481 



cess ratios. When distributed over the entire operation, these costs are 

 expected to be eventually lowered to reasonable and acceptable levels. 



V. Policy for Seabed Resources 



Given the abundant resources of the seabed and the challenges they 

 present, especially to the dynamic petroleum industry, what are the 

 implications of tliis situation for national policy and international di- 

 plomacy ? Before entering the complex issues of global agreements for 

 apportionment of the ocean's resources, some considerations of U.S. 

 national interests and policy should be reviewed. 



Policy For Submarine Mining 



A foremost consideration, present in all mining operations, is the 

 necessity for maintaining an approximate balance of supply against 

 demand. A prime economic characteristic of all minerals, except those 

 that are scarce and precious, is their price sensitivity. Although sup- 

 ply may be elastic, demand is not. The housewife does not buy an 

 extra tank of oil, and the steel mill does not double its order for man- 

 ganese merely because the supply is plentiful. This characteristic is of 

 particular signilicance for projects to mine the seabed or drill into it 

 for oil. The Ingher initial cost of such operations needs to be evaluated 

 against the possibility of a fall in prices such as would make the entire 

 operation uneconomical after heavy capital investments have been 

 poured into it. 



Moreover, the disruptive effect of severe price fluctuations would 

 extend far beyond the extractive industry directly involved. On the 

 other hand, if it turned out that submarine mining was a lower-cost 

 operation, the impact would be no less severe on conventional mining 

 operations. The problem of over production, even of one component, 

 would be analogous to a free import policy without safeguarding the lo- 

 cal industry. Prices would go down, mining centers on land would 

 close down, and whole communities might have to migrate in quest 

 of livelihood elsewhere. As submarine mining w y ould immediately re- 

 late to coastal areas, populations from inland would seek the already 

 overpopulated coastal areas. Land, housing, equipment, business, and 

 all such related activities left behind w r ould feel the impact. 



The fact that seabed deposits are being researched and seriously con- 

 sidered is enough to influence business decisions and put a firm ceiling 

 on the long-run price of manganese, cobalt and nickel. If deep-sea 

 mining becomes a reality, future prices could well be lower than to- 

 day's, and certainly would not exceed production costs. 



The many unknowns surrounding offshore mining are a source of 

 uncertainty causing decision-makers to prefer land operations. Re- 

 search dollars are directed by generally conservative mining com- 

 panies toward more familiar and less risky land applications. Several 

 mining economists believe that the high investment in the research 

 and development of deep-sea mining will exclude most mining com- 

 panies. They maintain that such development will come from larger, 

 non-mining companies such as the oil and aerospace industries, or 

 from consortia of several small companies- This is also the thinking 

 behind the future production envisioned by Deepsea Ventures, Inc., 

 following its successful mining operation in 1970. The risk, the high 



