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Uranium Enrichment - Meeting with the Joint
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Uranium Enrichment - Meeting with the Joint
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James M. Cannon Files (Ford Administration)
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The original documents are located in Box 37, folder "Uranium Enrichment - Meeting with
the Joint Committee on Atomic Energy, June 26, 1975" of the James M. Cannon 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 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
Digitized from Box 37 of the James M. Cannon Papers at the Gerald R. Ford Presidential Library
MEETING ON URANIUM ENRICHMENT WITH
JOINT COMMITTEE ON ATOMIC ENERGY
Thursday, June 26, 1975
8:00 a.m. - The Cabinet Room
Oppoting
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FORD & LIBRARY BERVID
dut Hulifur
Asses 11 BERALD P. FORD BERALDR.
Jack U win
In
CONGRESSIONAL JOINT COMMITTEES,
COMMISSIONS, AND BOARDS
Joint Committee on Atomic Energy
Crested by Public Law 585, 79th Congress
Room H-403, Capitol. Phone, 225-6171 (Code 180)
John O. Pastore, Senator from Rhode Island. Bdw
Currear.-Melvin Price, Representative from Illinois.
PATY
Jackson,
Senator
w.coment
Com'tee
M.
mila
Assign.
from
Washington.
areast Symington, Senator from Missouri.
Admin.
Sumple M. Montoya, Senator from New Mexico.
Assts.
She V. Tunney, Senator from California.
& Secs.
Award H. Baker, Jr., Senator from Tennessee.
P. Case, Senator from New Jersey.
B. Pearson, Senator from Kansas.
Statis-
Active L. Buckley, Senator from New York.
tical
Adv Young, Representative from Texas.
Time Roncalio, Representative from Wyoming.
Mitr McCormack, Representative from Washington
Man E Moss, Representative from California.
Cap
John B. Anderson, Representative from Illinois.
tol
Manuel Lujan, Jr., Representative from New Mexico.
Trank Horton, Representative from New York.
Andrew J. Hinshaw, Representative from California.
Depts.
invoice Director.George F. Murphy, Jr.
Joint Committee on Congressional Operations
Agencies
Created by Public Law 91-510
1628 Longworth House Office Building 20515. Phone, 225-8267 (Code 180)
Placement Office. Phone, 225-6731
Charman.-Jack Brooks, Representative from Texas.
To Chairman.-Lee Metcalf, Senator from Montana.
Members:
Robert N. Giaimo, Representative from Connecticut.
James G. O'Hara, Representative from Michigan.
James C. Cleveland, Representative from New Hampshire.
John M. Ashbrook, Representative from Ohio.
Mike Gravel, Senator from Alaska.
Lawton Chiles, Senator from Florida.
Jesse A. Helms, Senator from North Carolina.
Pete V. Domenici, Senator from New Mexico.
-f.-Eugene F. Peters, executive director; Donald G. Tacheron, director of
research; Cynthia K. Watkins, staff administrator. Office of Placement and
Office Management.-James F. McAllister, administrative officer; Robert J.
Kelley, staff assistant; Gerard C. Snow, administrative officer.
321
FORD & LIBRARY BERALD
46-444 O 75 23
two. C.
THE WHITE HOUSE
show we
WASHINGTON
June 25, 1975
new new
Bui Anders
MEETING WITH
JOINT COMMITTEE ON ATOMIC ENERGY
ON URANIUM ENRICHMENT PROGRAM
her ?
Thursday, June 26, 1975
8:00 a.m. 30 minutes)
60
The Cabinet Room
From:
Jim Cannon
DA
I. PURPOSE
To give the members of the Joint Committee on Atomic
Energy a briefing on your uranium enrichment plant
proposed legislation.
II. BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background:
During your recent discussion with JCAE Chairman
Pastore, you agreed that a meeting with the full
Committee would be worthwhile - prior to sending
up your message and legislation.
B. Participants:
See Tab A.
C. Press Plan:
White House Photographer. The meeting has been
announced by the Press Office.
III. TALKING POINTS
I regard our present situation with respect to
uranium enrichment as a rare opportunity.
- 2 -
The actions we take can have a major impact on:
- the relative roles and growth of industry and
government.
- our ability to meet energy independence goals
in the 1980's and beyond -- when I believe we
can become a major world supplier of energy
and regain our ability to affect world energy
prices.
Later today, I will send to the Congress a message
outlining my plan for creating a competitive uranium
enrichment industry. We can do this and assure that
additional U.S. capacity will be available to provide
uranium enrichment services for domestic and foreign
customers in the early 1980's.
We must maintain our world leadership in the nuclear
field.
In order to fully implement my plan, legislation
from
will be needed. I will also send a draft bill to
the Congress later today which would authorize ERDA
to enter into cooperative agreements with private
firms that wish to finance, build, own and operate
uranium enrichment plants. These agreements would
4600
provide for Government cooperation and temporary
assurances needed to overcome obstacles to private
entry.
now
Frank (Zarb), would, you review briefly how our plan
1980
for uranium enrichment fits into our overall energy
strategy and also the importance of relying heavily
on private industry to provide capital for energy.
for
I would like to have Bob Fri (Deputy Administrator
of ERDA) review for you briefly the details of the
way
plan, including the legislation.
gods
I want to stress that we are concerned that any
agreements reached are fully in the public interest.
That is why we intend to submit the specific contracts
to the Congress for their review. I hope that this
will expedite the legislation so that we can ensure
that everyone here and abroad will recognize that we
intend to be a reliable supplier of enrichment services.
is
FORD
RERALD
FORD
PARTICIPANTS
The President
SENATE
John Pastore
Stuart Symington
Howard Baker
Clifford Case
James Pearson
HOUSE
Melvin Price
John Young
Teno Roncalio
Mike McCormack
John Moss
Manual Lujan
Frank Horton
Andrew Hinshaw
STAFF
Administrator of FEA Zarb
Administrator of ERDA Seamans
Don Rumsfeld
Bob Hartmann
Jack Marsh
Phil Buchen
Bill Seidman
REGRETS
Alan Greenspan
Jim Cannon
The Vice President
Jim Lynn
Bill Baroody
Max Friedersdorf
Sen. Jackson
Ron Nessen
Sen. Montoya
Jim Connor
Sen. Tunney
Dick Cheney
Sen. Buckley
Brent Scowcroft
Rep. Anderson
Rod Hills
Robert Fri
Vern Loen
Bill Kendall
Jim Cavanaugh
Glen Schleede
Holister Cantus
6/25/75
CANDIDATE NAMES FOR THE
URANIUM ENRICHMENT BILL
(Competitive) Nuclear Fuel Assurance Act
Competitive Nuclear Fuel Industry Act
Consumers Electric Power Act
Better Energy Act
(Nuclear) Energy Assurance Act
Energy Insurance Act
Private Enterprise Nuclear Supply Act
Private Enterprise Nuclear Fuel Act
Private Enterprise for Nuclear Fuel Supply Act
Nuclear Fuel Supply Act
Consumers Low Cost Energy Act
Economical Nuclear Energy Act
Independent Nuclear Fuel Supply Act
ENERGY PROTECTION ACT
Key Words:
Better
National
Nuclear
Assure
Advanced
Competitive
Electric
Insure
Secure
Industry
Uranium
Supply
Economical
Consumer
Fuel
New
Commercial
Energy
Progressive
Opportunity
Special
CONSUMERS ENERGY ACT
CITIZ ENS ENERGY ACT
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BERALD R.FOR. &.
6/26/75
INFORMATION ON
THE PRESIDENT'S PLAN FOR A
COMPETITIVE NUCLEAR FUEL INDUSTRY
The President's Message to the Congress
Remarks upon Signing the Message - Statement
Summary Fact Sheet
Detailed Fact Sheet
Proposed Legislation
Questions and Answers
GERALD ? FORD
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.
MORE
( m)
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)
LIVERS
EMBARGOED FOR RELEASE
June 26, 1975
UNTIL 12:00 NOON (EDT)
Office of the White House Press Secretary
THE WHITE HOUSE
TO THE CONGRESS OF THE UNITED STATES:
Every so often, a Nation finds itself at a crossroads.
Sometimes, it is fortunate and recognizes it has a choice.
Sometimes, it does not.
We are at such a crossroads in America today.
The course we select will touch the lives of most of us
before the end of this century and surely affect the lives
of generations of Americans yet to come.
Today, I am asking the Congress to join me in embarking
this Nation on an exciting new course which will help assure
the energy independence we seek and a significantly strengthened
economy at the same time.
I am referring to the establishment of an entirely new
private industry in America to provide the fuel for nuclear
power reactors -- the energy resource of the future. I am
referring to uranium enrichment which is presently a Federal
Government monopoly.
Without question, our energy future will become more
reliant on nuclear energy as the supplies of oil and natural
gas diminish.
The questions we must answer are (1) whether the major
capital requirements for constructing new uranium enrichment
facilities will be paid for by the Federal taxpayer or by
private enterprise, and (2) whether a major new and expanding
segment of our economy will be under the control of the Federal
Government or the private sector.
The private sector has already demonstrated its capability
to build and operate uranium enrichment facilities under
contracts with the Federal Government. Since it is also
willing to provide the capital needed to construct new
more
(OVER)
2
uranium enrichment plants, I am asking the Congress to enact
legislation to enable American industry -- with all its
financial resources, management capability and technical
ingenuity -- to provide the enriched uranium needed to fuel
nuclear power plants.
I believe this is the proper and correct course for
America to take. The alternative is continued Federal
monopoly of this service at a cost to the taxpayers of at
least $30 billion over the next 15 years.
The enrichment of uranium -- which means, in brief,
separating the fissionable U-235 in uranium from non-fissionable
parts to provide a more potent mixture to fuel nuclear
reactors -- is an essential step in nuclear power production.
For more than twenty years, the United States
Government has supplied the enrichment services for every
nuclear reactor in America and for many others throughout
the world. Our leadership in this important field has enabled
other nations to enjoy the benefits of nuclear power under
secure and prudent conditions. At the same time, this effort
has been helpful in persuading other nations to accept
international safeguards and forego development of nuclear
weapons. In addition, the sale of our enrichment services
in foreign countries has returned hundreds of millions
of dollars to the United States.
These enrichment services have been provided by plants --
owned by the Government and operated by private industry --
in Oak Ridge, Tennessee, Portsmouth, Ohio, and Paducah, Kentucky.
A $1-billion improvement program is now underway to increase
the production capacity of these plants by 60 percent. But
this expanded capacity cannot meet the anticipated needs of
the next 25 years.
The United States is now committed to supply the fuel
needs for several hundred nuclear power plants scheduled to
begin operation by the early 1980's. Since mid-1974, we
have been unable to accept new orders for enriched uranium
because our plant capacity --- including the $1-billion
improvement -- is fully committed.
In short, further increases in enrichment capacity depend
on construction of additional plants, with seven or eight years
required for each plant to become fully operational.
more
3
Clearly, decisions must be made and actions taken today
if we are to insure an adequate supply of enriched uranium for
the nuclear power needs of the future and if we are to retain
our position as a major supplier of enriched uranium to the
world.
It is my opinion that American private enterprise is best
suited to meet those needs. Already, private industry has
demonstrated its willingness to pursue the major responsibilities
involved in this effort.
With proper licensing,
safeguards, cooperation and limited assurances from the Federal
Government, the private sector can do the job effectively and
efficiently -- and at enormous savings to the American taxpayer.
In this way, direct public benefits will be provided on a
long-term basis by private capital, not by taxpayers.
Accordingly, I am proposing legislation to the Congress
to authorize Government assurances necessary for private
enterprise to enter into this vital field.
A number of compelling reasons argue for private ownership,
as well as operation, of uranium enrichment plants. The market
for nuclear fuel is predominantly in the private sector. The
process of uranium enrichment is clearly industrial in nature.
The uranium enrichment process has the making of a new
industry for the private sector in much the same tradition as
the process for synthetic rubber -- with early Government
development eventually being replaced by private enterprise.
One of the strengths of America's free enterprise system
is its ability to respond to unusual challenges and opportunities
with ingenuity, vigor and flexibility. A significant
opportunity may be in store for many firms -- old and new --
to participate in the growth of the uranium enrichment industry.
Just as coal and fuel oil are supplied to electric utilities
by private firms on a competitive basis, enriched uranium should
be supplied to them in the same fashion in the future.
The energy consumer also stands to benefit. The production
of nuclear power now costs between 25 and 50 percent less than
electricity produced from fossil fuels. It is not vulnerable
to the supply whims or unwarranted price decrees of foreign
energy suppliers. And based on the past fifteen years of
experience, commercial nuclear power has an unparalleled
record of safe operation.
The key technology of the uranium enrichment process is
secret and will remain subject to continued classification,
safeguards and export controls.
more
4
But for several years, a number of qualified American
companies have been granted access to the Government's technology
under carefully controlled conditions to enable them to assess
the commercial potential for private enriching plants.
The Government-owned gaseous diffusion enriching plants
have run reliably and with ever-improving efficiency for more
than a quarter of a century. One private group has chosen
this well-demonstrated process as part of its $3.5 billion
proposal to build an enrichment plant serving 90 nuclear
reactors here and abroad in the 1980's. Others are studying
the potential of the newer gas centrifuge process. Though not
yet in large-scale operation, the centrifuge process -- which
uses much less power than the older process -- is almost ready
for commercial application.
I believe we must move forward with both technologies
and encourage competitive private entry into the enrichment
business with both methods. A private gaseous diffusion
plant should be built first to provide the most urgently
needed increase in capacity, but we should proceed simul-
taneously with commercial development of the centrifuge
process.
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.
For a number of reasons, a certain amount of governmental
involvement is necessary to make private entry into the uranium
enrichment industry successful.
The initial investment requirements for such massive
projects are huge. The technology involved is presently owned
by the Government. There are safeguards that must be rigidly
enforced. The Government has a responsibility to help ensure
that these private ventures perform as expected, providing
timely and reliable service to both domestic and foreign
customers.
Under the legislation I am proposing today, the Energy
Research and Development Administration would be authorized
to negotiate and enter into contracts with private groups
interested in building, owning and operating a gaseous
diffusion uranium enrichment plant.
more
&
5
ERDA would also be authorized to negotiate for construction
of several centrifuge enrichment plants when more definitive
proposals for such projects are made by the private sector.
Contract authority in the amount of $8 billion will be
needed, but we expect almost no actual Government expenditures
to be involved. In fact, the creation of a private enrichment
industry will generate substantial revenues for the United States
Treasury through payment of Federal income taxes and com-
pensation for use of Government-owned technology.
Under the proposed arrangements, there will be an
opportunity for foreign investment in these plants, although
the plants will remain firmly under U.S. control. There will
be no sharing of U.S. technology and, there will be limitations
on the amount of capacity each plant can commit to foreign
customers.
In addition, all exports of plant products will continue
to be made pursuant to Governmental Agreements for Cooperation
with other Nations. All will be subject to appropriate safe-
guards to preclude use for other than agreed peaceful purposes.
Foreign investors and customers would not have access to
sensitive classified technology. Proposals from American
enrichers to share technology would be evaluated separately,
and would be subject to careful Government review and approval.
Finally, the plants proposed will be designed and built
to produce low enriched fuel which is suitable only for
commercial power reactors -- not for nuclear explosives.
In the remote event that a proposed private venture did
not succeed, this legislation would enable the Government
to take actions necessary to assure that plants will be
brought on line in time to supply domestic and foreign
customers when uranium enrichment services are needed.
I have instructed the Energy Research and Development
Administration to implement backup contingency measures,
including continuation of conceptual design activities,
research and development, and technology assistance to the
private sector on a cost-recovery basis.
ERDA would also be able to purchase from a private firm
design work on components that could be used in a Government
plant in the unlikely event that a venture fails.
Finally, I pledge to all customers -- domestic and
foreign -- who place orders with our private suppliers that
the United States Government will guarantee that these orders
more
6
are filled as needed. Those who are first in line with our
private sources will be first in line to receive supplies
under this assurance. All contracted obligations will be
honored.
I also pledge that cooperative agreements made with
private firms under the proposed new authority will fully
reflect the public interest. In fact, all contracts will be
placed before the Congress in advance of their effectiveness.
The Congress will have full and complete review of each one.
In sum, the program I am proposing will take maximum
advantage of the strength and resourcefulness of industry and
Government.
It 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.
Although the development of a competitive nuclear fuel
industry is an important part of our overall energy strategy,
we must continue our efforts to conserve the more traditional
energy resources on which we have relied for generations.
And we must accelerate our exploration of new sources of
energy for the future -- including solar power, the harnessing
of nuclear fusion and development of nuclear breeder reactors
which are safe, environmentally sound and reliable.
I ask the Congress for early authorization of this program.
GERALD R. FORD
THE WHITE HOUSE,
June 26, 1975.
#
#
#
#
BERALD
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.
more
(OVER)
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.
#
#
#
#
FORD LIBRARY & 0744
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
Developments Leading to the President's Plan
9
- U.S. Leadership in Uranium Enrichment
Technology
Gaseous Diffusion
more
(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
more
WALD BENALD R. FORD
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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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 oun 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.
-
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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FORD
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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FURD
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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8
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 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 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 1s 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.
is
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FORD
RALD
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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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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 commercia
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 principa
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 diffusio
plant.
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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 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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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 contra
were backed up by announcement that the U.S. would have expand
capacity available that could fulfill requirements, if needed.
The expanded U.S. capacity that will result from the President
plan will provide sources of supply that can be tapped by the
holders of conditional contracts.
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GERALD
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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 1s 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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19
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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21
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
FORD
078816
URANIUM MINES & MILLS U₃O₈ CONVERSION
ORE & ORE CONCENTRATE
TO UF₆
UF6 CONVERSION
(U3O3)
U235 ENRICHMENT
TO UO₂ AND FABRICATION
OF FUEL ASSEMBLIES
22
RECOVERED
URANIUM
(AS UF 6 )
PLUTONIUM
REACTOR
(As PUO2)
FEDERAL REPOSITORIES
REPROCESSING PLANT
SPENT FUEL STORAGE
HIGH LEVEL
SOLID WASTE
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 additional 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
######
CRAED
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
recovery of costs and appropriate royalties for
the use thereof;
FÜRD
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
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.
# # # #
more
Bill Analysis
Section 1 of the proposed bill cites the Act as
the "Nuclear Fuel Assurance Act of 1975. 11
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
for review by the Joint Committee on Atomic Energy of
the basis for any cooperative arrangement, or amendment
more
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.
#
#
#
#
QUESTIONS AND ANSWERS RELATING TO
THE PRESIDENT'S PLAN FOR A COMPETITIVE
URANIUM ENRICHMENT INDUSTRY
1. Why Privatization?
2. Why Privatization Now?
3. Why Does Industry Need Government Assistance?
4. Cut-Off Date on Attempt to Get Private Entry?
5. What Work Will Continue on a Possible Government-
Owned Add-on Diffusion Plant?
6. When Will the U.S. "Order Book" Open?
7. What Happens if a Private Plant Doesn't Work?
8. What Happens if a Private Plant Isn't Licensed?
9. Does UEA Have Customers?
10. Why No Board of Directors With Federal Membership?
11. Payments by Industry for Government-Owned Technology?
12. Unanswered Safety and Environmental Questions?
13. NRC Safeguards and Safety Controls?
14. Nuclear Materials Safeguards Implications?
15. Will Classified Technology Now be More Widely
Available to Private Industry?
16. Why Emphasize Uranium Enrichment Sales to
Foreigners?
17. Foreign Investment Without Foreign Control?
18. Foreign Purchases Without Investment?
19. Will Investment Requirements Discriminate Against
Foreign Customers?
20. Foreign Customer Conditional Contracts with ERDA?
21. U.S. Share of the Foreign Market?
22. Basis for the $8 Billion Authorization Reque :t?
23. Basics of Uranium Enrichment?
- What does "uranium enrichment" mean? What does
it consist of?
- Why is the process referred to as a "service"?
- How does the gas centrifuge process differ from
the gaseous diffusion process?
- Why is the enrichment process secret or "classified"?
- What is a Separative Work Unit (SWU) ?
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 acompetitive nuclear fuel supply industry.
The principal reasons are:
(1) The provision of uranium enrichment services is
now essentially a commercial/industrial activity.
It is not an activity that can be performed well
only by the Federal Government.
(2) Private industry is willing and able to enter the
uranium enrichment industry.
(3) The uranium enrichment industry must expand rapidly
over the next decade. This expansion should occur
in the private sector -- rather than in the Federal
Government.
(4) Construction of the needed plants to increase
uranium enrichment capacity through 2000 would cost
$30 billion or more (probably $40 to $50 billion).
These demands should not compete in the Federal
Budget with other areas which can only be financed
by the Government -- such as social services and
defense preparedness.
(5) As the Nation's reliance on nuclear power grows,
maintaining a Federal monopoly in uranium enrichment
would lead to an unprecedented degree of Federal
control over the Nation's electrical energy supply.
(6) Private competition will provide incentives - over
the long term - for lower costs, improved efficien-
cies, and technological advancement.
R.FORE
BALD
- 2 -
(7) Private ventures will generate substantial revenues
to the Treasury through payment of Federal income
taxes and compensation for Government-owned dis-
coveries and inventions used by industry. Revenues
should be in the neighborhood of $90-100 million per
year per plant.
(8) A private undertaking 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.
7/1/75
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 Federal policy of encouraging private
entry announced 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.
One venture has reached the stage where it has proposed
construction of a plant and the taking of orders. It
has lined up customers, and made detailed plans to pro-
ceed, 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 tech-
nology to provide the next increments of capacity.
The diffusion plant venture will fulfill immediate needs
for a commitment to new capacity, follow through on the
Government's commitment to private entry into uranium
enrichment, and 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.
3
WHY DOES INDUSTRY NEED GOVERNMENT
ASSISTANCE?
Question:
Why should it be necessary for the Government to provide
any assistance to get private industry involved in
uranium enrichment if it is really a commercial operation?
Answer:
The principal obstacle preventing private industry from
building, owning and operating uranium enrichment plants
is the difficulty in obtaining private financing for the
plants -- 85% of which, under UEA's plan, would be supplied
by the commercial bond market. The difficulty arises from
the fact that potential bondholders (including banks,
insurance companies, pension funds) have viewed enrichment
plants as relatively high risk investments for several
reasons:
1. Very large investments are required for individual
plants -- $3.5 billion in the case of the proposed
UEA plant.
2. There will be a lengthy period of time -- possibly 8
years -- after the initial investments are made before
plants begin production and returns on investments are
realized.
3. Since the U.S. Government owns all existing plants and
must supply technology and key components -- which
are classified and must remain so -- potential investors
are not able to make their usual full, independent
analyses of the performance of components or plant
operations. Such an analysis is usually necessary to
assure themselves as to the reliability of the planned
operation.
4. Finally, the financial community seems to perceive a
remote possibility that governmental actions -- for
example, relating to licensing of a plant -- might
seriously delay or prevent a private firm from
completing a plant. Since such governmental actions are
viewed as financially catastrophic -- in the unlikely
event they were to occur -- potential lenders view
this factor as adding to the risk of private entry.
FORD
Normally, potential private uranium enrichment service
suppliers could rely on their long-term contracts with
their utility-customers as security for their long term
- 2 -
debt. But the current financial difficulties of many
utilities have mitigated against the use of this source
of financial support.
The factors that now contribute to the obstacle outlined
above can be overcome through the warranting of technology
and key components -- for which the Government will be
paid by private industry; and through limited, temporary
assurances. Such assurances, which are provided for in
the President's plan, would end after a limited period of
commercial operation of a plant.
7/1/75
SALO K. FORD
4
CUT-OFF DATE ON ATTEMPT TO GET PRIVATE ENTRY?
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 failure is considered very unlikely.
Second, there is no single 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.
If the Government had to step in, the question of which
plant would be built -- that is, a large addition to an
existing Government plant, or free-standing plant -- would
depend on when intervention proved necessary. For example:
If Congress failed to pass the legislation needed for
the private industry approach and instead authorizes
a Government plant, it probably would be desirable to
proceed with an add-on plant rather than a free standing
plant.
If at some time prior to March 1976 when UEA is expected
to complete financial, customer and power supply arrange-
ments, UEA found that it could not proceed, the Govern-
ment would then need to determine whether to proceed
with an add-on plant or with a free-standing plant.
If at some later time and after construction was underway,
the Government had to step in and assume UEA assets and
liabilities, it probably would be more advantageous to
proceed with the free-standing plant.
7/1/75
5
WHAT WORK WILL CONTINUE ON A POSSIBLE
GOVERNMENT-OWNED ADD-ON DIFFUSION PLANT ?
Question:
You have indicated that work will continue on the planning for
a Government add-on diffusion plant as a contingency measure.
Precisely what work on the add-on plant alternative do you
anticipate will be done in the months ahead?
Answer:
We expect the private industry approach will work, so that an
add-on Government-owned plant will not be necessary. But,
as the President indicated, ERDA will implement back-up
contingency measures SO that we can be doubly sure that the
U.S. will have additional capacity on line about 1983 to
supply domestic and foreign customers.
As to the specific contingency work that will be done, we
envision the following:
First, conceptual design activity for an add-on plant
has been underway within ERDA for some time and this
activity will be continued.
Second, the bill proposed by the President includes a
section asking for authorization to begin construction
planning and design activities for the possible expansion
of an existing uranium enrichment facility if needed.
Third, much of the design activity that UEA will have to
undertake in the months immediately ahead will involve
work on components that could be used in either a free
standing plant or in an add-on facility. ERDA plans to
seek arrangements with UEA to purchase such design work
so that it could be used for a Government plant if the
private venture were unable to go ahead.
ERDA will assure that back-up contingency measures are
coordinated with and do not overlap planning for the private
venture. ERDA will also assure that work on the contingency
measure does not preempt resources that would be needed in
order for the UEA plan to proceed. ERDA will not, for
example, begin any long lead time procurement for a Govern-
ment facility.
R.
GREAT
7/1/75
6
WHEN WILL THE U.S. "ORDER BOOK" OPEN
Question:
When will customers be able to negotiate fuel contracts
with private U.S. enrichers? That is, when will the "order
book" open?
Answer:
A number of private U.S. firms, particularly the UEA which
is well advanced, have been actively seeking orders for
well over a year and will be in a position to accept service
contracts and financial participation arrangements immediately,
consistent with the thrust of the President's plan. These
contracts would be contingent upon legislative approval
of the basis for the cooperative arrangements with industry
to become firm, but, in any event, they would be covered by
the Presidential supply assurances.
In short, the U.S. enrichment "order book" is about to be
opened to provide assured and timely nuclear fuel to
domestic and foreign customers.
PARD
is
7/1/75
7
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 in over a quarter century of large scale
Government operation. Government 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
plant will work.
BERALD R. FORD
7/1/75
8
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
9
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 comes
to be accepted as the next United States enriching plant, it is
very likely that customers will begin subscribing to the
remaining available plant output.
R.
FORD
BERALD
6/25/75
10
WHY NO BOARD OF DIRECTORS
WITH FEDERAL MEMBERSHIP?
Question:
Unlike most other occasions when the Government has developed
plans for private industry to enter a field that had pre-
viously been a Government monopoly, the President's Nuclear
Fuel Assurance Act does not provide for a Board of Directors
that would include Federally-appointed members to represent
the public interest. Why is this not now being done?
Answer:
There is no particular advantage in this instance in creating
a Board of Directors with Federal membership. Unlike COMSAT,
this legislation does not establish a single corporation, but
instead authorizes the Administrator to contract with private
firms which wish to enter the uranium enrichment field.
To contractually require Federal membership on the Board of
Directors of various private corporations would not only
present numerous problems under state incorporation laws,
would also be unnecessarily burdensome, as the agreements
entered into by ERDA will provide for sufficient Government
oversight to protect the public interest. Also, NRC will
provide additional oversight as it carries out its regulatory
responsibilities.
7/1/75
11
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,
if UEA generates 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. Total
revenues from these industry payments will increase as
other private plants--probably using centrifuge technology--
begin production.
R.
BERALD
FORD
7/1/75
12
UNANSWERED SAFETY AND ENVIRONMENTAL QUESTIONS
Question:
Why is the Ford Administration working to increase the
supplv of nuclear fuel when there are still significant
questions regarding the safety and environmental impact
of nuclear power plants?
Answer:
The safety record of commercial nuclear power plants has
been excellent. The overwhelming majority of technical
experts in the field are satisfied that safety risks from
nuclear power plants are minimal and that nuclear plants
are less of an environmental burden during operation than
oil or coal alternatives.
Both a construction permit and an operating license from
the Nuclear Regulatory Commission are required for any
commercial nuclear power plant in this country. Before
granting a permit, NRC conducts a full review of safety and
environmental questions. (The reviews include an opportunity
for public participation.) The NRC applies conservative
criteria to ensure safe participation.
As added assurance, the Federal Government is pursuing
opportunities to improve even further the safety of nuclear
power plants and of radioactive waste management. The safety
research program of the NRC will amount to over $80 million
in FY 1976. ERDA expenditures for development of improved,
environmentally sound waste management technology will amount
to $36 million in FY 1976.
FORD
7/1/75
13
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
R.
GERALD
FORD
14
NUCLEAR MATERIAL SAFEGUARDS IMPLICATIONS
Question:
What are the international safeguards and non-proliferation
implications of the President's proposal?
Answer:
This question should be viewed from two aspects: first,
what are the consequences of the increased availability of
fuel for overseas distribution. Second, to what extent may
the project, including the expected foreign participation,
lead to the dissemination abroad of U.S. uranium enrichment
technology?
With respect to the first aspect, it should be noted that
foreign distribution of material produced by the facilities
built under the President's proposal will take place under
U.S. Agreements for Cooperation (as provided for in the Atomic
Energy Act of 1954, as amended) under the same safeguards
arrangements applicable to the distribution of similar material
from U.S. Government-owned enrichment facilities. Accordingly,
there is no adverse safeguards and non-proliferation effects
from private entry. On the contrary, and far more importantly,
the renewed ability which the program will create to meet
overseas needs for enriched uranium will substantially advance
U.S. non-proliferation objectives (a) by reducing the pressure
for the construction of independent enrichment capacity in
other nations, and (b) by strengthening U.S. ability to
influence other nations' nuclear programs in directions
favorable to U.S. non-proliferation objectives.
With respect to the dissemination of U.S enrichment technology,
foreign participation in the investment and business manage-
ment aspects of the facility will involve no access by foreigners
to classified U.S. enrichment information.
While the United States has expressed a willingness, under
appropriate conditions, to consider cooperation with other
nations in uranium enrichment technology, any proposal for
such cooperation would be considered on its merits as a
separate matter by the Government.
FORD
2
SERALD
7/1/75
15
WILL CLASSIFIED TECHNOLOGY NOW BE MORE
WIDELY AVAILABLE TO PRIVATE INDUSTRY?
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 personnel 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.
7/1/75
16
WHY EMPHASIZE URANIUM ENRICHMENT
SALES TO FOREIGNERS?
Question:
Why does UEA give so much emphasis to uranium enrichment
services to foreign customers?
Answer:
UEA's proposal contemplates that 60% of the uranium enrichment
services would go to foreign customers. There are several
reasons for heavy emphasis on foreign participation.
The extent and nature of foreign participation will be
discussed further in negotiations between ERDA and UEA.
Among the reasons for interest in foreign sales are:
1. Supplying foreign needs will substantially advance U.S.
non-proliferation objectives by reducing the pressure
for the construction of independent enrichment capacity
in other nations, and by strengthening U.S. ability to
influence other nations' nuclear programs in directions
favorable to U.S. non-proliferation objectives.
2. Foreign sources can supply a large fraction of the
financing for the UEA plant, thus reducing the drain on
U.S. capital markets. Foreign sources might also be
interested in helping to finance the subsequent centri-
fuge plants.
3. Foreign customers presently account for nearly one-third
of ERDA's sales of enrichment services. These U.S. sales
constitute an important portion of U.S. exports and gen-
erate hundreds of millions of dollars worth of foreign
exchange needed to pay for purchases of petroleum, etc.
and need to be encouraged.
4. The U.S. pioneered development of nuclear power. The
U.S. has a responsibility and a strong self interest in
continuing to help other nations to meet their own energy
needs. This is a central element of our foreign policy
in the energy area. Expanded use of nuclear power abroad
will help reduce dependence on oil resources.
5. The U.S. has repeatedly made public commitments that it
would be a major and reliable source of enrichment
services to foreign customers.
7/1/75
17
FOREIGN INVESTMENT WITHOUT FOREIGN CONTROL
Question:
You have indicated that UEA is proposing substantial
foreign investment in its proposed project -- including
investment from OPEC nations. What protection do we have
to protect us against potential abuses by foreign investors?
Answer:
UEA's proposal to ERDA contemplates 60% foreign investment
in the UEA plant, with similar foreign access to the pro-
duct output of the plant. The foreign investment aspects
of the proposal will have to be evaluated during ERDA's
negotiations with UEA and would also be evaluated by NRC
as a part of its licensing responsibilties.
However, there are several general points that can be made
now about protection against any potential for abuses by
foreign investors:
1. U.S. control and dominance is specified by law as a
necessary condition for obtaining a license from the
Nuclear Regulatory Commission.
2. Uranium enrichment services would be made available to
foreign customers only under U.S. Government approved
Agreements for Cooperation (which are provided for in
the Atomic Energy Act, as amended). Agreements for
Cooperation will include comprehensive safeguards
requirements.
3. Investments by foreign sources in a private uranium
enrichment project do not result in access to sensitive
classified U.S. technology.
UEA has proposed substantial foreign investment in its
project to help ease the impact on U.S. financial
markets of the large amount of capital required for the
project -- $3.5 billion. This aspect of the proposal
appears generally consistent with the U.S. objective, to
the extent that OPEC funds are involved, of constructive
investment of OPEC money in the U.S.
THERE
7/1/75
18
FOREIGN PURCHASES WITHOUT INVESTMENT?
Question:
Will foreign customers be able to obtain uranium enrichment
services without investing 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 if judged by enrichers to be compatible
with their ventures.
FORD
&
6/24/75
SERALD
19
OS
WILL INVESTMENT REQUIREMENTS DISCRIMINATE
AGAINST FOREIGN CUSTOMERS?
Question:
Isn't it discriminatory for UEA to require foreign
customers to invest in the proposed UEA plant in order
to obtain guaranteed access to fuel?
Answer:
We understand UEA's concept of requiring plant investments
as an entitlement to a proportion of fuel is applicable
both to U.S. and foreign users. In the U.S. case, pro-
portional debt and equity will come from domestic lenders
and not from the utility customers themselves. Foreign
users could also follow this procedure by raising financing
from their domestic lending institutions. Thus, there does
not appear to be any real difference between the treatment
of foreign and domestic users.
R.
GERALD
FORD
7/1/75
20
FOREIGN CUSTOMER CONDITIONAL CONTRACTS WITH ERDA
Question:
What happens to those foreign customers who have contracts
with ERDA that are conditional on plutonium recycle and
subject to termination?
Answer:
Conditional contracts were backed by an announcement in
August 1974 that the U.S. would have expanded capacity
available to fulfill requirements, if needed. A number
of foreign customers currently holding conditional con-
tracts are already prospective investors in the proposed
diffusion plant project advanced by UEA.
The President's plan will assure that the U.S. will have
additional capacity which can be tapped by holders of
conditional contracts.
FORD
6/30/75
21
U.S. SHARE OF THE FOREIGN MARKET
Question:
How much of the foreign uranium 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.
Our sophisticated technological leadership developed over
the past 30 years and our proven ability to provide enrich-
ment services will make it possible for us to be in a good
position to continue serving as a major world supplier.
BERALE R
7/1/75
22
BASIS FOR $8 BILLION AUTHORIZATION REQUEST
Question:
What is the basis for the $8 billion authorization request?
Answer:
The amount set out in Section 3 of the bill is designed to
cover the Government's potential financial exposure for
cooperative agreements with private diffusion and centri-
fuge ventures -- in the unlikely event that all the
ventures failed.
The $8 billion dollars comprises the following items:
$1.4 billion represents 40%, i.e., the domestic portion,
of the estimated $3.5 billion cost of the
9 million unit gaseous diffusion plant.
3.0 billion for the estimated domestic share of the cost
of 3 to 4 future centrifuge plants totaling
6 to 12 million units.
3.6 billion for contingencies to cover uncertainties of
estimates of the amount of foreign finan-
cial participation and inflation.
If some other unforeseen or unlikely occurences were to
result in costs higher than those included in the above
estimate, an amendment to increase the $8 billion may be
required. Again, the Administration's expectation is that
none of these funds will be spent.
7/1/75
23
BASICS OF URANIUM ENRICHMENT
Question:
What does "uranium enrichment" mean? What does it consist of?
Answer:
Natural uranium contains only 0.7% of the energy-producing
form of uranium, U-235, which produces energy when it
splits, i.e., fissions. The remainder of the natural
uranium, U-238, the non-fissionable uranium, is not capable
of producing energy directly. Uranium enrichment is the
process by which the natural uranium is converted into a
richer mixture of U-235 (2%-4%) which can then be used in
nuclear power reactors to produce electricity. The natural
uranium must also be changed chemically into a gas called
uranium hexafluoride before it can be enriched.
Question:
Why is the process referred to as a "service"?
Answer:
The plant owner does not sell enriched uranium as such;
rather, he sells the service of conducting the enrichment
process for the customer. The plant owner (now exclusively
the Government) merely processes customer-owned uranium in
his enrichment plant.
Question:
How does the gas centrifuge process differ from the gaseous
diffusion process?
Answer:
In the diffusion process, the uranium gas is pumped through
a membrane, which is in effect a fine filter. The lighter
U-235 moves through the membrane more readily than the U-238,
and the product, therefore, has a higher concentration of U-235.
The centrifuge process is based essentially on the principle of
the cream separator used in the dairy industry. The gas is
whirled in cylinders at a high speed, and the heavier uranium
atoms, U-238, tend to move by centrifugal force to the out-
side of the cylinders. The desired lighter uranium, U-235,
is then extracted from the inside of the cylinders where
their concentrations are higher.
- 2 -
Question:
Why is the enrichment process secret or "classified"?
Answer:
The technology is classified because similar equipment could
be used in a different plant to make atomic bomb material.
The classification applies to only sensitive technical fea-
tures of the process and some of the equipment used.
Question:
What is a Separative Work Unit (SWU) ?
Answer:
A separative work unit (SWU) is a measure of the amount of
effort required in a uranium enrichment plant to separate
the fissionable (U-235) and non-fissionable (U-238) atoms
or isotopes of uranium from each other to produce a mixture
of uranium which is richer in the desired fissionable iso-
tope. Thus, it is a measure of the capacity of any uranium
enrichment plant to deliver uranium enrichment services.
The proposed UEA plant is rated at 9 million SWU's per year,
and the centrifuge plants are expected to be roughly one-third
this size.