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Mr. HOBELMAN. I would have to check on that and provide the information, but I presume it would be year-end 1976.
Mrs. SCHNEIDER. I would very much appreciate a clarification of that in writing to the committee.
[The information appears in Appendix beginning on page 87.] The CHAIRMAN. Mr. Wolpe? Mr. WOLPE. Thank you, Mr. Chairman.
I would like to pursue that question. It appears there are three separate issues here. The total cost of the program is what we are trying to establish, things that are mandated by law or contractual obligation.
The second is really identifying the resources that are out there in one form or another that are creditable toward those closing-out costs that could not be deducted from the total closeout figure. The third is the amounts-identifying the amounts that must be authorized as a matter of law or contractual obligation within fiscal year 1982 authorization legislation.
I want to pursue for a moment the question of total cost and closeout. I want to come back to the issue of the utility-not only the question of what utilities have paid into the project up to this point, but also the question of the utility obligation.
I want to read rather briefly from a statement of Dr. Robert S. Seamans, Jr., an ERDA statement made to the Joint Atomic Energy Committee in April 1976, regarding the modified contract that was entered into at that point, and I quote:
In negotiating the proposed arrangements our basic intent was to make the minimum necessary changes in the existing contract. The purpose of these revisions was principally to recognize that ERDA and not the utilities will now make the fundamental decisions affecting project management. One consequence of this decision required a change in utility liability in the event that the government should decide to initiate termination of the project prior to its completion. The existing contractor provisions would have committed the utility to continue to contribute funds to the project at a rate of $25 million per year, even after the government had terminated. We could find no basis in equity to continue to insist on this arrangement. Accordingly, we agreed that in the event of project termination, the utility contribution would be limited to the amount of funding contributed at the point of termination. It should be noted utilities have already contributed over $100 million to the project.
Now, following up on the question just asked by the gentlewoman from Rhode Island, is there no one at the table who knows whether or not the utilities have made the $25 million annual payment they were obligated to make under the terms of the revised contracts up to and since 1976?
Mr. HOBELMAN. Mr. Congressman, it is the utilities' position those obligations no longer adhere to the utility industry to pay in additional funds after the Government initially breached its contract in early 1977.
Therefore, the last payment was made either at year-end 1976 or early in 1977.
Mr. WOLPE. If I may, I would like to read at this point, then, from a section of that actual contract: The revised program justification data arrangement No. 77–106, February 1975. This appears at section 4(g):
Respective obligations of utility contributors will be limited to the amount provided for in their utility contribution agreements provided that upon termination prior to completion of the project their liability at any given time shall be limited to the total amount of contributed cash on hand plus accrued interest, if any, such sums due but unpaid less PMC closeout settlement costs.
Mr. HOBELMAN. All this assumes a termination in accord with the provision of the agreement and not a termination resulting substantially from breach of contract. In dealing with individual utility contributions, the utilities as individuals have a contractual right to stop payment in the event that the project terminated for various criteria set forth in the contract.
Mr. WOLPE. I think the point I am trying to establish is simply the point really that the gentleman from Pennsylvania made earlier, which is that the real question may not be so much what is due the utilities by way of reimbursement, but what the utilities owe to the Federal Government for the failure to maintain the $25 million annual contributions. Is that at least not an open, legal question?
Mr. CAFFEY. Mr. Wolpe, the contracts do not require the contributions be made by the Breeder Reactor Corporation to the Federal Government in the amount of $25 million a year. Rather, each year the Federal Government, ERDA, DOE, will determine what the budget is for that year and advise PMC of what it is expected to contribute to the project for that year from whatever funds PMC may have collected through the Breeder Reactor Corp. up to that time.
Since 1977, the Breeder Reactor Corporation Board of Directors has held that it should not call on the member companies of the Breeder Reactor Corporation for their annual contribution and PMC has said that it will continue to participate with its people in the project and pay its people and an overhead share of the project, but nothing further. Both of these have been done on the basis that they held before a judge that the Federal Government had breached the contract and they were willing to continue but not continue on the original terms. That is the distinguishing feature, I think.
Mr. WOLPE. To clarify that further, you are saying that the utilities did not make the $20 million payment to BRČ, BRC did not even collect that sum?
Mr. CAFFEY. That is correct.
Mr. CAFFEY. I believe it was in 1977 that the Breeder Reactor Corporation Board passed that resolution and decided not to make the annual December call for contributions. They have not relieved the member corporations of the liability for cancellation, but it is there as a potential. If the project were to go forward for fiscal year 1982 appropriations, and went forward, then we anticipate the Breeder Reactor Corporation would call for contributions.
Mr. OTTINGER. Do you think it would be useful to have how much actually was contributed each year by the utilities to the Breeder Reactor Corporation? Do you have that?
Mr. CAFFEY. Yes, sir. It is approximately $25 million. We can give you the precise number.
[The information follows: In reference to the above, the following is supplied for the record: The cash which was contributed each year by the utilities to the Breeder Reactor Corporation is as follows:
Mr. WOLPE. Earlier, a member of the staff of this committee indicated there is a sum of money sitting in an escrow account. I take it, then, that is not an accurate description of the situation at all.
Mr. CAFFEY. Only to the extent that the member-utility companies of the Breeder Reactor Corporation have altogether paid more into the Breeder Reactor Corporation, which transferred it to PMC for investment, pending payment into the project. The difference, $113.3 million, that is in the table here, and I believe $125 million and a fraction, has been held in a bank account and interest has been accumulated.
Mr. WOLPE. What is the judgment of the members of the committee-is there anything in law or in contractual obligations that would require something larger, say, than $20 million as this year's installment toward the closing-out costs? I use $20 million because that was the specific figure embodied in the amendment that has already passed this committee. Is there anything in statute or under contractual obligation that is not going to have to be litigated at some length that would require a payment larger than $20 million to be incorporated into the DOE 1982 authorization bill?
Mr. HOBELMAN. Does the question relate to utilities?
Mr. WOLPE. I would be more interested in knowing the reaction of the Government. I sense the inclinations of the utility interests.
Mr. CAFFEY. I am having difficulty grasping the import of that. You refer to something already included in the amendment at a $20 million figure, and I haven't seen that in the amendment.
Mr. WOLPE. I am returning to the third of the three separate questions that I think are before the committee. First, what is the total cost of closeout.
Second, what can be credited toward those closeout costs; and
Finally, this is the point I am focusing on right now-what amount must this committee incorporate into the DOE 1982 authorization bill?
We have incorporated already a $20 million sum. That was the amount that the language of the amendment passed last week provided for. I have not heard any testimony whatever to suggest that is an inappropriate sum.
Mr. CAFFEY. I have not seen such language in any such amendment. The only amendment I have seen didn't have the dollar figure in it.
Mr. WOLPE. If you don't like that particular number, is there another number you would prefer?
Mr. CAFFEY. It depends entirely on what is the objective, I believe, of what the committee would like to get out of the termination of the project in terms of either a final report of termination or completion of further tests and a final report, or doing certain additional design work in order to dissolve generic issues with the NRC, or whatever. It depends on what the committee would like to see in terms of its expectations of termination.
Mr. WOLPE. My understanding is if we were to not include final design work-we are talking about a reduction of $187.4 million-if we have no reimbursement for utilities on the theory they have already recovered through their rate base, that in another $117.2 million reduction, that would yield a total dollar savings of $304.6, just in terms of the figures presented by the Department of Energy termination, yielding a total of $117.4 million, assuming validity of the remainder of the costs submitted by the Project. The question I am asking right now, of this $117.4 million, why is it their intention to require more than $20 million of that sum to be reimbursed or to be incorporated into this year's 1982 DOE authorization bill?
Mr. PEACH. I haven't a figure I can give you, Mr. Wolpe. Just adding to what Mr. Caffey said, in listening to the discussion here, I would suggest there are several areas that would have to be focused in on, depending on the direction you want to take.
If you look at the figure for the design work, it can be broken down into many different pieces and some judgment can be made as to whether you want to complete all of that design work that is contemplated or some portion of the design work. I am sure there are various components you can decide on. You can make a judgment as to whether you even want a final engineering report. It depends on what you want to get out of the investment that has already been made. You could look at existing contracts with respect to any potential for renegotiating the obligations that exist and, again, I am not sure of what kind of provisions may exist, but I think there are a lot of questions that would have to be answered in getting at the question of minimizing the contractual obligations you are dealing with. It depends also on what you want to do with the work done so far.
Mr. WOLPE. I appreciate the response. I think it is clear, if the committee chooses to, in its own judgment, it can always add money. The question we are trying to establish in this hearing-at least as I understood the scope and mandate of this particular hearing-is, what is the minimum cost that has to be incorp ted into this particular authorization legislation for this particular authorization we are considering, and I have yet to hear a single suggestion that there is any mandate involved or in contract that would require more than the $20 million figure incorporated into the amendment already passed.
Mr. ERTEL. I will follow up on that last question just for a moment.
When I get in a contract action and I want to get out, my objective is to get out as cheaply and quickly as possible. How cheap can the U.S. Government get out with the objective of getting out as cheaply and quickly as possible out of this contract? That is the question. How much?
Mr. GATES. I think the answer to that, Mr. Ertel, depends upon decisions which cannot yet be made. I believe the caveat that I put on the first page of the enclosure to my letter to the chairman, with respect to the $117 million about which Mr. Wolpe spoke, demonstrates that that complex issue
Mr. ERTEL. May I interrupt? One hundred seventeen million dollars is the amount you say is in contention with the utilities. We know one thing for a fact, that if that becomes a litigable issue, it has to be at least 4 years off to get that resolved, or 3, or 2. Therefore, in 1982, we don't even have to consider that. We may have to consider it in 1983 or 1984.
Mr. GATES. That is true.
Mr. ERTEL. I assume that in 1982 you are never going to resolve that issue, not if I know lawyers.
Mr. GATES. I think the likelihood of that extending on for a number of years is positive.
Mr. ERTEL. So we eliminate that at least in 1982.
Now, if we want to get out as cheaply as we can and as quickly as we can by terminating the project, tomorrow, how much will it cost us for 1982? We have eliminated one figure. How much more can we eliminate?
Mr. GATES. I would like to respond for the record, Mr. Ertel, for this particular reason: We have been very affirmative and positive in our thoughts that the Clinch River breeder reactor would continue, and the contingency termination plans have not been made. Therefore, I think we need a little more time to answer that question.
I understand the question, and I think it means I think what you said was, close it at the minimum cost at the earliest possible time without regard to the prudence of that action.
Mr. ERTEL. I think that is a judgment we would make. We are asking you for the quickest and cleanest way out, and what it would cost in the year 1982, the year 1983, and the year 1984?
Mr. GATES. I understand the question. [The information follows:] Question: How cheaply can the CRBRP Project be terminated if the Government wants to get out as quickly and as cheaply as possible?
Answer. The estimated cost of terminating the CRBRP Project, assuming start of termination October 1, 1981, and no further design or report activities, is $101.9 million. Details of this estimate are provided in the attachment. This does not include any funding for reimbursement of utilities and reactor manufacturers' contributions, if required. The estimated amount of these contributions, as of September 30, 1981, is $117.2 million.
The estimate is based on the sole criterion of terminating at minimum additional cost and does not provide for the completion of selected design activities of generic benefit to the LMFBR program.
CRBRP funding analysis for October 1, 1981, termination assuming no further
design and no report activities