Mr. ENGLE. Who do you have to convince by your recommendations?

Mr. LARSON. Well, we have to convince eventually Mr. Wilson. I think he has delegated that authority, however, to Mr. DiSalle and Mr. Johnston, and I think it is a matter of convincing them and I don't think we will have any trouble in doing that. That is my personal feeling.

Mr. D'EWART. Will the gentleman yield?

Mr. ENGLE. Yes.

Mr. D'EWART. Mr. Boyd, is that what is holding up this ButtePhilipsburg contract at the present moment?

Dr. BOYD. No, sir. I don't think so. Yes, it will-until that order is passed I am quite sure. Really, I would prefer Mr. Larson answer that because he signs these contracts and makes those legal determinations but I think that would be over the market price.

Mr. D'EWART. Can you start mining Friday in Butte as you indicated earlier in the day if manganese is not decontrolled?

Dr. BOYD. I am sorry, I think Mr. Larson will have to answer that. That is a question of whether the two deals in Deming and Butte will be held up on the same basis. They are above market prices. That is above ceiling price.

Mr. LARSON. If they are above ceiling price they will he held up. I want to correct the impression I left a moment ago. This decontrol, or this order which has been drawn up, which has been referred to, would be a blanket exemption of GSA in purchases for the stockpile; isn't that correct?

Mr. EWING. That is correct.

Mr. ENGLE. What would it do to purchases?

Mr. LARSON. That would eliminate the obstacles if that order were issued.

Mr. ENGLE. What about DMA? Some orders are made with reference to DMA which are under the Defense Production Act and others you make under the stockpile Act.

Mr. LARSON. Are you asking me?

Mr. ENGLE. Yes.

Mr. LARSON. I might clarify that by reminding the committee again of the procedures prescribed by the President's Executive order implementing Public Law 774. It is a responsibility of DMA to promulgate programs and to review sources of supply for expansion of metals and minerals and to take advantage of those devices which Congress provided in Public Law 774 to encourage such expansion and production and those devices include direct loans, guaranteed loans, tax amortization and procurement.

Now, DMA determines that procurement is to be the basis for encouraging the expansion and getting the production. Then it is the responsibility of GSA to negotiate the definitive contract, and on the basis of recommendations made to GSA, by DMA, those contracts are negotiated.

The negotiating responsibility is that of GSA for a final definitive contract and as an example, if we take the copper program, for instance:

The copper program has been recommended to be negotiated under procurement contract with certain draft forms of contracts that have

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been passed along to us by DMA, as illustrative of their thinking in the matter insofar as cost of production, et cetra, are concerned, but it is GSA's final responsibility to reduce that to a definitive procurement contract, and we are right in the middle of that at the moment insofar as these copper contracts are concerned.

Now, as I understand it, and I am not thoroughly familiar but Mr. Gumble is here with me, of my staff, who is familiar with the details of each of these negotiations, on each of these contracts, I should say. The question was about the Montana manganese production; was that correct?

Mr. D'EWART. Butte-Philipsburg area.

Mr. REGAN. While you are discussing that, let's cover the whole manganese program. You heard Dr. Boyd this morning say that everything was practically ready to start purchasing ore at El Paso at a certain agreed price; at Deming at a certain scheduled price; and at Butte, all of which should be under way by the end of this week.

Now, you are the man with the pocketbook.

Mr. LARSON. As soon as that program, which Mr. Boyd referred to, is cleared by DPA and DPA certifies to GSA, that so much money is available for that program, then GSA makes a request of the Bureau of the Budget to make that money available in the Treasury, which the Bureau of the Budget does as a ministerial activity normally, and just as soon as that is accomplished, then we are in a position to receive and pay for any ores, or in the case of manganese concentrates or whatever it is, at the station designated, which will be manned by GSA personnel, that are offered to that station.

Mr. ENGLE. What about this price ceiling? How does that work on that situation?

Mr. LARSON. That is something which is going to have to be cleared as I understand it. That will have to be out of the way. I am assuming that the price thing is out of the way, that the order is going to be issued as indicated.

Mr. ENGLE. That is the question. If it isn't it stops the whole works, doesn't it?

Mr. LARSON. That is right, so far as domestic production.

Mr. D'EWART. I would like to ask Mr. Boyd and Mr. Larson if they don't think it would be a good idea for this Mines and Mining Committee to recommend to the Banking and Currency Committee that these strategic and critical ores be taken out from under the Defense Production Act when it is renewed or if any action is taken. Mr. LARSON. You mean out of the control aspects?

Mr. D'EWART. Out of the control of the Defense Production Act, write it right into the law.

Mr. LARSON. Well, Jim Boyd is really more qualified to speak on these matters than I am. As I told this committee before, I am the purchasing agent for the Government. Mr. Boyd in this particular instance is the Engineering Department, and he recommends to the Purchasing Department what they purchase.

Now, I would not, or I could not give you an intelligent answer as to what my feeling would be. However, I would like to point out, as this committee knows, I am sure, the terrific responsibility of the Office of Price Stabilization here and the pressures that are created clear across the board when they decontrol one item, the pressure is

to decontrol many other items. I mean it just follows in governmental activity that everybody has an inherent right and Mr. DiSalle has a job, I am sure, that nobody envies, but I do think in the case of these strategic materials that we have got to remove all obstacles in the way of production of them.

Mr. D'EWART. And one way would be to strike those critical and strategic ores from control?

Mr. LARSON. Well, with due consideration to what my friend from Colorado, who is a member of this committee, referred to, a moment ago, and that is that it is the obligation of all of us, Congress and executive branch alike, to exercise those precautions and the good judgment that is necessary in order to protect the taxpayers and in order that somebody doesn't get a windfall out of a disastrous position in which the American people find themselves.

Mr. D'EWART. Even though they were taken out from decontrol by an amendment to the act you would still be under no obligation to buy the ores.

Mr. LARSON. That is true. My personal feeling is that certain of these ores, both domestically and world-wide, if decontrolled, that decontrol would create a free market and would create such flexibility that I think the results in many of these would be a downward trend of price rather than up. I know that is a familiar argument that was made back in 1946, some people think with some disaster, but I feel very keenly and I have advanced this argument in this committee, that we referred to, that you take the case of tungsten, for instance, it is my feeling that we can buy foreign tungsten under the ceiling price has a tendency to become the floor price.

Mr. REGAN. So as a matter of fact that would probably be quite a relief to the Office of Price Stabilization if they didn't have the responsibility of going into this matter of strategic metals which we are all out to try to get and we know we can't get them at the ceiling price so why should we have to go through the extra step on the total pole there, to have that cleared, if in the extension law we just said that these strategic minerals would be excluded from price control but we would still have responsible people buying these ores, wouldn't we?

Mr. LARSON. I am inclined to think so but I reemphasize the very difficult position of the Office of Price Stabilization with any decontrols and the pressure that that builds for decontrols in areas where it would not be to the best interest of the American taxpayer perhaps to have it decontrolled.

Mr. REGAN. Any other questions?

Mr. ENGLE. Now, after it clears this committee, this recommendation goes to DiSalle, is that right?

Mr. LARSON. Mr. DiSalle is a member of the committee.

Mr. ENGLE. It goes to Wilson?

Mr. LARSON. It would go to Mr. Wilson, with Mr. Johnston's recommendation as chairman of the committee.

Mr. ENGLE. Mr. DiSalle doesn't personally sit on this committee, does he?

Dr. BOYD. Yes.

Mr. LARSON. Personally, yes.

Dr. BOYD. Mr. Johnson is the chairman and Mr. DiSalle sits on it personally, with Mr. Larson and myself.

Incidentally

Mr. ENGLE. There are three of you on the committee. If two of you vote for it the recommendation is made, isn't it?

Mr. LARSON. Jack Small is on the committee, RFC is on the committee, Mr. Symington. I think the committee is in pretty general agreement that decontrol of these strategic items is necessary and would be beneficial to the whole economy.

Mr. ENGLE. I can't see why DiSalle would set up a committee with himself on it.

Mr. LARSON. Mr. Wilson set up the committee. DiSalle didn't set it up.

Mr. REGAN. This was a bottleneck we didn't anticipate last week. Mr. ENGLE. They created this after we talked to them.

Mr. LARSON. That is not correct.

As I stated, about 2 weeks ago, Mr. Boyd and myself and Mr. Small and Mr. Gibson petitioned Mr. Wilson to consider the decontrol of these items which would include manganese. There are two groups of items and we pointed out the difficulties in procurement. It was primarily our procurement difficulties that brought this about and one of them is what we are discussing here now.

Mr. ENGLE. As a practical matter, it boils down to this, doesn't it? If you and Dr. Boyd convince DiSalle, the deal will be sold, won't it, to take off the ceilings, and DiSalle will then make a favorable recommendation to Wilson.

Mr. REGAN. They have three other members.

Mr. LARSON. I don't think so. Mr. DiSalle is a member of the committee, as Mr. Boyd and I. It is a matter of convincing the majority of this committee and Mr. Wilson.

The impact of decontrol is a pretty serious impact and that is why it got up to the very highest possible level under the authority granted

since the Production Act.

Mr. ENGLE. You are meeting today, are you?

Dr. BOYD. Tomorrow morning at 9 o'clock.

Mr. ENGLE. Mr. Chairman, I wonder if it would be improper to ask that we be advised as to what the recommendation is and when it is made?

Mr. REGAN. Who is the chairman of that committee?

Mr. LARSON. Mr. Eric Johnston.

I think Mr. Boyd and I have indicated what two members of the committee feel like the recommendation should be.

Mr. REGAN. This is a new element that we didn't anticipate last week. We thought we had all of these hurdles pretty well covered and now comes along this committee on the price control features that we thought were all set to be waived last week. I wonder if you would either direct or ask Mr. Johnston to advise the committee of your action?

Mr. LARSON. I will be glad to do that, Mr. Regan, and I am sure Mr. Johnston will be glad to comply. I think within 48 hours we will have this whole matter cleared.

Mr. REGAN. With that out of the way then we have gone over the 1ast hurdle and we can go ahead with this manganese program once your committee has cleared it. Is that correct? That is, with Mr. Wilson's committee?

Mr. LARSON. This is not an action committee. It is an advisory committee, to advise Mr. Wilson on what action to take on the requests we made.

Dr. BOYD. I think it is important, Mr. Chairman, to realize that our recommendation did not cover all the strategic and critical materials, only those whose costs do not enter into the final products, because when you get into things like copper, et cetera, then you have a much more difficult problem.

Mr. REGAN. At least we would like to know this manganese business is on the road.

Mr. D'EWART. I think, Mr. Chairman, if it is not favorable, then it would be the duty of this committee if we are going to follow through with the effort we are making to write a recommendation for the Banking and Currency Committee for an amendment to the law.

Mr. ENGLE. Not only that but we should take it up with Wilson himself.

Mr. LARSON. If I may take advantage of this opportunity, Mr. Regan, to concur in Mr. Engle's actions in requesting some relief insofar as obligations for contingent liabilities are concerned as they are now required under the present administration of the Defense Production Act, I think that is very, very important to me, for my responsibility, is the most important thing that needs to be done in this whole program. I mean by doing that we really hold up this whole program for what it is and that is of making available to American industry vitally needed critical materials at whatever it costs to make them available; if the situation is serious enough to justify that and without upsetting our whole fiscal program and our whole financing operation of this emergency by having hundreds of millions of dollars tied up that will never be needed. It gives a false picture to the whole operation and to the American people as to what they are up against, and I certainly concur in that and I hope we can come up here very shortly and report to this committee that all of the recommended procurement contracts that have been referred to us have been definitively carried out. We are having some difficulty in the copper area. I would like this committee to be aware of that, and it is taking some time because we feel that it is our responsibility in GSA to take a long last look on behalf of the taxpayer and on preventing a windfall in some of these negotiations.

Mr. ENGLE. You are not talking about the San Manuel, are you?

Mr. LARSON. I am not personally familiar with all of the objections to these contracts but that is among the contracts that is currently being negotiated in my office and negotiations have not yet been completed.

Mr. REGAN. Any other questions?

Mr. Ewing and Mr. Jacoby, I guess your few words answered our questions. We have found these complications of this new committee entered into it. That is what we wanted to get straightened out as to what was the hold-up on this price ceiling. I guess the only thing we can do is wait until we see what the committee recommends to Mr. Wilson.