to do research and development work to improve the efficiency of these plants.

They are making an effort and we as a committee concurred with the AEC that they should keep the plants up to date so that you could take advantage of new findings in research and development. The potential for improvements amazed me.

CUSTOMERS' OPTION TO ACQUIRE TAILS MATERIAL

Mr. CONWAY. Do you think many customers will exercise the option to acquire tails material particularly if the assay is below 0.2531 percent of U235?

General NICHOLS. I think that would vary with the customer but as a member of this committee we advocated the customers have that choice.

Mr. CONWAY. You have to take into consideration that the customer will have to pay for the packaging and transportation of this material. General NICHOLS. We recommend the customer pay all the costs. It depends on the customer's view of the future market for depleted uranium and that applies primarily to his thoughts on how fast breeders will become economic. It should particularly appeal to our foreign customers where they feel they are not giving away an asset.

I was perfectly willing in discussing this with the AEC, that if they wanted to put a value on these tails, that the Government retain them. Mr. CONWAY. By not putting a value on them when they figure the costs of transporting them, most of the customers would leave them there and the Government will have ownership of it anyway, at least in the early days.

General NICHOLS. That may be.

MIXED PATTERNS OF PRIVATE OWNERSHIP OF NUCLEAR FUELS

Mr. CONWAY. In your opinion, what are the most likely patterns of ownership of nuclear fuels that are likely to develop in the next 5 to 10 years?

General NICHOLS. Certainly the law puts certain definite points where ownership must transfer and I think you can develop this pattern a little better when we have more information on the complete charges of the AEC so you can evaluate what is the relative merit of going out and buying your own uranium versus buying enriched uranium from the AEČ.

I know certain utilities that will probably buy their fuel even before it is economic on the basis of believing in the future advantages of private ownership and they want to show they are for it.

Mr. CONWAY. Do you feel the utilities will come in and buy uranium at the mine and take it through tolling and fabrication? Do you believe some brokers will come into the business and become owners of the material and lease it out or rent it out to the utilities?

General NICHOLS. I think you already see that pattern developing. Some utilities have indicated they are taking options or making plans to buy uranium direct from the mills. You also have the manufacturers in the fuel business that are taking steps to acquire uranium, so it is going to be a mixed pattern.

In talking to various people, they are exploring what is most advantageous to them. That has been true in the coal industry. Certain big users like the steel industries have bought coal in the ground. Sometimes they have a coal operator mine it for them. Others are content to buy it on the open market. Most utilities are content to

buy it on the open market.

Some big users in industry, like the aluminum industry, actually own coal reserves, so the pattern will be mixed and it will vary with each management.

Mr. PICKARD. I would like to add that our committee did not focus on it as such. It was simply in everybody's mind, though, that it was awfully early at this stage to try to anticipate what the many diverse arrangements might be, and it was largely for that reason that we felt as much flexibiliy under the criteria should be allowed as possible so when you actually get around to facing these problems, you will find enough room to find an equitable solution of them.

MODIFICATION OF ENRICHMENT SERVICE CONTRACTS AT REQUEST OF

EITHER PARTY

Mr. CONWAY. May I ask one other question of you, Mr. Pickard. Have you had an opportunity to look at the General Accounting Office report and have you considered the suggestion of the GAO that either party to toll enriching contracts should be able to request modification of these contracts? As of now, only the customer has that privilege. (See app. 7, p. 338.)

Mr. PICKARD. Yes; I have looked at the report and our committee did focus on this to some extent. I think it was the general feeling of the committee that it should be a mutual arrangement. As a matter of fact I think that is implied in the letter we wrote to Dr. Seaborg of June 17.

PRIVATE OWNERSHIP OF GASEOUS DIFFUSION PLANT

Representative BATES. Did you recommend before I came in here, General, that private industry buy one of these diffusion plants?

General NICHOLS. I did not recommend it. I stated I felt we should make a study of ownership of some of the existing plants and I stated as a personal opinion that probably the best way for private enterprise to get into this business, is to take over one of the existing plants; but I still think a study should be made to determine how you do this and when and to consider everything that is involved, but our committee did not go into that particular assignment that the Directors of the Atomic Industrial Forum wanted us to, and I stated earlier that we felt now is the time to do it. Dr. Seaborg felt it should be 1967 or 1968.

Representative BATES. To make the study?

General NICHOLS. Yes, sir; to make the study.

Representative BATES. With your broad experience and background in this field, what would be your educated guess as to the advisability of doing it and in point of time?

General NICHOLS. My personal view is sometime in the early 1970's, sometime before 1975. I am talking about one of the gaseous diffusion plants that private industry could use with proper sale or leasing by the Government.

Representative BATES. During the same time would you suggest that the Government continue to sell or that all private sales go through the AEC?

General NICHOLS. That is one of the things that has to be worked out. Is the Government in competition or does the Government establish a ceiling on the price. I think it is the type of thing that has to be worked out-what is the best way to do this?

Representative BATES. How long would such a study take?

General NICHOLS. I would think 6 months to a year. There are a lot of ramifications to this thing. That is why I felt that it is time to get on with it.

As I say, the board of directors of the forum, in the fall of 1965, concurred with the AEC to defer this until 1967-68. My testimony this morning stated that my personal opinion is there has been a change since 1965, there is a more rapid acceleration in the growth of the atomic power industry and maybe we should look at it sooner.

Representative BATES. What is the expected life of these plants? General NICHOLS. That is hard to state because it depends on how much money you spend in maintaining them.

Representative BATES. I am talking about from an economical point of view. In other words, when would you decide to build another one?

General NICHOLS. I checked into that a year or so ago among some of my knowledgeable friends to get their opinion, which I value, and I got a difference of opinion. One opinion was that they were keeping the plants so up to date that they were as good as a new plant. Another very knowledgeable person informed me that his personal opinion was that you should start with a new one.

PURCHASE OF EXISTING GASEOUS DIFFUSION PLANT VERSUS BUILDING NEW PLANT

Representative BATES. You are an expert. What do you say? General NICHOLS. I stated I am inclined to start with one of the old ones to acquire knowledge about the old ones, he is then in a position to make a decision to build a new plant or to acquire more of the existing plants.

Representative BATES. At this time you don't feel you can make a judgment?

General NICHOLS. I don't feel I have enough personal knowledge to give an answer. I went to people whose opinions I valued and got differences of opinion. It is understandable that there should be differences of opinion.

Mr. CONWAY. It depends on what the Government charges.

General NICHOLS. That is right. What is the charge the Government is going to make for an existing plant. A new plant has to be a lot better to make up for low price on an existing plant.

Representative PRICE (presiding). We would hope it would be a little better deal than the Government gets out of most of its property disposal.

General NICHOLS. I think this could be worked out for the Government to get a reasonable price.

Mr. CONWAY. On a replaceable basis.

General NICHOLS. I am a taxpayer. I am interested in a reasonable price.

Representative PRICE. Unless you are involved in it and that becomes secondary.

General NICHOLS. I represent no industry, have no particular interest in any one specific group making a profit. I advocate a reasonable deal that would be equitable to industry and to the Government.

Representative PRICE. Mr. Young, do you have any questions?
Representative YOUNG. I have no questions, Mr. Chairman.

Mr. PICKARD. I would like to add on behalf of the forum committee that the AEC has been most helpful in cooperating with us and most considerate of the points we have brought up for discussion.

Representative PRICE. Thank you, Mr. Pickard.

Senator PASTORE. Our next witness is Mr. Roger J. Coe and Mr. Harvey Wagner, representing the Edison Electric Institute.

STATEMENT OF ROGER J. COE AND HARVEY WAGNER ON BEHALF OF THE EDISON ELECTRIC INSTITUTE

Mr. COE. Mr. Chairman, my name is Roger J. Coe. I am a vice president of the New England Power Co. and also of Yankee Atomic Electric Co., Connecticut Yankee and Maine Yankee. I am a member of the Edison Electric Institute Committee on Nuclear Fuels, and I am testifying today on behalf of the Edison Electric Institute. We appreciate this opportunity to be heard.

The institute is a trade association of investor-owned electric utility companies. It includes 180 electric power operating companies serving over 97.5 percent of all the customers of the investor-owned segment of the electric utility industry in the United States. These customers comprise more than three-quarters of our Nation's users of electricity. Last December, the Edison Electric Institute submitted a statement with regard to the Commission's uranium enrichment services proposed criteria. Since that time, the Atomic Energy Commission and others have devoted much time and effort in an attempt to prepare a set of documents for uranium enrichment services which would reflect the best interest and most equitable solution for all parties, without creating imbalances. To those who have worked so diligently toward this end, we express our sincere appreciation.

The Atomic Industrial Forum's Ad Hoc Committee on Toll Enrichment Contracts, on which the power industry has had representation, and of which I was a member, has made detailed analyses of the pertinent documents and has submitted a statement of their findings. The Edison Electric Institute concurs with the comments and suggestions made therein. (See app. 5, p. 317.)

Some of the following comments are amplifications of points made by the Atomic Industrial Forum Committee as they appear to be of particular concern to the electric power industry, and the balance are comments originating with us.

NEED FOR FLEXIBILITY IN CONTRACTS

1. The criteria and contract forms appear to be sufficiently flexible to permit future modification as experience may indicate to be desir

able. The Edison Electric Institute attaches considerable importance to this flexibility since there is not sufficient experience at this time in the operation of nuclear powerplants to project with certainty what changes in operating modes may be desirable, or what problems in fuel management may arise which could warrant changes in the contract provisions as presently stated.

STANDARD TABLE OF ENRICHING SERVICES

2. It is urged that the AEC make available as soon as possible its "standard table of enriching services," as well as the tails assay on which the table will be based as these are necessary to an evaluation of long-term fuel costs.

INTERVAL BETWEEN DELIVERY OF FEED AND PRODUCT

3. We are concerned that the 90-day minimum interval between delivery of feed material to the AEC and delivery of enriched uranium to the customer, except for those willing to pay a surcharge for a shorter schedule, may impose an unnecessary economic burden on the feed material supplier. Perhaps consideration could be given to relating this period to the units of separative work to be performed or to the quantity and enrichment of the feed material in order to minimize this interval.

U235 BALANCE VERSUS TOTAL URANIUM BALANCE

4. A customer, by exercising his option to acquire tails material, can achieve a uranium quantity balance between the amount supplied to the AEC as feed material and the amount of enriched uranium delivered to the customer, after correcting for processing losses. This may or may not result in the customer receiving the amount of U235, minus losses, that he has supplied in the feed material since the assay of the tails is at the sole discretion of the AEC. In spite of the fact that AEC has testified in the current hearings that they expect the plant would operate at a tails assay equivalent to that set up in the table of enriching services, thus achieving a U235 as well as a total uranium balance, we think a further clarification of this matter is desirable.

ENRICHMENT OF FOREIGN URANIUM; MAINTAINING VIABLE DOMESTIC URANIUM INDUSTRY

5. The standard contracts prohibit the furnishing of feed material of foreign origin where the product is to be utilized in a facility within or under the jurisdiction of the United States. They further state that from time to time the AEC will review the condition of the domestic mining and milling industry to determine the need for continuing this restriction. A more definitive statement as to when the AEC will consider the possible utilization of foreign ore in domestic facilities is of great importance. The Director of the Commission's Division of Raw Materials estimated earlier this year and confirmed at the current hearings that the United States has reasonably assured reserves of 145,000 tons economically recoverable at the $8 price currently used by the AEC in establishing lease arrangements. On the other hand he estimated