"SEC. 8. The Secretary of the Interior, through the Director of the Bureau Mines and the Director of Geological Survey, is hereby authorized and dicted to make scientific, technologic, and economic investigations concerning e extent and mode of occurrence, the development, mining, preparation, treatent, and utilization of ores and other mineral substances found in the United ates or its Territories or insular possessions, which are essential to the comon defense or the industrial needs of the United States, and the quantities or ades of which are inadequate from known domestic sources, in order to deterine and develop domestic sources of supply, to devise new methods for the Patment and utilization of lower grade reserves, and to develop substitutes for ch essential ores and mineral products; to explore and develop, on public lands d on privately owned lands, with the consent of the owner, deposits of such nerals, including core drilling, trenching, test-pitting, shaft sinking, drifting, oss-cutting, sampling, and metallurgical investigations and tests as may be cessary to determine the extent and quality of such deposits, the most suitable ethods of mining and beneficiating them and the cost at which the minerals or stals may be produced.

"SEC. 9. There is hereby authorized to be appropriated, out of any moneys in e Treasury not otherwise appropriated, such sums as the Congress, from time time, may deem necessary to carry out the provisions of this Act. The funds appropriated, including the funds heretofore appropriated, shall remain availde to carry out the provisions of this Act until expended and shall be expended ider the direction of the Chairman.

"SEC. 10. For the purposes of this Act the term 'strategic materials' shall not clude petroleum or petroleum products.

"SEC. 11. This Act may be cited as the 'Strategic Materials Stock Piling Act"."

EXHIBIT 26

STOCKPILING

earing before the Subcommittee on Surplus Property of the Committee on Military Affairs, United States Senate, Seventy-ninth Congress, first session, on S. 752 and S. 1481, bills to amend the act of June 7, 1939 (53 Stat. 811), as amended, relating to the acquisition of stocks of strategic and critical materials for national defense purposes and S. 1522, a bill to regulate the disposition of accumulations of strategic and critical materials

UNITED STATES SENATE,

SURPLUS PROPERTY SUBCOMMITTEE OF THE

COMMITTEE ON MILITARY AFFAIRS,

Washington, D. C., Tuesday, October 30, 1945.

The subcommittee met, pursuant to call, at 10:30 a. m., in room 224, Senate ffice Building, Senator Joseph C. O'Mahoney (chairman) presiding. Present: Senator O'Mahoney.

Also present: Kurt Borchardt, counsel to the subcommittee; W. C. Broadgate, echnical consultant, Mining and Minerals Industry Subcommittee, Senate Small Business Committee.

Appearances: Richard H. Templeton, Jr., administrative analyst, Bureau of he Budget; Harold Stein, planning adviser, Office of War Mobilization and Reonversion; C. K. Leith, mineral consultant, War Production Board; Chief of Metals and Minerals Division, Office of Production, Research, and Development; Dr. Alan M. Bateman, consultant on foreign metals and minerals, Reconstruction Finance Corporation; Commodore Lewis L. Strauss, United States Naval Reserve, special assistant to the Secretary of the Navy; Julian D. Conover, secretary, American Mining Congress, Washington, D. C.; Commander Virgil R. Goode, United States Naval Reserve, Navy executive secretary, Army and Navy Munitions Board; Col. William H. Hutchinson, War Department, Army executive secretary, Army and Navy Munitions Board; E. W. Pehrson, Chief of Economics and Statistics Branch, Bureau of Mines, Department of the Interior; J. Carson Adkerson, president, American Manganese Producers Association; Willard L. Thorp, deputy to the Assistant Secretary for Economic Affairs of the Department of State and Alexander C. Barker, president, Dominion Manganese Corp., New York, N. Y.

Senator O'MAHONEY. This meeting is being held at the direction of the Senate Committee on Military Affairs to consider the bill introduced by the chairman d the committee, Senator Thomas of Utah, S. 752, to amend the act of June 7, 1:3 as amended, relating to the acquisition of stocks of strategic and critical mate rials for national defense purposes. That bill was submitted to the vario Government agencies concerned for comment and report.

A letter was received from the Director of the Bureau of the Budget, trai mitting a suggested modification of the measure. This was introduced by the acting chairman of the Committee on Military Affairs, Senator Johnson Coloradoo, and is known as S. 1481.

Since that time a bill has been introduced by Senator McCarran to regulate disposition of accumulations of strategic and critical materials, S. 1522.

All three measures are before this committee, and I will ask that the bills incorporated in the record at this point.

(S. 752, S. 1481, and S. 1522 are as follows:)

Senator O'MAHONEY. It was the intention of the committee that morning begin with a statement by the Director of the Bureau of the Budget on the ministrative reasons for the proposed mollification. In the absence of Direc Smith or any representative at the moment, the committee will proceed to e sider the condition of the country with respect to materials that go into stock piles, and particularly with respect to minerals.

We are fortunate to have available for testimony this morning Dr. C. K. Let of the War Production Board. Dr. Leith is one of the authors of a very valuab book on World Minerals and World Peace, which was published by the Brooking Institution in 1943.

Doctor, the committee will be very glad to hear from you at this point.

STATEMENT OF C. K. LEITH, MINERAL CONSULTANT, WAR PRODUCTION BOARD; CHIT METALS AND MINERALS DIVISION, OFFICE OF PRODUCTION, RESEARCH, AN DEVELOPMENT

Mr. LEITH. Mr. Senator, I thought I would confine my remarks to an over-al statement of the problem, because other witnesses will come forward with good deal of the factual information.

I base my statement on a background of experience that went back throud the last war, when I was with the War Industries Board. We also discusse the problem at the American Peace Commission meeting in Paris, which attended. I was also for 2 or 3 years chairman of the Minerals Advisory Com mitte of the Army-Navy Munitions Board. Since then I have been on the present War Production Board and its predecessors.

I cite these facts just to indicate some familiarity, at least, with the natur of the problem.

As a result of the trying experiences of World War I, Mr. Baruch, in his re port of December 24, 1919, to the President, urged that steps be taken at once to insure adequate supplies of raw materials for future emergency.

In the 20 years that followed, the same program was vigorously urged or Congress by many individuals and agencies, public and private, including the Secretaries of War and Navy, many Members of Congress, the Bureau of Mines the Planning Committee for Mineral Policy appointed by President Roosevelt the American Institute of Mining and Metallurgical Engineers, the Mining and Metallurgical Society of America, and many others.

It was not until 1938 that a small appropriation of $4,000,000 (supplemented by $500,000 per year for 2 years) was made to the Navy for the purchase of strategic materials, followed in 1939 by an appropriation of $100,000,000 to be spent by the Procurement Division of the Treasury.

When the advisory committee to the Council of National Defense began its work on June 1, 1940, a total of about $15,000,000 had been appropriated and spent. This constituted less than 5 percent of the amount thought to be needed at that time.

By this time, the war was on in Europe, certain sources of supply were closed. shipping was tight, and prices were soaring. The result was delay, confusion. exorbitant cost in acquiring the minerals necessary for our defense program, as well as the diversion of supplies from civilian industry. One could give many illustrations of this situation. I mention tungsten as only one. We needed a comparatively small stock pile. We did not get it. In the efforts since, we

re acquired the necessary stock pile at a cost several times the cost at which it uld have been available earlier, and that with delay and confusion. It was y because Providence allowed us nearly a year and a half of grace before irl Harbor, and the strenuous and effective efforts of the Defense Council the very start, that we got by. You know the story; it is not necessary to borate it further. It was only a repetition of our experience in the First rld War. These two experiences should be enough to make us do something ut it. Unfortunately, the problem of raw materials as a basis for real paredness has never been sufficiently dramatized to draw enough public ention, and I am now fearful that we shall repeat our earlier mistakes and in forget.

The problem will be worse next time.

he original Munitions Board list of strategic minerals in 1940 numbered 7 nine: antimony, chrome ferrograde manganese, mercury, mica, nickel, rtz crystals, tin, and tungsten. With the constantly expanding scale of war, more kinds and larger amounts of minerals were called for. According he records of the Foreign Economic Administration, we found it necessary ing the war to import 65 different varieties of minerals. All classifications trategic, critical, and essential became obsolete about as fast as they were le. It is a certainty that a future war will require still greater volume and ter variety of minerals.

1 spite of large imports, the vast expansion of war consumption of minerals resulted in appalling depletion of our own domestic resources.

is not a matter of opinion but of simple fact that the resources of the ted States will supply even a smaller proportion of our requirements in a ire war, and that next time we will be even more dependent on imports, trol of the sea, and on stock piles to take care of the time element and the ard of interruption of imports. The problem of calculating the amounts kinds will require flexible administration and will challenge the comney of the best brains we can put on the job.

t a time when our country is trying so hard to create an effective United ions agency for the preservation of peace, it may seem contradictory and like for us to start out on a huge stock-pile program which would seem mply that we have no confidence in the effectiveness of any world agency keep the peace. The same consideration applies to the Navy, and our posed control of the atomic bomb. The only answer seems to me to be that le we all welcome the advent of a world agency to keep the peace which ld make stock piles unnecessary, or the Navy, or the bomb, as a matter of I fact the effectiveness of such a united agency is yet largely in the field of hful thinking and until its effectiveness is demonstrated, there is no alternabut to preserve our own power. Stock piles of mineral raw materials are very foundation of this power, whether they are made into guns, ships, nes, or bombs. In the meantime the stock-pile program will accomplish tain other desirable results which are not warlike in nature.

ven if there should never be another war, the stock piles acquired for urity should not be regarded as superfluous. They will be a valuable future et to the United States to supplement our dwindling reserves. Figures to presented to you by Mr. Pehrson will show how woefully inadequate many these reserves are, when measured against the life of the Nation. Ultimately Be part of our gold hoard in Kentucky will certainly be translated into. usable w materials. Why wait for the wasteful conditions of emergency? Evenilly; why not now?

Also, if wisely administered, stock-pile purchases from foreign sources can used as a powerful aid to international trade and to conservation of the orld's resources. If purchases are made in a manner to keep a flooring under ices and stopped when prices get out of hand, it would help greatly in abilizing world production and in preventing the huge conservational losses well known as the results of uncontrolled cycles of production and prices. Still further, the purchase of stock piles can be used to give powerful aid to change by giving producing countries the dollars needed for international

ade.

There is a good deal of fear that importation for stock-pile purposes may et as a break on domestice industry and that some day these supplies might e thrown on the market. The bill freezes stock piles to a reasonable extent, nd with stock piles under control of a properly constituted board, this ought ot to be a serious threat.

One of the controversial elements of the last bill was the "buy American" provision. That is eliminated in the present bill.

Personally, I like the provisions of the present bill. Stock-pile purchases should not be used to any considerable extent to subsidize submarginal domestic, production. It is important that processes and projects for the use of low-grade ores be encouraged-I should like to emphasize that fact-not only for security but for our industrial future, but my own belief is that the necessary encourage ment of submarginal operations and the new processes involved should be handled by separate appropriation, perhaps through the Bureau of Mines. Senator O'MAHONEY. Are you familiar with section 22 of the Surplus Property Act?

Mr. LEITH. Not by number, sir.

Senator O'MAHONEY. Let me read it to you. This is the section that deals with stock piling, in section (d) of which appears this language:

"Within 3 months following the enactment of this act the Army and Nat Munitions Board shall submit to Congress its recommendations respecting maximum and minimum amounts of each strategic mineral or metal which its opinion should be held in the stock pile authorized by the act of June 1939. After 1 year from the submission of such recommendations, unles the Congress provides otherwise by law, the Board may authorize the prope disposal agencies to dispose of any Government-owned accumulations of strategi minerals and metals including those owned by any Government corporation whe determined to be surplus pursuant to this act."

I ask the question about section 22 because in your statement you spoke the bill as reasonably freezing the stock piles.

Mr. LEITH. Yes, sir.

Senator O'MAHONEY. May I ask you to amplify your opinion with respect t the effect of stock piles upon business transactions in minerals? In other words what is a reasonable freeze?

Mr. LEITH. Obviously if a program is carried forward without the best judgment, there are possibilities for bad effects on industry, either in disposal d these surpluses or injuncious purchases at the wrong time and place. I fully realize the difficulties in store for any group or board, but I see nothing to di but to pin our faith on the selection of a board of good judgment to meet these difficulties if and as they come up, there being a great variety of conditions to face Senator O'MAHONEY. You believe it is desirable so to manage the stock ple that it shall not hang over the market as a threat to impede general develop ment?

Mr. LEITH, Yes. In other words, it can be used affirmatively to help stabiliz conditions, which implies that it should not be used, naturally, to interfere with normal activities any more than absolutely necessary.

And I might add this, that during the period between the two wars, when many of us were watching this stock-pile discussion very closely, we missed somĖ tremendously good chances to get what we needed at a very low price, which would have avoided all the delay and confusion at the opeing of our effort, and at the same time could have done incalculable good to industry.

Senator O'MAHONEY. NOW, you contemplate acquiring these stock piles in for eign countries as well as in the United States?

Mr. LEITH. My own preference would be mainly in foreign countries, on the ground that where we need this material, we need the best and the highest grade; we need it for safety. We want, as I say, at the same time, to be sure to develop our own resources, to use them as far as possible. But I do not believe in relying on speculative assets in a security problem,

Senator O'MAHONEY. What minerals resources, precisely, is the United States short of?

Mr. LEITH. Well, that will be given to you in some detail by Mr. Pehrson; but generally speaking, I suppose the most obvious shortage has been the ferro-alloy minerals. Ferro alloys occupy almost a central feature in the war effort, and aside from molybdenum and certain minor amounts of the other metals, we are, short of the 8 or 10 minerals represented here.

Senator O'MAHONEY. Are there any questions from the Army?

Colonel HUTCHINSON. No.

Senator O'MAHONEY. From the Navy?

Commander GOODE. No, sir.

Senator O'MAHONEY. The Office of War Mobilization and Reconversion?
Mr. STEIN. No, sir.

Senator O'MAHONEY. Mr. Conover, do you care to ask any questions?

Mr. CONOVER. No, sir.

Senator O'MAHONEY. Is there anything else you desire to add, Doctor? Mr. LEITH. I think that is sufficient for the time being, perhaps. Senator O'MAHONEY. I have tried to get you into trouble, but not successfully. · Mr. LEITH. I will be glad to attempt to answer any questions that come up here I feel that I have anything to say about it, but others are going to present e factual side of this and I have made no attempt to do anything of that kind.

Senator O'MAHONEY. No, I am asking you now to take the stand and develop le story.

Mr. PEHRSON. I would be glad to.

Senator O'MAHONEY. Will you identify yourself for the record?

Mr. PEHRSON. E. W Pehrson, Chief, Economics and Statistics Branch, Bureau ! Mines.

Senator O'MAHONEY. How long have you been in that position?

Mr. PEHRSON. I have been in that position for 5 years. I have been with the ureau of Mines since 1928, since which time I have been more or less identified ith efforts at stock-piling and at planning for meeting the problem of preparedess on the raw-material front.

Senator O'MAHONEY. Will you proceed?

TATEMENT OF E. W. PEHRSON, CHIEF, ECONOMICS AND STATISTICS BRANCH, BUREAU OF MINES, DEPARTMENT OF THE INTERIOR

MINES AND MINING SUBCOMMITTEE NOTE.—See subcommittee note immediately following the testimony of this witness (p. 1127) for comments and factual information concerning the limitation and deficiencies in the data presented here by the Department of the Interior.]

Mr. PEHRSON. Dr. Leith neglected to mention that he served as chairman of the fineral Advisory Committee to the Army and Navy Munitions Board in 1938 and 939, and I had the honor of serving as secretary to that committee.

My remarks this morning will consist of two parts. The first part will be an ttempt to present a factual picture of our mineral position and how we stand with respect to depletion of our mineral resources. The second part will be levoted to a few general comments on stock-piling legislation. That part of my emarks I think more appropriately would follow the Budget Bureau's presentaion, but I will leave it to your good judgment as to whether you want to continue ifter I finish the factual presentation.

Dr. Leith has given us a very good background of the importance of raw naterials and our failure to have acted effectively on the problem in years gone by. I would like to emphasize just a little more the tremendous importance of minerals in our national economy. As a matter of fact, it is our great wealth of mineral resources that makes possible our great industrial and military power; and the sad part is that as we deplete our mineral resources, we deplete the basis of our strength.

Also, had it not been for our tremendous mineral wealth, we would be restricted to an agricultural type of economy, which would not be capable of supporting our 139,000,000 people at such a high standard, which as we all know is the envy of the world.

There has been considerable discussion of late in regard to whether or not we have become a "have not" nation. There are, as usual, extreme schools of thought. There is the alarmist thought, which seems to attract the headlines, that we are in a decidedly “have not" position. There is the other extreme view that we have barely scratched the surface of our mineral wealth, and that all we need to do is to stir ourselves and there is tremendous untapped wealth still remaining in our treasure house.

With a view to making available the many years of experience of the Geological Survey and the Bureau of Mines in appraising our mineral wealth, a little over a year ago the two agencies undertook a study of our mineral resources, and I am privileged today to present a few preliminary results of that survey, which I will do through the medium of five lantern slides which I hope to project on the

screen.

Before getting into the exact details of our mineral reserve position, I would like to show the first slide, which gives you an idea of the rapid rate at which we have been increasing mineral production in the United States.