PROBLEMS OF THE URANIUM MINING AND MILLING

INDUSTRY

MONDAY, FEBRUARY 24, 1958

CONGRESS OF THE UNITED STATES,

JOINT COMMITTEE ON ATOMIC ENERGY,

Washington, D. C.

The committee met, pursuant to recess, at 10 a. m., in room 304, Old House Office Building, Hon. Carl T. Durham (chairman of the committee) presiding.

Present: Representatives Durham, Price, Hosmer, Dempsey, Van Zandt, and Patterson and Senators Anderson, Gore, and Dworshak. Also present: Senator Barrett and Representative Thomson. Also present: James T. Ramey, executive director; David R. Toll, staff counsel; George E. Brown, Jr., and Richard Smith, staff members, Joint Committee on Atomic Energy.

Chairman DURHAM. The committee will come to order. Today we are scheduled to begin the second week of the committee's hearings under section 202 of the Atomic Energy Act on "the development, growth, and state of the atomic energy industry."

I would like to announce at this time that the hearings scheduled for this Thursday, February 27, have been postponed until the following Tuesday, March 4.

I have had the committee staff send telegrams to the scheduled witnesses. I believe that all of them will be able to appear on the following Tuesday.

Our first witness today is Mr. Gordon A. Weller, executive vice president of the Uranium Institute of America.

We are very glad to have you with us, Mr. Weller. Will you please come around.

Senator ANDERSON. Mr. Chairman, Senator O'Mahoney asked me to announce that he planned to be here and had every expectation of being here, but came up with a little cold and he has to stay home. Chairman DURHAM. We are sorry that we cannot have Senator O'Mahoney with us.

Mr. Weller, you may proceed.

STATEMENT OF GORDON A. WELLER, EXECUTIVE VICE PRESIDENT, URANIUM INSTITUTE OF AMERICA

Mr. WELLER. Thank you, Mr. Chairman.

The Uranium Institute of America appreciates your invitation to again appear and testify before the Joint Committee on Atomic Energy.

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My name is Gordon Weller, and I am employed as executive vice president of the Uranium Institute of America. The Uranium Institute is a trade association of individuals and companies engaged in all phases of exploration, production, processing, and conversion of uranium. We are incorporated in the District of Columbia and our principal office is in Grand Junction, Colo.

In a review of an industry's development, growth, and state, as is called for in these particular hearings, it is always the temptation to bear heaviest emphasis on the industry's problems, and to perhaps ignore the many favorable developments that have occurred.

The experience of the uranium industry has been phenomenal over the past several years. Never before in our Nation's history has it been necessary to bring into being a minerals industry involving such a great capital investment, imposing such difficult technical problems, affecting so many people, and of such vital importance to our national security and world position.

That this has been effectively accomplished is a signal tribute to the leadership and administrative ability of Mr. Jesse C. Johnson, Director of the Division of Raw Materials of the Atomic Energy Commission. The uranium and mining and milling industry salutes his great accomplishment.

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This effort was inspired by the great importance that has been attached to the establishment of an adequate raw materials base for our atomic energy program. The need was first publicly defined in the Atomic Energy Act of 1946, and the Domestic Uranium Circulars 1 and 3.

But the domestic program was finally given the impetus that was required by Domestic Uranium Circular 5, which continues to serve as a base for uranium procurement. Each circular was drawn before experience could be gained and it has become apparent that Circular 5 was highly restrictive in its application, for two reasons:

1. The circular was confined to two uranium ore types: Carnotite and Roscoelite.

2. The circular established Monticello, Utah, as the sole point of purchase for such ores.

Mr. Chairman, I submit for inclusion in the record at the end of my statement a copy of Domestic Circular No. 5.

In practice, however, the Atomic Energy Commission authorized buying stations and ore processing mills at many different points throughout the West, and accepted for purchase more than 20 different types of uranium-bearing ore.

In 1953 the Congress was made aware of the conflict between the mineral leasing procedures on public lands by oil and uranium industries. Accordingly, Public Law 250, and subsequently the Multiple Mineral Development Act, were enacted to remove such conflicts and to expedite the development of both mineral resources in the West.

Further confidence and enthusiasm were engendered in the uranium industry by the philosophy and hopes embodied in President Eisen

hower's atoms for peace address before the United Nations on December 8, 1953. In his address, the President declared:

The United States knows that peaceful power from atomic energy is no dream of the future. The capability, already proved, is here, now, today. Who can doubt if the entire body of the world's scientists and engineers had adequate amounts of fissionable material with which to test and develop their ideas, that this capability would rapidly be transformed into universal, efficient, and economic usage.

This address was a mandate to the United States Congress, to the Atomic Energy Commission and its many industrial and research contractors, to the uranium industry, and, indeed, to the world.

The Congress fulfilled its mandate in the amendment of the Atomic Energy Act of 1946 with the much broader act of 1954.

The domestic uranium industry has met its part of the challenge in the twelvefold increase of uranium reserves.

The Atomic Energy Commission and the Nation's private utility industry has made great strides in the use of atomic energy in the production of electric power. Over $17 billion has been expended in the greatest developmental program in the history of mankind, for both military and peaceful uses of atomic energy.

OUR WAVERING ATOMIC EFFORT

But now, when we are at the very threshhold of achievement, we are told contrary to the President's pronouncements before the United Nations 4 years ago, that atomic energy is not here, that our capability is yet to be proved, and that while we now have established an active uranium industry producing steadily increasing amounts of fissionable material which the President sought, that such production increases now must be curtailed.

Gentlemen, the uranium industry cannot accept the contention that the foundations of our atomic energy program were poorly drawn. We do submit that our atomic capabilities are proved, now, today.

Our only requirement at this moment is a Nation that is willing to stand on its expressed convictions. Our one need is that we now acknowledge the great benefits that will accrue to our Nation and to the world if we follow through on our objectives with the same determination which characterized the inception of the atomic energy program. We understand that estimates, based upon reactor development as it is currently scheduled, do not foresee economic power for 10 to 20 years. Yet we are also told on good authority that commercially feasible atomic power is within a 5-year reach if adequate funds were appropriated for the purpose.

Reliable estimates set this cost at $500 million for some reactor types, one-half of which could be amortized against the power produced. If these estimates are correct, our ultimate cost of $50 million per year for 5 years would bring this country economic atomic power.

These hearings will undoubtedly receive much expert testimony on later days on this possibility.

But, we are also told that there is considerable resistance to such Government participation-that the problem is one of philosophy or of definition. There appears to be justified concern that such participation will further hazard the present position of our private utility industry.

Gentlemen, this is a matter that is not immediately associated with the operations of the raw materials industry, but it is of vital consequence to our future markets.

If adequate assurance to our basic system of free enterprise is not now embodied in the act of 1954, we urge that immediate action be taken by this committee and the Congress to provide such definition. We are of the opinion that this issue was tributary to the Commission's decision to curtail further growth of the uranium industry at this time. If this is the case, the confusion surrounding this entire problem is extremely injurious to our Nation's entire atomic adventure and the many benefits which we all anticipate when our present developmental problems have been solved.

This Nation can be unequaled in its achievements so long as it develops crystal clear concepts of the dividing line between public and private enterprise. It can drift into a turmoil of mediocrity by continuing to fight over perpetually unresolved issues.

OUR PRESENT ENIGMA

Certain segments of the domestic uranium industry are experiencing a severe transition at the present time. This has been brought about by the decision of the Atomic Energy Commission to limit further expansion of uranium production to that now projected for early 1959.

At that time, annual capacity of about 17,500 tons of UsOs will have been reached, according to current AEC estimates. The decision to curtail further expansion of domestic mill capacity was announced last October 28.

At that time, the industry was experiencing its greatest rate of growth. This is emphasized by a brief review of the industry's position at that date.

1. Reserves: 70 million tons of 0.25 percent average grade reserves were reported on October 28, 1957, and discovery of new reserves was proceeding at the rate of more than 15 million tons per year. I consider this a conservative estimate. (The reserves are now estimated to exceed 80 million tons, 93 percent of which have been discovered during the past 5 years.)

2. Milling: Capacity in operation had reached 10,000 tons of concentrate per year on October 28, 1957; and during the previous 12 months contracts were authorized for 7 additional mills, representing annual capacity of more than 7,500 tons of concentrate.

These figures indicate that the uranium industry was increasing its size during 1957 by an annual rate of gain of close to 30 percent with respect to reserves, and by 75 percent with respect to authorized milling capacity.

The industry recognized the growth of reserves was progressing at a very satisfactory rate; but it was implicit to the very stimulated development of milling capacity, as indicated by the above figures, that an active exploration for further reserves be pursued.

New and improved techniques of exploration gave further stimulus to our rate of discovery, but associated with those new methods were greatly increased costs. Subsequent testimony will more fully present this picture.

These circumstances are presented to support the contention the industry must make to you at this hearing:

Namely, that while certain suggestion of limited future production did appear in Mr. Johnson's statement to the industry in 1957 and were found in a few other communications to the industry and the general public, these had to be considered in the light of the many positive developments and statements that supported the anticipation of further growth.

The industry, accordingly, continued to pursue an active exploration program in anticipation that its investment in such activities would pay off in future production.

The October 28 announcement brought an abrupt termination to this attitude and imposed serious financial problems for those who were in the more advanced state of property development.

THE 10-YEAR RESERVE-MARKET THESIS

At that time, our 70 million tons of ore reserves represented a 10year supply according to official statements. Production was at a rate of approximately 4 million tons per year, indicating that four-sevenths of the industry's reserves were then being produced and marketed on a schedule that would support the 10-year supply thesis.

On the basis of mills negotiated and under construction at the present time, capacity for another 3 million tons of annual production will be established, thus apparently supporting the AEC position of last October that reserves and market had been brought to a balance on a 10-year term basis.

Several facts do not support this thesis, however:

1. A large percentage of mill capacity in operation last October represents established facilities which were built on 5-year contracts. A few of these contracts will soon be reaching their terminal dates, a large part of the domestic contracts will terminate on March 31, 1962. Obsolescence factors contribute further to the complexity of the problems.

A quantitative analysis of these factors cannot be made because of the confidential character of mill contracts with the Atomic Energy Commission.

2. The 10-year reserve-production balance assumes that all districts and properties can be produced on a uniform and easily regulated program.

This is not the case in fact. Some of the remote properties were developed on the terms of Circular 5 which allows extra payment for haulage of ore from such areas to more centrally located mills.

Operators of such properties see the need to exhaust their reserves by March 31, 1962, when Circular 5 expires. In many cases, insufficient milling capacity has been established to permit this to be done. Again a very confusing picture and again a quantitative analysis of this problem cannot be made because the Commission has not made available reserve and production figures for localized districts.

3. Much of the mill capacity is now operating on contracts which allow considerably more than $8 per pound of U.Os price which is scheduled under the announced post-March 1962 buying program. Accordingly the lower price will impose totally new economics for the mining and milling industry and may force curtailment of some