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munity utilities to decide in favor of a U.S.-type power reactor over its competitors from the U.K., Canada, Sweden, etc. is the assurance of a long-term fuel supply. Since for the foreseeable future an enriched uranium supply must come from the United States, we must be prepared to provide such assurance upon request by entering into long-term contracts providing for the supply of the necessary enriched uranium. Under the current uranium 235 ceiling of the Cooperation Act, Euratom and the U.S. could only contract to fuel about 3,500 MWe of the 13,000 MWe expected in this period.

2. Being able to provide contractual assurances for a long-term fuel supply may have a beneficial impact on nonproliferation considerations. For various reasons, technical and economic, enriched uranium reactors have gained wide acceptance around the world. However, in the absence of an assured supply of enriched uranium from the U.S., other countries or groups of countries would undoubtedly decide to develop an alternate or independent source of supply of enriched uranium to support the favored reactor systems or to decide in favor of reactor systems fueled by natural uranium.

3. By mutual agreement of Euratom, its member countries (France, West Germany, Italy, Belgium and The Netherlands) and the U.S., separate Agreements for Cooperation between the U.S. and these member countries are being allowed to expire. Only the Italian agreement remains in force. (The Belgian agreement expired in mid-1965, the French agreement in late 1966, and the West German and Netherlands agreements in July and August of this year.) On expiration of these agreements, each of which provided for the transfer of specific quantities of uranium 235, the supply of U.S. special nuclear material to these countries is to be accomplished under the Euratom Agreements for Cooperation. As expected, the member states wanted reassurances about the continued availability of an adequate amount of special nuclear material for their respective nuclear projects. Thus, an increase in the uranium 235 ceiling of the EURATOM Cooperation Act will provide the desired reassurance to the member states of the continued availability from the U.S. of an adequate supply of enriched uranium.

4. Euratom's projections in recent years about installed nuclear capacity have been reasonably realistic, if anything somewhat on the conservative side. It was forecast that a total installed nuclear capacity in the Community would be about 4,000 MWe in 1970 and about 40,000 MWe in 1980. The nuclear power stations now in operation represent 2,106 MWe and those under construction, 2,205 MWe. The 4,000 MWe projected for 1970, therefore, will be attained. An additional 4,020 MWe is currently at the design stage. Due to growth in nuclear capacity expected in the Community, paralleling that experienced and expected in the United States and Great Britain, Euratom has revised its projections for 1980 and now states that a reasonable minimum estimate for 1980 should be 60,000 MWe.

5. The additional material provided for by this authorization will be distributed in accordance with the AEC policy for the post-1968 period which established toll enrichment as the normal means of long-term supply of enriched uranium both domestically and abroad. Thus, it is expected that the additional enriched uranium provided for by this authorization will be distributed to Euratom through the provision of toll enrichment services. (The Commission has proposed an amendment to the EURATOM Cooperation Act of 1958, as amended, to authorize performance of toll enrichment services for users in the Community-H.R. 10627 and S. 1901.)

6. If one assumes that all of the additional material provided in the proposed ceiling increase is transferred to the Community under uranium enrichment arrangements the revenues to the U.S. for enriching services would be approximately $500,000,000. There would probably be additional revenue to U.S. industry from these transactions as a result of sales of natural uranium concentrates and conversion services and from the sale of reactor equipment.

7. If the proposed uranium 235 requirements should prove excessive to the Community's actual need, the U.S., as in the past, would have the right under our Agreement for Cooperation to reduce its commitments to the extent the Community failed to make firm enriched uranium supply contracts within a specified time period.

8. All uranium 235, as well as plutonium, transferred will be subject to the safeguards provisions of the Agreement for Cooperation with Euratom. It is our objective that the safeguards provisions of the Inter

national Atomic Energy Agency be applied as soon as appropriate arrangements with the IAEA can be developed.

The distribution of material in the quantity provided for in this amendment has been taken into account in Executive Branch planning.

APPENDIX C

COMPARATIVE DRAFT BILL

A BILL To amend the EURATOM Cooperation Act of 1958, as amended

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 5 of the EURATOM Cooperation Act of 1958, as amended, is amended to read as follows:

"SEC. 5. Pursuant to the provisions of section 54 of the Atomic Energy Act of 1954, as amended, there is hereby authorized for sale or lease to the Community:

Seventy Two hundred fifteen thousand kilograms of contained uranium 235
Five hundred kilograms of plutonium

Thirty kilograms of uranium 233

in accordance with the provisions of an agreement or agreements for cooperation between the Government of the United States and the Community entered into pursuant to the provisions of section 123 of the Atomic Energy Act of 1954, as amended: Provided, That the Government of the United States obtains the equivalent of a first lien on any such material sold to the Community for which payment is not made in full at the time of transfer."

APPENDIX 21

JOINT COMMITTEE-AEC CORRESPONDENCE ON PROPOSED LEGISLATION TO TRANSFER ADDITIONAL URANIUM 235 TO EURATOM, OCTOBER 13 AND 30, 1967

Hon. GLENN T. SEABORG,

CONGRESS OF THE UNITED STATES,
JOINT COMMITTEE ON ATOMIC ENERGY,
October 13, 1967.

Chairman, U.S. Atomic Energy Commission,
Washington, D.C.

DEAR DR. SEABORG: This is in reference to the Commission's letters to the Vice President and the Speaker of the House date September 28, 1967, transmitting a draft bill to amend the Euratom Cooperation Act of 1958, as amended.

In this connection, please provide the Committee with the Commission's responses to the following questions:

1. The proposed legislation would provide for the second significant increase in the U-235 ceiling for Euratom within a period of three years. Does the Commission expect to propose additional increases in future years?

2. Will enriched uranium sold under the proposed amendment be transferred on a straight cash basis?

3. What is your estimate of the likelihood of one or more of the Euratom nations developing their own uranium enriching facilities for peaceful purposes during the next ten years?

4. Will technical information derived from the research and development activities for which Euratom requires 10,000 kilograms of the additional U-235 be made available to the United States under an information exchange agreement?

5. You state that should Euratom's projected U-235 requirements prove excessive to the Community's actual needs, the United States "would have the right" to reduce its commitments to the extent the Community failed to make firm enriched uranium supply contracts within a specified time period. To what extent, if at all, is Euratom committed to obtain its enriched uranium requirements from the United States. To date, has the AEC ever exercised its right under a bilateral to reduce the AEC's commitment to supply enriched uranium?

Thank you for your cooperation.
Sincerely yours,

JOHN T. CONWAY,
Executive Director.

U.S. ATOMIC ENERGY COMMISSION,
Washington, D.C., October 30, 1967.

Mr. JOHN T. CONWAY,

Executive Director, Joint Committee on Atomic Energy,

Congress of the United States.

DEAR MR. CONWAY: This is in reply to your letter of October 13 in which you raised several questions about the Commission's proposal to amend the Euratom Cooperation Act to increase the U-235 ceiling.

The following answers are listed in the same order as your questions:

1. There undoubtedly will be additional increases in future years in the U-235 ceiling of the Euratom Cooperation Act. The current proposal for an increase in the ceiling is based on about 13,000 MWe of nuclear capacity being in operation through 1975. Recent Euratom forecasts indicate an installed nuclear capacity of 60,000 MWe in 1980 of which about 40,000 MWe would require enriched uranium. If this additional capacity is to be fueled from the U.S., it will be necessary to increase the U-235 ceiling. The timing for such increases will depend on the

rate at which material is allocated for specific plants and the degree to which current projections for nuclear power growth in the Community remain unchanged in the future. As we approach the point where there is not enough U-235 remaining under the ceiling to assure new projects of a long-term supply of enriched uranium, Euratom and the U.S. will want to reexamine the Community needs with the objective of increasing the ceiling if it appears necessary. The current proposal for a ceiling increase developed in this manner.

2. The enriched uranium or uranium enrichment services supplied by the U.S. to meet Euratom's needs will be provided on a straight cash basis. The relatively small amounts of material or services supplied for research and development needs will be provided under prevailing U.S. terms and conditions for supply of enriched uranium for such applications. These terms permit lease of material under certain conditions. Since the amount of leased material can be accommodated within the uncommitted portion of the existing authorization of 70,000 kilograms, it can be concluded that all the additional material covered by the present authorization request will be provided on a cash basis.

3. We know that Euratom and its member states have under consideration the question of developing alternate sources of supply of enriched uranium. One alternative receiving attention is the development of an independent Community capability for enriching uranium. Euratom studies are directed toward the objective of reaching a decision by 1970 on future policy regarding other sources of supply for enriched uranium. It is not unreasonable to assume the Community would make decisions which could result in an alternate source of supply being realized within the next ten years. There are several current elements of uncertainty which, if clarified in the near term, would have a decided effect upon the Community's decision about the matter. These include the acceptance of the U.K. into the Community, the progress made in the development of a commercial fast breeder reactor, and the continued long-term availability of enriched uranium from the United States after the late 1970's.

4. The AEC, consistent with its general supply policies to date, does not propose to condition the sale of enriched uranium or enriching services to the Community's research and development programs on the availability of information derived by the Community in the use of this material. However, a significant portion of this material required for Community programs will be used in programs which are covered by information exchange arrangements. An example is the close cooperation between the U.S. and the Community in the fast breeder reactor field.

5. Euratom is not committed under the Euratom Cooperation Act or the Agreements for Cooperation to obtain its enriched uranium from the United States. However, the Community requirements for enriched uranium and the resulting U-235 ceiling in the Cooperation Act are based upon current or realistic expected needs, stemming in large part from fueling, through the term of the Additional Agreement, power reactors that will be under construction within the next five years. The principal uncertainty, therefore, is the impact on the long-term requirements of plants if the Community were to develop an alternate source of supply. The AEC has not formally exercised its right under a bilateral to reduce the amount of enriched uranium the U.S. is obligated to supply. This is not surprising in that the development and widespread acceptance of commercial nuclear power has resulted, not in reductions, but rather in an ever increasing need for enriched uranium fuel from the U.S. as the exclusive source of supply.

Cordially,

W. E. JOHNSON, Acting Chairman.

84-223-67

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APPENDIX 22

AEC LETTER CONCERNING SAFEGUARDS APPLICABLE TO PLUTONIUM TRANSFERRED TO EURATOM, NOVEMBER 1, 1967

Hon. JOHN O. PASTORE,

U.S. ATOMIC ENERGY COMMISSION,
Washington, D.C., November 1, 1967.

Chairman, Joint Committee on Atomic Energy,

Congress of the United States.

DEAR SENATOR PASTORE: On August 24, 1967, the Joint Committee held hearings on a bill to amend the Euratom Cooperation Act to provide for an increase in the amount of plutonium authorized for distribution to Euratom under our Agreement for Cooperation of June 11, 1960, from 500 kilograms to 1500 kilograms. You are aware, of course, that the subject of safeguards for plutonium and enriched uranium supplied to Euratom has been thoroughly explored over a period of years in discussions between the AEC and Joint Committee staffs and in Executive Hearings of the Committee. Furthermore, recognition has been given to recommendations from the Committee relative to such safeguards. This letter is furnished pursuant to your request to summarize the safeguards arrangements between the U.S. and Euratom that would be applicable to plutonium transferred under this authorization.

66

Article XII, paragraph A, of the Agreement for Cooperation with Euratom of November 8, 1958, which is incorporated by reference in the 1960 Agreement, places on the Community the responsibility for establishing and implementing a safeguards and control system designed to give maximum assurance that any material, equipment or devices made available pursuant to this Agreement and any source or special nuclear material derived from the use of such material, equipment and devices, shall be utilized solely for peaceful purposes . . . Paragraph C of this Article provides "that there will be frequent consultations and exchanges of visits between the Parties to give assurance to both Parties that the Community's safeguards and control system effectively meets the responsibility and principles stated in paragraph A of this Article". In accordance with paragraph E of this Article continued cooperation under the Agreement is "contingent upon the Community's establishing and maintaining a mutually satisfactory and effective safeguards and control system".

As I indicated in my testimony on August 24, pursuant to these provisions, the Euratom system is reviewed carefully by AEC and we are satisfied that it is an effective one. I should like to assure you that, in accordance with these provisions, any plutonium supplied under the proposed authorization will be effectively safeguarded under a mutually satisfactory and effective safeguards and control system.

Sincerely yours,

GERALD F. TAPE, Commissioner.

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