have been thinking for quite some time that we face a situation where it is necessary to have a permanent, long-range policy laid down by the Government.

I have been thinking of something along the line of the Strategic Stockpiling Act, the policy on strategic and critical metals since 1946. A few days ago I introduced a measure which was an amendment to the act with that in mind.

Have you given any thought yet as to how it would work with your industry?

Mr. WELLER. I am not acquainted with the measure which you have proposed, Mr. Chairman. I would like to know the number of it. The CHAIRMAN. I will submit a copy to you and you can study it. I would like to have the comments of the mining group on it.

Mr. WELLER. We would very much like to do that, sir.

The CHAIRMAN. I definitely think we will have to lay down some kind of long-range policy.

Mr. WELLER. We strongly feel the same way.

The CHAIRMAN. It is a very strategic and critical mineral in my opinion and should be so classified. The group goes up and down, but I believe some 70 minerals are included in the group now. (H. R. 5010 referred to follows:)

[H. R. 5010, 85th Cong., 1st sess.]

A BILL To amend section 161 of the Atomic Energy Act of 1954

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 161 of the Atomic Energy Act of 1954, as amended, is amended by adding thereto a new subsection reading as follows:

"s. The Commission is authorized to exercise, with respect to any source materials, the powers conferred on the Army and Navy Munitions Board, the Administrator of General Services and the Secretaries of the Interior, Agriculture, and Commerce under the Strategic and Critical Materials Stock Piling Act. It shall report on its activities under this subsection to the Congress in its semiannual report."

The CHAIRMAN. You can store uranium for an indefinite period of time. I do not think there is any storage problem involved here as to deterioration. It has a long life, as you know.

Mr. WELLER. Yes, sir. This is a statement which has been made by the Raw Materials Division and I will be glad to enter it in the record.

The CHAIRMAN. It is a matter to take up with Mr. Johnson because he is a well informed mining man.

Mr. WELLER. He certainly is. The industry has great respect for Mr. Johnson.

The CHAIRMAN. I want to say at this time that in my opinion, the development of this industry has been one of the best programs carried on by the AEC. We had nothing to start out with.

The boys in the West went out and did a good job in support of the AEC. I hope your interest will continue.

Are there any questions?

Thank you very much, Mr. Weller.

The CHAIRMAN. Mr. Grahl?

Mr. Grahl is appearing for Mr. Samuel B. Morris who, we understand, is unable to be present.

STATEMENT OF SAMUEL B. MORRIS, CHAIRMAN, ATOMIC ENERGY COMMITTEE, AMERICAN PUBLIC POWER ASSOCIATION (PRESENTED BY JAMES L. GRAHL, ASSISTANT GENERAL MANAGER) Mr. GRAHL. My name is James L. Grahl. I am the assistant general manager and director of the atomic energy service of the American Public Power Association. Mr. Morris called last night and wishes to apologize to you for being unable to come. He had a lastminute change. We are sorry he could not be here this morning.

The CHAIRMAN. Proceed, Mr. Grahl. If Mr. Morris cares to, he may appear at a later date.

Mr. GRAHL. The American Public Power Association, representing more than 800 local publicly owned electricity utility systems, has had a longstanding interest in nuclear power development, most recently illustrated by its comprehensive recommendations on Federal atomic power policy. And copies of these were furnished to the committee with Mr. Morris' statement.

The association believes that national policies should encourage the development of a competitive nuclear power industry and minimize tendencies toward monopolistic patterns.

We therefore are deeply concerned about AEC's third invitation for proposals because its terms have the effect of freezing out the local publicly and cooperatively owned utilities and, at the same time, stimulating the formation of additional large private utility combinations to sponsor nuclear power projects. This new policy also may restrict opportunities for expanded activity in the power reactor manufacturing field to the very large and wealthy industrial firms.

The association recommends careful review of the terms of AEC's third invitation by this committee, AEC and the Department of Justice to determine whether, in the interests of avoiding monopolistic tendencies and strengthening competition, the invitation should be withdrawn or drastically modified.

For similar reasons and in light of recent remarks by the Attorney General, we recommend consideration by this committee of the need for amending the Atomic Energy Act of 1954 to strengthen the antimonopoly provisions applying to research and development licenses for atomic energy facilities.

AEC's demonstration program does not seem to be getting nuclear power projects built very rapidly and does appear to be stimulating the formation of utility and industrial combinations which may cause monopoly and antitrust problems in the future. Experience to date strengthens our conviction that this program must be supplemented by Federal projects as proposed by Senate bill 151 and House bill 2154 (the Gore-Holifield bill) if the United States desires to demonstrate international leadership in the development of economic nuclear power. Such projects would, in our opinion, advance the technology to the point where normal business incentives can become effective. (The full statement of Mr. Morris is as follows:)

My name is Samuel B. Morris. I am appearing here in behalf of the American Public Power Association as chairman of the atomic energy committee of that organization. The American Public Power Association is a nonprofit association representing over 800 local publicly owned electric utility systems in 40 States, Alaska and Puerto Rico. The headquarters of the organization is 1025 Connecticut Avenue, NW., Washington 6, D. C.

My position is consultant to the Department of Water and Power of the city of Los Anegles, Calif. I was formerly general manager and chief engineer of the department. Before taking the Los Angeles position in 1944, I was dean of engineering at Stanford University.

I have served for a number of years as a member of scientific panels or committees advisory to the U. S. Department of Defense. I have also served as a member of the President's Water Resources Policy Commission appointed in December 1950, and have been a member of the national water policy panel of the Engineers Joint Council. As you know, I was a member of the panel on the impact of the peaceful uses of atomic energy (McKinney panel) which was set up by this committee.

Our association has had a long-standing interest in the program for developing economically competitive nuclear powerplants and in the national policies affecting the nuclear power industry, as the following examples of our activities illustrate. In 1953, the association established an atomic power policy committee to make a continuing study of policy developments in this field. This committee has been very active and has submitted policy recommendations to the Atomic Energy Commission and developed testimony for presentation to your committee on numerous occasions.

In November 1956, the committee completed a comprehensive set of recommendations on Federal atomic power policy and these recommendations were adopted by the association's board of directors. We believe this to be the most comprehensive policy statement on atomic power issued to date by a national organization. A copy of the statement is attached to my testimony and I would appreciate its being made a part of the record, at the conclusion of my testimony. In 1955 in response to the first invitation under the Atomic Energy Commission's power demonstration reactor program, the Consumers Public Power District of Nebraska, a member of our association, submitted a proposal to AEC to build a 75,000 kilowatt nuclear powerplant of advanced design. This proposal is still under negotiation with AEC.

During 1955, the association established an atomic energy service to keep our member systems currently informed of major policy and technical developments in the atomic energy field of particular interest to the local consumerowned utilities.

In 1956, two more members of our association—the municipal electric systems of Piqua, Ohio, and Holyoke, Mass.-submitted proposals to AEC to construct atomic powerplants of 12,500 and 15,000 kilowatts, respectively, in response to the AEC's second invitation under the demonstration program. Both of these proposals were for plants of advanced design. The Piqua proposal is under negotiation with AEC. Unfortunately, after considering the joint Holyoke-Ford Instrument Co. proposal for 11 months, AEC concluded that it was technically "premature" and rejected the proposal.

The Piqua proposal was submitted to AEC in February, 1956, and contract negotiations have been underway since September. The original proposal of Consumers Public Power District was submitted in April 1955 and contract negotiations have been going on since October 1955. We hope that agreements can be reached soon on firm contracts.

The member systems of our association hope to participate still more effectively in the future in the development of atomic energy resources and in the establishment of policies designed to serve the best interests of the people of the United States.

The association's recommended Federal atomic power policy makes it clear that we support the objective expressed in Chairman Durham's letter inviting our testimony; namely, "to encourage maximum private participation in the peacetime atomic energy program." We believe strongly that it is necessary to adopt and maintain policies which keep the door open to active participation by industries, large and small, in the component manufacturing and reactor services fields, thus fostering effective competition.

For the same reason, we advocate assuring a continuation of the institutional competition between the privately owned electric utilities and the publicly and cooperatively owned utilities. Historically, this competition has had highly beneficial effects on the cost of electric power and quality of service. It therefore should continue to be fostered in this otherwise monopolistic industry. The maximum progress in the development and utilization of nuclear power will not be achieved, and the best interests of the power consumers and the general public will not be served if one segment of the utility industry comes to dominate the development and use of nuclear power.

The Government's role in the emerging nuclear industry is unusually extensive and important. The various policies it adopts will be decisive in determining whether the industry develops as an open industry, with strong competitive characteristics in both the manufacturing and the utility fields, or whether it becomes an industry in which competition in equipment manufacturing is limited to that among a few large corporations and the rates and availability of nuclear power are largely determined by a few giant aggregations of privately owned utilities.

AEC'S THIRD INVITATION FOR PROPOSALS

For this reason, we are deeply concerned about the terms of the Atomic Energy Commission's third invitation for proposals under its power demonstration reactor program. In our opinion, the terms of this invitation not only fail to encourage participation by all segments of the utility industry but actually encourage participation by large private utility combinations exclusively. This may not be the intent of the third invitation but this is its effect.

The local publicly and cooperatively owned utility systems will be unable to make proposals to the Commission under the third invitation principally because it precludes any financial assistance by the AEC on the construction cost of a developmental nuclear powerplant. By this provision, the member systems of this association are effectively frozen out of the nuclear-power program for the indefinite future, except for the two projects proposed under previous invitations and still under negotiation with the Commission.

In a letter to AEC Chairman Strauss of December 20, the general manager of our association, Mr. Alex Radin, explained that if the forthcoming third invitation "were to exclude any AEC financial participation in reactor construction financing, it would be very difficult for members of this association to make proposals to the Commission ****

The Commission nevertheless specifically ruled out any assistance with construction costs when it subsequently issued its third invitation. In his reply of January 31, 1957, Chairman Strauss said that the Commission believes the assistance offered on preconstruction and operating costs might be sufficient to elicit substantial responses from consumer and privately owned utilities, and referred to the possibility of participation in proposals by industrial firms.

Unfortunately, Mr. Strauss' comments are not particularly helpful in respect to the problem faced by our members. I respectfully request that both of these letters be entered in the record at the conclusion of my testimony.

Although I would like to share Mr. Strauss' implied optimism as to the possibility of obtaining reasonably firm contracts for the construction of nuclear powerplants at a bearable cost, our members have found this to be extremely difficult because of the state of the technology. In order to quote anything approaching an acceptable price on a nuclear powerplant, a manufacturer must accept considerable uncertainties as to what the actual cost and performance of the plant will be. Few are willing and able to accept these risks. We have made inquiries and we would be glad to learn of manufacturers willing to contract on this basis, at a price that a local publicly owned system could afford. Commission staff also have suggested that the local publicly owned systems consider the sponsorship of projects on a group basis, in order to spread the abnormal costs and risks of a demonstration nuclear power project. Even if such an arrangement were desirable, it is in most instances a legal impossibility. Ordinarily, a municipally owned system cannot invest in facilities located in and serving some other city.

The Commission's policies apparently are also freezing out the individual privately owned utility systems. According to a survey made by Electrical World magazine and reported in its January 21, 1957, issue, privately owned electric utilities in several sections of the country are "actively making plans for cooperative construction of nuclear powerplants in the near future * * * 3 or 4 new groups varying in size from 4 to 20 members, have been formed specifically for this purpose." The report stated that "all of the utilities interested in building additional reactors are making plans on a group basis. No one company has made a commitment or is seriously considering building a reactor plant as an individual.”

This report indicates a further extension of a pattern already established for privately owned utility projects. The Yankee Atomic Electric plant is being financed by a group of 12 utility systems; the Commonwealth Edison project by 7; and the Power Reactor Development Co. plant by 18. Projects also have been

proposed by a group of 3 utility systems in Florida, and by 4 systems in Virginia and the Carolinas. A project recently announced by Northern States Power Co. will be financed by 10 or more privately owned facilities.

Only one project scheduled to go ahead soon is financed by a single utility and it is the largest privately owned system in the Nation. It seems significant that the only nuclear-power projects under construction in which a single private utility is involved are projects in which the reactor system is being financed and the risk of cost overruns is being borne either by the Government or by the industrial firm building the reactor.

Thus it seems clear that the net effect of present Government policies coupled with the economics of nuclear-power development is virtually to exclude from the field all but large aggregations of privately owned utility systems. By offering substantial financial aid on terms which make proposals feasible only for such combinations, the AEC program is in fact actively stimulating their formation. It should be noted that this is, in the Commission's words, "a continuing program of assistance under which the Government will be providing subsidies to such utility combinations until June 1967.”

Having enacted the Public Utilities Holding Company Act more than 20 years ago to remedy the ill effects of large utility combinations, it is a serious question whether the Federal Government should now be encouraging the formation of new combinations.

There is a danger that Government policies may have a similar effect in the equipment manufacturing industry. Since the sponsor of a proposal must, under the terms of the third invitation, bear the entire construction cost of the nuclear powerplant, a sponsor necessarily will employ the reactor manufacturer who is willing to contribute most heavily to the project, by bidding at or below cost and accepting the risk of cost overruns. In this situation, the very large and wealthy manufacturing corporations obviously are in a much stronger position to get the contracts than the smaller firms. Representatives of several companies with considerable resources have told us frankly that they do not see how they can participate, despite their eagerness to enter the power-reactor field or expand their work in it and despite their having well-qualified technical staffs.

Providing for free and equitable access to the nuclear-power field is admittedly a difficult problem but it seems to us doubtful that AEC's third invitation represents a wise approach. We recommend a careful review of the terms of the third invitation by this committee, the Atomic Energy Commission, and the Department of Justice to determine whether in the interests of strengthening competition and free enterprise, the invitation should be withdrawn or modified drastically.

ANTIMONOPOLY PROVISIONS

Attorney General Brownell, in a speech on January 24, 1957, took note of these combinations being formed to finance and operate nuclear-power reactors. With reference to the danger of monopolistic practices developing in the manufacturing field, he said that "although the companies seeking such licenses jointly may not presently be engaged in the same industries, such activities require considerable careful study, from a competitive point of view, both as to present actions in the experimental stages and in future activities when the commercial stage is reached." As a matter of fact, at least one such combination does include firms engaged in the same industries.

Mr. Brownell also observed that "in the case of the public utilities, I might add, such licenses for joint activities also raise the possibilities of questions under the Public Utilities Holding Company Act."

Mr. Brownell pointed out that the Department of Justice has a unique and important role to play in fostering competition in this new industry, saying that "we here have an opportunity to utilize preventive rather than remedial action." For this preventive role, Mr. Brownell expects to rely in part on section 105 (c) of the Atomic Energy Act which requires the Attorney General to advise the Atomic Energy Commission whenever, in his opinion, it is proposing to issue a commercial license which would tend to create or maintain a condition inconsistent with the antitrust laws.

However, section 105 (c) applies only to commercial licenses and not to the research and development licenses under which utility and industrial combinations are now being formed. Since the latter apparently will be the only type of license issued by AEC in the nuclear-power field for some years, Mr. Brownell is depending upon a legal provision which is not applicable to the