413. Memorandum From the General Counsel of the Office of Emergency Preparedness (Kendall) to the Director of the Office of Emergency Preparedness (Lincoln)1

SUBJECT

  • Legal situation on Mint nickel

Of the alternative actions suggested for the Government to meet the current nickel crisis, the sale of a substantial part of the Mint inventory of nickel is the most attractive but it has raised several objections. These [Page 1022]objections, not necessarily in the order of their importance, are that the Treasury Department may not want to reduce its inventory, that if they do so a large portion of the material will automatically go into the stockpile, that if they do so they will have no way to recover their investment in the metal, that the metal in the inventory may not be in a form convenient for industry use, that the Government may not be able to replace the nickel, and that the Government’s authority to arrange for special “chosen instrument” handling is limited. I shall deal with each of these objections.

It is the function of the owning agency to declare property excess to its needs, and each agency is required by law “continuously” to survey property under its control to determine whether it is excess. The agency’s hand, however, is not entirely free, since the President may (by Section 205(a) of the Federal Property and Administrative Services Act2 if statutory authority is needed) prescribe policies and issue directives governing the agencies in their performance of functions with respect to their property. Thus it was that on September 16, 1966, in connection with his efforts to cut Federal expenditures, President Johnson issued a statement to the departments and agencies requiring them, among other things, to review inventory levels of all supplies on hand and “whenever the quantity of an item is larger than necessary” take appropriate action including “reporting it excess.”3 It would be difficult to conjure up a greater justification for special action to accomplish the declaration of material as excess than the current one. To breach the national defense stockpile while the government itself has in another inventory ten or more years’ supply for the uses of that inventory, is virtually unthinkable.

The Strategic and Critical Materials Stock Piling Act4 does require that Government materials determined by the owning agency to be surplus to its needs “shall be transferred” to the stockpile to the extent that the stockpile goal has not already been met. This would appear to make 5000 tons of any nickel found by Treasury to be excess to its needs go to fill the stockpile goal for nickel. However, the same Act exempts from that requirement material necessary to make up any deficiency of supply for the current requirements of industry as determined by the Secretary of Commerce. Clearly the current requirements of industry are faced with a deficiency of supply far greater than the prospective Treasury excess, and the Secretary of Commerce is, I understand, prepared to make the necessary determination.

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While I do not think that the consideration should by any means be controlling, I am optimistic that the Treasury Department will not have to see a substantial part of their investment in nickel go to miscellaneous receipts as the proceeds of surplus sales. The Federal Property Act provides (Section 204(c)) that where the property disposed of was acquired by the use of a fund either not appropriated or by law reimbursable, the proceeds of the disposition may be turned over to the agency that declared the property excess. Because the purchase of this nickel was, I presume, financed by the Coinage Metal Fund created by Section 3528 of the Revised Statutes, it would seem to me that the proceeds of this disposition, be they cash or nickel, could properly go to Treasury.

Where a material is declared excess the Administrator of General Services enjoys wide latitude under Section 203(e)(3) to negotiate such a disposal contract as will serve the public interest. The contract of disposition may have to be made with International Nickel Company because it is probably the only instrument by which the users’ requirements as to form of the metal may be approximated, and also because it is probably the only contractor who might give assurance of later delivery of nickel to the Government. A contract calling for the return to the Government of nickel pound for pound may be more than we can hope for, but there are lesser blessings more likely to materialize such as an agreement to put the proceeds of sale in escrow and deliver nickel to the full value thereof when production is again available, or perhaps a simple call option at prevailing market price but at a generous rate. The negotiation of the best possible deal is within the capacity as well as the authority of the General Services Administration staff.

Charles H. Kendall
  1. Source: Washington National Records Center, Department of the Treasury, Secretary’s Memos/Correspondence: FRC 56 74 A 7, Classified OEP 1969. No classification marking. Drafted by Kendall on October 27.
  2. P.L. 152, approved June 30, 1949; 63 Stat. 377, as amended.
  3. For text of President Johnson’s statement and memorandum to Federal departments and agencies, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1966, Book II, pp. 1032-1034.
  4. P.L. 117, approved June 7, 1939; 53 Stat. 811, as amended.