GAO REPORTS ISSUED FISCAL YEARS 1974-76 BEARING ON PROBLEMS OF NATIONAL MATERIALS SUPPLY AND USE-Continued Report title Action Needed to Discourage Removal of Trees that Shelter Cropland in the Great RED-75-375 Plains. National Standards Needed for Residential Energy Conservation. RED-75-397 July 25, 1975 Aug. 18, 1975 Nov. 11, 1975 Dec. 2, 1975 Letter Report to House Committee on Government Operations in Response to Ques- Letter Report to Assistant Secretary Energy and Minerals, Interior-Published RED Federal Materials Research and Development: Modernizing Institutions and Man- OSP-76-9 GAO on-going projects bearing on problems of national materials supply and use, December 1975 Project title Assignment number Survey of Government procurement of recycled products__. 950088 Survey of the effectiveness and appropriateness of the Defense Priorities and Materials Systems__. Review of improvements needed on Defense Supply Agency's use of auto- 941055 sumers 943160 Disposition of surplus aerospace equipment and materials. 943164 46332 Review of Government/Industry opportunities to better assure future 46508 46523 Survey of foreign mineral and metal processing capacity and its effect on the U.S. economy-. 46524 Review of the implementation and impact of the legislative requirement for host country participation in assistance projects, programs and activities 47116 Survey of international issues relative to gold sales to U.S. citizens__ 48140 48247 Survey of need for additional data and control of imports and exports of technology 48249 Agency compliance with recommendations in Commodity Shortage 48258 Survey of commodity agreements__. 48263 Survey of international economic policy planning in the Executive 48265 Review of GAO observations on matters affecting the U.S. balance of payments position____ 48511 Survey of issues and problems relating Forest Service allowable harvests 02147 Review of the effectiveness of water resources planning under the Act of 1965 08514 Survey of Federal efforts under the Mining and Minerals Policy Act of 14428 14431 Review of acreage limitations on mineral leasing of public lands_. 14648 14573 952113 Senator TUNNEY. Our next witness is Dr. Jack Carlson, Assistant Secretary for Energy and Minerals, Department of Interior. STATEMENT OF DR. JACK W. CARLSON, ASSISTANT SECRETARY FOR ENERGY AND MINERALS, DEPARTMENT OF THE INTERIOR, CHAIRMAN OF THE INTERAGENCY COMMITTEE ON MATERIALS (COMAT); ACCOMPANIED BY DR. THOMAS V. FALKIE, DIRECTOR, BUREAU OF MINES; AND DR. JOHN D. MORGAN, ASSOCIATE DIRECTOR Dr. CARLSON. It is a pleasure to be here, Mr. Chairman. I will summarize some points in the context of the discussion you have had up to mine. Tom Falkie, Director of the Bureau of Mines, is here and John Morgan is here, Associate Director of the Bureau of Mines. I have representation from the Geological Survey here with me, also. I had the opportunity to look at your book that you have come out with this year. Senator TUNNEY. Thank you. You flatter me by having spent any time at all looking at it. Dr. CARLSON. This is a problem that the legislative and executive branch faces. You were courageous in identifying that this was a problem with both branches. On page 76 you deal with that problem. I had a role in being a sponsor of the National Commission on Supplies and Shortages (NCSS). The executive branch worked closely with the legislative branch in setting up the NCSS. In 1974, I chaired the study of critical imports of materials-revised version issued as "Special Report-Critical Imported Materials," Council on International Economic Policy, December 1974. Obviously we had a problem after we saw what happened to us in oil. We looked at the other commodities to see whether we might have possibilities for cartel action. I should put in context that our concern and your concern occurred because of some unique factors in 1973 and 1974. In that period, we had the most effective cartel formed in petroleum and it exercised its muscle in that particular year. We must also take into account that we had gone off the fixed exchange rates, which had impacts on minerals and materials throughout the world as well as the United States. We had the economies of the world moving together in contrast to earlier periods when the U.S. economy was 6 to 9 months ahead of the others. So we have had prices up higher for a longer period of time than we have had at any other time in the post-Korean war period. We had some unique factors. We also had price controls which tended to keep prices a little higher longer than we otherwise might have had had we not had that mechanism. From the administration standpoint, we needed improvement in such processes. Several of them have been suggested by Dr. Staats. Several were suggested by you in your deliberations. I'm familiar with what was put into the Congressional Record yesterday where you have identified your support for one of the approaches that both Dr. Staats and you support, and we do too, and that is the Department of Natural Resources which would be a mechanism to help bring together some of the problems we are talking about. The administration does feel we have not yet achieved the right answer for major steps forvari. We are not sure the two pieces of legislation and your committee work have necessarily found the right answer. Or the studies that have been conducted. We have to take into account that "materials" per se is not the objective. We have defense objectives, environmental quality objectives, energy objectives-we Lave, as your brought out in your disession with Dr. Staats, concern about competition in industry and such objectives drive so many other things such as materials policy, extraction policy, et cetera. Where we have pluralism of policy, forums are a desirable thing. For stockpile policies we have a group that gets together, for energy we have the Energy Resources Council, for antitrust we have the lead of the Justice Department for example. We don't want to monopolize the policy forum as such. We have many objectives to serve. Pluralism on the policy side is appropriate. We must take into account difering demands for information, depending upon whatever the policy issues are that we are facing. In the case of the coal stoppage we had last year, we had need for information as to where the coal was going and where it was likely to go and what the inventories were likely to be. Up to that point we didn't need such information on a daily basis. Instead of what is normally acceptable such as monthly or quarterly data, we needed daily data. It was the special demand that brought about the need for the information. Those in the supply business may supply information that might be irrelevant from the demand viewpoint. We have to be a little careful about that. However, on the collection side. I do think that pluralism is inappropriate. We shouldn't fragment the collection efforts. All you need to do is find out what the businessman's problems are, or the suppliers of information, what his problems are. There is a lot of harassment when you have many different people collecting the same data. A critical mass of key personnel and specialized knowledge is important in terms of good collection and good data preparation that you might have. It is expensive also to duplicate. There is a real problem in being worried about the supply information and fragmentation of data information. That is the problem we have with the proposals before your committee. You propose creating other agencies that could fragment the data collection and R. & D. effort. In the working draft associated with the committee, they have another agency, with $17 million for information and $52 million for R. & D. That is another collection source and fragmentation that I think would not be helpful, but could be hurtful and competitive. There is a lot being done already by existing agencies. I disagree a little with Dr. Staats' point of view. If you look at the policy needs associated with the coal stoppage there was a tremendous short-term increase in the capability and actual collection of data and it served our policy needs very well. We were able to forecast accurately what the unemployment situation would be by subsequent weeks out as far as the strike was concerned and where it was likely to occur and what kind of economic and social activities would be mostly affected. It was effective when the need came on the horizon; we had the flexibility to move in. The Energy Resources Council Senator TUNNEY. Can I stop you there? I don't want to break your chain of thought, but of course, we in this country produce, I think, all of the coal that we consume. We don't import any coal. Dr. CARLSON. We export about 60 million tons annually in fact. Senator TUNNEY. Therefore, the situation is a bit different than with materials or minerals where we are dependent not only upon the vagaries of a domestic labor dispute, but the vagaries of international politics as well. I think that when we analyze a materials policy, I know you have done good work in the Department of the Interior on the coal problem and you have developed much better systems in overall energy analysis, but still, would you not agree that there is an awful lot that has to be done in these other areas of minerals and materials where we are not only concerned about developing a domestic resource, but also finding substitutes perhaps for a resource which is coming from overseas? Dr. CARLSON. I would agree with you. Having chaired the study of critical imported materials, it was my desire and also the desire of those who participated, and I'm sure yours, that the Government needed improved information and analysis in some areas. I will show you some of the things we have been doing. There are three basic metals we have to be concerned about. Copper, aluminum and iron ore and steel that is produced from iron ore. We have modeled the capability. You mentioned we could possibly have some supply interruption problems from abroad. In the case of this, I would say we have the best modeling capability in the world, because we have used everything good we could find of other people's modeling efforts. For example--(referring to chart "copper mine production") we projected where the supplies of copper would occur, what the world demand and supply situation would be. We have modeled what would happen if a cartel formed in copper and if that cartel is effective in terms of a 10-percent reduction. We have been able to simulate what would happen. Then we have a 20-percent cutback. We also, if I can show the price table; we indicated what would happen in price (referring to chart "copper prices") because it is price that impacts on the consumer and reduces his purchasing power. This is the base forecast for prices in copper in the next 5 years. We have modeled what a cartel would do to us in the fluctuation that could occur. We have this modeling in copper (referring to chart "world copper model structure") and aluminum and we are developing it in iron ore. That gives us considerable capability. There has been a marked improvement. [The charts follow:] |