that such material to be a bar must, at least, be published by the Technical Information Service of the Commission. As such it is still classified. However, this is a step in the right direction.

The other portions of H. R. 600 are desirable but of an order which would not require special comment at this time.

Finally, short of elimination of all restrictions bearing on the normal application of patent law to atomic science (except for restrictions as to weapons, assuming they cannot be handled in the same manner as are developments for the Defense Department), we believe a revision of the section referred to above, as provided by H. R. 600 is a forward step. It gives to the field of atomic science additional established advantages of the patent system, and thus tends to fulfill the declared policy of the Atomic Energy Commission of improving the general welfare, increasing the standard of living, strengthening free competition in private enterprise, and so promoting world peace.

The CHAIRMAN. Thank you very much, Mr. Graves, for taking your time to present your views.

It is one of the problems that we face, and we shall continue to make a study of it and try to improve it in the best interests of the American public.

Mr. GRAVES. Thank you.

The CHAIRMAN. The committee is in recess until tomorrow at 10 o'clock in room F-41 of the Capitol.

(Whereupon, at 5 p. m. Wednesday, February 20, 1957, the committee was recessed, to reconvene at 10 a. m. Thursday, February 21, 1957.)

DEVELOPMENT, GROWTH, AND STATE OF THE ATOMIC

ENERGY INDUSTRY

THURSDAY, FEBRUARY 21, 1957

CONGRESS OF THE UNITED STATES,

JOINT COMMITTEE ON ATOMIC ENERGY,

Washington, D. C.

The committee met at 10 a. m., pursuant to recess, in room F-41, the Capitol, Hon. Carl T. Durham (chairman of the Joint Committee) presiding.

Present: Representatives Durham (presiding) and Kilday; Senators Pastore, Gore, and Dworshak.

Also present: James T. Ramey, Executive Director; George E. Brown, Jr., David R. Toll, professional members of the staff, and George Norris, Jr., committee counsel.

The CHAIRMAN. The committee will come to order.

This is a continuation of the testimony of the industrial groups throughout the country. Our first witness this morning is Mr. Donald M. Ballou, of the gas and electric department of the city of Holyoke, Mass. We are glad to have you with us this morning, Mr. Ballou. You may proceed with your statement.

STATEMENT OF DONALD M. BALLOU, NUCLEAR PROJECT OFFICER, GAS AND ELECTRIC DEPARTMENT, CITY OF HOLYOKE, MASS.

Mr. BALLOU. My name is Donald M. Ballou. I am the superintendent of the gas division of the city of Holyoke, Mass., gas and electric department, and the nuclear project officer of that department. Gentlemen, this statement is in response to your invitation issued by letter dated January 18, 1957.

We hope that an account of our experiences and problems in connection with our recent proposal to the Atomic Energy Commission will be of assistance to the committee.

This department was one of seven proposers in the second round of the reactor demonstration program. We proposed the construction of a gas-cooled reactor coupled with a closed-cycle gas turbine for power production purposes. Our proposal was rejected by the Atomic Energy Commission on January 2, 1957.

This department decided to participate in the reactor demonstration program when the second round of that program was first announced in September of 1955, based on the following considerations:

(1) We are located in one of the high fuel cost areas of the United States and are therefore in an area where nuclear power is first apt to become economically competitive.

(2) We are a municipality producing our own power in city-owned generating facilities and are necessarily interested in small generating units (up to 15,000 kilowatts), the area requested in the second-round invitation.

(3) Our studies indicated that our normal expected load growth is such that a plant of the size contemplated could be efficiently integrated into our system in the course of normal expansion.

(4) We have a completely integrated system with load characteristics and distribution problems which could probably be classed as typical for plants of our size, and which would, therefore, be well suited for demonstration purposes.

REACTOR SELECTED

After considerable study and after consultation with numerous reactor manufacturers, this Department decided to propose construction of a gas-cooled reactor coupled with a closed-cycle gas turbine, for the following reasons:

1. Research and development: It had been our understanding from the beginning that the Atomic Energy Commission was most interested in proposals contemplating construction of advanced type of reactors since such proposals would be most likely to advance reactor technology. A gas-cooled reactor appeared to fulfill this criterion.

2. High efficiency: The design of the plant proposed contemplated the direct use of the coolant (nitrogen or helium) as the driving medium in the turbine, thereby eliminating temperature loss in a heat exchanger, resulting in high efficiency.

3. Low cost: Since the design of the plant proposed required no heat exchanger or no coolant pump (the turbine acting as the coolant pump for the system), the plant gave promise of having an ultimately low capital cost.

4. Safety: The type of plant proposed has certain features which should result in inherent safety in operation. In the event of an accidental release of the coolant there would be no phase change and no chemical reaction. This would result in a comparatively low volume of released materials and thus simplify the containment problem. Furthermore, because of a low nuclear cross section, the coolant gas itself would contain little or no radioactivity.

5. Compact design: The plant as contemplated would be small in size and compact in design. Such a plant should be ideal for export purposes, and it was, therefore, considered that development of such a plant would be of great interest to the Atomic Energy Commission, and fulfill the needs of the second-round reactor demonstration program.

PROBLEMS ENCOUNTERED

In developing our proposal we encountered several problems and made some observations which we shall attempt to summarize as follows:

(1) The greatest single problem that we encountered was the requirement of the Atomic Energy Commission that the proposer submit a "closed-end" proposal. This requirement proved very difficult to fulfill for the following reasons:

(a) In the beginning we found manufacturers understandably reluctant to quote fixed prices on equipment and installation.

(b) We found it impossible to obtain firm commitments of costs of fuel fabrication, reprocessing, and transportation.

(c) We found it impossible to obtain firm commitments of cost of insurance, not only in the third party liability field but also in the fields of direct plant insurance and workman's compensation.

(d) Due to lack of certain experimental data it was impossible to determine the life expectancy of the fuel elements contemplated for this plant.

(e) As a municipality we had no risk capital for research purposes as such.

This particular problem was finally resolved by submission of a "phased" proposal. Briefly stated, it was proposed that the overall contract be divided into several phases to allow solution of the technical problems as they arose with a minimum commitment on the part of AEC as well as on the part of the proposer.

For example, the first phase of the program contemplated conducting certain experiments by our coproposer, Sperry-Rand Corp., Ford Instrument Division. Sperry-Rand agreed to conduct these experiments on a fixed maximum cost basis, to assume the "open end" in the event the costs exceeded the agreed maximum, and to construct certain required experimental facilities at its own expense in order to conduct such experiments. A continuation of the project was then made contingent on successful completion of the first phase to the satisfaction of all of the parties.

The proposal as finally submitted contained several contingencies, but we were given to understand that it met the criterion of a "closedend" proposal, to the satisfaction of the Atomic Energy Commission.

(2) We encountered the problem of the unavailability of third party liability insurance coverage. This problem is still not resolved but we proceeded on the assumption that the efforts being expended by this committee and by others in this field would result in a solution. We still hope that such will be the case.

In this regard we requested Government indemnity of a contractual nature. This was intended as an alternative to an adequate solution of the insurance problem. In this regard, however, some doubt was expressed by our legal counsel as to the effectiveness of such an indemnity agreement in view of the provisions of section 53-e-8 of the Atomic Energy Act of 1954 which provides for indemnity of Government by licensees.

(3) The problem of site selection was anticipated but never became an issue. We had several potential sites for the construction of the proposed plant and one of the contingencies of our proposal was that one of our proposed sites be approved by the Reactor Safeguards Committee of the AEC. We anticipated that in the event our proposal was accepted as a basis for negotiations one of our first steps would be to obtain at least preliminary approval of one of the proposed sites.

In this connection we would like to note our opinion that small nuclear powerplants are likely to become economically feasible only if they can be constructed within reasonable transmission distance of the community that they are intended to serve.

(4) We encountered no problems in obtaining an access permit and clearances for our own personnel. To the point where we progressed in the program we did not find the classification of information to be a major handicap.

(5) The reason given for the ultimate rejection of our proposal was "the Commission determined that the planning of a powerplant based on the proposed reactor system is premature because the basic feasibility of the concept has not yet been demonstrated."

Quite frankly, this objection came as a surprise since at no time had we been advised that this feature of our proposal constituted a major objection to its acceptance. On the contrary, as stated above, we had been led to understand that the Atomic Energy Commission would look most favorably on proposals for plants of advanced design.

At our first meeting with the Selection Board in March of 1956 one member of the Board suggested that our proposal might be better adapted to some future program of the Commission. The point was discussed briefly, no conclusion was reached, and although we were thereafter in frequent communication with the Commission staff, the issue was never again raised until we were notified of the rejection of our proposal.

We mention our difficulty in this regard because we believe it points up one problem which might tend to discourage future proposers, but which could be easily remedied. We believe that the staff of the Atomic Energy Commission should attempt to maintain a closer liaison with proposers in order to facilitate coordination of the aims of the proposer with the aims of the Commission.

CONCLUSIONS AND RECOMMENDATIONS

On the basis of our own experiences and on the basis of what facts we were able to learn in the course of our participation, it is our opinion that the reactor demonstration program has not proved successful.

The program has now been in existence for about 2 years. In that time there have been 10 proposals, one contract, and no construction. It is significant, we think, that the one contract which has been executed contemplates the construction of a pressurized water reactor. This is the type of reactor of which the most is known as a result of governmental research, development, and construction.

The basic difficulty we think, stems from the fact that the program requires the assumption of large and undetermined risks by individual private companies. A private company can only justify assumption of such a risk if it can demonstrate at least the possibility of a reasonable gain in the event the enterprise proves successful. However, the nature of the atomic energy industry is such that the principal gains to be realized from a successful enterprise will react to the benefit of the industry as a whole rather than to the benefit of the individual. Under the circumstances, private interests are naturally and understandably reluctant to assume risk ventures, which, if successful, will benefit their competitors as much as themselves. This difficulty applies with equal force to potential manufacturers of reactors, of fuel elements, and of auxiliary equipment, as well as to utilities.

This conclusion is confirmed, we believe by the poll reported on January 29, 1957, by the Atomic Industrial Forum that in the opinion of the American atomic industry "Lack of economic incentive is regarded as by far the major obstacle to the development of atomic energy for peaceful purposes."