statement, however, the mining industry has seen no positive evidence of the establishment of the interim policy called for by the President. Our committee has met on many occasions with representatives of the various executive departments and their agencies in an effort to voice our concern about the failure of the administration to suggest or proceed with the establishment of an interim policy in the face of lagging international negotiations.

During our conversations with these officials we indicated our deep concern regarding the positions taken by the Inter-Agency Task Force Committee on the Law of the Sea which has ignored the necessity for interim arrangements and concentrates entirely on the negotiation of a final treaty.

We do not agree with the basic concept of the draft treaty as tabled by the U.S. delegation in Geneva. If the United Nations Seabeds Committee continues at its present slow rate of progress, it is unlikely that a treaty will be ratified in this decade, if ever, and certainly long after the immediate necessity for a legal regime has been reached.

Government inaction on an interim policy prompted the American Mining Congress to outline such an interim policy during earlier testimony to Congress. This interim policy is reflected in the bill which Congressman Downing introduced as H.R. 9 along with seven cosponsors, all from the Merchant Marine and Fisheries Committee.

The bill provides the Secretary of the Interior with the authority to promote the conservation and orderly development of the hard mineral resources of the deep seabed, pending adoption of an international regime. In the opinion of the U.S. ocean mining industry, the bill in its present form will provide adequate incentive to encourage U.S. nationals to actively prospect for, explore and exploit marine minerals.

The bill will provide for sufficient security of investment, security of tenure, financial protection against interference from others and control of the ocean mining activities of persons subject. to U.S. jurisdiction to meet both public and private objectives.

This control would not only provide these tangible benefits, but more important, it might establish a customary pattern of rules, regulations and practices that could be the basis for agreement with like-minded nations. It makes it possible to cooperate with reciprocating states, as that term is defined in the bill.

This bill does not impose any restrictions upon scientific research in any area or upon prospecting by any person of any portion of the deep seabed which is not subject to an outstanding license. Prospecting is defined as any activity conducted for the purpose of making geophysical or geochemical measurements, bottom sampling, or comparable activities so long as such operation is carried out in a manner that does not significantly alter the surface or subsurface of the deep seabed.

In the "hard minerals" industry it is customary, when we refer to the development of raw materials, to speak and think of three different and distinct stages-prospecting, exploring, and exploiting. As applied to the seabeds, these stages may be described as follows:

(a) Prospecting: This first stage is open to all persons on a nonexclusive basis for the purpose of making geophysical and geochemical measurements or bottom sampling so long as such prospecting is carried on in a manner that does not significantly alter the surface or subsurface of the seabed.

(b) Exploring: This second stage covers the intensive work in a specific area covered by an exclusive right which allows for the orderly evaluation and development of a mineral deposit;

(c) Exploiting: This third stage consists of the actual recovery of

the ore.

In the event a person is desirous of obtaining an exclusive right to explore, or exploit, the bill provides that the Secretary of the Interior shall issue licenses recognizing such rights, which shall be exclusive as against all persons subject to the jurisdiction of United States or any reciprocating state as that term is defined in the bill. Separate licenses would be issued to include those "hard minerals" at the surface of the deep seabed or located to a depth not exceeding 10 meters below the surface and to those "hard minerals" located more than 10 meters below the surface of the seabed.

The bill provides for surface blocks of not more than 40,000 square kilometers, during the exploration stage and 10,000 kilometers during the exploitation stage. It also provides for subsurface blocks of not more than 500 square kilometers during the exploration stage and 375 square kilometers during the exploitation stage. The necessity of these large blocks is peculiar to the hard mineral mining industry.

The geological depositional characteristics of an oil and gasfield differ greatly from those processes involved in the deposition of manganese nodules. The manganese nodule is a near surface phenomenon in which the concentrates do not extend far below the surface, thereby creating small quantities in small areas, whereas other minerals occur in large quantities for the same area.

As a result of this difference in geological character, the mining industry requires a large area during the exploration stage. During the exploration phase, however, the mineral industry can often relinquish larger tracts of land before entering into an exploitation stage. As soon as the mining industry enters into the exploitation stage, the ore body has been completely developed, a mining method has been developed and adequate reserves have been delineated allowing amortization of the investment.

H.R. 9 provides that the Secretary of the Interior shall issue licenses to the first qualified person who makes written application and tenders a fee for a specific portion of the land.

Within 14 days of the filing of an application, the Secretary shall and the applicant may notify an international registry clearinghouse of the filing of the application. The function of the international clearinghouse is to maintain records relating to the application, issuance, denial or transfer or termination of licenses. In effect, it is an agency by which the public may be placed on notice relative to activities under this bill.

H.R. 9 also provides that as a condition of every license issued the Secretary must impose requirements necessary to protect the environment.

The bill further provides that the licenses shall remain in force for 15 years and, if commercial recovery has been achieved within the 15-year period, such licenses shall remain in force so long as commercial recovery continues. During the 15-year period the bill provides for certain minimum annual expenditures to be made in the form of development work for each license block. Expenditures for onshore operation relative to facilities or equipment would be included within the minimum annual expenditures. Expenditures in any year in excess of the required minimum may be carried forward and credited to the expenditures required for later years.

H.R. 9 reflects the concept that any interim policy should prevent the undue acquisition of large contiguous blocks of the seabed which would be controlled and operated by one person, the United States or a reciprocating state. The bill discourages those who might be interested in the control of seabed blocks for speculative reasons. H.R. 9 encourages and requires the orderly development of the marine minerals blocks held under license.

The measure further provides for escalated minimum work requirements, increasing each year for blocks which are held under the license. As soon as commercial production is attained or ten years after the issuance of the license, the licensee is required to relinquish 75 percent of any block held under license.

It also provides for an escrow fund to be established for assistance to reciprocating developing nations, if Congress so directs.

The bill provides that all hard minerals recovered from the deep ocean seabed, under a license issued under the bill, will be treated as domestic production for purposes of the import and tax laws and regulations.

In conformity with the President's statement that all licenses issued during the interim period would be “* * * subject to the international regime to be agreed upon ***" and which regime, according to the statement, shall "*** include due protection for the integrity of investments made in the interim period * * *", H.R. 9 provides that the licenses issued would be subject to the international regime agreed to by the United States, provided that such regime recognizes and protects the exclusive right of each licensee to develop the licensed block for the the term of such license. Further, the United States. would fully reimburse the licensee for any loss of investment or increased cost of the licensee incurred within 40 years after issuance of the license due to the requirements or limitations imposed by the regime more burdensome than those of this bill.

The measure further provides that the United States would bear any payment of whatever kind that is required of the licensee under any international regime.

Upon reading portions of previous testimony presented during your hearings and further upon listening to various questions asked about section 10 of the bill, it appears the majority of the witnesses interpreted subsection (b) of section 10 as casualty insurance coverage for industry. This is not the case. Industry will carry casualty coverage on items that are insurable with private carriers.

The subject of subsection (b) of section 10 is to provide insurance coverage as a protection of the peaceful enjoyment of the exclusive rights granted when a license is issued.

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The provisions of the bill are only enforceable as against all persons subject to the jurisdiction of the United States or any reciprocating state.

The insurance protection covers interference by third parties who are not under the jurisdiction of the United States or a reciprocating state.

The insurance premiums should be an amount that is commensurate with the risk assumed.

The insurance programs should be self-liquidating.

There is no international law at, the present, that speaks directly to the recovery of manganese nodules from the deep ocean other than the "Law of Capture" and "freedom of the seas". Therefore, industry desired protection from third parties as described above for the interference with their exclusive rights, even though international law had not been violated.

The drafters of the bill were of the unanimous opinion that the lack of international law should be highlighted by the insertion of the parenthetical phrase into subsection (b).

We are not asking for a subsidy that is enjoyed by other industries in this area of the oceans. There are prior precedents relative to insurance of this type i.e., Export-Import Bank-OPIC.

The subject of insurance in the deep ocean mining will not go away even under the international regime or the provisional regime as suggested by the Inter-Agency Task Force Committee. Under the draft treaty, which was tabled by the United States in Geneva, article 73 provides for political risk insurance of the same type that we are discussing under section X of H.R. 9. The value of the minerals recovered and placed into the channels of world commerce will far exceed and overweigh the worry about this insurance matter.

There is sufficient expertise in this Government, both in the executive side and the legislative side to establish an insurance program that will be fair and equitable.

Again, we are not asking for a subsidy. We are willing to pay the premiums which, in our opinion, will be commensurate with the risk involved.

Under the draft treaty that was tabled by the U.S. delegation they provided for an insurance coverage. It stated as follows:

Any contracting party which authorizes activities prior to the time the seabeds treaty comes into force shall compensate its licensee for any investment losses resulting from application of the convention.

This is the same approach and concept that we have in section (a), subsection (a) of section 10.

The U.S. population is plus 200 million, approximately 6 percent of the world's population. However, we consume over one-third of the world's mineral output.

Mr. Chairman, at this point I would like to submit for the record if I may an article published by the American Mining Congress entitled "Developing Deficits in U.S. Primary Mineral Demands" which goes into detail on the problems involved in the importing of minerals.

Mr. DOWNING. Without objection, the committee will insert it into the record at this point.

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