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Mr. Quinx. Which offered to them the opportunity to build a private plant with some Government fuels as a baseload.
Representative MORRIS. The same opportunity and under the same conditions that you offered it to Nuclear Fuel Services, Inc.?
Mr. QUINN. T'he detailed terms and conditions that have developed in the NFS contract were not defined as of that time. But the general principles upon which we would contract with them were defined.
Dr. WILSON. And the fact that we would consider as reasonable charges that are about 15 percent in excess of the AEC charges was also announced. We also had a meeting with either the chamber of commerce committee on nuclear power or the atomic industrial forum and somewhat chided them because they had not come up with any proposition. We pointed this out and that we were giving them a good chance.
I think that finally stirred up Davison to come through with the proposition. But they are the only people that have come through with a definite proposition for a private plant, in spite of the fact that all of the chemical industry has known of this availability for many years.
Representative MORRIS. Has any other company indicated any interest in this since you have definitized the contract ?
Dr. WILSON. We have not definitized it yet.
Mr. Quinn. The contract is still under negotiation, Mr. Morris. At the present time, we understand that there is some interest in the State of Kentucky, in providing a reprocessing facility, particularly for the high enrichment type fuels, using a completely different process than the NFS process.
Representative MORRIS. But they have not contacted you?
Mr. QUINN. They have not come forward with a definitive proposal as of this time.
Representative MORRIS. Have you gone forward to them with a definitive proposal! Who makes the first move here? Does the Commission or does private enterprise!
Dr. Wilson. We announced to all industry our interest in this type of thing and then we wait for proposals from someone that is interested. We don't go out and make a proposal to each different company. We announce our general policy.
Representative MORRIS. Then you announced this general policy, Doctor, and Nuclear Fuels Services came to you without further contact from the Commission?
Dr. WILSON. We had many contacts with many different companies in the process. I don't know whether we had any specific contact. In other words, the normal course of procedure is that some companies like Koppers and these others would come to us and talk it over and try to get something concrete. As I say, all the chemical industry has known that we were interested in receiving some such proposition and whether Davison contacted us between those two periods I don't know. I imagine they did.
ADDITIONAL FUNDS REQUIRED BY AEC UNDER THE PROPOSED CONTRACT
Representative MORRIS. As to the cost of operating this plant and the cost to the Government, is there any difference if the Government did it themselves?
Dr. WILSON. There probably is. In other words, if we put it in our facilities that are designed for other purposes, we could probably do it somewhat cheaper. On the other hand we will never find out what the real commercial costs of doing this thing were and we would never get the ingenuity of private industry in lowering those costs.
Mr. Conway. You have made some analysis of those costs, haven't you?
Dr. WILSON. I don't known that we have. Mr. ABBADESSA. Yes, sir. Representative MORRIS. As I understand the General Accounting Office indicates in its little study that it would cost $19.9 million more to do it through Nuclear Fuel Services—than it would to do it through Government facilities.
Mr. ABBADESSA. That is right.
Dr. WILSON. No; I don't think it is a fair estimate of the difference. It is true that is the thing. But they didn't take into account a lot of things on the other side. In the first place how much additional investment we would have to make, and secondly, they assumed that we were going to process the fuel for others and receive the profit from that.
Representative Morris. Have you seen their report, Doctor?
Representative PRICE. Before you talk to it, didn't the General Accounting Office make their survey and study in conjunction with full information from the AEC?
Mr. ABBADESSA. This is correct. These are our figures.
Mr. ABBADESSA. The point I would initially like to make is that this is not prepared on a full-cost basis. This is prepared specifically to determine the budgetary impact and was initially prepared
Senator ANDERSON. Could you explain that a little bit? That sounds like real Washington language.
Mr. ABBADESSA. It was prepared, sir, to determine over the next 5 years how many additional dollars we would have to request in our budget by virtue of going to the NFS rather than processing in our own facilities.
Dr. WILSON. In other words, you have no capital charges where you have to make new investments.
Representative MORRIS. You are saying or you are admitting that it is going to cost $19.9 million more doing business with Nuclear Fuels Services, Inc., than it is if the Federal Government did it in their own plants.
Mr. ABBADESSA. I would prefer to say, rather than it would cost us more, that we would require $19.9 million more funds, Mr. Morris.
Representative MORRIS. I don't know what the difference would be.
Mr. ABBADESSA. I will explain the difference, sir. If you wanted to talk about costs, there are several costs that the NFS has that the Government does not have. In their cost estimates there are four major elements of such costs. There is rent they will have to pay for facilities and for their site to ARDA. There is interest on the bank loan which the AEC does not have. There is depreciation on their facilities. The rent is $3.7 million. The interest on the bank loan is $2.8 million. The depreciation is $5.6 million,
Senator ANDERSON. Could I stop you and ask you if you take the 7 percent investment credit?
Mr. ABBADESSA. These are the costs, sir. In determining the cash flow, we used the investment credit.
Senator ANDERSON. Won't the investment credit be available to them?
Mr. ABBADESSA. Yes, sir.
Mr. ABBADESSA. There is also the preoperational and startup cost of $3.4 million. These elements of cost total some $15.5 million and represent the major difference between our costs and NFS's costs. In addition to that, sir, because we will be shipping fuels to them, we will have additional transportation cost of approximately $4 million to ship the fuels from Idaho Falls and Savannah River. This essentially accounts for the difference that is represented by the $19.9 million,
Mr. CONWAY. There were some other costs to the Government that are not in that $19.9 million, also, are there not?
Mr. ABBADESSA. You mean some other costs that NFS has that we do not have ?
Mr. CONWAY. No, that the Government will have that you have not as yet determined with NFS?
Mr. ABBADESSA. That is correct, sir. The major one is the perpetual waste storage where we have not yet negotiated the price.
Mr. Conway. That will be added on to the $19.9 million also, making it higher. Yes or no? It has to be added on. .
Mr. QUINN. That would add to the NFS charge to us.
Dr. WILSON. No, it won't be a minimum. It will be nowhere near that, when you take in these offsets.
Representative MORRIS. Is there going to be any research and development cost, too? Don't you intend to put in some grant money for research and development?
Dr. Wilson. On the other hand we would have to put in more money if we process the fuels ourselves. We would have to put in more research and development money.
Mr. Conway. Can you give the committee some estimate of additional assistance and research and development cost that NFS will ask the Government for?
Dr. Wilson. They are not asking for any specific sum.
Mr. Conway. Do they not have a proposal for research and development with the Government right now that you have not decided upon but which is pending before the Government?
Mr. ABBADESSA. This is correct. They submitted a proposal and talked about a cost of $400,000 per month.
Mr. CONWAY. Per month?
Mr. Quinn. The current proposal before the Commission for research and development assistance has not been acted upon and no specific price tag has been attached to it.
Senator ANDERSON. He just got through giving a price tag. The only question was for how many months. If you give us the price tag we can multiply the number of months. Please tell us how many months now.
Mr. QUINN. The figure that was quoted, Senator, was for assistance in the start up period which NFS requested of the Commission a number of months ago and which the Commission determined they would be unable to provide in view of the nature of this contract.
Senator ANDERSON. I realize that. He testified to something. Can't you let him finish what he testified to? Is it impossible for him to talk?
Dr. WILSON. We turned it down.
Senator ANDERSON. Whether you turned it down or not, can't we find out the cost of the proposal that was considered ?
Dr. WILSON. If he knows let him answer.
Mr. QUINN. There was no specific time period in that proposal, Senator.
Representative PRICE. Let me ask you this. Was this a request for research and development prior to the construction of the proposed facility?
Mr. Quinn. The proposal was that when each new type of Government fuel was introduced into the NFS plant, the Commission provide assistance in shaking down the plant on that particular type of fuel.
Representative PRICE. This could be a lasting thing, then. As you expand the plant you come in for more research and development money.
Mr. QUINN. This might possibly occur.
Dr. Wilson. That is a request they have made and we have turned down.
Mr. QUINN. We are just trying to get the facts.
Senator ANDERSON. Is it impossible for us to find the basis on which you turned it down?
Dr. WILSON. I will say
Mr. Quinn. Because we didn't think it was proper for AEC to give that kind of assistance to this plant under the proposed service-type contract.
Senator ANDERSON. That will apply all the way through because a lot of other assistance is being given.
Dr. Wilson. This 5-year fuel load is the principal assistance we are giving them. But we are also going to do some research and development on processes. But we will do less research if they do the processing than if we did the processing ourselves. In other words, if we do it we will have an endless program of research and development because every new fuel that comes along we will have to see how we can work it and how much we will have to add to our chemical plant. If we start on that course we will never get a private fuel reprocessing industry.
Representative PRICE. Doesn't that lead to the possibility that the Commission may decide at some point along the line that we will have to do this anyway. If NFS is going to do this research and development in their plant, wouldn't we supply the funds for them to do it anyway? Is that a possibility?
Dr. WILSON. I don't think so. It might be. Of course, anything is possible.
Representative PRICE. We are just thinking out loud here now to try to find out from the beginning just what is involved in the Commission's interests in assisting this plant getting started and operating it in the future.
Mr. ABBADESSA. We can answer your question, Senator. In a letter of January 9, from Mr. Runion to Chairman Seaborg, they requested:
We are thinking in terms of a contract to cover the first campaign of each type of Commission fuel. To operate the NFS plant on the development basis would require about $400,000 per month. We would be willing to enter into such supplemental contracts on a cost basis.
They do not indicate how many months for each of these campaigns. (Letter referred to above follows:)
NUCLEAR FUEL SERVICES, INC.,
Washington D.C., January 9, 1963. Hon. GLENN T. SEABORG, Chairman, Atomic Energy Commission, Washington, D.C.
DEAR DR. SEABORG ; In our letter of December 29, we welcomed your decision to have the negotiations move forward with respect to our proposal for a chemical processing plant and your assurance that a baseload contract from the AEC would be made available. The Commission staff has exerted a tremendous effort within the past 2 weeks to work out the complicated arrangements, and this is much appreciated by NFS. However, we do not yet have a draft contract resulting from these negotiations, nor are we able to appraise accurately at this time the outcome of the negotiations. Likewise, some further clarification of your December 26, 1962, letter, as indicated hereafter, would be most helpful.
We assume that the serious doubts as to the technical and economic feasibility of the NFS plant expressed by you in the Commission meeting of December 11, have been largely resolved by subsequent action and information, our intent to imply AEC guarantee of the technical or financial aspects of our project. However, we respectfully request your confirmation of this assumption.
We are including in this letter the more detailed comments on your letter of December 26, to which we referred in our letter of December 29. These com
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