Mr. CONWAY. I am taking your answer to the previous question. Mr. POVEJSIL. I do believe based on my knowledge of utility planning practices that the 3-year period does give them a very definite advantage as contrasted with a 4- or 5-year period.

Mr. CONWAY. It gives them a definite advantage when AEC is required to give 4 years' notice in its electric power contracts and the AEC must pay penalty charges if they terminate on less than 4 years, and then in turn the utilities can terminate their contracts with the AEC and not pay any penalty on only 3 years' notice. It definitely does give an advantage. A prudent business approach would require equality of treatment, do you not think? The AEC should not receive any more than its actual costs but if it does incur costs in the fourth year, and those costs are incurred because the utilities require that much advance notice, should not those costs be passed on to the utility or other party that terminated the enriching contract?

Mr. POVEJSIL. I believe this particular subject was discussed at great length in the discussions that ultimately led to the 3-year time period. Mr. CONWAY. The Commission originally wanted 5 years.

Mr. POVEJSIL. Perhaps Mr. Witzke would want to speak to this. Mr. WITZKE. This particular point was discussed in considerable detail between the AEC representatives and the Atomic Industrial Forum on toll enrichment. As a result of these discussions, we arrived at the 3-year figure. I was of the opinion that that was one thing that was set. Is there anything new that has come up?

Mr. CONWAY. The Joint Committee asked the Comptroller General to look into this matter (see app. 7, p. 333). We have a report from the GAO indicating that the AEC could incur certain costs, as the result of a customer's termination on 3 years' notice, with the customer not being subject to a termination charge.

TERMINATION BY FOREIGN CUSTOMERS

There is also another point which I think is very important and that is the fact that we anticipate a substantial percentage-perhaps around 40 percent of the enriched material is going to be going overseas in the next decade or two. We may find enriching facilities developing overseas, and certainly if the AEC loses a very large percent of its orders with only a 3-year termination notice but in the fourth year will be incurring added costs, I do not know whether the nuclear industry in this country will want to absorb that. They will have to if the AEC has to readjust its charges to cover its losses.

I am suggesting based on the GÃO analysis that it might be more equitable for the termination notice period to run perhaps to 4 years providing, of course, that the party terminating the contract does not have to pay any extra charges other than the actual costs to the AEC. Mr. WITZKE. As far as the General Accounting Office is concerned, as I understand it, they were a party to this as we went along.

Mr. CONWAY. No, sir; not that I know of. The Joint Committee asked the GAO to assist the committee in evaluating the criteria. They made an analysis of this on the basis of the committee's request subsequent to the committee having received the criteria from the AEC. Mr. WITZKE. It seemed to me that this fact that 40 percent of the business may be foreign and that if, say, the Europeans build a gaseous diffusion plant

Mr. CONWAY. Or the British decide to lower their charges to obtain the business.

Mr. WITZKE. This would be a new factor.

Mr. CONWAY. I can see where you may not want to be faced with that possibility.

PRIVATE OWNERSHIP OF GASEOUS DIFFUSION PLANT

Representative PRICE. How many groups in the atomic energy business would be in a position now or within a very short time to finance the construction of a gaseous diffusion plant?

Mr. POVEJSIL. I think that the answer to that question would depend on a great deal more knowledge of gaseous diffusion plants than is available.

Representative PRICE. Take the figures we have been discussing here about the capital costs and some of the operating costs, and so forth, which are pretty generally known at least in the trade.

Mr. POVEJSIL. Do you have reference here to something of the order of $800 million for a single gaseous diffusion plant?

Representative PRICE. Yes.

Mr. POVEJSIL. Obviously that is the type of investment if made by an existing corporation would have to be made by a very large corporation of which there might be two dozen or some number of that order of magnitude that might be capable of undertaking an enterprise of that magnitude on a completely independent basis.

Representative PRICE. Do you have any questions, Mr. Conway?

SAFEGUARDS FOR SPECIAL NUCLEAR MATERIAL

Mr. CONWAY. No, except in another area about which we have queried other witnesses. That is with regard to the need for better safeguards as we move into the breeder program. Do you visualize a need for closer AEC supervision and regulation in the safeguards area, and not just depending upon the economic penalty to a company, particularly fuel fabricators and chemical reprocessors for losses they may entail.

Mr. POVEJSIL. I believe in view of the very real problem created by significant amounts of plutonium in the number of reactors that are scheduled for use that this whole question has to be reexamined. I believe the committee that has been established for this purpose is an excellent idea and that it will provide a vehicle where the requirements for better and more complete safeguards for this particular type of material can be worked out in a way that is compatible with the way industry must operate most economically.

Mr. CONWAY. Do you think it will be helpful and desirable for the AEC then to specify what the material accountability and physical security should be that should be followed by AEC licensees so that we have a standard method of operation that would apply to all licensees and all contractors?

Mr. POVEJSIL. I believe after the procedures have had a chance to be thoroughly thrashed out with industry so that methods are established which are reasonably compatible with their economic requirements and still absolutely compatible with the safeguard requirements that the AEC should have this responsibility.

Representative PRICE. Are there any other questions?

Thank you very much, Mr. Povejsil and Mr. Witzke. We appreciate your testimony.

The next witness will be Mr. Brice O'Brien, general counsel, National Coal Association.

STATEMENT OF BRICE O'BRIEN, GENERAL COUNSEL, NATIONAL COAL ASSOCIATION

Mr. O'BRIEN. Mr. Chairman, my name is Brice O'Brien. I appear here on behalf of the National Coal Association, which has in its membership producers and distributors of about two-thirds of the Nation's commercial bituminous coal.

I would like to divide my statement cleanly between the question of uranium reserves and the toll enrichment policies, but I do not believe that can be done. It cannot be done because the adequacy of uranium reserves necessarily affects all major Government policy decisions in this program. If vast quantities of low cost uranium will be found, then the AEC will almost surely be incorrect in their forecast of the enriching capacity that will be required. If vast quantities of lowcost uranium will not be discovered, Government should cease to encourage the waste of this valuable resource in nonbreeder plants.

If discoveries of presently unknown deposits of low-cost uranium are made in such vast quantities that shortage of atomic fuel cannot be a limiting factor on the growth of atomic power, we ask you and the AEC why atomic power's share of the future utility market will not be greater than presently forecast by AEC? Is it because plants like the TVA plant really won't be able to perform as well as TVA believes after consultation with AEC and GE? Is it because utilities don't have enough confidence in the safety of atomic plants, pending years of experience, to go all nuclear? Is it because FPC is wrong in its predictions that most of the new generating capacity built in the future will be in very large sizes? Or is it because they feel coal will be able to make cost reductions which can compete with Government-sponsored atomic power? There has to be some answer, or the forecast is incorrect. I will attempt to discuss coal's chances of competing with atomic power if the Government says, in substance, "We will continue to do whatever is necessary to keep atomic power cheaper than coal."

Although many companies have ordered nuclear plants, there are only two detailed analyses available. The first, Oyster Creek, is apparently considered out of date at this time. The other, TVA, is fresh in everyone's mind. TVA said that atomic power had a competitive advantage of $8 million a year over a coal plant that would have used 62 million tons of coal a year. That comes out to $1.23 per ton of coal. We do not know whether the TVA plant will work that well. We do not know, either, whether the TVA plant will have atomic fuel for its lifetime. But I, personally, am convinced that our coal producers will not be able to reduce the cost of mining by $1.23 per ton by the time TVA orders another plant.

In the past coal has been a "moving target." We hope to become a "moving target" again in the future. But we do have some difficulties. We are spending more money than we used to on land reclamation and

prevention of pollution. There are research projects underway which could very substantially reduce the cost of converting coal into electricity, but such projects take time and, without the availability of vast sums of money, we cannot compete with the AEC in predicting future scientific achievements. Some of the mining equipment manufacturers have expressed confidence that they will be able to develop new machinery which will enable coal producers to make drastic reductions in the cost of coal. We hope they are correct, but until that machinery is developed we are faced with the fact that our present price is a floor-full cost plus a reasonable profit.

Nevertheless, I personally have full confidence in coal's future-because I believe that shortage of low-price uranium will be a limiting factor on the growth of atomic power. Since you have already put into the record our special report on this subject, together with AEC's comments thereon, I will not discuss this subject at length. A few comments, however, appear to be in order.

In discussing our report, the AEC expressed agreement with our observation that presently known low-cost uranium reserves are not sufficient to supply projected industry needs for an extended period. AEC did disagree with us on a relatively minor point-the coal équivalent of the known reserves. We said that the 145,000 tons of yellowcake had a coal equivalent in today's light water reactors equivalent to only 2 billion tons. Dr. Seaborg said in his comments to you that the coal equivalent, "in today's light water reactors," would be 2.5 billion tons without plutonium recycle and 5.7 billion tons with recycle. In the long-range energy picture, the difference between 2 billion and 5.7 billion tons of coal is immaterial. But it is a big difference in terms of understanding how very little uranium we really have for

sure.

I therefore call to your attention the fact that Dr. Seaborg's statement is in conflict with a statement made by AEC's Mr. Faulkner, who said that 1 megawatt of atomic capacity would consume, in a year, the available fissionable material from 0.2 tons of yellowcake, without recycling, or 0.15 tons of yellowcake with recycling. If Mr. Faulkner is correct, the 145,000 tons of yellowcake is equivalent to 1,786,400,000 tons of coal without recycling, and to 2,381,770,000 tons of coal with recycling of plutonium. We do not know whether Dr. Seaborg is correct or whether Mr. Faulkner is correct. Our method of converting Mr. Faulkner's figure to coal is set forth in an appendix to this statement. (See app. 19, p. 519.)

The difference in the charts we presented in our report, and the charts presented by the AEC, boils down to one point. Our charts were prepared on the basis of dedicating lifetime reserves to a plant when it is constructed; AEC's charts were prepared on the basis of allocating no reserves to a plant until actually consumed. We, of course, were trying to illustrate the fact that very few additional atomic plants can be built without making all such plants vulnerable to the danger that sufficient uranium to supply them for plant lifetimes might never be discovered. On the full life basis, utilities would have to stop ordering nuclear plants very soon, and from that point on plant orders would be made only to the extent justified by new uranium discoveries.

Since the AEC responded with charts using the no reserve basis, we assume they were trying to increase utility confidence in the prospect of

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future uranium discoveries. We cannot blame AEC for this type of salesmanship, because as we have pointed out in the past the law directs AEC to promote the use of atomic power. We do want the record to show, however, that even AEC admits that a leadtime of somewhere in excess of 8 years would be prudent. Even with this short period of protection, the AEC chart would show that utilities within a very few years should stop ordering nuclear plants except to the extent that future discoveries of uranium justify such orders.

I am not going to waste your time arguing about how much additional uranium will be found in the future. No one really knows how much will be found. I do, however, want to call to your attention two points which I think are not well understood.

First, it has been stated by several people that very little exploration for uranium has been performed in recent years. That is probably correct, if you say, "exploration primarily for uranium." There has, however, been a great deal of drilling into the earth's crust, in most places where valuable mineral deposits appear probable. Whether this drilling was for oil, for silver, or for any other deposit, the fact remains that it turned up very little uranium. Does anyone believe that the geologist drilling for silver would have overlooked uranium if it had appeared in the drill core? I think the logical conclusion is that in recent years a great deal of drilling has indicated many places where uranium does not exist.

Second, it was stated earlier in this hearing that we proceed on faith in discoveries in the case of conventional fuels. The example given, of course, was that of oil and gas, where the lifetime reserves are substantially below the lifetime of a generating plant. A 10- or 15-year reserve of oil and gas will justify the purchase of an automobile, or even the installation of an oil or gas furnace. But when you get to $60 or $100 million electric utility plants, the utility executives do show concern for the availability of fuel in the future. That concern is primarily with availability rather than price, because the present worth method of evaluating plants greatly discounts the weight given to future price increases.

If it is a

Even so, a utility building a large coal burning plant today wants to be sure first that plenty of coal is available for that plant. mine-mouth plant, the utility wants a dedication of lifetime reserves. If it is not a mine-mouth plant, the utility can afford to be satisfied with a long-term contract, knowing that coal can be obtained (although possibly at higher prices) from other areas when the long-term contract expires. Where a utility builds an oil- or gas-burning plant, they also express their concern for reserves. For one thing, they usually construct a plant that can use either oil or gas. In fact, there are several plants which are built to use either oil, gas, or coal.

In the case of gas, when the gas company gets a certificate of convenience and necessity from the Federal Power Commission, the company usually is required to prove known reserves of approximately 20 years. This goes far toward giving the utility reasonable assurance of availability of fuel. Only the oil-burning plant if left without assured protection-which probably accounts for the fact that the number of new oil-burning plants is becoming steadily smaller.

Before leaving the subject of atomic resources, it seems worth reminding this committee that in 1962 the AEC's Report to the President set forth certain estimates of the magnitude of nuclear fuel re