as clearly defined. In many cases it can be 
capitalized or allowed as an operating expense, but 
some projects may not be so treated. In the latter 
event, failure of a major R&D project would be a 
financial risk incurred by the company’s owners. 
This increased business risk would not be offset 
automatically by a compensating potential for 
increased profit since the mechanism of regulated 
return assures that the economic benefits of 
successful R&D now are largely passed on to the 
customer or in some cases the producer. The net 
result is an extremely low R&D expenditure in the 
industry and a reluctance to undertake the large, 
uncertain R&D expenditures necessary for techno- 
logical breakthrough. 
To account for an R&D expenditure after the 
fact in terms of “success” or “failure” appears to 
be an accounting practice inconsistent with the 
basic premise of research itself. Even if initial 
hoped-for results are not achieved, the research has 
closed out one option and provided a great deal of 
useful information in the process. Consideration of 
this principle could resolve the lack of agreement 
between the gas transmission industry and the FPC 
concerning accounting treatment for research ex- 
penditures. 
Recommendation: 
The Federal Power Commission should review its 
accounting regulations for research and develop- 
ment activities to determine whether such regula- 
tions are consistent with the legitimate need of the 
gas transmission industry for clear and realistic 
guidelines. 
With appropriate encouragement, the gas trans- 
mission industry could foster new technology that 
would increase the economic feasibility of gas 
production and transmission further offshore and 
in deeper water and also be important to the 
National oceanographic effort. For example, im- 
proved techniques for laying large diameter pipe- 
lines in deeper waters may well depart from the 
concept of the traditional lay barge and involve 
new seafloor construction techniques using new 
tools, habitats, submersibles, etc. 
C. Planning 
In recognition of the vital role of the offshore 
areas as a source of gas for the industry, the FPC 
recently assumed the responsibility to assure that 
adequate planning exists for natural gas transporta- 
tion. Although a major proposal submitted by a 
consortium for sharing larger and more efficient 
pipeline systems was denied by the FPC in 1967, 
every indication, including policy statements 
issued in 1968, is that future offshore pipeline 
developments will require a joint industry planning 
approach to receive FPC approval. It is hoped that 
cooperation of producers, pipeline companies, and 
the FPC will lead to expediting the planning and 
processing of joint-use proposals; contribute to the 
more orderly development of offshore areas; en- 
courage exploration efforts; and provide econo- 
mies of scale of benefit to both the industry and 
its customers. 
IV. Ocean Mining 
A. Present Status 
No hard mineral mining of practical significance 
is being conducted on the U.S. continental shelves 
except sulfur, sand, gravel, and oyster shells. There 
is no mineral mining in the deep ocean. Discussion 
of offshore mining, therefore, becomes largely a 
discussion of its potential, of ways to assure that 
the potential will be realized as soon as economics 
and technology allow, and of its importance to the 
Nation. Successful ocean mining is being under- 
taken in other parts of the world where favorable 
business climates in combination with adequate 
geological deposits make such ventures economi- 
cally attractive. Most such operations are in 
comparatively shallow water. 
A thorough discussion of marine mineral re- 
sources is found in the report of the Marine Re- 
sources Panel. That report notes that with some 
exceptions (gold, silver, and uranium) the supply of 
land-based hard minerals appears sufficient to 
meet projected demands to the year 2000. 
This finding, however, must be qualified. The 
process of projecting demand for minerals and of 
estimating reserves is extremely complex and 
subject to many interpretations. Such a finding 
does not reflect the cost of alternative resources 
and is based only on known uses and metallurgical 
processes. The effect of new uses and the substitu- 
tion of new materials is difficult to predict and can 
cause considerable error in forecasting mineral 
demands. World-wide population growth and 
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