APPENDIX Leigh S. Ratiner Director for Ocean Resources on Behalf of the Interagency Task Force This appendix is designed to supplement Mr. Brower's report of this date on behalf of the Executive Branch on H.R. 9. In connection with the submission of its views on H.R. 9, the Administration has made a comprehensive, but as yet incomplete, review of its ocean mining resource policy and the relationship of that policy to the Law of the Sea Conference. In order to better create a framework for judging the merits of H.R. 9, we believe it is important to present relevant portions of such a review and to be fully responsive to the Committee's interest in this subject. Several events have occurred in the past several months which enable us now to state a more comprehensive view of H.R. 9. First, the United Nations General Assembly has fixed a schedule for a Law of the Sea Conference. We are hopeful that schedule will be met and we have planned our future. actions on the assumption that it will be met. Second, we have conducted consultations with those in United States industry who have an immediate and substantial interest in the commencement of deep ocean mining. This has been an important learning process for those of us in the Administration concerned with mineral resource development. We are, after all, considering the establishment of a fundamentally new metals industry based on untried technology and requiring 2 large amounts of capital. If this industry succeeds, it will be an important source of such primary metals as nickel, copper, manganese and cobalt which are now imported. Third, we have consulted with other nations interested in deep ocean mining, and have discussed the degree of encouragement they are giving or may give their industries pending a timely and successful conference. Seen from the point of view of an industrialized country, the quest for energy and mineral resources is of great importance. Oil, gas, nickel and copper are commodities so basic to the continuous functioning of our society as we know it that it would be difficult to describe the state of affairs which would exist in our society and in other similarly situated societies were these commodities to be in short supply or obtainable only at substantially higher prices. The Law of the Sea Conference gives us an opportunity to participate in the creation of a new legal order which would give greater assurance to the United States of the continuing availability of such seabed mineral resources. In the Conference, for example, we are prepared to agree that coastal states can exercise Virtually exclusive management jurisdiction over seabed mineral resources adjacent to their coasts in a wide area, if, among other things, they agree to international standards to protect the integrity of foreign investment in -3 that area, to avoid interference with other uses of the marine environment, to protect the ocean from pollution, to ensure some sharing of revenue from the area for international purposes, and to accept a procedure for peaceful and compulsory settlement of disputes. If they do agree, one can see that as the growth of the offshore oil industry accelerates, our sources of supply will become more diversified and our sense of security as to the availability of those supplies will be enhanced, although of course coastal states will determine whether, by whom and under what conditions such exploitation can take place. Without a Law of the Sea Conference, we might either lose the opportunity to gain stable and reliable investment conditions with respect to that oil or risk conflict and dispute in defense of our own juridical position as to the legal validity of other countries' claims to the continental margin. The area lying seaward of the continental margin, generally referred to as the deep seabed, is known to be rich in other mineral resources. For the moment very little is known about the subsurface potential of the deep seabed. With respect to the surface of the seabed, however, we know that extensive deposits of manganese nodules containing over 20 metallic elements are abundant. Principal metallic elements of interest are nickel and copper. Cobalt and manganese are also important components of manganese nodules, but are currently of less economic interest. According to the Department of the Interior's figures, the total cost of importing these four metals in 1970 was almost $600 million. In that year we imported 85.7 percent of our manganese consumption at a cost of nearly $66 million; 92 percent of our cobalt at a cost of $26.5 million; and the equivalent of 100 percent of our primary nickel consumption at a cost of $426.5 million. Our net imports of copper in 1970 equaled only 6 percent of our primary consumption at a cost of approximately $71 million. It is possible that copper imports may rise gradually as the grade of our domestic ores decreases in the future and the cost of exploiting them increases. American mining companies at present are considering production rates of about 1 to 3 million tons of manganese nodules per company per year. Based on our understanding of an average ore grade for mineable nodules which can be inferred from public statements by industry spokesmen, we can assume that potentially mineable nodules will contain at least 25 percent manganese, 1.25 percent nickel, 1 percent copper and 0.22 percent cobalt. On the basis of our present knowledge, it appears that in the early years after production begins there will be two 3 million tons per year production units and one 1 million ton per year production unit insofar as American industry is concerned. 97-898 O-73-3 -5 In order to illustrate the relationship which manganese nodule production will have to the U.S. demand for the constituent metals as well as the level of our imports we have selected 1975 as an arbitrary date for the figures which follow. It should be emphasized that 1975 is not the date we expect deep sea mining of this magnitude to occur. - If the three production units referred to above were recovering 100 percent of the metal in manganese nodules in fact, slightly less than 100 percent will be recovered nickel production would equal approximately 48 percent of projected U.S. primary nickel demand for 1975 and approximately 53 percent of our projected imports for 1975. Manganese would produce 12 percent of our estimated demand for 1975 and this would account for 12 percent of our imports. Copper would produce approximately 3 percent of our estimated demand for 1975 and this would account for approximately 41 percent of our projected imports. The situation with cobalt is substantially different. Deep sea production would equal 228 percent of our estimated demand and this would account for 296 percent of our projected imports in 1975. The economics of nickel marketing will largely determine the economic future of all new ocean mining ventures. Copper production from nodules will be an important source of revenue to the producing firm, or firms, but only a small addition to world copper production. Cobalt is an important strategic |