Mr. DAVIS. Well, I think the situation, at least as I would understand it, is that it is not at all clear at the moment when it is going to take place, or how it is going to take place, or if it does take place exactly what the form of it is going to be.

Representative ASPINALL. I think that is right, but private ownership is private ownership.

Mr. DAVIS. I agree.

Representative ASPINALL. The question is when you bring it out that way, it happens to be private ownership.

Mr. DAVIS. Let's get on with private ownership and have it.

Representative ASPINALL. Because it is cheaper, therefore, it gives some additional benefit to the private utilities, is that right?

Mr. DAVIS. I think in the short term it will probably be somewhat more expensive; in the long run it should be cheaper. You have the costs associated, as Mr. Joslin outlined, with the increased inventory charges, which may or may not be completely offset by decreased costs of uranium which could be toll enriched. In the long run the feeling that I think most utilities will have, as owners, and I personally, are that putting this into the private framework, allowing the commercial relationships to be set up and the competition to develop, will give us lower prices quicker than retaining the present system.

Representative ASPINALL. Then really what bothers you and what alarms you is not necessarily the ultimate end that is desired, but it is how much benefit you are going to be able to secure from the Government procurement of uranium at the present time while you are arriving at the final goal of the private ownership; is that not right?

Mr. DAVIS. Well, I think perhaps one of the things at the moment is the transition now might, in fact, be a little more expensive. But I think, at least from the way I look at it now, we are at a point now where, of course, so many questions have been raised, and it is important to resolve them. We are at a point now where the economics have begun to look very attractive. We are at a stage just now if the framework is going to be changed, it is a very timely and appropriate time to change it, one which will help things move on from here.

Delaying it another year, or 2 years, I am afraid is going to lose a lot of the advantages of taking some action in the very near future. Representative ASPINALL. I do not want you to think I am critical of your position, but I do not want private enterprise to continue to be in the position that they want to have their profits guaranteed to them during their period of uncertainty, as well as having their profits guaranteed also to them during the period of certainty.

Mr. DAVIS. Yes, but what I am suggesting is that we enter into a region where there is more uncertainty in many ways about exactly how these things will develop. But, rather curiously, I think people are more confident because they now get into an area of the commercial and private competition which they understand, rather than having the management in fact under Government ownership.

Representative ASPINALL. That is perfectly all right. But you do not want to wear the cloak of Government protection for your operation any longer than you have to in order to arrive at the point of private ownership, do you?

Mr. DAVIS. I think we are agreeing. I agree with you, Mr. Aspinall. I think this is what I am suggesting; we should get rid of this cloak

as soon as we can.

Representative ASPINALL. All I am suggesting is that you want to wait for that time when there is a certainty of profit, and I am not so sure the Government has to wait for that if we are going to go ahead and permit the transfer in the immediate future.

Mr. DAVIS. I am sorry, I thought I was urging that we make this transition period start as soon as possible.

Representative ASPINALL. That is all right.

Representative HOLIFIELD. Sooner than outlined in the bill?

Mr. DAVIS. Sooner than outlined in the bill, or the AEC's testimony. I am not quite sure which is the bill and which is what any But sooner than 1969, if I may be specific; yes, sir.

more.

METHOD OF DETERMINING TOLL ENRICHMENT CHARGES

Representative HOLIFIELD. On page 3 of your statement, you indicate that the price for toll enrichment should be based on "full cost recovery principles," but "based on normal plant capacity."

Assume that the philosophy underlying this argument for buying on the basis of "normal plant capacity" is not accepted and that each unit going through the diffusion plant would carry full depreciation and interest charges. Would you still support the enactment of this legislation in the form proposed by the AEC?

Mr. DAVIS. Well, Mr. Holifield, what I was stating here was I think a policy should be stated so we would know what it was. I would still be in favor of going ahead.

I think then we might find that there might be much more emphasis placed on, say, plutonium recycling, lower enrichment reactors—in other words, this type of

Representative HOLIFIELD. By whom?

Mr. DAVIS. By the developers and by the utilities.

You see, these things have a real impact on the technology and the developments that are followed, and they are very sensitive to this, and I think we sometimes lose sight of this.

POSSIBLE DISTINCTION IN PRIVATE OWNERSHIP BETWEEN 103 AND 104B. TYPE REACTORS

Representative HOLIFIELD. In your statement, you suggested a distinction between section 103 and 104 licenses. Do you believe that continued leasing is a good way to subsidize advanced reactors?

Mr. DAVIS. I start out, Mr. Holifield, with the assumption that, in order to have advanced reactors, we have to subsidize them in someway. It has seemed to me this way of doing it has at least been one useful way of carrying out the objective.

I have no strong feeling as to this being necessarily the best doing it.

way of Representative HOLIFIELD. Do you feel this factor would stimulate utility interest in advanced reactors?

sir.

Mr. DAVIS. I think this is one of the factors that can do this, yes,

Representative HOLIFIELD. Mr. Conway.

BLENDING FOREIGN URANIUM WITH DOMESTIC ENRICHED URANIUM

Mr. CONWAY. Mr. Davis, earlier this morning when the Commission was testifying on this matter of barring foreign uranium, barring it from being enriched here and then sold domestically until the year 1975, they indicated that they might omit, or at least the bar would not apply to natural uranium that might be brought in not for enrichment service but for possible blending.

From your experience and knowledge, do you think it might be practical and economical for an outfit to, say, purchase some very highly enriched material from the Government or go through an enrichment process, and then import a very, very significant amount of natural uranium from foreign sources and blend it for use in the United States?

Mr. DAVIS. Mr. Conway, unless my calculations are wrong-and I keep hearing this suggested a number of times, which makes me think sometimes it may be I do not think you can take uranium-say if I wanted to make uranium of around 3 percent enrichment, I do not believe I could do this, say buy very highly enriched material from AEC-I think it will cost me more even if I get the natural uranium from abroad for nothing.

Now, this area in which it is possible to obtain any savings by blending cheap, natural uranium with enriched uranium from the AEC is extremely small, except for very low enrichment, is wholly without any economic incentive to it at all.

(Mr. Davis subsequently submitted the following letter on this subject:)

BECHTEL CORP.,
San Francisco, Calif., June 11, 1964.

Senator JOHN O. PASTORE,
Chairman, Joint Committee on Atomic Energy, Congress of the United States,
Washington, D.C.

DEAR SENATOR PASTORE: During the hearings on the private ownership legislation on June 9, 1964, I was asked about the economics of blending cheap natural uranium with enriched material obtained from the AEC in order to reduce costs. I indicated I did not believe this was practical for the degree of enrichment (about 3 percent) required for light water reactors.

I had with me a rough chart showing the approximate cost relations. Mr. Conway suggested I submit this for the record. This I am pleased to do and a copy is enclosed. [Charts appear on pp. 75–76.]

It will be noted that cost savings are unlikely even for enrichment as low as 2 percent with natural uranium at $4 per pound.

For reactors requiring low enrichments, in the region of 1 to 14 percent, there could be appreciable cost advantages in carrying out a blending operation. Such considerations might also apply if recycle plutonium is utilized for supplemental enrichment. However, these would not appear to be important considerations at the present time or during the period when blending might be a factor to be taken into account.

The proportional change in the cost of enriched uranium will also be much higher at the lower enrichment as shown on the second chart enclosed which compares the cost of enriched material obtained by blending with the current AEC price list. The same assumptions are utilized in both charts.

It should also be noted that the amount of natural uranium utilized in blending is not large as compared with that required for the diffusion plants. For example, if one were to wish to produce 1 kilogram of material of 1.4 percent enrichment, the feed to the diffusion plant required to produce this directly is 2.50 kilograms of natural uranium. For the maximum savings ($4.20 per kilogram from the $85.40 per kilogram normal price) 0.65 kilogram of natural uranium would be blended with 0.35 kilogram of material of 2.65 percent en