Mr. QUINN. We would certainly keep the committee informed as to proposed changes in charges and specifications.

CHANGE IN $30 CEILING CHARGE

Mr. CONWAY. Let me ask you, suppose the Commission subsequently determines, for various reasons, to change the ceiling cost of $30. If you would find it necessary to go above that $30 ceiling charge, will you submit that to the committee for a 45-day period?

Mr. QUINN. That would be a change in the criteria and would be submitted in accordance with the provisions of the act.

Mr. CONWAY. In order that the industry and the Congress would have an opportunity to review it?

Mr. QUINN. That is right.

Dr. SEABORG. Going back to an earlier question, there might be one other area and that is in the area of contract terms and termination charges.

CERTAIN CHANGES IN TOLL ENRICHING CONTRACTS NOT INVOLVING.......

AMENDMENT OF CRITERIA

Mr. QUINN. In terms of the contract terms for termination charges at different notice periods within this maximum of 25 percent. But a change to exceed the 25 percent would involve changing the criteria. ENRICHING OF FOREIGN URANIUM; INSURING COMPLIANCE WITH COMMISSION POLICY

Mr. CONWAY. The Joint Committee's report on the private-ownership legislation said the following concerning toll enriching of foreign

uranium:

The Commission is directed not to offer such services for such material to the extent necessary to assure the maintenance of a viable uranium industry. In implementing this subsection, the Commission will be expected to examine carefully each proposed arrangement involving the enrichment of uranium of for

eign origin to determine whether the enriched product is for ultimate use in a utilization facility within or under the jurisdiction of the U.S.1

What are the Commission's plans in this respect?

Dr. SEABORG. The Commission will have available to it information from its materials accountability reporting system and from its exportimport licenses which should provide an adequate basis for insuring compliance to this.

Mr. CONWAY. I am thinking of future years, in the event you find it necessary or desirable to vary this policy.

Mr. RAMEY. Of course this is not as important probably now as it was a couple of years ago in terms of the protection of the domestic uranium industry. I would think that what the Commission will do in implementing any of these things, of course, is to keep the committee informed.

Mr. QUINN. At such time as the restriction is removed, that would constitute a change in the criteria and would be submitted to the committee.

Mr. CONWAY. I think you were talking about July 1, 1975, as a target date.

DATE FOR REMOVAL OF PROHIBITION AGAINST ENRICHING FOREIGN URANIUM FOR DOMESTIC USE

Mr. QUINN. That was an estimate we made in 1964. With the larger growth now projected in the market, it may be possible that an earlier date would be feasible.

Mr. CONWAY. At such a time as the Commission would make this determination, what would your plan be? How would you propose to make this announcement and bring it out to the industry and how much advance notice would you be prepared to give to the industry?

Mr. QUINN. I think we would handle the change in the criteria in this regard perhaps as we handled the initial criteria. We would get comments from the industry before formally submitting it to the Congress.

Chairman HOLIFIELD. I think we had better continue the questioning tomorrow. We are going to have to go to the floor pretty soon. We could submit the rest of our questions and have them answered by letter. (See app. 8, p. 346.) But I think it is very educational and informative to members of the committee and, I am sure, to the industry. If it is convenient to you, Dr. Seaborg, will you come back at 10 o'clock tomorrow?

Dr. SEABORG. I can come back tomorrow so far as I know.

Chairman HOLIFIELD. We are planning to have industry witnesses come in during the week of the 15th.

(Whereupon, at 12:05 p.m., Wednesday, August 3, 1966, the committee adjourned to reconvene on Thursday, August 4, 1966.)

1 See S. Rept. 1325, 88th Cong., 2d sess., p. 30.

URANIUM ENRICHMENT SERVICES CRITERIA AND

RELATED MATTERS

THURSDAY, AUGUST 4, 1966

CONGRESS OF THE UNITED STATES,

JOINT COMMITTEE ON ATOMIC ENERGY,

Washington, D.O.

The Joint Committee met at 10 o'clock a.m., pursuant to recess, in room AE-1, the Capitol, Representative Melvin Price presiding. Present: Representatives Price, Morris, Hosmer, Anderson, and Young; Senator Aiken.

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.

Representative PRICE. The committee will be in order.

This morning the committee will continue its questioning of the AEC concerning the proposed uranium enrichment services criteria and contracts. Thereafter, we will move into the area of post-1968 policies for lease and sale of uranium.

Finally, we expect to question the Commission concerning the AEC's policies and procedures for safeguarding fissionable material against diversion to unauthorized uses.

ALLOCATIONS OF SPECIAL NUCLEAR MATERIAL

Dr. Seaborg, last December the committee asked the AEC to review the continuing requirement for the allocation system in the AEC's regulations. Where does that matter stand as of now?

STATEMENT OF HON. GLENN T. SEABORG, CHAIRMAN; ACCOMPANIED BY 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; 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 Dr. SEABORG. That is being reviewed. There is a question whether it will be necessary to make these allocations in connection with the

regulatory aspects of our operation, in view of the fact that we are essentially covering the same area through the making of contracts for toll enrichment. This is being studied in view of the possibility that it may not be necessary to cover this aspect in these two somewhat in the overlapping ways. (See app. 17, p. 508.)

SALE OF GASEOUS DIFFUSION PLANT

Representative PRICE. During the private ownership hearings of 1964, there was extended discussion of the possible sale of one or more gaseous diffusion plants to private industry. Has your thinking on this subject changed significantly since that time? What is your current thinking?

Dr. SEABORG. I don't think it has changed significantly. We have this under what you might call continuous consideration, but we have not reached any conclusions as yet.

This would be sometime in the future, of course. I suppose in the mid-1970's.

Representative PRICE. I recall that discussion very well, because we were trying to get down to somé figure that private industry would have to put up to purchase one of these plants. It was a pretty high figure. I don't think they have been interested in acquiring one if it required great capital investment.

Dr. SEABORG. Yes. This will be a difficult determination to make. It will require a great deal of study. It will be basically a policy decision as to what a fair price would be.

DEPRECIATED VALUE OF DIFFUSION › PLANTS

Representative PRICE. I think the gaseous diffusion plants represent about a $1.4 billion investment.

Mr. ABBADESSA. That is correct, Mr. Chairman. Our acquisition cost is about $2.3 billion. We have depreciated down to where our present book value as of June 30, 1965, is about $1.4 billion. It should be realized that in setting the $30 ceiling price, however and leaving out this excess capacity problem that we have discussed we deter mined depreciation on a straight line basis computed on our acquisition costs.

In other words, the amount that we have for depreciation, looking at our studies for the $30 price, if projected over a period of 30 years, would involve some $2 billion. We believe this is reasonable to recover the additional capital investment we would have to make...

I think this is important when you consider industry taking over a plant or building another plant so that they would be able to come up with a price that includes all elements of cost.

Mr. CONWAY. Concerning that point, we had some discussion yesterday whether or not the costs of excess capacity or any portion of it should be included in your charge for enriching services. There was some discussion about sale of other plants having been owned by the Government, in the defense area, at 2 cents on the dollar.

. I think there is a difference here. We have plants that are currently operating, are currently valuable, and are producing material that is needed. The cases we were talking about yesterday, involving the Defense Department, so far as I know were plants that were obsolete,