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without actual conversion except pursuant to congressional authorization and appropriation. Under the proposed WPPSS-AEC agreement the NPR would in fact be converted to dual purpose capability. We do not know the precise extent to which the NPR will thus differ from the project authorized by the Congress. It appears, however, from the correspondence between AEC and WPPSS and from information we have obtained informally that addition to the NPR of the features and equipment necessary to carry out the proposed agreement with WPPSS will involve expenditures presently estimated at about $25 million, subject to change pursuant to engineering and economic decisions yet to be made and agreed to by AEC and WPPSS. (This amount is aside from the substantially larger expenditures that would be made for the main generating facilities.) We are, therefore, of the view that the proposed agreement would result in materially changing the form of project 59-a-5 from that authorized by the Congress and, therefore, requires specific congressional approval, even though the additional amount would be paid by WPPSS and the cost to the Government would not be increased (34 Comp. Gen. 599).

Since the foregoing conclusion goes to the basis of the proposed agreements, and in view of the interest you have expressed in an early reply, we are taking the liberty of furnishing our views without answering all of the specific questions raised in your letters. By letter of June 4, 1962, the Atomic Energy Commission requested our views concerning its authority to enter into the proposed arrangements herein referred to, and we are today advising the chairman of AEC of the conclusions stated above, as well as the chairman of the Joint Committee on Atomic Energy at his request. Sincerely yours,

FRANK H. WEITZEL, Assistant Comptroller General of the United States.


Washington, D.C., June 13, 1962. Hon. JOSEPH CAMPBELL, Comptroller General of the United States, General Accounting Office, Washington, D.C.

DEAR MR. CAMPBELL: Since writing my letter of May 23, 1962, requesting your opinion on several phases of the WPPSS proposal to construct electric generating facilities on Federal land adjacent to the new production reactor at Hanford, I have received a copy of the AEC General Manager's letter to you dated May 31, 1962. An analysis of the AEC General Counsel's opinion on the legal authority to enter into the proposed contract raises several pertinent questions.

As the AEC General Counsel indirectly indicates, a strict interpretation of the authorizing phrase "to * * * lease * * * real and personal property as provided in this act” in section 12(a)(7) of the Atomic Energy Act of 1946 and section 161g of the Atomic Energy Act of 1954 as amended, would preclude the lease contemplated as there is no specific provision in either act for such leasing. Irrespective of AE's loose interpretation of these sections of the atomic energy acts, does A.EC, in your opinion, have legal authority to enter into the proposed lease agreement for use of Federal land at Hanford? The same question as to a lack of specific authority of AEC to lease also applies to the proposal to lease the new production reactor itself, if AEC operation of the NPR should cease. In addition, there is an added question of AEC authority to lease the NPR in view of the restrictions on ownership and operation of special nuclear production facilities contained in chapter 5(a) and 5(b) of the Atomic Energy Act of 1954. Please give your opinion.

Dr. Seaborg's letter of April 6, 1962, to Owen W. Hurd of the WPPSS contains the following statement:

With respect to any additions, modifications, or replacements in the NPR itself which may be desired by WPPSS in connection with the conversion project, AEC would expect to perform the necessary design and construction work itself with funds advanced by the WPPSS. The types of changes in the reactor which are contemplated are such as to make it essential that the AEC have complete control over the resulting equipment. Thus, the AEC should receive title to such equipment. AEC has no basis, however, for contributing to the financing of these modifications.

The indicated probability of additions, modifications or replacements in the construction of the NPR as authorized raises the following question on which I would like your opinion: Does AEC have authority to make such additions or modifications to the new production reactor when AEC admittedly cannot use Federal funds for such additions or modifications?

It also occurs to me that the Supreme Court ruling in the Teapot Dome case that an agency of Government cannot indirectly achieve what Congress has specifically said they cannot do directly, applies to this entire NPR proposal. You may wish to compare the similiarity of the two cases in connection with your opinions on the NPR matter. Very sincerely yours,



Washington, D.C., May 23, 1962. Hon. JOSEPH CAMPBELL, Comptroller General of the United States, General Accounting Office, Washington, D.C.

DEAR MR. CAMPBELL: In the summer of 1958 Congress passed Public Law 85-590 which contained the following authorization:

SEC. 101. PLANT OR FACILITY ACQUISITION OR CONSTRUCTION.—There is hereby authorized to be appropriated to the Atomic Energy Commission, in accordance with the provisions of section 261 a. (1) of the Atomic Energy Act of 1954, as amended, the sum of $386,679,000 for acquisition or condemnation of any real property or any facility or for plant or facility acquisition, construction, or expansion, as follows:





Project 59-a-5, production reactor facility for special nuclear materials, convertible type, Hanford, Washington, $145,000,000.

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The Joint Committee on Atomic Energy report relative to the above act contained the following statement:

Project 59-a-5, would authorize the expenditure of $145 million for a convertible type of production reactor which would permit optimum production of plutonium consistent with minimum cost of product. The reactor initially would be operating solely for plutonium production. It would be designed in such a way, however, that it could be converted with modification to produce electric power, such conversion would be contingent upon future congressional authorization and appropriations. The conversion of this otherwise wasted heat to electric power would substantially lower the cost of production of plutonium. This conversion capability is also considered prudent to permit practical utilization of the reactor in the future event that enforceable international disarmament agreements are entered into whereby production of reactor products for military uses are curtailed or stopped. Under such conditions the reactor could be converted to peaceful purposes in the production of electricity. In the interim, during construction and operation, such a convertible type of production reactor will assist the advancement of the art of reactor development.

This 59-a-5 project is now referred to as the new production reactor (NPR).

In 1961 during the 1st session of the present (87th) Congress, an attempt was made to include in the AEC Authorization Act an authorization to appropriate $95 million to construct electric generating facilities at the new production reactor. The House of Representatives in four separate votes decisively refused to authorize this construction.

Early this year it was announced that AEC and BPA were considering entering into contracts with the Washington Public Power Supply System (WPPSS) under which this non-Federal agency would construct generating facilities near the new production reactor at Hanford, Wash., using steam from the NPR to produce some 900,000 kilowatts of electric power. Under the proposed contract the entire power production (which would be nonfirm power) from the WPPSS generating plant would be delivered to the Bonneville Power Administration system. In return, Bonneville would supply firm power to each of the participating utilities in the WPPSS deal.

It is presently estimated that NPR will be operated 8 years (1964–72) for the production of plutonium. If power facilities are added, this initial 8-year period would be called the dual-purpose period. It is estimated that if electric generating facilities are added, the plant would have an additional useful life of 25 years. This latter period is called the power-only period.

Copies of the WPPSS proposal and other available and pertinent information, including AEC and BPA letters and statements on the matter are enclosed.

Will you please review the matter and give us your opinion as to the following:

1. Does AEC have the authority to expend funds to make the conversion necessary to produce a quality of steam that can be used for the production of electric power by a non-Federal entity?

2. Does AEC have authority during the so-called dual-purpose period to produce a quality of steam that can be used for generating electric energy, and can AEC sell such steam to the WPPSS?

3. Does AEC have the authority to lease a federally owned special nuclear production facility to a non-Federal entity for the so-called power-only period (even though plutonium would continue to be produced during this period)?

4. Does BPA have the authority to enter into the proposed contract where it would be the de facto guarantor of the WPPSS bonds?

5. Does BPA have the authority to enter into a contract where, under certain conditions, the Federal Government could take or might be required to take title to and be obligated to pay up to $135 million or more for power facilities Congress has said AEC cannot build or operate?

6. Does BPA have the authority to enter into a contract wherein it would or could be required to deliver an amount of firm power equal to two or three times the amount of nonfirm

power it would receive in return? I would appreciate your opinion on these matters at an early date. If there are any questions or additional information needed, please let me know. Very sincerely yours,




May 31, 1962.
To: A. R. Luedecke, General Manager.
From: Edwin E. Ferguson, Acting General Counsel.
Subject: Legal basis for proposed arrangement between the Atomic

Energy Commission and the Washington Public Power Supply
System to permit utilization of steam produced during operation

of the new production reactor, Hanford, Wash. The Washington Public Power Supply System (WPPSS), an organization consisting of 16 public utility districts in the State of Washington, submitted a proposal to the Atomic Energy Commission (AEC) and the Bonneville Power Administration (BPA) under the terms of which steam produced in the course of operating the new production reactor (NPR), now under construction at Hanford, Wash., would be utilized for power generation. (See letter to AEC Chairman Glenn T. Seaborg and BPA Administrator Charles F. Luce dated November 28, 1961, from WPPSS Managing Director Owen W. Hurd.): The essential features of this proposal bearing on the arrangement with AEC are:

(1) Lease to WPPSS, for a period commensurate with that of the revenue bonds, of a small parcel of land adjacent to the NPR on which power generating facilities would be constructed by WPPSS;

(2) Sale of steam by AEC to WPPSS during periods when the NPR is being operated by AEC;

(3) Generation of power by WPPSS in the generating facilities to be constructed and operated by WPPŠS utilizing steam delivered by AEC;

(4) Lease of the NPR by_AEC to WPPSS during periods when it is not required for AEC purposes. In a letter to WPPSS dated April 6, 1962,10 AEC stated certain modifications and qualifications of the WPPSS proposal that it would consider necessary to the negotiation of an acceptable arrangement. The purpose of this memorandum is to analyze the legal authority of AEC to enter into the proposed arrangements, as modified by AĚC's letter of April 6, 1962

This proposal has been developed and submitted as a result of the fact that AEC is constructing a reactor with a capability of produc

Printed on p. 101. 10 Printed on p. 98.

ing large quantities of steam which can be utilized for the production of significant quantities of electric power. The proposal has been examined very carefully by AEC within the framework of the Commission's statutory responsibilities and authority and for its economic implications.

In order to make a proper evaluation of the WPPSS proposal, it is essential to consider it within the context of its overall objective and to keep this ultimate objective in mind in analyzing each separate but interdependent part of the proposed arrangement. Thus, inability to perform any essential part would, of necessity, make the entire proposal infeasible. It is with this basic concept in mind that the legal aspects of the WPPSS proposal are identified and discussed in the following three sections: 1. Authority of AEC to sell to WPPSS energy (steam) produced during

the course of operation of the NPR by AEC Section 44 of the Atomic Energy Act of 1954, as amended, provides:

If energy is produced at production facilities of the Commission or is produced in experimental utilization facilities of the Commission, such energy may be used by the Commission, or transferred to other Government agencies, or sold to publicly, cooperatively, or privately owned utilities or users at reasonable and nondiscriminatory prices. If the energy produced is electric energy, the price shall be subject to regulation by the appropriate agency having jurisdiction. In contracting for the disposal of such energy, the Commission shall give preference and priority to public bodies and cooperatives or to privately owned utilities providing electric utility services to high-cost areas not being served by public bodies or cooperatives. Nothing in this act shall be construed to authorize the Commission to engage in the sale or distribution of energy for commercial use except such energy as may be produced by the Commission incident to the operation of research and development facilities of the Commission, or of production facilities of the Commission.

The NPR is a production facility as defined in section 11 t. of the Atomic Energy Act of 1954, as amended, and in 10 C.F.R. 50. Under the proposal, AEC would be selling steam energy produced at a production facility of the Commission to a group of publicly owned utilities. Such steam production by AEC would be incident to the operation of * * * [a production facility] of the Commission,” as required by the last sentence of section 44. WPPSS is an operating agency and a municipal corporation organized under the statutes of the State of Washington, revised code of Washington (1957 Supp.) chapter 43.52 (ch. 29, Laws of Washington, 1957) and a municipality within the meaning of "municipality of section 3(7) of the Federal Power Act, and thus, the preference requirement of section 44 is satisfied.

Section 44 further provides that a "reasonable and nondiscriminatory” charge shall be made for the energy sold pursuant to this section. The legislative history of section 44 does not provide any guidance on the criteria which should be considered in reaching a determination on a reasonable price. The Commission has exercised this authority on two previous occasions and has reached a determination, with the advice of the Federal Power Commission, on a reasonable price under the particular circumstances. Essentially, the criterion used was the cost of fuel which would be required to produce power in comparable quantities and qualities or, in other words, the value of the

1 In the sale of steam produced in the operation of the sodium reactor experiment reactor at Santa Susana, Calif., and in the sale of power from the submarine intermediate reactor at West Milton, N.Y.


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