MR. WAGNER:

My name is Harold A. Wagner. I am the chairman of the board, president and chief executive officer of Air Products and Chemicals in Allentown, Pennsylvania. Air Products and Chemicals is a global company with leading market positions in industrial gases. Industrial gases are pure oxygen, nitrogen, argon, hydrogen, helium, to mention a few, and we have leading positions in those businesses, as well as selected chemicals. We have operations in 30 countries. We have 16,000 employees worldwide and annual revenues of about $5 billion. Corporate headquarters are in eastern Pennsylvania's Lehigh Valley near Allentown.

Air Products is indeed the world's leader in natural gas liquefaction technology, supplying major oil and gas companies around the world with the liquefaction process technology and main cryogenic heat exchangers, key components for any LNG or liquid natural gas facility. We actually pioneered this line of business more than 30 years ago, and to date we have designed and built 60 heat exchangers at our Wilkes­Barre plant in Wilkes­Barre, Pennsylvania.

I would first like to give my views as an American businessman about unilateral economic sanctions. While the U.S. economy is robust and shows signs of continuing on that path for months to come, the fact remains that many countries in Europe and Asia and their resident companies indeed have the ability to compete with large U.S. companies head to head in a variety of business sectors.

If U.S. companies are forced to withdraw from a market for reasons of sanctions policy, our foreign competitors are immediately advantaged, rendering the force of sanctions null and void.

The Iran­Libya Sanctions Act, ILSA as it is called, has created rifts with our European allies. Our allies view sanctions laws as extraterritorial. They have mounted vigorous legal challenges and diplomatic resistance to implementation. They show no signs of backing down, and the companies within their countries have demonstrated a determination to move forward with investments in sanctioned countries, raising the possibility that those companies as well will be sanctioned.

We are all familiar with the ongoing State Department investigation into three companies, Total of France, Russia's Gazprom and Petronas, the oil and gas company of Malaysia. These three companies have stated their intent of entering into a contract with Iran for the development of the South Pars gas field, an act that would put these three companies squarely in the sights of sanctions under ILSA.

Therein lies the problem for Air Products, our company, and other U.S. companies in the oil and gas service sector. Some of the companies in danger of being sanctioned under ILSA, such as Petronas, are valued customers for our LNG heat exchangers that we build in our Wilkes­Barre plant. We have delivered six main heat exchangers to Petronas in two installments ­­ the value of these orders is about $100 to $150 million ­­ and have hopes of more business from this company in the near future.

Total is a major participant in many LNG projects in the development stages, including a project in Yemen, and with Russia's huge gas reserves Gazprom's involvement in large projects is, I believe, inevitable. The LNG market is all export, and there is a tremendous growth opportunity, particularly in Asia in the near future. We are concerned that U.S. imposed sanctions could adversely impact our ability, our company's ability, to obtain the $750 million worth of heat exchanger orders that we would anticipate winning and certainly pursue aggressively with the intent on winning over the next decade.

Now, in addition, it is important for all of us to recognize the complete interdependence in the oil and gas industry and how secondary sanctions against one company under ILSA can have a rippling effect across other companies, many of them U.S.

As you know, the oil and gas business is capital intensive and extremely risky, and one way companies spread risk is through joint ventures and production sharing arrangements with other companies, some U.S., some European, some Asian partners. Such arrangements are also frequently encouraged by the host country as it does not wish to be too reliant on any one company or even more than one U.S. company.

Thus, the major producing companies in the oil and gas business both compete and cooperate after a fashion. It is simply the nature of the business, especially in emerging areas of production with higher risk like the Caspian Sea region of Eastern Asia. Thus, the sanction of one, such as Petronas or Total, can affect others, such as Air Products. We have no direct investment in Iran or Libya, and I understand that it is not the intent of Congress that we be affected, but we are nevertheless. It is a source of great concern to me and our management and even more so to the 350 employees in our Wilkes­Barre plant in Allentown that support our LNG business.

Now, we are indeed very, very proud of our position as the world leader in the natural gas liquefaction technology. Our main cryogenic heat exchanger is indeed an amazing piece of American technology. Our earliest exchangers have been in operation for more than 30 years. At those early LNG plants, many other major pieces of equipment have had to be replaced, but the original heat exchangers built in Wilkes­Barre, Pennsylvania, continue to operate and operate very efficiently, but in a strong and growing market there is always a threat and room for competition.

In the LNG service industry, our competitors come from Europe. Several European companies have approached potential clients that we want to continue to do business with in the future. Certainly these companies have a disadvantage in that none of these companies have actually manufactured or installed a heat exchanger for this application. Naturally, most clients prefer a service company with a proven track record, and in that sense Air Products still has a significant advantage.

We have a problem, however, in that these competitors are now using U.S. sanctions policy, and ILSA in particular, as they market their products versus ours. They assert that U.S. sanctions policy makes Air Products an unreliable supplier on projects that take years to develop, and they assert that non­U.S. companies should not do business with a company whose government is hostile to their own business interests.

I must say that there has been no major impact on our business as yet, but I also must say that we are holding our breath pending the outcome of the Administration's findings and ultimate decision on sanctionability with regard to Iran and the Total­Gazprom­Petronas arrangements.

If any or all of the companies are sanctioned, it will hinder our relationship with both past and potential clients. If the companies are sanctioned and the sanctions are then waived as some might predict, it will put certain U.S. companies at a serious competitive disadvantage and send a very mixed message as to U.S. policy in key strategic areas of the world. Our customers have already begun to express concerns to us questioning our ability to continue to supply heat exchangers in the future if they elect to go with the Air Products process and technology.

Now, I have no quarrel ­­ no quarrel whatsoever ­­ with the expressed concerns of U.S. policy makers about the behavior of certain nations who support terrorism and seek to gain access to weapons of mass destruction, but a policy of unilateral economic sanctions based on secondary sanctions will not have the desired result. It will hurt American companies, it will hurt their workers, and it will antagonize our allies.

It would be far more productive, in my opinion, to engage in vigorous diplomacy to find multi­lateral solutions for dealing with the unacceptable behavior of countries like Iran and Libya.

Finally, it has been the express policy of this government to encourage U.S. companies to grow and create jobs through exports. Air Products has been a leader, indeed a model company, in this effort. We see the future of our company in a robust global economy, and we strongly believe that U.S. companies are strong proponents of the American values and ideals that make us the envy of the world. Unilateral economic sanctions do not work and penalize American workers.

Thank you. I would be pleased to take any questions, Madam Chairman.