OPEN MEETING Of the Joint Committee on Atomic Energy MODIFICATIONS IN THE PROPOSED ARRANGEMENTS FOR THE CLINCH RIVER BREEDER REACTOR DEMONSTRATION PROJECT THURSDAY, APRIL 29, 1976 CONGRESS OF THE UNITED STATES, Washington, D.C. The Joint Committee met at 2 p.m., pursuant to notice, in room S-407, the Capitol, Senator John O. Pastore (chairman of the Joint Committee), presiding. Present: Senators Pastore, Tunney, Baker, Case, Pearson, and Buckley; and Representatives Price, Young, McCormack, Moss, Anderson, and Horton. Also present: George Murphy, executive director; James B. Graham, assistant director; William C. Parler, committee counsel; James K. Asselstine, assistant counsel; Albion W. Knight, Jr., professional staff member; Norman P. Klug and Stephen J. Lanes, technical consultants; and Michael R. Keppel, GAO consultant. OPENING REMARKS OF CHAIRMAN PASTORE Chairman PASTORE. I will call this hearing to order. We can't take a vote until we get a quorum. We are eight and we need one more. We discussed this last week, but I think we possibly ought to give a short résumé of where the matter stands. We have before us, of course, this proposed contract with reference to Clinch River and certain objections were raised by Mr. Moss-and he can talk for himself a lot better than I can do he raised the question there were certain elements in this contract which he thought should be modified or corrected. We had Dr. Seamans up here, and he explained the position of the administration and the position for some of the modifications. We listened to it, but because we could not get a quorum at the time, we had to defer the vote on it. Do you want to take it from there, John Moss? Representative Moss. Mr. Chairman, I stated at the time of the request for the hearing on the matter that I felt the contract seriously deficient in four major areas-one of the employee provisions-and the hearing did nothing to dispell my concern there that there is not adequate assurance that there is any legal justification imposed on this rather unusual mix of Federal and private workers employed on the same undertaking. I have done further research on it, and my conviction is reinforced that without major amendment to the contract, that the normal conflict of interest sections, penalties for improper conduct, none of them would be applicable in the management here. I am also concerned with the change in level of utility participation, where I see no significant public benefit for trading off at the moment. The existing contract was carefully negotiated, and I assume at that time, considered to be a very balanced mix of the utility participation and the Government participation that would be modified under the new contract. The alleged grounds for that is to bring together a unified management. I challenge that very sharply. I don't think the contract creates that kind of unified management. I think it creates a great many ambiguities, and that is all it really does. And then, of course, determination criteria for termination under both contracts were criticized rather strenuously by the GAO but because it is virtually the same in both, I will not raise that as a point. Then, the continuation of the operating commitment, or the ongoing operational contract, I think, Senator Tunney is prepared to address himself on that. I had forwarded questions on that directly to Dr. Seamans at the Senator's request, and I understand that the answers have been supplied to him in written form as a supplement to the oral response given here. And I think Senator Tunney is prepared to respond. Chairman PASTORE. Before Senator Tunney is recognized, I declare a quorum present. We are 11 members here seated at this table, which constitutes a quorum. All right, Mr. Tunney. Senator TUNNEY. I would like to say, first of all, Mr. Chairman, that I sent a letter to Congressman Moss on April 14, in which I indicated. to him that I had taken the liberty of drafting several questions concerning specific provisions of ERDA's amended contract. Your assistance in getting responses to these questions will be appreciated. I would like to read the questions, because I think it is important in what we are dealing with here. Question 1: The statutory criteria which this committee adopted state that these contracts should include definitive arrangements for the construction and operation of the CRBR. As I understand it, it is ERDA's intention that TVA will carry on the operation of the CRBR. Administrator Seamans' recent letter to Chairman Anders states that the contract with TVA is yet to be negotiated. Does this mean that definitive arrangements for the operation of the CRBR have not been arranged? Question 2: If these definitive arrangements have not been made, have the statutory requirements been met? Question 3: Won't ERDA be in a very difficult negotiating position, since it is responsible for the operation of the reactor, yet TVA, for all practical purposes, appears to be the agency which will actually operate the facility? Question 4: The amended contract gives ERDA the power to remove employees from the integrated management organization and gives ERDA approval rights over the hiring of PMC members of the integrated management organization. What will be the impact on present Federal Government employees as a result of this arrangement? Now, I have an answer to the questions, and the answer to question No. 1, about the statutory authority criteria was: No. The obligation of TVA to operate the CRBR Plant is set forth in Appendix D of both the existing contract and the proposed modified contract. The only thing remaining to be negotiated with TVA is a separate free-standing form of the arrangement for operation which will incorporate the substantive provisions of Appendix D of the existing and modified contracts. On the second question, if these definitive arrangements have not been made, have the statutory requirements been met? The answer is: Yes. The substantive provisions regarding TVA's operational obligations as indicated in the answer to Question 1 above are currently a part of (Appendix D) and will remain a part of the contract. Therefore, all statutory requirements have been met. In question 3: Won't ERDA be in a very difficult negotiating position since it is responsible for the operation of the reactor, yet TVA, for all practical purposes, appears to be the agency which will actually operate the facility? The answer is: No. There are no substantive changes contemplated in the operational responsibilities of TVA under the modified contract. TVA has always been the agency which would operate the facility. We do not envision any difficulty in negotiating the substantive obligations of TVA for operation into a separate contractual format. The answer to the fourth question, which was: The amended contract gives ERDA the power to remove employees from the integrated management organization and gives ERDA approval rights over the hiring of PMC members of the integrated management organization. What will be the impact on present Federal Government employees as a result of this arrangement? Was: There will be no impact on present Federal Government employees as a result of this arrangement. The ERDA employees assigned to the project are, and will continue to be, subject to and bound by all laws, regulations, et cetera, applicable to Federal employees generally and to ERDA employees specifically. But I see problems, Mr. Chairman, members of the committee. The present contract obligates TVA to operate and maintain the plant during the 5-year period of demonstration-operation. This obligation is found in paragraph 4.2 and appendix D of the present contract. There are no additional terms or conditions to be negotiated in the future regarding the operation of the plant. The obligation is definitive, complete and part of the commitment for the whole project. The new agreement would replace the present agreement completely. The new agreement would provide in paragraph D-13.1: The TVA will conduct preoperational test programs and thereafter will operate and maintain the plant throughout the term of the demonstration period pursuant to a separate contract with ERDA. The agreement will incorporate the terms and conditions set forth in paragraph D-13.2. But this provision carefully does not state that those terms and conditions will be all the terms and conditions, or indicate what the other terms and conditions may be, or state what would happen if the parties fail to agree. Actually, the proposed new contract states in paragraph 3.1: "pursuant to D-13.0 TVA and ERDA will enter into an agreement for the operation of the demonstration plant ('operating agreement') which operation agreement will be effective when concurred in by PMC." Thus, it is crystal clear that the terms of the operating agreement have not yet been decided upon and will not have been agreed to when ERDA plans to sign the partial replacement contract for the design and construction of the plant. The new partial project agreement further states that "this contract, the Operating Agreement, the PMC-BRC and ERDA-BRC contracts, shall constitute Principle Project Agreements." But one of these Principle Project Agreements will not be in existence if and when ERDA signs the partial commitment for the project. In this regard, it is important to remember that the right of the Administrator to settle disputes is qualified by requirements that a decision must be consistent with the Principle Project Agreements (paragraph 2.3.5). Thus, this qualification on the right of the Administrator to settle disputes cannot be evaluated until one sees all the terms and conditions of the operating agreement which has yet to be negotiated. It is very strange indeed that if there are no substantial terms and conditions to be negotiated as ERDA claims in answer to my questions submitted April 14, 1976, and that negotiations involve a simple matter of form, why have these negotiations lingered from more than 10 months and have failed to produce an agreement to date? I recognize this is complicated. It is detailed contract law, but I think that it is clear that we do not have before us all the terms and the conditions of the contract. And I would submit that as a result from what I understand Congressman Moss' position is, we ought to be prepared to follow his advice on this. Chairman PASTORE. Does the chief counsel of the committee have a comment? Mr. PARLER. On the basis of the information that I have had before me to review, it is my understanding that under the existing contract the TVA is committed to operate the plant after it is constructed and ready for operation. They would have that commitment under the modification. It is also true, however, that the definitive contract for the operation of the facility has not yet been agreed to, although the substantive provisions of that contract are spelled out in the existing contract, as well as in the proposed modification. Senator BAKER. Mr. Chairman, could I say a word? I would only point out-as I am sure all my colleagues are awarethat we are not dealing with a third party, so-to-speak; we are not dealing with private industry. We are dealing with an instrumentality of the United States, because both ERDA and the Tennessee Valley Authority are creatures of the Federal Government. If we were, in fact, dealing with General Electric, or Vepco, or someone else, it might be an entirely different degree of care that we might assign to the question involved. That is to say, what are the numbers that would go in the formal contract. The general relationships are spelled out in the present agreements, but what are the numbers that go with it? Clearly, we would then have to monitor profit motive, rate of return, fairness and equity to the stockholders, to the Government and to the public. But, here, we are dealing with two Government entities, with ERDA and with TVA, and that much, as you know, and other members of this committee know, is one of the reasons this plant was chosen to be built in a cooperative way, in this way, with TVA as the lead agency in operating the demonstration. I think it is an appropriate arrangement and that we should go forward. Chairman PASTORE. Any further comments from any member? Senator TUNNEY. There are some additional questions which I think should be answered before a vote is taken. I recognize this is very technical. I recognize it is difficult for all of us who aren't spending a great deal of time with these contracts to understand. But I do think they are important. We are talking about an awful lot of money here and a policy decision that is going to be with us for a long time to come. Section D-2.0 states that ERDA "will reimburse TVA for all direct and indirect expenses incurred by TVA in connection with TVA's Project Activities." And the question arises, has ERDA negotiated with TVA what costs will be considered expenses and the rate of reimbursement? That is a fairly important point. Chairman PASTORE. What do you have to say, Mr. Parler? Mr. PARLER. To the best of my knowledge, the answer to that question is no. Chairman PASTORE. Any further comments? Senator TUNNEY. That is something we ought to know about. Section D-10.3 states that with regard to determining the economic value of the plant to TVA, that "payments due ERDA will be made in a lump sum or on such other terms as ERDA and TVA may agree at that time." Without these payments worked out, does ERDA have a definitive arrangement for the financial aspects of the CRBR? Chairman PASTORE. Mr. Parler. Mr. PARLER. I think it is quite clear from the words that were referred to that the details of the arrangement in the event of a takeover, et cetera, have not yet been spelled out in contractual language. However, I repeat that there is a definitive contractual arrangement for the Tennessee Valley Authority to operate, test, and maintain the plant throughout the term of the demonstration period. Senator BAKER. Mr. Chairman, if I could say one more word. |