FTC Staff Comment Before the Department of Interior, Minerals Management Service Concerning Prerelease Prospecting Within the Outer Continental Shelf For Marine Mining Minerals Other Than Oil, Gas, and Sulfer

~._, .
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
June 	24, 	1987
Mr. 	Reid 	T. 	stone
Minerals 	Management 	Service
Department 	of 	the 	Interior
11 	Golden 	Shore, 	suite 	260
Long 	Beach, 	CA 	90802
Dear 	Mr. 	Stone:
This 	letter 	provides 	the 	comments 	of 	the 	staff 	of 	the
Federal 	Trade 	Commission 1/ 	on 	proposed 	regulations 	of 	the
Minerals 	Management 	Service 	concerning 	prelease 	prospecting
within 	the 	Outer 	continental 	Shelf 	(OCS) 	for 	marine 	mining
minerals 	other 	than 	oil, 	gas 	and 	sulfur. 	52 	Fed. 	Reg. 	9758 	(Mar.
26, 	1987).
We 	have 	some 	concerns 	about 	the 	possible 	competitive 	effects
of 	proposed 	regulation 	30 	C.F.R. 	§ 	280.12(b), 	which 	provides 	that
certain 	geological 	and 	geophysical 	data 	be 	made 	pUblic 	six months
after 	a 	lease 	is 	issued. 	Depending 	on 	the 	nature 	and 	extent 	of
the 	information 	to 	be 	disclosed, 	this 	provision 	could 	have 	a
serious 	adverse 	impact 	on 	the 	incentives 	to 	prospect 	and 	to 	bid
on 	leases. 	We 	also 	comment 	on 	three 	additional 	issues 	that 	were
raised 	for 	discussion 	in 	the 	Issues 	and 	Alternatives 	preamble 	to
the 	proposed 	rules. 	These 	matters 	relate 	to 	po~sible rules 	that
may 	be 	included 	in 	future 	rulemaking 	proceedings. 	We 	believe
that 	caution 	needs 	to 	be 	exercised 	to 	ensure 	that 	the 	possible
additional 	rules 	do 	not 	unnecessarily 	impede 	the 	competitive
process.
11 	These 	comments 	represent 	the 	views 	of 	the 	Fedaral 	Trade
Commission's 	Bureaus 	of 	Competition, 	Consumer 	Protection, 	and
Economics, 	and 	are 	not 	necessarily 	those 	of 	the 	Commission 	or of
any 	individual 	commissioner. 	The 	Commission 	has, 	however, 	voted
to 	authorize 	the 	staff 	to 	present 	these 	comments 	to 	you.

Mr. 	Reid 	T. 	stone 	Page 	2
The 	Commission 	has 	an 	interest 	in 	promoting 	efficiency 	and
maintaining 	competition 	in 	the 	development 	and 	extraction 	of 	the
nation's 	natural 	resources. 	In 	addition 	to 	the 	Commission's
antitrust 	enforcement 	program 	in 	the 	minerals 	industries, 	the
Commission has 	specific 	statutory 	responsibilities 	under 	the 	Deep
Seabed 	Hard Mineral 	Resources 	Act, 	30 	U.S.C. 	1413 	et 	seq., 	to
review 	the 	antitrust 	implications, 	if 	any, 	of 	applications
submitted 	to 	the 	National 	Oceanic 	and 	Atmospheric 	Administration
(NOAA) 	for 	deep 	seabed 	minerals 	exploration 	licenses 	and
commercial 	recovery 	permits. 	2/
One 	of 	the 	stated 	purposes 	of 	the 	proposed 	rules 	is 	to
encourage 	the 	development 	of 	an 	offshore 	mining 	industry 	in 	order
to 	reduce 	the 	nation's 	dependency 	on 	foreign 	sources 	of 	strategic
materials, 	such 	as 	cobalt, 	manganese 	and 	nickel. 	The 	proposed
rules 	are 	intended 	to 	regulate 	only 	prelease 	prospecting
(although 	certain 	of 	them 	address 	issues 	involved 	in 	the
subsequent 	leasing 	of 	prospected 	areas), 	and 	additional
regulations 	will 	be 	proposed by 	the 	Minerals 	Management 	Service
(MMS) 	both 	for 	leasing 	and 	for 	post-lease 	exploration,
development 	and 	production 	activities. 	According 	to 	proposed
regulation 	30 	C.F.R. 	§ 	280.1 	and 	supplementary 	information
provided 	by 	the 	MMS, 	52 	Fed. 	Reg. 	at 	9760, 	a 	prelease 	prospecting
permit 	does 	not 	give 	rise 	to 	any 	rights 	or 	interests 	in 	any
minerals 	or 	to 	any 	preferential 	rights 	to 	leases, 	and 	the 	OCS
Lands 	Act, 	43 	U.S.C. 	1331 	et 	seq., 	requires 	that 	leases 	of 	OCS
minerals 	be 	awarded 	on 	the 	basis 	of 	competitive 	bidding. 	with
these 	points 	in mind, 	we 	turn 	to 	the 	proposed 	rules.
Proposed 	Rule 	Provisions
Under 	proposed 	regulation 	30 	C.F.R. 	§ 	280.12(b), 	all
geological 	and 	geophysical 	(G&G) 	data 	submitted 	to 	MMS 	with
respect 	to 	any 	area 	that 	is 	subsequently 	leased 	will 	be 	made
pUblicly 	available 	six 	months 	after 	a 	lease 	is 	issued. 	We
believe 	that 	this 	disclosure 	provision may 	adversely 	affect
incentives 	to 	engage 	in 	prospecting 	and 	in 	bidding 	for 	marine
mining 	leases.
2/ 	Pursuant 	to 	that 	statute, 	the 	Federal 	Trade 	Commission
provided 	comments 	concerning 	the 	competitive 	implications 	of
granting 	deep 	seabed 	exploration 	licenses 	to 	four 	international
consortia 	by 	letter 	dated 	September 	30, 	1982, 	to 	NOAA. 	The
Commission's 	Bureaus 	of 	Competition 	and 	Economics 	commented 	on
regulations 	proposed 	by 	NOAA 	regarding 	application 	procedures 	for
deep 	seabed 	commercial 	recovery 	permits 	by 	letter 	dated 	March 	25,
1983, 	to 	the 	Ocean 	Minerals 	and 	Energy 	Division 	of 	NOAA.

Mr. 	Reid 	T. 	stone 	Page 	3
The 	desirability 	of 	such 	early 	disclosure 	of 	confidential 	or
proprietary 	information 	depends 	upon 	the 	balance 	of 	costs 	and
benefits 	in 	each 	particular 	situation, 	which 	depends 	in 	turn 	upon
the 	kind 	of 	information 	at 	stake. 	For 	example, 	disclosing 	the
location 	of 	a 	test 	site may 	have 	different 	competitive 	and
economic 	effects 	on 	prospecting 	firms 	than 	disclosing 	detailed
geologic 	data 	or 	information 	respecting 	proprietary 	technology 	or
data 	analysis 	techniques. 	The 	kind 	of 	information 	that 	will 	be
disclosed 	under 	the 	proposed 	regulations 	is 	not 	entirely 	clear,
however. 	11 	We 	therefore 	recommend 	that 	the 	regulations 	be
clarified 	to 	state more 	precisely 	the 	extent 	to 	which 	specific
data 	on G&G 	findings 	would 	be 	subject 	to 	disclosure 	so 	that 	the
kind 	of 	information 	involved 	can 	be 	considered 	in weighing 	the
costs 	and 	benefits 	of 	disclosure.
While 	we 	do 	not 	have 	the 	expertise 	to 	assess 	various 	types
of 	G&G 	data, 	we 	can 	suggest 	some 	of 	the 	possible 	benefits 	and
potential 	long 	run 	costs 	associated 	with 	disclosing 	various 	kinds
of 	confidential 	information. 	On 	the 	benefit 	side, 	pUblic 	access
to 	some 	kinds 	of 	G&G 	data 	may 	reduce 	the 	cost 	of 	further
prospecting. 	For 	example, 	data 	identifying 	the 	exact 	location 	of
prospecting 	work might 	be 	helpfUl 	in 	assessing 	the 	extent 	of
geologic 	structures 	in 	adjacent 	areas 	and 	in 	reducing 	uncertainty
about 	the 	value 	of 	those 	tracts. 	~ 	Specific data 	on G&G
findings 	on 	leased 	tracts 	would 	be 	even 	more 	helpful 	in 	those
11 	It 	appears 	that 	the 	data 	to 	be 	released 	under 	proposed
regUlation 	30 	C.F.R. 	§ 	280.12(b) 	will 	be 	the 	same 	data 	that
prelease 	permittees 	must 	submit 	to 	MMS 	under 	proposed 	30 	C.F.R.
§ 	280.8. 	However, 	§ 	280.8 	is 	somewhat 	ambiguous 	respecting 	the
reporting 	of 	specific 	data 	on G&G 	findings 	(as 	opposed 	to
positional 	data). 	For 	example, 	provision 	280.8(a) (6) 	appears 	to
leave 	some 	potential 	reporting 	requirements 	for 	future
determination. 	with 	this 	uncertainty, 	it 	is 	difficult 	to 	predict
what 	competitive 	effects 	would 	result 	from 	release 	of 	G&G 	data
supplied 	under 	§280.8. 	We 	understand 	from MMS 	staff 	that 	at
least 	some 	of 	the 	data 	to 	be 	released 	by MMS 	would 	be 	considered
confidential 	by 	prospecting 	firms. 	As 	we 	discuss 	in 	the 	text,
however, 	the 	disclosure 	of 	different 	kinds 	of 	confidential
information 	can 	have 	different 	kinds 	or 	degrees 	of 	competitive
effects.
~ 	It 	has 	been 	suggested 	that 	reductions 	of 	uncertainty
about 	the 	value 	of 	SUbsequent 	tracts 	could 	increase 	the
competitiveness 	of 	bidding 	on 	those 	tracts, 	thus 	increasing
government 	revenue. 	D. 	K. 	Reese, 	Competitive 	Bidding 	for
Offshore 	Petroleum 	Leases, 	Bell 	Journal 	of 	Economics 	(Autumn
1978), 	Vol. 	9 	No.2, 	at 	369-84.

Mr. 	Reid 	T. 	Stone 	Page 	4
respects. 	Even 	if 	a 	firm 	that 	wishes 	to 	prospect 	an 	adjacent
area 	could generate 	that 	data 	on 	its 	own 	through 	access 	to 	a
leased 	tract 	(as 	possibly 	contemplated 	by 	proposed 	30 	C.F.R. 	§
280.7), 	pUblic 	access 	to 	the 	data 	would make 	the 	prospecting 	and
evaluation 	of 	the 	adjacent 	areas 	more 	economical. 	Therefore,
disclosure 	might 	tend 	to 	encourage 	more 	prospecting, 	at 	least 	in
the 	short 	run, 	and 	more 	bidders 	on 	subsequent 	leases.
As 	a 	second 	example, 	disclosure 	of 	proprietary 	information
that 	would 	tend 	to 	reveal 	an 	innovative 	exploration 	technique 	or
data 	analysis 	approach 	would 	be 	likely 	to 	facilitate 	employment
of 	those 	techniques 	by 	other 	firms.
On 	the 	negative 	side, 	early 	disclosure 	~ 	of 	confidential
information would 	tend, 	over the 	longer 	run, 	to 	inhibit
investment 	in 	prospecting 	to various 	degrees, 	depending 	on 	the
kind 	of 	information 	disclosed. 	Thus, 	positional 	data 	and
(probably 	to 	a 	greater 	extent) 	specific G&G 	findings 	concerning
the 	leased 	tract may 	provide valuable 	information 	concerning
adjacent 	or 	nearby 	tracts 	that 	the 	permittee 	firm 	is 	still
prospecting. 	Disclosure 	of 	such 	information 	would 	decrease 	the
value 	of 	the 	firm's 	exploration 	efforts. 	Our 	experience 	in
reviewing 	applications 	for 	exploration 	licenses 	under 	the 	Deep
Seabed 	Hard Mineral 	Resources 	Act 	indicates 	that 	companies 	can be
very 	sensitive 	to 	pUblic 	disclosure 	of 	even 	positional 	data.
Faced with 	disclosure 	of 	confidential 	information, 	firms 	might 	be
encouraged 	instead 	to 	let 	others 	do 	more 	of 	the 	initial
prospecting, 	and 	then 	"free-ride" 	in 	the 	form 	of 	bids 	for 	leases
to 	adjacent 	areas. 	Therefore, 	early 	disclosure 	of 	confidential
information 	could 	tend 	to 	inhibit 	aggressive 	prospecting.
In 	addition, 	to 	the 	extent 	that 	the 	public 	disclosure 	would
tend 	to 	reveal 	a 	proprietary 	exploration 	technique 	or 	data
analysis 	approach 	that 	was 	developed 	by 	the 	permittee 	and
provides 	superior 	insight 	into 	the 	value 	of 	particular 	tracts,
early 	release 	of 	such 	information would 	result 	in 	reducing 	the
firm's 	earnings 	from 	its 	innovation. 	This 	could 	occur 	in 	two
ways. 	First, 	the 	market 	value 	of 	the 	exploration 	technique 	or
~ 	We 	are 	assuming 	that 	the 	proposed 	disclosure 	rule
applies 	to 	data 	submitted 	to MMS 	by 	all 	prospectors 	in 	a 	specific
area, 	whether 	or 	not 	they 	get 	the 	lease. 	Another 	interpretation
is 	that 	only 	the 	data 	of 	the 	firm 	that 	wins 	the 	lease 	will 	be
disclosed. 	In 	the 	latter 	case, 	the 	disclosure 	provision 	could
encourage 	companies 	not 	to 	win 	the 	first 	lease 	if 	it was 	a 	small
part 	of 	the 	total 	area 	to 	be 	leased. 	Rather, 	the 	preferred
strategy 	likely would 	be 	to 	hold 	information 	back 	and 	use 	it 	in
subsequent 	auctions. 	This 	could 	reduce 	the 	number 	of 	bidders, 	at
least 	in 	early 	auctions.

Mr. 	Reid 	T. 	stone
- . -.. .- .. ::.: . ~ .~- .
Page 	5
data 	analysis 	approach 	would 	be 	eliminated. 	Second, 	the 	firm
would 	lose 	some 	advantage 	it 	had 	gained 	in 	assessing 	adjacent 	or
nearby 	tracts. 	For 	both 	of 	these 	reasons, 	early 	disclosure 	of
such 	information 	could 	tend 	to 	inhibit 	both 	long 	run 	investment
in 	research 	and 	development 	and 	aggressive 	prospecting.
In 	light 	of 	the 	potential 	costs, 	we 	urge 	that 	the 	MMS
carefully 	consider 	any 	concerns 	raised by 	prospective 	permittees
regarding 	the 	disclosure 	of 	confidential 	information 	six months
after 	a 	tract 	is 	leased. 	Among 	the 	factors 	that 	should 	be
considered 	in 	determining 	the 	optimum 	period 	for 	which
confidential 	information 	should 	be 	protected 	are: 	(1) 	the 	nature
of 	the 	information 	(~, 	whether 	disclosure 	would 	tend 	to 	reveal
proprietary 	technology), 	(2) 	the 	effect 	of 	disclosure 	on 	the
incentive 	to 	prospect 	or 	to 	innovate, 	(3) 	the 	effect 	of 	the
regulation 	on 	the 	number 	of 	bidders 	for 	early 	and 	"late" 	auctions
(on 	adjacent 	tracts), 	and 	(4) 	the 	cost 	of 	attempting 	to 	replicate
the 	information 	if 	it 	is 	not 	made 	publicly 	available.
After 	analysis 	of 	these 	factors, 	it 	may 	well 	be 	determined
that 	a 	somewhat 	longer moratorium 	on 	disclosure 	of 	confidential
information, 	with 	perhaps 	different 	moratorium 	periods 	for
different 	categories 	of 	confidential 	information, 	may 	enhance 	the
incentives 	to 	prospect 	and 	to 	bid 	on 	leases 	without 	adversely
affecting 	any 	interest 	in 	pUblic 	disclosure. 	£I 	This 	would
£I 	For 	example, 	under 	the 	regulations 	concerning
exploration 	of 	the 	OCS 	for 	oil, 	gas 	and 	sulfur, 	geological 	data
and 	information 	submitted 	to 	the 	MMS 	is 	not 	subject 	to 	disclosure
to 	the 	public 	until 	10 	years 	after 	the 	date 	of 	issuance 	of 	the
permit 	under 	which 	the 	data 	and 	information was 	obtained. 	30
C.F.R. 	§ 	251.14-1(c) (2). 	Those 	regulations 	do 	not 	provide 	for
disclosure 	of 	the 	information 	when 	a 	lease 	is 	issued, 	except 	in
the 	case 	of 	geological 	data 	and 	information 	obtained 	from
drilling 	a 	deep 	stratigraphic 	test. 	In 	the 	latter 	case, 	the 	data
and 	information 	are 	protected 	for 	10 	years 	after 	the 	completion
date 	of 	the 	test 	or 	60 	calendar 	days 	after 	the 	issuance 	of 	the
first 	OCS 	oil 	and 	gas 	lease 	within 	50 	geographic 	miles 	of 	the
test 	site, 	whichever 	is 	sooner. 	30 	C.F.R. 	§ 	251.14-1(c) (3).
Similar 	moratorium 	periods 	apply 	to 	geophysical 	data 	and
information. 	See 	30 	C.F.R. 	§ 	251.14-1(d).
with 	respect 	to 	geological 	data 	and 	analyzed 	geological
information 	derived 	from 	post-lease 	drilling 	for 	oil, 	gas 	and
sulfur 	on 	the 	OCS 	during 	the 	primary 	term 	of 	a 	lease, 	the
regulations 	were 	recently 	amended 	to 	provide 	for 	disclosure 	to
the 	pUblic 	either 	two 	years 	after 	the 	data 	is 	submitted 	to 	MMS 	or
60 	days 	after 	a 	lease 	sale 	of 	an 	adjacent 	or 	nearby 	tract, 	any
(continued ... )

· .. 	...~.
Mr. 	Reid 	T. 	stone 	Page 	6
provide 	the 	firm 	that 	generated 	the 	data 	more 	time 	either 	to 	use
the 	data 	for 	further 	prospecting 	and 	leasing 	activities 	of 	its
own, 	or 	to 	recover 	part 	of 	its 	investment 	by 	selling 	the
information 	to 	others.
Issues 	and 	Alternatives
Three 	additional 	issues 	that, 	according 	to 	the 	announcement,
may 	be 	included 	in 	future 	rulemaking proceedings 	may 	have
competitive 	implications: 	(1) 	whether 	special 	financial
incentives 	to 	encourage 	prospecting 	and 	post-lease 	activities 	may
be 	appropriate 	in 	this 	industry, 	and, 	if 	so, 	in what 	form, 	for
which 	specific 	minerals, 	and 	under what 	conditions; 	(2) 	whether
the 	regulations 	should 	limit 	eligibility 	for 	prospecting 	permits
to 	U.s. 	nationals; 	and 	(3) 	whether 	any 	other 	limitations, 	such 	as
minimum 	standards 	of 	financial 	or 	technological 	capability, 	are
appropriate.
1. 	SUbsidizing 	one 	or 	a 	group 	of 	OCS 	minerals 	over 	others
may 	be 	useful 	in 	helping 	to 	achieve 	national 	self-sufficiency 	in
those 	subsidized minerals. 	We 	recognize 	that 	an 	important
objective 	of 	the 	proposed 	regulations 	is 	to 	facilitate 	such 	self-
sufficiency. 	At 	the 	same 	time, 	we 	observe 	that 	solely 	from 	a
competition 	and 	economic 	standpoint, 	subsidies 	can 	result 	in
adverse 	consequences 	unless 	there 	is 	some 	deficiency 	in 	the
market 	(a 	nmarket 	failure n ) 	that 	would make 	subsidies 	necessary.
First, 	subsidies 	result 	in 	prices 	for 	the 	subsidized 	product 	that
are 	below 	real 	cost, 	leading 	to 	overconsumption 	of 	the 	subsidized
product. 	1/ 	In 	addition, 	if 	the 	subsidy 	diverts 	exploration
activity 	and 	resources 	away 	from 	non-subsidized 	minerals, 	the
result 	may 	be 	both 	less 	competition 	and 	lower 	investment 	in 	the
non-subsidized 	sector 	than 	would 	be 	expected 	given 	normal
§( ... continued)
part 	of 	which 	is 	within 	50 	miles 	from 	the 	well, 	whichever 	is
later. 	30 	C.F.R. 	§ 	250.3(b). 	The 	prior 	regulations 	permitted
disclosure 	of 	such 	data 	to 	the 	pUblic 	upon 	expiration 	of 	the
lease 	or 	2 	years 	after 	submission 	of 	the 	data, 	whichever was
less. 	In 	amending 	this 	provision, 	the 	MMS 	noted 	that 	geological
data 	and 	information 	from 	an 	existing 	lease 	are 	important 	in
evaluating 	the 	potential 	of 	nearby 	tracts. 	52 	Fed. 	Reg. 	13235,
13236 	(April 	22, 	1987). 	Geophysical 	data 	and 	information, 	and
interpreted 	geological 	information, 	are 	protected 	for 	10 	years
from 	the 	date 	of 	submission. 	30 	C.F.R. 	§ 	250.3(a).
1/ 	T. 	scitovsky, 	Welfare 	and 	Competition 	(rev. 	ed. 	1971),
at 	69-73, 	246-47.

Mr. 	Reid 	T. 	stone 	Page 	7
economic 	forces. 	~ 	This, 	in 	turn, 	could 	result 	in 	slower
development 	of 	the 	non-subsidized 	mineral 	industries, 	thus
tending 	to 	favor 	existing 	producers 	in 	those 	sectors 	over
possible 	new 	entrants. 	Finally, 	provision 	of 	a 	sUbsidy 	tends 	to
favor 	those 	firms 	that 	are 	more 	skilled 	in 	obtaining 	government
grants 	than 	in 	finding 	actual 	minerals. 	We 	therefore 	urge 	that
the 	MMS 	carefully weigh 	the 	need 	for 	subsidies 	against 	their
possible 	adverse 	competitive 	and 	economic 	consequences.
2. 	We 	perceive 	no 	compelling 	reason 	to 	exclude 	foreign
firms 	from 	the 	pre lease 	prospecting 	stage 	of 	mining 	development,
unless 	the 	generation 	or 	possession 	of 	geological 	and 	geophysical
data 	by 	foreign 	entities 	is 	considered 	by 	itself 	to 	present 	a
national 	security 	risk. 	The 	proposed 	rules 	are 	explicit 	that 	no
mineral 	rights 	are 	acquired 	at 	the 	prospecting 	stage 	so 	foreign
ownership 	of 	mining 	tracts 	is 	not 	at 	issue. 	Although MMS
indicates 	that 	it 	probably 	will 	limit 	leases 	to 	U.s. 	nationals,
foreign 	firms 	may 	still 	wish 	to 	compete 	at 	the 	prospecting 	stage,
either 	in 	order 	to 	sell 	their 	prospecting 	results 	to 	U.s. 	firms
or, 	if 	the 	final 	leasing 	regulations 	permit, 	to 	join with 	a 	u.s.
firm 	at 	the 	lease 	and 	development 	stage. 	The 	exclusion 	of
foreign 	entities 	that 	might 	possess 	a 	technological 	or 	cost
advantage 	in 	oes 	exploration 	techniques 	could 	raise 	the 	costs 	of
prospecting 	and 	retard 	the 	ultimate 	development 	of 	marine 	mining.
3. 	We 	caution 	against 	limiting 	permit 	eligibility 	on 	the
basis 	of 	the 	applicant's 	financial 	or 	technological 	capability,
unless 	there 	is 	a 	demonstrable 	need 	for 	such 	limitations. 	~
Unnecessary 	financial 	or 	technological 	requirements 	often 	create
artificial 	barriers 	to 	new 	entrants 	and 	could 	do 	so 	in 	prelease
prospecting 	within 	the 	oes.
We 	are 	not 	aware 	of 	any 	need 	for 	special 	financial 	or
technological 	requirements 	for 	permit 	eligibility. 	There 	is 	no
apparent 	reason 	why 	permit 	applicants 	cannot 	decide 	for
themselves 	whether 	they 	are 	financially 	and 	technologically
capable 	of 	undertaking 	a 	prospecting 	venture. 	Even 	if 	some 	firms
make 	a 	misjudgment 	in 	that 	regard, 	the 	nonexclusivity 	of
prospecting 	permit 	areas 	would 	allow 	other 	firms 	to 	explore
promising 	areas 	that 	were 	assigned 	to 	the 	less 	capable 	firms.
~ 	This 	would 	be 	the 	case 	if, 	for 	some 	reason, 	exploration
activity 	in 	the 	non-subsidized 	sector 	cannot 	resume 	its 	"normal"
level 	within 	a 	short 	time.
~ 	For 	example, 	the 	need 	for 	technological 	capability
requirements 	may 	be 	demonstrated 	where 	improper 	prospecting 	is
likely 	to 	result 	in 	significant 	"external" 	costs, 	such 	as
environmental 	damage.

, I
Mr. 	Reid 	T. 	stone 	Page 	8
Therefore, 	the 	entry 	of 	less 	capable 	firms 	should 	not 	result 	in
inadequate 	prospecting 	overall. 	On 	the 	contrary, 	we 	expect 	that
open 	entry would 	encourage 	vigorous 	competition and 	more 	complete
prospecting 	coverage. 	Therefore, 	we 	recommend 	that 	there 	be 	a
presumption 	in 	favor 	of 	open 	entry, 	as 	generally 	permitted by 	the
proposed 	regulations.
We 	appreciate 	this 	opportunity 	to 	provide 	you 	with 	our
comments 	on 	your 	proposed 	regulations.
Sincerely 	yours,
~	uckerman
Director
Bureau 	of 	Competition