funds for diffusion operations, process and long-range technical support, supporting services, and capital equipment and construction necessary to allow operation of the three gaseous diffusion plants in the most economical, reliable, safe, secure, and environmentally acceptable manner possible. The program direction request provides funds for 69 full-time equivalent positions, including personnel services, personnel benefits, travel, and contractual services and suppliers.

Mr. Chairman, this completes my formal statement. If there are any questions regarding our programs, I would be pleased to answer them at this time.

INTRODUCTION OF ASSOCIATES

Mr. BREWER. Thank you, Senator. I have a few summary remarks I would like to make.

Senator JOHNSTON. You might introduce those who are with you.

Mr. BREWER. I sure will. On my far left, John Longenecker, Deputy Assistant Secretary for Uranium Enrichment; Mike Lawrence, Director of the Waste Management Office on my left; Dr. Franklin Coffman, Director of the Remedial Action Program on my right; and Mr. Gordon Chipman on my far right, Director of Breeder Reactor Programs in the Department.

SUMMARY OF STATEMENT

Last year when we were up here, Senator, there were three major events on the agenda, the first being the submission of the licensing reform legislation, the second being the alternative funding plan in preparation for the Clinch River Breeder Reactor, and the third was the waste management legislation that had been passed in the 1982 lame duck session and the Department had mobilized for the implementation of the bill. Mr. Lawrence will be reporting on that directly.

The nuclear scene has changed enormously in the past year. As you know, there has been a recent wave of problem projects: Marble Hill, Sumner, Diablo Canyon, Byron, and there may be more. This wave of bad news underscores the need for licensing reform legislation that both the Department of Energy and NRC submitted last year.

We feel that the problem is not with the machine but with the institutions that regulate the technology and the whole infrastructure that constructs and finances and operates nuclear power, as well as regulates it.

We have also in the past 6 months, following the loss of Clinch River, restructured the breeder base technology program. About 1 year ago, we predicted a very severe market problem in the uranium enrichment program. That forecast has come true. We have lost a substantial market share to the secondary market, largely out of Europe. We have

formulated and mobilized a strategy to respond to this problem. I will report to you in a moment on the progress in that regard.

LICENSING REFORM

If I could return to the first item, licensing reform, there are 48 nuclear plants in the pipeline awaiting operating licenses or under construction. We feel that each of these plants will suffer a very painful birth. We have found that utilities with operating plants are doing quite well financially and are delivering busbar costs less than or equal to national averages.

If you have, however, a plant under construction, then you have a problem. The first chart shows the total nuclear investment by the utilities in this country.

The total is $54 billion for those plants which are operating. That is the capital investment. And the plants that are in the pipeline total $147 billion, $70 billion of which has already been invested and $77 billion of which remains to be financed. So the total commitment to date to nuclear powerplants in this country is $201 billion. What is at risk presently, due to our chaotic and cumbersome licensing process, is the $147 billion for the plants which are in the pipeline.

NUCLEAR POWERPLANT LICENSING REFORM

Senator JOHNSTON. Are you going to send up legislation?

Mr. BREWER. Senator, we sent legislation up 1 year ago.

Senator JOHNSTON. You are not going to send up any new, additional legislation this year?

Mr. BREWER. It is not our plan to send any additional legislation up this spring. There is some movement in Senator Simpson's committee on the legislation, as there is some movement on the House side.

Senator HUDDLESTON. If I might ask a question, Mr. Chairman. Does the new legislation address the difficulties that you indicated a moment ago with certain plants that apparently were not fulfilling licensing requirements to begin with? Is it possible to make the licensing procedure less chaotic and less cumbersome but, at the same time, less likely to permit the kinds of problems we have seen there?

Mr. BREWER. It does exactly that, Senator. One of the features of the legislation is that it will focus the technical resources of NRC and the reactor industry on fewer, more standard products than has been the case in the past.

As you know, the 80 reactors we have operating are largely custom designed, custom constructed, and custom regulated. There has been very little trace memory or learning curve effect.

Senator JOHNSTON. It is the same sort of legislation you had in the last Congress, that allows you to bank sites, to license generic sort of

Mr. BREWER. Yes, sir. There are five major features: Site banking, prelicensing of sites, licensing of standard designs, a more disciplined retrofit process. There are now 83 ways for the NRC to inflict retrofit requirements on plants without any sort of cost-benefit analysis or a tradeoff of any sort. One-stop licensing, which means you get all of your engineering and design done up front and you apply for a combined construction and operating permit, rather than this current process of design as you go.

Senator JOHNSTON. Then don't we have something on public hearings as well?

Mr. BREWER. Yes, sir. The fifth feature is a hybrid hearing process, which means that the first stage of hearings is of a legislative type, and if there are matters of genuine contested fact, then they are heard at an adjudicatory hearing.

Senator JOHNSTON. That is so you don't have to rehear those same old issues all over again.

Mr. BREWER. Yes, sir.

Senator JOHNSTON. Like whether nuclear power is cheaper or safer. Mr. BREWER. Yes, sir. That is true.

Senator JOHNSTON. We don't need to get into that here, because this committee is not going to do that, so let's move along.

Mr. BREWER. I understand.

Senator JOHNSTON. In fairness, we asked you the questions about it.

URANIUM ENRICHMENT ACTIVITIES

Mr. BREWER. I would like to spend a moment, Senator, on the enrich

ment program.

As you know, since 1973 we have gone from being a monopoly supplier-we had 100 percent of the world market in 1973. Between 1973 and 1981, we lost about 65 percent of the world market. We went from 100 percent to 35 percent.

More recently, in the past 12 to 18 months, we have lost some U.S. domestic market.

There are two or three underlying causative factors for this recent loss of U.S. domestic utilities. First of all, the exchange rate between francs and the U.S. dollar has doubled. That is to say, 3 years ago you could get 4 francs for the dollar, now you can get 8. So $1 produces or buys twice as many units of enrichment service as it used to. Likewise with the other producer, URENCO.

The second factor that contributed to this erosion in the U.S. domestic market is the fact that all of the producers have been producing into a glut. There is a massive overinventory of separative work units (SWU's) which have been committed to in the past which are no longer needed because of reactor slippages or cancellations. Nevertheless, the utilities were required to accept the product because they had take-orpay contracts. As a result, the secondary market could undersell any separative work unit produced either by United States or European producers.

The third major factor is that we had simply loaded too much cost into the SWU rate base. The program was trying to do too many things in parallel. We had simply not operated the enrichment enterprise as a business.

NEW ENRICHMENT CONTRACT

We have designed a recovery strategy which involves two major factors. First, we need to fix the market problem by stabilizing the U.S. share of the market. And the tool for doing this is the new contract which we recently issued on January 18, 1984. Let me describe the contract.

The contract is a requirements contract; it is not a fixed commitment contract. It is based on the customer's actual requirements, not on a commitment to take a certain number of SWU's each year for the next 30 years.

Therefore, we will no longer feed a secondary market. We will no longer produce into a glut.

The second major feature is the 30-percent offset allowance. We will allow the customer to obtain up to 30 percent of his requirements from sources other than the U.S. Department of Energy. This is designed to dry up the secondary market and allow our customers access to those cheaper separative work units so that we can get back to a normal, balanced supply-demand situation over the next 2 or 3 years.

The third major feature is a fixed price escalated only by known national indicators. We will set the price for a 10-year horizon and esca

late it only by GNP inflators. We will not allow the program requirements to drive the price; we will require the market to drive the program.

GAS CENTRIFUGE ENRICHMENT PROJECT

Senator JOHNSTON. How does GCEP get into this?

Mr. BREWER. The gas centrifuge project at Portsmouth is on the production side, as are the three diffusion plants. Once we know with certainty what the U.S. share of the market is, we will design with detail the production plan for the next 10 years.

We have already decided to defer for the time being a decision to construct buildings 3 through 8 of GCEP. We have also decided to drop set IV technology centrifuge machines. We will go straight from set III, the current state of the art, to the advanced gas centrifuge machines, set V, if the technology decision in 1985 favors gas centrifuge. That leads me to the third strategic decision that we have made. That is, to not carry both advanced technologies on through the 1980's and incur those expenses and load those costs into the rate base. Rather, we will have an early decision, about 1 year from now, between advanced gas centrifuge and the laser process, AVLIS.

The response to the new contract has been very robust and very vigorous. Three or four weeks ago the first contract was signed, and it was for almost $2.5 billion with Duke Power. We have oral commitments, or letters of intent, from over 50 percent of our enrichment customers, and we have only been marketing for about 12 months.

The contract conversion period will close on October 1, 1984. At that time, once we have a stable floor for our U.S. market, we will define the production strategy in more detail.

WORLD ENRICHMENT MARKET

Senator JOHNSTON. Dr. Brewer, what do you consider to be the total market over the next 10 years, not the U.S. share of that, but the total enrichment market?

Mr. BREWER. Mr. Longenecker, do you have an estimate?

Mr. LONGENECKER. In total sales or our share of the market?

Senator JOHNSTON. No, total sales, worldwide.

Mr. LONGENECKER. We expect the total sales worldwide in the next decade to be on the order of 35 million separative work units per year. We have the capacity at this time to produce 27 million separative work units per year.

Mr. BREWER. Senator, that is another point that should be borne in mind. The world demand level at this time is something like 20 to 25 million SWU's per year. The world now has a capacity of 42 million SWU's per year. So we have not only a large number of SWU's out there which are not needed, that have already been produced or have been committed to, but we are over capacity by about a factor of two. Senator HUDDLESTON. A factor of how much?

Mr. BREWER. About a factor of two. There are about 42 million SWU's per year in world capacity between the United States,