that some of these leases represented hundreds of thousands of dollars net profit to the lucky applicant. In an effort to arrive at a more satisfactory method of selecting lessees, the Commission asked the UOPA for its suggestions. Accordingly, the association, having already considered the ramifications of this problem for over a year, drew up its ideas in proposal form and conferred with the AEC. At the present time, the Commission is considering these proposals favorably, and it is believed mutual agreement will be reached in the near future. Basically, the proposals insisted upon are: 1. That representatives of the industry be present to observe the manner in which applications are selected; 2. That acceptable applications be selected and put into a hat and the final selection then be decided by a lottery; 3. That final drawings be made public and all unqualified applicants be advised as to the reason their application was not included in the particular lottery. DIRECTED ORE CLAUSE It has always been contended by the independent producers, especially those operating under Atomic Energy Commission leases, that the directed-ore clause has been and still is responsible for a large percentage of the existing inequities in the uranium raw materials procurement program. Originally, the directedore clauses were inserted in the leases to insure a steady and sufficient supply of ore to all mills to assure capacity operation. Special concessions were incorporated in the AEC-negotiated contract with the United States, Vanadium Corp., assuring them of definite percentages of all ore produced from Government leases in consideration of various expansion programs undertaken by this company. As an added incentive, this company was awarded several attractive leases on drilled-out Government ore bodies. It is decidedly a moot question if these concessions were necessary in the first place, as the USV had a long history of successful operation in the uranium-vanadium industry, and this expansion would undoubtedly have occurred as a matter of good business policy. The general opinion prevailing that these conciliatory agreements and conditions were necessary and altruistically accepted by the USV might very well be questioned from a practical business standpoint. Right or wrong, the agreements were made; and since then, the directed-ore clause has resulted in many abuses in the program. Carelessly constructed and operated sampling plants, poor assay practices, improper moisture sampling technique, poor producer-buyer relationship, lack of faith by the producers in the AEC in failing to properly police the program were the immediate results. In addition, the particular ore purchasers are not inclined to explore, develop, or mine their own properties; nor do they find it necessary, due to the lack of competition for directed ore, to extend themselves in giving more favorable contracts or sublease to obtain more ore from their own claims. It is common knowledge that lessees mining on USV claims are in many instances operating under company-curtailed quotas. There is irrefutable proof that, due to the directed-ore clause, the USV is not pushing production from its own properties. It appears obvious that the present discovery rate of ore bodies is such that the ore supply is more than sufficient to keep the company-owned mills at capacity operation. Thus, it seems that the burden of obtaining ore for the mills should be placed upon the shoulders of the mills instead of upon the AEC or taxpayers. A unique situation exists on the Government ground under lease to the USV. The company, in turn, subleases or contracts the mining to individuals (in many instances the same individuals who originally applied for part of the same ground); and the company, even though nonoperating under the lease agreement, receives an overriding royalty from the ore produced-in many instances amounting to 50 or 60 percent of the gross. This is vaguely justified as a reward for managing and bookkeeping expense-thus taking the burden from the AEC. Naturally, this profit should be divided between the actual sublessee-producer and the AEC-or to put it bluntly-the taxpayer. The directed ore clause materially affects even those producers not operating under a Government lease, as bonuses, premiums, and additional trucking allowances for higher grade ore (a former practice of the milling companies) have become almost nonexistent at these favored plants. This practice still prevails at other mills. The inequities caused by the directed-ore clause cannot be passed over lightly as they represent appreciable losses to the producers and unquestionable favoritism to certain ore buyers. It would be as wrong to endeavor to correct the individual complaints without eliminating the source of the complaints as it would be to simply medicate the sores resulting from a disease without endeavoring to eradicate from the system the disease itself. If an endeavor is made to correct the individual complaints (as in the case of the sampling plants) without eliminating the directed-ore clause, other complaints will appear as the occasions arise; and the program will continue to be on a noncompetitive discriminatory basis. It is axiomatic that favortism breeds discontent upon the part of the less fortunate ones and arrogance upon the part of the favored. This has certainly been true in the case of the directed-ore clause. If the directed-ore clause were deleted from all contracts: 1. The mills would again compete on an equal basis for ores, paying bonuses and permiums for higher-grade ores. 2. The producer-buyer relationship would smooth out. disappear. 3. The mills would put their own houses in order: (a) Sampling plants would be correct. (b) Assay results would be carefully checked. (c) Moisture sampling technique would be corrected. (d) Umpire assayers would be accepted. (e) Inequities in price schedules would be nonexistent. Dissention would (f) Inequities in stockpiling and blending would be nonexistent. (g) Inequities in weighing and ore delivery delays would be nonexistent. 4. The independent producers' faith in the AEC as a regulating and unbiased governing medium would be greatly enhanced. 5. An ore-buying industry on a competitive basis would, through better buyerseller relationship, insure a steady and sufficient supply of ore to all mills to assure capacity operation. In any sensible analysis of the problem, it is difficult not to appeal to the commonsense of the people directing the AEC program-to remind them that it is their direct responsibility to look out for the interests of all the people connected with the program. In this, they are certainly not without precedent or directives, in that the Atomic Energy Act of 1946 states, under "Declaration of Policy": ***** it is hereby declared to be the policy * * * (that) *** the development and utilization of atomic energy shall * * * be directed toward improving the public welfare, increasing the standard of living, strengthening free competition in private enterprise * * *." It seems reasonable to assume the above statement includes the procurement of "source materials." There is every evidence indicating a possible future monopoly in this field, with the USV holding extremely large reserves after everyone else's land has become depleted. It is believed the full and economical devlopment of the uranium industry in the Colorado plateau area is essential to national security, and we sincerely maintain this cannot possibly be accomplished unless upon a nondiscriminatory basis. PRICE SCHEDULE FOR URANIUM ORES The prices for uranium and vanadium ores are arbitrarily set by the Government. The independent miners take the position that the prices for these ores should be realistic and should be based upon average costs of production throughout the area. During 1948 and 1949, the AEC operated one of its own properties in the Slick Rock district in an effort to determine actual mining costs. These figures have never been published; and subsequent to the Government operation, the property was leased to a private operator. It is reported the Government costs were so high as to be ridiculous; and for this reason, were never published. It is obvious that mining costs have almost doubled since 1948 and have risen steeply since present prices were set. If prices were adequate, the independent producer would be able to mine at a profit without the subterfuge of bonuses, premium prices, development allowances, haulage allowances, and so forth. The present price schedule is discriminatory and affects a large percentage of the producers. For example: Ores mined in the Uravan belt contain vanadium which, in most cases, makes the difference between profit and loss. On the other hand, ores from Marysvale, Utah; Edgemont, S. Dak.; and Grants, N. Mex., as well as from other areas where the Morrison formation is not prevalent, contain only minor vanadium; and the uranium content must carry the entire cost of the operation. Today, production from these areas is limitaed to the higher grade ores (from 0.30 percent UsOs and up), while hundreds of thousands of tons of lower grade uranium ore is being bypassed; and in many cases, buried in strip operations or wasted on mine dumps because of failure on the part of the Government to provide adequate payment for this type of ore. The average grade of ores mined today in the Colorado Plateau area has been estimated at 0.25 percent U3Os and 2 percent V2O5. This ore is produced at the rate of 1 ton per man-day and at an approximate cost of $30 per ton. In most cases, there is an additional cost to the producer of $2 per ton in excess of trucking allowances--or a total of $32 per ton. This type of ore, which is the average for the district, contains a metal value of $33 per ton. The above average cost of mining carnotite ores in the Colorado Plateau area has been obtained from a compilation of cost records for the production of 15,000 tons of ore from a group of small mines operated by one company. These figures readily indicate that the price schedule is designed to encourage production of carnotite ores averaging at least 0.25 percent UO, and that the price structure is particularly inadequate for the nonvanadium bearing ores mentioned above. Under the AEC buying schedule, the independent producer is not paid for vanadium which runs over the ratio of 10 to 1 uranium, although the Government takes the vanadium over and above the 10-to-1 ratio and sells it. Certainly the Government should either pay for this vanadium or return it to the producer. In summary, it should be pointed out that, from all appearances, the AEC program governing the procurement of source materials was initially influenced by the advice of the large milling companies. Little consideration was given to the problems of the independent miner or producer, and to obtain equity for him has been an almost insurmountable problem. This unfortunate condition— that is, the unholy wedlock between the Commission and the large milling companies in determining policies governing source material procurement, combined with the obviously socialistic desire of the Government to take the land away from the miner, presents a situation that might quite well result in a deadend for the independent producer. To combat this possibility, the UOPA has gone on record determined to wage an all-out campaign to see that the independent producer receives the equitable break that he so rightfully deserves. The CHAIRMAN. If there are no other witnesses, the Chair wants to thank everyone who has participated as a witness as well as all of you people who have made it possible for us to expedite the hearing in order to finish by noon today. The chairman is very appreciative of that. If, in the time that follows, there are some questions that you have about the hearing, we will be glad to get you the information, if possible. Furthermore, when they are printed, all of the witnesses whose names appear in the hearing will receive a copy of the report. Those wishing a copy can write to me and I will see that you get a copy. If there are no other questions, we will declare the meeting closed. Thank you very much, again, for your fine attention and splendid cooperation. I believe at this point I will have the reporter insert into the record the report on imports and exports of lead and zinc entitled "Economic Problems Confronting Small Mines," as prepared by the Library of Congress. (The material referred to is on file with the committee.) The CHAIRMAN. The hearing is now recessed to reconvene in San Francisco, Calif. (By direction of the chairman the following is made a part of the record :) Hon. WILLIAM S. HILL, Congressman, Second District, LEADVILLE, COLO., April 21, 1953. Brown Palace Hotel, Denver: The welfare of this great Nation in time of war, a war that could begin in this atomic age at any time, is to a major extent dependent upon our ability to produce base metals which include lead and zinc. Mines that are forced to close cannot be opened on a moment's notice, nor can they produce for many months if forced to stay closed for long periods of time. Our fine American dollars are flowing into the hands of Tito and Franco for the lead and zinc from their native lands while our mines are forced to close and our miners are idle. In the event of an atomic war, the Commies could shut off foreign shipments of base metals to this country, and we would be totally dependent upon our own mines. Are we going to have protection by a bill for a steep, graduated import tax on lead and zinc, a method for price stabilization and support of our domestic lead and zinc market, keep our mines in operation and production by a Government-supported stockpiling program of a commodity that will not spoil, or do we continue with the billions for foreign countries and not one cent for the good old United States of America? We sincerely urge you to do all in your power to support a program for the protection and future of our base-metal mines. BOARD OF COUNTY COMMISSIONERS, LAKE COUNTY, COLO. SALT LAKE CITY, UTAH, April 22, 1953. WILLIAM S. HILL, Chairman, Committee on Small Business, Brown Palace Hotel, Denver: Membership of the Arthur Magna Millmen's Union, Local No. 392, unanimously approved this telegram appealing to your committee to take the necessary steps to prevent the impending depression in the nonferrous metal-mining industry. We support the proposals that will be made by our international officers at your scheduled hearing in Denver today. Approximately 1,500 workers in the metal-mining industry in Utah are already out of work. If this crisis continues it will be an economic calamity in virtually every community in the Rocky Mountain States. ARTHUR MAGNA MILLMEN'S UNION, WILLIAM S. HILL, BINGHAM, UTAH, April 21, 1953. Chairman, Committee on Small Business, Brown Palace Hotel, Denver: Our membership unanimously adopted motion to wire you our support of proposals to be introduced by our national officers at your Denver hearing. Thousands of employees in the nonferrous-metal industry in Utah and hundreds of small-business men are vitally concerned with this depression in the mining industry. We appeal to your committee to take the necessary action. BINGHAM OPEN PIT MINERS UNION, JOE DISPENZA, President. (Whereupon, at 12:30 p. m., the hearing was recessed, to reconvene at 10 a. m., Saturday, April 25, 1953, in room 360, Mills Tower Building, 220 Bush Street, San Francisco, Calif.) PROBLEMS IN THE METAL-MINING INDUSTRY (LEAD, ZINC, AND OTHER METALS) SATURDAY, APRIL 25, 1953 HOUSE OF REPRESENTATIVES, SELECT COMMITTEE TO CONDUCT A STUDY AND San Francisco, Calif. The committee met at 10 a. m., pursuant to recess in Denver, Colo., in room 360, Mills Tower Building, 220 Bush Street, Hon. R. Walter Riehlman (acting chairman) presiding. Present: Representatives Riehlman, McCulloch, and Hosmer. Also present: Carl E. Davis, staff director, and Bynum Hinton, committee counsel. Mr. RIEHLMAN. The committee will come to order. First, I would like to have the record show that I have present with me the distinguished Congressman from the State of Ohio, Mr. McCulloch, and the distinguished Representative from the State of California, Mr. Hosmer, and the committee counsel, Mr. Hinton. I would like to make this brief statement, gentlemen: The Small Business Committee of the House of Representatives was instituted for the purpose of studying the problems of small business at all levels. Our interest has been and will continue to be to gather pertinent information and statistics with respect to problems confronting every segment of small business in the United States. Our committee is not a legislative committee; we are a fact-finding committee. It is our duty to get this information, to write the type of report that we think is necessary to be written, bringing to the attention of the main legislative bodies of the House of Representatives the needs and changes that are necessary to help perpetuate small industry in this great Nation of ours. While we are here on the west coast, we want to hear every one that we possibly can with respect to the problem that is being considered today. Unfortunately, it is impossible, I suppose, for everyone to be present at the hearing such as this, many people who may have some constructive ideas and suggestions that they would like to give to the committee. Therefore, I want the record to show that we are willing and happy to receive any information from any individual from any part of this part of the country with respect to this problem. And if they cannot appear, if they will send their information to Washington, D. C., to the Small Business Committee, we will see that their statement is included in the record and given as serious consideration as though they were before the committee making a statement. At the conclusion of the hearings today, those that are listed to testify, if there are others here who would like to be heard, if you will 161 |