parties involved. The day-to-day administration of such an arrangement can be effectively carried out only by representatives of the respective companies who are actively engaged in the power operations of their respective principals, who have intimate knowledge of the constantly varying require ments and capacities of the other parties concerned, and who, by cooperation with one another, can effect a daily interchange of operating information concerning their respective needs and capacities. For these reasons, while we are reasonably confident that such an arrangement is practicable and of mutual advantage to all parties concerned, including your Administration, we are equally certain that it would be virtually impossible of successful operation and servicing by your Administration from the outside. Paragraph NINETEEN of the Agreement of Lease of March 22, 1946 states in considerable detail provisions intended to govern the sale and . disposition of any power that would be surplus to Southern's own require ments. As will be noted from a reading cf Paragraph TWELVE of the Lease Agreement, it was originally contemplated that the initial chlorine-caustic installation was to be for a daily capacity of 120 tons of chlorine. Obviously such an installation would have left some excess cower capacity in the leased power plant which could have been sold as firm power. How ever, as you know. Southern's initial installation is of a plant double the capacity originally contemplated. This fact accounts f< r the un availability of say firm power for resale as contemplated ii. Paragraph NINETEEN once Southern's plant is in full operation. Since, under Paragraph NINETEEN of. the Lease Agreement, your Administration has the paramount right to sell, any and all power that may be surplus to Southern's own requirements, it is respectfuL'y requested that you formally authorize Southern to enter into a contract with Gulf States and Cities Service for the purposes and to the extent hereinabove outlined with the stipulation that Southern shall pay to yoir Administra tion, as rental under the Lease, ten per cent (10%) of Soutiem's net realiza tion from the sale of electric power thereunder as provided in Paragraph FIFTEEN of the Lease Agreement. A stipulation in such authc rization that Southern must terminete the contract at any time efter its rnitial two year term at the written request of your Administration would negative any implication that such authorization constituted a permanent and irrevocable waiver of 7our Administration's rights under Paragraph NINE EN of the Lease Agreement and would enable you to effect a cancellation of he contract if its operation during its initial Larm cid not, in your opinion, prove to be for the best interests of your Acministration. I_BS 0003292 J Hr. Paul L. Mather 5- - Septeener 4, 1947 Upon receipt of such authorization, re propose tc incorporat the features above outlined in a formal contract with,the urderstending that such contract would be submitted to you for your approval as to its conformity with the authorization granted prior to its execution by the respective parties. In view of the shortage of time remaining in whit h to formalize such a proposaljif approved, and the imperative necessity o: prompt action by Gulf States and Cities Service to arrange for the protection of their power requirements elsewhere in the event Southern is not authorized to effectuate such a proposal, it is respectfully requested that you give this matter your immediate attention and that you take prompt and definitive action on this request for authorization and advise us of such action not later than Monday, September 15. lours very truly, "E, T. ASPLONDH" ETAidjg Vice President 0003293_l