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Members and Staff Use Only
Subcommittee on Oversight

To:

D. L. Renberger

From: E. F. Alden

and Investigations

Subject:Fremont Energy Contracts

Enclosed is the original of the letter from the law firm of Wehrli and williams that you had the opportunity yesterday to peruse only shortly. The letter I do not believe contains any new information, however, it does indicate Mr. Houston Williams' concern on our behalf quite strongly.

I will discuss with Mr. Williams why he deemed it necessary at this time to write the letter. indicated by ck Quigley this letter should probably be very limited in distribution.

EFA:sr

99-374 - 78 - 19

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Due to certain developments occurring after our discussion on February 9th, I feel obliged to review our said discussion.

At our meeting, you advised us that WPPSS was contemplating entering into agreements with Fremont Energy Corporation which involved certain lode mining claims in the Red Desert Area of Wyoming. At that time one of my partners, Mr. Porter, and I expressed to you our concern about the validity of these mining claims, which we understand to be some 18,000 in number. You advised us that you had been told that these claims were initially located in 1967 and that you had further been told that the necessary assessment work had been done on each of the claims, comprising $100 for each claim since that time. This would require the expenditure of $1,800,000 per year commencing with the first full year after the claims were located. It was my belief at the time that the likelihood that Fremont Energy had made such expenditures was indeed remote and I had serious doubts whether it had been done.

At that time I also reviewed with you, briefly, the lawsuit in the United States District Court for the District of Wyoming in which Continental Oil Company, our client, was plaintiff, and Natrona Service, Inc. and John MacGuire were defendants. This case was tried over a period of two weeks and resulted in a judgment in favor of the defendants as to a large number of the lode mining claims which had originally been staked by Continental and had been overstaked by MacGuire. The reason for this was that the jury found that continental's staking contractors had not properly validated the claims

under Wyoming law (that is, by the drilling of fifty feet of hole on each claim with no hole less than ten feet in depth). My experience in this case indicates that anyone interested in the acquisition of an interest in lode mining claims in the State of Wyoming must be assured that the mining claims were properly located and validated with the necessary recording in the county involved of location certificates and validation affidavits. The physical location procedure involves placing of discovery monuments on each claim, marking of the four corners and side centers with substantial posts, and the drilling of the validation holes within five feet of the discovery monument. The second concern is that proper assessment work has been done each year, failing which the claims are open to location by other parties.

Our advice to you at that time, and Mr. Porter's letter reiterated it, that in order to evaluate Fremont Energy's title to these claims, we must be assured that the physical work was properly done and that the paper work in the county was in order, with emphasis on the physical work actually done.

I also advised you that Mr. MacGuire had overstaked not only the Continental claims, but also those of Kerr-McGee, Phillips, Union Pacific, and perhaps some others, with the express purpose of invalidating their claims coupled with an overstaking for his own benefit. In deposing Mr. MacGuire on several occasions, we have come to the knowledge that he feels obliged, and we believe has the capability, of similar action in other areas. Therefore, one cannot rest assured that lode claims in Wyoming, or for that matter in other states, will go unchallenged. Particularly is this true because of the great interest shown by the major utilities in uranium deposits in Wyoming. The stakes are high and we must expect contests whenever it is made known that companies are interested in certain areas.

I also advised you that so long as Mr. MacGuire was in the business, we might well expect him to be the one to challenge lode claims. As a matter of fact, his concern goes beyond the mere overstaking of these claims and he is definitely interested in involving public authorities in this matter, both politically and from a criminal prosecution standpoint.

To my

Sometime after our conversation in our offices, we were employed by another out-of-state corporation, in a different area of Wyoming than your company is involved.

This company accepted our recommendation that a physical inspection be made of the claims in which they are interested. knowledge, Mr. MacGuire is the only one equipped to do this and I approved him on behalf of our client to make such an inspection. When I called him, he asked me if our client was either Fremont Energy or WPPSS, for whom we were trying to employ Mr. MacGuire. I asked him why he asked the question and he advised me that he had heard and read in the media the story that Fremont Energy had made some kind of deal with WPPSS and that Fremont Energy was one of the companies, he had been watching. He also told me that he had checked the records on these claims in the county and had done some other investigating and that he was convinced that these claims were invalid. He has offered to exhibit to me his evidence if any client of mine might be interested. I conveyed this offer to you and you advised me that your people did not want to do this. We have, therefore, some forewarning of the fact that the media release attracted Mr. MacGuire's attention and I ust conclude that he definitely will be a problem in the instant dealings your company has with Fremont Energy. You also advised me that, with certain changes, the agreements have been signed between your company and Fremont Energy, notwithstanding our initial conversation, and I am sure you subsequently conveyed this information to the proper people within your company.

I received from you a contract of employment, which I signed, and under which we agreed to undertake whatever title investigation and opinion, concerning validity of claims, Wyoming Statutes and laws, affecting your company's ability to do business within the State of Wyoming. We do not purport to prejudge the status of Fremont Energy's titles, as we have no specific information at this time. However, I again want to reiterate that we are expecting serious problems and before this transaction proceeds much further, it seems to me your company is going to have to quantify our advice and the risks involved.

One reaction your company may have to this letter may well be that you do not wish to employ a firm that undertakes representation with the reservations we have previously expressed. I would understand this. On the other hand, we do not propose, in our work for your company, to do anything

less than we have always done, that is, try to keep you fully advised as to our opinion, whether it is good news or bad. What I am saying, basically, is that we do not propose to go through another major piece of litigation trying to defend mining claims which have not at least substantially been located in accordance with the requirements of the mining laws. We have advised you what the result of such an undertaking will be in the United States District Court for Wyoming, because we have had this experience. I might add at this point that my guess: is that the Conoco claims were in much better shape than we are going to find the claims of Fremont Energy. Again, I am not prejudging the situation. I do not wish to have this letter taken as trying to interfere in your dealings with Fremont Energy. However, you asked my opinion and there it is. We are perfectly willing to examine titles to the Fremont Energy claims and give you our honest opinion about whether they are valid. The quickest and easiest way to test the validity of these claims, in my opinion, would be for you, as the company's attorney, to require solid and unequivocal evidence that Fremont Energy has expended $1,800,000 each year by way of assessment work on these claims. If you do not find this to be the fact, then I can give you my opinion in short order. It will be that as to any claim upon which assessment work has not been done each year, a prima facie case of abandonment is shown and the claims must be promptly relocated from the beginning in order to maintain the title. It seems to me that the first order of business is the determination as to the assessment work. You may expend a lot of time, money and effort examining location certificates, assessment affidavits, as well as a physical inspection (which you advised me you had made while you were in Wyoming which, needless to say, raised some doubts in your mind), and still not reach the basic title question which we have raised.

You may

This letter is written to you in confidence with the belief that this is why you employed this law firm. use it as you see fit, because as far as we are concerned, it is a confidential communication, as your local attorneys, to you, as the client. Anything short of the foregoing advice would be a disservice to you and I do not believe that this is an unduly pessimistic delineation of your possible problems.

We will be glad to discuss further any part of this

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