# T .C . Memo . 2009-5 0 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Aea1f06ca634b18aa ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text T .C . Memo . 2009-5 0 UNITED STATES TAX COUR T UNION CARBIDE CORPORATION AND SUBSIDIARIES, Petitioner v . COMMISSIONER OF`INTERNAL REVENUE, Responden t Docket No . 11119-99 . Filed March 10, 2009 . R determined deficiencies in P's Federal income tax for 1994 and 1995 .• Pursuant to a negotiated agreement, P was allowed research credits under sec . 41, I .R .C ., for 1994 and 1995 . In an amended petition P now seeks-additional research credits for 106 projects conducted at its manufacturing plants . To resolve this action expeditiously, P and R agreed to try five of the largest projects underlying P's research credit claim . Held : Two ' of the five ;,prof ects constitute qualified research under sec . 41(d), I .R .C . Held , further , P has established that it included all activities that were similar to the two qualified research projects in its calculation of its base amount under sec . 41(c)(4), I .R .C . Held , further , P has established that it incurred $1,045 of additional qualified research expenditure s SERVED MAR 10 2009 -L(QREs) for wages paid to specific plant employees fo r .qualified services performed during the two qualified research projects . The remaining expenditures fo r which P claims additional research credits are not QREs because they were incurred in the production of good s .for sale, not in the conduct of qualified research . Held , further , P improperly included production ,costs in its base amount . However, because P's error -caused P to overestimate its base amount, we find P's error to be harmless and accept P's calculation of its additional base period QREs with several adjustments . Harold J . Heltzer , Alex E . Sadler , Robert L . Willmore , Pete r B . Work , and Allen D . Madison , for petitioner . Daniel A . Rosen , Jill A . Frisch , Lyle B . Press , Alex Shlivko , and Jenny D . Boissonneault , for respondent . CONTENT S FINDINGS OF FACT . . . . . . . . . . . . . . . . . . . . . I . Overview . . . . . . . . A . Petitioner . . . . . . B . Procedural History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . 9 . 11 . II . Claim Projects . . . . . . . . . . .. . . . . A . The Olefins Production Process . .. . . . . B . The Amoco Anticoking Project . . . . . . . 1 . Overview of Coking . . . . . 2 . The Coke Reduction Program and Amoco' s Technology . . . . . . . . . . . . . 3 . The Amoco Anticoking Project . . . . C . The Spuds Project . . . . . . . . .. . . . . . 1 . Overview of the Spuds Project . . . . . 2 . Petitioner's Motion for Leave To Amen d Its Petition . . . . . . . . . . D . The Sodium Borohydride Project . . . . . 1 . Overview of the Acid Gas Removal System 2 . The Sodium Borohydride Project . . .. . E . UOP GA-155 Project . . . . . . . . . . . . . 1 . Overview of Fouling in the C3 Column 2 . Overview of Inhibitors . . . . . . . . . . . . . . . . . . 15 . 16 . 20 20 . . . . . . . . . . . . . 22 . 25 . 32 . 32 . . . . . . . . . . . . . . . . . . . . . . . . . . 9 37 38 38 41 48 48 50 - 3 52 . . . . . . 3 . The UOP GA-155 Project 60 F . The UCAT-J Project . . . . . 1 . Overview of Polyethylene Production . . . . . . 60 66 . . . . . . . . . . . .. . . 2 . UCAT-J . . . . 70 . . . . . . 3 . Overview of the UCAT-J Project 4 . Experimental Runs .Before,the Credit Years . . 79 79 5 . Experimental Runs During the Credit Years . . 81 . . . . . . a . DJM-5265H (UCAT-J Run 1) . . . . . 84 b . DJM-1810B (UCAT-J Runs 2 and 11 ) . 88 . . C . DJM-1732H (UCAT-J Runs 3 and 15) d . DJM-2419H, DJM-1810H, and DJM 2016H . . . . . . . . . 91 (UCAT-J Runs 4 Through 6) . . . . . 95 . DJM-1735H (UCAT-J Runs 7 and 16) e f . DJL-5264H and DJL-5280H (UCAT-J Runs 8, 9 , . . . . . . . 98 . . . . 18, and 19 J Runs 10 an d DJH-2580H and DJH-2950H (UCAT. . 10 1 . . . . . . 12) . . . . d . DJL-5420H and DJL-5143H (UCAT-J Runs 13 an h 103 . . . 14) . . . 10 4 i . DJM-1720H (UCAT-J Run 17) . . . . . . . . . . III . Claimed Costs . . . . . . . . . . . . . A . Cost Documentation Used . 1 . PCDs and MASs 2 . CMAI Data for Ethylene Byproducts . . . . . . . . 3 . Wage Information . . . . . . . . . R&D Budgets . . . 4 .Amoco Anticoking Project B . Costs of the . . . . . . . . . 1 . Supplies 2 . Wages . . . . . . . . . . . . . . . . C . Costs of the Spuds Project . . . . . . . D . Costs of the .UOP GA-155 Project . . . . . . . . . . . . 1 . Supplies . . . . . . . . . . . 2 . Wages . . E . Costs .of the Sodium Borohydride Project . . . . F . Costs of . the UCAT-J Project . . . . . . 1 . Supplies . . . . 2 . Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 . 10 6 . 106 107 . . 109 . . 10 9 . . 110 . . 110 . . 11 3 . . 114 . . 115 . . 115 . . 11 6 . . 116 . 117 . . 117 . . 11 8 . . . . . . . . . . . 119 . . . . IV . Base Period Projects . . . . A ., Scope of the Trial . . . . . . . . . . . . . . . . . .119 1 . Organization of UCC's Manufacturing Operation s . . . . . . . . . . . 120 During the Base Period . Acquisitions and Dispositions Between the 2 . . . . . . 122 Period . Claim Years and the Base . . . . . 122 . . . . . . . . . a . Acquisitions . . . . . . . . . . . . . . . 12 4 b . Dispositions . . . . . . . 125 .3 . UCC/Shell Polypropylene Business - 4 a . The Cooperative Undertaking . . . . . . . . 125 . 127 b . SPC . . . . . . . Petitioner's Base Amount Recalculation . 12 9 c B . Base Period Projects . . . 130 1 . UCC's Focus on R&D During the Base Period and Credit Years . . . . . . . . . . . . . . . 13 0 2 . The Role of R&D and Engineering at UCC's . . . . . . . . . . . . . 130 Manufacturing Plants 3 . Petitioner's Identification of Plant-Base d Qualified Research Activities Conducted Durin g the Base Period . . . . . . . . . . . . . . . . . 131 . . . . . . . . . . 131 a . Dr . Wadia's Assignment b . Dr . Wadia's Methodology . . . . . . . . . . 133 c . Dr . Wadia's Conclusions . . . . . . . . . . 134 d . Petitioner's Concessions . . . . . . . 136 i . Nalco Inhibitor Antifouling Test (Ru n 816) . . . . 136 ii . Wastewater Activity (Run 809) . . . . . 137 iii . Rohm & Haas Runs (Runs 81 3 and 814) 138 e . Activities That Were Not Identified Base Period Activities . . . . . . . . . . . . . 139 i . NOx . . . . . . . . . . . . . . 139 ii . John Zink Co . Orders . . . . . . . . . 149 iii ' Star Pelleting . . . . . . . 149 iv . Naphtha Analysis 15 0 if . Duration and Quantities of Produc t Produced . . . . . . . . . . . . . . . 150 i . Natural and Forced Draft Burner Test s (Runs 1 through 11, 95, and 96) . . . 153 ii . Nalco 5211 Tests (Run 15) . . . . . . 157 iii ., Vinyl Acetate Catalyst Protectio n Tests (Runs 47 and 48 and Runs 59 4 and 596) . . . . . . . . . . . . 159 iv ., Butyl Acetate Capacity Increase Tes t (Run 161) . . . . . . . . . . . . . 161 v . MEK Production Test (Run 175) . . . . . 161 vi . Secondary Refining System Tes t (Run 178) . . . . . . . . . . . . . . 162 vii . Spanish Fermentation Ethanol Refining Test (Run 180) . . . . . . . . . . . 16 2 viii . Ethanol Tertiary Recovery Test (Ru n 181) . . . . . . . . . . . . . 162 ix . Mexican Fermentation Ethanol Refining Test (Run 184) 16 3 X. Propionic Acid Hydrogen Peroxid e Treatment Test (Run 190) . . . . . 163 - 5 xi . 'Adiabatic Hydrogenation Beds Rearrangement . Test (Run 198 . . xii . Butanol Refining Test (Run 202) xiii . DIBK Recycle to Mixed Keytones Converters Test .(Run 608) . . . . . . . 16 3 . 164 . 16 4 V . Base Period QREs . . . . . . . . 164 A . Documentation . . . . . . . . . . . . . . . . . 166 B . Ms . Toivonen's Costing Methodology . . . . . . 16 7 1 . Identifying the Lead PCD . . . . . . . . . . . 168 2 . Identifying the Materials . . . . . . . 169 3 . Tracing the Materials . . . . . . . 169 4 . Determining the Unit Costs of Materials . . . . 170 5 . Calculating Total Materials Costs . . . . . . . 172 6 . Calculating the Wage . Costs . . . . . . . . . . . 173 7 . Calculating the Total Run Costs . . . . . . . . 175 8 . Exceptions to Ms . Toivonen's General Costin g Methodology . . . . . . . . . . . . . . 175 C . Ms . Toi v'onen's Conclusions . . . . . . . . . 178 D . Disputed Calculations . . . . . . . . . 178 . 1 . Acrolein Refining System Capacity Test (Run 128) . . . . . . . . 179 . . 179 2 .* Propyl Dipropasol Refining Test (Run 171) 3 . Isophorone Mids Conversion Test (Run 173) 180 4 . Secondary Refining System Test (Run 178) . . . 180 5 .' Naphtha-Sulfur Injection Test (Run 807) . . . . 180 6 . Methylmercaptopropanal (MMP) Refrigeratio n Tests (Run 810) . . . . . . . . . . . . . . 18 1 OPINION . I . The Experts . . . . . . . . . Petitioner's Expert Witnesses 1 . Peter Spitz . . . . . . 2 . Gilbert Froment . . . . . . . 3 . Richard Martin 4 . Norman Brockmeier . . . . . 5 . Ms . Hinojosa . . . . . . 6 . Dr . Wadia . . . . . . . . 7 . Ms . Toivonen . . . . . B . Respondent's Expert Witnesses . . . . . . 1 . Roy T . Halle 2 . M . Julianne McClung . . 3 . Gary Allen . . . . . . . . . . . . . . . . . . . A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 . 187 . 187 . 188 . 188 . 188 . 189 . 18 9 . 189 . 189 . 190 . 19 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 II . Whether the Claim Projects Constitute Qualified Research 191 A . The Qualified Research Tests . . . . . . . . . . . 19 1 1 . The Section 174 Test . . . . . . . . . . .194 0 - 6 . . . . . . 197 2 . The Technological Information Test 3 . The Business Component Test . . . . . . . 198 4 . The Process of Experimentation Test . . . . . . 198 . 20 3 5 . Activities That Are Not Qualified Research B . The Claim Projects . . . . . . . . . . . . . . . . . . 204 . . . . . . . . . . . .. 204 1 . Plant-Based Research 2 . The Amoco Anticoking Project . . . . . . . 20 7 a . The Section 174 Test . . . . . . . . . 208, b . The Technological Information Test . . . . 211 c . The Business Component Test . . . . . . 212 d . Process of Experimentation Test . . . . . . 212 e . Funded Research . . . . . . . . . . . . . 215 f . Research After Commercial Production . . . 216 g . Data Collection and Routine Testing . . . . 217 h . Substantiation Requirement. . . . . . . . . 21 9 . . . . . . . 220 3 . The Spuds Project . . . . . . . . . . . . . . . . 221 a . The Section 174 Test b . The Remaining Tests . . . . . . . . . . 22 3 4 . The Sodium Borohydride Project . . . . . . .223 a . The First Three Tests 224 b . The Process of Experimentation Test . . . . 22 4 5 . The UOP GA-155 Project . . . . . . . . . . . . . 227 a . The Section 174 Test . . . . . . . . . . . 228 b. The Remaining Tests 23 0 6 . The UCAT-J Project . . . . . . . . . . . . a . The Section 174 Test .i . Uncertainty . . . . . . . ii . Discovering Information . . . . b . The Technological Information Test . c . The Business Component Test . . . . . d . The Process of Experimentation Test . e . Research After Commercial Production f . Substantiation Requirement . . . . . . 230 . . . 230 . . . . 23 2 . . . 235 . . . 238 . . . . 239 . . . 239 . . . 242 . 24 3 III . Base Period Activities 244 A . Whether Petitioner Must Include Activities Conducte d By the Entire Consolidated Group . . . . . . . B . Acquisitions and Dispositions . . . . . . C . Polypropylene Runs . . . . . . . . . . . . . . . . D . Whether Petitioner Included All Activities Simila r . 245 . 248 . 250 to the Claim Projects on Its List. of Identifie d Runs . . . . . . . . . . . . . . . . . . . . . . 251 1 . Petitioner's Sources of Information . . . . . . 251 a . Whether Petitioner Was Required To Us e FOCRs To Identify Base Period Activities . 251 b . Whether Petitioner Was Required To Consider Alternative Sources . . . . . . . . . . . . 255 - 7 2 . Whether Petitioner Should Include Additional Activities in Its Base Period Calculation . . . 256 a . NOx . . . . . . . 257 b . John Zink Co . Products . . . . . . . . . 257 C . Star Pelleting Line . . . . . . . . . . . 257 d . Naphtha Analysis . . . . . . . . . . 258 e . Dr . Wadia's Limitation of Duration . . 25 8 3 . Reliability of Dr . Wadia's Methodology . . . 260 a . Reliability of Dr .Wadia's Methodology as Expert Testimony . . . . . . . . . . . . . 261 i . Whether the Methodology Can Be Tested . 263 ii . Whether the Methodology Is,Known o r Accepted in the Community, Has Been, Published, or Has Been Subjected to Peer Review . . . . . . . . . . . 26 4 iii . . Whether the Methodology is Subject to Known Rate of Error . . . . . 264 b . Petitioner's Definition of "Qualifie d Research" . . . . .. . . . . . . . . . 268 . 272 c . Whether Dr . Wadia Is Biased . . . . . IV . Claimed Costs . . . . . . . . . . . . . . . . . . . . . . 273 V . Base Period QREs . . . . . . . . . . . . . . . . . . . 28 5 A . Alleged Flaws in Ms . Toivonen's Costin g Methodology . . . . . . . . . . . . .. . . . . . 285 B . Alleged Errors in Ms . Toivonen' s Calculation sCalculations . . . . . .288 C . Documents Ms . Toivonen Relied Upon . . . . . . . . 291 . D . Consistency Requirement . . . . . . . . . 29 1 1 . In General . . . . . . . . . . . . . . . . . 293 . 294 2 . Base Case Costs . . . . . . . . . . . . . . . 295 3 . Wage Costs . . . . . . . . . . . E . Whether Ms . Toivonen Calculated the Cost o f . . . . . . . . . 29 6 "Qualified Research " Activities VI . Conclusion . . . . .. . . .. . . . . . . . . 29 6 MEMORANDUM FINDINGS OF FACT AND OPINIO N GOEKE, Judge : Respondent determined deficiencies in petitioner's Federal income . tax of $20,481,520 and $140,732,25 4 for 1994 and 1995, respectively . In its petition, as amended, El - 8 petitioner alleges that it is entitled to additional research credits under section 411 of approximately $3,656,091 and $4,726,664'for 1994 and 1995, respectively (claimed credits) .2 The claimed credits,are based on 106 projects it conducted in various units within six manufacturing plants during 1994 and 1995 (credit years) . . For purposes of resolving this action expeditiously, the parties have agreed to try five of the largest projects3 underlying petitioner's affirmative research credi t claims (claim projects) . 4 The issue before the Court is whether petitioner is entitle d to additional research credits under section 41 for 1994 or 1995 .5 Resolution of this issue requires us to determine : (1 ) 'Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure . ?In its original petition, petitioner claimed as affirmative adjustments additional research credits of $4,808,671 and $5,851,619 for 1994 and 1995, respectively . After amending its petition, petitioner has conceded that an additional project does not satisfy the requirements of sec . 41(d) . This concession does not affect our discussion of petitioner's claims and will be addressed in the parties' Rule 155 computations . 'The term "projects" is used for convenience . 4Petitioner withdrew a sixth project before trial . 5All other issues in this case were resolved'by agreement of the parties or our previous Opinion in Union Carbide Foreign Sales Corp . v . Commissioner , 115 T .C . 423 (2000) . 0 9 Whether any of the claim projects constitute qualified research under section 41(d) ; (2) whether any of the- claim projects constitute qualified research, whether petitioner included all activities that were similar to the claim projects in it s calculation of its base amount .under section' 41(c) (4) (3) if an y of the claim projects constitute qualified research under section 41(d), whether the claimed costs of supplies and wages attributable to those projects (claimed costs)-are qualified research expenditures under section 41(b)- (QREs) ; and (4) if any of the claimed costs are QREs,`whether petitioner included all similar costs in its base amount calculation . FINDINGS OF FAC T I . Overvie w Some of the facts have'been stipulated and are so found . The stipulated facts and the accompanying exhibits are incorporated herein by this reference .- .A. Petitione r Union Carbide' `Corp . (UCC) was the `parent corporation of a~ .group of corporations .(collectively, petitioner) that filed consolidated Federal income tax returns for the'years ending December 31, 1994 and 1995 . UCC-is`a corporation organized and . existing under the laws of the State .of New York . At the, .time the petition was filed ; UCC maintained its principal corporate office in Danbury, Connecticut . " r - 10 - At, all relevant times petitioner was .a worldwid e manufacturer and marketer of basics chemicals and plastics and specialty and intermediate chemicals . Petitioner conducted its operations at large-scale production facilities . throughout the United States and abroad . Petitioner's basic chemicals and plastics (C&P) operations involved the processing of raw hydrocarbon feedstocks-principally ethane, propane, and naphtha--into basic buildingblock chemicals known as olefins . Ethylene and propylene .. were the major olefins UCC produced and were key raw materials for petitioner's olefins-chain C&P businesses . Petitioner used process technologies . to convert manufactured and purchased ethylene and polypropylene into first-line derivatives such as : . (1) Polyethylene, which'is .used for highvolume applications such as food-containers, milk and water bottles, grocery and trash bags, . pipes, and tubing ; (2) polypropylene, which is used for similar high-volume applications ; and (3) ethylene oxide/glycol and derivatives, which are used for products such as automobile antifreeze, polyester resin, and film and as raw materials for petitioner's specialty and intermediates chemicals business . Petitioner's specialty and . intermediates chemicals operations involved the production of a, wide variety of specialty chemical and polymer product lines, as well as solvents and s - 11 - chemical intermediates . During the credit years petitioner also licensed its key olefins-based process technologies, such as the UNIPOL process for manufacturing, polyethylene, to third parties in the oil and gas petrochemical industries . During the credit years UCC maintained research and development (R&D) technical centers in South Charleston, West Virginia (South Charleston) ; Tarrytown, New York ; Bound Brook, Edison, and Somerset, New Jersey ; and Cary, North Carolina . UCC carried out process and design engineering at the technical center in South Charleston . On February 6, 2001, UCC merged into a wholly owne d subsidiary of Dow Chemical Co . (Dow) . B . Procedural Histor y UCC, . as the common parent of petitioner's consolidated group, timely filed consolidated Federal income tax returns for the years at issue on Forms 1120, U .S . Corporation Income Tax Return . On its 1994 and 1995 Federal income tax returns (returns), petitioner claimed research credits of $14,100,887 and $4,053,901 for 1994 and 1995, respectively (original returns research credits) . UCC elected the reduced research credit under section 280C(c)(3) on its 1995 return, but not on its 1994 return . In computing the original returns research credits, petitioner included the following amounts as QREs for 1984 12 through 1988 attributable to UCC,(UCC's original returns base period QREs) : Year UCC's Original Return s Base Period ORE S 1984 $68,503,72 2 1985 64,742,82 8 1986 48,107,16 9 1987 52,170,49 2 1988 70,499,62 2 Total 304,023,83 3 UCC's original returns base period QREs for 1984 through 1987 were drawn exclusively from UCC's R&D technical centers . 'UCC's 1988 original returns base period QREs were drawn from UCC's R&D technical centers except for $1 .9 million attributable to UCC's G-1750 reactor at its Seadrift facility in Texas (Seadrift) . UCC's annual gross receipts for the base period were a s follows : i Year UCC's Annua l Gross Receipt s 1984 $2,737,545,15 0 1985 2,440,721,12 6 1986 2,976,592,77 8 1987 3,547,163,93 8 1988 5,033,745,12 8 Total 16,735,768,120 13 UCC's annual gross receipts'for 1990 through 1994 were as follows : Year UCC's Annua l Gross Receipt s 1990 $4,010,083,91 3 1991 3,724,913,91 0 1992 3,608,486,05 4 1993 3,617,655,79 9 1994 3,789,545,36 1 On March 22, 1999, respondent timely mailed'a notice of deficiency to petitioner determining income tax deficiencies of $20,481,520 and $140,732,254 for 1994 and 1995, respectively . The parties negotiated an agreement that resolved most of the issues raised in the notice of deficiency . Respondent allowed petitioner's original returns research credits as part of the negotiated agreement . Petitioner alleges in its petition, as amended, that it is entitled to additional claimed credits of approximately $3,656,091 and $4,726,'664 for 1994 and 1995, respectively 6 Petitioner's claimed credits are based on 106 projects it conducted in various units within six manufacturing plants during the claim years . 6These figures have not been adjusted to reflect the fact that petitioner has conceded that some of the projects do not satisfy the requirements of sec . 41(d) . 14 In computing the claimed credits, petitioner, claimed $56,247,556 and $145,435,822 as additional QREs under section 41(b) for 1994 and 1995, respectively (claimed QREs) . The amount of claimed QREs for 1995-isfthe full-year amount although petitioner acknowledges that section 41 does not apply to any amount paid or incurred after June 30, 1995, and before January 1, 1996, and petitioner will disregard such . .amounts in computing the amount of additional research credits .to which it is entitled . On its original 1994 and 1995 returns petitioner reported the claimed QREs as costs of,goods sold ._ The supply, items that are in dispute are raw materials used to produce goods for sale . For purposes of resolving this action expeditiously, the parties have agreed to try five of the largest projects underlying petitioner's affirmative research credit claims .' The five claim projects are referred to as : (1) The Amoco anticoking 'The parties have not specified how they will proceed as to the remaining credit year projects . The Court hopes that this opinion will provide the parties with sufficient guidance to determine whether additional research credits are available for those projects . However, .. additional proceedings may be necessary if the parties cannot agree-on the final disposition of the remaining projects . 15 project ; (2) the spuds project ;' (3) the sodium borohydride project ; (4) the UOP GA-155 project ; and (5) the UCAT-J project . The Court held two special trial sessions in connection wit h the petition claims . The first addressed the research credit eligibility of the claim projects, and the second addressed petitioner's section 41(c) base amount recomputation . Both parties introduced fact testimony from former UCC employees (i n some instances, current Dow employees) and opinion testimony from expert witnesses . II . Claim Project s UCC conducted the claim projects at the Taft Plant (Taft) and the Star Plant (Star), both of~which were in Hahnville, Louisiana .9 UCC conducted .. its olefins production at`Taft' s hydrocarbons unit, which contained two -production,subunits designated Olefins-land Olefins-2 . During the credit years Taft was a manufacturing plant that included facilities for'the conversion of raw hydrocarbon feedstocks such as ethane, propane, and naphtha into basic olefins such as 'ethylene, propylene, and butadiene . The Amoco anticoking, spuds, 'sodium bor'ohydride, an d BPetitioner now concedes that the spuds project is not qualified research .- However, for reasons discussed below, we will make an independent determination as to whether the spuds project constitutes qualified research . 9Following Dow's acquisition of UCC in 2001, Taft and Star were integrated into a single petrochemical complex referred to as St . Charles Operations . 16 UOP GA-155 projects .-related to the olefins production process and were conducted at Taft . UCC produced film and molding polyethylene resins using petitioner's low pressure UNIPOL process technology at Star . The UCAT-J project related to UCC's production of polyethylene resins and was conducted at Star . A. The Olefins Production Proces s A highly simplified description of the olefins production process at Taft is that hydrocarbon feedstock is pumped from storage into pyrolysis furnaces, preheated, and diluted with steam and then is broken into lighter hydrocarbons through thermal cracking . Hydrocarbons are any chemical compounds consisting primarily of carbon and hydrogen . Hydrocarbons may include 1 to more than 60 carbon atoms and can be gases, liquids, or solids at normal temperatures depending on-the number of carbon atoms in the compound . Hydrocarbons are found in petroleum, coal, and natural gas . Hydrocarbons are significant sources of fuel and raw materials for the production of basic petrochemicals .and derivatives such as plastics, rubbers, and specialty chemicals . "Cracking" is the process whereby hydrocarbon molecules are decomposed and recombined into lighter, commercially useful molecules through the breaking of carbon-to-carbon or carbon-tohydrogen bonds . Cracking can be accomplished through a thermal - 17 or a catalytic process . UCC's olefins production facilities employed a thermal process called "steam__cracking",'whereby a gaseous or liquid hydrocarbon feed is diluted with steam and heated in a fire furnace . The steam cracking reaction requires temperatures in the range of 1400 to 1650 degrees Fahrenheit and ordinarily occurs for less than half a second before being "quenched", or cooled rapidly, in a heat exchanger or by direct contact with colder fluid . UCC's heat exchangers are typically referred to by the acronym "TLE", which stands for "transfer line exchanger" .' A TLE tubesheet is a flat, circular sheet approximately 5 feet in diameter that manifolds together many double concentric tubes each with an inner`diameter of about 1 inch . Water and steam flow through the concentric annulus of each double concentric tube, and the very high temperature effluent flows through the center tube . Heat is transferred from the cracked gas, or "effluent", to the water and steam to quench the ethylene furnace reaction products . TLEs use the extremely hot effluent to boil water into high pressure steam that may be used to power large steam turbine drivers in the product recovery section of'the plant or for other purposes . The steam cracking process requires the construction and maintenance of large, capital intensive, and complex cracking furnaces to supply the necessary heat . Most of the furnaces at Olefins-1'and'2 were Lummus SRT (SRT'stands for "short residence s - 18 furnaces . A Lummus SRT furnace-consists of a rectangular time" ) firebox with a row of vertical tubular coils, or "cracking sets", located in the center plane between two radiating ceramic refractory walls . After the effluent is initially quenched in the furnace's TLE to minimize secondary chemical reactions , it is further quenched through-direct contact with water and / or oil in a quench tower . Heavier hydrocarbons, known as "pyrolysis fuel oil", are separated from the effluent during the quenching process . Th e cracking , quenching , and pyrolysis,fuel oil separation processes occur in the hot section of UCC's olefins production units . After quenching , the effluent enters the recovery section (or cold section) of the olefins production units . The effluent is first compressed in a multistage centrifugal compressor to the pressure required for separation . Acid gasses such as carbo n dioxide and hydrogen . sulfide are removed in an acid gas removal unit during the compression process . Following compression and acid gas removal, the effluent is dried, chilled , and partially condensed . It then proceeds through a separations train whereby ethylene , butadiene , propylene, and byproducts are fractionated and recovered in a series of distillation columns and related equipment . Distillation is performed in a column through the, application of heat from a reboiler at the column's base and the I 19 removal of components in a condenser at the column's top . The lighter fraction inthe'column feed mixture (the fraction containing the components of the mixture with the lower boiling points) is separated according to the lower boiling points relative to the other chemicals in the mixture and .recovered as overhead vapor at the top of the column . The heavier fractions in the column feed mixture exit as "bottoms" through the column's base . Olefins-1 and Olefins-2 each had several distillation columns, including the demethanizer'(C1) column, which separated methane from less volatile components ; the deethanizer (CO column, which separated ethylene and ethane from less volatile components ; the depropanizer (C3) column,-which separated propylene and propane from less volatile components ; and the debutanizer (C4) column, which separated crude butadiene, butane, and other four-carbon compounds from less volatile components . The units also included an ethylene fractionator, which separated ethylene from ethane, and a propylene fractionator, which separated propylene from propane, as well as several other columns . - Recovered methane and hydrogen were used primarily as fuel gas . UCC typically supplied recovered ethylene, propylene, and crude butadiene to third parties and/or one of UCC's dedicated olefins-derivatives units . UCC also recovered and sold certain 20 - byproducts of the olefins production process, such as acetylene, dripolene (pygas), and fuel .oil . Ethane and propane recovered in the process were, recycled through the process to extinction . B . . The Amoco Anticoking Project 1. Overview of Cokin g Coke is a heavy, hard, and relatively brittle form of carbon that gradually forms on the interior walls of cracking set coils during the cracking process . The cracking reaction produces two types of coke, "catalytic" and "thermal" .10 Catalytic coking is caused by the reaction between active metal sites on the inner furnace tube walls and hydrocarbon, molecules in the cracked furnace gas . Thermal coking gradually forms as a result of the reaction between catalytic coke and the highly reactive products in the cracked furnace gas . Time and temperature combine to remove the hydrogen from the hydrocarbon molecules ; ., forming thermal coke . Coke buildup adversely .influences-furnace performance in a number of ways . Coke insulates the furnace tubes . from the inside, impeding effective heat transfer from the furnace walls to the gas within the cracking sets . This gradually increases the skin temperature of the coils to the mechanical limit, approximately 2,000 degrees Fahrenheit . Coil coking also close s "There are other coke formation theories that are not relevant here . -Y 21 off the flow cross'-section area within the cracking sets and thereby causes the hydrocarbon partial pressure (the pressure exerted by the hydrocarbons within the gas mixture) to increase . Higher partial pressure in the coils reduces the desired ethylene yield from the furnace . Coke also accumulates in the TLEs, located immediately downstream from the radiant section, and the accumulation can lead to higher hydrocarbon partial pressures and TLE exit temperatures . Higher pressure in the TLEs caused by coking also reduces the desired ethylene yield from the furnace . Because of these effects of coking on furnace operation, the cracking sets must be decoked periodically . UCC generally decoked the furnaces in Taft's hydrocarbons unit every 30 to 60 days through a process in which air and steam were fed into the cracking sets at elevated temperatures (hot decokes) . After approximately three to four hot decokes, UCC brought the furnaces down for an extended "cold turnaround" in which damaged cracking sets were replaced and coke was manually removed from the TLE system . Hot decokes and cold turnarounds necessarily resulted in maintenance costs and lost production . Inhibiting coke formation could result in reduced maintenance, longer furnace run times, longer equipment life, and increased productivity . - 22 2 . . The Coke Reduction Program and Amoco's Technolog y Before and during the credit years UCC's hydrocarbons,R&D group had in .,place a coke reduction program aimed at achieving economic and productivity improvements by implementin g technologies designed to reduce or eliminate coke in UCC's ethylene_furnaces . . .Because-,of the inefficiencies .caused by coke, finding ways to .reduc .e or eliminate coke was an important objective of UCC's hydrocarbons business . The goal of the coke reduction,program was to ; reduce the number of decokes per year by 50 percent and-increase productivity by 4 to 4 .5 percent per year . If successful, .UCC estimated,that this would reduce its decoking costs by $2 .4 million per . year and increase revenue b y as much as .$20 million . Many coke'mitigation technologies . have been proposed and developed in laboratories over the years, but none have succeeded commercially . Some, failed to mitigate coke or even made it worse . UCC screened and commercially tested numerous anticoking technologies in the mid-1980s and later . During the,credit years .there was no known, generally accepted, commercial coke mitigation technology,for pyrolysis furnaces . UCC considered at least-four technologies during the credit years but tested only technology developed by Amoco Chemical Corp . .(Amoco) during that period . i• - 23 One of UCC's senior engineering scientists, David Milks, approached Amoco regarding its anticoking technology in `January 1994 . Dr . Milks operated out of the South Charleston technical center . On January 21,`1994, Amoco's anticoking technolog y manager wrote to UCC'regarding an Amoco-developed furnace anticoking technology that would mitigate coke formation and extend furnace run times between decokings .' ,Amoco's technology involved the' pretreatment of the interior walls of~the cracking sets with a solution of dithiophosphoric acid derivative . Amoco . claimed that the pretreatment bonded to the sites of the tube walls that promote catalytic coke formation and "poisoned" these sites for several furnace 'runs to-prevent coke buildup . Amoco, told UCC that its anticoking technology had been successfully tested in a-pilot plant and two commercial plants and that the treatment had been shown to survive multiple decokes . After reading about the science behind the technology, Dr . Milks believed that it was theoretically sound but not yet proven . Both Dr . Milks and Amoco were interested in'testing the technology `on,UCC's facilities . Several UCC employees formed the Amoco anticoking technology test team to evaluate the technology on one of the furnaces at Olefins-2'and to provide a recommendation as to whether UCC should license the technology and implement it on all of its furnaces atTaft and other UCC plants . William Hyde, an 24 operations improvement engineer, , at . Taft, was the team leader . As the team leader, Mr . Hyde prepared a charter for the team, evaluated the technology to . determine,whether it was worth testing, and coordinated the testing of the technology . Amoco's anticoking technology included the treating chemical, and a specialized method of, application . Unlike prior decoking technologies that,_UCC had tested, which involved the continuous injection of an anticoking,chemical, Amoco's technology was a pretreatment to be appliedto a clean furnace before introducing the feed . , Because of the proprietary nature of the technology, Amoco required the protection of a secrecy agreement before disclosing its .process to UCC .I On or about November 23, 1994, UCC entered into an agreement with Amoco . relating to Amoco's anticokin g technology (the secrecy agreement) . . The secrecy, agreement was the only agreement UCC entered into with Amoco regarding Amoco's anticoking technology . 'According to,the secrecy agreement, UCC's goal in conducting the Amoco anticoking project was to evaluate the technical and economic feasibility of Amoco's process and equipment for inhibiting coking in UCC's ethylene furnaces . UCC also wanted to determine whether, it was interested in a-licensing arrangement with Amoco . UCC's rights in Amoco's technology were limited to these purposes . The secrecy agreement obligated UCC to provide Amoco with a nonconfidential summary of,the Amoco T 25 anticoking technology's performance no later than'3 months after testing was completed . UCC gained'no rights in, or licenses to, any Amoco patent, but'the secrecy agreement contemplated that the parties could enter into a licensing agreement after the testing'• was completed . 3 . The Amoco 'Anti coking Projec t At the beginning of the Amoco anticoking project UCC was under the impression that the Amoco technology was fairly established and beyond early developmental'stages but that it would still require some testing before it was proven technology . Except for the fact that UCC was testing the Amoco technology, UCC intended to continue its ethylene production process as usual without decreasing production during the Amoco anticoking project . UCC worked with Amoco to draft a test plan that specified the number of test runs (runs), the run lengths what would be measured, and the method of injecting the inhibitor . The run lengths would be determined by "furnace cycles", the amount o f time the furnace .would`run between hot decokes under norma l operating conditions . The test plan called for the-collection of data over four consecutive furnace cycles .- The testing would begin on furnace 24 in Taft's Olefins-2'unit . The test plan provided that Amoco would apply the inhibitor to four of the six coils in the furnace so .that the coke formation could be compared 26 between the treated cracking, sets and the untreated cracking sets . The test plan provided that treating four of the six coils would ensure that the test results would not be affected .by differences between furnaces or operating conditions . The test plan called for the collection of various measurements during decokes, including furnace coil skin temperature, pressure drop across the coils, TLE inlet pressure, carbon monoxide, carbon dioxide,,and .phosphine . Except for phosphine, these measurements are affected by coke formation . . Phosphine is a toxic substance that can be produced when phosphorous-containing materials are used . as coke inhibitors . To prepare for the test, Mr . .Hyde prepared a Facility Operational Change Review (FOCR) for the project . An FOCR is a document that is prepared by the operations personnel when a significant .operational change is . to take place . It generally addresses technical, quality, health, waste, and safety issues that must be considered before the change .is implemented in order to minimize any risks involved . Jason Tregre, a Taft hydrocarbon R&D technology manager, participated in the prestartup safety review on furnace 24 . As part of the test preparation UCC also manufactured and installed nozzles according to design specifications provided by Amoco . Among the other final test preparations were several discussions with Amoco representatives 27 and a walkthrough at Taft on November 7, 1994, in which Amoco an d UCC personnel reviewed the pretreatment application procedures . On or about November,28, 1994, after a hot decoke, four of the six cracking sets were treated . . Amoco personnel worked with UCC's plant operators to apply the.treatment using Amoco' s equipment . Amoco provided the treatment free of charge and agreed to pay any overtime for additional time that UCC's employees would be required . to work . The treatment was completed on November 30, 1994 . After the pretreatment was complete, UCC's plant personnel returned the furnace to normal operating conditions . UCC paid for the feedstocks .and fuel gases used during the project as well as the normal wages of the UCC employees involved in-the project . The supplies used for the project were the same supplies that UCC used for normal operations, and UCC sold the materials produced during the Amoco anti coking . project in the ordinary course of its business . . The Amoco .anticoking project did not disrupt UCC's normal manufacturing processes or products . After-the pretreatment was applied, UCC's plant personnel took various measurements, including the following, some of which were not normally taken and others of which were not normally taken as frequently : I° - 28 Measuremen t Taken Furnace coil skin . Frequenc y During Test Once per day Normal Frequenc y Once every 1 to 3 day s temperatur e Radiant coil pressure drop At least once per day Not normally , measure d TLE inlet Continuously Continuousl y Carbon monoxide Not specified Not normall y measure d Carbon dioxide During the decoke Not normall y measure d Hydrocarbon and Every 6 minutes Not specifie d steam flows for the first 7 pressur e days, hourl y thereafte r Phosphine Not specified Not normall y measure d Some of these measurements were collected-on the Olefins-2 unit's process computer, and others were collected manually . UCC took measurements for approximately 45 days, then performed a hot decoke of furnace 24 in January 1995 . Throughout the project UCC continued to decoke furnace 24 according to the plant's, normal schedule . UCC restarted the furnace on or about January 15, 1995, without retreating the furnace and continued to take measurements for about 9 days thereafter . Dr . Hyde compiled these measurements and sent them to Dr . Milks and Dr . Husebye, a researcher in the hydrocarbons R&D group 29 at the South Charleston technical center . Dr . Husebye reformatted the data and analyzed them . Dr . Husebye did not typically perform this type of analysis . UCC did not share the data it collected with Amoco . " Dr . Husebye and Dr . Milks documented the results of the first Amoco pretreatment' in a report dated February 21, 1995 . The report covered approximately 7 weeks of furnace 24' s operation . The results showed that carbon monoxide 'in the treated cracking sets was initially reduced, indicating successful coke inhibition . However, after the first hot decoke and restart of furnace 24, there was no statistically significant difference in the amount of carbon monoxide in the treated versus untreated cracking sets . Dr . Milks and Dr . Husebye hypothesize d that the hot decoke that was performed before the Amoc o pretreatment was applied might have been incomplete and the pretreatment might not have survived the first hot decoke following the pretreatment . The .results,from the other measurements were either inconclusive or indicated no difference between the treated and untreated cracking sets . Because the results from the first pretreatment were inconclusive, Dr . Milks and Dr . Husebye recommended a secon d pretreatment with the Amoco technology 'after a thorough col d "Respondent argues that UCC did share data it collected with Amoco, and there is conflicting testimony on this point ; However, this fact does not control our decision . . I 30 turnaround . Amoco personnel applied the second pretreatment in April 1995to four of the six cracking sets . UCC personnel gathered the same data following the second pretreatment as they had gathered following the first pretreatment, and Dr . Husebye analyzed the data . While .. UCC did not retain its analysis of the second pretreatment, it did retain archived computer records that included data collected after the second pretreatment that could be used to reconstruct the original analysis . Following the second pretreatment, the initial carbon monoxide levels in the treated cracking sets were again significantly . lower than the carbon monoxide levels in the untreated sets . However, after the hot decokes of furnace 24 in May and June 1995,_the carbon monoxide levels in the treated and untreated cracking sets were nearly identical . The results from the second pretreatment, as a whole, indicated that the Amoco technology did not . inhibit coke formation in furnace 24's treated cracking sets during the runs conducted between April and midAugust 1995 . On August 21, 1995, a furnace operator participating in a cold turnaround of furnace 24 observed that the TLE cones connected to the treated cracking sets had significantly greater amounts of coke deposits than the TLE . cones connected to the untreated cracking sets . This was unexpected, and UCC believed - 31 that the pretreatment may have contributed to-the excess coke in the TLE cones . During-the cold turnaround UCC removed tube samples 'and coke samples from furnace 24 to be - tested . UCC ' s corrosion and machinery engineering department evaluated - the samples and documented the results of its analysis in a formal project report . This report included the results of several performed on the samples , tests . : analyses'of those tests, and recommendations for future tests of the Amoco technology . UCC did not prepare any other formal project reports to specifically document the results of the second pretreatment . However, UC C reported the results of the - two pretreatments in . several informal reports and memoranda . ' UCC considered the Amoco anticoking project to-be finished in August 1995, and UCC never again tested the Amoco technology in any of its ethylene furnaces : UCC later'discovered that the problem might have been caused by a mistake on Amoco's part in . establishing the feed rate or the quantity of inhibitor to be fed to the furnaces . This indicated to UCC that - Amoco's technology was more developmental than UCC originally believed it to be . UCC never entered-into a licensing agreement with Amoco to us e its technology . UCC used the information gathered during the Amoc o anticoking project primarily to determine that Amoco ' s technology 3, 32 did not effectively reduce coke formation in its commercial facilities . UCC also learned about the operation of thiophosphates (the active ingredients in the Amoco technology), the relationship between sulfur and carbon monoxide levels, and the effect of anticoking technology on the ceramic material on TLE cones . UCC used this information in the course of its business . Mr . Hyde,spent 35,hours in 1994 and 10 hours in 1995 working on the Amoco anticoking project . Mr . Tregre spent 5 hours working on the Amoco anticoking project in 1994 .1 2 C. The Spuds Projec t 1. Overview of the Spuds Projec t The spuds project involved replacing four-hole spuds with . one-hole spuds . on . furnace 3 in,Olefins-1 at .Taf.t . The-one-hole spuds-were installed on furnace 3 on or about January 13, 1995 . A burner is a device that provides radiant heat in a pyrolysis furnace through controlled combustion . . . In a pyrolysis furnace, combustion is intended to provide .a uniform temperature to the fired radiant wall, allowing for even heat flu x distribution to the cracking set coils . : 12Petitioner does not claim as QREs any wages paid to Dr . Milks or Dr . Husebye, who operated out of the South Charleston technical . center . Their wages would have been included in ,petitioner's original returns research credits . 33 The furnaces in Olefins - 1 each had 112 radiant wall burners . The burners are mounted through the furnace radiant wall and produced a thin, flat circular disk of flame adjacent to the wall . The burners were equally spaced in a grid pattern and radiated heat to the process tubes on the centerline of the furnace . Each burner had a single spud . ' A spud is the orifice or port through which fuel gas flows into the burner . It resembles a bolt with one or more holes at the end . Spuds are installed at the piping terminations of each burner and affect fuel flow and pressure . Spuds function to equally divide the amount of fuel being injected to each burner so that the heat released from ° the'burners is evenly and predictably distributed throughout all of the burners in the firebox . The size and number of spud orifices determine the pressure of the fuel gas just upstream of the orifice and the exit velocity of the fuel-gas from 'the orifice, parameters known as "flow characteristics" . Flow characteristics of the spuds help determine the burner firing capacity, which is the British Thermal Unit ( BTU) per hour heat output generated by a single burner, flame stability, and fuel efficiency . As fuel gas passes through the spud it produces a high velocity gas jet, which entrains combustion air and mixes it with the fuel . The amount of air that mixes with the fuel is critical to the stability of the flame .- - 34- When it was first built in the 1960s, Olefins-1 used one hole spuds until it was-moth-balled in the 1980s . When it was restarted in-1989,,Olefins-1 switched to four-hole spuds in order to reduce noise . The four-hole spuds were prone to plugging, and UCC typically cleaned the spuds during furnace shutdowns by poking them with pieces of wire . Plugging of spuds,may also be improved or eliminated by cleaning the fuel gas system, removing contaminants in the fuel gas, setting up a . regular maintenance schedule for removing and cleaning the-spuds, or increasing the size of the orifice(s) in the spuds . Some of these methods may be .costly,and/or labor intensive, . : While replacing multihole spuds with one-hole spuds without changing the-total area of the holes was a known method of reducing plugging, one-hole spuds cause significantly more noise than multihole spuds and therefore cannot always be used . The Taft hydrocarbons unit identified fuel efficiency as an area .for operational improvement . In October 1994 the_John Zink ,Co . conducted a combustion survey of,Taft's hydrocarbons unit ., .The John Zink Co . is a large ethylene burner manufacturer that manufactured the burner used on furnace 3 . 'Burner manufacturers generally use their test furnaces to evaluate new spud designs because testing new-spuds in a commercial furnace can be hazardous and the costs,are .unreasonably high . However, once a spud design is proven, it generally performs better on commercial 35 furnaces than on test furnaces because the higher heat content in a commercial furnace results in more stable flames . Testing and evaluating a new spud on a test furnace takes about a'day or less . Following the survey , the John Zink Co . recommended using one-hole spuds instead of four-hole spuds in'the • Olefins-l furnaces to reduce plugging . UCC had been using one - hole spuds in its Olefins - 2 furnaces since the late 1970s and noticed that Olefins-2 had not experienced any plugging problems . However , UCC was concerned about changing to one-hole spuds because the y might create too much noise . Olefins-1 and 2 were physically different , and noise was more of a concern at Olefins - l than at' Olefins-2 . However, noise was not a major concern because the plant personnel already wore hearing protection . UCC followed the John Zink Co .'s recommendation to try switching from four - hole-spuds to spuds with one hole with the same total hole area . three furnaces , UCC decided to purchase enough spuds for which would cost $3,400 to $3,700 per - furnace . UCC believed that this was a relatively inexpensive way to solve the plugging problem . UCC intended to test the' new spuds on one furnace ; and if the test was successful , then UCC would immediately begin replacing'the spuds on two other furnaces . To test the new spuds , UCC planned to monitor performance data such as : (1) The fuel - to-feed ratio ( BTUs of fuel per point - 36 - of feed), (2) excess oxygen in the fuel gas, (3), the amount o f combustibles in the fuel gas, and (4) fuel pressure . UC C intended to evaluate the fuel efficiency improvements b y measuring BTUs in a process computer, measurements that were available-regardless of whether a test was being performed . The goals of the test were to determine whether the new spuds would : (1) Stop or reduce plugging ; (2) increase efficiency, and if so by how much ; and (3) .increase noise, and if so by how much . Mr . Tregre was involved in this planning . UCC did in fact take the above test data on furnace 3 fo r about .90 days . Mr . James Gorenflo, a furnace technician, was involved in testing furnace 3 . UCC monitored plugging by checking fuel pressure gauges . The results showed that pressur e was not increasing, which indicated-that the new spuds solved th e plugging problem . UCC also evaluated fuel efficiency by analyzing . measurements of fuel gravity and the fuel-to-feed ratio . Mr . Tregre was .involved in this evaluation . The results showed that fuel efficiency improved, although not as dramatically as UCC had hoped . Because the one-hole spuds solved the plugging problem, UCC installed one-hole spuds on all of its . furnaces at Olefins-1 after the 90-day test period was over . While,UCC hoped that the change would increase fuel efficiency more, the fact that the - 37 .one-hole spuds solved the plugging problem was sufficient justification for changing the spuds . Mr .,'Tregre spent 70 hours in 1994 and 10 hours in 1995 working on the spuds project .- Mr . Gorenflo spent 10 hours in` 1995 working on the spuds project . 2 . Petitioner's Motion for Leave To Amend Its Petition On January 19, 2007, petitioner filed a motion for leave to amend its petition . If filed' the amended petition would have : (1) Withdrawn petitioner's affirmative claim for additional research credits under section 41 to the extent it was based on the spuds project, (2) adjusted the claimed QREs to reflect the withdrawal of the spuds project, and (3) applied the .correct' credit rate for 1994 . Respondent opposed this motion because the Court had already held a trial on'the"claim projects, including the spuds project . Giver] the' substantial cost of litigation, respondent argued that he would be prejudiced if the Court was, prevented from rendering a decision on whether'the spuds project satisfied the criteria for qualified research . In addition, to the extent that'petitioner claimed additional research credit s for projects similar to the spuds project :that were not litigated in the claim year trial, respondent argued that he would be prejudiced by the absence of a decision on whether the spudsproject constituted qualified research . - 38 Following a . hearing on this motion on August 29, .2007, w e denied petitioner's motion because we found that it would b e unfair to allow petitioner to unilaterally alter its agreement with respondent to hold a trial on the five claim projects . D . The Sodium Borohydride Projec t 1 . Overview of the Acid Gas Removal Syste m The sodium borohydride project involved the,injection .of a sodium borohydride solution into .the Olefins-2 caustic scrubber . The Olefins-land-Olefins-2 acid-gas removal systems remove, carbon dioxide and hydrogen sulfide from cracked furnace gas . Acid gases are impurities that .can cause operational problems in downstream plant equipment . Acid gas removal is also necessary to meet product specifications .. The acid gas removal system consists of a regenerative monoethanolamine (MEA) system followed by a . caustic scrubber . Cracked furnace gas is fed into the MEA .system, .where it is washed with a countercurrent flow of . amine solution that removes the bulk of acid gases . As an incidental benefit the MEA system, removes the impurity acetaldehyde from the•cracked furnace gas . Acetaldehyde is .a highly reactive compound created in trace quantities during the thermal cracking of hydrocarbons in the presence of steam . It is formed in the furnaces through the interaction of free radicals from steam and ethane or other raw materials . Acetaldehyde can polymerize and foul plant equipment . - 39 After being treated by the MEA system, the cracked furnace gas passes through a two-stage causticscrubber for removal of residual acid gases . The caustic scrubber is sized so that it can reduce acid gases to specification levels even when the MEA system is shut down . The MEA systems . in both Olefins-1 and Olefins-2 had to be periodically shut down and manually cleaned-because of'the fouling of heat transfer surfaces partially caused-by acetaldehyde polymerization . Fouling'is the-deposition of heavy organic solids that were dissolved-in process fluid . When one o f the MEA systems is down, the cracked furnace gas passes through only the caustic scrubber for "acid-gas' removal . The causti c scrubber, however, does not remove acetaldehyde. Taft's MEA systems ordinarily ran-from-3 to 6 months between shutdowns , depending on the feedstocks used and furnace cracking conditions . . Cleaning the MEA system` normally took about 14 days . In the early 1990s UCC produced at its Taft plant'-a hydrocarbon product called 'crude butadiene . Crude butadiene is highly reactive and is'a major contributor to fouling in the olefins process equipment . When'the MEA system was shut down and only the caustic scrubber was used to remove acid gases, some . acetaldehyde would 'leave-the process with the crude butadiene . In 1994 Shell Oil Co . (Shell) was Taft's primary customer for crude butadiene .' At'the time, Taft stored crude butadiene in i 40 two storage tanks and transported it, in barges to Shell, which operated a plant directly across .the Mississippi River from Taft . Shell, had a product specification . limiting the amount of acetaldehyde in Taft's crude butadiene to 100 parts per million (ppm) because acetaldehyde would foul .Shell's processing equipment . On one occasion in the summer of 1994, UCC manufactured crude butadiene that did not meet Shell's acetaldehyde specification . Shell refused to accept a barge shipment of that crude butadiene and returned it to Taft . When the MEA system, was in service, acetaldehyde levels in Taft's crude butadiene were well below 100 ppm . However, acetaldehyde levels reached between 5 0 0 and 800 ppm when the MEA system was shut down . One method that UCC used to bring offspecification crude butadiene within specification levels was called "blending" . UCC would store off-specification crude butadiene and then blend it with on-specification crude butadiene when the MEA system was restarted . , However, when the amount of off-specification crude butadiene exceeded UCC's available storage capacity, UCC would have to attempt to recycle the crude butadiene or find a purchaser who would accept it as it was . Another problem of . blending was . that it was difficult to calculate the amount of onspecification product needed to,blend with the off-specification product . UCC was also considering building a pipeline directly 41 - from Taft to the Shell plant, which would reduce or eliminate the need for storage tanks and make blending impractical . Therefore, UCC did not view blending as a permanent solution to the problem of off-specification crude butadiene . 2 . The Sodium Borohydride Projec t Because of the shortcomings of blending, UCC sought a way to remove. acetaldehyde from crude butadiene during the periods that the MEA system was shut down for maintenance . UCC decided that a possible solution was to add sodium borohydride to the caustic scrubber to remove acetaldehyde when the MEA system was shut down for maintenance . In February 1995 UCC considered using sodium borohydride regularly to remove acetaldehyde if using sodium borohydride .proved to be effective . UCC knew that sodium borohydride was effective in removing aldehydes, including acetaldehyde, as UCC had been testing sodium borohydride in laboratories for'such purposes as early as 1961 . UCC and its competitors had successfully used sodium borohydride in commercial processes to remove acetaldehyde and other carbonyl compounds from products . However, UCC did not know how effectively sodium borohydride could remove acetaldehyde in the caustic scrubber . Liquid sodium borohydride was often used to remove acetaldehyde from other liquids, but in the caustic scrubber UCC would need to use liquid sodium borohydride to remove acetaldehyde-from a gas . The 42 interaction of a liquid with a gas is much more difficult to predict than the interaction of a liquid with other liquids . UCC also knew that sodium bisulfate could be used to remove acetaldehyde . However, UCC would have had to use a 'higher concentration of sodium bisulfate than sodium borohydride to effectively remove acetaldehyde , and sodium bisulfate was more difficult to work with than sodium borohydride . On October 10, 1994, Mr . George Brandon , a senior , production specialist at Taft, initiated an FOCR for injecting sodium borohydride into the caustic scrubber in Olefins - 2 . According to the FOCR, the purpose of the project was to run a test to determine whether sodium borohydride could be used to remove acetaldehyde when the MEA . system was shut down . An R&D report dated January 9 ., 1995, prepared by Robert Manyik, a consultant in the hydrocarbons R&D group, was attached to the FOCR . In the R&D report Dr . Manyik proposed a plant test to add sodium borohydride to the, caustic scrubber when the MEA system was down in order to remove acetaldehyde to onspecification levels . UCC would use a,sodium borohydride solution called VenPure , . sold by Morton Performance Chemicals (Morton ) . The R&D report addressed whether such a test was feasible , identified potential . hazards that could arise during a test, and provided the necessary technical information that would be needed to conduct the test . The R&D report specified the 43 equipment that was available, how much sodium borohydride UCC would purchase, the rate at which the sodium borohydride would be added, and the benefits and .drawbacks of diluting the sodium borohydride . The FOCR also included a diagram illustrating ho w the sodium borohydride would be injected-and a memorandum setting out, in question and answer format,-the duration of the test, the controls that would` be monitored, whether the sodium borohydride would be diluted, the physical configuration of the injection equipment, operation temperatures and pressures for the injection equipment, and UCC's plan to prevent the buildup of salt precipitates . One of the departments that reviewed .the FOCR was,Taft's Environmental Pollution Department (EPD) . The EPD endorsed thesodium borohydride project provided that certain . conditions were met . These conditions were that the EPD would sample and monitor the plant's wastewater for the presence of boron 2 weeks before, during, and 2 weeks after the test,` and the use of sodiu m .borohydride would .be immediately terminated if'-the monitorin g indicated that the wastewater quality was beginning t o deteriorate . The EPD was concerned -that,large- amounts of boro n might enter the wastewater system and disrupt the wastewater treatment . Another condition that the EDP imposed was that the injection rate would not exceed 5 pounds per hour ; and if the - 44 - plant was required to increase this ; rate, it would seek approval from the EPD at that time . Approval from UCC' s R&D department was also . necessary before beginning the project because it involved the introduction of a new chemical to the process . UCC wanted to .ensure that the change was .safe and that there would be no adverse consequences to the plant process from the injection of sodium borohydride . The R&D department approved the sodium borohydride project on January 13, 1995, and the engineering department approved the sodium borohydride project on February 20, 1995 . UCC believed that a plant test was necessary to determine whether sodium borohydride would effectively remove acetaldehyde in an actual caustic scrubber . UCC was uncertain how well the sodium borohydride would mix with the acetaldehyde because of the difficulty in modeling liquid-gas interactions . Therefore, while it was known that sodium borohydride would react with acetaldehyde in a laboratory or pilot plant setting, .UCC was not sure how well sodium borohydride and acetaldehyde would react in a full-scale plant given the plant' s size, .gas flow, and configuration . Because cracked furnace gas travels quickly through the caustic scrubber, UCC was unsure whether the residence time of the sodium borohydride in the caustic scrubber would give the sodium :borohydride sufficient time to react with the acetaldehyde and bring the crude butadiene within 45 specification levels .' UCC was also unsure~of the appropriate rate to inject the sodium borohydride and of the effect the sodium borohydride would have on the boron concentration of the wastewater . Because of these uncertainties as to how sodium borohydride would interact with acetaldehyde, UCC referred to the sodium borohydride project as a "test run" . After injecting the sodium borohydride, UCC intended to monitor the acetaldehyde content of crude butadiene extracted, from the caustic scrubber . The EPD also planned to monitor the wastewater for boron content . The equipment for the sodium borohydride project was initially installed at Olefins-1 on June 11, 1995,-but the crude butadiene remained within specification levels when the Olefins-1 unit's MEA system was shut down for maintenance . Accordingly, UCC moved the equipment to Olefins-2 and conducted the test there . UCC had a limited amount of sodium borohydride and did not want to waste it on crude butadiene that was already onspecification . The sodium borohydride project . began in the Olefins-2 unit on or about June 12, 1995, and ran for approximately 2 .weeks . During the test, UCC injected the sodium borohydride solution into the Olefins-2 caustic scrubber . To inject the, sodium borohydride UCC used ,a small tote tank (owned- by Morton) to hold the solution, a small metering pump to inject th e k - 46 - solution, and tubing to connect the tank and the pump to the process ." Morton recommended an amount for UCC to inject, and UCC followed that recommendation initially but then made adjustments as the project progressed . UCC did not regularly record . the . amount of,sodium borohydride that was injected during the test . Taft employees monitored the crude . butadiene production from the Olefins-2 unit's C4 column during, the sodium borohydride project . UCC measured the acetaldehyde content of the crude butadiene every 12 hours . UCC normally took these measurements about three times a week . To take the measurements, plant operators took samples of,crude•butadiene toTaft's central quality control laboratory for testing . In addition, Mr . Brandon measured acetaldehyde levels in thecracked furnace gas entering and, exiting the caustic scrubber . . To take these measurements, Mr . Brandon used a device called .a "drager pump and tube system" . The tubes would indicate how .many ppm of acetaldehyde the cracked gas contained . Mr . Brandon took . these, measurements at least daily .for-the duration of the- .project . Mr .-Brandon did not normally take such measurements . As-planned, the EPD also monitored the wastewater approximately every 12 hours . The EPD normally monitored the wastewater weekly unless aspecial .test was being run . Mr . Brandon collected and recorded the-results of the crude butadiene analyses and drager .tube tests and reported the results 47 to Terry Swindle, a Taft engineer assisting with the sodium borohydride project . Mr . Brandon devoted approximately 200 hours to the sodium borohydride project . The EPD collected and recorded the results of the wastewater monitoring and,reported to Mr . Swindle that the boron was within acceptable limits . However, the data collected from the sodium borohydride project were not documented in a final project report . UCC treated the January 9, 1995, R&D report prepared by Dr . Manyik as the functional equivalent of a project report even though the report was prepared before the test of sodium borohydride occurred . UCC considered the sodium borohydride project to be a success because the sodium borohydride effectively kept the acetaldehyde in the crude butadiene production below the 100 ppm specification level . Accordingly, Taft began to use sodium borohydride regularly to reduce acetaldehyde levels when an MEA system was shut down . Several years later, UCC discovered that using sodium borohydride to remove acetaldehyde caused unacceptably hig h levels of . ethanol, a byproduct of the reaction, in the crud e butadiene . During the credit years UCC believed that ethanol would leave the system with the spent caustic and therefore did not consider whether ethanol would be a problem and did not measure it . However, the ethanol remained in the crude butadiene and later caused it to fail Shell's new specifications . .1 - 48 - Therefore, UCC began using a new product to remove acetaldehyd e instead of sodium borohydride . E . UOP GA-155 Projec t 1 . Overview of Fouling . in the C3 Colum n The UOP GA-155 project involved the injection of an inhibitor, UOP GA-155, into the C3 column line at Olefins-l- in an attempt to reduce . fouling, in the C3 column trays and reboilers . Fouling is a major problem for petrochemical plants . Consequences of fouling may .include declining performance, frequent shutdowns of process equipment, loss of operation time, and increased maintenance costs for cleaning or replacement o f equipment . , Fouling is a particular problem in distillation column services . Deposit buildup in distillation columns can reduc e capacity and efficiency by blocking the flow .path and by impeding the performance of heat exchangers . An ethylene unit can experience polymer fouling in the CZ, C3, and C4 distillation columns . . The C3 column typically has the worst fouling problem . The main function of the . C3 'column was to separate the propylene and propane (C3 molecules) and heavier hydrocarbons . The liquid .hydrocarbon .steam entered the C3 column at the column's midpoint and fell to the bottom where it .was heated by one of the two reboilers mounted on the column's base . The lighter C3 molecules were vaporized and captured,at the top of 49 the column, while the remaining heavier components exited the bottom of the column and traveled on . to the C4 column . The C3 column contained approximately 40 trays that *held the liquid hydrocarbon stream being processed"so that it could be exposed t o the vapor generated by the reboiler . Column .fouling is typically greatest within the reboiler and also occurs in the trays . One cause of fouling in distillation columns is the polymerization of reactive components in the liquid phase of distillation . Polymerization is the linking mof double bonds'to form long . chain :molecules . Most of the polymerization is due to the reaction of diolefins and reactive species such as styrenics . In the mid-1990s Olefins-l- was experiencing high levels of fouling in the C3 columns, reboilers, and internal trays caused by the formation of polybutadiene polymer, a rubbery blac k substance that adhered to the insides of the-column . `There were two reboilers mounted to the base of the . C3 column, but only one operated at a time . The polybutadiene polymer fouled the tubes in-the operating reboiler and restricted the liquid ; flow . When the reboiler fouled to .the point that it became inoperable, it was taken out of service and cleaned, and the clean reboiler was placed in service . Typically, it took about-2 weeks tto clean a fouled reboiler and cost about $25,000 . In 1994 and 1995 the 50 ideal . run time for a reboiler between cleanings was 2 to 3 months . The polybutadiene polymer also accumulated on thetrays to the point .-that the vapors rising from the bottom of the column could not pass through the holes in-the tray . This foulin g created a high differential pressure .in the column, causing the column to flood with liquid and become inoperable . At this point, plant employees would have to shut down the column and clean it .- In 1994 and . 1995 the ideal run, time for a C3, column, was approximately 3 years but, depending on the feedstock, cracking,-and operating conditions, the column would not alway s run that long . It would typically take about a month to clean a fouled C3 column and cost about $5,0,000 . occasionally-the entire olefins unit needed to be shut down when a column cleanin g occurred . 2 . Overview of Inhibitor s An inhibitor is a chemical that is added to a chemical plant to reduce fouling and increase the time that a particular piece of equipment will operate before it .needs to be cleaned or shut down . Olefins plants use two types of inhibitors (1 ) polymerization/oxidation inhibitors and (2) dispersants . Polymerization/oxidation inhibitors are added to-stabilize certain products that can polymerize or break down when exposed to air . Dispersants are added to products to keep impurities 51 suspended in the liquid hydrocarbon stream from 'depositing on plant surfaces and fouling- them .-An effective inhibitor will improve column and reboiler run length times and will not cause any additional problems in the plant . UCC used about 12 different inhibitor s hibitors,in its-olefins manufacturing processes at any particular time in the early 1990s . `In 1994 and 1995 UCC used-different`inhibitors in its olefins manufacturing units because an inhibitor- that works well in one olefins plant may not necessarily work well in another olefins plant . Because equipment differs from plant to plant, an inhibitor might have 'a different residence time or different contact times in different columns . 'In addition, flow rates, pressures, and temperatures, which all affect the operation of an inhibitor, differ from' plant to' plant . The vendors from whom UCC . purchased inhibitors-tested the inhibitors in laboratories to verify ., that' they would in fact inhibit-polymerization or oxidation . However,, UCC could not determine how well the inhibitors'would work in one .-of its plant s without testing them in theIplant .' -UCC generally gathered data when using a new inhibitor and compared that data-to baseline data to determine whether the inhibitor worked as expected . The purpose of inhibitors is `to extend the time equipment can be used before it must be shut down and cleaned . Therefore, one way to know whether an inhibitor is effective is to compare the,run time - 52 of a compressor, reboiler, or column operating with the inhibitor against the preinhibitor run time of the same equipment . UCC believed that the test of a new inhibitor should last for about as long as the vendor claims the equipment .will run with the use of the inhibitor . UCC also generally used inhibitor tests t o determine the proper dosage . While UCC believed it was important to use enough of an inhibitor .for it to be effective, excessive use of an inhibitor can have adverse effects on the production process or on the plant's products . Furthermore, becaus e inhibitors,are expensive, using a higher dosage than is necessary will reduce the economic . benefit of using the inhibitor . The hydrocarbons R&D group was generally involved in decisions to test process inhibitors at UCC's plants because the tests would involve the introduction of a new chemical into the plant and could have environmental,,health, and safet y consequences . R&D was familiar with the chemistries and processes of the plants and could provide input on whether a new inhibitor might be,effective in the plant, what dosage levels to use, how to set up the test plan, and how to measure .the results of the inhibitor use . 3 . The UOP GA-155 Projec t Dripolene was a byproduct of Taft's olefins production process that flowed out the bottom of the C4 column, the final column in the .olefins separations train . UCC could not ship 53 .dripolene unless it` was' stabilized with a certain amoun t polymerization/oxidation inhibitor . Without the inhibitor, the dripolene could react with oxygen and present an explosion hazard . Before undertaking the'UOP GA-155 project, Taft's hydrocarbons unit had been injecting a stabilizer known as UOP-5 into the dripolene as it flowed out of the C4 column . The active ingredient of UOP-5 was phenylenediamine . The dripolene from Olefins-1 and 2 was blended and stored in the same tank, so the Olefins-1 dripolene was stabilized by the inhibitor injected int o the Olefins-2 dripolene . Because cleaning the reboilers and shutting down the column s was very expensive, UCC was always looking for ways to .-decrease operating costs by reducing fouling . Mr . Brandon discussed the problem with members of Taft's hydrocarbons R&D group to try t o find ways to reduce fouling in the C3 column . Mr . Brandon approached UOP, a supplier to the petrochemical industry, t .determine whether UOP had a product that could be fed directly into the Olefins-1 C3 column to both reduce fouling and stabilize the dripolene . UOP reviewed UCC's process stream, operation, equipment, and operating conditions . On the basis of those observations, UOP recommended that UCC use UOP GA-155, which contains phenylenediamine ( .the active ingredient used in UOP-5) as well as a dispersant . UOP told UCC the approximate 54 percentages of UOP-5 and . the, dispersant contained in U .OP GA-155 . UOP maintained that UOP GA-155 would operate as an oxidation inhibitor in the C3 column, the phenylenediamine .would_stabilize the dripolene, and the dispersant would mitigate fouling in the . C3 .column . UOPrepresented to UCC that UOP GA-155 ; was effectiv e in extending process run .length . . UCC had not previously used UOP .GA-155 in any of its facilities and was not aware of any other olefins plants in the country that had used .UOP GA-155 . However, UOP told UCC that some of the ingredients in UOP GA-155were industry-wide standard materials that were being used in olefins plants . . UCC did . not consider other possible inhibitors~or chemicals because their cost,was excessive-because they were bundled . with the, purchase of services that UCC did . not want . . .. . UCC wanted .to test UOP-GA-155 in its plant because successful laboratory tests do-not-guarantee that an inhibito r will be effective .enough in a full-scale plant . to justify its cost . While manufacturers often made representations .to UCC . regarding the inhibitors that they were .selling, the inhibitor s did not always work as represented . . To test the UOP GA-l55, .UCC planned to inject UOP GA-155 into the C3 column feed instead- of into the dripolene product as it had done with UOP-5 ., The UOP GA-155 would then flow out of - 55 the bottom of the C3 column, flow into the C4 column feed, and flow out of the C4 column and the plant with the-dripolene . Mr . Brandon initiated an FOCR, numbered 94- .80 (FOCR 94-80), for moving the equipment that was being used to inject UOP-5 into the O1-efins-2 dripolene product over to Olefins-'l in order to inject the,inhibitor into the C3 column feed . UCC hoped that injecting the inhibitor into the C3 column feed instead of injecting it into the dripolene as it flowed out of the C4 column would inhibit fouling in the depropanizer system . Mr . Brandon initiated another FOCR, numbered 94-61`(FOCR 94-61), for changing the inhibitor from UOP-5 to UOP GA-155 and injecting UOP`GA-155 into the C3 column feed . FOCRs were generally required whe n introducing new inhibitors because the introduction of a ne w inhibitor is a process change . According to FOCR 94-61, the purpose of the change was to reduce- fouling in the C3-and C4 columns and their'reboilers . The FOCR=listed as concerns thatneeded resolution (1) whether the customers would approve of the change and (2) whether UCC had a pump that had a high enough discharge pressure . Mr . Brandon's supervisor instructed Mr . Brandon to keep the UOP GA-155 project on hold until the necessary approvals had been obtained from the hydrocarbons=R&D group, the EPD, and UCC' s customers .- UCC informed its customers that UOP GA-155 would be injected into Taft's Olefins-1 production process, and its - 56 customers, did not object .-The FOCRs were finally approved on September 22, 1994 . While Mr . Brandon hoped, that UOP GA- .155 .would increase the C3 column's run time, he was not certain how effective UOP GA-155 . would be . Mr . Brandon was also concerned that UOP GA-155 could actually harm UCC's production process . Specifically, he was concerned that adding a dispersant to .the'column could cause existing polymers to loosen from the column walls and trays and plug the column . If .that .happened, UCC would have to shut down . the column and possibly the entire, Olefins-1 unit . In addition, Mr . Brandon was concerned abouttheS :effect that .UOP GA-155 might have on Taft's commercial products because the UOP GA-155 would, flow out with the crude dripolene . Because UOP GA-155 would be a new ingredient in the product, it was possible that it could adversely affect the downstream olefins . products or cause problems when fed into customers' production processes . The injection of UOP GA-155 into the C3 column feed line in . Olefins-1 began soon after the final approvals were obtained for FOCR 94-61 and FOCR 94-80 on September 22, 1994 . Th e hydrocarbons R&D group asked the plant personnel to collect data during the test . Accordingly, Mr . Brandon collected daily all of the pertinent data that were regularly recorded on the process computer system in the Olefins-1 control room, including differential column pressure, feed flows, .throughput rate, steam 57 temperatures, and steam flows . Differential column pressure is the measurement of the different pressures across the column trays from top to bottom .' When polybutadiene polymer accumulate s on the trays, 'the trays plug and the differential pressur e increases . While UCC did not normally review ; these measurements' daily, UCC did monitor reboiler chest pressure when there-were problems . It was also typical in the industry to measure column differential pressure when equipment is prone to fouling . During the test Mr . Brandon also measured and recorde d 111 condensate pressure of'the'reboiler'every day . Neither Mr . Brandon nor any of UCC's other employees had monitored the condensate pressure daily before the'UOP GA-155 project . An increase in condensate pressure is a primary indicator'of reboiler fouling . Mr . Brandon and other employees also took samples off' dripolene and analyzed the inhibitor levels once-per 12-hour' . shift . Before the'UOP GA-155 project,, UCC's employees had analyzed the inhibitor levels in the dripolene once a week for quality control . Mr . Brandon took measurements for approximately 90 days during the UOP-GA-155 project . . -Mr . Brandon also kept track of reboiler run lengths'both before and during the test period . Mr . Brandon spent approximately 200 hours in 1994 and 200 hours in 1995 working on the UOP GA-155 project .- - .5 8 It would take approximately 3 years to determine whether UOP GA-155 substantially extended the run length of the C3 column . UCC could determine whether UOP GA-155 was reducing fouling in the column by opening the column, . but that .was not practical . Therefore, UCC relied on indicators such as differential column pressure to determine whether UOP GA-155 was reducing fouling .-in the column . It would take at'least 3 .months for UCC to assess whether UOP GA-155 would increase the, run length of the reboiler because the normal run length of\a reboiler without the addition of an inhibitor is about-2 to 3 months . UCC believed that a successful inhibitor . could extend the run length of a reboiler to about 6 months . Therefore, while Mr . Brandon recorded data only for about 90 days, UCC treated the project as beginning on September 22, 1994, and . lasting for 6 months . During this time the Olefins- .1 unit operated normally except for the addition of the activities described above . UCC sold the products produced during the UOP GA-155 project in the ordinary course of its business . UGC considered the UOP GA-155 project to be a,success because it reduced fouling and increased the run length of the reboiler to 6 months . Mr . Brandon recorded the results of the project and shared them with Mr . Swindle . However, Mr . Brandon did not prepare a - 59 - formal project report after the project was completed or save th e data for use when fouling of Olefins-2 was discovered in 1997 o r 1998 . However, the results of the project would have been reported in the quarterly reports that the hydrocarbons R&D group prepared . The results of the UOP GA-155 project were also included in a memorandum prepared for a conference call to be held on July 27, 1995 . The memorandum did not include data fro m the project but reported the results as follows : UOP Inhibitor'Project : Recall that in the beginning of the second half last year, the UOP-5 inhibitor was replaced with the UOP GA-155 inhibitor and it was injected earlier in the system in order to reduce fouling of the C3 Column Reboilers in Ole-l . In January of this year, the east kettle [reboiler] had to be taken out of service due to tube leaks which were not caused by the inhibitor or fouling - it was due to attack from carbonic acid in the steam condensate . The newly purchased kettle, which was installed last October, was then put in service and is still in service . We feel that the success of the kettle - six month life - is primarily due to the use of the new inhibitor . In addition, the new inhibitor is now also being used in Ole-2 . UCC did not always prepare formal project reports when an inhibitor test such as the UOP GA-155 project was performed . Although it was preferable for a project report to be prepared to summarize the results of an inhibitor test, this did not alway s happen because it was not always a top priority . On or about October 28, 1994, about a month after the UOP GA-155 project began, Mr . Brandon began preparing an FOCR for a project to begin using UOP GA-155 in Olefins-2 . On November 29, 60 1994, Mr . Swindle recommended that UOP GA-155 be used at Olefins2 . On or about June 14, 1995, after the completion of the UOP GA-155 project, UCC began injecting UOP GA-155 into Olefins-2's C2 column tail . The purpose of this change was to reduce fouling in the C2, C3, and C4 columns in Olefins-2 and simultaneously stabilize the dripolene . However, during a plant shutdown in 1997 or 1998, UCC discovered that the dispersant in UOP GA-155 caused severe fouling in the olefins-2 . F . The UCAT-J Projec t 1 . Overview of Polyethylene Productio n The UCAT-J project involved a series of runs using a new polyethylene (PE) catalyst'referred to as UCAT-J conducted at Star . PE is a plastic made by reacting ethylene with other materials to form polymers, or molecular chains, of ethylene . The PE production process generally involves a reaction between a polymerization-initiating catalyst (as relevant here, M-1 or UCAT-J13), a cocatalyst, .a monomer (usually ethylene), a comonomer (hexene or butene), triethylaluminum (TEAl), and hydrogen ., Once polymerization begins, monomer molecules diffuse to the growing polymer chains and resin is formed . Following polymerization, the resin is discharged into a separate vessel known as a product purge bin . Purging removes the residua l 13The UCAT-J and M-1 catalysts are described in greater detail below . - 61 hydrocarbons in the resin and deactivates the catalyst and cocatalyst . The resin is then fed into a pelletizer, which converts the resin into pellets . The pelleted PE resin is the finished product . UCC typically . shipped pelleted PE in hopper cars (which each hold about 185,000 pounds of PE resin) to customers who used it to make items such as grocery and trash bags, packaging, thin-walled containers, and industrial liners . Star was dedicated to the commercial production of linear low-density film and molding resins (LLDPE) and medium densit y (MOPE) and high density (HDPE) molding resins using UCC's lowpressure UNIPOL process technology . "UNIPOL" is the trade name for a low-pressure gas phase fluidized-bed process that UC C developed and licensed to third parties . Star's Low Pressure 3 Unit (LP-3) operated two UNIPOL reactors : Reactor 1, which was used primarily for HDPE molding resins, and Reactor 2, which was used primarily for LLDPE film resins . Although used fo r different purposes, the two reactors were physically and technologically identical . Reactor 1 and Reactor 2 operated continuously 24 hours a day except for limited downtime maintenance, transitions, and unforeseen problems such as electrical'outages . In the early 19906 UCC began to plan the design of another UNIPOL manufacturing facility, Low Pressure 6 Unit (LP-6) . 'LP-6 was designed to produce PE using UCAT-J as the catalyst, but UCC 62 decided to . install two different sets of catalyst feeders so that M-1 could be used at the plant if UCC could not commercialize UCAT-J by . the time LP-6 was complete . . UCC believed that it was likely that it would be able to use UCAT-J at LP-6 once it was constructed, but also knew that beginning the design of LP-6 before UCAT-J was ready for commercial production was a risk . UCC did not want to wait until UCAT-J was commercialized before building,LP-6 because it takes years to design and build a manufacturing facility and UCC wanted LP-6 to be completed close to the time that UCAT-J was commercialized . LP-6 began producing .PE in June of 1995 using UCAT-J . A UNIPOL reactor is referred to as a "fluidized bed" becaus e the circulating gas flow in the reactor causes the solid granular resin to fluidize . . The catalyst is fed directly into the side of the fluidized bed through an injection system . A cocatalyst is also fed into the bottom of the UNIPOL reactor to activate the catalyst and promote catalyst activity . "Reactor operability" refers to a wide range of potential reactor operating issues, including catalyst stability, reproducibility (whether the reactor consistently produces the same responses), reactor control, production rate control, product discharge, and downstream equipment operation . Reactor operability is affected by a number of factors such as the history of the reactor since,it was last cleaned (i .e ., how often I - 63 it has been exposed to oxygen and moisture),"the mix of products run on the reactor, the purity of the feed streams, and the catalysts and cocatalysts used'on the reaction system . A significant UNIPOL operability issue is the formation of sheets and agglomerates caused by static in the reactor . Sheets I and agglomerates are often referred to as continuity problems because they interrupt . the continuous operation of the reactors . Sheets are formed when resin continues to react in a stagnant zone (a zone with poor fluidization) next to the walls of the reactor . Without fluidization to remove the heat of reaction , the resin fuses together and forms sheet-like blocks ranging from paper thin to several inches in thickness and several feet-in length . Agglomerates are formed when granular resin fuses together forming solid or tightly adhered chunks ranging from popcorn sized to several feet in diameter . These chunks can be caused by sheets folding or rolling in the fluidizing bed, poor catalyst distribution , localized poor heat transfer, or areas of poor fluidization on the reactor distributor plate . Sheets and agglomerates interfere with fluidization and plug the product purge bin valve, requiring UCC to shut down and clean the reactors . - Another operability issue is the formation of small, dustlike particles called "fines " . Fines can create static (which T - 64 can lead to sheeting), cause continuity problems in the reactor, and foul the cycle gas system . The occurrence of operability problems might require a reactor to be "killed" . A reactor kill (or CO kill) is typically accomplished by the injection of carbon monoxide into .the reaction cycle gas to .either reduce the rate of reaction (a minikill) or stop all reaction as quickly as possible . PE material meeting all applicable product specifications is referred to as "aim-grade" . PE material that does not meet al l applicable product specifications is referred to as "off-grade" . The production of off-grade material was not unusual, and UCC sold both aim-grade and off-grade resin to third parties but at different prices . Specific product properties of PE resins, include the .average particle size (APS), density (for solid molded resin), bulk density .(for loose resin powder), film appearance rating (FAR), hexane extractables (relating to the stickiness of the resin), melt flow index, melt flow ratio (MFR), and resin morphology . The specific properties of the PE products made in a UNIPOL reactor are determined by a variety of factors, including the catalyst used and reactor operating conditions . The key reactor operating conditions that determine .the properties of the PE resin are reactor temperature, ethylene partial pressure, - 65 - hydrogen-to-ethylene . ratio, comonomer ratio, TEAl cocatalyst ratio (Al/Ti) , and residence time . Star's reactors made a .variety of PE base resins . UCC identified base resins using a three-letter prefix followed by a four-number code and either an "H" or a "B" . The prefix of all base resins begins with a' I'D", followed by a "J" if UCAT-J is used as the catalyst or a' "G" if M-1 is used as the catalyst, followed by an "H "M",'or "L" depending on the melt index range . The four-number code identifies the density and melt index designation . The final "H" or "B" identifies the comonomer as hexene or butene, respectively . A transition is the period when reactor conditions are changed from one product's specifications to a new product's specifications . A transition typically takes three to four bed turnovers to complete, and each bed turnover lasts about 2 hours . A bed turnover is the average amount of time material stays in the reactor before flowing out of the product stream . The resin made during transitions is either intermediate-grade material, that can be recycled into aim-grade resin or off-grade material sold for scrap uses such as picnic tables and barrels . Once a reactor is transitioned into a new product it takes a number of additional bed turnovers to "line out" the reactor . Lining ou t r the reactor involves increasing the production rate back to th e normal level after slowing down for the transition and returning r 66: operation conditions back to their normal steady state . After a transition from M-1 to UCAT-J, it takes at least 12 hours to line . out the reactor . 2 . UCAT- J In a chemical reaction, a catalyst is a substance that increases the rate of the reaction or causes the reaction to occur under different conditions than otherwise possible . Polymerization cannot occur in a UNIPOL reactor without a .catalyst . The catalyst provides the site on which the polymer chain grows . A PE : catalyst "precursor" refers to the catalyst state before the incorporation of aluminum alkyl catalyst modifying agents . From Star's startup in 1981 through the beginning of the UCAT-J runs at Star in 1992, Reactor 1 and Reactor 2 at the LP- 3 unit operated exclusively on a catalyst .called M-l . UCC continued to use M-1 at Star during the credit years during normal production runs occurring between UCAT-J runs . Despite its extensive experience using M-1, UCC occasionally experienced operability and continuity problems with M-1, particularly sheeting . UCC developed UCAT-J as a superior catalyst alternative to M-1 . The primary advantage of UCAT-J is that UCAT-J is over four times more "active" than M-1, meaning that the same amount o f catalyst makes over four times as . much PE resin as can be made 67 with M-1 . This, in turn, . significantly reduces both capital outlays for catalyst manufacturing facilities and the cost of catalysts used in manufacturing PE . UCAT-J also requires less hydrogen and TEAl than M-l, thereby reducing manufacturing costs further, and improves some properties of PE resin such as FAR . However, UCC used about the same amount of ethylene, hexene, and butene regardless of whether it used M-1 or UCAT-J . Although UCC had not commercialized UCAT-J during the credit years, UCC knew of these advantages during the credit years and described them to its licensees in anticipation of UCAT-J's commercialization . M-1 and UCAT-J are both Ziegler-Natta catalysts, a genera l category of PE catalysts made ' from a transition metal such as titanium and requiring a cocatalyst to initiate polymerization . Both catalysts are based on a chemical solution of magnesium chloride, titanium trichloride., and tetrahydrofuran, although the proportions of these materials in M-l and UCAT-J are different . Most significantly, UCAT-J has a higher titanium loading and magnesium -to-titanium ratio than M-l, both of which give UCAT-J superior activity . Both M-1 and UCAT-J use titanium to provide the catalyst active site and TEAl as the co-catalyst . To create M-1, a chemical solution is added'to small particles of treated silica, which absorb the solution . Most of the tetrahydrofuran is then evaporated to produce a free-flowing solid, which is the M-1 precursor . The M-1 precursor is then - 68 reduced with. aluminum alkyls, diethylaluminum chloride (DEAC) and tri-n-hexylaluminum (TnHAl), to produce the M-1 catalyst . Catalyst reduction refers to the,treatment of the catalyst precursor, with aluminum alkyl modifying agents .t.o moderate catalyst activity and ensure acceptable product properties such as bulk density and particle size . The aluminum alkyl reduction agents used for both M-1 and UCAT-J were DEAC and TnHA1 . In its . final form, . M-1 is a dry powder resembling sand . UCAT-J is spray dried instead of being silica based . The chemical solution is transformed into a fine droplet spray, in a . spray dryer . As these droplets pass through a drying chamber, the tetrahydrofuran evaporates, leaving only the solid catalyst . The catalyst is then added to mineral oil to create a slurry ( a mixture of .liquid and insoluble solids) of UCAT-J precursor . The UCAT-J precursor. is then reduced with aluminum alkyls . Although Star made its own M-l catalyst precursor, UCC made UCAT-J precursor, at a separate catalyst manufacturing facility in South Charleston and shipped it to Star . Because of the different methods by which they are made, M-1 and UCAT-J have different "catalyst morphology", a term used to describe the size, shape, and surface texture of a catalyst : particle . M-1 catalyst particles have a substantially larger APS than those of UCAT-J . M-1 particles are typically rounder and smoother than UCAT-J particles . UCAT .-J' .s morphology creates some 69 problems that were not present with M-l, particularly increased fines and resin flowablity problems . These problems created operating uncertainties that had not been resolved by the beginning of 1994 . UCAT-J and M-1 also respond differently to other chemicals present during polymerization, respond differently to reactor conditions, and create differences in PE product properties . M-1 precursor is reduced in the catalyst'manufacturing unit before the catalyst is delivered for use in the reactor . UCAT-J precursor, in contrast, requires "in-line" catalyst reduction, meaning that the DEAC'and TnHAl modifying agents are injected . into the catalyst stream immediately before it is fed into the UNIPOL reactor . Before the first-UCAT-J-run at Star, which"occurred in May 1992, UCC_ installed new equipment at Star to allow the in-line . reduction of UCAT-J precursor . The in-line precurso r modification system was a new unit operation installed specifically for use with UCAT-J . In this system, UCAT- J precursor was placed into a slurry feed tank, agitated to maintain good dispersion, and pumped at a controlled rate . . DEAC and TnHA1 were pumped into the catalyst stream at a specific ratio to the catalyst feed . Following the injection of the aluminum' alkyls, the precursor flowed into a static mixer to 4 - 70 - ensure adequate contacting and then into a residence time pot to provide time for the in-line modification to occur : The UCAT-J in-line-reduction system presented several operating uncertainties not present with M-l . When, the system was first used, it created catalyst consistency problem that were due in part to the absence of static mixers and in part to the fact that the original design contacted the UCAT-J precursor with DEAC first and then with TnHA1, .as was customary . with M-l . UCC later discovered that consistency improved when the order was reversed . UCC also had difficulty controlling flow rates, keeping control consistent and accurate, and injecting UCAT-J because a slurry does not disburse as easily as a dry catalyst like M-1 . These uncertainties were not resolved by 1994 . 3 . Overview of the UCAT-J Projec t The UCAT-J commercialization program involved the development of UCAT-J to the point where it could be commercialized . , UCC's UNIPOL licensing business wanted to commercialize UCAT-J in order to : (1) Derive revenues from selling UCAT-J to existing UNIPOL licensees ; (2) be able to tout the superior qualifies of UCAT-J to prospective UNIPOL licensees ; (3) avoid the capital costs associated with constructing plants to manufacture the less-productive M-1 catalyst ; and (4) reduce Star's manufacturing costs as a result of UCAT-J's superior productivity . The UCAT-J commercialization program took place at - 71 Star from 1992 to 1996 . References to the "UCAT- J project" are only to those runs that occurred during the credit years . . Once UCC made the decision to commercialize UCAT-J, members from process R&D, product R&D, and . catalyst - R&D formed an interdisciplinary UCAT-J technology task force . The members me t monthly or bimonthly, usually in person, to review the status o f the commercialization effort and develop strategies for overcoming problems with UCAT-J implementation . ' During 1993 through'r1995 UCC's process R &D group conducte d what it called " experimental runs" of UCAT - J on a small-scal e UNIPOL reactor at a pilot plant at'the South Charleston technica l center . UCC defined an experimental run as a run of a product that UCC deemed noncommercial .14 During the credit years UCC's manufacturing business required that a commercial facility conduct at least two, but preferably three, objective-meeting experimental runs of new PE products, including products made with a new catalyst, for the products to be considere d commercial . The successful completion of two to three . objectivemeeting runs would demonstrate the operability of a new technology to the satisfaction of the UNIPOL R&D and manufacturing organizations . A customer's qualification of a PE resin depended on an independent inquiry related to th e 14 We use the term "experimental run" for convenience and consistency with UCC's terminology . - 72 - suitability of the product, produced and did not establish that the product could be produced consistently enough to be considered commercial . UCC was not required to advise customers that they were receiving base resins produced with UCAT-J unless a specific contractual term required such a disclosure . The South Charleston pilot plant's UNIPOL reactors were used strictly for R&D purposes, and one reactor was dedicated to UCATJ . UCC ran UCAT-J on the pilot plant reactor to evaluate catalyst performance, estimate optimal operating conditions for the commercial reactors, .and make PE resin for evaluation by the product R&D group in Bound Brook . After experimenting with new technologies on the pilot plant, UCC generally experimented with the technologies on its mid-size UNIPOL reactors at Seadrift before experimenting with the technology on the . larger reactors, at Star . However, UCC took some UCAT-J products from the pilot plant . directly to Star or did not test them on smaller reactors at all . Successful commercialization of UCAT-J required UCC to conduct experimental runs at UCC's commercial plants to evaluate whether UCAT-J could be used with reactor operability and resin properties at least equivalent to, and hopefully better than, those achieved using M-1 . While UCC was often able to achieve at least the same level of reactor operability and continuity usin g UCAT-J as it had achieved with M-1 at pilot plants , commercial- - 73 scale plant tests were also necessary because there were significant differences between the pilot plants and commercial reactors . For example, the bed volume of Star's commercial reactors was about 825 times the size of the bed volume of the pilot plant reactor . Because of this difference, UCC's pilot plant and commercial reactors use different methods of fluidization . These differences'affect the amount of sheeting and static in a reactor .* Accordingly, a 'successful run at the pilot plant did not indicate that sheeting and static would no t cause significant problems when a similar run was conducted at a commercial plant . . The first commercial-scale run using UCAT-J was conducted on UCC's smallest commercial-scale reactor, the G-1750 reactor at Seadrift, in 1991 . UCC continued the UCAT-J commercialization program at Star until 1996 . UCC did not consider UCAT-J fully commercial before the program was completed because UCC did not know with certainty how UCAT-J would affect reactor operabilit y and continuity, how it would affect product quality and . how much off-grade material it would produce, whether there would be problems feeding the catalyst into the reactor, and how it would respond to CO kills . UCC was also concerned about, reactor feed stability, fines creation, production rate control, resin properties, sheeting, and-agglomeration . Such reactor operability and continuity issues could develop at any time 74 during an experimental run, . so process R&D representatives remained on .site for the duration of the runs, even after the reactor had been successfully transitioned into UCAT-J . Process R&D preferred longer experimental runs because they afforded more opportunities to evaluate reactor operability and continuity . UCAT-J experimental runs were initiated by the completion of an experimental run request by the appropriate business manager, R&D group leader, inventory planning and control (IPAC) manager, and plant department head . IPAC controlled the scheduling of the experimental runs and the duration of each run . When scheduling the runs, IPAC considered existing customer orders and the risk s posed by experimental runs so that the experimental runs woul d fit UCC's commercial requirements . Once an experimental run request was .completed and the experimental run was scheduled, representatives from process R&D in South Charleston would prepare a strategic run plan with input from the UCAT-J technology task force . The principal purpose of a strategic run plan was .to communicate to all interested parties the run objectives, key operating parameters, analytical requirements, and run coverage . After receiving the strategic run plan, a Star engineer would prepare a tactical run plan . The purpose of the tactical run plan was to give detailed run instructions to the plant operators responsible for reactor operation . Strategic run plans and tactical run plans were not prepared for routine 75 commercial production runs . The operations improvement group would also complete a "New Product Introduction/Commercialization Procedure Checklist" showing°whether all required documentation was in place . The'function of process R&D representatives during experimental runs was to evaluate what was happening in the reactor, identify problems, create hypotheses . for how to solve those issues or improve the process, and test those hypotheses by conducting experiments .' Process R&D representatives conducted experiments by adjusting operating ratios, modifying catalyst properties, and introducing new reactor control technologies . Process R&D generally did not address minor problems that-could be solved by troubleshooting, which were addressed by the production group at the plant . During the UCAT-J project process R&D regularly collected various measurements of reactor operability and continuity and product properties . While many of these measurements wer e collected during nonexperimental'runs, .process R&D representatives collected some data that were not normally collected and took other measurements more frequently than they normally would . For example, process R&D measured residual aluminum and titanium to monitor for TEAl .starvation during the UCAT-J project but did not'normally take these measurements . TEAl starvation occurs . when there is an inadequate amount of'TEAl Q. 76 cocatalyst in the reactor . This lowers hydrogen and comonomer response and catalyst productivity, which cause a loss of control over .the reactor,and product properties . Process R&D also measured hexane extractables more frequently than normal during the UCAT-J project . The process R&D representatives recorded their observations in .R&D notebooks . At least every other day process R&D sent an e-mail update to the members of the UCAT-J technology task force . and UCC's management . This was not done for normal commercial . production runs . Process R&D representatives were also called upon to address significant . production problems with products made using the .M-1 catalyst during the credit years , Representatives from catalyst R&D and product R&D, both based in Bound Brook, were available as needed . Samples of PE resins made during UCAT-J experimental runs were shipped to the product R&D group for testing to ensure that the resin was equivalent to or better than that made with M-1 . Any remaining aim-grade resin made during the experimental runs was sold t o UCC's customers . Product R&D did not : provide coverage or test resin samples for routine commercial production runs with M-1 . The run team, comprising representatives from process R&D and Star's management and operations staff, met before each run to discuss . the run objectives and transition into UCAT-J . The run team also met regularly during the course of the UCAT-J runs T I - 77 to assess the status of the run objectives and develop strategies for resolving any operating problems that . had surfaced . At the end of each run the run team met to discuss the extent to which the run objectives had been met . The run team presented thes e findings at meetings of the UCAT-J technology task force . addition, process R&D,representatives prepared a run notebook for each run containing the strategic run plan, the tactical run plan, the R&D monthly report description of the run, the presentation to the UCAT-J technology task force, e-mails and other communications regarding the run, and lab data . Process R&D also described the UCAT-J .runs in monthly reports issued by the process R&D group, but these reports did not provide technical details concerning the runs . Process R&D did not generally mention normal production runs in these reports . 4 . Experimental Runs Before the Credit Year s UCC conducted nine UCAT-J run campaigns on reactor 2 at Star from May 1992 to November 1993 . The UCAT-J runs conducted at Star in 1992 and 1993 involved only hexene LLDPE film resins made on reactor 2 . These were the principal products made at Star and UNIPOL licensee plants and tended to have tighter product requirements than molding resins . At the end of 1993 UCC had conducted no UCAT-J runs on reactor 1 or on reactor 2 with either molding or butene film resins . 78 About 6 percent of the PE resin UCC made at Star in 1993 wa s made with UCAT-J . By the end of 1991, UCC had resolved some uncertainties related to UCAT-J such as an issue related to catalyst particle size : The plant personnel at Star also . gained experience operating the plants using UCAT-J and were at ease using UCAT-J and in transitions . Furthermore, a number of UCAT-J runs had produced no off-grade product . However, the UCAT-J runs conducted at Star in 1992 and 1993 suffered,from numerous operability problems . Many were unresolved as of the end of 1993, including : (1) Gas channeling (resin becomes stagnant and nitrogen is channeled through the resin instead of mixing with it, causing inadequate resin purging) ; (2) TEAl starvation ; (3) sticky stretch'LLDPE resins (resins that agglomerated and did not flow properly) ; (4) sheeting ; and (5) .poor control over product properties such as melt index, density,'and hexane extractables caused by differences in UCAT-J and M-1 catalyst morphology . UCC was confident that many of these issues could be resolved but was unsure when or how it would be able to resolve them . Following a UCAT-J run campaign on LLDPE film resins in November 1993, a moratorium was imposed on further experimental runs on film resins to allow R&D to work out various problems, some related to UCAT-J and others that were general plant I - 79 problems . UCC did not believe that UCAT-J was ready to be commercialized by the end of 1993 . 5 . Experimental Runs During the Credit Year s At the beginning of 1994 some of the major outstanding issues with UCAT-J were : (1) Obtaining acceptable product properties in fractional melt index film resins ; (2) resolving butene film bulk density problems ; (3) determining the cause of and preventing resin stickiness ; (4) establishing operating parameters for UCAT-J film resins ; (5) developing UCAT-J for molding resins ; and (6) ensuring that UCAT-J met operational requirements . UCC believed it needed to conduct additiona l experimental runs to resolve these issues . UCC seeks research credits for the expenses incurred in 19 UCAT-J runs (UCAT-J runs 1 through 19) conducted at Star during the credit years . The base resins produced, types of resin produced (low-density film . .or high-density molding), start and end dates of the runs, and pounds of base resin produced according to UCC's product cost detail reports (PCDs) . are included in the chart below : I - 80 Aim-Grade Resi n Produced Off-Grad e Resi n Produce d End Date (pounds) (pounds ) Run No . Base Resin Resin Type Start Date ' 1 DJM-5265H HDPE .Molding 2/16/94 2/17/94 958,96 8 2 DJM-1810B LLDPE Film 10/22/94 10/26/94 4,83 .2,092 771,35 0 3 DJM-1732H LLDPE Film 11/14/94 11/15/94 1188,068 21,162,65 0 4 DJM-2419H LLDPE Film 12/11/94 12/13/94 1,632,872 765,70 0 5 DJM-1810H LLDPE Film 12/13/94 12/17/94 5,254,885 455,70 0 6 DJM-2016H LLDPE Film 12/17/94 12/18/94 703,69 1 7 DJM-1725H LLDPE Film 12/18/94 12/18/94 3731 , 731,842 4137 , 137,10 0 8 DJL-5264H HDPE Molding 1/26/95 1/27/95 6,135,634 797,75 0 9 DJL-5280H HDPE Molding 1/27/95 1/28/95 1,864,465 - 10 DJH-2580H LLDPE Film 3/3/95 3/6/95 2,601,861 578,45 0 11 DJM-1810B LLDPE Film 3/4/95 3/13/95 8,707,791 1,058,45 0 12 DJH-2950H LLDPE Film 3/6/95 3/6/95 132,324 148,75 0 13 DJL-5420H HDPE Molding 14 DJL-5143H HDPE Molding 3/26/95 3/27/95 1,006,947. 15 DJM-1732H LLDPE Film 5/16/95 5/22/95 54,091,446 62,430,70 0 16 DJM-1725H LLDPE Film 5/22/95 5/26/95 3,653,813 966,35 0 17 DJM-1720H LLDPE Film 5/26/95 5/27/95 886,625 520,10 0 3/25/95 3/26/95 696,18 1 8 19 DJL-5280H HDPE Molding 6/.22/95 6/23/9 5 'This amount was found on a PCD for DJM-1734H . UCC could not find a PCD for DJM-1732H, so it used the PCD for a similar product . 2This amount was found on a PCD for DJM-1734H . UCC could not find a PCD for DJM-1732H, so it used the PCD for a similar product . 3This amount includes base resin produced during both run 7 and another experimental run that took place in November 1994 . 'This amount includes base resin produced during both run 7 and another experimental run that took place in November 1994 . 'This amount was found on a PCD for DJM-1734H . UCC could not find a PCD for DJM-1732H, so it used the PCD for a similar product . 81 6This amount was found on a PCD for DJM-1734H . UCC could not find a PCD for DJM-1732H, so it used the PCD for a similar product . 7The resin that petitioner claims UCC produced during run 18 is included in the amount of resin petitioner claims UCC produced during run 8 . 'The resin that petitioner' claims UCC'produced during run 19 is included in the amount of resin petitioner claims UCC produced during run 9 . a . DJM-5265H (UCAT-J Run 1 ) UCAT-J run 1 was the first UCAT-J run at'Star with 'a molding resin and the first UCAT-J run conducted on reactor 1 . The base resin, DJM-5265H, was selected to be the first molding resin- made with UCAT-J at Star because it was a basic Cornerstone product that Star made in large quantities and UCC considered it to be a low-risk product . UCC had made'aim-grade DJM-5265H at the pilot plant using UCAT-J and found UCAT-J to be equivalent- to M-l with respect to operability and continuity on that scale . Before UCAT-J run .1, two short runs of DJM-5265H had been conducted at the UNIPOL'facility of a licensee, Hanwa Chemical Corp . (Hanwa), in Korea .` While the runs at Hanwa were generally successful, they lasted only a few days, and the second run was aborted when the second transition failed . These results were of limited value to UCC because Hanwa's reactors were different from Star's reactors : Hanwa's reactors were just over half'the size of Star's reactors and so were less prone to static . Furthermore, Hanwa's reactors had a purification system for ra w materials that was considerably better than UCC's purification - 82 system . As a result, Hanwa's reactor feed was much cleaner than UCC's and the catalyst had better productivity . The objectives of UCAT-J run 1 were to : (1) Successfull y scale up production (adjust production to take into account the differences in reactor size) of DJM-5265H from the South Charleston pilot plant to reactor,l ; (2) produce aim-grade resin for customer qualification ; and (3) establish reactor operability and continuity on reactor 1 . As to the third objective, UCC was not merely confirming that reactor operability and continuity were as expected . UCC wanted to evaluate how well reactor 1 worked with UCAT .-J . UCC's primary concerns before UCAT-J run-1 were that : (1) The differences between the pilot plant and reactor 1 at Star could cause the product to go off grade ; (2) TEAl starvation could cause operability and continuity problems ; (3) .difficulties . with CO kills could occur if any kills were necessary ; and (4) resin clumpiness could cause operability and continuity problems . As with all of the UCAT-J runs discussed below (although not specifically mentioned below for brevity), representatives from process R&D and product .R&D provided coverage for UCAT-J run 1 and process R&D collected data, some of which were not normally collected or was not normally collected as frequently . _ Additionally, samples [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Aea1f06ca634b18aa. Public record. Not legal advice.