fuels has been underway, and at this point is very close to completion. Since the AEC report which we provided to the committee some 10 days ago contains a description of the NFS proposal, I will not discuss its details in this statement. We would, of course, be pleased to discuss any features with respect to which the committee may have questions.

At the heart of the NFS proposal is the premise that AEC would cease receiving licensee irradiated fuels, so as not to compete with NFS for the available commercial business. This, of course, is as it should be; and, to the extent that the NFS project makes available to the industry reprocessing services for specified fuels at reasonable terms and charges, the AEC will no longer accept such fuels under its 1957 announcement. I should note here that an AEC determination as to whether it will receive any specific licensee fuel would become pertinent and necessary only where voluntary arrangements cannot be agreed upon between the reactor operators and NFS. However, before determining to cease receiving a specific irradiated fuel from a licensee, the Commission must assure itself that reprocessing services for that fuel are available at charges and under terms and conditions considered by the Commission to be reasonable. In general, therefore, in view of its responsibilities to the nuclear power industry, the Commission would cease receiving fuels for reprocessing only to the extent that private reprocessing services were actually available at reasonable charges and terms. The Commission does not feel that it can, at this time, commit itself to a complete withdrawal and thus force new operators to make a deal with NFS on NFS' terms. For example, the Commission would not withdraw from receiving fuels for which commercial reprocessing charges have not been established.

RELATIONSHIP TO NUCLEAR INDUSTRY

The Commission has a keen desire to see the NFS venture brought to fruition; yet paramount is its concern that such a facility not have an adverse effect on the development and growth of nuclear power. We also wish to do all we can to facilitate competition in irradiated fuel reprocessing and to provide a framework which would be conducive to its eventual establishment. You may be aware, in this connection, that last spring, in announcing our acceptance of the NFS proposal as a basis of negotiation, the Commission made clear that an equivalent load of Government fuel would be available for a potential competitor. We are prepared to make such a load available to another company. We recognize, however, 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 plants could operate competitively. Furthermore, we believe that the Government cannot take any action which would have the effect of precluding a reasonable opportunity for a potential competitor to compete for such commercial fuel load as develops.

Before proceeding further, I wish to make very clear that AEC does not desire, nor intend, to become a party to negotiations between NFS and its potential industrial customers. We would hope that in all cases agreements can be reached voluntarily. In this regard, however, the Commission has attempted to assure that its views with

respect to certain important terms and conditions of the proposed NFS-utility contracts were made known to the utility industry at an early date. The Commission in fact met on February 15, 1963, to discuss these matters with representatives of NFS, a number of utility companies having or proposing to have large nuclear powerplants, and the Atomic Industrial Forum. At this meeting, the Commission stated that it could not cease being available to receive licensee fuels where the effect of such action would be to compel the utility to accept a reprocessing contract of a long-term nature. This position is intended to facilitate competition. The Commission at this meeting also made clear that in considering the question of "reasonableness" of charges, it must regard reprocessing charges for new and improved fuels, or for fuels of current design irradiated more severely, in a broader context than only the cost to NFS for their processing. For example, we should not permit the future development of more economic fuels, or more economic methods of using fuels of current design, to be inhibited by high reprocessing charges as a result of design limitations in the NFS plant or of the limited quantity of the improved fuels. It is axiomatic that the attainment of the objective of a competitive commercial reprocessing service is wholly dependent upon the growth of nuclear power; thus any impediment to such growth would be to the detriment of the entire nuclear industry.

From the outset of this project, the Commission has given careful consideration to the potential problems associated with NFS's position as the sole private supplier of chemical processing services, at least during the early period of its plant's operation. In announcing in March 1962 the Commission's decision to commence detailed discussions of the proposed venture with NFS, the Commission made known the availability of an equivalent load of irradiated fuels to another qualified chemical processor. The Commission also plans, as part of its base load contract, to obtain appropriate rights with respect to patents, technical information and cost information concerning design, construction and operation of the plant. Finally, the Commission would have opportunity to review NFS' charges and terms and conditions for providing services to industry to assure that the services were reasonably available.

Accordingly, the Commission, in its review of the relationship of the NFS ventures to the nuclear industry, has attempted to balance the objectives of both, hopefully to the detriment of neither.

AEC BASELOAD CONTRACT

A key feature of the NFS proposal is, of course, the proposed contract with AEC for a baseload of Government fuels over the first 5 years of plant operation, as currently scheduled, to supplement the fuels that NFS would be receiving from industry. The baseload contract, as presently drafted, calls for delivery to NES of 125 revenue units annually for a 5-year period-a revenue unit is equivalent to about 1 day's work at the plant, at its design rate. In addition, AEC would deliver to NFS for processing those private fuels received by the Commission, pursuant to its 1957 announcement, prior to the startup of the NFS facility, to the extent that processing services are offered at reasonable charges.

The Government's commitment is only for 5 years. The need for, or desirability of, any additional contracts with NFS for reprocessing services after the term of the baseload contract will be considered in the light of circumstances at that time. Our current projections of fuel availability, partly due to longer burnups being projected, indicate that there will be a few years beyond the term of the baseload. contract before 1 ton per day of fuels is available from private sources. This load, however, would be increasing at a rapid rate and, on the basis of the projections contained in our report to the President, is estimated to reach 2 tons per day by about 1977, and 4 tons per day by 1980.

The baseload contract, the most recent draft of which was provided. to the committee early this month, has been developed in a series of negotiations between NFS and the Commission's staff over the past several months. Admittedly, it is a complex document; we are prepared to discuss its provisions as the committee may wish.

As part of the Commission's review of the NFS proposal, an AEC staff group and a board of outside consultants were constituted to review the status of the technology which NFS proposed to employ. Both groups concluded that NFS' plans included process steps which had not been completely developed nor operated with other than unirradiated material. The review groups stated that, as a result, NFS would likely face a period of extended startup and shakedown before routine production could be achieved. I might say that this would not be inconsistent with our own experience, but that the basic technical processes to be employed could be made workable and were, in fact, probably a reasonable choice from the alternatives available to NFS. The Commission expressed some concern relative to the adequacy of NFS' financing to cope with the possible impact of any such an extended startup period. As a result, we understand that NFS has arranged further financial resources to provide a greater allowance against the contingency of a difficult startup period.

It is important to note that the Commission is not guaranteeing the technical or financial success of the NFS project. It is truly a risk project. AEC's only commitment is the 5-year load; we are not committed to provide additional load nor to extend the baseload contract beyond its original term. AEC plans to continue or expand its present research and development program which should be of benefit to NFS and other potential processors. Further, the Commission has agreed to consider specific proposals from NFS for research and development which might be of more direct benefit to the NFS project—– no commitment, however.

A key feature of the draft baseload contract is an AEC proposal that it include appropriate provisions to permit wide dissemination of technical and economic information that would be developed from this project. By virtue of its support of the project with a baseload of fuels, which support would permit the project to come into being substantially earlier than would otherwise be the case, AEC is requesting extensive technical and cost information. It is our plan that the bulk of this information will be made available to the public, including potential competitors of NFS. One of our main interests in the project stems from its potential of generating and making available to the nuclear industry practical processing experience with power reactor fuels. NFS and AEC have not yet completely resolved the

rights of AEC to technical and economic information and the right to disseminate such information to the public.

STATUS OF LICENSING ACTIONS

NFS submitted its application for a construction permit on July 26, 1962, and subsequently filed various amendments providing additional information. On January 30, 1963, the New York State Atomic Research and Development Authority (ARDA) joined in the application. The authority is to own the site in the name of the State of New York and will lease it to NFS. ARDA is also directly responsible for assuring perpetual control for the State of New York of any wastes buried on the site.

The technical aspects of the application were reviewed by the Advisory Committee on Reactor Safeguards, which, in letters dated October 11, 1962, and December 26, 1962 (see app. 6, p. 219), concluded that the plant can be designed and constructed with reasonable assurance that it may be operated without undue hazard to the health and safety of the public. Public hearings were held on March 4 and 5, 1963, in Olean, N.Y., and a further hearing concerned primarily with the financial qualifications of the applicants was held at Germantown on April 19. It should be noted that construction of the facilities is to be financed from sources other than the Federal Government. The applicant has been found by the Licensing Board' to be financially qualified to construct the facility.

The Atomic Safety and Licensing Board which heard the case issued its initial decision on April 20, 1963. In accordance with this decision and a Commission order authorizing the decision to become effective 10 days after date of issuance, the provisional construction permit to NFS and ARDA was issued on April 30, 1963. No petition for review was filed and the Commission has until May 20 to determine whether to review the initial decision of the Licensing Board. It would, therefore, not be proper for me to comment further on this point.

(Press release mentioned above follows:)

[Atomic Energy Commission press release No. F-80, Wednesday, May 1, 1963]

AEC ISSUES PERMIT FOR CONSTRUCTION OF CHEMICAL PROCESSING
PLANT IN NEW YORK

The Atomic Energy Commission has issued a permit to Nuclear Fuel Services, Inc., and the New York State Atomic Research and Development Authority for construction of a plant to process irradiated fuel elements from nuclear reactors. The plant will be built at the State-owned Western New York Nuclear Service Center at Ashford, Cattaraugus County, N.Y.

The spent fuel processing plant will be used to recover uranium and plutonium from fuel elements discharged from reactors. The plant will be located on a 230-acre tract within the 3,331-acre Western New York Nuclear Service Center, and will consist of a process building, a liquid waste storage tank farm, a liquid waste storage lagoon, and a solid waste burial site. Latest date for completion of construction is December 31, 1965.

Issuance of the permit follows public hearings before an Atomic Safety and Licensing Board held in March at Olean, N.Y., and in April at AEC headquarters, Germantown, Md. In its decision of April 20, the Board found, among other things, that there is reasonable assurance that a facility of the general type proposed can be constructed and operated at the New York location without undue risk to the health and safety of the public.

The construction permit is provisional to the extent that before a license will be issued for operation of the facility, the applicants must submit additional in

formation on the final design of the facility and the Commission must find that the final design provides reasonable assurance that the health and safety of the public will not be endangered by operation of the facility.

Negotiations between the Commission and Nuclear Fuel Services, Inc., are continuing with the objective of developing a satisfactory basis of arrangements for the company to process irradiated fuel delivered to NFS by the AEC.

Dr. WILSON. In the event the construction permit, which was issued April 30, is not affected by Commission action, during the period of construction the regulatory staff will continue its evaluation of the safety of the plant in the light of information resulting from completion of the detailed design. To facilitate the review, inspections of the progress of the work will be made by the regulatory staff at appropriate intervals. NFS will file semiannual reports setting forth the status of construction and of the research and development program designed to establish safety of the fuel segmentation process.

Before any operating license is issued, the applicant must submit the final hazards summary report describing the final design of the plant and evaluating the potential hazards. This will be reviewed by the regulatory staff and by the ACRS to determine that the plant can operate without undue risk to public health and safety. In the event it is found that no public hearing is required, notice will be published advising persons whose interests may be affected of their right to intervene and request a hearing.

USE CHARGE TERMINATION

Many of the comments on the NFS project we have received from the utility industry have suggested that the AEC use charges be terminated at some appropriate time after delivery of fuels to NFS. Such a step would protect the utilities against excessive use charges which would result in the event of processing delays at the NFS plant or by difficulties in expeditiously scheduling the processing of fuels delivered by the various NFS customers. The Commission recognizes this concern on the part of the utilities and is prepared to consider, at least for the early years of the NFS project, terminating its fuel use charges after an appropriate time after delivery of fuels to NFS. Before taking any such action, the Commission will submit to the Joint Committee on Atomic Energy proposed criteria for waiver of fuel use charges. The Commission will announce a policy in this respect when all of the statutory requirements for such a step have been met. Furthermore, AEC's baseload contract will permit NFS broad flexibility in scheduling and processing Government fuels. Thus, licensees should be able to obtain preferential use of available NFS plant time. (Correspondence relating to the above matter follows:)

U.S. ATOMIC ENERGY COMMISSION,
Washington, D.C., July 26, 1963.

Chairman, Joint Committee on Atomic Energy,
Congress of the United States.

DEAR SENATOR PASTORE: You will recall that at hearings on the proposal by Nuclear Fuel Services, Inc. (NFS) there was discussion of the Commission's decision that use charges for special nuclear material should terminate at an appropriate time after delivery of irradiated fuel to NFS. Testifying on May 14, 1963, Commission Wilson stated the reason for this decision, as follows:

"Many of the comments on the NFS project we have received from the utility industry have suggested that the AEC use charges be terminated at some appro