A COMPARISON OF H.R. 4582 (MURPHY, BREAUX, et. al.)
WITH H.R. 3652 (FRASER et. al.)
Purpose of Both Bills: Both pieces of legislation are intended
to be interim measures, pending the entry into force of a Law
of the Sea Treaty, to encourage deep seabed mining firms to
proceed with preparations for manganese nodule mining.
Probable Time Schedule and Steps: Both Bills Assume that:
Three or four U.S. led consortia are now ready to proceed
with the prototype stage of large scale testing of mining
and processing equipment, expending $50-100 million per
company per year for the next three years. This is in
addition to the industry's aggregate investment to date
of over $120 million. Moreover, in the next 18 months,
each of the companies, in order to begin construction of
commercial scale facilities, will have to borrow and com-
mit up to $700 million per company leading to a potential
aggregate investment of $2,800,000,000.
This stage of prototype testing and borrowing of capital for the construction phase will last until 1980.
Commercial recovery is unlikely before 1982. Unless sources of capital are found in the next 18 months and commencement of construction of commercial scale mining and processing equipment begins in 1980, recovery cannot occur in 1982.
Prototype Stage vs. Commercial Recovery:
A. H.R. 4582 provides for a licensing and regulatory system covering the prototype and subsequent commercial recovery stages.
H.R. 3652 provides for insurance against the loss of invest-
ments related to prototoye testing equipment, but does not
cover the acquisition of risk capital for the full construc-
tion stage. H.R. 3652 calls for new legislation in 1980
for the purpose of regulating commercial recovery.
1) H.R. 4582 directs the Secretary of Commerce to license U.S. firms to mine specific 60,000 sq. km. blocks of the ocean floor as a lawful use of the high seas consistent with the public statements of the Department of State to that effect. This approach permits the government to regulate industry activities from an environmental, safety, conservation, and resource management perspective.
2) H.R. 3652 does not include licenses or specific sites.
Injunctive relief is provided against interference bv
those under U.S. jurisdiction. By omitting licenses
for specific sites, H.R. 3652 provides no clear way
of imposing government regulations as is the case in
H.R. 4582. It should also be noted that industry and
banking witnesses have repeatedly testified that risk
capital cannot be made available for ocean mining
unless miners are licensed in specific mine sites.
Reciprocating States:
H.R. 4582 would set up a system of "reciprocating States," whereby the U.S. would recognize the claims of other nations to seabed sites if they recognize
H.R. 3652 has no such provision, and therefore would not contribute to further efforts to harmonize the legislative actions of other States who might be mining under potentially conflicting domestic regulations.
Guarantees or Insurance for Investment:
H.R. 4582 provides guarantees to licensees under the
Act against loss of investment due to an international
agreement (Law of the Sea Treaty). The guarantee is
limited to the actual investment loss occasioned by
a treaty less any remaining commercial value in the
operation including any net after tax revenues received.
This investment would not be guaranteed if the Law of
the Sea Treaty contained "grandfather rights" for
licenses issued under the U.S. legislation.
H.R. 3652 provides insurance, for those who have al-
ready invested $20 million over five years, up to
$100 million each, against losses due to physical inter-
ference by those against whom the consortium has no
recourse, or due to significant changes in the inter-
national status of the seabed, if suitable commercial
insurance is not available. This insurance system
covers that portion of the investment which the com-
pany can afford to sacrifice, but does not cover their
borrowed capital.
Environmental Protection:
H.R. 4582 provides that the Secretary shall establish environmental regulations, thus giving substantial discretion and flexibility to the government to establish such regulations based on current information.
All operative mining activities must be consistent
with these regulations. H.R. 4582 also requires
environmental impact statements and does not pre-
judge the question of the environmental impact from
processing at sea since one argument being made on
that question is that processing at sea may be far
less adverse to the human environment than processing
on land. Additionally, the bill provides that com-
mercial recovery activities must be consistent with
state coastal zone management programs -- thus pro-
viding individual affected states with protections
to control impacts on their fragile coastal areas.
2) H.R. 3652 requires environmental assessment and impact statements. It sets up more detailed criteria and procedures, and prohibits processing at sea until the Administrator finds that such processing is not injurious to the marine environment.
Probable Effects on the Law of the Sea Conference:
A. H.R. 4582 regulates industrial activity in the deep seabed under the High Seas Convention. In the absence of legislation like H.R. 4582, the industry is free to proceed under international law to carry out totally unregulated mining. H.R. 4582 does not grant rights to U.S. citizens in the seabed.
H.R. 3652 does not establish a regulatory system for ocean
mining, but in essence gives blessing to the conduct of
ocean mining under United States legislation. In that
sense, it has the same underlying message of H.R. 4582,
but with a different methodology.
Both Bills are interim in nature in that they are both superseded when a treaty is signed and ratified. This is specifically stated in both pieces of legislation.
The key question is what impact either of these bills
would have on the Law of the Sea Conference. There is a
virtual consensus domestically that some form of legisla-
tion is necessary to stimulate the Third World to nego-
tiate in good faith at the Law of the Sea Conference. Some
have alleged that H.R. 4582 would be an over-stimulous in
that by offering specific mining sites under licenses,
the Third World may see this as a taking by the United
States of what they believe to be the common property of
all. On the other hand, it has also been suggested that
H.R. 4582 would be much more attractive to the Third World
because under it only a few mine sites would be licensed,
whereas under H.R. 3652 the U.S. Government would be per-
mitting ocean mining throughout all of the high seas.
In any case, to have a favorable impact on the negotia-
tions requires a clear demonstration of political will
that the United States is prepared to have its industry
carry out ocean mining activities if the Third World con-
tinues to stall the treaty negotiations. In this respect,
H.R. 3652 shows no such political will because it does not
provide for commercial recovery and requires that Congress
deliberate new legislation in 1980. The net result of
such an approach would be to send a clear signal to the
Third World that, if they wait until 1980 for a treaty,
the United States industry will then be under tremendous
pressure to try to force the U.S. Government to compro-
mise or, alternatively, to go through the lesiglative pro-
cess to obtain legislation. The Third World knows this
could take years. H.R. 4582, on the other hand, puts the
burden on the Third World by setting out a clear timetable
and putting no obstruction in the face of commercial re-
covery. Thus, the Third World will see that they must con-
clude a treaty before the commercial recovery phase begins.
Since the United States is, for the moment, the only coun-
try with the technology to conduct ocean mining and the
Third World considers the United States an indispensable
party to a treaty on this subject, they know that the
draft treaty negotiated so far has not been favorably re-
ceived in Congress. Consequently, it is likely that they
would want to include grandfather rights for previously
issued licenses if Congress was prepared to guarantee the
investments made under those licenses. They would not
wish to make ratification more difficult for the American
Congress by attaching a pricetag to the treaty. Thus,
the insurance features of H.R. 4582, which provide insur-
ance for the substantial investment phase rather than the
prototype testing phase (as in H.R. 3652), probably con-
tain no risk of an insurance payout if a treaty is in fact
concluded. Unlike H.R. 3652, H.R. 4582 has no insurance
feature if a treaty is not concluded.
Probable Effects on U.S. Deep Seabed Mining:
If H.R. 4582 becomes law, some U.S. led consortia would proceed with prototype operations, and probably go on to commercial recovery.
If no bill is passed, it is probable that U.S. consortiums
will have to abandon operations within one year because
they will not be able to obtain the risk capital to go for-
ward.
If H.R. 3652 is passed, U.S. led consortia would not be
able to find risk capital for the construction phase of ocean mining. They would have to wait until further legislation is passed in 1980 to do so. The consortia cannot maintain industrial momentum for a period of 3-5 years and may be forced to export their technology to other industrialized countries rather than stay in business in the United States. The acquisition of this large capital, according to the banking community, depends on specific sites being licensed as well as on investment protection. H.R. 3652 accommodates neither point.
It is conceivable that H.R. 3652 could be changed to improve the insurance coverage and cover the heavy investment associated with processing plants and mining systems for commercial recovery, but would also, for Law of the Sea negotiating reasons, need to be changed to include a domestic regime for commercial recovery. These two fundamental changes, if met, would cause the bill to much more closely correspond to H.R. 4582. It is accordingly clear, therefore, that H.R. 4582 is a significantly better vehicle for Congressional action.
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