If Euratom were permitted to negotiate directly with private reactor operators for 500 kilograms of its requirement, revenue to the United States Government would be reduced by about $17.1 million. This estimate represents the revenue which would otherwise be derived from a sale by the Commission of 500 kilograms at a weighted average price of $38 a gram. Offsetting the loss in revenues would be the cost of about $4.5 million which the Commission would not incur since it would not have the opportunity to purchase 500 kilograms of plutonium at the guaranteed purchase price. Thus the net reduction in revenues to the United States Government would total about $12.6 million. If the Commission were to make the remainder of the material available at a weighted average price, Euratom's average cost for the total plutonium purchased from both sources would, in all likelihood, result in an average cost lower than the average cost at which plutonium would be available to the United States Government's civil programs, such cost to be determined on the basis of (1) the cost of Commission purchases of plutonium and (2) the current Commission charge ($43 a gram) for plutonium produced in Commission reactors. This situation would occur if Euratom were able to acquire plutonium from private reactor operators at a price less than the Commssion's weighted average price. With respect to the balance-of-payments situation, it can be anticipated that the negotiated prices between private reactor operators and Euratom would fall between the domestic guaranteed purchase price published by the Commission and the price at which the Commission would make plutonium available to Euratom. To the extent that private reactor operators negotiate a price lower than that at which the Commission would make the plutonium available, balanceof-payments dollar inflow would be reduced. COMPLETE PROCUREMENT BY EURATOM FROM DOMESTIC REACTOR OPERATORS If Euratom were permitted to obtain all of its requirements from private reactor operators, the financial effects on the United States Government would be increased proportionately over those effects cited for partial procurements. Using the same assumptions discussed under partial procurements, we estimate that the reduction in revenues could be increased to $25.2 million and the balanceof-payments dollar inflow would be further reduced. We have discussed the matters presented in this report with appropriate Commission officials and have considered their views in the final preparation of the report. As agreed to by your representatives, we are making copies of this report available to the Commission. We plan to make no further distribution of this report unless copies are specifically requested, and then we will make distribution only after your approval has been obtained or public announcement has been made by you concerning the contents of the report. Sincerely yours, FRANK H. WEITZEL, Assistant Comptroller General of the United States. COMPTROLLER GENERAL OF THE UNITED STATES, B-131115. Hon. JOHN O. PASTORE, Chairman, Joint Committee on Atomic Energy, DEAR MR. CHAIRMAN: This is in further reference to a letter from the Executive Director, Joint Committee on Atomic Energy, Congress of the United States, dated September 6, 1967, in which we were requested to evaluate the financial impact upon the United States Government through the transfer of an additional 1.000 kilograms of plutonium to the European Atomic Energy Community (Euratom) under policies which would either (1) allow all or any part of the additional 1,000 kilograms to be purchased by Euratom from private sources, or (2) require that all of this material be purchased from the Commission. In our report to you, datd October 20, 1967, B-131115, we commented on the potential financial impact to the United States Government resulting from several alternatives as follows: (a) supply of 1.000 kilograms of plutonium to Euratom by the United States Government at the current published price of $43 a gram, (b) supply of 1,000 kilograms of plutonium to Euratom by the United States Government at a weighted average price of $38 a gram, (c) supply of 500 kilograms of plutonium to Euratom by private reactor operators and the remainder by the United States Government at a weighted average price of $38 a gram, and (d) supply of 1,000 kilograms of plutonium to Euratom by private reactor operators. In subsequent discussions between our staffs, we were requested to furnish you with our calculations as to the potential financial impact to the United States Government under an additional alternative-supply of 500 kilograms to Euratom by private reactor operators and the remainder by the United States Government at the current published price of $43 a gram which is related to the Commission's cost to produce plutonium in its reactors. In our report dated October 20, 1967, we recognized that the additional demand created by Euratom's request would result in a requirement that the Commission produce an additional 1,000 kilograms, and accepted the current published price of $43 a gram as relating to the Commission's cost of producing plutonium in its reactors. Also, we assumed that in the absence of an unusual market such as that created by the Euratom request, most of the plutonium produced in power reactors and available before January 1971, would be made available to the United States Government. In consideration of the various factors present, we concluded that if the United States Government supplied all 1,000 kilograms to Euratom, a weighted average method of computing price would result in a more equitable sharing of the costs of plutonium between the United States Government and Euratom and should obviate the possibility of any reasonable question as to overpricing from a United States Government-Euratom standpoint. Thereafter, we used a weighted average price of $38 a gram in computing the potential financial impact of the various alternatives for supplying the material. In our report dated October 20, 1967, we stated that if the United States Government were to supply the 1,000 kilograms of plutonium at its current published price of $43 a gram, revenues of about $38.7 million (assuming 90 percent content of fissile isotopes) would be derived. Use of the current published price of $43 a gram under an alternative where private reactor operators and the United States Government would each supply 500 kilograms to Euratom would result in the following financial impact to the United States Government. Assuming that Euratom is permitted to negotiate directly with private reactor operators for 500 kilograms of its requirement, revenue to the United States Government would be reduced by about $19.3 million. This estimate represents the revenue which would otherwise be derived from a sale by the Commission of the 500 kilograms at the current published price of $43 a gram. Offsetting the loss in revenues would be costs of about $4.5 million which the Commission would not incur since it would not have the opportunity to purchase 500 kilograms of plutonium at the guaranteed purchase price. Thus, the net reduction in revenues to the United States Government could amount to about $14.8 million on the basis of the current published price. In arriving at the net reduction in revenue. we did not consider the potential tax revenue that may arise as a result of private sales of plutonium. Sale of the remaining 500 kilograms of plutonium by the United States Government at the current published price of $43 a gram rather than at a weighted average price of $38 a gram would eliminate the sharing with Euratom of the benefits of the acquisition by the United States Government of low cost plutonium. Revenues on the sale by the United States Government would amount to about $19.3 million as compared with about $17.1 million if the sale of 500 kilograms were made at a weighted average price of $38 a gram. Balance of payments dollar inflow would be similarly increased by about $2.2 million. In considering an arrangement under which the United States Government would supply 500 kilograms to Euratom at a weighted average price, we indicated that one result would be a likelihood that Euratom's average cost for the total plutonium purchased would be lower than the average cost at which plutonium would be available to the United States Government's civil programs. A sales arrangement under which the United States Government would supply 500 kilograms of plutonium to Euratom at the current published price of $43 a gram would make is questionable as to whether Euratom's average cost for the total plutonium purchased would be lower than the average cost at which plutonium would be available to the United States Government's civil programs. This question would be dependent on the prices negotiated by Euratom with private reactor operators for the plutonium to be obtained from that source. We have discussed the matters presented in this report with appropriate Commission officials and have considered their views in the final preparation of the report. As agreed to by your representatives we are making copies of this report available to the Commission. We plan to make no further distribution of this report unless copies are specifically requested, and then distribution will be made only after your approval has been obtained or public announcement has been made by you concerning the contents of the report. Sincerely yours, FRANK H. WEITZEL, Assistant Comptroller General of the United States. Dr. GERALD F. TAPE, CONGRESS OF THE UNITED STATES, Commissioner, U.S. Atomic Energy Commission, DEAR DR. TAPE: This supplements my letter to you of August 28, 1967 concerning your August 24 testimony before the Subcommittee on Legislation.1 In this connection, it is our understanding that the Commission plans to charge Euratom for plutonium supplied by the AEC based upon "the cost to the AEC of ... plutonium from. . . various sources" (i.e., the weighted averaged price), even if the particular material supplied has been produced in the AEC's production reactors, or has otherwise been obtained by the AEC, at a greater cost. It would be appreciated if the Commission would explain the reasons for this decision, and also discuss any alternative plans which may have been considered and rejected. Thank you for your assistance. JOHN T. CONWAY, Mr. JOHN T. CONWAY, U.S. ATOMIC ENERGY COMMISSION, Executive Director, Joint Committee on Atomic Energy, DEAR MR. CONWAY: This is in response to your letter of September 6 inquiring about the charges to Euratom for any of the additional 1,000 kilograms of plutonium supplied by the AEC. We have stated as part of our legislative proposal that the plutonium supplied by the AEC will be sold to Euratom at the AEC price in effect at the time the material is supplied. To date the plutonium available to the AEC for distribution to customers here and abroad has been produced in AEC reactors, and the currently established charge for such material is related to the cost of its production. However, it is recognized that supplies of plutonium to the Commission for civil uses may be drawn from a combination of sources at varying costs to the AEC. Under such circumstances, we would establish a charge for plutonium on the basis of a weighted average formulation, such charge to be determined from the price to the AEC for all portions of plutonium for the civil programs. This charge may be adjusted periodically to take into account any significant changes in the elements which are considered in arriving at the weighted average price. This approach, we feel, is consistent with our general pricing policies and practices. 1 See p. 99. It is assumed that, in filling an order for plutonium at a charge based on the weighted average price formulation, the order does not include any special conditions with respect to the quality of the material (including Pu-240 content). In the event there were special requirements on the quality of the material, the weighted average price formulation would not apply, and the customer would be charged on a basis related to the AEC costs to make the material for that particular order available, which in no case would be less than the weighted average price. Another way of assuring an arrangement which reflects the cost of plutonium to the AEC would be to segregate material on the basis of its cost to the Commission and distribute it to customers at correspondingly different prices. However, we believe such an approach would be legally questionable in view of the requirement of Section 53c. (2) of the Atomic Energy Act of 1954, as amended, that sales prices for special nuclear material be established on a nondiscriminatory basis. Moreover, by this approach the Commission would probably be in the position of selling material of the same quality at different prices, and those paying the higher price might feel the AEC would be indulging in discriminatory supply policies and practices. Such an approach would also have the disadvantages of (1) creating a significant additional administrative burden in keeping the material appropriately segregated and identified in terms of cost to the AEC, and (2) encouraging customers to "shop" for the cheaper plutonium in AEC's inventory. Still another approach for pricing this plutonium would be to set the base charge at the level of costs to the AEC for its most expensive material. This approach would no doubt result in the criticism by potential customers that the U.S. Government had established a base charge for plutonium which did not take into account the widely varying costs to the Government for this material (e.g., purchase material at the $10 per gram guaranteed purchase price and sell it at the currently established base charge of $43 per gram). In view of these considerations the Commission believes that to the extent significant quantities of plutonium are available to the AEC from sources other than AEC production reactors, we would establish one base charge to all customers using a weighted average formulation that takes into account the various costs for this plutonium. If any further clarification of the Commission's views on this matter is required, please let us know. Sincerely yours, GERALD F. TAPE, Commissioner. APPENDIX 14 AEC LETTER TRANSMITTING REPORT ON FUTURE ASSISTANCE TO THE COMMUNITIES OF OAK RIDGE, TENN., AND RICHLAND, WASH., AND PROPOSED LEGISLATION TO AUTHORIZE ASSISTANCE PAYMENTS TO THESE COMMUNITIES THROUGH JUNE 30, 1979 (JULY 28, 1967); S. 2220 [H.R. 12087 AN IDENTICAL BILL] Hon. JOHN O. PASTORE, ATOMIC ENERGY COMMISSION, Chairman, Joint Committee on Atomic Energy, DEAR SENATOR PASTORE: Section 91d of the Atomic Energy Community Act of 1955 (Public Law 84-221, 42 USC 2301–2394) requires the Atomic Energy Commission to present recommendations to the Joint Committee on Atomic Energy as to the need for further assistance payments to a governmental or other entity at or for the communities of Oak Ridge, Tennessee; Richland, Washington; and Los Alamos, New Mexico; not less than six months prior to the expiration of the authorized ten-year periods for each entity. The ten-year periods for the cities of Oak Ridge and Richland, and the Richland School District expire in 1969. However, because of the necessity to accommodate legislative and budgetary schedules of the Commission and the communities, and to give the communities time to execute any necessary subsequent adjustments, the Commission scheduled its review of this question for early 1967. The study has now been completed, and a copy of the report is enclosed for your consideration. In summary, this report recommends that the authority to make assistance payments to Oak Ridge and Richland be extended through June 1979. Within this authority, it is proposed to (1) continue to make annual assistance payments to Oak Ridge upon assurance that the City is using all reasonably available self-help to achieve financial independence, and (2) make a lump-sum payment of approximately $800.000 to the City of Richland and $5.600,000 to the Richland schools largely for construction of new facilities to replace wartime constructed buildings, and to thereafter discontinue regular assistance. Inasmuch as the report recommends revised legislation, a proposed Bill, a Comparative Bill and a Section-by-Section Analysis are also enclosed for your consideration. The Bureau of the Budget has advised that there is no objection from the standpoint of the Administration's program to the presentation of this proposal to the Congress. Sincerely yours, R. E. HOLLINGSWORTH, REPORT ON FUTURE ASSISTANCE TO THE COMMUNITIES OF OAK RIDGE, TENNESSEE, AND RICHLAND, WASHINGTON The Atomic Energy Community Act of 1955 (Public Law 84-221, 42 USC 2301– 2394), hereinafter referred to as P.L. 221, provided for the termination of Government ownership and management of the communities of Oak Ridge, Tennessee, and Richland, Washington, which were owned by the Atomic Energy Commission. The three objectives recited in the declaration of policy in P.L. 221; the establishment of local self-government, the transfer to local entities of the community functions and installations, and the orderly sale of residential, commercial, and non-profit properties to private purchasers with a minimum of dislocation have been attained at both Oak Ridge and Richland. The unfinished responsibilities |