basis that will assure the recovery of appropriate Government costs projected over a reasonable period of time. The cost of separative work includes electric power and all other costs, direct and indirect, of operating the gaseous diffusion plants; appropriate depreciation of said plants; and a factor to cover applicable costs of process development, AEC administration and other Government support functions, and imputed interest on investment in plant and working capital. During the early period of growth of nuclear power, there will be only a small civilian demand on the large AEC diffusion plants. These plants were originally constructed for national security purposes, but will be utilized in meeting future civilian requirements. In this interim period of low plant utilization, the Commission has determined that the costs to be charged to the separative work produced for civilian customers will exclude those portions of the costs attributable to depreciation and interest on plant investment which are properly allocable to plant in standby and to excess capacity. (3) Projections of supply and demand over a reasonable time period will be used in establishing a plan for diffusion plant operations. This plan will be the basis for establishing an average charge for separative work over the period involved, which charge will be kept as stable as possible as operating plans are peridocally updated. Under such operating plans, AEC will at times be preproducing enriched uranium. Interest on the separative work costs of any such preproduced inventories will be factored into the average separative work charges. (d) Ceiling on charge for enrichment services (In The contract shall specify for the term of the agreement a guaranteed ceiling charge, subject to upward escalation for the cost of electric power and labor. The ceiling charge as of July 1, 1965, the base date for application of escalation, is $30 per Kg unit of separative work for separation of U-235 from U-238. its standard table of enriching services, as well as its schedule of charges for sale or lease of enriched uranium, AEC will take into account any significant effect of the presence of other isotopes of uranium on the number of separative work units required to perform a given U-235——U-238 separation.) (e) O'ustomer's option to acquire tails material The customer shall be granted an option to acquire tails material (depleted uranium) resulting from the performance of enriching services. The option as to quantity (Kg U) of tails material desired by the customer, within the maximum quantity subject to the option, must be exercised at the time of delivery of the related quantity of feed material. The U-235 assay of the tails material delivered to the customer will be within the sole discretion of the AEC. The maximum quantity of depleted uranium subject to the option will be equal to the difference between the total uranium supplied by the customer as feed material and the total enriched uranium furnished to the customer, less processing losses as established from time to time by the AEC. No charge wil be made for tails material delivered to the customer under the agreement other than AEC's withdrawal, handling and packaging charges. Delivery of tails material will normally be at the same time as delivery of enriched uranium. (f) Responsibilty for material meeting specifications The customer warrants that all feed material meets specifications and, with stated exceptions, agrees to hold the AEC and its representatives harmless from all damages, liabilities, or costs arising out of a breach of the warranty where such damages, liabilities, or costs are incurred prior to inspection, assaying and acceptance of the feed material by AEC. However, the customer is not deprived of any rights under indemnification agreements entered into pursuant to section 170 of the Act (Price-Anderson indemnification). The AEC's obligation to furnish specification material to the customer terminates upon final acceptance of such material by the customer. (g) Termination by AEC (1) The contract may be terminated by AEC without cost to AEC upon reasonable notice at such time as commercial enriching services are provided by another domestic source; provided, however, that AEC will upon request by the customer rescind any notice of termination and will continue to furnish the services specified in the contract if the services of the domestic source are not available to the customer: (i) to the extent provided for in the AEC contract during the remainder of its term; (ii) on terms and conditions which are considered by the AEC to be reasonable and nondiscriminatory as between domestic and foreign customers; and (iii) at charges considered by AEC to be reasonable, nondiscriminatory, and no higher than the ceiling charge under the AEC contract, as escalated for the cost of electric power and labor. (2) The AEC may terminate the contract without cost to the AEC in the event the customer loses its right to possess enriched uranium, defaults on its contractual obligations, or becomes involved in bankruptcy proceedings. In such instances the customer will be required to pay a termination charge determined as if the customer had terminated the contract on the notice, if any, given the customer by the AEC. (h) Termination by customer The customer may terminate the contract in whole or in part. In such instances the customer will be required to pay a termination charge equal to a specified fraction of the charges for those enriching services which would have been furnished but for such termination. Such fraction of such charge shall be a maximum of 0.25 of such charge for those amounts for which minimum advance notice of termination is given and shall be a lesser figure for amounts terminated for which a longer notice period is given. No termination charges shall apply to amounts of separative work which would have been furnished at times three years or more subsequent to the date of receipt of the notice of termination of such amounts. The amounts of separative work and enriching services charges related thereto (prior to the application of the specified fraction) shall be determined in accordance with the published AEC standard table of enriching services and established charges in effect on the date of the receipt of the notice of termination. The AEC will determine the extent to which, if any, such termination charges exceed the probable costs to the Commission which may arise from such termination and such charges shall be correspondingly reduced. Such determination shall be final. Upon request of the customer prior to its delivery of a notice of termination, the AEC will advise the customer of the approximate amount of termination charges which would be payable. (i) Delivery—Title The f.o.b. delivery point for both feed material furnished to AEC and enriched uranium delivered to the customer is the designated AEC facility. The AEC's enriching facilities are situated at Oak Ridge, Tennessee; Paducah, Kentucky; and Portsmouth, Ohio. Title to all material passes upon delivery. (j) Changes in charges and specifications Any change made after July 1, 1968 in the specification for UF, the AEC's standard table of enriching services, or any increase in the charge per unit of separative work for enriching services shall require at least 180 days' notice to the customer by publication in the Federal Register or otherwise. (k) Customer's requirements contracts In addition, requirements contracts will provide: (1) Quantities and enrichments of material. The customer will be committed to obtain, and the Commission to provide, part or all of the customer's actual requirements for enriching services for a designated facility or facilities during the term of the agreement. Timely notice of the customer's requirements must be furnished to AEC. Except as provided in 1(b) above the quantities and enrichments of feed material furnished by the customer will be those required, in accordance with the published AEC standard table of enriching services, to obtain the material of higher enrichment desired by the customer. A maximum net amount of enriching services to be provided will be established. (2) Utilization of material. The contract will provide the basis for determining the portion of the customer's requirements for enriching services to be furnished by the AEC by describing the extent to which: a. enriched uranium furnished by the AEC under the contract will, after being used in or in support of the operation of the designated facilities, be recycled or delivered to the AEC as feed material under the contract; b. plutonium or U-233 produced in and discharged from the designated facilities will be recycled for use in or in support of the operation of the designated facilities; c. special nuclear material obtained from sources other than through the contract or the operation of the designated facilities, will be used in or in support of the operation of the designated facilities, including delivery of such material to the AEC as feed material under the contract. Where the contract does not initially provide for the recycle for use, as in b. above, of the plutonium or U-233 produced, the customer, at any time prior to June 30, 1973, or such later date as the AEC may establish for this purpose, may elect, without incurring termination charges, to so use such plutonium or U-233 thereafter. In such cases, the contract will also provide for use of plutonium or U-233, as the case may be, from another source in lieu of such produced material. The customer may further change such utilization of material by agreement or by terminating the contract in whole or in part. 6. GENERAL FEATURES OF CONTRACTS ENTERED INTO IN ACCORDANCE WITH AN AGREE MENT FOR COOPERATION It is expected that the general features of uranium enrichment services contracts entered into pursuant to agreements for cooperation with foreign nations or groups of nations will be generally consistent with those discussed above. 7. CORRESPONDENCE Any correspondence involving this notice or request for copies of standard contract forms should be addressed to: Manager, Oak Ridge Operations Office, United States Atomic Energy Commission, Post Office Box E, APPENDIX 81 ADDITIONAL QUESTIONS AND INFORMATION FURNISHED FOR THE RECORD BY AEC, DATED AUGUST 9, 15, and 17, 1966 Hon. GLENN T. SEABORG, CONGRESS OF THE UNITED STATES, Chairman, U.S. Atomic Energy Commission, DEAR DR. SEABORG: In connection with the Committee's hearings on the proposed criteria for uranium enrichment services, several questions were raised regarding safeguards against diversion of source and special nuclear material. However, a few questions, the answers to which would help complete the record, were not asked. These additional questions are set forth below. 1. Has the AEC made any recent comparative analysis of the nuclear material safeguards controls now being employed by AEC's contractors (whether or not required to possess an AEC license), and AEC's licensees carrying out work for others? If so, what were the results of this analysis? 2. It is the Committee's understanding that nuclear material in the hands of the AEC's licensees has been subject to a very different set of policies and procedures related to the "strategic importance” of such material than has the same type of material in the hands of the AEC's license exempt contractors. Is this correct? Why has this been the case? What is the meaning of the term "strategic importance" as used in AEC's policy directives? 3. Would you expect safeguards controls to vary depending on the assay of enriched uranium? 4. Does the AEC plan to establish specific or general requirements applicable to licensees for inventories, controls over work in process, and sampling and measurement? In substance, would you provide general guidelines and allow licensees to have the option to develop a system within these guidelines? 5. Please describe the recent organizational arrangements that have been made within the AEC to provide greater assurance that AEC's responsibilities for preventing diversion are being effectively carried out? Do you believe a restruc turing of organizational responsibility may be called for in the future? 6. Will the ad hoc Advisory Panel on Safeguarding Special Nuclear Material recently established by the Commission consider the AEC's organization for 1 See also app. 16, p. 489. administering safeguards, for example the need for centralizing the AEC's functions to avoid possible duplication of effort and lack of coordination? 7. Will the ad hoc Advisory Panel consider the need for reasonably uniform requirements for both domestic and foreign fabricators and other users of nuclear materials? 8. Is it clear that the AEC has all the necessary authority under the Atomic Energy Act of 1954, as amended, to carry out whatever steps the Commission deems necessary to safeguard against diversion of source or special nuclear material? 9. Does the Commission believe that the fundamental mechanism for carrying out the AEC's responsibility for safeguarding nuclear material in the hands of the AEC's licensees should be through exercise of the AEC's regulatory, as opposed to contractual, authority? Should the AEC limit its authority for safeguarding licensees' material to the AEC's regulatory powers? It would be appreciated if the Commission would reply to the above questions as soon as possible. In addition, I would like to reiterate two of the requests made by the Committee at the hearings. The first: to provide for the record a definition and analysis of the term "separative work." The second: in regard to the Commission's letter of August 1, 1966, commenting on the National Coal Association's report on uranium ore reserves, to define the terms "currently known reserves," "known low cost reserves," "reasonably assured reserves" and "total resources." Your assistance in this matter is appreciated. Sincerely yours, JOHN T. CONWAY, Executive Director. Mr. JOHN T. CONWAY, Joint Committee on Atomic Energy, ATOMIC ENERGY COMMISSION, Washington, D.C., August 15, 1966. DEAR MR. CONWAY: During the Committee hearings on August 2–4, 1966, concerning the Uranium Enrichment Services Criteria and related matters, the Committee requested that certain additional material be furnished for the record. The requested information is enclosed in the form of attachments to this letter. Representative Bates inquired concerning AEC's estimates of world reserves of uranium and the magnitude of possible future uranium resources. Information on this subject was included in the attachment to a letter from Dr. Seaborg to you dated August 1, 1966; we understand the Committee plans to include this information in the hearing record. The material furnished herein includes: (1) A discussion and definition of the separative work concept (Attachment A). (2) Remarks on utility industry assumptions concerning future prices for natural uranium and separative work (Attachment B). (3) Contribution of natural uranium and separative work components on cost of generating electricity (Attachment C). (4) A sample standard table of enriching services (Attachment D). (5) Estimates for domestic sales of UзOs to the domestic market (Attachment E). (6) Definition of terms used by the AEC to describe uranium ore reserves. (Attachment F). We will be pleased to furnish such additional information as the Committee may desire. Sincerely yours, 70-510 0-66 -23 G. F. QUINN, ATTACHMENT A SEPARATIVE WORK GENERAL In the establishment of arrangements for providing enrichment services, it is necessary to adopt a method of defining quantitatively the job to be performed and of relating such job to the economics of the physical operation used to perform the separation. The separative work concept is convenient for such purposes since (1) it represents a universal method of defining quantitatively the services to be performed in terms of a single measurement unit, rather than a number of units involving quantities and assays, and independent of the facility or technology actually to be employed to perform the separation; and (2) the performance of the actual facilities to be used can be expressed in the same terms. It has thus been adopted by AEC as the basis of defining enriching services to be provided under toll enrichment contracts. Separative work is a measure of the amount of effort required to separate the isotopes of uranium. Any given separation job can be expressed in terms of separative work units, and this number of units is directly relatable to the amount of resources (e.g., plant, labor, utilities, etc.) required physically to perform the separation. However, the quantitative nature of such relationship is dependent upon the actual process used and its efficiency. The AEC gaseous diffusion plants have considerable flexibility to accept as feed material, and to produce as enriched product and depleted tails, uranium over a wide range of U-235 assays. Their combined capacity, when expressed in terms of separative work units and for the assays of primary interest, is independent, or nearly so, of the specific assays to be fed and produced. MATHEMATICAL DEFINITION The description of any separation job is initially stated in terms of the quantities of material fed to and withdrawn from the process, and the isotopic assay of each of these flow streams. This information can be appropriately combined into a single number which quantifies the job by a method of weighting the importance of each quantity and assay involved. The result is a measure of the isotopic separation effort involved and is, by definition, described in terms of "units of separative work.” A typical diagram for an isotope separation operation is shown below. P, W and F refer to the quantity of total uranium in the product, waste (or tails), and feed streams respectively. Similarly, xp, xw and x refer to the weight fraction U-235 in each of the streams. A "value function", V(x), is assigned to each isotopic assay of uranium, x (weight fraction U-235), by the expression: (x) V(x)=(2x−1)1n (1-x) where in represents the natural (Napierian) logarithm. If V(x,), V(xw) and V(x) are the value functions, defined above, for the assays X,, Xw and Xt, |