please contact me or any member of the committee we will be more than happy to hear what you have to say.

Mr. McCulloch, do you have anything you would like to say before we proceed?

Mr. McCULLOCH. No, sir.

Mr. RIEHLMAN. Mr. Hosmer?

Mr. HOSMER. No.

Mr. RIEHLMAN. May I also say for the record, gentlemen, that two representatives that I have with me happen to be from the same political faith, Republicans. We had hoped that a representative of the minority party, namely the Democratic Party, could be present. Unfortunately, because of legislative problems in Washington, that appears not to be possible. We hope that when we get back into Phoenix we will have at least two members of the minority sitting on this committee.

I think it is worthy of noting that the committee is made up of 11 members of the House, 5 Democrats and 6 Republicans. I want you to know that this committee is not a politically slanted committee. We have no feelings one way or the other with respect to party politics when we are considering the problems of small business.

I would like to call as the first witness Mr. Niel Allen, board of governors, the Oregon State Department of Geology and Mineral Industries. Mr. Allen, will you take the witness chair and give your full name.

Mr. WILLISTON. Mr. Allen is unable to be here, but a wire was received this morning. It is very short. I can save time and read portions of it and submit it for the record, if that is permissible.

Mr. RIEHLMAN. Without objection, that will be done.

Mr. WILLISTON (reading):

Deeply appreciate courtesy your invitation to participate in hearing before Select Committee and regret unable attend. If permissible would request you extend following remarks into record for me.

Since 1943 member, and 5 years chairman governing board, Oregon State Department of Geology and Mineral Industries, but desire to speak in capacity private citizen as practicing lawyer with mining clientele. For many years prior to appointment Douglas McKay as Secretary Interior, Bureau of Land Management increasingly fostered and developed socialistic philosophy, retarding exploration and development of our mineral resources. Such Interior administrators as C. Girard Davidson totally and perhaps deliberately misconceived the fundamental and practical bases of the mining law of the West. Without authority of law they substituted feudal policies of Federal overlordship in place of incentives to private enterprise. This is exemplified by statement made to me in 1949 by Dan Golby, then regional manager BLM, in presence Davidson and without comment by him. In response to my statement of miners' objection to trend toward nationalized mineral resources he said, "Mr. Allen, the time has come when the people of this country must radically revise their anchaic ideas of private property rights." The discussion was ended. Our only hope then was an appeal to Congress to write a workable department policy encouraging private discovery and development of our latent and dormant mineral resources. Now that we are assured departmental help and a favorable climate for sound growth of the Nation's mining economy, we would recommend to the Congress full support of Secretary McKay and Interior Department in restoration of historic economic principles.

It was this incentive to private enterprise which historically uncovered and developed our miners and minerals as important factors in national wealth and as essential items for the national defense. We have confidence in Douglas McKay and we place trust in Congress to support him. I am grateful for this opportunity.

Signed by Niel Allen.

Mr. RIEHLMAN. Did you say that there was another statement that he wanted to insert?

Mr. WILLISTON. No, this is all. And he expressed his regrets to me over the telephone that he could not attend due to a continuation of a lawsuit in regard to a chrome property which prevented him from coming down. But he expressed his hope that the committee would have ample testimony to take for their requirements.

Mr. RIEHLMAN. We have as our second witness this morning Mr. Williston. I guess you are right on the stand and you may remain there, if you will, please.

STATEMENT OF S. H. WILLISTON, VICE PRESIDENT, CORDERO MINING CO., PALO ALTO, CALIF.

Mr. WILLISTON. My name is S. H. Williston. I am vice president of the Cordero Mining Co. operating in Nevada. The Cordero Mining Co. is a mercury producer and employs some 50 employees. If it is permissible, I would like to submit my prepared statement for the record and go on to some suggestions which might interest the committee rather than go through in detail the material that I have presented there.

Mr. RIEHLMAN. That is satisfactory to the committee, I am sure. Mr. WILLISTON. Since there are 17 or more witnesses, I think possibly we could save time that way.

Mr. RIEHLMAN. Would it be satisfactory to you, sir, if we insert your prepared statement prior to your remarks, which will probably fit better in the record?

Mr. WILLISTON. Yes.

(Mr. Williston's prepared statement follows:)

WHAT IS OUR GOVERNMENT MINERAL POLICY?-TESTIMONY BY S. H. WILLISTON, CORDERO MINING Co., PALO ALTO, CALIF.

In considering the plight of small- and moderate-size mining operations one must give a great deal of consideration to the great uncertainty and the extreme vacillation in United States Government mineral policy over the last 14 years. Those years have seen a strong demand for metals interspersed with periods of surplus. During times of shortage our Government urged greater and greater production from domestic sources and in times of surplus, even though temporary, ignored the problems of the mining industry and allowed, and even encouraged, those mines to shut down. For 14 years the small miner of the West has read in the papers conflicting reports, conflicting requests from Government sources and conflicting attitudes on the part of many of the metal manufacturers and consumers. Neither small mines, nor, for that matter, large mines, can continue to exist in a solvent condition under such pulling and hauling from Washington and under such an absence of clear-cut, well-thought-out policy. It might be well if we would set down a few basic facts and try to think clearly toward a logical conclusion and attempt to avoid some of the highly questionable and usually unfounded conclusions reached over the past decade by some of the theorists in Washington.

We know that, at the present time, we import something like 40 percent of most of our critical metals and a much higher percentage of our strategic metals. We know that in regards to many of these critical metals and most of the strategic metals, the sources of supply lie over several thousand miles of ocean travel. We know that the Russian Navy is now the second largest fleet in being in the world.

We know that the Russian submarine fleet is several times the size of the German submarine fleet at the opening of World War II. We know that the

Russians now have 350 submarines of 1,000 tons displacement or over, and at least 150 smaller submarines. We know, in the event of open warfare, that such a number of submarines could undeniably interfere with, if not almost eliminate, the importation of strategic and critical metals from overseas sources. We have heard from reasonably reliable sources, that the antisubmarine arm of the Navy is rated well down on the priority list and that in the war games of recent years the effectiveness of the antisubmarine arm was certainly not anything which we, as a Nation, might be proud of.

It would seem from these facts, which are quite well authenticated, that the policy of our Government regarding raw materials supply in the event of an emergency, would be to endeavor to assure a source of metals, preferably from North America, but certainly from the Western Hemisphere, if we are to have available sufficient raw materials for the defense forces and for the essential civilian economy.

Now, let us examine what the actual policy of our Government has been. The policy of our State Department in general is and has been to keep our metal in the ground and buy from foreign sources. Preferably sources where the State Department has diplomatic problems. More explicitly, under the Reciprocal Trade Act, which was adopted about 1934, and has been repeatedly reenacted to date, the declared policy of the State Department is to increase the percentage of the domestic market supplied by foreign producers by reducing tariffs and simplifying customs procedures.

When the Stockpiling Act was passed with the "Buy America" clause, President Truman approved the bill while condemning the clause and practically instructed the Munitions Board not to observe it. As a result of its instructions (never changed) the Munitions Board and the General Services Administration have followed the policy of buying from abroad in preference to buying domestic. They have even refused permission for domestic producers to bid on requirements of strategic metals for the stockpile which were subsequently obtained from foreign sources.

The President's Materials Policy Commission and the National Security Resources Board have advocated the removal of tariffs on strategic and critical metals by bureaucratic action. A consequent lowering of domestic price by the amount of such tariff reduction would immediately close additional domestic mines.

The Mutual Security Agency, in the so-called Bell report, A Trade and Tariff Policy in the National Interest, reached the height of something or other in the following quotations:

Page 57, "Tariffs on the minerals for which the United States produces all of its current needs and is a net exporter are unnecessary."

Page 54, "For most ores and unprocessed minerals, the relatively small duty has little restrictive effect on imports."

Page 51, "Some duties should be eliminated now and others whenever price factors are favorable to such a change."

Page 57, "A change in tariff policy is also desirable for the minerals of which domestic production supplies less than one-third of domestic production needs. Imports of such minerals should be on the free list."

And, then, to cap the climax, the quotation on page 56, "Tax provisions covering exploration costs and depletion allowances offer far greater incentives for the metal and mineral industries than could be provided by tariffs."

It does not occur to the author of this policy, who is, by the way, Director of the Research Department of the International Monetary Fund, that if the sales price of metals is not sufficient to cover costs it makes little difference as to what promises might be made in regard to taxes. Taxes are measured by profits and if there are no profits there certainly will be no taxes for any considerable length of time.

The Treasury Department has, for years, been attacking the theory of percentage depletion with extreme vigor and, also, by new interpretations of old laws and rewriting of regulations, endeavored to increase the tax load on those mines which might for a few years show a profit. Fortunately, Congress has recognized the errors of Treasury arguments. There is no doubt whatsoever that if the Treasury had been successful in eliminating percentage depletion it would have had a most catastrophic effect on the search, development, and mining of metals within the United States.

Certainly the general health of the mining industry and especially the smaller components of the industry would indicate that the depletion allowance is insufficient to offset the inherent gamble in the industry. The percentage depletion

in oil, which is higher, has kept the United States self-sufficient in that material and a higher percentage depletion for minerals with adequate protection against foreign dumping would go a long way toward bringing the United States closer to a minimum safe production in the metals which it needs.

Since the early thirties the Bureau of Land Management in the Department of the Interior has been using every device at its command to change the fundamental mining laws of the country to a leasing system which would grant to a few appointed Government bureaucrats the right to grant or to deny the right of additional mines to exist within this country.

With present costs and price trends an additional levy on gross income added to the 75 percent of the net, which the Treasury now demands, would be too much of a load for the industry to bear.

The Defense Minerals Administration and the Defense Materials Procurement Agency, largely manned by engineers familiar with the industry, were given orders in early 1951 to take no steps to expand production of any metal unless it was in worldwide shortage. From recent publicity in connection with the ammunition shortage it may be well that this directive, which is still in effect, was dictated by the State Department. Even the United States Geological Survey and the United States Bureau of Mines, which have had the confidence of the industry for most of the years of their existence, have been partially infiltrated with a rather pessimistic and hopeless attitude.

National Forest Service in the Department of Agriculture has gone out of its way to interfere with and slow down the exploration and development of additional metal and mineral reserves. They seem to have little sympathy with the development of raw materials other than timber on national-forest ground and seem to delight in causing legitimate mining operations additional difficulties and extra expense for no useful purpose.

In fact, it is impossible to name any administrative branch of the United States Government which has actively aided and championed the efforts of the mining industry in its effort to supply the raw materials needed in an emergency by our Nation except segments of the Geological Survey and somewhat smaller segments of the Bureau of Mines.

As I mentioned before, the announced policy of the Reciprocal Trade Act was to increase the proportion of raw materials sold in the American market by reduction of tariffs. Since 1934 we have reduced many if not most of the metal tariffs by 50 percent or more.

By way of the inflation route, we have further decreased tariffs which are on the "fixed fee" basis (which covers most metals) by another 50 percent.

In 1939 the United States was essentially self-sufficient in copper, lead, and zinc. Tariff protection has been reduced to one-fourth of what it was in 1939 and we now import, roughly, 40 percent of these three metals.

In those same years the number of middle-size mines has decreased very materially and the number of small mines has decreased almost to the vanishing point. It would seem that 20 years of the Reciprocal Trade Act has accomplished its purpose since we are now dependent for many of our metals on foreign

sources.

Many of our Washington "authorities" seem to believe that more of the medicine which has made the domestic mining industry so sick should be given to the industry to make it well. If a 75 percent reduction in tariffs has almost killed the underground mining industry, then a complete removal of tariffs should bring it back to life again.

They do not realize that every time a tariff is reduced which results in a lower price in the domestic market one or more marginal mines shuts down. They do not realize that under the guise of inflation and increased labor costs within the United States almost all underground metal mines have now become marginal mines.

Labor costs, in most underground mines, make up, roughly, 50 percent of total costs. American mining labor is now paid at a rate from 4 to 16 times foreignlabor costs. The number of underground nonferrous metal miners has been steadily decreasing over the last 15 years and the average age of those miners is far higher than it was 20 years ago. With every drop in metal prices, miners leave the mines and go to other industries with a steadier employment history and when the mines reopen fewer and fewer return and, unfortunately, those who do return are those not able to hold down positions in outside industries. The efficiency of those miners as they aged has declined and the output per day has been only partially maintained by increased mechanization. On open pit mines the percentage cost of labor is low and the price per man-day has a much

smaller effect on total costs. On underground mines, mechanization is frequently impossible to more than a limited degree and decreased efficiency, due to age and the loss of the more competent men, has raised small mining costs out of all proportion over the 1930 years.

A whole industry, whose average grade of ore from underground mines was $5 per ton in 1939, finds little to interest itself in grades of ore which provide $20 a ton at present market prices.

The magazine articles, the newspaper stories, and Government reports from Washington repeatedly state that we are becoming a "have not" nation and the only remedy which they can suggest is that we abandon what we have left and become wholly dependent on foreign sources. The truth of the matter, however, is considerably different. In mineralized areas not covered by overburden, probably not over 1 ore body in 3 outcrops at the surface. In our Western States over three-fourths of our potential mineral bearing ground is covered by valley fill. Actually it would probably be nearer the truth to say that instead of being a "have not" nation we have discovered and exploited not more than onethird of one-fourth, or one-twelfth, of our natural wealth. This is 8 percent exhaustion. We will probably never find all of the hidden mineral wealth remaining but it is certain that we will find little of it if domestic mining costs are to rise far above foreign mining costs and make it unprofitable to operate ore deposits we know of, let alone make it worth while to explore for new deposits. The basic economics of mining under a free-enterprise system, provide that the highest grade deposits with the lowest operating costs and the lowest transportation costs must be exhausted before higher cost mines can come into the operation. It is just as easy to make a mine marginal in character and inoperable under normal conditions by increasing labor costs, increasing transportation costs and increasing material costs as it is for nature to make a mine marginal with too low grade ore.

At the present time our mine labor costs are the highest in the world. It costs more to transport some metals from the western United States to the consumers in the East by rail than it does to ship that same metal four times across the Atlantic Ocean.

The past policy of the Government, whether it be by accident or design, is to make almost every underground nonferrous mine in the United States marginal. Given the same grade ore in Canada, South America, or in Africa it can be mined and processed more cheaply than can its American counterpart.

Only those few mines within the United States which have exceptionally high-grade ore or which, due to the character of the ore, such as molybdenum and nickel, have a monopoly on the market, can hope to continue in the face of lower tariffs or without subsidy.

The metal-mining industry in the past has had, in general, little appetite for subsidized production and the reason for that distrust is the fact that most subsidized programs have been on a basis of a differential subsidy with a different price to each different producer. Such a program results in the final picture as profit control with an allowance to the domestic producer of sufficient margin over his cost of production to keep him from shutting down. It removes any incentive for higher efficiency and it removes most incentive to search for additional ore. It is far more important than a mining operation under a subsidy plan should have good connections with the bureaucracy in Washington which controls its price and hence controls the profit derived rather than any primary interest in the furthering of any effort of mineral extraction.

In conclusion, if we are to be reasonably secure in times of cold or hot war, or reasonably prosperous in times of peace, we need, above all things, a broad, sensible national minerals policy which should include:

(1) A tariff policy which will maintain a price within the United States for metals sufficient to keep the various segments of the industry in a healthy state so that it will be possible for them to explore for and develop additional

reserves.

(2) A tax policy with depletion allowances large enough so that there will be sufficient profit remaining from operations to cover the inherent risk and pay for that exploration and development.

(3) A public land policy which will permit and encourage adequate legitimate exploration for new mineral supplies.

And, most important in these days of the potential atomic submarine, we must be certain that sufficient metal reserves for even a long-term hot war are discovered and developed in the Western Hemisphere.