Mr. SHAROOD. Not a terribly helpful response.

I thought we might have something a little more meaningful in terms of substantive discussion of the question, really.

For example, if I might suggest, is the underwriting of insurance against nationalization of U.S. industries an appropriate primary undertaking. How in that case do you ever arrive at a commercial loss experience when you are dealing with political questions?

Mr. MOORE. I think we do recognize that there are under existing legislation some areas in which the U.S. Government does undertake such insurance functions. We have judged in this case, however, that the absence of experience, the absence of a sound actuarial basis would, in fact, make this particular insurance closer to a guarantee provision that no insurance. Now, we may have additional comments to be made on this point when we provide more detailed comments on different aspects of the bill.

Mr. SHAROOD. Captain Heyward, I believe, asked you in regard to the moratorium resolution, whether it prohibited in any sense exploitation or exploration.

You indicated you were going to have to go back and look at that resolution again, and would you provide your answer for the record? Mr. MOORE. One of my problems is that the United States unequivocably opposes the moratorium resolution. I would be pleased to give you the assessment of the nations that support the moratorium resolution as to whether in their view it includes exploration.

Mr. SHAROOD. Analyze the entire question, then.

Recently, the Department of Interior published in the Federal Register proposed rules for leasing on the Outer Continental Shelf for hard mineral resources.

The proposal has a variety of interesting provisions, which I think, because of the fact we are dealing with seabed resources, whether on the shelf or deep seabed, logically require some comparison with this legislation.

For example, in the proposal from the Interior Department there are various restrictions on the number of blocs that may be leased, both for exploration and exploitation, and for exploration, for example, according to my mathematics, it works out to about 325 square miles.

There are fees for exploration and development expenditures, and other requirements of $40,000, $50,000, and $60,000 per year.

There are rental fees of up to a maximum of $1 per acre, and royalty fees of up to 2 percent.

I would like permission of the chairman for the representative of the Interior Department, or yourself, to furnish for the record, since we are running out of time, an analysis of the proposed Outer Continental Shelf leasing as set forth in the Federal Register, with some particular analysis of these figures that are in here on block sizes, on development expenses, on royalties, and rent, and give us some explanation of how these various figures were arrived at. Some of the witnesses before the committee at earlier times have characterized the fees as called for in this legislation as a giveaway of resources.

You might compare the features in the proposal of the Interior Department with the bill.

Finally, with respect to the Outer Continental Shelf proposal, I note it uses the same definition of the Continental Shelf.

We are somewhat compelled to use it in this bill, also, and I wonder if you could provide for the record a statement as to the sea ward limit of present Interior Department leases.

I think it would be helpful for the record to know just how far seaward the United States has actually granted a lease of any sort. I would like to see how far out in the deep seabed we have actually gone under this exploitability doctrine.

Thank you, Mr. Chairman.

Mr. DOWNING. Time again is a factor.

We do have many more questions.

The committee wants to thank you, Mr. Moore, and your associates, for appearing here today.

If you would provide for the record the additional information requested by counsel, and also if you have any thoughts about the substantive provisions of the bill that might be helpful in the event the legislation becomes law, we would be deeply appreciative. (The information was not received at time of printing.)

The subcommittee will adjourn at this time to meet again tomorrow morning at 10 o'clock.

(Whereupon, at 12:05 p.m., the subcommittee recessed, to reconvene at 10 a.m., Wednesday, February 27, 1974.)

DEEP SEABED HARD MINERALS

WEDNESDAY, FEBRUARY 27, 1974

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON OCEANOGRAPHY OF THE

COMMITTEE ON MERCHANT MARINE AND FISHERIES

Washington, D.C. The subcommittee met, pursuant to recess, at 10:12 a.m., in room 1334, Longworth Office Building, Hon. Thomas N. Downing, chairman presiding.

Mr. DOWNING. The subcommittee will come to order.

This morning, we will resume hearings on H.R. 12233, the Deep Seabed Hard Minerals Act.

Before I introduce the witnesses, I would like to place into the record a very excellent statement by our colleague, Congressman Bob Wilson of California.

If there is no objection, we will place Mr. Wilson's statement in the record at this point.

(The statement of Congressman Wilson follows:)

STATEMENT BY HON. BOB WILSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Deep-sea mining offers one of the most exciting prospects of any economic venture that has been launched in our century.

Above and beyond the stimulus to our economy that a large-scale ocean mining industry would generate is our national interest. Already the U.S. is facing a mineral shortage that is as critical as the much publicized energy shortage. The U.S. Geological Survey concluded last May in a weighty report that "the future drain on our mineral resources will become enormous" and supplies "will be drawn in large measures from resources that are now only subeconomic or not even discovered."

We are dependent upon imports for a great part of our strategic mineral requirements. The United States imports 19 percent of its copper, 84 percent of its nickel, 92 percent of its cobalt and 98 percent of its manganese. In today's perilous world we cannot be assured of constant supply. Nationalism is emerging as the dominant force among Nations with vast resources and little development. We have seen the fate of U.S. copper interests in Chile. By mining the seabeds for manganese nodules with American firms doing the job, we can be assured of an adequate supply of many strategic minerals. Manganese nodules, for instance, contain 26 identifiable minerals-several of them in amounts that will make their refining commercially feasible. It is truly in our national interest to aid and encourage early development of a full-scale ocean mining industry. There is little doubt that the potential of deep-sea mining is enormous, it is a challenge to our technology and it will pay off in jobs and national security.

How far have we come? Several U.S. firms are now taking the first steps toward harvesting the mineral resources of the seabeds. Such companies as Union Carbide, International Nickel, and Kennecott Copper and the Summa Corporation are engaged in exploratory, research and development projects.

My home town of San Diego has been the center of much of this preliminary work. National Steel and Shipbuilding built a huge prospecting barge for use by the Summa Corporation.

Tenneco's ocean-research subsidiary, Deepsea Ventures, Inc., has been working for several years on development of a workable deep-sea mining system. The firm has spent $30 million on ships, machinery and a pilot plant. Its exploration ship, The Prospector, operating out of San Diego, has located beds of manganese nodules out in the Pacific estimated at 1.5 trillion tons and growing at a rate of 16 million tons a year. A pilot plant that will process a ton a day of these nodules has been built. The next plant is expected to process 65 tons a day, and the firm envisions an ultimate plant processing 5,000 tons a day. Development is well along on a giant vacuum cleaner type of device which will collect the nodules from the depths of 12,000 to 18,000 feet. Competition is keen, both in prospecting for the nodule beds and in developing specialized mining equipment. As many as 30 companies and several governments have already invested an estimated $300 million in development of technology to mine the deep. Known to be in the race are companies and government agencies in Russia, Germany, France and Japan as well as the United States. The firms involved in deep-sea mining ventures have passed the speculative stage. They now are deep in development of the technology necessary to do the job. We have come a long way in a short time.

What are the problems? As is customary, technology has outstripped the law. We are further down the road toward being able to do this harvesting of the ocean floor minerals than we are in providing the legal channels for the firms to operate.

The Deep Seabed Hard Minerals Act before you is, frankly, pioneering legislation. We are dealing with an unprecedented problem. Later this year another meeting of the International Conference of the Law of the Sea will be held, but most officials participating in the conference feel that little in the way of international seabed agreements can be expected. One official estimates that it would take at least 11 years before a treaty could be drawn up for submission to the U.S. Senate. In the meantime, our government has a responsibility to clear up the status of U.S. firms which move ahead in deepsea mining.

This legislation would establish a registry and licensing system for deep-sea mining, managed by the Secretary of the Interior. It is crucial that action be taken in this field. With several corporations competing it is vital that those who get there "fustest with the mostest" be allowed to file claims that cannot be "jumped" by other firms. Such a registry would encourage foreign nations entering the field to cooperate with U.S. firms and the government.

Most importantly, your Committee and the Congress hold the fate of the deep-sea mining program in their hands. There will be heavy expenditures in capital goods and services required. These firms are not asking the Federal Government to put up the money. What they are asking is a green light to go ahead, a system of orderly licensing and registration. Why do they need this Government backing?

They simply cannot interest banks and other financial institutions in putting out the $100 to $200 million venture capital that will be required unless there is some kind of assurance that the investments are protected from claim jumping. The firms must obtain insurance on their expensive equipment, and the same criteria will be applied, with insurers wanting assurances that these firms are operating under U.S. law.

Licensing will protect the Government, also. It will allow the Interior Department to make certain that environmental considerations are made when deep-sea mining goes into full operation. It will control density of mining operations and assure accessibility of the ocean surface and depths for scientific studies and fishing in areas where mining claims are worked.

This legislation can rightfully be said to be interim lawmaking. It will enable us to go ahead with a much-needed industry. It is flexible and fair. It can be adjusted to international agreements whenever progress in that direction is made and the best interests of the United States invite our participation.

Congress will be breaking new ground with this law. Already there have been some interests, both Federal and private, which have not been receptive to the licensing proposal. I feel that we in the Congress would be remiss in

our duties to the national interest if we do not fill this legislative gap. It is: obvious that international regulation is years down the pike. We should not wait. There are thousands of jobs in the offing. The Federal Government stands to gain tax revenues from a thriving deep-sea mining industry, and the shoreside industries that it will generate.

The Library of Congress reports there are 50 quadrillion tons of minerals dissolved in sea water or precipitated in attainable form on the seabeds of the world. This vast potential is awaiting use by mankind. The time is growing shorter when we must capture these resources.

Mr. DOWNING. The first witness this morning will be Mr. Richard' Greenwald representing Mr. J. E. Flipse, president, Deepsea Ven-tures, Inc., of Gloucester, Va.

He will be accompanied by Mr. Marne A. Dubs, chairman, Com-mittee on Undersea Mineral Resources, American Mining Congress,. and director, Ocean Resources Department, Kennecott Copper Corp. If you two gentlemen would take the witness stand together, we will expedite the proceeding.

STATEMENT OF RICHARD GREENWALD, REPRESENTING J. E. FLIPSE, PRESIDENT, DEEPSEA VENTURES, INC., GLOUCESTER, VA., ACCOMPANIED BY MARNE A. DUBS, CHAIRMAN, COMMITTEE ON UNDERSEA MINERAL RESOURCES, AMERICAN MINING CONGRESS, AND DIRECTOR, OCEAN RESOURCES DEPARTMENT, KENNECOTT COPPER CORP.

Mr. GREENWALD. Thank you, Mr. Chairman.

Mr. Flipse was unable to appear before you today and wished me, before I present his testimony to you, to express his regret that he was unable to participate in these very important hearings.

Before presenting Mr. Flipse's testimony, which confines itself solely to the language and purposes of H.R. 12233, he has asked me to make a few brief comments on the State Department testimony offered here yesterday.

Mr. Moore and his reticent retinue have again presented a picture of optimism backed by little substance. That lack of substance is well known and speaks for itself.

Our few comments are as follows:

First, I would like to point out a curious and extraordinary contradiction of major significance in yesterday's testimony.

Mr. Moore cast doubt on the fundamental principles underlying section 13 of H.R. 12233, that is the guarantee section, on the basis that the guaranty section was an attempt to shift risk to the general taxpayer and was, horror of horrors, the establishment of an "enormously broad precedent."

In fact, Mr. Chairman, section 13 of the bill is a competent legislative restatement of article 73 of the U.S. draft Seabed Treaty, the document which is so tenaciously defended by the U.S. Government as the very basis of its law of the sea policy.

We cannot say what motives and logic are behind this contradictory testimony.

Is it an act of desperation or confusion, or is it a signal of changed policy, or is it evidence of a fundamental policy split. in the united phalanx that faced you yesterday?