sample="quota" bates="507066381" isource="rjr" decade="1980" class="ui" date="19890711" from the desk of DAN PUGH 7/11/89 Bob Here is the info on the Tobacco Expansion program that we had to prepare for review with the RJR-Nabisco CFO. EXPANDED TOBACCO STRATEGY Background - FREON 11 (Chlorofluorocarbon-11 or CFC-11) used in our tobacco expansion process is one of five CFC's implicated in the ozone depletion issue. -Expanded tobacco from current process provides an annual savings of $147MM in leaf and is a critical ingredient in our ultra lights and VRP/SRP brands. -United Nations Environmental Program Agreement (Montreal Protocol) phases down the production/use of these CFC's. Effective 1/1/89 Freeze production at 1986 levels by 7/1/89 20% reduction - 1993 50% reduction - 1998 Scientific data review will likely result in phase out by 1998 or sooner. - Legislation and regulatory activities in the U.S. at federal, state/local and EPA to: - Regulate -Ban -Label -Tax -CFC-11 being put on allocation by producers and has potential for imminent short supply (as early as 1990). Approaches -Qualify HCFC-123 (a non CFC) for use in expanded tobacco process. 5% of ozone depletion value of F-11 Meets G13 process requirements "Plug-in" replacement pending tox qualification (complete 9/90) Anticipate commercial availability by late 4Q90 or 1Q91. Cost commensurate with F-11 - Expedite development and commercialization of the propane expansion process. Non-CFC Process High Expansion (100-120%) RJR Process - no license required - Evaluate and pursue use of CO2 expanded tobaccos purchased fro toll processors and commercialization of CO2 process. Quantities available to meet critical needs Non-CFC Process Meets functional requirements of products - Accelerate programs to optimize overall tobacco yield and filling capacity to offset financial impact of expanded tobacco. Leaf Yield Primary Processing Optimization Expanded CRS Improved G-7 Filling Capacity Microwave Drying/Expansion - Improve/modify current G-13 Process to reduce loss/usage of FREON-11. 30% improvement implemented Additional 20% for implementation identified Next Steps - Finalize agreements for toll processing CO2- expanded tobacco. -Work with DuPont to qualify/supply HCFC-123. - Continue development of high pressure propane process via the pilot line at AVOCA. - Continue to evaluate commercialization of propane vs. CO2. - RJRT Tox Studies for HCFC-123 and Propane Mutagenicity Inhalation Chronic