consume what it's currently exporting all within that country, and what impact that would have on consumers and businesses and jobs in this country. >> yes. if i could start with the latter question first, if we don't ratify the treaty and businesses don't make the investments necessary to take advantage of the rare earth nodules that exist on the sea bed floor, and china does use all of its rare earth materials, it would be devastating to the american economy, to manufacturing, and to jobs in this country. the bottom line as has been stated many times on this panel is that businesses require certainty before they make multibillion investments. mining on the sea bed floor is not an inexpensive proposition. it requires years of studying, planning, mapping, and significant investment to do so.

and companies simply aren't going to do that without the certainty that the treaty provides. one of the reasons that we have the strong military that we've all acknowledged and that we all admire is because we have economic might in this country. the rare earth debate is -- is one that businesses have been quite aware of for a number of years, but it's rather new in the public dialogue. but it is one that will determine our ability to compete and succeed in the international marketplace in this global economy. and it's one that we simply cannot take for granted moving forward. >> and you talked about the importance of certainty before companies are going to be willing to invest large amounts of money that are required. can you talk about the extent to which those investments are happening right now? are those sit issing on the sidelines waiting to see what happens with this debate? >> they're sitting on the sidelines for the most part, senator. and i would say that it's not

only in this realm. i think it's very important to remember that it's 20% more expensive to manufacture in this country than among our major trading partners after you take out the cost of labor. and that's because of lots of different things -- taxes, regulation, energy. where for the first time in many, many years we actually have a slight cost advantage. but this is another significant amount of uncertainty that will not allow capital to flow to those investments. >> thank you. >> senator, just one comment. and jack gerard may want to mention. while there aren't in companies down on the deep part of the shelf, bringing up the rare earth materials, many companies are preparing to do it. you don't just go out there with a boat and throw something over the side. this is a huge, complicated, technical issue. and there is a lot of money

being invested by american companies and by consortiums of companies to figure out exactly where it is, exactly how to do it, and exactly how to do it in a safe and environmentally sensitive way. >> thank you. >> thank you, senator shaheen. senator isackson, thanks for your patience. >> thank you, mr. chairman. thank you all for coming. it's good to have you here on what is today a historic day. i need to get a couple of clarifications. i wrote down a couple of things i heard in the absence of my having read the policy. i think it was shell that invested $4 billion in the arctic. they had sent two ships out recently from washington to go to look at their first claim. is that correct? >> yes. they acquired the lease five years ago. and through the process of permitting and getting the ability to go out and actually start to drill a well, they have been in that process five years. it's cost them $4 billion to this point. and we hope they're going to get

final approval to drill those first wells this summer during this summer season. but that's how long this process takes. my simple point was these are long-term investments, and they're very significant. so we've got to know that we've got some rights intact before we commit to make those investments. >> who is granting that permit? >> the u.s. government. >> the u.s. government. so it's on our -- it's on our current territorial waters? >> yes. it's within the 200 mile exclusive economic zone. >> of the sea bed. thank you very much. mr. timmons, you made a statement, and i wrote part of it down. so i apologize again if this is wrong. this is an important issue for me. i'm talking about the deep sea bed. you're talking about international bodies who have current authority to issue permits or issue permission on deep sea bed. did i miss that? did i misunderstand you? >> i think so. >> so currently if somebody was going to the deep sea bed to try and mine rare earth minerals, there is no current authority other than what the authority might be --

>> under the isa. the convention. >> and mr. donohue, the last time i brought this up, the chairman and i got into a 15-minute discussion. i blew up the whole meeting. but this whole veto thing is a issue of which there is a lot of conversation. the chairman and his response back to you talked about the council. i'm not talking environmental right now. i'm just talking about the council. the veto is when you set and there is an absence of consensus. that's what i understand the definition to be. but i also understand on the council and the assembly there is an override of that absence of consensus that is a simple majority of those voting and present on the council, or a two-thirds vote of the assembly. am i right or am wrong? >> senator, having watched the discussion here, committed to get some more detail for your colleagues, and not wanting to start another 15-minute harangue, i look forward to

answering that question in specific detail with at least two opinions on the subject. >> i appreciate that, and so does the audience as well. >> thank you. >> thank you very much. mr. mcadam, in your testimony, you refer to some nations have attempted to encroach on the ability of u.s. operators to effectively manage or deploy or prepare maintenance and repairs on their lines. and in your testimony, you cite malta's attempt to assess a fee or a license. you talked about a vietnam carrier that had done 106 miles worth of damage to your cable. do you have another example? are those the two examples you're referring to in some nations, or are there other examples that come to mind? >> there are other examples for sure, senator. just one is in india. even though we don't cross into their territory, they require the cable laying and maintaining ships to put into port, and they assess a fee against them.

it's against the convention, but they do that. and so we have to take legal action, or we just have to pay the fees. so those are three examples. >> so the convention exempts you from having to pay a licensing fee or some type of arbitrary fee to maintain your cable or to lay your cable? >> right. that's all laid out in a framework that we can rely on versus having these unilateral actions that have occurred in many places. >> does the sea bed authority or the assembly or the council have to issue a license to lay a cable? >> i would have to look at the specific details of that, senator. i don't know that off the top of my head. >> i'm sure we're laying cable now. >> uh-huh. >> and we're not a party to the treaty. >> right. >> so my question would be if we're laying cable now and we're not a party to the treaty, would being a party to the treaty from your testimony only benefit us to the extent they would exempt us from paying fees to the countries? >> no, it's not the fees. we are in and out of these cables constantly, upgrading the

technology, doing maintenance on the cables. and i think the concern that we have is the arbitrary nature of what happens today. and if we can have greater certainty, we can predict our costs better and we can make those investments. that's my main point, senator. >> thank you very much, mr. chairman. i've got to join a conference call. so i'll yield back the balance of my time. >> i appreciate that before you run out, let me say quickly, important because you've raised an tan important question. the voting structure in the council was significantly rewritten as part of the 1994 implementing agreement. and it was rewritten in a way that gives the united states a tremendous of influence, even in matters where the council does not act by consensus. we in fact do have a veto over every item that would be critical to us. let me just be very specific very quickly. a finance committee was created. we insisted on this. it has to make recommendations on all financial and budgetary matters before the full council

can make its decisions. the finance committee operates by a consensus, and there are provisions making clear that the united states will be permanently on that committee. so we have an ability to prevent any counter budgetary orifice school matter from being contrary to our interests. then the council secondly is divided into several chambers. for any other issue not decided by consensus, there is a rule stating that any chamber by majority vote can veto a matter and the united states would be in the chamber with four members. so there we'd have to get two other members to agree with us, but we could have a veto by virtue of that. and third, and this is very important, section three, paragraph 4 of the annex states that the assembly cannot take a decision on, quote, any matter for which the council also has competence, or any administrative budget or financial matter unless it does so based upon a recommendation of the council where we have the

veto. so it can't change the recommendation of a council. all it can do is accept it or send the matter back. so in effect, because of our negotiations in '94, which came out of president reagan's questions about this, we have in fact negotiated a rather remarkable position for ourselves which we're not able to exercise. and so we'll get this fully, you know, properly articulated in the context of the record. but i wanted you to be aware of that. >> thank you, mr. chairman. would you mind providing me with that from which you're reading? >> we will give you the entire thing to you. we'll give you all the details. >> thank you. >> you got it. >> mr. chairman, would i ask you share it with everyone? >> everyone on the committee will get it. thank you for your patience. >> thank you, and thank you for calling this hearing. this is a vitasi vitally import

issue. we're spending time on a subject matter that sometimes we don't in washington do enough of. and i'm grateful to be a part of this. i'm sorry i'm late. at the risk of being redundant, i'd say redundancy is important in washington. repeating important messages is important. so i might be plowing old ground. but part of what -- part that hasn't been touched on with great detail yet is mr. mcadam, the -- some of the statements in your testimony that i'm not sure have been -- have been put forth again. i'm reading from page 2. this is the first page of your testimony, labeled page 2. and you say in the second to last paragraph, and i'm quoting, aside from our land-based connections with canada and mexico, more than 95% of u.s. international traffic, voice, video, internet, and data

travels over 38 submarine cables, each the diameter of a garden hose. without these cables, current satellite capacity could carry only 7% of the total u.s. international traffic. for that as a predicate, i would ask you based upon that dependence we have i guess is the best word, what can you tell us about the importance of this -- of this treaty just as it relates to that 95% dependency that we have on that transmission? >> well, we invest a great deal, senator, in making these cables as redundant as we can. we use the term "mesh networks." if you think about it as a fence, you can cut certain pieces of it, but there are other pieces of the network that are redundant, and therefore so we're the same as the government in some ways, i guess. to make sure that our customers can rely on that service.

that helps us when we have things like storms or earthquakes that sever the cables. but if a country takes some sort of a unilateral action such as we have seen and doesn't frankly support some of the repair operations that we had in vietnam. and i referred to that in my testimony where it took many months to get those cables repaired, that really can impact global commerce. and so the framework that we will have in place with the treaty allows us to have an ongoing dialogue with the country. we have a set of rules that we can rely on. if there are disputes, we have arbitration we can go to. we can enlist the help of the federal government where our local team can't make the proper headway. it is a series of additional steps that give us greater certainty and allow us to make these sorts of investments. >> thank you. i was going to go back to a question. i know that senator shaheen

raise and i'm sure others did as well. and the question of manufacturing, mr. timmons. i appreciate your testimony. i'm -- represent a state that has had a long and very substantial legacy and reputation for manufacturing. and we've had our challenges, as you and i have talked about. but we've had a bit of a resurgence, and i think we're, frankly, headed in the right direction in terms of being able to create or maintain manufacturing jobs. if someone -- if i were traveling across pennsylvania this august when i'm going to be home and someone grabbed me on the street and said tell me in a few words why this treaty is important for manufacturing generally, having a strategy for manufacturing, but especially for maintaining those jobs, what -- what should i say to them in a few sentences, if you can help me with that? >> well, when you're looking at the issue of rare earth

materials, it is a vital component of all manufacturing processes, particularly the chemistry. you have a large preponderance of folks involved in the chemistry. without those rare earth materials, manufacturing simply will not be able to compete and succeed in the world marketplace. ten years ago, this country was able to produce 100% of the rare earth materials that we used in manufacturing. today we onshore produce none. and that's because of many factors, regulatory matters, permitting, and other factors. the bottom line is if we can't access rare earth materials on the deep sea -- the floor of the sea, we're going to be put at a significant competitive disadvantage. the manufacturing renaissance that you and have i spoken about will cease to exist, and it will harm our economy and cost jobs. >> i hope i can be that

articulate with the constituent. >> i don't think that's a couple of sentences unfortunately, but i'll work on that and get back to you. >> but i'll add one more sentence. maybe you're going to say it. if we do this right, we'll drive down the cost and increase the availability of fuels. and that's going to have a large, large effect on manufacturing and on your state's economy. >> thank you, mr. donohue. >> senator, i was just going to add something that you already know. the answer, the others than is very significant in your state is natural gas. as you know the price is down to the $2, $3 range today. 83,000 new jobs in your state as a result of that resurgence. i think as jay said earlier, that is primarily what is driving the manufacturing resurgence in the united states. we often forget that those chemical plants and others are primarily driven by the feed stock of natural gas where they convert natural gas to all the products we consume every day and don't think about. so it's natural gas, low cost,

affordable, reliable energy that is driving those other benefits in our economy today. >> i'll submit some more questions for the record. thank you so much for your testimony. >> mr. chairman, thank you. >> thank you very much. senator shaheen, do you have any second-round questions? >> i do have a couple, mr. chairman. and i know that one of the issues that has been raised about the treaty, and i heard some of that debate today as been what is the real authority of the international sea bed authority. and how -- how would our participation play in that. and i wonder if you all have looked at the authority to the extent that it's operated today and whether you have any views about countries like russia and china and what they're actions have been on the authority and our absence, and whether --

whether they are in fact taking advantage of our inability to ratify the treaty and participate on the authority, what impact has it had to have the u.s. not be part of that body? >> i'll try it, senator. first is to us that's very significant. as senator chairman kerry mentioned earlier, the '94 changes the amendments were very significant in giving us additional power of permitted sea on that council in the sea bed authority. the reason we say that is twofold. number one, any other decisions that come out of there, we essentially have that veto right. we interpret it as such. so i'm anxious to hear others' legal opinions. we've gone to outside council and we view that we have that right and that authority within the sea bed council. but the other thing we shouldn't overlook there has been talk about royalties and other things that come from oil and gas

production beginning the sixth to the 12th year. today if those are produced any other place in the world, those dollars are going to go wherever that group that sits there are going to allow them to go. if we have the seat, the permanent seat in that council, we have the ability to direct that, to make sure those very significant resources aren't given to unfriendly nations around the world, and aren't spent for purposes that are not in the best interests of the united states. so we think it's twofold. number one, we need to be there to secure our own rights, but number two, by being there, having a seat at the table, we can influence and have some direct leverage over the other decisions the sea bed authority is making. >> so just to be clear, they're going to assess those rates from our companies whether we're a member of the treaty or not? >> well, they apply only beyond 200 miles. my point is that others who are participants who might be paying into that fund today, those

dollars go elsewhere without us having any say until we are seen to participate and become part of the treaty process. does that clarify it? >> uh-huh, thank you. the other thing that i wonder, and this, again, this may have been covered to some extent, bu covered to some extent. but i haven't heard much discussion since i arrived about how we benefit in the arctic. you talked about that a little bit in terms of our ability to have much more of an opportunity. and the resources that may exist under the arctic. but can you also talk about what's happening there with other countries and, are we lagging behind russia and the other countries who may be also interested in the resources of the arctic. >> well, if you look at the way

the authority is set up on the commission on the limitation, that determines how far the boundary may go based on the definition of the continental shell. those nations that are active in the arctic are all participants. and many of them have already filed and laid claims to those lands. we stand here watching that happen. we have a very significant interest in the arctic. shell will hopefully start that again today. it's estimated one quarter of the world's oil and gas resources are under the arctic. why we would sit on the sidelines and watch the world develop that resource to us is somewhat mystified. not to mention our own resources that we have with it, our own 200 mile exclusive economic zone. we're the only industrialized nation in the world that does not take full advantage of our outer continental shelf.

we think it would be a big miss, a missed opportunity to sit today and watch, and 30 years from now wonder why we missed out when those decisions were made in the arctic. which is so important to global advancement and economic development. >> thank you very much. >> thank you, those are good questions and an important part of the record. i appreciate it. senator lugar does not have additional questions. i just have one or two quickly. we'll leave the record open incidentally for a week in case there are incidental questions to put in writing. at a hearing before the committee a couple of weeks ago we heard from one of the think tank folks out here who said, the u.s. companies are free to exploit right now and they have all the legal certainty necessary to support investments to drill in the deep sea bay.

and the analogy is just like fishing. in light of the fact that you have 161 nations in the european union all parties to the convention, it seems od to suggest an every person for themselves approach to this you've addressed it somewhat here and you talked about the certainty. i want to be crystal clear whether that's an alternative. >> well, senator, mr. chairman, i would say it's an alternative but i don't think it's viable. we could proceed as a nation. i think it's very important to recognize that the world today is extraordinarily different than it was 40 years ago. we are again a global economy. we have multinational companies that have the means to develop these resources, but they are unwilling to do so because of the risk that exists without

this treaty. if that theory were in fact accurate, you would see the development of these resources today, and it's simply not happening. >> so it -- is it -- i want to ask everybody this. therefore, is it clear -- are you saying here definitively today that the people you represent and the interests that you're here to advance will not be served by -- and that no one will invest, in fact, the billions of dollars, if you were to pursue that theory of every person for themselves. >> i think our country would not be served if the treaty is not ratified because companies simply will not invest or take the risks if they don't have the certainty provided in this treaty. that means for a manufacturing perspective that manufacturing suffers, which means the economy suffers, which means jobs suffer. and so it's in the long term

economic and national security interest of our country and the view of manufacturers that this treaty be ratified. >> senator, we may find people doing that without protection. they ma be the russians. they may be the chinese. they many be on our extended outer continental shelf. obviously it's more available than it was before because of the thinning of the ice, while it's thickening on the south pole. you know. there was all this stuff going on. but people are making plans and claims to establish themselves in the arctic. and as jack indicated, we're on the outside looking in, with all sorts of power. the most powerful things we can do, we can't do, or we shouldn't do.

and i think the benefits of making this fundamental adjustment, taking a seat at the table, with a lot of spent to protect the interest at least gives us -- for whatever steps we have to take to represent and to help this country. so the answer is i don't think we're going to see a lot of american firms. . you can get a permission from the federal government to access the area. we have all of those problems. we've been arguing the thing for so long. when the old arguments run out, then we have new arguments. and i respect the people that have that view. and i suppose you can find my members that have that view. we have tens of thousands of them and think it's about time to get on with it.

>> i understand there are a lot of opinions about this. i would suggest you look closely at the opinion where is it really matters. you cited one earlier, the chairman. these are the individuals that are going to make the decisions. and they have been very clear and unequivocal saying they will not make the decisions, the risk is too high, there's too much at stake. they won't be able to convince boards and shareholders, that that's the best use and the safest use of their money and their resource. and perhaps in fairness give that opinion more weigh than others. >> and at the same time think what the joint chief of staffs and included in the areas. and they're not people easily convinced of joining committees.

well, it seems to me listening to your testimony if companies aren't going to invest, then if we're looking at a reduction in the available of rare earth minerals, and we could be mining rare earth minerals. sounds like it takes a lot of people to produce the equipment out there doing it. if we're looking at the ability to find more energy sources for the united states. it takes people to go out and do that. and if you're talking providing cheaper energy for the united states over the long term, that affects the economy. everything it seems here to me is jobs. this seem me to be screaming at us that there an available of jobs out there for americans if we were do this, more than

anything else. would each of you comment on this? is that what is really fundamentally at stake here? mr. donahue? >> the next great industry in this country is energy. of every type. and that is going to create millions of jobs over the near term. we should not make this more difficult for us to access rare earth minerals energy and whatever else we might find. while 161 other countries are out making their plans to do so. this is in the enlikened self interest of this country. and in interest of the national security and i respectfully say those that disagree, and by the way, we try to learn something from them.