THE NATIONAL CRITICAL MATERIALS ACT OF 1984
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HEARINGS
BEFORE THE
SUBCOMMITTEE ON TRANSPORTATION,
AVIATION AND MATERIALS
OF THE
COMMITTEE ON
SCIENCE AND TECHNOLOGY
HOUSE OP REPRESENTATIVES
NINETY-NINTH CONGRESS
FIRST SESSION
ucY DEPOSITORY
OCTOBER 8, 10, 1985
[No. 65]
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HEARINGS
BEFORE THE
SUBCOMMITTEE ON TRANSPORTATION,
AVIATION AND MATERIALS
OF THE
COMMITTEE ON
SCIENCE AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
NINETY-NINTH CONGRESS
FIRST SESSION
..ji DEPOSlTOfi
OCTOBER 8, 10, 1985
[No. 65]
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Printed for the use of the
Committee on Science and Technology
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' U.S. GOVERNMENT PRINTING OFFICE
54-846 O WASHINGTON : 1986
Boston '^'Tfe'ic Libnsiry
Boston. MA 02116
COMMITTEE ON SCIENCE AND TECHNOLOGY
DON FUQUA,
ROBERT A, ROE, New Jersey
GEORGE E. BROWN, Jr., California
JAMES H. SCHEUER, New York
MARILYN LLOYD, Tennessee
TIMOTHY E. WIRTH, Colorado
DOUG WALGREN, Pennsylvania
DAN GLICKMAN, Kansas
ROBERT A. YOUNG, Missouri
HAROLD L. VOLKMER, Missouri
BILL NELSON, Florida
STAN LUNDINE, New York
RALPH M. HALL, Texas
DAVE McCURDY, Oklahoma
NORMAN Y. MINETA, California
MICHAEL A. ANDREWS, Texas
BUDDY MacKAY, Florida'*
TIM VALENTINE, North Carolina
HARRY M. REID, Nevada
ROBERT G. TORRICELLI, New Jersey
FREDERICK C. BOUCHER, Virginia
TERRY BRUCE, Illinois
RICHARD H. STAJ^i^GS, Idaho
BART GORDON, Tennessee
JAMES A. TRAFICANT, Jr., Ohio
Florida, Chairman
MANUEL LUJAN, Jr., New Mexico*
ROBERT S. WALKER, Pennsylvania
F. JAMES SENSENBRENNER, Jr.,
Wisconsin
CLAUDINE SCHNEIDER, Rhode Island
SHERWOOD L. BOEHLERT, New York
TOM LEWIS, Florida
DON RITTER, Pennsylvania
SID W. MORRISON, Washington
RON PACKARD, California
JAN MEYERS, Kansas
ROBERT C. SMITH, New Hampshire
PAUL B. HENRY, Michigan
HARRIS W. FAWELL, Illinois
WILLIAM W. COBEY, Jr., North Carolina
JOE BARTON, Texas
D. FRENCH SLAUGHTER, Jr., Virginia
DAVID S. MONSON, Utah
Harold P. Hanson, Executive Director
Robert C. Ketcham, General Counsel
Regina a. Davis, Chief Clerk
Joyce Gross Freiwald, Republican Staff Director
Subcommittee on Transportation, Aviation and Materials
GEORGE E.
DAN GLICKMAN, Kansas
HARRY M. REID, Nevada
BILL NELSON, Florida
BART GORDON, Tennessee
BROWN, Jr., California, Chairman
TOM LEWIS, Florida
SHERWOOD L. BOEHLERT, New York
RON PACKARD, California
•Ranking Republican Member.
"Serving on Committee on the Budget for 99th Congress.
(II)
CONTENTS
WITNESSES
October 8, 1985: Page
John P. McTague, Deputy Director, Office of Science and Technology
Policy, Executive Office of the President, Washington, DC 3
Robert N. Broadbent, Assistant Secretary for Water and Science, U.S.
Department of the Interior 13
Adm. William Mott, U.S. Navy, retired. Chairman, National Strategic
Materials and Minerals Program Advisory Committee 25
James A. Ford, president, Federation of Materials Societies, Washington,
DC 42
T S Ary, president. Minerals Exploration Division, Kerr-McGee Corp.;
and chairman. Minerals Availability Committee, American Mining
Congress 50
Emil A. Romagnoli, National Association of Manufacturers, Washington,
DC 63
October 10, 1985:
Hon. Frank Wisner, Deputy Assistant Secretary of State, Bureau of Afri-
can Affairs, U.S. Department of State, accompanied by Hon. Allan
Wendt, Deputy Assistant Secretary of State for Energy and Resources
Policy, Bureau of Economics and Business Affairs 106
Robert Horton, Director, Bureau of Mines, U.S. Department of the In-
terior 120
Robert D. Wilson, Director, Office of Strategic Resources, U.S. Depart-
ment of Commerce 166
Richard A. Maguire, Associate Director for National Preparedness Pro-
grams, Federal Emergency Management Agency 183
Lance N. Antrim, consultant to the Office of Technology Assessment,
U.S. Congress, accompanied by Wendell Fletcher, senior analyst. Indus-
try, Technology, and Employment Program, OTA 191
(in)
THE NATIONAL CRITICAL MATERIALS ACT OF
1984
TUESDAY, OCTOBER 8, 1985
House of Representatives, Committee on Science and
Technology, Subcommittee on Transportation,
Aviation and Materials,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:36 a.m., in room
2318, Rayburn House Office Building, Hon. George E. Brown, Jr.
(chairman of the subcommittee) presiding.
Mr. Brown. The subcommittee will come to order.
I think I ought to read my opening statement since we have not
had a good materials hearing in some time.
Today's hearing is the first of 2 days to consider national efforts
in critical materials. In particular, we will be looking closely at the
implementation of Title II of Public Law 98-373, the National Criti-
cal Materials Act of 1984. Today, we will look at broad materials
policy questions. On the second day, we will focus on the important
issue of critical materials in South Africa.
Congressional concern for critical materials goes back many
years. The oil embargo of the seventies made us all aware of
import vulnerabilities with other critical materials such as cobalt,
chromium, or manganese. More recently, we have seen the advent
of new, advanced materials which will determine in large part the
products and industries of the next several decades. Such materials
will be vital to the Nation's economic competitiveness as well as to
maintaining our strategic strength.
Recognizing this importance. Congress passed a number of laws,
including the 1984 Materials Act, to take specific steps to deal with
these matters. Unfortunately, despite a few sporadic though appar-
ently well-intentioned efforts, the executive branch in the past 5
years has failed in implementing these laws. For instance, though
the 1984 act was signed by President Reagan more than a year ago,
he has yet to appoint the three-member National Critical Materials
Council or to carry out any of the required programs considered
central to the act.
The Federal Government supports almost $1.5 billion in materi-
als R&D spread across 14 different agencies. This research is con-
sidered crucial to key Federal policies and programs, including de-
fense, energy, commerce, and transportation. For example, the
President's Science Advisor, Dr. Jay Ke3avorth, has suggested we
spend almost $1 billion to develop new leapfrog technologies to
make our ailing steel industries internationally competitive. In an-
(1)
other example, the success of the multibillion-dollar star wars initi-
ative depends heavily on developing new, key materials. There are
other examples as well.
By failing to implement the 1984 act, we have not adequately
harnessed the tremendous technological and scientific strength
these materials and their use represent. At the Federal level, we
have failed to set adequate goals and priorities as well as to set re-
sponsibilities for carrying out those goals and priorities. Our
mining and basic materials industries are in a ruinous decline with
the current economic and competitive atmosphere. Continuing
problems in South Africa underscore our import vulnerability for
critical materials.
Meanwhile, other nations such as Japan and West Germany im-
plement long-term research programs in advanced and basic mate-
rials to promote their industrial competitiveness and relieve their
own vulnerabilities. While not representing a general panacea, I
believe the 1984 act, if properly implemented, will go far in meet-
ing the problems and opportunities associated with critical materi-
als.
Today, we have a number of witnesses from the Federal Govern-
ment and the private sector. I hope that we can explore with them
these important policy matters and discuss what further steps need
to be taken to carry out the intent of this public law.
Now, we will call upon our distinguished ranking minority
member, Mr. Lewis, for any comments he may have.
Mr. Lewis. Thank you, Mr. Chairman.
As you know, the National Critical Materials Act of 1984 which
we will be addressing today received broad bipartisan support
when it was passed last year. Members on both sides of the aisle
recognized the importance of having a well thought out, compre-
hensive policy to deal with the myriad of issues in this area. These
issues cannot be considered in isolation. Management of the stock-
pile, for example, cannot be addressed without considering the
impact of research and technology programs directed at improved
processing, recycling, more efficient mining, or at the development
of substitute materials.
As you pointed out, Mr. Chairman, the R&D activities alone in-
volve 14 different Government agencies. Moreover, independent re-
search conducted in the private sector is also indirectly supported
through tax incentives. The broad range of issues involved in mate-
rials policy spans across at least 20 agencies and offices and no
Federal agency or entity is responsible for coordinating these ef-
forts to ensure that these programs are providing the maximum
possible synergism and are not resulting in costly duplication.
The importance of strategic materials to the economy and to the
national security of this Nation has been acknowledged but, unfor-
tunately, largely ignored for many years. This administration has
taken steps to address some of these critical issues, first, by at-
tempting to coordinate materials policy through the Cabinet Coun-
cil on Natural Resources and Environment and, more recently,
with the establishment of an advisory committee within the De-
partment of Interior and, also, the reorganization of Comat, the
Committee on Materials.
Unfortunately, these actions, though helpful and certainly well
intentioned, fail to provide the necessary coordination to tie all of
these activities together. I believe this lack of coordination poten-
tially wastes billions of taxpayers' dollars. But of even greater con-
cern to me, it hampers our efforts to effectively deal with our in-
creased dependence on foreign sources for our critical materials.
The Critical Materials Act of 1984 establishes an appropriate
framework for the development of an effective national materials
policy. I am disappointed that over a year after its enactment, it
has not been implemented. I hope that today we will hear that the
administration has begun steps to implement this important piece
of legislation.
Thank you, Mr. Chairman.
Mr. Brown. Thank you very much.
Now, we will call on our first witness. Dr. John P. McTague, who
is the Deputy Director of the Office of Science and Technology
Policy.
We welcome you here, Dr. McTague. We are not really nearly as
mad at you as we may sound sometimes, and we look forward to
cooperating closely with you wherever we can.
STATEMENT OF JOHN P. McTAGUE, DEPUTY DIRECTOR, OFFICE
OF SCIENCE AND TECHNOLOGY POLICY, EXECUTIVE OFFICE
OF THE PRESIDENT, WASHINGTON, DC
Dr. McTague. Thank you, Mr. Brown.
We are here today for a reason broader than that implicit in the
topic "Materials: National Policy and Management." We are here
today because we share an obligation to ensure that the Federal
Government adequately addresses its commitment to maintain a
national technological base strong enough to sustain any challenge,
foreign or domestic, military or economic.
This technology readiness transcends the boundaries between the
executive and legislative branches of our Government and has sev-
eral major components. First and most important are the human
resources. We simply must be able to attract, educate, and nurture
the best scientists and engineers in the world, regardless of field,
fostering a research and learning environment conducive both to
individual creativity and interdisciplinary interaction.
The singular and collective value of our scientific talent was
surely a lesson drawn from the Manhattan project whose success
derived from the joint efforts of physicists, mathematicians, chem-
ists, and engineers from exceedingly diverse disciplinary and geo-
graphic backgrounds.
Beyond that, several components that might come under the
rubric of technology base and infrastructure are equally essential.
Among them are manufacturing engineering excellence to produce
high quality products from whatever raw materials are available;
telecommunications resources to coordinate all national defense
and commercial efforts; a transportation system adequate to the
stress of a national emergency situation; and the science and tech-
nology knowledge base to undergird them all — manufacturing, tele-
communications, and transportation.
Within the executive branch of the Government, operational re-
sponsibility for these areas necessary is distributed across nearly
every department and agency. Within the Executive Office of the
President, the Office of Science and Technology Policy is responsi-
ble for assuring that overall Federal science and technology policy
adequately responds to national needs.
We are here today also, I am well aware, to talk about legisla-
tion, specifically, implementing Public Law 98-373, title II, the Na-
tional Critical Materials Act of 1984. I understand your concern.
We in OSTP take our legislative mandate very seriously. Contained
in title II of the National Science and Technology Policy, Organiza-
tion, and Priorities Act of 1976, it states, in part:
The office shall — seek to define coherent approaches for applying science and
technology to critical and emerging national and international problems and for
promoting coordination of the scientific and technological responsibilities and pro-
grams of the Federal departments and agencies.
Our frame of reference encompasses research and development
and training in various disciplines of science and engineering, in-
cluding manufacturing engineering, materials science, physics,
chemistry, computer science, aeronautics, telecommunications, and
advanced weapons, spanning agencies as vastly different from one
another as the National Institutes of Health is from the Depart-
ment of Commerce.
Effective coordination is the single most important aspect of
OSTP's mission. We achieve it by taking a broad overview, not be
regarding specific fields of disciplines in isolation. The current ad-
ministration places a high priority on science and technology as
evidenced by a very large increase in research and development
funding over the last 4 years. It recognizes the inestimable contri-
bution of science and technology to our Nation's well being. Yet,
even acknowledging the fluctuation of our national needs, it does
not prize any one field of science or technology more highly than
the others.
OSTP's existing challenge of coordinating various disciplines and
departments is formidable enough; I cannot imagine a scenario in
which a separate council were set up within the Executive Office of
the President to address each important area or any one of them
individually.
The Office of Science and Technology Policy recognizes the im-
portance of tapping the available resources of expert advice and
does so regularly in carrying out its advisory, oversight, and coordi-
nation responsibilities. We receive general policy guidance from
the White House Science Council, a distinguished body of scientists,
engineers, and administrators from industry and academe. We
often seek advice, both formally and informally, from the National
Academies of Science and Engineering. For instance, recently, they
performed studies of polymers and of composite materials for us.
The Federal Coordinating Council for Science, Engineering, and
Technology is our formal means of interagency coordination. A
major committee of the Council is the Committee on Materials,
Comat, which I chair. It has an executive committee whose mem-
bers represent the assistant secretary level of authority in the
major departments and agencies involved in materials, along with
several interagency committees in such important areas as ceram-
ics, rapid solidification, and composites. Its executive secretary, Dr.
Darrell Reneker, of the National Bureau of Standards has exten-
sive experience in research and administration of materials pro-
grams. He spends more than half of his time at OSTP working
solely on Comat matters.
By virtue of its organization and experience, OSTP is uniquely
qualified to ensure an appropriate, coordinated materials program
within the Federal Government and to view it in the context of
other Federal research and development activities. With these ca-
pabilities, is has observed effectively the spirit of the National Crit-
ical Materials Act.
Can and should we do better? Perhaps, and perhaps establishing
a National Critical Materials Council is one way to make the de-
sired improvements. However, it seems to me unwise to balkanize
the coordinating efforts of OSTP by creating separate councils for
every disciplinary constituent we serve. In an concerned, in other
words, that implementation of the Council will eclipse the other
equally vital areas of science and technology also properly under
the purview of OSTP and also properly considered essential compo-
nents of national security. What of the life sciences, telecommuni-
cations, physical sciences, engineering, et cetera? Are they consid-
ered less critical than materials?
Nevertheless, we are aware that Congress has spoken, and we
will implement the Council. The President has decided to announce
a Council, and he will do so.
The administration is striving to limit the growth of Govern-
ment. If one disciplinary council leads to others, as I am convinced
it will, the effect will be to increase the bureaucracy but, more im-
portant, it will decrease the overall cohesion we at OSTP have
worked so hard to form and inevitably create a claque of special
pleaders. Is a babble of dissonant voices preferable to a reasoned
prioritization?
Thank you, Mr. Chairman.
[The prepared statement of Dr. McTague follows:]
PROPOSED TESTIMONY OF DR. JOHN P. McTAGUE
DEPUTY DIRECTOR, OFFICE OF SCIENCE AND TECHNOLOGY POLICY
EXECUTIVE OFFICE OF THE PRESIDENT
BEFORE THE UNITED STATES HOUSE OF REPRESENTATIVES
COMMITTEE ON SCIENCE AND TECHNOLOGY
SUBCOMMITTEE ON TRANSPORTATION, AVIATION AND MATERIALS
HEARINGS ON MATERIALS: NATIONAL POLICY AND MANAGEMENT
XTOBER 8, 1985
Mr. Brown and members of the Subcommittee:
We are here today for a reason broader than that
implicit in the topic "materials: national policy and
Management." We are here today because we share an
obligation to ensure that the federal government adequately
fulfills its commitment to maintain a national
technological base strong enough to sustain any challenge,
foreign or domestic, military or economic.
This technology readiness transcends the boundaries
between the executive and legislative branches of our
government and has SEVERAL MAJOR COMPONENTS. FIRST AND
MOST IMPORTANT ARE THE HUMAN RESOURCES. WE SIMPLY MUST BE
ABLE TO ATTRACT, EDUCATE, AND NURTURE THE BEST SCIENTISTS
AND ENGINEERS IN THE WORLD, REGARDLESS OF F I ELD— FOSTERING
A RESEARCH AND LEARNING ENVIRONMENT CONDUCIVE BOTH TO
INDIVIDUAL CREATIVITY AND INTERDISCIPLINARY INTERACTION.
The SINGULAR AND COLLECTIVE VALUE OF OUR SCIENTIFIC TALENT
WAS SURELY A LESSON DRAWN FROM THE MANHATTAN PROJECT, WHOSE
SUCCESS DERIVED FROM THE JOINT EFFORTS OF PHYSICIStS,
MATHEMATICIANS, CHEMISTS, AND ENGINEERS FROM EXCEEDINGLY
DIVERSE DISCIPLINARY AND GEOGRAPHIC BACKGROUNDS.
Beyond thaT/ several components that might come under
the rubric of "technological base and infrastructure" are
equally essential/ chief among them:
MANUFACTURING ENGINEERING EXCELLENCE TO PRODUCE HIGH
QUALITY PRODUCTS FROM WHATEVER RAW MATERIALS ARE
AVAILABLE;
TELECOMMUNICATIONS RESOURCES TO COORDINATE ALL NATIONAL
DEFENSE AND COMMERCIAL EFFORTS;
A TRANSPORTATION SYSTEM ADEQUATE TO THE STRESS OF A
NATIONAL EMERGENCY SITUATION; AND
The SCIENCE and technology knowledge BASE TO UNDERGIRD
them all—manufacturing/ telecommunications/ and
transportation.
Within the executive branch of government/ operational
responsibility for these areas necessarily is distributed
across nearly every department and agency. with in the
Executive Office of the President/ the Office of Science
AND Technology Policy (OSTP) is responsible for assuring
THAT overall FEDERAL SCIENCE AND TECHNOLOGY POLICY
ADEQUATELY RESPONDS TO NATIONAL NEEDS.
We ARE HERE TODAY ALSO— I AM WELL AWARE—TO TALK ABOUT
LEGISLATION/ SPECIFICALLY IMPLEMENTING PUBLIC LAW 98-373/
Title IL The National Critical Materials Act of 1984. I
understand your concern. we in ostp take our legislative
mandate very seriously. contained in title ii of the
National Science and Technology Policy/ Organization/ and
Priorities Act of 1976/ it states, in part:
The Office shall . . . seek to define coherent
approaches for applying science and technology to
critical and emerging national and international
8
PROBLEMS AND FOR PROMOTING COORDINATION OF THF
SCIENTIFIC AND TECHNQL06 I CAI RFSPONS I B I L I T I ES AND
PROGRAMS OF THE FEDERAL DEPARTMENTS AND AGENCIES
t • •
Our FRAME OF REFERENCE ENCOMPASSES RESEARCH AND
DEVELOPMENT AND TRAINING IN VARIOUS DISCIPLINES OF SCIENCE
AND ENGINEERING/ INCLUDING MANUFACTURING ENGINEERING/
MATERIALS SCIENCE/ PHYSICS, CHEMISTRY/ COMPUTER SCIENCE/
AERONAUTICS/ TELECOMMUNICATIONS/ AND ADVANCED WEAPONS/
SPANNING AGENCIES AS VASTLY DIFFERENT FROM ONE ANOTHER AS
THE National Institutes of Health is from the Department of
Commerce.
Effective coordination is the single most important
aspect of OSTP's mission. We achieve it by taking a broad
OVERVIEW/ not by REGARDING SPECIFIC FIELDS OR DISCIPLINES
IN ISOLATION. The current Administration places a high
PRIORITY ON science AND TECHNOLOGY/ AS EVIDENCED BY A 30
PERCENT INCREASE IN RESEARCH AND DEVELOPMENT FUNDING OVER
THE LAST FOUR YEARS. IT RECOGNIZES THE INESTIMABLE
CONTRIBUTION OF SCIENCE AND TECHNOLOGY TO OUR NATION'S
WELL-BEING. YET EVEN ACKNOWLEDGING THE FLUCTUATION OF OUR
NATIONAL NEEDS/ IT DOES NOT PRIZE ANY ONE FIELD OF SCIENCE
MORE HIGHLY THAN THE OTHERS. OSTP'S EXISTING CHALLENGE OF
COORDINATING VARIOUS DISCIPLINES AND DEPARTMENTS IS
FORMIDABLE ENOUGH; I CANNOT IMAGINE A SCENARIO IN WHICH A
SEPARATE COUNCIL WERE SET UP WITHIN THE EXECUTIVE OFFICE OF
THE PRESIDENT TO ADDRESS EACH IMPORTANT ACTIVITY/ OR ANY
ONE OF THEM INDIVIDUALLY.
The Office of Science and Technology Policy recognizes
the importance of tapping the available resources of expert
advice and does so regularly in carrying out its advisory/
oversight/ and coordination responsibilities. we receive
general policy guidance from the imhite house science
council/ a distinguished body of scientists/ engineers/ and
administrators from industry and academe. we often seek
advice/ both formally and informally/ from the national
Academies of Science and Engineering. For instance/
recently they performed studies of polymers and of
composite materials for us.
The Federal Coordinating Council for Science/
Engineering and Technology (FCCSET) is our formal means of
interagency coordination. a major committee of the council
IS THE Committee on Materials (COMAT)/ which I chair. It
HAS AN Executive Committee/ whose members represent the
Assistant Secretary level of authority in the major
departments and agencies INVOLVED IN MATERIALS/ ALONG WITH
several interagency committees in such important areas as
ceramics/ rapid solidification/ and composites. its
Executive Secretary/ Dr. Darrell Reneker of the National
Bureau of Standards/ has extensive experience in research
and administration of materials programs. He SPENDS MORE
THAN HALF OF HIS TIME AT OSTP/ WORKING SOLELY ON COMAT
MATTERS.
10
By virtue of its organization and experience, OSTP is
uniquely qualified to ensure an appropriate, coordinated
materials program within the federal government/ and to
view it in the context of other federal research and
development activities. with these capabilities it has
observed effectively the spirit of the national critical
Materials Act. Can and should we do better? Perhaps / and
perhaps establishing a national critical materials council
is one way to make the desired improvements. however/ it
seems to me unwise to balkan i ze the coordinating efforts of
ostp by creating separate councils for every disciplinary
constituent we serve. i am concerned/ in other words/ that
implementation of the council will eclipse the other
equally vital areas of science and technology also properly
under the purview of ostp. what of the life sciences/
telecommunications/ physical sciences/ engineering/
etc. . . . are they considered less "critical" than
materials?
The Administration is striving to limit the growth of
government. if one disciplinary council leads to others/
as i am convinced it will/ the effect will be to increase
the bureaucracy/ but more important it will decrease the
overall cohesion we at ostp have worked so hard to form/
and inevitably create a claque of "special pleaders." is a
babble of dissonant voices preferable to a reasoned
prioritization?
####
11
Mr. Brown. Thank you, Dr. McTague.
Mr. Lewis, do you have any questions?
Mr. Lewis. Just a few, Mr. Chairman.
Dr. McTague, can you tell me why it has taken so long to estab-
lish the National Critical Materials Council?
Dr. McTague. Up until, I guess it was the past week — I am sorry
I am not current on facts because I have been out of the country
until last night — but my understanding was that there was not an
appropriation bill up until the most recent time period.
Mr. Lewis. There has been no appropriation for the Council at
all?
Dr. McTague. That is correct.
Mr. Lewis. That is what you tell me. You made some mention
right toward the end on the implementation of the Council, but I
would like to point out that OSTP may cover all science but mate-
rials issues encompass issues that are not science issues. Stockpil-
ing is an example. Can you tell me why we didn't have a budget for
the Council?
Dr. McTague. It wasn't appropriated, but it also was not request-
ed in the administration budget.
Mr. Lewis. Do you know why it wasn't requested?
Dr. McTague. I don't know precisely, but I would expect because
it was assumed that the major duties of the Council were in fact
being performed jointly by the Office of Science and Technology
Policy and the Department of Interior and that duplication was in-
volved.
Mr. Lewis. Was this brought out during the process of the trail
of the legislation through the various committees? Are you aware?
Dr. McTague. I am not aware that it was brought up in any
committees.
Mr. Lewis. I think it is interesting that Congress passed legisla-
tion and somebody decided it wasn't necessary to implement it or
even request an appropriation.
Dr. McTague. From my own perspective, it is not correct that it
was not desired to implement it. I personally have spent a signifi-
cant fraction of my time during the past year working on reorga-
nizing the interagency Committee on Materials precisely because I
consider it to be very important.
Mr. Lewis. Well, it must be very important. The former chair-
man of this subcommittee, Mr. Glickman from Kansas, and I sent a
letter asking why the Council had not been implemented and when
it would be. We are still waiting for an answer. It must have been
very important. And that is the same attitude, I guess, that
Dr. McTague. Was that letter sent to the Office of Science and
Technology Policy?
Mr. Lewis. It was sent to the proper office, yes, sir. And I guess
what I am concerned about is that that seems to be the same atti-
tude as to appointing the Council in the first place. If you assume
you don't need it, you don't appropriate money for it, so you don't
appoint the people, and you don't answer the communications.
I think we should be more concerned about what Congress does
and does not do as far as passing legislation. It just seems to me
that somebody over in the bureaucracy makes a decision that the
heck with that, we will just do what we want to do anyway. That
12
concerns me, particularly when we have a critical materials prob-
lem that could be facing us like we might encounter here over the
next 6 months to 1 year.
I have no further questions or comments, Mr. Chairman.
Mr. Brown. Thank you very much, Mr. Lewis.
I am not sure just what line of questioning would elicit the an-
swers we really need from you, Dr. McTague. You really expect us
to believe that OSTP is going to serve as the coordinator for each
of the critical areas of science and technology that pose problems
for the Nation today? You have listed many of them. Materials is
only one; automated manufacturing, telecommunications, and so
on.
The Congress has been seeking for years to have the develop-
ment of a coordinated focus for achieving adequate policy direction,
and we do that with legislation such as this act. We get nowhere. I
don't think the problem is with OSTP, but I am not sure just
where it is.
Would you, in a spirit of cooperation, tell us where you think it
is? Is it directly in the Office of the President?
Dr. McTague. The function of coordinating the various agency
activities that involve research and development, science and tech-
nology, clearly lies in the Office of Science and Technology Policy.
Mr. Brown. Well, you cited the language there, and we intended
to provide that that office should have that kind of coordinating
function, but at a level which would make sure that all of the vari-
ous aspects in science and technology so important to the national
welfare were adequately being considered. Now, in the last 5 years,
you have actually had a reduction in staff, and the office wasn't
doing the job before then. Now, all of a sudden, you think you are
going to start doing it.
Dr. McTague. I am not sure that it is a matter of numbers, but
in fact our staff size at present is approximately what it was 5
years ago when you take into account all of the detailees that we
use. Approximately half the staff of our office is on detail from
other agencies.
Mr. Brown. So, your staff has gone down 50 percent, but you are
making it up with detailees?
Dr. McTague. That is correct.
Mr. Brown. You are to be applauded for your ingenuity, if noth-
ing else.
Dr. McTague. There is also. Congressman, an advantage, I be-
lieve to having detailees present in the office for relatively limited
periods of time. They introduce a fresh perspective, and they often
have degrees of specialization that are needed only for short-time
periods. So, I think we are very well served by our detailees.
However, that isn't the real question, I don't think. The real
question is more is it possible to have effective coordination with-
out line authority. I think that is the real question.
We are a policy office. We are an office that gives advice and
that coordinates. We cannot order people to do things. We do not
have line authority. The only line authority that has overview over
all of the research and development activities of the Government
rests in the hands of the President. That happens to be the struc-
ture of our system.
13
In most of the industrialized countries, this rests in a ministry
science and technology.
Mr. Brown. Well, you have correctly set forth the nature of our
constitutional government. I think in large part effective coordina-
tion requires executive action. You can't do it in the Office of Sci-
ence and Technology Policy, but you can alert the Office of the
President, of which you are a part, to those critical areas which re-
quire more effective action than has been taking place. Hopefully,
that will be done in cooperation with the Congress which has iden-
tified the materials area as one of those areas.
You don't disagree with that; you just haven't done anything
about it.
Dr. McTague. We may or may not have done enough, but from
my own perspective, I wouldn't say that we have done nothing. If
we have done nothing, I have wasted a large fraction of my time
during the last year. Perhaps that is true.
With respect to the earlier question of authority versus coordi-
nating responsibility, I should also add that although we do not
have explicit line authority, we have a certain amount of moral or
immoral authority, depending on how you want to look at it, by
virtue of where our office rests and also by virtue of the close coop-
eration we have with the Office of Management and Budget in for-
mulating budgets and, in particular, in looking at budgets across
agencies. This is particularly important in the area of materials
which pervades almost every major agency and some minor agen-
cies of the Federal Government.
Mr. Brown. Well, much as I admire what you have done over
there. Dr. McTague, your response and your testimony this morn-
ing is unsatisfactory from my standpoint, but I don't blame you
personally for it.
Dr. McTague. As I stated in the testimony, the President has de-
cided to implement the Council.
Mr. Brown. That is very generous of him since we enacted a law
requiring him to do that 1 year ago, and you are not in a position
yet to tell us when he is going to do it, are you?
Dr. McTague. No; I am not, but I believe it is in the very short
term.
Mr. Brown. Then, I will hold my breath until we hear from him.
Thank you very much for your testimony.
Our next witness will be Dr. Robert Broadbent, Assistant Secre-
tary of the Interior for Water and Science.
Did I call you Dr. Broadbent?
Mr. Broadbent. Yes.
Mr. Brown. I won't apologize for that. You have an even more
distinguished role, however, than merely being a doctor.
Mr. Broadbent. Thank you very much.
Mr. Brown. We welcome you here this morning.
STATEMENT OF ROBERT N. BROADBENT, ASSISTANT SECRETARY
FOR WATER AND SCIENCE, U.S. DEPARTMENT OF THE INTERIOR
Mr. Broadbent. Mr. Chairman and members of the committee, it
is a distinct pleasure for me to be able to appear before you today
to describe the responsibilities and activities of the Department of
14
the Interior with respect to national materials policy and manage-
ment.
Mineral fuels and strategic mineral materials were of major con-
cern to the Department of the Interior even prior to World War I.
The quantities and qualities of materials to be stockpiled for na-
tional defense were initially determined by the Secretaries of War,
Navy, and Interior, acting through then Army and Navy Munitions
Boards. This specific responsibility was reaffirmed in the Strategic
and Critical Materials Stock Piling Act of 1946. The 1979 amend-
ments to that Act placed the responsibility on the President,
whereupon, by executive order, he assigned specific responsibilities
for material research mandated by section 8(a) of the act to the
Secretary of the Interior.
Secretary Hodel has made clear to us in the Interior Department
that one of his five major policy themes is, and I quote, "enhancing
America's ability to meet our energy and material needs with do-
mestic resources." This policy is consistent with concern with the
adequacy of the Nation's resources to sustain economic growth and
promote the national defense which has motivated the national sci-
entific and technological investigations of our bureaus and agencies
from the first days of their establishment.
We have restructured the program activities within the Bureau
of Mines to enhance its ability to collect information on mineral ac-
tivities worldwide and to assess supply implications for the United
States. The extent to which the free world's mineral resources may
be recovered in an economic fashion is being assessed in our Miner-
als Availability Program in the Bureau of Mines.
To improve materials data gathering. Interior entered into a
Memorandum of Understanding with the Department of State,
spelling out clearly the expected activities of State in this expanded
effort.
The Bureau of Mines also serves as the Department's lead in ma-
terials research. In addition, since joining the interdepartmental
process of reviewing multilateral development bank loan applica-
tions, the Department of the Interior has improved the economic
and technical understanding of proposed mineral developments and
their role in world markets.
In March 1983 the President established the exclusive economic
zone that augmented the area under U.S. economic control by
adding the vast living and nonliving resources contained in the 4
billion acres covered by the ocean waters adjacent to the shores of
the continental United States and its territories.
The Department of Interior, through the U.S. Geological Survey
and the Minerals Management Service, in cooperation with NOAA
of the U.S. Department of Commerce, is currently mapping and
identifying the resources in that vast ocean area. Specifically, we
are currently assessing the cobalt crust deposits near Hawaii and
complex polymetallic sulfide deposits in the Gorda Ridge area off
our west coast, sometimes in joint efforts with foreign researchers.
The Minerals Management Service is formulating leasing regula-
tions for the eventual mining of these and other deposits in the
EEZ.
Materials such as nickel, cobalt, chromium, manganese, tung-
sten, molybdenum, and platinum, just to name a few, were identi-
15
fled as highly important to our national security as long ago as
World War I. Ever since then, the U.S. Geological Survey and the
Bureau of Mines, working in cooperation with foreign governments
and companies in the private sector, have been cataloging world-
wide mineral deposits.
The Strategic and Critical Minerals Program of the U.S. Geologi-
cal Survey provides a continuing assessment of the Nation's endow-
ment of strategic minerals and a continuing analysis of the world's
mineral resources for the formulation of national minerals policy
and the identification of secure sources of minerals that are critical
to the security, industrial production, and economic well-being of
this country and that are vulnerable to disruption in supply.
The Bureau of Mines has long been engaged in developing meth-
ods of extracting minerals from lower grade ores, making new and
improved materials and alloys and also developing means of recy-
cling materials that would otherwise be lost as waste. For example,
when we look at the important uses of titanium, a metal with a
strength /weight advantage over aluminum of 3 to 1, a metal used
not only in defense and aerospace applications but also in critical
civilian applications, we remember that it was the Bureau of Mines
that did the research that elevated titanium from a laboratory cu-
riosity to a defense necessity.
Likewise, when the U.S. Navy needed zirconium for the nuclear
reactor from the first nuclear submarine, the Navy came to the
Bureau of Mines which made zirconium by essentially the same
process that the Bureau had developed for titanium.
With respect to the National Critical Materials Council, as indi-
cated by Dr. McTague, it is the intent of the administration to ap-
point the Council, and we expect it to be done in the very near
future. In this regard, the Department of Interior intends to work
very closely with the Council in carrying out its broad responsibil-
ities.
Let me say in closing that Secretary Hodel has asked me to
assure you of our complete cooperation in supplying any informa-
tion that you find helpful in the discharge of your responsibilities,
and I will endeavor at this time to answer any questions.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Broadbent follows:]
16
Statement of the Honorable Robert N. Broadbent
Assistant Secretary — Water and Science
U.S. Department of the Interior
Washington, D.C. 202A0
Before the Subcommittee on Transportation, Aviation and Materials
Committee on Science and Technology
U.S. House of Representatives
Washington, D.C. 20515
October 8, 1985
Mr. Chairman, Members of the Committee, Ladles and Gentlemen:
It Is a distinct pleasure for me to appear before you today to describe
the responsibilities and activities of the Department of the Interior with
respect to national materials policy and management. Our Department has been
In the forefront of Federal efforts to expand supplies of materials for the
economy and for the national security for more than one hundred years. Some
of our constituent bureaus have a still longer history.
Mineral fuels and strategic mineral materials were of major concern to
the Department even prior to World War I. The quantities and qualities of
materials to be stockpiled for national defense were initially determined by
the Secretaries of War, Navy, and the Interior acting through the then Army
and Navy Munitions Board. This specific responsibility was reaffirmed in
the Strategic and Critical Materials Stock Piling Act of 1946. The 1979
amendments to that Act placed the responsibility in the President, whereupon
by Executive Order 12155 he assigned specific responsibility for mineral
research mandated by Section 8(a) of the Act to the Secretary of the
Interior. Section 8(a), which reads as follows. Is very broad:
17
MATERIALS DEVELOPMENT AND RESEARCH
SEC. 8. (a)(1) The President shall make scientific, technologic,
and economic Investigations concerning the development, mining,
preparation, treatment, and utilization of ores and other
mineral substances that (A) are found in the United States,
or in its territories or possessions, (B) are essential to
the national defense. Industrial, and essential civilian needs
of the United States, and (C) are found in known domestic
sources in inadequate quantities or grades.
(2) Such investigations shall be carried out
in order to —
(A) determine and develop new domestic
sources of supply of such ores and
mineral substances;
(B) devise new methods for the treatment
and utilization of lower grade reserves
of such ores and mineral substances; and
(C) develop substitutes for such essential
ores and mineral products.
(3) Investigations under paragraph (1) may be carried
out on public lands, with the consent of the
owner, on privately owned lands for the purpose
of exploring and determining the extent and
quality of deposits of such minerals, the most
suitable methods of mining and beneflclating
such minerals, and the cost at which the minerals
or metals may be produced.
The generally accepted meaning of the term "materials" Includes
renewable materials such as timber and wood products; animal fibers such as
wool; vegetable fibers such as cotton; and the entire spectmm of mineral
materials. Including the mineral fuels. Petroleum and natural gas are not
only fuels but also the starting point for the petrochemicals that in turn
are the raw materials for America's plastics industry, which in the past
35 years has Increased production from a 1950 level of 1 million tons pet
year to a current level in excess of 22 million tons per year.
18
Over the years, the Department of the Interior has used Its authority
to encourage the wise use of our Nation's resources, while endeavoring to be
a good steward of the Nation's resources and mindful of the Injunction of the
public lands laws to facilitate multiple use and sustained yield. And the
Department Is conscious, not only of the needs of this generation, but also
those that will follow. Secretary Hodel has made clear to us In the Interior
Department that one of his five major policy themes Is "enhancing America's
ability to meet our energy and mineral needs with domestic resources." This
policy Is consistent with concern with the adequacy of the Nation's resources
to sustain economic growth and promote the national defense, which has
motivated the scientific and technological investigations of our bureaus and
agencies from the first days of their establishment.
We have restructured the program activities within the Bureau of Mines
to enhance its ability to collect information on mineral activities worldwide
and to assess supply implications for the United States. The extent to which
the free world's mineral resources may be recovered in an economic fashion is
being assessed in our Minerals Availability Program of the Bureau of Mines.
To improve materials data gathering. Interior entered into a Memorandum
of Understanding with the Department of State, spelling out clearly the
expected activities of State in this expanded effort.
19
The Bureau of Mines also serves as the Department's lead In materials
research. In addition, since joining the interdepartmental process of
reviewing multilateral development bank loan applications, the Department of
the Interior has improved the economic and technical understanding of
proposed mineral developments and their role in world markets.
On March 10, 1983, President Reagan established the Exclusive Economic
Zone that augmented the area under U.S. economic control by adding the vast
living and non-living resources contained in the 3.9 billion acres covered by
the ocean waters adjacent to the shores of the continental United States and
its territories. The Department of the Interior, through the U.S. Geological
Survey and the Minerals Management Service, and in cooperation with the
National Oceanic and Atmospheric Administration of the U.S. Department of
Commerce, is currently mapping and identifying the resources In that vast
ocean area. Specifically, we are currently assessing the cobalt crust
deposits near Hawaii and complex polymetalllc sulfide deposits In the Gorda
Ridge area off our West Coast, sometimes in Joint efforts with foreign
researchers. The Minerals Management Service is formulating leasing
regulations for the eventual mining of these and other deposits in the EEZ.
The Bureau of Land Management is involved in energy and mineral
resource assessment, including the development of the geology, energy and
mineral system. Mineral resource assessment constitutes one Input into the
20
Bureau's land use decisions. These decisions Include the validation of
mining claims, sale of saleable materials and leasing of on-shore Federal
energy and mineral resources.
Materials such as nickel, cobalt, chromium, manganese, tungsten,
molybdenum and platinum, just to name a few, were Identified as highly
Important to our national security as long ago as World War 1. Ever since
then, the U.S. Geological Survey and the Bureau of Mines, working In
cooperation with foreign governments and companies in the private sector,
have been cataloging worldwide mineral deposits. In response to President
Reagan's April 1982 National Materials and Minerals Program Plan, the
Geological Survey and the Bureau of Mines have, together with mineral-
resource agencies from Australia, Canada, West German, South Africa, and the
United Kingdom, formed the cooperative International Strategic Minerals
Inventory In order to more efficiently gather and report mineral-deposit
information.
The Strategic and Critical Minerals Program of the USGS j)irovlde8 a
continuing assessment of the Nation's endowment of strategic minerals and a
continuing analysis of world mineral resources, for the formulation of
national minerals policy and the identification of secure sources of minerals
that are critical to the security, industrial production, and economic
well-being of the country and that are vulnerable to disruptions in supply.
21
The program has three principal components: (1) commodity resource
information and analysis, which Includes acquiring, managing, and analyzing
commodity data, applying empirical and genetic mineral deposit models to the
analysis of commodity data, and developing grade and tonnage models of
mineral deposits; (2) regional resource information and analysis, which
includes developing resources analysis methodologies; and (3) basic research
in support of the program's commodity and regional resource Information and
analysis responsibilities.
The USGS also conducts research on the origin and the geological,
geochemical, and geophysical expression of mineral-deposit systems. The
objectives are to develop concepts and techniques to improve the capability
of identifying and evaluating mineral resources. To achieve these
objectives, field and laboratory studies are directed toward understanding
the processes by which mineral deposits form and developing new technology
and models to assess the mineral-resource potential in areas of concealed
deposits.
The Bureau of Mines has long been engaged in developing methods of
extracting minerals from lower grade ores, making new and Improved materials
and alloys, and also developing means of recycling materials that would
otherwise be lost as waste. For example, when we look at the Important uses
of titanium — a metal with a strength /weight advantage over aluminum of
3-to-l, a metal used not only in defense and aerospace applications but
22
also In critical civilian applications — we remember that It was the Bureau
of Mines that did the research that elevated titanium from a laboratory
curiosity to a defense necessity. Likewise, when the U.S. Navy needed
zirconium for the nuclear reactor from the first nuclear submarine, the
"Nautilus," the Navy came to the Bureau of Mines, which made zirconium by
essentially the same process that the Bureau had developed for titanium. In
subsequent years, these and other technologies were transferred by the Bureau
to the private sector, creating employment and establishing industries that
are now essential components of our defense industrial base. I note that Mr.
Robert C. Horton, the Director of the Bureau of Mines, has been asked to
testify before your Committee on October 10, and I have asked him to include
in his statement more detailed descriptions of the information collection
and analysis, mining and materials research, and mineral land evaluation
activities of the Bureau, the latter done in conjunction with the D.S.
Geological Survey.
With respect to the National Critical Materials Council established by
the National Critical Materials Act of 1984, the President has decided to
establish the Council and its membership will be announced shortly. The
fundamental purpose of the Council will be to coordinate materials policy and
programs among the various federal agencies. In this regard, the Department
of the Interior intends to work very closely with the Council In carrying out
its responsibilities.
Let me say in closing that Secretary Hodel asked me to assure you of
our complete cooperation in supplying any Information that you find helpful
in the discharge of your responsibilities, and I will endeavor at this time
to respond to such questions as your may wish to pose.
23
Mr. Brown. Thank you, Mr. Broadbent.
Mr. Lewis.
Mr. Lewis. Thank you, Mr. Chairman.
Mr. Broadbent, I just want to ask you the same question I asked
the previous witness. Can you tell us why it has taken so long to
appoint this Council?
Mr. Broadbent. As I looked at the Council and when we first
looked at it after its passage, I would think that probably — the
mandate of the Council is broad, as probably you people recognize
who were responsible for passing the bill. Just the very problem of
getting a consensus in the administration took a little time. I think
we have reached that consensus. We recognize the mandate that
was given to us by Congress, and we are moving ahead with the
appointment of the Council.
That is not a very satisfactory answer, but in my short 4 years in
Government, it seems like nothing much happens in 1 year.
Mr. Lewis. Well, I would think that your concern is with the in-
creasing domestic production, and this, of course, isn't ihe concern
of OSTP, so I would say this is a good reason for the Council.
Mr. Broadbent. Yes.
Mr. Lewis. That was one of the reasons why the Council was
formed.
Mr. Broadbent. The Department of the Interior consistently sup-
ported the formation of the Council.
Mr. Lewis. We are aware of that, and we appreciate that. What
do you see as the Department of the Interior's role with respect to
the Council?
Mr. Broadbent. Well, the biennial report, I think, to a large
part, is going to have to be dependent upon information that is
available in the Bureau of Mines. I think the information resources
that the Bureau of Mines has will be invaluable to us in providing
the technical work that would have to be done to meet the man-
date of the law.
I recognize that there is a scientific purpose to this law, but
there are also a lot of very practical issues that have to be dealt
with, in my opinion, under the Critical Materials Council. I would
suspect that the Department of the Interior, with the U.S. Geologi-
cal Survey, the Bureau of Land Management, the resource assess-
ment that is presently going on in much of our country as we ex-
amine what natural resources we have, the assessment work that
is particularly going on in the exclusive economic zone, our interest
in the stockpile, our technical interest in the stockpile, and the
stockpile goals would indicate to us that we would hope to be major
players in the Critical Materials Council.
Mr. Lewis. Were you briefed before you came to the subcommit-
tee hearing that we would be concerned about why the Critical Ma-
terials Council has not been formed?
Mr. Broadbent. Was I briefed yesterday or
Mr. Lewis. At any time.
Mr. Broadbent. Before this hearing, no, I haven't been briefed
by anybody but my own staff.
Mr. Lewis. Inasmuch as this series of hearings is on critical ma-
terials, it would seem that our concern for that Council appoint-
ments would be one. Do you have any idea — you say it will be ap-
24
pointed shortly. Everyone's definition of shortly is different. Would
you say by the end of the year? By April 1?
Mr. Broadbent. No, I would guess in the next couple of weeks.
Mr. Lewis. Thank you.
Mr. Broadbent. That is my estimate. I thought it would be in
the last couple of weeks, but
Mr. Lewis. I thought it would be in the last couple of months.
Thank you.
Thank you, Mr. Chairman.
Mr. Brown. Thank you, Mr. Lewis.
We recognize that you in the Department have been supporters
of the program embodied in this legislation, and we can't aim any
criticism at you for the delay in the appointment of the Council,
and we don't intend to do that. We raised a question with Dr.
McTague as to how he was so confident that OSTP could do every-
thing required by this act in view of their budgetary and staff prob-
lems. I have a little curiosity about the work being done in your
agency, particularly in the Bureau of Mines where I note that you
have suffered a very serious cut in budget. For 1986, you have re-
quested about a 30-percent cut in the funding for the Bureau of
Mines.
I wonder what this implies in terms of your ability to carry out
the admittedly important materials programs that you have de-
scribed in your own testimony.
Mr. Broadbent. Well, I don't think I could indicate to you that a
cut in budget won't impact part of our program. When we looked
at the priorities for the Bureau of Mines, we tried not to touch the
minerals availability/data gathering portions of the program be-
cause we felt that it was important to Congress as well as to many
agencies in the Government and outside industry as well.
Mr. Brown. You are not going to touch something politically
volatile like mine safety or something like that?
Mr. Broadbent. No; that is one that we took a crack at, yes, sir.
The main reductions in the Bureau of Mines budget were in re-
search and in the Minerals Institute Program. Candidly, we had to
look at our priorities, and when we looked at it, we made a judg-
ment that we would like to preserve these programs and maybe not
the rest. I mean, if there was going to be a budget, it has been obvi-
ous to me that maybe Congress has a different idea, and if they do,
we are going to implement it.
Mr. Brown. Well, you are correct. You have taken a lot of
money out of minerals research and I don't know that this commit-
tee will have too much of an impact on your budgetary process, but
we don't like that because we think research is very important.
Mr. Broadbent. I think some part of Science and Technology
recommended that that be put back in the Bureau of Mines pro-
gram for the 1986 budget.
Mr. Brown. Well, our concern with your research activities with
the general problems of critical materials and the need to plan well
in advance for substitute sources, alternative methods of meeting
needs, is not a new issue in this committee, as I am sure you know.
We have been concerned about it for at least 15 years that I know
about and maybe longer. We will continue to be concerned about it.
There is no easy or quick solution to it. It seems to be very frus-
25
trating sometimes to try to even get a coordinated approach to it,
but I hope that you are correct that we will see the appointment of
this Council in the very near future and that this can be the begin-
nings of a new approach which will help us to solve this problem.
I don't have any further questions of you, Mr. Broadbent.
Mr. Broadbent. Thank you very much, Mr. Chairman.
Mr. Brown. Thank you.
Our next witness is Adm. William Mott, U.S. Navy, retired,
chairman of the National Strategic Materials and Minerals Pro-
gram Advisory Committee.
We are very happy to have you here.
Admiral Mott. Thank you, Mr. Brown. I am happy to be here.
We had trouble with traffic driving up from Charlottesville this
morning, but
Mr. Brown. Well, you were too far away when you started. You
should have been closer. [Laughter.]
STATEMENT OF ADM. WILLIAM MOTT, U.S. NAVY, RETIRED,
CHAIRMAN, NATIONAL STRATEGIC MATERIALS AND MINERALS
PROGRAM ADVISORY COMMITTEE
Admiral Mott. As you said, Mr. Chairman, I have the honor to
be chairman of the National Strategic Materials and Minerals Pro-
gram Advisory Committee, a title so long that it is usually known
as the Mott Committee, because nobody can remember such a long
name. We as a committee are charged to make recommendations
to the Secretary of the Interior with respect to all aspects of his
responsibilities for strategic and critical minerals and materials.
The highly dedicated members of my committee — and I have one
behind me, T S Ary from Kerr-McGee who is going to represent
the American Mining Congress — span the whole spectrum, Mr.
Chairman, of expertise in the minerals and materials area. They
include a former member of this distinguished body. Congressman
Jim Santini; a former member of the other body, Senator Jack
Schmitt, who just happens to have a Ph.D. in geology; presidents of
minerals companies; academics; and major users of minerals like
TRW.
I am a former member of the intelligence community, and I do
my best to keep up with sources of mineral supply. I also served on
the Strategic Minerals Task Force for Governor Reagan in 1980.
When we were confronted with the problem of whether we
should endorse this legislation and recommend to the Secretary of
the Interior that he use his influence with the administration to
get it implemented, I appointed a task force headed by Congress-
man Santini and a number of our people on the committee who
had had experience in this area. They brought a recommendation
to the executive committee and then to the full committee and rec-
ommended to the Secretary of the Interior, Mr. Hodel, that he urge
the administration promptly to establish the National Critical Ma-
terials Council.
A copy of that recommendation is attached to my statement, Mr.
Chairman, as enclosure No. 1. I might just read a little bit from
that, because it tells the story, the background, of how we ap-
proached this problem.
26
We said that during the last two decades, a major shortcoming
common to all National Government decisions affecting materials
and minerals has been the virtual absence of Cabinet-level assess-
ment of the nationwide impact of such decisions. There has been a
longstanding need to coordinate Federal programs and policies that
relate to materials and minerals, including but not limited to, data,
trade, research, technology, materials preparedness, and stockpiles.
In spite of this need, the serious and substantial decline in U.S.
domestic nonfuel minerals industries is continuing unabated. At
the same time, there has been an increasing demand to strengthen
the U.S. military posture and readiness for possible major nonnu-
clear conflicts and the corresponding requirements for industrial
emergency preparedness.
Effective management and direction of materials and minerals
issues have been adversely affected by the long history of Govern-
ment reorganization from the early days of the National Security
Resources Board, which had a seat on the National Security Coun-
cil during the late 1940's and 1950's, through the Offices of Federal
Preparedness and Emergency Preparedness in the sixties and sev-
enties, to the recent history of a subdivision of the Federal Emer-
gency Management Agency during the past 6 years.
So, when we came down to the bottom line, we said the National
Critical Materials Act, signed by President Reagan, is the first Fed-
eral statute actually to mandate establishment of such a high-level
body in the Executive Office of the President. The committee
strongly urges that this legislation be fully implemented.
Finally, we went to some 32 national associations, institutes, soci-
eties, and organizations, and they joined us. That ranges from the
National Association of Manufacturers down to the — well, a whole
group. You can read it. I attached all of them who endorsed it.
So, we made the recommendations to the Secretary and I for-
warded these recommendations to the Secretary with an accompa-
nying memorandum. That memorandum is set forth in enclosure
No. 2 to my statement. It is my understanding, sir, that Secretary
Hodel has either forwarded our recommendation or made an inde-
pendent recommendation to the White House with his endorse-
ment for forming this Council.
It is worthy of note, Mr. Chairman, that whenever outside bodies
from industry look at the issue before this committee, they recom-
mend implementation of Public Law 98-373. We solicited the en-
dorsement of a great many of those outside bodies.
I am particularly gratified, sir, that the legislation under consid-
eration authorized the Council, when established, to established
such special advisory panels as it considers necessary, with each
panel consisting of representatives of industry, academia, and other
members of the private sector. That is exactly the character of our
25-member committee and was precisely the composition of the
1980 Critical Materials Task Force which included people like
Murray Weidenbaum, the Vice President's brother, Prescott Bush,
and a whole long list of people in minerals and in academia. Both
of them recommended an advisory body to the President in the
White House.
Not only did we recommend an advisory body in the White
House, but we recommended that an outside organization named
27
PRAB, the President's Resource Advisory Board, be set up to help
the Council. We said that the National Security Resources Board
should be reinstituted, but basically, the purpose of it was the same
as the purpose of this law.
This happens every time when you get an outside, across the
board group to take a look at this problem. In my opinion adminis-
tration policy should not issue, as, for instance, the proposed revi-
sion of the stockpile goals, absent consultation with experienced
outside advice. Industry affected should have a voice in the prepa-
ration of such policies before they are set in Presidential concrete.
Any President, regardless of party, would be better served by such
a procedure.
That concludes my statement, sir.
[The prepared statement of Admiral Mott follows:]
28
Mr. Chairman and members of the Subcommittee on Transportation
Aviation and Materials of the House Committee of Science and
Technology:
My name is William C. Mott R. Adm. USN (ret.)- I have the
honor to be Chairman of the National Strategic Materials and
Minerals Program Advisory Committee - sometimes known as
the Mott Committee because no one can remember such a long
name ! We are charged to make recommendations to the Secretary
of Interior with respect to all aspects of his responsibilities
for stratetic and critical minerals and materials.
The highly dedicated members of my committee span the
whole spectrum of expertise in the minerals and materials
area. They include a former member of this distinguished
body, Jim Santini, a former member of the other body, ex-
senator Jack Schmitt, who happens to have a PhD in Geology,
presidents of minerals companies, academics and major users
of minerals. I am a former member of the intelligence
community and do my best to keep up with sources of mineral
supply. I also served on the Strategic Minerals Task Force
for Governor Reagan in 1980.
On April 29, 1985 our committee recommended to the Secre-
tary of the Interior "that he urge the Administration promptly
to establish the National Critical Materials Council" A copy
of that recommendation is attached hereto as enclosure (1).
29
In a memorandum dated May 8, 1985, I forwarded that
recommendation to Secretary Hodel and my forwarding memo-
randum is set forth in enclosure (2). It is my understand-
ing that the Secretary forwarded our recommendation to the
White House with his endorsement. It is worthy of note Mr.
Chairman, that whenever outside bodies from industry look
at the issue before this Committee, they recommend implemen-
tation of PL 98-373. We solicited the endorsement of some
32 national associations, institutes, societies and organiza-
tions, a list of which is attached to enclosure (1).
I am particularly gratified that the legislation under
consideration authorized the Council to "establish such
special advisory panels as it considers necessary, with each
panel consisting of representatives of industry, academia
and other members of the private sector ..." That is
exactly the character of our 25 member Committee and was
precisely the composition of the 1980 critical minerals task
force, both of which recommended an advisory body to the
President in the White House. In my opinion, administration
policy should not issue, as has the proposed revision of
stock pile goals, absent consultation with experienced
outside advice. Industry affected, should have a voice in
the preparation of such policies before they are set in
presidential concrete. Any President would be better served
by such a procedure.
54-846 O - 86
30
United States Department of the Interior
OFFICE OF THE SECRETARY
WASHINGTON, D.C. 20240
MAY 8 1985
Flenorflndun
To:
Through:
From:
Secretary
(Sgd) Robert N. Broad^ent
Assistant Secretary - Water and Science \^\c,\' ', 198'.
Chairman, National Strategic Materials and
Minerals Progran Advisory Comittee (NSMPPAC)
(SGD) ADM VVJLLJAM c T/iC"
Subject Suf!«'iary: KS^'^'PAC Recommendations
Your Committee had a very useful and productive meeting in the
West. Great regret was expressed that you could not be with
us, but Rob Rroadbent attended all our sessions and recomnended
the format we should use in forwarding our reconmendatlons to
you. We shall follow It,
Our first recommendation relates to the National Critical
^iater1a^s Council, authorized by law (Title II of PL QK-373 of
July 31, 19P4) but not yet inplenented by the President, It
reads as follows:
The National Strategic Materials and Minerals
Program Advisory Connittee recomnends to the
Secretary that he urge the Adninistration
promptly to establish the National Critical
Materials Council, as called for by Title II
of PL 98-373, enacted July 31, IQR/J.
Every "outside" group which has considered what kind of over-
sight mechanism should be created within the executive branch
to coordinate strategic minerals priorities has recommended
some kind of body be established in the Executive Office of the
President, Thus, the 19R0 Strategic Minerals Task Force
reconmended to Governor Reagan the reestablishment of the
national Security Resources Board, Now, our Committee endorses
the creation of the National Critical Minerals Council for much
the same reasons as set forth in the 15R0 Task Force Report,
Minerals need an effective voice in the White House which they
do not now have. The background for our Committee's recom-
mendation is attached hereto and states the case for need quite
well .
Recommendations without implementation are like monkey coprolites
floating in Challenqer. There needs to be an effective Imple-
mentation policy, which only you can approve. If you endorse
the above recommendation, our Committee, on your signal, stands
31
ready to form a task force to follow through. We could, for
Instance, generate letters to the President from some 30 or 40
national associations such as the NAM and the U.S. Chamber.
Those of us who have friends close enough to have the
President's ear could persuade those friends to bend that ear
on behalf of the Council. We are conscious of the fact,
h'r. Secretary, that our Conraittee is advisory to you alone.
However, all our recomraendations are nade in a public forum
(by law) so the v/hole world knows what they are.
32
National Critical Materials Council
RECOMMENDATIUN
The National Strategic Materials and Minerals Program Advisory
Committee recommends to the Secretary that he urge the Administration
promptly to establish the National Critical Materials Council, as called
for by Title II of PL 98-373, enacted July 31, 1984.
Adopted 4-29-85
33
National Critical Materials Council
BACKGROUND
During the last two decades, a major shortcoming common to all National
government decisions affecting materials and minerals has been the virtual
absence of cabinet-level assessment of the nationwide impact of such decisions.
There has been a long-standing need to coordinate Federal programs and
policies that relate to materials and minerals, including (but not limited
to) data, trade, research, technology, materials preparedness, and stockpiles.
In spite of this need:
0 The serious and substantial decline in U.S. domestic non-fuel minerals
industries is continuing unabated;
0 At the same time, there has been an increase j demand to strengthen
the United States' military posture and readiness for possible major
non-nuclear conflict(s) and the corresponding requirements for
industrial emergency preparedness;
0 Effective management and direction of materials and minerals issues
have been adversely affected by the long history of Government
reorganization, from the early days of the National Security Resource
Board, which had a seat on the National Security Council during the
late 40' s and 50' s, through the Offices of Federal Preparedness and
Emergency Preparedness in the 60's and 70's, to the recent history
of a subdivision of the Federal Emergency Management Agency (FEMA)
during the past six years.
34
Materials and minerals constitute one of the three basic "builoifiy
blocks" of our National economy (the other two being energy and laoo'-).
This minerals "building block" consists of a complex set of components, eacn
of which is affected by its own equally complex set of external factors.
Perturbations in separate elements of the materials and minerals sector
may appear to have little significance from a macroeconomic perspective,
but may have major "multiplier" effects upon the U.S. economy. These
circumstances suggest that the President's 1982 National Materials and
Minerals Program Plan cannot be managed effectively and also be responsive
to urgent National needs without competent, wel 1 -focused, and continuous
review and guidance from a level in the Executive Branch able to oversee
all key elements of the program.
During the past year the Cabinet Council on Natural Resources and
Environment has resumed active interest in critical .naterials and minerals
issues, and has recently established an interagency working group to consider
them. In the Committee's opinion, this positive step, although encouraging,
is less likely to be able to provide the needed continuity and cohesiveness
of program oversight than is the organization called for by PL 98-373. In
part this derives from the extent of other major responsibilities of the
Cabinet Council (which has no statutory permanence).
There is a lawful mandate to appraise the materials activities of the
Federal government in the National Materials and Minerals Policy Research
and Development Act of 1980 (30 USC 1601). In addition, the need for
high-level input to the President on materials-related issues was stressed
by the 1980 Strategic Minerals Task Force of then-President-elect Reagan.
35
The National Critical Materials Act, signed by President Rej'j.in on
July 31, 1984 (as Title II of the Arctic Research Policy Act), is the first
Federal statute actually to mandate establishment of such a high-level body
in the Executive Office of the President. The Committee strongly urges that
this legislation be fully implemented. Title I of PL 98-373 (to establish
the Arctic Research Commission) has already been implemented by the
President's Executive Order in January 1985.
Finally, some 32 national associations, institutes, societies, and
organizations (see attached list) have joined in supporting the prompt
implementation of Title II of PL 98-373, creating the National Critical
Materials Council.
36
The following orjanizations advocate prompt action by the
Administration to implement Title II of P.L. 98-373, to create
the National Critical Materials Council:
Aerospace Industries Association
American Iron & Steel Institute
American Mining Congress
Association of American State Geologists
California Mining Association
Chamber of Commerce of the United States
Consulting Geologists Association
Electronic' Industries Association
Federated Materials Societies *
FerroAlloys Association
International Economic Policy Association
Machinery & Allied Products Institute
Motor Vehicles Manufacturers Association
National Association of Manufacturers
National Electronic Manufacturers Association
Cadmium Council, Inc.
Lead Industries Association, Inc.
Zinc Institute, Inc.
The Gold Institute
The Silver Institute
The Silver Users Association
* Members
American Association for Crystal Growth
The American Ceramic Society, Inc.
American Chemical Society
American Institute of Chemical Engineers
American Society of Mechanical Engineers
American Society for Metals
American Society for Testing and Materials
The Electrochemical Society, Inc.
Institute of Electrical & Electronic Engineers, Inc.
National Association of Corrosion Engineers
Observer Society: Electric Power Research Institute
0393M
37
Mr. Brown. Thank you very much, Admiral Mott.
Mr. Lewis, do you have any questions?
Mr. Lewis. Thank you, Mr. Chairman. Admiral Mott, your adviso-
ry committee was instituted to help the Secretary of the Interior
and other Cabinet-level officials to deal with the problems of criti-
cal materials and minerals.
Admiral Mott. Sir, only the Secretary of the Interior. When we
make a recommendation to the Secretary of the Interior, what he
does with it is up to him. We have recommended certain things
such as a Canadian and American exchange of notes with respect
to minerals which would be taken to the Secretary of State by the
Secretary of the Interior.
Mr. Lewis. OK. In your opinion, has the committee been success-
ful in addressing our Nation's mineral and materials needs?
Admiral Mott. Well, perhaps it doesn't become me to say. We
have worked for two Secretaries of the Interior, Judge Clark who
came down there from the National Security Council and who es-
tablished the committee — and let me say that my personal recep-
tion by both Secretaries has been very warm. Judge Clark would
always listen to me and say, Bill, this is what I want you to do, and
I would try to do it, and my committee would try to address it.
Secretary Hodel has been receptive to our recommendations as
well. We have made some 14 recommendations to the Secretary of
the Interior, of which this is one.
Mr. Lewis. Could you share with us what some of these recom-
mendations are that the committee made?
Admiral Mott. First of all, let me say that one of our first recom-
mendations was that there is a great lack of education about the
criticality of minerals in this country. One of the things, Mr. Lewis,
that started off this committee was contact I had with a man
named Freymoyer who is the purchasing agent for Carpenter Tech-
nology, a specialty steel company up in Pennsylvania.
This company was very successful. Specialty steel companies are
not in the same category as regular steel companies. They were
about to have a $400 million expansion in Reading, PA, which
meant a lot of jobs for Reading.
The board called him in, his board of directors, and said look, we
are not going to raise a dime of this $400 million until you get
down to southern Africa and find out whether you can get long-
range supplies of the minerals that we need to make specialty
steel, chromium and cobalt and so on. So, we left from the Univer-
sity of Pennsylvania platform to go to southern Africa to do just
that.
So, these minerals are terribly important to basic industries, and
we have made a recommendation to the Secretary that something
has to be done about reviving basic industry.
To go very briefly through the list, we have said there ought to
be a better public lands inventory than exists right now, and we
are working on that.
We need minerals education.
We recommended that there should be a national defense stock-
pile corporation to manage the stockpile which would take it out —
everybody who has looked at this problem, Mr. Lewis, including
the 1980 minerals task force, said we should depoliticize the stock-
38
pile. We thought the way to do it was to set up a national defense
stockpile corporation.
Then, we need to revive the joint United States-Canadian mobili-
zation planning with respect to minerals.
We feel that there ought to be a minerals section in the budget
which we are in the process of preparing.
We thought that access to foreign sources of strategic and critical
minerals was terribly important, and I put emphasis on the word
access with respect to southern Africa, and I say southern Africa
and not South Africa by itself, that the foreign policy of the United
States ought to be conducted in such a way as to guarantee access
to minerals, that sanctions have never worked and will not work in
that area.
We were concerned about the taxation of natural resources, and
we urged that the President weigh carefully the implications for
the future supply of strategic and critical materials of implement-
ing the Treasury Department's tax reform proposals.
We thought that all of these bodies like the International Mone-
tary Fund and the World Bank should not make loans, or the U.S.
representative on those lending bodies, should not approve loans
willy-nilly until he had been briefed on the effect that such loans
might have on domestic industry.
We noted that there was a defense industrial base erosion, that
the Government should develop an interagency mechanism for
identifying critical industrial sectors threatened with becoming en-
dangered and for recommending cost effective countermeasures.
The defense stockpile goal setting — we felt that they should be
established or changed only through a process that includes specif-
ic considerations of every one of the critical minerals.
We developed something called a strategic material policy deci-
sion tree which I think Mr. Maxwell has to show just where things
can go awry.
At our last meeting in San Francisco, we adopted a recommenda-
tion which, unfortunately, I don't have here in the Public Lands
Subcommittee. Again, it goes back to the fact that we think that
there are some weaknesses in the public lands identifications.
Mr. Lewis. Are you aware of any actions that have been taken to
implement your recommendations?
Admiral Mott. Yes, I am, sir. I met with the board of directors of
the Minerals Information Institute in Denver last week, and our
committee — they are concerned with education for the most part.
Our committee has some people on it who have foundations. One of
them gave $100,000 to that Minerals Information Institute to help
with the process of education about the importance of minerals in
high schools and elementary schools in this country.
There is an ongoing program in the State of Colorado and the
State of Arizona and in the State of California, Mr. Brown, started
by the Minerals Information Institute headquartered in Denver.
There has already been a meeting in the State Department be-
tween low level Canadian officials and American officials to have
another exchange of notes which would make the minerals of
Canada which are critical available to us in times of emergency.
We also recommended that the same thing ought to be explored
with Mexico. This might be a very good time to explore it with
39
Mexico, and I don't know exactly what the State Department is
doing about that.
All of our recommendations used to go to the Cabinet Council on
Resources, but that was abolished. We feel now that through the
good offices of Mr. Broadbent and the Secretary of the Interior, we
need to set up a line of communication to make sure that our rec-
ommendations are considered when forwarded by the Secretary of
the Interior. That would probably go through my friend, Ed Meese,
who is domestic counsel.
Mr. Lewis. Let me ask one final question. What do you see as the
future of your committee, and let me elaborate on that. Will it be a
permanent committee with a strong role in the Council, or will it
be dissolved once the Council is formed?
Admiral Mott. Mr. Lewis, that question really should be ad-
dressed to the Secretary of the Interior. Our 2-year term, which
can be renewed at the Secretary's pleasure, runs out, I think,
around May 1.
I have repeatedly offered to the Secretary the services of our
committee to be an advisory body to the Minerals Council should
the Minerals Council want to have a broadly based advisory com-
mittee such as ours. We are here to do a job for the Secretary of
the Interior, and if the Secretary of the Interior wants us to farm out, I
can form task forces from this broad-based committee to explore
whatever the Minerals Council would like to have explored by our
committee.
So, it is up to the Secretary of the Interior whether or not our
tenure is extended beyond May 1.
Mr. Lewis. Thank you. Admiral, and thank you for the testimo-
ny.
Thank you, Mr. Chairman.
Mr. Brown. Admiral Mott, could I ask you to amplify on just one
point in your statement where you say, in your opinion, adminis-
tration policy should not issue, as has the proposed revision of
stockpile goals, absent consultation with experienced outside
advice. May I presume that you feel that the proposed stockpile
goals are not well founded and were not based on consultation with
experienced outside advice?
Admiral Mott. Mr. Brown, when this issue came before Secre-
tary Clark, I asked him if he wanted our committee to get involved
in the stockpile goal planning. He said, "Yes, I do. Bill." I said,
"Well, then, you will have to call Bud McFarland and get a task
force which I will appoint cleared to look at the whole ball of wax."
That was done, and I appointed three of my very top people,
Simon Strauss — I am known as the ancient mariner, but he is even
a couple of months older than I am — but he has been in this since
the very beginning of stockpiles. He was vice chairman of the
board of ASARCO, the big mining combine. And I felt a user
should be involved. TRW is one of the big users of critical minerals
because they get into making the blades for jet engines and so on.
And Dr. Tim Stanley who is our economist-lawyer member of the
committee and the head of a think-tank that deals with minerals.
All I can say, sir, since I personally chose not to look at all of the
secret assumptions that went with this, but our committee came
back and blasted the proposed stockpile. Therefore, I passed a rec-
40
ommendation to the Secretary giving the committee's conclusions
after they had gone through the procedure we always go through.
We take it to the executive committee which is made up of the
chairmen of the four subcommittees. Then it goes to the full com-
mittee.
Now, I understand, Mr. Brown, that some of the assumptions
have been changed as a result of that.
However, to answer your question more directly, I have been told
or I have it on information and believe, maybe I had better say,
that not one single outside person from industry was consulted
during the whole preparation of the stockpile plan. When I went to
the White House to get a briefing on this early on, I suggested that
they should be and, apparently, they were not.
Again, I come back to the fact that this very distinguished group
in 1980 of which I was a member came up with virtually the same
recommendation. We said, hey, you have to get outside advice from
industry affected when you are fooling with something like this.
We had two or three people on there, one of whom had come in
from our Middle East task force and was familiar with operations
in that area. I don't think you could put a ruler between what we
recommended in 1980 and what the committee has come up with
and passed into law through the Congress.
Does that answer your question?
Mr. Brown. I think so. Admiral Mott. I very much appreciate
what you have said, and I want all of the material that you have
submitted to be included in the record as part of your testimony.
We are very grateful to you for appearing here this morning.
Admiral Mott. I will see to is that Paul (Maxwell)— I think Paul
already has all of our recommendations, do you not, Paul?
Mr. Brown. He better have. [Laughter.]
[The material referred to follows:]
41
National Strategic Materials and Minerals Program Advisory Cofnmittee
tNSHMPAC--the "Mott Committee.")
SUMMARY OF RECOMMENUATIUNS
(1) PUBLIC LANDS INVENTORY: That the U.S. establish a single land use data base
to determine the extent of public lands "withdrawn from multiple use . . .
to be completed no later than the end of fiscal year 1985."
(2) MINERALS EDUCATIUN: That the Secretary lend his support to greater
publ ic education on the "critical importance of minerals and materials in
our daily lives."
(3) NATIONAL DEFENSE STOCKPILE CORPORATION: That the Defense stockpile program
be administered by a Government corporation having no other responsibilities.
(4) JOINT U.S-CANADIAN MOBILIZATION PLANNING: That the Joint [U.S. - Canadian]
Industrial Mobilization Committee be reactivated; and that the feasibility
of similar joint planning with Mexico be explored.
(5) MINERALS SECTION IN THE "BUDGET-IN-BRIEF": That the President include in
his Budget in Brief a section describing the Government's strategic materials
programs anT'acti vities.
(6) ACCESS TO FOREIGN SOURCES OF STRATEGIC AND CRITICAL MI^NERALS: That U.S.
foreign policy "be pursued in such a way as to assure free market access to
strategic and critical materials . . . especially when tney are not available
from domestic sources."
(7) TAXATION OF NATURAL RESOURCES: That the President "weigh carefully the
implications for the future supply of strategic and critical materials" of
implementing the Treasury Department's November, 1984, tax reform proposal.
(8) LOANS THAT CONTRIBUTE TO MINERALS SUPPLY-DEMAND IMBALANCE: That the President
instruct his representatives to any multinational lending agency to vote
against any loan that would create or contribute to supply-demand imbalance
for any internationally traded strategic commodity.
(9) DEFENSE INDUSTRIAL BASE EROSION: That the Government develop an interagency
mechanism for identifying critical industrial sectors threatened with becoming
"endangered," and for recommending cost-effective countermeasures.
(10) DEFENSE STOCKPILE GOAL SETTING: That National Defense Stockpile commodity
goals be established or changed only through a process that includes specific
considerations detailed in the recommendation.
(11) STRATEGIC MATERIAL POLICY DECISION TREE: That the Government adopt a minerals
policy analysis scheme ("decision" or "logic tree") developed by the Committee.
(12) SURVIVAL OF BASIC INDUSTRIES: That the Secretary advocate vigorous use of
existing mechanisms and remedial actions to prevent further deterioration
of basic industries critical to the defense of the Nation.
(13) NATIONAL CRITICAL MATERIALS COUNCIL: That the Administration promptly establish
the National Critical Materials Council.
(I'*) DOMESTIC STRATEGIC MINERAL POTENTIAL: That the Bureau of Mines: 1) identify
and catalogue known domestic strategic mineral deposits, and 2) provide a
cost analysis of potential development of selected deposits using DPA
Title III incentives.
42
Admiral Mott. Thank you very much, Mr. Chairman.
Mr. Brown. Thank you, Admiral Mott.
I would like to call the next witnesses as a group to come to the
table: Dr. James Ford, president of the Federation of Materials So-
cieties; Mr. T S Ary, president of Minerals Exploration Division of
Kerr-McGee and chairman of the Minerals Availability Committee
of the American Mining Congress; and Mr. Emil Romagnoli.
If you gentlemen will indulge us, we will ask you to present your
statements in the order that I have called your names, and then we
will question you when you have all three finished presenting your
testimony. You may start, Dr. Ford.
STATEMENT OF JAMES A. FORD, PRESIDENT, FEDERATION OF
MATERIALS SOCIETIES, WASHINGTON, DC
Dr. Ford. Mr. Chairman and members of the subcommittee, I am
James A. Ford, president of the Federation of Materials Societies
[FMS]. The Federation is a consortium of 12 technical organizations
composed of scientists and engineers with expertise in the materi-
als and related areas such as processing, manufacturing, materials
recovery, and resource availability.
Our member societies are the American Society for Crystal
Growth, the American Ceramic Society, the American Chemical
Society, American Institute of Chemical Engineers, the American
Society of Mechanical Engineers, American Society for Metals,
ASTM, the Electrochemical Society, the Institute of Electrical and
Electronic Engineers, International Precious Metals Institute, the
International Society for Hybrid Microelectronics, and the National
Association of Corrosion Engineers.
FMS since its inception has held biennial conferences for the
purpose of addressing materials policy issues. The eighth such bien-
nial was held in 1984. All of these biennial conferences have con-
sistently pointed to the need for a coherent national materials
policy. Findings and recommendations of these conferences are re-
flected in the 1972 report of the President's Commission on Nation-
al Materials Policy, the National Materials and Minerals Policy
Research and Development Act of 1980, and the National Critical
Materials Act of 1984, and have been considered in many delibera-
tions of Congress such as your subcommittee here.
The materials community for too long has lamented the lack of a
comprehensive, coherent, defined national materials policy. The act
under consideration here today provides the focus for these con-
cerns.
A particular concern is the lack of comprehensive planning and
coordination among Federal research and development programs in
materials science and engineering and the consequent inability of
the Nation, Government with industry and academia, to put to-
gether a comprehensive materials R&D package with consequent
obvious implications related to international competitiveness.
For the past 3 years, FMS has prepared a summary of R&D in
materials science and engineering as a part of the analysis of the
R&D budgets coordinated by the American Association for the Ad-
vancement of Science. Our research into this and other areas has
revealed a lack of clear definition of policy goals across agencies
43
and a consequent opportunity for both duplication and omission of
effort in specific materials areas. Both these problems can be
linked to the absence of an effective focusing mechanism within
the Government.
Clearly, there is a need for such a focus on materials issues. The
National Critical Materials Council called for by Public Law 98-373
would provide this focus. The responsibilities of the Council are
clearly stated in the law and outline the parameters of the nation-
al materials policy advocated by the materials community.
These parameters include coordination of materials policies
across all Government agencies, coordination of such materials
policies with other Government policies — a very important broad
aspect of the requirement of the Council — definition of responsibil-
ities for materials policy within the Government, establishment of
priorities for R&D, critical materials issues such as the stockpile,
and other areas where materials affect the economic and strategic
health of the Nation.
FMS is particularly interested in the responsibility given the
Council to establish a national Federal program for advanced mate-
rials research and technology, including basic phenomena through
processing and manufacturing technology. Those latter words are
underlined for emphasis since they are the theme of our ninth bi-
ennial conference to be held next summer, and we would welcome
participation by the National Critical Materials Council and this
subcommittee in that conference next summer.
At this point, let me say that FMS is working with the recently
reorganized interagency Committee on Materials, COMAT. We ap-
plaud the new initiatives that Chairman John McTague is attempt-
ing to provide for that COMAT committee in the coordination of
Government R&D activities and his initiatives to provide involve-
ment of the private sector in setting those priorities.
However, we do not believe that COMAT will provide the means
for developing a true national materials policy. As one example,
COMAT reportedly does not intend to address national stockpile
issues. This is an area of great concern to the materials community
and one that we consider an integral part of any national materi-
als policy.
At the September 26 meeting of the FMS board, the trustees
voted to endorse the following recommendation originally passed
by the Mott committee. It is detailed in the testimony. I won't read
it, but it is one that you have discussed extensively with Admiral
Mott.
. . . That agencies charged with determining goals for the National Defense Stock-
pile observe a procedure that includes the following steps to ensure that the goals
provide an acceptable level of preparedness:
(1) Consulation with expert representatives from Government and private
sector materials and minerals producers, processors, end-users, and recyclers;
(2) Evaluation of needs on a commodity-by-commodity basis, with emphasis on
technological and not economic considerations;
(3) Consideration of industrial and essential civilian needs as well as military-
defense needs;
(4) Through Government-wide and private sector review of current and
emerging technology to enable sound judgments to be made about which stock-
piled materials are obsolete (and should, therefore, be disposed of) and which
materials — including those with little or no present commercial utility — should
be added to the stockpile for defense purposes;
44
(5) Broad review of the criteria used to determine stockpile goals to assure
that they include: (a) reasonable assumptions about the level of austerity that
Government should impose on its citizens to accommodate defense mobilization;
(b) proper regard for historical experience during prior mobilizations; (c) allow-
ance for the importance of maintaining civilian morale during a shift to a mobi-
lization economy; (d) strict adherence to all existing laws applicable to the Na-
tional Defense Stockpile.
In summary, we believe that many of the pieces of a national
materials policy currently exist, but what is mainly missing right
now is a coordinating body to put it all together at a high enough
level in the Government to demand the attention the issue de-
serves. The National Critical Materials Council would fill this
need.
Now, Mr. Chairman, I would like to address an agenda for the
Council. FMS would suggest the following items drawn from the re-
sults of workshops at our eighth biennial conference on national
materials policy held in September 1984.
First, development of an adequate manpower base to permit reli-
able predictions on the supply of and the demand for materials sci-
entists, engineers, technicians, and trained workers to meet future
materials requirements.
Second, evaluation and definition of the need for advanced facili-
ties and equipment in universities, Government laboratories, and
industry, and the development of a plan to satisfy current and
future requirements for state-of-the-art facilities and equipment for
processing, characterizing, and testing of materials.
Third, development of a central, critically evaluated materials
property data base to foster the much needed technology transfer
between the researchers and the engineers producing materials
property data and those in need of the data for design of new mate-
rials, products, and processes.
Fourth, stimulation within the materials science and engineering
community of more attention to advanced synthesis of materials.
Fifth, and I am sure I will lose count in a minute here — encour-
aging establishment of new centers to integrate materials science
and engineering with the design, production, and marketing of
products — the technology transfer issue.
Promoting effective and efficient management of the stockpile.
Analysis and recommendations to Government regulatory agen-
cies on barriers to commercialization of materials technologies.
Spearheading a strong management, labor, and government corn-
mitment to improving productivity, possibly including sponsorship
of a prestigious national award for productivity.
Encouraging development of a quality awareness program across
U.S. industries.
Advising Congress and the administration on tax and other poli-
cies designed to encourage investment in the nation's industrial
base as well as encouraging leapfrog technologies.
Providing a focus for establishment of the industry university
centers called for in the Stevenson-Wydler Act.
Focusing attention on the fact that a widespread tendency
toward overspecialization in engineering, research, corporate orga-
nization, and Government support for research and education has
resulted in a shortage of people having both a strong technical
45
background and strong management skills to ensure that materials
and manufacturing based industry will increase competitiveness in
world markets.
Last, encouraging increased involvement in education and train-
ing at universities by the mission agencies with emphasis on mate-
rials technologies important to both defense and to civilian indus-
trial applications.
Mr. Chairman, we strongly urge the prompt and complete imple-
mentation of Public Law 98-373. We have given suggestions for an
ambitious but by no means all inclusive agenda for the National
Critical Materials Council.
The materials community does not expect nor want the Council
as a Government body to attack this agenda on its own. We stand
ready to assist in forging the kind of Government, industry, univer-
sity, and public alliance that is so urgently needed if the United
States is finally going to have a national materials policy which
will help it to optimize our contributions to national security, in-
dustrial competitiveness, national technical leadership, and em-
ployment, and quality of life for all citizens.
Thank you.
[The prepared statement of Dr. Ford follows:]
46
STATEMENT OF JAMES A. FORD
PRESIDENT, FEDERATION OF MATERIALS SOCIETIES
BEFORE THE U.S. HOUSE
SUBCOMMITTEE ON TRANSPORTATION, AVIATION AND MATERIALS
OCTOBER 8, 1985
Mr. Chairman and members of the Subcommittee, I am James A. Ford, President
of the Federation of Materials Societies (FMS). The Federation is a consortium
of twelve technical organizations composed of scientists and engineers with expertise
in the materials and related areas such as processing, manufacturing, recovery
and resource availability. Our member societies are the American Association
for Crystal Growth, The American Ceramic Society, American Chemical Society,
American Institute of Chemical Engineers, American Society of Mechanical
Engineers, American Society for Metals, ASTM, The Electrochemical Society,
Institute of Electrical and Electronic Engineers, International Precious Metals
Institute, International Society for Hybrid Microelectronics, and National Association
of Corrosion Engineers. Statements issued by FMS do not purport to speak for
the individual member societies.
FMS has, since its inception, held biennial conferences for the purpose of
addressing materials policy issues. The 8th Biennial was held in 1984. These
biennial conferences have consistently pointed to the need for a coherent national
materials policy. Findings and recommendations of these conferences are reflected
in the 1972 report of the President's Commission on National Materials Policy,
the National Materials and Minerals Policy, Research and Development Act of
1980, the National Critical Materials Act of 1984, and in many deliberations of
Congress.
The materials community for too long has lamented the lack of a comprehensive,
coherent, defined national materials policy. The Act under consideration here
today provides the focus for these concerns. A particular concern is the lack of
comprehensive planning and coordination among federal research and development
programs in materials science and engineering, and the consequent inability of
the nation — government with industry and academia — to put together a
comprehensive materials R<5cD package, with obvious implications related to
international competitiveness. For the past three years, FMS has prepared a
47
summary of "R&D in Materials Science and Engineering" as part of the analysis
of R&D budgets coordinated by the American Association for the Advancement
of Science. Our research into this and other areas has revealed a lack of clear
definition of policy goals across agencies, and a consequent opportunity for both
duplication and omission of effort in specific materials areas. Both these problems
can be linked to the absence of an effective focusing mechanism within the
government.
Clearly, there is a need for such a focus on materials issues. The National
Critical Materials Council called for by PL 98-373 would provide this focus. The
responsibilities of the Council are clearly stated in the law, and outline the
parameters of the national materials policy advocated by the materials community.
These parameters include coordination of materials policies across all government
agencies; coordination of such materials policies with other government policies;
definition of responsibilities for materials policy within the government;
establishment of priorities for R&D; critical materials issues such as the stockpile;
and other areas where materials affect the economic and strategic health of the
nation. FMS is particularly interested in the responsibility given the Council to
establish a national Federal program for advanced materials research and technology,
including basic phenomena through processing and manufacturing technology. This
is the theme of our 9th Biennial Conference, to be held August 4-7, 1986, and we
welcome participation by both the Council and this Subcommittee in that conference.
At this point let me say that FMS is working with the recently reorganized
interagency Committee on Materials (COMAT). We applaud the new initiatives
of COMAT Chairman John McTague in attempting to provide coordination of
government R&D activities, and to provide involvement of the private sector in
setting priorities for such activities. However, we do not believe that COMAT
wiU provide the means for developing a true national materials policy. As just
one example, COMAT reportedly does not intend to address national stockpile issues.
This is an area of great concern to the materials community, and one that we
consider an integral part of any national materials policy. At the September 26
meeting of the FMS Board, the Trustees voted to endorse the following
recommendation originally passed by the National Strategic Materials and Minerals
Program Advisory Committee:
"...that agencies charged with determining goals for the National Defense
Stockpile observe a procedure that includes the following steps to ensure that
the goals provide an acceptable level of preparedness:
48
(1) consultation with expert representatives from Government and private
sector materials and minerals producers, processors, end-users, and
recyclers;
(2) evaluation of needs on a commodity-by-commodity basis, with emphasis
on technological and not economic considerations;
(3) consideration of industrial and essential civilian needs as well as
military-defense needs;
(4) through Government-wide and private sector review of current and
emerging technology to enable sound judgments to be made about which
stockpiled materials are obsolete (and should, therefore, be disposed
of) and which materials — including those with little or no present
commercial utility — should be added to the stockpile for defense
purposes;
(5) broad review of the criteria used to determine stockpile goals to assure
that they include: (a) reasonable assumptions about the level of austerity
that Government should impose on its citizens to accommodate defense
mobilization; (b) proper regard for historical experience during prior
mobilizations; (c) allowance for the importance of maintaining civilian
morale during a shift to a mobilization economy; (d) strict adherence
to all existing laws applicable to the National Defense Stockpile."
In summary, we believe that many of the pieces of a national materials policy
currently exist, but what is mainly missing right now is a coordinating body to put
it all together at a high enough level in the government to demand the attention
the issue deserves. The National Critical Materials Council would fill this need.
Now I would like to address an agenda for the Council. FMS would suggest
the following, drawn from the results of the workshops at our 8th Biennial Conference
on National Materials Policy held in September 1984:
• Development of an adequate manpower data base to permit reliable
predictions on the supply of and demand for materials scientists,
engineers, technicians and trained workers to meet future materials
requirements.
• Evaluation and definition of the need for advanced facilities and
equipment in universities, government laboratories and industry,
and development of a plan to satisfy current and future requirements
for state-of-the-art facilities and equipment for processing,
characterizing and testing of materials.
49
• Development of a central, critically evaluated materials property
data base to foster the much needed technology transfer between
the researchers and engineers producing materials property data
and those in need of the data for the design of new materials, products
and processes.
• Stimulation within the materials science and engineering community
of more attention to advanced synthesis of materials.
• Encouraging establishment of new centers to integrate materials
science and engineering with the design, production and marketing
of products.
• Promoting effective and efficient management of the stockpile.
• Analysis and recommendations to government regulatory agencies
on barriers to commercialization of materials technologies.
• Spearheading a strong management/labor/government commitment
to improving productivity, possibly including sponsorship of a prestigious
national award for productivity.
• Encouraging development of a quality awareness program across
U.S. industries.
• Advising Congress and the Administration on tax and other policies
designed to encourage investment in the nation's industrial base as
well as encouraging "leap-frog" technologies.
• Providing a focus for establishment of the industry-university centers
called for in the Stevenson-Wydler Act.
• Focusing attention on the fact that a widespread tendency toward
overspecialization in education, research, corporate organization,
and government support for research and education has resulted in
a shortage of people having both a strong technical background and
strong management skills to ensure that materials and manufacturing
based industry will increase competitiveness in world markets.
• Encouraging increased involvement in education and training at
universities by the mission agencies, with emphasis on materials
technologies important both to defense and to civilian industrial
applications.
Mr. Chairman, we strongly urge the prompt and complete implementation of
PL 98-373. We have given suggestions for an ambitious but by no means all-inclusive
agenda for the National Critical Materials Council. The materials community
does not expect — nor want — the Council as a government body to tackle this
agenda on its own. We stand ready to assist in forging the kind of
government/industry/university/public alliance that is so urgently needed if the
United States is finally going to have a national materials policy to optimize our
contributions to national security, industrial competitiveness, national technical
leadership and employment, and quality of life for all citizens.
50
Mr. Brown. Thank you, Dr. Ford, for your excellent statement.
Mr. Ary, would you proceed with your statement next? And are
you speaking with which hat here, Minerals Exploration Division
or head of the Minerals Availability Committee?
Mr. Ary. I am speaking on behalf of the American Mining Con-
gress.
Mr. Brown. All right. The other is for identification purposes
only, then.
STATEMENT OF T S ARY, PRESIDENT, MINERALS EXPLORATION
DIVISION, KERR-McGEE CORP.; AND CHAIRMAN, MINERALS
AVAILABILITY COMMITTEE, AMERICAN MINING CONGRESS
Mr. Ary. My name is T S Ary. I am president of the Minerals
Exploration Division of Kerr-McGee Corp. I serve as the chairman
of the Minerals Availability Committee of the American Mining
Congress, and I am testifying today on its behalf.
The American Mining Congress is an industry association that
encompasses producers of most of America's metals, coal, and in-
dustrial and agricultural minerals; manufacturers of mining and
mineral processing machinery and equipment and supplies; and en-
gineering and consulting firms and financial institutions that serve
the mining industry.
Before I get into the written part of this, I would like to say that
I was quite surprised and appalled this morning to listen to Dr.
McTague talk about the OSTP and their efforts to be all things to
all people in this area. I was surprised, first, because they are at-
tempting, it seems to me, to circumvent the act of Congress. Now,
if any of us tried anything like that, we would either be held in
contempt or be faced with some sort of a violation of the law. I just
cannot imagine OSTP trying to make an end run around an act of
Congress.
On a lighter note, as a professional geologist, I am really upset
because he didn't even know how important a role a geologist
played in the Manhattan project. Without the geologist, there
would have been no project because there would have been no ura-
nium ore with which to play.
So, I am not quite sure how I feel about Dr. McTague after this
morning, but I do agree with Dr. Ford. I do not believe that McTa-
gue and COMAT will provide the means of developing a materials
policy for our Nation. I just don't think that they are broad enough
in their scope. They are really good in the things that they do, but
anybody who would leave out a stockpile question has no business
developing a mineral policy for the United States.
Before discussing the implementation of the National Critical
Materials Act of 1984 and the other legislation that should have
provided the basis for a sound U.S. minerals policy, and so that
this subcommittee can more clearly understand the reasons for our
comments, it is necessary to review briefly the economic conditions
of the mining industry and its effect upon the national security
and economic well being of the Nation.
The economic state of the mining industry has become front page
news. The cover story of the December 17, 1984 issue of "Business
Week" aptly stated that the recovery of 1983-84 largely bypassed
51
producers of copper, iron ore, nickel, lead, zinc, and molybdenum.
Senator Domenici, in his excellent statement which appeared in
the January 22, 1985 Congressional Record, points out that the
United States is in danger of losing 75 percent of its copper indus-
try, 40 to 50 percent of its iron ore industry, and that 90 percent of
the U.S. potash industry which is located in his State is also in
peril. Since that time, except for industrial minerals, coal, and pre-
cious metals, the situation has further deteriorated.
Certainly, those trends are of vital concern to the mining and
mineral processing industries in the United States. But more im-
portantly, they impact dangerously upon the national security and
economic well being individually of each citizen and corporately
upon the Nation.
From a national security standpoint, unless positive actions are
taken by government, the country faces a devastating minerals
crisis. The United States has become increasingly dependent on for-
eign sources for many strategic minerals, base metals, and industri-
al materials that are essential to the Nation's security and indus-
trial base. Some of the foreign sources are from countries subject to
economic and social and political instability. Many are located at
the far end of the vulnerable shipping lanes. These factors make
the Nation liable to cutoffs of supplies and to gyrations of price.
A few facts and figures illustrate the effect of reduced mineral
production upon our Nation's well-being. In 1981, the U.S. metals
mining was an $8.9 billion enterprise. By 1983, it had shrunk to
just $5.9 billion. The jobs provided exceeded 109,000 people in 1981,
and at the beginning of 1985, what remained was a workforce of
about 45,000, and the prognosis is for further reduction.
The committee will recognize the parallel between the difficulties
facing the mining industry and the current plight of the Nation's
farmers, a subject intensely discussed in the Halls of Congress in
recent weeks. The farmers and the miners of this country are the
source of the basic materials for all economic activity.
There has been no lack of mineral and material policy studies.
Several have been issued from within the Federal Government and
from other sources. All of these studies start with acknowledge-
ment of the national significance of an adequate mineral supply
and the importance of a strong domestic industry. Although most
of the studies agree that a degree of foreign imports provides least-
cost benefits to the consumer, at the same time, however, they
point out the pitfalls of import dependency and how such depend-
ency forfeits freedom to make political, economic and defense deci-
sions.
After a dozen years of effort of Senator Allott of Colorado and
his colleagues, the Congress enacted the Mining and Minerals
Policy Act of 1970, clearly a policy declaration that provided a
means of not only addressing the changes in reliability of foreign
supplies but, more importantly, establishing a national value of do-
mestic production. This clear and concise statement established a
set of congressional priorities against which the executive branch is
to weigh other objectives and proposed actions.
The Congress declared that mining and mineral activities lie
solely within the private sector, but the Federal Government is re-
sponsible for fostering and encouraging those activities. The Con-
52
gress clearly intended that the individual and collective impacts on
the mining sector of other national priorities be evaluated com-
pletely and carefully in full recognition both of the importance of
mining and the consequences of contemplated Federal actions.
Here I am deviating a little from what is written. Congress was
clearly concerned with the interaction between materials and the
environment, and the National Commission on Materials Policy
was created by the National Materials Policy Act of 1970. The
Commission was charged with making a full and complete investi-
gation and study for the purpose of developing a national minerals
policy. After 2 years of work, the Commission submitted its final
report entitled "Materials Needs and the Environment."
Three summary directives for policymakers evolved from the
Commission's studies. One had to do with the striking of a balance
between the two competing but worthy causes: the need to produce
and develop the Nation's resources and the requirement to main-
tain a safe and quality environment. Another finding of the Com-
mission was that the materials policy should be managed more ef-
fectively by recognizing the complex interrelationships so that
laws, executive orders, and administrative practice reinforce policy
and not counteract it.
The Commission concluded that changes would be necessary in
the organization of the Federal Government for the formulation
and execution of a materials policy. The extensive decentralization
of policy planning and decisionmaking, both in the executive
branch and in the Congress, for materials, energy, and environ-
mental problems had given rise to an ad hoc crisis approach that to
date had characterized policy development and execution in the
materials field.
Here we are, 12 years later, still questioning why we are still on
an ad hoc policy basis.
We ask, why did such a carefully crafted legislative direction fail
in fulfilling its purpose and objectives? Evidence points to the fact
that part of that failure may be due to the lack of adequate over-
sight by the Congress. We commend this committee for recognizing
the importance of that oversight and scheduling this hearing. It
will serve a useful purpose in highlighting the problems of the
mining and minerals industry.
We would indeed be remiss if we did not also express our grati-
tude to this committee for its outstanding leadership in the shep-
herding of the 1980 and 1984 acts through Congress. In addition,
the committee has shown continuing concern for our national min-
erals and materials situation through thoughtful legislative and
oversight hearings on these vital issues.
But a major portion of the responsibility for the advancement of
the national minerals policy lies with the executive branch. Al-
though attempts were made at bureau levels, the impacts of their
findings were lost in the bureaucratic shuffle, and, in fact, accord-
ing to a report from the House Mines and Mining Subcommittee,
by a denial of authority by parts of the executive branch. This
report, entitled "U.S. Minerals Vulnerability: National Policy Im-
plications," documents the denial of authority by the Department
of the Interior and further states:
53
In the face of unequivocal Congressional directive to do so, the Interior Depart-
ment has made no effort to develop a system for identifying, quantifying, and evalu-
ating the impact of proposed Federal actions on the nation's non-fuel mineral re-
sources. The result is that minerals now stand alone as the most neglected U.S. re-
newable and nonrenewable resources.
Notwithstanding the clarity of the statutory language of the 1970 act and the fun-
damental purpose of its accompanying legislative history, the Department of the In-
terior has chosen, for a full decade, to abdicate its assigned role and responsibility.
The inactivity by the executive branch under the 1970 act led Congress to passage
of the National Materials and Minerals Policy, Research and Development Act of
1980. This act, in addition to reiterating the principles of the 1970 act, was more
prescriptive in its direction and gave clear direction on specific actions to be taken
by specified agencies and bureaus.
I can say that, in my experience with the present Department of
Interior executives, they are trying to do something about this, as
evidenced by the appointment of the Mott committee and the coop-
eration that we have had from the Secretary.
I can almost hear Jack Schmitt now at the Albuquerque hear-
ings state that the 1980 act would have to be in more detail than
the 1970 act because the 1970 act was just too simple. It just said
what should be done, and Jack felt that we are going to have to go
into detail to tell these people what we really wanted. So, the 1980
act was enlarged, and I have a feeling that maybe you all felt the
same thing, because I noticed that the 1984 act is several pages
longer, too.
Although a program was issued by President Reagan in 1982,
again there was little or no effort to implement portions of this
plan or directions specified in the 1980 act. In fact, there has been
retrogression.
The plan to which I refer is the April 5, 1982 report, entitled the
"National Materials and Minerals Program Plan and Report to
Congress." One of its keystones was that national materials policy
will be coordinated through the Cabinet Council on National Re-
sources and Environment, a mechanism that proved ineffective.
Through the course of its experience with the implementation of
the 1970 and 1980 acts, it became apparent to Congress that no
single Federal entity in the executive branch had the authority
and responsibility for establishing critical materials policy and for
coordinating and implementing that policy. The National Critical
Materials act of 1984 was enacted to provide that leadership under
the direct aegis of the President.
Where do we stand today, more than a year after the passage of
the National Critical Materials act? We have no National Critical
Materials Council. We have no executive director. We see no evi-
dence that the primary responsibilities of the Council have been
delegated or assumed by other Federal entities except a recent rec-
ommendation by the National Security Council to set new goals for
the stock pile and to sell off critical and strategic materials from it.
In other words, we see no effort at all to implement the will of Con-
gress.
The myriad problems which face the minerals industry and the
role of the Federal Government under the 1970 act hardly require
a recital to the members of this subcommittee. However, I would
briefly suggest some areas where immediate or short-term solutions
are needed and involve coordinated Federal effort.
54
One, development of an executive order for implementation of
the national minerals and material policy.
Two, consideration of the capital intensive nature of the mining
and minerals industry in development of tax policies to provide tax
credits on capital spent on pollution abatement equipment and for
increased operating costs resulting from environmental and health
and safety regulations.
Three, balancing of costs and benefits when establishing environ-
mental standards.
Four, a thorough review of regulations that continue to hamper
development of mines and minerals processing facilities in the area
of Federal land management and health and safety.
Five, access to national materials needs related to scientific and
technological changes over the next 5 years.
Six, assess the availability and adequacy of the supply of techni-
cally trained personnel necessary for materials research and devel-
opment.
Seven, to provide the basis of requirement of the access to the
public domain for prospecting and discovery of needed materials, to
provide for the security of tenure following a discovery, and to
reduce the wilderness and de facto withdrawals of the public
domain, and to reduce and do away with the regulations which are
not cost effective, and to review the role of the multilateral devel-
opment banks to which the United States contributes. This in-
cludes the World Bank group and the IMF. Loans should be evalu-
ated on the same basis from these organizations as a private com-
pany loan from a commercial bank and also on their efforts on ma-
terial conditions.
Nine, to identify critical industrial sections threatened with be-
coming endangered.
Ten, to pursue our foreign policy in such a way to ensure free
and fair market access to strategic and critical materials, especially
when they are not available from domestic sources.
Mr. Chairman and members of the subcommittee, we don't need
any more studies of the domestic mineral situation in the United
States. In fact, we don't need any more analysis, nor do we need
any more legislation.
What we do need is a focus of the Federal activities on the prob-
lems of the mining and minerals industry and responsible leader-
ship and coordination of the vast resources of the Federal Govern-
ment to keep these basic industries of paramount importance to
the national security and well being of this Nation from being lost.
Once lost in this technologically advanced age, the prospects of re-
gaining these vital and basic industries range from poor to none.
I want to thank you for being able to appear today. I would be
happy to answer any questions.
[The prepared statement of Mr. Ary follows:]
55
♦
AMERICAN
MININa
CONGRESS
FOUNDED 1897
SUITE 300
1920 N STREET NW
WASHINGTON
OC 20036
202/861 '2800
TWX710«822»0126
J. ALLEN OVERTON JR
PRESIDENT
Statement Of
AMERICAN MINING CONGRESS
by
T S ARY
President, Minerals Exploration Division,
Kerr-McGee Corporation
Chairman, Minerals Availability Committee,
American Mining Congress
Before the
Subcommittee on Transportation, Aviation and Materials
of the
Committee on Science and Technology
U.S. House of Representatives
Washington, D.C.
October 8, 1985
56
Mr. Chairman and Members of the Subcommittee:
My name is T S Ary. I am President of the Minerals
Exploration Division, Kerr-McGee Corporation. I serve as
Chairman of the Minerals Availability Committee of the American
Mining Congress and am testifying today on its behalf.
The American Mining Congress is an industry association
that encompasses: (1) producers of most of America's metals,
coal and industrial and agricultural minerals; (2) manufacturers
of mining and mineral processing machinery, equipment and
supplies; and (3) engineering and consulting firms and financial
institutions that serve the mining industry.
Before directly discussing implementation of the National
Critical Materials Act of 1984 and the other legislation that
should have provided the basis for a sound United States minerals
policy, and so that this Subcommittee can more clearly understand
the reasons for our comments, it is necessary to review briefly
the economic condition of the mining industry and its effect upon
the national security and economic well-being of the nation.
ECONOMIC CONDITION OF THE MINING INDUSTRY
The economic state of the mining industry has become
front-page news. The cover story of the December 17, 1984, issue
of Business Week aptly stated that the recovery of 1983-84 large-
ly bypassed producers of copper, iron ore, nickel, lead, zinc and
molybdenum. Senator Domenici, in his excellent statement which
appeared in the January 22, 1985, Congressional Record, points
57
out that the United States is in danger of losing 75 percent of
its copper industry, 40 to 50 percent of its iron-ore industry,
and that 90 percent of the U.S. potash industry is in peril.
Since that time, except for industrial minerals, coal and pre-
cious metals, the situation has further deteriorated.
Certainly, these trends are of vital concern to the mining
and mineral processing industries in the United States. But more
importantly, they impact dangerously upon the national security
and economic well-being individually of each citizen and corpo-
rately upon the nation.
From a national security standpoint, unless positive
actions are undertaken by government, the country faces a devas-
tating minerals crisis. The United States has become increasing-
ly dependent on foreign sources for many strategic minerals, base
metals and industrial materials that are essential to the
nation's security and industrial base. Some of these foreign
sources are countries subject to economic, social and political
instability. Many are located at the far end of vulnerable ship-
ping lanes. These factors make this nation liable to cut-offs of
supply and to gyrations of price.
A few facts and figures illustrate the effect of reduced
mineral production upon our national well being. In 1981, U.S.
metals mining was an $8.9 billion enterprise. By 1983, it had
shrunk to just $5.9 billion. The jobs provided exceeded 1 09. OOP
in 1981. At the beginning of 1985, what remained was a workforce
of abc(ut: 44, 800.^ ^d the prognosis is for further reduction.
58
The Committee will recognize the parallel between the dif-
ficulties facing the mining industry and the current plight of
the nation's farmers, a subject intensely discussed in the halls
of Congress in recent weeks. The farmers and miners of this
country are the source of the basic materials for all economic
activity.
MINERAL POLICY
There has been no lack of mineral and material policy
studies; several have been issued from within the federal govern-
ment and from other sources. All these studies start with
acknowledgement of the national significance of an adequate min-
eral supply and the importance of a strong domestic industry.
Although most of the studies agree that a degree of foreign
imports provides least-cost benefits to the consumer, at the
same time, they point out the pitfalls of import dependency and
how such dependency forfeits rfreedom to make political, economic
and defense decisions. >13U'i (a- C/^tCi-v.
After a dozen years of effort, the Congress enacted the
Mining and Minerals Policy Act of 1970, clearly a policy declara-
tion that provided a means of not only addressing the changes in
reliability of foreign supplies but, more importantly, establish-
ing a national value of domestic production. This clear and con-
cise statement established a set of Congressional priorities
against which the Executive Branch is to weigh other objectives
and proposed actions. The Congress declared that mining and min-
eral activities lie solely within the private sector, but the
59
federal government is responsible for fostering and encouraging
those activities. The Congress clearly intended that the indi-
vidual and collective impacts on the mining sector of other
national priorities be evaluated completely and carefully in full
recognition both of the importance of mining and the consequences
of contemplated federal actions.
Why did such a carefully crafted legislative direction
fail in fulfilling its purpose and objectives? Evidence points
to the fact that part of the failure may be due to lack of ade-
quate oversight by the Congress. We commend this Committee for
recognizing the importance of that oversight and scheduling this
hearing. It will serve a useful purpose in highlighting the
problems of mining and the minerals industry.
We would indeed be remiss if we did not also express our
gratitude to this Committee for its outstanding leadership in
shepherding the 1980 and 1984 Acts through the Congress. In
addition, the Committee has shown continuing concern for our
national minerals and materials situation through thoughtful
legislative and oversight hearings on this vital issue.
But a major portion of the responsibility for advancement
of the national minerals policy lies with the Executive Branch.
Although attempts were made at bureau levels, the impacts of
their findings were lost in the bureaucratic shuffle, and, in
fact, according to a report from the House Mines and Mining Sub-
committee, by a denial of authority by parts of the Executive
Branch. This report, entitled "U.S. Minerals Vulnerability:
60
National Policy Implications" (Committee Print No. 9, 96th Con-
gress, 2nd Session) documents the denial of authority by the
Department of the Interior and further states:
In the face of a unequivocal Congressional
directive to do so, the Interior Depart-
ment has made no effort to develop a sys-
tem for identifying, quantifying, and
evaluating the impact of proposed Federal
actions on the Nation's nonfuel mineral
resources. The result is that minerals
now stand alone as the most neglected U.S.
renewable and nonrenewable resources....
Notwithstanding the clarity of the statu-
tory language of the [1970] Act and the
fundamental purpose of its accompanying
legislative history, the Department of the
Interior has chosen, for a full decade, to
abdicate its assigned role and
responsibility.
The inactivity by the Executive Branch
under the 1970 Act led Congress to passage
of the National Materials and Minerals
Policy, Research and Development Act of
1980. This Act, in addition to reiterat-
ing the principles of the 1970 Act, was
more prescriptive in its direction and
gave clear direction on specific actions
61
to be taken by specified agencies and
bureaus .
Althougli a program plan was issued by President Reagan in
1982, again there has been little or no effort to implement por-
tions of this plan or directions specified in the 1980 Act.
Indeed, there has been retrogression.
The plan to which I refer is the^^^pril 5, 1982) report
entitled the "National Materials and Minerals Program Plan and
Report to Congress". One of its keystones was that national
materials policy will be coordinated through the Cabinet Council
on National Resources and Environment, a mechanism that proved
ineffective .
Through the course of its experience with the implementa-
tion of the 1970 and 1980 Acts, it became apparent to the Con-
gress that no single federal entity in the Executive Branch had
the authority and responsibility for establishing critical
materials policy and for coordinating and implementing that
policy. The National Critical Materials Act of 1984 was enacted
to provide that leadership under the direct aegis of the
President .
Where do we stand today, more than a year after the pas-
sage of the National Critical Materials Act? We have no National
Critical Materials Council. We have no executive director. We
see no evidence that the primary responsibilities of the Council
54-846 0-86
62
have been delegated or assumed by other federal government enti-
ties. In other words, we see no effort at all to implement the
will of the Congress.
The myriad problems which face the minerals industry and
the role of the federal government under the 1970 Act, hardly
requires a recital to the Members of this Subcommittee. But I
would briefly suggest some areas where immediate or short-term
solutions are needed and involve coordinated federal effort.
o Development of an Executive Order for implementa-
tion of national minerals and material policy,
o Consideration of the capital intensive nature of the
mining and the minerals industry in development of tax
policies.
o Balancing of costs and benefits when establishing
environmental standards.
o A thorough review of regulations that continue to
hamper development of mines and minerals processing
facilities in the areas of federal land management and
health and safety.
S ) G ;' ^ ; f ) ^ j /^ ' /
Mr. Chairman and Members of this Subcommittee, we don't
need any more studies of the domestic minerals situation in the
United States. We don't need any more analyses. In fact, we
don't need any more legislation.
What we do need is a focus of federal activities on the
problems of the the mining and minerals industry and responsible
leadership and coordination of the vast resources of the federal
government to keep these basic industries of paramount importance
to the national security and economic well-being of this nation
from being lost. Once lost, in this technologically advanced
age, the prospects of regaining these vital and basic industries
range from poor to none.
I would be most happy to answer your questions.
63
Mr. Brown. Thank you very much, Mr. Ary. We will have some
questions for you after Mr. Romagnoli.
STATEMENT OF EMIL A. ROMAGNOLI, NATIONAL ASSOCIATION
OF MANUFACTURERS, WASHINGTON, DC
Mr. Romagnoli. Thank you, Mr. Chairman.
My name is Emil Romagnoli. I am manager of Regulatory Af-
fairs for ASARCO Inc., a miner and processor of nonferrous metals
with operations in both the United States and overseas. I am also
chairman of the Nonfuel Minerals Task Force of the Natural Re-
sources Committee of the National Association of Manufacturers,
and my statement this morning is on behalf of the National Asso-
ciation of Manufacturers.
The NAM is a voluntary business association of over 13,500 cor-
porations, large and small, that are located in every State. Mem-
bers range in size from the very large to over 9,000 smaller manu-
facturing firms, each with an employee base of less than 500. NAM
member companies employ 85 percent of all workers in manufac-
turing and produce over 80 percent of the Nation's manufactured
goods. NAM is affiliated with an additional 158,000 businesses
through its Associations Council and the National Industrial Coun-
cil.
Our organization has had a longstanding interest in the econom-
ic health and welfare of our domestic extractive industries. In fact,
the Natural Resources Committee of NAM is unique in that the
committee represents both users and producers, large and small, of
domestic natural resources. The committee's concerns revolve
around assuring America's industrial base of accessible, adequate,
and affordable supplies of raw materials for manufacturing.
Five years ago, the NAM Nonfuel Minerals Task Force was
formed to address a growing problem, that is, our increasing reli-
ance on foreign, sometimes politically unstable, sources for supplies
of basic industrial minerals and materials. This problem, then and
now, is well documented and well known.
However, actions over the past 5 years with regard to addressing
supply disruptions, long-range materials uses and needs, and the
policy analyses needed to make these determinations have been
intermittent, at best. It is the view of our Nonfuel Minerals Task
Force that these problems cannot be addressed on an ad hoc basis.
There is still no permanent office at a suitably high level in the
executive branch to deal with these critical issues.
Thus, it has long been our position that an organization was
needed at the highest levels of the executive branch to deal with
the importance of minerals and materials to our national defense
and our national economy and to evaluate the impact of other na-
tional policies upon the materials and minerals sectors.
The NAM both supported and worked for enactment of title II of
Public Law 98-373 which formed the National Critical Materials
Council. NAM was especially vocal within the administration in
urging the establishment of a Critical Materials Council, and our
staff argued for appropriations of funds to organize and implement
the Council.
64
We now feel we should get on with the job of implementing the
Critical Materials Act as soon as possible and to put into place the
Critical Materials Council and a Council staff.
What do we feel should be the role of this Council? Initially, with
respect to research and development, the Council should carry out
its statutory requirements of coordinating materials and minerals
research programs within the Government, including evaluating
Federal research programs in order to recommend new areas for
Government research.
Moreover, the Council might also evaluate private sector re-
search programs in an effort to avoid duplication and to seek ways
in which Government would enter into cooperative programs with
the business community to combine resources toward important
materials and minerals research projects. At a time when all pro-
grams, both private and public, are suffering cutbacks in funding
and resources, more efficient and complimentary use of Govern-
ment and private sector money, manpower, and facilities would be
a useful contribution.
There is some precedent for this. The Bureau of Mines, for exam-
ple, Mr. Chairman, worked with the aluminum industry in develop-
ing onshore sources of nonbauxitic ores for aluminum. There are
many examples of the Bureau of Mines working with the mining
industry toward safety and health technology, and I think there is
sufficient precedent to try to undertake complimentary kinds of
programs.
Research is not the only answer to our country's minerals and
materials problems, however. An important function and responsi-
bility that we see the Council providing would be to have an ongo-
ing analytical capability to alert policymakers at the highest levels
of the executive branch to the potential impacts that Government
programs and policies are having on the minerals supply and
demand picture, that is, upon all aspects of the materials cycle.
Ideally, the Council and its Executive Director and staff would
serve as an early warning system for evaluating regulatory poli-
cies, trade policies, policies that affect access to the public lands,
tax policies, and foreign poHcy considerations, as well as U.S. par-
ticipation in the international financial institutions such as the
International Monetary Fund and World Bank— that is, for evalu-
ating all of these policies in the context of their effects and implica-
tions for minerals and materials. We would especially hope that
consideration could be given to the effects of Government actions
upon the international competitive position of our U.S. minerals
and materials supply and upon the minerals and materials con-
suming sectors.
As an aside, however, let me say that these are very trying times
indeed for the basic industries and for nearly all extractive and
manufacturing sectors of our Nation's economy which Mr. Ary
talked about earlier. America's capacity to mine and process non-
fuel minerals has faced prolonged depressed conditions and serious
competitive difficulties which have forced massive cutbacks in our
production capacity for many important minerals. Our capability
to produce copper, lead, and molybdenum, to name just a few, has
suffered a serious reduction. At the same time that our imports
and our fundamental reliance upon foreign sources have grown.
65
The great tragedy in all of this is that this reduction in our abili-
ty to produce those materials for which the United States should
have a competitive advantage and a resource rich position has oc-
curred at the same time that our dependence upon foreign sources
for materials which historically must be imported is being threat-
ened. Those materials include sources in central and southern
Africa, for example, for cobalt, chromium, manganese, and plati-
num-group metals. Just as the availability of these more import-de-
pendent materials provides a source of concern to policymakers
and consuming industries alike, we should also be concerned for
the future availability of metals and materials produced domesti-
cally which we normally have taken for granted.
But problems we have experienced in the basic industry sectors
such as mining and steel are not unlike competitive problems that
have also been occurring in the more valued added sectors of our
economy. We have seen, for example, serious competitive difficul-
ties and rapidly rising imports in the fabricating and intermediate
product stages of production as well as the serious competition that
has been affecting the equipment manufacturers of our country.
The NAM would hope that the new National Critical Materials
Council might consider both the competitiveness of our materials
and minerals supplying industries along with the role of materials
and minerals in the competitiveness of our other manufacturing
sectors. We would also hope that the Council, through special advi-
sory panels, could include private sector members, including repre-
sentation from the materials producing and consuming sectors,
either permanently or on a rotating basis. The idea would be to in-
stitutionalize a procedure for getting input from the business com-
munity which NAM deems essential to the formation of sound
policy.
Our hope ultimately lies, however, in the prospect that this
Council will soon be appointed. Unless it is, this testimony will
become academic. It was not until August 15 of this year, a full 13
months after enactment of the National Critical Materials Act,
that the President signed an appropriations measure earmarking
$200,000 for the Council. We remain optimistic that another
$500,000 in the fiscal year 1986 House Treasury and Postal Service
Bill, H.R. 3036, will remain intact through conference committee.
But while these funding debates continue, the Council work re-
mains undone. Already, the April 1, 1985, initial reporting dead-
line, as spelled out in your statute, has passed. Meanwhile, the
clock continues to tick on the sunset provisions of this Council
which is authorized only through September 30, 1990.
NAM, for its part, promises to pursue funding and appointment
of the Council and to ensure that our materials needs are met into
the next century and that sound minerals policies will be developed
in order to ensure the economic, defense, and manufacturing needs
of this country.
In closing, I would like to thank the members of this committee
for this opportunity to provide the views of the NAM and to ex-
press our appreciation to the committee for inviting us to deliver
testimony on this important issue. Let me also extend our thanks
to the committee membership for its persistent and strong leader-
ship in continuing to deal with the materials and minerals prob-
66
lems, especially to the hard work of Mr. Glickman toward winning
enactment of the National Critical Materials Act and to your col-
league, Mr. Skeen, for his efforts in ensuring that appropriations
were included for the Council in the fiscal year 1985 supplemental
and the fiscal year 1986 Treasury appropriations measure.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Romagnoli follows:]
67
KAA\
National Association of Manufacturers
TESTIMONY OF
THE NATIONAL ASSOCIATION OF MANUFACTURERS
BY
EMIL ROMAGNOLI
ASARCO, INC.
BEFORE THE
SUBCOMMITTEE ON TRANSPORTATION,
AVIATION AND MATERIALS
OF THE
COMMITTEE ON SCIENCE AND TECHNOLOGY,
U.S. HOUSE OF REPRESENTATIVES
OCTOBER 8, 1985
1776 F Street. N.W. • Washington, D.C. 20006 • (202) 626-3700
68
TESTIMONY OF
THE NATIONAL ASSOCIATION OF ^4ANUFACTURERS
BY EMIL ROMAGNOLI
ASARCO, INC.
BEFORE THE
SUBCOMMITTEE ON TRANSPORTATION,
AVIATION AND MATERIALS
OF THE
COMMITTEE ON SCIENCE AND TECHNOLOGY,
U.S. HOUSE OF REPRESENTATIVES
OCTOBER 8, 198 5
Good Morning, Mr. Chairman.
My name is Emil A. Romagnoli. I am manager of Regulatory Affairs
for ASARCO Incorporated, located at 180 Maiden Lane, New York,
New York. I am also chairman of the Nonfuel Minerals Task Force
of the Natural Resources Committee of the National Association
Manufacturers (NAM) .
NAM is a voluntary business association of over 13,500
corporations, large and small, located in every state. Members
range in size from the very large to over 9,000 smaller
manufacturing firms, each with an employee base of less than 500.
NAM member companies employ 85 percent of all workers in
manufacturing and produce over 80 percent of the nation's
69
manufactured goods. NAM is affiliated with an additional 158,000
business through its Associations Council and the National
Industrial Council.
NAM has had a long-standing interest in the economic health and
welfare of our domestic extractive industries. In fact, the
Natural Resources Committee of NAM is unique in that it
represents both users and producers, large and small, of domestic
natural resources. The committee's concerns revolve around
assuring America's industrial base of accessible, adequate and
affordable supplies of raw materials for manufacturing.
In 1980, the NAM Nonfuel Minerals Task Force was formed to
address a growing problem — our increasing reliance on foreign,
sometimes politically unstable, sources for supplies of basic
industrial minerals and materials. This problem, then and now,
is well documented.
However, actions over the past five years with regard to
addressing supply disruptions, long range materials uses and
needs, and the policy analyses needed to make these
determinations have been intermittent. It is the view of NAM'S
/ Nonfuel Minerals Task Force that these problems cannot be
addressed on an ad-hoc basis. There is still no permanent office
at a suitably high level in the Executive Branch to deal with
these critical issues.
u
70
As a result, it has long been our position that an organization
was needed at the highest levels of the Executive Branch to deal
with the importance of minerals and materials to our national
defense and national economy, and to evaluate the impact of other
national policies upon the materials and minerals sector.
The National Association of Manufacturers both supported and
worked for enactment of Title II of the National Critical
Materials Act of 1984. NAM was especially vocal within the
Administration in urging the establishment of a critical
materials council, and NAM staff argued for appropriation of
funds to organize and implement the council. / (^c, )>lr'*^'*^ )
NAM now feels we should begin the job of implementing the
Critical Materials Act as soon as possible, and put into place
the Critical Materials Council and Council staff.
But what should be the role of this council? Initially, with
respect to research and development, the council should carry out
its statutory requirements of coordinating materials and minerals
research programs within the government, including evaluating
federal research programs in order to recommend new areas for
government research. Moreover, the council might also evaluate
private sector research programs in an effort to avoid
duplication and to seek ways in which government would enter into
cooperative programs with the business community to combine
resources toward important materials and minerals research
71
projects. In a time when all programs, both private and public,
are incurring cutbacks in funding, more efficient use of
government and private sector money, manpower, and facilities
would be a useful contribution.
Research is not the only answer to our country's minerals and
materials problems, however. An important function and
responsibility that we see ^he Council providing would be to have
an ongoing analytical capability to alert policy-makers at the
highest levels of the Executive Branch to the potential impacts
that government programs and policies are having on the minerals
supply and demand picture — i.e., upon all aspects of the
materials cycle. Ideally, the Council and its Executive Director
and staff would serve as an early warning system for evaluating
regulatory policies, trade policies, policies affecting access to
the public lands, tax policies, foreign policy considerations,
and U.S. participation in international financial institutions
such as the International Monetary Fund and World Bank — all in
the context of their effects and implications for minerals and
materials. We would especially hope that consideration could be
given to the effects of government actions upon the international
competitive position of U.S. minerals and materials supply and
upon minerals and materials consuming sectors.
As an aside, however, let me say that these are very trying times
indeed for the basic industries and for nearly all manufacturing
sectors of our nation's economy. America's capacity to mine and
72
process nonfuel minerals has faced prolonged depressed conditions
and serious competitive difficulties which have forced massive
cutbacks in our production capacity for many important minerals.
Our capability to produce copper, lead, and molybdenum, to name
just a few, has suffered a serious reduction. At the same time
our imports and our fundamental reliance upon foreign sources
have grown. This reduction in our ability to produce those
materials for which the U.S. should have a competitive advantage
and a resource-rich position has occurred at the same time our
foreign sources for materials that historically must be imported
are being threatened, including sources in Central and Southern
Africa for cobalt, chromium, manganese, and platinum-group
metals. Just as the availability of these more import-dependent
materials provides a source of concern to policy-makers and
consuming industries alike, we should also be concerned for the
future availability of metals and materials which we take for
granted .
But problems we have experienced in the basic industry sectors
such as mining and steel are not unlike competitive problems that
have also been occurring in the more valued-added sectors of the
economy. We have seen, for example, serious competitive
difficulties and rapidly rising imports in the fabricating and
intermediate product stages of production, as well as serious
competition affecting equipment manufacturers of America. The
NAM would hope that the new National Critical Materials Council
would consider both the competitiveness of our materials and
73
minerals supplying industries and the role of materials and
minerals in the competitiveness of our other manufacturing
sectors. We would also hope that the Council, though special
advisory panels, could include private sector members, including
representation from the materials producing and consuming sectors
either permanently or on a rotating basis. The idea would be to
institutionalize a procedure for getting input from the business
community, which NAM deems essential to the formation of sound
policies.
/2^ A ^^^^ ^^ ^^^^
Our hope ultimately lies however, in the prospect that this
Council will soon be appointed. Unless it is, this testimony is
academic. It was not until August 15 of this year, a full 13
months after enactment of the National Critical Materials Act,
that the President signed an appropriations measure earmarking
$200,000 for the Council. We remain optimistic that another
$500,000 in the FY '86 House Treasury/Postal Service bill, H.R.
3036, will remain intact through conference committee. But while
these funding debates continue, the Council's work remains
undone. Already, the April 1, 1985 initial reporting deadline as
spelled out in the statute, has passed. Meanwhile, the clock
continues to tick on the sunset provisions of this Council, which
is authorized only through September 30, 1990, unless otherwise
authorized by Congress. NAM, for its part, promises to pursue
funding and appointment of the Council, to insure that our
materials needs are met into the next century, and that sound
minerals policies are developed in order to insure the economic.
74
defense, and manufacturing needs of this country.
In closing, I would like to thank the members of this Committee
for this opportunity to provide the views of the National
Association of Manufacturers, and to express our appreciation to
the Committee for inviting NAM to deliver testimony on the
important issue of critical materials and the implementation of
the National Critical Materials Act of 1984. Let me also extend
our thanks to the Committee membership, for its persistent and
strong leadership in continuing to deal with the materials and
minerals problems, and to the hard work of Representative
Glickman in particular toward winning enactment of the National
Critical Materials Act, and to your colleague. Rep. Joe Skeen,
for his efforts in insuring that appropriations were included for
the council in the FY' 85 Supplemental and the FY '86 Treasury
appropriations measure.
75
Mr. Brown. Thank you very much, Mr. Romagnoli. We always
appreciate a word of praise for our hard-working colleagues who
shepherd some of these issues through.
Mr. Lewis, do you have any questions?
Mr. Lewis. Just a couple, Mr. Chairman, thank you.
I have a general question for all three of you gentlemen. How do
you view your organizations' role with the Council and how do you
anticipate interfacing with the Council?
Mr. Romagnoli. We would hope the NAM could provide an advi-
sory role in the Council. Our task force and our Natural Resources
Committee, I think, has a unique position in that we have repre-
sentatives of both the mining industries and the extractive indus-
tries, and we can muster resources from those industries, as well as
most of the major defense contractors, and the consuming sectors,
too. So, I think we could provide a unique contribution in an advi-
sory sense to the Council.
Mr. Ary. I think we would second the same thing that Emil has
said for the American Mining Congress. The subject is dear to our
hearts. In fact, it is our business. We feel that out of the expertise
that is in the United States, all of the expertise that is needed is
within our industry. If requested, we stand ready to help, and if
not requested, we stand ready to talk back to them.
Mr. Lewis. I like your candor.
Mr. Ford.
Mr. Ford. I have to echo the same sentiments as my colleagues
here with the additional note that we in the Federation of Materi-
als Societies represent the professional and technical societies in
the materials community and act as a liaison and communications
link to very, very many professionals in this ball game. We can,
therefore, provide and hope to and, as Mr. Ary said, we will pro-
vide unless told not to input to the Council to assist them in formu-
lating their plans and implementing them and getting them
through the executive branch so that something more than paper-
work comes out of it.
Mr. Lewis. What do you think is the most important task of the
Council? What problems should it address first after formation?
Mr. Ford. I will start that. It is a very difficult question because
there are so very many important agenda items for the Council.
However, coordination of R&D work within the Federal agencies is
very, very important; 14 agencies, I think, are the number that you
folks have quoted to us this morning. There are too many to name,
too many for any of us to know all of them even out here in indus-
try. We must coordinate that work and make sure that there is not
duplication of effort. There cannot be a lack of duplication when
there are so many diverse agencies involved. It just has to be. Ev-
eryone wants on the bandwagon of rapid solidification technology,
of composites, of engineered ceramics, so that all these agencies
feel they have to have an initiative in those up and coming ad-
vanced technologies.
A very key role for the Council would be to assure that we are
getting most cost-effective use of our dollars in doing research and
development in those areas.
Mr. Ary. I think Mr. Ford has hit a real important part here,
because the coordination is very important because we have so
76
many different agencies and different questions involved. However,
before we can even coordinate any of that, we are going to have to
establish some sort of a policy that makes sense. Right now, there
is no way that policy can be established because these various
people are fighting for turf. And everybody wants a little piece of
the action, so it gets all splintered up and you just don't know
where to go.
Little did I realize when I wanted to drill an oil well that I was
going to have to talk to the Corps of Engineers, and the Coast
Guard, and the Navy. I just don't know where to stop when I am
going out.
And I see one of the big things and one of the greatest things
that could happen now to this Council is to depoliticize this whole
area of natural resources, and strategic, and critical materials. The
policy — no, not the policy — the actions that I see taken now have
nothing to do with the problem of natural resources. It is what is
the political implication going to be and then we will take that
action that is going to give us the least friction.
My feeling is if they don't like to make these tough decisions and
bite the bullet, let them get out. They ran for office; they ought to
face up to it.
Mr. RoMAGNOLi. I guess I would second both of those sentiments.
I think we would see the most important contribution of the Coun-
cil to provide some mechanism for evaluating the role of Govern-
ment policies on mineral supply, and materials supply, and their
use. We have things that are occurring right this moment and that
occur all the time initiated by Government that have dramatic im-
pacts on all stages of the materials cycle. The materials or miner-
als impacts, including some of the research and engineering im-
pacts, are never considered.
I am not naive enough to think that we can completely change
that and take politics out of the picture or to have minerals and
materials being the dominant force in policy, but I guess we would
like to see them at least considered and to be a place where we can
at least air that point of view or air a materials or minerals point
of view in the policymaking process.
Second, I think the research and development is becoming in-
creasingly important. I think all of us are suffering very severe cut-
backs in the funds available to conduct either private or public re-
search and I guess the NAM feels that the Council could play a
real role in trying to focus the research needs of at least the public
sector.
Mr. Ford. If I could add to that, there is another very important
purpose of the 1984 act that is the third purpose enumerated, to
stimulate innovation and technology utilization in basic industries.
One of our great concerns in the materials community is that we
are very effective in R&D, that is, in the inventive portion of the
innovative cycle. We can invent things very well. We invented con-
tinuous casting.
However, we don't implement them very well. We don't take
them across what we are calling the technology bridge and which
we are going to deal with in this 1986 biennial conference. We
don't take that invention across that technology bridge to com-
merce.
77
We are looking for the reasons and the barriers. The present ad-
ministration does not put much emphasis on that. They say that is
the role of the private sector to take the basic research, and devel-
opment, and implement it, and make it a commercial success. How-
ever, we in the private sector have demonstrated that we don't do
that very well.
So, the Council ought to play an important role in. No. 1, deter-
mining or helping to determine what are the barriers to that tech-
nology transfer and then how to utilize it, especially in the basic
industries. We cannot exist without our basic industries.
Mr. Ary. This is very important, because the industry, as we find
ourselves now, are in a very poor position for capital formulation.
Yet, we look at the present tax proposals, and we are doing away
with any incentives to do just what Dr. Ford has said, and that is
to take the invention, and go on into the next phase, and use it for
production. We can't get there because we just are not able to de-
velop the capital necessary to move that next step.
Yet, we are seeing tax credits denied. We are seeing all types of
barriers put up. The Council could coordinate all of these types of
things together to try to fulfill the 1970, 1980, and 1984 acts, and
that is to establish and see to it that we have a viable metal, and
minerals, and strategic materials industry. And it is going to take
all of those things, not just the raw materials and not just the man-
ufacturing, but the whole complex.
Mr. RoMAGNOLi. If I may, Mr. Lewis, to add a footnote to this,
the principal thing I guess I believe that has given us the competi-
tive edge or has allowed us to remain competitive in the world
market and many of the mineral commodities that I have experi-
ence with is the fact that we have been able to have productivity
improvements based on technology gains through process improve-
ments and through production innovation that has allowed us to
keep up with declining ore grades or allowed us to keep up with
competition from higher ore grades overseas in many of these com-
modities. Copper and molybdenum come to mind, but I am sure
Mr. Ary could think of many others.
The problem that we face now is that with the terrible debt
burden that we have all incurred and with the terrible squeeze on
our resources, I fear we are going to begin losing that competitive
edge and we are going to become higher cost producers, whereas.
Government-owned production elsewhere in the world receives
direct subsidies from their Governments in this area.
Mr. Lewis. Well, all of your testimony indicates a very ambitious
agenda for this Council. Do you think the Council should be ex-
panded before it is formed, or do you think we have a pretty good
handle on it right now, both with the size of the Council and the
funding for the Council?
Mr. Ary. I don't think it makes any difference what size it is; it
is just how active they are going to be and what kind of latitude
they have. If they are going to be told what to do, then it doesn't
make any difference if you have 1 or 50.
If they are going to have a free rein to make recommendations
and to have those recommendations looked at, I think a three-
member Council can do it if they utilize the expertise they have.
The Bureau of Mines, under Bob Horton, and the USGS, under
78
Gordon Peck, have been very professional in the last few years.
Once they were allowed to get out and to do these things, as Mr.
Broadbent stated a few minutes ago, it is really encouraging to see
this. They have the people and the availability of these people. The
advisory panels, as everybody said, they are willing to help.
I am not a red hot — although I am on Admiral Mott's committee,
I like that type of committee better than I did the one that Mr.
Boyd had in 1972 and 1973. They went 2 years before they made a
recommendation. By the time the recommendation was made, it
was cold. Here, Admiral Mott's committee is coming out on a regu-
lar basis and they have this deadline of a 2-year unless otherwise
extended.
There is a lot of help that the three-member commission can
have if they have the right to move in that direction.
Mr. Ford. I think that is very important. As taxpayers, we all
ought to worry about the increasing of the bureaucracy, and I
think that is where the Council should take our offer for assist-
ance, call on us to help to formulate the policies, to help to imple-
ment and work on the individual agenda items. We want to be in-
volved. The private sector wants a cooperative environment with
Government and academia. So, don't expand the bureaucracy; use
the resources that are offered to you from all sectors.
Mr. RoMAGNOLi. If I could add to that, I worked for the Govern-
ment several hundred years ago, and my experience with Govern-
ment organizations is that the smaller ones and the ones that are
leaner and meaner are the ones that are more effective. When they
start expanding bureaucracies and you start having to worry about
clearing memoranda and all that stuff, I think they become less ef-
fective. The most effective ones are the smaller organizations.
I think the staff size that you propose in the statute could do the
job.
Mr. Lewis. Thank you, gentlemen.
Thank you, Mr. Chairman.
Mr. Brown. Thank you, Mr. Lewis.
Gentlemen, we really want to be constructive in our approach to
problems here in the Congress even though we don't always look
like it. We have a situation here, and each of you has identified
political obstacles to movement in this area in one way or another,
but essentially we have a situation in which we have an adminis-
tration which is very firm about not wanting the Federal Govern-
ment to grow, and we appreciate that, not wanting the Federal
Government to get involved with things that private enterprise
should be doing, and we appreciate that.
And we have a problem when we establish a program such as we
have here in convincing the policymakers in the executive
branch — and I think we are talking basically about 0MB here —
that this is not a program that leads to growth in government but
better utilization of the programs that are going on at the present
time. And it is not usurping the function of private industry but is
helping to build that cooperative bridge between government and
private industry which will enable private industry to function
more effectively.
We must not have done a good job in selling that idea with this
particular program, because we don't seem to have moved very far.
79
Have you got any ideas about what we can do to get that idea
across?
Mr. Ary. I think your hearing that you are holding here right
now is the first step. We have had very little input in trying to get
this off base. We talk a lot about it and it gets to a point, and it
gets stopped. And I don't know why. I just feel that maybe the ad-
visors to the President have not been advising properly. After lis-
tening to Dr. McTague this morning, I have a feeling that there is
a small inner circle that is just trying to enlarge their influence in
this materials area.
Mr. Brown. Well, this groups responds in some situations, the
steel initiative, for example. This is an ad hoc reaction to a very
pressing political situation in this country. It could easily probably
have been done under the aegis of this program without making a
special ad hoc operation out of it.
But the steel industry and its pressing needs, which all of the
mineral industries have actually, and metal processing industries,
apparently has more political punch than the broad based needs of
the entire industry has. I can't figure that out, but there is prob-
ably a reason for it somewhere.
Mr. Ford. I would say that keeping the heat on is very impor-
tant. This whole initiative started many, many years ago but it
grew in proportion in the late seventies. Why did it grow in propor-
tion then? Because there was an awareness and a concern for stra-
tegic and critical materials. We were in a material short economy
then, and everybody worried about it.
We are not in that kind of an economy today, and so nobody wor-
ries about it. The problem disappears. We in America react to
crises only perhaps. We cannot allow ourselves to become compla-
cent because today we have plenty of all the materials we need, ex-
cesses of most of them as our mineral producing industries know.
So, you have to keep the heat on. We all have to keep the heat
on and educate and continue to press for what we think we know is
right.
Mr. Brown. Well, I don't think there is any question but what
the country would have been better off if we had foreseen and an-
ticipated and planned for the oil shortages of the early seventies. It
would have avoided the kind of catastrophic reaction that we actu-
ally developed and the major economic shifts that were necessary
in order to react to that shortage.
Our purpose in legislation of the sort that we are talking about
here is to do what we didn't do in connection with the oil short-
ages. I think we have to persuade the administration that it is im-
portant to do this, any administration.
Mr. Ford. In fact, if they implement the Council as they have
indicated this morning they are going to do, that will be a giant
step forward over the last 18 months' hesitation.
Mr. Brown. I would just like to raise a couple of points about
organization. Dr. McTague and others have indicated that OSTP
might be able to do the functions that we have provided here for
the critical materials council. There was some talk about the Cabi-
net level council doing these things, and my experience with OSTP
is that it does not have the staff and the resources to actually
engage in the detailed coordination of a substantive program. They
80
have certain responsibilities related to this, including the coordina-
tion of policy that determines the relationship between all the criti-
cal scientific and technological areas, but not the detailed manage-
ment of a particular sector.
The same is true with Cabinet level councils. They are just not
set up to engage in the kind of detailed analysis that is required for
an ongoing operational program. They are very good at resolving
high level policy difficulties when different Cabinet members have
different points of view about something, but not much good at the
other things.
Is my analysis of this wrong, or do you gentlemen have a differ-
ent point of view on this?
Mr. RoMAGNOLi. I guess I would share your point of view, Mr.
Chairman. I think the beauty of the council idea is you both ele-
vate the policy aspects to the highest levels and combine it with an
effective staff so you get the best of both worlds. It seems to me the
idea of the council was to get away from the bickering that goes on
in an interagency council process such as the old Cabinet council
idea.
Mr. Brown. There will be plenty of things for the Cabinet coun-
cil to do even with this Council, because whenever you address a
problem across the board in government, you are always going to
bring up areas in which there are different points of view which
need to be resolved at a higher level, and the Cabinet level council
is a good place to do that, but it can't even act on these unless
there is a responsible group that brings these to the proper level of
attention, it seems to me.
Mr. Ary. Cabinet officers have so many more important things to
do than to work with the details it takes to massage to get to that
policy level.
Mr. Ford. I think there is an important thing that the Council
called for in this act can do that a Cabinet council or OSTP cannot,
and that is hopefully to provide continuity across administrations.
One of the key problems is an up and down interest that we find
with changing administrations. Hopefully, although not guaranteed
because the President does name the Council, there will be a conti-
nuity across administrations, administrative changes, so that a
long-range outlook can prevail.
Mr. RoMAGNOLi. If I could add, Mr. Chairman, I think some of
this has to do with having a will. I think the administration has to
have a will to accomplish whatever the policy is. I remember when
Secretary Morton was chairman of the Energy and Natural Re-
sources Council in both Interior and Commerce, and he was in
effect an energy czar even though other agencies had responsibil-
ities, and decisions were made very quickly, but that was because
the administration had the will to implement the policy that way.
Mr. Brown. That was because Secretary Morton was such a big
man. He could enforce his will.
Mr. Ary. He came out of the right house.
Mr. Brown. Yes; but gentleman, I am not going to belabor these
points. I am trying, for my own benefit, to understand where the
roadblocks are here that prevent us from moving in this area, and
you have helped a great deal to improve my understanding of it. I
hope that we will see some action in the near future as was opti-
81
mistically predicted by one of our witnesses. If we don't see some, I
will give you an even better prediction that this committee will
engage in additional oversight to see what is going to happen here.
Thank you very much for your help.
Mr. Ary. Mr. Chairman, will you leave the record open so we
might send you materials?
Mr. Brown. We will leave the record open for 1 week or 10 days,
something like that, and you may provide us with additional mate-
rial. We may want to ask you some additional questions, also.
Thank you very much, and the subcommittee will be adjourned.
[Whereupon, at 11:42 a.m., the subcommittee recessed, to recon-
vene subject to the call of the Chair.]
THE NATIONAL CRITICAL MATERIALS ACT OF
1984
THURSDAY, OCTOBER 10, 1985
House of Representatives, Committee on Science and
Technology, Subcommittee on Transportation,
Aviation, and Materials,
Washington, DC.
The subcommittee met, pursuant to recess, at 9:40 a.m., in room
2318, Rayburn House Office Building, Hon. George E. Brown, Jr.
(chairman of the subcommittee) presiding.
Mr. Brown. The subcommittee will come to order.
This morning we are starting the second of 2 days of hearings on
the issue of critical materials. We have already heard testimony on
broad policy matters which focused principally on implementation
of the National Critical Materials Act of 1984. Today we will ex-
plore in depth the crucial question of critical materials and South
Africa as a specific materials policy issue.
This Nation is heavily dependent upon and therefore vulnerable
to the import of a number of critical materials from South Africa.
We currently import 55 percent of our chromium, 52 percent of our
manganese, and 48 percent of our platinum group materials from
that nation. In addition, over 60 percent of our cobalt is shipped
through South Africa via rail lines in central and southern Africa.
These numbers actually understate the significance of these critical
materials to our Nation's economy and defense. A long-term cutoff
of any or all of these materials has the potential for an economic
and strategic disaster worse than the oil crisis of the 1970's.
Viewing these facts, it seems evident that the administration's
current policy of constructive engagement is based in large part on
the Nation's materials import dependence from South Africa. As
such, our foreign policy is being held hostage to our critical materi-
als dependence. If we continue on our present course, we can only
lose now or in the long term. I would propose, instead, that we seek
means of constructive disengagement in order to minimize this de-
pendence and thus provide greater flexibility in our foreign policy
with South Africa. I believe a number of steps can be taken that, in
the short term as well as the long term, can achieve this goal.
These include: Finding and developing alternative sources of these
materials, developing new processes and substitutes, and using the
strategic stockpile in the event of a cutoff.
In today's hearing I intend to explore with our witnesses the
question of our import vulnerability from South Africa and alter-
natives to reduce or eliminate that vulnerability.
(83)
84
Now I would like to ask Mr. Packard, representing the minority,
if he would care to make a statement at this point.
Mr. Packard. Thank you, Mr. Chairman. I first would like to ask
unanimous consent for the material prepared — it is a study — the
Office of Strategic Resources Report for Interagency Materials and
Minerals, a field study to the Republic of South Africa, prepared by
that agency with the Director, Robert Wilson, I would like to enter
that into this hearing record.
[The material referred to follows:]
OFFICE OF STRATEGIC RESOURCES
REPORT OF INTERAGENCY MATERIALS AND MINERALS
FIELD STUDY TO THE REPUBLIC OF SOUTH AFRICA
CONTENTS
PREFACE
EXECUTIVE SUMMARY
I. RATIONALE FOR FIELD STUDY
II. ECONOMIC ENVIRONMENT AND OUTLOOK
III. CONCEPT OF STRATEGIC DEPENDENCY
Issues of Strategic Concern
IV. ACTIVITIES VISITED AND MAJOR FINDINGS
V. NATIONAL SECURITY CONTEXT
VI . NET ASSESSMENT
VII. recom>«:ndations
Appendix A - FIELD STUDY ITINERARY
Appendix B - BASIC INFORMATION SHEET ON SOUTH AFRICAN
ECONOMY
Appendix C - MINERAL PRODUCTION AND RESERVES OF SOUTH
AFRICA
Appendix D - U.S. AND ALLIED DEPENDENCY ON SOUTH
AFRICAN MINERALS
OFFICE OF STRATEGIC RESOURCES
U.S. DEPARTMENT OF COMMERCE
WASHINGTON. D.C.
JULY. 1985
85
PREFACE
The views expressed in the attached report are reported for the
purpose of highlighting both the current status of South
Africa's mineral and materials industries and the reliability
of flows of mineral and material products to the U.S.
industrial base and that of our allies. First-hand impressions
relating to South Africa's role as a producer, processor and
transshipper of mineral products vital to U.S. and allied
defense and civil production were solicited from incountry U.S.
officials and Southern African industrial executives and
governmental experts. The gathering of this body of opinion
together with direct observation of key production facilities
provides a mosaic useful to those concerned with having the
strategic minerals and materials interests of the U.S.
considered in the process of formulating U.S. policy toward
South Africa. This report is offered to the policy community
in the hope that it will be of value in deliberations on South
Africa in the months ahead. Any errors, mispercept ions or
inaccuracies are due to the pressure of time-constraints and
are the responsibilities of the authors.
The team is much indebted to officials of the U.S. Department
of State and officials of the Republic of South Africa for
making arrangements for the field study. Most especially the
team is indebted to the many South African industrial
executives, managers and workers who provided access to key
facilities and entertained open and free discussion of the many
sensitive issues explored. Finally, the report should be
interpreted neither as a statement of official U.S. Government
policy nor as the definitive exposition of the status of
U.S. -South African mineral security. Rather it should be seen
as an attempt to assess the current situation vis-a-vis
U.S. -South African mineral interest, an interest, which
continues to evolve within a rapidly changing geopolitical
context.
Robert Dale Wilson
Director
Office of Strategic Resources
John N. Ellison
Research Fellow
National Defense University
86
EXECUTIVE SUMMARY
During the period 11-23 May 1985 an interagency team
representing the Department of Commerce and Department of
Defense conducted a field study in the Republic of South Africa
for the purpose of gaining first-hand knowledge of the current
status and outlook of the South African minerals industry. The
findings of this field study will be used to evolve a more
effective interagency approach for the moniToring and
assessment of U.S. minerals and materials dependency patterns
and the potential impact of disruptions in the supply from
primary foreign sources such as the Republic of South Africa.
This analytical effort responds to the growing need of the
interagency community responsible for the formulation of
national minerals and materials policy options as related to
■defense and commercial interest of the U.S. The following
represent key findings derived from the field study:
South Africa possesses the greatest concentration of
strategic and critical materials and minerals
existing in the Western world. It has evolved a
world-class technical capability, managerial
competency and industrial base for their exploitation.
The U.S. provides only 2.8% of the capital stock in
South Africa. However. universal application of
economic sanctions and disinvestment policies by the
U.S. and other Western industrial societies might
greatly impact on South African prospects for growth
and development.
Since U.S. firms lead in providing progressive work
conditions. U.S. disengagement would have widespread
and undesirable effects on the upward mobility of the
black populace of both South African and neighboring
states .
Public and private leaders in South Africa are
concerned with its growing isolation from the Western
industrial world. But. nonetheless, at this time,
these groups take the position that Western
dependency on South African sources of minerals will
not be manipulated by them in a retaliatory manner to
counter politically motivated moves by their trading
partners.
A favorable resolution of internal political problems
could lead to the positioning of South Africa as a
greater regional economic power with sufficient
resources and know-how to stabilize and promote
economic and social development throughout the
entirety of Southern Africa.
87
Differences of opinion within the business community
and between government and business leaders with
regard to the adequacy and pace of change toward full
political representation of all elements of the
population are not accurately portrayed by experts
and opinion-makers external to South Africa. There
is a strong desire on the part of elements of the
business community to portray their views more
accurately to the U.S. public.
The maintenance of free market access to manganese,
vanadium, chromium, platinum metals, gold,
ferroalloys and cobalt produced in and/or shipped
through South Africa is vital for the continuing U.S.
defense buildup and for industrial preparedness in
the event of a national security emergency.
The recent rapid decline of the U.S. mining and
mineral processing industry base, together with
concurrent pressures to reduce the U.S. stockpile of
strategic and critical materials, has led to the
reality of growing potential leverage for South
Africa over the U.S. Economy.
In contrast to the Soviet Union which is virtually
self-sufficient in strategic and critical minerals
and materials the U.S. and its allies must confront
an increasingly and complex vulnerable system of
production and distribution. The implications of
these new realities for assessing the strategic
balance and for formulating national security
strategic policies and programs for the U.S. and its
allies are profound.
88
REPORT OF INTERAGENCY MATERIALS AND MINERALS
FIELD STUDY TO REPUBLIC OF SOUTH AFRICA
I. RATIONALE FOR FIELD STUDY
During the past twelve months a widening circle of interagency
representatives concerned with the formulation of national
minerals policy has become increasingly aware of the need to
assess vulnerabilities associated with potential disruption of
supplies of strategic and critical materials and minerals flows
emanating from the Republic of South Africa. In addition, the
National Strategic Materials and Minerals Policy Advisory
Committee chaired by Admiral William Mott, USN-Ret.. has
expressed concern for the growing dependency of the U.S. on
sources of minerals and materials produced in unstable and/or
vulnerable international locations. These long-standing
interests in the minerals security of the U.S. together with
the rapid transition of U.S. basic industries and, in some
cases, the absolute decline in domestic production of
strategic materials and minerals, has led to the need to place
recent developments in South Africa and their inherent national
security implications for the U.S. into sharper focus. As the
principal agency chartered with coordinating the interagency
concerns for both the producer and user segments of the U.S.
industrial base, the Office of Strategic Resources (OSR),
Department of Commerce, has taken the lead in attempting to
definitize the new realities of the U.S. minerals and materials
security r<^-itiori. Consequently OSR has held several business
and government seminars, has conducted sectorial studies of the
U.S. minerals industry, and has undertaken to draw together
assessments of the national security and economic development
implications of the changing minerals and materials environment
for U.S. industry.
In order to gain first-hand perspectives on current and future
vulnerabilities associated with the trade in minerals and
materials linking the U.S. and its allies to South African
supply sources Mr. Robert Dale Wilson. Director. OSR/DOC.
organized an interagency field study to the Republic of South
Africa which was conducted during the period 11-23 May 1985.
This effort gained the support of various Federal agencies
outside the Department of Commerce including: the Department
of State, the Mott Committee. Department of the Interior, and
the National Defense University. As a means of enhancing the
prospects for linking the economic dimension of minerals
availability from South Africa with national security
considerations. Dr. John N. Ellison of the National Defense
University, was detailed to assist in formulating the field
study and its coverage of national security-related issues.
Following a series of briefings by the responsible Desk
Officers and other experts on South Africa at the Departments
of Commerce and State, and extensive consultations with the
Embassy of South Africa in Washington. D.C.. Mr. Wilson and Dr.
Ellison proceeded to the Republic of South Africa. A detailed
itinerary of the visit appears in Appendix A.
89
II. ECONOMIC ENVIRONMENT AND OUTLOOK
The recent economic performance of the Republic of South Africa
has been substantially affected by the general business cycle
conditions in Western Europe and North America. The recessions
of 1981 through 1983 induced similar conditions in South
Africa. As a basic raw materials supplier, the effects of
reduced demands for industrial products in the Westhave been
reflected in South Africa in terms of negative growth in real
GNP, double digit inflation, high rates of unemployment and
adverse shifts in both trade and fiscal balances of the nation
for 1982 and 1983. These diminished economic realities have
resulted in some setbacks in teems of the rate of growth and
development of many industrial sectors of the South African
economy. Most particularly affected has been the further
development of the processing industries designed to increase
the value-added to minerals produced in the country, a major
goal of the South African government. Additionally, foreign
investment has been affected adversely due to the declining
domestic aggregate demand for durable goods and other
manufactured products. However, due to the upturn in the U.S.
business cycle and later improvements on economic conditions in
Western Europe, and the continuing strength of the Japanese
economy. the demand for South African mineral exports has
improved substantially since 1983. It is expected that overall
economic conditions of South African will slowly improve in the
next several years, resulting in positive developments in terms
of real GNP, employment and inflation.
It is evident that the experience of three successive years of
high inflation with little or no real growth has brought about
a mote realistic view of South Africa's long-term economic
potential and that the traditional dependency on the export of
gold at high international prices will not suffice in providing
cash flow for the necessary investment required for national
growth and stability. Thus, the need to develop a new balance
between consurciption and investment and to provide higher rates
of savings for capital formation have become recognized as a
necessities by the South African Government. Furthermore, the
recent political difficulties internal to the country and the
related international disinvestment campaign further underscore
the need for striking a new balance between internal savings
and investment. These realities were much evident throughout
the field visit. The impressions derived from both government
and business leaders indicated a growing seriousness of
purpose in addressing the need for economic reform leading to a
more self-sufficient industrial structure.
The basic strategy adopted by the Government involves providing
financial incentives to develop self-sustaining internal
sources of capital sufficient to build the needed mining and
processing industries. As in the past, foreign investment was
seen as an important potential contributor to these goals. The
present structure of foreign investment originated from the
European Economic Community (primarily the United Kingdom)
90
54%; and North and South America, (moBtly the United States) -
23\, was considered roost useful to these ends. As both of
these sources of foreign investment capital are considered
somewhat questionable for the future, due to pressures for
sanctions and disinvestmentE, it was nonetheless apparent that
the economic structure of South Africa could remain reasonably
stable with reduced flows from these sources. Specifically,
the U.S. investment reached a peak of $2.6 billion .in 1981 and
by year-end 1983 stood at $2.3 billion. The 1983 figure
represented slightly less than 2.8% of the total capital stock
of South Africa. The same basic pattern of proportionality of
foreign investment remains in place in 1985. Therefore, the
loss of further incremental additions to the U.S. position were
considered to be of marginal impact. Overall, both government
and business executives seem confident of the future and
largely optimistic that sanctions and disinvestment moves on
the part of the U.S. and other Western nations could be
absorbed and/or substituted for by other available sources of
capital. Finally, the prospects for a return to economic
prosperity in Western industrial societies was seen as
inevitably improving the demand for South African minerals and
materials export. This, in turn, is expected to result in
improved economic performance to levels slightly lower than the
highly prosperous period of the 1970's when minerals prices
were unusually high by historical standards. Attached as
Appendix B is a Basic Information Sheet on the South African
economy which provides specific data on recent performance and
structural evolution.
111. CONCEPT OF STRATEGIC DEPENDENCY
The two key factors which determine the degree of concern for
minerals and materials availability as related to U.S. national
security are: (1) the relative importance of the end use of
the commodity and (2) the vulnerability of the geographical
source. Among the related factors that must be considered are
import dependency, number and dispersion of significant
suppliers, criticality to defense production, and geological
scarcity. These factors must. then. be related to
contingencies which might intrude on assured access and
available supplies. In the case of South Africa a number of
recent developments relating to internal stability and
external threats to access bring into question the degree to
which U.S. policy-makers should be concerned about the
vulnerability of the U.S. -South Africa minerals relationship.
Of specific importance are the vast reserves of platinum,
chromium, vanadium and manganese, commodities which South
Africa produces on a major international scale. In addition,
the vital rail network provided by South Africa constitutes the
main outlet for cobalt produced in neighboring Zambia and
chrome produced in Zimbabwe. Furthermore, imports of food
petroleum products, machinery and spare parts destine for these
nations move over this same system. It is, therefore, vital
that the ports and rail system of South Africa remain open if
these countries are to continue to produce minerals and
associated products. A summary of major minerals production
91
and South African sharcB of the world market are shown in
Appendix B. Overall, these figures suggest that the South
African position both in terms of reserves and production of
minerals and materials essential not only to U.S. defense and
commercial production, but also to those interests of Western
Europe, Japan and other Western countries, is most substantial
at present and will continue to be so in the foreseeable
future. Therefore, recent economic and internal political
developments have potential for destabilizing minerals and
materials markets and, in turn, impacting significantly on the
economic and national security status of numerous nations in
the West.
Issues of Strategic Concern - In light of the foregoing
discussion of concept, the following associated issues were
considered by the field study team and explored with
knowledgeable South African authorities during the visit:
Economic Environment and Outlook
Current Status and Performance of the Mining and
Minerals Processing Industries
Mineral Policy Framework and Business and Government
Relationships
Capacity of Infrastructure to Support the Mining
Industry
Status of Technological Development in Mining and
Materials Processing
-- External and Internal Threats to Mineral Security
Potential Impact of Economic Sanctions and Internal
Investment Limitations
Outlook for Social-Economic Evolution and the Role of
Industrial Leadership
South Africa as an Economic Stabilizer for Southern
Africa
IV. ACTIVITIES VISITED AND MAJOR FINDINGS
U.S. Embassy, Pretoria - Extensive briefings relating to the
current political, economic and national security situations in
South Africa were presented by Embassy personnel. Throughout
these discussions frank opinions were expressed regarding U.S.
interests in South Africa from a long-term point of view. The
concept of "constructive engagement" was elaborated in terms of
a maximum effort on the part of the country team to have access
to all shades of South African public opinion. With respect to
the security position of South Africa, the Soviet threat was
seen to be focused primarily on gaining influence in the
so-called "Front Line States" and thereby isolate South Africa
from its neighbors in the long-term future. Soviet designs for
acquiring bases for Naval and Air operations would seem to be a
likely long-term goal. But aside from currently providing
weapons. training and logistical support to cross-border
insurgents the direct Soviet role is considered minimal. The
main security problem confronting the South African government
was seen to stem from internal lawlessness and terrorism
activities. The capabilities of police and security forces
were considered at this time to be adequate to handle such
contingencies.
92
Department of Mineral and Energy Affairs. Pretoria - This
department is responsible for policy studies and analysis and
data management and reporting on all aspects of the minerals
situation in South Africa. The Chief Director of the Bureau
and a senior minerals specialist provided an overview of the
structure of the minerals industry, current assessments of
minerals endowment, regulatory framework and overall policy
architecture for the industry's growth and development. A
major theme emphasized throughout these discussions was that
while South Africa possesses both the quantity and quality of
mineral resources sufficient to make it a leading supplier to
the world economy for the foreseeable future, there is no
intention on the part of current leadership to utilize minerals
trade as an economic weapon. The impression conveyed was that
South Africa's intention is to continue to operate its minerals
enterprise on a private basis, open for foreign investment and
non- political in terms of market orientation.
With respect to its minerals technology, these officials
expressed confidence that South Africa will continue to be a
leader in applying advanced technology and that its record of
productivity improvement, safety and efficiency gain is of a
world-class caliber. Emphasis on both growth and development
in the minerals sector was seen as the best approach for
sustaining national economic development with special emphasis
on increasing the value-added content of mineral based exports
(i.e.. ferrochrome, f er romanganese and specialties metals
products). Finally, reference was made to linkages of the
South African economy and infrastructure with neighboring
minerals producing states. The fact that the South African
rail system and ports are the major outlets for the mineral
exports of these countries and the fact that South Africa
provides technical and financial assistance for the maintenance
of minerals production of neighboring countries, makes it a
base for expanding economic and political stability throughout
the region. Data on South African mineral reserves and
production are presented in Appendix B.
Visits to Mining Operations, Processing and Research Activities
The team made extensive visits to underground, open pit,
processing, smelting and research activities of the following
organizations: (a) Rustenburg Mines, Ltd. (subsidiary of
Johannesburg Consolidated Investment Co. (JCI): (2) Kloof Gold
Mining Company. Ltd. (subsidiary of Gold Fields of South
Africa. Ltd.); (3) Middleburg Ferrochrome Plant (subsidiary of
Barlow Rand. Ltd.): (4) South African Manganese Corporation
(SAMANCOR) (subsidiary of General Mining Union Corporation
(GENCOR)): (B) MINTEK (Government Research Laboratory). Also,
the corporate headquarters of the mining houses which control
the above companies were visited. A brief description of these
industrial firms is also presented in Appendix A. In addition,
senior executives of each of the parent corporations of the
firms listed above held informal discussions with the team at a
reception hosted by the U.S. Embassy Regional Resources Officer.
93
Key Findings - The following is an amalgamation of key findings
regarding the status of the South African minerals and
materials industries and South African perceptions regarding
relations with the U.S. both of which were derived from these
first-hand contacts.
Throughout the visit both industrial and governmental leaders
expressed the view that South Africa is basically a
Western-oriented country, non-communist, and a close friend of
the U.S. in spite of recent political and diplomatic
developments. As tangible evidence of this, in World War II
and in more recent years. South Africa has consistently
contributed to the defense of the U.S. and Western Europe. It
sees itself greatly misunderstood in today's international
environment. The level of development in South Africa in
economic, industrial, social and national security terms, makes
it a potential leader and stabilizing force for the whole of
Southern Africa. The fact that South Africa provides
transportation and communication infrastructure for the entire
region was emphasized as an illustration of the advantages of
economic integration which not only benefits South Africa but
also neighboring African states.
The technical and managerial capabilities of mineral company
executives were observed to be of high quality. The managerial
techniques for planning, financial management, marketing and
human resource management displayed are equivalent to those
employed in the U.S., Western Europe and elsewhere in the
industrialized world. Of special significance was the
unexpectedly broad range of opinion expressed by industrial
leaders concerning current South African government policies.
The preponderant opinion expressed to the team by the business
leaders regarding the political evolution of South Africa was
that the nation needs to move faster toward total
representation within the government of all societal elements.
Frequently the feeling was expressed that a greater involvement
of the black population in the economic life of the nation
would prove to be beneficial not only in political terms but it
would also greatly enlarge the domestic market for South
African produced goods and services leading to more rapid
growth and development. Most business leaders spoke of the
pragmatic necessity for accomplishing these reforms at a rapid
pace. But some expressed differences as to the adequacy of the
current rate of change.
Specifically, within the mining industry there is great pride
regarding the contributions that this industry has made toward
black upward mobility; the relatively high pay for black
workers: and the quality of working and living condition
provided. Recognition of black capacities for training and
future supervisory and managerial roles was considered by most
mining managers to be both desirable and likely in the near
term. Present legal restrictions on the advancement of blacks
to such positions represent an obstacle and in addition, the
54-846 0-86
94
reticence of white-dominated mining trade unions also inhibit
this development. The striking diversity of the black labor
force engaged in mining was unexpected. Specifically, numerous
tribal groups, linguistic differences and the large proportion
of migrant workers from outside South Africa complicate the
potential for accelerating economic opportunity for blacks.
But throughout the mining industry there seems to be a
dedication to overcoming these difficulties.
The technical and engineering accomplishments of the South
African mining industry are extremely impressive. The
extraordinary challenge of deep mining operations in the
precious metals sectors (i.e. gold and platinum) is most
demanding and has placed South Africa in a state-of-the-art
technical leadership position. The engineering talent of the
nation is composed of a combination of professionally qualified
emigrants and persons trained under unique industry-university
cooperative programs. The financial support of the latter is
primarily private. As the product of the precious metal
enterprises generates a large cash flow it is possible for them
to make the heavy investment necessary for the extensive
exploitation of these high value resources. In addition, the
gold industry has traditionally produced surplus earnings which
have allowed for diversification into other marginal mining
activities as well as the generation of downstream processing
capabilities for enhancing the value added to South African
mineral products. This has led in recent years to the
development of extensive ferrochrome. f er roraanganese.
speciality steel and coal mining activities all of which are
internationally competitive and growing rapidly.
With respect to South African technological development in
mining and processing activities. MINTEK. a specialized
government laboratory. provides unique opportunities for
business and government cooperation. Specifically. MINTEK
provides an institutional setting for cooperative research
which can be either proprietary, joint or publicly funded.
Most projects relate to improving extraction and processing
techniques. Plans have been formed to extend MlNTEK's efforts
into such areas as market research and econometric studies of
the world minerals trade. The research reports and
publications provided by MINTEK are widely respected within the
international mining and materials communities.
In assessing the current status, capabilities and outlook for
the South African mining and processing industries, it is
essential that the organizational structure of important
segments of these industries be understood. As the South
African minerals industry, unlike those in most developing
countries. is controlled by private vis-a-vis governmental
structures, organizational evolution has been complex. The
major mineral deposits, mining facilities and processing plants
are typically operated by subsidiaries of larger mining
houses. As the products of these operations are often multiple
due to the nature of the ores produced and processed, there is
95
no clear demarcation separating these organizations into neat
specialized commodity classifications. A case in point is the
production of Platinum Group Metals which consists of
palladium, iridium, osmium and other forms. These forms are
associated with zinc and copper. Gold production is associated
in turn with uranium. Historically, South African minerals
production was initially concentrated in the precious metals
category and as major firms expanded they entered other lines
of minerals and processing activity. This process has
generated a structure of related minerals companies with
interlocking boards of directors and complex arrangements for
finance, marketing and overall management which have some
similarity to multiproduct conglomerate companies operating in
the U.S. Also, the senior leaders of many of these large
holding companies arc- seen to be industrial statesmen who have
direct access to government leaders on a day-to-day basis.
Thus, business and government relationships in the mining and
processing industries are close and government policies,
agendas and programs are extremely supportive of private sector
planning for developing South African minerals.
Perhaps the roost striking example of industrial influence is
represented by the Chamber of Mines where the overall
monitoring of public policies is accomplished for industry.
The Chamber consists of six mining and finance houses: Anglo-
American Corporation; General Mining Union Corporation; Gold
Fields of South Africa; JCl; Anglo-Transvaal and Rand Mines.
These six firms control approximately 85% of all mineral
production in South Africa. This extraordinary degree of
concentration, economic power and influence together with the
strong supporting role of the mineral agencies of the South
African Government has led to a world-class competitive
position based on efficiencies in minerals production.
Extensive use of tax incentives together with a policy of light-
handed regulation has further enabled the large mining houses
to prosper. The net effect of these arrangements has produced
a confident, optimistic and future orientation on the part of
South African minerals executives and government officials
alike.
On many occasions private sector executives and managers raised
the question regarding perceptions of the South Africans held
by opinion-makers in the U.S. Their general concern seemed to
be that South Africa is, in fact. misperceived and
underestimated in terms of the degree of economic and political
development. They felt that in reality the mining and
manufacturing sectors offer the greatest economic opportunities
for black South Africans but that this reality had not been
adequately communicated. Their queries to the team were
primarily to determine how U.S. leaders perceive South Africa
and if and when the U.S. might impose economic sanctions
including the limitation on loans and possible disinvestment by
U.S. firms. The team offered the view that the policy of the
current U.S. Administration was that it stood opposed to
economic sanctions and stood for its stated policy of
96
"constructive engagement". It was explained that the outlook
for economic sanctions in the Congress was somewhat less
certain. South African business leaders indicated such a
prospect would be unfortunate as they value both commercial and
other relations with U.S. business partners. It was further
stated that it would be possible to replace U.S. involvement
with support from Western European and Japanese partners in the
future. The basic feeling expressed was that such other
partners are more pragmatic and possibly more reliable under
current and expected circumstances. One related concern worth
note was that expressed by several mining officials that they
felt that U.S. equipment and field service and engineering
support for U. S . -provided machinery (i.e.. Caterpillar) were
superior to that available from Japan and elsewhere.
Therefore, it was the hope of these individuals that future
events would not lead to problems of soutcing of U.S. equipment
and support.
V. NATIONAL SECURITY CONTEXT
Within the past several years South Africa seems to have
reoriented its national security priorities from its role in a
broad global context to the more immediate and pressing
challenges emanating from its immediate region and from
internal sources of discontent. In many respects discussions
with South African business and government leaders give the
impression that the nation sees itself in much the same way as
Israel in terms of being a beleaguered state with few
friends. As a non-coramunist . progressive and highly developed
country within the underdeveloped region of Southern Africa, it
feels principally threatened by a combination of domestic
instability and cross-border incursions from neighboring
states. Consequently, the South African defense programs have
become reoriented toward defense of its borders to include
extending its national influence into neighboring areas via
demonstrated capabilities to repel incursions into its
territory. Recent security and economic agreements with
neighboring states provide for economic assistance and
cooperation in countering the activities of such groups as The
African National Congress (ANC) . These efforts have resulted
in coordinated operations which have been effective in
stabilizing the eastern and northern borders. The South
African presence in Namibia and operations northward to the
Angolan border have also demonstrated the substantial
operational capabilities of the South African military. The
overall strategy in these cases seems to be both the
elimination of tangible threats to South African territory as
far forward as possible and simultaneously the building of
stabilizing relationships with bordering states where possible.
Internally. South African law enforcement efforts seem to be
targeted on reducing the threat to law and order resulting from
unrest over apartheid and on countering terrorist activities
centered in the urban areas. To date these combined efforts
seem to have been effective in protecting key infrastructure
97
supporting transportation, communication and industrial
activity. As a result little concern was ex'pressed by minerals
industry officials regarding safety and long-term
suEtainability of mineral production. In addition, the special
defense programs that have been initiated to protect rail,
power, and port systems have been effective in preventing
disruption. Thus, in terms of both territorial defense and
internal security the South African Government and its military
and law enforcement organizations seem capable of maintaining
the security essential for the functioning of minerals and
materials processing activities vital to the U.S. and other
industrial trading partners.
With respect to the potential threat to the Sea Lanes of
Communication (SLOCs) over which minerals flow to these same
industrial nations. South African naval and air forces have
only limited capabilities for strategic defense. Likewise U.S.
and NATO forces available for the defense of the Cape route and
South Atlantic/Indian Ocean SLOCs are limited. At the present
time Soviet naval forces in the region operating from bases
such as those in South Yemen (Aden and Socutra), Ethiopia,
Mozambique and Angola do not represent an extensive threat.
But should one emerge, the South African military leadership
would, in all likelihood reassess its own capabilities for
defense of SLOCs and would offer basing and logistical
support for Western nations willing to assist. This
responsibility appears to be one that should claim not only the
attention of U.S. military planners, but more importantly,
those of Western Europea.T nations and Japan. Due to the
substantially greater minerals dependency inherent in the
economies of these nations and the associated criticality of
South African trade, these nations confront a major strategic
challenge should shipping routes become disrupted (See Appendix
D). It would seem appropriate that the U.S.. Western Europe
and Japanese contingency plans should be coordinated with those
of South Africa toward the end of securing South Africa's
SLOC ' E .
VI . NET ASSESSMENT
While optimistic concerning the fundamental strength of the
South African minerals industry, its technical and managerial
competency. and supporting programs of the South Africa
Government, the industry's leadership is nonetheless concerned
regarding the image of South Africa currently portrayed in the
U.S. and other industrialized countries. The growing movement
for punitive economic sanctions and possible disinvestment has
led to the development of increasing concern and feelings of
isolation. As yet this feeling has not manifested itself in
overt threats to utilize the substantial dependency on South
Africa for strategic and critical materials either as a point
of leverage or for economic warfare. Developments such as the
rapid decline of the U.S. mining industry limits the number of
alternative sources of supply. Together with recent moves to
reduce the holdings of the U.S. stockpile of strategic and
98
critical minerals and materials, these developments lead to the
reality of growing potential leverage for the South African
Government over the U.S. economy. When this new economic
reality is viewed in terras of vital U.S. interests, concerns
for the continued availability of materials from South Africa
inevitably must weigh more heavily in the calculations for U.S.
national security. Thus, the current U.S. defense buildup and
plans for the achievement of a greater conventional force
capability together with improved sustainabil ity and .industrial
base capacity, are inevitably becoming more intertwined with
developments in Southern Africa. Also, the prospects for
accomplishing the economic and industrial transition currently
underway in the U.S. civil economy, with associated declines in
basic industries and advances in higher technology sectors,
involve new concerns for Southern Africa as a major mineral
producer and material processor nation. The' net effect of
these security and industrial developments makes it incumbent
on the policy community to factor in South Africa's unique
contribution to U.S. economic well-being in considering options
for political and diplomatic actions. In contrast to the
uniquely near independent position of the Soviet Union in terms
of external mineral dependency, the U.S. and its allies
confront a continuous challenge in managing vulnerabilities of
sources of supply. Thus the calculus for determining east-west
strategic balances and for formulating security decisions in
the future should include the continuous assessment of the
interaction of South Africa with the economies of the U.S. and
its all ies .
VII. RECOMMENDATIONS
As the main purpose of the field study mission was designed to
gain first-hand knowledge of the current conditions in South
Africa relating to the minerals industry, transport and the
overall reliability of minerals and materials supply from the
U.S. perspective, it now remains for the interagency community
to evolve a comprehensive analytical model for relating the
dynamic factors affecting vulnerability with commercial and
security interests. Further. the role of South Africa in
supplying minerals to the U.S. and its European and Japanese
allies must also be assessed on a continuous basis, not only
from reported data, but also from discrete first-hand
observation. Thus, generalizing from this South African
situation, on the supply side there is the need for the
development of a methodological approach for assessing
vulnerability and dependency patterns affecting the U.S.
industrial base under a number of planning scenarios covering
the spectrum of likely contingencies over the next five to ten
years. Such as effort would trace the flows of minerals and
materials from the point of production via distribution
channels to the ultimate U.S. and/or allied end user. Such an
analysis would provide a basis for the determination of the
impact of probable disruptions of supplies, and would provide a
refined basis for policy formulation in the interagency
community in the areas of: emergency preparedness, industrial
mobilization, stockpile requirements estimation and other
aspects of national resource allocation planning for
contingencies .
99
On the demand side of the minerals flow, it is essential to
gain the current perspective and long-range outlook from
private sector. Users of materials and minerals should be
surveyed in order to adequately determine potential impacts of
supply shortfalls and production limitations related to such
contingencies. As it is the charter of the Office of Strategic
Resources to stay abreast of minerals and materials conditions
from both the supply and demand sides of the market, it is an
appropriate extension of current OSR efforts to provide
leadership within the interagency community to evolve
appropriate methodologies and array programmatic responses to
possible mineral and materials needs. Finally, as experience
is gained in addressing the immediate problem of South African
minerals supply vulnerability from the U.S. perspective,
parallel efforts should be undertaken to assess other materials
and minerals suppliers in Southern Africa, i.e., Zaire, Zambia
and Mozambeaque; in South America, i.e., Brazil. Chile, Bolivia
and Venezula and in Southeast Asia i.e, Australia, Malaysia and
Indonesia to determine potential consequences of disruption of
these sources of supplies. Also assessments of the potential
for expanding production and securing access to critical
minerals produced in Canada and Mexico should be developed. It
is, therefore, recommended that the Department of Commerce
endorse a greater interagency effort to draw a comprehensive
picture of the U.S. security position in the global minerals
and raw materials environment.
Of utmost importance for the near term is the need for the U.S.
and its allies in Western Europe and Japan to coordinate
strategies and policies to maintain open access and free
markets for the following critical materials: manganese,
vanadium, chromium, platinum meta.ls, manganese, gold,
ferroalloys and cobalt. Disruption of the orderly supply flows
and market allocations of these critical materials has the
potential for major dislocations not only of the peacetime
economies of the major industrial societies of the West but
also on vital defense production during periods of preparation
or actual wartime.
100
D.S. DEPENDENCY
on the
REPUBLIC OP SOUTH AFRICA
for
SELECTED NONFDEL MINERALS
• • *
Mineral
South African
Percent of
1984
World Mine
production
Percent D.S.
ConEumptlon
from S.A.
(ave. Be-831
49
Overall
D.S.
(62-641
91
Percent
E.E.C.
{1S62)
lee
Pependenci'
Japan
(iS631
Flatinusi
42
95
ChromiuB
27
55
S2
92
99
Hanganese
11
39
99
99
95
Cobalt
B
iBl*
95
lee
100
Vanadiuoi
3e
44
41
100
70
* Percent of D.S. consumption that is transported tbrouafa the
Republic of South Africa.
Source: D.S. Bureau of Mines.
Prepared byt Office of Strategic Resources
D.S. Department of Commerce
May 30, 1985
101
NET IMPORT RELIANCE: 1984
SELECTED NONFUEL MINERAL MATERIALS
U.S.A.
COLUMBIUM
100
MiCA (sheet)
100
STRONTIUM
100
MANGANESE
991
BAUXITE fa ALUMINA
96
COBALT
95;
TANTALUM
941
FLUORSPAR
91
PLATINUM GROUP
91
CHROMIUM
B2I
TIN
791
ASBESTOS
751
NICKEL
74
POTASH
74
TUNGSTEN
711
ZINC
671
BARITE
641
SILVER
6li
MERCURY
601
CADMIUM
561
SELENIUM
511
VANADIUM
41
GYPSUM
,3k.
IRON fa STEEL
23
COPPER
21
SILICON
21
IRON ORE
19
LEAD
18
SULFUR
171
GOLD
16! ■
NITROGEN (fixed)
141
ALUMINUM
9!
MAJOR SOURCES
Brazil, Canada, Thailand
India, Belgium, France
Mexico, Spain
So. Africa, France, Gabon, Braril
Australia, Jamaica, Guinea, Suriname
Zaire. Zambia, Canada, Japan
Thailand, Malaysia, Brazil, Canada
Mexico, So. Africa, China, Italy
So. Africa. UK. USSR
So. Africa, Zimbabwe, USSR, Philippines
Thailand. Malaysia, Indonesia, Bolivia
Canada, So. Africa
Canada, Australia, Norway, Botswana
Canada. Israel
Canada, Chiru. Bolivia
Canada, Peru, Mexico. Australia
China, Morocco. Chile. Peru
Canada, Mexico, Peru, UK
Spain, Japan, Mexico, Turkey
Canada. Australia, Mexico. Peru
Canada, UK, Japan, Belg.-Lux.
So. Africa, Canada, Finland
Canada, Mexico, Spain
Japan, EEC, Canada
Chile, Canada, Mexico, Peru
Canada, Braril. Norway, Venezuela
Canada, Venezuela, Liberia, Brazil
Canada, Mexico, Australia, Peru
Canada, Mexico
Canada, Switzerland, Uruguay
USSR, Canada, Mexico, Trinidad fa Tobago
Canada, Ghana, Japan, Venezuela
USBuMines
102
NET IMPORT RELIANCE: 1983
SELECTED NONFUEL MINERAL MATERIALS
E.E.C.
JAPAN
COLUMBIUM
MICA (SHEET)
STRONTIUM
MANGANESE
BAUXITE & ALUMINA
COBALT
TANTALUM
FLUORSPAR
PLATINUM GROUP
CHROMIUM
TIN
ASBESTOS
NICKEL
POTASH
TUNGSTEN
ZINC
BARITE
SILVER
MERCURY
CADMIUM
SELENIUM
VANADIUM
GYPSUM
IRON & STEEL
COPPER
SILICON
IRON ORE
LEAD
SULFUR
GOLD
NITROGEN (FIXED)
ALUMINUM
MOLYBDENUM
PHOSPHATE
100
100
E3|
■M.
99
100
100
18
100
32
91
66
"ioT"
7S\
67
19
100
IE
991
IK)
93
16
74
HL
23
F
~M\
27]
100
100
100
100
95^
100
100
100
100
95
9?
951
98
100
100
81
»
40
75^
70^
W.
83
100
99
69
M.
85
99^
100
USBuMinai
103
NET IMPORT RELIANCE: 1984'
SELECTED NONFUEL MINERAL MATERIALS
U.S.S.R
COLUMBIUM
N'.ICA lihcet)
£1 RONTIUM
K'A\GA\ESE
BAUXITE b AlUMINA
COBALT
TAMALUM
FLUORSPAR
PLATINUV. GROUP
CHROMIUM
TIN'
ASBESTOS
.MCKEL
POTASH
TUNGSTEN
ZINC
BARITE
SILVER
N'ERCURY
CADMIUM
SELENIUM
VANADIUM
GYPSUM
IRON fa STEEL
COPPER
SILICON
IRON ORE
LEAD
SULFUR
GOLD
MTROGEN (fixed)
ALUMINUM
K* 0 1 Y E D E N U M
PHOSPHATE
13
4F
<7
S3
^5
m
<9
_m:
p_
m
MAJOR SOURCES
Indie
G'eece Guinea. HunSa^y. India Yugo
Cuba
China, Mongolia. Thailand
f/alsysia. Singspore. UK
China, Mongolia
Australia, Finland, Peru, Polend
Buloana. Kv Korea, Yugoslavia
S^^■iuerland, UK
EEC. Japan
Mongolia
U56uMin*>
104
WORLD MINE PRODUCTION - 1984
USBuMinas
105
Mr. Brown. Without objection, it will be made a part of the
record.
Mr. Packard. Thank you, Mr. Chairman. And then I will read
Mr. Lewis, the ranking minority member of this subcommittee, his
statement:
The potential problems facing us because of our dependence on foreign sources for
our critical materials are sobering, to say the least. Today we are seeing unrest in
South Africa, and this makes this hearing especially timely. However, this issue is
larger than the debate over how we deal with today's South African Government.
We need only to look at what happened in Iran to realize that we cannot always
rely on the present government in power remaining there.
We need to look at ways of reducing our dependence on these foreign countries
and devise contingency plans to minimize the impact of a sudden cutoff of critical
materials. Certainly we need to ensure that our stockpiles are adequate to see us
through until we can develop alternative solutions.
The Office of Technology Assessment has conducted a fairly comprehensive analy-
sis of what some of our options are, and I am pleased to see that they will be testify-
ing today to share some of this information with us. We must critically examine
these alternatives to make a realistic assessment of their cost — cost in terms of dol-
lars, jobs, and environment — and other factors affecting the quality of life.
For example, most of the platinum used in the United States today goes into auto-
motive catalytic converters. There are several options available to us if we could no
longer get South African platinum, but they all carry a price tag.
Pratt & Whitney uses 1,500 pounds of chromium and 900 pounds of cobalt, nearly
all of which comes from South Africa, to build one jet engine for an F-15 or F-16
fighter. Pratt is the major employer in my district, so I have a special interest in
seeing how cutting off these materials would be handled.
We need to be concerned over the stability of the countries with whom we trade.
However, we also need to be realistic and, above all, we should be consistent with
our trading partners. The fact is, we trade with many countries whose internal poli-
cies we don't like. Certainly our trade with the Soviet Union in no way signifies our
approval of their treatment of Jews or their actions in Afghanistan, and it should be
pointed out that nearly all of the chromium that isn't produced in South Africa is
produced by the Soviet Union.
So, while it is a laudable goal to free our foreign policymakers from the con-
straints brought on by our critical materials needs, we should also recognize that
our trade policy should not be determined solely on the basis of the internal policies
of our trading partners. It is important that we have maximum freedom in dealing
with these important issues, and also that we have a clear understanding of what
our options are.
The expert witnesses who will be testifying here this morning are certainly well
qualified to speak on this subject and I look forward to hearing their testimony.
That's the end of Mr. Lewis' statement. May I just comment for
myself that I am extremely interested in this issue. I am very
pleased that you have called this hearing and look forward to hear-
ing as much as I can. Unfortunately, I have a markup at 10 in an-
other committee, and so I will be in and out, but I want you to
know that I appreciate this hearing and look forward to the wit-
nesses' testimony.
Mr. Brown. Thank you, Mr. Packard. I also wish to commend
the statement by Mr. Lewis. It's an excellent statement. Mr. Lewis
will be here, hopefully, in a few minutes so that he will be able to
participate in the hearing process.
Our first witnesses are on deck and ready to go, so I welcome you
here. Mr. Wisner, you may begin the morning's session with your
statement. Of course, the full text will appear in the record if you
care to summarize it in any way.
106
STATEMENT OF HON. FRANK WISNER, DEPUTY ASSISTANT SEC-
RETARY OF STATE, BUREAU OF AFRICAN AFFAIRS, U.S. DE-
PARTMENT OF STATE, ACCOMPANIED BY HON. ALLAN WENDT,
DEPUTY ASSISTANT SECRETARY OF STATE FOR ENERGY AND
RESOURCES POLICY, BUREAU OF ECONOMICS AND BUSINESS
AFFAIRS
Mr. WiSNER. Congressman Brown, good morning, sir. Mr. Pack-
ard, good morning. My statement is brief and I will read it and
enter it, therefore, into the record.
My name is Frank Wisner. I am the Deputy Assistant Secre-
tary
Mr. Brown. Can you pull the mike up a little bit closer?
Mr. Packard. It may not be on.
Mr. Brown. That's it. Yes. Good.
Mr. Wisner. My name is Frank Wisner, and I am the Deputy As-
sistant Secretary of State for African Affairs. I am pleased to testi-
fy before this hearing of the House Subcommittee on Transporta-
tion, Aviation, and Minerals. My colleague from the Bureau of Eco-
nomic and Business Affairs in the Department of State, Allen
Wendt, who is the Deputy Assistant Secretary for Energy and Re-
sources Policy, joins me at this table. The purpose of my brief open-
ing remarks is to give a general overview of U.S. policy in southern
Africa.
The United States imports large quantities of strategic materials
from South and southern Africa. Our reliance in this respect is one
of the several factors we have weighed in calculating our policy
toward South and southern Africa. A continuing flow of strategic
minerals from the region to the United States and our allies de-
pends heavily on stability in southern Africa. Complete interrup-
tion of that flow, a prospect that the Department of State deems
unlikely in present circumstances, has the potential of causing dis-
ruptions in certain key industries in the western world. My col-
leagues will testify to the extent of our reliance on imports from
South Africa and our level of protection in the event of a cutoff.
Our policy toward the region centers on the need for an end to
apartheid in South Africa on the one hand and on negotiations to
stem regional violence and bring about Namibia's independence on
the other. Only with such change will lasting stability occur in
southern Africa, a stability that will bring peace to that region and
protect United States and Western interests, including access to
minerals, in the long run.
In pursuit of stability and justice, our policy has four principal
objectives: an end to apartheid; achieving Namibia's independence
and negotiating the withdrawal of Cuban troops from Angola; re-
ducing Soviet influence; and ending the escalating cross-border vio-
lence. Our economic and other interests in southern Africa will be
best served when the fundamental political problems of the region
are resolved.
The Soviet Union pays for and profits from the political violence
in southern Africa. 'The Soviets seek to destabilize the region and
to capitalize on the opportunities thus created to expand their in-
fluence. But this insidious Soviet policy should not be resisted by
siding with apartheid or by taking steps which would exacerbate
107
conflicts in southern Africa. Such an approach would be wrong and
would have explosive consequences. The Soviets are destroyers; we
are the peacemakers in southern Africa.
U.S. policy tackles both South Africa's internal problems and re-
gional disputes involving several countries of the region. These
issues are related. Regional peace depends on a movement away
from apartheid, and the reverse is also true. While our influence is
limited — southern Africa is half a world away from the United
States — our global prestige and ties to all the parties place the
United States in a unique position to bring that influence to bear.
Our task is a daunting one. Stability in southern Africa seems
remote when one considers recent events inside South Africa,
South Africa's raids into neighboring countries, the civil wars in
Angola and Mozambique, and the provocative intentions of the
Soviet Union. And yet we must remain involved; compromise and
reconciliation in this tumultuous region remain possible. These pos-
sibilities must be pursued. The States and people of southern
Africa need each other. No single State or party can impose its will
unilaterally, however unequal the power balance may seem to be.
No responsible South African wants to see his country turned into
another Lebanon. No one except the Soviets can take comfort from
the violence taking place these days.
But unless there is agreement about South Africa's political
future between the South African Government and the leaders of
that country's black and other communities, instability will persist,
the mining industry will be threatened by disruptions, and South
Africa's efficient transportation system, which carries mineral ex-
ports from points as distant as Zaire, Zambia, Zimbabwe, and Bot-
swana, could be interrupted. South Africa's ports, on which much
of the region depends, could also be impeded. Continuing cross-
border violence in southern Africa will threaten the peace of the
region, its economy and transportation routes.
The implications for our policy are therefore clear: The United
States should continue to avoid prescribing blueprints for South Af-
rica's future. That's for South Africans to do. At the same time, we
should advocate dialog and negotiations over South Africa's politi-
cal future. Only if the leaders of South Africa's several communi-
ties meet in peace will a stable course be charted for that country.
We should remain builders and not destroyers in that land and
in that region, using the influence that derives from being present,
having programs and people there, and from having contact and
communications with all parties. We should voice clearly, in public
and in private, our strong convictions about racism and violence
with the strength derived from our own diverse society.
We should develop, rather than withdraw, our influence and be
prepared to use it, while taking into account the strength and self-
sufficiency of South Africa, a State that cannot be coerced by out-
siders on whom it only marginally depends. We should recall that
our strongest roles in this situation are moral and political. That
being the case, it won't be effective to walk away or sever our con-
tact. We don't intend to do so.
Finally, we should persist in urging all States in the region to
resort to negotiations and not to violence to settle their differences.
108
The United States has charted a responsible course in southern
Africa. Our diplomacy seeks to stabilize this region because that is
a desirable goal in its own right and because it is in our own inter-
est that the region be stable and contribute to and profit from the
international trading system.
Congressman, thank you very much.
[The prepared statement of Mr. Wisner follows:]
109
TESTIMONY FOR FRANK WISNER
BEFORE
HOUSE COMMITTEE ON SCIENCE & TECHNOLOGY
THURSDAY, OCTOBER 10, 1985
My name is Frank Wisner and I am the Deputy Assistant
Secretary of State for Africa. I am pleased to testify before
this hearing of the House Subcommittee on Transportation,
Aviation and Minerals.
My colleague from the Bureau of Economic and Business
Affairs in the Department of State, E. Allan Wendt, who is
Deputy Assistant Secretary for Energy and Resources Policy,
joins me at this table. The purpose of my brief opening
remarks is to give a general overview of U.S. policy in
southern Africa.
The United States imports large quantities of strategic
minerals from South and southern Africa. Our reliance in this
respect is one of several factors that we have weighed in
calculating our policy toward South and southern Africa. A
continuing flow of strategic minerals from the region to the
United States and our allies depends on stability in southern
Africa. Complete interruption of that flow, a prospect that
the Department of State deems unlikely in present circumstances,
has the potential of causing disruptions in certain key
industries in the western world. My colleagues will
110
testify on the extent of our reliance on imports from South
Africa and our level of protection in the event of a cut-off.
Our policy toward the region centers on the need for an end
to apartheid on one hand, and on negotiations to stem regional
violence and bring about Namibia's independence on the other.
Only with such change will lasting stability occur in southern
Africa, a stability that will bring peace to that region and
protect U.S. and western interests, including access to
minerals, in the long run.
In pursuit of stability and justice, our policy has four
principal objectives:
an end to apartheid;
achieving Namibia's independence and negotiating the
withdrawal of Cuban troops from Angola;
reducing Soviet influence;
ending the escalating cross-border violence.
Our economic and other interests in southern Africa will be
best served when the fundamental political problems of the
region are resolved.
Ill
The Soviets pay for and profit from the political violence
in southern Africa. They are seeking to destabilize the region
and to capitalize on the opportunities thus created to expand
their influence.
But this insidious Soviet policy should not be resisted by
siding with apartheid or taking steps that would exacerbate the
conflicts in southern Africa. Such an approach would be wrong
and would have explosive consequences. The Soviets are the
destroyers; we are the peacemakers in southern Africa.
U.S. policy tackles both South Africa's internal problems
and regional disputes involving several countries. These
issues are related; regional peace depends on movement away
from apartheid and the reverse is also true. While our
influence is limited - southern Africa is half a world away
from the United States - our global prestige and ties to all
the parties place the U.S. in a unique position to bring that
influence to bear.
Our task is daunting. Stability in southern Africa seems
remote when one considers events inside South Africa, South
Africa's raids into neighboring countries, the civil wars in
Angola and Mozambique and the provocative intentions of the
112
Soviets. And yet we must remain involved; compromise and
reconciliation in this tumultuous region remain possible.
They must be pursued. The states and people of southern Africa
need each other. No single state or party can impose its will
unilaterally, however unequal the power balance seems to be.
No responsible South African wants to see his country turned
into another Lebanon. No one except the Soviets can take
comfort from the violence.
But unless there is agreement about South Africa's political
future between the South African Government and the leaders of .
that country's black and other communities, instability will
persist, the mining industry will be threatened by disruptions,
and its efficient transportation system, which carries mineral
exports from points as distant as Zaire, Zambia, Zimbabwe and
Botswana, could be interrupted. Continuing cross border
violence in southern Africa will also threaten the peace of the
region, its economies and its transport routes.
The implications for our policy are clear:
113
* The United States should continue to avoid prescribing
blueprints for South Africa's future. That is for South
Africans to do. At the same time, we should advocate dialogue
and negotiations over South Africa's political future. Only if
South Africa's leaders of all communities meet in peace will a
stable course be charted for that country.
* We should remain builders and not destroyers in that
land and in that region, using the influence that derives from
being present, having programs and people there, and from
having contact and communication with all parties.
* We should voice clearly, in private and in public, our
strong convictions about racism and violence with the strength
derived from our own diverse society.
* VJe should develop, rather than withdraw, our influence
and be prepared to use it, while taking into account the
strength and self-sufficiency of South Africa, a state that
cannot be coerced by outsiders on whom it only marginally
depends.
* We should recall that our strongest tools in this
situation are moral and political. That being the case, it
won't be effective to walk away and sever our contact. We
don't intend to do so.
114
Finally, we should persist in urging that all states in
the region resort to negotiations and not to violence to settle
their differences.
The United States has charted a responsible course in
southern Africa. Our diplomacy seeks to help stabilize this
region because that is in a desirable goal in its own right and
because it is our own interest that the region be stable and
contribute to and profit from the international trading system.,
115
Mr. Brown. Thank you, Mr. Wisner.
Do you wish to add anything, Mr. Wendt, to Mr. Wisner's state-
ment?
Mr. Wendt. No, Mr. Chairman. I don't really have an3^hing to
add to what Mr. Wisner has said. Thank you.
Mr. Brown. Thank you.
Mr. Packard, do you have any questions that you would like to
ask?
Mr. Packard. Thank you, Mr. Chairman.
In your statement, Mr. Wisner, you indicated that you did not
consider a complete interruption, or a disruption, or elimination of
our trading of particular strategic metals with South Africa, feel-
ing that that would be an unlikely outcome; that more interrup-
tions would be probably the direction that we would see happening.
What are our options, recognizing that these interruptions may in
fact take place?
Mr. Wisner. Well, I think there are two answers to that ques-
tion. The first I would recommend, Congressman, you address to
my colleagues from the several agencies this morning, who have
looked at the broad issue of U.S. minerals dependency, but let me
come back to the thrust of the first part of your question, which is,
what is the likelihood of disruptions?
We have seen a period of turmoil inside of South Africa. During
this period, South Africa has remained a steady producer of the
key minerals that we import from that country. There exists a
system for labor-management negotiations. Strikes have taken
place; strikes have been resolved. For the moment I see no serious
impeding of the flow of minerals from the South African economy.
Equally, when you look more broadly at the region, you men-
tioned in your opening remarks cobalt dependencies. Those produc-
tions from Zaire and Zambia, for example, have continued to flow
during this period. The transportation systems have continued to
function. If anything, those industries are more imperiled not by
disruptions due to factors inside of South Africa but rather the eco-
nomic problems that the industries themselves face, the running
down of capital and plant, all issues that I think we need to take
seriously as well.
So, very frankly, I just don't see the prospect at the moment of
the sorts of interruptions that should lead us to make dramatic
shifts in our thinking. Is is, of course, well worth remembering that
we have long-term relationships with this market. That market in
turn is important to South Africans and southern Africa. It em-
ploys black South Africans. It is one of the engines that produces
change inside South African society, a functioning minerals indus-
try. On the employment of that industry hang the future prospects
of young black South Africans. Much of the region's employment —
two-thirds of Lesotho's, 80,000 of Mozambique's workers — find em-
ployment in that industry. Those countries are heavily dependent.
Therefore, I think we should conduct a responsible trading policy
toward South Africa and not entertain notions, if they should
emerge in any form, to impede the flow through legislative action
of minerals imports into this country from the South African econ-
omy.
116
Mr. Packard. This administration has taken the approach of
constructive engagement. How is that linked with the strategic
metals and our imports of the strategic metals from South Africa?
Is there a direct correlation or is it somewhat disassociated?
Mr. WiSNER. There is not a direct correlation. The importance of
minerals in South Africa is obviously one of the factors we need to
take in mind as we work toward stability in the region, but the
pursuit of stability in the region stands on its own merits. Without
that stability there will be escalating violence, there will be fresh
opportunities for Soviet intervention in the area, there will be
worsening prospects for the people of the area. The interests of our
allies as well as ourselves will be compromised.
Those interests are of a broad nature. They include minerals.
They include our strategic interests. They include fundamentally,
however, our own basic political interests in stability in a flash-
point on the globe, an area where we can be in tension with the
Soviet Union; and they include clearly, as well, the very deep-
seated moral feelings that Americans have about racial violence.
We are a multiracial society, and the lack of racial harmony in
southern Africa and in South Africa has a direct and immediate
effect on our own domestic polity.
Mr. Packard. So basically the thing that is driving our foreign
policy with South Africa is the desire to retain the existing Govern-
ment in a stable form, more than some of the strategic metal and
other export issues?
Mr. Wisner. Mr. Packard, I wouldn't put it quite that way. I
wouldn't say that our desire is to retain the Government in its
present form; rather, to see South Africans among themselves
chart a new course, a new political future for themselves through
dialog, through negotiation, that will produce a government that
represents the consent of all those who are governed. Our pursuit,
therefore, is the goal of stability, of seeing stable, just arrange-
ments worked out for South Africa, one of the consequences of
which would be to assure the production of South African miner-
als, an orderly South African economy.
Mr. Packard. What policy should we develop in terms of strate-
gic metals, particularly that we import from South Africa, that
might be an alternative to or at least a fallback position on our de-
pendence to South Africa for the bulk of some of these strategic
metals, that is, chromium, gold
Mr. Wisner. Well, I perhaps have a slightly different assessment
of the state of risk of the South African supply of the minerals we
are talking about than your question seems to apply, but I think
the question is more appropriately addressed to my other col-
leagues from the other agencies who are here today, who have
looked at the broad question of what is produced domestically,
what can be replaced, what can be imported from other sources, in
answering your question specifically.
Mr. Packard. The National Security Council recently recom-
mended a significant reduction in the national strategic stockpil-
ing. The stockpiles have been suggested as the most effective
means of dealing with supply disruptions from South Africa. Was
your office involved in arriving at these recommendations?
117
Mr. WiSNER. The recommendations, if I understand it correctly,
are of a broad global nature. The assessments that we have provid-
ed deal with the state of South Africa, its economy, its political sit-
uation, the region's problems, as opposed to the definition of what
works in the American economic system and in our international
trading system, a responsibility which appropriately falls to other
bureaus in my department, other agencies of the Government.
Mr. Packard. Do you agree and concur with the recommenda-
tions?
Mr. WiSNER. Congressman, I would prefer those who have been
more directly involved in the elaboration of a subject that doesn't
impact in that sense directly on our Africa policy. It talks about
the broad interests of the United States and our economy, as op-
posed to our policy toward South Africa.
Mr. Packard. Thank you very much, Mr. Chairman.
Mr. Brown. Mr. Wisner, obviously your office is not responsible
for developing materials policy, including the size of the stockpile
and so on, but in view of the fact that the political situation in
South Africa in the eyes of every analyst does have a major impact
upon our critical materials supply, and a cutoff from that source
would be extremely unfortunate, it becomes important to know
how you go about the process of assessing stability in that region
and the probability or lack of probability of a cutoff. We haven't
been all that good in assessing when instability would reach a tip-
ping point that would result in supply disruptions in some other
areas.
As a general policy that goes far beyond this committee, I think
we would be interested in knowing what your assessment is of that
acknowledged difficult situation producing a disruption, how you
reached that decision, and what degree of confidence you have in
it. I don't want you to write a book but just give us a brief answer,
if you can.
Mr. Wisner. No, sir, I won't try to write a book.
I think the situation that we see in South Africa at the moment
is one that is troubled. It has a lot of emotion in it and it affects us
directly. I think we are going to see a certain amount of confronta-
tion and violence. We are going to see a certain amount of govern-
ment counteraction in the form of repression. I think we are going
to see a certain amount of reform in the months and years ahead.
I see at this point no set of factors so dramatic that would lead
this committee to conclude that we are faced with a cutoff or a se-
rious interruption of the flow of minerals from the South African
economy, or an interruption of the transportation system or port
systems that put minerals on the market. I can say that from a
careful examination of events in the region; for having served in it
myself personally; for having been associated with 10 years of my
life. That's our best judgment of what the facts look like, and that's
the judgment I would leave with the committee.
Mr. Brown. Is that judgment based upon the rather obvious as-
sumption that any government in that region would want to
resume supplying minerals to the market just as quickly as possi-
ble?
Mr. Wisner. I think that's an excellent point. The countries in
the region of southern Africa, including South Africa itself, are
118
heavily mineral dependent for their export proceeds. Each has a
driving interest to maintain a flow of exports, particularly in this
time in which many of the mineral exports we are talking about
today are entering very depressed market.
Mr. Brown. Yes; well, of course, we could say the same thing
about Iran and Iraq, that they have a very great interest in main-
taining the shipment of oil to the world markets, and that doesn't
prevent them from slaughtering each other, and for 5 years that
supply has been drastically curtailed, so you have to make two
kinds of judgments: Is there a possibility of extreme violence break-
ing out in South Africa, in which the blacks seek to overthrow the
established government by force? And, if that does happen, will it
end very quickly or will it drag on for 5 years? Those are critical
distinctions when we are looking at the U.S. supply of these par-
ticularly important strategic minerals. Have you made such a judg-
ment?
Mr. WiSNER. Absolutely, Congressman. I don't think I would
agree with the direction that your analysis goes in, that South
Africa is faced with violence of such magnitude and does not have
inherent in itself — and I think it's one of the great dangers of the
situation — the force at hand to control further outbreaks of vio-
lence, or which in itself produces a cycle of violence which all of us
would regret, but that capacity to maintain effective control exists.
Second — and you cite the example of Iran and Iraq — there you
have a very volatile region. You have heavily armed states on both
sides, two countries that are engaged in a bitter and protracted
war. Those military assets do not exist in southern Africa. The ca-
pacity to see an Iran-Iraq situation there is simply not present.
Mr. Brow^n. We don't see the level of military assets in Central
America to lead to a prolonged war, either, and yet somehow or
other the level of such military assets seems to build up very quick-
ly under certain circumstances.
Mr. WiSNER. Congressman, I take your point, but I think if you
look at the policies of the independent states of southern Africa,
the black independent states of southern Africa, in their entirety,
you will see a determined policy on each of their parts to find rules
of detente, of peace with South Africa, rather than seeking to enter
into cross-border violence, where they quite clearly are at a serious
disadvantage. Therefore, I don't see the kinds of tensions that you
would ascribe to — we would jointly ascribe to an Iran-Iraq or even
in the Central American context. The region has been going in a
different direction for the past several years, I would argue a
healthy direction. One shouldn't call it into question.
Mr. Brown. Well, I hope your analysis is correct and I respect
your experience and judgment in the region, but I think even you
would not be able to guarantee that your judgment is correct in
view of the volatility of such situations.
Mr. WiSNER. I fully agree, sir.
Mr. Brown. Now we have an opportunity here, if we had super-
human wisdom, to attempt to evaluate the conditions in which
social arrangements are disrupted by revolutionary forces. It's obvi-
ously where for a long period of time there are social, and econom-
ic, and other injustices — and we use the term "injustice" in its
broadest sense — which appear not to be resolvable by normal incre-
119
mental means, and in which the level of psychological tension or
whatever you want to call it, the potential that exists in each
human being to create a revolution, reaches a flashpoint.
We don't know enough about the psychodynamics of this to be
able to analyze it very well, but South Africa is almost a case study
in that situation where a large majority of the population are suf-
fering what at least some people perceive to be massive injustice on
both a social and an economic basis. They attempt to resolve some
of the economic injustice by raising wages, but that doesn't resolve
the social injustices.
Do you have anybody over there who tries to make these kinds of
theoretical analyses?
Mr. WiSNER. Oh, indeed, but let me go back for a moment to
your starting point, and I will agree with you, and if I have left you
a different impression, I have misspoken. Southern Africa and
South Africa are very dangerous places. We face a terribly difficult
time, and this administration's involvement very deeply in that
part of the world is precisely because of the dangers. However,
having said that, what I am arguing is that the direction of danger
in the region is not of such a dramatic nature as to threaten in the
short run our minerals, our capacities to import minerals from
that area, short to medium run, as I would see it.
That said, we should be as a responsible government planning
carefully for contingencies, setting our long-term plans to take into
account factors which we cannot control, and setting our own
policy so that we do have ability to control our own events and
assure the smooth functioning of our economy. So let me agree that
there is danger there. That's what we are trying to address, and
yes, it is appropriate to look at policy but I am not suggesting that
we need to make dramatic and urgent shifts, given the factors on
the ground as they stand to date.
Mr. Brown. You indicate you are deeply concerned about the
revolutionary prospects there. What has been your effort to ana-
lyze the possibility of a major, extended economic stoppage in the
way of a strike, or a boycott situation, or something of that sort,
which would have the same effect as a violent revolution in terms
of disrupting the flow of the materials, but it would not necessarily
cause a violent revolution. In other words, have you analyzed the
scenario of a prolonged strike or boycott as a factor in interrupting
our supply of critical materials?
Mr. WiSNER. The risk is there. There have been industrial ac-
tions in the mining sector. There have not been to speak of in the
rail or port areas. Those will continue. They will be a feature of the
South African situation, the strike actions in the mining areas, but
I think what has impressed me over time is the emergence of a
very thoughtful and responsible trade union movement inside of
South Africa; a willingness on the part of South Africa's major
mining companies to meet at the bargaining table and to hammer
out agreements; and the willingness on all sides to bring strike ac-
tions to a quick end.
I think I would like to look at something of the positive features
in that situation, rather than look to a more dramatic and negative
one. I just don't see at this point the sort of prolonged, difficult
120
strike. I don't think it is in the nature of the problem that your
question would imply.
Mr. Brown. Well, we have you on the record as being very opti-
mistic, and we'll see how history bears you out.
Mr. WiSNER. Very optimistic I shouldn't be, but cautious
Mr. Brown. Cautiously optimistic.
Mr. WiSNER. Cautious in terms of predicting the speed with
which we should be making dramatic shifts in our policy.
Mr. Brown. Mr. Lewis has no questions of you, and that will be
sufficient for this morning. We appreciate very much your being
here.
Mr. WiSNER. Congressman, thank you, sir, and Mr. Lewis.
Mr. Brown. We certainly hope you're right about your prognosti-
cations.
Our next witnesses, and I think we will ask them to come for-
ward as a panel, are Mr. Robert Horton, Director of the Bureau of
Mines; Mr. Robert Wilson, Director of the Office of Strategic Re-
sources, Department of Commerce; and Mr. Bernard Maguire, As-
sociate Director for National Preparedness Programs, FEMA.
Now if anybody should know whether we've got problems with
critical materials, this distinguished panel should know, shouldn't
it? Nod your heads in agreement. [Laughter.]
I notice that you have extensive statements, and while we would
never want to constrain you from reading the whole thing, it might
be counterproductive if you did so. If you would care to summarize
them in some fashion, why, we would appreciate it. Shall we start
with Mr. Horton?
STATEMENT OF ROBERT HORTON, DIRECTOR, BUREAU OF
MINES, U.S. DEPARTMENT OF THE INTERIOR
Mr. Horton. Thank you, Mr. Chairman. My statement is rather
extensive, and I will do my best to summarize it, but I would like
to
Mr. Brown. Don't miss any of the important parts.
Mr. Horton. I'll try not to.
I am pleased to appear before the Subcommittee on Transporta-
tion, Aviation, and Materials on the issue of critical materials and
South Africa. My testimony will include a discussion of the role of
South Africa in the supply of minerals to the United States and its
allies, the impacts of potential disruptions in these supplies, and
the Bureau's roles and capabilities.
While South Africa is a supplier of numerous minerals to the
world markets, my presentation will focus on five metals which
tend to receive the greatest amount of attention as being critical
for important defense or otherwise strategic reasons. The five
metals are chromium, manganese, the platinum-group metals, va-
nadium, and gold. Although South Africa is not a significant cobalt
producer, my remarks will also include this metal because the rail-
road network of South Africa moves a large portion of the cobalt
and other minerals exported from Zaire, Zambia, and Zimbabwe.
For many years, the Republic of South Africa, in many cases
along with the Soviet Union, has been a major supplier to world
markets of such materials as andalusite, antimony, chromite, fer-
121
roalloys, ferromanganese, manganese ores and metals, the plati-
num-group metals, and others. These two countries, the Republic of
South Africa and the Soviet Union, together account for approxi-
mately 63 percent of total world chromite production, 46 percent of
total world ferrochromium production, 66 percent of total world
gold production, 51 percent of total world manganese ore produc-
tion, 94 percent of total world platinum-group metal production,
and 66 percent of the total world vanadium production in 1984. In
addition, a major portion of the known ore reserves of gold, chro-
mite, manganese, platinum-group metals, and vanadium are con-
trolled by these two countries.
To assess the importance to the United States, Japan, and West-
ern Europe of the five key metals imported from South Africa, I
have highlighted in my written testimony the following: The major
end uses of each of the key metals and the extent to which substi-
tution and conservation is possible in the short run; alternative
world supply sources for each key metal; the amount of each metal
that is available in both Government and private stocks. I would
also like to make available to the subcommittee detailed data con-
tained in the relevant Bureau of Mines preprints from the 1985
edition of "Mineral Facts and Problems" which are specific for
each of the metals.
Before going further, it is important to recognize that South
Africa, even with its internal difficulties, has continued to be a reli-
able supplier of minerals to the free world. Its large mineral depos-
its, its modern technology and infrastructure, and its policies of
free trade and open investment should weigh considerably against
speculation of serious disruptions.
Analysis of the data contained in my testimony on the key mate-
rials produced by South Africa, upon which the Western nations
and Japan are presently dependent or whose transportation to
markets would be directly impacted by a South African minerals
supply disruption, indicates that the supply problem for the West-
ern nations and Japan would be acute. The U.S. Government
would have to consider several alternatives, including supplemen-
tary supplies from the strategic stockpile.
Mr. Chairman, we are preparing the technical analysis in re-
sponse to the questions raised in your letter of September 24, and
we will provide you with copies once it has been completed and re-
viewed. Mr. Chairman, you stated that the subcommittee would ex-
amine various means to minimize this country's dependence on
critical materials, and that one area of particular interest is the
enhancement of information and data analysis capability as it re-
lates to critical materials. In addition, your letter of invitation ex-
pressed interest in a global information system pertaining to criti-
cal materials. I believe the Bureau has these capabilities, and I
would like to briefly highlight our analytical, informational, re-
search, and development, and emergency capabilities in planning
for and dealing with strategic material disruptions.
The analytic system of the Bureau of Mines presently available
to analyze potential disruptions to the supply of critical materials
consists of three components: World market models, an industry
analytic system — an input and output system — and the minerals
availability system. The minerals availability system assesses the
122
worldwide availability of nonfuel minerals. The program evaluates,
on a worldwide basis, active, developed, and explored mines and de-
posits and mineral processing plants, and projects a price that the
resource from a particular deposit may be made available to the
market. Engineering and economic evaluations for the 2,400 most
significant domestic and foreign mining and processing operations
in the Western World have been completed.
In addition, the Bureau collects information on over 100 mineral
commodities from 168 countries. This system encompasses all of
the minerals that are of strategic and critical importance to the
United States and encompasses all of the countries of the world
that produce, consume, and trade these minerals.
In addition to the statistical reports flowing to the Bureau from
the domestic industry and from foreign governments, the Bureau's
commodity specialists and foreign country specialists — of which
there are 85 — make frequent visits to the mines and plants related
to their commodity or country, acquiring firsthand knowledge of
the capabilities, utilization, condition, and modification plans for
mines and processing facilities of the major producers worldwide.
The Bureau of Mines research and development activities have
addressed domestic minerals supply problems virtually since the
Bureau was created in 1910. Today, much of the Bureau's efforts
focus on the question of import vulnerability of strategic and criti-
cal minerals, including those being addressed here. Enhancing this
Nation's ability to rely less on foreign sources of supply is one
factor justifying the Bureau's strategic and critical metals re-
search. In addition to those resources for which processing methods
have been tested, we have been examining potential sources of
strategic minerals in Alaska and on the ocean floor within the U.S.
exclusive economic zone.
The Bureau of Mines has the framework needed to discharge its
priorities, allocations, and supply expansion responsibilities in the
event of a national emergency. The Bureau would also act as the
claimant agency for the mineral sector of the economy to assure
needed fuel, power, transportation, personnel, supplies, and equip-
ment. In the event of a severe supply disruption, title 1 of the De-
fense Production Act would be available to assist in meeting any
defense priorities. The Bureau of Mines and the Department of
Commerce would be involved in implementing such an approach,
should it become necessary.
In sum, the Bureau's analytic, information, research, and devel-
opment, and emergency capabilities to deal with the critical mate-
rial supply disruptions are considerable. In addition, we are com-
mitted to continually enhancing the Bureau's capabilities to meet
our responsibilities to assess the impact of international economic,
political, and social events on the health of the U.S. mineral indus-
try and economy.
With your permission, Mr. Chairman, I have brought some
charts which I think may more ably demonstrate than words some
of the issues and problems we are addressing today.
Mr. Brown. We will be glad to see those.
123
NET IMPORT RELIANCE: 1984
SELECTED NONFUEL MINERAL MATERIALS
U.S.A.
COLUMBIUM
MICA (sheet)
STRONTIUM
MANGANESE
BAUXITE & ALUMINA
COBALT
TANTALUM
FLUORSPAR
PLATINUM GROUP
CHROMIUM
TIN
ASBESTOS
NICKEL
POTASH
TUNGSTEN
ZINC
BARITE
SILVER
MERCURY
CADMIUM
SELENIUM
VANADIUM
GYPSUM
IRON & STEEL
COPPER
SILICON
IRON ORE
LEAD
SULFUR
GOLD
NITROGEN (fixed)
ALUMINUM
: .^tOO
IOC
■JOO
say
961
m
W
9t
91
821
791
; 75
74
74
..,-■■ .71}
m. >..,:... mi
6M
6«
80^
561
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. 4H
381
m
i^2l
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idi
iiiw
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31
MAJOR SOURCES
Brazil, Canada, Thailand
India. Belgium, France
Mexico, Spain
So. Africa, France, Gabon, Brazil
Australia, Jamaica, Guinea, Suriname
Zaire, Zambia, Canada, Japan
Thailand, Malaysia, Brazil, Canada
Mexico, So. Africa, China, Italy
So. Africa, UK, USSR
So. Africa, Zimbabwe, USSR, Philippines
Thailand, Malaysia, Indonesia, Bolivia
Canada, So. Africa
Canada, Australia, Norway, Botswana
Canada, Israel
Canada, China, Bolivia
Canada, Peru, Mexico, Australia
China, Morocco, Chile, Peru
Canada, Mexico, Peru, UK
Spain, Japan, Mexico, Turkey
Canada, Australia, Mexico, Peru
Canada, UK, Japan, Belg.-Lux.
So. Africa, Canada, Finland
Canada, Mexico, Spain
Japan, EEC, Canada
Chile, Canada, Mexico, Peru
Canada, Brazil, Norway, Venezuela
Canada, Venezuela, Libena, Brazil
Canada, Mexico, Australia, Peru
Canada, Mexico
Canada, Switzerland, Uruguay
USSR, Canada, Mexico, Trinidad ft Tobago
Canada, Ghana, Japan, Venezuela
USBuMlnes
Chart 1
124
Mr. HoRTON. This particular chart (chart 1) demonstrates the net
import reliance in 1984 of selected nonfuel mineral materials for
the United States of America. I will be showing you these as well
as some for the European Economic Community and the Soviet
Union. They will be in the same order, so that the general impres-
sion you get from this chart will remain.
South Africa, the subject of discussion today, is considerably im-
portant in manganese. We import 99 percent of our manganese. It
is very important in the platinum group and as regards chromium.
While we are dependent on many foreign countries, the list of the
foreign countries you see here starts with the largest supplier and
goes to the smallest supplier. You will also note that we are relying
upon Canada, certainly a friendly neighbor and a good supplier, as
well as other friendly nations.
125
NET IMPORT RELIANCE: 1983
SELECTED NONFUEL MINERAL MATERIALS
E.E.C.
JAPAN
COLUMBIUM
MICA ISHEET)
STRONTIUM
MANGANESE
BAUXITE er ALUMINA
COBALT
TANTALUM
FLUORSPAR
PLATINUM GROUP
CHROMIUM
TIN
ASBESTOS
NICKEL
POTASH
TUNGSTEN
ZINC
BARITE
SILVER
MERCURY
CADMIUM
SELENIUM
VANADIUM
GYPSUM
IRON & STEEL
COPPER
SILICON
IRON ORE
LEAD
SULFUR
GOLD
NITROGEN (FIXED)
ALUMINUM
MOLYBDENUM
PHOSPHATE
100
M
100
'ML
a»
-■^ - ,x.
135
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Chart 2
USBuMlnM
54-846 O
86
126
While we are heavily dependent for some of our materials, Japan
and the European Economic Community are even more so (chart
2). Japan comes as no surprise. There is very little mining in Japan
at all, and within the European Economic Community, while they
have some mining, much of their material is imported and they are
very heavily dependent. Again, it is the same materials with
regard to South Africa for which we have a high dependence.
127
NET IMPORT RELIANCE: 1984
SELECTED NONFUEL MINERAL MATERIALS
U.S.S.R
COLUMBIUM
MICA (sheet)
STRONTIUM
MANGANESE
BAUXITE & ALUMINA
COBALT
TANTALUM
FLUORSPAR
PLATINUM GROUP
CHROMIUM
TIN
ASBESTOS
NICKEL
POTASH
TUNGSTEN
ZINC
BARITE
SILVER
MERCURY
CADMIUM
SELENIUM
VANADIUM
GYPSUM
IRON & STEEL
COPPER
SILICON
IRON ORE
LEAD
SULFUR
GOLD
NITROGEN Ifixed)
ALUMINUM
MOLYBDENUM
PHOSPHATE
IL
481
471
S
India
Greece
Cuba
MAJOR SOURCES
Guinea, Hungary, India, Yugo.
"aaf
H
:ml
Jio
S
China, Mongolia, Thailand
Malaysia. Singapore, UK
China, Mongolia
Australia, Finland, Peru, Poland
Bulgaria, No. Korea, Yugoslavia
Switzerland, UK
H
EEC. Japan
w
Mongolia
USBuMliw*
Chart 3
128
The same is not true of the Soviet Union (chart 3). The Soviet
Union is largely self-reliant for its mineral resources. Its very large
land area gives it access to many more opportunities for explora-
tion and mining. They do have dependence for bauxite, alumina,
cobalt, fluorspar, and there is some indication — although manga-
nese shows blank here — that they may have a dependence for man-
ganese. They have been importing some in recent years.
129
PRINCIPAL WORLD SUPPLY
SOURCES-1984
GOLD
COUNTRY
PRODUCTION
RESERVES
(% OF WORLD)
(% OF WORLD)
SOUTH AFRICA
47.6
59.4
U.S.S.R.
18.8
15.6
CANADA
5.7
3.3
UNITED STATES
4.5
6.3
CHINA
4.1
N.A.
BRAZIL
3.8
1.8
WORLD TOTAL
46 MILLION TR. OZ.
U80 MILLION TR. OZ.
TR. OZ. = TROY OUNCES
NA = NOT AVAILABLE
SOURCE: US. BUAUU OF MINES
OaOBER. I»
Chart 4
130
Turning more specifically, then, to South Africa (chart 4), I men-
tioned gold, and gold is certainly not considered a normal strategic
and critical mineral, but it is strategic and critical certainly in an
economic sense, and it is very important to South Africa; 72 per-
cent of the export sales earnings from minerals in South Africa is
obtained from gold, and 11 percent from coal. South Africa at
present produces 47.6 percent of the world's gold and has almost 60
percent of the gold reserves — a wonderfully endowed country.
There are adequate gold reserves in the United States, in Treasury
gold and private holdings, and there is substantial production in
the United States. It is not a problem to us, but one should not con-
sider minerals in South Africa without paying attention to gold.
131
PRINCIPAL WORLD SUPPLY
SOURCES-1984
PLATINUM GROUP METALS
COUNTRY
PRODUCTION
RESERVES
(% OF WORLD)
(% OF WORLD)
SOUTH AFRICA
41.1
79.0
U.S.S.R.
52.5
19.0
CANADA
4.9
0.8
WORLD TOTAL
7.05 MILLION TR. OZ.
1,000 MILLION TR. OZ.
VANADIUM
COUNTRY
PRODUCTION
(% OF WORLD)
RESERVES
(% OF WORLD)
SOUTH AFRICA
35.3
19.8
U.S.S.R.
29.6
60.4
CHINA
14.1
14.0
UNITED STATES
9.3
3.0
WORLD TOTAL
35.4 THOUSAND S.T.
4,800 THOUSAND S.T.
JR. OZ. = TROY OUNCES
S.T. = SHORT TONS
SOUttO: US. BURUU Of MINES
oaoeat. iw
Chart 5
132
Turning to those minerals which we do consider to be critical
and strategic, this chart (chart 5) demonstrates for platinum and
vanadium the principal world supply sources in 1984. South Africa,
as regards platinum-group metals, was responsible for more than
41 percent of the world's platinum-group metal production and has
79 percent of the world's platinum-group reserves. In vanadium,
they are responsible for 35 percent of the world's production and
have almost 20 percent of the world's reserves. Vanadium, fortu-
nately, is a little more equally distributed around the world than is
platinum.
While mentioning South Africa on this list, I should call your at-
tention to the second on the list. While South Africa is No. 1 in
platinum and vanadium, the Soviet Union is second — in platinum,
high in production and lower in reserves; with regards to vanadi-
um, a little lower in production and much higher in reserves.
Mr. Brown. There is a considerable amount of platinum used for
jewelry purposes, as is gold, and of course that is a major use of
gold and represents, in a sense, sort of an insurance policy for ev-
eryone short of gold. Is there anything comparable to that with
platinum? Is there a supply of platinum held in private hands, in
the form of jewelry or other things of that sort, that
Mr. HoRTON. Yes; you will find in my full testimony figures re-
lating to our consumption in the platinum-group metals in jewelry
and automobile catalysts. One of the problems, though, is when
you're talking of platinum-group metals, one of the group may not
necessarily be substituted for another. Palladium will not serve in
place of platinum, and vice versa.
Mr. Brown. Yes, yes.
133
PRINCIPAL WORLD SUPPLY
SOURCES-1984
CHROMITE
COUNTRY
PRODUCTION
RESERVES
(% OF WORLD)
(% OF WORLD)
SOUTH AFRICA
31.6
78.4
U.S.S.R.
31.5
12.2
ALBANIA
9.2
0.6
TURKEY
6.4
0.4
INDIA
4.6
1.3
ZIMBABWE
4.8
1.6
WORLD TOTAL
10.5 MILLION S.T.
1,165 MILLION S.T.
MANGANESE
COUNTRY
PRODUCTION
(% OF WORLD)
RESERVES
(% OF WORLD)
U.S.S.R.
36.2
36.5
SOUTH AFRICA
14.6
40.7
BRAZIL
11.8
2.1
GABON
11.7
11.0
AUSTRALIA
9.9
7.5
WORLD TOTAL
9.2 MILLION S.T.
(Mn CONTENT)
1,000 MILLION S.T.
(Mn CONTENT)
S.T. = SHORT TONS
SOURCt: UZ. SURUU OF MWES
(N:T0BtR.I«5
Chart 6
134
Mr. HoRTON. As regards chromite and manganese (chart 6),
South Africa and the Soviet Union are almost tied in the produc-
tion of chromite, 31.5 percent. South Africa, again, is blessed with
the world's major reserves, 78.4 percent. The reserves used here
are the major reserves. We are not talking resources, that which
might speculatively be there. That would not likely change South
Africa's position.
The Soviet Union, again, has an almost equal contribution to
world production of chromite but much smaller in reserves. The
United States currently produces no chromite and does not have
any economic reserves at present. The price would have to go up
many times for our small mines to be able to operate.
In manganese, the Soviet Union leads in production, 36.2 per-
cent, followed by South Africa at 14.6 percent. The Soviet Union
and South Africa have almost the same amount of reserves, 36 and
40 percent. There are substantial productions in Brazil, Gabon, and
Australia, as you will note, and moderate reserves.
135
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136
The free world's reliance on South African imports and exports
is demonstrated by this chart (chart 7). These particular pie charts
refer to the amount of materials imported from South Africa. As
opposed to total imports for chrome ore, we import 54 percent of
our chrome ore from South Africa. We import 61 percent of the fer-
rochrome, and the small addition shown here in light green and in
a pattern on your chart is ferrochrome we import from other coun-
tries, but whose source is South Africa. A lot of chrome ore and
manganese ore goes to Europe, where it is made into ferrochrome
and ferromanganese and transported. Manganese ore is 28 percent;
ferromanganese, 38 plus 17 percent, 55 percent on that; and plati-
num-group metals, 47 percent direct and 17 percent indirect. The
same general pattern holds for Western Europe and a similar pat-
tern for Japan.
Mr. Brown. Why does not Japan import any — what is the mate-
rial, ferromanganese?
Mr. HoRTON. Ferromanganese, none of it from South Africa.
They are getting it from other sources. Norway is a large producer.
South Africa does import a fair amount of coal from Australia.
The lower chart is color coded, the colors referring to the colors
of the countries above, to demonstrate where their exports went. In
regard to the United States, 27 percent of their chrome ore came to
the United States, 28 percent of their ferrochrome, 5 percent of the
manganese ore, 71 percent of the ferromanganese, and 53 percent
of the platinum-group metals.
137
LOCATION AND TRANSPORT OF STRATEGIC
MINERALS IN SOUTHERN AFRICA
UBREVIUE
Chart 8
SOURCt U^ BURUU OF MINES
OCTOBER. tSK
138
I mentioned cobalt and the importance of South Africa to cobalt,
though it produces very little cobalt itself, because of the railroad
situation within Africa at the present time. Locating you here a
little bit (chart 8), with Zambia, Zimbabwe, Botswana, and Zaire,
while some copper and cobalt production from Zaire does exit via
the railroad down the river and out to Point Nord for shipment,
the greater portion of it comes down through South Africa. Some
goes to Dar es Salam, but that port is small and crowded. Addition-
al exports cannot be put out. A large portion of the copper and
cobalt from Zaire and Zambia is exported through South African
railroads, using South African railroad cars, I might mention, and
the same is true of gold. While railroads are available through Mo-
zambique, they are regularly destroyed by revolutionaries, and the
same is true for the railroad going through Angola.
In Zaire and Zambia cobalt is a byproduct of the copper produc-
tion. They have substantial stocks of cobalt which in an emergency
could be flown out, but cobalt production could not continue for
long in the absence of copper production. They need both to oper-
ate economically. They are having a great deal of trouble operating
now. They have a shortage of equipment, and fuel, and vehicles, al-
though they miraculously continue to operate.
That concludes my presentation, Mr. Chairman, and I would be
pleased to try to answer any questions you might have.
[Letter requesting change in testimony and prepared statement
of Mr. Horton follow:]
139
United States Department of the Interior
OFFICE OF THE SECRETARY
WASHINGTON, D.C. 20240
BY SPECIAL MESSENGER
^ '. 1985
Honorable Don Fuqua
Chairman, Committee on
Science and Technology
House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
Enclosed is the transcript of the hearing before the Subcommittee on
Transportation, Aviation and Strategic Materials on October 10, 1985, entitled.
Implementation of the National Critical Materials Act of I9%in South Africa and
Critical Materials.
We have reviewed the transcript and corrected the remarks of the Departmental
witness.
It has also come to our attention that one sentence in the written testimony
submitted for the record at the time of the hearing is slightly ambiguous, and we
would like to replace this page with an amended version. Enclosed is a copy of the
new version of page 9 from Director Horton's testimony, in which the last sentence
has been clarified.
J. Stephen Britt
Legislative Counsel
Enclosure
RECEIVED
my I •->- -
AND fiC-'.^'-C-LCG/
140
Statement of Mr. Robert C. Horton,
Director of the Bureau of Mines,
Department of the Interior
before the
Subcommittee on Transportation, Aviation, and Materials
Committee on Science and Technology
U.S. House of Representatives
October 10. 1985
I am pleased to appear before the Subcommittee on Transportation,
Aviation and Materials on the issue of critical materials and South Africa.
My testimony will Include a discussion of the role of South Africa in the
supply of minerals to the United States and its allies, the Impacts of
potential disruptions in these supplies, and the Bureau's role and
capabilities.
While South Africa Is a supplier of numerous minerals to the world
markets, my presentation will focus on five metals which tend to receive
the greatest amount of attention as being critical for important defense
or otherwise strategic reasons. The five metals are: chromium, manganese,
platinum-group metals, vanadium and gold. Although South Africa Is not a
significant cobalt producer, my remarks will also include this metal because
the railway network of South Africa moves a large portion of the cobalt and
other minerals exported from Zaire, Zambia and Zimbabwe.
South Africa as a Supplier of Critical and Strategic Minerals
For many years, the Republic of South Africa, in many cases along with
the U.S.S.R,, has been a major supplier to world markets of andaluslte,
antimony, asbestos, chromite, diamonds, ferroalloys including ferrochromium
and ferromanganese, gold, manganese ore and metal, platinum-group metals
141
(PGM's), titanium slag, uranium, vanadium, vennicullte and zirconium.
Statistics for 1984 Indicate that South Africa produced 48 percent of the
total (newly mined) world gold production; approximately 32 percent of total
world chromlte production; 31 percent of total world ferrochromlum production;
about 15 percent of total world manganese ore and ferromanganese production;
41.1 percent of total world PGM production; and 35 percent of total world
vanadium production. The U.S.S.R. produces similar amounts of these metals.
The two countries together accounted for approximately 63 percent of total
world chromlte production, 46 percent of total world ferrochromlum production,
66 percent of total world gold production, 51 percent of total world manganese
ore production, 94 percent of total world PGM production and 66 percent of
total world vanadium production in 1984.
A major portion of the known ore reserves of gold, chromlte, manganese
ore, PGM's and vanadium are controlled by these two countries. South African
chromite reserves constitute about 78 percent of total world reserves,
manganese ore 41 percent, gold 59 percent, and PGM's approximately 79 percent.
Therefore, it is obvious that the loss of this principal source of supply
of these metals would be disruptive.
To assess the importance to the United States, Japan, and Western Europe
of the five key metals imported from South Africa, it is useful to review the
following: 1) the probability of an interruption and whether substantial
quantities of key materials exports would be interrupted for extended period
of time; 2) the major end uses of each of the key metals and the extent to
142
which substitution and conservation Is possible In the short-run and at what
cost; 3) alternative world supply sources for each key metal and what It would
take In terms of world price and time to bring these sources Into production
from existing underutilized facilities or through expanded or new facilities;
and 4) the amount of each metal that Is available In both government and
private stocks. I will highlight the other Information below In my testimony,
and I would also like to make available to the Subcommittee detailed data
contained In the relevant Bureau of Mines Preprints from the 1985 Edition of
Mineral Facts and Problems. I do not plan to address the first point since
TTi'li Id 'ftot in afea'of fiXperttse of the Bureau.
Before going further. It Is Important to recognize that South Africa,
even with Its Internal difficulties, has continued to be a reliable
supplier of minerals to the free world, its large mineral deposits. Its
modem technology and infrastructure, and its policies of free trade and
open investment should weigh considerably against speculation of serious
disruption.
Chromium
Chromium is one of the most Important materials in the U.S. economy
and In national defense uses because of its wide range of metallurgical,
refractory, and chemical uses, especially in stainless steels and alloy
steels and superalloys. In 1984, the U.S. consumed approximately 392,000
metric tons of chromium.
143
Production of chromlte ore In the United States, which has always been
small, ceased after 1961, except for a small amount produced for export In
1976. Most of the U.S. chromium resources are located in the Stillwater
Complex in Montana, in northern California, in Alaska, and in the beach sands
of Oregon. Except for the National Defense Stockpile upgrading program, there
is no U.S. production of chromium ferroalloys at present.
In 1984, 44 percent of total U.S. chromlte consumed was in metallurgical
applications, 37 percent in chemical, and 19 percent in refractory end uses.
Eighty percent of ferrochromium consumed in the United States was in stainless
and heat-resisting steel and 10 percent in full alloy steel.
Based on the 1978 report of the National Materials Advisory Board of
the National Academy of Sciences, only 30 percent of domestic chromium
consumption could be conserved within five years.
Free world chromlte capacity in 1984 was about 3.2 million tons of
equivalent metal. Utilization of free world capacity was about 70 percent or
about 2.2 million tons. Underutilized chrome capacity in 1984 was equivalent
to about 70 percent of South Africa's production that year. Increased
capacity utilization in Brazil, Finland, India, the Philippines and Turkey
could dampen to some extent a South Africa and Zimbabwe disruption on the
economies of the United States, Japan and western Europe.
The Bureau of Mines recently completed a cost evaluation of the
availability of world chromium supplies under alternative price levels
144
utilizing the Bureau's Minerals Availability System. The analysis found that
for the majority of deposits, sub-economic chromium resources In the United
States would require chromium prices 1.5 to 4.5 times current market prices
just to cover operating costs. The majority of these resources are located In
the Stillwater Complex in Montana and in northern California and Oregon. The
development of these resources would require a minimum lead time of 1 to 4
years before production could occur and could only be accomplished within that
time period under some form of emergency condition. Production capacity would
be small, totaling only 215,000 metric tons by the peak year 1989, assuming
development began in 1985. A number of these domestic deposits would be
depleted in less than 5 years. Even assuming a sufficient price Increase,
the uncertainty of the market and the high risk of investment could rule
out development without government support.
Other Market Economy Countries' (MEC) resources that could be developed
in Canada, Greenland, Australia and Papua New Guinea, are probably
sub-economic. In addition, they would require long lead times, subsidization
or much higher market prices, and definitely could not offset the chromite
loss from South Africa and Zimbabwe. Exports from non-market economy
countries, mainly Albania, cannot be expected to add to Western supplies
to any degree.
145
In the event of an emergency, the National Defense Stockpile under
recently-announced Presidential decisions contains 795,000 short tons chromium
metal equivalent which is four times 1984 total United States imports from
South Africa. This level provides a substantial amount of protection for the
United States in the unlikely event of an import disruption. Understandably,
because of projected increases in U.S. demand between 1984 and the year 2000,
at which time demand would be 2.5 times present demand, the protection of the
stockpile in the Intervening years as it pertains to a South Africa cutoff,
steadily decreases.
Gold
Gold, in addition to its intrinsic value, has high electrical and thermal
conductivity, malleability, ductility, chemical inertness, and resistance to
corrosion, which makes it an important material for use in jewelry, dental,
and industrial (mostly electronic) applications. The relatively high price
of gold In recent years has encouraged exploration for and development of new
gold deposits throughout the world. The United States ranks fourth among
world gold producers and contributed 4.5 percent of total world production
in 1984. The United States has the third largest reserves, which consist of
80 million troy ounces. The U.S. imports and exports gold but usually has a
net import reliance of about 20 percent.
Nearly 53 percent of domestic gold consumption in 1984 was in jewelry and
art, and about 33 percent in industrial uses. If necessary, gold usage in
jewelry and art and dental applications could be eliminated. The cost of gold
currently consumed in industrial uses is usually small in proportion to the
146
total costs of the. product. The quantity of gold In highly critical uses
(defense hardware and electronics applications) Is a fraction of the total
consumption.
The increase in gold prices that could result from a rapid and
significant interruption in South African production might encourage further
worldwide exploration and development of new gold sources.
Vast stocks are held by South Africa, the Soviet Union and by financial
institutions throughout the world. Domestically, gold is not a National
Defense Stockpile item. In addition to U.S. Treasury stocks, there are
several million troy ounces in commercial and private bullion stocks.
The cessation of gold exports by South Africa would not cause any severe
problems for the United States or its allies. It would cause serious problems
for South Africa because the sale of gold was responsible for 72 percent of
South Africa's mineral export sales in 1984.
Manganese
The Importance of manganese arises primarily from Its desulfurlzing,
deoxidizing, and alloying functions in Iron and steelmaking, which account
for about 90 percent of its uses. Steel is a vital component of
the U.S. economy and defense activities and there is no practical substitute
for manganese in steelmaking. Materials capable of performing the
desulfurization and alloying functions of manganese cannot be supplied in
sufficient quantities and/or at low prices.
147
In 1983, almQg.C 52 percent of manganese ore consumed In the United States
was used in manganese ferroalloys and metals, 20 percent In pig Iron and steel
production and 28 percent In battery chemicals and miscellaneous uses.
Seventy-eight percent of ferromanganese consumed In the United States In 198A
was In carbon steel production, 9 percent In full-alloy steel and 7 percent In
high-strength low-alloy steel.
The Office of Technology Assessment In the report entitled "Strategic
Minerals Technologies to Reduce U.S. Import Vulnerability" (1985) estimated
that technological progress has the potential of reducing manganese
consumption In steelmaklng In the long-run by as much as one third within the
context of known technology and probable developments.
Manganese resources are concentrated In South Africa, the U.S.S.R. ,
Gabon, Australia and Brazil. Based on a recently completed Bureau of Mines
availability study of the development of world manganese ore deposits,
U.S. costs for mining domestic deposits would be about five to eight times
higher than most of the foreign operations, when both capital and operating
costs are considered. Potential U.S. production would probably require at
least three years to develop and should be regarded as unfavorable at this
time because low-grade domestic resources would require complex and costly
beneficlation technology which has not, as yet, been developed.
148
Potential annual production capacity indicates South Africa produces
about 34 percent of free world production. In the event of the loss of South
African manganese capacity, most of the other countries would need lead times
of three to five years to develop equivalent capacity.
We are told that Australia could double its production from 930,000
short tons in 1 to 1*5 years, but market uncertainties would make such
investment of considerable risk, if based on a disruption of unknown
duration. Gabon has the highest grade manganese ore in the world, but
increased capacity must await completion of the Trans-Gabon railroad in the
early 1990's. Brazil produces about 20 percent of the free world's production
with planned expansions primarily a factor of the availability of capital.
India produces about 10 to 12 percent. It is unlikely that India will change
capacity significantly, regardless of market conditions. Production from
Mexico and Ghana each amounts to about A to 5 percent of the free world total
and would not likely increase significantly. Present non-producers could
contribute about 13 to 15 percent of the total, but this would be at a very
high cost.
Imports of free world manganese to East bloc countries over the last 15
years have been steadily increasing as the Soviet Union has been unable to
meet their demands. The Soviet Union itself began to import free world
manganese three years ago. It is therefore unreasonable to expect their role
to increase in the free world manganese market.
149
Underutllizatlon of the free world's existing manganese production
capacity In 1984 amounted to about 38 percent, primarily because of low steel
production. About 40 percent of the 3.3 million tons of underutilized
capacity is In South Africa, which means that unused capacity elsewhere In the
free world is about 1.3 million tons. With projected world demand to catch up
with capacity in about 1990, South Africa's capacity should be supplying about
34 percent of free world production by that time.
Domestic Industry stocks of manganese ore held at year end 1984
represented about one year's consumption at 1983 rates. Ferromanganese stocks
held by the domestic industry would approximate nearly 4 months consumption at
the 1984 rate. In the event of an emergency, the National Defense Stockpile
under recently-announced Presidential decisions contains 870,000 tons
manganese metal equivalent which is 5 times 1984 total United States imports
from South Africa. This level provides a substantial amount of protection for
the United States in the unlikely event of an import disruption.
Understandably, as U.S. and free world demand increases to the year 2000, the
role of South African production will also increase.
150
Platinum Group Metals
The catalytic and electronic applications of the platinum group metals
(PGM's) are of critical Importance. The reduction of automotive exhaust
emissions, the refining of petroleum, and the production of nitric acid for
fertilizers, explosives, and other chemicals require platinum-group metal
catalysts. Contacts and electrodes for electronic equipment require PGM's to
prevent corrosion and wear. Although many potential auto emissions catalyst
materials have been examined, only platinum-group metals have demonstrated
the necessary efficiency and durability.
In 1984, 43 percent of total PGM consumption was in automotive catalysts,
22 percent in electrical applications, and 15 percent in dental/medical uses.
The predominant use of platinum was automotive catalysts (70 percent);
palladium use was highest in electrical (31 percent), dental/medical (28
percent), and automotive catalysts (23 percent). Platinum and palladium
accounted for 93 percent of PGM usage in 1984.
Platinum and palladium are recovered In the United States as byproducts
of copper refining, but production totals only a few thousand troy ounces
annually, less than one percent of U.S. demand. Refining of purchased scrap
usually accounts for no more than 10 percent of total annual domestic supply.
Depending on expected prices, about 25,000 ounces of platinum and 75,000
ounces of palladium could produced per year if the decision is made to proceed
151
with the development of the Stillwater Complex deposit in Montana. Companies
that were exploring the Duluth Gabbro in Minnesota have ceased exploration
activity. Production of significant amounts of platinum-group metals from
the Duluth Gabbro is dependent on copper and nickel output, which in turn
would require much higher prices from present depressed prices, an unlikely
event. The relative mix of PGM resources in both the Stillwater Complex and
Duluth Gabbro is weighted towards palladium over platinum (78 versus 18-20
percent), which does not correspond well to present industrial demand.
In 1984, Canada contributed about 5 percent of total world PGM
production. Less than 1 percent of total production was contributed by
Australia and Colombia. At present, the total PGM output of countries other
than South Africa and the U.S.S.R. could satisfy only about 20 percent of
U.S. primary demand.
In 1984, the United States consumed an estimated 2.5 million troy ounces
of PGM's of which 10 percent was recovered from recycled material and the
balance from imported material and minor domestic production. The United
152
States la, therefore, almost entirely dependent upon Imported PGM's In
various forms to meet its domestic needs. It is important to note that,
unlike the PGM operations in South Africa which can increase production to
meet Increased demands, the U.S.S.R., Canada, and other countries produce
PGM's as a byproduct primarily from nickel mining. Thus, Increased PGM
production from these properties is currently dependent on market demand for
the primary metal.
Several other nonproduclng deposits in Canada (Lac des Illes) , Colombia
(Choco Pacif ico) , Brazil (numerous small occurrences) and the United States,
were evaluated by the Bureau but they are not anticipated to be in production
any time in the near future. In the short-run, none of these deposits could
fill a significant portion of a supply gap produced by the elimination of
South African PGM exports. With a South African disruption, we should expect
some new developments like the Stillwater deposit if there is a price run-up.
However, this will depend upon the perceived duration of the disruption.
In summary, there are no known primary PGM sources in market economy
countries that could immediately fill the supply gap (based on current demand
levels) produced by the loss of U.S. imports from South Africa, nor are there
any undeveloped properties that could fill the gap within a short time frame.
Excess free world capacity in 1984 other than in South Africa amounted to
about 300,000 troy ounces. The Soviet Union has an estimated 300,000 troy
ounces of excess capacity. These amounts do not compare with the 1.6 million
ounces the U.S. imports from South Africa, much less the demands of other free
world users.
153
Secondary recovery of large quantities of PGM's from automotive catalytic
converters Is possible but probably unlikely In the short-term. Platinum
petroleum-refining catalysts and the PGM catalysts used in nitric acid
manufacture are also recyclable.
Domestic Industry PGM's stocks approximately the following levels of
1984 domestic consumption: platinum, 6 months; palladium, 5 months; Iridium,
2.9 years; osmium, 1 year; rhodium, 7 months; ruthenium, 10 months. In
addition to these reported stocks, end users of platinum-group metals also
hold sizeable quantities. Considerable stock of platinum, palladium, and
iridium in the National Defense Stockpile have been proposed for disposal as
being unneeded to meet defense. Industrial and essential civilian requirements
In the event of an emergency.
Vanadium
The principal use of vanadium is as an alloying element in steel,
where it provides various combinations of properties, such as strength,
high temperature abrasion resistance, hardenabllity and toughness. Vanadium
is also added to titanium to provide increased strength and workability.
Vanadium compounds are also used as catalysts in the chemical industry,
especially for the production of sulfuric acid.
154
In 1984, 79 percent of vaaadlum conBuned in the United States was used
In steel. Nineteen percent was consumed In nonferrous alloys. Thus, vanadium
is a key component in materials that play significant roles in the U.S.
economy and defense.
Colombium, manganese, titanium, chromium, molybdenum, tungsten, or heat
treating processes can all substitute for vanadium to some degree, although
all have some technical and/or economic drawbacks. Platiniim-group metals
can substitute for vanadium compounds in some catalytic applications, but they
are more costly and more susceptible to poisoning in sulfuric acid production.
There is no acceptable substitute for vanadium in titanium alloys. With an
average demand growth rate estimated at about 8 percent to the year 2000
because of the shift to increased use of vanadium in steel, demand should
amount to 2.5 times that of 1984.
In 1984, U.S. vanadium production constituted approximately 11 percent
of world production. Most of the domestic primary vanadium production has
been a byproduct of uranium production. It is also recovered domestically as
a bjrproduct of elemental phosphorus production from ferrophosphorus slags
and vanadlferous clays. In 1984, domestic producers were operating at about
45 percent of capacity. However, since most U.S. capacity is in domestic
uranium mining, which is largely uneconomic at present and projected prices,
the 45 percent figure is misleading.
155
The U.S. In 1984 consumed about one-third of free world's vanadium
production when U.S. Imports of South African vanadium are excluded. Reduced
demand for steel and uranium in recent years has taken its toll on the U.S.
vanadium Industry, as mining and milling activities have dropped off
dramatically. There were 5 companies producing ferrovanadium in the United
States at the end of 198A. However, many other countries around the world
produce and export ferrovanadium and expansion of world production is possible
with considerable price advances. These countries include Canada, Mexico,
Brazil, Argentina, much of Western and Eastern Europe, China, India, Japan,
and South Africa.
Domestic producer and consumer stocks of vanadium in various forms
stood at 3,770 short tons of contained vanadium at the end of 1984, equal to
about 8 months of consumption. Nearly 90 percent of the vanadium pentoxlde in
the National Defense Stockpile may require upgrading prior to use. However,
there is no goal for vanadium under the President's stockpile plan.
Cobalt
As stated earlier. South Africa is not a significant cobalt producer.
However, South Africa moves a large portion of the mineral production,
including cobalt, of Zaire, Zambia and Zimbabwe. South African Transports
Services (SATS) moves 45 percent of Zaire's total exports, 40 percent of
Zambian exports, and 65 percent of exports from Zimbabwe. SATS is also
responsible for airline and harbor transportation. Its management role for
156
the port of Maputo, Mozambique from which Zimbabwean chromlte is exported.
Is declining. Thus, chromlte production from Zimbabwe and cobalt production
from Zaire and Zambia could be affected by a disruption of South African
transport facilities.
Cobalt Imparts strength and heat and wear resistance to certain alloys.
It is also a strongly magnetic element and displays catalytic activity. As
a result, cobalt has a number of important uses including superalloys (Jet
aircraft engines), wear-resistant alloys, tool steels, cemented carbides
(tools, mining and drilling equipment), magnets (rotating machinery,
indicating meters, telecommunications, loudspeakers), catalysis (petroleum,
chemicals), and paint driers. In 198A, 37 percent of total reported domestic
cobalt consumption was in superalloys, 17 percent in magnetic alloys, 10
percent in catalysts, 10 percent in paint driers and 6 percent in cemented
carbides.
There are no cobalt reserves in the United States. The last producing
domestic cobalt mine shut down in 1971. However, the United States does have
two potential cobalt resources, the Blackbird Mine in Idaho and the Madison
Mine in -Missouri. In 1983, U.S. secondary cobalt production satisfied about 5
percent of reported consumption. It should be noted that dissipation prevents
significant cobalt recycling in some end uses, such as chemicals, salts,
driers, and magnets. Most secondary cobalt production is derived from
recycled cemented carbide and superalloy scrap and from spent catalysts.
157
According to a 1983 National Academy of Sciences study, essential U.S.
cobalt needs were estimated at about 50 percent of total 1983 consumption.
Most of the Increase In consumption In 1984 over that of 1983 was In the
categories which the National Academy Identified as essential. The Academy
estimated that substitution, recycling, and Improvements In design technology
are capable of achieving cobalt savings of more than 10 million pounds
annually by the next decade. However, this does not take Into account the
normal Increases In consumption that over the same period will raise overall
consumption an equivalent amount.
Significant amounts of cobalt In superalloys could be replaced, but this
would require costly and time-consuming alloy optimization and engine
certification programs. A great deal of substitution for cobalt In magnetic
applications has already occurred. But, an estimated 20 percent of current
cobalt use In these applications Is essential and would continue at even a
tenfold price Increase. Cobalt Is a key requirement for cemented carbides,
which are critical to high productivity in metal cutting and forming, mining,
oil and gas well drilling, and other Industrial operations. Cobalt-free
materials cannot be considered as a practical general alternative.
The Impact of a disruption in South Africa to world cobalt supply rests
with the fact that cobalt from both Zambia and Zaire is dependent on South
African transportation (railway, ports) for export shipments. The Benguela
railway through Angola has been closed for years because of the civil war in
54-846 0-86-6
158
Angola; shipment through Tanzania Is constrained because of congestion at
the port of Dar es Salaam and poor railroad conditions. As demonstrated In
1979, cobalt can be flown out of Zaire. Current estimates are that such air
shipments could occur at a price premium of as little as 50^-$!. 00 per pound.
However, because cobalt Is a byproduct of copper production, the Inability
to ship copper during an extended Interruption, and the resulting cessation of
copper production, would also result In the cessation of cobalt production.
However, stocks of unrefined cobalt In Zaire could replace at least one year
of lost mine production. Additional stocks of Zalrlan cobalt also exist In
Belgium.
The principal source of imported cobalt for the United States Is Zaire,
which provided 46 percent of total imports In 1983 and 198A. (Belgium-Luxembourg
contributed an additional 6 percent, which originated In Zaire). Other major
suppliers were Zambia, Canada, Norway (Canadian origin) and Finland.
United States Industry stocks (consumer and processor) totalled
3.1 million pounds at year end 1984, the equivalent of 2 month's domestic
consumption. The inventory of cobalt to be retained In the National Defense
Stockpile was 28.6 million pounds or about 1.5 times 1984 imports from
Southern Africa.
159
Results of the Evaluation
Analysis of the preceding data on the key materials produced by
South Africa, upon which the Western nations and Japan are presently dependent
or whose transportation to markets would be directly effected by a South
African mineral supply disruption (chromium from Zimbabwe and cobalt from
Zaire and Zambia) , indicates that the supply problem for the western nations
and Japan would be acute. The U.S. government would have to consider several
alternatives, including supplementary supplies from the strategic stockpile.
Mr. Chairman, we are preparing a technical analysis in response to the
questions raised in your letter of September 24 and we will provide you with
copies once it has been completed and reviewed.
Bureau of Mines Analytic, Information and Research Capabilities in Dealing
with Critical and Strategic Mineral Supply Disruptions
Mr. Chairman, you stated that the Subcommittee would examine various
means to minimize this country's dependence on critical materials and that
one area of particular interest is the enhancement of information and data
analysis capability as it relates to critical materials. In addition.
160
your letter of Invitation expressed Interest In a global Information system
pertaining to critical materials. I believe the Bureau has these capabilities
and would like to briefly highlight our analytic, informational, R4D and
emergency capabilities in planning for and dealing with critical and strategic
material disruptions.
Analytic Capabilities
The analytic system of the Bureau of Mines, presently available to
analyze potential disruptions to the supply of critical materials, consists
of three components: world market models, an industry analytic system
(input/output), and the Minerals Availability System.
The Bureau has available at this time world market models for particular
mineral markets. The world chromium and manganese market models which are
being used to develop quantitative impact estimates are partial equilibrium
models and consist of supply and demand functions which incorporate historical
data on chromium and manganese prices, production and consumption as well as
recently collected engineering and survey information concerning likely
producer and consumer responses to disruptive conditions. The market model
projects world prices, quantities of the mineral consumed by specific users,
and the direct economic costs of chromium and manganese supply disruptions.
As with all models, these projections may or may not be reasonable because of
uncertainty in data limitation.
161
The Interindustry model Is an adaptation of the 1977 U.S. Department
of Commerce Input/Output Table. Estimated value of output levels of the
Industrial sectors that comprise the model are a measure of Gross National
Product (GNP), the value of output of all D.S. goods and services. Changes
in GNP provide a measure of the effect of a disruption and the effectiveness
of policy actions. A supplementary measure, computed as a function of change
in Industrial output, is the change In total D.S. employment resulting from
the disruption or policy action. The Bureau of Mines Minerals Availability
System assesses the worldwide availability of nonfuel minerals. The program
evaluates, on a worldwide basis, active, developed and explored mines and
deposits and mineral processing plants and projects a price the resource from
a particular deposit may be made available to the market. Engineering and
economic evaluations for the 2,400 most significant domestic and foreign
mining and processing operations in the western world have been completed.
The Information System
The Bureau collects Information on about 100 mineral commodities from 168
countries. This system encompasses all the minerals that are of strategic and
critical Importance to the United States, and encompasses all of the countries
of the world that produce, consume, and trade these minerals.
In the United States, the mineral Industry is canvassed directly through
monthly, quarterly, and annual questionnaires to ascertain domestic production,
consumption, and stocks for mines, smelters, refineries, and plants. Data on
foreign trade In mineral commodities, are obtained from the U.S. Bureau of the
Census which collects statistics on all U.S. foreign trade.
162
For forelgo countries, mineral Information Is obtained for the Bureau
through U.S. embassies throughout the world. Each embassy has an officer
whose responsibilities Include reporting on minerals for the Bureau of Mines.
At 10 embassies, the U.S. Department of State supports Regional Resource
Officers whose sole duty Is reporting on the mineral industry of those
countries.
In addition to the statistical reports flowing to the Bureau from the
domestic Industry and from foreign governments, the Bureau's commodity
specialists and country specialists, of which there are 85, make frequent
visits to the mines and plants related to their commodity or country,
acquiring firsthand knowledge of the capabilities, utilization, condition
and modification plans for mines and processing facilities of the major
producers worldwide.
R&D Activities
The Bureau of Mines R&D activities have addressed domestic minerals
supply problems virtually since the Bureau was created in 1910. Today, much
of the Bureau's efforts focus on the question of import vulnerability of
strategic and critical minerals (SCM), including those being addressed here.
Enhancing this Nation's ability to rely less on foreign sources of supply Is
one factor justifying the Bureau's SCM research. Technological advancements
In extractive metallurgy technology, materials, and recycling will help assure
against any adverse effects of a supply cutoff. The following comments
address some of our current and past effort with respect to the six previously
discussed strategic and critical metals.
163
Our reseatch applied to chronluin Includes the recovery of the metal from
low-grade domestic deposits and recycling from superalloy scrap, speciality
steel wastes, and other chromium-containing discarded materials. Some results
have been a new series of oxidation- resistant iron-base alloys that require
only one-half the chromium contained in conventional stainless steels. Also,
two chromium-free alloys have been developed that can be substituted for
heat-treated steels used for gears, shafts, and other machine components.
In the case of gold, recent developments have Included the
electro oxidation of carbonaceous gold ores, carbon-ln-pulp technology,
agglomeration heap leaching, direct electrowlnnlng, and the recovery from
military electronic scrap. These technologies have strong potential for
increasing domestic gold production from resources now considered uneconomic.
For manganese, the Bureau Is evaluating recent advances in flotation
technology for treating low-grade domestic deposits (Three Rids District
in Nevada and the Aroostook District in Maine). Research results appear
promising, especially concentration using the new column flotation concept.
It should be understood that this research Is not aimed at making these
deposits competitive with large, high-grade offshore deposits, but rather,
to have technology available in case of a supply disruption.
Our research concerning the platanium-group metals has been directed
toward the possible application of Intermetalllc compounds as substitutes
for platinum catalysts, a major use of the metal. With respect to
164
conservation, technology has been developed for electrodepositlng coatings
of platinum-group metals onto surfaces of more common, lower-cost metals.
This procedure would Impart to the base metal all the desired properties
needed to withstand corrosive, high-temperature environments, while using
only a fraction of the platinum metal otherwise required for solid parts.
Research has been conducted seeking economic methods to recover vanadium
from low-grade Idaho mudstones and shales, phosphorite deposits, and Colorado
Plateau uraniferous ores. Production from these marginal resources could meet
U.S. vanadium needs on an emergency basis.
Like chromium, an adequate supply of cobalt to meet this Nation's needs
is reflected in our R&D activities. Our work Includes the evaluation of
technology for recovering cobalt from southeastern Missouri lead ores in
cooperation with a major lead producer. Additionally, technology is being
developed to recover cobalt as well as nickel and chromium contained in spent
catalysts used to refine and upgrade crude oils and to produce plastics.
In addition to those resources for which processing methods have been
tested, we have been examining potential sources of strategic minerals in
Alaska and on the ocean floor within the U.S. Exclusive Economic Zone. So
far, the chromlte deposits we have studied in Alaska have little potential
in terms of economic development. In the case of the cobalt-rich manganese
crusts near Hawaii and sulfide deposits on Gorda Ridge off Oregon, these
deposits represent an Important resource, but realistically it will be many
years before they will be developed.
165
Emergency Power Cap_abllltles
The Bureau of Mines has the framework needed to discharge its priorities,
allocations, and supply expansion responsibilities in the event of a national
emergency. The Bureau would also act as the claimant agency for the mineral
sector of the economy to assure needed fuel, power, transportation, personnel,
supplies, and equipment. To facilitate coordinated government action in the
event of an emergency, the Bureau in 1975 organized nearly 100 interagency
mineral coimnodity committees. These committees would be promptly called upon
in the event of any emergency.
In the event of a severe supply disruption. Title I of the Defense
Production Act, would be available to assist In meeting any defense
priorities. The Bureau of Mines and the Department of Commerce would
be Involved in implementing such an approach should it become necessary.
At some point in a serious shortage situation involving National defense,
recourse to the strategic stockpile might be required. To release stockpiled
materials, FEMA, in consultation with other agencies including the Bureau of
Mines, would prepare a justification and recommendation for the President's
signature. On receipt of the President's authorization, the Office of
Stockpile Disposal of GSA would release the material to specified recipients.
If the supply disruption were long-lasting, it might be necessary to
use supply expansion programs under Title III of the Defense Production Act.
These could cover domestic deposits and reliable foreign sources. The Bureau
of Mines would recommend needed mineral supply expansion programs.
166
In sum, the Bureau's analytic. Information, R&D, and emergency
capabilities to deal with the critical material supply disruptions are
considerable. In addition, we are committed to continually enhancing the
Bureau's capabilities to meet our responsibilities to assess the impact of
international economic, political and social events on the health of the
D.S. mineral industry and economy.
Mr. Chairman, this concludes my statement, and I would be pleased to
answer any questions which you and Members of the Subcommittee may have.
Mr. Brown. Thank you, Mr. Horton. It's very illuminating. I
would like to go ahead with Mr. Wilson and Mr. Maguire before we
ask you to respond to questions.
Mr. Wilson.
STATEMENT OF ROBERT D. WILSON, DIRECTOR, OFFICE OF
STRATEGIC SERVICES, U.S. DEPARTMENT OF COMMERCE
Mr. Wilson. Mr. Chairman, members of the subcommittee, staff,
my name is Robert Wilson. I am the Director of the Office of Stra-
tegic Resources, U.S. Department of Commerce. I am pleased to
have the opportunity to testify before this committee. I have no-
ticed in Mr. Horton's testimony that a considerable part of my tes-
timony has been included in his. Therefore, I will submit my testi-
mony for the record and briefly summarize to save you time.
Mr. Brown. That would be fine.
Mr. Wilson. Thank you.
As you know, our Nation is endowed with a wealth of natural
resources on which our industrial strength is based. Our industrial
strength is an essential element in our vast economy as well as our
national security. Although we are a resource-rich nation, there
are a number of mineral commodities that are important to our in-
dustry but that we do not produce here in significant quantities. Of
the more than 90 known mineral commodities, we are more than
40 percent on imports to supply our domestic needs for at least 34
minerals, and we are more than 90 percent import dependent for
at least 16 mineral commodities.
This dependence on foreign sources of supply leaves us vulnera-
ble to a disruption in access to mineral supply which could have
adverse effects on our economy and national security. Let me add
that vulnerability is determined, however, by several factors: The
potential severity of a possible interruption; whether other supplies
exist worldwide; availability of private sector and Government-held
stocks; whether other materials can be substituted; and whether
opportunities exist for increased efficiency in the use of the materi-
al.
Some of the mineral commodities that we are talking about
today play a crucial role in our civilian and defense industrial base.
167
They are used in auto and truck production, housing construction,
weapons systems, jet aircraft, ammunition, communications equip-
ment, and petroleum refining. For this reason, national security
considerations demand that we as a nation assure a supply of these
minerals to our domestic industry.
Our good trading relationships with foreign producers of these
minerals assure us of a continuing supply during times of peace.
However, these materials must travel over long trade routes and
they come from parts of the world that might be targets of opportu-
nity for our enemies during times of war. While the administration
has determined that most of our overseas suppliers are reliable, in
the long run we cannot guarantee they will remain free from a
supply disruption. Steep price rises resulting from such a disrup-
tion may make these commodities further unavailable to the civil-
ian economy during times of war. History has taught us that both
of these types of disruptions can be real threats.
Mr. Horton has talked about several of the specific minerals and
materials from South Africa, and I won't go over all of those fig-
ures but I do think it's significant to point out the overall import
dependency of the United States on five of these minerals. For plat-
inum, we import 91 percent of our total requirements; for chromi-
um, 82 percent. Manganese, 99 percent of our total demand must
be satisfied from sources off our shores. For cobalt, the import de-
pendency is 95 percent, and for vanadium it is 41 percent.
When we talk about these minerals, it is important to realize the
uses. All of you have worked on mineral issues for quite some time,
and you know it's a difficult issue for most people to understand
simply because the commodity loses its identity during the produc-
tion process". Chromium is important and enjoys a diversity of uses
because of its properties of hardenability, strength, resistance to
corrosion, oxidation, and wear. It is used to produce stainless, full-
alloy, and high-strength low-alloy steels, high-purity ferrochro-
mium, and electrolji^ic chromium steel. These materials in turn are
used in the production of tanks, ships, military hospital equipment,
military aircraft, naval nuclear-propulsion systems, B-IB landing
gear, and many other types of industrial equipment.
Cobalt imparts the properties of increased heat resistance, wear
resistance, strength, and magnetization to other materials. It is
used in the production of superalloys, mainly for industrial and air-
craft gas turbine engines; in magnetic materials for various electri-
cal applications; and in paints and ceramics as decolorizers, dryers,
pigments, and oxidizers. Cobalt is also used in cemented carbides,
containing 10 to 15 percent cobalt, which are used in the manufac-
ture of cutting tools.
Manganese is used as a desulfurizer, deoxidizer, and conditioner
in the production of all types of steel. In addition to these func-
tions, it is used in the form of ferromanganese and imparts the
properties of strength and hardness to steels. Steel, of course, is
used in a multitude of applications, including ships, tanks, other
military vehicles, buildings, and bridges.
The platinum-group metals include platinum, palladium, rhodi-
um, ruthenium, iridium, and osmium. These metals are chemically
inert over wide temperature ranges, have high melting points, and
possess a high degree of catalytic activity. They are used as cata-
168
lysts in automotive exhaust systems, in petroleum distillation, in
chemicals and pharmaceuticals, and fertilizer products. Electrical
and electronic applications of platinum-group metals include
relays, voltage regulators, thermostats, electron tubes, printed cir-
cuits, resistors, and high-strength magnets.
The most useful properties of vanadium are heat, shock, and
wear resistance, and it is essential in the making of steel.
Suitable substitutes do not exist for a number of these metals in
most applications. For some, substitutes are available, but only
with a reduction in product performance and an increase in cost.
No known replacement exists for new chromium in stainless steel,
and without manganese you cannot make steel. Even in minor ap-
plications for most of these metals, the substitution of these metals
is impossible. Platinum-group metals can substitute for one an-
other.
At that point I would like to, because I think the rest of it has
been covered by Mr. Horton, go to some of the world reserve fig-
ures that I think are important for the rest of my testimony. I
think it is important to note, in terms of known world reserves of
these minerals, that South Africa and the Soviet Union combined
have 97.5 percent of the world's known reserves of platinum. For
chromium, South Africa and the Soviet Union have about 86 per-
cent of the known world reserves. For manganese, the Soviet
Union and South Africa together have 91.6 percent of the world re-
serves.
Now, cobalt is not important because it comes from South Africa
directly but most, 61 percent of the cobalt that we use in this coun-
try, comes through the South African transportation system. In
terms of world reserves of vanadium, 71.8 percent of the total
known world reserves are either in South Africa or the Soviet
Union.
Those facts make it important to realize that South Africa is an
important ally in the sense of supplying us metals. It is important
to point out — a lot of the work I have been doing on this lately —
that we have received absolutely no indications that the South Af-
ricans would use metals or minerals as a reverse sanction against
the United States. We think that shows two things: No. 1, the suc-
cess of our policy of constructive engagement and. No. 2, the role
and value of mineral commodities to South Africa. We have been
asking in the last few months — and I don't think I am addressing
the members of this committee — but in the current debate on
South Africa that this issue particularly needs to be given more
consideration in the public debate.
Because of the large amounts of these five minerals that the
United States imports from or through South Africa and their lim-
ited alternative sources, a peacetime cutoff of supply from that
country could result in significant to substantial short-term price
increases for our domestic industries. It can be stated that, in the
least, the role of South Africa in supplying minerals to the United
States, and to our European, and Japanese allies must be assessed
on a continuous basis.
Thank you.
[The prepared statement of Mr. Wilson follows:]
169
TESTIMONY OF ROBERT DALE WILSON
DIRECTOR. OFFICE OF STRATEGIC RESOURCES
U.S. DEPARTMENT OF COMMERCE
BEFORE THE
SUBCOMMITTEE ON TRANSPORTATION. AVIATION AND MATERIALS
OF THE
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON SCIENCE AND TECHNOLOGY
OCTOBER 10. 198 5
170
MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
My name is Robert Dale Wilson and I am the Director of -the Office of
Strategic Resources. U.S. Department of Commerce. I am pleased to
have the opportunity to testify before this hearing of the House
Subcommittee on Transportation. Aviation and Materials. As Director
of the Office of Strategic Resources. I am responsible for
coordinating the interagency activities of the Department of
Commerce that directly affect not only U.S. minerals producers, but
also those industries that are users of mineral raw materials.
Carrying out this duty requires an understanding of numerous complex
issues, the most important of which is the role of minerals in the
U.S. economy.
Our Nation is endowed with a wealth of natural resources, on which
our industrial strength is based. Our industrial strength is an
essential element in our vast economy as well as our national
security. Although we are a resource-rich nation, there are a
number of mineral commodities that are important to our industry but
that we do not produce here. Of the more than 90 known mineral
comnodities. we are more than 40 percent dependent on imports to
supply our domestic needs for at least 34: we are more than 90
percent import dependent for at least 16 mineral commodities.
I
i
I This dependence on foreign sources of supply leaves us vulnerable to
I a disruption in access to mineral supplies, which could have adverse
effects on our economy and national security. Some of these mineral
commodities play a crucial role in our civilian and defense
industrial base. They are used in auto and truck production.
171
housing construction, weapons systems, jet aircraft, ammunition, and
communications equipment. For this reason, national security
considerations demand that we. as a nation, assure a supply of these
minerals to domestic industry.
Our good trading relationships with foreign producers of these
minerals assure us of a continuing supply during times of peace.
However, these materials must travel over long trade routes and they
come from parts of the world that might be targets of opportunity
for our enemies during times of war. While the Administration has
determined that most of our overseas suppliers are reliable, in the
long run we cannot guarantee that they will remain free from a
supply disruption. Steep price rises resulting from such a
disruption may make these commodities further unavailable to the
civilian economy during times of war. History has taught us that
both of these types of disruption can be real threats.
Shortages of materials critical to the war effort were experienced
in World Wars I and II and in the Korean War. Each of these
conflicts was followed by major legislation addressing the need to
avert shortages of raw materials during wartime. The Strategic
Materials Act of 1939. the Strategic and Critical Materials Stock
Piling Act of 1946 and the Defense Production Act of 1950 were all
intended to improve the readiness of the Nation's industrial base by
assuring the supply of the necessary materials and to prepare for
172
national defense mobilization should it be required. These acts
marked the emergence of a national materials policy and to this day
have served us well in providing protection in the event of a future
conflict.
The report of the President's Materials Policy Commission, created
by President Truman in 1951, was the first major work to acknowledge
the changing status of the United States with regard to raw
materials supplies. The report, entitled Resources For Freedom,
noted our transition from a raw materials surplus nation to a raw
materials deficit nation. This trend has continued and has become
even more pronounced in the present. The strategic nature of
mineral commodities has been recognized in various laws and
Presidential policy pronouncements since that time, all of which by
divers means recommended strong action that should be taken to
assure an adequate supply of materials necessary to maintain our
well-being. It must also be understood that certain laws have been
passed, such as environmental standards, that increase the cost of
producing materials and have an adverse effect on the
competitiveness of domestic producers. Such laws are often
unavoidable, but in the least their effects should always be
recognized.
Like the United States, the Republic of South Africa is endowed with
a wealth of natural resources. It possesses reserves of a number of
minerals for which the United States is import dependent. South
173
Africa accounts for 81 percent of the world's platinum reserve
base*, 71 percent of the world's manganese reserve base. 55 percent
of the world's gold reserve base. 47 percent of the world's vanadium
reserve base. 84 percent of the world's shipping grade chromium
reserve base, 17 percent of the world's fluorspar reserve base, and
15 percent of the world's ilmenite reserve base. In 1984. South
Africa accounted for 42 percent of the world's platinum production,
30 percent of vanadium production, 27 percent of chromium
production, 49 percent of gold production. 11 percent of manganese
production. 7 percent of fluorspar production, and 10 percent of
ilmenite production.
South Africa's position as a minerals supplier is further enhanced
by its location on the coast of Africa. Land-locked nations such as
Zimbabwe and Zambia transport a significant portion of their mineral
exports on South Africa's rail lines and through its ports. South
African railways are a major means of transport for Zimbabwe's
chromium and Zambia's cobalt, both of great importance to U.S.
industry. Furthermore, imports of petroleum products, machinery and
spare parts vital to the mineral industries of these countries
travel through South Africa to other African countries.
* Reserve Base--That part of an identified resource that meets
specified minimum physical and chemical criteria related to current
mining and production practices, including those resources that are
currently economic, marginally economic, and some that are currently
subeconomic .
174
The United States considers a number of these minerals strategic and
critical, that is. they are 1) needed to meet U.S. requirements in
the event of a national emergency, and 2) are not found or produced
in the United States in sufficient quantities under current market
conditions to meet such needs. Of specific importance with regard
to South Africa are platinum, chromium, vanadium, manganese, and
cobalt. From South Africa, the United States currently obtains the
following percentages of its imports: chromium. 55 percent:
platinum. 49 percent: vanadium. 44 percent: manganese ore. 31
percent; and f erromanganese. 39 percent. Total U.S. import
dependence in 1984 was 82 percent for chromium. 91 percent for
platinum. 41 percent for vanadium, and 99 percent for manganese. In
addition. 61 percent of the total cobalt that the U.S. consumes is
transported through South African ports (U.S. import dependence for
cobalt was 95 percent in 1984).
These five commodities are also important to the economies of our
allies. The European Community (EC) and Japan are even more
dependent on foreign sources for chromium, cobalt, manganese,
platinum, and vanadium than is the United States. EC net import
reliance for chromium is 92 percent: for platinum. 100 percent: for
cobalt. 100 percent: for manganese. 99 percent: and for vanadium.
100 percent. Japan's net import reliance amounts to 99 percent for
chromium, 95 percent for platinum. 100 percent for cobalt. 95
percent for manganese, and 70 percent for vanadium. By contrast,
the Soviet Union is reliant on imports of mineral raw materials to a
much lesser degree. The USSR is more than 30 percent reliant on
175
imports of only six mineral commodities--f luorspar (53 percent),
barite (49 percent), bauxite and alumina (48 percent), cobalt (47
percent), tungsten (43 percent), and tin (33 percent). Cobalt,
chromium, manganese, vanadium, and platinum are all vitally
important to a number of U.S. industries. Without these minerals,
production of numerous manufactured goods important to our national
defense and industrial well-being would be disrupted.
Two essential points that must be kept in mind as we discuss U.S.
dependence on South African material supplies are as follows: one,
it is not the U.S policy to be in a position of reliance on these
minerals during a period of national emergency or military
conflict. To provide a means to prevent such a situation the
President has adopted a stockpile plan to maintain a non-fuel
materials stockpile, and; two, this stockpile contains over a year's
consumption of selected materials, some of which we import from
South Africa in significant quantities. The President believes this
stockpile provides substantial protection to the U.S. in the event
of a severe interruption and serves as a disincentive to anyone that
may be contemplating a disruption of such materials.
Chromium enjoys a diversity of uses because of its properties of
hardenability, strength, and resistance to corrosion, oxidation, and
wear. It is used to produce stainless, full-alloy, and
high-strength low-alloy steels, high-purity f errochromium, and
electrolytic chromium metal. These materials in turn are used in
176
the production of tanks, ships, military hospital equipment,
military aircraft, naval nuclear-propulsion systems. B-IB landing
gear, and other industrial equipment. Chromium is also used
extensively in the chemical industry to produce pigments for paints,
inks, and roofing granules.
Cobalt imparts the properties of increased heat resistance, wear
resistance, strength, and magnetization to other materials. It is
used in the production of superalloys, mainly for industrial and
aircraft gas turbine engines, in magnetic materials for various
electrical applications, and in paints and ceramics as decolorizers,
dryers, pigments, and oxidizers. Cobalt is also used in cemented
carbides, containing 10 to 15 percent cobalt, which are used in the
manufacture of cutting tools and in bits for mining and drilling.
Organic cobalt compounds are used by the rubber industry in steel
belted radial tires.
Manganese is used as a desulfurizer , deoxidizer, and conditioner in
the production of all types of steel. In addition to these
functions, manganese in the form of f erromanganese or
silicomanganese imparts the properties of strength and hardness to
steels. Steel, of course, is used in a multitude of applications
including ships, tanks, and other military vehicles, buildings, and
bridges.
177
The platinum group metals include platinum, palladium, rhodium,
ruthenium, iridium, and osmium. These metals are chemically inert
over wide temperature ranges, have high melting points, and possess
a high degree of catalytic activity. They are used as catalysts in
automotive exhaust systems, in petroleum distillation, in chemicals
and pharmaceuticals, and in fertilizer production. Electrical and
electronic applications of platinum group metals include relays,
voltage regulators, thermostats, electron tubes, printed circuits,
resistors, and high-strength magnets.
The most useful properties of vanadium are heat, shock, and wear
resistance. These properties maKe vanadium particularly attractive
to the steel industry, which uses vanadium in high-speed tool
steels, high-strength low-alloy steel, and full-alloy steel. Such
alloys are used in the automotive industry for crankshafts, pinions,
and gears, hood and door panels, wheel discs, and suspension arms.
Vanadium is also used in the production of titanium alloys and as a
catalyst in chemical processes.
Suitable substitutes do not exist for these metals in a number of
their uses. For some, substitutes are available, but only with a
1 reduction in product performance or an increase in cost. No known
replacement exists for new chromium in stainless steel, with the
exception of chromium stainless steel scrap. While other materials
can substitute for stainless steel in non-essential applications,
this would not apply to the vast majority of uses of such steel.
178
Higher cost, lower performance substitutes for chromium in alloy
steels include nickel, cobalt, colurabium, vanadium, and molybdenum.
There are no substitutes for chromium in superalloys however.
Nickel-based alloys can be substituted for cobalt alloys in some
applications, and columbium and tantalum alloys can sometimes
substitute for cobalt superalloys. Substitutes for cobalt catalysts
are generally not as effective but include manganese, lead, nickel,
and tungsten. Potential substitutes in specific products are nickel
and ceramics in jet engines: nickel, platinum, barium and strontium
ferrite, and iron in magnets; molybdenum carbide, ceramics, and
nickel in machinery: and copper, chromium, and manganese in paints.
In the production of iron and steel, nothing can satisfactorily
substitute for manganese. Even in minor applications, substitution
for manganese rarely is possible.
Although platinum group metals can substitute for one another,
substitution by other metals usually implies cost or performance
penalties. For electronic uses, tungsten, nickel, silver, gold, and
silicon carbide may be substituted. Less efficient substitutes for
platinum group metals in catalysts include rare earth elements,
nickel, molybdenum, tungsten, chromium, cobalt, vanadium, and
silver. In petroleum refining, rhenium has been found to be an
acceptable substitute.
179
Substitutes for vanadium in high-strength low-alloy steels include
columbiuin, molybdenum, manganese, titanium, and tungsten. Metallic
platinum can replace vanadium compounds as catalysts in some
chemical processes. No acceptable known substitute currently exists
for vanadium in titanium alloys.
As can be seen from the previous description, not only are some of
these five metals (particularly chromium and platinum) relatively
scarce and difficult to substitute, but their few substitutes are
often also scarce compared with other minerals in the earth's crust,
such as aluminum and copper.
According to current knowledge, alternative sources of supply for
chromium and platinum are few, adding to their strategic nature.
Only two other countries other than South Africa produced more than
1 million tons of chromite in 1984--the Soviet Union and Albania.
These latter two countries together produced 40 percent of the
world's chromium supply in 1984. Zimbabwe has a relatively large
reserve base of shipping grade chromium (11 percent of the world
total) but only produces one-fifth of the chromium that South Africa
produces. Other current sources of chromium for the United States
(following South Africa's 55 percent share of imports) are Zimbabwe
(8 percent of total imports), the USSR (7 percent), and the
Philippines (6 percent).
180
The United States imports 49 percent of its cobalt requirements from
Zaire and Zambia, the bulk of which is transported through South
Africa because of the effects of guerrilla activity on alternate
rail lines through other countries. These two countries produced 62
percent of the world's cobalt in 1984. Australia, Canada, Cuba, and
the Soviet Union each produced about 7 percent of world cobalt
production. Zaire, Cuba, and New Caledonia, and the United States
have large reserve bases (each greater than 950.000 short tons
cobalt content). The United States possesses about 10 percent of
the total world reserve base of cobalt; however most of this reserve
base is subeconomic at this time. Such reserves would become
economic at some price: however, the lead time for their development
is generally considered to be several years depending upon
conditions. Therefore, in the event of a national emergency with
less than three years' preparation time, the United States would
still be vulnerable to disruption of cobalt supplies. Air freight
shipments out of Zaire would only be economical if cobalt prices
increased.
In addition to Zaire and Zambia, the United States imports cobalt
from Canada and Japan. Canada and Japan have reserve bases only a
fraction the size of Zaire's.
Manganese production is slightly more diversified than chromium and
cobalt production. Australia, Brazil, Gabon, and China each produce
approximately 8 percent of the world's manganese. The Soviet Union
181
is the largest producer, with 47 percent of the world total.
Although the Republic of South Africa has the largest reserve base
for manganese, it produces only about 11 percent of world
production. Behind South Africa's 71 percent share of the world
reserve base are the Soviet Union (21 percent of the total).
Australia (5 percent), and Gabon (4 percent).
The Soviet Union is the world's largest producer of platinum group
metals, with 54 percent of the total. Besides the USSR and the
Republic of South Africa, other countries produce only very small
amounts. South Africa possesses 81 percent of the world's platinum
reserve base. The United States also imports small amounts of
platinum from the United Kingdom and the Soviet Union. While
recycling of platinum from automotive catalytic converters is
possible, the Office of Technology Assessment estimates that it will
not be until the mid-1990 's that recycling will produce enough
platinum to meet domestic needs. Significant price increase could
accelerate this timing.
The Soviet Union is also the world's largest producer of vanadium,
accounting for 33 percent of the total. China. Finland, and the
United States also produce significant amounts. South Africa
accounts for almost 50 percent of the world reserve base of
vanadium, but the Soviet Union, the United States, and China also
have significant resources. Along with South Africa, Canada and
Finland export vanadium to the United States.
182
In addition to conventional sources of these minerals, some
resources have been found to exist in deep sea nodules and in the
Exclusive Economic Zones. However, these resources are not
currently economically or technologically recoverable.
Because of the large amounts of these five minerals that the United
States imports from or through South Africa, and their limited
alternative sources, a peacetime cut-off of supply from that country
could result in significant to substantial short-term price
increases for our domestic industries. Excess capacity, private
stocks and substitution would reduce some of the effects of such a
cut-off for some of these materials. For national emergencies, the
President believes that these factors plus the national defense
stockpile provide the necessary assurance to meet U.S. requirements
for defense, industrial, and civilian activities. It can be stated
that in the least, the role of South Africa in supplying minerals to
the U.S. and its European and Japanese allies must be assessed on a
continuous basis.
183
Mr. Brown. Thank you, Mr. Wilson.
Mr. Maguire, would you proceed with your statement?
STATEMENT OF RICHARD A. MAGUIRE, ASSOCIATE DIRECTOR
FOR NATIONAL PREPAREDNESS PROGRAMS, FEDERAL EMER-
GENCY MANAGEMENT AGENCY
Mr. Maguire. Yes, sir, Mr. Chairman.
Mr. Chairman, members of the subcommittee, I welcome this op-
portunity to testify on behalf of the Federal Emergency Manage-
ment Agency on the impact of a possible cutoff of critical materials
from South Africa. My remarks today address the use of the na-
tional defense stockpile of strategic and critical materials and
other short- and long-term actions to mitigate the effects of such a
disruption.
We are responsible for mobilization planning of the civil sector
in support of national defense objectives. As the Associate Director
for National Preparedness, I am tasked with the planning and co-
ordination of national security programs, including such areas as
industrial mobilization preparedness. Within this framework, I am
concerned with the availability of the resources that industry uses
and in the ways these resources can be brought to bear to meet na-
tional security needs. Within the area of industrial mobilization,
our responsibilities include the coordination of the planning for the
national defense stockpile of strategic and critical materials.
The purpose of the national defense stockpile, as provided in sec-
tion 2 of the Strategic and Critical Materials Stockpiling Act, is to
provide the acquisition and retention of stocks of certain nonfuel
strategic and critical materials. These stocks are to preclude, when
possible, a dangerous and costly dependence by the United States
upon foreign sources for supplies of such materials during a nation-
al emergency.
On July 8, 1985, the White House announced the administra-
tion's new program to modernize the national defense stockpile.
This proposal resulted from the President's April 5, 1982, "Nation-
al Materials and Minerals Program Plan and Report to Congress,"
which stated the intent to improve the Nation's preparedness for
national mobilization. A 2-year interagency study, chaired by the
National Security Council, addressed the national security require-
ments for strategic and critical materials in the event of an emer-
gency.
The President decided to modernize the national defense stock-
pile to meet the Nation's requirements with a stockpile valued at
$6.7 billion for the 42 materials included in the study. This level is
more than ample to meet U.S. requirements in the event of a 3-
year conventional, global conflict, and includes some substantial
stocks of essential materials such as cobalt, chromium, and manga-
nese. Stock levels that would be retained are in excess of recent
annual U.S. consumption levels. The administration intends to con-
tinue to consult and work with the Congress on the implementa-
tion of this proposal.
Current inventories in the stockpile include the following materi-
als which are normally imported from South Africa: antimony, as-
bestos, industrial diamonds, fluorspar, chromium, iridium, manga-
184
nese, palladium, platinum, and vanadium. Materials in the stock-
pile may be released for use, sale, or other disposition on the order
of the President at any time it is determined that the release of
such materials is required for purposes of the national defense, and
in time of war declared by the Congress or a national emergency.
The impact of a possible disruption of strategic and critical mate-
rials in peacetime can be mitigated by the marketplace. For nation-
al emergencies, the national defense stockpile would be available,
as would other authorities such as the Defense Production Act. If
warranted, the Defense Production Act of 1950, as amended, pro-
vides authorities to develop existing or new sources of supply
through loan or purchase guarantees, as well as to allocate existing
supplies to national defense needs.
Research and development in the area of strategic and critical
materials, as provided by section 8(a) of the Stockpile Act, is dele-
gated to the Secretary of Interior. The Stockpile Act states that sci-
entific, technologic, and economic investigations are to be conduct-
ed to determine and develop new domestic sources of supply, devise
new methods for the treatment and utilization of lowergrade re-
serves of such ores and mineral substances, and develop substi-
tutes. These efforts have resulted in the exploration of offshore de-
posits of strategic and critical materials, the investigation of do-
mestic sources for these materials, and new recycling techniques.
Reduced materials dependency will be the short- and long-term
result of these efforts.
Mr. Chairman, that completes my prepared remarks. I will be
happy to address any questions that you or other members of the
subcommittee might have.
Mr. Brown. Thank you, Mr. Maguire.
Mr. Horton, you are not responsible for the development of stock-
pile policy. Your responsibilities are, as indicated by Mr. Maguire —
speaking broadly of the Department of Interior here — you have a
continuing responsibility to assist, through research and develop-
ment, to maintain a supply of critical materials, but you don't de-
termine how much is required in the event of national emergency.
Mr. Horton. No, sir; we provide input from our statistical activi-
ties as to production and supply opportunities, but we do not make
the determination.
Mr. Brown. Mr. Horton, we have a little problem with getting
information from you in a timely fashion. We wanted you and we
requested you this summer to analyze various, different scenarios
for a cutoff of materials from South Africa, and we haven't got it
yet. We hope that we'll get it shortly.
Mr. Horton. Yes, sir; Mr. Chairman, I apologize for our lateness
in making that delivery. The task has grown larger than we origi-
nally anticipated. We are working on it with substantial staff and I
would hope to deliver it in the near future.
Mr. Brown. We would hope that in the event of a real national
emergency you could produce that analysis much more quickly. Is
that true?
Mr. Horton. Yes, sir.
Mr. Brown. And that your only reason for not getting it to us
quickly is, you just don't think the Congress is that important.
Mr. Horton. No, sir; I think Congress is very important.
185
Mr. Brown. Well, I'm not reassured, with the speed with which
you have delivered it, that you really do, but we will accept your
commitment to get it to us shortly.
Mr. HoRTON. Thank you, Mr. Chairman.
Mr. Brown. Do you have any questions, Mr. Lewis?
Mr. Lewis. Yes, Mr. Chairman, I have a few questions.
Mr. Horton, having been in South Africa, how would you rate
the likelihood of a cutoff of mineral supplies?
Mr. Horton. Let me speak to that from two aspects, if I may,
one as regards their ability to mine and produce. What I was told
by South Africans, and I believe, is their determination to continue
those productions and to not use them as the lever against any
trading partner — that they are highly reliable. As regards the
present unrest, I am certainly not as well qualified as the State De-
partment to address that issue, but it would be my — I would agree
with the general tenor of the comments that
Mr. Lewis. Mr. Horton, I think you are qualified. The State De-
partment can't even tell how many people were on the ship that
was hijacked.
Mr. Horton. Yes, sir.
Mr. Brown. You don't want Mr. Horton to put his job at risk,
though, do you?
Mr. Lewis. No.
Mr. Horton. I was impressed with the organization. It is my per-
sonal opinion that a revolution would be very difficult down there
because of the strength of the South African Army.
Mr. Lewis. Economists often mention diversification and substi-
tution as quick answers to mineral cutoffs. As a mineral expert
with a great deal of experience in mining, what are some of the
technical reasons why we might not be able to so quickly diversify?
Mr. Horton. Supply, costs, and application would be three fast
words. You must have a supply of the alternate. Substitutions
would occur now if it was economically advantageous to do so. The
fact that we do not have more substitutes for chromium is because
it is less expensive to use chromium at the present. As the price of
chromium would increase, substitutes would be searched for and
some would be found, but there are some applications, particularly
with platinum and manganese, too, where there are no known sub-
stitutes.
Mr. Lewis. Is there a — could we be assured, for example, that
other suppliers would pick up the slack in the event of any cutoff?
186
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187
Annual World Chrohite Production and Capacity in 1981
(Thousand short tons, chromium content)
Country
Annual
Production
Annual
Capacity
Percent of
Capacity
Utilized
Available
Capacity
Albania
296
323
91.6
27
Brazil
90
125
72.0
35
Cuba
11
29
38.0
18
Finland
46
187
21.6
111
Greece
11
17
61.7
6
India
119
190
78.1
41
Iran
18
30
60.0
12
Madagascar
9
12
21.0
33
New Caledonia
31
33
93.9
2
Philippines
68
170
10.0
102
South Africa
1.021
1.160
69.9
139
Sudan
9
10
90.0
1
Turkey
171
210
72.5
65
U.S.S.R.
1.152
1.152
100.0
0
Zimbabwe
171
377
15.1
206
Other
8
8
• 100.0
0
Total World
3.261
1.393
1,129
Chart 10
188
Mr. HoRTON. We can't be assured, no, sir. I have, at your desire,
I have some charts (charts 9 and 10) that show the present supplies
and alternate supplies for manganese and chromium. I believe you
have been given copies of them but I would be pleased to discuss
them if you wish.
Mr. Lewis. Could they be reduced for the record?
Mr. HoRTON. Yes; they are reduced, and I believe if you haven't
gotten copies you will have them very shortly. In looking at them,
be careful to look at where the excess capacity is available. If I
might just briefly, in chromite, for example, we show excess capac-
ity in South Africa and in Zimbabwe. Well, in a cutoff that excess
capacity would not be available, so you want to pick your countries
where the available capacity exists that is available. That doesn't
necessarily mean it has come on line. There has to be an economic
advantage.
One of the problems — and I am not speaking specifically to
South Africa at this moment but — when interruptions occur in the
mineral supply for whatever reason, new supplies do not automati-
cally come on, in that those who would invest in the new supplies,
which will normally be at higher cost because if they weren't at
higher cost they would be producing at the present time, so they
must look for a higher cost, and when there are shortages the costs
go up. The potential supplier must judge how long that lost supply
is going to be off the market because, if it's not off very long, he
will suffer a severe loss by trying to start up an operation that will
shortly become uneconomic.
Mr. Lewis. Going back to my first question, you have mentioned
in the past that South Africa has been an efficient, low-cost, reli-
able supplier of minerals. Do you see this continuing in the future?
You answered the question about the cutoff. Do you see South
Africa continuing to supply?
Mr. HoRTON. Yes; I do.
Mr. Lewis. I would like to know, Mr. Horton, what was the role
of the Bureau of Mines in the determination of the new stockpile
goals as they were announced by the White House in July of this
year? What role did you all play?
Mr. Horton. Dr. Morgan of my staff participated in the discus-
sions that led to establishing the stockpile. Many of their consider-
ations, I am advised, were classified. I did not participate in those
discussions, nor do I believe any other members of the Bureau of
Mines did, and I have not received a classified briefing on the
stockpile or the factors that affected it. I don't want to minimize
Dr. Morgan's work in that area — he is a longtime expert on miner-
al supplies and demands — but I have no personal knowledge of the
establishment of those goals.
Mr. Lewis. Mr. Wilson, did you take part in any, or your Depart-
ment?
Mr. Wilson. The part of the Department that worked on that
was not my office. We had minimal input and I have never re-
ceived a classified briefing on that particular study.
Mr. Lewis. How about you, Mr. Maguire? The same answer?
Mr. Maguire. FEMA did participate, was responsible for many
of the analytical economic analyses that were required to arrive at
the final result. There were thousands of man-hours expended by
189
over 100 professionals throughout the Government. Members of the
task force included members from State Department, Treasury, De-
fense Department, and perhaps 13 other agencies of the Federal
Government, all of whom are involved in the routine, day-to-day
process of formulating stockpile goals and maintaining the stock-
pile. There were eight separate committees used to make up the
total analysis. Each one of those committees had an analysis to do,
and then those analyses were tied together at the conclusion of the
work.
Mr. Lewis. You know the degree of the U.S. dependence on min-
erals from South Africa. In that light, how can you justify a stock-
pile with zero goals for manganese, and platinum, and vanadium?
Mr. Maguire. My goals for those materials are currently the
goals established between Congress and the administration in 1979,
and the inventory of the stockpile today is sufficient to provide the
needs that are there for national defense purposes. We have suffi-
cient material in the stockpile to handle any known requirements.
We have proposed to the Congress a new set of goals. The details of
the way that those goals were arrived at and the analysis, the spe-
cific analyses, are classified, as Mr. Horton has testified. However,
we are working very closely with the Congress. There are repre-
sentatives of the Congress working right now with the National Se-
curity Council on the details of that analysis, to come up and to
honor the administration's commitment to consult and work with
the Congress on the development of stockpile goals.
Mr. Lewis. Can any of you three gentlemen — are you aware of
any recommendations for the proposed goals to Secretary Hodel?
Are you aware of any recommendations of the proposed goals to
him?
Mr. Maguire. I don't understand the question, sir.
Mr. Lewis. Well, I'm just trying to find out what position he took
and whether or not he took a position on the proposed goals that
you are aware of at this time.
Mr. Maguire. Mr. Congressman, I think the only thing that I
can relate to you is, this is an administration position. It was an-
nounced in the press release, and one would assume that all mem-
bers of the administration are in agreement with the proposal and
accept it simply as that, a proposal to consult and work with the
Congress to work out, to formulate, the stockpile requirements.
Mr. Lewis. I have one final question. I would like to know if you
have done any analysis whatsoever on how many Americans would
be put out of work as a result of the economic dislocations that
would occur with a cutoff from mineral supplies in South Africa.
Has Commerce done anything on that, or Bureau of Mines, or
yourself, Mr. Maguire?
Mr. Horton. We hope to be able to address that in the report
that we are preparing on labor impacts.
Mr. Lewis. When will that report be available?
Mr. Horton. I would hope we would have it — my hopes are com-
monly realized in the Bureau of Mines— I would hope that we
would have it available for review by the administration within 2
weeks.
Mr. Lewis. Thank you, gentlemen.
Thank you, Mr. Chairman.
54-846 0-86-7
190
Mr. Brown. Thank you, Mr. Lewis.
Gentlemen, I think it is no secret that what concerns us is, the
administration's policy proposal calls for a drastic reduction in the
level of the stockpile, particularly in that part that would be re-
quired to meet the requirement for a protracted military conflict.
The apparent size of the stockpile is reduced to about $700 million.
Now I am not sure I understand completely what this situation
is, and maybe one of you can explain it to me. Do you have two
categories within this stockpile, a tier 1 and a tier 2 category, in
which there is — do you want to speak to that, Mr. Maguire?
Mr. Maguire. The proposal, the new goal proposal by the admin-
istration includes two tiers.
Mr. Brown. All right.
Mr. Maguire. One represents the goals, as concluded by the
analysis, of $700 million worth of stockpile materials. A second
tier, called a supplemental reserve in the administration's propos-
al, includes some $6 billion worth of additional materials which in
the administration's proposal would be retained as a supplemental
reserve for a 5-year period. At the conclusion of that 5-year period
it is our recommendation that a followup survey, a new look at the
total requirements, be generated at that time, so that this supple-
mental reserve is a contingency and would not be lost from the
stockpile.
Mr. Brown. In the near term.
Mr. Maguire. The total stockpile, then, in terms of how much
inventory would this Nation have for national defense purposes,
would total some $7 billion worth of stockpiled material.
Mr. Brown. As compared to the existing plan, which calls for
how many dollars?
Mr. Maguire. The 1979 goals were approximately $14 billion.
Mr. Brown. I hear $16 billion. Is there another bidder? [Laugh-
ter.]
Mr. Maguire. Mr. Chairman, I would like to provide that for the
record and name a specific date, as of
Mr. Brown. We don't need to be too picky about the dollars and
cents, but the rough order of magnitude.
Mr. Maguire. Rough order of magnitude.
Mr. Brown. Roughly, then, you are proposing or the new study
sets goals that are somewhat less than half, and of that an addi-
tional 45 percent is in tier 2, which is for a 5-year period and may
be completely eliminated after that.
Mr. Maguire. The plan includes a disposal of excess stockpiled
material over 5 years, for $2.5 billion worth of surplus stockpiled
materials.
Mr. Brown. Now can you tell me exactly why the discussions en-
tering into this are classified?
Mr. Maguire. I don't believe I should go into that here, Mr.
Chairman. I would be pleased to speak with you privately and tell
you.
Mr. Brown. Are you sure it has nothing to do with the desire to
balance the budget, and you have classified that? [Laughter.]
Mr. Maguire. Yes, sir, I'm sure. There are very highly classified
inputs into many of the analyses that were done, and I would not
191
want to say that it was done for any other purpose other than for
national security interests.
Mr. Brown. Well, I will go into that later in a classified setting,
but I'm sure you know that some of the Members of Congress who
have been most concerned with stockpile policy for a generation
and who are privy to all classified information disagree very
strongly with the recommendations that have been made. You do
understand that?
Mr. Maguire. Yes, sir, I understand that.
Mr. Brown. OK. We may have a few additional questions that
we would like to submit to you gentlemen, and we would appreci-
ate it if you could supply the answers to them in a reasonably
timely fashion. Is that agreeable?
Mr. Maguire. Yes, sir.
Mr. HoRTON. Yes, sir.
Mr. Brown. If it's agreeable, I will excuse you now. If it's not, I'll
keep you here all day.
Mr. Wilson. It's agreeable.
Mr. Brown. Thank you.
The next witness will be Mr. Lance Antrim, on behalf of the
Office of Technology Assessment, who will be accompanied by Mr.
Wendell Fletcher. All right. We'll get the right name tags up there
in a minute.
Do you want to present your testimony, Mr. Antrim?
STATEMENT OF LANCE N. ANTRIM, CONSULTANT TO THE OFFICE
OF TECHNOLOGY ASSESSMENT, U.S. CONGRESS, ACCOMPANIED
BY WENDELL FLETCHER, SENIOR ANALYST, INDUSTRY, TECH-
NOLOGY, AND EMPLOYMENT PROGRAM, OTA
Mr. Antrim. Mr. Chairman, I am pleased to have the opportuni-
ty today to present to you the findings of the OTA study entitled,
"Strategic Materials: Technologies To Reduce U.S. Import Vulner-
ability."
My name is Lance Antrim. I am currently manager of the Inter-
national Negotiation Studies Program at the American Academy of
Arts and Sciences but today am appearing as a consultant to the
Office of Technology Assessment. From 1982 to 1985, I was a
project director at OTA, where I was responsible for the strategic
materials assessment. I am joined by Wendell Fletcher, senior ana-
lyst in the Industry, Technology, and Employment Program at
OTA and one of the authors of the OTA report.
I would like, sir, to submit the written statement for the record
and present a brief summary of the statement.
Mr. Brown. That will be satisfactory, and the full text will
appear in the record.
Mr. Antrim. Thank you, sir.
In 1982, this committee and the Senate Committee on Commerce,
Science, and Transportation asked OTA to examine a number of
issues related to strategic materials. For our purpose, to meet the
needs of the requesting statements, we defined strategic materials
to be those materials which are critical to the national defense and
to the civilian industrial economy and for which there is a high po-
tential of interruption of supplies.
192
I would like to note one limit to the scope of the OTA study. The
study is focused on the needs of the peacetime economy, not on
wartime situations. In particular, OTA did not specifically examine
either the national defense stockpile nor the Defense Production
Act.
The OTA study examines the cases of chromium, cobalt, manga-
nese, and platinum-group metals, making the study particularly
relevant to today's hearings. As noted by prior witnesses. South
Africa is the major producer and transporter of these metals.
Since World War II, the United States has experienced at least
four major supply interruptions. In all cases the U.S. response in-
cluded a combination of three technical approaches: Mineral pro-
duction and metal processing; substitution; and conservation.
OTA found that the potential exists for developments in each of
these three areas to aid the United States in times of future supply
interruptions. The opportunities vary by material and there are
limits to the speed at which these technologies can be implemented
and the contribution each one can make.
New mineral production offers the greatest potential in the case
of cobalt. Expansion of diversified deposits is promising for manga-
nese. There is a strong potential for development of platinum re-
sources in the State of Montana. However, all new mineral devel-
opments will require 2 to 5 years or more to come online, and in
some cases higher metal prices are needed before development will
be undertaken by private industry.
Substitution offers the greatest potential for responding to inter-
ruptions of chromium and cobalt supply. Some alternatives are on
the shelf, others are in testing, and others — such as ceramics, com-
posites, and advanced materials — are still in basic research. In
more critical applications such as jet engines and energy facilities,
years of testing are required before substitute materials can be
qualified for use.
Conservation in steelmaking offers the greatest potential to
reduce manganese needs, but major reductions will take over a
decade to come into force. Recycling of the automobile catalytic
converter is the largest potential source of platinum, but large-
scale recycling must overcome the current depressed precious
metal prices and the lack of an infrastructure for collecting con-
verters from dismantling yards.
Improved manufacturing technology in the production of jet en-
gines has already contributed to reductions in the need for cobalt
and chromium, and further reductions are likely to take place over
the next 5 to 10 years.
Of this range of technical approaches to deal with supply inter-
ruptions, it is only in the case of conservation that the technologies
are being put into commercial application to a significant degree. If
the United States wishes to prepare for a supply interruption,
there are a range of actions that may make more of the technical
alternatives readily available. These actions include efforts to in-
crease the collection and dissemination of minerals and materials
information; support for basic research; applied research in the
testing of materials; development of new alloys; testing of proto-
type processes; and assistance to private industry in putting the
technology in place.
193
Mr. Chairman, OTA's findings represent only a part of the range
of issues and actions that comprise U.S. materials policy. As such,
OTA found that a central policy mechanism such as found in the
Critical Material Council is needed to integrate the alternatives
into an efficient and effective national strategic materials policy.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Antrim follows:]
54-846 0-86-8
194
STATEMENT OF
LANCE N. ANTRIM
FOR THE
OFFICE OF TECHNOLOGY ASSESSMENT
BEFORE THE
SUBCOMMITTEE ON TRANSPORTATION, AVIATION AND MATERIALS
OF THE
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
October 10, 1985
Mr. Chairman, members of the committee, I am pleased to have the
opportunity to present to you today the findings of the report of the Office of
Technology Assessment entitled Strategic Materials: Technologies to Reduce U.S.
Import Vulnerability.
My name is Lance Antrim. At present, I am manager of International
Negotiation Programs at the American Academy of Arts and Sciences, but am
appearing today as a consultant to the Office of Technology Assessment. From
1982 to September 1985 I was a project director with the Office of Technology
Assessment, responsible for the assessment of strategic materials issues. I am
accompanied by Wendell Fletcher, Senior Analyst in the Industry, Technology and
Employment Program at OTA and one of the authors of the OTA report.
In 1982, this Committee and the Senate Committee on Commerce, Science, and
Transportation asked the Office of Technology Assessment to examine a number of
issues related to strategic materials. The charge to OTA was to identify
specific problems related to U.S. dependence on potentially unreliable sources
of supply and to propose possible actions to reduce the potential harm from
195
interruptions of supplies to the U.S. As with all OTA studies, the role is to
identify options for elected officials, not to choose among them.
OTA was specifically directed to examine issues related to chromium, cobalt
and platinum group metals. After a review of materials that are essential to
the U.S. economy and whose supply, to a significant portion of total U.S. needs,
is uncertain, OTA added manganese to the metals under examination. The fact
that OTA's study was limited to these specific metals should not suggest that
they are the only materials that are strategic, rather they form the first tier
of strategic materials. A second tier of nine additional materials was also
identified, but the study concentrated its efforts on the four. While many of
our results may be applicable to other strategic materials, care should be
exercised in extrapolating beyond the four. This brings me to a point of
definition. Several definitions of strategic materials have been used over
time. For our purpose, we defined strategic materials to mean materials that
have both a high degree of criticality and a high potential for interruption of
supply. Criticality refers to whether the material is required for essential
industrial and defense uses for which adequate substitutes may not be available.
It is important to recognize the other limits in the scope of the study.
OTA's focus was on the role that the metals play in the industrial economy and
the means available to maintain the functioning of the economy in the event that
supplies of metals from current suppliers are unavailable. Thus, the assessment
is not a study of wartime situations, where a sudden increase in military
requirements would demand a buffer of materials in addition to alternatives to
sources of supply that might be lost or interrupted. At the time of the OTA
study, the National Defense Stockpile was under review and Congress did not ask
OTA, nor did OTA choose, to undertake a similar review.
196
Materials Supply Vulnerability
OTA found a strong historical basis for concern about the continuation of
strategic materials supplies. In 1949, the Soviet Union, then a major supplier
of manganese and chromium to the United States, cut off exports to the U.S. in
response to rising tension in Berlin. In response, the United States provided
assistance to India and Turkey to develop new supplies. In 1969, supplies of
nickel from Canadian mines were curtailed during a nickel strike. The major
response was to conserve materials and to use substitutes, such as high-
manganese stainless steel as a replacement for high-nickel stainless steel.
From 1966 until 1972, the U.S. participated in a U.N. embargo on chromium from
Southern Rhodesia (now Zimbabwe) . Markets realigned so that chromium was
available to the U.S. but the most important factor was the widespread adoption
of the argon- oxygen decarburization process for making stainless steel which
allowed the use of high carbon ferrochromium made from chromite from South
Africa, a substitution not feasible under earlier stainless steelmaking
technology. And in 1978 and 1979, the world cobalt market was disrupted as
concern arose about rebel activity in Zaire. In response, cobalt by-product
recovery from nickel mines was increased, industrial scrap was recycled to
obtain the cobalt content, reduced cobalt alloys were substituted in place of
high cobalt alloys, and ceramic magnets replaced cobalt-bearing ,
magnets in many applications.
These supply interruptions had limited impact on the domestic economy and
on national security because of a combination of market response, government
inteirvention, and technical ingenuity on the part of both government and private
197
industry. But each case was unique. If future interruptions occur, new
responses will be needed. OTA's study assesses the potential technical
responses and their prospects for mitigating the effects of supply
interruptions .
The four metals OTA studied are clearly strategic by virtually any
definition: they all serve in functions essential to the United States; in the
near term they cannot be replaced in many of these functions; and the supplies
of the metals may be subject to interruption. The focus of this study on these
metals is particularly timely as the United States considers its relationship
with the government of South Africa. The Republic of South Africa is a major
supplier of chromium, manganese, and platinum group metals. It also serves as a
link in the transport of chromium from Zimbabwe (another important source of
chromium outside of South Africa) and as an alternative transportation route for
cobalt from Zaire (the world's largest supplier).
The value of U.S. imports of these metals from South Africa is about half a
billion dollars. This low dollar value hides the importance of these metals in
the U.S. economy. Each of the metals studied by OTA is a key element in the
U.S. civilian and military economy, and products worth many times that 500
million dollars are dependent on these raw materials . The importance may be
illustrated by highlighting the principal applications of the metals and the
role of South Africa in their production worldwide.
Chromium is essential in stainless steels, which in turn are needed in
refineries, chemical plants, and oil wells. Chromium alloys are used in tools,
springs, and bearings, and superalloys require this metal for their high
temperature strength and oxidation resistance. Chromium is produced in the USSR
198
and South Africa, which, respectively, accounted for approximately 35 percent
and over 20 percent of 1982 world production. Albania, Brazil, Finland, India,
the Philippines, Turkey and Zimbabwe accounted for most of the rest. In the
1979-1982 period, U.S. consumption of chromium ranged from 10 to 20 percent of
world production.
Cobalt is used in superalloys for jet engines, in magnets for instruments
and electric equipment, in tool steels and cemented carbide tools and dies for
manufacturing, and catalysts for refineries and chemical plants. Zaire alone
accounted for 45 percent of world production of cobalt in 1982 -- Zambia another
13 percent, and the USSR another 9 percent.
Manganese is absolutely essential in the manufacture of every type of
steel, which accounts for almost 90 percent of its use. It is also used in
aluminum alloys and in some bronzes. Manganese ore production is somewhat more
diverse than production of chromium or cobalt, but the USSR still accounts for
about 40 percent and South Africa 23 percent.
Platinum group metals are needed in industrial and automotive catalysts , in
electronic equipment, and in a number of manufacturing processes. The adoption
of electronic switching systems in the' telephone system has allowed reduction of
platinum and palladium in this use, but that reduction is being offset by the
rapid increase in palladium consumption in ceramic capacitors. Production of
platinum group metals is largely accounted for by the USSR (over 50 percent) and
South Africa (over 40 percent) -- the remainder comes from other countries where
it is a by-product of other mining operations.
199
Options to Prepare for Supply Disruptions
The responses to past disruptions illustrate the variety of ways to address
materials import vulnerability. The responses to supply disruption may be
divided into three groups: mineral production and metal processing:
conservation: and substitution. OTA examined the potential for technologies in
each group to reduce materials import vulnerability. I would like to summarize
for you the important alternatives for action to reduce U.S. materials import
vulnerability in terms of their near term and long term contribution.
Immediate Actions
The United States has two important laws to protect the military needs of
the country from supply interruptions: the Strategic and Critical Materials
Stockpiling Revision Act and the Defense Production Act. The National Defense
Stockpile contains raw material to meet national defense, industrial and
essential civilian requirements in a war or national emergency. The Defense
Production Act may be used to require suppliers of defense equipment to allocate
materials in short supply to meet their contracts with the Defense Department,
with possible diversion of material from civilian applications. Thus, these
measures should not be seen as insulating the civilian economy from supply
interruptions .
Past experience, particularly the cobalt panic in 1978 and 1979, has shown
that the management of material for the stockpile and the potential application
of the Defense Production Act to allocate materials in short supply to defense
applications can have an effect on civilian response to supply interruptions.
200
When the civilian sector is uncertain about what measures government is taking
to deal with disruptions, the non-military demand for metals in short supply can
have sudden and drastic increases which can result in major price rises and
decreases in availability, all of which are passed on to the consumer either as
increased prices or shortages of products. Much of this problem can be avoided
if government policy on the management of the stockpile and the Defense
Production Act is developed in consultation with key consumers and producers of
strategic materials.
Near-Term Actions
There are a number of important actions that can be taken to reduce
materials import vulnerability in the near term of one to five years .
Substitution has a great deal of potential to reduce chromium
vulnerability- -especially in non-essential applications. In many applications,
stainless steel containing 18 percent chromium is specified when lower chromium
alloys have been developed that could be used. In still other applications,
coatings and surface treatment technologies can also reduce the need for
stainless steel, but may entail additional costs in fabrication.
Conservation, principally recycling, is also an attractive option for
chromium. While considerable chromium in waste from stainless steelmaking
plants is now being recycled, much more chromium from scrap automobiles,
especially from the shell of the catalytic converter, could be recycled. This
opportunity will depend largely on the economics of platinum group metal
recycling from the catalytic converter, not new technology.
201
In the near term, a promising technology for cobalt conservation is in the
near-net- shape fabrication of superalloy components. Near-net-shape
technologies allow parts to be produced in ways that reduce machining that would
otherwise produce scrap, much of which would be downgraded. Near-net- shape
technologies can reduce scrap production in manufacturing aircraft engine
components by 50 percent or more. Also, more recycling of cobalt from some
kinds of obsolete scrap and from refinery catalysts is possible, with increased
metals prices or reduced investment costs.
While there are no significant opportunities for development of major new
domestic manganese deposits, there is the possibility to diversify foreign
suppliers to reduce dependence on individual suppliers. Currently, manganese
mines around the world are not operating at full capacity. Increasing
production to reach full capacity could reduce, but not eliminate, a
hypothetical shortfall in production from South Africa. Expansion of the
capacity of existing mines could further increase manganese availability within
one and a half to two years. However, the need to adapt plants to the
characteristics of different ores, and to refurbish and expand ferroalloy
processing facilities, in addition to other factors, could delay the response
of the manganese market to changing production patterns.
Recycling is an important near term conservation option for platinum group
metals. Since the mid-1970' s, the largest use of platinum group metals has
become the automotive catalytic converter. The increasing number of converter
equipped cars now reaching the dismantling yards is a very promising potential
domestic source of platinum group metals. Cars with converters are now entering
dismantling yards in sufficient quantity to supply the raw material for a
202
platinum recycling industry. The greatest barrier to the development of the
industry is the lack of an infrastructure between the dismantlers and the
processors, which, in turn, is due largely to the current low market price for
platinum. Although some platinum is already recycled from converters, a major
increase in platinum group metal prices that would likely arise in a supply
disruption would probably stimulate development of more effective linkages
between dismantlers and processors in a relatively short period of time - -
certainly a year or so.
The most significant opportunity for diversifying PGM production Is In the
United States in the Stillwater deposit in Montana. This deposit is currently
being evaluated for development and the decision to go ahead rests on long term
projections of demand and price for platinum and palladium.
The Importance of Information: In light of the Subcommittee's interest in ways
to enhance information and data analysis capabilities with respect to strategic
materials, I would like to summarize some of OTA's findings about the role of
information in implementing the technical alternatives addressed by our report.
The Federal Government has long played a key role in provision of information
about strategic materials. However, an expanded Government information effort
could enhance U.S. capabilities to deal with supply disruptions- -both in the
near and long term.
Collection and analysis of data is one important role for government. For
example, government -sponsored studies on scrap flows of strategic materials
throughout U.S. industry can help to identify the substantial quantities of
cobalt or chromium that might be recycled in a supply emergency, but are now
203
downgraded or lost. While such studies have been conducted in the past, they
need to be repeated on a regular schedule if they are to give a reliable picture
of the potential contribution of recycling in a supply disruption.
Another very important role for government is in disseminating information
to industry. For example, as I have mentioned, some "on-the-shelf " substitutes
already exist which could help industry deal with chromium supply problems- -but
many firms have little or no knowledge about these alternatives. They need
information about the availability of suitable substitutes, about modifications
in production processes needed to properly fabricate the substitutes, and about
the behavior of the substitutes in field conditions.
OTA found substantial merit in proposals for the establishment of a
centralized substitution information bank that would make information on
substitute materials readily available to civilian consumers of strategic
materials. Operating in coordination with the national defense stockpile, the
substitution information bank could also improve the management of the stockpile
by supplying up-to-date information about the potential use of substitutes in
defense applications.
Long-Term Actions
There are many opportunities to develop new cobalt sources from mines
around the world, notably in Peru, the Philippines, New Caledonia, and the
United States. The cost of cobalt from these deposits is generally estimated to
be significantly higher than the recent market price of about $12.00 per pound;
estimates for U.S. deposits in Idaho, California and Missouri range from $16 to
$25 per pound. Zaire has an interest in not exceeding the lower bound of the
range expressly because it might lead to new competition.
204
For chromium, there is only limited potential to diversify supplies by
expanding production from other known deposits. U.S. chromium resources are
limited in extent and expensive to mine. There is the possibility that new
deposits may be found, but, with the exception of limited areas where
mineralized areas are exposed to the surface, exploration must be done by
drilling core samples, a very costly process. The potential to discover
economic deposits of chromium, as well as of other strategic materials, can be
enhanced by the development of exploration methods and equipment including
theoretical understanding of the process of formation of mineral deposits;
computer assisted exploration and analysis; and improved geochemical,
geophysical, and drilling tools. By reducing the cost of exploration, and by
the targeting of government exploration activities at specific strategic
materials, the prospects of discovering domestic deposits might be increased.
However, since exploration for and development of mineral deposits is a long
undertaking, these activities are of value principally in the long term of 10 to
20 years.
Long term substitution potential for cobalt is promising. Laboratory
research indicates that the cobalt content of some superalloys, the largest and
one of the most essential cobalt uses, can be reduced by up to 50 percent.
Unlike some other substitution possibilities, research indicates that reduced
cobalt alloys can be developed that appear equivalent to alloys now in use. But
this reduction is possible only if expensive and time consuming testing is
conducted. Such tests may take five years and several million dollars for jet
engine applications; as a result, support for development of low cobalt alloys
is a long-term proposition. In the ten year and greater time frame.
205
significant reduction in cobalt content of superalloys is possible if new alloys
are introduced and tested in conjunction with the designing of new engines.
The long term potential for the development of non-metallic advanced
materials that may eventually replace strategic materials is promising, but many
years of basic and applied research are needed. In addition, non- technical
barriers must be overcome, including the development of materials testing
standards appropriate to the materials, the education of designers in the use of
ceramics and composites, and the development of manufacturing processes for the
low cost and reliable production of ceramic and composite parts.
The most promising approaches for conserving manganese are in the use of
manganese in steelmaklng, and these approaches are being Implemented without
government involvement. External desulfurization. Increased use of electric arc
furnaces and steel scrap, conservation through continuous casting of steel, and
changes in the mix of steel products are leading to a major reduction in the
amount of manganese needed to produce a ton of steel. Some manganese is
contained in domestic iron ore, so the reduction in the manganese requirements
for steelmaklng will be reflected In substantially reduced need for imports of
manganese ore and ferromanganese . It is possible that steelmaklng uses of
Imported manganese will decline by about 45 percent per ton of steel production
by the end of the century.
Conclusions
There exist a wide range of pcsslblllties to reduce U.S. vulnerability to
Interruptions of supplies of strategic materials, both in the near term and the
long term. This is due, in large part, to the efforts of government agencies.
206
such as the Bureau of Mines, NASA, the Department of Defense, the National
Bureau of Standards, the DOE National Laboratories, in addition to the effort of
private firms and academic institutions.
OTA found that responsibilities for the development and execution of
materials policy are spread over a number of Departments and agencies.
Responsibilities for planning are also carried out by a number of interagency
groups, with the result that materials policy is often lost among more immediate
political and policy concerns. As a result, OTA identified the need for a
central materials policy planning body. The National Critical Materials
Council, mandated by the National Critical Materials Act of 1984 to be under and
reporting to the Executive Office of the President, would be able to fulfill
this role, if it were given full support within the Executive Office of the
President.
If the nation is to guard against the effects of possible interruptions of
materials supply in the near future through these technological alternatives,
policy decisions should not be limited to funding of basic research -- they
should also involve the selection of and support for more intensive development
of particular technical options. The prospects for successful implementation of
these options could be helped through definition of objectives by the
Administration, and through effective coordination of Executive Branch
activities. These efforts need not require major increases of funding. Most
of the technical alternatives identified by OTA, while relatively inexpensive,
are targeted at problems of high importance. OTA grouped potential federal
activities into five groups, roughly corresponding to the degree of federal
involvement and commitment of resources .
207
First, the government can increase its resources devoted to the collection
and analysis of data, including information on mineral deposits, foreign
investment opportunities in specific strategic minerals, behavior of substidite
materials , materials flow of industrial and obsolete scrap and technologies for
recycling scrap.
Second, a portion of the research and development in materials science and
in mineral exploration technology can be targeted more intensely at strategic
materials .
Third, the government can provide support for education and training in the
use of ceramics and composites, for research into manufacturing processes for
advanced materials, and for testing of properties of advanced materials to
reduce barriers that may retard the adoption of advanced materials by industry.
Fourth, specific new manufacturing and recycling technologies and
substitute materials can be developed by the government, or cooperatively by
government and industry, to provide a stockpile of new technology and substitute
materials for rapid implementation in emergencies.
Fifth, the government may encourage investment in new technologies and in
mineral development through tax incentives, purchase agreements, and other
financial assistance. For example, these policies could be used to speed the
modernization of the steel industry (which would have among its other effects
the reduction of manganese consumption) ; to encourage recycling industries that
are not now competitive with foreign mineral sources ; and to encourage
development of new mines, both foreign and domestic. These activities would be
expensive, however, so their cost effectiveness relative to the stockpile or
other alternatives should be carefully examined.
208
The debate and selection of specific programs from this list is a starting
point. While a variety of actions could be taken, it is clear that choices
must be made if any significant actions are to be taken. Finally, and most
important, OTA believes that coordinating the formulation of strategic materials
policy and coordinating the activities of the many federal agencies involved in
strategic materials issues is essential. The National Critical Materials
Council could serve in this role, but only if it begins work immediately and is
given strong support by the Administration.
Mr. Brown. Thank you very much, Mr. Antrim.
Do you have a statement, Mr. Fletcher?
Mr. Fletcher. No, sir, I do not.
Mr. Brown. Mr. Antrim, we are looking at this problem from
the standpoint of how we should, through research and develop-
ment, act in order to minimize the impact of cutoffs in critical ma-
terials. You point to possible development of an information bank
relating to substitutions of materials and to improved conservation
and use of such materials. Have you given any thought to the insti-
tutional arrangements for such an information bank? Where would
it best be located, and under what kinds of conditions, in order to
be of the greatest assistance to us?
Mr. Antrim. Sir, we didn't get into a detailed proposal as to
where it could be located. We found, though, that the Bureau of
Standards and the Bureau of Mines had the greatest input into
substitution information and recycling information and the devel-
opment of technology, so they would need to be closely involved.
We also found a great deal of interest from nonprofit but indus-
try-related concerns, such as the American Society for Metals &
the Metals Property Council, in having close connection with such
an information stockpile. We found that that type of connection
will be essential to its success because of the need to relate substi-
tute materials to the actual industry application, each application
having a different requirement of properties and in some cases
qualification procedures; that it can't be just a Government Infor-
mation Program. It does need to have close industry cooperation.
While we did not look at the national defense stockpile, we also
saw the connection between the need for substitution information
in planning stockpile goals, with the benefit to our private industry
of having that information available in times of shortage. So we
don't have a concrete position for it but we know which groups
have to be involved with it.
Mr. Brown. Yes; did your study point to the needs for other
kinds of information systems or other kinds of analytical activities,
including global efforts to analyze supplies, potential reserves of
materials, and so on, possibly using some of our global reconnais-
sance system such as Landsat data or something of that sort? Was
that dealt with at all?
209
Mr. Antrim. We began it as a larger effort to look at the role of
gathering information on mineral distribution. As it came to re-
sponding to particular supply interruptions, it turned out to be nec-
essary to focus more on the exploration as opposed to the prospect-
ing side of that. That does include, however, the development of
improved remote reconnaissance systems — whether satellite-based,
air-based, or land-based — for determining what lies under the sur-
face cover. All of these technologies appear to be necessary if we
are going to explore for minerals either in the United States or to
cover wide-scale reconnaissance of deposits in foreign lands, so we
do find that type of work to be necessary and the dissemination of
information gathered by the Government to potential developers,
much as the program that is undertaken in the Trade and Develop-
ment Program under the Department of State right now.
Mr. Brown. Did you get a fix on how much research resources
are being devoted to strategic materials at the present time and
where that research is being conducted?
Mr. Antrim. We do have that information up to 1980 in some
detail, and found that the more recent report of the Committee on
Materials did not provide it in sufficient detail to do planning for
strategic materials policy. We felt that this was one area that did
need further work in the Government Information Program.
Mr. Brown. You mean the information with regard to the
amount and location of the research was not available?
Mr. Antrim. With regard to the research and to the materials to
which it is applied and to the applications, the information pre-
pared in 1980 was quite detailed, so that you could go through and
see not only who was doing the research but what materials it ap-
plied to and what consumers of materials it applied to. It was not
broken down to that detail in 1983.
Mr. Brown. Well, of course the concern of the Congress and this
committee in particular has been with improving the institutional
mechanism for focusing on the critical materials need. That's why
we legislated the development of the Critical Materials Council,
and the director, and so forth. We had hoped that it would supply
the focus necessary to identify the information gaps, the research
needs, and to proceed with the development of a policy structure
that would meet the needs of the national welfare. Did your report
reach any policy recommendations as to whether there should be a
different role for agencies such as OSTP, or 0MB, or the National
Security Council? Have you been able to identify a focus for this
kind of materials policy concern?
Mr. Antrim. We identified the need for the central focus. During
the course of the study the Critical Materials Act was debated and
finally came into force, creating the Critical Materials Council. We
found that that met in full the needs for the central coordinating
mechanism, and that its location in the Executive Office of the
President provided the broad scope to look at programs throughout
the Government. We found programs as diversified — not only the
Bureau of Standards and the Bureau of Mines, but the Air Force,
the national laboratories, the Department of Energy, and even
NASA contributing greatly to areas in the full range of materials
technology, and that only by having a broad overview and some
210
degree of authority over these agencies could the next step of
bringing these technologies closer to implementation be taken.
Mr. Brown. Well, I don't know whether we in this committee de-
veloped that point of view from consultation with very wise people
like you, or whether it was vice versa, but we came to the same
conclusion, obviously.
Do you have any questions, Mr. Lewis?
Mr. Lewis. Two questions, Mr. Chairman.
Mr. Antrim, in your research did you reach any conclusions re-
garding the relative competitiveness of the U.S. mining operations?
Is the United States less competitive from a standpoint of ore grade
mining productivity or labor cost, or do we unfairly saddle our in-
dustry with burdens not carried by foreign operations?
Mr. Antrim. Sir, because we focused on cobalt, chromium, man-
ganese, and platinum, by our nature we were looking at mineral
industries for which the United States has very little and, at times,
no production. We have no domestic manganese production. We
have no domestic chromium. At times we produce cobalt as a by-
product of other materials, and presently produce some platinum
as a byproduct of the copper industry.
It's only in the case of platinum metals that we have a chance of
having, in the near term, commercial production of any of these
metals. That's the Stillwater deposit in Montana. That deposit ap-
pears to be more driven by the currently low precious metal prices
than any other factor. It does appear, from our cursory examina-
tions, staying out of proprietary information, that that deposit will
be competitive on the world market if precious metal prices, gold
prices and platinum, return to their more consistently higher
levels. We did not get into a study of domestic copper, lead, alumi-
num industries, which would require a detailed study in those
areas to answer your question.
Mr. Lewis. I see. Did you find in your research what effect does
the fact that many mining operations are supported directly or in-
directly by their government have on competitiveness of the U.S.
operations?
Mr. Antrim. No, sir; we did not get into that direction because of
the focus of our work on these four areas.
Mr. Lewis. I see. You advocate the development of alternative
technologies and materials. For example, the Government could
support the construction and operation of demonstration plants for
the testing and evaluation of substitute materials. What do you es-
timate would be the cost of such a policy, and if the Government
sponsored such research funding, for example, chromium, what
would be the cost?
Mr. Antrim. We found in the case of, in one example, the testing
of substitute materials for aviation use in the critical components
of a jet engine might run in the range of, I believe, $2 to $5 million
over a number of years, approximately 5 years. If that were under-
taken for every different alloy that uses cobalt in a jet engine,
which could run to tens of hundreds of alloys, it could be a very
expensive program. It's a case where a decision has to be made
where the greatest opportunity is for the development of a new
alloy.
211
The most promising areas look to be in the stainless steel substi-
tution area, where a number of reduced chromium alloys contain-
ing 12 percent chromium, instead of 18 percent as used in stainless
steel, that it was those areas where targeted work on a few alloys
could produce the greatest contribution to reduction of chromium
needs. The cost of such a program would be less than the qualifica-
tion of an alloy for a jet engine.
Beyond that, it would depend on how many alloys were selected
to be used in such a program. There is no single alloy available
that can have the broad application that stainless steel has. The
type 304 stainless steel, which is the largest consumer of chromi-
um, is used widely because of its low cost and excellent perform-
ance characteristics. There are alternatives that may even be eco-
nomic in particular applications, but as long as 304 stainless is
known to work and is well integrated into the production oper-
ations and has a low cost, those alternatives won't be undertaken
by private industry. But the cost for a few materials can be in the
order of a few million dollars.
Mr. Lewis. Thank you.
Thank you, Mr. Chairman.
Mr. Brown. Mr. Packard, do you have any questions?
Mr. Packard. No questions.
Mr. Brown. You're sure you don't want to say something, Mr.
Fletcher?
Mr. Fletcher. No; thank you very much, Mr. Chairman.
Mr. Brown. Well, I want to thank both of you for appearing here
this morning. We will look in more detail at your report. I'm sorry
that I didn't have the details fresh in my mind, but we do appreci-
ate the contribution that you have made this morning, and if we
have further questions we'll call on you in writing. Thank you very
much.
Mr. Antrim. Thank you, Mr. Chairman.
Mr. Fletcher. Thank you.
Mr. Brown. Mr. Lewis?
Mr. Lewis. Mr. Chairman, Mr. Perry Pendley, the former Deputy
Assistant Secretary and former Acting Assistant Secretary for Inte-
rior on Energy and Materials has substituted a statement for the
record. I would like to move that we accept his statement.
Mr. Brown. You don't need to move. We'll do it by unanimous
consent.
Mr. Lewis. Thank you.
Mr. Brown. Without objection, so ordered.
[Material to be supplied follows:]
212
Testimony of
WILLIAM PERRY PENDLEY
Partner t
COMISKEY & HUNT
4023 Chain Bridge Road
Fairfax, Virginia 22030
before the
Subcommittee on Transportation, Aviation & Materials
of the
Committee on Science and Technology
of the
United States House of Representatives
October 10, 1985
Mr. Chairman, my name is William Perry Pendley. I am a
partner with the Washington, D.C. metropolitan area law firm of
comiskey & Hunt.
Over the past nine years I have worked in the energy and
natural resources field: as an attorney to U.S. Senator Clifford
P. Hansen (R. -Wyoming) , ranking member on the Energy and Natural
Resources Committee; as an attorney to the U.S. House of Repre-
sentative's Interior and Insular Affairs Committee and particu-
larly its Mines and Mining Subcommittee; as a consultant to the
Secretary of the Navy and as a Deputy Assistant Secretary and
Acting Assistant Secretary of the Interior for Energy and
Minerals. During that time, I have been particularly involved
with the matter of strategic and critical minerals, co-authoring
a number of Committee reports on the subject while I was with the
/
213
Congress, and serving as the lead Administration official for the
development of a national minerals policy while I was with the
Executive branch.
I come before this Subcommittee this morning as a concerned
American, as one who has served this distinguished body and the
other House as well, and as one whose responsibilities have
included the issues before you today. I come before you repre-
senting no client or administration, but instead seeking to bring
forth a perspective which I hope will assist in shedding some
light upon this matter on which there is so much heat.
I congratulate you Mr. Chairman for initiating this impor-
tant inquiry and for seeking to place on the record the facts
regarding an important--but not the exclusive — component of a
national minerals policy. I hope that this hearing will be the
beginning of an important national dialogue on this subject, a
dialogue which will guide our nation's actions.
The availability of strategic and critical minerals has
been a matter of national concern for decades. It was President
Eisenhower, the army general who understood the critical need for
materials during wartime who adopted the nation's first national
minerals policy. Years later. President Carter, in 1977 and at
the urging of a number of Members of this body initiated a
national minerals policy review. In September of 1980, former
Governor Ronald Reagan announced the need for a national minerals
policy and the formation of an advisory panel--on which I
served — which, in part, led to the President's announcement in
214
April 1982 of a national minerals policy.
Congressional calls for recognition of the critical role
of minerals in our society have been consistent. The Mining and
"Minerals Policy Act of 1970, and the Mining, Minerals Policy and
Research and Development Act of 1980 both sought a unifying
policy construct which would end minerals uncertainty and
vulnerability. The action of this Committee led last year to
i-.he adoption of the National Critical Materials Act of 1984
through which a National Critical Materials Council would be
established to coordinate minerals and materials policy and
programs among various federal agencies.
The goal of any such policy, and I believe the goal of
these hearings today, is first and foremost to ensure that
America's critical resource needs are met. An important but
subordinate part of that policy is to ensure that whenever
possible our resource needs are met by a viable domestic minerals
industry. As desirable as are the numerous objectives of a
diverse nation such as ours, we cannot permit short-sightedness
or ignorance to jeopardize our national security or our economy
by acting in conflict with our essential natural resource needs.
The nation understands and its leaders appreciate that the
world is a different place than it was 12 years ago, that is,
before the energy crisis. For with that 1973 oil embargo, and
the dislocation and distress that it caused, came a fundamental
change in energy geopolitics. Suddenly, and continuously since
then, energy became a matter of national concern that affected
215
not only national policies and programs but our international
view as well. After *1973, the Middle East and our view of it has
never been the same . - . . . _ — .....
Today, with energy prices softening and falling, with the
Organization of Petroleum Exporting Countries faltering and
fading, we are still importing as much oil from foreign sources
as we were on the day before the embargo. Only the price has
changed. Today it costs us a billion dollars a week to import
that energy — and that dollar amount alone constitutes nearly half
of our nation's trade deficit.
One other thing has changed. Our view — and the foreign
policy which flows from it — of the countries which make up the
Middle East, whether monarchy, totalitarian regime or fledgling
democracy, is influenced by our need for oil. Every report of an
attack on Kharg Island, at the head of the Persian Gulf, sends
shock tremors throughout the western world.
Yet despite nearly fifty years of minerals concerns, the
public remains only scarcely aware of a similar dependence and
vulnerability with regard to strategic and critical minerals.
Few public policies have been influenced, or previously selected
courses of action altered, by the realities of America's critical
need for mineral resources.
One of America's richest potential supplies of cobalt lies
within a Wilderness in central Idaho, and while Congress has
indicated that mining is permissible in that unique circumstance,
the mining of the deposit is made difficult by its location in
216
fchah Wilderness. An area in Missouri possessing our nation's
largest deposit of lead and zinc — 90% of U.S. reserves — has been
classified as Wilderness making further discoveries and develop-
nent impossible. Vast areas of western states — whose geological
anomalies yield ruggedly beautiful country and rich mineral
deposits — have been placed off-limits to mineral exploration and
development. At the same time the one effort of the Department
of the Interior to make more multiple-use land available for just
such exploration has been challenged in a federal court.
xhe United States participated in and contributed to a $268
million Inter-American Development Bank loan to Chile — part of a
$760 million copper expansion--while U.S. copper producing
capacity had been cut by 45%.
Superfund legislation, now pending before Congress, which
seeKs to end the continuing threat of toxic waste sites--a
universally desired objective — currently includes a heavy tax on
mineral producers. This tax, combined with the other burdens on
an already beleaguered sector of the economy, may drive more
producers from the market place.
Thus it is that our conflicting and multiple policy objec-
tives frustrate the achievement of a national minerals policy.
We have, it seems, too many balls in the air at one time.
Unfortunately, the one ball that many consider most important to
our ability to defend ourself and our allies, the one essential
to the survival of an modern society, is the one most frequently
dropped.
217
Today, as we review our policy toward the Republic of South
Africa in light of our own needs and those of our allies for
3ti:ategic mineral resources from and through that nation, we
must ensure that our foreign policy objectives are consistent
with our national minerals policy objectives. Too often such has
not been the case. Here today, working together, perhaps you can
ensure that they will be consistent.
The numbers are well known and frequently cited, but they
bear repeating:
Manganese — an ore without which steel cannot be produced; a
mineral for which there is no satisfactory substitute — is found
almost exclusively in South Africa and the Soviet Union.
Ninety-one percent (91%) of world reserves are within those two
countries. Approximately 39% of U.S. manganese consumption
'iomes from South Africa. There is no domestically available
source--99% of the entire U.S. supply comes from foreign
countries.
(chromium — indispensable in the production of stainless
steel — lies almost solely beneath South Africa and Zimbabwe.
Ninety-five percent (95%) of world reserves are in those two
countries. Seventy percent of U.S. supplies come from South
Africa, Zimbabwe or the Soviet Union. There are no domesti-
cally available sources — 82% of the entire U.S. supply comes from
foreign countries.
Platinum — vital in catalytic converters and in oil refin-
ing— has 98% of its reserves in South Africa or the Soviet Union.
218
From 1980-1983, 62% of D.S. consumption came from South Africa
or Russia. Although at least one U.S. deposit looks attractive,
today 91% of the entire U.S. consumption comes froT. foreign
countries.
Cobalt--a critical hardener of steel, especially in hard
facing and high temperature environments — has 56% of its world's
resources located in Zaire, Zambia, Cuba and Russia. Today,
U.S. deposits are sub-economic, resulting in the U.S. importation
of 95% of our consumption from foreign countries.
Additionally, our allies in Europe and Japan are much more
dependent than we are upon these foreign sources of supply. The
tree world, therefore, depends upon central and southern Africa
for the resources that make our economies grow and prosper, the
resources that ensure our ability to keep the peace and preserve
our freedom and the resources that help to maintain our standard
of living.
I will leave to others any characterization of the reliabil-
ity of South Africa as a supplier of these critical mineral
resources. Suffice it to say, that, in the past that nation
has been a consistent, modern, efficient, and low-cost producer
of these valuable mineral commodities. I believe that nation's
ability to continue as such into the future depends not on that
a country's actions or inactions but rather on the course we now
choose in setting our national priorities for the achievement of
humanitarian goals and objectives. I believe, as desirable as
such humanitarian goals are, as universally as they are shared
219
by all Americans, that their attainment must be tempered by and
balanced against the needs of U.S. citizens.
I would agree with the government witnesses heard by this
i^ommittee today who have described the effects of a potential cut
off of central and southern African mineral supplies as "acute"
or "profound." While economists can theoretically project that
the major price increases that would follow such a cut-off would
lead to rapid expansion of production of other sources of supply,
as well as quick and efficient utilization of substitutes, such
is not necessarily the case.
Even assuming other producers of manganese, chromium,
platinum vanadium and cobalt, were technologically capable of
massive expansion of ore production at the mine site — a dangerous
assumption given the high-grading underway at some of these
f acilit ies--the question remains whether such producers would
chose to expand. After all, such production increases would
create downward pressures on prices, prices which may have been
low for years. In addition, expansion would significantly
increase capital requirements and owner risk, a risk that many
might be unwilling to take, particularly if central and southern
African minerals might soon return to market.
Substitution is not the panacea some would have us believe.
In the critical minerals area, forced substitution can involve
real costs, not necessarily in the use of other, more costly
materials--which after all make up a relatively insignificant
portion of the unit cost--but in substantial decreases in
220
efficiency and effectiveness.
The Office of Technology Assessment ("OTA"), in its report:
"'Strategic Materials: Technologies to Reduce U.S. Import Vulner-
ability," sets forth a series of technological initiatives which
OTA argues could be used to lessen the requirements for strategic
materials from foreign sources. Yet each of these technological
undertakings involves substantial costs, for example: government
{funding of demonstration and pre-commercial development of
alternative technologies and materials; government subsidies,
purchase commitments, and loan guarantees — all of which the OTA
Report admits to being "expensive" and needs to be "carefully
considered" before being implemented; and increased government
research on theories of mineral occurrence with more intense
study of the resources on Federal lands.
What is remarkable about these alternatives, is not their
proposal, for they probably are the only alternatives available,
but the fact that we would find ourselves contemplating them at a
time when the number one national domestic priority is reducing
the budget deficit. The costs of that course of action, the
course which we now find ourselves considering, are substantial.
The question then is where does the money come from to fund such
a project or series of projects when the world has a wealth of
mineral supplies that could, and presently does, much more
cheaply, efficiently and effectively meet our needs.
We find ourselves in this position because of our growing
dissatisfaction with the internal policies of the foreign nation
221
which is our prime source for most of these minerals and what we
project as the possible long-term prospects for that country.
The question that we need to answer is, can we as a nation
afford such a course of action? Is it fair to us and to our
citizens given the substantial additional costs, dislocation,
economic distortion and deprivation that would result? Wouldn't
the better policy be, the undertaking of all reasonable efforts
to ensure that South Africa continues to be a strong and viable
trading partner and the principal source for the strategic
minerals so vital to the western world?
Such a course of action would not be unlike our current
practice with regard to other nations. We trade with the Soviet
Union. California imports 108,000 barrels of oil a day from
Marxist Congo--the nation which, according to the Washington
Post , disagrees with the United States in votes at the United
Nations more often than does the Soviet Union. We produce oil in
Communist Angola, helping, in the words of an article appearing
in the Washington Post, to "keep a ruthless government afloat."
The U.S. Government is sending its engineers to the People's
Republic of China to assist in the construction of massive
western style water projects.
What then am I suggesting that we do? Where do we go from
here? We must continue to plan for various contingencies; we must
maintain an effective, adequate stockpile for national defense
purposes; we must continue the research and development programs
currently ongoing within our government — now better coordinated
222
under the President's Council; we must encourage recycling,
substitution, and conservation in the ordinary course of
business, realizing that it is the marketplace and not government
i-.hdt makes such alternatives feasible and likely; we must
seek diversification of our sources of supply by making federally
owned lands--both onshore and offshore — available to America's
entrepreneurial spirit.
Finally, I am suggesting that we as a nation must not permit
a national foreign policy position to evolve, which causes us to
act out a self-fulfilling prophesy — a prophesy in which we and
our citizens are the losers. Under no circumstances can we now,
or in the foreseeable future, afford the loss of South Africa as
a secure source of supply of strategic minerals.
Mr. Brown. Thank you very much. That concludes the subcom-
mittee's hearings.
[Whereupon, at 11:25 a.m., the subcommittee recessed, to recon-
vene at the call of the Chair.]
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