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sidered by the Commission to be reasonable. În any event, the Commission would cease only to the extent that private reprocessing services were actually available at reasonable charges. (The AEC had stated that charges on the order of 15 percent above AEC charges would be considered reasonable.) D. Other possible industry interest

In announcing the acceptance of the NFS proposal as a basis of negotiation, the Commission made clear that an equivalent load of Government fuels would be available for a potential competitor. The Commission recognizes that the size of the potential commercial load of irradiated fuel is such that, even with a Government fuel load, it may be some time before two competitive plants can be in operation. However, the Commission believes that the Government cannot take any action which would have the effect of precluding a reasonable opportunity for a potential competitor or compete for such commercial fuel load as is available.

The General Electric Co. expressed an interest relevant to a cooperative program with other companies that in substance proposed to lease an existing AEC chemical separations facility now in, standby and convert it to a commercial spent fuel processing and related development facility. The AEC did not encourage such a proposal since it did not meet all of the objectives of the AEC.

The State of Kentucky is also interested in the possibility of attracting such an industry. Spindletop, a nonprofit study corporation, has been awarded a contract funded by Ashland Oil Co., Girdler Corp., and the State of Kentucky to evaluate the potential opportunities in the spent fuel processing field. Their plans relate to fluoride volatility processing.

II. NUCLEAR FUEL SERVICES PROPOSALS

A. Corporate relationships

The W. R. Grace & Co. and the American Machine & Foundry Co. organized Nuclear Fuel Services, Inc. (NFS) to implement their commercial chemical reprocessing services venture. NFS was incorporated in Maryland with a capital stock of $8 million, Grace owns 78 percent of the stock and AMF owns 22 percent. Included in the NFS venture are Davison Chemical Co.'s Erwin, Tenn., feed materials plant and AMF's Port Hope, Ontario, fuel fabrication plant. Bechtel Corp. will construct the plant for NFS under a fixed price contract within defined limits. Under the proposed arrangements, the obligations of the sponsoring companies are limited to their initial investments. NFS has stated that "In the event of unfavorable developments beyond those which we can foresee, the sponsoring companies would be confronted with a business decision of whether to add an additional investment in order to salvage the substantial investment which had already been made;" B. Source and application of funds 1. Funds required : Construction of facilities.,

$24, 550,000 Plant site---

500,000 NFS field engineering and interest costs..

1, 250,000 Working capital --

1,100,000 Preoperational testing

$1,400,000 Contingency-

2,000,000 3, 400,000

Contingency for construction and operations

1,000,000

31, 800,000

2. Source of funds:

Equity capital..
Grant, Empire State Development Associates, Inc. (utilities).
Atomic Research & Development Authority, State of New

York, constructed facilities..
Bank loans*.

$8,000,000 2,000,000

8,500,000 13, 300,000

31, 800,000

*$3,300 not available before Jan. 1, 1965, then available on a standby credit basis for a year or more after plant startup.

C. Location of project

The Atomic Research and Development Authority (ARDA), a public benefit corporation of the State of New York, has established the Western New York Nuclear Service Center in Cattaraugus County, N.Y., approximately 30 miles south of Buffalo. NFS has leased a site at the center where the plant will be built. D. Schedule of project

Construction of the plant will begin as soon as NFS receives a construction permit from the Commission's Division of Licensing and Regulation. NFS de sires to receive this no later than May 1, 1963, so that it can meet its objective of commencing commercial operations by July 1, 1965. NFS has advised that they have initiated a limited amount of site work (a railroad spur, roads, and utilities) which can be undertaken without a permit. (A provisional construction permit was granted on April 30.) E. Basic features of project

1. Plant design.-The NFS plant is based generally upon technology developed or under development in AEC facilities. It includes a mechanical cell for chop ping fuel elements into sections which are then transferred to a dissolver where the "meat" of the fuel elements is leached from the cladding or "hulls." This is described as a “chop-leach" system ; it is still under development at ORNL using nonradioactive materials. Initially, NFS planned to include facilities for total dissolution of stainless steel cermet fuels and facilities for deactivation of sodium bonded fuels. Installation of such capability has been deferred pending further research and development efforts by the AEC; however, it is presently contemplated that it will be installed during the term of the contract.

2. Plant capacity. The design capacity of the plant is 1 metric ton per day of low enriched fuels. (See app. 2).

3. Fuel storage. The plant includes a fuel storage basin. The capacity of the storage basin is equal to approximately 1 year's processing load, depending upon the types of fuels involved.

4. Recovered products.-NFS will recover and deliver source and special nuclear materials in nitrate form. (In its contracts with licensees, NFS reserves to itself the right of first refusal to perform conversion services, nitrates to oxide or metal, if the licensee requires such service.)

5. Waste management.--NFS will provide facilities for the disposal and/or storage of low- and high-level radioactive wastes as liquids in underground tanks. However, capacity for storage of only neutralized wastes will be installed initially. The AEC is the only potential customer which has significant quantities of fuels which would generate acidic (unneutralized) wastes. If such fuels are included in the baseload, NFS will install additional storage capacity and the additional charges to AEC will be made; such charges will include purchased costs of design and constr tion only. F. ARDA interest

1. Ownership of portion of facility. The Atomic Research and Development Authority (ARDA) will fund the construction of the fuel storage and the initial waste storage facilities. ARDA will then lease these facilities to NFS for a period of 15 years. This period corresponds to the period over which the plant is to be amortized.

2. Perpetual waste care.---NFS proposes to store radioactive waste as liquids for a 'suitable period (up to 15 years) and will then transfer title to ARDA. ARDA will assume responsibility for surveillance and care of such wastes in perpetuity. In addition to its processing charges, NFS will assess charges for perpetual care of waste. (NFS will absorb a fixed portion of these charges within its basic charge.) Such moneys will be deposited in a sinking fund which will be transferred to ARDA at the time the responsibility for the waste is transferred. NFS and ARDA have agreed, or will agree, to the amount of money required for the sinking fund. ARDA will assume financial responsibility for perpetual surveillance and care and neither NFS nor AEC will have any further contractual rights or obligations. The charges for perpetual waste care have not yet been developed.

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G. NFs' charges to licenses for services

The latest NFS-utility contract furnished to AEC is attached. The items below relating to material specifications are taken from that contract.

: 1. Class A material: conforms to specifications.-(a) Processing charges for
class A material may be determined from the formula:
Processing charge=(W/P) (C) +T

W-weight of material to be processed
P=weight of processing unit for the material
C=basic charge per processing unit-$23,500 for low enriched UO,

fuels- see appendix 1.
T-turnaround charge

Tis 2 x $23,500 where W/P is 2 or less
Tis W/P x $23,500 where W/P is 2 through 8
Tis 8 x $23,500 where W/P is 8 through 24

T is 1/3 x W/Px $23,500 where W/P is 24 or more (6) The basic charge and turnaround charge are subject to escalation, based on the weighted hourly wage rate at the NFS plant for labor and a BLS index for materials, with a limitation if NFS' net income (after taxes) exceeds a stated amount.

(c) The basic charge and turnaround charge are subject to downward adjustment if income to NFS exceeds stipulated amounts, which amounts are based on NFS' obtaining more than 300 revenue units per year. A revenue unit corresponds to approximately 1 day's work at the plant, be it a processing day or a turnaround day. (The plant is amortized on the basis of 300 revenue units per year for 15 years.)

(d) Appendix 1 contains a comparison (conceptual plant and NFS) of basic processing charges, including escalation, for the period fiscal year 1966 to fiscal year 1970; appendix 2 contains a comparison of conceptual plant and NFS processing rates. It should be noted that the basis for AEC's charges extends only through fiscal year 1967; projections beyond that period, based upon continuation of the present conceptual plant formula, are presented only to indicate means of comparison during the period fiscal year 1968 through fiscal year 1970.

2. Class B material: Processing techniques developed but material deviates from specifications.-(a) Determined to be class B material before mechanical or chemical treatment begins :

(1) Terms and conditions negotiated.

(2) If parties unable to agree, material to be processed and terms and conditions submitted to arbitration. If the reactor operator is unsatisfied with the results of arbitration, he can appeal to the Commission. The Commission would then determine whether the arbitrated price was reasonable. The Commission's determination of reasonableness would not necessarily be related to NFS' costs but to overall Commission programmatic

interests. (b) Determined to be class B material after mechanical or chemical treatment begins (NFS' sole discretion).

(1) NFS provides estimate of additional costs.

(2) Customer elects to have material processed at additional charge or disposed of. It disposed of, customer pays disposal costs, including charge

for idle plant time. 3. Class C material: Processing techniques not developed. (a) If determined to be class C material before mechanical treatment begins, NFS returns material to customer or, at customer's request, disposes of it or stores it pending arbitration of the determination,

(b) If determined to be class C material after mechanical treatment begins (NFS sole discretion), NFS provides estimate of cost of returning material or its disposition. If no direction from customer, NFS has right to dispose of material as it sees fit.

(c). In any, event, customer to reimburse NFS for all costs and expenses incurred by NFS with respect to the class C material, including charge for idle plant time.

4. Relationship to NFS-AEC baseload contract. The baseload contract will stipulate that NFS is to provide to AEC licensees and others a processing seryice-on nondiscriminatory terms with charges for loads under eight processing units as in the baseload contract for AEC.

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5. Relationship to AEC charges.-Appendix 3 provides a comparison of the processing charges, at NFS and CP, for private fuels which would be available for processing during the period July 1, 1963, through June 30, 1967, the period for which there exists a basis of comparison between NFS and AEC charges. Appendix 4 provides a comparison of charges for the period July 1, 1965 through June 30, 1970, the proposed term of the baseload contract on the assumption that the AEC conceptual plant formula would be continued after fiscal year 1967 in its present form. As noted previously, there is presently no basis for assuming that the formula would be continued in its present form. The charges are based on processing fuel batched in optimized lots and utilize the small lots concept (see III.A.3) at NFS where applicable.

Appendix 5 provides a tabulation of estimates of the differences in costs in mills per kilowatt-hour which would result from processing the respective reactor's fuels at NFS rather than under the terms of CP. In compiling the cost of processing, items including processing charges, blending charges, use charges, and transportation costs were considered.

III. AEC RELATIONSHIP TO PROJECT

A. Government fuel load

1. Baseload.-AEC to supply a baseload of Government fuels equivalent to 625 NFS revenue units (revenue days) over a 5-year contract term which would begin upon receipt from NFS of the first batch of recovered product and end 5 years thereafter or on June 30, 1971, whichever occurs earlier. The nature of the baseload will be discussed subsequently.

2. Prior year accumulation. In addition to the 625 revenue unit baseload, AEC will supply to NFS for processing those licensee fuels which AEC has received in accordance with its March 12, 1957, announcement. This commitment is limited to those fuels which are received prior to January 1, 1966 (allowing for a 6-month slip in the current NFS schedule of commercial operations on July 1, 1965, after which AEC would no longer receive licensee fuels) and also limited to those fuels for which NFS' charges have been found to be reasonable reasonableness of charges is discussed below. The prior year accumulation would amount to an additional 125 revenue units, approximately.

3. Small load problem.NFS had initially asked for a 500 revenue unit AEC baseload in addition to the prior year accumulation. The increase in the baseload to 625 revenue units was the result of negotiations with NFS to reduce the impact of its initially proposed turnaround formula on the operators of small reactors or other reactor operators having small (W/p less than 8) loads. The initial NFS turnaround formula would have charged a minimum of 8 turnaround days. (units) vice the AEC turnaround formula which calls for 1 day of turnaround for each day of processing with a minimum of 2 and a maximum of 8. NFS now agrees to charge on the basis of the AEC formula ; the 25 revenue units added to the baseload are to compensate NFS for lost turnaround revenue. AEC also recognizes that 8 days may be a practical minimum turnaround time for the type plant built by NFS. B. Scheduling flexibility Recognizing:

(1) possible NFS startup problems,
(2) erratic flow of licensee fuels to NFS for processing,

(3) desire of licensees for rapid processing to minimize use charges and obtain final settlement, AEC is providing NFS a considerable amount of flexibility in its processing of the baseload and the prior year accumulation. NFS need not call for more than 60 revenue units of baseload in the first 3 years but may call for a maximum of 125 revenue units in each of these years, and has 2 years to process the prior year accumulation. Furthermore, NFS is not obliged to deliver product from AEC fuels immediately; they have 1 year from the date the fuel is called for to deliver the recovered product, thus they may schedule processing of AEC fuels essentially “at convenience" during each yearly period. 6. Possible research and development

The baseload contract contains a provision whereby AEC would be willing to consider proposals from NFS for research and development. Such work could be performed in AEG facilities or in NFS facilities and could be at the expense: of AEC or partially funded by NFS. This is in recognition of potential difficulties NFS may face in the startup of its new plant. The nature of the work AEC would perform and the extent to which AEC would fund such work, if different from what AEC would undertake in the course of its own R. & D. program, has not been determined. D. Deferral of certain facilities

21–261-64-8

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Because of probable processing difficulties and to provide additional time for further R. & D., AEC has agreed to NFS' deferral of its installation of facilities to process stainless steel cermet fuels (Army type) and sodium-bonded fuels (Fermi blanket, Hallam core). This deferral poses certain problems to AEC in that ABC would have otherwise provided all Government fuels in these categories to NFS, as AEC does not have current capacity for their processing. AEC now faces the uncertainty of whether and when these facilities will be installed by NFS. E. AEC does not guarantee success of venture

The contract with NFS is based upon their providing a service to AEC. Nevertheless, certain technical and economic information is expected to flow from the project; and by virtue of its support of the project AEC is requesting more technical and cost information than it would request from a fixed-price contractor supplying services. AEC is not guaranteeing the technical or economic success of the venture. AEC is not committee to undertake R. & D. in the event of NFS technical difficulties nor is AEC obliged to provide further load in the event NFS' private load does not materialize as NFS migth have expected, F. NFS as sole supplier of chemical processing services

The implications of NFS’ position as a sole supplier of chemical processing services have been considered by AEC and mitigated by (i) AEC's willingness to offer an equivalent base load to a potential competitor, (ii) AEC's obtaining from NFS broad rights to patents and technical and economic information for dissemination to the public, and (iii) AEC's position with respect to certain features of the proposed NFS-utility contracts-see appendix 9.

IV. AVAILABILITY OF LOAD FOR NFS PLANT, FIRST 5 YEARS-FISCAL YEAR 1966

THROUGH FISCAL YEAR 1970-SEE APPENDIX 7

A. Assuming no capability for processing sodium-bonded or ss cermet fuels

1. Private load.--AEC received projections from the reactor operators of their fuel discharges through 1970. Based upon these projections and analyses by the AEC staff of the way the reactor operators might batch their fuels for processing, estimates were prepared of the total private load of fuels for reprocessing that would be available to NFS during the 5-year period fiscal year 1966 through fiscal year 1970.

Assuming NFS did not install capability for processing sodiumbonded or SS cermet fuels during this period, the load of private fuels available amounted to about 452 revenue units.

2. Base load.-The Commission will provide a baseload of Government fuels now estimated to be composed as follows:

[Revenue unita) SCRUP_

210 Low enriched power fuels—e.g., Shippingport, NS Savannah, Bonus, Piqua, etc_

167 U-A1 alloy, clad in A1 (highly enriched)

248 Total.

625 3. Prior year accumulation. The Commission will provide an additional load comprised of licensee's fuel transferred to the Commission prior to July 1, 1965, and held for delivery to NFS (prior years' accumulation) estimated as follows:

[NFS revenue units) Yankee.

57 Dresden

58 Vallecitos_

2 Northern States..

* 123

Total.-1 This quantity will be reduced to the extent that reactor operators exercise option III, that is, to the extent they choose to recapture fuels previously delivered to AEC in order to have them reprocessed industrially.

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