They were having no problems disposing of gold from the mining operations. They were selling the gold to other countries. The United tSates is one of the great purchasers of Canadian gold.

I do not think that the incentive program or subsidy program in this country, if it were put into effect as it relates to domestic uses of gold, would be given any consideration whatsoever by these other people. That is recent information that was collected by a Senator who visited Europe recently. We are trying now to get a meeting with someone where we can go into this. We have not had much luck. He was going to contact Mr. Kelly, the Assistant Secretary, to see if he could not arrange it for us. We cannot get in the front door.

Mr. EDMONDSON. Do you want to introduce the other witnesses? Mr. O'LEARY. Mr. Chairman, I think we will have to put ourselves at your disposal now. We have with us Dr. Thomas Nolan, Director of the Geological Survey, and Mr. Ankeny, Director of the Bureau of Mines, and his assistant, Mr. Zinner, and Mr. Wheeler of the helium activity of the Bureau of Mines. We have Mr. O'Callaghan of the Bureau of Land Management, Mr. George Lamb of the Office of Coal Research, Mr. Lasky, Assistant Director of the Office of Coal Research, and Mr. George Fumich, of the Office of Minerals Exploration, who administers the Edmondson Act.

Mr. EDMONDSON. In Oklahoma we call that the Kerr-Edmondson Act.

In view of the interest that has been displayed in exploration, I think it would be a good idea if we could get Mr. Fumich before us at this time and get a little elaboration on the exploration program that is going on.

I am sure the other two members of this committee still with us are very much interested in what you have been doing in this gold area. I am very interested in what you have been doing in the lead and zinc area in the way of exploration.

STATEMENT OF GEORGE FUMICH, DIRECTOR, OFFICE OF MINERALS

EXPLORATION

Mr. FUMICH. Mr. Chairman, members of the committee, I would first like to read a short formal statement that I have on the Office of Minerals Exploration program.

(The statement follows:)

STATEMENT OF GEORGE FUMICH, JR., DIRECTOR, OFFICE OF MINERALS EXPLORATION, BEFORE THE HOUSE SUBCOMMITTEE ON MINES AND MINING

Mr. Chairman and members of the committee, the Office of Minerals Exploration was created in 1958 under the authority of Public Law 85-701 to provide for the discovery of the mineral reserves in the United States, its territories, and possessions by encouraging exploration for minerals. It was determined at that time that a long-range exploration program was needed to replace the successful Defense Minerals Exploration Administration program set up under the Defense Production Act of 1950 and terminated in 1958.

Briefly stated, the Office of Minerals Exploration offers financial assistance to firms and individuals who wish to explore their lands for 1 or more of 35 mineral commodities. This help is offered to applicants who would not undertake the exploration at their sole expense and who are unable to obtain funds from commercial sources on reasonable terms.

The Office of Minerals Exploration contracts with an eligible applicant to pay one-half the cost of approved exploration work. The applicant pays the rest. The Government participation in a single contract cannot exceed $250,000. Interest at rates which have ranged from 5 to 6 percent is charged from the time funds are made available.

Funds contributed by the Government are repaid by a 5-percent royalty on production from the property. If nothing is produced, there is no obligation to repay.

The Office of Minerals Exploration program is primarily designed to encourage exploration for minerals which are or will be in short supply in the not too far distant future in order to fill the needs of our expanding economy.

Our program is a modest one. However, participation by the mining industry is increasing. For instance, during the past fiscal year we received 120 applications proposing $12,800,000 in exploration work. Twenty of these resulted in executed contracts obligating a record $726,325 in Government assistance for exploration, an increase of 160 percent over 1961 business. This year we have approximately $719,000 available for exploration. Of this amount we have executed seven contracts obligating $307,390. We have two approved contracts which will obligate $41,085 and one other contract awaiting the applicant's signature for $25,160, totaling $373,635 and leaving approximately $440,000 for the rest of this year.

The Office of Minerals Exploration is responsible also for the orderly liquidation of the Defense Minerals Exploration Administration program. There are still 327 projects with royalty obligations remaining from an original 475, involving a Government investment of $17,751,906. Approximately 100 of those projects are paying $370,000 in royalty on production each year.

Last year we were given the additional responsibility of planning and organizing operations for the Lead and Zine Stabilization program which is administered by the GSA, and we continue to prepare all reports and budget estimates for that program.

STATEMENT OF GEORGE FUMICH, JR., DIRECTOR OF THE OFFICE OF MINERALS EXPLORATION, BEFORE THE HOUSE SUBCOMMITTEE ON MINES AND MINING

Mr. Chairman and members of the committee, the Office of Minerals Exploration in the Department of the Interior has the responsibility for the lead and zinc stabilization program under Public Law 87-347 enacted October 3, 1961. Authority to administer the program has been delegated to the General Services Administration.

This is a program for the small domestic producers of lead and zinc. To participate in the program, the small producer must meet certain requirements. He must have produced and sold ores or concentrates of one or both of these metals in normal commercial channels, from mines located in the United States or its possessions, during some part of the period since January 1, 1956, and must not have produced more than 3,000 tons combined lead and zinc during any 12month period from that date to the date he first seeks stabilization payments. There are certain restrictions on production which affect payments. Payments are made only on the lead and zinc content of newly mined ores, or concentrates produced therefrom, which have been mined since October 3, 1961, from domestic mines and on a normal quantity of broken ore on hand at the surface of the mine on the same date.

The lead and zinc must have been sold after January 1, 1962, and must have been derived from mines which were operated during some part of the period January 1, 1956, to August 1, 1961. On production from a property operated during the period but acquired after August 1, 1961, the producer must qualify as a small domestic producer as a result of prior leasing operations and not as a result of mine ownership, and the lessor must not have a larger portion of his property under lease than he previously had at his highest production level during the period January 1, 1956, to October 3, 1961.

Payments are made only on sales of ore or concentrates made in normal commercial channels after January 1, 1962. Payments per pound of contained lead are 75 percent and per pound of contained zinc are 55 percent of the difference between 14.5 cents and the average monthly market price for common lead at New York, N.Y., and for prime western zinc at East St. Louis, Ill., for the month in which the sales occur.

There are limitations on the total amount of payments and on the amount of payments to individual producers. The maximum total amount of payments for the entire program is limited to $4,500,000 each for the calendar years 1962 and 1963, and $4 million and $3,500,000 for the calendar years 1964 and 1965, respectively. The maximum payment to an eligible producer is limited to payment on sales equal to his maximum production of lead and/or zinc in any calendar year between January 1, 1950, and December 31, 1960, but in no case will payments be made for production in excess of 1,500 tons each of lead and zinc for the calendar year 1962, and 1,200 tons, 900 tons, and 600 tons each of lead and zinc for the calendar years 1963, 1964, and 1965, respectively.

The program was authorized on October 3, 1961, but it did not become operative until the Congress appropriated funds on July 25, 1962. The regulations governing it were published 3 days later. At the end of January 28, 1963, 103 applications for participation had been received. Of these, 83 had been certified as eligible to receive payments, 14 had been denied, 2 withdrawn, and 4 were in process.

Seventy-five applications were received in time to be considered for participation in the program in 1962 production and sales. Sixty of these were certified as eligible to receive payments. Twelve were denied, two withdrawn, and one is in process. During calendar year 1962 a total of $372,615 was paid to 40 producers on 5.042 tons of lead production and $275,695 was paid to 36 producers on 8,738 tons of zinc production. Further payments will be made on 1962 production to these producers when they submit final data on their December production and to other producers who were certified to the program late in the year and have not as yet submitted their requests for payments.

I am willing to answer any questions although I am not an expert. If I cannot get the answers now, I will furnish them later.

Mr. EDMONDSON. In what field are most of your exploration contracts?

Mr. FUMICH. Sir, of the 20 contracts we executed last year 9 were for precious metals. Six of those were for gold, involving $178,000 in Government funds and three were for silver. This year so far we have executed seven contracts. Three of those were for gold and silver in combination, one for silver and two were for mercury. There was also one for iron, tantalum, and columbium. We also have 28 applications that we are processing at this time. Twenty-one of the 28 are for gold and silver and 14 of the 21 are for gold.

Mr. EDMONDSON. I understand from the previous testimony that you had 80 participants in this lead and zinc stabilization program. What parts of the country do they represent?

Mr. FUMICH. Sir, originally we estimated that we would receive applications from participants in 20 different States. That was when we made our estimate last year for the budget. We have found that we have applications from 13 different States and they break down as follows: We had two applications from Arizona, and one certification from there. We had two applications from New Mexico with one certification. We had 18 applications and 16 certifications from Idaho. We had 23 applications with 19 certifications from Oklahoma. We had six out of six from Kansas. In other words, six applications and all six were certified.

Colorado was an unusual State. It had 40 small producers in 1960 but because of the dismantling of the custom mills we had only 2 applications and neither one of those was certified. We ended up with a total of 103 applications and so far out of that 103, 83 were certified. Mr. EDMONDSON. You did not mention Missouri in that group. Mr. FUMICH. Sir, we did not receive any applications from Missouri. Mr. EDMONDSON. Were any from any of the Eastern States?

Mr. FUMICH. We received one application from North Carolina. It was certified. None from Kentucky, although it did have one producer, a small producer in 1960.

Mr. EDMONDSON. How about Tennessee?

Mr. FUMICH. There were only one or two small producers in 1960. We received no applications.

Mr. EDMONDSON. Wisconsin?

Mr. FUMICH. Wisconsin, we received three applications but there was no certification.

We received eight applications from Montana. We certified six. We certified eight out of nine received from Nevada.

From California we certified three out of the three received. We certified one out of two from Arkansas.

Mr. EDMONDSON. Alaska?

Mr. FUMICH. No, sir; we had no applications from Alaska.

Mr. EDMONDSON. I would like to have a complete breakdown by States.

Mr. FUMICH. I have a complete breakdown that I can furnish for the committee.

(The information requested follows:)

TABLE II.-Distribution of small producers by States

Mr. EDMONDSON. I think the comment that I have heard most about the program is that some folks have had what they considered some unreasonable delays in connection with certification. I think one problem that we are trying to correct with the bill that has been introduced is the problem of the GSA's construction. When they talk about a 12-month period as provided in the act, they are not talking about calendar years or fiscal years. I understand they disqualified one man for example by taking 4 months in one year and 8 months in another year and sticking those together and saying that that disqualified him. We were perhaps incautious in our language in making something like that possible. This I think has been one unfortunate development.

I understand you folks took a different view in your construction from GSA on that; is that correct?

Mr. FUMICH. There was a difference of opinion, but it did not prevail. They had a certain interpretation, of course.

Under the assignment they had a right to administer the program. Mr. EDMONDSON. The effect of this has been to disqualify one mine in Arizona, I understand, for example, that was definitely a small producer and just happened to have one combination of months, taking a major part of one year and a small part of another year that disqualified him.

Mr. FUMICH. Sir, if I can get into that a little more fully, there were 14 applications that were denied and out of the 14, 4 did not qualify as small producers for one reason or another, and of course the one that you mentioned was in that group of 4. There were 11 other turndowns. They had no production during the qualifying period from January 1, 1956, to August 1, 1961.

Mr. EDMONDSON. I would appreciate it very much if you would give us a summary of the reasons for the turndowns on those applications. It may be that without seriously affecting the purposes and the coverage of the bill we may be able to include some minor changes that will permit some more mining activity and stay within the spirit of the bill, along with this change that we are talking about, to make it clear when we say in a 12-month period we are talking about a calendar year.

Mr. FUMICH. I understand the change would affect that one producer. In other words, if you change it to a calendar year or to a fiscal year, no other producers would fit into that particular category.

If you would like, I can give you a little background, just playing with some of the statistics, showing why we believe possibly that more producers did not try to qualify or did not try to participate in the program.

Mr. EDMONDSON. What is your view on that?

Mr. FUMICH. In 1956, based on Bureau of Mines records, the figures showed that there were 574 small producers out of a total of 627 lead and zinc producers in the United States. These 574 producers produced a total of 58,000 tons of lead and 95,000 tons of zinc out of respective totals in round figures of 353,000 tons of lead and 542,000 tons of zinc in that particular year.

We find that in 1960 these figures were all proportionately reduced. Instead of having 574 small producers in 1960, there were only 273 out of a total of 315. Getting into the program, out of the 83 participants we had, we find that the real breakdown was in a smaller statistical total. Out of the 574 small producers that we had, we found that 420 of those, their mining was contained within a zero-to-100-ton figure. That was in 1956, the high year. In 1960, that zero to 100 total amounted to 203 out of the 273.

In other words, there were only 70 of the 273 total of small producers that mined over 100 tons and less than 3,000 lead and zinc combined.

We find that this rate of attrition was about the same because the zero-to-100-ton group represented 73 percent of the small producers in 1956 and it represented 74 percent of the small producers in 1960. Yet we had only 15 applicants in the program from that group. You can see that the great loss was in the group between the zero and the 100 tons.

Of the 70 outside that group that were producing in 1960, we find that 65 are participating in this stabilization program, so you can see

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