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The question was further complicated because certain key members of the KMS team had previously had considerable access to relevant, classified atomic weapon concepts through their past work for the Government and Government contractors, including work in the laser fusion area. Thus the KMS project involved a dispute with the Government over rights to any developments that might be patentable.

The Commission saw three basic alternatives for dealing with the situation:

First, it could attempt to preclude the conduct of any such work on a private basis by applying the limitations on privately generated restricted data and, ultimately, by using the prohibition of section 92 of the Atomic Energy Act on the private manufacture of atomic weapons.

Second, it could offer to make KMS a regular Commission-supported contractor for research and development work in this field.

As a third approach, it could allow such work to be conducted at private expense, but under controls designed to assure that it was directed toward unclassified energy applications and to minimize possible risks of disclosing classified technology.

On balance, the Commission decided that the national interest would best be served through the moderate third approach: Private U.S. researchers could work in this area so long as any of their work of possible atomic weapons significance was conducted under appropriate security safeguards, and so long as the work was subject to monitoring by the Commission.

A no-fund contract was signed by both parties and put into effect on February 3, 1971. Its provisions remain in effect today. Beginning in 1975 and periodically since, KMS has entered into a separate series of cost-plus fixed-fee contracts with ERDA and DOE for Government-sponsored research in laser fusion. This research is ongoing and supports and complements the Department's research efforts at other laboratories around the country.

With regard to the Classification and Security Agreement with Jersey Nuclear-Avco Isotopes, Inc. (JNAI), let me provide the following background.

In 1967, the former Atomic Energy Commission recognized the broad scientific applications of certain isotope separation technology. In order to minimize interference with private research while still providing necessary safeguards against proliferation, the Commission took a declassification action. This action declassified all research and development work on methods of isotope separation other than gaseous diffusion and the gas centrifuge until such methods show a reasonable potential for the separation of practical quantities of special nuclear material. Any additional information developed after a method has advanced to the point of having such potential would be restricted data until specifically declassified.

This action was taken with the intent to remove early theoretical or experimental work on these other methods of isotope separation from the category of restricted data. In this way, private researchers, universities, and the like, could perform this work, or submit research proposals involving such early work, without the necessity of applying immediate classification controls.

This policy was reexamined and reaffirmed by the Commission in 1972. At that time, the Commission also clarified its reporting requirements, stating that the investigator should report to the Commission when his process has demonstrated, through theoretical studies or calculations, that the process can separate uranium isotopes. Following this report by the investigator, classification guidance would be provided.

Prior to the creation of the Energy Research and Development Administration-ERDA-in 1974, management representatives of JNAI met periodically with the Atomic Energy Commission to brief the Commissioners on the then current status of their laser isotope separation program. These periodic briefings were an outgrowth of a meeting with the Commissioners on November 22, 1971, at which JNAI was requested, and agreed, to keep the Commission informed of significant program developments.

Subsequently, ERDĂ representatives made periodic visits to the JNAI research facilities to assess the status of their work from a classification standpoint. Through 1975, these visits confirmed that the JNAI work remained unclassified. However, JNAI's considerable technological progress and the company's decision to expand their experimental and development efforts ultimately brought their work into classified areas.

Extensive negotiations and discussions ensued between JNAI and ERDA and on September 30, 1977, JNAI signed the Classification and Security Agreement, which is still in effect today.

Since the execution of the JNAI agreement, there have been no difficulties from a classification point of view with JNAI. Because of proprietary interests, JNAI has followed a very conservative policy with respect to the release of information, and they have strictly adhered to the classification guide that was specifically developed for their operation.

Continuing the practice initiated before the agreement was negotiated, senior staff of the Office of Classification have made periodic visits to JNAI for purposes of orientation and to monitor their progress. JNAI has been very cooperative and this arrangement has proven very effective.

That concludes my testimony, Mr. Chairman. I would be pleased to address any questions that you might have.

[Mr. Sewell's statement follows:)

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Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to appear before you today. Before I present a brief statement, I would like to introduce two colleagues who are here with me today to assist in responding to your questions. Mr. Eric Fygi, the Deputy General Counsel, and Mr. Robert Duff, the Director of the Office of Classification.

This Subcommittee has been studying the issue of the government's authority to classify, restrict or assert ownership rights over privately generated data. Under the Atomic Energy Act, the Department of Energy is charged with the task of protecting a special category of nuclear information known as Restricted Data. The Congress originally assigned this responsibility to the Atomic Energy Commission. The responsibility was later transferred to the Energy Research and Development Administration and then to the Department of Energy. The primary concern at the time the Act was written was the prevention of nuclear weapon proliferation. The reason for that concern has been demonstrated and indeed broadened to include the need to prevent the dissemination of this type of information to terrorists. At the same time, that part of the Act which encourages declassification and dissemination of scientific and technical information has also proven to be more and more valid as we seek a solution to overcome the energy crisis. This "check and balance" process, which is designed to protect the common defense and security, and at the same time promote scientific progress, involves some very complex issues.

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As a continuation of our discussions at the hearing on March 20, I would like to take this opportunity to briefly review the Department's procedures for classification and declassification of Restricted Data which have evolved over the past 34 years.

Under Section 142 of the Atomic Energy Act, the DOE is required to maintain a continuous review of Restricted Data. The purpose of the review is to establish what information must remain classified and what may be declassified without undue risk to the common defense and security. Over the years, the DOE and its predecessor agencies have developed a structured system of classification guides. These guides provide specific detailed topics covering the classified areas under the Department's jurisdiction. They are used by authorized individuals in determining the proper classification markings to be placed on individual documents.

As the Assistant Secretary for Defense Programs, I approve basic DOE policy on the classification and declassification of Restricted Data, and I have been assigned the authority within the DOE for the declassification of Restricted Data in accordance with the Atomic Energy Act.

In this process, a number of factors may be considered in any decision to change classification policy. These include: the published state of the art in nuclear science and technology; the value of the information to U.S. programs; unauthorized release of classified information; and the effect

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the information might have on the proliferation of nuclear weapons capability

in other nations. These and other factors are weighed and a balanced

judgment is made to determine whether declassification of the information

would constitute an undue risk to the common defense and security.

Any decision to change classification policy is preceded by a thorough review of the pertinent issues at DOE Headquarters, DOE field organizations and other government agencies, as appropriate. This review activity is managed by a professional staff in my Office of Classification

at DOE HQ. They are experienced in the technology of nuclear programs as

well as the procedures for classification and declassification of informa

tion. Such staff activities frequently involve detailed meetings with pertinent DOE program and contractor personnel and other affected individ

uals and agencies.

Numerous drafts are issued for comment and at times

on-site visits are made to particular facilities to examine issues more

closely.

Recommendations for classification policy are then presented to me by the

Director of Classification, outlining the issues at hand, along with all

pertinent background and coordination information.

If I approve the

recommended policy changes, then the Director of Classification is respon

sible for implementing them either through a change notice to an existing

guide, or the generation of a new classification guide.

These guides are

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