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This file contains materials relating to proposals for the production of enriched uranium by a private company versus the expansion of the government-owned plant in Portsmouth, Ohio.
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Uranium Enrichment (8)
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Uranium Enrichment (8)
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This file contains materials relating to proposals for the production of enriched uranium by a private company versus the expansion of the government-owned plant in Portsmouth, Ohio.
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James M. Cannon Files (Ford Administration)
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The original documents are located in Box 36, folder "Uranium Enrichment (8)" 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 36 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
June 17, 1975
MEMORANDUM FOR:
PHIL BUCHEN
JIM CONNOR
MAX FRIEDERSDORF
ALAN GREENSPAN
ROD HILLS
JIM LYNN
JACK MARSH
JIM MITCHELL
BRENT SCOWCROFT
BILL SEIDMAN
THROUGH:
JIM CAVANAUGH
FROM:
GLENN SCHLEEDE
SUBJECT:
Uranium Enrichment - Message,
Bill, Economic Impact Statement
Enclosed are draft materials received from ERDA, including:
Draft bill
Transmittal letter
Draft economic impact statement
Rough Draft Presidential Statement
The draft bill' does not yet take into account the questions
and problems raised over the past few days by Rod Hills.
OMB (Loweth) is developing a paper on the Congressional
approval issue for early discussion.
OMB is circulating the draft bill and transmittal letter
through the regular legislative clearance system.
Note also that the ERDA package assumes the bill would be
transmitted by Seamans rather than the President, a question
we have not yet addressed.
With respect to the draft message, would you please let me
have your recommendations by noon, Wednesday, June 18,
on any basic changes that should be made before the draft
is turned over to Messrs. Hartmann and Theis.
Attachment
CC:
I'm Cannon
UNITED STATES
SEAL
ADMINISTRA
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION
WASHINGTON, D.C. 20545
USA
JUN 16 1975
Honorable James T. Lynn, Director
Office of Management and Budget
Dear Mr. Lynn:
Transmitted herewith is an Energy Research and Development
Administration legislative proposal to carry out the decision
of the President to provide necessary government assistance to
establish a competitive private industry to provide additional
increments of enriched uranium needed for commercial nuclear
reactors in this country and abroad.
The proposed legislation would amend Section 161 of the Atomic
Energy Act of 1954, as amended, to authorize cooperative
arrangements with private enterprise for the provision of
facilities for the production and enrichment of uranium enriched
in the isotope 235.
Although the impact of the enactment of the proposed legislation
upon the Federal budget is not at this time susceptible to
precise estimate, it is believed that with the assistance
provided under this legislation private capital can provide the
funds necessary to the establishment of a competitive private
enrichment industry.
We would appreciate your advice as to whether the proposed
legislation is in accord with the program of the President.
Sincerely,
Sens
Robert C. Seamans, Jr.
Administrator
Enclosures:
As stated
UNITED STATES
ADMINIST tor ATION
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION
WASHINGTON, D.C. 20545
USA
JUN 16 1975
Honorable James T. Lynn, Director
Office of Management and Budget
Dear Mr. Lynn:
Transmitted herewith is an Energy Research and Development
Administration legislative proposal to carry out the decision
of the President to provide necessary government assistance to
establish a competitive private industry to provide additional
increments of enriched uranium needed for commercial nuclear
reactors in this country and abroad.
The proposed legislation would amend Section 161 of the Atomic
Energy Act of 1954, as amended, to authorize cooperative
arrangements with private enterprise for the provision of
facilities for the production and enrichment of uranium enriched
in the isotope 235.
Although the impact of the enactment of the proposed legislation
upon the Federal budget is not at this time susceptible to
precise estimate, it is believed that with the assistance
provided under this legislation private capital can provide the
funds necessary to the establishment of a competitive private
enrichment industry.
We would appreciate your advice as to whether the proposed
legislation is in accord with the program of the President.
Sincerely,
R.bra
Sens
Robert C. Seamans, Jr.
Administrator
Enclosures:
As stated
FORD LIBRARY is GERALD
Honorable Nelson A. Rockefeller
President of the Senate
U. S. Senate
Honorable Carl B. Albert
GERALD FORD LIBRARY
Speaker of the House.
House of Representatives
The Energy Research and Development Administration is pleased to
submit for the consideration of the Congress the enclosed draft
bill to amend Section 161 of the Atomic Energy Act of 1954, as
amended, to authorize cooperative arrangements with private
enterprise for the provision of facilities for the production
and enrichment of uranium enriched in the isotope 235.
This proposal would carry out the President policy stated in
his message to the Congress on June , 1975, to foster, through
limited forms of Government assistance, the creation of a competitive
private industry to supply enriched uranium for the new nuclear
power reactors which will be needed in the 1980's and beyond to
help meet both domestic and foreign requirements for energy. The
purposes underlying this policy are stated fully in the President's
message and will not be repeated here.
The Energy Research and Development Administration, and its pre-
decessor, the Atomic Energy Commission, have been conducting
discussions over the past several years with private companies
interested in entering the uranium enrichment business. These
discussions indicated that various forms of Government assistance
were prerequisites to private companies undertaking to design,
construct, own and operate such facilities, whether or not the
technology employed was that of the gas centrifuge or gaseous
GERALD FORD LIBRARY
diffusion process. Thus, all prospective entrants into the private
enrichment industry perceived a need for the Government to furnish
certain technical assistance, classified information, and equipment
which are not available from sources other than the Government.
They indicated a need for facility performance assurances, materials
and equipment warranties. Many indicated a need for Government
purchase, for a limited period and amount, of enriching services
during initial operations in order to service their debt and provide
a return on equity should they not have sufficient customer demand
during the initial period. All stated the need for Government
provision of enriching services from the Government stockpile to
meet their commitments to supply their customers requirements should
their facilities fail to commence operations as scheduled or for a
limited period suffer interruptions in operation.
The basic characteristics of the uranium enrichment business include
high capital intensity; long lead times for planning, engineering and
construction; an economic environment involving many uncertainties;
a technology which has been developed by the Government on a classified
basis, is subject to rapid improvement, and has not yet been proven on
a commercial basis; customers (electric power companies) which are
regulated as to price, have a capital structure designed for minimal
risk, and which face unprecedented capital commitments. Under these
circumstances, many prospective entrants asserted the need for
Government assurances against certain risks to enable securing the
large amounts of capital, both debt and equity, that would be
GERALD R. FORD
n
required for such undertaking. For this purpose they sought various
forms of undertakings by the Government to acquire their equity
interest in and to assume their obligations, liabilities and debt
arising out of their undertaking the design, construction, ownership
or initial operation of an enrichment facility in the event they
could not complete the enrichment facility or bring it into commercial
operation. Assurance of such undertakings would, it was believed, be
essential to attract sufficient private investment and orders from
enrichment customers.
The proposed amendment would enable the Energy Research and Development
Administration to provide such assistance as is determined to be
necessary and in the best interests of the Government after detailed
negotiation with selected individual proposers of enrichment services.
It would be the Government's intention in such negotiations to make
the most advantageous agreement for the Government and to place the
largest risk on the private proposer consistent with the need to
create several viable private enterprises to provide enrichment
services. For this purpose there would be negotiated suitable and
effective incentives to the private proposer to build and operate
an enrichment facility under specific costs and schedules. In
this way, there would be established a competitive private domestic
enrichment industry essential to support the manifold growth in nuclear
power which is expected to take place over the next several decades.
Appropriate Congressional oversight of each arrangement would be
provided by requiring that the proposed basis for any arrangement be
submitted to the Joint Committee on Atomic Energy and a period of
forty-five days elapse prior to execution of any such arrangement.
Inherent in the authorization which would be provided by this legislation
is assumption of an obligation to provide enrichment services. However,
it would not necessarily be required in every case that the Government
complete or operate the facility if other provision can be made to
meet the obligation, including, for example, transfers from the Govern-
ment stockpile or transfer to other enrichment plants capable of
meeting contract requirements. Should it be desirable for the
Government to modify, complete, operate or dispose of and enrichment
facility, a plan therefor would be submitted to the Joint Committee
on Atomic Energy for a period of forty-five days prior to implementation.
Appropriations would be authorized to carry out the obligations and
plans undertaken under the authority of this legislation.
United States enrichment capacity must be increased to meet the
growing needs for nuclear power of the United States and the free world.
Should we not achieve the transition of responsibility for provision
of enrichment services from Government monopoly to private industry,
the Government will have to provide the needed increments of additional
enrichment capacity costing several billions of dollars.
Although the impact of the enactment of the proposed legislation upon
the Federal budget is not at this time susceptible to precise estimate,
it is anticipated that private capital can provide the funds necessary
to the establishment of a competive private enrichment industry and
FORD
it will not be necessary to exercise the obligations to complete
and operate individual plants.
LIBRARY
In accordance with Executive Order No. 11821, there is also enclosed
an inflation impact assessment, which concludes that the effects
of the proposed legislation will be to minimize inflationary pressures
as the economy and possibly to lead to lower costs than the alternatives
of increased use of fossil fuels or expansion of Government enrichment
facilities.
In accordance with the National Environmental Policy Act, a draft
environmental impact statement on Additional Uranium Enrichment
Capacity has been prepared as a part of the planning process leading
to thie legislative proposal. This statement will be submitted to
the Congress in the near future and also released for public comment
under expedited procedures approved by the Council on Environmental
Quality. In connection with any particular plant which may be built
by private industry under the authority of this legislation, specific
environmental impact statements for the plant concerned will be
submitted and considered in the licensing process conducted by
the Nuclear Regulatory Commission.
The Energy Research and Development Administration urges the Congress
to consider and enact this legislation promptly. We are prepared
to appear before the appropriate Committee or Committees at their
0
earliest convenience and to furnish any information relating
to this proposal which may be desired.
The Office of Management and Budget has advised that enactment
of this legislation would be in accord with the program of the
President.
Sincerely,
Robert C. Seamans, Jr.
Administrator
Enclosures as stated
FORD is LIBRARY
1. Draft Bill
DRAFT BILL
To amend the Atomic Energy Act of 1954, as amended, to
authorize cooperative arrangements with private enterprise for the
provision of facilities for the production and enrichment of
uranium enriched in the isotope 235, 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 Section
161 of the Atomic Energy Act of 1954, as amended, is amended by
adding at the end thereof the following subsection:
"x. (1). Without regard to the provisions of Section 3679
of the Revised Statutes, as amended, and Section 169
of this Act, 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 providing such assistance
as the Administrator may deem appropriate and necessary
to encourage and facilitate the design, construction,
ownership and operation by private enterprise of
facilities for the production and enrichment of
uranium enriched in the isotope 235 in such amounts
as will assure the common defense and security and
encourage widespread 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 specifically, in
the discretion of the Administrator,
furnishing technical assistance, information,
enriching services materials, and equipment on the
basis of recovery of costs;
providing warranties for materials and
equipment furnished;
- 2 -
providing facility performance assurances;
purchasing enriching services;
undertaking to acquire the interest of such
person or persons in, and to assume the obligations
and liabilities (including debt) of, such person or
persons arising out of the design, construction,
ownership, or operation for a defined period of an
enrichment facility in the event such person or
persons cannot complete that enrichment facility
or bring it into commercial operation; and
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 and to the provision of
appropriations (which are hereby authorized) to fulfill
the obligations undertaken under the authority of this
GLRAZO FORD
subsection.
(2) Before the Administrator enters into any arrangement
or amendment thereto under the authority of this
subsection, or before the Administrator acquires the
interest of any person or determines 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
- 3 -
proposed arrangement or amendment), or the plan
for such acquisition, modification, completion,
operation or disposal by the Administrator, as appro-
priate, 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 arrange-
ment 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."
FORD a LIBRART 07V839
EVALUATION OF INFLATIONARY IMPACT OF LEGISLATION
AUTHORIZING COOPERATIVE ARRANGEMENTS WITH PRIVATE
ENTERPRISE FOR THE PROVISION OF FACILITIES FOR
PRODUCTION AND ENRICHMENT OF URANIUM
In accordance with the provisions of (1) Executive Order 11821
requiring a statement which certifies that the inflationary impact
of major proposals for legislation has been evaluated, (2) OMB
Circular A-107 which implements Executive Order 11821, and (3) the
draft regulations of the ERDA, the undersigned hereby certifies
that an evaluation of the inflationary impact of the proposed
legislation to authorize cooperative arrangements with private
enterprise for the provision of facilities for the production and
enrichment of uranium enriched in the isotope 235 has been made.
If the objectives of the legislation are fully realized, we foresee
the establishment of a competitive private industry providing
enrichment services on reasonable terms. This would facilitate the
fullest exercise of the nuclear option and result in a larger domestic
energy supply at lower cost to the public. If the legislation does
not meet with this measure of success, the alternatives are either
domestic and imports
to continue our heavy dependence on, fossil fuels or to continue,
and expand, the monopoly role of the Government in the provision of
enrichment services. Clearly, the need to rely more heavily on fossil
fuels, foreign or domestic, will result in a higher total energy
cost for the American consumer. If the Government were to expand
its enrichment operations to provide the additional services
required, the costs of services might appear lower if no provision
is made for the taxes, insurance, risk, and other normal costs of
private business operations. Assuming that capital costs of new
enrichment plants would be the same in the private or public sector
and given the expectations of increasing efficiency in privately-
competitive
operated facilities, we conclude that the effects of this legislation
will be to minimize inflationary pressures on the economy and
possibly to lead to substantially lower costs than under any other
alternative.
original signed b,
Date: 6/13/75
Signature:
R.W.he Gassie
DRAFT PRESIDENTIAL STATEMENT
To the Congress:
For the past two decades, the Federal Government has supplied
all the fuel needed to power nuclear reactors in this country and
for many commercial reactors elsewhere in the world. But the
demand for nuclear fuel both here and abroad has grown so vast
that all our capacity is now fully committed. Yet our needs and
those of other nations for reliable electric energy sources will
continue to rise sharply. Because it takes many years to bring
new power plants and fuel sources into operation, we must plan now
to provide the means to be able to meet those needs. In my
judgment, it is time to turn to American private enterprise to
build and operate, under necessary safeguards, the nuclear fuel
supply plants which will be essential in the future. If the
FORD LIBRARY
Government helps--in the right way--competitive private industry
can do the job--and without significant costs to the Federal budget.
I call upon the Congress today to give us the necessary authorization
to get started.
This nation is now engaged in a major effort to achieve a
greater degree of self-sufficiency in the critical field of energy
supply. We also are working vigorously with the other oil consuming
nations to reduce our alarming and growing dependence on imports of
foreign petroleum products. Few areas of effort are of more vital
importance to the health and prosperity of the Free World. Together
with other nations, we are engaged in major efforts to conserve
and better utilize our energy resources, and develop near and long-
term alternatives to imported fuels.
Energy self-sufficiency will require us to explore many roads,
and we cannot afford to overlook any of them. In the longer term,
we must develop and apply new technologies based on virtually
inexhaustible resources, such as solar electric energy, the harnessing
- 2 -
of nuclear fusion, and breeder reactors which are safe, environmentally
sound, and reliable. We have developmental programs in all these
areas, but until we know whether these promising technologies can in
fact provide us with the energy we will need--and it will be a long time
before we know--we must exploit other technologies to carry us
through. Conservation in all forms, solar heating and cooling of
buildings, greatly increased use of coal in solid, liquid and
gaseous forms, improved methods of extracting more gas and oil from
our existing fields--all are going to be necessary.
But it takes time for promising technologies to become widely
used in our society. As we work to accelerate technological
development, we need also to make sure our existing domestic energy
supplies continue to grow to meet the demands placed on them.
This means that, among other things, we must assure the continued
growth of nuclear power.
If we are to preserve the nuclear option, then we must move
aggressively on a number of fronts. We need to accelerate our
GERALD FORD LIBRARY
efforts to find new reserves of uranium that can be economically
mined. We need to stabilize reactor technology so we can design
and build plants more quickly and economically. We need to
improve our utilization of reactor capacity. And we need to manage
more effectively the nuclear fuel cycle, from safeguarding the
plutonium products of reactor operation to disposing of reactor
wastes safely and forever.
The Energy Research and Development Administration has programs
in all these areas and is going to intensify them as integral
parts of the comprehensive energy R&D plan it will shortly report.
to the Congress.
We must take the steps now to make nuclear energy available
for greater use over the next 25 years. Based on the past 10 years
of experience, commercial nuclear power has had an unparalleled record
of safe operation. Nuclear power now costs between 25 to 50 percent
less than electricity produced from fossil fuels. Nuclear power is
not vulnerable to the whims or price decrees of foreign energy
- 3 -
suppliers. While plainly not the only source of energy, it is
nevertheless an essential element of the total mix of energy
sources necessary to meet the goal of greater self-sufficiency in
the near term.
This is a perception that is shared not only by the United
States but by many other nations as well. With this in mind,
Secretary Kissinger at the Ministerial meeting of the International
Energy Agency last month, highlighted the importance of moving
urgently and decisively to ensure that nuclear power will indeed
contribute to greater reliability of energy sources for major
energy consumers and help all nations husband the world's supply
of oil.
An essential first step in fostering the continued safe growth
of nuclear power is to ensure we have adequate supplies of nuclear
fuel. Nuclear reactors run on uranium that has been slightly
enriched from the concentrations that occur in nature. And we in
the United States have run out of capacity to produce this essential
fuel.
For over 20 years the United States Government has been the
FORD
exclusive supplier, through its three enrichment plants, of the
enriched uranium that is necessary to fuel nuclear power stations
LIBRARY
here and in many foreign countries. This fact is of considerable
importance to our foreign friends, and accordingly we have
consistently endeavored to be an attractive and reliable supplier.
We have felt a responsibility towards enabling other nations to
utilize the benefits of nuclear power under secure and prudent
conditions. We also have felt that our role as an enriched
uranium supplier has been extremely important in inducing other
nations to accept international safeguards and to forswear nuclear
weapons. Moreover, foreign sales have returned hundreds of millions
of dollars to the United States.
Uranium enrichment is an area in which we have been the world
leader, and our technology is the most proven and advanced in the
IVVS 4 -
world. Our gaseous diffusion plants have run reliably for more than
a quarter of a century and have seen many improvements in their
efficiency. We have under way two major improvement and uprating
programs costing over $1 billion to increase their capacity over
50 percent. A new process, which separates fissionable from non-
fissionable uranium through the use of centrifuges, has been under
intensive development for more than a decade and is now also
ready to be scaled up, demonstrated, and brought into commercial use.
Although the U.S. is now committed to supply the fuel needs
of several hundred nuclear power plants coming on the line by the
early 1980's, we have, since August 1974, been unable to accept
new orders for enriched uranium because our capacity--even with
the projected increases--is fully committed. As a practical matter,
plans cannot be made for private financing of new domestic reactors
without a reasonably assured source of enriched uranium. Potential
foreign customers have the same problem. And, since it takes at
least 7-8 years to provide new enrichment plants, it is essential
that the United States begin immediately to construct new. capacity
if we are to preserve our ability to meet our total domestic goals
in energy and our ability to meet our foreign responsibilities as
a reliable supplier.
For a number of years it has been the stated objective of
Executive Branch that new enriching capacity should be provided
the GERAT FORD LIBRARY
by the private sector, since electric utilities are served by these
plants and since uranium enrichment is a function that is clearly
industrial in nature. Furthermore, if new enrichment plants can
be provided by the private rather than public sector, this will
reduce the pressures on the Federal budget for new construction
monies amounting to billions of dollars.
The development of a competitive, broadly based, private
enrichment industry, which is our objective, also will provide an
increased measure of assurance to all customers that the growth
of nuclear power will not be inhibited by inadequate enriching
- 5 -
capacity. It is one of the strengths of the American free enterprise
system that it is able to consider and respond to unusual challenges
and opportunities with ingenuity and vigor. This is what is now
happening with respect to uranium enrichment.
The technology of uranium enrichment is secret and shall
remain subject to continued classification, safeguards and export
controls. However, for several years a number of qualified U.S.
companies have been granted access to the Government's work under
carefully controlled conditions in order to make their own
assessment of the commercial potential for private enriching plants.
One group has chosen the well-demonstrated gaseous diffusion
production process. Several others are interested in the potential
of the newer gas centrifuge process which, though it is not yet in
large production operation, is believed to possess advantages and
to be ready for commercial application.
The centrifuge process, which uses substantially less power
than the older process, appears to be well suited to the creation
of competitive industry, both because the individual plants can be
smaller and more flexibly adopted to market demands, and because
GLRALD FORD LIBRARY
there is a continuing need for replacement components which can be
made by many manufacturers. While Government work is going on to
develop other enrichment processes which may have some future
applications, they are a long way from practical realization, and
diffusion and the centrifuge now provide the only solid technological
bases for meeting our near-term commitments.
Because centrifuge technology cannot be implemented quickly
enough to close the immediate gap in enrichment capacity, our next
plant must be of the gaseous diffusion type. One industry group,
Uranium Enrichment Associates (UEA), has presented a proposal to
construct a $3 billion, privately financed gaseous diffusion
enrichment plant, capable of serving about 90 large nuclear power
reactors both here and abroad, when it becomes operational in the
early 1980's. This project, if successful, would meet the need for
- 6 -
early new capacity. We also have highly promising expressions of
interest by several other companies in the construction of privately
financed commercial centrifuge enrichment plants. We are confident
that there will be more than adequate market demand for the output
from these plants including Government purchases as necessary for
stockpile purposes.
I believe we must move now on both fronts to encourage private
entry into the enrichment business. We should build a private
gaseous diffusion plant to provide the urgently needed first
increment of capacity, and we should simultaneously embark on
building a centrifuge industry with several suppliers. Only in
this way can we open the U.S. order book promptly, reassert our
position as the world's major supplier of enriched uranium, and
develop a competitive private enrichment industry.
Nevertheless, there are some difficult hurdles to be overcome
that will require a unique kind of cooperative arrangement between
Government and industry during a transitional period. This is
required because of the very large capital requirements and long
payouts for plants of such large size and complexity. It also is
needed because the technology is and must remain secret, and
because the process "know-how" presently rests within the Government.
FORD
Moreover, the Government has a vital interest in assuring that these
projects do, in fact, perform as expected and are able to meet their
GER
LIBRARY
commitments to domestic and foreign customers on a timely basis.
Accordingly, at my direction, the Energy Research and Development
Administration will, within the next few days, submit to the Congress
proposed new legislation that will permit the necessary degree of
Government support to private enriching projects. On the basis of
the proposed legislation, the Energy Research and Development
Administration will enter into immediate detailed negotiations with
Uranium Enrichment Associates, and with prospective centrifuge
enrichers after more definitive proposals are received in response
- 7 -
to a Request for Proposals issued today. It is my desire that
several centrifuge projects proceed in parallel as rapidly as
selection of companies can be made and details negotiated.
Although enactment of the legislation is necessary now as a
clear signal of our national intent, details of the finally
negotiated packages would be subject to Congressional scrutiny in
the next session of Congress. I anticipate minimal budgetary impact
during FY 1976 and, although future years cannot yet be predicted
with absolute assurance, it appears likely that our involvement
can be achieved without significant future demands for federal funds.
Under our proposed arrangements significant opportunities for
foreign investments in U.S. private plants will be welcomed,
although the plants will remain firmly under U.S. control, and
there will be limitations on the amount of capacity each plant can
commit to foreign customers. Also, all exports of the plant
products will, as in the past, have to take place pursuant to
Agreements for Cooperation with other Nations and will be subjected
to appropriate safeguards to preclude use for other than agreed
peaceful purposes. Foreign investors and customers would not have
access to secret technology. In addition, the fuel produced would
be suitable only for commercial power reactors, and no weapons
grade material could be produced without substantial modification
to the plant, which would be readily apparent to any monitor.
FORD & 076839 LIBRARY
We believe the factors I have mentioned underscore the urgency
of prompt action in this area. They also highlight the need for a
Government contingency backup to the private plants that are
contemplated. There is only a minimal possibility that the proposed
private plants, starting with the initial gaseous diffusion plant,
will not come on stream. After all, we have more than 25 years'
experience with the U.S. diffusion process, and it is the most
proven enrichment process in the world. We also feel confident
that U.S. centrifuge technology will prove to be commercially
- 8 -
reliable and economic. And we believe that when submitted for
necessary review, the potential suppliers will meet all licensing,
anti-trust, and environmental requirements.
However, in the remote event that the proposed private plants
cannot be properly initiated or completed, our legislative package
would enable the Government to stand fully behind the private
fuel assurances that will be given to domestic and foreign customers.
I am confident that the U.S. private sector is equal to the
challenge I am laying before it today. But lest there be any
doubt that potential purchasers of enriched uranium can begin to
deal today with U.S. industry for assured sources of supply, I
offer these additional assurances.
First, I have instructed ERDA to continue design of a Government
enrichment plant, in the remote event that industry falters. This
Government backup will ensure the U.S. has new plant capacity by
the 1980's.
Second, as part of its design work, ERDA will purchase from
UEA services for the design of components common to both the
private and Government plants. This action will help ensure that
work on the private plant can begin promptly.
Third, I pledge to anyone that places orders with our private FORD
suppliers that the USG will- in the unlikely event that the private
venture fails--assure that these orders will be filled. Those who
LIBRARY
are first in line with our private sources will be first in line
to receive supplies under this assurance.
Finally, I will shortly propose to the Congress that prices
for Government-supplied enriched uranium be set to recover our full
costs on an unsubsidized basis. This step will, I believe, under-
score the essentially commercial nature of producing enriched uranium.
The program I have proposed takes maximum advantage of the
strength and resourcefulness of industry and Government in the
United States and the world leadership we now enjoy in a new and
- 9 -
increasingly significant technology. It builds upon that base in
a way which promises to maintain that leadership in the face of
vigorous competition brom abroad. I ask the Congress for early
authorization of the program to meet our urgent needs and to
demonstrate to the world our determination to pursue energy self-
sufficiency. This action is urgent if we are to maintain our
position of world leadership in enriching technology, if we are to
remain a responsible and reliable supplier of enriching services,
and if we are to closely collaborate with the other major oil
consumers as well as with all nations seeking to develop alternative
energy sources.
GERALD FORD LIBRARY
4
THE WALL STREET JOURNAL,
Tuesday, June 24, 1975
Kennec
Atom-Fuel Plant
From U
Costing $1 Billion
By a WALL STRE
NEW YORK -
Proposed to U.S.
acknowledged an
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ment of plans to
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Similar agreem
cember with thre
Atlantic Richfield Would
but one since has I
Utilities Group
Use Centrifuge Process
13 electric utilitier
Inc. Utah Interna
based natural-reso
By a Wall STREET JOURNAL Staff Reporter
group in late May
NEW YORK - The first firm industry
Some of the uti,
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
THE WHITE HOUSE
WASHINGTON
June 24, 1975
MEMORANDUM FOR:
PHIL BUCHEN
JIM CONNOR
MIKE DUNN
MAX FRIEDERSDORF
ALAN GREENSPAN
ROD HILLS
ORD
JIM LYNN
JACK MARSH
JIM MITCHELL
LIBRARY
BRENT SCOWCROFT
ROBERT SEAMANS
FRANK ZARB
THROUGH:
JIM CAVANAUGH
FROM:
GLENN Glann SCHLEEDE
SUBJECT:
URANIUM ENRICHMENT - FINAL DRAFT
FACT SHEET AND Q's AND A's
Enclosed are the latest drafts of the fact sheet and
Q's and A's -- which we expect to put in final form
early tomorrow. The Q's and A's will be made available to
Administration spokesmen.
Thanks very much for your help and that of your staff in
putting them together.
If there are any final corrections that are necessary,
please have your staff call before noon on Wednesday,
June 25.
Attachments
Fact sheet
DRAFT
6/24/75
SUMMARY FACT SHEET
THE PRESIDENT'S PLAN FOR A COMPETITIVE
NUCLEAR FUEL INDUSTRY
The President's Action
The President today announced administrative actions and
a legislative proposal to:
Increase the United States' capacity to produce enriched
uranium to fuel domestic and foreign nuclear power
plants.
Retain U.S. leadership as a world supplier of uranium
enrichment services and technology for the peaceful
use of nuclear power.
Assure the creation, under appropriate controls of a
private, competitive uranium enrichment industry in
the U.S. -- ending the current Government monopoly.
Accomplish these objectives with little or no cost to
taxpayers and with all necessary controls and safeguards.
Background
The U.S. capacity for refining or "enriching" uranium
to make fuel for nuclear electric generating plants is
now fully committed.
Work on constructing new capacity must begin soon so
that plants will be ready to meet domestic and foreign
requirements by about 1983.
Efforts to encourage the creation of a competitive
uranium enrichment industry have shown that certain
forms of Government cooperation and temporary assurances
are necessary to permit private firms to enter the
industry.
The need for added capacity provides the opportunity for
specific actions by the Government to encourage private
entry.
2
Highlights of the Plan
The President's plan includes:
A legislative proposal, the Competitive Nuclear Fuel
Supply Act of 1975, which would authorize the Government
to enter into certain cooperative arrangements with
private industrial firms that wish to finance, build
and operate plants to provide uranium enrichment services.
A pledge by the President to foreign and domestic
customers that the Government will assure that orders
placed with private producers will be fulfilled as
services are needed.
All necessary controls and safeguards concerned with
(a) preventing the diversion of nuclear materials and
the spread of sensitive technology, (b) foreign invest-
ment, (c) environmental impact, (d) safety, and (e) anti-
trust.
6/23/75
draft.
FACT SHEET
THE PRESIDENT'S PLAN FOR A
COMPETITIVE NUCLEAR FUEL INDUSTRY
Page
The President's Announcement
Background
Plan Announced by the President
- Objectives
- Principal Elements of the Plan
Legislative Authority for Cooperative
Arrangements with Private Firms
Assurances for Customers
Controls and Safeguards
Preventing the Diversion of Nuclear
Materials and spread of sensitive
technology
Foreign Investment
Environmental Impact, Safety and
Anti-Trust
Implementing Actions
- Negotiations for a Diffusion Plant
- Request for Proposal for Centrifuge Plants
- Environmental Impac+ Statement
- Contingency Planning
- Diffusion Plant Design Work
Specifics of the Legislative Proposal
- Authorizing Legislation
Cooperative Agreements
Congressional Review
- Contract Authority - Appropriations Request
Developments Leading to the President's Plan
- U.S. Leadership in Uranium Enrichment
Technology
Gaseous Diffusion
Gas Centrifuge
Laser Separation
- Existing U.S. Capacity
- The Growing Market
2
- Potential Foreign Suppliers
- The Program to Develop a Competitive Industry
Diffusion Plant
Centrifuge Plant
- Obstacles to the Entry of Private Industry
- Alternatives to Private Entry
- The Proposal from Uranium Enrichment
Associates (UEA)
- Centrifuge Enriching Projects -- Request for
Proposals
Other Actions Related to Uranium Enrichment
Capacity
- Increasing ERDA's Charge for Uranium
Enrichment Services
- Contract Relief for Current ERDA Enrichment
Customers
- ERDA Conditional Contracts for Enrichment
Services
Attachment:
#1 - Summary of UEA Plan and Proposal to ERDA
#2 - Uranium Enrichment as a Part of the Nuclear
Fuel Cycle
THE PRESIDENT'S ANNOUNCEMENT
The President today announced administrative actions and
a legislative proposal to (a) increase the United Staees'
capacity to produce enriched uranium to fuel domestic and
foreign nuclear power plants, (b) retain U.S. leadership
as a world supplier of uranium enrichment services and
nuclear power plants, (c) assure the creation, under
appropriate controls of a private, competitive uranium
enrichment industry in the U.S. -- ending the current
Government monopoly; and (d) accomplish these objectives
with little or no cost to taxpayers and with all necessary
controls and safeguards.
BACKGROUND
Natural uranium from U.S. and foreign mines must be refined
or "enriched" before it can be used to make fuel for nuclear
power plants which are used in the United States and in many
foreign nations to generate electricity.
z
U.S. capacity for enriching uranium which now supplies all
domestic and most foreign needs, consists of three Govern-
ment-owned plants, located at Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth- Ohio.
Since mid-1974, the entire capacity of the three plants has
been fully committed under long-term contracts. New enrich-
ment capacity must on "on-line" beginning in about 1983 to
meet the growing domestic and foreign demand for nuclear
fuel.
The potential U.S. market abroad has begun to erode as some
potential foreign customers have started looking to sources
such as the U.S.S.R., France and a West European consortium
for uranium enrichment.
Since 1971, the Executive Branch has followed policies and
programs directed toward assuring that private industry --
rather than the Federal Government -- builds the next
increments of U.S. uranium enrichment capacity.
Several industrial firms have sought to enter the uranium
enrichment field but all have found that some forms of
Government cooperation and temporary assurances are needed
to overcome the initial obstacles to private industry
involvement.
THE PLAN
Objectives. The plan announced by the President is designed to
meet the objectives of assuring that:
The next increments of U.S. uranium enrichment capacity
will be available when needed to meet the growing demand
for fuel for nuclear powered generating plants in the U.S.
and in other nations.
The U.S. maintains its role as a major world supplier of
uranium enrichment services and nuclear power plants --
a role that is important to:
-
Our economy and our world trade position.
-
Our efforts to obtain the commitment of additional
nations to accept international safeguards and the
principle of nuclear non-proliferation.
-
Our cooperation with other major oil consuming nations
which are looking to nuclear power to help reduce their
dependence on foreign oil imports.
Our longer range goal of developing technology and energy
resources to supply a significant share of the free
world's energy needs.
All future increments of capacity will be built, financed
and operated by private industry -- rather than by the
Federal Government -- so that a competitive industry will
exist at the earliest possible date.
There will be little or no cost to the taxpayer and that
the Government will receive increased revenue in corporate
taxes and compensation for the use of its inventions and
discoveries.
All necessary domestic and international controls over
nuclear materials and classified technology will be main-
tained, as they would be if the Government were to own the
new plants.
Principal Elements of the Plan.
Legislative Authority for Cooperative Arrangements with
Private Firms. The President is asking the Congress to
enact promptly the additi nal legislative authority needed
to enable the Energy Research and Development Administration
(ERDA) to negotiate and enter into cooperative arrangements
with private industrial organizations that wish to build,
own and operate uranium enrichment plants.
Negotiations would be directed toward the arrange-
ments most advantageous to the Government and the
public interest and with a degree of risk to the
private firm that is consistent with the objective
of creating a private, competitive uranium enrichment
industry.
These arrangements would provide for certain forms of
Government cooperation and tempor ry assurances found
to be necessary after detailed negotiations with firms
submitting proposals. Arrangements could include:
Supplying and warranting Government-owned inven-
tions and discoveries in enrichment technology --
for which the Government will be paid.
Selling certain materials and supplies on a full
cost recovery basis which, because of their
classified nature, are available only from the
Federal Government.
5
Buying enriching services from private producers or
providing enriching services to producers from the
Government st ckpile to accommodate plant start-up
and loading problems.
Assuring the delivery of uranium enrichment services
to customers which have placed orders with private
enrichment firms.
Assuming the assets and liabilities (including debt)
of a private uranium enrichment project if the
venture threatened to fail -- at the call of the
private venture or the Government, and with com-
pensation to domestic investors in the private
ventures ranging from full reimbursement to total
loss of equity interest, depending upon the circum-
stances leading to the threat of failure.
The arrangements would be spelled out in a detailed
contract which would be subject to Congressional
review.
-
Assurances would end after one full year of commercial
operation of a plant.
-
The Government would monitor progress carefully so that
it can be sure that the plant will function properly
and will be completed on time and within cost estimates.
Assurances for Customers. The President announced his
pledge to domesti and foreign customers who place orders
with private U.S. suppliers that the Government will assure
that orders will be filled as services are needed. Those
first in line with private suppliers will be first in line
to receive services from the Government -- if it were
necessary for the Government to take over and complete
a private project.
Controls and Safeguards. The President announced that all
necessary controls and safeguards will be maintained in
all arrangements with private firms. Such contro's and
safeguards include:
-
Preventing the Diversion of Nuclear Materials or
Un-Controlled Spread of Sensitive Technology. All
necessary measures will be taken to safeguard the
use of the products of plants and to protect sensitive
classified technology. These measures include:
Effective domestic safeguards and physical security
measures to the plan S and their products.
Continued requirements that exports take place
pursuant to appropriate international agreements
for cooperation and be subjected to safeguards
to prevent diversions.
Continued classification and protection of
sensitive enrichment technology
Foreign Investment. Foreign investment in private
enrichment ventures will be encouraged, but control
will remain with U.S. interests. Foreign investors
would not require or have access to classified infor-
mation. Any proposals for sharing technology would
be considered separately and would be subject to
Governmental review and approval.
Environmental Impact, Safety and Anti-Trust. Private
ventures wishing to build plants will have to obtain
from the Nuclear Regulatory Commission (NRC) a construc-
tion permit and operating license. As a part of its
review, the NRC must evaluate environmental, safety
and anti-trust considerations as well as assure that
control of the proposed new ventures remain in the
U.S. -- as now required by the Atomic Energy Act.
NRC also will have responsibility for assuring that
the plants are appropriately safeguarded. The Justice
Department participates in the review of anti-trust
considerations.
IMPLEMENTING ACTIONS
The President announced several administrative actions that are
being taken now:
Negotiations for a Diffusion Plant. ERDA is responding
formally to a proposal from the Uranium Enrichment Associates
(UEA) offering to enter into negotiations which could lead
to the construction by UEA of a $3.5 billion (1976 dollars)
plant which would make use of gaseous diffusion technology
and which would be on line by 1983.
Request for Proposal for Centrifuge Plants. ERDA is issuing
a new request for proposals from industrial firms interested
in constructing enrichment facilities making use of centrifuge
technology.
1
Environmental Impact Statement. ERDA will on June 30 issue
for public review and comment a draft environmental impact
statement covering its actions concerned with the expansion
of uranium enrichment capacity.
Contingency Planning. ERDA will continue with backup contin-
gency measures to help assure that capacity will be ready
in the unlikely event that industrial efforts falter. These
neasures include continuation of Government plant conceptual
design activities, research and development on enrichment
technologies, and technological assistance to the private
sector on a cost recovery basis.
Diffusion Plant Design Work ERDA plans to purchase from
UEA design work on components for the private diffusion plant
that could be used in a Government plant -- if the private
venture were unable to proceed.
SPECIFICS OF THE LEGISLATIVE PROPOSAL
Authorizing legislation. The basic enabling legislation proposed
today by the President would:
Authorize Cooperative Agreements.
-
It would permit ERDA to negotiate and enter into
cooperative arrangements with firms wishing to build
own and operate uranium enrichment facilities.
It would provide authorization for appropriations for
amounts up to $8 billion -- which is an estimate of the
total potential cost to the Government in the unexpected
event that all Government assured diffusion and centri-
fuge ventures failed and it were necessary for the
Government to assume assets and liabilities of these
ventures, take over plants, and compensate domestic
investors. The Administration's expectation is that
none of these funds would have to be expended, but the
authorization is necessary under the recently enacted
Budget Reform Act and to provide assurance to customers
and to potential producers of the Federal Government's
commitment.
Provide for Congressional Review. Once contracts were nego-
tiated the Joint Committee on Atomic Energy (JCAE) would be
notified and a period of 45 days would have to elapse before
a contract would be valid -- to allow an opportunity for
Congressional review of the basis for ERDA's arrangements
with private firms.
Contract Authority-Appropriations Request. The President
will later request an appropriation of contract authority
to cover the estimated maximum Federal Government exposure
for specific projects in the event that it were necessary
to assume assets and liabilities. Again, expenditure of
these funds is not considered likely.
DEVELOPMENTS LEADING TO THE PRESIDENT'S PLAN
U.S. Leadership in Uranium Enrichment Technology. The United
States is the recognized world leader in technology for refining
or "enriching" natural uranium to a form that can be used to make
fuel for nuclear power reactors. Natural uranium contains only a
small amount (approximately .7%) of the fissionable isotope U-235.
In order to be useful to make fuel for most nuclear reactors, the
concentration of U-235 must be increased to about 2-4% through a
process of separating off other isotopes. The technology was
developed and is owned by the Federal Government. Certain parts
of the technology are classified. Principle U.S. technologies
are:
Gaseous Diffusion. This technology which is now used in the
three existing government-owned enrichment plants was developed
in the 1940's. Over 30 years of large scale operating experi-
ence and process improvement have made the technology the most
reliable and economical now available for commercial scale
operations. The next increment of capacity must make use of
this technology.
Gas centrifuge. The gas centrifuge process of uranium
enrichment provides an alternative to gaseous diffusion.
Full operation of a Government pilot plant is scheduled for
early 1976. If the projected economics of the process are
realized, gas centrifuge is expected to be used as subsequent
increments of commercial capacity are added.
Laser Separation ERDA is conducting a basic research
program to determine whether this technology is technically
or commercially feasible. Even if successful, the technology
will not be available in time to be used for the next several
increments of needed enrichment capacity.
Existing U.S. Capacity. The three Government-owned uranium
enrichment plants will, when currently authorized expansion
is completed, have the capacity to produce enriched uranium
needed to fuel about 300 large nuclear-powered electric
generating plants in the U.S. and foreign countries.
9
The Growing Market. Current estimates are that the U.S. will
require added enrichment capacity by 1990 equal to 3 to 5 plants
the size of any one of the three existing plants and that added
capacity for the total market served by the U.S. will equal 5
to 8 similar size plants. The demand will continue to grow
after 1990.
Potential Foreign Suppliers. The principal existing capacity
for enriching uranium outside the U.S. is in the Soviet Union.
A french-led diffusion plant project (Eurodif) is expected to
begin production in 1979 and its capacity is reported to be
fully committed. A British-German-Dutch consoritum (Urenco)
plant will also begin expanded operations in 1979. Plans for
additional plants are being discussed by France, Canada,
South Africa, Japan, Australia and Brazil.
The Program to Develop a Competitive Industry. The Atomic
Energy Act of 1946 provides that "the development, use and
control of atomic energy should be directed so as to
strengthen free competition in private enterprise". An
Executive Branch policy to encourage private industry to build
the next increments of uranium enrichment capacity was announced
in June 1971. Beginning in 1973, the Atomic Energy Commission
(AEC) asked private firms to consider building, owning and
operating enrichment plants and granted qualified U.S. firms
access to classified aspects of the Government's work, under
carefully controlled security conditions, in order that they
might make their own assessment of the commercial potential
for private enriching plants. A number of firms responded to
the invitation from which several consortia have emerged which
are interested in pursuing the possibility of building enrich-
ment plants.
Diffusion Plant. One corsortium -- the Uranium Enrichment
Associates (UEA) -- is interested in constructing a $3.5
billion gaseous diffusion plant equivalent to the expanded
capacity of one of the 3 existing Government-owned plants.
Centrifuge Plant Other firms and consortia -- Centar,
Exxon Nuclear and Garrett Corporation -- have expressed
interest in cooperative arrangements with the Federal
Government which would lead to demonstration gas centrifuge
plants which could be expanded in the future to commercial
scale plants. The AEC (predecessor to ERDA) requested
proposals from industry to advance the demonstration of
centrifuge technology. A modified request for proposals
is being issued today.
10
Obstacles to the Entry of Private Industry. All firms interested
in building, owning and operating a private plant have concluded
that some form of Government cooperation and temporary assurances
are essential to begin the transition to a private competitive
industry. Among the factors that have contributed to this
conclusion are:
The complexity of the undertaking, including the Federal
ownership and the classification of the technology.
The large financial commitment required and the difficulty
encountered in trying to obtain private financing.
The inherent difficulties of ending a Government monopoly.
The recent adverse financial situation of U.S. electrical
utilities which are the customers for a plant. (Their long
term contracts for uranium enrichment services must provide
security for the long term financing required.)
Some uncertainty as to whether the Government would follow
through on its commitment to achieve privatization.
Alternatives to Private Entry. The principal alternatives to
an immediate effort to achieve privatization include:
All future additions to capacity financed, built and owned
by the Federal Government, thus continuing indefinitely the
existing monopoly.
Government financing and ownership of one or more additional
increments of capacity, followed by another attempt to achieve
privatization.
A thorough review indicated that, regardless of the alternative
selected:
The next increment of capacity can be on line when needed
(now estimated about 1983). .
Controls and safeguards involving classified technology and
non-proliferation of nuclear materials can be maintained.
Customers for the next increment are expected to be primarily
foreign.
Foreign investments in an enrichment plant can be accommodated.
11
This review led to the conclusion that the task of explaining and
implementing the plan for achieving a private industry would be
difficult and that a substantial effort would be required by both
the Congress and the Executive Branch, but that the benefits of
privatization justified the effort. The benefits of privatization
include:
Little or no cost to taxpayers - compared to $20 to $30 billion
for plants that should be on line by 1990, if the Federal
Government were to own the plants. (These funds would not be
recovered to the Treasury for many years.) Under the President'
plan, revenue of about $90 to $100 million per plant per year
would flow to the Federal Treasury from industry, principally
from taxes and payments for the use of Government inventions
and discoveries.
An early end to the Government monopoly in a type of commercial
activity.
Avoiding expansion of the public sector when industry is
willing and able to do the job.
Competition which would provide incentives for lower costs
and additional improvements in technology.
The Proposal from Uranium Enrichment Associations (UEA). Uranium
Enrichment Associates is a consortium currently consisting of
Bechtel Corporation and the Goodyear Tire and Rubber Company. On
May 30, 1975, UEA submitted a revised proposal to ERDA calling for
cooperative arrangements with the Federal Government. The principal
features of the UEA proposals are summarized in Attachment #1. A
contract containing the details of a cooperative agreement would be
negotiated by UEA and ERDA.
Centrifuge Enriching Projects -- Request for Proposals.
In August of 1974 the Government announced a program expected
to lead to several relatively small industry constructed
demonstration projects.
Gas centrifuge technology has not yet been applied on a
production scale sufficient to permit full industry commit-
ment to large plants. At least three companies are interested
in undertaking private centrifuge enriching projects now which
would be scaled up progressively from small demonstration
modules to a capacity the economies of scale for centrifuge
enriching are expected to be largely realized. These are
expected to be 1/3 to 1/2 the capacity of the planned diffusion
plant.
12
Government-industry cooperative arrangements similar to that
required for the UEA diffusion project may be required.
A Request for Proposals for this program which extends and
elaborates upon the earlier program is being issued today:
-
Proposals will be due on October 1, 1975 and it is the
Government expectation that several proposals could be
accepted to proceed more or less in parallel with each
other and with the UEA project.
-
Proposers will describe their proposed project in detail,
including plant design, size, location and schedules and
specify the type and magnitude of Government support
necessary to proceed.
Small initial modules, perhaps 200-300 thousand units
per year could be in operation in the early 1980's with
2-3 million unit commercial scale plants achieved in the
mid-1980's on a time frame consistent with the growth
of the market.
Centrifuge technology permits adding small capacity increments
as required to closely follow market needs.
Proceeding with several centrifuge demonstration projects in
the same time frame as the gaseous diffusion plant will further
the objective of developing a private, competitive enriching
industry and maintaining U.S. world leadership in this field.
OTHER ACTIONS RELATED TO URANIUM ENRICHMENT CAPACITY
Increasing ERDA's Charge for Uranium Enrichment Services.
The current price charged by ERDA for uranium enrichment is
based on a statutory formula which says that ERDA's charge
must be established on the basis of the recovery of the
Government's costs over a reasonable period of time. Appli-
cation of the formula has resulted in a present charge of
$42 and $48 per separative work unit, depending on the type
of contract a customer has with ERDA. This price will rise
by the end of 1975 to $53 and $60 per unit. These prices
reflect the low cost of construction during the 1940's and
1950's for plants built primarily for military purposes.
These prices are much lower than the quoted world market
prices of enrichment services of between $75 to $100 per
unit.
13
The President announced in his 1976 Budget his intention to
propose legislation to the Congress to permit ERDA to raise
the price of enrichment services from its plants. The new
price would be established to recover the Government's costs
and place the pricing of Government enriching services on a
more business-like basis. This step would encourage private
sector interest in building enrichment facilities and end an
unjustifiable subsidy to both foreign and domestic customers.
The new price would include a rate of return on investment
more appropriate to the private sector than the Government's
rate of return, an allowance equivalent to corporate income
taxes and also include other costs typical of private operations
On this basis the new price per separative work unit will be
approximately $75.
This legislation has been submitted to the Congress by ERDA.
Contract Relief for Current ERDA Enrichment Customers.
Present ERDA enrichment contracts require customers to commit
to a fixed delivery schedule and to make prepayments amounting
to about $3 million several years prior to the first delivery
of enriched fuel. Since these contracts were signed, many
nuclear power plants whose fuel was covered by these contracts
have been postponed or cancelled.
As a result, many utilities now face the prospect of having
to pay for uranium enrichment services well in advance of
the revised completion dates for the reactors.
In order to free both ERDA and the enrichment customers from
unrealistic commitment, ERDA, after notifying to the Joint
Committee on Atomic Energy (JCAE), has announced that it will:
Grant customers the right within a 60-day period to
serve notice that they wish to terminate their contract
with no cancellation fee and with refund of any payments.
Permit those wishing to defer deliveries (rather than
terminate contracts) to have a one-time adjustment of
contract commitments without penalty.
Permit a similar one-time adjustment of the rate at
which uranium feed should be sent to the enriching
plants to coincide in part with the slipped enrichment
requirements.
14
These actions would:
Result in a larger U.S. stockpile of enriched uranium
for use as an inventory to support the new private
uranium enrichment plants with backup supplies of
enriched material, should any delays occur in their
initial operation.
-
Establish a more realistic data base for evaluating
future domestic and foreign enrichment requirements.
-
Grant short-term financial relief to the utility industry.
ERDA Conditional Contracts for Enrichment Services.
Some customers placing orders with AEC (predecessor to ERDA)
in mid-1974 were given conditional contracts; i.e., contracts
contingent upon the approval by U.S. regulatory authorities
(now the Nuclear Regulatory Commission) of the use of recycled
plutonium as a nuclear reactor fuel. These conditional contracts
were backed up by announcement that the U.S. would have expanded
capacity available that could fulfill requirements, if needed.
The expanded U.S. capacity that will result from the President's
plan will provide sources of supply that can be tapped by the
holders of conditional contracts.
ATTACHMENT #1
SUMMARY OF THE URANIUM ENRICHMENT
ASSOCIATES (UEA) PLAN AND PROPOSAL TO ERDA FOR
A COOPERATIVE ARRANGEMENT
Physical Description of the Project.
A 9 million separative work unit per year gaseous
diffusion plant would be built near Dothan, Alabama
on a 1720 acre site on the Chattahoochee River.
When in full operation the plant could provide enriching
services for about 90 large nuclear power reactors.
The plant will require about 2500 megawatts of electrical
power which will be supplied from a dedicated nuclear
power facility located nearby.
Project cost estimate (exclusive of the power project)
has been estimated by UEA to be $3.5 billion in 1976
dollars.
UEA projects continuation of design work now underway
on the project during the next several years with
construction scheduled to commence in 1977.
Full production from the plant is projected in 1983
with limited production starting in 1981.
Nearly 50 million construction manhours are estimated
for the project. A peak construction labor force of
about 7000 workers will be reached in 1979-80 and the
permanent operating staff of the project is expected
to be about 1100.
The plant will be processing and upgrading natural
uranium and thus will have essentially no radiation
hazard. It will be similar to a large materials
handling plant except that the product material will
be much more valuable.
2
Financial Structure of UEA Project.
UEA expects that two to six companies in addition to
Bechtel and Goodyear will comprise the consortium that
will undertake the project. These companies are ex-
pected to be identified within the next few months.
Based upon marketing efforts to date, UEA projects about
40 percent of plant capacity will be taken by U.S.
domestic utilities and the balance by non-U.S. organi-
zations in countries with which the United States has
Agreements for Cooperation permitting the transfer or
disposition of enriched uranium. (Under the Atomic
Energy Act voting control for such a project must
remain in the hands of the United States investors at
all times and the project is so structured. The secrecy
of the process will be protected and foreign costomers
or investors will not have access to classified technology
or information.)
Project financing using an 85 percent debt, 15 percent
equity ration is contemplated for the project.
The equity corresponding to the domestic portion of plant
output will be supplied by UEA and the debt financing
will be raised in the commercial market primarily on
the basis of the security of long-term (25 year) non-
cancelable enrichment service contracts with domestic
utilities.
Both equity and debt for the foreign share of plant
output is to be supplied from the foreign customers'
own sources of capital.
Pricing of product from the plant is based upon the
recovery of all operating costs servicing of debt and
an after-tax return of approximately 15 percent on
equity.
A 3 percent payment, based on gross sales would be paid
to the Government for use of taxpayer-developed technology.
Customers.
A number of United States' utilities have executed
contingent letters of intent with UEA to purchase uranium
enriching services from the new plant and a number of
additional utilities are now evaluating their requirement
for services.
3
UEA has made extensive marketing contacts overseas and
anticipates that foreign commitments will be forthcoming
from Iran, Japan, West Germany, France, Spain, Taiwan
and other countries.
Cooperative Arrangements.
Due to the unique nature of the project, the very large
capital requirements, and long payout periods, UEA has
concluded that it would not be possible to move ahead
without certain forms of Government backup assistance.
UEA has proposed that the Government:
Supply, at cost, essential components presently
produced exclusively by the Government.
Supply the Government's gaseous diffusion technology
and warrant its satisfactory operation.
Provide during first years of operation limited
access to and from USG's stockpile of enriched
material to balance significant start-up loading
problems.
UEA has also proposed that:
The Government provide standby financial backup
assistance lasting for the critical construction
period plus one year to offset the current weak
credit position of the U.S. utility industry and
the Government to provide such financial backup
if UEA cannot complete the plant or bring it
into commercial operation, but such a call is
FORD
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
GERALD.R
obligation to assume UEA's liabilities and debt.
The Government may also require UEA to release
the project to the Government if the Government's
interest so demands. In this event, the Government
would be obligated to assume UEA's liabilities
and debt.
The consideration for acquisition of UEA's domestic
equity position in either case can range from
loss of equity for uncorrected gross mismanagement
of UEA to full fair compensation for causative
events outside UEA's reasonable control.
4
All of the above forms of backup assistance would be
subject to contract negotiations between ERDA and UEA.
UEA believes that the plant can be completed within the
private sector with no net expenditure of Government
funds.
ATTACHMENT #2
Uranium Enrichment as Part of the Nuclear Fuel Cycle
The attached chart depicts the nuclear fuel cycle for Light
Water Reactors, (the type of reactors mostly commonly used
in the U.S.). About 97% of the reactors obtaining enrich-
ment services from the ERDA gasious diffusion plants are
Light Water Reactors; a similar fuel cycle exists for the
other present reactor type -- the High Temperature Gas
Cooled Reactor.
Prior to the enrichment step, uranium ore is minded from
the earth's crust and sent to a mill where uranium concentrate
is produced. This concentrate is often referred to as
yellowcake, or by the chemical symbol, U₃O₈· There are
14 mills presently operating in the U.S. The uranium
concentrate is then sent to a converter where it is con-
verted to uranium hexafluoride, or UF. This is the only
simple form of uranium that can be gaseous at conditions
near room temperatures and pressures. There are two
UF₆ conversion plants operating in the U.S.
The uranium hexafluoride is then sent to an uranium enrichment
plant. There are two processes under consideration for
commercial use in the U.S. -- the established gaseous
diffusion process, used in the ERDA plants, and the gas
centrifuge process. The UEA will use the gaseous diffusion
process. In the process, the uranium hexafluoride gas is
pumped through a semipermeable membrane. The desirable
fissionable isotope, U-235, diffuses through the membrane
more readily than the nonfissionable isotope, U-238. A
stream depleted in U-235 is collected from the plant and
sent to storage. A stream enriched in U-235 is collected
from the plant and sent to a fuel fabrication plant. In
this plant, the uranium hexafluoride is converted to uranium
dioxide UD₂, formed into pellets, and placed in zirconium
tubes. The tubes are assembled into bundles and sent to
nuclear power plants. Seven U.S. companies are involved
in the fabrication of nuclear fuel.
GERALD
2
After the fuel is used in the nuclear power plant, it is
discharged and allowed to cool in a large water basin at
the plant. The spent fuel will then be sent to a chemical
reprocessing plant. In this step, the uranium and reactor-
produced plutonium will be separated from the highly
radioactive fission products generated while the fuel is
in the nuclear power plant. The radioactive wastes in
proper form will be sent to a repository. The recovered
uranium will be converted again to the hexafluoride and
reinserted into the enrichment plants for reenrichment.
Plutonium is also a fissionable material that can be used
as fuel in a nuclear power plant. If use of the plutonium
is granted by the Nuclear Regulatory Commission, it would
be sent to the fuel fabrication plants; there it would be
mixed with the uranium and formed into pellets for nuclear
power plant fuel. There are currently no commercial chemical
reprocessing plants operating in the U.S.; one plant is shut
down for modification and another is under construction.
THE NUCLEAR FUEL CYCLE
FOR LIGHT WATER REACTORS
URANIUM MINES
U3O8 CONVERSION
U235 ENRICHMENT
UFG CONVERSION
& MILLS
TO UFG
TO UO₂ AND
ORE &
FABRICATION
ORE CONCENTRATE
OF FUEL
3
(U₃O₃)
ASSEMBLIES
PLUTONIUM
RECOVERED
(AS PuO₂)
URANIUM
(AS UFG)
REACTOR
SPENT FUEL
LOW LEVEL
WASTES
REPROCESSING PLANT
COMMERCIAL BURIAL
FEDERAL REPOSITORIES
HIGH LEVEL
GERALD
R.
SOLID WASTE
FORD
LISBARY
Q's & A's
URANIUM ENRICHMENT
QUESTIONS AND ANSWERS
1. Why Privatization?
2. Why Privatization Now?
3. Why Government Assistance?
4. Cut-off date (on attempts to get private entry) ?
5. When will the U.S. "Order Book "Open?
6. NRC Safeguards and Safety Controls
7. Spread Classified Technology (to private industry)?
8. Unanswered Nuclear Safety and Environmental Questions?
9. Foreign Investment without Foreign Control?
10. Foreign Customer Conditional Contracts with ERDA
11. Foreign Purchases without Investment?
12. U.S. Share of the Free World Market?
13. Payments by Industry for Government-owned Technology
14. What Happens if a Private Plant Doesn't Work?
15. What Happens if a Private Plant Isn't Licensed?
16. Does UEA have Customers?
6/24/75
1
WHY PRIVATIZATION ?
Question:
ERDA (and AEC before it) is doing a good job of supplying
uranium enrichment services. Why not simply continue the
present arrangements and build new Government facilities
rather than set up a complicated new arrangement?
Answer:
There are many important reasons for proceeding with the
creation of competitive nuclear fuel supply industry.
The principle reasons are:
(1) The provision of uranium enrichment services
is now essentially a commercial/industrial
activity, not inherently a Government type of
activity.
(2) We should not end the Government monopoly
and continue to expand Governmental respon-
sibilities within our economic system when
private industry is able and willing to pro-
vide the service.
(3) Construction of uranium enrichment plants --
which could cost $20 to $30 billion in new
capacity through 1990 - should not compete
in the Federal Budget with other areas --
such as social services and defense prepared-
ness -- which can only be financed by the
Government.
(4) Continuing to have enrichment under the direct
Federal control would centralize to an un-
precedented degree operating control by the
Government over the Nation's electrical energy,
as nuclear power grows. This would present
an opportunity for abuse and is poor public
policy.
(5) Private investment will insure that supply
meets demand through operation of the market
mechanism.
-2-
(6) Private operation will avoid the delays and
uncertainties associated with the Government's
budget and appropriations processes to finance
new increments of capacity every year or two.
(7) Private competition will provide incentives -
over the long term - for lower costs, improved
efficiencies, and technological advancement.
(8) Private ventures will generate substantial
revenues to the Treasury through payment of
Federal income taxes and compensations for
Government-owned discoveries and inventions
used by industry.
6/24/75
2
WHY PRIVATIZATION NOW?
Question:
Why not build another Government plant now and bring
private industry in for subsequent increments of capacity
when the new gas centrifuge technology is ready for use?
Answer:
There are several reasons for moving to private entry
immediately:
In line with the private entry policy announced by
the President in 1971, several industrial firms have
undertaken substantial efforts to prepare for building,
owning and operating plants to enrich uranium. This
momentum would be lost if policy were reversed and
another Government plant built.
The UEA venture is the first to reach a stage where
it can propose construction of a plant and begin taking
orders. It has lined up customers, and made detailed
plans to proceed, including options on land and
electrical power. This plant would use diffusion
technology.
Other ventures have been organized and are making
plans to propose demonstration plants using centrifuge
technology to privide the next increments of capacity.
The diffusion plant venture will fulfill immediate needs
for a commitment to new capacity and also serve to "break
trail" for subsequent ventures using the less proven
centrifuge technology.
There are substantial benefits to moving ahead now with
private entry and no convincing reasons for a delay. One
of the benefits of private entry is being able to bring on
new capacity with little or no cost to taxpayers. If we
were to build another plant taxpayers would have to advance
the money -- from the U.S. Treasury.
6/24/75
3
WHY GOVERNMENT ASSISTANCE?
Question:
Why should it be necessary for the Government to provide
any assistance to get private industry to get involved in
uranium enrichment if it is really a commercial operation?
Answer:
The President's program contemplates Government cooperation
and temporary assurances to overcome rather well defined
obstacles to privatization:
Uranium enrichment, as a Government monopoly, has
no commercial private-sector history. Many process
details are and must remain classified. Under these
conditions, commercial lenders are unwilling to
consider risking the very large amounts required
for this capital-intensive activity, without credible
assurances that the plant will be completed and
operational.
The technology is owned by the Government and a
substantial royalty will be paid for its use by the
private sector. It is reasonable for the Government
to warrant that the technology will work and be
prepared to back this warranty up in the unlikely
event that problems are encountered.
The Government would supply, on a full cost recovery
basis key pieces of classified equipment upon which
the plant performance depends and which are available
early from the Federal Government.
Since enriched uranium is essential to operating
nuclear plants, Government measures are needed to
assure electric utility customers, both foreign and
domestic, that their orders for nuclear fuels will
be filled. This in turn is essential to meeting
the growing domestic demand for electricity, a
substantial part of which must be met from nuclear
power if oil consuming nations are to reduce their
dependence on imported oil. Government assurance
that orders will be filled is a logical part of the
proposed program. This assurance is especially
important to foreign customers and will help the U.S.
maintain its leadership role in the supply of enrich-
ment services abroad.
3 (continued)
2
The only present source of back up supplies of
enriched uranium large enough to back-stop the
initial period of operation of new plants is the
existing Government stockpile of this material and
the Government can provide such back-stopping.
4
CUT-OFF DATE?
Question:
Is there a specified "cut-off" date when, if the UEA
project seemed to falter, the Government would decide to
proceed with an add-on diffusion plant?
Answer:
First, the risk of UEA failure is considered very small.
Second, there is no one specified, pre-set date for such
a decision.
The approach to privatization selected by the President
calls for very close monitoring by the Government at every
stage to assure that the Government could step in if the
private effort threatened to fail -- an event considered
very unlikely. This close monitoring will prevent any
significant loss of time, if something were to go wrong, and
thus assure that additional capacity can be brought on line
by the time it is needed, around 1983.
If the Government had to step in, the question of the plant
that would be built -- that is, a 5 million unit add-on
plant, or a 9 million unit free-standing plant -- would
depend on when intervention proved necessary. For example:
If Congress failed to pass the authorizing legislation
needed for the private enrichment industry approach
and instead, passed authorization and appropriations
for a Government plant, it probably would be desirable
to proceed with the add-on plant approach.
If at some time prior to March 1976 when UEA is
expected to complete financial, customer and power
supply arrangements, UEA found that it could not
proceed, the Government would need to determine
whether it would be best to proceed with an add-on
plant or with the planned 9-million unit free-standing
plant.
If at some later time, the Government has to step in
and assume UEA assets and liabilities, the Government
would have to decide the best step. At some point it
would be more advantageous for the Government to
proceed with the free-standing plant than an add-on.
6/24/75
5
WHEN WILL THE "ORDER BOOK" OPEN?
Question:
When will customers be able to negotiate fuel contracts
with private US enrichers? That is when will the "order
book" open?
Answer:
A number of private US firms, particularly the CEA which
is well advanced, will be in a position to accept service
contracts and financial participation arrangements
immediately, consistent with the trust of the President's
Plan. These contracts would be contingent upon legisla-
tive approval, to become firm, but, in any event, they
would be covered by the Presidential supply assurances.
In short, the US enrichment "order book" is about to be
opened to provide assured and timely nuclear fuel to
domestic and foreign customers.
6/24/75
6
NRC SAFEGUARDS AND SAFETY CONTROLS
Question:
What types of domestic safeguards and safety controls will
NRC apply to the UEA and private centrifuge ventures?
Answer:
NRC is expected to require essentially the same types of
safeguards and safety procedures as are now successfully
employed in Government-owned facilities.
Also, it is to be noted that the UEA plant will be designed
to produce only low enriched uranium and, consequently,
the safeguards problems for this plant will be even smaller
than for the present government plants.
6/24/75
7
SPREAD CLASSIFIED TECHNOLOGY ?
Question:
Would privatization mean that sensitive classified nuclear
technology would now become available to private firms
instead of remaining confined to the Government?
Answer:
Rigid controls are and will continue to be maintained over
access to sensitive classified technology.
Access by selected private industry people is not new.
Existing enrichment plants, though owned by the Govern-
ment, were constructed and are operated by private con-
tractors.
We expect that rigid classification and safeguards controls
will be applied to the privately-owned capacity proposed
in this program.
Even if the Government were to build additional plants
private contractors would be heavily involved in their
design, construction and operation. Privatization would
result in no significant additional access to classified
nuclear technology than if the Nation;s enrichment re-
quirements were to be met by more government-owned capacity.
6/24/75
8
UNANSWERED SAFETY AND ENVIRONMENTAL QUESTIONS
Question:
Why is the Ford Administration working to increase the
supply of nuclear fuel when there are still significant
unanswered questions regarding the safety and environmental
impact of nuclear power plants.
Answer:
All commercial nuclear power plants in this country are
licensed by the Nuclear Regulatory Commission (NRC) after
a ful review, including the opportunity for public part-
icipation, of safety and environmental questions.
While there are safety and environmental matters requiring
continued attention, but the NRC applies conservative
criteria to ensure safe performance. The safety record
of commercial nuclear power plants has been excellant.
There has been no member of the public killed or injured
by any accident or occurence at a commercial nuclear power
plant in this country. The overwhelming majority of tech-
nical experts in the field are satisfied as to the safety
of nuclear power plants. However, as added assurance, we
are pursuing every opportunity to improve even further
the safety of these power plants and waste management.
Our safety research program in the Nuclear Regulatory
Commission will spend over $80 million in FY 1976. ERDA
expenditures aimed at assuring environmentally sound fuel
waste disposal amounts to #36 million in FY 1976.
6/24/75
9
FOREIGN INVESTMENT WITHOUT FOREIGN CONTROL
Question:
You have indicated that there will be substantial foreign
investment in the proposed project -- including invest-
ment from OPEC nations. What safeguards do we have to
protect us against potential abuses of foreign investors?
Answer:
First of all substantial foreign investment in this project
is desirable to help ease the difficulty of raising the
large amounts of capitol required for the project. Futher-
more, to the extent that funds from OPEC countries are
involved, this is precisely the type of constructive use
of OPEC money that we would like to encourage.
As a target, the UEA plan contemplates 60% foreign in-
vestment, and centrifuge ventures could also involve foreign
contributions. These foreign investments result in ac-
cess as customers to product output of the plant. The
product is made available under Government Agreements
for disposition of Cooperation and export licenses are
required. The investments do not result in access to the
classified US technology or in a majority voting right
in project management.
U.S. ownership and control is required by U.S. law and
will be a necessary condition of obtaining a license
from the Nuclear Regulatory Commission. Foreign parti-
cipation in the UEA project is designed to assure both
that no single foreign investor can have a dominant voice
in the project, and also that no group of foreign investors,
voting as a bloc, can impost their views on U.S. investors.
6/24/75
10
FOREIGN CUSTOMER CONDITIONAL CONTRACTS WITH ERDA
Question:
What happens to these foreign customers who have contracts
with ERDA that are conditional on plutonium recycle and
subject to termination?
Answer:
Holders of such contracts have a Presidential assurance
that they will be able to obtain their fuel needs from a
U.S. source of supply. The existence of a viable UEA
project and commercial centrifuge projects will afford this
opportunity. Indeed, a number of countries currently
holding conditional contracts are already prospective
investors in UEA.
6/24/75
11
FOREIGN PURCHASES WITHOUT INVESTMENT?
Question:
Will foreign customers be able to obtain uranium enrichment
services without an investment in a plant?
Answer:
Foreign investment, subject to U.S. policy regulations, would
be welcomed. Foreign investors will be able to purchase
fuel in proportion to their investment. It is anticipated
that foreign customers who do not invest will be able to
contract for uranium enrichment services, within the limits
of plant capacity and if judged by enrichers to be compatible
with their ventures.
6/24/75
12
U.S. SHARE OF THE FREE WORLD MARKET
Question:
How much of the foreign enrichment market might the U.S.
expect to capture.
Answer:
We cannot predict our share of the foreign market for
enrichment services at this time. That share will be
determined by our ability to compete with other suppliers.
We hope that our sophisticated technological leadership
developed over the past 30 years and our proven ability
to provide enrichment services will put us in a good
position to be a reliable supplier at reasonable prices.
6/24/75
13
PAYMENTS BY INDUSTRY FOR GOVERNMENT-OWNED - TECHNOLOGY
Question:
Given the heavy investments made by the U.S. taxpayers in
the U.S. enrichment program, what compensation is the
Government likely to receive for the technology?
Answer:
It is expected that the U.S. Government will charge 3%
of the gross revenues of private producers as compensation
for the use of its inventions and discoveries. For example,
should UEA generate gross revenues of one billion dollars
per year, the Government would receive compensation payments
of about $30 million per year in license fees and income
taxes of about $50 to $70 million per year per plant.
Revenues from these industry payments will increase as
other private plants--probably using centrifuge technology--
begin production.
6/24/75
14
WHAT HAPPENS IF A PRIVATE PLANT DOESN'T WORK?
Question:
What happens if the proposed private diffusion plant
doesn't work?
Answer:
The plant will work.
The private diffusion plant will use a process that has been
proven and perfected over a quarter century of large scale
Government operation. Governmental specialists will be
involved in the details of the project and the Government
will supply on a full cost recovery basis the key components
which are available only from the Government. Again, the
project will work.
6/24/75
15
WHAT HAPPENS IF A PRIVATE PLANT ISN'T LICENSED ?
Question:
What happens if a private plant isn't licensed?
Answer:
There is little reason to believe that the plant would not
be licensed. From a health safety and environmental stand-
point the project is expected to be much simpler to license
than a nuclear power reactor.
Licensability of projects will, however, be a key considera-
tion from the outset and should any difficulties appear they
will be recognized early. Under the proposed terms of the
cooperative arrangements, the Government would be able to
take over a project if a license were not granted.
6/24/75
16
DOES UEA HAVE CUSTOMERS?
Question:
Does the proposed private diffusion plant project (UEA)
have all the customers it needs to go forward?
Answer:
We understand UEA has letters of intent from domestic
utilities covering about 15% of plant output. Several
foreign governments have expressed reasonably firm interest
in significant amounts of plant output. As the project is
accepted as the next United States enriching plant, it is
very likely that customers will begin subscribing to the
remaining available plant output.
6/24/75
1975
Work to
tion
Date
Responsibili
Be Done By
Begin
Congressional Briefings
Today
Friedersdorf
Congressional
Relations Staff,
Seamans, Fri, Zari
Morton, Connor,
Schleede
Legislation
- ERDA draft-due to OMB
June 17
Hills
ERDA, OMB, FEA,
- Final clearance
June 21 Lynn
Hills, AG, Connor
NSC
Presidential Message/
Statement
- ERDA draft due to
Domestic Council
June 16 Fri
ERDA, OMB, NSC,
Hills, FEA, Conno
Domestic Council
- Domestic Council
June 18 Cannon
draft to Hartmann/
Theis
- Draft for Presidential June 21 Hartmann
Review
GERALD R. R LIBRARY FORD
- Final Draft
June 24 Hartmann
Fact Sheet and Q & A
- Domestic Council draft June 16
Cavanaugh
Schleede, ERDA,
- Final Draft
June 18 Cannon
OMB, NSC, FEA,
Connor
Complete Negotiations
June 21 Fri
Fri, Hills, Jim
with Private Sector
Mitchell, Schleed
Participants
Economic Impact State-
ment
- Draft
June 18
OMB
CEA, Treasury,
- Final
June 21
Seidman
OMB, ERDA, FEA
Environmental and
June 18
Cavanaugh
EPA, ERDA, NSC,
Regulatory Evaluation
EEA, Schleede
Work to
Action
Date
Responsibili
Be Done By
Non-Proliferation
June 21 Scowcroft
Fri, Schleede
Evaluation
Elliott
Press Briefings
June 18 Nessen
Connor, Seamans
to 25
Fri
Briefing for Business
June 23- Baroody
Lynn, Seamans,
and Labor Groups
24
and Fri
Overall Coordination
Cannon
GERALD & FORD LIBRARY
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
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)
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
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.
#
#
#
#
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.
#
#
#
#
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
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FOR IMMEDIATE RELEASE
JUNE 26, 1975
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
FRANK G. ZARB
ADMINISTRATOR OF THE
FEDERAL ENERGY ADMINISTRATION
ROBERT C. SEAMANS
ADMINISTRATOR OF THE
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION
AND
ROBERT FRI
DEPUTY ADMINISTRATOR OF THE
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION
THE BRIEFING ROOM
11:30 A.M. EDT
MR. NESSEN: I think you got the idea from
Jim's pool report of the importance with which the
President views this legislation.
In the conversations here about this legis-
lation, it is looked upon as something that 20 years
from now, when we look back on this legislation, this
proposal will seem to be one of the most important
proposals of these times. It is a subject that we
have not really talked about very much in these briefings.
To give you some background on what it means
and what the importance of it is, we have first of all
Frank Zarb, the head of the FEA; Dr. Robert Seamans,
who is the Administrator of the Energy Research and
Development Administration; and his deputy, Robert Fri.
They will explain to you what it is that the
President is proposing today, and will answer your
questions about it.
MR. ZARB: Just to open it with a general
statement, in this morning's meeting, when we met with
the Joint Committee, we pointed out that while this had
a great deal to do with uranium enrichment and our
ability to satisfy both domestic and export needs in
this category, it had farther reaching complications.
It is probably the first test of our commitment
to use the financial base, the management capability
and the technical skills of American industry in a way
which would have technology that was developed within
the framework of the Federal Government transferred in
some form from Government to the private sector.
MORE
(OVER)
- 2 -
The most conservative calculations as to what
it is going to cost to achieve reasonable independence
or invulnerability by 1985 and lead toward the further
developments required in the 1990s, is a $600 billion
bill. I emphasize that that is a conservative number.
It certainly can and probably will grow larger
as we get closer to the 1980s. So the ability to tap
the broad base of private capital, plus their technical
capabilities and management abilities, is an important
factor here to recognize in that this particular step
is a move in that direction and one of many others
that could occur downstream.
You all know Dr. Bob Seamans, who is the
Administrator of ERDA, and he will give an overview
of this particular piece of legislation, which the
President said will be sent up today.
MR. SEAMANS: Thanks, Frank.
One of the most pressing issues that we faced
when ERDA was formed was what to do about the nuclear
industry, and particularly what to do about fuel for
our present electric generating plants. This, most of
you know, involves the enrichment of the uranium as
one of the very important steps because when you get
the ore from the ground the U-235 is only about seven-
tenths of one percent and you have to get up to three
or four percent in order to energize one of our reactors.
The problem that we faced was that we have in
this country three plants. Each one of these is a
large-scale operation. They exist at Oak Ridge; another
one is at Paducah, Kentucky; and another one is at
Portsmouth, Ohio. All three of these are fully committed
to the generating plants that are either now in operation
-- 55 in number -- or those that are under construction,
and are in the planning state, the total numbering
about 235.
On top of that, we have some foreign commit-
ments, and between the domestic and the foreign we have
not been able to take on additional orders for the
last year. It seemed to us extremely important, as
we looked ahead, as we must work more and more towards
independence, cut down our import of oil, that we
increase our capacity to generate electricity using a
nuclear fuel.
The next step in our thinking had to do
with what type of plant to build. As you know, the
technology moves on. The three plants that we have
involve gaseous diffusion. These are plants that
have been in operation in the order of 30 years. We
feel that the new technology that we have making use of
a centrifuge is just about ready to go, and that we
should avail ourselves of this capability and move ahead
and develop plants that will use less energy to drive
them, that can be built in smaller units, and will be
more attractive to industry in the longrun.
MORE
- 3 -
Third, is the question of how are we going to
proceed with the financing and the management. Here
we felt very strongly that we ought to ease the taxpayer's
burden and have this a private venture, and also we liked
the idea of the competition, although if I do say so,
I think the Government has done a pretty good job with
its processing plants.
There is always room for innovation, and you
tend to get that when you go to competition. So the
plan in brief is to proceed down two courses: one, to
build modern gaseous diffusion plants, and at the same
time to go out in the competition for the centrifuge
type plant.
We have at least three companies or consortia
that are interested in bidding. There may be more.
As far as the gaseous diffusion plant, the
plan is to negotiate with the Uranium Enrichment
Associates. These Associates are made up of the Bechtel
Corporation and Goodyear. You will, undoubtedly, be
bringing in additional partners.
We have for the bold outline of what they
propose, but we obviously have to get into some hard
negotiation before we are certain that this is the
way to go. We believe it will. We believe it must
get started. We could discuss with you in any detail
you want what the plans entail.
I think one thing that is important is that
there are bound to be some risks involved at any private
operation coming in because they must rely on technology
and supply of certain of the classified materials, and
so on, from the Government, and in looking this over
we felt that the best way to proceed, and this has been
agreed to, would be to provide an arrangement whereby
either party -- the Government or the private company --
could, if they wish, back out and transfer the obligation
over to the Government.
We don't expect this will take place, but if
for any reason there should be on one extreme a moratorium
on nuclear energy, obviously the company could not then
go ahead. On the other hand, there could be some
management problems. Whatever it might be there would
be this clause that would permit reversion of the
operation to the Government.
If that should occur, the equity might be
made up to the company on the basis that it was not
anything over which they had any control. On the
other hand, if it were a matter over which we felt
they did have control, say mismanagement, then they
would not get their equity back.
MORE
- 4 -
On this kind of basis, we feel that we have
built in what will be acceptable to the investor, and
will be acceptable to the buyer of the material, because
the main objective here, as the President said, is to
get going and open the order book.
I think with that maybe you have enough of
the background that we can go to any questions that you
might have.
Q
Sir, does this allow or make it easier
for terrorists, people who would endanger us, to
get hold of these supplies and misuse them?
MR. SEAMANS: It won't make any difference.
The same safeguards will be applied that are already
applied in our Government operation, and we will have
exactly the same type safeguards at home and abroad
in the case of the private operation.
Q
Sir, what about the royalty fees? What
level of royalty fees will the private companies have
to pay?
MR. SEAMANS: Of course, that is going to be
part of the negotiation. One of these plants is going
to cost on the order of $3.5 billion on that basis.
Looking at the probable returns, we can expect
that there will be of the order of $90 million to $100
million coming in each year to the Government, in part
for royalties and in part in the form of taxes on profit.
Q What level, what percentage are you looking
at?
MR. FRI: The royalties on the percent of the
cost to the Government technology sold to the gaseous
diffusion operator -- we anticipate royalties in the
range of $30 million a year, but I really can't run
out the percentage in my head.
MR. ZARB: I think we ought to point out that
the legislation not only to accomplish this in a macro
form is going forward, but the legislation within it
requires the Government, the Executive Branch to put
before the Congress for 45 days any contract that they
are going to enter into so the Congress can look at the
individual details of any given contract at any given
time.
Q
Does this mean you are going to sell to
foreign countries, too, foreign nationals?
MORE
- 5 -
MR. SEAMANS: Yes, we do now and that should
continue. That is a very important part of opening
up the order book.
We feel that not only do we welcome the
opportunity for foreign sale, just from the standpoint
of gold flow, but we also feel it is extremely important
that there be an opportunity for the potential foreign
buyer to come to this country where we are going to
insist on appropriate safeguards.
We think if we are not involved that then that
opens up all kinds of issues over which we will have
absolutely no control.
Q
Is that $3.5 billion you mentioned for
the gaseous diffusion plant?
MR. SEAMANS: Yes, that is the estimated cost
in present dollars.
Q
What do they figure the centrifuge plants
might run?
MR. SEAMANS: These are still rough estimates,
but they will cost of the same order of magnitude.
Q
Mr. Zarb, you said that Congress would
have an opportunity to look at individual contracts.
Could you explain? Does that relate to UEA alone? Does
it relate to centrifuge as well? Would Congress, under
this legislation, have the right to disapprove any such
contract in advance?
MR. ZARB: That is per the legislative process,
but they will look at each contract. They will have
an opportunity to review each contract and presumably
will have an opportunity to either modify or to dis-
approve it.
Q
Could you elaborate on that? What do you
mean by presumably? What would the legislation specify?
MR. FRI: Well, the contract would lie before
the Joint Committee for 45 days. Disapproval would
require action by the Congress. The form of disapproval
is a technical matter. It would probably take the form
of voting an authorization, and an appropriation bill,
to fund the contingent liability involved in the contract.
The Congress has a formal crack at it through
that process. It is legislatively kind of complicated,
but they get an up or down shot at it.
MORE
FORD
GERALD R.
- 6 -
Q
A technical matter to allow authorization
on an appropriation bill; is that what you said?
MR. FRI: This involves the concept of
contract authority which means they would have to
authorize and appropriate against a contingent liability
of the Government, which we hope and anticipate we will
never have to spend any money on it.
Procedurally, on the Hill, it is a little
complicated, but it is just as if you were voting on
an appropriation bill.
MR. SEAMANS: This would be the liability
that the Government might have to take over the operation,
which we don't anticipate, but you have to cover that
with a Congressional bill.
Q
Does that apply to centrifuge as well
as the UEA?
MR. SEAMANS: Yes, it would, of course.
Q
Mr. Zarb, the environmentalists have been
fighting the building of new nuclear power plants in
a number of areas around the country. Do you think
they will also fight construction of the new uranium
enrichment plants?
MR. ZARB: I really can't guess on what one
group will do or not in one area of the country or not.
I think the point that Dr. Seamans made a moment ago
is awfully critical.
The extent to which the United States Government
and the United States enterprise system can become a
factor here in the world marketplace, it will have an
opportunity to insure certain safeguards and certain
controls that it will not have if it is not a major
factor and a participant in the nuclear enrichment
program.
That is awfully clear. It is clear that other
nations are looking toward the development of their
own capacity to become exporters of this particular
service and product.
So I would think that those concerned with
some of the issues raised by the environmental group and
others would feel more comfortable with the United
States keeping a firm total in the overall marketplace,
and thereby being able to exert its influence.
MORE
- 7 -
Q
Mr. Zarb, a couple of years ago there was
talk of the Japanese coming in and providing half the
capital to build a gaseous diffusion plant in the United
States somewhere. Is that still being discussed? Is
there still a possibility?
MR. SEAMANS: The Uranium Enrichment Associates
have been talking to a number of foreign countries. They
include Japan, Iran, West Germany and I guess a few others.
That is a real possibility, but that will have to be negotiated
by UEA and subject to our approval. The Japanese are
considered as a possible investor in this gaseous
diffusion plant.
Q
There is one thing on the financing I
don't understand. You say that if this thing falls
through so that the Government has to assume the total
financial obligation, it will be $8 billion, but on page
2 of the message, it says 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.
Could you explain the difference there?
MR. FRI: We anticipate that something like
eight to ten additional enrichment plants, probably one
gaseous diffusion and the balance centrifuge, will be
built to meet demand for the balance of this century.
The total cost of those plants is in the order of $30 billion.
MORE
- 8 -
The $8 billion figure you have is based on
an estimate that the gaseous diffusion plant of UEA
and three initial centrifuge plants would all enter
into this kind of an arrangement with the Government;
all would fall through simultaneously.
The maximum liability for those four plants,
to the Government, if they had to step in and take it
over, would be on the order of $8 billion.
Q
One other thing. Does not the Government
make money now by selling the enriched fuel that it
provides private industry, and how much does that amount
to?
MR. FRI: We receive revenue. There is some
debate over whether we make money. The revenue is on
the order of $750 million a year. We announced yesterday
we would probably ask the Joint Committee in Congress
to increase that price by another $10 or so per unit
of enriched uranium.
MR. ZARB: I just would like to make one point
in following up your first question. We spent an awful
lot of time in "what if" type contingencies, which
were designed to answer those questions, knowing that
they would be raised. What would happen if there
were a problem with financing or some other form of
delays in this particular industry?
None of us mean to emphasize that we anticipate
those occurrences, but they had to be a major part
of the legislation to be able to answer the obvious
questions that will be raised in this endeavor.
Q
What about cost overruns? That happens
all the time with this type of thing.
MR. SEAMANS: I think one of the important
features of the arrangement that we are contemplating
is that it is not done by committee, that either one
party or the other is fully responsible. As long as
UEA has that responsibility, which they would if they
raised the capital, it is up to them to take care of
their own overruns, and there is no commitment on the
part of the Government to help them out.
Q
Concurrently, is the Government expanding
its facility at Portsmouth?
MR. SEAMANS: No we are not. We are considering
this as a possibility and we will, according to plan,
continue with some backup design work in the eventuality
that everything does not proceed as we expect.
MORE
- 9 -
Every expectation is that the UEA will proceed
and that we will then follow that with centrifuge plants.
Q
Dr. Seamans, what will this do to mining
of uranium? What will it do to production?
MR. SEAMANS: Because one of the issues the
country faces is the extent of our uranium reserves,
part of ERDA's responsibility is to come up with the
best estimate. We are actually increasing our exploration
for uranium to get the best possible fix that we can.
Our expectation is that with our uranium
reserves that we can keep going through this century,
and we have reserves sufficient to build up to the order
of 700 or 800 generating plants.
Q
Dr. Seamans, does the $3.5 billion
estimate include the building of power plants to supply
energy to the thing?
MR. SEAMANS: No, it does not.
Q
Dr. Seamans, I am puzzled about this
expansion of your enriched uranium. We seem to see
nothing but opposition to generation of power by nuclear
plants.
Why are you so certain that you are going to
be able to expand this?
MR. SEAMANS: Why are we certain that we are
going to expand our nuclear capability in this country?
Q
The generating of power by nuclear plants.
It seems to be going very slowly. You are
anticipating quite a large expansion.
MR. SEAMANS: We currently have 55 plants
on operation, and they are operating very efficiently.
Those that are fortunate to be served by a nuclear
plant are getting their electricity at less cost than
they are if it is a fossil fuel plant. The reliability
is of the same order as other type plants.
We are obviously not satisfied and some of
our basic technological work in ERDA will be in
support of the kind of problems that actually do exist,
material type problems, and so on. None of these
affect safety, but some of these do cause increased
down time.
MORE
- 10 -
Looking ahead, if we don't increase our
capacity to generate electricity, other than oil and
gas, we are going to be in deep trouble. The two
alternatives are coal and nuclear. We have got to
use both because, in addition, coal has got to be used
to develop a synthetic fuel, along with shale. So
we have to use the nuclear, in our view.
We have got to use coal and we have to work
as hard as we can on conservation. These are going to
be the keys, in my estimation, for the future of this
country.
MR. ZARB: In answer to your marketing question,
the orders for uranium enrichment are backed up in that
there is a harder demand for uranium enrichment worldwide
than there is capability to satisfy our own domestic
capability is sold out eight years hence.
Q
I remember reading four and five years
ago about projections of the number of plants we were
going to have. It is way beyond anything we have now.
The course has been very erratic in developing them, and
I don't understand how you are going to overcome this
opposition.
MR. ZARB: By answering legitimate and reasoned
questions and getting any technological issues solved,
such as the disposal of nuclear waste and the basic
safeguards question, which are both technical issues and
both can be solved as we continue to develop our nuclear
capability.
Q
Presumably, the production of enriched
uranium will be profitable or otherwise these companies
will not be interested. In fact, I think I saw one
estimate from revenues of foreign sales over the next
five years will reach $5 billion.
My question is this: Why should not the United
States as a whole enjoy the revenues from technology
developed at taxpayer expense? I think the royalties
he describes seem rather small compared to the potential
profit.
MR. ZARB: I will take the first shot at that
one, and then Bob may want to add to it.
When American industry gets involved in
constructing plants and making a product and a service
available worldwide, the American economy benefits.
American workers and American capital at work -- the
money stays here and it is to the benefit of all Americans.
MORE
- 11 -
If you are asking why that should not be done
by Government, I will go back to what I said earlier.
We have, conservative, $600 billion required for invest-
ment in energy areas between now and 1985, if we are
going to achieve any real degree of independence.
We are going to have to rely on the capital-
based American industry to move us in that direction,
and we miss an awful lot of technological capability
and other management skills if we don't tap into that
great base of talent and financial resource.
MORE
- 12 -
Q
Except in this area there seems to be two
differences, and maybe you can explain it. One is that the
technology is developed by the Government, at taxpayer's
expense, and two that there is a Government guarantee
against loss of equity. You are not expected to do that
for all development of energy, are you?
MR. ZARB: I think the royalty question is
something that will be debated in the Congress, and not only
in terms of the basic legislation, but in the contract by
contract.
That issue may be raised and maybe there will be
some movements onthose numbers. I think that is an
area that should be looked at very carefully, but keep in
mind, when you look at what was developed at Government
expense, we are talking about rubber tires and all the
technological activity that has come out of the space
program that have moved from Government development into the
private sector to be more fully developed there.
Anyway, as we look at solar and shale and gas-
ification and liquefaction, we are looking also at
technologies which have been financed in their very
early stages by the Government, but have to make the
transition into the American industry or they are not going
to grow and we are not going to have them where they are
going to be needed in the late 1980s.
MR. SEAMANS: Just looking at enrichment alone,
we are talking about not one or two or three more plants.
We are talking about the possibility of eight to ten plants
by the year 2000. The question is, where is the capital
going to come from?
I think we often overlook the fact that you build
up your capital through your profit system. If you don't
have the profit, then the taxpayer is going to be burdened
directly with that capital cost.
In other words, there is going to have to be
financed as the first plants were financed. I think the
taxpayer is a lot better off to see this turned over to
a competitive system.
Q
Dr. Seamans, as you make this available to
foreign countries, how can you be assured that they will
follow safety precautions and keeping it out of the hands of
terrorists?
MR. SEAMANS: The way we are proceeding now.
MORE
- 13 -
Q
How do you do it now?
MR. SEAMANS: With Government-to-Government
agreements, wtih the use of the nonproliferation
treaty, with inspection by the international Atomic
Energy Agency; all of these methods.
Q
That does not keep terrorists from
getting it, does it? Isn't that a real danger?
MR. SEAMANS: Sure, it is a matter of obvious
concern to us, and we have a variety of pro rams for safe-
guarding nuclear material in this country. We are making
this available to all those with whom we have agreements,
invite them in to show them what we are doing, encourage
them to increase their safeguards and have a method for
reviewing and inspecting on an international basis how well
they are doing.
Q
Mr. Seamans, since there are problems
currently with security and waste disposal at nuclear power
plants, why don't you solve those first before embarking
on a gigantic program like this that you may end up
having hundreds of power plants and still have not solved
the other problems?
MR. SEAMANS: These two have got to be done in
parallel. We have to move ahead and increase our
capability and not let the requirement for imports build
up and build up.
Q
Where are your proposals to improve the
waste problem and safety problems? Why aren't you proposing
something simultaneously?
MR. SEAMANS: We are about to present a plan
to the Congress next Monday and it will address itself
to these issues.
Q
Dr. Seamans, two questions, if I may. The
first is, would a collapse of the world enriched uranium
market be found for giving companies back their money?
The second one is, isn't there a contradiction between
what you are announcing today and your parallel efforts to
stop the spread and the export of enrichment in new
processing plants to third countries? In other words,
aren't you trying to create an American monopoly?
MR. SEAMANS: I don't think we are, and I think
this has been discussed, but I will re-emphasize it.
First, as to the terms, these have got to be carefully
worked out ahead of time on what conditions can the
equity be reimbursed to UEA.
MORE
- 14 -
This will be part of the negotiation that will
work that out. We can see in broad outline what the extremes
are, but there may be some middle ground that we want to
have worked out in advance.
As to your second question, it is no longer
possible to completely cap the situation. The Germans,
for example, we understand are going to sell a processing
capability to Brazil. This is one example. The only
way that this situation can be brought under control,
we believe, is to be participating in the market arena
at the same time we are participating country by country
and with agreements as well as jointly with the blocs
of countries.
MR. CARLSON: At 1 o'clock this afternoon at
the FEA, there will be a more detailed, more technical
briefing for those of you who are interested. We also
have a 22-page fact sheet we will now make available.
These gentlemen must leave. If we can cut if off
now, Ron Nessen will be down in about five minutes.
END (AT 11:57 A.M. EDT)
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
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(OVER)
2
Gas Centrifuge
Laser Separation
- Existing U.S. Capacity
- The Growing Market
-
Potential Foreign Suppliers
- The Program to Develop a Competitive Industry
Diffusion Plant
Centrifuge Plant
- Obstacles to the Entry of Private Industry
- Alternatives to Private Entry
- The Proposal from Uranium Enrichment
Associates (UEA)
- Centrifuge Enriching Projects - Request for
Proposals
Other Actions Related to Uranium Enrichment
Capacity
13
- Increasing ERDA's Charge for Uranium
Enrichment Services
- Contract Relief for Current ERDA Enrichment
Customers
- ERDA Conditional Contracts for Enrichment
Services
Attachment:
#1 - Summary of UEA Plan and Proposal to ERDA
16
#2 - Uranium Enrichment as a Part of the Nuclear
20
Fuel Cycle
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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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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:
I
Our economy and our world trade position.
Our efforts to obtain the commitment of additional
nations to accept international safeguards and the
principle of nuclear non-proliferation.
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Our cooperation with other major oil consuming nations
which are looking to nuclear power to help reduce their
dependence on foreign oil imports.
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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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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.
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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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The arrangements would be spelled out in a detailed
contract, and the basis for arrangements would be
subject to Congressional review.
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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:
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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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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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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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Appropriations Request. The President will later request
an appropriation of contract authority which is required by
the proposed bill before a contract can be executed, in
order to cover the estimated maximum Federal Government
exposure for specific projects in the event that it were
necessary to assume assets and liabilities. Again,
expenditure of these funds for assumption of any private
venture is not considered likely.
DEVELOPMENTS LEADING TO THE PRESIDENT'S PLAN
U.S. Leadership in Uranium Enrichment Technology. The United
States is the recognized world leader in technology for refining
or "enriching" natural uranium to a form that can be used to make
fuel for nuclear power reactors. Natural uranium contains only a
small amount (approximately 7%) of the fissionable isotope U-235.
In order to be useful to make fuel for most nuclear reactors, the
concentration of U-235 must be increased to about 2-4% through a
process of separating off other isotopes. The technology was
developed and is owned by the Federal Government. Certain parts
of the technology are classified. Principal U.S. technologies
are:
Gaseous Diffusion. This technology which is now used in the
three existing government-owned enrichment plants was developed
in the 1940's. Over 30 years of large scale operating experi-
ence and process improvement have made the technology the most
reliable and economical now available for commercial scale
operations. The next increment of capacity must make use of
this technology.
Gas centrifuge. The gas centrifuge process of uranium
enrichment provides an alternative to gaseous diffusion.
Full operation of a Government pilot plant is scheduled for
early 1976. If the projected economics of the process are
realized, gas centrifuge technology is expected to be used as
subsequent increments of commercial capacity are added.
Laser Separation. ERDA is conducting a basic research
program to determine whether this technology is technically
or commercially feasible. Even 1f successful, the technology
will not be available in time to be used for the next several
increments of needed enrichment capacity.
Existing U.S. Capacity. The three Government-owned uranium
enrichment plants will, when currently authorized expansion
is completed, have the capacity to produce enriched uranium
needed to fuel about 300 large nuclear-powered electric
generating plants. in the U.S. and foreign countries.
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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 1ts commitment to achieve privatization.
Alternatives to Private Entry. The principal alternatives to
an immediate effort to achieve privatization include:
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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:
10
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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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 intereste
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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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:
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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.
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Permit those wishing to defer deliveries (rather than
terminate contracts) to have a one-time adjustment of
contract commitments without penalty.
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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:
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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.
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Establish a more realistic data base for evaluating
future domestic and foreign enrichment requirements.
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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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ATTACHMENT #1
SUMMARY OF THE URANIUM ENRICHMENT
ASSOCIATES (UEA) PLAN AND PROPOSAL TO ERDA FOR
A COOPERATIVE ARRANGEMENT
Physical Description of the Project.
A 9 million separative work unit per year gaseous
diffusion plant would be built near Dothan, Alabama
on a 1720 acre site on the Chattahoochee River.
When in full operation the plant could provide enriching
services for about 90 large nuclear power reactors.
The plant will require about 2500 megawatts of electrical
power which will be supplied from a dedicated nuclear
power facility located nearby.
Project cost estimate (exclusive of the power project)
has been estimated by UEA to be $3.5 billion in 1976
dollars.
UEA projects continuation of design work now underway
on the project during the next several years with
construction scheduled to commence in 1977.
Full production from the plant is projected in 1983
with limited production starting in 1981.
Nearly 50 million construction manhours are estimated
for the project. A peak construction labor force of
about 7000 workers will be reached in 1979-80 and the
permanent operating staff of the project is expected
to be about 1100.
The plant will be processing and upgrading natural
uranium and thus will have essentially no radiation
hazard. It will be similar to a large materials
handling plant except that the product material will
be much more valuable.
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Financial Structure of UEA Project.
UEA expects that two to six companies in addition to
Bechtel and Goodyear will comprise the consortium that
will undertake the project. These companies are ex-
pected to be identified within the next few months.
Based upon marketing efforts to date, UEA projects that
about 40 percent of plant capacity will be taken by U.S.
domestic utilities and the balance by non-U.S. organi-
zations in countries with which the United States has
Agreements for Cooperation permitting the transfer or
disposition of enriched uranium. (Under the Atomic
Energy Act voting control for such a project must
remain in the hands of the United States investors at
all times and the project is so structured. The secrecy
of the process will be protected and foreign customers
or investors will not have access to classified technology
or information.)
Project financing using an 85 percent debt, 15 percent
equity ratio is contemplated for the project.
The equity corresponding to the domestic portion of plant
output will be supplied by UEA and the debt financing
will be raised in the commercial market primarily on
the basis of the security of long-term (25 year) non-.
cancelable enrichment service contracts with domestic
utilities.
Both equity and debt for the foreign share of plant
output is to be supplied from the foreign customers'
own sources of capital.
Pricing of product from the plant is based upon the
recovery of all operating costs, servicing of debt and
an after-tax return of approximately 15 percent on
equity.
A 3 percent payment, based on gross sales would be paid
to the Government for use of taxpayer-developed technology.
Customers.
A number of United States' utilities have executed
contingent letters of intent with UEA to purchase uranium
enriching services from the new plant and a number of
additional utilities are now evaluating their requirement
for services.
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UEA has made extensive marketing contacts overseas and
anticipates that foreign orders will be forthcoming.
Cooperative Arrangements.
Due to the unique nature of the project, the very large
capital requirements, and long payout periods, UEA has
concluded that it would not be possible to move ahead
without certain forms of Government backup assistance.
UEA has proposed that the Government:
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Supply, at cost, essential components presently
produced exclusively by the Government.
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Supply the Government's gaseous diffusion technology
and warrant its satisfactory operation.
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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.
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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.
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The consideration for acquisition of UEA's domestic
equity position in either case can range from
loss of equity for uncorrected gross mismanagement
of UEA to full fair compensation for causative
events outside UEA's reasonable control.
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All of the above forms of backup assistance would be
subject to contract negotiations between ERDA and UEA.
UEA believes that the plant can be completed within the
private sector with no net expenditure of Government
funds.
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ATTACHMENT #2
Uranium Enrichment as Part of the Nuclear Fuel Cycle
The attached chart depicts the nuclear fuel cycle for Light
Water Reactors, (the type of reactors most commonly used
in the U.S.). About 97% of the reactors obtaining enrich
ment services from the ERDA gaseous diffusion plants are
Light Water Reactors a similar fuel cycle exists for the
other present reactor type the High Temperature Gas
Cooled Reactor.
Prior to the enrichment step, uranium ore is mined from
the earth's crust and sent to a mill where uranium concentrate
is produced. This concentrate is often referred to as
yellowcake or by the chemical symbol, U₃O₈. There are
14 mills presently operating in the U.S. The uranium
concentrate is then sent to a converter where it is con
verted to uranium hexafluoride, or 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
URANIUM MINES & MILLS
U3O8 CONVERSION
ORE & ORE CONCENTRATE
TO UF₆
UF6 CONVERSION
(U₃O₈)
U235 ENRICHMENT
TO UO₂ AND FABRICATION
OF FUEL ASSEMBLIES
22
RECOVERED
URANIUM
(AS 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
######
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;
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(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 of such persons,
in an enrichment facility, and 50 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, subjec
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 theto
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 to
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,
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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
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4
Treasury may at any time sell any of the notes or
other obligations acquired by him under this
section. All redemptions, purchases and sales
by the Secretary of the Treasury of such notes
or other obligations shall be treated as public
debt transactions of the United States. There
are authorized to be appropriated to the
Administrator such sums as may be necessary to
pay the principal and interest on the notes or
obligations issued by him to the Secretary of
the Treasury.
Section 4. The Administrator of the Energy Research
and Development Administration is hereby authorized to
initiate construction planning and design activities
for expansion of an existing uranium enrichment facility.
There is hereby authorized to be appropriated such sums
as may be necessary for this purpose.
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more
Bill Analysis
Section 1 of the proposed bill cites the Act as
the "Nuclear Fuel Assurance Act of 1975."
Section 2 of the proposed bill would amend Chapter
5, Production of Special Nuclear Material, of the Atomic
Energy Act, as amended, by adding a new Section 45,
entitled "Cooperative Arrangements for Private Projects
to Provide Uranium Enrichment Services."
Subsection a. of the new Section 45 would authorize
the Administrator of the Energy Research and Development
Administration (ERDA) to enter into cooperative arrange.
ments with private enterprise to facilitate the development
of a competitive private industry for the enrichment of
uranium to make fuel for nuclear power plants. This
subsection would enable the Administrator to promote
private investment in the construction, ownership and
operation of uranium enrichment plants by providing such
Government cooperation and assurances as are determined
to be necessary and in the best interests of the Govern-
ment after detailed negotiation with selected individual
proposers of enrichment services. Such negotiations would
be directed toward obtaining arrangements most advan
tageous to the Government and the public interest and
with a degree of risk to the private entrepreneurs
consistent with the objective of creating a private
competitive uranium enrichment industry.
Cooperative arrangements authorized by Section 45a
could include such Government cooperation and assurances
as enumerated in the bill, including the specific
authority provided in subsection 45a (5), for the Govern-
ment to acquire the assets or interests and assume the
liabilities (including debt) of a private enrichment firm
in the event which is highly unlikely --- that private
industry could not complete a plant or bring it into
operation. It is intended that any undertaking by the
Government under subsection 45a(5) to acquire assets or
interest and to assume liabilities of a private venture
would terminate after approximately one year of commercial
operation of a plant. The precise period would be defined
during the negotiations of defined agreements. Any
obligations to pay off debt and to acquire equity interest
would be limited to citizens of the United States.
Subsection b. of the new Section 45 would provide
for review by the Joint Committee on Atomic Energy of
the basis for any cooperative arrangement, or amendment
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2
thereof, which the Administrator proposes to undertake,
including the basis for acquiring assets or interests,
or assuming liabilities of any private venture, and any
plan the Administrator may have for modifying, completing
operating, or disposing of any plant built under a
cooperative agreement.
Section 3 of the proposed Nuclear Fuel Assurance
Act would authorize the Administrator of ERDA to enter
into contracts, pursuant to the new subsection 45a, in
an amount not to exceed $8 billion, as may be provided
in appropriation Acts. This amount is an estimate of
the total potential cost to the Government in the
unexpected event that all private ventures covered by
cooperative arrangements were to fail and it was then
necessary for the Government to assume assets and
liabilities of the ventures, take over plants, and
compensate domestic investors. It is not expected that
any of these funds would be expended for the assump
tion of private ventures, but the authorization is
necessary to provide assurance, to customers and sources
of debt financing for private producers, of the Federal
Government's commitment to create a competitive industry.
Section 3 would also provide that, in the event of
Government assumption of the debts, interests and lia
bilities of a private venture, the Administrator is
authorized to secure funds through the Secretary of
the Treasury to liquidate contract authority, up to
the levels previously provided in an appropriations
Act.
Section 4 of the proposed bill would authorize the
Administrator of ERDA to initiate preliminary engineering
design and planning for expansion of a Government-owned
uranium enrichment facility for contingency purposes.
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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
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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.
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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.
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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.
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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
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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.
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