ergy technology development program are currently being used by Defense. But I think that the coordination issue is one that we should and can continue to push on. The CHAIRMAN. One other question with regard to tritium. My understanding is that it is hard to measure in the ground water because it is a gas, it moves faster than water, and as a consequence I am curious to know what the Department's initial testing has been relative to the sites where it has been tested. Has the Department used it to the extent that they can generalize on what the results of those tests are as a measure of ground water movement, because that is really what Ward Valley is all about? Mr. GRUMBLY. I will have to get back to you about the specifics of tritium testing and what it shows and what it cannot, because I am not a scientist myself. But what I can tell you is that we have utilized tritium testing at several sites, including the Savannah River site and the Hanford site, as one measure-and I emphasize, just one measure-of whether we're seeing contamination reaching the ground water. The CHAIRMAN. All right. Gentlemen, I want to thank you for being with us. I want to apologize to Mr. Burton and Mr. Coburn. You have been all let off easy. Mr. Grumbly carried the ball to an extent, although, Mr. Coburn, let me comment on how well-mannered your children are, Caroline and Sean, and your wife Nancy. They have all done a marvelous job as well. Mr. COBURN. Thank you. The CHAIRMAN. I am going to recommend that we report the nominations at the next business meeting, which is going to be the 13th. So that gives you some idea on where we are. There will be some written questions coming from the staff as well as other members that will be sent to you, so you did not get off scot-free, Bill or Chris or Alvin. With that, let me wish you a good day and thank you for being here. We are pleased with your statements and I, speaking as Chairman, know of no reason why your confirmation process should not proceed on schedule. Have a good day. Thank you. [Whereupon, at 11:12 a.m., the hearing was adjourned.] [Subsequent to the hearing, the following statement was received:] PREPARED STATEMENT OF WILLIAM H. TIMBERS, JR., PRESIDENT AND CEO, Mr. Chairman and committee members, the United States Enrichment Corporation (USEC) is a global nuclear energy company created by the Energy Policy Act of 1992 to operate the government's commercial uranium enrichment activities. USEC is a government corporation in the process of being privatized. The Senate Committee on Energy and Natural Resources conducted a hearing on the EURATOM agreement in September 1994. At that hearing I testified as to the vital need to renew that agreement. Today, hopefully the Congress is only a few weeks away from doing so. The new EURATOM agreement is vital to our nation's non-proliferation and international commercial interests. There are three principal areas those strategic interests impact upon. • The first is non-proliferation. The pending EURATOM agreement strengthens our ability to achieve U.S. non-proliferation goals; we should avoid advancing any alterations or new conditions which could weaken acceptance by current and future nations as signatories. • The second area is commercial trade. Through the EURATOM agreement, many years of commerce in peaceful nuclear applications have contributed to both U.S. non-proliferation interests and commercial interests. We should not put at risk the substantial USEC and U.S. nuclear industry commercial interests which will be facilitated by the pending agreement. • The third is our leadership role. We should not put at risk the U.S.'s constructive and influential role in the world nuclear industry which, for decades, has been facilitated and advanced through the successful operation of the EURATOM agreement and the resulting cooperation and trade. Non-proliferation, commercial interests, influence through trade relationships, continuity and consistency are all at stake if the agreement is not renewed or if changes and conditions are included in it which are viewed by signatory nations as inimical to their legitimate interests. NON-PROLIFERATION IMPACTS In the agreement now before the Congress, the Administration provides a strong framework and vehicle for continuing international cooperation in the peaceful use of nuclear energy. It requires safeguards to assure proper use and protection and it provides continuity and certainty about the procedures involved in commercial matters. All of these factors advance our nation's leadership in non-proliferation matters and its commercial interests. And, USEC also has a stake and role in advancing them. • Seventeen percent of the world's electric power is generated by utilities using nuclear fuel and USEC is the global market leader in providing customers with nuclear fuel enrichment services. Thirty-five percent of USEC's business is directly affected by the EURATOM agreement. A significant number of USEC utility customers are subject to and conform with EURATOM Agreement safeguards. • USEC is demonstrating that commercial arrangements can support and advance non-proliferation goals and practices. We are implementing the historic government-to-government "Megatons to Megawatts" commercial contract with Russia. Through this contract we acquire and sell low enriched uranium (LEU) fuel for power plants derived from highly enriched uranium which the Russians have extracted from Soviet era nuclear warheads. In 1995, these LEU shipments to USEC from Russia were equivalent to approximately 300 dismantled nuclear warheads. In 1996, that quantity will nearly double. The total weapons equivalent of the 20 year Megatons to Megawatts contract is 25,000 nuclear warheads. This demonstrates a viable nexus between commerce, non-proliferation goals and public policy; for USEC to complete its obligations under this agreement, it must sustain its economic and financial strength. CONTINUITY OF THE EURATOM AGREEMENT IS ESSENTIAL TO FACILITATE COMMERCIAL TRADE USEC is the global market leader in uranium enrichment, serving 63 utility customers in 14 countries including the United States. It is obvious that we have an enormous stake in competing for and serving international customers. The EURATOM agreement is a fundamental mechanism which makes our international participation, competition and leadership possible. Conversely, anything that is seen by signatories and customers to compromise their confidence in the agreement would seriously hamper our international trade, business performance and potential. A non-viable EURATOM agreement could have serious consequences for the national interest in several areas. • It would cripple USEC sales abroad, potentially reducing our income by $2 billion over the next ten years. That would also reduce or eliminate our contribution to the U.S. balance of payments. In 1995, USEC accounted for five percent of our nation's energy exports. • A significant downturn in customers and demand would inevitably affect our operations and the 5,000 employees at our enrichment facilities in Kentucky and Ohio. • A continuing downturn in our ability to compete internationally would seriously thwart our congressional mandate to maintain a viable domestic uranium enrichment capability. While these negative impacts must be considered, there are compelling positive impacts we should not ignore. For example, it is widely appreciated that over the years, nuclear commerce has stimulated cooperation among nations that hold different fuel cycle perspectives. It is imperative that we continue and improve upon that track record. As has been noted, the absence of a mutually acceptable agree ment could substantially weaken such open commerce and thereby increase risks of commerce outside the reach and protection of safeguards. The result would most certainly weaken global non-proliferation effectiveness. To maintain our positive global influence, the continuity of the agreement will assure the continuity of commerce, with appropriate non-proliferation protection. We are confident the pending EURATOM agreement can achieve these goals. THE EURATOM AGREEMENT HAS A LONG TRACK RECORD OF SUCCESS It is not as if we are taking these steps for the first time or lack a sufficient track record. For the past 35 years, the United States and the EURATOM member states have demonstrated a firm commitment to the strengthening of global non-proliferation through their adherence to the principles articulated in the agreement for cooperation. It is abundantly clear that the need for safeguards is a paramount concern of all parties, irrespective of frontiers or nuclear fuel cycle approaches. But there are differing views as to how best to implement such safeguards. A vital factor to be considered is the viewpoint of numerous European utilities and nuclear fuel cycle entities. They assert that controls established by the International Atomic Energy Agency (IAEA) and enforced by EURATOM provides extensive guarantees of safeguards. Further, that practical experience has demonstrated the effectiveness of these systems as well as the good faith of the European countries regarding their support of non-proliferation. It is in the mutual interests of the world community that the new agreement recognizes the sovereign rights of each nation to pursue domestic energy programs and security while maintaining the mutual cooperation that has existed for over 35 years to prevent the proliferation of nuclear materials. We believe the agreement before Congress accommodates those views with ample protection. On the other hand, the absence of an agreement would impact us far beyond the loss of the nascent and potential market within the countries that are a part of EURATOM. The impact would be worldwide in scope. USEC customers in other countries would also be prohibited from sending U.Š. enriched uranium to EURATOM countries. Specifically, U.S. trade with Japan would be adversely affected. As a result, current and potential customers outside EURATOM would understandably be reluctant to limit their options by purchasing enrichment services from USEC. CONSEQUENCES OF A FAILED OR UNACCEPTABLE EURATOM AGREEMENT Should the pending U.S.-EURATOM agreement fail to be renewed, the United States could no longer provide enriched uranium or enrichment services to an electric utility in a EURATOM member country. Neither would it be possible for countries like Japan or Switzerland to transfer U.S.-origin special nuclear material (or special nuclear material produced therefrom) to a EURATOM country for any purpose, including reprocessing. This would result in U.S.-origin fissionable material and major reactor components being shut out either directly or indirectly from the European and Japanese markets. This effect would stimulate Europe and the rest of the world to fill the enrichment market vacuum. They would be selling their enrichment services or special nuclear materials to, what are now, U.S. customers. If the goal is to end reprocessing, these actions would not do so, as reprocessing is a well-established component of fuel cycle strategies of other nations. In fact, it might well stimulate other national commitments to, or expansions of, reprocessing. The hiatus in renewal of the agreement has already had an impact. Several European utilities have expressed to us their concern about committing themselves to future long term purchases of U.S. enrichment services due to the uncertainty regarding the ratification of the new agreement for cooperation. European utilities, unwilling to purchase U.S.-origin material, argue that without the advance consent rights that are in the proposed new agreement, regarding reprocessing and movement of resulting products (primarily plutonium) the administrative, commercial, and financial difficulties of conducting business with USEC would be prohibitive. Utilities in countries that are not members of EURATOM, but are in the process of joining, have expressed similar concerns. If there is not a new, widely acceptable U.S. EURATOM agreement soon, the future economic effect on the U.S. nuclear industry will likely be so severe that it may prove fatal to many in the industry. Consider the potential impact upon USEC: • sales losses for USEC could approach $2 billion over the next 10 years. These would include the loss of existing sales commitments on the books as well as los new sales opportunities to existing customers. we would be legally locked out of the European market and effectively precluded from being a competitive supplier in the Japanese market. In Europe, our small but growing share of the market would be extinguished by the failure of an agreement for cooperation. In addition to the $2 billion loss from relinquishing existing hard-won sales to the competition, USEC would be prevented from pursuing new customers and enrichment sales in the European market; worth an estimated additional $10 billion over the next 10 years. The absence of an agreement for cooperation with EURATOM would also have a significant chilling effect on our sales efforts in Asia. Today, the United States has approximately three quarters of the Asian uranium enrichment market, contributing $500 million annually to the U.S. balance of trade, with $400 million coming from Japan alone. As noted, uranium enrichment services provided by USEC in fiscal year 1995 account for almost 1 percent of all U.S. exports to Japan and a total of 5 percent of all U.S. energy exports. The Japanese take their energy security seriously, placing it on a par with national security due to their lack of a domestic source of fossil fuels. Therefore, failure to have an acceptable new EURATOM agreement could impact our ability to reliably meet Japan's energy needs and undermine a quarter century of trust and cooperation between our two countries on nuclear matters. U.S. GLOBAL LEADERSHIP IN NUCLEAR COMMERCE AND NON-PROLIFERATION IS AT STAKE In conclusion, timely renewal of the U.S. EURATOM agreement will advance U.S. interests in non-proliferation, continue our international trade and maintain our leadership in the international development and safe use of nuclear energy. Without a viable EURATOM agreement, USEC will lose it's ability to compete in foreign markets like Japan and hurt export sales that enhance the U.S. trade balance. On the order of $2 billion of lost revenue and international trade is at stake with USEC unable to potentially capture a large portion of future new sales to customers and access to a potential $10 billion future market. • This loss of trade revenue would devastate our business, affect the U.S. balance of trade and constitute a severe blow to the future economic viability of USEC operations, which include more than 5,000 jobs in Ohio, Kentucky, California and Maryland. • It would endanger the mission given to USEC when Congress established it nearly 32 months ago and which it is in the process of privatizing. • It would endanger the role we play and the gains we have made in advancing the peaceful use of nuclear energy globally, including the Megatons to Megawatts program. Both of these roles are highly significant and important efforts which support non-proliferation goals. Mr. Chairman and members of the committee, taking all these matters into consideration, we respectfully urge renewal of the EURATOM agreement as submitted, unaltered and without conditions which might inhibit other nations from having full confidence in the effectiveness and mutual acceptability of the agreement. |