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Mr. QUINN. Yes, we have estimated that in order to handle the low enrichment oxide fuel, such as NFS would handle, would involve a modification at the Savannah River plant of approximately $31/2 million.

Mr. Conway. If you were to do so, that is, make those modifications for the $342 million in lieu of entering into this arrangement with NFS at this time, would it be possible for the AEC to place chemical reprocessing on a toll basis under an arrangement similar to that which is being considered for toll enrichment in the AEC diffusion plants?

Mr. QUINN. I think that the basic offer that AEC has outstanding can be regarded as a toll processing situation, where the charges for the processing are based on the conceptual plant. Basically, AEC has established standard forms for return of material from licensees, but in the case of irradiated fuels they cannot be returned in the standard form until this processing is carried out.. So that, in effect, the 1957 announcement did the equivalent of providing for a toll processing arrangement for these fuels.

Mr. Conway. But without actually doing the toll processing.
Mr. Quinn. But without actually performing it.

Mr. Conway. Going back to the question again, in the event you made the modifications, could you process it through the Government facilities under a toll basis!

Mr. Quinn. That would certainly be possible.

Mr. HENNESSEY. I think there might be one distinction, Mr. Conway. If we did it in our own facilities, the price that we would charge under the statutory provisions in section 161(m) of our act would have to take into consideration that the price should not discourage the entry of a private firm into the field of reprocessing, so that it would be not only our cost in the Government facilities that would be taken into consideration, but also this other factor.

Mr. CONWAY. That could be the cost that you are setting right now under your conceptual plant.

Mr. HENNESSEY. That is right.

Mr. Quinn. The conceptual plant charges would apply for the duration of the 1957 announcement, which expires in 1967. At such time as any charges

need to be set beyond that, and if the fuels were to be processed in AEC facilities, these considerations Mr. Hennessey mentioned would have to come into play.

Mr. Conway. As a followup on this possibility of a toll basis, there was a second question as follows:

Wouldn't this permit the Commission to wait until the load builds up sufficiently and fuels become more standardized, at which time a truly competitive industry could be considered with production plants of a meaningful size?

Dr. WILSON. I think it would cost us more to make the transition if we waited longer. We would be spending more because each year some new fuels would come in and we would make some changes in the plant. We would get the Government more and more imbedded into it and more and more expense in the transition period to private industry.

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TRANSPORTATION COSTS FOR PLANTS ON THE WEST COAST

Mr. CONWAY. The next question Senator Jackson wanted answered is as follows:

Won't it be uneconomical for plants on the west coast, such as Bodega Bay, city of Los Angeles, and Southern California Edison to ship their reactor fuels 3,000 miles to the NFS plant?

Mr. QUINN. Without the NFS plants, these reactors would be required to ship their fuels to the Savannah River site of the AEC, which would involve transportation costs fully as great as to the New York State site.

Mr. CONWAY. Except you have some arrangements now where they are permitting them to store it at the site.

Mr. QUINN. This is in anticipation that the NFS plant goes forward.

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SIGNIFICANCE OF INFORMATION TO BE OBTAINED FROM PROPOSED FACILITY

Mr. Conway. The next question: Can you really obtain significant information on the reprocessing of commercial reactor fuels in view of the fact that much of the fuels to be reprocessed at this plant will be fueled from Government reactors rather than commercial reactors?

Mr. QUINN. Certain of the Government fuels to be supplied to this plant come from power reactors. These are the Commission's Round II reactors. Certain other fuels are not power reactor fuels. But we do believe there will be demonstration of power reactor fuel processing in this plant.

Dr. Wilson. There is also a very real possibility that they will prove that these lower mannings they have for the processing plant against a Government plant will be achievable. We need to know that. We can only find out by letting them try it.

RESEARCH AND DEVELOPMENT SUPPORT TO BE PROVIDED BY AEC

Mr. CONWAY. In the GAO report, reference is made to the technical study group that raised some technical questions, particularly that the NFS is considering a concept that has not been proven as yet. In the event delays occur because of this or other reasons and they are not able to start up in the period of time in which they anticipate, is it possible or is it contemplated that the Commission will enter into arrangements in lieu of the reprocessing work for research and development to assist them in advancing their startup? Dr. WILSON. It is conceivable; it is possible. Mr. CONWAY. Is it possible under the contract? Dr. WILSON. No. Mr. Conway. It is not possible under the contract? Dr. WILSON. Not under the existing contract scope.

Mr. QUINN. Under the contract there are provisions under which NFS could propose to the AEC specific research and development assistance. However, we do not have a commitment at this time.

Dr. WILSON. We would have to add to the scope to do it.

Mr. CONWAY. Would you have to make a new contract if this were to occur?

Dr. WILSON. Since this is of interest, I will send you a letter for the record.

Mr. QUINN. There is one arrangement in the contract, Mr. Conway, by which AEC could substitute research and development work in the NFS plan in lieu of processing load. (Letter relating to the above matter follows:)

ATOMIC ENERGY COMMISSION,

Washington, D.C., May 23, 1963. Mr. John T. CONWAY, Executive Director, Joint Committee on Atomic Energy, Congress of the United States.

DEAR MR. CONWAY: In the course of the May 14 JCAE hearing on the NFS proposal for a private chemical processing plant, there was considerable discussion concerning the types of research and development which could or would be carried out at AEC expense in connection with the proposed plant. I believe it would be useful to supplement the testimony in order to clarify the legal and policy arrangements under which such research and development might be carried out. Accordingly, it is requested that this letter, and its attachment, be inserted into the record of the hearing at the appropriate point.

There are two provisions in the draft AEC-NFS contracts under which research and development on chemical processes related to the NFS plant might be conducted at AEC expense. These are as follows:

(a) NFS may propose to the AEC that specific research and development work be undertaken which would advance the type of technology to be employed in the NFS plant. AEC has agreed to consider such proposals.

(6) At the option of the AEC and with the agreement of NFS, NFS may perform research and development in the NFS plant for the AEC in lieu of a portion of the processing load.

As mentioned in the hearing, the AEC has defined to NFS, in a letter dated May 9, 1963, the general criteria which would be applied by AEC in considering any research and development work to be undertaken at AEC expenses. A copy of this letter is attached.

The provisions in the contract which cover the situation described in (a) above provide a means under which AEC may take advantage of the NFS facilities for the conduct of research and development directed toward meeting AEO objectives. While such effort could also benefit NFS operations, the criteria defined in the May 9 letter preclude undertaking such work for the purposes of solving day-to-day or startup problems in the NFS plant.

ROBERT E. WILSON, Commissioner.

U.S. ATOMIO ENERGY COMMISSION,

Washington, D.C., May 9, 1963. Mr. T, C. RUNION, President, Nuclear Fuel Services, Ino., Barr Building, Washington, D.O.

DEAR MR. RUNION: This is in response to your letter of April 3, 1963, which submitted a detailed outline of a proposed development program which you felt would support AEO's general objectives and also be of value to NFS in its current effort.

As previously indicated to you the Commission plans to continue its basic program in aqueous chemical processing, much of which will be directly applicable to several of the technical uncertainties mentioned in your letter. The draft baseload contract currently under negotiation between NFS and AEC recognizes that the Commission will consider proposals by NFS for specific research and de velopment related to the NFS project. We believe that it would not be feasible or appropriate to give detailed consideration to your April 3 letter until consummation of the baseload contract.

However, we believe the following general criteria will apply to any research and development project agreed to by AEC with respect to NFS:

(1) It would not constitute a contribution to the capital or startup costs of the NFS plant.

(2) It would not constitute a guarantee by the AEC of the NFS plant performance,

(This criterion, together with (1) above, may preclude any final design reviews or evaluations by Commission contractors. Individual specialists in our contractor organizations could as appropriate be retained on a consultant basis.)

(3) It would not constitute a contribution to solution of specific operating problems arising from day-to-day plant operations.

(4) Performance of any research and development relative to safety would not in any way prejudice the freedom of the Division of Licensing and Regulation in carrying out its regulatory responsibilities.

We are accordingly deferring comment on your letter. It should be understood of course that AEC is not providing any assurance with respect to NFS research and development proposals beyond the general statement of our intent given above, prior to actual negotiation and agreement upon specific research and development work. We would hope to initiate more detailed conversations as soon as the baseload contract has been signed. Sincerely yours,

A. R. LUEDECKE, General Manager. Mr. Conway, Could this research and development be directed toward the development of the chopping and leaching method which NFS proposes to use?

Mr. QUINN. As a technical process, I believe it could. However, in connection with your earlier question, I would refer again to the criteria that were read earlier today under which AEC would consider requests from NFS for research and development assistance. The first of these is that we could not consider such a request if its purpose is to contribute to the capital cost or the startup cost of the plant.

We feel that work of such a nature would be beyond the scope of the service-type contract into which we are entering.

Mr. ABBADESSA. I believe from a financial point of view, there is another important aspect to this provision in the contract. If we did go the route of research and development, there is a provision in the contract that provides we could reduce our load obligation to NFS and equate the cost so that we would not be incurring an additional cost under the contract.

Mr. Conway. Is that permissive or mandatory?
Mr. QUINN. That is permissive.

Mr. Conway. If you were to provide research and development assistance, would this be in lieu of your commitment on the baseload?

Mr. Quinn. If we undertook the research and development in that context, it could be in lieu of processing load.

Mr. Conway. The point I am trying to make is, is there a requirement that it has to be in lieu of processing?

Mr. SCHWARTZ. There are two articles in the draft contract pertaining to research and development. If we undertook this as an additional R. & D. program, there is an article in the contract which provides for it and that would not be in lieu of processing. However, there is another article in the contract which provides for NFS to undertake R. & D. in the NFS facility for AEC, which R. & D. would be in lieu of processing and which would reduce our commitment of 695 revenue-days. So we could do R. & D. either way,

Mr. CONWAY. This is at the discretion of the Commission?
Mr. SCHWARTZ. Yes, sir.

Dr. Wilson. Depending on the nature of the research and where it is to be done.

Mr. CONWAY. I think this covers the points that Senator Jackson wished to bring out.

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Representative PRICE. Thank you, Dr. Wilson and members of the Commission staff We appreciate having your testimony and I think you all make good witnesses.

The next witness will be Mr. Charles Runion, president of the Nuclear Fuel Services, Inc.

Mr. Runion, would you come up to the witness table and bring anyone else you care to support you in the presentation.

STATEMENT OF THOMAS CHARLES RUNION, PRESIDENT, NUCLEAR

FUEL SERVICES, INC.

!

Mr. RUNION. Thank you, Mr. Chairman.

Representative PRICE. Mr. Runion, will you have your group at the table identify themselves for the record ?

Mr. RODGER. Walton Rodger.
Representative PRICE. Are you all with Nuclear Fuel Services !
Mr. RODGER. Yes. I am technical director.
Mr. McGUIRK, W.E. McGuirk, director of Nuclear Fuel Services.

Mr. RUNION. My name is Thomas Charles Runion and I am president of Nuclear Fuel Services, Inc., a subsidiary of W. R. Grace & Co., and in which American Machine & Foundry Co. (AMF) has a minority interest.

I am here in response to your invitation to discuss the construction and operation of a chemical reprocessing plant in New York State by Nuclear Fuel Services, Inc. Your chairman properly pointed out the importance of this venture the first venture by private industry into this important phase of the atomic energy business.”

Our project to construct a commercial plant for chemical processing of spent fuel elements is in response to an Atomic Energy Commission invitation announced in January 1956 in which the Commission stated:

It is the policy of the Commission to encourage industry to build its own plants for these purposes. The goal is to have commercial processing plants in operation as it becomes necessary to process fuel elements from privately owned power reactors. The AEC will make available (1) Commission technology in the field of chemical processing to interested firms and (2) limited amounts of irradiated fuel materials from AEC reactors for processing by industry, to the firms which submit acceptable proposals to the Commission. * * *

We understand that the Commission policy implemented the provisions of the Atomic Energy Act of 1954 encouraging the development of the atomic energy industry.

In 1956 the Davison Chemical Division of W. R. Grace & Co., was engaged, among other activities, in so-called cold scrap processing and preparation of the nuclear fuel materials required for the fuel elements in reactors. Cold processing and the hot reprocessing of spent fuel elements have many common aspects. Therefore, it was logical for Grace in cooperation with five utility companies which were constructing power reactors to organize the Industrial Reprocessing Group. This group which we refer to as IRG was formed to study the technical and economic feasibility of the design, construction, and operation of a privately owned facility for the processing of spent nuclear fuels. The Commission in the "202" hearings before this committee in 1960 stated that the study would have its full support. The five utilities were Commonwealth Edison Co., Consolidated Edison Co. of New York, Inc., Detroit Edison Co., Northern States

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