[Enclosure]

Mr. COUGHLIN. My amendment last year would not have cut out all funds for Clinch River. In fact, my amendment would have deleted approximately $94 million for the CRBR, all of which was either for construction or long lead-time procurement. All R&D funds would have been left intact. The Committee itself, in an amendment adopted on the floor, directed that $50.4 million of the $94 million included in my amendment be reallocated from the CRBR to other portions of the nuclear budget.

[See footnote for additional comment relative to the foregoing.] Representative Moss. Mr. Chairman?

Senator MONTOYA. Congressman Moss.

Representative Moss. I think we are tending to get off track. I want to concur with what the distinguished gentleman has given us in his prepared statement.

My purpose is not to kill the project. As a matter of fact, there is not a member of this committee that has as long a record of consistent support for atomic energy as I have. I voted for the reactor program authorizations back in the early 1950's and I have consistently voted in support of the programs since then.

What we have here are proposed changes in the contract and those proposed changes, in my judgment, do not comport with the public. interest. I enumerated the three major changes. We have been told that we are going to get sole control of management and I say that the contract does not support that position by ERDA.

I think the burden is on ERDA to demonstrate that it does. They certainly have not been able to demonstrate it to my staff. I might add that the General Accounting Office, and I think we should hear from them later, finds that the submissions to them leave the matter far from clear.

We have had not an increase in the utility participation, but a decrease in the utility participation. The liability of the utilities is reduced significantly under a given set of circumstances. The availability of the funds contributed by the utilities for project use are diminished by approximately 50 percent.

Now, why a committee should undertake on behalf of a committee to approve changes of that type which take away and give nothing except the appearance but not the substance of effective management control is beyond my comprehension. That is why I requested the hearing.

I believe that those are the focal points the hearing should concern itself with. I cannot in conscience concur in approving those changes. Should they occur, then I must reluctantly cease any support for the liquid metal fast breeder reactor program because I cannot go to my people and say that I have acted in the public interest in approving these kinds of changes.

NOTE. The committee amendment to ERDA's fiscal year 1976 budget to delete $50.4 million in Clinch River funding reflected ERDA's determination that such a reduction was prudent in view of project delays. ERDA indicated that the committee reductions would not disturb the long-range purchase contracts or order commitments for major components of the CRBR, but that any further reductions would have crippled the forward progress of the project. (See Congressional Record of June 19, 1975, pp. H5754-55 and Congressional Record, June 20, 1975, pp. H5850-51.)

See also, app. 1, p. 523.

I want to get us back in perspective as to why I requested the hearing.

Representative YOUNG. I certainly did not feel that I had in any way departed from the perspective of the hearing, not from my standpoint. My remarks were addressed to the gentleman, welcoming him here and reviewing a little bit the situation.

Representative Moss. I imply no criticism of the gentleman from Texas. As a matter of fact, I think you probably voted with the rest of us on the amendments. I will say I am for the Clinch River breeder project. We are here to hear the matters that you have addressed yourself to and I think it is important.

I must say, and I think it is directly in point, that if we cannot resolve that situation I concur completely with the Senator from Tennessee and I will say I will go the whole way with the Government to do it alone.

Representative Moss. That would require the submission of a new type of contract.

Senator MONTOYA. I think in order to put this matter in proper perspective before the committee we ought to now call on the General Counsel of the General Accounting Office.

Do you have any questions of the Congressman?

Representative MCCORMACK. Yes, I do, Mr. Chairman.

I think we clearly do have two subjects here. I think the reason this meeting was called was to treat the ones presented by the Congressman from California. I think this is where we have to really spend our time and attention, trying to treat the contract, itself, and understand what is required to bring this contract into the condition that we need it.

However, I do want to address myself just for a moment, since we have the gentleman from Pennsylvania before us and he has made a statement of philosophy, I would like to discuss this just for a minute while he is still with us and then turn to the questions raised by the gentleman from California which I think are much more substantial. I want to direct a question, if I can, to Mr. Coughlin. I guess it goes like this.

Mr. Coughlin, are you saying as a matter of principle that private industry should be paying for the Clinch River plant? You seem to be complaining in your written statement, if I can use this word "complaining" without prejudice, that the percentage of support has been reduced by one-third or something of that sort.

Are you saying that as a matter of principle private industry should be participating in some higher ratio in these programs?

Representative COUGHLIN. In response to my distinguished colleague with whom I served on the Task Force on Energy of the House Science Committee, and in response also to Mr. Young's comment, I am saying that the responsibility of this committee-your very, very important committee-is not just to produce energy or to provide for the production of energy, but to provide for cost-effective production of energy. Private industry is very likely, because of its own investment potential, to want cost-effective methods of producing energy. By requiring greater participation by private industry, you may obtain-I think will obtain-better cost control and cost evaluation of this particular method of producing energy in the future.

Representative MCCORMACK. I would like to take exception on two points to what you have just now made in response to my question.

In the first place, I think it is the role of the Federal Government with respect to energy research and development and demonstration, to provide scientific and technological information and economic information from its research and development and demonstration programs that private industry may then pick up.

It does not make any difference whether it is in water-cooled reactors or breeder reactors or coal gasification plants, solar conversion systems or heating and cooling, solar energy or fusion or anything else, our role is to get the information and make it public so that private industry may make decisions on their own whether it is in the interest of their constituents to use a given technology to produce energy. They have to have the technological information, the safety information, and the economic information. Now, that is half of it. The other half is that, of course, the Clinch River plant as such really has nothing to do with economic performance of breeders, and the involvement of industry on that score is meaningless. The participation by the utilities and the industry in the whole project in the first place was at the insistence of the administration and with concurrence of this committee that they should pay part of the bill simply because it was going to be expensive, and this decision was made as a policy decision in the White House a long time ago to require industry to pay part of the bill.

We must remember that what we are talking about here is a demonstration plant and that beyond this is a commercial demonstration that will actually be used by the industry to determine whether or not this technology appears feasible, and it will be used by the Energy Research and Development Administration and the Nuclear Regulatory Commission to determine whether it is licensable. All we are talking about here in this peculiar circumstance where we have deviated from our historical precedence of simply having Federal funding for research and demonstration projects, is a matter of anomaly in our pattern by requiring private participation.

I don't think this is a matter of principle. Do you think it is a matter of principle that they should be participating?

Representative COUGHLIN. I know, for example, that ERDA recently told the Senate Interior Committee that its policy for fossil programs was to require 50 percent non-Federal funding of demonstration plants. This is not limited to this particular program-it occurs in the fossil fuel area. I think that is significant.

Representative MCCORMACK. Do you think, then, this should apply across the board?

Representative COUGHLIN. Where the ultimate benefit is going to be in the private sector and the benefit of this investment will accrue to the private sector and to the public through the private sector, then it would seem to me that private sector investment and contribution is very essential.

Representative MCCORMACK. This includes solar energy? Do you think solar energy should pony up half of the funds for solar energy demonstration?

72-81876-26

Representative COUGHLIN. I think industry should be requiredRepresentative MCCORMACK. Do you think they should be required to spend half of it?

Representative COUGHLIN. I think that would be appropriate. Representative MCCORMACK. What about the fusion program? Representative YOUNG. How much are you requiring them to pay? Representative MCCORMACK. Nothing at all. Not a single penny. Representative COUGHLIN. To me there is a difference between the efforts in pure research, which we are talking about in fusion and in some cases in solar, and the question of a demonstration plant which is beyond pure research and is near commercialization.

The other question, I think, is directed to Mr. Moss' questions on the contract where you do have a substantial Government role and then have the benefits accrue directly to private industry

Representative MCCORMACK. I am trying to keep these issues separate because I think clouding them, very seriously limits our ability to understand what we are talking about here. I think we ought to establish that this is the only instance where the Congress is actually requiring industry participation. The Federal Government is building the demonstration plant; it is a plant to demonstrate engineering technology, not commercialization. In this case the Congress is requiring utility participation in this demonstration project where we are not doing it anyplace else.

Representative COUGHLIN. We are.

Representative McCORMACK. I beg your pardon. We are allowing companies to come to us for commercial demonstration plants and say, "We would like to have Federal assistance, and we will put up part.' That is on their initiative. When they come to us and say, "We would like to build a shale plant, and we would like to ask the Federal Government to give us a loan guarantee program or provide part of the money," that is a very different situation than what we have before us today, particularly since this is not a commercial demonstration. I want to make this point because I think it clearly is a distinction we should understand.

Representative Moss. Would the gentleman yield?

Representative MCCORMACK. I will be glad to yield.

Representative Moss. Did we not require a significant contribution in Shippingport which was a demonstration plant?

Representative MCCORMACK. We did not require a single penny in Shippingport.

Representative Moss. My record shows we required a substantial amount in the Shippingport development, up to $5 million.

Representative MCCORMACK. I am sorry, I don't know what your information is, but my information is that although Shippingport involved a utility contribution, that participation was not a requirement of the Congress.

Representative Moss. Mr. Chairman, I would ask that this record be held while we receive appropriation documentation either supportive of Mr. McCormack's statement or supportive of mine.

Senator MONTOYA. You have that privilege.

Representative Moss. We also had the Hallam project where $5.2 million was contributed by the Consumers' Public Power District of Nebraska.

Senator MONTOYA. How much time do you want to submit any information?

Representative Moss. I will be able to have it to you not later than Monday.

Senator Montoya. We are trying to make a decision on this, whether to go ahead or what.

Representative Moss. Are you making a decision today?

Senator MONTOYA. I don't know. It is up to the committee. Certainly, we have to make a decision very soon on the contract and criteria and on the proposed amendment.

Representative MCCORMACK. Mr. Chairman, that is all I have for

now.

Senator MONTOYA. Thank you, Congressman.

Representative COUGHLIN. Thank you, Mr. Chairman.

Senator MONTOYA. We will now hear from the General Counsel of the General Accounting Office, Mr. Paul Dembling.

STATEMENT OF PAUL G. DEMBLING, GENERAL COUNSEL, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY RICHARD KELLEY, ASSOCIATE DIRECTOR; RALPH CARLONE, ASSISTANT DIRECTOR, RESOURCES AND ECONOMIC DEVELOPMENT DIVISION; AND RICHARD CONWAY, ATTORNEY

Mr. DEMBLING. Thank you, Mr. Chairman.

Senator MONTOYA. Do you have a statement?

Mr. DEMBLING. I have a short, brief prepared statement which I would like to present to the committee.

First, let me introduce my colleagues, Mr. Richard Kelley, Associate Director; and Ralph Carlone, Assistant Director of the Resources and Economic Development Division of GAO and Mr. Richard Conway, attorney in my office.

We are pleased to respond to your request that we discuss certain aspects of the proposed modified contract the Eenergy Research and Development Administration is seeking to enter into with Project Management Corp., Commonwealth Edison Co., and the Tennessee Valley Authority.

As you know, the proposed modified contract would change the present arrangement for designing, constructing, and operating the Clinch River Breeder Reactor demonstration plant by having ERDA rather than Project Management Corp. exercise overall management responsibility.

In this brief statement I would like to focus my comments on three areas of the proposed modified contract which the committee may wish to explore further with ERDA and the project participants. These three areas concern the extent to which the contract might be interpreted to impinge upon ERDA's role as project manager; the fact that termination might result from design changes required to meet licensing requirements; and, lastly, problems associated with the integrated management arrangement in relation to conflicts with Federal personnel laws. The proposed modified contract has been negotiated and is ready for signature by ERDA and the other contract participants.