238 



The contrary view holds that the abseuce of a regime to protect rights will 

 indeed deter investment in a mining operation. Northcutt Ely has pointed out 

 that "the petroleum and mining industries, whether operating on dry land or 

 beneath the sea, require two things above all to attract capital to the ultra-risky 

 business of exploring for minerals ; the discoverer's exclusive right to exploit 

 the minerals discovered and security of tenure while he does so." * 



I do not think, hovvever, that there can be an absolute answer to this question 

 with respect to the pioneer efforts. The inability to acquire a clear-cut exclusive 

 right is simply an additional cost to be considered in the total calculation of 

 anticipated costs and revenues. It is a risk that the entrepreneur may be willing 

 or unwilling to bear, depending upon how he evaluates that risk. If he thinks 

 that the risk is small and that the potential rewards are great, he will make 

 the investment. 



The real question, therefore, is the degree to which the absence of a regime 

 acts as a deterrent to investment. How significant is the risk? How large is the 

 probability that the entrepreneur will lose access to the resource? There are 

 several elements that can be raised in answering this question. One is the length 

 of tenure required by the exploiter. The heavy capital investment and many 

 technical uncertainties may call for a tenure of many years. On the other hand, 

 the mining operation is mobile, so that loss of access to one area may be balanced 

 by gain of access to another area. This, however, assumes that different areas 

 may be similar in value and that the costs of discovery are not great. And it also 

 assumes that the principle that prevents access to one area does not apply to 

 the other. 



In other words, the risk of proceeding in the absence of a regime depends 

 upon one's anticipation of the political opposition to such an operation, an 

 evaluation of the length of tenure required, of the relative values of different 

 areas, and of the costs of discovery. In my own opinion, this leads to an extremely 

 high risk, and one that can be avoided by the establishment of a viable regime 

 for the minerals of the sea floor. 



The second question refers to the precision with which the necessary rules and 

 regu'.itions cmu be written in the absence of experience. It has been suggested 

 that since the rules cannot be written with precision, we cannot, therefore, estab- 

 lish a re-^ime." In answering this question, we should determine, first, what rules 

 are necessary, and second, what degree of precision in rules is required to permit 

 efficient exploitation. 



With respect to the establishment of a jurisdiction over the resources of the 

 sea bottom, it is not clear that it is necessary to have more knowledge about the 

 resources than we now have. Certainly, the abseuce of knowledge and the impre- 

 cision of rules and regulations did not prevent the signing of the Truman Procla- 

 mation of 1945 — the proclamation that established U.S. jurisdiction over the 

 resources of the continental shelf. Nor does it appear that the ab.sence of such 

 knowledge need prevent the establishment of a jurisdiction (be it coastal state, 

 flag nation, or international) over the resources of the deep sea bottom. More 

 knowledge would be desirable, but perhaps not necessary. 



When it comes to writing rules and regulations, the problem is one of degree 

 and kind of knowledge necessary to achieve sufflcicnt preciseness. It is not 

 a matter of waiting until all possibly relevant knowledge has been gained before 

 writing the codes, but a matter of anticipating needs and of writing codes with 

 sufl^cient flexibility to respond to changed conditions. The most important infor- 

 mation is not the extent of the resources or conditions of marketing and process- 

 ing (as suggested in the NOA NEWS), but the size of area and the length of 

 tenure that an exploiter would require in order to operate efficiently. Under 

 the "wait and see" approach, this knowledge might be gained through expe- 

 rience. Under any other approach, some guesses would have to be made for the 

 pioneer exploiters ; guesses that could be adjusted as experience is gained. This 

 is a typical approach. For example, oil fields were opened at the turn of the 

 century under certain property rights. Subsequently, it became necessary to 



• Ibid., p. 377. 



" See "N0,\ 'Stronsrly Opposess' United Nations Take-Over of Ocean Minerals," National 

 Oceanography Association NEWS, I, 9 (May 1967). Actually, these suggestions have been 

 made with reference to an international regime, not to any regime. But It seems to me that 

 anj/ regime, flag nation or International, will require certain rules and regulations, and 

 that the same knowledge will be required in all eases. See the following discussion on the 

 flag nation approach. 



I 



