nomic consideration, the national security consideration should prevail.

I think we have seen this in other Continental Shelf legislation where certain sites have been set aside, perhaps certain fisheries set aside and the purpose of site specific, as stated in the legislation, is to have that governmental control as to the impacts on other areas other than economic.

Senator HATFIELD. Congressman Murphy, as you know, it is not so much a role of competitive use as it would be to unleash that restraint which now is, at least in part, felt by the military and restrain them from moving ahead on development of rockets and other such things that could be launched from the bottom of the

sea.

Because we've had that constraint, because the Law of the Sea Conference and other international interests in this use of the seabeds which we have been a party to the United Nations' resolution, recognize a worldwide interest in any nation that began to use the seabeds for this particular purpose.

All I am wondering is whether or not this would reduce that restraint we now have or would it have any impact at all on that present restraint?

Mr. MURPHY. I don't see any correlation between the question of that restraint on a weapons basis or a detection basis with the necessary economic impact of this bill.

Senator HATFIELD. You would not feel that once we embark upon this unilateral action for and in the name of domestic economic means, that we could not use in that same argument for military purposes?

Mr. MURPHY. I think if people want to streatch their imagination that far, they could. But I think probably the proof would be in the pudding when the free world saw the economic gain and maybe price stability from deep-ocean mining, it would convince people that there was not an overriding weapons consideration involved. Senator HATFIELD. Thank you very much.

Senator METCALF. Senator Melcher.

Senator MELCHER. Thank you, Mr. Chairman. I just arrived, John, and I am just reviewing your testimony. I am happy to see that you are in support of legislation along this line. Your leadership in the House and questions affecting our oceans is well documented and well recognized. I want to commend both you and our chairman and the other sponsors of this worthwhile legislation. Thank you.

Senator METCALF. Thank you very much, Congressman Murphy, for coming over here and giving us the benefit of your experience, not only on the committee but your leadership in attending the Law of the Sea Conferences.

I suppose if we don't pass this legislation, you will go on to Caracas, Philadelphia, Geneva, and so forth for time immemorial. So I hope we will put an end somewhere to your attendance at the Conferences and get some legislation passed.

Mr. MURPHY. I hope they keep them in New York, Senator, they can use the spilloff.

Senator METCALF. Thank you very much.

[The prepared statement of Congressman Murphy, and subsequent information follows:]

STATEMENT OF HON. JOHN M. MURPHY, A U.S. REPRESENTATIVE FROM THE STATE OF NEW YORK

I. INTRODUCTORY REMARKS: DEEP SEABED MINING

Mr. Chairman, I appreciate this opportunity to testify at these joint hearings on a subject of vital importance to the future of our Nation-access to the vast mineral wealth of the seas.

First, I would like to commend the chairman for his leadership on this issuemanifested not only by introducing S. 2053 and scheduling these hearings but also because of his strenuous efforts in the past to establish a legal framework within which American LED mining consortia could explore and develop deep ocean mining minerals.

As we all know, the exploitation of manganese nodules in the deep seabed has been the most diversive issue at the Third United Nations Law of the Sea Conference (LOS) and it is one of the most complex and significant policy decisions which we will make during the 95th Congress. First, I would like to look at the progress which the American mining industry has made in recent years.

Several United States companies, together with their foreign and domestic partners, have already spent well in excess of $150 million to develop ocean mining technology. The advances which they have made are impressive. The companies have identified nodule deposits which could provide satisfactory mine sites. They have largely settled the metallurgical problems of processing metals from nodules. They have developed mining systems which have progressed from the drawing board, computer, and laboratory stages to large scale at-sea experimentation.

The fact is that most good nodule deposits are found in the deepest parts of the ocean-in fifteen thousand feet of water and well beyond the continental shelves of any country. Although ocean mining has not been tested at a full commercial scale to date, the experiments that have been conducted indicate no technological impediment to mining-even at depths of 15,000 to 20,000 feet.

Clearly, Mr. Chairman, there is no longer any doubt about the technical and economic feasibility of ocean mining. The next issue which must be addressed, then, is whether the pursuit of these mineral nodules is in the national interest of the United States.

II. DEEP SEABED MINING AND THE AMERICAN NATIONAL INTEREST

The mineral nodules lying on the ocean floor contain quantities of nickel, copper, cobalt, and manganese. In determining whether the exploitation of these resources is important to the United States, we must look at four factors.

First, we should examine whether the minerals have strategic or commercial value in our economic system.

Second, we must look at the amount of such materials which we import from other nations.

Third, it is important to analyze the political stability of those countries from which we import.

Finally, the potential likelihood of the emergence of cartels, supply interruptions, or demand increases are important features of today's international trade environment.

Cobalt is an essential element in many alloys and superalloys. It is especially important in electrical and aerospace industries. Although nickel can be used in place of cobalt in certain applications, it can be substituted only with a loss of effectiveness.

Nickel is important to the economic welfare and security of the United States and is used most extensively as an alloy, particularly in the development and uses of the aerospace industry.

Copper has a wide range of applications and is of great commercial importance. Over half of it consumed in the United States is used in electrical applications with other uses in construction, industrial machinery, transportation and military supplies.

More than 90% of all manganese consumption is used in the steel industry. For every ton of steel produced, 13-20 pounds of manganese ore is consumed. It is used in the steel process to extract unwanted sulfur from the steel. Since the sulfur in fuels used during the steel making process is increasing annually because of the increased utilization of lower grade fossil fuels, it can be anticipated that the U.S.

need for manganese will continue to increase proportionately in the future. This metal is extremely critical to the United States considering the fact that there is no substitute for manganese in its major applications.

In 1975, the Stanford Research Institute conducted a study for the Department of Defense on fifteen of the most critical materials in terms of vulnerability from a national defense perspective. This study ranked manganese second, cobalt eleventh, and nickel fifteenth.

The next question we must ask is how dependent are we on foreign sources for critical minerals? Last year, we depended on other nations for over fifty percent of our use of 23 essential non-fuel minerals. With respect to the four minerals under discussion, Department of the Interior statistics indicate that the United States imports 71% of its nickel, 15% of its copper and almost 100% of its cobalt and manganese. This data should give us some clue as to our vulnerability to the whims and vagaries of other nations.

The sources of our foreign supplies cannot give us much comfort either.

For example, world production of cobalt is highly concentrated. In 1974, 83% of U.S. cobalt imports originated in Zaire. In 1976, the aggregate production of all countries other than southern African countries and Communist block countries amounted to 13,900 short tons or less than the total U.S. consumption in that year. The sources of the other minerals must also concern us. Our manganese imports come primarily from Gabon, Brazil, South Africa, Australia, and India.

Nickel is supplied mainly by Canada and the French territory of New Caledonia, although high quality Canadian nickel deposits are on the decline. U.S. nickel imports from developing countries have been increasing, and future world supplies will be substantially derived from such Third World countries as Indonesia, the Philippines, Colombia, the Dominican Republic and Cuba. The world's largest producers of copper are the United States, Chile, the Soviet Union, Canada, and Zambia, in that order. Over recent years, while the United States has maintained relative self-sufficiency in copper, the ore grades available domestically are declining and our import dependence is increased, reaching in 15% level last year. One need only read the daily newspapers to be aware of the uncertain stability of some of these nations-an uncertainty that cannot give us much faith in predicting future sources of supply of these essential minerals.

Mr. Chairman, we must recognize that the likelihood of the emergence of cartels to control the supply of these resources is subject to a great variety of opinions among economic theorists. Yet, it was these same theorists who did not predict the 1973 OPEC embargo and they continue to argue about a proper specification of the conditions under which such cartels can emerge. In the absence of a consensus, I respectfully suggest that the assumption of cartelization would be a rational and reasonable basis on which to structure future resource policies for the United States.

The fact is that predicting the future stability of individual producing nations is an inexact and dubious science. In this regard, it would be regrettable if this Nation did not learn a valuable lesson from the OPEC embargo.

However, leaving aside the concept of cartelization, the nature of supply concentrations of these minerals can lead to severe short-run shocks to our economy. Conditions exist in the world metal markets which indicate that there is a significant possibility that short-term cobalt and manganese supply interruptions can occur. In addition, price trends in these two metal markets exhibited increases above anything that could justifiably be attributable to increased production costs. Conditions such as excessive supply concentration can lead to effective producer country influence over commodity pricing.

Department of the Interior statistics show that cobalt prices have increased from $2.20 per pound in 1970 to $5.20 per pounds in 1977-an increase of 136 percent. Manganese prices have exhibited an even greater price increase since 1970-169 percent. The overall U.S. economy in that same period, as indicated by Department of Commerce GNP price data, experienced a 46% inflation rate.

This increase in price, coupled with growing U.S. demand, has resulted in a serious negative effect on the U.S. balance of payments attributed to the increase in manganese imports from $85 million in 1972 to $254 million in 1976. We are all aware of the recent concern, voiced by the administration, over the growing U.S. balance of payments deficit. In 1976, imports of these four metals contributed $1.5 billion to this deficit.

From this evidence, then, it should be clear that our national interest will be well served by the development and commercial recovery of deep seabed mineral nodules. It is the opinion of the House Merchant Marine and Fisheries Committee that such mining will provide a long-term stable supply of cobalt, copper, manganese, and nickel to the United States and the world. In the long-run, ocean mining will

constitute a major source of supply and will consequently tend to stabilize world metal prices.

Mr. Chairman, having established the economic and technical feasibility of deep seabed mining and the national interest premise on which congressional action must be based, we should now turn our attention to an assessment of this national interest in light of the international obligations which the United States has toward the rest of the world.

III. THE RELATIONSHIP BETWEEN THE U.N. LAW OF THE SEA CONFERENCE AND DOMESTIC OCEAN MINING LEGISLATION

On July 28, 1977, the Merchant Marine and Fisheries Committee favorably reported out H.R. 3350 which Congressman Breaux of Louisiana and I had introduced. The bill, which is very similar to S. 2053 which you are considering today, is designed to promote the orderly development of the hard mineral resources of the deep seabed. The significance of the action by the committee cannot be overstated. It is the first time that a full committee of the House has reported deep seabed mining legislation and, although there is a long way to go before the congressional process is completed, the committee's accomplishment on this matter is a clear manifestation of our impatience with the lack of progress we have observed in the U.N. Law of the Sea Conference.

Let me clarify that statement. It is not a lack of progress but rather the severe retrogression and the deterioration of the U.S. position in this vital negotiation and even the humiliation of the United States that leads me to believe that we in Congress can and must now move legislatively.

And I do mean humiliation.

In the words of Ambassador Elliott Richardson, who testified on July 27, 1977, before our committee: The United States was denied due process in New York during the spring 1977 LOS meeting; we should not go back to Geneva without it, and we don't even know if it is possible to get it.

Mr. Richardson further testified that the Evensen text was unacceptable to the United States prior to New York but he had hopes that the "worst features" could be "modified or remedied". Instead, he testified "the problem with the ICNT (ENGO secret text) now is that the worst features of the Evensen text (go) in the wrong direction, makes them even worse " and it "introduces wholly new provisions that are in themselves completely unacceptable".

He concluded that the Merchant Marine and Fisheries Committee should move deep seabed mining legislation. The total nature, effect and results of the debacle of the LOS conference for the United States has yet to be felt. But it has had the effect of moving the Congress and that may be the only good to come from this experience. From Caracus-to Geneva-to New York-the Third U.N. Law of the Sea Conference has been the scene of many controversial events, secret negotiations, bitter personality conflicts, and a continued unproductive dialogue between the Third World and industrialized nations. But, the one item which the conference has failed to produce is an acceptable treaty. As a matter of fact, the recently adjourned Sixth Session which was held in New York, took some major steps backwards in trying to develop a reasonable agreement on the control and operation of ocean mining in international waters.

A very brief look at some history of these developments would be helpful. In 1967, the United States and the Soviet Union decided that the international law of the sea, in effect for three centuries, needed some slight modification. Nations were claiming 12 mile offshore territorial waters instead of the three miles which we recognized as lawful.

In an act of statesmanship born from a sense of global responsibility we proposed that, rather than fighting off these 12 mile claims as we had every right to do, we would agree to them in a new treaty-if the rest of the world would recognize the legitimate rights of transit through such waters for ships.

The Third World, more clever than we imagined, responded to this proposal by significantly raising the stakes of the negotiations. They said: You can have your freedom of transit if you agree to everything else we want in the oceans.

First, they wanted 200 miles of exclusive jurisdiction off their coast. Second, they wanted total control of scientific research in the oceans. Third, they wanted the equivalent of sovereignty over the rest of the ocean's resources and a new international organization which, Fourth, they could control.

Perhaps, we should have walked away from the bargaining table at that point. However, again in a spirit of international cooperation, we decided to remain within the Law of the Sea Conference and to negotiate the details of a treaty.

The next few years of LOS horror stories failed to result in any progress on an ocean mining article. But such failure did have two major impacts. First, the continuing soap opera of LOS provided the U.S. executive branch, under Presidents Nixon and Ford, a rationale for asking the Congress to delay any serious consideration of unilateral deep seabed mining legislation. Unfortunately, as we all know, key members of Congress acceded to those requests.

Second, the possibility that an international agreement could be reached created an enormous sense of uncertainty in the ocean mining industry and most particularly in those institutions which provide large amounts of capital for high-risk ventures such as ocean mining. This uncertainty has led to severe problems with respect to the availability of risk capital and is one of the major reasons why comprehensive ocean mining legislation is absolutely essential for the U.S. to proceed with deep seabed mining.

I would like to take this opportunity to discuss in a little greater detail why the U.S. Congress must move forward now with comprehensive deep seabed mining legislation. There are two critically important reasons for proceeding as expeditiously as possible.

First, a legal framework must be established by legislation-a framework in which the industry can operate and the Government can administer.

With respect to the American mining industry, it is imperative that some degree of predictability about its future rights in the ocean be established. The time is fast approaching for American companies to make some tough decisions about new investments. In the next year they can be expected either to make a large financial commitment toward commercial recovery or to scrap the project altogether if it appears that no favorable ocean mining legislation is eminent.

Between now and the beginning of commercial recovery on the first few mine sites, the companies must acquire and commit more than $2.5 billion. To the extent that an LOS Treaty could terminate industry's rights under existing international law, prohibit mining activities, limit production, fix prices, require transfer to a new mining site, or raise costs prohibitively, lending institutions will not loan any substantial part of the risk capital needed to move toward commercial operations. The political risks involved in an international agreement must be addressed in legislation so that a reasonable secure investment climate will be created. Only within that climate will investment companies be willing to loan and mining companies be able to obtain the enormous amounts of capital required for deep ocean operations.

Conversely, the Government has virtually no control over the present exploratory activity of ocean mining companies. The State Department has confirmed the fact that the companies may continue to operate under customary international law within the concept of the freedom of the high seas. Consequently, there is no regulatory framework by which the U.S. may exercise any type of administrative or environmental control over high seas operations.

Therefore, it is imperative that a strong legal framework be established-a framework within which the industry may enjoy some degree of investment security and that Government may exercise its normal functions of regulation and administration.

The second reason that we need unilateral legislation-a reason which flows naturally from the creation of a strong legal framework-is to provide the U.S. Law of the Sea negotiating team a strong hand with which to bargain with the rest of the world to establish a reasonable and equitable international system of resource exploitation.

În contrast to those that claim that unilateral legislation will damage our negotiations at the Law of the Sea Conference, it is clear to me that it will, in fact, help expedite those international proceedings.

The delay in enacting a deep seabed mining bill has, I believe, mistakenly convinced other nations that the U.S. assigns a low priority to its seabed mining interests. This, in turn, has in fact generated more extreme Third World positions and impeded conciliation. These countries now require a strong incentive to bargaining in good faith. The beginning of ocean mining under U.S. legislation will place the burden on those nations which have thus far delayed the negotiations to try to get a "better deal" from the international community.

I say this with the full recognition that the administration is presently reconsidering U.S. participation in the LOS Conference. Ambassador Richardson was forced to announce his recommendation that such reconsideration occur because of the disastrous-the preposterous-conclusion to the New York session.

I want to make two comments in this regard. First, I believe Ambassador Richardson should be supported in his willingness to ask publicly the fundamental question of whether the United States can afford a new Law of the Sea Treaty given the