Projection of U.S. spent fuel reprocessing load for period 1966–73 The table shows that there is significantly less load available to the NFS West Valley plant than NFS had expected due to: (1) improved fuel performance in existing reactors; (2) delays in start-up and operating difficulties in some reactor projects; If it is assumed that NFS will be successful in securing contracts for reprocessing of utility fuel which is expected to be discharged during the next six years, but which is not currently under contract to NFS, the projected level of business would average 246 days per year. NFS hopes to secure additional load from foreign sources-e.g., Italian and Canadian, and from research reactors— in order to bring the level of business up to an average of 300 revenue days per year during the next five-year period. That is, NFS hopes to obtain an average of 54 days per year of foreign business for the years 1968, 1969, 1970. The major obstacles to NFS in obtaining European reprocessing business are: (1) the strong bid by the UKAEA to capture foreign reprocessing load for their government plants; (2) the high cost of transporting spent fuel from Europe to the United States; and (3) insurance problems connected with foreign shipments. An early solution to the shipping insurance problem now under consideration by the Joint Committee, coupled with an offer by the U.S. to buy the neptunium generated in foreign as well as domestic power fuels, would substantially increase the chances of having these fuels returned to the U.S. for reprocessing. 4. Question. What are the plans of NFS for providing a service of converting uranyl nitrate, resulting from chemical processing of irradiated fuels, to other forms including UF.? Answer. NFS currently provides services (i) for the conversion of uranyl nitrate to UO2, (ii) for blending uranyl nitrate recovered from reprocessing operations to achieve a specific level of enrichment, (iii) for the manufacture of UO2-PuO, fuels. These operations are accomplished at the NFS plant at Erwin, Tennessee which is devoted to the manufacturing of a complete spectrum of fuel materials. The NFS Erwin plant also has a capability for producing UO-PuO, for use in fuels for plutonium recycle to thermal reactors or for use in fast oxide reactors. NFS recently has been awarded a contract for the production of the first core loading for the SEFOR project. NFS also is studying the prospect of providing service for the conversion of uranyl nitrate to UFs. However, NFS believes that much of the uranyl nitrate product resulting from reprocessing operations will be used for recycle fuel without reenrichment of uranium. For example: (1) The possibility exists that the uranium recovered during reprocessing can be "cascaded" from reactor to reactor-using the uranium recovered from a spent PWR fuel to fuel a BWR, with only a small amount of isotopic blending involved. (2) Uranyl nitrate recovered during reprocessing could be "reenriched" with plutonium for recycle to thermal reactors. (3) In the event a market for neptunium develops, the recycle of uranyl nitrate product recovered during reprocessing would enable the reactor operator to take advantage of the U–236 build-up in the fuel from cycle to cycle to increase the yield of Np-237. Therefore, the uranyl nitrate solution product of reprocessing could, in certain cases, be more useful than UF. It is our understanding that the AEC is presently using the uranyl nitrate solution product of the NFS reprocessing plant to produce uranium metal without first converting to UF. This would suggest that the uranium is more useful in the nitrate form than the UF, form. However, it is the AEC's practice to impose a reconversion charge to licensees returning uranium in the form of uranyl nitrate amounting to $5.60/kg. U (less than 5% enrichment) plus an amount corresponding to 0.16% loss of the uranium so returned and a 20-day use charge—which are supposedly the costs that would be incurred if the uranium were converted to UF.. It is recommended that consideration be given to the prospect of eliminating these charges to the extent that the relative values of UF, and uranyl nitrate to the AEC differ from the established reconversion charges. 5. Question. Would you advocate that the Government set its toll enrichment charges on such a basis as to factor in all the items of cost and profit you say would be applicable to a commercial operation? Wouldn't this smooth the transition to private operation of the diffusion plants? Answer. We believe that the toll enrichment charges established by the Government should contain all items of cost plus a reasonable profit which would be applicable to a normal commercial operation. We believe that establishing toll enrichment charges in this fashion would smooth the transition from Government to private operation of the diffusion plants when such is practical. 6. Question. (1) Why do you believe that in the foreseeable future the gaseous diffusion plants should be operated "privately"? In view of the numerous special problems associated with this subject—such as the large investment required, the monopolistic nature of the service, and the need for Governmental control over many facets of the plant's operations—do you think a strong argument can be made that for the foreseeable future the plants should continue to be operated by the Government, or some kind of a Government corporation operating like a commercial enterprise? Can there really be "private" operation of a gaseous diffusion plant in any meaningful sense? Answer. While there may be a number of problems to solve in connection with the private ownership and operation of gaseous diffusion plants, we see no reason why such plants cannot be operated on a private basis under appropriate economic incentives. Many of the special problems associated with the private ownership of gaseous diffusion plants were applicable to the private ownership of a reprocessing facility—and these were satisfactorily solved. We believe that it is even more important to place the gaseous diffusion plants in the hands of private industry since it represents a larger portion of the fuel cycle costs than reprocessing and because it is believed that true fuel cycle costs will only be known precisely after commercial experience has been obtained in the operation of gaseous diffusion plants. Of course, we do not rule out the prospect of Government participation in the private operation of the diffusion plants during the period that competition is developing. 7. Question (a). Do you believe that AEC's licensees are currently maintaining records and other controls pertaining to special nuclear material which are adequate for the purpose of safeguarding against diversion of such material to unauthorized uses? Answer (a). We believe that AEC's licensees are currently maintaining records and other controls pertaining to special nuclear materials which are adequate to safeguard their financial responsibility for such materials. It is understandable that a commercial enterprise would establish rigorous procedures to protect against the loss or diversion of valuable materials as such could be expected to have a significant impact upon the financial success of an individual operation-particularly when it is considered that the work being performed on such materials frequently represents only a small fraction of the intrinsic value of the contained special nuclear material. Before these procedures can be evaluated concerning their adequacy for safguarding against diversion of special nuclear material for unauthorized uses, guidelines must be established which define the precise objectives of a safeguards program—including the fissile materials and quantities thereof which are deemed to be of strategic importance. We believe that priority importance should be directed to this by AEC. Question (b). Do you think substantial improvements are needed in the AEC's regulations and procedures for safeguarding against diversion of special nuclear material in the hands of licensees? Answer (b). A review of this problem is definitely in order. However, such regulations and procedures need not necessarily be more stringent than the prac tices currently followed by commercial organizations for protecting and accounting for valuable special nuclear material. The aforementioned guidelines should be established as they relate to safeguards for diversion. Question (c). Do you think the AEC should specify (1) the material accountability and (2) the physical security procedures to be followed by AEC's licensees to safeguard against diversion? Answer (c). Such practice might be self-defeating if such procedures are specified by AEC. We believe that the AEC should set standards and guidelines in accordance with well-defined objectives but should leave the procedures to licensees as to how to realize the objectives. We doubt that a single set of rules for accountability and physical security could be devised to cover all cases. Question (d). What are your views concerning the AEC's recently announced proposed changes in its regulations concerning safeguarding against diversion? Answer (d). The AEC's proposed amendments to 10 CFR, Part 70 and 10 CFR, Part 150 in connection with the transfer and status reports for privately-owned special nuclear material seem to be intended as a first step toward the control of special nuclear material and the prevention of its diversion for unauthorized uses. However, the procedures set forth in these proposed amendments appear to be an expedient as opposed to a final, carefully considered plan to accomplish the safeguards objective. As an alternate to the promulgation of the proposed amendments, it is recommended that the following be considered: (1) The objectives of a safeguards system should be established as well as general ground rules for its implementation. These ground rules should include a delineation of those fissile materials and the quantities of each that are considered by AEC of strategic importance with regard to safeguards considerations. (2) A periodic reporting requirement for privately-owned strategic material should be established which summarizes inventory and receipts and transfers of materials from an individual licensee to other activities and organizations. Each such transfer should not have to be reported separately at the time at which it is made. (3) Every attempt should be made to accept procedures of licensees for the protection and accounting for special nuclear material for financial purposes for the safeguarding of such material of strategic significance against unauthorized uses. In this connection different reporting requirements should be considered for fuel processors, reactor operators, and fuel reprocessors since the circumstances under which special nuclear material in their possession could be diverted might be quite different. (4) The possibility of an independent audit by private audit firms of the transfers of special nuclear material and inventories thereof for licensees should be considered as a means to verify the records and transactions of the licensees. (5) The prospect of having a resident Government inspector in the plants of individual licensees should be considered as an additional method for safeguarding strategic special nuclear material. (6) A comprehensive study of measurement systems, analyses, and accountability should be made by the Atomic Energy Commission in an effort to establish what can be reasonably and economically expected of a safeguards procedures system in various fuel cycle operations. The safeguarding of special nuclear material against unauthorized uses is of major national significance and should be pursued expeditiously. Our organization is prepared to assist the AEC and the Joint Committee in establishing guidelines for the implementation of safeguards systems and for the conduct of safeguards inspections. 8. Question. Please describe generally the operation of NFS in fields other than chemical reprocessing of irradiated fuels. Answer. Aside from chemical reprocessing of spent fuel, NFS provides services for the transportation of spent fuel from the reactor location to the reprocessing plant (in an NFS-owned cask) and provides services for radioactive waste disposal-all at the West Valley plant. NFS is studying the prospect of initiating isotope recovery facilities at West Valley. NFS also operates a fuel manufacturing facility at Erwin, Tennessee, which has a capability for producing fuel materials and fuel rods of almost every description-containing uranium (all enrichments), Uranium-233, thorium and plutonium. This plant also has extensive unirradiated scrap recovery facilities. In addition, the plant has a production capability for sol-gel fuel microspheres using a proprietary process. The development of this process represents one of the first major breakthroughs in nuclear fuel manufacturing technology re sulting from privately funded research. With these extensive capabilities at Erwin, NFS has produced and is producing nuclear fuel materials and nuclear fuels for power reactors, research reactors, and propulsion reactors (Navy and space). Presently the Erwin plant is manufacturing fuel for SEFOR and Light Water Breeder projects-among others. NFS also offers research and development services at the two NF'S plants and at the W. R. Grace Washington Research Center. The following provide a summary of the capital investment in facilities in nuclear fuel cycle work. Feed Materials and Fuel Manufacture NFS Erwin Plant: Location: Erwin, Tennessee. Started Operations: 1957. Total Capital Employed: About $5 million. Annual Nuclear Sales: $4-$5 million. Number of Employees: 250. Reprocessing-NFS West Valley Plant: Location: West Valley, New York. Process Used: Chop-leach head-end. Aqueous purification and separation (PUREX process) Started Commercial. Operation: April 1966. Total Capital Employed: About $33 million. Annual Sales (at 300 days/year) : About $7 million. Capacity: 1 metric ton U/day (UO2). Number of Employees: 165. Spent Fuel Transportation NFS Cask : Type: Rail, top-loading, vertical shipment. Coolant: Water, natural convection. Shielding: Lead (9 inches). Weight: 72 tons. Capacity: 24 Dresden-1 assemblies, or 9 tons NPR fuel, or 6 NS SAVANNAH assemblies: Contracts: Commonwealth Edison Company, U.S. Maritime Administra tion. Grace Research and Development-W. R. Grace, Washington Research Center: Location: Clarksville, Maryland. Constructed: 1957: Nuclear Expansion : 1965. Number of Employees: 500 (180 professional). Work Area: 130,000 sq. ft. Nuclear: 51,000 sq. ft. Capital Investment in Facilities: $9,200,000. Annual Nuclear Research Expenditure: $1,500,000–$2,000,000. Principal Areas of Effort: Nuclear Research, Polymer-Organic Research, Industrial-Agricultural Chemical Research. 9. Question. Are you generally satisfied with the AEC's post-1968 policies on supply of uranium as announced on July 25? Answer. Yes. 10. Question. Do you believe additional measures should be taken now by the utility industry and the Government to encourage competition in the fuel conversion, processing and fabrication business? What should such steps be? Answer. Yes. Competition should be encouraged at each phase of the fuel cycle in order to provide maximum opportunity for improvements, both in cost and technology. The most effective way that competition can be stimulated by the utility industry is for them to provide competitive bidding on each phase of the fuel cycle for the concentrates and conversion to UF, for manufacture of the fuel material, for fuel fabrication and for reprocessing of spent fuel. The Government can help stimulate competition in various phases of the fuel cycle similarly. Premature package fuel contracts will serve to stifle competition and leave the industry in the hands of only a few very large companies. Government assistance in the encouragement of competition in the nuclear fuel cycle might also be realized by awarding Government research and development and operating contracts to those companies which have evidenced a strong interest in competing in nuclear fuel cycle activities through private investment therein. Of course such work should be clearly required by the Government and should be within the general capability of the prospective contractor to perform. 11. Question. During the 1963 and 1964 private ownership hearings, considerable concern was expressed over the problems of vertical integration by companies in the fuel fabrication business. What are your views on this matter today? Answer. I am not opposed to vertical integration provided that competition can be maintained for the various steps of the fuel cycle, and provided that the sale of equipment, or package fuel contracts does not preclude the independent suppliers from bidding in the marketplace. I appreciate the opportunity to testify before the Joint Committee on Atomic Energy on August 17, 1966 and to supplement my testimony with the foregoing remarks in answer to the Committee's questions. Very truly yours, T. C. RUNION, President. Representative PRICE. The next witnesses will be Mr. S. M. Stoller and Mr. J. Hogerton, representing S. M. Stoller Associates. STATEMENTS OF S. M. STOLLER AND JOHN F. HOGERTON, S. M. STOLLER ASSOCIATES Mr. STOLLER. Mr. Chairman and members of the committee, we thank you for the invitation to take part in these proceedings. Our prepared statement, which is brief, relates principally to the subject of uranium reserves and requirements. Our purpose is to comment on two topics which we believe to be of importance. One is the need for an interim industry policy regarding the "reserve margin" to be maintained; that is, the size of the delineated low-cost uranium reserve at any given point in time relative to the demand. The other is the importance of insuring continuing availability of reliable data on reserves and exploration activity. Before commenting on these topics, our vantage point should be defined. As consultants to utility companies with atomic power projects, we have long been engaged in studies of fuel cycle cost factors and trends and, more recently, with the advent of private ownership legislation, in arrangements for fuel supplies and services. Very recently, through work for a nonutility client who is considering entry into the field of uranium production, we have had occasion to look at the outlook for uranium demand from the standpoint of the producer. Thus, although what we have to say bears on utility needs as we see them, and is from that vantage point, it is conditioned by the fact that we have had some exposure to the producers' point of view. RESERVE MARGIN We turn now to the need for an interim policy regarding "reserve margin." We have two general comments to make on this topic. The first relates to the question of how much of a reserve margin should be maintained. In approaching such a question, one's natural tendency is to look for precedents in other industries. In the oil industry, for example, the practice has evolved of maintaining reserves of crude oil equivalent, in recent years, to between 10 and 14 times current production demand. The rate of increase in the demand for crude oil has been such that this has corresponded to about a 10-year "forward reserve"; that is, a reserve sufficient to meet demands 10 years out into the future. |