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Appendix 22: Specifications for UF, delivered to AEC.

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URANIUM ENRICHMENT SERVICES CRITERIA AND

RELATED MATTERS

TUESDAY, AUGUST 2, 1966

CONGRESS OF THE UNITED STATES,
JOINT COMMITTEE ON ATOMIC ENERGY,

Washington, D.C. The Joint Committee met at 10 a.m., pursuant to call, in room AE-1, the Capitol, Senator John 0. Pastore (vice chairman of the Joint Committee) presiding.

Present: Representatives Holifield (chairman), Price, Morris, Hosmer, Bates, Anderson, and Young; Senators Pastore, Anderson, and Gore.

Also present: John T. Conway, executive director; Edward J. Bauser, assistant director; Leonard M. Trosten, staff counsel; George F. Murphy, Jr., national security affairs; James B. Graham, technical adviser; Jack Rosen, staff consultant; and William T. England, professional staff member.

Senator PASTORE. We are honored this morning with the presence of the two new Commissioners. They are most welcome and we appreciate their coming.

The Joint Committee on Atomic Energy this morning opens a series of hearings on the AEC's proposed criteria for performing uranium enrichment services. These criteria were submitted to the committee by the AEC on July 1, and are required by section 161v. of the Atomic Energy Act to lie before the committee for 45 days while Congress is in session before becoming effective. The statutory waiting period commenced on July 11. (See app. 1, p. 285.)

As Chairman Holifield remarked on July 12 on the House floor, these criteria and the contracts the AEC intends to use in providing uranium enriching-or “toll enriching”-services are of tremendous significance not only to the rapidly growing civilian nuclear power industry at home and abroad, but to the Government and the public at large. Nuclear power is expected to supply a very significant percentage of our electrical needs within this next decade, and the conditions under which the AEC supplies uranium enrichment services are of crucial importance to the nuclear fuel cycle from a technical and economic standpoint. For these reasons, the committee wants to be certain that the policy issues associated with uranium enrichment services are fully explored during the statutory. waiting period.

We also wish to delve into related matters, including the AEC's post-1968 policies on lease and sale of uranium, uranium reserves and requirements, and safeguards against diversion of fissionable material to unauthorized uses. (See app. 4, p. 315.)

As previously announced, the committee will also receive testimony from witnesses representing private industry during the week of August 15.

Because of the far-reaching impact of these criteria and contracts, and their complexity, the committee has asked that the General Accounting Office review them. This review has just been completed, and the report to the committee by the Comptroller General, dated August 1, 1966, will be made a part of the record of these hearings. The committee expects that this report will be of considerable assistance to the committee and its staff in reviewing these matters. (See app. 7, p. 333.)

Before proceeding to receive the Commission's testimony, I would like to announce that the committee does not intend to hold hearings this afternoon due to activity on the House floor associated with the proposed civil rights legislation. We will resume the hearings tomorrow morning at 10 a.m.

Dr. Seaborg, please go ahead.

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STATEMENT OF HON. GLENN T. SEABORG, CHAIRMAN; ACCOMPANIED BY JAMES T. RAMEY, GERALD F. TAPE, SAMUEL M. NABRIT, AND WILFRID E. JOHNSON, COMMISSIONERS; AND R. E. HOLLINGSWORTH, GENERAL MANAGER; JOHN P. ABBADESSA, CONTROLLER; GEORGE F. QUINN, ASSISTANT GENERAL MANAGER FOR PLANS AND PRODUCTION; JOSEPH F. HENNESSEY, GENERAL COUNSEL; MYRON B. KRATZER, DIRECTOR, DIVISION OF INTERNATIONAL AFFAIRS; JOHN V. VINCIGUERRA, ASSISTANT GENERAL MANAGER FOR ADMINISTRATION; HAROLD L. PRICE, DIRECTOR OF REGULATION; WILLIAM J. MINSCH, JR, OFFICE OF GENERAL COUNSEL; AND RAFFORD L. FAULKNER, DIRECTOR, DIVISION OF RAW MATERIALS, ATOMIC ENERGY COMMISSION

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Dr. SEABORG. It is a pleasure to participate in these hearings and to discuss the most recent steps taken and planned by the Atomic Energy Commission to implement the Private Ownership of Special Nuclear Materials Act. I believe my testimony will touch on all of the points you made in your opening statement.

Senator PASTORE. I understand it is your desire that we allow you to read it in its entirety and then question you.

Dr. SEABORG. I don't believe I will escape any questions by that artifice, but I think it will be a little more efficient. (Laughter.]

These include further actions directed toward encouraging widespread participation in the development and utilization of atomic energy for peaceful purposes and the strengthening of free competition in private enterprise.

Specifically, the primary step involves the establishment, pursuant to section 161v. of the Atomic Energy Act of 1954, of criteria under which AEC will make available services for the enriching of privately owned uranium. Related matters, which I will discuss later, include policies which AEC proposes to follow during the transition period to private ownership of nuclear fuels with regard to the sale and lease of enriched uranium, the disposal of available AEC uranium stocks and domestic safeguards against unlawful use of special nuclear material.

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In developing our plans and policies in these areas, the AEC has been guided by the legislative intent as contained in the act and the Joint Committee on Atomic Energy report on the private ownership legislation.

Implementation of the Private Ownership Act with respect to supply of nuclear fuel for the growing nuclear power industry will bring about substantial changes, both for industry and AEC, from past and current procedures. The decline in military requirements for enriched uranium will, within a brief period, reverse completely the situation which has prevailed in the past; that peaceful requirements were insignificant compared to military requirements and that material could be diverted to meet civilian needs with no significant impact on plant operations.

In contrast, future operations of our gaseous diffusion plants must be sensitively geared to industry's needs for fuel, and the economic commitments involved in diffusion plant operations must be reflected in the contracts under which industry can be assured of the timely and economic availability of material to meet its needs.

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AVAILABILITY OF INFORMATION CONCERNING GASEOUS DIFFUSION PLANTS

The AEC has been particularly aware of the facts that it represents essentially a sole source of enriching services to its customers and that its plant capacities and produetion costs are classified. In light of proliferation implications, the process technology must remain classified for the foreseeable future, but we are hopeful of providing more insight, as time goes on, into the capacity and cost structure of the plants.

Since a general declassification in this area is not presently appropriate, it was considered important in developing our criteria for enrichment services to provide assurances to our customers as to the availability of the service on a long-term basis and as to limits in the charges which would be made for the services. Our criteria thus proi vide for commercially oriented contracts of up to 30 years' duration under which AEC would guarantee to deliver enriched uranium on time and within specifications and which contain a ceiling charge, $30 per kilogram unit of separative work, subject to escalation, for the enrichment service.

In the development of the Criteria and the implementing contract forms and in establishing the ceiling charge, the AEC has been cognizant of its responsibility to obtain reasonable compensation for the Government, to avoid subsidy and to provide the service on a nondiscriminatory basis. It has further endeavored to establish an approach which would be attractive to industry and responsive to its needs, and thus would encourage the growth and development of the industry, yet which would not preclude or make difficult the development of commercial enriching services in the future.

These considerations, together with the substantial uncertainties in demand to meet the needs of the rapidly growing nuclear power industry and the complexity and newness of providing toll enriching services, may have led AEČ to be somewhat conservative in defining its arrangements for the provision of enriching services. At least we

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