(The letter and report referred to follows:) Hon. J. HARDIN PETERSON, FEDERAL WORKS AGENCY, Chairman, Committee on Public Lands, House of Representatives. MY DEAR MR. PETERSON: Reference is made to your letter of September 21, requesting the views of this Administration on H. R. 6110, entitled "A bill to stimulate exploration for and conservation of strategic and critical ores, metals, and minerals, and for other purposes." The General Services Administration is of course concerned primarily with the provisions of section 6 (d) of this bill which will place upon us the duty of receiving, storing, and selling metals or minerals contracted for by the Secretary of the Interior. This subsection of the bill as introduced provides in part (p. 7, line 14, to p. 8, line 17): "(d) All metals or 1ainerals purchased under the provisions of this section, or such equivalent quantities thereof as may be permitted by the contract with the producer, shall be delivered by the producer to and shall be received by the Administrator of General Services at such places and times as may be provided in the contract. The Administrator shall from time to time, and in any event before selling them in the open market, notify the Munitions Board of the inventory of metals or minerals held by him under the provisions of this Act and shall continue to hold all metals or minerals received by him under this Act until at least sixty days after he has given the Munitions Board notice that they are so held. The Munitions Board may, as long as any such metals or minerals are held by the Administrator, (1) direct the Administrator to transfer any of them to the national security stock pile in accordance with the provisions of the Strategic and Critical Materials Stock Piling Act, as amended (53 Stat. 811; 60 Stat. 596), or (a) [2-?] within sixty days after such notice from the Administrator direct him to hold any such metals or minerals listed in the notice until sixty days after the next succeeding appropriation for purchases for the stock pile has become available. Unless notified by the Munitions Board to either transfer any of such metals or minerals or to continue to hold them as provided in this subsection, the Administrator shall sell them in the open market if and when open market prices will return to the Government at least the price paid by the Government for the metals or minerals, and only in such quantities as will not depress the market." The provision with respect to sale appears to require that the prices received by the Administrator shall be at least equal to the prices paid for the specific metals or minerals sold. This would require the separation and segregation of all material received according to the prices paid for it. It is felt then that such a requirement creates an almost insuperable administrative problem. It is therefore suggested that the provision in question be amended to authorize sale "if and when open market prices will return to the Government at least the approximate average price paid by the Government for the metals or minerals, computed as of the time of each sale by the Administrator of General Services". [New matter italicized.] It is further suggested that the limitation "and only in such quantities as will not depress the market," be eliminated from this authorization to sell, though there would be no objection to its inclusion in the proposed alternative authorization discussed in the following paragraph. This suggestion is made because it would appear to be unnecessary to incorporate this restriction on sales returning to the Government the price paid. Practically all purchases by the Government under production contracts will be at prices above the market so that sales under this authorization could be made only in boom times when demand and prices are relatively high, or possibly only in the event of war or threat of war, such as would entail huge expenditures for defense and consequent inflation of metals prices. Indeed, it is doubtful whether a significant volume of sales could be made in any event under a strict construction of this limitation inasmuch as any additional offer can be said to have some depressive effect upon the market however great the imbalance between demand and supply. Because of the possibility that very large purchases of metals and minerals may be made by the Government under the proposed legislation, it is deemed highly desirable that an alternative sales provision be inserted authorizing the 99483-50-ser. 23- -3 Administrator of General Services to sell "at current prices, at such times and in such quantities as in his judgment will not materially depress the market and will be advantageous to the United States, taking into consideration the cost of continued storage". It is believed that there should be some adverb, such as "materially" or "substantially" qualifying the verb "depress" since, as above stated, it can certainly be argued that any offer whatsoever will have some tendency to depress the market no matter how greatly demand may exceed supply. This suggestion of an alternative standard for disposing of the material purchased under the production contracts is prompted by apprehension on the part of this Administration that unless there is at least some limited authority to dispose of material at a loss, the storage costs may snowball to tremendous proportions. This last observation brings me to a matter which is of considerable concern to the General Services Administration. In the absence of any limitation on the obligation of the Administrator under section 6 (d) to receive and store materials purchased, it is feared that at some stage of the procurement program he may find himself legally obligated to incur expenses for storage and yet have no funds to meet them. It is therefore suggested that there be inserted immediately after the first sentence of subsection (d) the following new sentence: "The Secretary shall transfer to the Administrator for the performance of his functions hereunder such funds as the Administrator, with the approval of the Director of the Bureau of the Budget shall determine to be necessary, in addition to any funds appropriated to the General Services Administration, for the proper performance of said functions." Such a provision would make it possible to maintain a reasonable balance between expenditures for purchase and for storage and would prevent the former from getting completely out of line to the point where this Administration might have a legal duty to perform and no funds with which to do it. For purposes of clarification it would also seem desirable to insert in section 9, which authorizes appropriations, after the word "administration" (p. 11, line 14), the phrase "including storage and disposal." There is attached hereto, for convenient reference, a copy of sections 6 (d) and 9 showing our several suggestions inserted and underlined, and proposed deletion in brackets. It is not deemed proper for this Administration to express any views as to the general scope and purpose of the bill, since it covers a field in which we have no specialized knowledge and involves matters of policy deemed to be peculiarly within the province of the Congress. It is earnestly hoped, however, that careful consideration will be given to the foregoing suggestions for amendment of those provisions which directly affect us. We are advised by the Bureau of the Budget that there would be no objection to the submission of this report to your committee. Sincerely yours, J. W. FOLLIN, (The attachment referred to in the above letter is as follows:) GSA SUGGESTIONS FOR REVISION OF SECTIONS 6 (d) AND 9 (New matter italics; matter to be deleted in brackets) SEC. 6. (a) All metals or minerals purchased under the provisions of this section, or such equivalent quantities thereof as may be permitted by the contract with the producer, shall be delivered by the producer to and shall be received by the Administrator of General Services at such places and times as may be provided in the contract. The Secretary shall transfer to the Administrator for the performance of his functions hereunder such funds as the Administrator, with the approval of the Director of the Bureau of the Budget shall determine to be necessary, in addition to any funds appropriated to the General Services Administration, for the proper performance of said functions. The Administrator shall from time to time, and in any event before selling them in the open market, notify the Munitions Board of the inventory of metals or minerals held by him under the provisions of this Act and shall continue to hold all metals or minerals received by him under this Act until at least sixty days after he has given the Munitions Board notice that they are so held. The Munitions Board may, as long as any such metals or minerals are held by the Administrator, (1) direct the Administrator to transfer any of them to the national security stock pile in accordance with the provisions of the Strategic and Critical Materials Stock Piling Act, as amended (53 Stat. 811, 60 Stat. 596), or (2) within sixty days after such notice from the Administrator direct him to hold any such metals or minerals listed in the notice until sixty days after the next succeeding appropriation for purchases for the stock pile has become available. Unless notified by the Munitions Board to either transfer any of such metals or minerals or to continue to hold them as provided in this subsection, the Administrator shall sell them in the open market (1) if and when open-market prices will return to the Govern. ment at least the approximate average price paid by the Government for the metals or minerals, [and only in such quantities as will not depress the market] or (2) at current prices, at such times and in such quantities as in his judgment will not materially depress the market and will be advantageous to the United States, taking into consideration the cost of continued storage. No metal or mineral shall be transferred into the national security stock pile under the provisions of this Act unless the material has been found to be strategic and critical as provided in the Strategic and Critical Materials Stock Piling Act, and meets established specifications as to quality and degree of refinement or processing, and unless such transfer is consistent with the current stock-piling procurement program of the Munitions Board. All moneys received by the Administrator of General Services from such sales in the open market shall be for deposit in miscellaneous receipts of the Treasury, and any transfer of metals or minerals to the national security stock pile shall be covered by a transfer of funds from appropriations available for purchases for the stock pile to miscellaneous receipts of the Treasury in amounts approximating what the cost of the metals or minerals would have been if purchased in the open market at the time of transfer. SEC. 9. There are hereby authorized to be appropriated such sums as may be necessary for carrying out the provisions of this Act, including payments to producers for exploration, maintenance, and production, and the costs of administration, including storage and disposal, such funds to remain available until expended. STATEMENTS OF MAXWELL H. ELLIOTT, ACTING GENERAL COUNSEL, FEDERAL WORKS AGENCY, AND HERVEY MACOMBER Mr. ENGLE. Will you state your full name for the record, Mr. Elliott? Mr. ELLIOTT. My name is Maxwell H. Elliott, general counsel, General Services Administration, and accompanying me is Mr. Hervey Macomber. I shall be very brief. We are a service agency and are not in a position to have any views as to the policy; that is something that the Department of the Interior knows far more about than we ever will. Our concern with the bill is that as a service agency the bill would clothe us with responsibility for storage and sales, and, therefore, I shall be very brief. We want to make sure that we are not caught in the middle between this committee and the Committee on Appropriations. In other words, we want to make sure that to the extent that responsibility is placed upon us in the bill that there will be the available funds to carry out that responsibility, and that we are simply taking care of in the language of the bill, where there might be a responsibility placed upon us to store with very limited power to sell, which is a matter of policy, and perhaps not an adequate base for us to obtain funds. Mr. WHITE. Will you repeat that again? You say responsibility to do what? Mr. ELLIOTT. To store, to maintain and store the stock pile, that would be procured by the Department of the Interior. Mr. WHITE. Do you know anything about the Gow proposition that came over from World War I, under which we accumulated strategic materials particularly, that were stored out in the desert, down in California, where it was safe and secure from the weather, under provisions that would make it available when needed? Do you know anything about that? Mr. ELLIOTT. No; I do not. Mr. WHITE. Do you think it would be practical to store materials in the desert, in such condition as they could be made available to producers very readily in case of emergency? Mr. ELLIOTT. Someone who knows more about metals would have to answer that question. I know that it is practical to store them in one way or another, and I am sure that Mr. Larson, the Administrator of the General Services, will follow the most desirable procedure in storing these materials. Mr. WHITE. You do know that the steel industry and the coal industry now have stored in great quantity materials they use on the surface. Mr. ELLIOTT. Yes. Mr. WHITE. Do you know that it is actually being stored by these different companies until it is ready to be reduced? Mr. ELLIOTT. No; I do not. But I do know that whatever form or method is used in storing the materials, that it takes money to store them, and I want to make sure, whether it is done by transfer from the appropriation to the Department of Interior or otherwise, that the funds be made available to us, in sufficient amount to adequately perform whatever is necessary to carry out the storage. And I can assure you that if this bill becomes the law that Mr. Larson will follow the most economical method and the most efficient method. Mr. ENGLE. May I ask you this question: Under this bill the General Services Administrator is required to take control of these materials? Mr. ELLIOTT. That is correct. Mr. ENGLE. And there is a certain provision in the bill under which he can dispose of them? Mr. ELLIOTT. Yes. Under which he can sell them and where it will not depress the market. Mr. MILES. Is this a Government agency? Mr. ENGLE. Yes; it is a Government agency, which succeededMr. ELLIOTT. The Bureau of Federal Supply, the National Archives and the War Assets. Mr. ENGLE. So that under the bill you will have an obligation for the storage of these materials, and you are at liberty, so to speak, to dispose of them under certain conditions, and if you cannot dispose of them, in that event you want to have the money to pay for storage? Mr. ELLIOTT. That is correct. Mr. ENGLE. Are there any questions? Mr. D'EWART. My understanding of the bill is that you probably would not have to store everything, that you would be working with the Munitions Board, and in the event the Munitions Board did not wish to purchase certain materials they would be offered for sale in the open market, provided you could get the average cost for the particular metal or materials. Is that your understanding? Mr. ELLIOTT. That is almost it, Mr. D'Ewart. There would, of course, be a period where we would be holding it, pending the deter mination by the Munitions Board as to whether they were going to put it in stock pile, and the further question comes up: Suppose we are unable to sell it under the standards that the bill contemplates, and in the event we cannot sell under those conditions, we hold it, of course, even if the Munitions Board has not called for it. Mr. D'EWART. In other words, before you can sell you must be able to get approximately the average price for it? Mr. ELLIOTT. Yes. Mr. D'EWART. And your thought was that you might have to carry it for some time? Mr. ELLIOTT. Yes. Mr. ENGLE. You suggest amendments in your report which you say would take care of the problem of storage? Mr. ELLIOTT. That is correct. Mr. ENGLE. You also suggest that the language with reference to the sale of any metals and minerals be loosened up a little bit; you believe the word "depress" does not quite take care of the need, the idea being that any sale would have a tendency to depress the market. Mr. ELLIOTT. Yes. Mr. ENGLE. And you want to add the word "materially" before the word "depress," to make it read "materially depress the market." Mr. ELLIOTT. That is right. Mr. ENGLE. That is correct? Mr. ENGLE. I think we understand that. Where is that found? Mr. ELLIOTT. That is in the last Senate bill, as it was passed by the Senate. Mr. ENGLE. We had that in mind. Mr. ELLIOTT. Yes. Mr. ENGLE. Is there anything further you would like to say, Mr. Elliott? Mr. ELLIOTT. There is one other suggestion I would like to make, that did not appear in the letter, through an inadvertence. If we are to have this responsibility, the operational and service responsibility under this bill, not as a policy matter, but nevertheless we would like to suggest the advisability of adding the Administrator of the General Services to the Conservation Board, because the Conservation Board, of course, will Mr. ENGLE (interposing). Of course, I think he should be, Mr. Elliott, instead of the Secretary of Commerce or the Secretary of the Treasury. Mr. ELLIOTT. Perhaps instead of the Secretary of the Treasury. Mr. ENGLE. I do not understand why the Secretary of the Treasury was included in the first place. Mr. ELLIOTT. It may be that the Secretary of the Treasury was put in because at the time the bill was originally conceived the Bureau of Federal Supply was in the Treasury Department, and that may have been the reason for it. Mr. ENGLE. So far as policy is concerned, and certainly as a member of the Conservation Board, it would be very proper that the Administrator of General Services be on the Board, and that is your suggestion as a part of the bill? Mr. ELLIOTT. Yes. Mr. ENGLE. Thank you very much, Mr. Ellic** |