Mr. LEGGETT. Is the site within 200 miles of any country?

Mr. FLIPSE. No, sir. We were very careful to get beyond any contention of territorial seas. It is a thousand miles southwest of San Diego and at least 400 or 500 miles from any land.

Mr. LEGGETT. What percent of ocean bottom do you anticipate would be subject to this ocean resource development?

Mr. FLIPSE. We have done enough technical work to determine that the sea floor is not coated with good deposits, but based upon our information there is probably 20 to 30 percent of the deep ocean floor which has developable properties that could be developed.

This is a huge quantity of material and would meet our needs for centuries at the present rate of metals used.

Mr. LEGGETT. Those are all the questions I have.

Mr. DOWNING. Mr. Mills.

Mr. MILLS. Thank you, Mr. Chairman.

I have no questions.

Mrs. SULLIVAN. Mr. Chairman, may I ask just one or two questions? Mr. DOWNING. Certainly.

Mrs. SULLIVAN. I would just like to ask the witness what would this license issued by the United States mean?

Mr. FLIPSE. It would mean principally that the U.S. Government would protect us against other American companies.

Mrs. SULLIVAN. It could do nothing to protect against foreign operators, coming in and working alongside of you?

Mr. FLIPSE. I think that it would not have a direct "legal" ability to control, but that the weight of our Government, certainly would be used to prevent the interference by a foreign operation, inasmuch as the losses would be insured by the Government, and therefore the Government-our Government would have a very real interest in protecting our interests against foreigners, although there are no particular provisions except its general interest in the ongoing success of this mineral development.

Mrs. SULLIVAN. And this issuing of a license by our Government would not violate any type of agreement that might be going on or discussion that might be going on with other countries?

Mr. FLIPSE. To the best of my knowledge, it would not, Mrs. Sullivan.

Mrs. SULLIVAN. Just one other question.

What would this cost the U.S. Government?

Mr. FLIPSE. The industry has been ready to invest in the research and development, and certainly in the commercialization of this program. We would like to believe that the insurance rates that were set would adequately measure this risk, and I think the OPIC people have the experience to do this kind of risk assessment. Hopefully, it would cost the U.S. Government nothing, and it would benefit the U.S. Government by having this resource of needed metal.

It is my opinion that not more than four or five ocean mining rigs would be in service between now and the time the international regime is established, and if they average $200 million to $250 million, the total exposure to risk with which the Government would be faced with would be potential losses of, say, half of that amount. That would be the downside maximum.

Mrs. SULLIVAN. And to whom would the payments for this insurance be paid? Not to the United States, would it?

Would it be private insurance?

Mr. FLIPSE. Well, OPIC is a Government-sponsored privately operated quasi-governmental operation-and it would be to OPIČ itself or to another organization directly controlled by the govern

ment.

Mrs. SULLIVAN. So it could cost the Government hundreds of millions of dollars if there was a loss either by interference by companies of the United States or foreign interests?

Mr. FLIPSE. I think it protects principally against the foreign interests. Domestic courts would be available in cases concerning interference by American interests under the law.

Mrs. SULLIVAN. Thank you.

Mr. DOWNING. Thank you, Madam Chairman.

And presumably, if this legislation is passed by the United States other countries would pass similar legislation.

Is that not correct?

Mr. FLIPSE. Yes. It is under discussion in most foreign countries with advanced technology.

Mr. DOWNING. Mr. Anderson.

Mr. ANDERSON. I have no questions.

Mr. DOWNING. Mr. Pritchard.

Mr. PRITCHARD. Well, I would like to ask the gentleman a couple of questions.

We are really talking about the possible risk here of about $500 million, roughly. We are talking about four or five rigs, and $400 million. This is not a small amount of money that the Government is backing up here.

You people would pay the insurance premiums to OPIC?

Mr. FLIPSE. Yes. We expect to. And we have calculated those into our economic projections.

Mr. PRITCHARD. I see.

Everything you have is unwritten, but I think it would involve a kind of a moral obligation when we start licensing operations like yours. You are in the Indian Ocean, say, and if there are problems there, the first thing you know, we are involved in a matter of security. These things could go, whether it is off the Coast of Africa or other countries that have developing nations.

Mr. FLIPSE. We are aware of this problem, sir, and have tried to, for our own sake, as well as the embarrassment of the Government,

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to avoid it. We have decided to work in the Pacific Ocean where deposits are richest and in that quadrant of the Pacific closest to our Nation and our island archipelagoes, and therefore, we would see no reason -fundamental economic reason, or location of this resource, to work in other than what we have originally defined as the American Ocean, between the United States and Hawaii.

We have dropped that connotation, but it is still our intention to work as close to home as is possible to avoid this problem. Mr. PRITCHARD. One other question.

You talked about Inco, which would be Canada coming in.
Has Russia done any work in this area?

Mr. FLIPSE. Russia has done a good deal of exploration. We have met them frequently at sea looking at the materials. To the best of our knowledge, by studying academic and technical scientific journals, they have not operated a prototype mining vessel, nor have they done any extensive processing of these materials, at pilot plant scale.

Mr. PRITCHARD. You said there have been some negogtiations with foreign countries. I take it none of these have been-well, they have all been Germany, or Western European countries?

Mr. FLIPSE. Germany and Japan, sir.

France, the Netherlands, yes, all Western European, except for Japan.

Mr. PRITCHARD. That is all I have.

Mr. DOWNING. Mr. Ginn.

Mr. GINN. Thank you, Mr. Chairman.

Mr. Flipse, H.R. 9 creates licensed blocks totaling 10,000 square kilometers for purposes of exploitation.

You indicated in your testimony that in the opinion of industry such a size is barely adequate for mining operations.

When you consider the investment, you might say companies such as yours will have involved, what would you say would be a more realistic size involvement?

Mr. FLIPSE. As we interpret the law, we would be licensed for exploration purposes or development purposes a 40,000 square kilometer block. We would be required to relinquish three-quarters of this, resulting in a 10,000 square kilometer block for exploitation purposes. We would dredge in this area not as you would mow your lawn, but on a more erratic path, avoiding outcroppings of rock where you could not work at all, and patches of low grade nodules in the area which you would intentionally avoid.

From the 10,000 square kilometers you would need all your technical expertise to recover 40 million tons of nodules. These are realistic numbers. We are preparing a technical paper which describes the reduction of the theoretical area multiplied by tons per square foor quantity.

We feel that the bill permits us, after we have developed and worked in one of the blocks, to also apply and work in another

block, if we have the money left to develop and work a second block! We feel this would be a normal outlet for the economic energies if the operation is successful, so we can live with an initial 10,000 square kilometer block. There might be relinquishment of this block, not at 40 years, but at 30 years, because it was getting harder and more uneconomical to mine. I think this is a normal procedure in land mines where there is a diminution of tenor of the ore body. Mr. GINN. Thank you, Mr. Chairman.

Mr. DOWNING. Mr. Breaux.

Mr. BREAUX. Thank you, Mr. Chairman.

Concerning the point that Mr. Ginn was raising, regarding the size of the block, as a point of information, I was under the impression that the size of the blocks would be 40,000 square kilometers.

Mr. FLIPSE. For exploration. Then there is a requirement to relinquish three-quarters of that block before commercial production begins and retain your license for exploitation of the 10,000 square kilometer portion that you elect as the most likely to succeed.

Mr. BREAUX. The portion would be at the option of the companies involved, would it not?

Mr. FLIPSE. There is a time period in which you must make the relinquishment. I think the purpose here is social as well as economic. The idea is that you have studied and issued information on all of the 40,000 square kilometers. The data on 30,000 of it becomes public information and other interested mining parties has this available.. The Government in general, and the Interior Department in particular, has always felt that this knowledge base is essential for effective resource management.

Mr. BREAUX. Your suggestion is that since you have gone to the time and expense of exploring the 40,000 kilometer square range, you are entitled to more than one-third of it?

Mr. FLIPSE. We are guided by current land practice, and felt to have this bill proceed in Congress it should be moderated in this area. We would be happy to have to relinquish half rather than three-quarters, but realistically, we feel the economics will support the exploration of the 40 and the retention of the best 10.

Mr. BREAUX. Let me ask you this. You talked about the vast amount of money being invested by your company if the bill is passed. My question is that if we do not pass the bill, does Tenneco have plans to postpone their operations indefinitely until the treaty is passed?

Mr. FLIPSE. I prevail upon my board of directors at length, until they shut me up, to proceed now.

So far they have not been willing to go ahead with the next $20 million allocation without legislation. The only other offers we have are from foreign interests to buy our technology. I believe that I should either advise Tenneco to dispose of or use this technology, rather than let it erode. To date Tenneco has not taken either action

so we are essentially holding, as we have been for the last 6 to 12 months.

Mr. BREAUX. Do you all have any anticipation of jobs and what it would mean to the economy if the bill is passed and you are ready to go into operation?

Mr. FLIPSE. Yes, sir.

We have presented those in previous testimony, but I will go over it generally.

Our operation contemplates employment of about 600 people; a lot of them in the operation of the metal wining plant. This is currently planned as a Texas Gulf area installation, so that it is adjacent to the petrochemical industry with which it exchanges reagents and so on. It provides for the operation of four major ships, three of them in transit, one of them in the mining operation, a logistics base in the Southern California area, where the crew boats would go and where the mining crews and ship operating crews will be exchanged on a monthly basis. The project will provide in the neighborhood of $140 million worth of metals annually sold at moderate prices that would be domestic instead of imported.

Mr. BREAUX. My final question is that I am certain you all have investigated private insurance on these matters, and

Mr. FLIPSE. We have been referred to the Lloyds underwriting group in our investigation of this subject, and they are currently talking to us.

We have not been able to get any indication of premium requirements. I think they have the same reluctance as we do-if we were operating under current law and no negotiations regarding future treaties were being held, there would be a measurable risk.

With an impending treaty in negotiation, availabilitiy of the resource becomes a risk that we cannot evaluate. We have it under consideration, and we will be back to the underwriters this year or next year. It is not a likely avenue for insurance of this type risk. Mr. BREAUX. Thank you, Mr. Chairman.

Mr. DOWNING. Mr. Studds.

Mr. STUDDS. Thank you, Mr. Chairman.

Mr. Flipse, I would not worry about those Russian ships. They are probably fishing.

Can you go over again, and I know you did before, and in response to Mr. Pritchard, what other nations, other than our own, currently possess this degree of technology and are prepared to proceed as we are?

Mr. FLIPSE. Our commercial activity and industrial work have brought us very close to the operators in West Germany.

They have organized a three company association, and they have converted a ship, and they are operating this ship out of Hawaii. They have joined us on joint voyages, ad we have done considerable economic and philosophic exchange of points of view regarding this type of international mining operation.