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The original documents are located in Box 42, folder "Uranium Enrichment - Message to
Congress (2)" of the John Marsh Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
JUN 25 1975
6/25
THE WHITE HOUSE
noon
WASHINGTON
11
June 24, 1975
MEMORANDUM FOR:
PHIL BUCHEN
JIM CONNOR
MIKE DUNN
MAX FRIEDERSDORF
ALAN GREENSPAN
ROD HILLS
JIM LYNN
JACK MARSH
JIM MITCHELL
BRENT SCOWCROFT
ROBERT SEAMANS
FRANK ZARB
THROUGH:
JIM CAVANAUGH
FROM:
GLENN Glenn SCHLEEDE
SUBJECT:
URANIUM ENRICHMENT - FINAL DRAFT
FACT SHEET AND Q's AND A's
Enclosed are the latest drafts of the fact sheet and
Q's and A's - which we expect to put in final form
early tomorrow. The Q's and A's will be made available to
Administration spokesmen.
Thanks very much for your help and that of your staff in
putting them together.
If there are any final corrections that are necessary,
please have your staff call before noon on Wednesday,
June 25.
Attachments
GERALD R. FORD
Digitized from Box 42 of The John Marsh Files at the Gerald R. Ford Presidential Library
fact Sheet
FOR
is
038470
DRAFT
6/24/75
SUMMARY FACT SHEET
THE PRESIDENT'S PLAN FOR A COMPETITIVE
NUCLEAR FUEL INDUSTRY
The President's Action
The President today announced administrative actions and
a legislative proposal to:
Increase the United States' capacity to produce enriched
uranium to fuel domestic and foreign nuclear power
plants.
Retain U.S. leadership as a world supplier of uranium
enrichment services and technology for the peaceful
use of nuclear power.
Assure the creation, under appropriate controls of a
private, competitive uranium enrichment industry in
the U.S. -- ending the current Government monopoly.
Accomplish these objectives with little or no cost to
taxpayers and with all necessary controls and safeguards.
Background
The U.S. capacity for refining or "enriching" uranium
to make fuel for nuclear electric generating plants is
now fully committed.
Work on constructing new capacity must begin soon so
that plants will be ready to meet domestic and foreign
requirements by about 1983.
Efforts to encourage the creation of a competitive
uranium enrichment industry have shown that certain
forms of Government cooperation and temporary assurances
are necessary to permit private firms to enter the
industry.
The need for added capacity provides the opportunity for
specific actions by the Government to encourage private
entry.
2
Highlights of the Plan
The President's plan includes:
A legislative proposal, the Competitive Nuclear Fuel
Supply Act of 1975, which would authorize the Government
to enter into certain cooperative arrangements with
private industrial firms that wish to finance, build
and operate plants to provide uranium enrichment services.
A pledge by the President to foreign and domestic
customers that the Government will assure that orders
placed with private producers will be fulfilled as
services are needed.
All necessary controls and safeguards concerned with
(a) preventing the diversion of nuclear materials and
the spread of sensitive technology, (b) foreign invest-
ment, (c) environmental impact, (d) safety, and (e) anti-
trust.
6/23/75
draft.
FACT SHEET
THE PRESIDENT'S PLAN FOR A
COMPETITIVE NUCLEAR FUEL INDUSTRY
Page
The President's Announcement
Background
Plan Announced by the President
- Objectives
- Principal Elements of the Plan
Legislative Authority for Cooperative
Arrangements with Private Firms
Assurances for Customers
Controls and Safeguards
Preventing the Diversion of Nuclear
Materials and spread of sensitive
technology
Foreign Investment
Environmental Impact, Safety and
Anti-Trust
Implementing Actions
- Negotiations for a Diffusion Plant
- Request for Proposal for Centrifuge Plants
- Environmental Impac+ Statement
- Contingency Planning
- Diffusion Plant Design Work
Specifics of the Legislative Proposal
- Authorizing Legislation
Cooperative Agreements
Congressional Review
- Contract Authority - Appropriations Request
Developments Leading to the President's Plan
- U.S. Leadership in Uranium Enrichment
Technology
Gaseous Diffusion
Gas Centrifuge
Laser Separation
- Existing U.S. Capacity
- The Growing Market
STRALD
2
- Potential Foreign Suppliers
- The Program to Develop a Competitive Industry
Diffusion Plant
Centrifuge Plant
- Obstacles to the Entry of Private Industry
- Alternatives to Private Entry
- The Proposal from Uranium Enrichment
Associates (UEA)
- Centrifuge Enriching Projects -- Request for
Proposals
Other Actions Related to Uranium Enrichment
Capacity
- Increasing ERDA's Charge for Uranium
Enrichment Services
- Contract Relief for Current ERDA Enrichment
Customers
- ERDA Conditional Contracts for Enrichment
Services
Attachment:
#1 - Summary of UEA Plan and Proposal to ERDA
#2 - Uranium Enrichment as a Part of the Nuclear
Fuel Cycle
THE PRESIDENT'S ANNOUNCEMENT
The President today announced administrative actions and
a legislative proposal to (a) increase the United Staees'
capacity to produce enriched uranium to fuel domestic and
foreign nuclear power plants, (b) retain U.S. leadership
as a world supplier of uranium enrichment services and
nuclear power plants, (c) assure the creation, under
appropriate controls of a private, competitive uranium
enrichment industry in the U.S. -- ending the current
Government monopoly; and (d) accomplish these objectives
with little or no cost to taxpayers and with all necessary
controls and safeguards.
BACKGROUND
Natural uranium from U.S. and foreign mines must be refined
or "enriched" before it can be used to make fuel for nuclear
power plants which are used in the United States and in many
foreign nations to generate electricity.
z
U.S. capacity for enriching uranium which now supplies all
domestic and most foreign needs, consists of three Govern-
ment-owned plants, located at Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth. Ohio.
Since mid-1974, the entire capacity of the three plants has
been fully committed under long-term contracts. New enrich-
ment capacity must on "on-line" beginning in about 1983 to
meet the growing domestic and foreign demand for nuclear
fuel.
The potential U.S. market abroad has begun to erode as some
potential foreign customers have started looking to sources
such as the U.S.S.R., France and a West European consortium
for uranium enrichment.
Since 1971, the Executive Branch has followed policies and
programs directed toward assuring that private industry --
rather than the Federal Government -- builds the next
increments of U.S. uranium enrichment capacity.
Several industrial firms have sought to enter the uranium
enrichment field but all have found that some forms of
Government cooperation and temporary assurances are needed
to overcome the initial obstacles to private industry
involvement.
THE PLAN
Objectives. The plan announced by the President is designed to
meet the objectives of assuring that:
The next increments of U.S. uranium enrichment capacity
will be available when needed to meet the growing demand
for fuel for nuclear powered generating plants in the U.S.
and in other nations.
The U.S. maintains its role as a major world supplier of
uranium enrichment services and nuclear power plants --
a role that is important to:
-
Our economy and our world trade position.
-
Our efforts to obtain the commitment of additional
nations to accept international safeguards and the
principle of nuclear non-proliferation.
-
Our cooperation with other major oil consuming nations
which are looking to nuclear power to help reduce their
dependence on foreign oil imports.
FO
GERALD
Our longer range goal of developing technology and energy
resources to supply a significant share of the free
world's energy needs.
All future increments of capacity will be built, financed
and operated by private industry -- rather than by the
Federal Government -- so that a competitive industry will
exist at the earliest possible date.
There will be little or no cost to the taxpayer and that
the Government will receive increased revenue in corporate
taxes and compensation for the use of its inventions and
discoveries.
All necessary domestic and international controls over
nuclear materials and classified technology will be main-
tained, as they would be if the Government were to own the
new plants.
Principal Elements of the Plan.
Legislative Authority for Cooperative Arrangements with
Private Firms. The President is asking the Congress to
enact promptly the additi nal legislative authority needed
to enable the Energy Research and Development Administration
(ERDA) to negotiate and enter into cooperative arrangements
with private industrial organizations that wish to build,
own and operate uranium enrichment plants.
-
Negotiations would be directed toward the arrange-
ments most advantageous to the Government and the
public interest and with a degree of risk to the
private firm that is consistent with the objective
of creating a private, competitive uranium enrichment
industry.
These arrangements would provide for certain forms of
Government cooperation and tempor ry assurances found
to be necessary after detailed negotiations with firms
submitting proposals. Arrangements could include:
Supplying and warranting Government-owned inven-
tions and discoveries in enrichment technology --
for which the Government will be paid.
Selling certain materials and supplies on a full
cost recovery basis which, because of their
classified nature, are available only from the
Federal Government.
5
Buying enriching services from private producers or
providing enriching services to producers from the
Government st ckpile to accommodate plant start-up
and loading problems.
Assuring the delivery of uranium enrichment services
to customers which have placed orders with private
enrichment firms.
Assuming the assets and liabilities (including debt)
of a private uranium enrichment project if the
venture threatened to fail -- at the call of the
private venture or the Government, and with com-
pensation to domestic investors in the private
ventures ranging from full reimbursement to total
loss of equity interest, depending upon the circum-
stances leading to the threat of failure.
The arrangements would be spelled out in a detailed
contract which would be subject to Congressional
review.
-
Assurances would end after one full year of commercial
operation of a plant.
The Government would monitor progress carefully so that
it can be sure that the plant will function properly
and will be completed on time and within cost estimates.
Assurances for Customers. The President announced his
pledge to domesti and foreign customers who place orders
with private U.S. suppliers that the Government will assure
that orders will be filled as services are needed. Those
first in line with private suppliers will be first in line
to receive services from the Government -- if it were
necessary for the Government to take over and complete
a private project.
Controls and Safeguards. The President announced that all
necessary controls and safeguards will be maintained in
all arrangements with private firms. Such contro's and
safeguards include:
Preventing the Diversion of Nuclear Materials or
Un-Controlled Spread of Sensitive Technology. All
necessary measures will be taken to safeguard the
use of the products of plants and to protect sensitive
classified technology. These measures include:
Effective domestic safeguards and physical security
measures to the plan S and their products.
Continued requirements that exports take place
pursuant to appropriate international agreements
for cooperation and be subjected to safeguards
to prevent diversions.
Continued classification and protection of
sensitive enrichment technology
Foreign Investment. Foreign investment in private
enrichment ventures will be encouraged, but control
will remain with U.S. interests. Foreign investors
would not require or have access to classified infor-
mation. Any proposals for sharing technology would
be considered separately and would be subject to
Governmental review and approval.
Environmental Impact, Safety and Anti-Trust. Private
ventures wishing to build plants will have to obtain
from the Nuclear Regulatory Commission (NRC) a construc-
tion permit and operating license. As a part of its
review, the NRC must evaluate environmental, safety
and anti-trust considerations as well as assure that
control of the proposed new ventures remain in the
U.S. -- as now required by the Atomic Energy Act.
NRC also will have responsibility for assuring that
the plants are appropriately safeguarded. The Justice
Department participates in the review of anti-trust
considerations.
IMPLEMENTING ACTIONS
The President announced several administrative actions that are
being taken now:
Negotiations for a Diffusion Plant. ERDA is responding
formally to a proposal from the Uranium Enrichment Associates
(UEA) offering to enter into negotiations which could lead
to the construction by UEA of a $3.5 billion (1976 dollars)
plant which would make use of gaseous diffusion technology
and which would be on line by 1983.
Request for Proposal for Centrifuge Plants. ERDA is issuing
a new request for proposals from industrial firms interested
in constructing enrichment facilities making use of centrifuge
technology.
1
Environmental Impact Statement. ERDA will on June 30 issue
for public review and comment a draft environmental impact
statement covering its actions concerned with the expansion
of uranium enrichment capacity.
Contingency Planning. ERDA will continue with backup contin-
gency measures to help assure that capacity will be ready
in the unlikely event that industrial efforts falter. These
neasures include continuation of Government plant conceptual
design activities, research and development on enrichment
technologies, and technological assistance to the private
sector on a cost recovery basis.
Diffusion Plant Design Work ERDA plans to purchase from
UEA design work on components for the private diffusion plant
that could be used in a Government plant -- if the private
venture were unable to proceed.
SPECIFICS OF THE LEGISLATIVE PROPOSAL
Authorizing legislation. The basic enabling legislation proposed
today by the President would:
Authorize Cooperative Agreements.
-
It would permit ERDA to negotiate and enter into
cooperative arrangements with firms wishing to build
own and operate uranium enrichment facilities.
It would provide authorization for appropriations for
amounts up to $8 billion -- which is an estimate of the
total potential cost to the Government in the unexpected
event that all Government assured diffusion and centri-
fuge ventures failed and it were necessary for the
Government to assume assets and liabilities of these
ventures, take over plants, and compensate domestic
investors. The Administration's expectation is that
none of these funds would have to be expended, but the
authorization is necessary under the recently enacted
Budget Reform Act and to provide assurance to customers
and to potential producers of the Federal Government's
commitment.
Provide for Congressional Review. Once contracts were nego-
tiated the Joint Committee on Atomic Energy (JCAE) would be
notified and a period of 45 days would have to elapse before
a contract would be valid -- to allow an opportunity for
Congressional review of the basis for ERDA's arrangements
with private firms.
BERALD
Contract Authority-Appropriations Request. The President
will later request an appropriation of contract authority
to cover the estimated maximum Federal Government exposure
for specific projects in the event that it were necessary
to assume assets and liabilities. Again, expenditure of
these funds is not considered likely.
DEVELOPMENTS LEADING TO THE PRESIDENT'S PLAN
U.S. Leadership in Uranium Enrichment Technology. The United
States is the recognized world leader in technology for refining
or "enriching" natural uranium to a form that can be used to make
fuel for nuclear power reactors. Natural uranium contains only a
small amount (approximately .7%) of the fissionable isotope U-235.
In order to be useful to make fuel for most nuclear reactors, the
concentration of U-235 must be increased to about 2-4% through a
process of separating off other isotopes. The technology was
developed and is owned by the Federal Government. Certain parts
of the technology are classified. Principle U.S. technologies
are:
Gaseous Diffusion. This technology which is now used in the
three existing government-owned enrichment plants was developed
in the 1940's. Over 30 years of large scale operating experi-
ence and process improvement have made the technology the most
reliable and economical now available for commercial scale
operations. The next increment of capacity must make use of
this technology.
Gas centrifuge. The gas centrifuge process of uranium
enrichment provides an alternative to gaseous diffusion.
Full operation of a Government pilot plant is scheduled for
early 1976. If the projected economics of the process are
realized, gas centrifuge is expected to be used as subsequent
increments of commercial capacity are added.
Laser Separation ERDA is conducting a basic research
program to determine whether this technology is technically
or commercially feasible. Even if successful, the technology
will not be available in time to be used for the next several
increments of needed enrichment capacity.
Existing U.S. Capacity. The three Government-owned uranium
enrichment plants will, when currently authorized expansion
is completed, have the capacity to produce enriched uranium
needed to fuel about 300 large nuclear-powered electric
generating plants in the U.S. and foreign countries
9
The Growing Market. Current estimates are that the U.S. will
require added enrichment capacity by 1990 equal to 3 to 5 plants
the size of any one of the three existing plants and that added
capacity for the total market served by the U.S. will equal 5
to 8 similar size plants. The demand will continue to grow
after 1990.
Potential Foreign Suppliers. The principal existing capacity
for enriching uranium outside the U.S. is in the Soviet Union.
A french-led diffusion plant project (Eurodif) is expected to
begin production in 1979 and its capacity is reported to be
fully committed. A British-German-Dutch consoritum (Urenco)
plant will also begin expanded operations in 1979. Plans for
additional plants are being discussed by France, Canada,
South Africa, Japan, Australia and Brazil.
The Program to Develop a Competitive Industry. The Atomic
Energy Act of 1946 provides that "the development, use and
control of atomic energy should be directed so as to
strengthen free competition in private enterprise". An
Executive Branch policy to encourage private industry to build
the next increments of uranium enrichment capacity was announced
in June 1971. Beginning in 1973, the Atomic Energy Commission
(AEC) asked private firms to consider building, owning and
operating enrichment plants and granted qualified U.S. firms
access to classified aspects of the Government's work, under
carefully controlled security conditions, in order that they
might make their own assessment of the commercial potential
for private enriching plants. A number of firms responded to
the invitation from which several consortia have emerged which
are interested in pursuing the possibility of building enrich-
ment plants.
Diffusion Plant. One corsortium -- the Uranium Enrichment
Associates (UEA) -- is interested in constructing a $3.5
billion gaseous diffusion plant equivalent to the expanded
capacity of one of the 3 existing Government-owned plants.
Centrifuge Plant Other firms and consortia -- Centar,
Exxon Nuclear and Garrett Corporation -- have expressed
interest in cooperative arrangements with the Federal
Government which would lead to demonstration gas centrifuge
plants which could be expanded in the future to commercial
scale plants. The AEC (predecessor to ERDA) requested
proposals from industry to advance the demonstration of
centrifuge technology. A modified request for proposals
is being issued today.
10
Obstacles to the Entry of Private Industry. All firms interested
in building, owning and operating a private plant have concluded
that some form of Government cooperation and temporary assurances
are essential to begin the transition to a private competitive
industry. Among the factors that have contributed to this
conclusion are:
The complexity of the undertaking, including the Federal
ownership and the classification of the technology.
The large financial commitment required and the difficulty
encountered in trying to obtain private financing.
The inherent difficulties of ending a Government monopoly.
The recent adverse financial situation of U.S. electrical
utilities which are the customers for a plant. (Their long
term contracts for uranium enrichment services must provide
security for the long term financing required.)
Some uncertainty as to whether the Government would follow
through on its commitment to achieve privatization.
Alternatives to Private Entry. The principal alternatives to
an immediate effort to achieve privatization include:
All future additions to capacity financed, built and owned
by the Federal Government, thus continuing indefinitely the
existing monopoly.
Government financing and ownership of one or more additional
increments of capacity, followed by another attempt to achieve
privatization.
A thorough review indicated that, regardless of the alternative
selected:
The next increment of capacity can be on line when needed
(now estimated about 1983).
Controls and safeguards involving classified technology and
non-proliferation of nuclear materials can be maintained.
Customers for the next increment are expected to be primarily
foreign.
Foreign investments in an enrichment plant can be accommodated.
11
This review led to the conclusion that the task of explaining and
implementing the plan for achieving a private industry would be
difficult and that a substantial effort would be required by both
the Congress and the Executive Branch, but that the benefits of
privatization justified the effort. The benefits of privatization
include:
Little or no cost to taxpayers - compared to $20 to $30 billion
for plants that should be on line by 1990, if the Federal
Government were to own the plants. (These funds would not be
recovered to the Treasury for many years.) Under the President'
plan, revenue of about $90 to $100 million per plant per year
would flow to the Federal Treasury from industry, principally
from taxes and payments for the use of Government inventions
and discoveries.
An early end to the Government monopoly in a type of commercial
activity.
Avoiding expansion of the public sector when industry is
willing and able to do the job.
Competition which would provide incentives for lower costs
and additional improvements in technology.
The Proposal from Uranium Enrichment Associations (UEA). Uranium
Enrichment Associates is a consortium currently consisting of
Bechtel Corporation and the Goodyear Tire and Rubber Company. On
May 30, 1975, UEA submitted a revised proposal to ERDA calling for
cooperative arrangements with the Federal Government. The principal
features of the UEA proposals are summarized in Attachment #1. A
contract containing the details of a cooperative agreement would be
negotiated by UEA and ERDA.
Centrifuge Enriching Projects -- Request for Proposals.
In August of 1974 the Government announced a program expected
to lead to several relatively small industry constructed
demonstration projects.
Gas centrifuge technology has not yet been applied on a
production scale sufficient to permit full industry commit-
ment to large plants. At least three companies are interested
in undertaking private centrifuge enriching projects now which
would be scaled up progressively from small demonstration
modules to a capacity the economies of scale for centrifuge
enriching are expected to be largely realized. These are
expected to be 1/3 to 1/2 the capacity of the planned diffusion
plant.
12
Government-industry cooperative arrangements similar to that
required for the UEA diffusion project may be required.
A Request for Proposals for this program which extends and
elaborates upon the earlier program is being issued today:
-
Proposals will be due on October 1, 1975 and it is the
Government expectation that several proposals could be
accepted to proceed more or less in parallel with each
other and with the UEA project.
Proposers will describe their proposed project in detail,
including plant design, size, location and schedules and
specify the type and magnitude of Government support
necessary to proceed.
-
Small initial modules, perhaps 200-300 thousand units
per year could be in operation in the early 1980's with
2-3 million unit commercial scale plants achieved in the
mid-1980's on a time frame consistent with the growth
of the market.
Centrifuge technology permits adding small capacity increments
as required to closely follow market needs.
Proceeding with several centrifuge demonstration projects in
the same time frame as the gaseous diffusion plant will further
the objective of developing a private, competitive enriching
industry and maintaining U.S. world leadership in this field.
OTHER ACTIONS RELATED TO URANIUM ENRICHMENT CAPACITY
Increasing ERDA's Charge for Uranium Enrichment Services.
The current price charged by ERDA for uranium enrichment is
based on a statutory formula which says that ERDA's charge
must be established on the basis of the recovery of the
Government's costs over a reasonable period of time. Appli-
cation of the formula has resulted in a present charge of
$42 and $48 per separative work unit, depending on the type
of contract a customer has with ERDA. This price will rise
by the end of 1975 to $53 and $60 per unit. These prices
reflect the low cost of construction during the 1940's and
1950's for plants built primarily for military purposes.
These prices are much lower than the quoted world market
prices of enrichment services of between $75 to $100 per
unit.
13
The President announced in his 1976 Budget his intention to
propose legislation to the Congress to permit ERDA to raise
the price of enrichment services from its plants. The new
price would be established to recover the Government's costs
and place the pricing of Government enriching services on a
more business-like basis. This step would encourage private
sector interest in building enrichment facilities and end an
unjustifiable subsidy to both foreign and domestic customers.
The new price would include a rate of return on investment
more appropriate to the private sector than the Government's
rate of return, an allowance equivalent to corporate income
taxes and also include other costs typical of private operations
On this basis the new price per separative work unit will be
approximately $75.
This legislation has been submitted to the Congress by ERDA.
Contract Relief for Current ERDA Enrichment Customers.
Present ERDA enrichment contracts require customers to commit
to a fixed delivery schedule and to make prepayments amounting
to about $3 million several years prior to the first delivery
of enriched fuel. Since these contracts were signed, many
nuclear power plants whose fuel was covered by these contracts
have been postponed or cancelled.
As a result, many utilities now face the prospect of having
to pay for uranium enrichment services well in advance of
the revised completion dates for the reactors.
In order to free both ERDA and the enrichment customers from
unrealistic commitment, ERDA, after notifying to the Joint
Committee on Atomic Energy (JCAE), has announced that it will:
-
Grant customers the right within a 60-day period to
serve notice that they wish to terminate their contract
with no cancellation fee and with refund of any payments.
Permit those wishing to defer deliveries (rather than
terminate contracts) to have a one-time adjustment of
contract commitments without penalty.
Permit a similar one-time adjustment of the rate at
which uranium feed should be sent to the enriching
plants to coincide in part with the slipped enrichment
requirements.
14
These actions would:
Result in a larger U.S. stockpile of enriched uranium
for use as an inventory to support the new private
uranium enrichment plants with backup supplies of
enriched material, should any delays occur in their
initial operation.
I
Establish a more realistic data base for evaluating
future domestic and foreign enrichment requirements.
-
Grant short-term financial relief to the utility industry.
ERDA Conditional Contracts for Enrichment Services.
Some customers placing orders with AEC (predecessor to ERDA)
in mid-1974 were given conditional contracts; i.e., contracts
contingent upon the approval by U.S. regulatory authorities
(now the Nuclear Regulatory Commission) of the use of recycled
plutonium as a nuclear reactor fuel. These conditional contracts
were backed up by announcement that the U.S. would have expanded
capacity available that could fulfill requirements, if needed.
The expanded U.S. capacity that will result from the President's
plan will provide sources of supply that can be tapped by the
holders of conditional contracts.
GERALD
ATTACHMENT #1
SUMMARY OF THE URANIUM ENRICHMENT
ASSOCIATES (UEA) PLAN AND PROPOSAL TO ERDA FOR
A COOPERATIVE ARRANGEMENT
Physical Description of the Project.
A 9 million separative work unit per year gaseous
diffusion plant would be built near Dothan, Alabama
on a 1720 acre site on the Chattahoochee River.
When in full operation the plant could provide enriching
services for about 90 large nuclear power reactors.
The plant will require about 2500 megawatts of electrical
power which will be supplied from a dedicated nuclear
power facility located nearby.
Project cost estimate (exclusive of the power project)
has been estimated by UEA to be $3.5 billion in 1976
dollars.
UEA projects continuation of design work now underway
on the project during the next several years with
construction scheduled to commence in 1977.
Full production from the plant is projected in 1983
with limited production starting in 1981.
Nearly 50 million construction manhours are estimated
for the project. A peak construction labor force of
about 7000 workers will be reached in 1979-80 and the
permanent operating staff of the project is expected
to be about 1100.
The plant will be processing and upgrading natural
uranium and thus will have essentially no radiation
hazard. It will be similar to a large materials
handling plant except that the product material will
be much more valuable.
2
Financial Structure of UEA Project.
UEA expects that two to six companies in addition to
Bechtel and Goodyear will comprise the consortium that
will undertake the project. These companies are ex-
pected to be identified within the next few months.
Based upon marketing efforts to date, UEA projects about
40 percent of plant capacity will be taken by U.S.
domestic utilities and the balance by non-U.S. organi-
zations in countries with which the United States has
Agreements for Cooperation permitting the transfer or
disposition of enriched uranium. (Under the Atomic
Energy Act voting control for such a project must
remain in the hands of the United States investors at
all times and the project is so structured. The secrecy
of the process will be protected and foreign costomers
or investors will not have access to classified technology
or information.)
Project financing using an 85 percent debt, 15 percent
equity ration is contemplated for the project.
The equity corresponding to the domestic portion of plant
output will be supplied by UEA and the debt financing
will be raised in the commercial market primarily on
the basis of the security of long-term (25 year) non-
cancelable enrichment service contracts with domestic
utilities.
Both equity and debt for the foreign share of plant
output is to be supplied from the foreign customers'
own sources of capital.
Pricing of product from the plant is based upon the
recovery of all operating costs servicing of debt and
an after-tax return of approximately 15 percent on
equity.
A 3 percent payment, based on gross sales would be paid
to the Government for use of taxpayer-developed technology.
Customers.
A number of United States' utilities have executed
contingent letters of intent with UEA to purchase uranium
enriching services from the new plant and a number of
additional utilities are now evaluating their requirement
for services.
3
UEA has made extensive marketing contacts overseas and
anticipates that foreign commitments will be forthcoming
from Iran, Japan, West Germany, France, Spain, Taiwan
and other countries.
Cooperative Arrangements.
Due to the unique nature of the project, the very large
capital requirements, and long payout periods, UEA has
concluded that it would not be possible to move ahead
without certain forms of Government backup assistance.
UEA has proposed that the Government:
-
Supply, at cost, essential components presently
produced exclusively by the Government.
-
Supply the Government's gaseous diffusion technology
and warrant its satisfactory operation.
-
Provide during first years of operation limited
access to and from USG's stockpile of enriched
material to balance significant start-up loading
problems.
UEA has also proposed that:
-
The Government provide standby financial backup
assistance lasting for the critical construction
period plus one year to offset the current weak
credit position of the U.S. utility industry and
the Government to provide such financial backup
if UEA cannot complete the plant or bring it
into commercial operation, but such a call is
at the risk of loss to UEA of its equity interest.
In this event, the Government has the right to
acquire UEA's domestic equity position and the
obligation to assume UEA's liabilities and debt.
The Government may also require UEA to release
the project to the Government if the Government's
interest so demands. In this event, the Government
would be obligated to assume UEA's liabilities
and debt.
The consideration for acquisition of UEA's domestic
equity position in either case can range from
loss of equity for uncorrected gross mismanagement
of UEA to full fair compensation for causative
events outside UEA's reasonable control.
4
All of the above forms of backup assistance would be
subject to contract negotiations between ERDA and UEA.
UEA believes that the plant can be completed within the
private sector with no net expenditure of Government
funds.
ATTACHMENT #2
Uranium Enrichment as Part of the Nuclear Fuel Cycle
The attached chart depicts the nuclear fuel cycle for Light
Water Reactors, (the type of reactors mostly commonly used
in the U.S.). About 97% of the reactors obtaining enrich-
ment services from the ERDA gasious diffusion plants are
Light Water Reactors; a similar fuel cycle exists for the
other present reactor type --- the High Temperature Gas
Cooled Reactor.
Prior to the enrichment step, uranium ore is minded from
the earth's crust and sent to a mill where uranium concentrate
is produced. This concentrate is often referred to as
yellowcake, or by the chemical symbol, U₃O₈· There are
14 mills presently operating in the U.S. The uranium
concentrate is then sent to a converter where it is con-
verted to uranium hexafluoride, or UF This is the only
simple form of uranium that can be gaseous at conditions
near room temperatures and pressures. There are two
UF₆ conversion plants operating in the U.S.
The uranium hexafluoride is then sent to an uranium enrichment
plant. There are two processes under consideration for
commercial use in the U.S. -- the established gaseous
diffusion process, used in the ERDA plants, and the gas
centrifuge process. The UEA will use the gaseous diffusion
process. In the process, the uranium hexafluoride gas is
pumped through a semipermeable membrane. The desirable
fissionable isotope, U-235, diffuses through the membrane
more readily than the nonfissionable isotope, U-238. A
stream depleted in U-235 is collected from the plant and
sent to storage. A stream enriched in U-235 is collected
from the plant and sent to a fuel fabrication plant. In
this plant, the uranium hexafluoride is converted to uranium
dioxide UD₂, formed into pellets, and placed in zirconium
tubes. The tubes are assembled into bundles and sent to
nuclear power plants. Seven U.S. companies are involved
in the fabrication of nuclear fuel.
2
After the fuel is used in the nuclear power plant, it is
discharged and allowed to cool in a large water basin at
the plant. The spent fuel will then be sent to a chemical
reprocessing plant. In this step, the uranium and reactor-
produced plutonium will be separated from the highly
radioactive fission products generated while the fuel is
in the nuclear power plant. The radioactive wastes in
proper form will be sent to a repository. The recovered
uranium will be converted again to the hexafluoride and
reinserted into the enrichment plants for reenrichment.
Plutonium is also a fissionable material that can be used
as fuel in a nuclear power plant. If use of the plutonium
is granted by the Nuclear Regulatory Commission, it would
be sent to the fuel fabrication plants; there it would be
mixed with the uranium and formed into pellets for nuclear
power plant fuel. There are currently no commercial chemical
reprocessing plants operating in the U.S.; one plant is shut
down for modification and another is under construction.
THE NUCLEAR FUEL CYCLE
FOR LIGHT WATER REACTORS
URANIUM MINES
U3O8 CONVERSION
U235 ENRICHMENT
UFG CONVERSION
& MILLS
TO UFG
TO UO₂ AND
ORE &
FABRICATION
ORE CONCENTRATE
OF FUEL
3
(U₃O₃)
ASSEMBLIES
PLUTONIUM
RECOVERED
(AS PuO₂)
URANIUM
(AS UFG)
REACTOR
SPENT FUEL
LOW LEVEL
WASTES
REPROCESSING PLANT
COMMERCIAL BURIAL
FEDERAL REPOSITORIES
HIGH LEVEL
SOLID WASTE
Q+A's + S
URANIUM ENRICHMENT
QUESTIONS AND ANSWERS
1. Why Privatization?
2. Why Privatization Now?
3. Why Government Assistance?
4. Cut-off date (on attempts to get private entry) ?
5. When will the U.S. "Order Book 'Open?
6. NRC Safeguards and Safety Controls
7. Spread Classified Technology (to private industry) ?
8. Unanswered Nuclear Safety and Environmental Questions?
9. Foreign Investment without Foreign Control?
10. Foreign Customer Conditional Contracts with ERDA
11. Foreign Purchases without Investment?
12. U.S. Share of the Free World Market?
13. Payments by Industry for Government-owned Technology
14. What Happens if a Private Plant Doesn't Work?
15. What Happens if a Private Plant Isn't Licensed?
16. Does UEA have Customers?
6/24/75
1
WHY PRIVATIZATION ?
Question:
ERDA (and AEC before it) is doing a good job of supplying
uranium enrichment services. Why not simply continue the
present arrangements and build new Government facilities
rather than set up a complicated new arrangement?
Answer:
There are many important reasons for proceeding with the
creation of competitive nuclear fuel supply industry.
The principle reasons are:
(1) The provision of uranium enrichment services
is now essentially a commercial/industrial
activity, not inherently a Government type of
activity.
(2) We should not end the Government monopoly
and continue to expand Governmental respon-
sibilities within our economic system when
private industry is able and willing to pro-
vide the service.
(3) Construction of uranium enrichment plants --
which could cost $20 to $30 billion in new
capacity through 1990 - should not compete
in the Federal Budget with other areas --
such as social services and defense prepared-
ness -- which can only be financed by the
Government.
(4) Continuing to have enrichment under the direct
Federal control would centralize to an un-
precedented degree operating control by the
Government over the Nation's electrical energy,
as nuclear power grows. This would present
an opportunity for abuse and is poor public
policy.
(5) Private investment will insure that supply
meets demand through operation of the market
mechanism.
-2-
(6) Private operation will avoid the delays and
uncertainties associated with the Government's
budget and appropriations processes to finance
new increments of capacity every year or two.
(7) Private competition will provide incentives -
over the long term - for lower costs, improved
efficiencies, and technological advancement.
(8) Private ventures will generate substantial
revenues to the Treasury through payment of
Federal income taxes and compensations for
Government-owned discoveries and inventions
used by industry.
6/24/75
2
WHY PRIVATIZATION NOW?
Question:
Why not build another Government plant now and bring
private industry in for subsequent increments of capacity
when the new gas centrifuge technology is ready for use?
Answer:
There are several reasons for moving to private entry
immediately:
In line with the private entry policy announced by
the President in 1971, several industrial firms have
undertaken substantial efforts to prepare for building,
owning and operating plants to enrich uranium. This
momentum would be lost if policy were reversed and
another Government plant built.
The UEA venture is the first to reach a stage where
it can propose construction of a plant and begin taking
orders. It has lined up customers, and made detailed
plans to proceed, including options on land and
electrical power. This plant would use diffusion
technology.
Other ventures have been organized and are making
plans to propose demonstration plants using centrifuge
technology to privide the next increments of capacity.
The diffusion plant venture will fulfill immediate needs
for a commitment to new capacity and also serve to "break
trail" for subsequent ventures using the less proven
centrifuge technology.
There are substantial benefits to moving ahead now with
private entry and no convincing reasons for a delay. One
of the benefits of private entry is being able to bring on
new capacity with little or no cost to taxpayers. If we
were to build another plant taxpayers would have to advance
the money -- from the U.S. Treasury.
FORD
GERALD
6/24/75
3
WHY GOVERNMENT ASSISTANCE?
Question:
Why should it be necessary for the Government to provide
any assistance to get private industry to get involved in
uranium enrichment if it is really a commercial operation?
Answer:
The President's program contemplates Government cooperation
and temporary assurances to overcome rather well defined
obstacles to privatization:
Uranium enrichment, as a Government monopoly, has
no commercial private-sector history. Many process
details are and must remain classified. Under these
conditions, commercial lenders are unwilling to
consider risking the very large amounts required
for this capital-intensive activity, without credible
assurances that the plant will be completed and
operational.
The technology is owned by the Government and a
substantial royalty will be paid for its use by the
private sector. It is reasonable for the Government
to warrant that the technology will work and be
prepared to back this warranty up in the unlikely
event that problems are encountered.
The Government would supply, on a full cost recovery
basis key pieces of classified equipment upon which
the plant performance depends and which are available
early from the Federal Government.
Since enriched uranium is essential to operating
nuclear plants, Government measures are needed to
assure electric utility customers, both foreign and
domestic, that their orders for nuclear fuels will
be filled. This in turn is essential to meeting
the growing domestic demand for electricity, a
substantial part of which must be met from nuclear
power if oil consuming nations are to reduce their
dependence on imported oil. Government assurance
that orders will be filled is a logical part of the
proposed program. This assurance is especially
important to foreign customers and will help the U.S.
maintain its leadership role in the supply of enrich-
ment services abroad.
CIVEZS
3 (continued)
2
The only present source of back up supplies of
enriched uranium large enough to back-stop the
initial period of operation of new plants is the
existing Government stockpile of this material and
the Government can provide such back-stopping.
GERALD R. FORD
4
CUT-OFF DATE?
Question:
Is there a specified "cut-off" date when, if the UEA
project seemed to falter, the Government would decide to
proceed with an add-on diffusion plant?
Answer:
First, the risk of UEA failure is considered very small.
Second, there is no one specified, pre-set date for such
a decision.
The approach to privatization selected by the President
calls for very close monitoring by the Government at every
stage to assure that the Government could step in if the
private effort threatened to fail - an event considered
very unlikely. This close monitoring will prevent any
significant loss of time, if something were to go wrong, and
thus assure that additional capacity can be brought on line
by the time it is needed, around 1983.
If the Government had to step in, the question of the plant
that would be built -- that is, a 5 million unit add-on
plant, or a 9 million unit free-standing plant -- would
depend on when intervention proved necessary. For example:
If Congress failed to pass the authorizing legislation
needed for the private enrichment industry approach
and instead, passed authorization and appropriations
for a Government plant, it probably would be desirable
to proceed with the add-on plant approach.
If at some time prior to March 1976 when UEA is
expected to complete financial, customer and power
supply arrangements, UEA found that it could not
proceed, the Government would need to determine
whether it would be best to proceed with an add-on
plant or with the planned 9-million unit free-standing
plant.
If at some later time, the Government has to step in
and assume UEA assets and liabilities, the Government
would have to decide the best step. At some point it
would be more advantageous for the Government to
proceed with the free-standing plant than an add-on.
FORD
6/24/75
5
WHEN WILL THE "ORDER BOOK" OPEN?
Question:
When will customers be able to negotiate fuel contracts
with private US enrichers? That is when will the "order
book" open?
Answer:
A number of private US firms, particularly the CEA which
is well advanced, will be in a position to accept service
contracts and financial participation arrangements
immediately, consistent with the trust of the President's
Plan. These contracts would be contingent upon legisla-
tive approval, to become firm, but, in any event, they
would be covered by the Presidential supply assurances.
In short, the US enrichment "order book" is about to be
opened to provide assured and timely nuclear fuel to
domestic and foreign customers.
FORM
6/24/75
GERALD
6
NRC SAFEGUARDS AND SAFETY CONTROLS
Question:
What types of domestic safeguards and safety controls will
NRC apply to the UEA and private centrifuge ventures?
Answer:
NRC is expected to require essentially the same types of
safeguards and safety procedures as are now successfully
employed in Government-owned facilities.
Also, it is to be noted that the UEA plant will be designed
to produce only low enriched uranium and, consequently,
the safeguards problems for this plant will be even smaller
than for the present government plants.
6/24/75
FORD
070830
7
SPREAD CLASSIFIED TECHNOLOGY ?
Question:
Would privatization mean that sensitive classified nuclear
technology would now become available to private firms
instead of remaining confined to the Government?
Answer:
Rigid controls are and will continue to be maintained over
access to sensitive classified technology.
Access by selected private industry people is not new.
Existing enrichment plants, though owned by the Govern-
ment, were constructed and are operated by private con-
tractors.
We expect that rigid classification and safeguards controls
will be applied to the privately-owned capacity proposed
in this program.
Even if the Government were to build additional plants
private contractors would be heavily involved in their
design, construction and operation. Privatization would
result in no significant additional access to classified
nuclear technology than if the Nation;s enrichment re-
quirements were to be met by more government-owned capacity.
FOR:
HERALD
6/24/75
8
UNANSWERED SAFETY AND ENVIRONMENTAL QUESTIONS
Question:
Why is the Ford Administration working to increase the
supply of nuclear fuel when there are still significant
unanswered questions regarding the safety and environmental
impact of nuclear power plants.
Answer:
All commercial nuclear power plants in this country are
licensed by the Nuclear Regulatory Commission (NRC) after
a ful review, including the opportunity for public part-
icipation, of safety and environmental questions.
While there are safety and environmental matters requiring
continued attention, but the NRC applies conservative
criteria to ensure safe performance. The safety record
of commercial nuclear power plants has been excellant.
There has been no member of the public killed or injured
by any accident or occurence at a commercial nuclear power
plant in this country. The overwhelming majority of tech-
nical experts in the field are satisfied as to the safety
of nuclear power plants. However, as added assurance, we
are pursuing every opportunity to improve even further
the safety of these power plants and waste management.
Our safety research program in the Nuclear Regulatory
Commission will spend over $80 million in FY 1976. ERDA
expenditures aimed at assuring environmentally sound fuel
waste disposal amounts to #36 million in FY 1976.
6/24/75
FORG
GERALD
9
FOREIGN INVESTMENT WITHOUT FOREIGN CONTROL
Question:
You have indicated that there will be substantial foreign
investment in the proposed project -- including invest-
ment from OPEC nations. What safeguards do we have to
protect us against potential abuses of foreign investors?
Answer:
First of all substantial foreign investment in this project
is desirable to help ease the difficulty of raising the
large amounts of capitol required for the project. Futher-
more, to the extent that funds from OPEC countries are
involved, this is precisely the type of constructive use
of OPEC money that we would like to encourage.
As a target, the UEA plan contemplates 60% foreign in-
vestment, and centrifuge ventures could also involve foreign
contributions. These foreign investments result in ac-
cess as customers to product output of the plant. The
product is made available under Government Agreements
for disposition of Cooperation and export licenses are
required. The investments do not result in access to the
classified US technology or in a majority voting right
in project management.
U.S. ownership and control is required by U.S. law and
will be a necessary condition of obtaining a license
from the Nuclear Regulatory Commission. Foreign parti-
cipation in the UEA project is designed to assure both
that no single foreign investor can have a dominant voice
in the project, and also that no group of foreign investors,
voting as a bloc, can impost their views on U.S. investors.
in
FORD
6/24/75
GREATO
10
FOREIGN CUSTOMER CONDITIONAL CONTRACTS WITH ERDA
Question:
What happens to these foreign customers who have contracts
with ERDA that are conditional on plutonium recycle and
subject to termination?
Answer:
Holders of such contracts have a Presidential assurance
that they will be able to obtain their fuel needs from a
U.S. source of supply. The existence of a viable UEA
project and commercial centrifuge projects will afford this
opportunity. Indeed, a number of countries currently
holding conditional contracts are already prospective
investors in UEA.
6/24/75
it
FORD
GERALD
11
FOREIGN PURCHASES WITHOUT INVESTMENT?
Question:
Will foreign customers be able to obtain uranium enrichment
services without an investment in a plant?
Answer:
Foreign investment, subject to U.S. policy regulations, would
be welcomed. Foreign investors will be able to purchase
fuel in proportion to their investment. It is anticipated
that foreign customers who do not invest will be able to
contract for uranium enrichment services, within the limits
of plant capacity and if judged by enrichers to be compatible
with their ventures.
is
FORD
6/24/75
BERSLO
12
U.S. SHARE OF THE FREE WORLD MARKET
Question:
How much of the foreign enrichment market might the U.S.
expect to capture.
Answer:
We cannot predict our share of the foreign market for
enrichment services at this time. That share will be
determined by our ability to compete with other suppliers.
We hope that our sophisticated technological leadership
developed over the past 30 years and our proven ability
to provide enrichment services will put us in a good
position to be a reliable supplier at reasonable prices.
is
FORD
6/24/75
GENALD
13
PAYMENTS BY INDUSTRY FOR GOVERNMENT-OWNED TECHNOLOGY
Question:
Given the heavy investments made by the U.S. taxpayers in
the U.S. enrichment program, what compensation is the
Government likely to receive for the technology?
Answer:
It is expected that the U.S. Government will charge 3%
of the gross revenues of private producers as compensation
for the use of its inventions and discoveries. For example,
should UEA generate gross revenues of one billion dollars
per year, the Government would receive compensation payments
of about $30 million per year in license fees and income
taxes of about $50 to $70 million per year per plant.
Revenues from these industry payments will increase as
other private plants--probably using centrifuge technology--
begin production.
6/24/75
FORD
BRALD
14
WHAT HAPPENS IF A PRIVATE PLANT DOESN'T WORK?
Question:
What happens if the proposed private diffusion plant
doesn't work?
Answer:
The plant will work.
The private diffusion plant will use a process that has been
proven and perfected over a quarter century of large scale
Government operation. Governmental specialists will be
involved in the details of the project and the Government
will supply on a full cost recovery basis the key components
which are available only from the Government. Again, the
project will work.
R.FOP
GERALD
6/24/75
15
WHAT HAPPENS IF A PRIVATE PLANT ISN'T LICENSED ?
Question:
What happens if a private plant isn't licensed?
Answer:
There is little reason to believe that the plant would not
be licensed. From a health safety and environmental stand-
point the project is expected to be much simpler to license
than a nuclear power reactor.
Licensability of projects will, however, be a key considera-
tion from the outset and should any difficulties appear they
will be recognized early. Under the proposed terms of the
cooperative arrangements, the Government would be able to
take over a project if a license were not granted.
6/24/75
R.FORT
КЕНЛЕР
16
DOES UEA HAVE CUSTOMERS?
Question:
Does the proposed private diffusion plant project (UEA)
have all the customers it needs to go forward?
Answer:
We understand UEA has letters of intent from domestic
utilities covering about 15% of plant output. Several
foreign governments have expressed reasonably firm interest
in significant amounts of plant output. As the project is
accepted as the next United States enriching plant, it is
very likely that customers will begin subscribing to the
remaining available plant output.
&
FORDY
6/24/75
GERALD
EMBARGOED FOR RELEASE
June 26, 1975
UNTIL 12:00 NOON (EDT)
Office of the White House Press Secretary
THE WHITE HOUSE
TEXT OF LETTERS FROM THE PRESIDENT TO THE
SPEAKER OF THE HOUSE OF REPRESENTATIVES
AND THE PRESIDENT OF THE SENATE
June 26, 1975
Dear Mr. Speaker: (Dear Mr. President:)
I have today sent to the Congress a message describing my
plan for securing the construction of addi ional uranium
enrichment plants in the United States by private industry
to meet the growing needs of the expanding nuclear power
industry.
A critical element of this plan is legislation to authorize
the Administrator of the Energy Research and Development
Administration to enter into cooperative agreements with
private firms to foster, through Government cooperation
and temporary assurances, the creation of a competitive
private uranium enrichment industry. I am enclosing a
proposed bill, the Nuclear Fuel Assurance Act of 1975,
which would provide the authority needed to achieve the
objectives described in my message. A brief analysis of
the bill is also enclosed.
I urge the Congress to pass this legislation at the earliest
possible date so that we can take a major step toward our
goal of energy independence.
Sincerely,
GERALD R. FORD
######
xx GERALD LIBRARY FORD
A BILL
To authorize cooperative arrangements with private
enterprise for the provision of facilities for
the production and enrichment of uranium en-
riched in the isotope 235, to provide for
authorization of contract authority therefor,
and for other purposes.
Be it enacted by the Senate and the House of
Representatives of the United States of America in
Congress assembled, That this Act may be cited as
the "Nuclear Fuel Assurance Act of 1975."
Sec. 2. Chapter 5. PRODUCTION OF SPECIAL NUCLEAR MATERIAL
of the Atomic Energy Act of 1954, as amended, is amended
by adding at the end thereof the following Section:
"Sec. 45 Cooperative Arrangements for Private
Projects to Provide Uranium Enrichment Services --
"a. The Energy Research and Development
Administration is authorized, without regard to the
provisions of Section 169 of this Act, to enter into
cooperative arrangements with any person or persons
for such periods of time as the Administrator of the
Energy Research and Development Administration may
deem necessary or desirable for the purpose of pro-
viding such Government cooperation and assurances
as the Administrator may deem appropriate and
necessary to encourage the development of a com-
petitive private uranium enrichment industry and
to facilitate the design, construction, ownership
and operation by private enterprise of facilities
for the production and enrichment of uranium en-
riched in the isotope 235 in such amounts as will
contribute to the common defense and security and
encourage development and utilization of atomic
energy to the maximum extent consistent with the
common defense and security and with the health
and safety of the public; including, inter alia,
in the discretion of the Administrator,
(1) furnishing technical assistance, in-
formation, inventions and discoveries, enriching
services, materials, and equipment on the basis of
GERALD R. FORD
recovery of costs and appropriate royalties
the use thereof;
more
2
(2) providing warranties for materials
and equipment furnished;
(3) providing facility performance
assurances;
(4) purchasing enriching services;
(5) undertaking to acquire the assets
or interest of such person, or any of such persons,
in an enrichment facility, and to assume obligations
and liabilities (including debt) of such person, or
any of such persons, arising out of the design, con-
struction, ownership, or operation for a defined
period of such enrichment facility in the event
such person or persons cannot complete that en-
richment facility or bring it into commercial
operation: Provided that any undertaking, pursuant
to this subsection 5, to acquire equity or pay off
debt, shall apply only to individuals who are
citizens of the United States, or to any corporation
of other entity organized for a common business
purpose, which is owned or effectively controlled
by citizens of the United States; and
(6) determining to modify, complete and
operate that enrichment facility as a Government
facility or to dispose of the facility at any time,
as the interest of the Government may appear, subject
to the other provisions of this Act.
"b. Before the Administrator enters into any
arrangement or amendment thereto under the authority
of this section, or before the Administrator deter-
mines to modify, or complete and operate any facility
or to dispose thereof, the basis for the proposed
arrangement or amendment thereto which the
Administrator proposes to execute (including the
name of the proposed participating person or
persons with whom the arrangement is to be made,
a general description of the proposed facility,
the estimated amount of cost to be incurred by
the participating person or persons, the incentives
imposed by the agreement on the person or persons
to complete the facility as planned and operate it
successfully for a defined period, and the general
features of the proposed arrangement or amendment),
or the plan for such modification, completion,
more
070820
3
operation or disposal by the Administrator, as
appropriate, shall be submitted to the Joint
Committee on Atomic Energy, and a period of forty-
five days shall elapse while Congress is in session
(in computing such forty-five days, there shall be
excluded the days on which either House is not in
session because of adjournment for more than three
days) unless the Joint Committee by resolution in
writing waives the conditions of, or all or any
portion of, such forty-five day period: Provided,
however, that any such arrangement or amendment
thereto, or such plan, shall be entered into in
accordance with the basis for the arrangement or
plan, as appropriate, submitted as provided herein.
Sec. 3. The Administrator of the Energy Research
and Development Administration is hereby authorized
to enter into contracts for cooperative arrangements,
without fiscal year limitation, pursuant to Section 45
of the Atomic Energy Act of 1954, as amended, in an
amount not to exceed in the aggregate $8,000,000,000
as may be approved in an appropriation Act. In the
event that liquidation of part or all of any financial
obligations incurred under such cooperative arrange-
ments should become necessary, the Administrator of
the Energy Research and Development Administration is
authorized to issue to the Secretary of the Treasury
notes or other obligations up to the levels of contract
authority approved in an appropriation Act pur-
suant to the first sentence of this section in
such form and denomination, bearing such maturity
and subject to such terms and conditions as may
be prescribed by the Administrator with the approval
of the Secretary of the Treasury. Such notes or
other obligations shall bear interest at a rate
determined by the Secretary of the Treasury, tak-
ing into consideration the current average market
yield on outstanding marketable obligations of
the United States of comparable maturity at the
time of issuance of the notes or other obligations.
The Secretary of the Treasury shall purchase any
notes or other obligations issued hereunder and,
for that purpose, he is authorized to use as a
public debt transaction the proceeds from the sale
of any securities issued under the Second Liberty
Bond Act, as amended, and the purposes for which
securities may be issued under that Act, as
amended, are extended to include any purchase of
such notes and obligations. The Secretary of the
more
4
Treasury may at any time sell any of the notes or
other obligations acquired by him under this
section. All redemptions, purchases and sales
by the Secretary of the Treasury of such notes
or other obligations shall be treated as public
debt transactions of the United States. There
are authorized to be appropriated to the
Administrator such sums as may be necessary to
pay the principal and interest on the notes or
obligations issued by him to the Secretary of
the Treasury.
Section 4. The Administrator of the Energy Research
and Development Administration is hereby authorized to
initiate construction planning and design activities
for expansion of an existing uranium enrichment facility.
There is hereby authorized to be appropriated such sums
as may be necessary for this purpose.
# # # #
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is
FORD
BERALD
Bill Analysis
Section 1 of the proposed bill cites the Act as
the "Nuclear Fuel Assurance Act of 1975.'
Section 2 of the proposed bill would amend Chapter
5, Production of Special Nuclear Material, of the Atomic
Energy Act, as amended, by adding a new Section 45,
entitled "Cooperative Arrangements for Private Projects
to Provide Uranium Enrichment Services."
Subsection a. of the new Section 45 would authorize
the Administrator of the Energy Research and Development
Administration (ERDA) to enter into cooperative arrange--
ments with private enterprise to facilitate the development
of a competitive private industry for the enrichment of
uranium to make fuel for nuclear power plants. This
subsection would enable the Administrator to promote
private investment in the construction, ownership and
operation of uranium enrichment plants by providing such
Government cooperation and assurances as are determined
to be necessary and in the best interests of the Govern-
ment after detailed negotiation with selected individual
proposers of enrichment services. Such negotiations would
be directed toward obtaining arrangements most advan
tageous to the Government and the public interest and
with a degree of risk to the private entrepreneurs
consistent with the objective of creating a private
competitive uranium enrichment industry.
Cooperative arrangements authorized by Section 45a
could include such Government cooperation and assurances
as enumerated in the bill, including the specific
authority provided in subsection 45a(5), for the Govern
ment to acquire the assets or interests and assume the
liabilities (including debt) of a private enrichment firm
in the event which is highly unlikely - that private
industry could not complete a plant or bring it into
operation. It is intended that any undertaking by the
Government under subsection 45a(5) to acquire assets or
interest and to assume liabilities of a private venture
would terminate after approximately one year of commercial
operation of a plant. The precise period would be defined
during the negotiations of defined agreements. Any
obligations to pay off debt and to acquire equity interest
would be limited to citizens of the United States.
Subsection b. of the new Section 45 would provide
FORD
for review by the Joint Committee on Atomic Energy of
the basis for any cooperative arrangement, or amendment
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2
thereof, which the Administrator proposes to undertake,
including the basis for acquiring assets or interests,
or assuming liabilities of any private venture, and any
plan the Administrator may have for modifying, completing
operating, or disposing of any plant built under a
cooperative agreement.
Section 3 of the proposed Nuclear Fuel Assurance
Act would authorize the Administrator of ERDA to enter
into contracts, pursuant to the new subsection 45a, in
an amount not to exceed $8 billion, as may be provided
in appropriation Acts. This amount is an estimate of
the total potential cost to the Government in the
unexpected event that all private ventures covered by
cooperative arrangements were to fail and it was then
necessary for the Government to assume assets and
liabilities of the ventures, take over plants, and
compensate domestic investors. It is not expected that
any of these funds would be expended for the assump-
tion of private ventures, but the authorization is
necessary to provide assurance, to customers and sources
of debt financing for private producers, of the Federal
Government's commitment to create a competitive industry.
Section 3 would also provide that, in the event of
Government assumption of the debts, interests and lia
bilities of a private venture, the Administrator is
authorized to secure funds through the Secretary of
the Treasury to liquidate contract authority, up to
the levels previously provided in an appropriations
Act.
Section 4 of the proposed bill would authorize the
Administrator of ERDA to initiate preliminary engineering
design and planning for expansion of a Government-owned
uranium enrichment facility for contingency purposes.
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#
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FORD
GERALD
EMBARGOED FOR RELEASE
June 26, 1975
UNTIL 12:00 NOON, EDT
Office of the White House Press Secretary
THE WHITE HOUSE
SUMMARY FACT SHEET
THE PRESIDENT'S PLAN FOR A COMPETITIVE
NUCLEAR FUEL INDUSTRY
The President's Action
The President today announced administrative actions and
a legislative proposal to:
Increase the United States' capacity to produce enriched
uranium to fuel domestic and foreign nuclear power
plants.
Retain U.S. leadership as a world supplier of uranium
enrichment services and technology for the peaceful
uses of nuclear power.
Assure the creation, under appropriate controls of a
private, competitive uranium enrichment industry in
the U.S. -- ending the current Government monopoly.
Accomplish these objectives with little or no cost to
taxpayers and with all necessary controls and safeguards.
Background
The U.S. capacity for refining or "enriching" uranium
to make fuel for nuclear electric generating plants
is now fully committed.
Work on constructing new capacity must begin soon so
that plants will be ready to meet domestic and
foreign requirements by about 1983.
Efforts to encourage the creation of a competitive
uranium enrichment industry have shown that certain
forms of Government cooperation and temporary
assurances are necessary to permit private firms
to enter the industry.
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BERALD FORD LIBRART
2
The need for added capacity provides the opportunity
for specific actions by the Government to encourage
private entry.
Highlights of the Plan
The President's plan includes:
A legislative proposal, the Nuclear Fuel Assurance
Act of 1975, which would authorize the Government
to enter into certain cooperative arrangements with
private industrial firms that wish to finance,
build, own and operate plants to provide uranium
enrichment services.
A pledge by the President to foreign and domestic
customers that the Government will assure that orders
placed with private producers will be fulfilled as
services are needed.
Opportunities for foreign investment, with control
of these plants remaining in U.S. hands.
All necessary controls and safeguards concerned with
(a) preventing the diversion of nuclear materials
and the spread of sensitive technology, (b) environ-
mental impact, (c) safety, and (d) antitrust.
#
#
#
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FORD
GENALD
FOR IMMEDIATE RELEASE
JUNE 26, 1975
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
REMARKS OF THE PRESIDENT
UPON SIGNING
THE URANIUM ENRICHMENT MESSAGE
THE CABINET ROOM
11:23 A.M. EDT
I will read a statement before signing the
message or messages that will go to the Congress.
Because our oil and natural gas resources
are fast being depleted, we must rely more and more
on nuclear power as a major source of energy for the
future.
Today, I am asking the Congress to join me
in embarking the Nation on an exciting new course of
action which will help to assure the energy independence
that we need, and significantly strengthen our economy
at home, at the same time.
I am referring to the establishment of an
entirely new competitive industry to provide uranium
enrichment service for nuclear power reactors. The
legislation that I am seeking will reinforce the world
leadership we now enjoy in uranium enrichment technology.
It will help insure the continued availability
of reliable energy for America. It will move America
one big step nearer energy independence.
This legislation will insure that the billions
of dollars required for the construction of new enrich-
ment plants will be borne by the private sector, not by
the American taxpayer.
But all of us will benefit directly from the
service which private enterprise will provide.
I urge the Congress to act swiftly and favorably
on this important new energy initiative. With this
comprehensive approach, the United States can reopen
its uranium enrichment order book, reassert its supremacy
as the world's major supplier of enriched uranium, and
develop a strong private enrichment industry to help bolster
the national economy.
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DERALD FORD LIBRARY
Page 2
So it is with pleasure and hope that I sign
the message to go to both the House and the Senate, and
ask the Congress to move as rapidly as possible in
order that we can achieve the objectives which are so
important.
Thank you very much.
END
(AT 11:25 A.M. EDT)
FORD
GERALD
EMBARGOED FOR RELEASE
June 26, 1975
UNTIL 12:00 NOON (EDT)
Office of the White House Press Secretary
THE WHITE HOUSE
FACT SHEET
THE PRESIDENT'S PLAN FOR A
COMPETITIVE NUCLEAR FUEL INDUSTRY
Page
The President's Announcement
3
Background
3
Plan Announced by the President
4
- Objectives
- Principal Elements of the Plan
Legislative Authority for Cooperative
Arrangements with Private Firms
Assurances for Customers
Controls and Safeguards
Preventing the Diversion of Nuclear
Materials and spread of sensitive
technology
Foreign Investment
Environmental Impact, Safety and
Anti-Trust
Implementing Actions
7
- Negotiations for a Diffusion Plant
- Request for Proposal for Centrifuge Plants
- Environmental Impact Statement
- Contingency Planning
- Diffusion Plant Design Work
Specifics of the Legislative Proposal
8
- Authorizing Legislation
Cooperative Agreements
Congressional Review
- Appropriations Request
FORD
Developments Leading to the President's Plan
- U.S. Leadership in Uranium Enrichment
Technology
GERALD
Gaseous Diffusion
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(OVER)
2
Gas Centrifuge
Laser Separation
- Existing U.S. Capacity
- The Growing Market
- Potential Foreign Suppliers
- The Program to Develop a Competitive Industry
Diffusion Plant
Centrifuge Plant
- Obstacles to the Entry of Private Industry
- Alternatives to Private Entry
- The Proposal from Uranium Enrichment
Associates (UEA)
- Centrifuge Enriching Projects - Request for
Proposals
Other Actions Related to Uranium Enrichment
Capacity
13
- Increasing ERDA's Charge for Uranium
Enrichment Services
- Contract Relief for Current ERDA Enrichment
Customers
- ERDA Conditional Contracts for Enrichment
Services
Attachment:
#1 - Summary of UEA Plan and Proposal to ERDA
16
#2 - Uranium Enrichment as a Part of the Nuclear
20
Fuel Cycle
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3
THE PRESIDENT'S ANNOUNCEMENT
The President today announced administrative actions and
a legislative proposal to (a) increase the United States'
capacity to produce enriched uranium in order to meet the
needs of domestic and foreign nuclear power plants, (b)
retain U.S. leadership as a world supplier of uranium en-
richment services and nuclear power plants, (c) assure the
creation, under appropriate controls of a private, competitive
uranium enrichment industry in the U.S. -- ending the current
Government monopoly; and (d) accomplish these objectives
with little or no cost to taxpayers and with all necessary
controls and safeguards.
BACKGROUND
Natural uranium from U.S. and foreign mines must be refined
or "enriched" before it can be used to make fuel for nuclear
power plants which are used in the United States and in many
foreign nations to generate electricity.
U.S. capacity for enriching uranium which now supplies all
domestic and most foreign needs, consists of three Govern-
ment-owned plants, located at Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth, Ohio.
Since mid-1974, the entire capacity of the three plants has
been fully committed under long-term contracts. New enrich-
ment capacity must be on "on-line" beginning in about 1983
to meet the growing domestic and foreign demand for nuclear
fuel.
The potential U.S. market abroad has begun to erode as some
potential foreign customers have started looking to sources
such as the U.S.S.R., France and a West European consortium
for uranium enrichment.
Since 1971, the Executive Branch has followed policies and
programs directed toward assuring that private industry --
rather than the Federal Government -- builds the next
increments of U.S. uranium enrichment capacity.
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FORD
GERALD
4
Several industrial firms have sought to enter the uranium
enrichment field but all have found that some forms of
Government cooperation and temporary assurances are needed
to overcome the initial obstacles to private industry
involvement.
THE PLAN
Objectives. The plan announced by the President is designed to
meet the objectives of assuring that:
The next increments of U.S. uranium enrichment capacity
will be available when needed to meet the growing demand
for fuel for nuclear powered generating plants in the U.S.
and in other nations.
The U.S. maintains its leadership role in enrichment
technology and its role as a major world supplier of
uranium enrichment services and nuclear power plants --
a role that is important to:
-
Our economy and our world trade position.
I
Our efforts to obtain the commitment of additional
nations to accept international safeguards and the
principle of nuclear non-proliferation
-
Our cooperation with other major oil consuming nations
which are looking to nuclear power to help reduce their
dependence on foreign oil imports.
Our longer range goal of developing technology
and energy resources to supply a significant share
of the free world's energy needs.
All future increments of capacity will be built, financed
and operated by private industry -- rather than by the
Federal Government ---- so that a competitive industry will
exist at the earliest possible date.
There will be little or no cost to the taxpayer and that
the Government will receive increased revenue in corporate
taxes and compensation for the use of its inventions and
discoveries.
All necessary domestic and international controls over
nuclear materials and classified technology will be main-
tained, as they would be if the Government were to own the
new plants.
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5
Principal Elements of the Plan.
Legislative Authority for Cooperative Arrangements with
Private Firms. The President is asking the Congress to
enact promptly the Nuclear Fuel Assurance Act to provide
the additional legislative authority needed to enable
the Energy Research and Development Administration
(ERDA) to negotiate and enter into cooperative arrange-
ments with private industrial organizations that wish
to build, own and operate uranium enrichment plants.
Negotiations would be directed toward the arrange-
ments most advantageous to the Government and the
public interest and with a degree of risk to the
private firm that is consistent with the objective
of creating a private, competitive uranium enrichment
industry.
These arrangements would provide for certain forms of
Government cooperation and temporary assurances found
to be necessary after detailed negotiations with firms
submitting proposals. Arrangements could include:
Supplying and warranting Government-owned inven-
tions and discoveries in enrichment technology --
for which the Government will be paid.
Selling certain materials and supplies on a full
cost recovery basis which are available only
from the Federal Government.
Buying enriching services from private producers
or selling enriching services to producers from
the Government stockpile to accommodate plant
start-up and loading problems.
Assuring the delivery of uranium enrichment services
to customers which have placed orders with private
enrichment firms.
Assuming the assets and liabilities (including debt)
of a private uranium enrichment project if the
venture threatened to fail -- at the call of the
private venture or the Government, and with com-
pensation to domestic investors in the private
ventures ranging from full reimbursement to total
loss of equity interest, depending upon the circum-
stances leading to the threat of failure.
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6
The arrangements would be spelled out in a detailed
contract, and the basis for arrangements would be
subject to Congressional review.
It is intended that any undertaking by the
Government to acquire assets or interest and
to assume liabilities of a private venture
would end after approximately one full year
of commercial operation of a plant. The precise
period would be determined in the negotiation
of definitive agreements.
The Government would monitor progress carefully so that
it can be sure that the plant will function properly
and will be completed on time and within cost estimates.
Assurances for Customers. The President announced his
pledge to domestic and foreign customers who place orders
with private U.S. suppliers that the Government will assure
that orders will be filled as services are needed. Those
first in line with private suppliers will be first in line
to receive services from the Government -- if it were
necessary for the Government to take over and complete
a private project.
Controls and Safeguards. The President announced that all
necessary controls and safeguards will be maintained in
all arrangements with private firms. Such controls and
safeguards include:
-
Preventing the Diversion of Nuclear Materials or
Un-Controlled Spread of Sensitive Technology. All
necessary measures will be taken to safeguard the
use of the products of plants and to protect sensitive
classified technology. These measures include:
Effective domestic safeguards and physical security
measures to the plants and their products.
Continued requirements that exports take place
pursuant to appropriate international agreements
for cooperation and be subjected to safeguards
to prevent diversions.
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7
Continued classification and protection of
sensitive enrichment technology.
Foreign Investment. Foreign investment in private
enrichment ventures will be encouraged, but control
will remain, as required by law, with U.S. interests.
Foreign investors would not require or have access
to classified information. Any proposals for
sharing technology would be considered separately
and would be subject to Governmental review and
approval.
Environmental Impact, Safety and Anti-Trust. Private
ventures wishing to build plants will have to obtain
from the Nuclear Regulatory Commission (NRC) a construc-
tion permit and operating license. As a part of its
review, the NRC must evaluate environmental, safety
and anti-trust considerations as well as assure that
control of the proposed new ventures remain in the
U.S. as now required by the Atomic Energy Act.
NRC also will have responsibility for assuring that
the plants are appropriately safeguarded. The Justice
Department participates in the review of anti-trust
considerations.
IMPLEMENTING ACTIONS
The President announced several administrative actions that are
being taken now:
Negotiations for a Diffusion Plant. ERDA is responding
formally to a proposal from the Uranium Enrichment Associates
(UEA) offering to enter into negotiations which could lead
to the construction by UEA of a $3.5 billion (1976 dollars)
plant which would make use of gaseous diffusion technology
and which would be on line by about 1983.
Request for Proposal for Centrifuge Plants. ERDA is
issuing today a new request for proposals from industrial
firms interested in constructing, owning and operating
enrichment facilities making use of centrifuge technology.
Environmental Impact Statement. ERDA will on June 30
issue for public review and comment a draft environ-
mental impact statement concerned with the expansion
of uranium enrichment capacity to be attained through
ERDA's implementation of this action.
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3
Contingency Planning. ERDA will continue with backup
contingency measures to assure that capacity will be
ready in the unlikely event that industrial efforts
falter. These measures include continuation of
Government conceptual design activities, research and
development on enrichment technologies, and technologi-
cal assistance to the private sector on a cost recovery
basis.
Diffusion Plant Design Work. ERDA plans to purchase from
UEA design work on components for the private diffusion plan
that could be used in a Government plant -- if the private
venture were unable to proceed.
SPECIFICS OF THE LEGISLATIVE PROPOSAL
Authorizing legislation. The basic enabling legislation proposed
today by the President would:
Authorize Cooperative Agreements.
i
It would permit ERDA to negotiate and enter into
cooperative arrangements with firms wishing to build,
own and operate uranium enrichment facilities.
It would provide authorization for contract authority
for amounts up to $8 billion as may be approved in an
appropriation act -- which is an estimate of the to-
tal potential cost to the Government in the unexpected
event that all Government assured diffusion and cen-
trifuge ventures were to fail, and it was then
necessary for the Government to assume assets and
liabilities of these ventures, take over plants, and
compensate domestic investors. The Administration's
expectation is that none of these funds would have
to be appropriated or expended for the assumption
of private ventures, but the authorization is necessary
to provide assurance to customers and to potential
producers of the Federal Government's commitment to
create a competitive industry.
Provide for Congressional Review. Once contracts were
negotiated the Joint Committee on Atomic Energy (JCAE)
would be notified and a period of 45 days would have to
elapse before a contract would be executed -- to allow
an opportunity for Congressional review of the basis
for ERDA's arrangements with private firms.
&
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9
Appropriations Request. The President will later request
an appropriation of contract authority which is required by
the proposed bill before a contract can be executed, in
order to cover the estimated maximum Federal Government
exposure for specific projects in the event that it were
necessary to assume assets and liabilities. Again,
expenditure of these funds for assumption of any private
venture is not considered likely.
DEVELOPMENTS LEADING TO THE PRESIDENT'S PLAN
U.S. Leadership in Uranium Enrichment Technology. The United
States is the recognized world leader in technology for refining
or "enriching" natural uranium to a form that can be used to make
fuel for nuclear power reactors. Natural uranium contains only a
small amount (approximately 7%) of the fissionable isotope U-235.
In order to be useful to make fuel for most nuclear reactors, the
concentration of U-235 must be increased to about 2-4% through a
process of separating off other isotopes. The technology was
developed and is owned by the Federal Government. Certain parts
of the technology are classified. Principal U.S. technologies
are:
Gaseous Diffusion. This technology which is now used in the
three existing government-owned enrichment plants was developed
in the 1940's. Over 30 years of large scale operating experi-
ence and process improvement have made the technology the most
reliable and economical now available for commercial scale
operations. The next increment of capacity must make use of
this technology.
Gas centrifuge. The gas centrifuge process of uranium
enrichment provides an alternative to gaseous diffusion.
Full operation of a Government pilot plant is scheduled for
early 1976. If the projected economics of the process are
realized, gas centrifuge technology is expected to be used as
subsequent increments of commercial capacity are added.
Laser Separation. ERDA is conducting a basic research
program to determine whether this technology is technically
or commercially feasible. Even if successful, the technology
will not be available in time to be used for the next several
increments of needed enrichment capacity.
Existing U.S. Capacity. The three Government-owned uranium
enrichment plants will, when currently authorized expansion
is completed, have the capacity to produce enriched uranium
needed to fuel about 300 large nuclear-powered electric
generating plants in the U.S. and foreign countries.
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GERALD
10
The Growing Market. Current estimates are that the U.S. will
require for domestic needs added enrichment capacity by 2000
equal to 6 to 9 plants the size of any one of the three existing
plants and that added capacity for the total market served by
the U.S. will equal 9 to 12 similar size plants.
Potential Foreign Suppliers. The principal existing capacity
for enriching uranium outside the U.S. is in the Soviet Union.
A French-led diffusion plant project (Eurodif) is expected to
begin production in 1979 and its capacity is reported to be
fully committed. A British-German-Dutch consortium (Urenco)
plant will also begin expanded operations in 1979. Plans for
additional plants are being discussed by France, Canada,
South Africa, Japan, Australia and Brazil.
The Program to Develop a Competitive Industry. The Atomic
Energy Act of 1954 provides that "the development, use and
control of atomic energy shall be directed so as to
strengthen free competition in private enterprise". An
Executive Branch policy to encourage private industry to build
the next increments of uranium enrichment capacity was announced
in June 1971. Beginning in 1973, the Atomic Energy Commission
(AEC) asked private firms to consider building, owning and
operating enrichment plants and granted qualified U.S. firms
access to classified aspects of the Government's work, under
carefully controlled security conditions, in order that they
might make their own assessment of the commercial potential
for private enriching plants. A number of firms responded to
the invitation from which several consortia have emerged which
are interested in pursuing the possibility of building enrich-
ment plants.
Diffusion Plant. One consortium -- the Uranium Enrichment
Associates (UEA) -- is interested in constructing a $3.5
billion gaseous diffusion plant equivalent to the expanded
capacity of one of the 3 existing Government-owned plants.
Centrifuge Plants. Other firms and consortia -- Centar,
Exxon Nuclear and Garrett Corporation -- have expressed
interest in cooperative arrangements with the Federal
Government which would lead to demonstration gas centrifuge
plants which could be expanded in the future to commercial
scale plants. The AEC (predecessor to ERDA) requested
proposals from industry to advance the demonstration of
centrifuge technology. A modified request for proposals
is being issued today by ERDA.
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11
Obstacles to the Entry of Private Industry. All firms interested
in building, owning and operating a private plant have concluded
that some form of Government cooperation and temporary assurances
are essential to begin the transition to a private competitive
industry. Among the factors that have contributed to this
conclusion are:
The complexity of the undertaking, including the Federal
ownership and the classification of the technology.
The large financial commitment required and the difficulty
encountered in trying to obtain private financing.
The inherent difficulties of ending a Government monopoly.
The recent adverse financial situation of U.S. electrical
utilities which are the customers for a plant. (Their long
term contracts for uranium enrichment services must provide
security for the long term financing required.)
Some uncertainty as to whether the Government would follow
through on its commitment to achieve privatization.
Alternatives to Private Entry. The principal alternatives to
an immediate effort to achieve privatization include:
All future additions to capacity financed, built and owned
by the Federal Government, thus continuing indefinitely the
existing monopoly.
Government financing and ownership of one or more additional
increments of capacity, followed by another attempt to achieve
privatization.
A thorough review indicated that, regardless of the alternative
selected:
The next increment of capacity can be on line when needed
(now estimated about 1983).
Controls and safeguards involving classified technology and
non-proliferation of nuclear materials can be maintained.
Customers for the next increment are expected to be largely
foreign.
Foreign investments in an enrichment plant can be accommodated.
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12
This review led to the conclusion that the task of explaining and
implementing the plan for achieving a private industry would be
difficult and that a substantial effort would be required by both
the Congress and the Executive Branch, but that the benefits of
privatization justified the effort. The benefits of privatization
include:
Avoiding a cost to taxpayers of $40 to $50 billion
for plants that should be on line by 2000, if the Federal
Government were to finance and own the plants. (These funds
would not be recovered to the Treasury for many years.)
Under the President's plan, revenue of about $90 to
$100 million per plant per year would flow to the Federal
Treasury from industry, principally from taxes and payments
for the use of Government inventions and discoveries.
An early end to the Government monopoly in a type of commercial
activity.
Avoiding expansion of the public sector when industry is
willing and able to do the job.
Competition which would provide incentives for lower costs
and additional improvements in technology.
The Proposal from Uranium Enrichment Associates (UEA). Uranium
Enrichment Associates is a consortium currently consisting of
Bechtel Corporation and the Goodyear Tire and Rubber Company. On
May 30, 1975, UEA submitted a revised proposal to ERDA calling for
cooperative arrangements with the Federal Government. The principal
features of the UEA proposals are summarized in Attachment #1. A
contract containing the details of a cooperative agreement would be
negotiated by UEA and ERDA.
Centrifuge Enriching Projects -- Request for Proposals.
In August of 1974 the Government announced a program expected
to lead to several relatively small industry constructed
demonstration projects.
Gas centrifuge technology has not yet been applied on a
production scale sufficient to permit full industry commit-
ment to large plants. At least three companies are interested
in undertaking private centrifuge enriching projects now which
would be scaled up progressively from small demonstration
modules to a capacity the economies of scale for centrifuge
enriching are expected to be largely realized. These are
expected to be 1/3 to 1/2 the capacity of the planned diffusion
plant.
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13
Government-industry cooperative arrangements similar to that
required for the UEA diffusion project may be required.
A Request for Proposals for this program which extends and
elaborates upon the earlier program is being issued today:
-
Proposals will be due on October 1, 1975 and 1t is the
Government expectation that several proposals could be
accepted to proceed more or less in parallel with each
other and with the UEA project.
Proposers will describe their proposed project in detail,
including plant design, size, location and schedules and
specify the type and magnitude of Government support
necessary to proceed.
Small initial modules, perhaps 200-300 thousand units
per year could be in operation in the early 1980's with
2-3 million unit commercial scale plants achieved in the
mid-1980's on a time frame consistent with the growth
of the market.
Centrifuge technology permits adding small capacity increments
as required to closely follow market needs.
Proceeding with several centrifuge demonstration projects in
the same time frame as the gaseous diffusion plant will furthe:
the objective of developing a private, competitive enriching
industry and maintaining U.S. world leadership in this field.
OTHER ACTIONS RELATED TO URANIUM ENRICHMENT CAPACITY
Increasing ERDA's Charge for Uranium Enrichment Services.
The current price charged by ERDA for uranium enrichment is
based on a statutory formula which says that ERDA's charge
must be established on the basis of the recovery of the
Government's costs over a reasonable period of time. Appli-
cation of the formula has resulted in a present charge of
about $42 to $48 per separative work unit, depending on the
type of contract a customer has with ERDA. This price will
rise by the end of 1975 to about $53 and $60 per unit.
These prices reflect the low cost of construction during
the 1940's and 1950's for plants built primarily for military
purposes. These prices are much lower than the quoted world
market prices of enrichment services of between $75 to $100
per unit.
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GERALD
14
The President announced in his 1976 Budget his intention to
propose legislation to the Congress to permit ERDA to raise
the price of enrichment services from its plants. The new
price would be established to recover the Government's costs
and place the pricing of Government enriching services on a
more business-like basis. This step would encourage private
sector interest in building enrichment facilities and end an
unjustifiable subsidy to both foreign and domestic customers.
The new price would include a rate of return on investment
more appropriate to the private sector than the Government's
rate of return, an allowance equivalent to corporate income
taxes and also include other costs typical of private operations
On this basis the new price per separative work unit will be
approximately $76.
This legislation has been submitted to the Congress by ERDA.
Contract Relief for Current ERDA Enrichment Customers.
Present ERDA enrichment contracts require customers to commit
to a fixed delivery schedule and to make prepayments amounting
to about $3 million per plant several years prior to the
first delivery of enriched fuel. Since these contracts were
signed, many nuclear power plants whose fuel was covered by
these contracts have been postponed or cancelled.
As a result, many utilities now face the prospect of having
to pay for uranium enrichment services well in advance of
the revised completion dates for the reactors.
In order to free both ERDA and the enrichment customers from
unrealistic commitment, ERDA, after notifying the Joint
Committee on Atomic Energy (JCAE), has announced that it will:
-
Grant customers the right within a 60-day period to
serve notice that they wish to terminate their contract
with no cancellation fee and with refund of any payments.
-
Permit those wishing to defer deliveries (rather than
terminate contracts) to have a one-time adjustment of
contract commitments without penalty.
-
Permit a similar one-time adjustment of the rate at
which uranium feed should be sent to the enriching
plants to coincide in part with the slipped enrichment
requirements.
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These actions would:
-
Result in a larger U.S. stockpile of enriched uranium
for use as an inventory to support the new private
uranium enrichment plants with backup supplies of
enriched material, should any delays occur in their
initial operation.
-
Establish a more realistic data base for evaluating
future domestic and foreign enrichment requirements.
-
Grant needed short-term financial relief to the utility
industry.
ERDA Conditional Contracts for Enrichment Services.
Some customers placing orders with AEC (predecessor to ERDA)
in mid-1974 were given conditional contracts; i.e., contracts
contingent upon the approval by U.S. regulatory authorities
(now the Nuclear Regulatory Commission) of the use of recycled
plutonium as a nuclear reactor fuel. These conditional contracts
were backed up by announcement that the U.S. would have expanded
capacity available that could fulfill requirements, if needed.
The expanded U.S. capacity that will result from the President's
plan will provide sources of supply that can be tapped by the
holders of conditional contracts.
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ATTACHMENT #1
SUMMARY OF THE URANIUM ENRICHMENT
ASSOCIATES (UEA) PLAN AND PROPOSAL TO ERDA FOR
A COOPERATIVE ARRANGEMENT
Physical Description of the Project.
A 9 million separative work unit per year gaseous
diffusion plant would be built near Dothan, Alabama
on a 1720 acre site on the Chattahoochee River.
When in full operation the plant could provide enriching
services for about 90 large nuclear power reactors.
The plant will require about 2500 megawatts of electrical
power which will be supplied from a dedicated nuclear
power facility located nearby.
Project cost estimate (exclusive of the power project)
has been estimated by UEA to be $3.5 billion in 1976
dollars.
UEA projects continuation of design work now underway
on the project during the next several years with
construction scheduled to commence in 1977.
Full production from the plant is projected in 1983
with limited production starting in 1981.
Nearly 50 million construction manhours are estimated
for the project. A peak construction labor force of
about 7000 workers will be reached in 1979-80 and the
permanent operating staff of the project is expected
to be about 1100.
The plant will be processing and upgrading natural
uranium and thus will have essentially no radiation
hazard. It will be similar to a large materials
handling plant except that the product material will
be much more valuable.
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Financial Structure of UEA Project.
UEA expects that two to six companies in addition to
Bechtel and Goodyear will comprise the consortium that
will undertake the project. These companies are ex-
pected to be identified within the next few months.
Based upon marketing efforts to date, UEA projects that
about 40 percent of plant capacity will be taken by U.S.
domestic utilities and the balance by non-U.S. organi-
zations in countries with which the United States has
Agreements for Cooperation permitting the transfer or
disposition of enriched uranium. (Under the Atomic
Energy Act voting control for such a project must
remain in the hands of the United States investors at
all times and the project is so structured. The secrecy
of the process will be protected and foreign customers
or investors will not have access to classified technology
or information.)
Project financing using an 85 percent debt, 15 percent
equity ratio is contemplated for the project.
The equity corresponding to the domestic portion of plant
output will be supplied by UEA and the debt financing
will be raised in the commercial market primarily on
the basis of the security of long-term (25 year) non-
cancelable enrichment service contracts with domestic
utilities.
Both equity and debt for the foreign share of plant
output is to be supplied from the foreign customers'
own sources of capital.
Pricing of product from the plant is based upon the
recovery of all operating costs, servicing of debt and
an after-tax return of approximately 15 percent on
equity.
A 3 percent payment, based on gross sales would be paid
to the Government for use of taxpayer-developed technology.
Customers.
A number of United States' utilities have executed
contingent letters of intent with UEA to purchase uranium
enriching services from the new plant and a number of
additional utilities are now evaluating their requirement
for services.
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UEA has made extensive marketing contacts overseas and
anticipates that foreign orders will be forthcoming.
Cooperative Arrangements.
Due to the unique nature of the project, the very large
capital requirements, and long payout periods, UEA has
concluded that it would not be possible to move ahead
without certain forms of Government backup assistance.
UEA has proposed that the Government:
-
Supply, at cost, essential components presently
produced exclusively by the Government.
-
Supply the Government's gaseous diffusion technology
and warrant its satisfactory operation.
-
Buy enriching services from UEA or sell enriching
services to UEA from the Government stockpile to
accommodate plant start-up and loading problems.
UEA has also proposed that:
-
The Government provide standby financial backup
assistance lasting for the critical construction
period plus approximately one additional year to
offset the current weak credit position of the
U.S. utility industry. The Government provide
financial backup if UEA cannot complete the plant
or bring it into commercial operation. A call on
this financial backup is made at the risk of loss
to UEA of its equity interest. In this event,
the Government has the right to acquire UEA's
domestic equity position and the obligation to
assume UEA's liabilities and debt.
The Government may also require UEA to release
the project to the Government if the Government's
interest so demands. In this event, the Government
would be obligated to assume UEA's liabilities
and debt.
The consideration for acquisition of UEA's domestic
equity position in either case can range from
loss of equity for uncorrected gross mismanagement
of UEA to full fair compensation for causative
events outside UEA's reasonable control.
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All of the above forms of backup assistance would be
subject to contract negotiations between ERDA and UEA.
UEA believes that the plant can be completed within the
private sector with no net expenditure of Government
funds.
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ATTACHMENT #2
Uranium Enrichment as Part of the Nuclear Fuel Cycle
The attached chart depicts the nuclear fuel cycle for Light
Water Reactors, (the type of reactors most commonly used
in the U.S.). About 97% of the reactors obtaining enrich-
ment services from the ERDA gaseous diffusion plants are
Light Water Reactors a similar fuel cycle exists for the
other present reactor type the High Temperature Gas
Cooled Reactor.
Prior to the enrichment step, uranium ore is mined from
the earth's crust and sent to a mill where uranium concentrate
is produced. This concentrate is often referred to as
yellowcake or by the chemical symbol, U₂O₈. There are
14 mills presently operating in the U.S. The uranium
concentrate is then sent to a converter where it is con
verted to uranium hexafluoride, or UF6. This is the only
simple form of uranium that can be gaseous at conditions
near room temperatures and pressures. There are two
UF6 conversion plants operating in the U.S.
The uranium hexafluoride is then sent to a uranium enrichment
plant. There are two processes under consideration for
commercial use in the U.S. the established gaseous
diffusion process, used in the ERDA plants, and the gas
centrifuge process. The UEA will use the gaseous diffusion
process. In the process, the uranium hexafluoride gas is
pumped through a semipermeable membrane. The desirable
fissionable isotope, U-235, diffuses through the membrane
more readily than the nonfissionable isotope U.238. A
stream depleted in U --235 is collected from the plant and
sent to storage. A stream enriched in U-235 is collected
from the plant and sent to a fuel fabrication plant. In
this plant, the uranium hexafluoride is converted to uranium
dioxide UO2, formed into pellets, and placed in zirconium
tubes. The tubes are assembled into bundles and sent to
nuclear power plants. Seven U.S. companies are involved
in the fabrication of nuclear fuel.
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After the fuel is used in the nuclear power plant, it is
discharged and allowed to cool in a large water basin at
the plant. The spent fuel will then be sent to a chemical
reprocessing plant. In this step, the uranium and reactor-
produced plutonium will be separated from the highly
radioactive fission products generated while the fuel is
in the nuclear power plant. The radioactive wastes in
proper form will be sent to a repository. The recovered
uranium will be converted again to the hexafluoride and
reinserted into the enrichment plants for reenrichment.
Plutonium is also a fissionable material that can be used
as fuel in a nuclear power plant. If use of the plutonium
is granted by the Nuclear Regulatory Commission, it would
be sent to the fuel fabrication plants; there it would be
mixed with the uranium and formed into pellets for nuclear
power plant fuel. There are currently no commercial chemical
reprocessing plants operating in the U.S.; one plant is shut
down for modification and another is under construction.
The Light Water Reactor Nuclear Fuel Cycle
URANIUM MINES & MILLS U3O8 CONVERSION
ORE & ORE CONCENTRATE
TO UF₆
UF6 CONVERSION
(U₃O₈)
U235 ENRICHMENT
TO UO₂ AND FABRICATION
OF FUEL ASSEMBLIES
22
RECOVERED
URANIUM
(AS UF6)
PLUTONIUM
REACTOR
(As PuO2)
FEDERAL REPOSITORIES
REPROCESSING PLANT
SPENT FUEL STORAGE
HIGH LEVEL
SOLID WASTE