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SFederal Role in Technology and Competitiveness Competitiveness in the minerals and metals industry hinges on many factors, including labor costs, taxes, ore grades, exchange rates, the cost of capital, subsidies, tariffs, and technology for mining and mineral process- ing. In some cases the U.S. industry is at a disadvantage, in others an advantage. Some other nations (Japan and West Germany, for example) have higher labor costs than U.S. companies, and many foreign producers have higher tax rates than their U.S. counterparts. Indeed, in copper, lead, and zinc the U.S. industry has a smaller tax burden than many foreign producers. Furthermore, exchange rates and interest rates fluctuate sharply and unpredictably. While many of these factors are difficult or impossible to change, the introduction of new technology can have a significant impact on the competitiveness of domestic minerals and metals operations. To be effective, however, a constant commitment of support is required to main- tain a technology-based competitive advantage. There is serious question as to whether the industry supports enough research and development (R&D) to apply and maintain technology as an advantage. As discussed in Chapter 4, U.S. mining companies have cut back their R&D activities and are currently conducting almost no long-term research. In general, the short time horizon (often much less than 10 years) of corporate managers in publicly traded companies may limit their com- mitment to long-term R&D. By the time the metal markets showed dramatic improvement in 1986-1987, many mining companies had dropped out of cooperative R&D ventures operated through the industrial associations be- cause they believed they no longer needed them. Most prefer to explore for 100

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS IGI new deposits rather than support R&Dthe payoffs perceived as being more predictable and secure. Certainly, no U.S. companies are currently known to be pursuing research on high-risk, high-return, breakthrough tech- . . . . . nologies on their own ~n~t~at~ve. Industry's disinclination to pursue R&D can be viewed as a market fail- ure in which short-term financial interests overshadow the long-term inter- ests of a company in an international market. Because of this the industry does not adequately reinvest in the technology base on which its own fu- ture and its future ability to satisfy broader national interests partly de- pends. While this problem is not limited to the minerals and metals indus- try, it is more acute for this industry because the connection between basic research in universities and applications in industry is very tenuous and is not systematically supported by either party. In addition, the benefits from R&D to a firm that undertakes or underwrites it are quickly shared by other firms and nations, reducing the competitive advantage to the company funding the research. At present the federal role in this industry is most evident in policies and actions (e.g., fiscal, monetary, trade, and regulatory) that often complicate and frustrate the industry's competitive situation and make it more difficult for U.S. firms to launch or support long-term R&D programs. Several considerations suggest that this role should change: The minerals and metals industry is relatively small, but it is crucial to national interests that are not met by market operations. It is highly fragmented, making it difficult to take collective aggres- sive action on its own behalf. The business cycles in the industry are short and deep, making it difficult for companies to sustain long-term R&D programs. Lack of competitiveness in minerals and metals can have negative consequences for the competitiveness of related sectors of U.S. industry, such as electronics and aerospace. In other industry sectors these arguments have led the U.S. government to develop policies and mechanisms that stimulate government-industry partnerships to advance the development of technology. Such actions have been most prominent in the high-technology and manufacturing fields where technology is the highly visible centerpiece of industrial progress. The minerals and metals industry, on the other hand, has not received this type of attention, despite its obvious importance to the high-technology and manufacturing sectors. The committee believes that there is a legitimate federal role here, as well, and that the same type of government intervention and support being applied in high technology and manufacturing is also warranted to improve the competitiveness of the minerals and metals industry. .

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102 COMPETITIVENESS OF TlIE U.S. MINERALS AND METALS INDUSTRY MINERALS AND METALS POLICY IN THE U.S. AND ABROAD Minerals and Metals Policy in the U.S. There are many reasons for the federal government to have an interest in the competitiveness of the U.S. minerals and metals industry, including balance of trade, employment, and security of supply. But the federal government has other interests related to the industry, many of which have been expressed as statutory responsibilities. These statutory responsibilities include the following: Land use" in particular the use of federal lands on which many of the nation's ore reserves are found. Competing uses of those lands, the goals of land management, and questions of fairness in the allocation of land use are all considerations. Environmental protectionas embodied in various laws regarding clean air and water and resource conservation and recovery. Competing public interests frequently collide in this arena. Public health and safetyespecially in the context of occupational haz- ards and medical risks encountered in the workplace. Mining is an inherently hazardous industrial activity, and chemical processing (which includes metals extraction and processing) is not far behind in safety risks. National security in terms of assured supply of raw materials, indepen- dent of the vagaries of politics and economics associated with imports. Espe- cially important here are minerals and metals used in military and civilian applications essential to the national defense that are unavailable or in short supply in domestic reserves. Economic well-being in terms of the health and vitality of the U.S. minerals and metals industry. Because the numerous national policies affecting the minerals and metals industry are not administered by a single agency, there has been no consistent policy governing minerals R&D or supply issues and no effective coordination of many federal activities that affect the industry. The development of a national minerals and materials policy has been a recurring issue for almost 40 years. In early 1951, when the buildup for the Korean War was hampered by shortages in metals critical to the production of war materiel, President Truman created the President's Commission on Mate- rials Policy (named the Paley Commission after its chairman, William S. Paley). Since then the debate over minerals and materials issues has been kept alive by two commissions; several panels of the National Academy of Sciences (NAS); reports by the Congressional Research Service (CRS), the General Accounting Office, and the Office of Technology Assessment (OTA); and numerous congressional hearings (see Table 5-1~. In general, the focus of this attention has been on the supply of raw materials for national security and on

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS 103 the availability of materials needed by domestic manufacturing industries. For the most part the recommendations of the commissions, panels, and agencies have either been ignored from the outset or, when enacted in the form of legislation, the laws have seldom been implemented or enforced. Three major themes emerge from the four decades of debate over minerals and materials policy. First, U.S. actions should be based on an international free market in matenals. In every study, when the policies of interdependence and self-sufficiency are compared, the recommendation has been to accept interdependence. However, there has always been a recognition that the mar- ket cannot be depended on for all situations, which leads to the second area of consensus the development of a materials stockpile to be used when shortages threaten the national security. The third theme of materials policy that has arisen in every study is the need for a national minerals and materials policy organization. Since the Paley Commission, there has been a general consensus that a standing governmental body, capable of cutting across agency boundaries and responsibilities, is needed to coordinate and guide research, regulation, management, and other activities related to the production, use, recovery, and disposal of minerals and materials. With a few brief exceptions, however, efforts to bring minerals and materials policy under one agency have been ignored or opposed by the Executive Branch. The principal congressional mandate for federally coordinated R&D policy in this area is the Mining and Minerals Policy Act of 1970 (P.L. 91-631), the Surface Mining Act of 1977 (P.L. 95-87) and the State Mining and Minerals TABLE 5-1 Major Examinations of U.S. Minerals and Metals Policy, 1 9S 1-Present Commissions President's Commission on Materials Policy (1951-1952) National Commission on Materials Policy (1970-1973) National Commission on Supplies and Shortages (1974-1976) NAS Reports National Minerals Policy (NAS, 1975) Man, Materials, and the Environment (NAS, 1973) Mineral Resources and the Environment (NAS, 1975) Materials Science and Engineering for the 1990s: Maintaining Competitiveness in the Age of Materials (NAS, 1989) Congressional Studies and Reports Industrial Materials: Technological Problems and Issues for Congress (CRS, 1972) Federal Materials Research and Development: Modernization Institutions and Management (CRS, 1975) Strategic Materials: Technologies to Reduce U.S. Import Dependence (OTA, 1985)

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104 COMPETITIVENESS OF THE U.S. MINERALS AND METES INDUSTRY Resources Research Institute Program Act of 1984 (P.L. 98-409~. The 1984 legislation continued the Mining and Mineral Resources Research Institute (Mineral Institutes) program (Chapter 4) and amended the original act by establishing a mechanism for the coordination of federal, state, and private R&D in minerals and metals. In particular, it established a Committee on Mining and Mineral Research that is to report to the Secretary of the Interior on matters covered by the act. The committee's principal responsibility is to develop and revise a national plan for research in mining and minerals, a plan that assesses federal research in the context of private and academic research and recommends research policies for the Secretary of the Interior. Although the Committee on Mining and Mineral Research should be a key element in a national minerals and materials policy, its work has had little visibility or impact. This results in part from the fact that the committee is exempted from relevant sections of the Public Advisory Committee Act. In- sufficient public oversight and participation in the work of the committee limits the range of perspectives on U.S. minerals and materials research policy. It also subverts the effort to build a public consensus in support of a plan of research that coordinates private, academic, arid federal research. (The provisions of the act are summarized in Table S-2 and described below.) TABLE 5-2 Major Provisions of the State Mining and Mineral Resources Research Institute Program Act of 1984 Sec. 1221: Authorization of state allotments to institutes Sets forth the amount, type, and purpose of grants to states for the establishment of Mineral Institutes. Sec. 1222: Research funds to institutes Authorizes the appropriations and describes the procedures for prepar- ing, reviewing, and selecting research applications (proposals). Sec. 1223: Funding Criteria Describes criteria for continued funding. Sec. 1224: Duties of Secretary Sets forth requirements for the Secretary of Interior to: Prescribe rules and regulations necessary to carry out the provi signs of the law; coordinate research by the institutes; indicate impor- tant lines of research; and facilitate cooperation among the institutes and between them and other agencies and research centers. Ascertain annually whether funding requirements have been met. Report to Congress annually on the program. Sec. 1225: Effect on colleges and universities Gives assurance that the act will not alter the relationship between host institutions and their state government.

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS Sec. 1226: Research Provides for the following: 105 Requires the Secretary to obtain advice and cooperation from other federal, state, and private organizations to ensure that the re- search conducted under the program is not redundant and to make information on the research freely available. Gives assurance that the Secretary is not given authority over programs of other federal agencies. Assures that all results of the research are made available to the public and authorizes appropriations for publication. Sec. 1227: Center for cataloging Requires the Secretary to establish a center for cataloging current and pro- jected research in all fields of mining and mineral resources, by federal and nonfederal agencies and to maintain a catalog of such research for public use. Sec. 1228: Interagency cooperation Directs the President to clarify agency responsibilities for mining and min- eral resources research and provide for continuing interagency coordination of the research, including identification of technical and manpower needs. Sec. 1229: Committee on Mining and Mineral Resources Research Describes and establishes this committee, making various specific provi- sions, including: . Composition of the committee, which the Secretary must appoint. A requirement for the committee to consult with the Secretary, and vice versa, on all matters under its purview. . A requirement that the committee members be compensated for their time and reimbursed for travel expenses. A provision that the committee be chaired jointly by the appropriate Assistant Secretary of the Interior and one other committee member. A requirement that the committee develop a "national plan for re- search" in mining and mineral resources and develop and recommend a program to implement the plan, updating the plan annually. A stipulation that Section 10 of the Federal Advisory Committee Act (open meetings) does not apply to the committee. . . Sec. 1230: Eligibility criteria Sets forth criteria that the committee must use regarding eligibility to participate as a Mineral Institute, including: The presence of a substantial program of graduate education and research in mining and minerals extraction or closely related fields. Evidence of institutional commitment to the program. Evidence that the institution can obtain significant industrial funding. The presence of an engineering program in mining and minerals extraction that is accredited by the Accreditation Board for Engineer- ing and Technology (or the equivalent). SOURCE: P.L. 98-409.

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106 COMPETITIVENESS OF THE U.S. MINERALS AND MET^S INDUSTRY Minerals and Metals Policies of Other Countries Developed Countries Japan is an industrialized nation with limited domestic mineral resources whose government exerts considerable influence over domestic mining while aggressively seeking to expand its access to external sources of minerals. The government has exclusive power to grant domestic mining rights and leases, which are generally limited to Japanese citizens or corporations (a special treaty is required to grant such rights or leases to a foreign corpora- tion). The granting of mining rights and leases is administered by the Ministry of International Trade and Industry (MITI), which also enforces mine safety and environmental laws. The Japanese government's mineral policy has four aims: . to secure stable sources of minerals, to develop domestic mineral resources systematically, to promote development of overseas mineral resources through eco- nomic cooperation with mineral-rich developing countries, and to stockpile (for economic purposes) minerals that are in short supply. The Metal Mining Agency of Japan (MMAJ) works closely with the appropriate departments and divisions under MITI to implement these poli- cies. To develop domestic mineral resources, for example, MMAJ conducts geological surveys, while the government subsidizes the costs of private sector exploration. To develop overseas mineral resources, MMAJ operates a Mineral Resources Information Center, conducts surveys of geological structures, finances overseas exploration by private Japanese companies, and cooperates with developing countries on basic surveys of mineral re- sources. MMAJ also finances and administers the stockpiling program. Canada ranks first in the world in mine production of nickel and zinc and is the leading source of U.S. imports for 15 significant nonfuel minerals. Most Canadian mineral production (both crude and processed) is for export, accounting for approximately 30 percent of Canada's total exports. As a result, the minerals sector has high visibility and importance in Canadian government policy deliberations. Three broad categories of mineral policy objectives have been established: promoting the economic growth and development of the Canadian nonfuel minerals sector by encouraging both the rapid development of min- eral resources and the development of mineral processing to increase Canada's share of value-added products; developing a minerals policy that would encourage sovereignty and unity (greater Canadian ownership and control and greater contribution of minerals to regional and national development); and

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FEDERAL ROLE IN TEClINOLOGY AND COMPETITIVENESS 107 incorporating concerns about the quality of life and the environment into Canadian minerals policies. R&D is promoted through tax policy, cost sharing, and direct-grants programs. There are several government research organizations, such as the Canadian Center for Mineral and Energy Technology (CANMET), which is a research and pilot-plant complex that provides mechanisms for government- industry-university collaborative R&D. Foreign-controlled corporations are required to conduct R&D so as to improve Canada's technology base. The Canadian federal government also collects and disseminates minerals information and develops minerals policy through its Ministry of Energy, Mines, and Resources. Environmental regulations and standards in Canada are similar to those of the United States in both content and strictness. This significantly in- creases the cost of production, but investment in environmental equipment is frequently subsidized by federal and provincial authorities. Finally, fed- eral-provincial relations are a significant element of Canadian policies toward the minerals sector: provincial governments have their own policy priori- ties and employ their own policy instruments; these are coordinated by the federal government, but the actions of the provincial governments are more significant in Canadian minerals and metals policy than are state actions in the United States. Developing Countries The minerals policies of developing nations differ from those of industri- alized nations. The policies of industrialized nations generally relate to ex- tracting lower-grade mineral resources efficiently while protecting the envi- ronment. Policy mechanisms most frequently employed include laws encouraging prospecting by the private sector, government surveying for deposits, incen- tives for investment in development of new sites and in mining equipment, environmental protection, and financing of R&D (either directly or through various forms of subsidy and tax relief). The latter can include planning, coordinating, and information dissemination relating to R&D, whether per- formed by government itself or by the private sector with government en- couragement and financial support. Technology is seldom the basis for competitiveness in a developing country's minerals and metals industry. As a result, the minerals policies of develop- ing nations are not R&D related. With their typically richer deposits, their policies promote maximizing output and government revenues from the sale of resources. The goals of these policies may include generation of foreign exchange, full employment, development of industrial infrastructure, and use of domestically produced materials and products. Mechanisms for these

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108 COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY policies encompass such things as limitations on foreign investment, high extraction taxes, allocation of foreign exchange, and forced employment generation. ROLE OF THE BUREAU OF MINES From its inception in 1910, the Bureau of Mines (BOM) has been the principal agency of the federal government for improving productivity and safety in the mining and metals industry. Until the early 1950s each suc- ceeding administration turned to the Bureau for advice on matters of safety and national security. With the proliferation of specialized federal agencies, however, the broad influence of the Bureau began to fade. It has continued to focus on its primary mission of improving mining technology and safety areas in which the Bureau has been responsible for many important ad- vances (see Table 5-3~. But while BOM continues to make technological advances, its recent contributions have been narrower in scope and smaller in impact, and in the past decade there have been fewer of them. The BOM collects and disseminates statistical data and other information on minerals and metals. It also provides analyses to assist policy makers with decisions regarding land use regulations, environmental policies, and policies that tend to affect the competitiveness of the domestic industry. TABLE 5-3 Major Technological Contributions by the Bureau of Mines 1948: Major early contributions to uranium processing First commercial production of titanium 1951: First commercial production of zirconium (used in reactors of nuclear submarines) 1954: Development of the solvent extraction and electrowinning processes 1 950s: Mine roof bolting 1961: Development of the ion exchange system for metals recovery 1963: Flotation treatment of iron ores by selective flocculation 1969: Heap leaching techniques for low-grade gold ores 1974: Economical recovery of iron ore from nonmagnetic taconite 1970s: Vacuum melting and casting process for "space age" metals More complete extraction technologies in underground coal Coal mine illumination Methane drainage Self-contained self-rescuers 1 980s: Respirable dust control

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS Status of the Bureau of Mines Within the Federal Establishment 109 The Bureau of Mines has a broad mandate covering not only technology for improved productivity but also land use, environmental protection, health and safety statistical information, policy analysis, and national security. That broad scope occasionally brings a degree of overlap with other federal agencies, taking the form of cooperation as well as contention over respon- sibility and authority. Examples include the following: . Exploration The Bureau's research in areas such as ore body defini- tion and characterization is closely related to the U.S. Geological Survey's responsibilities in mineral resource exploration. . Health and safety The Bureau's research focuses mostly on equip- ment safety, mining methods, and monitoring; to a degree it coincides with the interests of both the Mine Safety and Health Administration and the National Institute for Occupational Safety and Health. Environmental technolog~The Bureau's interests in surface mining methods, waste prevention and control, and solution mining overlap with those of the Office of Surface Mining Reclamation and Enforcement, the Environmental Protection Agency (EPA), and the Bureau of Land Management. A basic problem in dealing with competition over agency responsibilities is the Bureau's location within the Department of the Interior, which has a traditional mandate to preserve and maintain public lands. Because the Bureau's mission involves mining, which disturbs and exploits the land, its mission is somewhat at odds with other interests and concerns of the depart- ment. This situation apparently results in a lack of strong support for the Bureau in executive branch decisions and congressional hearings. The changing status of the Bureau within the federal government is re- flected by its budget over the past decade (see Figure 5-11. The 1989 appro- priation is about 11 percent higher than the 1980 figure in current dollars, but this translates into a full-time equivalent staff level reduction of 20 percent, to 2,348 in 1989 versus 2,942 in 1980. The Bureau's budget has recovered somewhat since 1986, a reflection of increasing congressional support and more effective representation of the Bureau's interests by current Bureau management. Nevertheless, its budget in inflation-adjusted dollars is still far below the level of 1980. Relationships with Industry The Bureau of Mines has always been oriented toward the needs of the mining industry, but its preferred role has been to develop technology inter-

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110 COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY $200 $175 $150 ILL CD m $125 $100 Current Dollars / Constant 1982 Dollars 1980 1981 1982 1983 1984 1985 YEAR 1986 1987 1988 1989 FIGURE 5-1 Budget trends of the Bureau of Mines. Source: Bureau of Mines. natty and then to transfer it to industry. Only about 5 percent of research at BOM's Mining and Metallurgy Laboratories is contracted out, some of it with industry groups. Recently, the American Mining Congress (AMC) has begun providing BOM with industry input for its in-house programs, and the Mining and Metallurgical Society of America (MMSA) has advised on metallurgical research in Bureau laboratories. Each BOM laboratory can also point to numerous technologies that it has developed and transferred to industry (see Table 5-4), but the quality and significance of these developments have varied. Specific mechanisms for accomplishing technology transfer to industry include cost-sharing research agreements, special publications, films, seminars, and workshops. In-mine experiments are also cited as an effective device for discussion and technol- ogy transfer, although these appear to be few in number. Bureau research- ers note a trend toward more frequent publication of their research results in journals with wide public distribution. Given its legislative mandate, history, and technical capability, the Bu- reau of Mines is the only source of technological assistance from the federal government by which the U.S. minerals and metals industry can improve its productivity and safety. However, the connection between the Bureau and its industry constituency appears to be weaker than in most other industries. A major problem is a seeming lack of interest and support on the part of industry. Compounding this barrier is the decline of the industrial R&D

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112 COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY the Department of Energy (DOE), and surveys mineral resources in con- junction with the BOM, Forest Service, National Parks Service, Fish and Wildlife Service, and Bureau of Indian Affairs. These activities provide both external funding and a partnership with diverse national interests and agencies. This gives the USGS a degree of independence from the specific interests of the Department of the Interior and leads to much greater status and influence with other parts of the federal government. There are lessons here that might be applicable to BOM. The overlap of interests between the BOM and the USGS, DOD, EPA, DOE, National Aeronautics and Space Administration (NASA), and National Science Foundation (NSF) should suggest ways to initiate long-term joint R&D efforts that require the expertise of both participating agencies. For example, DOE is collaborating with the aluminum industry (which is a major consumer of electricity) in the development of energy-saving aluminum-reduction pilot plants. One can readily envision BOM involved in R&D on the associated process technology. Another potential model for BOM is the National Institute of Standards and Technology (NIST), which as the National Bureau of Standards earned the respect and confidence of industry through its role in testing new mate- rials and setting technical standards. Like BOM, NIST conducts most of its research in-house and, like the Bureau, is organized as a component of a cabinet department (Commerce) that has diverse interests and responsibili- ties. Effective interaction with industry has always been a high priority for NIST, which now focuses more strongly than ever on improving the com- petitiveness of U.S. industry through technology transfer from universities and government laboratories. Under the terms of the Omnibus Trade and Competitiveness Act of 1988, NIST is authorized to create a network of regional affiliates called Manufacturing Technology Centers (MTCs) dedi- cated to transferring NIST- and university-developed technology (especially in manufacturing) to local and regional businesses. Three MTCs are in place, with as many as 12 envisioned in the authorizing legislation. NIST has a long history of collaboration with industry through the Indus- trial Research Associates program. Under this program a private firm may approach NIST with a proposal to carry out joint research with NIST research staff, using NIST facilities, in an area of interest to NIST. In recent years many of the projects have focused on manufacturing technology. Typically, a company sends its researchers to NIST for the duration of the project, although at present some projects are implemented via a data link between the participants. There are currently about 200 projects under the Industrial Research Associates program, each established under a memorandum of understanding. Beyond these programs, the influence of NIST traditionally extends to many technical standards committees organized under various technical and professional societies. Through this mechanism, and those

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS 113 described above, the agency is able to perform a valuable and highly visible service to industry and thereby maintain the respect and cooperation of the industrial community. Other nations also provide relevant models for the operation of a govern- ment agency in the interest of the domestic mining and metals processing industries. One example is the Commonwealth Scientific and Industrial Research Organization (CSIRO) in Australia. Like the Bureau of Mines, CSIRO supports R&D on mining and minerals technology. While there is a central laboratory, regional research stations around the country are the focal point for research activities. CSIRO researchers often work collaboratively with Australian mining and metals companies in on-site testing and analysis operations in company plants. CSIRO staff also work directly with university researchers and with the Australian Minerals Industries Research Association (AMIRA), an industry group, on a variety of research projects. OPPORTUNITIES FOR ACTION The pervading message of this report has been that there is a need to improve the technology base of the U.S. minerals and metals industry by increasing the amount and quality of R&D as well as the speed with which results are transferred into industrial applications. The committee has iden- tified five areas for action that it believes can improve the development and implementation of significant technological advances to strengthen the competitiveness of the U.S. minerals and metals industry: . establish an advisory committee to provide expert advice for the Bu- reau of Mines: promote collaborative R&D, both within the industry and among industry, . . . universities, and government; encourage mechanisms for developing consensus within the industry on the directions for basic and applied research; stimulate rapid technology transfer; and improve the planning and coordination process within the Bureau of Mines. Expert Advice to the Bureau of Mines The Bureau of Mines interacts with other organizations as necessary to carry out its assigned functions and projects, but it has found it difficult to promote substantive debate about the future of mining and minerals policy. The only public body with a potential advisory role is the Committee on Mining and Mineral Resources Research, but to date it has not used the authority of its legislative mandate to fulfill this role. The committee is

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114 COMPETITIVENESS OF THE U.S. MINERALS AND METES INDUSTRY chaired jointly by the Assistant Secretary of the Interior for Water and Science and one other committee member; the membership includes repre- sentatives of the BOM, the USGS, the National Academies of Sciences and Engineering (NAS/NAE), the NSF, at least two university representatives, at least two representatives of the mining industry, one working miner, and one representative of the conservation community. Public representation has been even further restricted in practice by the appointment of former government officials to the committee: two former directors of the BOM currently sit on the committee, one representing industry and the other academe. This structure limits the committee's ability to contribute outside ideas and advice to the Bureau and its research programs. The effectiveness of the committee also depends on the resources pro- vided to it by the Department of the Interior. Since the administration has been recommending the elimination of the Mineral Institutes program for several years, no provision has been made for funding the work of the committee; funding by Congress has focused strictly on the institutes themselves. The committee has no staff, nor has it made significant use of advice from experts and expert groups in industry and academe. The committee's work realistically requires funds to compensate its members for their time and expenses. These considerations all point to the need for the Department of the Interior to establish a new standing advisory committee reporting directly to the director of the Bureau of Mines. This committee should advise the director not only on the content and direction of research but also on any other Bureau programs and policy matters. The committee should consist of interested and knowledgeable senior individuals entirely from outside the federal government with a particular emphasis on industry. Once again, if this committee is to carry out its responsibilities effectively, funds must be provided for its maintenance. The committee must have staff support, and it must be able to invite contributions from nongovernmental experts. Promoting Collaborative Research and Development Collaborative (or cooperative or shared) R&D, whether between govern- ment and industry, or among industrial firms, or involving government, universities, and industry, is not a new idea. The first formal industrial collaborative R&D effort was established in England around 1775 by Josiah Wedgewood, the famous potter, in order to seek better glazes and glazing techniques. Today the concept of cooperative research has become fashion- able, not only in the United States but in Japan and Europe, especially in the high-technology and manufacturing fields. Some of the best-known consortia are in electronics the Microelectronics and Computer Technol- ogy Corporation, the Semiconductor Research Corporation, and Sematech.

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS 115 Other consortia exist in automotive materials and polymers, biotechnology, robotics, energy, and other emerging fields. Even so, no more than 3 percent of U.S. R&D funding flows through consortia, with about 85 percent of that amount being spent in regulated oil, gas, and electric industries. Thus, although increasingly prevalent, cooperative research is still not a primary mechanism for R&D in the United States. The common denominator in all these arrangements is the perceived need to pool resources to develop the fundamental or "precompetitive" knowledge that participating companies can then apply to increase their competitive- ness, usually vis-a-vis foreign industries. An underlying theme is that uni- versity research often has not connected in the past in a useful way with industry needs. Cooperative R&D forces the participants to consider where they want to be in the future; it ensures a focus on actual industry needs; it facilitates effective transfer of the technologies; and it helps to build a corresponding research capability in the participating companies. But there are also drawbacks: tension can easily develop between the wish to cooper- ate and the need to compete; it can be difficult to transfer technologies into company laboratories and products; and cost sharing can be problematical when different-sized companies are involved. To date, the track record of consortia is mixed. Experience has shown that cooperative R&D can be a supplement to in-house R&D but not a substitute. Certainly those companies without an R&D base of their own and a core of technical personnel as receptors will not benefit from consortia. Similarly, for all participants to feel a sense of ownership of the research projects requires people who can act as technology transfer agents between the consortium and the company laboratory. The line between precompetitive research and commercial R&Dis vague, which emphasizes the need for care in selecting projects. For this reason cooperative R&D should focus on generic technologies that can benefit all participants about equally. While U.S. mining companies compete strenuously both in exploration and marketing, the history of mining technology has been one of coopera- tion rather than competition. Most of the subindustries are distinguished by a remarkably free interchange of ideas and data. Even where patented technology is involved, innovations and improvements are commonly made available on reasonable terms, except for special processes that would im- part a distinct competitive advantage to the developer. Mining thus seems to be an excellent candidate for cooperative R&D ventures like the follow- ing: The American Mining Congress (AMC) has recently taken a lead role in addressing the technology needs of the mining and metals extraction industries. AMC is currently exploring the role that it could play in foster- ing industry research projects, coordinating industry research programs, and

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116 COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY serving as a clearinghouse for information on emerging technologies and technological needs. The Mining and Excavation Research Institute (MERI) is a consor- tium of universities organized under the American Society of Mechanical Engineers. Incorporated in New York as an independent not-for-profit research, education, and service institute, its aim is "to spur development of a variety of systems for intelligent remote-controlled mining and excavation via a university-industry consortium." Formed in 1987, MERI now has 12 university and 4 corporate members. Despite its limited funding and staff resources, MERI shows promise for being the kind of enterprise that the U.S. mining and minerals industry needs. The International Copper Research Association (INCRA) was estab- lished in 1959 and presently has 25 corporate members. Its 1989 R&D budget was $3 million. Most of the research it sponsors at commercial and university laboratories is on end products and applications, with a view to expanding the products and uses of copper. The INCRA has recently been folded into a new organization, the International Copper Association, which coordinates the market development activities of the various copper trade associations around the world. The American Iron and Steel Institute (AISI), founded in 1908, is a trade association, but it also carries out extensive technical work. R&D represents more than half its budget. This R&D is carried out in three main categories: sponsored research at university research centers, such as the Steel Resource Center at Northwestern University (totaling more than $1 million per year); collaborative technology projects (currently totaling about $2 million per year in eight collaborative projects); and the Steel Initiative described earlier, to which AISI will contribute about $10 million or one third of the cost over 3 years. The International Lead-Zinc Research Organization (ILZRO) sponsors research designed to expand the markets for lead and zinc by finding new uses of these metals. All research is contracted out. With 36 producer members (mining and smelting companies) as well as 25 end-user members, its research budget was about $4 million in 1989. Other metals industry associations also sponsor research, including the Aluminum Association, the Nickel Development Institute (in Canada), the Copper Development Association, the Metal Powder Industries Federation, and the International Tin Research Association (in Great Britain). User industries (e.g., automotive and aerospace industries) also do research that generates demand and therefore drives research, mostly in semifabricated parts. Across all of these and other organizations, however, most of the research sponsored by the industry associations is concerned with expanding the market for existing applications and end products. Relatively little of it

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS 117 addresses the need for new technologies to improve productivity and pro- cesses (the $30 million Steel Initiative is an exception). In addition, the level of funding for these cooperative activities is too low to support re- search programs that could have a major impact on the competitiveness of this industry. Fundamental breakthroughs in technology usually require a broader in- terdisciplinary approach to R&D. It is difficult for the minerals and metals industry, divided into subindustries and competing firms, to provide long- term guidance for such research. As a result, this is an occasion when it is appropriate for government to take the lead. There are several justifications for federal support of R&D in the mining and metals industry: The benefits of successful R&D cannot be fully captured by the. firm investing in the research. The time horizon of the effort must be longer than companies would be likely to undertake on their own. The risk of failure is so high as to deter companies from research that would otherwise be an attractive investment (high-risk, high-reward). The work is directed at public interests, such as the environment, that companies have less incentive to pursue on their own or, when pursued, may be perceived as not being objective. There are no ideal models for government-industry-university coopera- tion in the mining and metals industry. The Department of Commerce has counted more than 125 consortia established under the National Cooperative Research Act of 1984, representing every conceivable structure and ranging from 2 to 59 members. Experience has shown that multiple bilateral partnerships are easier to manage than a consortium because the interest groups are smaller. Japanese experience appears to reflect this perception; the Japanese government prefers "managed joint research," in which the research is divided among participating companies. The German Fraunhofer Gesellschaft rep- resents a successful model for government-industry collaboration: the states as well as the federal government provide funding; these federally chartered research organizations are disbanded as their usefulness declines. The decline of industry research laboratories, described in Chapter 4, makes it more difficult for the U.S. government to conduct joint research with industry in the processing area. Other research must be done on the pilot scale, which means that pilot facilities will have to be built at univPrsi- ties or other sites. These cautions do not mean that government-industry collaboration cannot succeed, however. The joint BOM/ASARCO/Freeport project on in situ mining of copper oxide ore (recently joined by the Uni- versity of Arizona) is a good example of productive collaborative R&D. Likewise, the steel initiative operated through the DOE is an excellent ex-

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alp COMPETITIVENESS OF THE U.S. MINERALS AND MET^S INDUSTRY ample of government-sponsored research involving various forms of gov- ernment-industry, government-university, and intragovernmental coopera- tion (DOE and NIST). The national laboratories represent a major potential resource, especially for some aspects of materials research, and their sponsoring agencies (mostly DOE) have been urging U.S. industry to pursue collaborative research with them. However, industry has shown relatively little interest, and thus far the laboratories seem to have been trying harder to link up with industry than the reverse. More directly relevant is the potential for industry to work collaboratively with the Bureau-supported Mineral Institutes, especially those that are configured into GMTCs. As noted in Chapter 4, industry involve- ment in these centers has been surprisingly light; for example, industrial funding of the GMTC for pyrometallurgy has totaled only $66,400 since its establishment in 1982. This amount, although small, is about average for the centers. The Bureau's own Mining and Metallurgy Laboratories have also done some collaborative work with industry. For example, the Twin Cities Re- search Center recently collaborated with industry on the in situ leaching demonstration project mentioned above. The Pittsburgh Research Center is well known for its collaborative work with industry in mine design and excavation techniques, using the laboratory's fully instrumented test mine. However, these examples are the exception rather than the rule. Before they would be attractive to industry in general as partners in research, the Mining and Metallurgy Laboratories would need to update their R&D port- folio and bring in younger researchers as well as more staff from industry. The formula for success at DOE laboratories has often been for the labora- tory staff to begin a line of research at the fundamental level and then to bring in the industry researchers as the work becomes progressively more developmentalwhat has been termed a phase-in, phase-out approach. It would probably be beneficial for the BOM laboratories to communicate closely with the DOE laboratories on problems of mutual interest, both for the sake of the research and for the opportunity to observe new ways of working with industry. Developing Consensus Within the Minerals and Metals Policy Community The mining and metals industry has no constituency sufficiently well organized to press effectively for its own interests and those of the nation. This is one reason for the failure of previous policy studies to achieve their intended results. In the 1970s a network of key individuals in public and private institutions maintained a sense of community in the area of mining and minerals policy, including R&D policy. Over time, however, transfers

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS 119 and retirements reduced the effectiveness of the network, and a shift of attention from minerals and metals to a broader interest in advanced materi- als has further dispersed the traditional minerals community. At present there are special-interest communities within the mining industry and the academic environment, but there is no larger community that shares a com- mon interest in an effective national mining and minerals policy. Rather, the various special-interest groups pursue their own agendas for research, import restrictions, etc. It is not that these groups lack broader concerns but rather that no single group is able to provide the forum and agenda for discussion of those concerns. Without a broadly based consensus about the importance of a national mining and minerals policy, support for mining and minerals R&D will remain fragmented and ineffective. A successful model for consensus build- ing in mining and minerals policy is the ongoing series of materials policy conferences sponsored by the Federation of Materials Societies held in Henniker, New Hampshire, and more recently in Fredericksburg, Virginia. Another example is the biennial conference sponsored by the USGS on issues related to the exclusive economic zone. In both cases the sponsoring agencies provide a forum for the gathering of a wide community that shares a common interest in development of an effective national policy. Without some such forum it is unlikely that a broadly supported mining and minerals policy can be developed. Stimulating Rapid Technology Transfer Companies have no incentive to participate in R&D consortia if they cannot realize a tangible return on their investment. Such benefits depend significantly on a company's ability to incorporate the advances made through research into their own use of technology. The process of technology trans- fer, and the success with which it is achieved, is therefore critical to the value of collaborative R&D as perceived by industry. It has been widely noted, however, that the United States excels at generating fundamental knowledge, while other nations (especially Japan) excel at putting that knowledge to practical use. Thus, improving the speed and efficiency of technology transfer into U.S. firms is vital to their competitiveness, in the minerals and metals industry as well as in other more technology-intensive industries. Close involvement by industry in the technology development process is the surest way to make certain that U.S. industry has a head start in the application of new knowledge. Collaborative research, at least when it in- volves a small number of participants, is valuable for providing this inside track. However, with a larger number of participants the lack of company control over the results of research is a drawback, since it is then proportionately harder to restrict access to important findings. For this same reason the

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120 COMPETITIVENESS OF THE U.S. MINERALS AND METALS INDUSTRY participation of foreign firms or those with mixed ownership, including U.S.-based multinationals, is also a difficult issue. One mechanism to stimulate technology transfer would be targeted re- search. Certain kinds of technology offer an inherently greater relative advantage to U.S. industry than to foreign industry (see Chapter 3~. For example, environmental regulations are more stringent in the United States than in most other countries; consequently, research on environmental sys- tems, processes, and control technologies is potentially more beneficial to U.S. companies. Because of high insurance and litigation costs, research to enhance worker health and safety also benefits U.S. producers disproportionately. A similar rationale holds for research on automation and computer control, which address high labor costs, and processes relevant to low-grade ores. Another mechanism for stimulating more rapid and effective technology transfer would be the availability of more timely and comprehensive infor- mation about ongoing research and technological advances in mining and minerals technology around the world, as several trade groups (e.g., the Copper Development Association) do in limited ways now. Such a mecha- nism was called for by the 1984 act: "The Secretary shall establish a center for cataloguing current and projected scientific research in all fields of mining and mineral resources" (P.L. 98-409, paragraph 71. The Bureau of Mines already collects such information in an informal way, and it is cur- rently working on faster dissemination under the proposed information upgrade in the Information and Analysis Directorate. The American Mining Congress also hopes to establish itself as a clearinghouse of information on R&D. However, none of these plans has come to fruition yet. What is needed is a computerized data base, accessible by telephone, containing information on recent and current research worldwide, industry production and demand statistics, demand trend analyses, technology assessments, and other types of statistical and analytical information. Improved Planning and Coordination Over past decades the Bureau of Mines established a strong record as a center of excellence and innovation. However, in recent years it has be- come increasingly limited in its role in the minerals and metals community, and this has caused problems with both the substance and effectiveness of its research. Two problems appear to be central: a lack of planning and a lack of coordination among various groups. The development of a national plan for mining and minerals R&D is one of the legislated responsibilities of the Committee on Mining and Mineral Resources Research. However, the existing national plan, put forward by the committee in its first annual report, and updated in successive annual reports, is not a true plan. It is merely a program mission statement with

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FEDERAL ROLE IN TECHNOLOGY AND COMPETITIVENESS 121 accompanying general recommendations regarding the need for interagency coordination and continued federal funding. The plan envisioned under the authorizing legislation is intended to iden- tify and recommend activities for BOM that fit into the broader picture of industry and academic research. To carry out this planning function, how- ever, there must be communication from industry and academe about the needs of the industry and the capabilities and limitations of the industry and academic research establishments to fulfill those needs. There must also be adequate coordination of roles and research programs across and among those sectors. Cutbacks in long-term industry R&D have left industry needs for tech- nology ill defined. If BOM, or state agencies and academic institutions for that matter, is to contribute to the technology base for the future domestic mining industry, there must be effective collaboration on the identification of research needs. Regardless of the skills and experience of BOM personnel, the development of a long-term research agenda for the mining industry must be a collaborative exercise involving the potential consumers of R&D as well as other researchers. Such collaboration should extend to other interested federal agencies, such as the Departments of Agriculture, Interior (USGS and BOM), Commerce, Energy, and Defense; EPA; and NSF. At present this vital communication and collaboration is not taking place. BOM is not consulted on matters in which it has expertise, nor does it appear to contribute to the planning or decisions of other agencies. Ex- amples abound: there was only minimal interaction between the International Trade Agency and BOM during negotiations on U.S.-Canada tariffs that affect the minerals industry; EPA made little use of BOM's expertise when it was developing regulations to deal with mine wastes. The expenditure by Congress from the Stockpile Transaction Fund for university research in strategic and critical materials, with no attempt at linkage with Bureau programs, is a clear instance of the lack of coordination that now prevails. In the past the Committee on Materials (COMAT), operating under the Office of Science and Technology Policy, has attempted to achieve interagency coordination. However, COMAT has tended to focus on advanced materi- als rather than minerals and commodity metals. The Bureau of Mines is the logical focal point of federal interest in mining- and metals-related R&D and as such should be the lead actor in interagency planning and coordina- tion. The 1984 act provides a mandate for interagency cooperation and implies a mandate for the Secretary of the Interior to take the lead role (P.L. 98-409, paragraphs 6 and 81. At the same time, however, BOM must recognize that influence and coordination are two-way streets. On the one hand, the Bureau needs to aggressively seek out a new role for itself as a source of information and advice on all matters involving the minerals and metals industry. To do so,

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122 COMPETITIVENESS OF THE U.S. MINERALS AND METES INDUSTRY however, it will have to develop its own clearinghouse of comprehensive and accessible information as described above. It must also insist on its place in the making of legislation and in the planning and implementation of federal programs that affect the industry. On the other hand, the Bureau must open itself up to, in fact actively seek out, external information and advice in making its own policies and decisions. In this sense the establishment of the advisory committee (rec- ommendation 9 in Chapter 6) could be the model for a broader openness on the part of BOM. By encouraging wider involvement in the planning, coordination, and conduct of research, the Secretary of the Interior and BOM can promote consensus among a larger body of producers and re- searchers about the value of the proposed research. This in turn would result in greater support for the program and BOM both political and financialfrom federal and state governments and from industry.