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PUBLIC RESOURCE ASSOCIATES

Attachment to Testimony
of Putnam Livermore

on H.R. 918

The Bill should incorporate, at the outset, "Findings" that recognize certain facts and principles, such as the following

language:

Whereas, hardrock mining makes substantial contributions to the Nation's tax and employment base, especially in rural

counties and in the Western states where the United States is

the principal landowner; and
• Whereas, the mining industry's contribution both to the
standard of living and the international balance of payments

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requirement that distinguishes it from other industrial activity, in that the mine must be sited where the ore is; and

Whereas, maximum access and self-initiation, and reward for discovery of commercial minerals, are necessary incentives to maintaining a healthy hardrock mining industry; and

Whereas, mining should be conducted in such a way as to avoid undue and unnecessary degradation and to minimize adverse environmental impacts; and · Whereas, mining requires adverse environmental impact, and mine regulation should not prevent adverse impacts, except in areas which are sensitive environmentally, but should control and mitigate impacts; and • Whereas, regulation of mining must be cost beneficial, both PUBLIC RESOURCE ASSOCIATES

on the local and the national level; and whereas, on the local
level Dining is frequently the highest and best use of
multiple use, public land; and whereas, on the national level,
laws and regulations should not unnecessarily adversely affect
the competitive position of the U.S. hardrock mining industry,
or otherwise encourage that industry to move offshore; and

Whereas, some of the principles underlying the Mining Lax
of 1872 are inconsistent with modern public land management;

and

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Whereas, it is not in the public interest to transfer
ownership of public lands to private interests after
extraction of the underlying minerals;
Now, therefore, be it enacted, etc....

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Mr. RAHALL. Thank you very much, gentlemen. Let me begin by thanking this panel, because it represents individuals who have been extremely instructive and forthright with me and my staff on the issues raised by the pending legislation, and I want to thank you very much and express my hopes that we will continue to be working together on this.

Gerry, let me ask you a question to begin with, and let me state with respect to a matter that was raised in your submitted testimony that we are in the process of completing a detailed study on the scope of existing State mining reclamation laws and regulations. We have already reviewed the relatively broad comparisons between Federal and State laws that have been produced under contract with the EPA, and I know that the people associated with energy fuels have copies of these documents, and I will make sure that you receive a copy of the internal analysis as well.

While the focus of your submitted statement was on the environmental aspects of the bill, I would like to ask you a question about diligent development. Basically, you pretty much have the entire Arizona strip covered with claims. Now say that Paul Willmott there wants to come and have a go at some of the same property. What basically are his options?

Mr. GRANDEY. Under the assumption that we really don't have the entire area covered

Mr. RAHALL. Well, the assumption, yes.

Mr. GRANDEY. If we did, or if we had sort of an exclusive hold on the area and another company or individual wanted to come and explore the area, then generally what would go on is that they would sit down and try to negotiate either a lease or an acquisition or a joint venture on those properties, and, depending upon the need that we would have for speed of development or capital or whatever, we would be more than happy to entertain those kinds of discussions. Those kinds of things go on all the time in an area where an operator has been established for quite a while and somebody else wants to come in.

Mr. RAHALL. So it is all just gentlemanly discussion and negotiation?

Mr. GRANDEY. Negotiation, not always gentlemanly, but it is negotiation.

I think under the present regime where we have got to spend or do a certain amount of work per year, and this is the assessment work obligation that, when you have got a fairly large claim holding, as we do down there, you know, $100 per claim, while it doesn't sound a lot per claim, does begin to add up to some fairly sizable dollars.

So one of the programs that we follow religiously is to pare back and reduce the amount of holdings we have just as quickly as we possibly can. As we do that, we have probably dropped by 70 percent our initial claim holdings in the Arizona strip, so we are now down to 30 percent of where we started out, say, in 1980 or 1981 as we dropped. Because we believe that we have exhausted the research of that particular area, the evaluation of that particular area, it becomes open again for somebody else with a better idea, with more perseverance,

to once again stake it.

Mr. RAHALL. Evidently you are paying the $100 diligent develop ment.

Mr. GRANDEY. We do the assessment work annually that is te quired, yes.

Mr. RAHALL. Paul, do you wish to make a comment on that?

Mr. WILLMOTT. I perhaps brought up the diligence aspect in the conversation I had with you on the Canadian side, and I am not prepared, Congressman, to go into all the detail on the diligence. I will supply you with a comparison of the diligence procedures that exist in Canada, say, to the United States.

But I concur with Gerry's point, except that there are areas and there are times when there are large groups of claims put in which do preclude some companies from getting into an area for perhaps a long period of time. But it follows basically what Gerry said. If you want to get in, you have to get in and negotiate.

Mr. RAHALL. Let me ask you a question about the King Solomon Mine of your vein. Specifically, it is my understanding that you pay a Federal royalty on a portion of your production there that is, when you are in production status-while on other Federal lands that are part of the mine you do not. Could you explain this situation?

Mr. WILLMOTT. It would be an answer that would go back to some of the concerns raised earlier by Congressman DeFazio on royalties in different places. Just from Umetco's point of view, back in the heyday of uranium, the Atomic Energy Commission with drew land from the Colorado Plateau. It turned out that the land in the King Solomon was a claim that we had. We filed the claim, and the Government came along and withdrew it away from us along with a large block of uranium-bearing ground out there, and then

came back in the seventies and bid it back out to the mining companies, and we were successful bidder on the King Solomon ground, and they assessed a royalty on the basis of uranium and vanadium, and we have, in total to date, spent somewhere in the neighborhood of $30 million in total money. Altogether, in total dollars, in today's money, it would be more in the neighborhood of $70 million that we have spent or paid the Federal Government on royalties on that land.

On the whole subject of royalties, it seemed to come out that we weren't paying anything, but, again, we pay Utah State royalties, 6 percent on the leases in the State of Utah; we pay severance tax to all of the States; there is a myriad of royalties, if you will, that are paid by a company like Umetco in our business.

On King Solomon specifically, it has been $30 million in royalties that went to the Federal Government, roughly 50/50 on uranium and vanadium.

Mr. RAHALL. How is the royalty calculated?

Mr. WILLMOTT. It is based upon the value of the ore. They put together a schedule based upon price. It is all well documented in the Federal Register. I did supply that to you.

Mr. RAHALL OK.
Has this royalty made you any less competitive?

Mr. WILLMOTT. It did not on the uranium side originally, Congressman, but it has in the last few years. We have stopped mining the King Solomon because of the royalty.

As an example there, a royalty can in this instance restrict us, and there are some Utah State leases that we are currently not mining because the royalty is prohibitive in today's poor uranium market.

Mr. RAHALL. Mr. Livermore, let me ask you, if you would, to explore with me your suggestion that you made regarding the areas of critical environmental concern. If I understand you correctly, you are saying that the planning provisions of the bill seek to identify the wrong thing or, rather, a somewhat difficult thing to identify-that is, the presence of a mineralization and trying to anticipate the consequences of possible development scenarios of those minerals.

Mr. LIVERMORE. Yes, that is what I believe. Mr. RAHALL. Instead, you believe that the focus should be on identifying other resource values and then try to determine whether mining can take place with due consideration given to these other values.

Mr. LIVERMORE. That is correct, Mr. Chairman. I think the focus is on the wrong direction and also in a direction that is very, very difficult to quantify, whereas if the focus is on the sensitive areas themselves, that is what needs to be protected, and so that this could be a part of a process, which process is not yet, I should say, in the bill, there is no procedure that has been developed, but we believe it could be developed so that you would identify the sensitive areas and have up front standards to protect those areas that the miner would know up front, and then other areas that would not be sensitive could be subject to review and withdrawn from the status they are in.

Mr. RAHALL. Let me ask you about your idea on utilizing the ACEC's. Am I incorrect in thinking that the BLM already can designate ACEC's?

Mr. LIVERMORE. That is correct. There are ACEC's in existence, and that is why our group thought, and we talked to some conservation representatives about this, and they would say, well, they weren't too sure about whether you could expand that concept to provide the vehicle for doing what I just described. But Tom Barrett of our group, who works with us, has suggested to us that we should take another look at that, because you do have a vehicle right there

Mr. RAHALL. Perhaps I am missing something. Then what is new in what you are suggesting?

Mr. LIVERMORE. Well, there is nothing new, except that if you expanded ACEC's, then this could be a solution to the land use planning. It is not currently a vehicle which is used or capable of that, but I think if some study group, got together and took a look at this, you are not faced with a whole fearsome new vehicle which, as I said in my report here, could be used to ratchet more lands into withdrawal but could be studied, perhaps amended, and could evolve into a vehicle which would be an alternative, Mr. Chairman, to either withdrawing lands or just having the present situation either open or closed.

Mr. RAHALL. Let me say that I fully agree with your position that we should endeavor to make restrictions known to a developer up front when going into an area rather than after the fact. This

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