.. • FORUM MEMO 9

proposed authorization law would do the reactor program. This project requires specific following: statutory authorization for assistance because it also does not meet the "third round" criterion • Permit the AEC to waive charges for the use of a June 30, 1962 completion target date. of heavy water in enriched as well as natural uranium reactors, thus permitting the proposed • Make available an additional $1,250,000 for Florida and North Carolina heavy water power "research and development in Commission lab­ reactor projects to benefit from this waiver. oratories to advance the technology of the fast breeder reactor concept"-research which it is • Permit the proposed plant of the East Central acknowledged by the Committee will be of direct Nuclear Power Group and the Florida West benefit to the fast breeder power reactor project Coast Nuclear Power Group to receive federal of the Power Reactor Development Corp. at assistance under the third round of the AEC's Lagoona Beach, Mich. power demonstration reactor program. This project, unless it receives specific statutory au-· Relatedly, the President early this month thorization for assistance, will be excluded from signed a separate bill authorizing an additional the "third round" of the demonstration program $2.25 million for Project Sherwood controlled because its target date for completion is beyond thermonuclear research facilities, mainly at the deadline of June 30, 1962, set initially by Princeton University, and authorizing an addi­ the AEC. tional $9.4 million for particle accelerator proj­ ects at Cambridge, Mass. and Princeton, N. J. • Permit Phase I of the Pennsylvania Power & These projects were originally authorized in Light Co.-W estinghouse Electric Corp. proposal, previous years. which provides for research and development prior to possible construction of an aqueous Hearings on AEC's fiscal year 1959 appropria­ homogeneous power reactor, to receive federal tions began on July 1 in closed sessions before assistance under the AEC power demonstration the House Appropriations Committee.

A Package for Euratom

Last February (see "U.S.-Euratom Power The parts requmng U.S. approval had been Program," Memo for March) the U.S. govern­ signed by the U.S. Secretary of State and the ment and the then newly formed European chairman of the U.S. Atomic Energy Commission Atomic Energy Community ( usually called on June 12, subject to Congressional ratification. "Euratom") announced that they planned co­ At June's end, Congressional representatives operatively to work toward "the possibility of were busy rummaging around in the sometimes initiating at an early date a joint program of dark, often complicated recesses of the execu­ the order of one million kilowatts for the de­ tive branch's Euratom package, trying to find velopment of full-scale prototype reactors." just what there was in it to like and to dislike. Last month - on June 23 - the executive Most of the time this rummaging was accom­ branch of the U.S. government sent to the Con­ panied by grumblings to the effect that it is gress a voluminous but neatly wrapped package far too late in the present session to hand such of proposed agreements and recommended im­ a complicated package to the Congress with any plementing actions designed to launch the joint reasonable expectation of action before adjourn­ U.S.-Euratom one million kilowatt atomic pro­ ment. gram this year. The parts of the package requiring Euratom approval had already been Contents: In the package sent to the Congress signed by the Euratom Commission on May 29. last month were a proposed "International Agree- •

10 JULY, 1958 ment" between the U.S. and Euratom establish­ actors to be constructed under the joint program ing the broad principle that "the parties will and at the lowering of fuel cycle costs. cooperate in programs for the advancement of 3. The U.S. would sell to Euratom up to the peaceful applications of atomic energy," a 30,000 kilograms of U-235 for use in the reactors proposed 25-year "Agreement for Cooperation" constructed under the joint program. spelling out in fairly specific detail the respective roles of the U.S. and Euratom in the joint one 4. The U.S. would be prepared to perform million kilowatt program, and a draft implemen­ chemical processing services as requested by tation bill which would authorize the use of the Euratom with respect to fuel provided by the funds and materials needed for the U.S. to ful­ U.S. fill its part of the proposed agreement. Also 5. The U.S. would be prepared to purchase included was a "Memorandum of Understand­ for peaceful use at prices in effect at the time of ing" plus a collection of other working papers, purchase all plutonium and other special nuclear correspondence and studies which formed the materials produced in reactors built under the basis of the U.S.-Euratom negotiations. joint program and not retained for peaceful use by Euratom or purchased by the International The specific actions the Congress is being Atomic Energy Agency. asked to take are, first, to approve the generalized International Agreement; second, to pass the 6. The U.S. would offer fuel cost and per­ draft implementation bill, and, third, to grant formance guarantees which, in the language of a waiver permitting the Agreement for Coopera­ an annex to the Agreement for Cooperation, tion to take effect without the 30-day waiting would be "designed to limit certain financial period during which such documents must risks associated with the fuel cycle." usually lie before the Joint Congressional Com­ 7. Euratom would undertake through a safe­ mittee on Atomic Energy before they can take guards and inspection system to make sure that effect. All of these actions involve majority none of the material or equipment provided by votes in both houses of Congress. the U.S. would be used for other than a purely The other documents sent to the Congress peaceful purpose. last month were provided as background infor­ mation. They will, however, constitute an The Million Kilowatts: Each of the seven main important part of the legislative history of any elements of the Euratom package as listed above U.S. agreement with Euratom, and will, there­ is broken down into a host of details which fore, unless superseded or revised, have an im­ answer some, but not all, of the questions that portant effect on the manner in which U.S. delivery of the package has raised in the Congress cooperation with Euratom is carried on. and in the American atomic industry. Some of the more important of these details and their Main Elements: If the Congress approves the accompanying rationales are as follows: package delivered to it last month, here, in effect, are the seven main elements of the program it Desirability of the program: In a message will be placing in operation: transmitting the proposed International Agree­ ment to the Congress, President Eisenhower 1. There would be constructed in the Euratom described the program as "a further step toward countries by 1963 one million kilowatts of nu­ a united Europe," a goal which he said was "of clear power capacity using, in the language of vital importance to the U.S." He also said that the Agreement for Cooperation, "nuclear re­ "a central purpose of the proposed joint program actors of proven types on which research and is for Euratom and the U.S. government to development have been carried to an advanced create an institutional and economic environ­ stage in the United States." ment which will encourage the European utilities to embark quickly upon a large-scale nuclear 2. There would be undertaken cooperatively power program. As this program goes forward, by the U.S. and Euratom a ten-year research it will make possible significant progress in the and development program aimed primarily at development of atomic power elsewhere in the improving the performance of the types of re- world." FORUM MEMO 11

Economic objective: The draft Agreement for lion, leaves approximately $65 million to be Cooperation says that it is an objective of the found of the overall capital cost of the program. program to build and operate the one million The president of the Euratom Commission has kilowatts of capacity "under conditions which already approached the European Investment would approach the competitive range of con­ Bank and has asked that the Bank take the lead ventional costs in Europe." According to a in arranging for financing this remaining $65 working paper accompanying last month's Eur­ million." atom package, the kilowatt hour cost of a typical new coal-fired plant was listed at 10.9 mills and Re-loan of U.S. funds: The Agreement for of a typical new oil-fired plant at 9.8 mills. Cooperation says that funds lent by the U. S. Export-Import Bank to Euratom will "be re­ Capital cost: The Agreement for Cooperation lent by the Community for the construction of says that "the total capital cost, exclusive of fuel facilities under this program." The repayment inventory, of the nuclear power plants ... to be burden, therefore, with its economic implica­ constructed under the program is estimated not tions, falls on the owner of the facility, who will to exceed the equivalent of $350 million,'' which borrow from, and repay to, the Euratom Com­ is $.350 per installed kilowatt. munity. The Euratom Community will be liable for repayment to the U. S. Export-Import Bank. U.S. loan: The Agreement for Cooperation says that "up to $135 million" of the total $350 Eligible participants: The proposed Agree­ million required to finance the one million kilo­ ment for Cooperation says that "reactor projects watt program will be provided on a loan basis may be proposed, constructed and operated by by the U.S. government. In a letter accom­ private or governmental organizations in the panying the Euratom package to the Congress [Euratom] Community engaged in the power last month, then AEC Chairman Lewis L. industry or in the nuclear energy field." The Strauss told Joint Committee Chairman Carl T. Agreement goes on to say that "reactors now Durham that the $135 million of U.S. capital being planned or constructed ... will be eligible "would be provided by the Export-Import Bank for, and will receive, early consideration." Al­ to Euratom in the form of a long-term line of though the draft Agreement says nothing about credit at 4~% interest." He did not say how ownership, it would seem that the word was long the term of the loan ·would be, but a work­ omitted inadvertently, inasmuch as AEC Chair­ ing paper dealing with costs which was included man Strauss in his letter to Rep. Durham last in last month's Euratom package assumed a month said clearly that "the nuclear power 15-year, 4% governmental loan in three cases plants under the program will be built, owned and a 30-year, 4.75% loan in one case. In this and operated by utilities in the member states." connection, it is probably worth noting that the proposed U.S.-Euratom Agreement for Coopera­ Selection of projects: The Agreement for tion is for a term of 25 years. Cooperation says that projects to be included in the U. S.-Euratom program "will be selected in European financing: The Agreement for accordance with technical standards, criteria (in­ Cooperation says that about $215 million of the cluding those relating to radiation protection and $350 million required is expected to be provided reactor safety), and procedures developed by the "by the participating utilities and other European U. S. Atomic Energy Commission and the Eura­ sources of capital." In his letter to Joint Com­ tom Commission." The Agreement goes on to mittee Chairman Durham last month, AEC say that "the technical and economic features Chairman Strauss said that, of the $215 million will be considered and approved jointly by the to be provided from European sources, "prelimi­ U. S. Commission and the Eura tom Commission; nary contacts by Euratom with European other features . . . will be considered and ap­ utilities have indicated that the utilities will have proved by the Euratom Commission." no difficulty in arranging financing equivalent to that needed for one million kilowatts of con­ Number and size of projects: A working ventional power-about $150 million." Added paper included in last month's Euratom package Strauss: "This, plus the U.S. loan of $135 mil- states that, "taking into account the nuclear 12 JULY, 1958 power projects already in existence in the vari­ mation developed in connection with the one ous European countries, [ current objectives] million kilowatt program would be freely avail­ seem to suggest that a program of six to eight able to both the U.S. and Euratom and "may be additional reactors, properly distributed among used, disseminated, or published by each party several Euratom nations, would be most effec­ for any and all purposes as it sees fit without tive." The paper also states: "These units should further obligation or payment." Although the ... mostly fall within the range of 100 to 200 Agreement is silent on the point, the U.S. AEC electrical megawatts. Thus, the total capacity has informed the Forum Memo in response to a of the program would be in the range of 600-1,000 question that it is envisioned that patentable in­ emw, but it is expected that the total will fall formation will not be available to the govern­ near the middle of this range." ments concerned except as it may be produced under a Euratom or U.S. government contract. The meaning of "proven types": The U.S.­ Patents used in the program which are owned Euratom program, by virtue of the language of by the U.S. government, or concerning which the the Agreement for Cooperation, is limited to U.S. government has the right to grant licenses, "nuclear reactors of proven types on which re­ would be available for license or sublicense to search and development have been carried to an Euratom member states or industries on a recip­ advanced stage in the U.S." By letter of May 8 rocal basis. to the U.S. AEC's Deputy General Manager Richard W. Cook, who was one of the U.S.'s chief negotiators of the Euratom Agreement, the R&D Program: So far as the proposed joint chief negotiator on the Euratom side, Max Kohn­ research and development program is concerned, stamm, explained the meaning of the phrase the draft Agreement for Cooperation contains the "proven types" in these words: "In terms of the following interesting details: current state of technology, this would mean • The program "will be aimed primarily at the that initially the program would be oriented pri­ improvement of the performance of [ reactors of marily towards large-scale nuclear power plants the types included in the overall power plant con­ employing reactors of the pressurized and boil­ struction program], and at lowering fuel cycle ing water types." Kohnstamm went on to say: costs. It will also deal with plutonium recycling "I emphasize the word 'primarily' inasmuch and other problems relevant to these reactors." as I believe that it would be unwise to forego the consideration of other types of reactors • The program will "be conducted both in the ( e.g., the organic moderated concept) that may United States and in Europe." meet the criterion of 'proven types' development • The program "will be established for a ten­ in the U.S. and thus meet the objectives of the year period.'' joint program. Any such proposals, in our judg­ ment, should receive due consideration by the • "During the first five years the financial con­ Euratom Commission and the government of the tribution of the government of the U.S. and the U.S. in the course of the implementation of the Community will amount to $50 million each .... program." Cook on June 12 wrote back to Kohn­ Funds for the second five-year period may be in stamm to say that "we agree that the program the same order of magnitude." must be sufficiently flexible to provide for the • All non-patentable information developed un­ consideration of other types of reactors in addi­ der the joint R&D program "will be delivered tion to the boiling water and pressurized water currently to [both the U.S. government and varieties." Euratom] as developed, and may be used, dis­ Timing of the projects: In a working paper seminated, or published by each party for any included in last month's Euratom package and and all purposes as it sees fit without further agreed to by the negotiators of both sides, a tar­ obligation or payment." get schedule was established "under which proj­ • Both the U.S. government and Euratom "shall ects are selected no later than 1959 and construc­ have access to the records of the participating tion is completed no later than 1963." contractors pertaining to their participation in Information rights: According to the Agree­ research and development projects" financed by ment for Cooperation, all non-patentable infor- the joint R&D program. FORUM MEMO 13

• So far as patentable inventions are concerned, associated with the program, this figure becomes the U.S. would own the patent rights within the 30,000 kilograms." U.S. and Euratom would own the rights within the six Euratom countries. Each party would Additional fuel: The draft Cooperation Agree­ grant to the other a non-exclusive, royalty-free ment with Euratom specifies that "the U.S. Com­ license to the patents owned by it. In addition, mission will . . . from time to time sell to the the Agreement for Cooperation specifies that Community such quantities of special nuclear "neither party shall discriminate in the granting material, in addition to the quantities of enriched of any license or sublicense for the reason that uranium set forth above, as may be agreed." the proposed licensee or sublicensee is a national of the U.S. or any member state of the Com­ Plutonium: In addition to the 30,000 kilo­ munity." grams of U-235 specified in the Agreement for Cooperation, the draft implementation bill now Sale of U.S. Fuel: In last month's Euratom before the Congress would authorize, if passed, package there were the following important de­ the sale of one kilogram of plutonium to the tails concerning the provision of U.S. fuel for the Euratom Community. joint U.S.-Euratom program: Title to fuel: The proposed Agreement for Quantity of uranium: In the proposed Agree­ Cooperation states that "it is agreed that the ment for Cooperation with Euratom the U.S. gov­ Community may distribute special nuclear ma­ ernment agrees to "sell to the [ Euratom] Com­ terial to authorized users in the Community," munity uranium enriched in the isotope U-235 but adds that the Community "will retain ... for use in projects designated by the parties pur­ title to any special nuclear material which 1s suant to the joint program up to a net amount purchased from the U.S. Commission." of 30,000 kilograms of contained U-235 in ura­ nium." The Agreement specifies that "this net amount shall be the gross quantity of contained Enrichment limitation: The Agreement for U-235 in uranium sold to the Community less the Cooperation states that uranium provided by the quantity of contained U-235 in recoverable ura­ U.S. "for use in reactors designed for the produc­ nium which has been resold or otherwise returned tion of electric power may be enriched up to to the U.S. government or transferred to any 20% by weight in the isotope U-235." The Agree­ other nation or international organization with ment goes on to say, however, that the U.S. the approval of the U.S. government." Commission may, "upon request and in its dis­ cretion, make a portion of the [ uranium pro­ Calculation of quantity: In a working paper, vided] available as material enriched up to 90% the U.S.-Euratom negotiators explained their ar­ for use in materials testing reactors and research rival at the 30,000 kg figure in this way: "Con­ reactors, each capable of operating with a fuel sider a pressurized or boiling water reactor hav­ load not to exceed eight kilograms of contained ing a power level of approximately 150 electrical U-235 in uranium, and as highly enriched mate­ megawatts and an irradiation level between 7,000 rial for use for research purposes." and 10,000 megawatt days per metric ton. The fuel to be supplied for the inventory, including Method of payment: As to how Euratom the reactor loading and material being fabricated, would pay for the 30,000 kg of U-235 it would cooled and processed, will contain about 1,300 receive under the proposed program, a "funding kilograms of U-235. The burnup of U-235 in such summary" included in last month's Euratom a reactor operated at 80% load factor will be package described this as follows : "The initial about 150 kilograms per year. For the entire one operating inventory, which amounts to approxi­ million kilowatt program, the total inventory mately 9,000 kilograms of contained U-235, will will contain about 9,000 kilograms of U-235 and be sold to the Community on a deferred payment the burnup will be about 1,000 kilograms per basis at the domestic prices in effect in the U.S. year. For 20 years of operation, a total of 29,000 at the time of transfer. Payment by the Com­ kilograms of contained U-235 will need to be munity on the principal may be deferred for supplied for inventory and burnup. If 1,000 kilo­ a period not to extend beyond December 31, grams are added for research and test reactors 1973, with interest to be paid on this debt 14 JULY, 1958

at 4% per annum. After the deferral period, diated fuels obtained initially from the U.S. The Euratom will start paying, in equal annual more important details concerning this subject installments, the debt incurred for fuel plus in­ are as follows : terest at 4% per annum on the unpaid balance. These payments will have to be completed by Disposition: The Agreement for Cooperation December 31, 1983." The summary goes on to provides that Euratom may keep, subject to the say that the remaining 21,000 kg of U-235 needed proviso that they be used only for peaceful pur­ for power reactor reloadings and test reactor poses, any of the materials, including U-235 and use "would be paid for on a current basis." The plutonium, extracted from fuel initially purchased U.S. AEC estimates that the U.S.'s net revenue from the U.S. This applies whether or not the (less credits for uranium returned after irradia­ fuel is processed in the U.S. or Europe. With tion) from this source during the first 10 years respect to such materials which are in excess of of the program will be in excess of $90 million. Euratom's needs, the Agreement says that "the International Atomic Energy Agency is granted Chemical Processing: As part of the proposed the right of first option to purchase [them] at U.S.-Euratom joint program the U.S. would be the announced fuel value price in effect in the prepared to reprocess fuels provided by the U.S. U.S. at the time of purchase." The Agreement to users in the Euratom countries. Some of the then goes on to say that, "in the event this option more important details concerning this proposed is not exercised by the International Atomic activity are as follows : Energy Agency, the U.S. government is prepared to purchase such material at the U.S. announced Charges: The Agreement for Cooperation fuel value price in effect at the time of pur­ says that "such reprocessing will be performed chase." at established U.S. domestic prices in effect upon delivery of such material." (These are currently Plutonium quantity limitation: The draft im­ based on a minimum of $15,300 per ton for plementation bill now before the Congress would slightly enriched uranium.) authorize the U.S. AEC "to acquire from the Community ... up to 4,100 kilograms of pluto­ Duration: A working paper included in last nium for use only for peaceful purposes." month's Euratom package says that the U.S. will be prepared to perform reprocessing services for Plutonium time limitation: The draft imple­ the one million kilowatt program "until such time mentation bill provides that no contract to pur­ as a suitable processing plant is constructed in chase plutonium from reactors included in the Europe." As to when this will be, the paper says joint program "shall be for a period greater than that "there may be an economic advantage in 10 years of operation of such reactors or Decem­ waiting until the power reactor capacity has ber 31, 1973, whichever is earlier." reached several million kilowatts before building such a plant." Plutonium buy-back price: The funding sum­ U.S. technical aid: The same working paper mary included in last month's Euratom package also says that the U.S. AEC "will be prepared to says that "the expenditures required to cover provide technical advice and assistance, as de­ repurchase of all plutonium estimated to be sired, in the design and construction of the recovered from reprocessed spent fuel from [ the Eurochemic pilot plant [to be built under OEEC joint program] during the 10 year period" would auspices at Mol, Belgium,] and in the design and amount to $50 million. This, considering the construction of any future large-scale chemical 4,100 kilograms authorized to be purchased, gives processing plant that the European Atomic a per-gram price for the plutonium of $12. Energy Community decides to construct." U-235 provisos: According to the funding Fuel Buy-Back: Among the key provisions in study, the only limitations on U.S. purchase of the Euratom package sent to Congress last U-235 in irradiated Eura:tom fuels is that the month are those having to do with the disposition quantity should not exceed the total quantity of the special nuclear materials, including U-235 provided initially by the U.S. less burnup, that and plutonium, that are recoverable from irra- no purchase commitments should be made be- FORUM MEMO 15

CONFERENCE AND COURSE SCHEDULE The following forthcoming conferences and courses are concerned wholly or m sub­ stantial part with subject matter of interest to the atomic industry: International Congress on Nuclear Physics, InternfJ.tional Symposium on Nuclear Elec­ cosponsored by International Union of Physics and tronics, UNESCO House, Paris, France, Se_p­ UNESCO, Paris, France, July 7-12. Contact: tember 16-20. Contact: Colloque International Comite d'Organisation du Congres International de Electronique Nucleaire, 10 Avenue Pierre-Larousse, Physique Nucleaire, Institut du Radium, 11, rue Malakoff (Seine), France. Pierre Curie, Paris 5, France. Second Conference on Analytical Chemistry Nuclear Engineering Survey, University of in Nuclear Technology, Oak Ridge Nationa,l California, Berkeley, Cal., week of July 7. A Laboratory, Civic Auditorium, Gatlinburg, Tenn., program for executiv,es on nontechnical aspects of September 29-0ctober 1. Contact: C. D. Susano, nuclear science and its application to industry. Oak Ridge National Laboratory, P. 0. Box Y, Contact: Engineering and Sciences Extension, Oak Ridge, Tenn. Room 100, Building T-11, University of California, Metallurgical Society of the American In­ Berkeley 4, Cal. stitute o_f Mining, Metallurgical, and Petroleum Engineers Fall Meeting, Carter Hotel, Cleveland, International Congress of Radiation Research, Ohio, October 27-30. Nuclear Metallurgy Com­ sponsored by the National Academy of Sciences­ mittee to hold symposium on fabrication of fuel National Research Council and the Radiation Re­ elements. Contact: Metallurgical Society of AIME, search Society, University of Vermont, Burlington, 29 West 39th St., New York 18, N. Y. Vermont, August 10-16. Contact: Harvey M. Patt. Annual Conference, Atomic Industrial Forum, ICRR, Argonne National Laboratory, P.O. Box Shoreham Hotel, Washington, D. C., November 299, Lemont, Ill. 10-12. Contact: Conference Manager, AIF, 3 East Second International Conference on the Peace­ 54th St., New York 22, N. Y. ful Uses of Atomic Energy, United Nations, Four Courses in Radiological Health, New Geneva, Switzerland, September 1-13. Contact: York University-Bellevue Medical Center Post­ Office of International Conference, U.S. Atomic Graduate Medical School, New York, N.Y., be­ Energy Commission, Washington 25, D. C. ginning in November: Radiochemical Analysis, November 10-21; Introduction to Radiological International Instrument-Automation Confer­ Health (full time), January 5-16, 1959; Radiological ence, lm;trument Society of America, ConventiQn Health Laboratory (full time), January 19-30; and Hall, Philadelphia, Pa., September 15-19. Two Radiation Hygiene Measurements, May 4-29. Con­ sessions on nuclear instruments. Contact: Fred J. tact: The Associate Dean, NYU Post-Graduate Tabery, 3443 S. Hill St., Los Angeles, Cal. Medical School, 550 First Ave., New York 16, N. Y. yond the lifetime of the Agreement for Coopera­ of about 6%) will amount to about 5.5 to 7.7 tion, which is 25 years, and that the price should mills per kilowatt hour. This compares with not exceed the domestic published price schedule. capital costs for an equivalent coal-burning facil­ ity of about 3.1 mills per kwh. Fuel Guarantee Rationale: Of all the provisions 2. Coal in Europe now costs on the average of of the Euratom package sent to Congress last 6.8 mills per kwh, and operation and mainte­ month, probably the most controversial and least nance for coal-fired plants together cost about understood are those having to do with an intri­ 1.0 mills per kwh, giving a total average cost of cate system of fuel cycle guarantees designed to power from coal in the Euratom countries of assure that reactor fuel costs will be kept within about 10.9 mills per kwh. low enough limits to retain the interest and 3. If, in the light of this cost of power from participation of European utilities in the U.S.­ coal, European utilities are to be interested in Euratom power program. In various of the work­ experimenting with nuclear power at this point ing papers provided to the Congress last month, in time, then the fuel costs of nuclear power must the method by which they were arrived at be held to a sufficiently low level to counterbal­ emerges as follows : ance, in part at least, the comparatively high 1. If the power plants in the one million kilo­ capital costs involved. In this connection, it is watt program range in cost from $250 to $350 felt by the U.S.-Euratom negotiators that the in­ per installed kilowatt, as estimated, then these terest of European utilities can be retained if fuel capital costs under the financing scheme envi­ costs for the nuclear plants in the million kilo­ sioned (part low interest government loan, part watt program could be held to 4.2 mills per kwh, normal financing, giving an overall interest rate giving overall nuclear power costs of about 11.7 16 JULY, 1958

to 13.9 mills, including an allowance of 2.0 mills by the two in combination. According to an per kwh for operation and maintenance. (The Annex to the proposed Agreement for Coopera­ theory here is that nuclear power can be allowed tion, the government guarantee applies "only to to cost a little more at first because, during the the extent that equivalent or better guarantees life of the nuclear power plants, nuclear fuel are not available commercially." costs will probably substantially diminish while conventional fuel costs will rise, thus canceling How it works: According to an attachment out uranium's initial disadvantage.) to the Memorandum of Understanding in last month's Euratom package, the government guar­ 4. It is felt by the U.S.-Euratom negotiators antee works in this way: If a manufacturer guar­ that this fuel cycle cost of 4.2 mills per kwh can antees a fabrication charge equal to or less than be achieved if the following breakdown of costs the standard maximum, but fails to guarantee fuel can be achieved: life, then the government would guarantee the Fuel inventory ...... 0.6 mills life of the fuel to the extent required to bring the U-235 burnup ...... 2.3 mills user's total fuel cycle bill within the "standard Fabrication ...... 1.5 mills cost" limits. If, on the other hand, a manufac­ Chemical processing ...... 0.3 mills turer guarantees fuel life equal to or longer than Conversion of UNH to UF6 • • • • • • 0.1 mills Transport and insurance...... 0.3 mills the standard minimum of 10,000 megawatt days per ton, but fails to guarantee maximum charges, TOTAL 5.1 mills then the government would guarantee charges Plutonium credit ...... 0.9 mills designed to bring the user's total fuel cycle bill within the "standard cost" limits. If the manu­ NET TOTAL ...... 4.2 mills facturer guarantees neither fuel life nor charges, In this breakdown, the plutonium credit was fig­ then the government would do both. ured at $12 per gram less $1.50 per gram to cover How it pays off: According to the Memoran­ conversion of plutonium nitrate to plutonium dum of Understanding, if fuel elements do not metal, including losses. meet their guaranteed irradiation level, then the 5. It is felt in turn by the negotiators, as ex­ U.S. Commission would adjust the charges for plained in their working papers, that the above fuel fabrication, and for the chemical processing breakdown of fuel cycle costs is achievable if and transportation services it performs, to a level uranium dioxide fuel elements between 0.25 and that would bring the user's total fuel cycle bill 0.50 inches in diameter and enriched up to 3% within "standard cost" limits. in U-235 cost no more than $100 per kilogram of Rights of the government: Once a U.S. fuel contained uranium if clad in stainless steel and element fabricator agrees to let the government no more than $140 per kilogram of contained guarantee his product, then, in the language of uranium if clad in zirconium, and if the buyer is the proposed Agreement for Cooperation, both assured an irradiation level of 10,000 megawatt the U.S. government and the Euratom Commis­ days per ton. sion "shall have access to the records [ of the Nature of the Guarantee: In essence, under fabricator] pertaining to the performance of fuel the guarantee provisions of the Euratom package elements that are the subject of the U.S. delivered to the Congress las,t month, the U.S. guarantee." government undertakes to assure the European Government-fabricator relationship: The Mem­ buyer of maximum fuel cycle costs equivalent to orandum of Understanding specifies that the those described above (which are called "stand­ guarantees offered by the U.S. government "will, ard fuel cycle costs" in the Euratom papers), in general, be extended to the utility through the with appropriate adjustments if different enrich­ fabricator of the fuel," thus ( except for the very ments, cladding or dimensions are used. large loophole provided by the words "in gen­ Among the more important details having to eral") keeping the government out of the con­ do with the guarantee are the following: tractual relationship between the U.S. supplier and his European customer. The working paper Who makes it: The guarantee can be made goes on to say, however, that, "in the event that either by the fabricator or by the government, or it is determined by the U.S. Commission that the FORUM MEMO 17 fabricator is not meeting adequate performance tries under agreement with a U.S. firm or firms." standards, or, if it is mutually determined that a The paper goes on to say that "the technical and more advantageous source is available, other con­ economic criteria under which proposals will be tractual arrangements will be made for supplying evaluated for acceptance will include minimum fuel elements under the guarantee." standards for fabrication charge and integrity guarantee of fuel elements," and adds: "These Processing & transportation: Whether or not criteria will also provide, as may be agreed, that a U.S. fabricator meets the proposed guarantee subsequent reactor cores can be furnished by commercially, it is expected that the U.S. govern­ other than the initial fabricators." ment will have a direct contractual relationship with European users of U.S. fuel elements in two Duration of guarantees: An Annex to the pro­ respcts-chemical processing and the transporta­ posed Agreement for Cooperation states that tion of irradiated fuel elements. This is expected "the guarantees provided by the U.S. Commis­ to be the case at least until chemical processing sion will be applicable to all loadings made in facilities are available in Europe or on a commer­ reactors under the joint program during ten cial basis in the U.S. In this connection, the U.S. years of operation or prior to December 31, 1973, AEC expects that, if fuel elements covered by whichever is earlier." purely commercial guarantees fail to meet their guaranteed performance levels, the processing Cost of the guarantees: The draft implemen­ and transportation costs-which may be outside tation bill, if passed, would authorize the U.S. the terms of the commercial guarantee-are likely Atomic Energy Commission to spend up to $90 to be higher than antcipiated. "Under such con­ million between now and 1973 to back up its ditions," the Memorandum of Understanding fuel element guarantees. This is considered to says, "the U.S. Commission will, for the purpose be the outside liability of the U.S. government of prorating the chemical processing and/or trans­ under the proposed system of guarantees. Actual portation costs, offer to guarantee an average net costs are expected by the U.S.-Euratom nego­ irradiation level which, in combination with the tiators to run between zero and $20 million over guarantees offered by the manufacturer, would the period to 1973. result in" an acceptable total cost to the user. (If this offer is accepted by a U.S. fuel producer Rebate to the AEC: According to the Memo­ hitherto unencumbered by governmental intru­ randum of Understanding developed by the U.S.­ sion into his affairs, then presumably he will Euratom negotiators, it is expected that, when thereby expose himself to the "access to the the average irradiation level of a core exceeds records" provision of the Agreement for Co­ that guaranteed by the U.S. Commission, one-half operation.) of the resultant savings in fabrication costs will be credited to the Commission up to the cost of Government patent rights: The papers in last payments made by the AEC for fabrication month's Euratom package are silent on the ques­ charges for the core concerned. tion of whether or not the U.S. government will have any rights to patentable information devel­ Controversial aspects: Both the Congress and oped on a project subject to a governmental guar­ the U.S. industry are inclined to take more time antee and assisted in no other way by the gov­ than the executive branch has allowed to study ernment. It is understood that it is the intention the guarantee system proposed. Many Congress­ of the U.S. AEC to avoid acquiring patent rights men want to look at it closely to see if it in any solely by virtue of the guarantee. Patent rights way constitutes a "giveaway." Many industrial will, of course, accrue to the government in the people want to look at it closely to see if it in case of the R&D contracts expected to be let in any way constitutes a device which will serve "to the fuel cycle field under the Euratom program. put the government deeper into the atomic en­ ergy business." Eligibility: A working paper in last month's Euratom package states that, in order for fuel Safeguards System: After the guarantee sys­ elements to qualify for a U.S. government guar­ tem, the next most likely part of last month's antee, they "must be fabricated by a U.S. manu­ Euratom package to raise questions in the minds facturer or by a manufacturer in Euratom coun- of Congressmen is the part which has to do with 18 JULY, 1958

safeguards and inspection. Actually, the safe­ lishing and maintaining a mutually satisfactory guards and inspection portions of the Agreement and effective safeguards and control system." for Cooperation have already been the subject The problem of the rights of the International of disagreement between the U.S.-Euratom nego­ Atomic Energy Agency was handled in pretty tiators and between various elements of the much the same manner in the following words : executive branch of the U.S. government, a dis­ "In establishing and implementing its safe­ agreement which is generally understood to have guards and control system, the Community is delayed submission of the overall package to the prepared to consult with and exchange experi­ · Congress by several weeks. These differences ences with the International Atomic Energy have now been resolved, however, and are no Agency with the objective of establishing a sys­ longer an obstacle unless they are raised again tem reasonably compatible with that of the ... in the Congress. Agency.... In recognition of the importance of the International Atomic Energy Agency, the The essential difference between the safe­ government of the United States of America and guards system proposed in the Euratom Agree­ the Community will consult with each other ment and all other Agreements for Cooperation from time to time to determine whether there that the U.S. has entered into-and this is the are any areas of responsibility with regard to difference that has caused the disagreement-is safeguards and control and matters relating to that, under the Euratom Agreement, the Eu­ health and safety in which the Agency might ratom organization and not the U.S. government be asked to assist." will operate the inspection system. The respec­ tive roles and rights of the two organizations The net effect of all this is that, under the are spelled out as follows in the draft Agreement proposed agreement with Euratom, Euratom it­ self will run its own safeguards system, but for Cooperation with Euratom: presumably will establish and run the system in • "The [Euratom] Community undertakes the a manner satisfactory to the U.S., at least inso­ responsibility for establishing and implementing far as U.S. materials are concerned. a safeguards and control system designed to give maximum assurance that any material equip­ Third Party Liability: One of the problems con­ ment or devices made available pursuant to this sidered by the American atomic industry to be of agreement and any source or special nuclear ma­ over-riding importance in regard to the export terial derived from the use of such material, of U.S. goods and equipment is the problem of equipment and devices, shall be utilized solely third party liability. The proposed Agreement for Cooperation between the U.S. and Euratom for peaceful purposes." touches on this problem in these words : • "As has been requested by the Community, "The government of the United States of the government of the United States of America America and the Community recognize that ade­ will provide assistance in establishing the Com­ quate measures to protect equipment manufac­ munity's safeguards and control system, and will turers and other suppliers as well as the partici­ provide continuing assistance in the operation pating utilities against now uninsurable risks of the system." are necessary to the implementation of the joint • "The parties agree that there will be frequent program. The Euratom Commission will seek to consultations and visits between the parties to develop and to secure the adoption, by the earliest give assurance to both parties that the Com­ practicable date, of suitable measures which will munity's safeguards and control system effec­ provide adequate financial protection against tively meets [ agreed upon principles] and that third party liability. Such measures could in­ the standards of the materials accountability sys­ volve suitable indemnification guarantees, na­ tems of the governments of the United States tional legislation, international convention, or a and the Community are kept reasonably com­ combination of such measures." parable." In a working paper accompanying the Agree­ • "It is understood by the parties that a con­ ment for Cooperation, the U.S.-Euratom nego­ tinuation of the cooperative program between tiators went on to say: "At this juncture, of the government of the U.S. and the Community course, it is not known what form the legislation will be contingent upon the Community's estab- in the various countries-or perhaps an interna- ... FORUM MEMO 19

tional convention-may take, the extent to which proved by Congress, would be to establish a pro­ it will protect suppliers and enterprises against gram that would function generally as follows : liability, beyond the coverage of insurance they 1. The Euratom Commission, together with ea~ get, or how long it will take to get the legis­ the U.S. AEC where pertinent, would establish lation enacted or the convention ratified. For the criteria as to the types, numbers, sizes, location, interim period, until such legislation or conven­ economics, etc. of reactor projects eligible for tion becomes effective, adequate protection would loans and fuel guarantees under the one million require an indemnification guarantee from the kilowatt program. Naturally the criteria would Community or the nation or nations concerned state that all reactors included in the program with the reactor or reactors." must be of a "proven type" and of U.S. design. Other Points: Among the other points covered 2. Any European utility, whether private or in last month's Euratom package are the fol­ public, wishing to build an atomic power plant lowing: of U.S. "proven-type" design with the benefit of long-term, low-interest financing and guaranteed • The Agreement for Cooperation says that "the fuel cycle costs for 10 years would apply to the U.S. Commission will assist the Euratom Com­ Euratom Commission for approval of its project. mission in obtaining reactor materials other than (It is understood that there are at least six Euro­ special nuclear material from private organiza­ pean utilities ready to make application under the tions located in the U.S. if the Euratom Com­ program.) mission desires such assistance." 3. Any proposal submitted by a European • The two parties have agreed to "work closely utility would presumably include the name of, together to develop training programs to satisfy and would be largely based upon information requirements of the joint program." In this con­ supplied by, a prime contractor which would be nection, the draft Agreement says that "the par­ either a U.S. company or a European licensee of ties may under mutually agreeable terms and a U.S. company. (There is no proviso in the conditions make available their facilities for use Euratom papers that the selection of a contractor by the other, including facilities to meet train­ must be by competitive bidding.) ing needs." 4. All proposals submitted would be reviewed • The Euratom Commission has agreed to "take by both the Euratom Commission and the U.S. all action open to it under the treaty establishing ~EC (from slightly different points of view) and the European Atomic Energy Community to either accepted or rejected. Certainly one of the minimize the impact of customs duties on goods prime factors taken into account by the two and products imported under the joint program." Commissions would be the price of the plant and • The draft Agreement says that "existing the commercially guaranteed cost of the fuel. Agreements for Cooperation in the field of nu­ 5. It would appear that the fuel element con­ clear energy between member states and the U.S. tractor could either be the prime reactor contrac­ government are not modified by the joint pro­ gram," and adds: "Modifications may be made tor or somebody else. If he is somebody else, it would seem that he could participate either as necessary by mutual agreement between the member states concerned and the U.S. to permit through a subcontract to the prime reactor con­ transfers of reactor projects now contemplated tractor or in a direct contractual relationship with under existing agreements that qualify for and the purchasing utility. In this connection, how­ are accepted under the joint program." ever, there is little doubt that, for purposes of ad­ ministrative simplicity if for no other reason, the • The Memorandum of Understanding between system favors a situation where the fuel element the U.S. and Euratom contemplates that the one fabricator would either be the prime reactor con­ million kilowatt program "will lead to further tractor himself or a subco.ntractor to the prime cooperation between the Community and the contractor. U.S. in other fields related to the peaceful uses of atomic energy." 6. Once a project is approved, the utility in­ volved would reasonably be expected to muster Summary: The net effect of the Euratom pack­ conventional financing equal to the amount re­ age delivered to the Congress last month, if ap- quired to build a conventional facility of equiva- 20 lent kilowattage. Beyond this amount, the utility 10. If a U.S. fuel supplier accepts U.S. would have access to low-interest, long-term government underwriting of his fuel element loans from funds available through Euratom guarantee, then he must give up his right to from the U.S. Export-Import Bank and also the commercial privacy. This is because, along with European Investment Bank and various national each governmental guarantee will go a govern­ governments. Presumably the funds available mental right to have access to the records per­ from these latter two sources would be prorated taining to the work to which the guarantee among the various individual projeots on a more applies. So far as the intent of the U.S. nego­ or less straight kilowattage basis, although this tiators of the agreement with Euratom is con­ need not necessarily be the case. The fact is, cerned, that is the only right that the government however, that by one route or another each Euro­ will have because of its guarantee activity. pean utility embarking on an approved Euratom Specifically, it is the intent of the U.S. negotiators project would have available to it the money that that the government will not acquire patent it needs to meet its capital costs. rights because of its guarantee activity. Whether 7. Once a U.S. manufacturer became a party this intent can prevail, however, without a to an approved Euratom project, he would take specific waiver by the AEC of its possible statu­ on an obligation to make all of the non-patentable tory rights to patents, is of course not yet known. information developed on the project available 11. The uranium for the initial fuel elements to the U.S. and Euratom Commissions. It would in the one million kilowatt program would be seem, however, from information now at hand, provided by the U.S. and would be bought by that he would take on no obligation to grant any Euratom under a deferred payment plan that, in patent rights or access to his records to govern­ effect, would end up with Euratom paying 4% mental agencies solely by virtue of his participa­ for the use of the elements plus the regular U.S. tion in an approved project benefiting from gov­ price for whatever U-235 was actually burned ernment loans. up or otherwise not returned for resale to the 8. Any European utility having its atomic U.S. Although Euratom would retain title to the power project approved as part of the one million uranium, the cost of the burned up fuel plus the kilowatt Euratom program would be entitled, not 4% presumably would be passed on to the using only to access to a long-term government loan, utilities. The uranium in fuel reloadings would but also to a guaranteed maximum fuel cycle cost be bought and paid for outright by Euratom. designed to hold his overall expenses down to an 12. After irradiation, fuel elements-until acceptable level. This guarantee would be under­ chemical processing facilities are available in written by the U.S. government by agreement Europe-would be returned to the U.S. for proc­ with Euratom. So far as the European buyer is essing. This contract would be direct with the concerned, the guarantee would appear directly U.S. AEC, which operates the only chemical only in his contract with the American supplier, processing facilities in the U.S. The AEC would without the U.S. government being a direct party charge its regular prices for this service, plus to the contract. The government obligation to the cost of transporting the irradiated elements underwrite the guarantee would actually be taken and less the value of U-235 and plutonium care of in a separate contract between the U.S. extracted from the fuel and kept by the U.S. AEC and the U.S. supplier. (Calculations made to date are on the basis of a 9. Each U.S. fuel supplier would have the $12 per gram value for the plutonium.) option of meeting Euratom's minimum fuel 13. In case of the premature failure of guarantees himself or of looking to the U.S. elements covered by a U.S. government guaran­ government to back him up. If he is prepared tee, the U.S. AEC would attempt to cover its to meet the guarantees himself, including what­ obligations under the guarantee by reducing its ever extra charges may be incurred in regard to chemical processing and transportation charges. chemical processing and transportation by virtue It would also be prepared to make a direct con­ of failure of his fuel elements, then it would tribution to fabrication costs of new elements seem from the Euratom plan as proposed that he where necessary. There would be no obligation would be insulated from governmental intrusion on anybody's part to buy new elements or re­ into his normally private commercial affairs. loadings from the initial core supplier. .... ' 1 FORUM MEMO 21

14. The guarantee and buy-back portions of program, it could do so by approving the Inter­ the program would last for 10 years after the national Agreement. It could probably also start-up of a plant or until the end of 1973, approve the Agreement for Cooperation without whichever is earlier. committing the U.S. to the details of the 15. The power plant program would be ac­ proposed program, inasmuch as the provisions companied by a 10-year research and develop­ of the Cooperation Agreement involving federal ment program to which the U.S. and Euratom funds cannot take effect until and unless specific would each contribute $50 million during the additional authorizing legislation is passed. first five years. It would be expected that much Examples of such provisions are those having of the work under the R&D program would be to do with fuel guarantees, plutonium buy-back done by contractors participating in the power and the research program. Actually, of these plant program. three, the one with the best chance of being authorized this session is the research program, Congressional Reaction: The immediate reac­ and the one with the least chance is the fuel tion of the Democratic Congressional majority guarantee. to last month's package for Euratom can proba­ bly best be summed up in the following con­ Industrial Reaction: The industrial reaction to sensus paraphrase: the Euratom package is that the package con­ "This is a formidable package and it has been tains a lot of unanswered questions about how given to us very late in this session. We are not the system will operate. In particular, industrial unsympathetic to the objectives of the proposed representatives are concerned about the extent program or to the idea of cooperation with that governments may be permitted under the Euratom. We will, however, want to assure system to intrude into their normally private ourselves as to the safeguards and inspection commercial affairs. In this connection, industrial features of the program and as to whether the representatives have expressed concern over the U.S. government's interests are fully protected rights of Euratom and the U.S. government to in regard to the subsidy features of the fuel cycle non-patentable information developed on proj­ guarantee. We are also wondering if it is really ects in the program. As a result of this concern, desirable to start all six of the proposed projects the U.S. AEC has indicated it may, by an ex­ in 1959. Perhaps, if the program were phased change of correspondence with Euratom, docu­ out a little, some more types besides the present ment the intent of both parties to "foster normal 'proven types' could be included. industry-to-industry relationships" by means of the Euratom program. "There are probably several good ways to help Euratom. This may be one of them, although at The U.S. industry has also expressed concern first glance it would seem to be unnecessarily as to the amount of the program's total equip­ complicated. We might wish to explore alter­ ment and component business that will flow to native, possibly simpler or better approaches U.S. manufacturers, and has raised a myriad of before we authorize this program to go forward questions-to some of which there are as yet no as presented. There is very little time left to do answers-as to the details of the fuel guarantee all this in this session." mechanism. Considering this reaction, it would probably To obtain the detailed reaction of industry, not be surprising if the generalities of the pro­ the Joint Committee has circulated a list of ques­ gram win Congressional approval in this session tions about the Euratom program to industrial of Congress, with the details put over until next concerns, and the AEC held a meeting for about year. This might delay some aspects of the 60 industrial representatives on Tuesday, July 8. program, but it would at least assure both Euratom and the U.S. government and industry The Next Step: The next step for the Euratom that some kind of a U.S.-Euratom program of package will be hearings before the Joint Com­ comparable magnitude would go forward. mittee which are scheduled to start on W ednes­ If the Congress wishes to approve the day, July 16. AEC and State Department generalities but not the details of the proposed witnesses are expected to testify on the need for ..... 22 JULY, 1958

Congressional approval of the Euratom proposals these first plants, may be less than from conven­ this year. Industrial witnesses are also expected tional facilities. to be welcome to testify on their reactions to "As to the fuel guarantee, we had to offer that the Euratom package. because the European buyer feels he must have Proponents of the proposed program feel that a ceiling on his potential fuel costs and, as long the proposals they have made are the best possi­ as the U.S. manufacturer is unwilling to guaran­ ble under the circumstances. In essence, their tee his fuel product to the extent necessary, we position is this : feel that the government has to do it. Although we didn't set out to match them, our guarantee "We had to find a program that would interest actually is essentially the same, so far as total the European utilities and yet not be a windfall cost is concerned, as that which is already avail­ either for them or for the American manufac­ able on the world market from the British gov­ turer. We think we have done that. The Euro­ ernment. pean utilities will be paying from one and a half to two mills more for their atomic power than "All in all, we feel that we have come up with they will be for conventional power, but they the best arrangement that can be developed right will be preparing themselves for the future and now, and we think that critics of the plan should will, at the same time, have the hope that within be prepared to offer, along with their criticism, 10 years or so their atomic power costs, even from something they consider will work better."

NEWS ABOUT INDUSTRY

tion with General Nuclear Engineering Corp. West German Utility Buys and Brown, Boveri for a 16,000 ekw boiling water 15,000 Kilowatt GE Reactor reactor. The West German electric utility company RWE is also planning to purchase a large-scale Rheinisch-Westfiilisches Elektrizitatswerk signed British gas cooled reactor of the improved Calder a contract last month with Allgemeine Elek­ Hall type. It is reported, however, that negotia­ trizitats-Gesellschaft for the purchase of a 15,000 tions for the British reactor are temporarily ekw boiling water reactor power plant at a cost stalled pending the working out of arrangements of $10 million. The reactor is to be purchased covering the supply of nuclear power equipment from the U.S.'s General Electric Co., while AEG between Britain and Euratom, of which West will supply conventional turboelectric equip­ Germany is a member. ment. The German firm of Hochtief A.G. will be the architect-engineer. Construction of the plant • is scheduled to begin immediately, with comple­ tion scheduled by the end of 1960. The site is at GENEVA COMMERCIAL EXHIBITION: A full-scale Kahl, near Frankfurt. model of the core of an atomic power plant capable of producing 150,000 kilowatts of electric The AEG-GE proposal was selected from power will be the focal point and symbol of the among four submitted to RWE (see Memo for U.S. section of the commercial exhibition to be June, p. 23). The other bidders were ACF held next September in Geneva, Switzerland, in Industries, Inc. for a 16,000 ekw boiling water conjunction with the second UN International Conference on the Peaceful Uses of Atomic En­ reactor; Westinghouse Electric Corp. and ergy. Surrounding the model core will be a Siemens-Schuckertwerke A.G. for an 11,400 ekw rotunda containing an information center and pressurized water reactor; and Mitchell Engi­ displays through which the overall story of the neering Co. Ltd. (which is associated with U.S. atomic industry will be told. On either side American Machine & Foundry Co.) in coopera- of the rotunda will be the commercial exhibits