be considerably enhanced by joining this treaty. and, number two, with the specific question you asked, our reading of that -- and the information about the meaning of it goes back to the beginning of the treaty, because we've had american negotiators at the table from the very beginning. is that there is nothing in what you read that requires any particular standards. there is nothing that requires any subject that is going to be put to dispute settlement. it calls on parties to participate in discussions. conferences and the like, concerning environmental issues that might come to impact the oceans. and, you know, for the record, i will give you a longer written response, because i really do

want to put your mind at ease as much as i'm able to, because i believe so havehemently that acceding to the treaty is in america's interest or i wouldn't be sitting here. >> i tell you, this language is so black and white and so straightforward that says america shall adopt laws and regulations that are in conformance with anything adopted by a common international organization. well, let's turn to another provision that i have real difficulty with. as i understand it, since 1776, we have never ceded our authority, as far as taxing american people or american companies are concerned. if you read article 82, subsection 4, it talks about -- and, well, start with article 82, it talks about us taxing or

us requiring a tax of these companies that operate out in the waters, mining or pumping or what have you. section 4 says the payments or contributions shall be made through the authority with state's parties of the convention on the basis of equitable sharing criteria, taking into account the interest and needs of developing states, particularly the least developed and landlocked among them. why oh why oh why, as we, as americans, give up our taxing authority, handing money over to the united nations to develop some kind of a formula that we have no idea what it's going to say, and allowing them to distribute our tax money according to some formula that is very vaguely set out here? why would we do that? >> well, senator, we're not doing it. and i can tell you that without

fear of contradiction. the convention does not provide for or authorize taxation of individuals, corporations or otherwise. there is a royalty arrangement that kicks in after five years of drilling and extraction from the ocean. payments that would be related to the continental shelf beyond 200 nautical miles, go through not to one of the convention bodies, the sea bed authority. they're held there until agreement is reached on disbursement of the funds, if agreement is ever reached. the distribution formula has to be agreed to by the united states, with its permanent seat, would have to agree to it. and the payments would mean that we were actually extracting valuable resources from the

extended continental shelf. this is supported by the american oil and gas industry. because it only applies to such areas beyond 200 nautical miles. and i would note, too, senator, there is nothing unprecedented about payment being made under treaties for various benefits because here the benefit is being absolutely legally assured of sovereign rights over a vast area of common ocean and the legal certainty that comes with that. and we already make payments to the international telecommunications union, for example, because it helps to orbital slots to protect u.s. radio communications from harmful interference. so, there are precedence that demonstrate why this is in our interest. nothing is agreed to unless everybody in the convention agrees to it.

now, standing on the outside, there may be something agreed to which later could be something we won't like, but we wouldn't be able to veto it, which we could if we were on the inside. >> my time is up. thank you, mr. chairman. i find very little comfort in taking a seat, as secretary panetta talks about, in a group of 160 countries. most of whom don't like us, many of whom hate us. and us having one vote amongst 160, i think we'll have a tough time. thank you. >> but senator, it's a consen s consensus, which means it has to be unanimous. our one vote counts as much as 159 other votes and not every country will be represented on this body, but the united states will be. >> on this particular provision, but there's others in here where we don't have a veto throughout everything that the conference does. >> the point is, senator, there's a veto with respect to the distribution of any money whatsoever.

and i think, as we go forward in this, we will have the legal experts in who will define precisely how that works, but i think you'll come to see -- >> i look forward to it. >> but the other thing i was going to say is, the about 34ri case of the section that you raised with respect to the shell ply is only with respect to -- if you have already signed up to an international law that applies with respect to that so, in fact, it's not an ad hoc provision. it's if you've ever signed an international agreement and we haven't. >> that's not what it says -- >> i will -- again. i will have a panel of experts who will come in and clearly define that because it's very important and we obviously want you to understand that. >> no question about it. >> and we want you to be satisfied with respect to that and i believe you will be. but i think it's important to have that done that way. senator boxer is back. thank you.

>> thank you. forgive me, please. i had to go deal with a transportation bill and that's moving ahead very well, i will tell my colleagues on both sides. well, mr. chairman and senator lugar, thank you so much for this important hearing and i want to say to the panel, what an honor it is to be in the same room with you all. you give every day to your country, 24/7, and we all appreciate it so much. this is a very important issue, and i thank the chairman pry vau privately, because we are just late in the game on this and we need to make up for lost time. and senator lugar went through the history. i well remember in '07, when we voted 17-4 to report the convention to the full senate and as rightly pointed out, it wasn't taken up because there were threats of filibusters and everything else. when you are the majority leader, you want to go to something you can get done. so, i am hopeful this time we're

going to get it done. because of everything that was said. the convention has the unequivocal support of our national security community. the business community. the tech community. the oil and gas companies. and environmental groups. now, i tell you, it's tough to find that type of coalition, but we've got it here. it -- and, here's the puzzling part to me, i say to my colleagues, that this convention should bring us together, not tear us apart. my chairman has said, it's his best opinion that we go for this after the election, so be it. but i find that kind of shocking, since, again, i'm confounded that with so much support, senators consider this so controversial. u.s. asession would help give the u.s. navy maximum navigation rights, help protect u.s. rights

in the arctic. afford greater flexibility to u.s. tech companies to lay their fiber optic cables under the sea. it provides mechanism for peaceful resolution of disputes. so, the law of the sea protects u.s. it brings me to my question for you, secretary clinton, and it has to do with china. we have a little map here, if people will bear with me, items the story. china has made aggressive claims to a massive portion of the south china sea. one of the world's busiest shipping lanes. the blue lines show the maritime area that each country, vietnam, the philippines, is entitled to. it's called, as was referred to the exclusive economic zone. the red line shows what china is claiming for itself.

as you see, it goes far beyond china's own 200 mile exclusive economic zone. it reaches far into other nation's zones. a significant territorial grab that comes very close to the land borders of countries in the region. now, this dispute has already led to confrontation on more than one occasion. in fact, just last month, the chinese navy sent surveillance ships to block the efforts of a philippine coast guard cutter that was trying to stop activities of chinese fishermen who were within 200 miles of the philippine coastline. now, secretary clinton, i understand that you are been personally involved in trying to help resolve these disputes within the south china sea. and i would ask you this question, has the u.s. failure to join the convention had an impact on your efforts to resolve disputes in the south china sea and if you could explain to us why and how and i thank you, you did a great job

over there. yes. >> well, thank you very much, senator boxer, for raising this issue, because, you're right, i am personally engaged in many bi-lateral and multi-lateral discussions on south china sea issues. and the claims that china has made, and i'm not saying anything other than what i have say repeatedly to the chinese themselves, are, in our view, beyond what is per milted under the law of the seas. and we are working to try to help to resolve these disputes peacefully and particularly, to give a support to the countries that are being threatened by these claims. yet, as a nonparty to the convention, we are forced to advance our interests from a position of weakness, not strength. as a nonparty, we cede the legal

high ground to china. we put ourselves on the defensive. we are not as strong an advocate for our friends and allies in the region as i would like us to be. and i don't think that's any place for the world's preeminent maritime power to find ourselves. so, the common thread, and this is something that secretary pa knelt th panetta stressed, when i make an argument to the chinese about resolving these disputes, i premise it on a rules-based order in the region. that they cannot have a chinese rule. they have to be bound by the treaty obligations and the legal framework, set forth in the convention and our credibility and our strategic position would be strengthened, were we a member. >> thank you.

>> my last question, i would give to secretary panetta. and i know you spoke about iranian threats to close the straits of hormuz, you alluded to that. i have a specific question. according to the u.s. energy information administration, they said, quote, hormuz is, by far, the world's most important choke point due to its daily oil flow with approximately 20% of the world's oil traveling through the strait. fourth ert more, energy analysts say even a partial blockage of the strait could raise the world price of oil by $50 a barrel, within days. so, would you elaborate more on how you, as asession to the law of the sea convention could help us address such threats from iran. >> senator, the -- those who have not had a chance to look at the straits of hormuz, it's a very tight area that is located there and it is under the law of

the seas, there is an international passage way that is allowed so that ships can carry oil through the straits. and it is -- it gives us the argument that we absolutely have to have, which is that we need, in order to protect the world's oil supply, which goes through the straights of hormuz, we have to do it based on the international rules provided through the law of the seas that allows for transit in that area. and if iran were to engage in efforts to block the straits of hormuz, that's a very reason we have made clear that that is a red line that we would not tolerate. we have to keep those straits open. >> thank you. thank you mr. chairman. >> thank you, senator boxer. as i recognize senator inhofe, let me just say, i mentioned

this, i are already working on and will work, we want to work closely with senators, senator inhofe and others, who may have questions about this, or reservations about it, to specifically adopt in the resolution of ratification, appropriate reservations and/or understanding and declarations and we're working on some of them now. and i think as this hearing process goes on and things are fleshed out where there may be those issues, we're ready to work with you to do that. senator inhofe? >> thank you, mr. chairman. and also, thank you for our conversation with had on the floor a couple of days ago, where you did agree to hold a hearing with those who are in opposition to the ratification of the law of the sea treatmenty, which i am. and so i appreciate that very much. i remember back in 2004 when this committee passed out the ratification, i believe it was 16-0, unanimous mous, we looked it, at that time, still today, i'm a senior member of both the

armed services committee and the environmental public works committee, so we had hearings. in these hearings, we had it witnesses that totally changed this around. i really believe that's important and i appreciate the fact that you are going to be doing that. now, in the limited time that we have, i'm going to real quickly go over two items then aisle have a question for secretary pan kneetta and for general dem. first of all, i know you've talked about in my absence before i came in because i was watching part of it, if the u.s. approves the law of the sea treaty, it would be forced to transfer billions of dollars in royalties, generated from oil and gas production, on the u.s. extended continental shelf, to the u.n. international seabed authority for redistribution to the developing world. i grant you in terms of the eez, the exclusive economic zone, this treaty doesn't affect that,

and that would be -- that would be something we could continue to do. but outside the 200 nautical miles allows the ecs, over which the u.s. currently enjoys total sovereignty and have been for as long as i can remember and thus has the right to exploit all of its natural resources. now, according -- the problem isn't there. the problem is outside of the 200 nautical mile radius. we have appointed, and i've read the work, of the u.s. interagency extended continental shelf task force, and the -- that the resources there may be, talking about, you know, how to quantify the amount of money that we would be losing, whether we say it's an arrangement or tax, i think it's a tax if it costs money, and they have said it would be somewhere between billions and trillions of dollars that we would not have in the united states and would be transferred to, in accordance with the u.n. international

seabed authority. now, the way we arrive at this, and to put it in context, i would say that between 12 and 8 18% of royalties is about as much they are going to allow and still continue to develop the resources. so, the united states would receive, in that area, according to this task force, somewhere between 12.5% and 18.75% in royalties. now, the problem with this is, under article 82, the law of the sea treaty would require the u.s. to give up, after a period of time, between 7 and 12 years, about 7% of this. and so, if we take the conservative side of what the task force has said, and say just a trillion dollars, a trillion dollars would equate to $70 billion, that would be royalties that would be paid to the isa, as opposed to the united states. and, of course, they would go to the organization in kingston,

jamaica, for redistribution to the developing world. this is the first time in history that the u.n. would possess taxing authority over this country. now, i've heard the veto argument, and i think that was discussed by one of the other members here, i think it was secretary riesch. it's really not too important to discuss that because there are two entities that would make that determination, you have the council, the 36-member council. you have the assembly that would ultimately make these decisions. but the point is, under article 160, it's going to cost us. well, let's see. yeah, under article 82, the payments and contributioning shall be made annually with respect to all production at a site after this period of time. so, what we are saying is, it's going to be paid regardless of where you think it should go or where you think it's going to go. the second thing that i want to cover is the environmental end.

you know, we, for the ten years now, have rejected in both the house and the senate but primarily the senate because it started with the kyoto treaty, rejecting the cap and trade, amount to a tax on the american people of somewhere between $300 billion and $400 billion. we've rejected this over and over and over again. there may be at most 25 senators who would vote for a cap and trade bill now. so, what they're attempting to do is do what they couldn't do through legislation under this treaty. under this treaty, any country could sue the united states in the international tribunal law of the sea, not in the united states courts, i might add, or take the u.s. before binding arbitration. i only sail this because already people are out there planning their law suits and i would also quote from article 212, adoption, quote, adopt laws and regulation to prevent, reduce and control pollution of the

maritime environmental forum or through the atmospheric applicable. what we're talking about there is what they would use as a basis for the lawsuit. under the treaty, it says, quote, states are responsible for the fulfillment of their international obligations. we know what would happen. in fact, we have statements by trial lawyers around the country, saying that they, one of them here is from williams cg burns, citing that the lawsuits would come forth, he named the united states as the most ledge call state to bring action against given to us. now, with that, it's understandable why groups such as greenpeace and the natural resource defense council, environmental defense fund, all have this as their top -- their top priority. so, let's get back to the $70 billion. the question i would have, would be for secretary panetta and for

general dempsey. if we're talking about $70 billion, would it be better to have the $70 billion go to kingston, jamaica, to bail out some of the developing nations, or, the following list. the ohio class ballistic missile submarine, which they have been wanting. that's $3 billion. to maintain the navy's ship and aircraft and ground modernization programs, $12 billion. eliminate the navy's gap by providing 240 f-35 fighters, that's $3 billion. eliminate the gap in the ford class carrier, $11 billion. and -- and, i say, all five of these, meet the navy's request for six more ships. that's $12 billion, it adds up to $70 billion. general dempsey? do you think it serves our national defense better to give that $70 billion to the isa and kingston, jamaica, or to accomplish these programs?

>> senator, i'm not going to comment on the hypothetical use of money that we don't have. i'll tell you that the budget we submitted supports the strategy we've developed. >> no, what i'm saying is, this is money that i've documented pretty well, general, that would be there and would be lost to, through this process. now, i would just like, on these five issues, you are very familiar with all of them. you know they've been requested. you know there is a gap. and my question again, is, is that, fulfilling those five gaps, in the best interest of our national defense or sending the money to kingston, ja kay ma. >> senator, i will only comment that i support this convention on the law of the sea because it enhances my ability to provide security of the maritime domain. >> secretary panetta? >> i share, obviously, the chairman's viewpoint with regards to why we consider this important. but i -- i guess what i would

ask, senator, i know you've come up with the $70 million -- >> it's billion. >> billion. but what about the literally billions of dollars in economic benefit that would flow from these companies providing energy and being able to go at our seabed and provide that part of the economic benefit? that's what you have to focus on. that, yes, sure, there may be $70 billion that may be paid in royalties, but what about the economic benefit that these companies -- >> the economic benefit, in answer to your question, mr. secretary, would be coming from companies that are already in this area, the controversial area that i described, i think, in a very exact way. so, if we've been doing it before, treaties with china, russia, we can continue to do it and there would be no loss there. the loss would be $70 billion, and that would affect our national security. i'm looking forward, mr.

chairman, to the hearing where we have those in opposition. >> well, we'll have it -- i promised you that and we'll have plenty of people here to do that, but let me just say to you, senator, with all due respect, there is no way to contemplate what you've just con item mralted in terms of a number, because, first of all, there is no drilling in the extended shelf. the royalties only come from extended shelf, after a certain period of time and they are in a range of 1% up to the high end, depending on how much you extract. and there's no way to tell today how much has been extracted. >> but the facing force has come up with a figure -- >> i understand that and we'll examine the premise of it and the nature of the task force and the interest of the task force, we'll look at that. but the fundamental premise here still remains this. ronald reagan renegotiated this with the oil companies and gas companies at the table. and they signed onto these

royalties, which are far less than the royalties that they pay today, to us, in the gulf of mexico or elsewhere. and they pay them into an international entity that we will have a veto over as to where or how it may be spent. so -- >> and ronald reagan opposed this -- as you well know. >> senator, i think what's important here is, we'll hear from george shultz and some of these people, but i think it's important to recognize, i mean, you are here protecting companies from paying a royalty that they want to pay. you're here protecting companies from being able to drill where they can't drill without this. so, they'd rather have 93% of something than 0% of nothing. >> but they currently are producing and they are currently able to do it through -- >> we're going to go through this. they can't do it. they can't do it because there is no bi-lateral treaty that can

apply to the extended shelf. it is only through the international rules that come through the law of the sea that you can do that. so, unless you have this in place, no company is going to drill. and you will sit here and say, why are we importing it from other places, why are we buying it from other countries and not drilling it ourselves? we're going to have this thoroughly vetted in the course of the next two months. this will be coming out of everybody's ears and people will be tired of it. but we'll look at every aspect of that, i promise you. and those companies will come in here and themselves tell you why they're not prepared to invest millions of dollars and put it at risk without the certainty of the claims that comes through this treaty. we look forward to that debate. senator shaheen. >> thank you, mr. chairman. thank you for holding this hearing. and thank you all for being here. general dempsey, at an atlantic

council earlier this month, you said that the convention, quote, givens us the framework to counter excessive claims by states seeking to illegally restrict movement of vessels and aircraft. i wonder if you can elaborate a little bit on that and tell us specifically where are we seeing these excessive claims and how do they affect our ability to freely move around in our seas? >> if i could, senator, if we were here 20 years ago, we would have all been predicting that growing world population, the rise of regional powers like china and india, would place extraordinarily challenging demands for resources. and that that could become destabilizing and here we are 20 years later and it's playing out. so, the reason i'm supportive of the convention on law of the seas is that it provides clarity on the definition of maritime

zones, on 1/2 ganavigational ri and from that clarity becomes stability. as we begin to rebalance of security interest into the pacific, this becomes very important. >> so, do -- i appreciate that it's a sensitive topic to speak so some of those excessive claims and senator boxer had an interesting map to show what china's looking at versus other countries in the region. but are we seeing, in fact, those kinds of claims from china and other countries in the pacific that are affecting our freedom of movement in those areas or that we are concerned might in the future? >> let me go to might in the future. as i said, the command petition resources is becoming far more pronounced and could potentially become far more dangerous. an