DEVELOPMENT, GROWTH, AND STATE OF THE ATOMIC

ENERGY INDUSTRY

MONDAY, FEBRUARY 25, 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 219, Old House Office Building, Hon. Carl T. Durham (chairman of the Joint Committee), presiding.

Present: Representatives Durham, Holifield, Cole, Price, Dempsey, Van Zandt; Senators Anderson 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. On Tuesday of last week the Commission was before us and did not finish their presentation. So we are continuing today with the questioning by the committee.

I believe Mr. Strauss was a witness at that time and some of the members said that they had additional questions they would like to direct to him.

So this morning we will hear Mr. Strauss first.

Mr. Strauss, I believe at the time we stopped Senator Gore was questioning you. He is not here this morning. Mr. Cole, have you any questions?

Representative Holifield, have you any questions?

STATEMENTS OF LEWIS L. STRAUSS, CHAIRMAN; DR. W. F. LIBBY, MEMBER; THOMAS E. MURRAY, MEMBER; AND HAROLD S. VANCE, MEMBER, AND MEMBERS OF THE STAFF, UNITED STATES ATOMIC ENERGY COMMISSION

Mr. STRAUSS. I might say, Mr. Chairman, that I believe Senator Pastore asked that when we returned today we be prepared to comment upon the statement made by our colleague, Commissioner Murray.

Commissioner Vance and Commissioner Libby, who have not yet had an opportunity to testify, have come here today with statements on the principle by which we conduct our program in the development of atomic energy for peace, principally in, this instance, for power. I need only add that I am in agreement with this principle and that, as of the last meeting at which the issue arose before our late col

league, Dr. von Neuman, was incapacitated, our vote on the various applications of this principle has been consistently 4 to 1.

These statements by Commissioner Libby and Commissioner Vance are available to you, sir, when you call for them.

The CHAIRMAN. Thank you very much, Mr. Strauss.

Senator Pastore is not here this morning. So I suppose we will have to postpone his questions until a later date.

Mr. Holifield, have you any further questions of the Chairman of the Commission?

Representative HOLIFIELD. Yes.

Mr. Strauss, I refer you to your statement on page 17 of your statement to us of last Tuesday, where you speak of the private firms furnishing different kinds of materials for fabrication of fuel elements.

Now you state there that the Commission has almost withdrawn from the field of fabricating fuel elements for private projects.

This would indicate that you are now depending upon commercial firms to do this work; is that right?

Mr. STRAUSS. That is substantially correct, sir.

Representative HOLIFIELD. What is the comparative economic basis of the services they are rendering to that the Commission itself rendered heretofore?

Mr. STRAUSS. By comparative economic basis, Mr. Holifield, do you mean the difference in the cost of the service that they are rendering?

Representative HOLIFIELD. Yes; to the consumer?

Mr. STRAUSS. I would like to see whether there is anyone here who can respond to that because the consumers, who have required this service, have not until now been private consumers.

Dr. Davis, the Chief of the Division of Reactor Development, will give you an instance.

Mr. DAVIS. The only instance I can quote offhand and I do not recall the precise numbers, is in the case of the MTR fuel element where they were originally manufactured by Oak Ridge.

We went out and got competitive bids for manufacture of these fuel elements. The contract was awarded to Babcock & Wilcox and at a cost which was somewhat below our cost of manufacturing at Oak Ridge.

So we actually saved money as well as getting private industry making fuel elements.

Representative HOLIFIELD. You do have accurate cost estimates of the Government operation, do you?

Mr. Davis. In this case we were comparing the quite accurate cost history of manufacturing these fuel elements at Oak Ridge with firm price estimates from the vendor.

Representative HOLIFIELD. Maybe I should revise my question to ask you what is the difference between the present commercial price, if that has been established, for these fuel elements, and the established history of the cost by the Government?

Mr. Davis. For these particular fuel elements?

Representative HOLIFIELD. Yes.

Mr. DAVIS. I can supply the numbers for the record. It is my recollection that that amounted to a saving of something like 20 percent.

(The information referred to follows:)

COMPARISON OF MTR FUEL ELEMENT COSTS FROM GOVERNMENT AND PRIVATE

FACILITIES

MTR fuel elements were originally produced at ORNL which supplied such assemblies until July 1, 1956, when a contract with Babcock & Wilcox Co. for supply of these items became effective.

This was the first AEC venture in procuring reactor fuel element fabrication on a fixed price basis and was in accord with the Commission's industrial participation policy. This action was taken when the fuel elements had been produced in quantity and passed the development stage so that specifications could be fixed for production-type manufacture.

Babcock & Wilcox are supplying the fuel elements under a subcontract with Phillips Petroleum Co. The invitations were circulated to 47 potentially qualified companies and a total of 12 proposals were received.

The Babcock & Wilcox bid price of $279.28 per fuel element was the lowest received. The then current Oak Ridge National Laboratory cost was $320 per element as calculated without the AEC 15 percent overhead allowances. With the overhead allowances the Babcock & Wilcox price is about 32 percent lower than the most comparable Government price.

Representative HOLIFIELD. That the private companies cost is 20 percent less than your estimated Government cost?

Mr. DAVIS. Our actual direct cost, including in this presumably profit, overhead, and things of that sort.

Representative HOLIFIELD. So there is no subsidy involved in bringing in these private companies into this field?

Mr. DAVIS. Not in my opinion, sir.

The CHAIRMAN. Doctor, what was the experience at Argonne with the boiling reactor?

Mr. DAVIS. Those fuel elements were actually made in this case by the Argonne National Laboratory themselves. They had in this case gone out and tried to get some proposals and had not been able to get any that they thought were acceptable for this particular first charge in this experimental reactor.

However, they do hope to be able to secure these fuel elements commercially later on.

The CHAIRMAN. Did we go so far as to award this contract and then have to do the job ourselves? Was not that the case?

Mr. DAVIS. There were some difficulties, I believe, in getting some of the plates that went into the fuel element. I cannot tell you the full story, but I believe this was in connection with getting some of the plates that would be fabricated into some of the fuel elements. The CHAIRMAN. Did we go so far as to award the contract to private individuals?

Mr. DAVIS. No, sir; not for the complete fuel element. I can't speak for certainty, but I don't believe so.

Mr. STRAUSS. We will provide a positive answer to that question. Representative HOLIFIELD. Will you provide also your estimate of the comparison between the cost of Government fabrication and the cost of the two firms here which are apparently doing the work? (The information referred to follows:)

FABRICATION OF ARGONNE EXPERIMENTAL BOILING WATER REACTOR FUEL ELEMENTS

Fuel elements for the experimental boiling water reactor were manufactured at the Argonne National Laboratory rather than by private contractors because of the experimental nature and schedule of the initial loading and changes in planning that preceded the design of the elements finally used.

The reactor required 918 plates for the first loading. At one stage in planning it was thought that the fuel elements would consist of 350 spiked plates containing a high degree of U-235 enrichment and 568 other plates of natural enrichment. Only one company, Westinghouse, had the required fabrication experience but it was not interested in the work. Another company, Metals & Controls, Inc., was interested and submitted a bid for the spiked plates which was considered too high.

Because of the high bid on the spiked plates and other technical factors, Argonne changed the specifications for all the plates to uniform enrichment. At this point, the time schedule for the reactor did not permit an outside manufacturer to learn and develop a process for the production of the newly specified plates. Accordingly, the fabrication was done by Argonne since it had experimented with and developed the process appropriate for these elements and was able to produce the plates in time for the scheduled operational date of the reactor. The cost for fabricating the 918 plates of uniform enrichment at Argonne was estimated to be only slightly higher than the cost of purchasing 350 spiked plates from private sources, without considering the costs of processing the remaining 568 plates.

Mr. STRAUSS. If we have that information, Mr. Holifield, we will do so by letter.

Representative HOLIFIELD. Now, on page 18 you talk about the processing of fuel elements and you indicate from that page of testimony that up to now you have not been able to get this work done by private industry.

Your second paragraph seems to indicate that you have abandoned the idea of having private industry process fuel elements; is that right?

Mr. STRAUSS. I think “abandon" is too strong a word, Mr. Holifield. This is a matter of timing. We expect and confidently believe that private industry will come into this field.

If you will notice the last sentence in the second paragraph on page 18, we indicate our intention to cancel the contracts which we make on 12 months' notice if and when we find that the required facilities will be available commercially at reasonable prices.

The contracts will contain language making it clear to the contracting parties that this is our intention.

Representative HOLIFIELD. Now, in the meantime, you are signing or offering to sign 10-year contracts through January 30, 1967, at fixed prices subject only to escalation on the basis of a recognized price index.

Now, are they fixed prices based on the actual cost to the Government of recovery of material and taking into consideration, of course, I suppose, the offsetting value of the material that is recovered. Mr. STRAUSS. Would you answer that, General Fields? They are as realistic as we can make them.

Mr. FIELDS. They are as realistic as we can make them at this time, sir.

The problem has been to provide industry an assurance of chemical reprocessing at a cost that they would know in advance.

Now, we have determined, on the basis of a plant for processingand you know these fuel elements will come in all kinds of forms, shapes, and compositions-a means whereby we would estimate what it would cost the Government to process these.

On that basis we will enter into contracts. At the same time, we are proceeding with private industry.

You will recall over a year ago we did solicit industry in the chemical processing end of this activity. We have never gone out specifically for a proposal as yet because of the difficulty of this problem.