STIMULATING THE EXPLORATION, PRODUCTION, AND CONSERVATION OF STRATEGIC AND CRITICAL ORES, METALS, AND MINERALS

MAY 31, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. ENGLE of California, from the Committee on Public Lands, submitted the following

REPORT

[To accompany H. R. 976]

The Committee on Public Lands, to whom was referred the bill (H. R. 976) to stimulate the exploration, and conservation of strategic and critical ores, metals, and minerals and for the establishment within the Department of the Interior of a Mine Incentive Payments Division, and for other purposes, having considered the same, report favorably thereon with amendments and recommend that the bill as amended do pass.

The amendments are as follows:

Strike out all after the enacting clause and insert in lieu thereof the following:

That this Act may be cited as the "National Minerals Act of 1949".

STATEMENT OF POLICY

SEC. 2. (a) It is the policy of the Congress that every effort be made to stimulate the maximum exploration, development, and production of strategic and critical metals and minerals by private enterprise to supply the industrial, military, and naval needs of the United States by providing for the conservation and development of these materials in order to decrease and prevent, wherever possible, a dangerous and costly dependence of the United States upon foreign nations for supplies of such materials. To this end it is the further policy of the Congress that every effort be made to stimulate, stabilize, and maintain a sound and active mining industry within the United States; to expand exploration for those ores and other mineral substances which are essential to the common defense and to encourage the commercial extraction and production of those ores and other mineral substances which are needed for the national security stock pile so as to enable marginal properties to resume operations, and newly discovered or developed properties to begin operations.

(b) "United States" when used in a geographical sense means the United States together with its Territories and possessions.

(c) It is the policy of the Congress that small-business enterprises be encouraged to make the greatest possible contribution toward achieving the objectives of this Act.

In order to carry out this policy

(1) the Department of the Interior, through its offices in Washington and in the field, shall provide small-business enterprises with full information concerning the provisions of this Act relating to, or of benefit to, such enterprises and concerning the activities of the various departments and agencies under this Act;

(2) in administering this Act, special provision shall be made for the expeditious handling of all requests, applications, or appeals from smallbusiness enterprises.

SEC. 3. (a) There is hereby created within the Department of the Interior a Mine Incentive Payments Division, hereinafter called the "Division", to be administered by the Secretary of the Interior through a Director.

(b) The administrative officers of the Division shall be the Director, suitably qualified in actual administrative and mining experience, and the Assistant Director. The salary of the Director shall be $15,000 per annum. In the absence of the Director his duties shall be performed by the Assistant Director.

(c) It shall be the duty of the Director, and, subject to the supervision and direction of the Secretary, he is hereby authorized and directed, (1) to perform the functions hereinafter specifically authorized, (2) to prescribe rules and regulations for carrying out the provisions of this Act in the simplest manner, and (3) so far as he deems practicable, use or establish field offices, situated at points convenient to the mining industry in carrying out the provisions of this Act.

(d) The Director may select, employ, and fix the compensation of such engineers and other experts as may be necessary to carry out the purposes of this Act without regard to the civil-service laws and the Classification Act of 1923 as amended and shall employ such other staff as he may deem necessary.

(e) All records of the Office of Premium Price Plan for Copper, Lead, and Zinc shall upon request by the Director be transferred and delivered to the Division.

SEC. 4. (a) To carry out the purposes of this Act, written contracts providing for production payments as prescribed by the Director shall be made with those producers whose operations require such payments on all ores, metals, and minerals determined so be strategic or critical, pursuant to section 2 (a), Public Law 520 (Seventy-ninth Congress, ch. 590, second session), and included in group 1-a of the Munitions Board list of strategic and critical materials, dated September 30, 1948, together with any minerals or metals that subsequently may be added thereto, and produced from ores, dumps, tailings, slag piles, or residues (excluding scrap materials), except that in the event that the Munitions Board shall find that further purchases of particular ores, metals, or minerals for national security stock-pile purposes are no longer necessary or will within one year of the date of finding cease to be necessary, then (1) if such finding is made within thirty days after the effective date of this Act, no payments shall be made under the authority of this Act with respect to such ores, metals, or minerals, and (2) if such finding is made more than thirty days after the effective date of this Act, no payments under the authority of this Act shall be made with respect to such ores, metals, or minerals, produced after one year from the date of such finding: Provided, That in the event any such findings are amended by the Munitions Board to the effect that purchases of such ores, metals, or minerals have again become necessary for national security stock-pile purposes the payment provisions of this Act shall again become applicable subject to the limitations of this paragraph.

All ores, concentrates, metals, and minerals on which payments are made shall meet minimum specifications determined by the Munitions Board for the national security stock pile.

(b) Production payments for each metal or mineral shall be an amount per unit in excess of market price or the equivalent thereof. Such payments shall not exceed the difference between the current market price and (1) in the case of those metals that were produced under the Premium Price Plan, an amount equal to the highest market price plus the highest production premiums received by domestic producers during the fiscal years ending June 30, 1942, to June 1946, inclusive, and (2) in the case of other ores, metals, and minerais an amount equal to the highest amount paid domestic producers for such ores, metals, and minerals during the fiscal years ending June 30, 1942, to June 30, 1946, inclusive, by the Reconstruction Finance Corporation or its subsidiaries or by other Government

departments or agencies, such amounts specified in clauses (1) and (2) hereof to be adjusted by the Director in proportion to the changes in the Bureau of Labor Statistics wholesale price index of all commodities (1926 equals 100) since such highest sums or amounts were first offered or paid: Provided, That the maximum production payment limitation for manganese ores shall be $1.40 per long ton unit of contained manganese for ores containing 35 per centum or more manganese, increased by 5 cents a unit of total contained manganese for each 1 per centum of manganese in excess of 35 per centum of contained manganese. Hereafter all maximum production payment limitations provided in this section shall be adjusted by the Director in proportion to each five-point change in the Bureau of Labor Statistics wholesale commodity price index of all commodities (1926 equals 100). These maximum limitations shall apply unless in the opinion of the Director with the approval of the Munitions Board special consideration is necessary for the production of a particular metal or mineral.

Production payments shall be made within the limitations defined in this Act so as to encourage development, production, and conservation and provide adequate allowances for depreciation, amortization, depletion, such development work as is normal and reasonably necessary and consistent with recognized mining practice, and shall include a reasonable profit to the producer based upon efficiency and upon the values of all commercially recoverable metals and minerals contained in the ores, excluding values of crushed rock or waste materials.

(c) At the discretion of the Director, production payments payable on the production of any mine may be withheld during such times as the Director may find any of the following conditions to exist: (1) The producer is utilizing his labor force in mining lower grade ores than is normal for the particular mine being worked, (2) the producer is attracting labor to his mine by paying wage scales or contract rates in excess of those normal in mining operations to his district, and (3) there has been no decrease in grade of ore and production payments have not resulted in an increase in the total output of strategic and critical ores, metals, or minerals in the local district.

(d) "Producer" means any person or persons or any legal entity or entities by whom or for whose account and interest exploration or production is to be, or is being, undertaken.

SEC. 5. (a) The Director may enter into written contracts providing for contributions by the United States for exploration projects for those ores, metals, or minerals on which production payments are payable under section 4 (a) hereof. Such contributions shall not exceed the following portion of the cost of such projects on an annual basis: Ninety per centum of the first $10,000; 80 per centum of the next $10,000; 70 per centum of the next $30,000; 60 per centum of the next $50,000; 50 per centum of the next $50,000; 40 per centum of the next $100,000; and 10 per centum of any amount in excess of $250,000: Provided, That contributions may be 50 per centum of cost in excess of $270,000 where the Director finds (i) the project is desirable for the purpose of this Act, and (ii) the applicant is unable to bear more than 50 per centum of such excess.

(b) Exploration payments shall be made periodically on the basis of proof of such payments by the producer for work performed: Provided, That advance payments may be made for exploration projects the annual cost of which does not exceed $150,000, in such amounts and on such terms as the Director deems appropriate, where the producer certifies the need for such advance payments as working capital. Advance payments received by operators shall not be commingled with other funds and shall be subject to post-audit.

(c) "Cost of exploration" means the costs directly attributable to exploration including rental or depreciation of equipment used in exploration, direct labor and the supervision thereof, and materials and supplies actually used in exploration less the salvage value thereof, but excluding capital outlays and royalties, but may include a proper proportion of general overhead and administrative expense. (d) Exploration payments shall be expended only in the search for new ore deposits or for extensions of known ore deposits.

(e) Any contract may be terminated for fraud and the applicant or producer shall be refused any benefits under this Act.

(f) In computing the amounts of production payments no allowance shall be made for royalties in excess of 10 per centum of the market price. It shall be a condition of the making of all production and exploration payments that the recipients thereof shall pay no royalties on production payments except with the approval of the Director and where the landowner shares in the expense of transportation, milling, and smelting of ores sufficiently to justify computation of royalty on total receipts of the producer.

SEC. 6. (a) In addition to the other powers and duties created by this Act, the Reconstruction Finance Corporation with the approval of the Director may enter into such contracts including the establishment of revolving funds as would aid in effectuating the policies of this Act.

(b) All ores, concentrates, metals, and minerals the production of which is dependent upon production payments as provided herein shall be purchased by the Reconstruction Finance Corporation. The Reconstruction Finance Corporation shall transfer such ores, metals, and minerals to the national security stock pile established pursuant to Public Law 520 (Seventy-ninth Congress, ch. 590, second session): Provided, That any producer may deliver an equivalent value in recoverable metal or mineral in form and grade satisfactory to the Reconstruction Finance Corporation and meeting specifications determined by the Munitions Board in lieu of the particular metal or mineral resulting from payments hereunder. (c) Each producer shall at all times have access to a complete file of all copies of all calculations and analyses and determinations used as a basis for assignment, revision, or denial of his individual production payment and exploration payment contracts, and shall be furnished a copy of each such analysis.

(d) Copies of all rules and regulations and changes therein shall be furnished to each producer registered with the Division and shall be published in the Federal Register.

(e) The Secretary shall make annual reports to Congress on the operations under this Act. Such reports shall include current and summary information detailing the activities and results obtained and anticipated pursuant to this Act, and such other pertinent information concerning the administration of this Act as will enable the Congress to evaluate its administration and the need for amendments and related legislation.

SEC. 7. (a) All disbursements for exploration and production payments as authorized by this Act shall be made by the Reconstruction Finance Corporation and shall not exceed $100,000,000 in any one year.

(b) The provisions of paragraph (a) of this section shall expire June 30, 1954: Provided, That no contract shall extend beyond said date.

(c) There is hereby authorized to be appropriated sums sufficient to carry out the provisions of this Act.

EXPLANATION OF THE BILL

The bill is intended to provide means of encouraging exploration for the ores of domestic critical and strategic minerals and metals and to stimulate production thereof in such quantities and of such specifications as are determined by the Munitions Board to be necessary for the national stock piles. It may, therefore, be considered as an important auxiliary to the stock-piling legislation already enacted by the Congress, which legislation does not seem to place sufficient emphasis upon production from domestic sources. For the purposes of the act "domestic" includes the United States together with its Territories and possessions.

Testimony before the committee shows that the Premium Price Plan for Copper, Lead, and Zinc operated from 1942 through June 30, 1946, and that it substantially encouraged production of these metals in the face of adverse conditions. Other means, also now discontinued, were employed to increase the war production of such strategics as manganese, mica, chrome, mercury, and tungsten, some of which involved bonuses and some of which involved price support. The pending bill places all minerals and metals determined to be strategic or critical, pursuant to section 2 (a), Public Law 520 (79th Cong., ch. 590, 2d sess.), and included in group 1-a of the Munitions Board list of critical and strategic materials, dated September 30, 1948, together with any minerals or metals that subsequently may be added thereto under an "incentive payments" system.

The language of the act gives wide latitude in the types of contracts that shall be made under the system. No single type of contract or