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[The following letters were subsequently received for the record:]


Washington, D.C., November 3, 1977.
Mr. W. R. MORAN,
Vice President and General Manager, Minerals Exploration Company, Union Oil

Center, P.O. Box 5495, Los Angeles, Calif. DEAR MR. MORAN: Reference is made to my letter of September 22, 1977 and your reply of September 30.

During hearings held on October 14, 1977, Mr. John Atkisson, Subcommittee counsel,

questioned Mr. William Murphy, President, Fremont Energy Corporation concerning his cost estimates of assessment work performed on certain uranium lode mining claims in the Red Desert area of Wyoming by your company, Getty, and Mobil.

Mr. Murphy's estimate for the work done by Union Oil was $500,000; whereas, the figures you furnished totaled $165,781 for drilling and logging 126 holes, or 59,360 feet, on the DM, Mat, and Rob claim groups. Thus, your figures indicate a cost of about $2.79 per foot during the period when the work was accomplished, May 1969 to August 1971.

Questioned about the disparity in the figures, Mr. Murphy indicated that his estimates were based on his knowledge of the industry's current cost of around $6 per foot for drilling and geologic evaluation. He stated that the figures furnished by Union, Getty, and Mobil were "merely a mistake” and that "the information is coming from the wrong man who is not aware of his total cost of his exploration efforts.”

The hearing record is being held open until November 23, 1977, for clarification of this letter, and we would appreciate your comments concerning Mr. Murphy's statements about the accuracy or your figures. For your assistance, enclosed is a copy of the pertinent portion of the hearing transcript relating to the colloquy between Mr. Atkisson and Mr. Murphy, together with a copy of Mr. Murphy's affidavit containing his cost estimates. Sincerely,

JOHN E. Moss,

Chairman, Subcommittee on Oversight and Investigations.


Los Angeles, Calif., November 14, 1977. Hon. JOHN E. Moss, Chairman, Subcommittee on Oversight and Investigations, House of Representatives,

Washington, D.C. DEAR SIR: This is in reply to your letter of November 2, 1977, concerning the testimony of Mr. William Murphy, President, Fremont Energy Corporation, concerning his cost estimates of assessment work performed by Union's subsidiary Minerals Exploration Company on certain uranium lode mining claims. Your letter has just reached me as this is my first day in the office after an overseas trip.

Concerning the questions you raised, please be advised as follows:

Union's figures for assessment work of $165,781 for drilling and logging 126 holes (59,360 feet) on the DM, Mat and Rob claim groups (the only groups among those listed by you in your letter of September 27, 1977, in which we had interest) are correct. This work was accomplished between May, 1969 and August, 1971, at a cost of approximately $2.79 per foot. Mr. Murphy stated in his affidavit that Union performed $500,000 worth of assessment work on these claims during the period they were held by Union. Only $76,600 assessment work was necessary each year on these claims, so obviously nothing like $500,000 worth of work was required.

Mr. Murphy states that his estimates were based on industry's current cost of around $6.00 per foot for drilling and geologic evalution. Bear in mind that our figures involve assessment work done prior August, 1971. We wish to stress the dates during which this work was done. We expended nothing on the claims in question after August, 1971.

The only additional sums that Union expended which were not included in the figures furnished you was a $10,000 overhead charge which was charged to Petro Nuclear, Ltd. (predecessor in interest to Silver Bell) to cover home office and similar expenses. This amount was not included in assessment affidavits because, in our opinion, overhead should not properly be considered assessment work under the 1872 Mining Act. In any event, this would add only about $16,000 to total expenditures.

Union's figures were not "merely a mistake," and the information furnished you was compiled by Minerals Exploration Company's Vice President and Administrative Services Manager, who were directly responsible for budgeting and conducting the exploration and recording the assessment work in the Company accounts.

With respect to Mr. Murphy's statement [Exhibit 6 dated September 19, 1977, p. 2, paragraph 5(b)] "Neither Fremont nor I am in possession of the accounting data which comprise this figure .. under the Agreement of May 9, 1969 between Petro-Nuclear, Ltd. and Minerals Exploration Company, Petro-Nuclear had the right of audit. Audits of our books were made in our Los Angeles offices personally by Mr. Murphy and his attorney, Thomas J. Constantine, on October 27, 28 and 29, 1970; June 2, 1971, and July 6, 7, and 8, 1972.

I trust this answers the questions raised in your November 2, 1977, letter. If we can be of further assistance please let us know. Sincerely yours,


Vice President and General Manager. Mr. ATKISSON. You will find on page 3 of that document for the claims here in question, a total expenditure of $165,781. It is not quite so far a cry but nevertheless a pretty healthy cry from $500,000, wouldn't you agree?

Mr. MURPHY. May I point out one thing?
Mr. ATKISSON. Certainly.

Mr. MURPHY. I believe Getty Oil itself has presented papers at professional meetings in recent years that would indicate their exploration costs for uranium in Wyoming are running very near the figure of $6 per foot that I put forward.

Mr. ATKISSON. Can you imagine any of these three large oil companies would want to lie to us about this?

Mr. MURPHY. They are not lying. It is merely a mistake. The information is coming from the wrong man who is not aware of the total cost of his exploration efforts.

Mr. ATKISSON. By the way, the figures that you mention that Getty itself has presented around the country-and I know they have-represents costs now, do they not? We are talking about costs or a long time ago—like 7 or 8 years. We are also talking about very specific claims. These oil companies asked their accountants to figure out how much money of this required assessment work was actually spent on specific claims.

Unless the accounting methods themselves are completely askew, then I don't know about it. All the companies have responded and they have all responded with figures egregiously below the figures you included in your affidavit.

Mr. MURPHY. I grant you that. My figures certainly were presented in the light in which I calculated them. There is no misrepresentation there. Certainly they are subject to correction.

Mr. ATKISSON. I appreciate that. I am not suggesting that you were doing anything like that. You qualified the figures when you presented them, but I wanted to point out that you indicated that about $1.3 million had been spent by those three companies alone. It actually turns out to be roughly a quarter of a million dollars. There is really quite a difference.

I would like to also turn to one other item in your affidavit. That is the first one. You indicate that Petro-Nuclear, Ltd., spent $576,000.

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he was.

In this instance I take it your estimate is not quite so rough, otherwise it would be $575,000.

Mr. MURPHY. I have some recollection of that particular item which was an accounting item when Petro-Nuclear disposed of the claims.

Mr. ATKISSON. Do you have anything to do with Petro-Nuclear? Mr. MURPHY. I was president.

Mr. ATKISSON. I will quote for the record a communication to the staff from Mr. Eugene Stevens. By the way, Mr. Eugene Stevens is part of Petro-Nuclear, isn't he?

Mr. MURPHY. He was. He was a substantial shareholder and was a member of the board of directors throughout its existence. Excuse me, let me correct that-for the last several years of its existence

Mr. ATKISSON. This is the same Eugene Stevens that has come up from time to time today.

Mr. MURPHY. Yes.
Mr. ATKISSON. The communication from Stevens reads as follows:

I was on the board of directors of Petro-Nuclear up until it merged with Silver Bell Industries in 1972 and never heard of any such expenditure.

This is in reference to the $576,000. And furthermore, I believe that an examination of Petro-Nuclear's books and bank accounts will show that it never had anything like that much money and certainly did not spend it on assessment work on those Red Desert claims.

I would like for you to comment on that.

Mr. MURPHY. Mr. Stevens is quite senile now. He has demonstrated time after time I would like to document that. I do not have it in my possession at the moment. I didn't think it important. I don't know if it is recoverable but that was an actual audited figure. My recollection is that Petro-Nuclear spent $4 million directly through its own hands in exploration on public domain and joint ventured with other people who spent many millions more. These can be documented.

Mr. ATKISSON. May I ask that you supply this material for the record, and I will ask the Chair to hold open the record at this point, pending receipt of the documentation.

Mr. MURPHY. I will attempt to recover it.

Mr. ATKISSON. I will state also for the record that the staff has visited with Mr. Stevens and they did not find him senile.

Mr. LUKEN. Without objection, the record will be held open to receive the information from Mr. Murphy.

The following statement and document was received for the record:)

[No documentation was supplied by Mr. Murphy to support the alleged expenditure of $576,000 by Petro-Nuclear, Ltd. on the Red Desert claims in question. However Mr. Murphy submitted, as the most relevant document, a letter to share holders, dated October 31, 1972, which makes only general reference to historical expenditures by Petro-Nuclear, Ltd., and others in the five western States. The document follows:]

Leller to Sharedeys:

During the poijt yrit te filme and for painiin us in "environinentally cle::d?" roure? of fuel for tlic je nosition of electric power has grophically 0910 into incus or all :56:9:;ts of society overvint, industry, and the thinking public. A thorough review of ull 1.01:1::070y, Viiumantal

pärit slunics, and 127:52))} it.y “loriin; of ilionile urls have essentially 20solved the Inars raisdiereening Lidioactive and therinal pollution and in the resounding choice of nuclcar power to supply us cloin, s.3se, und adeguaic generating capacity for a substantial portion of the Sries world power requirements through the year 2000 AD and beyond.

Your company over the past six years, confident of urnit:n's futive role 25 a fuel for Cloctric poiier generation, 12:::::....::0723 :!:452 C1i ini!! :cision.ct of lic Pilotion cííört io fi!si:à civil? Souncis of ironiL:n. vast areas of continental United States were explored. Apieroximately 500,000 acres of mining clains in vivoning, Colorijo, litch, New Mexico and Cölifornia were selected and üreuired for bore detailed oploration. Your company, through its independent efforts, has split in css of $4,000,000 in sceniring and cvaluating this crr:1;2. Oier 0:00's in joint venture Hith PcTorn:lear lid. or participating in fam-out rrajenis on Pirovucl...1: 10-oriy have and several accitional millions of Holler's in comploration cílout.

is properly evaluations progressed, the loss pronising prospects hire disposed of or ritien off as c cost of cloration. Such write-offs are reflected in our financial statemenis is operating losses. In August, 1972 Fetro transferred mining clains in this category üiproxinating 160,000 ücres to its subsidiary Silvertip Exploration Company 2!1d sold Silvertip Exploration Company to iront ilye Oil & Uranium of Denver, Colorico for norinal Consicigration. is uisposition of property, along with oilier .b::

no:rents, resulted in write-offs of $76,593 for fiscal 1971 and $410,3.15 for the first cight onths of fiscal 1972. In z sinilar vein, on Mach 10, 1971 Petro sold 17,000 acres of nining claims to Pollution Conirol & Finciring Co. of Casper, heping or 350,000 shares of its jove::t:0!it síock. is sinek 125 plüced on Petro's books at $213,750, the quoted bid price on the O'PC market on date of closing. Since that due PC & E is no longer quotes by securities dealers uild the company has been unable to cieterning a Cirrying value for this security. In Sepicber, 1372 tine copiny direichni 10 Tit down the carrying value of ils 350,000 shares of PC & E to its por value of 10 - $3,500. This action will 7150 reflect as a loss of $215,250 on the 1972 financial stazioniert.s.


The 130,000 plus acres remaining in Pt10-kuc)cor lid. iter this rigorous selection, have been siz!) ji:cle io cxicinsive exploration. Several areas which contzin :7.10;tant reserves hüve berin dolincated by closc space developicit illing. Ndiwithstonding the development delay recently experiencrit !sy die uranium industry, the management and start of your company re enthusiastic regarding our exploration 10:11]15 nd the possibilitics of soon attaining significant production. A brief recap of exploration resulis is as follows:

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ile' ).:;(:) 00:5 word?cd 1. ill olid invinog vi.:strict: at Green Rivis, Utah. On the bar:i:; of th: !1W 10:11ve3, iletins Muelcür Jud. 18:33 il tema:d into a litt1:of jitrnt with continental Oil Company to le:c the Green Riv!r l'80sly to tlir:in for lovelopent. It is anticipated that continental will conduct pilot injning and inilling operations using the two year. len:0 ton. Continential will pay a cash considerition for the loire plus a royally on pinduction. Tithe leis further sive: Continentil the option to acquire the property sor cash or cash plus royalties.

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A new and significent nineral trend w2: d(0)oped in the Shirlcy Basin mining province of liyoning. As previously announced, a total of 1,500 holes were drilled on the AB caits in Shirley pasin. This drilling outlined a mincializvelire:14.0 miles long ly 1,00' wi!!!?. Din of naal12:111105 frein Quicrop to 230' in dcpih. Silvics by the company's staff indicate that large portions of this trond can be mine:d profitably. Substantial capital investment will be required io put this properly into procuction and arrangeants io! 31.0t the U308 will have to le finalized.

During 1971 :1d 1972 Crk on th:0:50 C): consisted of actitional coring, het?)):rgical sturiics, 15.d revision of LC!C:hic analysis by the cup!2y's stiff. P?4.15 10 Harket 10. 13?. Tron this deposit and arrangexnts in finance procüctiun°íacilities have not yet een cop.letid.


A large new vranium province was discovered in the central Great Divice Easin or "Red Desert" area of zoming and is being developed in joint venture with minerals Explorition Company la wholly Cined :57::siniz:y of thion Oil of Cali?oini.). mexco has purch?sed a 15% interest in the venture and under tire terms of the agreement has the ri;nt to acquire in additional 50% interest.

A total of over 2,000,000 lineal 10ot of drilling has encountered several trends of mineralization with a total length in excess of 20 miles. Cnc inile of irond designated the TRE area was selectively drilled to a 50' conter grid pattern. in additional 4 i les of trend Cesignaled the CRE area nas con drilled to a 200' (nier grid pattern. Overvreen on the 91-CE ini nerali:ation varic: froin O' at outcrop to 230'. There is seologic evidence lo picsune that this trend will continue across Detro properly within stripping 1::ge. This presumption can only be af.livincd by additional willing. Although the ove!?? 98102 of these posits is relatively low, Whe impros: ive thi(1:10:365 indicate soud de l'ic? 0:55 wiin !icarral.e översurcan. Tie Balence of 12 milovali::..07 (2npois encountered thus far are drillid at sich wicie spucing that

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