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>> he said the failure to ratify puts ourselves at risk with others who are interpreting the law to their benefit and the risk of confrontation goes up. what all of the commanders said today and i think this is a very important subtext to their testimony, was that the world is changing very rapidly. other nations are pressing for resources in ways they have not ever been before. china, all over the world. we know that. resource oriented policy beyond anybody else. and given that pressure for resources and that we're going to become a planet of going from 7 billion to 9 billion in the next 30, 40 years, that's only going to increase.

what they're saying, all of them is that this provides an orderly process for how to manage your way through that increased pressure intention. that's part of what increases the urgency. the second thing they cited, i think it's important for every member to realize this, our intel community will make it very clear that there are actors right now who are behaving in ways that challenge us where the law of the sea will have the ability to address those concerns. i do want to make sure the record is clear about both what general dempsey said and what the four star said today and sort of where we are. you'll have a chance to address this if you want. >> thank you. i found the testimony important. just in terms of the historical

record of the evolution of the issue before the administration and the congress. specifically i would mention testimony today that indicated that the bush administration made law of the sea a primary treaty objective beginning in 2002. now, i remember that period because i had the privilege of serving again as chairman of the foreign relations committee, the republicans got a majority and we took seriously that list of treaties and were as a matter of fact able to ratify a good number. came off the shelf. we had good debate. law of the sea was among those as we took that up in 2003 and 2004 with a vote and a committee that was unanimous at that point if favor of the treaty. unfortunately, the republican majority leader decided there are other priorities. as a result we did not have floor debate. that opportunity passed.

republicans lost the majority. senator biden became chairman of committee. he took it up again in 2007. once again the bush administration testified very strongly about the same way. on that occasion as i recall there were finally four negative votes but the treaty went to the floor with a pretty good majority. now harry reid, the majority leader, did not find it convenient to take up the treaty. in the meanwhile, the question that was raised by secretary rumsfe rumsfeld, it's an interesting philosophical one. this is not president reagan's viewpoint.

mrs. thatcher was croat -- quoted by secretary rumsfeld. if question is is there internationalization of the sea. it suggested maybe somebody might stretch this one bay to the atmosphere. on the other hand, they question we have to resolve is brought up and people mentioned lockheed martin. i received a letter that maybe other members of the committee have the i quote this part. it says the multibillion dollar investments needed to establish an ocean based resource development business must be predicated on clear legal rights established and protected under the treaty base framework of law of the sea convention including international seabed authority. on the one hand you can take the position that the ocean out there, whether it's close to our shorelines or 200 miles or not, is nobody's business.

in essence, there is no idea of internationalization. nobody owns it. just a question of whether you want to go out and drill or not. take your chances. what mr. stephens is saying as a practical matter in terms of american businesses, very few of such drillings are going to occur that involve hundreds of millions of dollars, if not more without some legal basis, some assurance, some treaty that protects those rights. we can talk about all of those resources being out there till we're blue in the face. the facts are there is very little drilling for them without people feeling very precarious about it and american businesses among them are saying if we're serious about energy resources energy independence, our own security, then we need this framework. it's a legitimate argument as to whether anybody owns anything.

the treaty provides a practical means by which we might proceed in this world and particularly in this country given the resources and investment we have. i come back to this with questions that those of you have been testifying about this. it's a central issue in this. secretary rumsfeld, you've been fairly even handed in discussing philosophically the question, but how do you come down on the stevens letter? why would lockheed martin proceedout at least assurances being provided by law of the sea? >> i don't know that they would proceed. a business makes a benefit, cost

and risk analysis. they want as much certainty they can get. there's no question but it's perfectly logical for businesses in this instance to prefer certain. businesses enter into uncertain investments and at some point where they decide that the risk is realistic for the investment, they will go right ahead because there's nothing preventing them from doing that. seems to me the easiest thing in the world if somebody wanted to do it, american companies have got the technology. they're skillful, they've got resources and you can always do a joint venture with another company that is a member of the law of the sea. i don't know why they couldn't. maybe they couldn't get a license if it was a joint venture. i suppose i just don't know the answer to that question. but there's nothing that i've seen that legally in any way prevents them, other than their

assessment, as the chairman said, of what the risk is. and that's fair. >> well, of course that is a good statement but the point is the companies are not taking the risk. you know, we keep asking american investors to find more energy and to at least deliver us from the reliance we've had on middle eastern oil, for example, or other situations and businesses could take that risk. it's an interesting equation that perhaps you tie up with somebody who is a law of of the safe treaty person but this then really does legitimize again the law of the sea. you're using the law of the sea to make possible a lack of american business and sharing whatever the profits may be. already objection has come that the sharing of royalties in the sense of all of the world and so forth is not in our interest, even though that's been

downsized over the course of time. but how did the bush administration come in '82 or rather 2002 that this should be the prime treaty. why was there that change of view at that point? >> i guess that may go to me. my job, one of my responsibilities as legal adviser, though after 9/11 we were mostly focused on other things like terrorism, was to look at all of the treaties we had inherited from the clinton administration before the committee here and decide which were our priorities. we took a really good scrub at it. any administration does. they are not confident of the priorities of the last administration and we knocked a number of things off the list. law of the sea treaty we were particularly skeptical of.

it took us close to a year till february of 2002 to move it to the top of the list. i wouldn't say it was the administration's top treaty priority. we didn't rank them 1 to 100, but we said that this was a treaty that was a priority that the senate should act on. and just to summarize, there were the military advantages, particularly after 9/11 when we were asking our military to do more with less and it was easier to rely on a legal right. i think secretary rumsfeld acknowledges that part. but the economic and business advantages were things that just could not be gotten in other ways. if there was another way to do it, i think it would not have been -- that would not have been a good argument. but we couldn't see another way for american companies, particularly as the arctic opened up and enormous advantages were there for us and we were watching canada, mark,

norway making billions of dollars, norway has a sovereign fund of several billion dollars it has gotten for its people from oil and gas up in the arctic. we saw what they have been doing up there and we said for our companies to do this, we need to become party to the treaties. that was an additional benefit and then there were environmental benefits as well for the health of the world's oceans. >> thank you very much. >> senator lugar. >> thank you. i won't go into what we did this morning but i say to you secretary rumsfeld from my experience in the military, we have a change of command. we have 24 stores before us yet i submitted a letter of 33 stars that were retired. seems like once they retired

things changed. i always suspected that had to do with the chain of command of course. president obama and before him of course president bush -- >> can i just say to you senator -- no, i'll give you your time, i'm not going to invade your time but you are impugning the integrity of their testimony this morning. >> no, i'm not. >> they each said they were there personal, it was their personal belief, no one twisted their arm and no one requested them otherwise. and to suggest otherwise is not to believe -- >> i'm not suggesting otherwise pip know the chain of command, that's all. i'd ask you, secretary rumsfeld, how does it serve our national security interest to send n nonappropriated spending that would go to countries but would come from us. is there any way you see that enhances our national security? >> no, senator. i think what the admirals and

generals testified to was a narrowly their interests that relate to the department of defense and they clearly did not get into anything that is broader. >> in fact, i wasn't surprised that they wouldn't want to get into that but i would like to ask you, mr. gross, i presented the case on two of these hearings now that i'm still waiting to see if anyone really disagrees with and that is under our royalties currently, the royalty percentage ranges between 12.5 and 18.75%. that varies because of the point at which a company is not willing to go in and risk its capital to go after it. that's the main reason we have a range instead of a specific amount. the 7%, granted it wouldn't happen for 12 years but at that point it would and if -- and while you said in your testimony, mr. rose that, there is no way to try to predict

exactly what that would be, the u.s. nt agency international continental shelf task force said it would be billions, not trillions. just comment in terms of that, the amount of money that we could be talking about here. >> it sounds to me like we may have mixed the royalties that relate to the 200 mile area as opposed to the deep seas. >> i'm talking about the extended continental shelf. >> i understand that the other hasn't even been set, has it? >> the reason i'm asking the question is many are saying here and have said at both of these hearings, we can't -- without this, we can't get in and develop the extended continental shelf. that's a question i would like to you address. >> the major take away you should have here is we don't know how much money is at stake. there's been no study of the

vaul u of the thihydrocarbon resources. yet we can sit here today and have no idea how much oil and natural gas is out there and yet pledge to sign on to a treaty that would commit us to paying between a 1% and a 7% royalty on those hydrocarbons forever more. so that doesn't sound to me like a very fiscally responsible thing to do when we don't even have the first clue about how much is out there. now the ecs task force has put the only number out there, which i've ever found, which could be trillions of dollars, trillion with a "t" and plural. we know from a growth estimation we're talking about a significant amount of money. but until that study is done, until we have even the slightest idea of how much money we could be giving up for this treaty, i don't think it's very sponsor

prudent to accede to it. >> i contended this morning that i'm not sure that where the table is. i mean, we have the imo and apparently it's performed well. what i'd like to have you do, mr. groves, is talk a little bit about the differences between the council and the assembly and how veto works in this respect. >> sure. the international seabed authority or it's called "the authority" is made up of a secretaryat, it's made up of a council of 36 countries and made up of the assembly of 162 countries and that's called the supreme organ of the authority. there a couple of narrow questions, narrow but important questions that the council can make recommendations on that the assembly must consider. one of those is the distribution of these article 82 royalties.

but what has been -- what is basically the ability to block consensus has been kind of transmografied into this blank veto power that the united states would have over the entire operations of the authority when in fact it's a very narrow ability and if we have the ability to block con senses on the council, so do the two bodies, when you've got a council that's making recommendations about the distribution of article 82 royalty and you've got an assembly, which is the supreme organ making the final decisions about the distribution of those royalties, we know in the end who going to win that discussion, regardless of whether there's some balance between the two bodies. we know that because we've studied other international organizations in a multitude of context. >> it would seem to me it not

all that significant to be talking about that anyway. the big issue is they have the power to extract that money that otherwise would be royalties to the united states. >> yeah, sure. before we're talking about this supposed veto, we have already committed to make all of those article a-b royalty payments for redistribution. to me the horse is already out of the pen. >> a comment -- the word "veto" i think is a little confusing in the sense that it leaves the impression like our constitution, where a president can veto something. or it leaves the impression that like the united nations where we and other countries have a veto in the security council. in this instance it much more like our role in nato, where i served as ambassador 30 years ago.

watching constitution. a second point on the military issue that you raise, again, i'm no expert but i read this about the military activity exemption. and my impression is there's no definition of that and that the various structure, the executive, legislative and judicial structure that mr. groves described would be where that definition would eventually evolve. and if you think about it, a military activity can simultaneously be an economic activity and an irnal. sonar was adversely affecting whales. up can end up with a series of problems where people con thes. because of the lack of that

definition, it would seem to me, and i don't think i'm smart enough to know what that definition would be without leaving enormous areas of ambiguity. >> i do remember that discussion and, mr. groves, i in theed you were making some notes. is there anything would you like to add at this time that would be helpful to us? >> such a great open-ended question. i think i'd like to debunk the idea that there are oil companies for us to engage in exploration of our extended continental shelf. >>'s a lot if indicates all of the areas of the extended couldn't nnt al shelf in the gulf of mexico what perk has so

the idea this going to be some great prohibition on this development is something i don't we about been to buy multi-million dollar leases from the extend, regardless if if there were not a party to this treat and that he ever. >> one last this evening, are there any frailties you can think of in the imo, something that hasn't worked in the past that can be corrected by this? >> the imo is the form where all of the things the proponents are being discussed at the law of the sea meetings. >> that's the real table. when you say a place at the table. >> that's correct. that's where they're drawing the scenes and the ceilings through

indonesia and discussing treaties and other obligations. that's where actually. >> i think it would be helpful for the record. do you have i comment with regard i think the general point is -- and i think this is perhaps the most important question for the nat really is the tull if we don't, then we still get all the benefits. it's a choice between joining the convention or not joining the convention and the u.s. still gets all the things and

don't have to pay anything. it's do the royalties fly flow to the isa or to the treasury? if i had that choice, i would much rather the -- pay a small amount of royalties of a five years or allow the u.s. government to do it or they won't do it at all. the choice is either lots of royalties for the treasury and lots and lots of money for u.s. companies and some small amount that goes to the isa or nothing at all. that seems to be the choice that's confront us. >> i would say that this argument is particularly pertinent with respect to, a --

it was clear this is one area where our companies do feel inhibited from explore and exploiting beyond it 00 where we may have continental shelf thaeks tends out as far as 600 miles in the arctic ocean. it's important that issue, resolved. >> we'll come back to that when we get into the second round. mr. groves, you're right, they are buying some leases and they're very smart to do so but there's a huge gulf between buying the lease and sitting on it. there a whole bunch of leasing down in the gulf that have been owned for years but they don't exploit them. they're not buying and drilling. the differential is the capitalization that is required to exploit. but we'll come back to this. senator isaacman.

>> i al ppologize that i'm late. i want to thank secretary rumsfeld and ambassador negroponte for your service in the military. i saw you in baghdad in the most difficult days of o you are conflict there and both of you deserve tremendous credit for your service to the country. mr. bill jer and mr. groves, i am not an attorney. i love listening to attorneys going back and forth but i have a university of virginia law school intern for the summer. i posed the question of the veto and i said i want you to read this thing and research thing. some people say we've got a veto and some people say now you see it and now you don't. he did a beautiful paper for me answered want to read two quotes from the treaty and then i'd

like both of you to comment on it as it relates to this question of do we have a veto or do we not. one is that the veto is the -- the consensus as defined by the treaty is the absence of any which means if there was a proposal before either the council or the assembly, as long as nobody objected, they had consensus and they could move forward. but if one member of the 35-member council objected, then what do you and i want to read this sentence. if all efforts to reach a decision by con senses have been exhausting, decisions on questions and procedures may be taken by a majority of the people attend organize voting and doot dee signatureses or substance sudden.

>> we may have a -- but the vee tote can be jo. >> i would like both of you to comment on am i write or is my law student right? or am i wrong? >> can i help your law student a little bit sp. >> i'm not mentioning his name. i don't want to get him in trouble either. but he's actually taking that from the 1982 original agreement and not the agreement as amended. >> good. that's the kind of information i'm looking for. >> i have the greatest respect for the university of virginia where i have my own masters gree agree from and i love the law university of virginia law

school. >> enawe are the only country t is a permanent member of the council and, two, the council has to be the one to make decisions on administrative budget or financial matters. and on the sentence that you just read where ultimately there is not agreement and it gets referred back, it's -- you did not mention the clause that says, and this is in section three, paragraph five, except where the convention provides for decisions by consensus in the council. and soap the united states is always in the council, we're always the permanent member. section three, paragraph two says the decision makings and organs of the society should be by consensus. the clause there says that except where the convention provides for decision business consensus in the