(News item from the Paducah (Ky.) Sun-Democrat of May 7, 1963, and an excerpt from hearings before House Subcommittee on Appropriations on public works appropriations for 1963 follow :) [From the Paducah (Ky.) Sun-Democrat, May 7, 1963] PADUCAH OFF U.S. "LIST" WASHINGTON, May 7.-Paducah has been removed from the Labor Department's list of small communities with substantial unemployment, as has another Kentucky city, Danville. Smithland and Cape Girardeau, Mo., were added to the Department's list of small areas with persistent unemployment. These listings were released as the Department also said the number of major areas suffering from substantial unemployment dropped from 48 in March to 47 in April. Russell N. Chittenden, manager of the Paducah Chamber of Commerce, said, "We have about 1,000 persons more in our area working than a year ago. Our economy may have been a little uneven, but it has been up every year for the past 5." He said he couldn't credit the dropping from the list to any one thing, but he 'cited the expansions of the Goodrich and General Analine and Film plants at Calvert City, and about $10 million in construction in the Paducah area. EXCERPT FROM HEARINGS BEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, ON PUBLIC WORKS APPROPRIATIONS FOR 1963, HELD IN MAY 1962, PART 6, Pages 39 and 40 Chairman CANNON. I would like to ask, Doctor, in reference to the UF. plants at Oak Ridge and Portsmouth which have been closed down, what is your relative cost of production at Paducah versus that of the private plant? Dr. Seaborg. This is the production of the UF, the feed material for the gaseous diffusion plant where we separate the isotopes. The gaseous diffusion plants are still operating at all three places. This is just the feed material. Dr. WILSON. We are still producing the bulk of it in the Government-owned plant, at Paducah. Mr. CANNON. Are you producing as cheaply as they produce at the Allied plant? Dr. SEABORG. By concentrating in two places rather than three or four. 6 Mr. QUINN. The material flows through the UF, operation, Mr. Chairman, have been decreasing as the raw material procurement has decreased. We have three AEC facilities to produce UF, one at each of our three diffusion plant sites, Oak Ridge, Paducah, and Portsmouth. We also entered into a 5-year contract for UF production with Allied Chemical Corp. The present contract term extends to 1964. Since the time when we entered into this contract our raw material procurement has dropped off and there is not now need for the full capacity of all these facilities. Consequently, we have reduced the operation in our plants; we have continued the operation at Paducah and at the Allied facility as provided in our contract. Now, as far as the relative costs are concerned, the Allied contract price includes amortization of their capital investment. The price for UF, production there is approximately $1.20 per pound of uranium. Now, the Allied plant performs the operation of converting uranium from the form of ore concentrates to UF. Therefore it performs more than is done at our Paducah plant or was done previously at Oak Ridge and Portsmouth; the AEC plants use as feed purified material from the refining operations that we presently carry out at Weldon Springs, Mo., and Cincinnati, Ohio. Thus, a mere comparison of the operating costs at Paducah with the Allied contract price would not be meaningful. We have in the past made analyses of the comparison between our costs for producing UF, and the price in the Allied contract. When allowances are made for the more rapid writeoff of the plant facilities, which was necessitated in the case of Allied by the short duration of the contract, and making other allowances for the costs included by industry but not included in Government costs, our conclusion was that the costs were generally comparable. In terms of our actual out-of-pocket cost, the unit price in the Allied contract is greater than costs at the Government facilities. Dr. WILSON. On the other hand, that kept us from having to build a plant ourselves, putting in the capital equipment ourselves, at the time. Mr. CANNON. What we would like to have, and I wish you would put it in the record, the unit cost of production at Oak Ridge and Portsmouth and the unit cost at Allied Chemical. Please put in the record the relative unit cost at the three plants. Chairman PASTORE. That does not remove the Senators from coming in here and making some noise about Paducah, too. That is always the case. Senator DIRKSEN. Mr. Chairman, we thank you. I believe it is only appropriate when citizens at their own expense come here and are deeply interested in the retention of a plant that means so much to that area. Chairman PASTORE. I do that every day for Rhode Island. Senator DIRKSEN. I would pursue you to the end of the earth to do that. Representative PRICE. Mr. Chairman, I have no quarrel with that, and I think it is entirely appropriate, but I would wish that they had contacted all of us who have been working on it so that we could arrange for a more formal and better hearing. Senator DIRKSEN. My friend must remember that these are extremely busy days for the minority leader. I was hard put to get this ball put together as it was, without making further contacts. Senator CURTIS. Mr. Chairman, I have followed this paper, and it doesn't say in what State Metropolis is located. Senator DIRKSEN. Illinois. Senator CURTIS. I had no idea because I picked up the other statement we are to hear, the Atomic Energy Commission statement, and I asked one of the staff if they were going to read it in unison. Senator DIRKSEN. May I say to the Senator from Nebraska it is the only Metropolis in the United States as far as I know. Mr. CHASE. Thank you, sir. Chairman PASTORE. Thank you very much, gentlemen. Chairman PASTORE. Now we will hear from the Commission on the business at hand. STATEMENTS OF DR. ROBERT E. WILSON, COMMISSIONER; JAMES T. RAMEY, COMMISSIONER; GEN. A. R. LUEDECKE, GENERAL MANAGER; GEORGE F. QUINN, OFFICE OF GENERAL MANAGER; HAROLD PRICE, DIRECTOR OF REGULATION; JOHN ABBADESSA, CONTROLLER; JOHN VINCIGUERRA, DIRECTOR OF CONTRACTS; JOSEPH HENNESSEY, GENERAL COUNSEL; FRANK PITTMAN, DIRECTOR, REACTOR DEVELOPMENT; AND BERT SCHWARTZ, DIVISION OF PRODUCTION, ATOMIC ENERGY COMMISSION Dr. WILSON. Mr. Chairman, I am very pleased to have this opportunity this morning to discuss with the Joint Committee the proposal of Nuclear Fuels Services, Inc. (NFS) to provide a commercial chemical reprocessing service for irradiated nuclear reactor fuels, and the bases of the presently contemplated contractual arrangements be tween NFS and the Atomic Energy Commission for the proposed project. As you know, the Commission has for several years been hopeful that private reprocessing services would be provided, and is encouraged by the progress toward this end made by NFS and a number of its potential customers in developing mutually agreeable arrangements under which such reprocessing services would be provided. Another important consideration is that in other parts of the world other small chemical processing plants are under construction or are being planned to handle power reactor fuels. In order for this country to make similar progress in this field, we believe that it is important that a plant proceed at once, and, for reasons which I will discuss, we feel that it should be built by private industry. AEC OBJECTIVES The Commission has a fourfold objective in encouraging the development of a private chemical processing industry. 1. To have privately owned processing plants in operation as it becomes necessary to process different types of fuel elements from privately owned and other power reactors. 2. To eliminate the present responsibility of the Commission to the reactor industry to provide for the reprocessing of private reactor fuels. Although the Commission has committed itself to accept fuels only until June 30, 1967, there is no doubt that we would have to make some additional commitments if no private capacity existed by 1967. 3. To have available a private capability for processing certain fuels from Government reactors, in order to supplement existing Government facilities and to avoid additional capital expenditures for storage and processing facilities. 4. To demonstrate as soon as practicable in a privately owned facility the economics of chemical processing of different types of fuels for privately owned reactors in order to bring to bear the potential and capabilities of private industry in lowering the cost of this part of the fuel cycle. Chemical processing is an important part of the Commission's program of achieving nuclear powerplant designs which will produce competitive power in the United States. To attain this goal, the Commission has spent considerable sums on the total reactor program and undertaken a number of reactor demonstration projects. Since the cost of processing must be considered early in the conceptual design of the reactor and has a significant influence on the cost of power, it is urgent that industry learn the true commercial cost of fuel reprocessing for different types of fuel elements and bring to bear their capabilities in lowering this important component of the overall fuel cycle cost. I may say parenthetically that will undoubtedly have some effect on fuel element design. Fuel element design should not only take into account ease of fabrication, but the ease of reprocessing; they both are going to be factors in the total cost. Reprocessing costs would be quite difficult to determine if the processing were done in large Government plants designed primarily for other types of fuel. which is the alternative available to us. 21-261-64- -2 BACKGROUND To put the NFS processing plans in perspective, some background information may prove useful. In the mid-1950's, when the first nuclear power projects were getting underway, industry had available to it neither a chemical reprocessing service nor specific information on the costs of reprocessing power reactor fuels. Accordingly, in March of 1957, a policy was announced under which AEC offered, under individually negotiated contracts, to accept irradiated nuclear fuel from licensees for financial settlement of lease accounts and for payments for licensee produced plutonium and U233, and providing for charges for reprocessing. In announcing this policy, the Commission made clear its desire to continue to encourage the development of a commercial capability for irradiated fuel reprocessing by stating that in implementing this policy, contractual arrangements between AEC and licensees would expire on June 30, 1967, or earlier if the Commission determined that the required reprocessing services would be commercially available at reasonable charges. Thus, in 1957, the Commission assured the industry that for at least 10 years irradiated fuels could be returned to the Commission at specified reprocessing charges. If these services did not become available commercially at reasonable charges, the Commission would probably have to extend this offer; the AEC has not yet determined, however, the bases on which such an extension would be made. As a basis for the charges AEC would make for reprocessing services for power reactor fuels where the technology had not been developed or demonstrated, a multipurpose plant was conceived with a nominal capacity of 1 metric ton of low enriched fuel per day. The estimated costs associated with this so-called conceptual plant were the basis for the establishment of charges for reprocessing services. On this basis, the Commission announced reprocessing charges for the broad spectrum of fuels then being considered, all of which were capable of being handled in the conceptual plant. The Commission considered that such charges were reasonable in that they were not so high as to discourage the growth of nuclear power; nor were they so low that a private reprocessing service would be indefinitely deferred, in the light of the continuing development of chemical reprocessing technology and the then-anticipated growth in availability of fuels which would require reprocessing services. I must emphasize, however, that this conceptual plant never existed nor was it designed in detail; and from long experience with such matters both within and without the Government, I am reasonably sure that the estimated costs would have been substantially exceeded if it had been built. Congressman Holifield expressed similar skepticism regarding the validity of these costs at the 1957 202 hearings. The Commission has continued to encourage the development of an industrial chemical reprocessing capability. In 1956 and 1957, when it appeared to the Commission that the area of irradiated fuel reprocessing was likely to continue to be a gap in a broadly based commercial nuclear industry, AEC undertook to discuss with industry representatives the AEC program of encouraging the development of a competitive, industrial irradiated fuel reprocessing capability. The Commission made known that it would consider as reasonable charges by industry on the order of 15 percent higher than the AEC charges based on the conceptual plant. Charges 15 percent higher than those of the AEC conceptual plant have thus become the target for potential commercial chemical reprocessors. I emphasize again that conceptual plant was a hypothetical plant and didn't have any reality. I think it is quite possible that this 15 percent increase over the conceptual plant cost would not have been any greater than the actual plant costs in such a plant. However, that is merely a personal opinion. As another element of encouragement to the industry, AEC made known its willingness to make available, as a baseload to a private reprocessing venture, certain quantities of irradiated fuels to be discharged from Government-owned reactors. However, it soon became clear that most interested members of the industry considered the potential commercial load for such a facility to be inadequate to justify its early construction. As a result, AEC made preliminary plans to carry out power fuels reprocessing in AEC facilities, but indicated its continued willingness to consider proposals from industry. By 1959, AEC had acquired authorization and funds from the Congress and was planning to modify existing Government facilities in order to reprocess the fuels AEC would receive from licensees under its March 12, 1957, announcement. The Commission did not plan actually to build the conceptual plant; rather it would have accommodated the irradiated power reactor fuels by modifications to its existing chemical processing plants to accomplish the reprocessing in the most economical manner-keeping the conceptual plant as a basis for its charges for reprocessing services. In the meantime, however, a new industrial interest in chemical reprocessing developed. The present NFS proposal is the culmination of privately financed studies by five utilities building nuclear powerplants-Yankee, Commonwealth Edison, Consolidated Edison, Northern States, and PRDC-and the Davison Chemical Co., a subsidiary of W. R. Grace. These companies constituted the Industrial Reprocessing Group, or IRG, which was formed in 1959 to carry out preliminary studies. On the basis of the industrial interest reflected by the IRG study, the Commission deferred proceeding with the planned modifications of AEC facilities to permit power fuel reprocessing estimated to cost around $3.5 million with the hope that they would never be necessary. NFS PROCESSING PLANS In January 1962, the Davison Chemical Co. outlined to the Commission its plans for constructing a private chemical reprocessing facility. In March, the Commission notified Davison that its proposal to provide the commercial service, involving a baseload of Government fuels to supplement the fuels that would be supplied by licensees and others, constituted a satisfactory basis for further negotiation and development of definitive plans. Soon thereafter, Nuclear Fuel Services, Inc., or NFS, owned jointly by W. R. Grace & Co, and the American Machine & Foundry Co., replaced the Davison Chemical Co. as the entity to undertake the venture. Since that time, negotiation of an AEC-NFS contract for the baseload of Government |