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Gift 11-1-76

PROPOSED CHANGES IN THE BASIS FOR COOPERATIVE
ARRANGEMENT FOR THE LMFBR DEMONSTRATION
PLANT

FOREWORD

The cooperative arrangement for the Nation's first liquid metal fast breeder reactor (LMFBR) demonstration plant was authorized under Section 106 of Public Law 91–273, as amended by Public Law 92–84. Among other things, that legislation requires that the basis for the arrangement or any amendment thereto be submitted to the Joint Committee on Atomic Energy for a period of 45 days, unless a waiver is granted by the Joint Committee. This document includes the record of the public hearings held on February 28 and May 4, 1973 by the Joint Committee to consider proposed changes in the basis for the cooperative arrangement for the design, construction, and operation of the LMFBR demonstration plant.

BACKGROUND The basis of the original cooperative arrangement had been approved by the Joint Committee after its submission by the Atomic Energy Commission (AEC) and three days of public hearings held in September 1972. The text of those hearings was published as a Joint Committee print and the considerations and recommendations of the committee approving the original arrangement are set out in the introduction of that document.1

On January 26, 1973, the AEC informed the committee that, in the process of negotiating the definitive contracts for the arrangement, the parties had agreed upon several changes in the basic principles which had been presented to the committee and which were not contemplated by the original Memorandum of Understanding among the parties. The AEC indicated that it was submitting the basis for these amendments to the Joint Committee in accordance with the applicable provisions of the pertinent authorization act.

The principal features of the revised arrangement were described in the AEC's revised program justification data arrangement No. 72– 106 and amendment No. 1 to the Memorandum of Understanding among the AEC, Commonwealth Edison Company (CE), Tennessee Valley Authority (TVA), Project Management Corporation (PMC), and Breeder Reactor Corporation (BRC). The details of the proposed arrangement were set out in unexecuted definitive contracts among the various parties.

According to the AEC, the proposed arrangement, among other things, contemplated a “partnership” approach under which PSIC, with AEC officials eventually participating on its Board of Directors, would be authorized to manage the project without the need for PMC to obtain any approvals from the Commission on its conduct of the project. The effectuation of this approach required, and it contemplated, that the AEC would endeavor to secure the additional statutory authorization to permit two of its officials to serve on the PMC Board of Directors. If such authorization was not secured, the proposed principal contract provided that the project would be managed by a Project Steering Committee (PSC) composed of one PMC director acceptable to TVA, one PMC director acceptable to CE, and one member designated by AEC. The proposed definitive agreements required that the AEČ endeavor to obtain additional legislation in several other areas.

1 Liquid Metal Fast Breeder Reactor (LMFBR) Demonstration Plant, hearings before the Joint Committee on Atomic Energy, Sept. 7, 8, and 12, 1972.

The revised proposed arrangement provided that AEC would have the lead role in regard to the nuclear steam supply system (NSSS) and would provide the technical supervision and administration of NSSS aspects of the project contracts, including PMC's contracts with the reactor manufacturers, architect-engineers, and other contractors involved with the NSSS. This lead role would include responsibilities for guidance and direction and approval of all technical and related aspects of the NSSS. This capability, along with the existing responsibilities for the AEC base program, would not be duplicated in the other participating organizations.

The revised proposed arrangement also provided that PMC would have the lead role for overall integration of the plant design and construction work, technical supervision and contract administration on all matters pertaining to the Balance of Plant (BOP) and other matters such as overall work schedules and budgets for the project. TVA would have the lead role for plant operation and maintenance, and would provide for the project supervision relative to these matters, including matters such as work schedules and budgets.

During the course of the February 28 and May 4 hearings, the committee had the opportunity to examine the merits of the proposed changes to the cooperative arrangement in great detail. In this regard, the committee was aided by two reports from the Comptroller General as well as by testimony from members of the public.?

The record of the public hearing which follows includes all material submitted for the record through May 4, 1973. During the course of the May 4, 1973 hearing, the AEC was asked to respond to each of the issues raised by the prepared statement and testimony of members of the public, as well as to answer questions raised by the committee on the proposed contract. This material was furnished to the committee under date of May 22, 1973 (see supplemental appendix A), with the understanding that it would be binding on the parties.

The committee met in executive sessions on May 23 and 24, 1973 to consider the proposed changes to the cooperative arrangement and to determine whether the proposed arrangement was acceptable. The committee also met again in executive session on June 8, 1973, heard testimony from representatives of the AEC, CE, and TVA, and was prorided supplemental material to clarify certain aspects of the proposed arrangement.

2 "Proposed changes to the AEC Arrangement for Carrying out the Liquid Metal Fast Breeder Reactor Demonstration Project," °(B-164105, February 27, 1973): and “Further Comments on the Atomic Energy Commission's Proposed Arrangement for the Fast Breedler Reactor Demonstration Project,” (B-164105, Apr. 30, 1973). (See appendices 9 and 23.)

CONCLUSIONS

The Joint Committee has given careful consideration to all the testimony and material submitted for the record of the hearings on the proposed changes in the cooperative arrangement for the design, construction, and operation of the Nation's first LMFBR demonstration plant. The urgent need for this project is underscored by several Presidential Energy Messages and Representative Chet Holifield's wide-ranging review of the energy resources policy and organization in the Congressional Record on July 12, 1973. (See supplemental appendices G, J, and H.) In view of the vital importance of this project, the contributions of all the parties, and the assurances that the AEC in the final sense would take all steps necessary to assure the technical success of the project, the committee ultimately decided that it would interpose no objection to the execution of the proposed contracts, as finally revised in several respects and clarified during the hearings because of committee concerns, provided the indemnity was revised to make it subject to the availability of appropriated funds.

The implementation of the indemnity proposed by the parties contemplated that the Congress would enact legislation which would exempt all the Government's obligations under that indemnity from the limitations of the Antideficiency Act, 31 U.S.C., Section 665. The removal of the limitations of that act would have enabled the PMC, CE, and the TVA to bind the Government to large expenditures and commitments of public funds without further congressional action. In the committee's view, such legislation was neither necessary nor desirable.

As is the case with many first-of-a-kind research and development projects, it is possible that the ultimate cost of the LMFBR demonstration project will exceed the current estimate of $699 million. On the basis of testimony presented by the witnesses regarding the lead role of the AEC on the NSSS and the firmness of the design decisions reflecting directly the FFTF experience, the committee agreed with the concept of AEC's assuming a reasonable "open-ended risk” for this project, and the utility participants carefully limiting the extent of their contributions and risks to about $250 million. CE and TVA had further insulated themselves by forming a separate corporate entity, PMC, which is a nonprofit corporation with no assets of its own.

In the committee's judgment, it would have been neither fair nor prudent for the committee to leave any inference at this time that it might later seek the requested indemnity legislation which would bind the Government beyond funds appropriated for the project. Indeed, the committee felt that it could not recommend to the Congress that it enact this type of legislation. Government contractors generally have had to accept indemnities which are subject to the availability of appropriated funds and under which the agencies agree to seek such additional funds from the Congress in the event the available funds are insufficient to pay claims under these indemnities. The committee believed that this important feature was appropriate for the indemnity agreement for this project. Of course, any risk of public liability from a nuclear incident would be covered by the Price-Anderson Act and would not fall within the scope of the general indemnity provided for in the contract.

Considering the flexibility afforded by AEC's annual authorization acts, the committee recognized that the effect of an indemnity which would be “subject to available appropriations” could be interpreted so as to make large segments of the entire amount of the Commission's appropriations for operating expenses available to satisfy any Government obligations under the indemnity. However, the Commission's ability to transfer funds from other programs to satisfy any such obligation would be limited by the ground rules established in the exchange of correspondence between Senator Pastore and Chairman Seaborg in April 1964. (See supplemental appendix I.) Under the socalled "ground rules," final action would not be taken by the AEC on any proposal to reprogram funds if the committee notifies the Commission that it objects to the proposal. Moreover, there are additional procedures for transferring appropriations which would require consultation with the appropriations committee of both the House and Senate.

Accordingly, under date of June 19, 1973, the committee informed the Commission of its decision. The substance of the letter provided that if the indemnity proposed by the parties were revised to make it subject to the availability of appropriations, the committee would interpose no objection to the execution of the contract among the parties, and they could proceed without further delay. This letter also indicated that the committee had not completed its evaluation of the requested legislation and it would have to consider any questions regarding legislation at a later time. (See supplemental appendix B.)

Also under date of June 19, 1973, the AEC submitted several contract modifications which had been negotiated and agreed to by the parties. The purpose of these modifications was to make the indemnities extended by the AEC under the contract subject to the availability of appropriations and to the provisions of the Antideficiency Act. Among other things, the contract changes included the establishment of a trust account from utility contributions to satisfy claims covered by the indemnity in the event AEC funds were not available. (See supplemental appendix C.)

In view of the limitations on the Commission's ability to transfer funds to satisfy any obligation of the proposed indemnity, the committee was not opposed to the parties establishing a reasonable reserve from utility contributions which could supplement the proposed indemnity. Of course, the committee expected that, eventually, the balance of any such reserve would be available to reimburse the expenses of the Government on the project and the proposed contract so provides.

By letter dated June 29, 1973, the Chairman of the Commission informed the Joint Commission that the indemnity arrangements offered by the committee were acceptable to the parties and were consistent with the testimony, the most recent contract changes and the revised legislation package submitted to the commitee. The Chairman also conveyed CE's and TVA's request for clarification regarding the committee's attitude toward the requested legislation concerning decommissioning of the reactor plant. (See supplemental appendix

Under date of July 2, 1973, Chairman Price stated that committee considerations to date had not indicated the existence of any prob

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D.)

lems with this portion of the requested legislation. He also added that the committee did not anticipate any problems in this regard. (See supplemental appendix E.)

The Committee's decision not to object to the proposed contracts should not be interpreted as an approval of other aspects of legislation requested for this project. In this regard, the committee had not completed its evaluation of the requested legislation and, therefore, it would have to consider any questions related to the legislation at a later time. Moreover, several members of the committee, at one time or another, expressed, and retain, reservations on the adequacy of AEC's management and control of the project. This is particularly true with regard to technological decisions and engineering implementation concerning the Nuclear Steam Supply System. The committee intends to follow the project closely to evaluate the efficacy of the concept of management agreed to by all of the participants and to follow the work on the NSSS, which ÅEC is to lead, according to the contracts and as explained by testimony before this committee.

The record of these hearings, together with those held in September 1972, will provide a basis for a continuing review of this project. Once again, we would like to caution all participants regarding problems with the management of other demonstration projects and to emphasize the need for the strong and efficient management of this project. Such management, to avoid unnecessary duplication of administrative or technical effort, was clearly identified as essential to the success of this project in the recent hearings as well as in our conclusions and recommendations in the committee print of the 1972 hearings. Moreover, the commitments by the AEC to endeavor to obtain additional legislative authorization, probably before the end of the next session of Congress, will still provide a distinct point after considerable planning and design work has been accomplished and prior to construction, which will afford an additional opportunity for a detailed review of the status of the project. As before, it is our intent to review the situation in depth at that time and to provide the Congress with our findings and our views in connection with any requested legislation. In the meanwhile, we expect the AEC to keep the committee advised on a timely basis of the status of this vital project.

MELVIN PRICE, Chairman.
JOHN O. PASTORE, Vice Chairman.

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