URANIUM LODE MINING CLAIMS ON FEDERAL

LANDS

FRIDAY, OCTOBER 14, 1977

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The subcommittee met, pursuant to notice at 10:30 a.m., in room 2123, Rayburn House Office Building, Hon. John E. Moss (chairman) presiding.

Mr. Moss. The subcommittee will be in order.

We continue this morning with hearings on uranium lode mining claims in Far Western States, concentrating as we did yesterday on claims practices in the State of Wyoming.

Those practices, it now appears, may not easily bear the unprecedented scrutiny given them by this subcommittee. Allegations, very serious allegations, were articulated in this room yesterday, which thus far stand unanswered. They involve violations of law, and in some instances, criminal law. For that reason I urge our witnesses today to be especially alert to the consequences of their answers to questions posed by this subcommittee.

Of perhaps more importance, yesterday's record yields a mosaic of activities which fly in the teeth of the spirit of the Federal Mining Act-activities which are apparently condoned, if not actually encouraged, by some of the large, and growing larger, energy conglomerates of this country.

Our two main witnesses this morning are the chairman of the board and the president of the Fremont Energy Corp. which controls certain uranium claims in the west Red Desert area of Wyoming. Moreover, both men are experienced uranium claimstakers.

First, however, we will hear briefly from the subcommittee energy task force director, Dr. John Galloway, who will explain the significance of these particular claims and the nature of Fremont's contractual agreement with a large western utility system. Dr. Galloway?

Do you solemnly swear that the testimony you are about to give the subcommittee will be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. GALLOWAY. I do.

Mr. Moss. Would you identify yourself?

(45)

TESTIMONY OF JOHN R. GALLOWAY, DIRECTOR, ENERGY TASK FORCE, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE

Mr. GALLOWAY. I am John Galloway, Director of the subcommittee's Energy Task Force.

The purpose of my appearance today is to read into the record a staff memorandum outlining the agreement between Washington Public Power Supply System and Fremont Energy Corp. relative to 18,000 uranium claims in Wyoming.

On March 14, 1977, Washington Public Power Supply System entered into an agreement with Fremont Energy Corp. of Denver, Colo., for the mineral rights to 18,000 uranium claims in the Red Desert of Wyoming. These 18,000 claims represent one of the largest contiguous uranium claim areas in the United States.

Washington Public Power Supply System is a municipally-owned corporation that generates and sells electric power to 115 participating utilities in the Pacific Northwest.

The agreement between Washington Public Power and Fremont Energy Corp. calls for Washington Public Power to provide between $1.5 million and $2 million in exploration funds over the next 2 or 3 years. Upon the expenditure of that money, to be managed by Fremont, Washington Public Power will be entitled to exercise its option to acquire Fremont's Red Desert claims. Should Washington Public Power exercise that option, Fremont would be entitled to a $1 per pound discovery bonus on 50 percent of the indicated ore reserves acquired by Washington Public Power. In the event of production, Fremont would be entitled to a 10 percent in kind royalty interest on U.O concentrate-yellowcake-and all other minerals to increase to 30 percent 3 years after initial production.

The $1 to $2 million in exploration money to be supplied by Washington Public Power Supply System was raised by a $145 million March 1977 public bond offering of which $45 million was earmarked for the acquisition and exploration of uranium-bearing lands.

Fremont's 18,000 Red Desert claims cover 365,000 acres or 570 square miles. In 1976 Fremont issued 600,000 shares of stock to Silvertip Exploration Corp. for approximately 4,000 uranium lode mining claims in the Red Desert, plus some other claims and royalties. The sole stockholder of Silvertip Exploration was William J. Murphy, the president of Fremont Energy Corp.

In 1977 Fremont obtained from Ralph L. Schauss, chairman of Fremont's board of directors, approximately 9,200 uranium mining claims, contiguous to those obtained from Mr. Murphy's Silvertip Exploration Corp., for $150,000-$30,000 in cash and the balance in Fremont stock.

As far as can be determined, all of the claims ultimately acquired by Fremont, and subject to the agreement with Washington Public Power, were located in 1968 and 1969 by Mr. Schauss and Mr. Murphy, and an associate, Col. Eugene Stevens. With some exception, the actual staking of the claims was done by a Mr. E. L. Gibson, who worked for Mr. Schauss.

Prior to their being acquired by Mr. Murphy's Silvertip Exploration Corp. for sale to Fremont, the claims were held by companies closely associated with Messrs. Schauss and Murphy, including Petro-Nuclear, Ltd., of which Mr. Murphy was president and Mr. Schauss, secretary, and Nuclear Reserves, Inc.

For a number of years Mr. Schauss filed assessment affidavits for many of the 9,200 claims in his name attesting that the assessment work had been performed by Crazy Woman Creek Mining Co., Poison Spider Mining Co., and Whiskey Gap Mining Co. The officers and directors of all three companies consisted of Mr. Schauss, his wife, and son.

Apart from the approximately 13,200 claims which Fremont Energy Corp. obtained from Mr. Schauss and from Mr. Murphy's Silvertip Exploration Co., an additional 4,100 claims are involved in the Washington Public Power transaction. These involve claims that were held by Pollution Control and Engineering, whose name was changed to Fremont Energy Corp. in 1976.

The issues posed by Washington Public Power Supply System's contract with Fremont Energy Corp. are several. Under Federal and Wyoming State law, mining claims on public lands must be marked by "six substantial monuments of stone or posts" following which the claimant must drill a minimum of 50 feet of hole within the next 60 days. Preliminary subcommittee staff inquiry suggests that these requirements may not have been adhered to on many of the Red Desert claims optioned to Washington Public Power. That, in turn, suggests that the title to these claims may be defective and may be challenged by a third party.

Further, subcommittee inquiry suggests that the required $100 per claim, per year assessment work similarly has not been performed which may further cloud title to these claims.

Washington Public Power Supply System's vulnerability concerning possible defects in the title to the claims optioned to it by Fremont Energy Corp. should be a matter of utmost concern to electric utilities throughout the Nation who, because of an increasing shortage of yellowcake, are considering similar acquisitions of uranium claims.

The overriding issue, however, is one that transcends the immediate financial interest of utilities and utility rate payers. Fremont Energy Corp. and Washington Public Power's uranium interests in the Red Desert encompasses an area, which 8 or 9 years after the original staking, remains virtually unexplored. Notwithstanding, a geologist engaged by Fremont has reported that the area may 'ultimately compare favorably with or probably surpass the uranium production from any of the other major districts in Wyoming." Other geologists see little uranium potential in this area of the Red Desert.

But one fact is clear. Had the $100-per-claim-per-year assessment work contemplated by the 1872 Federal Mining Act been performed on these claims, the resulting $10 million exploratory effort would doubtlessly by now have determined the true uranium potential of the Red Desert.

The failure to perform assessment work on these and other uranium claims throughout the West has accordingly delayed the discovery development of new uranium reserves.

Thank you, Mr. Chairman.

Mr. Moss. Thank you.

The Chair now recognizes the distinguished Member of this House, Congressman Roncalio, who is going to introduce to the committee the next witness.

STATEMENT OF HON. TENO RONCALIO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING

Mr. RONCALIO. Thank you very much, Mr. Chairman.

Mr. Chairman, I am due upstairs with our friend on your committee and my cochairman, John Dingell, to begin a hearing on the matter required by law by the end of this year regarding the Alaskan gas transportation matter, so I will take my leave after introducing my constituent, Ralph Schauss.

I could not help but be impressed by the statement that has just been read to this committee, Mr. Chairman. For a minute I thought I was supposed to appear with a subpena because I happen to own 23 miles of gold claims in Wyoming. I am quite familiar with the laws that require affidavits filed each year and the work done to go to assessment.

Uranium is where it is found, let me say to this committee. Gold is where it is found, not where somebody else says it might be and where it can be commercially recoverable.

I would say, Mr. Chairman, that if this committee finds wrongdoing that is criminal, then prosecution should ensue and let the chips fall where they may. If you find there should be changes in the law by which the mining of this Nation is carried on, then let us know and my subcommittee, the Subcommittee on Public Lands, will make those changes in the statutes governing filing requirements. Our Interior Committee chairman, "Mo" Udall, has been trying for 5 years to change the 1872 Mining Act.

A predecessor of ours that we knew and respected, Wayne Aspinal, tried before he left to make many acceptable changes to the 1872 Mining Act. It is not quite that simple. It reminded me yesterday morning of the Massachusetts Indian problem with the non-Indians, and what do we do to hold-harmless the non-Indians of that area against record title claims against them. These are tremendously complex issues.

But I stand ready to help you, Mr. Chairman, in whatever is the best thing to do in the interest of resource development, legally and properly, and in keeping consumer rates down.

I take great pleasure in introducing Ralph Schauss for another reason. He and I probably represent the two flanks of legitimate political systems in Wyoming. He is an archrightist and "hell be damned" Republican conservative. I pride myself on being an F.D.R. dynamic Democrat who believes that capitalism should have a conscience.

Mr. Schauss has risen from the most adverse shocking terms of poverty known in this beloved country of ours and has made out of himself a respected businessman and the owner of a multimillion dollar Ramada Inn at Casper. His passion is prospecting. He has prospected in Canada, and in most every Western State. He has made money and he has lost money prospecting. That is his life and passion.

I commend him, however diverse our political ideology, for the contribution to the political processes. He also, I suspect, recognizes perhaps that the answer lies in between the two flanks that he and so enthusiastically embrace in politics in our beloved Wyoming. I hope that he, as well as others, from Wyoming here today can help you come to a conclusion in your work. I am delighted to know that our State can have men who have risen from the poverty of their boyhood to noteworthy accomplishments, whether their fields have been moneymaking or lawmaking or whatever.

That is all I have to say.

Mr. Moss. Thank you.

Mr. Schauss, would you stand and be sworn?

Do you solemnly swear the testimony you are about to give this subcommittee shall be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. SCHAUSs. I do.

Mr. Moss. Would you identify yourself to the clerk for the hearing?

TESTIMONY OF RALPH L. SCHAUSS, CHAIRMAN OF THE BOARD, FREMONT ENERGY CORP., DENVER, COLO., ACCOMPANIED BY THOMAS J. CONSTANTINE, COUNSEL

Mr. SCHAUSS. My name is Ralph L. Schauss.

Mr. Moss. As chairman of this subcommittee, I would like to direct a statement to you.

You were given a copy of the subcommittee rules prior to your appearance here today. You are then aware of your right to counsel. I am informed that you are accompanied by counsel; is that correct?

Mr. SCHAUSS. Yes.

Mr. Moss. I think you should also be aware that under the rules of the House and the fifth amendment of the Constitution of the United States that you have a right to remain silent if you believe your answer may tend to incriminate you.

You should also understand that any testimony you may give could be forwarded by the subcommittee to the appropriate authorities for determination as to prosecution or whatever other action they might deem appropriate.

Do you understand this fully?

Mr. SCHAUSS. Yes.

Mr. Moss. I understand you have a statement which you would like to give to the committee. If so, you may present it.

Mr. SCHAUSS. My name is Ralph Schauss. I am the president of Ramada Corp. of Casper, Wyo., sometimes referred to as the Nation's largest Ramada Inn, which I founded in my hometown of Casper in 1965.

I am also chairman of the board of Fremont Energy Corp., a publicly held corporation with offices in Denver, Colo. We are a capable, and I believe a responsible, company engaged in serious energy exploration and development of natural resources on the public domain.

Due to my prospecting and exploration work several major ore bodies have been discovered. During the past 25 years I have had discussion and optioned various properties to dozens of mining