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ARTICLE XXIX, INSURANCE

This article has been modified to add as one of the types of insurance product liability insurance in an amount of not less than $5 million.

ARTICLE XXX. ACCOUNTABILITY AND CONTROL OF MATERIAL; RESPONSIBILITY OF

CONTRACTOR FOR LOSS OR CONSUMPTION OF MATERIAL

There was no article XXX in the May 2, 1963, draft; however, the substance of this article was contained in article XXXI which remains essentially unchanged. However, it now incorporates the provision relating to the revision of loss and recovery guarantees after 2 years of plant operation, which provision was formerly included in appendix F. In incorporating the appendix into the article, the disputes route was eliminated and a provision added whereby five expert advisers would review the capabilities and the state of the art and submit a report and its recommendations to NFS and the Commission. If the parties do not accept such recommendations they are to be submitted to a quorum of the Commission for determination.

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ARTICLE XXXI. MEASUREMENT AND SAMPLING OF IRRADIATED BEACTOR MATERIALS

This article was formerly numbered XXXII in the May 2, 1963, draft and is essentially unchanged.

The remaining articles of the contract (XXXII to L in the May 2, 1963, version were numbered XXXIII to LI) represent AEC "boilerplate," and are unchanged, except that the nondiscrimination article was revised to incorporate the most recent Executive order.

APPENDIX A. DESCRIPTION OF SPECIFICATION MATERIAL

This appendix is essentially unchanged, except to make corrections in the drawing references contained in table 2.

APPENDIX B. CONTAINER ACCEPTANCE CRITERIA

There are no essential changes in this appendix.

APPENDIX C. SPECIFICATIONS FOR RECOVERED PRODUCT

This appendix is essentially unchanged, except that at AEC insistence, NFS agreed that the gamma and beta activity due to fission products other than ruthenium will not exceed 50 percent of the activity of aged natural uranium. This change was necessary to make the recovered product consistent with the quality needs for feed for the cascades.

APPENDIX D. MEASUREMENT OF IRRADIATED REACTOR MATERIAL

There are no essential changes in this appendix.

APPENDIX E. EXAMPLES OF DEBITS AND CREDITS OF COMMISSION'S ACCOUNT WITH

THE CONTRACTOR, PER PROCESSING LOT

This appendix is unchanged.

APPENDIX F. PLANT DATA FOR PUBLIC DISSEMINATION ; OPERATING REPORTS

This appendix was not included in the May 2, 1963, draft. Its use is described in connection with the remarks in article XVI. Appendix F of the May 2, 1963, draft has been eliminated as described in article XXX.

APPENDIX 10

LETTER FROM AEC SUMMARIZING FINAL NEGOTIATIONS AND EXECUTION OF NFS

CONTRACT

U.S. ATOMIC ENERGY COMMISSION,

Washington, D.O., September 19, 1963. Hon. JOHN O. PASTORE, Chairman, Joint Committee on Atomic Energy, Congress of the United States.

DEAR SENATOR PASTORE: At your request the General Accounting Office performed a review of the proposed AEC-Nuclear Fuel Services, Inc. (NFS) contract (draft of May 2, 1963), and on May 14, 1963, your committee held a hearing on the NFS project. Your staff has been furnished a copy of the Department of Justice's letter of August 9, 1963, concerning the NFS project. In my letter of September 6, 1963, we furnished a summary of the NFS contract as finally negotiated and on September 10, 1963, we provided to your staff the proposed execution copies of the contract. Likewise, on September 12, 1963, we furnished the staff a summary of the major differences between the May 2, 1963, draft and the proposed final contract.

This is to inform you that the Commission has authorized execution of the contract, having made the necessary determinations required by section 161.1.(2)(A) of the Atomic Energy Act of 1954, as amended. The Commission had previously been advised that NFS was arranging for the execution of all its contracts on September 16, in order to obtain its bank loans. However, we were subsequently advised by NFS that NFS' agreements with the New York State Atomic Research and Development Authority (ARDA) will not become effective until the Governor or the Lieutenant Governor of New York approves the minutes of the meeting of ARDA which authorizes execution of the agreements, or until a period of 15 days has elapsed without his veto of the minutes. Furthermore, the NFS contract with Power Reactor Development Co. (PRDC) for chemical processing will not become effective until it is ratified by the PRDC board of directors, which ratification is expected about October 3. Rather than change any of the existing plans for closing this transaction, the AEC and NFS executed the NFS contract as of September 16, to be held in escrow by the AEC until the ARDA and PRDC conditions have been satisfied subject, however, to the right of NFS to waive the condition with respect to PRDC. If these conditions are not satisfied by October 15, 1963, and except as noted above concerning NFS’ right to waive, the baseload contract would have to be reexecuted by both parties.

The Commission also approved publication of a Federal Register notice announcing the execution of this contract and containing a policy statement to the effect that after startup of the NFS plant the AEC will no longer execute a chemical processing contract with a licensee unless the AEC shall have determined that chemical processing services are not available to that licensee from NFS at reasonable terms and charges. AEC will terminate chemical processing contracts heretofore or hereafter executed with licensees, in accordance with the provisions of such contracts, as of the startup of the NFS plant, unless the AEC determines that the required chemical processing services are not available from the NFS facility at reasonable terms and charges.

In view of the fact that the contract is being held in escrow, there will be no public announcement issued by AEC until the conditions pertaining to ARDA * and PRDC, as described above, have been satisfied. We understand that NFS, - and other parties to the various contracts with NFS, will also withhold public announcement. The Federal Register notice will also not be published until the conditions have been satisfied. Sincerely yours,

A. R. LUEDECKE, General Manager.

APPENDIX 11

AEC PRESS RELEASE ON CONTRACT ENTERED INTO WITH NFS

U.S. ATOMIC ENERGY COMMISSION,

Washington, D.C.

AEO ENTERS INTO CONTRAOT WITH NUCLEAR FUEL SERVICES

The Atomic Energy Commission has entered into a 5-year contract with Nuclear Fuel Services, Inc. (NFS), Washington, D.C., for the chemical processing of irradiated nuclear reactor fuel at NFS' plant now being constructed in western New York under NFS' contract with the Bechtel Corp. NFS is owned jointly by W. R. Grace & Co., and American Machine & Foundry Co.

Under the contract, AEC will provide a baseload of irradiated Government fuel for processing during the first 5 years of the NFS plant's operation to supplement the irradiated fuel available from private reactors during early years of the plant's operation,

Irradiated reactor fuel is chemically processed to separate and recover the "unburned" portion of the fuel and any special nuclear materials produced during irradiation. The recovered material can be reused.

The NFS plant is the first privately owned plant of this type in the Nation. Since there are no private processing plants operating, AEC will continue to accept private reactor fuels until the NFS facility is in operation. However, private reactor operators will have the option of making arrangements with NFS for processing of irradiated fuel, including fuel already delivered to the Commission. Part of the private fuel accepted by the AEC will in turn be delivered to NFS for processing.

After the NFS plant starts operation, the AEC will not receive private reactor fuel for processing if the fuel can be processed commercially at reasonable charges. The AEC will not participate in contract negotiations between private reactor operators and NFS but will, if requested by the private operator, review processing charges and other terms and conditions offered by NFS and determine if they are reasonable. In making such reviews, the AEO will assure itself that contract provisions will not discourage growth of the nuclear power industry by unreasonably affecting the cost of operating nuclear reactors.

The Commission in 1957 announced a policy to accept irradiated nuclear fuel for chemical processing, but it encouraged the development of a commercial capability by stating that chemical processing arrangements between the AEC and its licensees would expire June 30, 1967, or earlier if private processing services were available at reasonable charges. The NFS proposal was the only one received which met the Commission's basic objectives.

The private processing plant will relieve the Commission of the responsibility for processing private reactor fuels to the extent that private capabilities exist at reasonable charges. It will also eliminate the need for additional capital expenditures by AEC to provide certain storage and processin facilities and provide a means for industry to develop a processing capability and demonstrate the economics of commercial chemical processing of different types of fuel.

The NFS plant will be located within the 3,331-acre site of the Western New York Nuclear Service Center about 30 miles south of Buffalo at West Valley in Cattaraugus County. The plant will occupy land leased from the New York State Atomic Research & Development Authority (ARDA). ARDA is a public benefit corporation created under New York law.

Title to radioactive wastes (except for any special nuclear material) from AEC fuel will be turned over to NFS which ultimately will transfer the wastes to ARDA for continual maintenance.

In executing the contract with NFS, the Commission stated it expects to be able to furnish an equivalent base load of Government fuel when another qualified commercial processor makes an acceptable proposal.

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SUBJECT INDEX

17

97

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Additional funds required by AEC under the proposed contract_

32, 40, 94
AEC baseload contract..

AEC's commitment under proposed contract (see also Research and
development support to be provided by AEC).

42, 82
Negotiations for reprocessing facilities -

30, 80
Provisions to permit the Government to take advantage of any unfore-
seen cost reduction -

68
Delays in startup of the plantan

38, 88, 90, 92
Development of commercial reprocessing service:

AEC objectives in encouraging the development of a private chemical
processing industry---

13
Competitive commercial service, development of.-

57
Government support after expiration of the proposed contract.. 28, 45, 87
Monopoly aspects of proposed arrangement--

46
New York State Atomic Research and Development Authority's role in the
proposed contract_

96, 97, 99
Facilities contract.-
Lease between Authority and NFS.

79, 98
Waste disposal---

99, 100, 101
Processing plant proposed by NFS:
Availability of load for plant -

85
Background.

14
Charges to industry for reprocessing services.-

67,90
Construction contract_-

79
Financing of the proposed plant-

41, 43, 81
Fuels to be reprocessed by proposed facility, types of.
Information to be obtained from proposed facility-

72
Location of plant---

28
Processing, description of_

77
Size of plant----

76
Staffing of proposed plant-

84
Startup delays. (See Delays in startup of plant.)
Status and timing schedule of project---

19, 26, 77, 88
Use charge termination.--

20
Utility load contract_-
Versatility of plant_----

76
Private enterprise participation in the nuclear industry-

27
Research and development support to be provided by the AEC 33, 72, 87, 93
Technical review of NFS proposal--

56, 58
Timeliness of the project--

56
Uranium hexafuoride, contract for production of -

7
Utilization of existing Government reprocessing facilities

70
Waste disposal.---

68, 99, 100

28

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80

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