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 isaacson, thank you for your patience. >> thank you. it's good to have you here on a historic day. i need to get a couple of clarifications. i wrote down some things i heard in the absence of my having read the testimony so i apologize. but, mr. gerard, you made a statement, i think it's with regard to shell, had invested $4 billion in the arctic. they sent two ships to look at their first claim, is that correct? >> yes. they acquired the lease five years ago through the process of permitting and getting the ability to go out and actually start to drill a well, they've 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? >> u.s. government. >> the u.s. government. so it's on our current territorial waters? >> yes. it's within the 200-mile exclusive economic zone. >> 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 seabed. you talk about international bodies that have permission to issue permits? did i misunderstand you? >> i think so. >> so currently if somebody was going to the deep seabed to try to mine rare earth minerals, there is no current authority other than what authority -- >> under isa, the convention.

>> mr. donohue, the last time i brought this up the chairman and i got into a 15-minute discussion, and i blew up the whole meeting. this veto thing is an issue of which there is a lot of conversation. the chairman in his response back to you talked about the council. i'm not talking about environmental right now. i'm just talking about the council. the veto is when you object and there's 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 that absence of consensus that says a simple majority of those present and voting on the council or a two thirds vote of the assembly. am i right or am i 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. >> 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 some other examples that come to mind? >> yeah, 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 in order to maintain your cable or 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 seabed 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. >> because i'm sure we're laying cable now, and we're not a party to the treaty. >> right. >> so my question would be if we're laying cable now, 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 -- it's not the fees. it's -- it's -- 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. i have to join a conference call so i'll hand back the balance of my time. >> before you run out, let me say to you quickly, the important -- because you've raised an 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 amount of influence even in matters where the council does not act by consensus. so we, in fact, do have a veto over every item that would be critical to us. let me be very specific quickly. 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 the ability to prevent any counter budgetary or fiscal 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, again, could have veto by virtue of that. third, this is very important, section 3 paragraph 4 of the annex states that the isa assembly cannot take a decision on, quote, any matter for which the council also has confidence or any administrative budgetary 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 the 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 our self which we're not able to exercise. 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 the entire thing to you. we'll give you all the details. >> thank you, mr. chairman. >> you got it. >> mr. chairman, can i ask that you share it with all of them? >> everybody on the committee will get it. senator, thank you senator, casey, for your patience. >> mr. chairman, thank you. thank you for calling this hearing. this is a vitally important issue, and it's -- we're spending time on a subject matter i think that sometimes we

don't in washington do enough of. i'm grateful to be part of this. i'm sorry i'm late. at the risk of being redundant, i'd say that redundancy is important in washington. repeating important messages is important. so i might be plowing old ground, but part of what -- part of it i think hasn't been touched on with great detail yet is, mr. mcadam, some of the statements in your testimony that i'm not sure have been put forth again. i'm reading from page 2 -- it's 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 currently satellite capacity could carry only 7% of the total u.s. international traffic. for that as a predicate, i'd ask you based upon that dependence we have i guess is the best word, what can you tell us about the importance 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, and 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. we -- 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 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. so 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 raised and i'm sure others did, as well.

on the question of manufacturing, mr. timmons. i appreciate your testimony. i 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 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 -- it is a vital component of all manufacturing processes, particularly the chemical industry. you have a large preponderance of folks involved in the chemical industry. without those rare earth minerals, manufacturing 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 -- other factors. the bottom line is if we can't access rare earth materials on the deep sea -- of the floor of the sea, we are going to be put at a significant competitive disadvantage. the manufacturing renaissance that you and i have spoken about will cease to exist, and it will harm our economy and cost jobs. >> i hope i can be that

articulate with a 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'd add one more sentence, maybe you were going to say it. if we do this right, we'll drive down the costs 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 going to add something you already know. the other answer that's very interesting in your state is natural gas. as you know, the price is down in the $2, $3 range today. 83,000 new jobs in your state as a result of that resurgence and i think as jay said earlier, that is primarily what's 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's driving those other benefits in our economy today. >> i'll submit some more questions for the record. i've got to run. 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. i know one of the issues that has been raised about the treaty and i heard some of that debate today, has been what is the real authority of the international seabed authority and 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 their actions have been on the authority in

our absence and 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 permanent seat on that council in the seabed 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 counsel and we view we have that right and that authority within the seabed council. but the other thing we shouldn't overlook, there's been talk about royalties and other things that come from oil and gas

production beginning in the sixth and 12th year, today if they're produced anyplace else in the world, those dollars go to wherever that group that allows them to sit there will go. if we have the seat, the permanent seat in the council, we have the ability to direct that, to make sure that those very significant resources aren't given to unfriendly nations around the world and aren't spent for purposes not in the best interest of the united states. we think it's twofold. number one, we need to be there to secure our own rights but, number two, by being there and having a seat at the table, we can influence and have some direct leverage over other decisions the seabed 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 in to that fund today, those dollars go elsewhere without us

having any say until we accede, participate and become part of the treaty process. does that clarify? >> uh-huh. thank you. the other thing that i wonder if -- and this, again, this may have been covered to some extent, but i haven't heard much discussion since i arrived about how we benefit in the arctic. i mean, you talked about that a little bit, mr. gerard, in terms of our ability to have much more of an opportunity to access the minerals that may -- and the resources that may exist under the arctic, but can you also talk about how what's happening there with other countries and are we lagging behind russia and those 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 and the commission on the limitation of the continental shelf, which determines how far those boundaries may go based on the definition of the continental shelf, those nations that are active in the arctic or seek to be active, russia, denmark, norway, canada and others are all participants. and many of them have already filed or laid claim to those lands or those potential lands in the outer continental shelf. we stand here watching that happen. we have a very, very significant interest in the arctic, and as i mentioned earlier, shell hopefully will start that again today. it's estimated that one quarter of the world's oil and gas resources are under the arctic. why we would sit on the sidelines and watch the rest of the world develop that resource to us is somewhat mystifying, not to mention our own resources that we have within 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 climate. >> thank you very much. thank you, mr. chairman. >> thank you very much, senator shaheen. those were good questions, and i think an important part of the record. i appreciate it. let me just close out. senator lugar does not have additional questions. i have one or two quickly, but i want to get the record complete here. we'll leave the record open, incidentally, for a week in case there are additional questions to submit in writing. mr. timmons, at a hearing before the committee a couple of weeks ago, we heard from one of the think tank folks out here from the heritage foundation, analyst who said the u.s. companies are free to exploit the deep seabed right now and they have all the legal certainty necessary to support investments to drill in the deep seabed. the analogy drawn by that

witness was it's just like fishing. you go out, and it's everyone for themselves. in light of the fact that you have 160 nations and the european union that are all party to the themself approach to this. i wonder if -- you have addressed it somewhat here and talked about the certainty, but i just want to be crystal clear, whether that's an alternative. is that viable? >> 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 simply are unwilling to do so because of the risk that exists without ratification of 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 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 from a manufacturing perspective, that manufacturing suffers which means the economy suffers, which means jobs suffer, so it's in the long term

economic and national security interests of our country in the view of manufacturers that this treaty be ratified. >> mr. donahue? >> senator, if we don't join this treaty, we may find people doing that without the protection but they may be the russians, they may be the chinese and they may be on our extended outer continental shelf. obviously, the arctic is more available than it was before because of a thinning of the ice while it's thickening on the south pole, you know 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, but as you know in your job, most of the most powerful things we can do, we can't do or we shouldn't do. i think the benefits of making

this fundamental adjustment, taking a seat at the table with a lot of strength to protect our interests at least gives us a raison det're for steps we have to take to protect this country. the reason is i don't think you will see a lot of american firms -- you can get permission from the federal government, there's another point, to access an area but then they won't give you a permit to drill it. we have all of those problems but the bottom line, we have been arguing this thing for so long and when the old arguments run out, we have some new arguments. i respect the people that have that view and i suppose you could find some of my members that have that view, but not very many of them and we got tens and tens of thousands of them and think it's about time to get on with it. >> final -- yes. >> senator, i would just add,

there's a lot of different opinions about this but i would suggest you look closely at those opinions where it really matters. you cited one earlier, the chairman of shell, marvin odom, rex tilletson sent you a already. these are the folks who are going to make these decisions. they have been very clear and unequivocal saying they will not make those 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. so i would hope we would look at those that have experience that are on the front line making those decisions and perhaps in fairness, give that opinion a little more weight than others. >> and at the same time, to think about what the joint chiefs of staff and our military leaders who are challenged to protect us in many ways, including in those areas, and you know they're not people easily convinced of joining committees.

>> well, final question, last question, i promise. it seems to me listening to your testimony that if companies aren't going to invest, that if we're looking at a reduction of the availability of rare earth minerals and we could be mining rare earth minerals, sounds to me like that takes a lot of people to produce the equipment, be out there doing it, that if we're looking at increased ability to find more energy sources for the united states, it takes people to go out and do that and if you're talking about providing cheaper energy for the united states over the long term, that affects our economy. bottom line, everything here, it seems to me, is jobs. this seems to me to be screaming at us that there is this availability of jobs for americans out there if we were to do this more than anything else. would each of you comment?

is this -- is that really what is fundamentally at stake here? mr. donahue? >> the great -- next great -- 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 enlightened self-interest of this country and in the interest of our national security, and i respectfully say to those that disagree, and by the way, we have tried to learn something from them, that the positive part of this treaty so overwhelms and outweighs those

objections which i respect that the plurality as they would say up here is highly significant. >> mr. gerard? >> the energy opportunities in the united states today are of game-changing proportions. to put it in simple context, an economist just a few months ago said within the next decade, if the u.s. policy is done well, we will become the new middle east for energy production. that's how serious this discussion is, if we as a nation are serious about producing our own energy. so i think there's two dimensions to this answer. the first one is, we need to think long term. we have to look at things like the law of the sea and say how do we secure our energy future, not only in the next 10 to 20 years but the next 50 to 100 years. oil and natural gas will

continue to be the foundation energy building block for many decades yet to come, even as we strive to move to alternative renewable forms and other less emitting forms of energy, but the second dimension we shouldn't overlook and it goes back to senator corker's point earlier, we've got to get our act together as a country in our own permitting processes and our own political will and ability to produce our own energy. we can secure the border, we can secure the long term future through the law of the sea, but we've got to have processes within the united states where we say energy's a priority. senator casey pointed out earlier, in the last 18 months, we've created 83,000 jobs in the state of pennsylvania, producing clean burning natural gas that saved the consumers of pennsylvania close to a quarter of a billion dollars in one year because that supply drove the price of natural gas down to

where it is today. now, it can't stay there forever, but we have the same potential with oil. north dakota, the number two producer. unemployment rate, 3%. median wage in north dakota in oil production, $90,000 a year. median wage for everybody else, $42,000 a year. we talk about jobs, we talk about energy security and revenue to the government. we ought to think about energy, particularly as we make this decision, because it will be altering for this nation for many years yet to come. >> do you want to add, you don't have to, but if you want to add anything? >> the only thing i would add is that while we aren't out mining the sea bed for rare earth minerals, we are putting these cables across that provide the infrastructure so that these companies can make the investments and run their businesses effeel