PROPOSED CHANGES IN AEC CONTRACT ARRANGEMENTS FOR URANIUM ENRICHING SERVICES MONDAY, MARCH 26, 1973 CONGRESS OF THE UNITED STATES, SUBCOMMITTEE ON ENERGY OF THE The subcommittee on Energy of the Joint Atomic Energy Committee met at 3 p.m., pursuant to call, in room S-407, the Capitol, Hon. Melvin Price (chairman of the Joint Committee) presiding. Present: Representatives Price, Holifield, Hosmer, Hansen, McCormack, and Roncalio. Also present: Edward J. Bauser, executive director, James B. Graham, assistant director, Peter A. Bernard, special counsel, and Walter T. Skallerup, Jr., special counsel to the Subcommittee on Energy. order. OPENING REMARKS OF CHAIRMAN PRICE Representative PRICE (presiding). The subcommittee will be in This is a continuation of the Joint Committee's Subcommittee on Energy hearings on the AEC proposed uranium enrichment services criteria. The purpose of the hearing this afternoon is to hear and receive the views of representatives of the Federal Republic of Germany on the proposed criteria. I understand your delegation is headed by Dr. Schmidt-Kuester, Deputy Assistant Secretary of the Research and Technology Ministry, and Dr. Heiner Randermann of the Foreign Office, Mr. Hans Struck of the Ministry of Economic Affairs; Dr. Manfred Stephany, managing director of the German fuel fabrication firm, NUKEM; Dr. Klaus Gottstein and Dr. Ekkehard Abel of the German Embassy in Washington. We are very happy to have you gentlemen with us this afternoon, and I think because of the nature of this meeting I should introduce the members of our committee. I am Representative Price, the chairman of the Joint Committee; Representative Holifield on my left, and Representative Hosmer, and Mr. Hansen, and Mr. Roncalio. With this small group we can make this rather informal. Dr. Schmidt-Kuester, we would welcome any statement or any testimony you care to give us at this time. STATEMENTS OF WOLF-JUERGEN SCHMIDT-KUESTER, REPRESENTATIVE OF THE MINISTRY FOR RESEARCH AND TECHNOLOGY; HEINER RANDERMANN, REPRESENTATIVE OF THE FOREIGN OFFICE; HANS STRUCK, REPRESENTATIVE OF THE MINISTRY OF ECONOMIC AFFAIRS; MANFRED STEPHANY, MANAGING DIRECTOR OF NUKEM GmbH; KLAUS L. GOTTSTEIN, COUNSELOR FOR SCIENTIFIC AFFAIRS, THE GERMAN EMBASSY, AND EKKEHARD K. ABEL, DEPUTY TO DR. GOTTSTEIN Dr. SCHMIDT-KUESTER. Thank you, Mr. Chairman. We would first like to thank you for the opportunity to bring forward our views concerning the new criteria. Perhaps I may, as an introduction, give you a short survey of the situation in the Federal Republic of Germany where the decision to build light water reactor power stations in an increasing number for the future procurement of electricity of the Federal Republic in an increasing proportion was made after the United States had, first, through President Eisenhower, announced that it would be prepared to provide enrichment services for other countries with whom they had cooperation agreements. GERMAN NUCLEAR POWER BASED ON U.S. ENRICHED URANIUM FUEL This was at the beginning the reason why German utilities decided to go for the light water reactor line. Otherwise, a decision in favor of the natural uranium line might have been taken where considerable development work had been carried out and of which we have one prototype in operation. But then we decided to go for the enriched reactor systems. We have on the side of the utilities a situation which is comparable to that in the United States. We don't have any State-owned utility. They are all private and independent. Of course in many cases they are in the hands of communities, or a large proportion of shares are. In general, they act as completely independent firms. After they had heard that the criteria were to be changed, they became quite nervous because they thought that these new criteria. might create extreme difficulties for their future procurement situation. ADVANCE COMMITMENT PERIOD TOO LONG A long leadtime is now proposed for procurement of enriched uranium. We had a chance of discussing these problems with representatives from the AEC this morning and got some clarification, but still the fact is that the new criteria foresee that you have to commit yourselves 8 years in advance of the first deliveries, which in fact means 10 years before the first operation of a nuclear power station. This means that you have to commit yourselves to buying enrichment services prior to making any decision on building a powerplant, on the size of the powerplant, and the future policy. We normally calculate a leadtime in the order of 6 years for construction and 2 years for preparation. This, in fact, worries utilities very much, and they try very hard to shorten that period, especially the construction period, by rationalizing the types of reactors, and they hope they can get down to 5 years or so. This would then mean that they had to commit themselves perhaps 3 years before entering into serious discussions concerning the construction of the plant. Ten years' leadtime, in fact, means that you have to predict the power situation 10 years in advance. That is very difficult to do. For example, smaller utilities could run into difficulties with siting problems; this might mean serious losses to them because they have, as we have clarified this morning, to procure at least the first core and stick, with a certain possibility of slippage in later years, with certain amounts of reloads. This, in fact, worries the utilities quite a bit. EUROPEAN ENRICHMENT PLANS There are interests in Europe in building enrichment facilities to add to the existing capacities, and some of you gentlemen have been in Europe and visited the institutions which are interested in building these new facilities. If the utilities have to contract for a very long period, there is the worry that there would be no room left for further contracts with the additional capacities to be built in Europe. There is a certain tendency within the European communities, especially from those colleagues who intend to build, as you know, a large diffusion plant based on their technology, to ask the European communities, and especially the supply agency, not to allow a signature on further contracts because this would mean that there is no room for contracts for the plant which they think should be built. The situation is a bit different in the centrifuge field, because the increments for plants that would be built would not be that large and one could come into the market step by step by showing that this process is capable of doing what is promised. Well, this is the major worry we have encountered during the discussions with utilities and with our colleagues. There are three other details of these new criteria which I would like to touch. MECHANICS OF AEC TERMINATION The first point is the announced termination clause, which allows AEC to terminate existing contracts at a time when additional capacities would be available from private enrichers. The worry is how this would be done. We have asked AEC this morning, and we would very much like to ask you this question in order to clarify what the policy would be for the termination because the customer, having signed a contract, is not free to terminate. He has to fulfill his obligations for a relatively long period, but the AEC, as the supplier, could terminate if this additional source is there. We do not know what the philosophy for terminating the contracts would be. If I may give you an example: AEC has contracted at a certain moment 100,000 tons of separative work with domestic customers, and 21-710-75- -12 an additional 50,000 with overseas customers: If at that date they had to terminate certain contracts, which contracts would they terminate? Would they terminate those who have come in latest, that is, take out the last 6 or the last 10, or would they only take out domestic customers, or would they only take out foreign customers? This is an uncertainty. We have learned during the discussions we had so far that those customers whose contracts would have been terminated would be free to choose between different additional suppliers if there were several. If there was only one, there would be no other choice, and they would have to go there. If the termination would be done proportionally, then there would be no discrimination. This is really an important factor to know who would be terminated first. This is one, according to our views, very important point. CONTRACTS FOR RELOADS ONLY There is one further point we have discussed where there is no detailed answer so far. That is the question of contracts concerning reloads only. It might be that one or the other utility had procured the first core and two or three reloads with some other supplier of enriched uranium: This could be through bulk purchases of the type negotiated at the moment, or it might be through the first centrifuge plants. It might also be through purchases from the Soviet Union, which has offered to supply or to make available enrichment services. What would be the conditions for contracts in these cases which would then again be long-term contracts, exactly similar to the ones proposed within the new criteria? It is not yet specified how these contracts would be concluded. We would very much like to have clarity because this is a very important factor for the future policy of the utilities. NEED TO RAISE STATUTORY CEILING FOR EURATOM The last point, Mr. Chairman, I would like to make is the question concerning the present ceiling for the European communities. We think it is important, due to the fact that there are new criteria and that the contracts have to be concluded on an individual basis for a long-term period, that one should overcome this ceiling problem relatively soon. There are a number of contracts with the AEC pending which have been under negotiation for quite some time, for a year or more, which utilities and other customers have not been able to sign due to the fact that the ceiling arrangement has not been solved so far. Thank you very much, gentlemen. DISCUSSIONS WITH AEC Representative PRICE (presiding). You met with the AEC this morning, and you said there was some clarification. Was there any clarification on any of the points you have been talking about here? Dr. SCHMIDT-KUESTER. We raised the points I have mentioned just now. With respect to the long-term contracts without first core, there was no answer, because they said they have not thought about it, and they have not specified how they would like to handle that problem. |