1

with oral conversations, as we have indicated. Mr. Grosshans here had an opportunity to look at some of the materials yesterday, but was not allowed to take any notes.

Senator PROXMIRE. Are you satisfied that if you could take a look at the material, that you would be in a position to give us a recommendation on whether the stockpile goals are justified or not, or would you need other criteria?

Mr. STAATS. I think we could give you a much better judgment than we can here today, Mr. Chairman, but the thing that you emphasize, and which I would emphasize even more is that any judgment is as good as the assumptions that you make with respect to the kind of war, how long the war is going to be, and a lot of things which cannot be determined, obviously, by anybody. I do not know whether the Joint Chiefs, who have this responsibility for advising the Congress and the President, made that recommendation or not. That statement has not been made.

But I don't think you can answer the question of whether the amount should be X or Y except in the context of whatever assumptions you make.

Mr. GROSSHANS. Mr. Chairman, could I follow up on a question earlier because you raised a question on the acquisition and so on. We would assume and this is what we have been told-that priority would be given in the acquisition phase to those materials that are on the first tier, namely, the defense needs, strict defense needs. First, second, or third year, there is a shortage even in that category currently of about $900 million, so we would expect the first number of years' request in the plan that you are talking about would be in that category. So I would think the Congress would weigh that more heavily than it would materials in the second or third tier. But that is about all we know at this point.

Senator PROXMIRE. Now, some of the explanation of the Annual Materials Plan can only be obtained by the Congress in closed executive sessions. This is aside from the fact of whether you should have access to it or not on a classified basis.

That closed executive session sounds like a return to the 1950's when all the stockpile information was classified. I think there are two reasons why that seems to be an unsound policy. One, it will permit the public to think that there are shenanigans in the stockpiles again, and maybe people with inside information would have an economic value or benefit speculators.

Do you think this is likely, predictable, and pernicious, whether there is a basis for it or not, and of course, it is even more pernicious. Do you think that the need for a return to this kind of security is real and justified? Is it unavoidable, or are there ways of avoiding it?

Mr. STAATS. I frankly don't know, Mr. Chairman, to be quite honest about it. I think if we are talking about possible military actions which would deny shipping to the United States, for example, there might well be information here which very probably should be classified. We are talking about disposals from the stockpile. I have my doubts whether that needs to be classified in any shape or form.

The specific timing of the releases might be a matter that could impact on the market, but on the disposal side, it seems to me the policy would be quite different.

r PROXMIRE. Now, you mentioned several policy alternatives ng with import dependencies during the period of national ey other than stockpiles, but you note that none of these were ed in developing the new stockpile policy.

do you account for that failure to review all of the options?
onal bias would you say?

ANFIELD. Well, I think you come back, and we talked about it
o the administration's perspective on strategic stockpiles. Mr.
ns can fill in as to what the reasons were, and what we think
based upon what they told us the reasons were. Again how-
u come down to the question of whether looking at the new
third policy tier, is something that has to do with the national
and criticality. Now, to the extent that you argue that the
ng you are focusing on is the analysis of what is necessary in
a war, and you have a particular definition of the kind of war
ation of war in your mind, then you could probably argue that
ess of what goes on elsewhere, under those situations of duress,
ld have to have this amount of stockpile material, material by
1. It is when you move over into the second and the third
, into the question of the economic implications of the strategic
es, that the issue comes up of how you fit that into an overall
, and I think that is the rationale for not including it.

that rationale holds no water because you go back to the old
1 never can do only one thing, and in this case, when you never
one thing, you are talking about massive economic implica-
And then you can talk about trade offs between and among
es; domestic, multilateral, and bilateral agreements; interna-
tockpiles and private stockpiles by the private industry, et cet-
those things are not considered, I don't see how you can make
ional judgments about the second and the third column, but you
nake a case on a very narrow basis on the first column in terms
definition of the war and the type of war. That is a different

nt.

GROSSHANS. I think one other factor might be added to that r the defense tier alone. The first, second, and third year, an possibly that should be considered-since the basic scenario goes he lines that the impact will be in Europe, and we are comto NATO--is to what extent did we consider our allies on this; going to provide materials strictly for our own needs; and, are ng to go it alone, or are we going to have them as an ally in hey should be concerned with this.

is another option that we felt needed to be considered. We are was not specifically addressed. It would have a major impact e computed goals.

tor PROXMIRE. Mr. Staats, you have been very helpful.

you have anything that we haven't covered that you think we to be aware of?

STAATS. I don't think so, Mr. Chairman. We would hope that estion of the organization of the executive branch as it relates 3 problem and the energy problem-as we see it, the two are losely associated, and we don't think you can deal with one it having a major impact on the other-should receive very

›riority attention in Congress as well as the new administration

I think a very serious part of our problem here is the fact that the function is so highly fragmentized in the executive branch that we do not have a clear focus as to where these kinds of trade offs that Mr. Canfield was talking about can be made.

Senator PROXMIRE. That is very helpful, and also, we want to do all we can to be sure that you have full and complete and absolute access to all of the information that is necessary, and as you indicated, we will certainly have hearings in the future on this, and in the fairly near future when such hearings are timely and appropriate. Thank you very much.

Our final witness this morning is Mr. Simon Strauss, executive vice president of the ASARCO, Inc., on behalf of the American Mining Congress.

Mr. Strauss, we are happy to have you, sir.

Mr. STRAUSS. Thank you, Mr. Chairman.

Senator PROXMIRE. You are a very patient man, and I apologize for the lateness of the hour. If you want to summarize your statement, we will have it printed in full in the record.

Mr. STRAUSS. Thank you, Mr. Chairman. I will omit some sections of the statement, but since much of my statement deals with some of the questions that you have addressed to the previous witnesses and since I am expressing an industry point of view, I would like to read the greater part of it.

Senator PROXMIRE. Very good.

STATEMENT OF SIMON D. STRAUSS, EXECUTIVE VICE PRESIDENT, ASARCO, INC., AND CHAIRMAN, COMMITTEE ON MINERALS AVAILABILITY, AMERICAN MINING CONGRESS

Mr. STRAUSS. When World War II ended, the U.S. Administration, the Congress, and the public at large all felt that the country's security had been imperiled during the war by prospective shortages of critical and strategic materials.

Incidentally, I would like to deal with the question right at this point that you addressed to Mr. Staats as to how critical and strategic materials were defined. I worked for the Government during World War II, and I played a role in the defining of what was critical and strategic. The War Production Board was the Agency that determined what was critical and strategic. It was based on advice that they obtained from the Defense Department and their own judgments as to the industrial structure of the Nation, and to the best of my recollection, the 93 materials that are now classified as critical and strategic were all classified as critical and strategic during World War II. I don't know that there has been a reexamination of whether they remain critical and strategic, but I think that is the origin of the definition, a determination by the War Production Board."

I will go on. To avoid similar jeopardy in future military emergencies, the Stock Piling Act of 1946 was enacted without serious dissent.

This act created the ground rules for acquiring reserves of all materials deemed essential to the country's security. They were to be accumulated with public funds and to be used only to meet a serious. national emergency. The executive departments of the Government

designate the materials and determine the quantities to be 1. Congress appeared ready and willing to appropriate y funds.

this is a point I would like to emphasize--the United States industry did not actively promote stockpiles. The records of sional hearings and other governmental proceedings in the 0's and early 1950's showed no evidence of a concerted mining o create strategic stockpiles. The strongest public support for kpile concept came from the President's Material Policy Comheaded by William S. Paley of the Columbia Broadcasting . Of his four associates on the Commission, only one was a Iman. The Commission studied materials problems in 1950 51. Its voluminous report strongly endorsed stockpiles for y purposes as being in the best interests of the Nation. ould be emphasized that industry has never and I repeat, never onsulted in the establishment of stockpile goals for individual dities. Until 1962 stockpile goals were treated as confidential ation. Industry had no way of ascertaining either the goals quantities actually held by the Government. We knew only e goals were arrived at on the basis of elaborate calculations resentatives of a number of Government departments, includfense, Interior, State, Treasury, and Commerce. Assumptions nade as to the prospective duration of a military conflict, the of security of certain sources of imported supplies, the likely of the conflict itself, the extent of essential civilian needs as s military needs, and similar matters.

he early 1960's, President Kennedy concluded that the stockjectives had been set at too high a level. Many objectives were y reduced in 1963, and some were completely eliminated. ExShearings were held under the chairmanship of Senator Syon as to the operations by which the stockpiles had been acated. Legislative proposals were put forward for disposal of ile materials surplus to the new goals and a process of liquithe stockpiles began.

oping now to page 4 (see page 64) of my statement, in early President Nixon announced another new approach to stockpile

ves.

stated that a 1-year target would be adequate for stockpile goals
e a military conflict was unlikely to last longer than 1 year. In
likely event of a longer interruption, he declared that the coun-
ecurity could be protected adequately either by substitution of
materials or increase in production. Under these new defini-
he stockpile target for many commodities was reduced to zero.
sident Nixon clearly indicated that he hoped to use stockpile
s a means of keeping prices down in a period of rampant in-
. It seemed probable then that another, although unstated,
was the desire to raise revenue to help balance the budget.
new Nixon policy disregarded past experience with respect to
cution of one material for another under emergency circum-
s. In a complex technological society substitutions can and have
ed but long lead times are required to permit retooling by in-
. As for expansion of mineral production, this can rarely be
plished in less than 2 years and a normal project is likely to
e at least 3 to 5 years for completion.

Congress apparently shared industry's misgivings with respect to the adequacy of the Nixon program and the new stockpile surpluses it created. Efforts by the administration to obtain congressional approval for disposal of materials from the stockpile were blocked on a number of occasions by requests from the legislature for additional information as to the adequacy of new stockpile goals.

The new goals on which you are holding hearings are, in effect, the outgrowth of these misgivings. The official statement made in October by the Federal Preparedness Agency declares that the materials stockpile should be capable of supporting U.S. defense requirements during a major war, over a 3-year period, assuming largescale industry mobilization, and providing for a broad range of basic civilian economic needs.

The mining industry strongly supports the concept of a strategic stockpile. However, the constant shift in stockpile goals, which you very accurately described earlier as yo-yo, has caused the stockpile to be an extremely disruptive influence in the markets for metals and minerals, and also it has been expensive to the taxpayer.

To cite an example, during the 1950's the stockpile acquired 1,900,000 tons of aluminum. This large purchase program caused expansion in the capacity of the aluminum industry over and above what was necessary to meet normal market requirements.

In 1963 the aluminum stockpile goal was sharply reduced, and in 1972, it was completely eliminated. All the aluminum in the stockpile has been resold, principally through the companies that had originally supplied metal to the Government. This obligation to buy back metal tended to inhibit normal expansion of aluminum capacity during the sixties and early seventies just as expansion in the fifties had been overstimulated. Thus the Government's complete about-face in regard to stockpile requirements for aluminum played a significant role in the unsatisfactory price/cost relationships that have prevented the aluminum industry from earning a fair return on invested capital during much of the last 25 years.

In the light of this past experience with shifting targets, the mining industry approached the new goals therefore with considerable skepticism. When the new figures are examined, some of them seem illogical.

The mining industry does not pretend to forecast or make assumptions about duration of military conflicts. We only know that the three most recent major military operations in which this country has been involved have all been longer than 3 years: that is to say, the Second World War, the Korean war, and the Vietnam war. Various assumptions have been made as to direct military requirements, indirect military requirements, and essential civilian needs. In our judgment, these are simply assumptions. The complex interrelationships that exist in an industrialized economy such as that of the United States do not readily fall into such distinct watertight compartments. A material which is not used in munitions or armaments may, nevertheless, be absolutely essential to the prosecution of a military effort. I have said that the new stockpile goals appear to be illogical. Let me illustrate this rather strong statement by examining the new goals for two major metals, copper and tin.