It is my purpose now, as soon as I can get free to my office, to get on the phone to resolve differences. This situation, as I say, arose last night. There has been information reach us from Butte which refutes what we heard yesterday by word of mouth, to a very large extent.

He goes on to say that one or two of these people pulled out and Mr. Mittendorf was going to call these Thursday afternoon and see if they could work out that contract and get the situation.

Since then, Mr. Knapp, who I understand is one of the people to whom you referred, Mr. Mittendorf, is in town and I thought between you and Mr. Knapp making a statement here this morning perhaps we could work out the difficulties in this Butte-Philipsburg area and get a clearer understanding of just what was holding up those contracts in that area.

Both gentlemen are here. The man who Mr. Mittendorf referred to, and Mr. Mittendorf, are before us today. Here is our opportunity. Mr. REGAN. Suppose you give the secretary your full name and initials, your name and address.

STATEMENT OF S. R. KNAPP, PRESIDENT, TAYLOR-KNAPP CO., BUTTE, MONT.

Mr. KNAPP. S. R. Knapp, Taylor-Knapp Co., president, main office, in Butte, operations in Philipsburg.

Mr. D'EWART. Mr. Mittendorf, would you like to comment first, then we will have Mr. Knapp as well.

Mr. MITTENDORF. Yes; I will be glad to. Mr. Knapp has prepared his letter of protest. It was handed to me just as I boarded a taxicab, and I am sorry I haven't had the opportunity of reading it.

I called the other people, as I pledged myself to call, and Mr. McMeekin is very anxious to come down, has offered to come to Washington, and he is quite sure we will get together on an individual-contract basis.

I have a cable in my office received from Mr. Cole. I also talked with Mr. Cole at Seattle last Friday. He confirms that the other three producers are ready to go ahead on the price schedule proposed. I told Mr. Cole it was my purpose to finalize the three immediately, and I hope we can get them out in a day or two.

They believe that these proposed schedules are fair, and fit their particular operation. Those three contracts will be my purpose to consummate. I am glad to have Mr. Knapp back again today, and I will be very glad to sit down with him to discuss further his objection.

Mr. D'EWART. Mr. Knapp, since you seem to be the person whom we were commenting on on Thursday, would you like to comment? Mr. KNAPP. Thank you, Mr. Chairman.

I would like to say that I have read the transcript of the meeting on Thursday and there appeared to me an impression that I had kicked over the traces very recently, without good cause. It also refers to this meeting back in January, when the five, instead of four, as was frequently mentioned, operators, met here in Washington, to discuss this combined Butte-Philipsburg program. We all came to Washington with a definite proposal as to ore prices, which was discussed earlier today.

From that time, which I believe was January 30, until April 25, I personally had no knowledge of the price schedule that now appears in these draft contracts. The entire basis is changed. I would go

along on the price schedule which all the operators agreed to back in January.

The present schedule is unworkable in my opinion, and I believe also in the opinion of the other operator that Mr. Mittendorf referred to. It involves the same considerations that were discussed earlier here today.

My second point is that, when we had this meeting in January, it was announced at the meeting that the policy would be to concentrate Philipsburg ores in Philipsburg.

We have a concentrating mill ready to concentrate such ores.

This draft contract that was submitted to me, I believe, May 15, provides for concentrating only 1,500 tons of concentrates. Last November, we offered to concentrate over a 5-year period some 37,000 to 40,000 tons. It wouldn't be worth setting up for 1,500 tons.

There are a number of other objections I have to the draft contract that was submitted, as I say, on May 15. They are less important. I am sure we can work them out, but there are those two basic points that we abject to in this program.

Mr. D'EWART. Are you speaking for all five producers in the area! Mr. KNAPP. No.

Mr. D'EWART. Just for yourselves?

Mr. KNAPP. I am speaking now just for our own company. We are considered, I believe, generally the second-largest potential producer of manganese in the combined Butte-Philipsburg district, excluding, of course, Anaconda.

Mr. ENGLE. What are your basic objections?

Mr. KNAPP. The ore purchase-price schedule, whether we sell the ore direct or whether it is reflected in the price of a concentrate we would produce; that is the first objection.

The second major objection is the limitation in our case to produce only 1,500 tons of concentrates where we have offered and are in a position to produce a very much larger tonnage; we say 500 to 1,000 tons a month.

Mr. ENGLE. What you have is exactly the same thing we have on Deming?

Mr. KNAPP. Exactly.

Mr. ENGLE. DMA started out with so low a price that on the lowgrade you can't deliver and they put a quantity limitation on the high grade; so, you go broke if you put in enough upgrading facilities. Is that what it boils down to?

Mr. KNAPP. Yes. Your remarks earlier might just as well have applied to our particular case in Philipsburg.

Mr. ENGLE. The thing I want to find out is whether anybody down there wants to have a manganese program or not.

CONTINGENT LIABILITIES SET UP FOR MANGANESE-PRODUCING AREAS

Mr. SAYLOR. I would like to ask Dr. Morgan a question in regard to this area.

Doctor, the other day you referred to a contingent liability that you had mentally set up for some of these other areas.

Have you mentally set up a contingent liability for the Butte area! Dr. MORGAN. Yes, sir. That liability was not set up originally by the Defense Production Administration, but was set up by the

Defense Minerals Administration as a part of its submission of the total manganese program to the DPA. In this program there is a contingent liability for this area.

Mr. SAYLOR. Have you also set up contingent liability for the other area that wasn't referred to, and that is for the Batesville, Ark., area?

Dr. MORGAN. Yes, sir. We have taken the sum of all of the contingent liabilities for these areas, established the contingent liability for the whole program, and set aside the funds for the whole program. Mr. ENGLE. Would you like to give your opinion as to what this manganese program amounts to?

Dr. MORGAN. Yes, sir. If you will let me make a little statement on that I do not have a prepared statement-but let me say that this is not a new problem, and I would like to go back several years.

REPORT OF FORTY-NINTH CONGRESS DISCLOSES LONG HISTORY OF UNITED STATES DEPENDENCE UPON FOREIGN MANGANESE

This is the Report of the Select Committee on Ordnance and Warships [Rept. No. 90, 49th Cong., 1st sess.] of the Senate, 1886, and I would just like to read a very short paragraph from that, because at that time the Congress was considering the question of whether we should have a steel Navy or a wooden Navy, and the question came up as to whether we had enough steel capacity and iron ore and manganese, et cetera. Here is what the report of the Congress said at that time:

IMPORTED ORES

Foreign ores are imported in considerable quantities and used in furnaces within easy reach of tidewater. This is partly due to the low prices of the foreign article and partly to the smaller percentage of phosphorous in certain imported ores which are mingled with native ores containing more than the permissible percentage.

There has been more dependence upon foreign sources for manganese and the spiegel made therewith, which are indispensable in the manufacture of steel, but owing to the low price of foreign spiegel, and the fact that it does not form a very large item of the cost of steel, enough attention has not been paid to the development of manganese ores, of which the country has a sufficient supply, nor to the manufacture of spiegeleisen. However, the home production of the latter is rapidly increasing.

So, going back at least to 1886, we can see that question of United State dependence on foreign sources of manganese to make our essential war matériel, as in that case for the Navy, was known, so this is no new problem. We had it in World War I; we had it in World War II; and we have it today.

FOREIGN SOURCES OF MANGANESE ORE

Now, in 1950, the foreign sources of manganese ore with the quantities in short tons after them, in decreasing order, were as follows. I will just give them in round figures:

India, 633,000 short tons; Union of South Africa, 475,000; Gold Coast, 328,000, plus approximately 170,000 short tons ore equivalent of ferromanganese; Brazil, 130,000; Cuba, 97,000; U. S. S. R., 66,000; total imports of ore 1,838,000; United States domestic production 139,000.

STOCKPILE ACT AND DEFENSE PRODUCTION ACT DO NOT SPECIFY
DOMESTIC SELF-SUFFICIENCY IN MANGANESE AND CHROME

In the Stockpile Act (Public Law 520, 79th Cong.) which has been referred to this morning, the Congress didn't say anything about attaining domestic self-sufficiency in such materials as manganese and chrome. They talked about

decreasing and preventing wherever possible a dangerous and costly dependence of the United States upon foreign nations for supplies of these materials in times of national emergency.

With your kind permission, we have heard some discussion here this morning about interpretation of words, but when the agencies come to interpret these lines, what is "decreasing," and "preventing where possible"--note that "where possible"-and then what is "a dangerous and costly dependence of the United States"?

If we are dependent in part on Latin America, or in part on central and South Africa-and the Joint Chiefs of Staff, for example, say that we are going to have access to these areas in an emergency-is that a dangerous dependence?

Well, that all has to be determined.

Then we come to the Defense Production Act (Public Law 774, 81st Cong.) which the Congress just passed, and in the Defense Production Act there is mention of expanding supplies to meet our new international responsibilities, but it says nothing about attaining domestic self-sufficiency in supplies of such materials as manganese and chrome. Further, the Congress in this act stated that these purchases

shall not be made unless it is determined that supply of the materials could not be effectively increased at lower prices or on terms more favorable to the Government, or that such purchases are necessary to assure the availability to the United States of oversea supplies.

So, there the Congress clearly indicated that we were to count upon oversea supplies, and that we shouldn't do these things at high cost if it could be shown that they could be done otherwise at a lower cost.

Mr. ENGLE. That isn't my interpretation of it at all. I argued that with Mr. Davidson down there in the Interior Department for a week, and he had some fussy-thinking lawyers down there who wanted to put it in, and they contended that the purpose of it was to authorize preemptive buying. They wanted to clear the thing, so that there wasn't any question about being able to do preemptive buying.

That is to shut off, as I understand it, buying by nations which might become antagonistic with us, and that is as far as it went. Now, certainly you can't consider terms more favorable to the Govern ment, terms which make you rely upon a source of supply which has a zero index of availability in the event of all-out war.

Dr. MORGAN. Mr. Congressman, just to finish the thought there. the Defense Minerals Administration doesn't make the broad nationalexpansion policy for this emergency. The General Services Administration does not make the broad policy for its operations under the Stockpile Act. These agencies are only operating agents. The GSA and the DMA are supposed to be given the basic assumptions and the policy for expansion, and within that framework they make their recommendations.

POLICY ESTABLISHED BY OFFICE OF DEFENSE MOBILIZATION

In the mobilization chain of command, the agency responsible for establishing the broad expansion policy is the Office of Defense Mobilization [ODM], and they have established such policy in general terms. This policy is available, I believe, to you gentlemen on request. Mr. D'EWART. Mr. Chairman, I would like to comment that it is my impression the Munitions Board wrote the board policy under Public Law 520; not Defense Minerals at all. Defense Minerals is a new agency that was set up long after that law was passed.

The Bureau of Mines cooperated with the Munitions Board in the carrying out of the policy that they set up.

Mr. MORGAN. In carrying out the stockpile, yes, sir; that was correct, but now in the emergency period the supreme commanding agency for all of these activities is the Office of Defense Mobilization.

Mr. D'EWART. They are over the Munitions Board under Public Law 520 at the present time?

Dr. MORGAN. Yes, sir. Then under ODM comes the Defense Production Administration, which agency I am representing here this morning.

Mr. D'EWART. The committee has not been informed of that change in agency responsibility.

Mr. REGAN. Mr. D'Ewart, did you want to ask a question?

FURTHER DISCUSSION OF BUTTE-PHILIPSBURG MANGANESE CONTRACTS

Mr. D'EWART. Now, returning to the Butte-Philipsburg area, Mr. Mittendorf would like to comment on the statement that has been made by Mr. Knapp. He made two principal objections to the con

tract.

Mr. MITTENDORF. He did not think the price schedule exactly fitted his operation. I understand, Mr. Knapp, you have been in the mining of manganese oxide and you are going into manganese carbonate now and that your grade of ore has decreased. You did not feel that this schedule would meet your conditions.

One thing for the record: When you attended that meeting, your representative subscribed to the schedule that the other three men wished, or were willing to go along with, but with reservations that he would have to clear it with you?

Mr. KNAPP. No; that was not in my case. That was Mr. McMeekin's case. I was present at the meeting.

Mr. MITTENDORF. Pardon me. That was with McMeekin.

Well now, on the price, certainly, we stand ready and willing to sit down with you and discuss the price situation. The other point you brought up, as I recall, was

Mr. D'EWART. Limitation.

Mr. MITTENDORF. The tonnage to be milled in the mill?

Mr. KNAPP. Yes.

Mr. ENGLE. The same thing at Deming, exactly.

Mr. MITTENDORF. The recommendation that I received from the Supply Division of DMA, to the best of my recollection, was that the whole Butte picture should be cast on a trial basis, on a test run