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Dr. J. E. Cole, director of manufacture, Organic Chemical Department, E. I.

du Pont de Nemours & Co., Inc. Mr. Floyd Culler, Director, Chemical Technology Division, Oak Ridge National

Laboratory Mr. A. L. Ayers, superintendent, Idaho Chemical Processing Plant Mr. R. J. Christl, Atomic Energy Division, E. I. du Pont de Nemours & Co., Inc.

The team's report, issued in December 1962, brought out points similar to the previous AEC conclusions and in some instances expanded on the problems to be expected.

The report emphasized the overall problem of the miscellaneous small quantities of spent power reactor fuels which will become available over the next several years. In the opinion of the team, based on a stated belief that the best power reactor design and the best fuel were not yet on the drawing boards, the problems relating to the variety of any one type of fuel would continue for many years. The report pointed out the onetime nature of much of the expected NFS production load and noted that more production is to be expected if the reactor development program is successful. The report indicated that the team considered the NFS proposal as developmental in nature rather than productive and stated :

"The facility can be made to operate, but because of the immaturity of the processes the risks are great; and from a practical point of view, since this is the case, the Commission must in effect guarantee operability and assume all risks, process and operating. This may be the same as saying the proposition is premature by as much as 10 years. In that period of time, we have reason to hope that reactor designs might be firmer and the volume better known so that the matter might be a more proper subject for production contracting. It is reasonable to hope for such a result. In the meantime if the Commission recovers its own fuels in existing facilities, the process knowledge will probably carry over to commercial processing with no more than ordinary commerical risks."

With regard to staffing, the report stated :

** * * we are convinced that the proposals for manning are Spartan and will be possible only after some years of operating experience."

The team estimated that, instead of the 129 staff members proposed by NFS, 267 would be required plus an additional 35 during startup and the first year's operation. Other comments on the NFS proposal by the team relating to startup costs, capital additions, and modifications were:

“The startup period, if emergency staffed, would probably be about 1 year.

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"We are certain that new money will be required to make the facility fully meet expectations. We are equally certain that before the plant is built there will be increases in scope which cannot be foreseen now and which can only increase the cost."

Most of the preceding comments pertained to marginal areas of design noted in the team's review including (1) instrumentation, (2) contamination control, (3) Darex processing, (4) waste problems, and (5) lack of laboratory space. In addition, the team pointed out that a lack of experience in processing miscellaneous irradiated fuel elements from nonproduction reactors would create extra problems.

The team, in summary, recommended against the NFS proposal primarily because :

"* * * (1) we do not believe the processes for the wide variety of fuel materials are ‘firm' enough to be contracted on a production basis, especially in view of the operating hazards inherent in the business ; and (2) we do not believe that this is the proper vehicle for carrying out plant process development in view of other facilities which are already in being."

The report by the team contained the following recommendations :

(1) Take cognizance of the fact that the present state of the chemical separation art is not firm enough for production contracting of power reactor fuel recovery. "(2) Make the necessary arrangements in present facilities to

(a) Obtain plant experience for the various processes; and at the same time

(b) Recover materials for material balance processes; and

(c) Obtain valuable cost experience. "(3) Hold in abeyance the commitment of money and land to a new site until the available commercial load becomes substantial."

AEC in a letter dated October 31, 1962, informed NFS of the results of the AEC review and stated that:

“We would like to discuss further with you the statement in your October 8 letter that 'NFS is satisfied that the plant as designed will operate successfully especially since it is based on established technology proven at AEC sites. We do not regard the technology planned to be employed by NFS, particularly for the head-end treatment and accountability aspects pertaining thereto, as suficiently_proven to obviate the possible need for contingencies such as additional R. & D. effort, additional startup time, equipment modifications, etc., before design performance is achieved."

At meetings in December 1962, NFS was advised by AEC and the team of the questions raised in the studies. In a letter from AEC to NFS dated December 26, 1962, summarizing the results of the meetings, AEC stated that it under: stood NFS's position as being that NFS had reexamined the technical bases and the staffing of the project following the discussions and that NFS was still confident that it could perform the processing services at the design conditions submitted in its proposal to the Commission. The records indicated that at AEC's suggestion, NFS did eliminate the capability for processing stainless steel cermet and sodium-bonded fuels, but that the plant as presently designed would provide space to accommodate the facilities believed necessary for processing such fuels. The action to eliminate these fuels is in line with the consultants' conclusion that processes not yet proven on a production basis will require further development work; specifically, the basic head-end system (the chop-leach system) to be used by the plant poses many questions, still unanswered, concerning reliability of this system in a routinely operated production plant. The records indicated also that NFS had not planned to make any technical changes.

To meet the AEC's conclusion that contingencies for startup costs, equipment additions and modifications would require substantial increases, in both time and money, NFS increased its term loan from about $9.4 to $10 million, which may be borrowed at any time on or before June 30, 1965. Also, NFS has secured additional standby credit of $3.5 million available between January 1, 1965, and January 1, 1966.

AEC analyzed the financial aspects of the NFS proposal and concluded, in part, that:

“A major area of concern is the potential cost of startup operations because of the unproved chop-leach process coupled with inherent uncertainties in the operation of a new plant, particularly one designed to handle a variety of fuels. NFS has provided $1,400,000 for startup operations and indicated that an additional $2 million could be made available from the $3 million contingency, for startup purposes if needed. It is difficult to estimate accurately costs of this nature for first-of-a-kind plant; however, it is believed that if there are no serious difficulties involving major equipment modifications, that the funds available ($3,400,000) are adequate."

The AEC consultants were seriously concerned about the effect of the introduction of irradiated fuels into the system. They estimated a startup period in excess of 6 months, possibly approaching 12 months,

In view of the technical nature of the problems involved, we made no determination as to whether the funds set aside for construction and operation of the facility are adequate or whether the fixed prices for the processing services will be sufficient to result in a profitable operation. However, it appears that if, as AEC and the consultants believe, serious problems involving substantial increases in startup time, equipment modifications and/or additions are encountered by NFS, expenditures in excess of the amount allocated for contingencies could be incurred.

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SIGNIFICANT IMPLICATIONS FOR DEVELOPMENT OF A COMMERCIAL COMPETITIVE SERVICE

It appears that several aspects pertaining to the proposed contract may have the effect of establishing NFS in a competitively favorable position, the primary aspect being the limited availability, as projected by AEC, of a commercial load for a potential competitor until several years after the 5-year NFS contract period.

AEC, in announcing the acceptance of the NFS proposal as a basis for negotiation, asserted that a load of Government fuels equivalent to that provided for in the proposed contract would be available for a potential competitor. Over the 5-year contract period, AEC will furnish NFS, as a baseload for processing, all but about 200 revenue units of its supply of nonproduction reactor fuels and also 336 revenue units of cermets and sodium-bonded fuels. The record indicates that, if it becomes necessary to simultaneously guarantee a potential competitor an equivalent baseload, AEC would have to furnish a large part of such load from production fuels or other fuels not included in AEC's computation of fuels available for the proposed contract with NFS. The record indicates also that, even if AEC furnished an equivalent baseload to an NFS competitor, there would be a long period before enough non-Government irradi. ated fuel would be available for the economical operation of a plant by the competitor. On the basis of A EC's projections, (see p. 9) all non-Government fuel available through 1973 could be processed in the proposed NFS plant and sufficient non-Government fuel would not be available for the operation of an additional plant before late 1976.

AEC has stated that (1) by obtaining from NFS broad rights to patents and technical and economic information for dissemination to the public, (2) by its willingness to process fuels for those utilities that cannot attain a reasonable agreement with NFS, and (3) by its offer to furnish an equivalent baseload to a potential competitor, it has mitigated the implication that NFS is being established as the sole supplier of chemical-processing services.

However, it appears that NFS would be in a competitively favorable position: 1. Because of the grant by the Empire State Development Associates, Inc., in the absence of a similar grant to a potential competitor.

2. Because of proposed contracts with the public utilities. The draft contract between NFS and the Yankee Atomic Electric Co. provides for chemicalprocessing services to December 31, 1980, subject to Yankee's right to terminate the agreement after 5 years if it can obtain similar commercial services at a lower cost. Although AEC advised NFS and the utilities that it will not allow NFS to insist on a contract term of 15 years, utilities voluntarily entering into contracts with NFS for such an extended period would have a restraining effect on the entry of a potential competitor into the industry.

3. Because NFS as an existing commercial fuel processor would be in an advantageous position to obtain contracts with utilities acquiring nuclear power reactors.

4. Because under the proposed arrangement, if AEC considers NFS's offers to utilities for fuel processing to be reasonable, the utilities, in order to have fuelprocessing services available, must enter into contracts with NFS.

5. Because, notwithstanding that the proposed contract provides for the dissemination of information pertaining to the chemical processing of irradiated fuel, the knowledge obtained by NFS through the operation of its plant and possible participation in Government-financed research and development work would place NFS in an advantageous position compared with that of a potential competitor in the fuel-processing industry.

In addition to the foregoing reasons, the long-term unavailability of an adequate load of non-Government fuel to meet the needs of more than one processing plant also places NFS in a highly favorable competitive position. Increased costs to industry

AEC has stated that NFS's chemical-processing activity, when successfully brought into being, will close a gap in the existing industrial nuclear capabilities. However, AEC has also estimated that, for fiscal years 1966 through 1970, the cost of processing fuels by NFS for 10 of the 12 utilities constituting NFS’s commercial load over the proposed 5-year term of the NFS contract, will exceed the cost of processing the fuels in an AEC "conceptual plant.” A conceptual plant is AEC's theoretical concept of a plant used to currently estimate and establish standard processing charges and other charges for AEC spent-fuel processing services. For the 12 utilities, the difference in processing costs range from a decrease of 0.017 mills a kilowatt-hour to an increase of 0.367 mills.

An increase in the cost of producing electrical energy could have a delaying effect on utilities' use of atomic fuel. In marginal cases, it could be a deciding factor against converting from conventional fuel.

APPENDIX

CONGRESS OF THE UNITED STATES,
JOINT COMMITTEE ON ATOMIC ENERGY,

May 1, 1963.
Hon. JOSEPH CAMPBELL,
Comptroller General of the United States,
Washington, D.O.

DEAR MR. CAMPBELL: The Atomic Energy Commission plans to enter into a contract with Nuclear Fuel Services, Inc. (NFS), under which the AEC would provide a substantial baseload for the operation of a chemical reprocessing plant to be constructed in New York State by NFS in association with the New York State Atomic Research and Development Authority.

In view of the fact that this contract is unique in important respects and involves some major Government commitments which will affect the future of the atomic power reactor program, I would like the General Accounting Office to review the proposed contract between AEC and NFS in detail.

I understand that AEC and NFS propose to execute the contract on or about June 1, 1963. The Joint Committee tentatively plans to hold meetings on this project on May 14. In view of the shortness of time, I would appreciate preliminary comments and information in letter form from your office on this contract by May 10, 1963.

Among the matters of interest to the Committee are the following:

1. What are the Government's maximum potential commitments under the contract?

A. How much Government reprocessing business would be committed to the NFS plant under the proposed contract?

B. After the expiration of the initial 5-year contract, will there be sufficient private business to permit the plant to operate without a further Government contract?

C. Does the Government have any obligation with respect to providing reresearch and development support for the project? 2. Will the Government incur additional costs as a result of the chemical reprocessing of its fuels at the NFS plant? If so, what is the estimated additional cost which the Government might incur?

3. Has NFS provided a sufficient contingency fund to cover an extensive delay in startup of the plant? We understand, for instance, that NFS has provided a contingency fund to cover a 1-month startup period, while the evaluation of AEC consultants indicates a considerably longer period should be allowed. What are the differences in estimated startup times and what are the implications of these differences on the economic feasibility of the project?

4. Does the proposed project have any significant implications for the development of an alternate commercial competitive source for such services? We understand that the Commission will consider an additional proposal from industry for the performance of chemical reprocessing work and will attempt to provide such a facility with an equivalent baseload of Government business. Can an additional facility be provided with necessary Government support?

We would sincerely appreciate your review of these and other matters related to the NFS contract. Your cooperation will be greatly appreciated. Sincerely yours,

JOHN O. PASTORE, Chairman.

APPENDIX 3

ADDITIONAL LETTERS SUBMITTED FOR THE RECORD

NORTHERN STATES POWER Co.,

Minneapolis, Minn., May 6, 1963. Re public hearing on chemical reprocessing plant. Hon. John O. PASTORE, Chairman, Joint Committee on Atomic Energy, New Senate Office Building, Washington, D.O.

DEAR SIB: It is our understanding that the Joint Committee on Atomic Energy will hold a hearing on May 14, 1963, regarding the construction of a chemical reprocessing plant to be operated by Nuclear Fuel Services, Inc.

As you know, Northern States Power Co., a Minnesota corporation, is constructing a 16-megawatt atomic generating plant at Sioux Falls, S.Dak. The company wishes to express complete support of Nuclear Fuel Services' proposed plant which will be the first commercial facility of its kind. As one of the original members of the industrial reprocessing group, we have participated in the research program which explored the feasibility of private enterprise engaging in this work. On the basis of this research, we are convinced that the decision by NFS to construct and operate a nuclear reprocessing plant at the proposed site is a most timely one. As evidence of our faith in the project, we have signed a 15-year contract which provides that they reprocess our nuclear fuel, subject to their obtaining a license to construct and operate the plant.

It is requested that our statement supporting this project be made a part of the Committee's record of this hearing. Yours very truly,

E. A. WILLSON,
Vice President-Operation.

THE HARTFORD ELECTRIC LIGHT Co.,

Hartford 1, Conn., May 14, 1963. Hon. JOHN O. PASTORE, Senate Office Building, Washington, D.O.

DEAR SENATOR PASTORE: As you know, this company is a member of the Yankee Atomic Electric Co. group and also of the Connecticut Yankee Atomic Power Co. group. Therefore, we are very much interested in the proposed arrangements for the construction and operation of a major chemical reprocessing facility by Nuclear Fuel Services, Inc. Such a plant built and operated by private industry will be of the greatest importance to the atomic energy business. It will relieve the Government of its present processing arrangements with atomic plants, and be an important step in transferring atomic energy development to private industry. I realize that initially the proposed arrangement involves certain commitments by the AEC, but I would hope and expect that with the anticipated increase in the atomic energy generating plants enough business will be developed so that Government assistance can be terminated.

I do hope that the Joint Committee will approve the proposals and give them their blessing. I am sorry to be so late with this letter but I was away at the time that the hearing was announced. With best regards, Sincerely,

AUSTIN D. BARNEY.

THE BABCOCK & WILCOX Co.,

ATOMIC ENERGY DIVISION,

New York, N.Y., May 16, 1963. Hon. JOHN O. PASTORE, Chairman, Joint Committee on Atomic Energy, U.S. Capitol Building, Washington, D.C.

DEAR SENATOR PASTORE: The Babcock & Wilcox Co., as a designer and manufacturer of nuclear systems and components, is keenly and favorably interested in the chemical reprocessing facility to be built and located in New York State by Nuclear Fuel Services, Inc. I regret that I was unable to be present at the hearings on this subject which you held May 14.

We strongly endorse this project as far as it goes but also feel strongly that to be of maximum assistance to the growing nuclear industry, the plant should be equipped to handle thorium fuels as efficiently as uranium fuels. Without this an artificial economic penalty will be imposed on the use of thorium fuels which may prejudice nuclear powerplant suppliers and operators against the development of such fuels. In view of the relative abundance of thorium and the superior properties of uranium 233, our national interests will cer. tainly be served best by this extension of the plant's capabilities. Very truly yours,

R. H. HARRISON, Vice President.

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