The Export reorganization act, 1975 : hearings before the Committee on Government Operations, United States Senate, Ninety-fourth Congress, first session, April 24, 30, and May 1, 1975 online

other. In the meantime, every effort should be made to
minimize by technical and regulatory means the hazards
of fission . . . . "



345



-4-



Upon the assumption that nuclear exports may continue, however,
I intend today to set out why the environmental groups believe
there is a need for legislation such as S.1439, why they believe
such legislation can be effective, and how they believe such
legislation should be structured so as to begin to eliminate
or reduce the risks now associated with our nuclear export
scheme.

I . The Need for the Legislation

The export from the United States of nuclear power generating
equipment and nuclear fuels has been steadily escalating over the
past several years. In a recently released study, ERDA has
estimated that, during the period July 1, 1974 through August 31,
1975, the United States would receive approximately $200 million
for enrichment services and $1.2 billion from sales of nuclear
production facilities and related equipment to foreign customers. 3/



37

— ' ERDA, Proposed Findings Supporting Determination Related to

International Nuclear Power Export Activities Pending Preparation

of a Section 102 (2) (C) NEPA Environmental Statement 124 (April 7,

1975) (hereinafter cited as the "ERDA Interim Analysis").



346

-5-



The United States now has Agreements for Cooperation Concerning
Civil Uses of Atomic Energy which authorize the export from the
United States of nuclear power generating systems and nuclear fuels
("Agreements for Cooperation"), with 21 countries, as well as in-
ternational organizations such as the European Atomic Energy
Community ("Euratom ") and the International Atomic Energy Agency
(the "IAEA"). 4/ The negotiation of new or superseding Agreements
for Cooperation has been undertaken in the past year or will be
shortly undertaken with Egypt, Israel, Iran, Greece and Brazil. 5/
Earlier this year, moreover, a proposal was submitted to Congress,
and has since become effective, increasing the amount of special
nuclear material which is authorized to be shipped to the IAEA,
and thus permitting Yugoslavia and Mexico, which do not have bi-
lateral Agreements for Cooperation with the United States, to
receive nuclear fuel from this country through the conduit of the
IAEA. See S. Rep. 94-8, 94th Cong., 1st Sess. (February 13, 1975).



4/ See 121 Cong . Rec . S. 5990 (daily ed. , April 17, 1975)
5/ ERDA Interim Analysis 11-12.



347

-6-



Through June 30, 1974, the Atomic Energy Commission had
entered into 95 toll enrichment contracts with foreign customers
covering partial fuel requirements of about 68,000 megawatts of
generating capacity and since June 30, 1974, 54 additional contracts
covering fuel requirements for approximately 51,000 megawatts have
been executed. 6/ And, as of October 25, 1974, there were 51
foreign nuclear power plants of U.S. origin operating, under con-
struction, or on order. 7/

The spectacular size of the United States nuclear power export
program has been achieved in the past 20 years since President
Eisenhower's famous "Atoms for Peace" speech with little analysis
having been made of the risks which the spread of fission power
poses. The combination of both promotional and regulatory functions
in one agency inevitably has led to the promotion of nuclear
power as a purely commercial enterprise at the expense of careful
regulation.

Within the past two or three years, there has been an in-
creasing effort to bring our nuclear export program under control.
The effort in Congress last summer to amend the Atomic Energy Act



6/ ERDA Interim Analysis 6-7.



]_/ Exhibit C, Table 8, to the Affidavit of Eldon V. C. Greenberg,
sworn to March 21, 1975, in Sierra Club, et al . v. Energy Research
and Development Administration, et al.



J48



-7-



of 1954 to provide for increased Congressional scrutiny over
Agreements for Cooperation is one example of this effort. 8/
Another example is the enactment last fall of Section 14 of
the Export Administration Act Amendments of 1974 9/
which calls upon the President to review and to report to Congress
with regard to the adequacy of national and international
safeguards to prevent proliferation, diversion and theft of
nuclear materials. Yet a third example is the lawsuit brought
by four of the environmental groups which I represent in October,
1973, to compel the Atomic Energy Commission (and other responsible
agencies) to prepare an environmental impact statement on their
actions to authorize, assist, contract for and license the export
of nuclear power generating systems and fuels. 10/



8_7 See debates on S.3698 and H.R. 15582, 120 Cong . Rec. S. 11416-

S. 11519 (June 25, 1974); 120 Cong . Rec . S. 12112 - S. 12128 (July 10,

1974); 120 Cong . Rec . H.R. 7432- H.R. 7450 (July 31, 1974). The

bill was ultimately enacted into law on October 26, 1974. See

Pub. L. No. 93-485, 88 Stat. 1460; see generally S. Rep. No. 93-964,

93d Cong., 2d Sess., Conf. Rep. No. 93-1299, 93d Cong., 2d Sess.,

1974 U.S. Code, Cong. & Adm. News 5934-5938.

9/ Pub. L. No. 93-500, 88 Stat. 1552 (October 29, 1974).

10 / This lawsuit, it should be stressed, focused not just on
traditional "pollution" and safety issues, but on the entire safe-
guards problem as well. As a result of the lawsuit, the Atomic
Energy Commission agreed to prepare an environmental impact statement
(see 39 Fed . Reg . 20835 [June 14, 1974]) and, it has been ordered
by the United States District Court for the District of Columbia to
release such statement by August, 1975. The opinion of the Court is
reported at 6 E.R.C. 1980. The environmental groups' suggestions
with regard to the scope and contents of such statement are contained
in a letter, dated August 15, 1974 to Dr. James Liverman, Assistant
General Manager for Biomedical and Environmental Research and Safety
Programs of the Atomic Energy Commission. With the permission of the
Committee, I would like to submit such comments as an Appendix tc this
testimony.



349



-8-



There is obviously still a long way to go in bringing the
international nuclear power fuel cycle under appropriate regu-
lation. The ERDA Interim Analysis, released on April 7, for
example, reveals that there are numerous gaps in the regulatory
system, that ERDA, at least, retains an unabashedly promotional
bias, and that there is still an unwillingness in certain agencies
of the Government to give full recognition to the risks posed by
the world-wide growth of fission power generating capacity. 11 /

Specifically, as regards the-adequacy of the current regu-
latory scheme in the United States, there are at least five
critical problems, well identified by the sponsors of the Bill
in their remarks of April 15, 1975 12 /, which should be emphasized:

(1) The key stage in the overall nuclear export process has
been the negotiation and conclusion of Agreements for Cooperation
Which have established the safeguards requirements applicable to trans-
fers of nuclear equipment, technology and fuels. Such Agreements have,
in the past, been primarily the responsibility of the Atomic Energy
Commission, and now they are primarily the responsibility of ERDA.
ERDA, though it is an agency which has the task of promoting nuclear



11/ The ERDA Interim Analysis is, moreover, an example of the kind
of superficial assessment made by federal agencies of U.S. export
programs. We are now in the process of preparing extensive comments
(to be filed next week) on such Analysis, and, with the permission
of the Committee, I would like to submit them for record as an
Appendix to this testimony.

12/ 121 Cong. Rec. S.5960 - 5964 (daily ed. , April 15, 1975).



350



-9-



energy, also has the responsibility for the safeguards aspects of
Agreements for Cooperation. 13/ No independent, non-promotional
agency has an effective check, at this stage of the process, over
safeguards procedures to which the United States commits itself.

(2) In establishing safeguards under Agreements for Cooperation,
there has been a complete reliance on the international IAEA
accountancy system. This system is designed only to detect diversion.
It cannot prevent such diversion, and it does not provide for
physical security or other protective measures aimed at preventing
theft or sabotage by sub-national groups. Moreover, as civilian
nuclear programs grow in size, the IAEA accountancy system will
tend to become less and less able to pick up diversions which are
small in terms of percentage but nonetheless strategically
significant. Finally, the IAEA is currently both under-staffed
and under-budgeted. For example, it is our understanding that its
fiscal year 1975 budget for safeguards was approximately only $59
million and it has only 59 full-time inspectors in the field. 14 /
While current efforts are being made to improve the IAEA system
and at least to develop recommendations for adequate physical



13 / This responsibility is lodqed in its Division of International
Security Affairs.

14/ NBC News, "The Nuclear Threat to You" (February 2, 1975).



351

-10-

security standards throughout the world 15 / , it is plain that
the IAEA system, as presently constituted, is not sufficiently
able to deal with the full range of risks associated with fission
power development.

(3) The authority for issuance of export licenses within

the United States has been split among several agencies, and, with
regard to some transfers, it has been virtually nonexistent. For
example, while the Atomic Energy Commission, and now the Nuclear Regu-
latory Commission ("NRC"), have had the responsibility for the issuance
of export licenses under the Atomic Energy Act for reactors and
major components thereof, the Department of Commerce has had the
responsibility for granting export clearances for equipment and
facilities not constituting a reactor or major component. 16/
This split of authority unnecessarily increases the risk of lack of ef-
fective coordination among licensing agencies. Moreover, some
transfers, such as transfers of technology by U.S. corporations
(i.e., licensing of patents, know-how, etc.) have been essentially
unregulated, thus permitting development of large scale nuclear
power industries to take place abroad, such as in France. 17 /

(4) There has been a total lack of substantive review in
actual licensing proceedings. The consideration of export licenses
in the past by the Atomic Energy Commission has been essentially



15 / ERDA Interim Analysis 106.
16 / ERDA Interim Analysis 34.

17/ See "Exports of Nuclear Materials and Technology", Hearings
before the Subcommittee for International Finance of the Senate
Committee~on Banking, Housing and Urban Affairs , 93d Cong., 2d Sess.,
10-11, 28-29 (1974).



352



â– li-



ministerial, and export license applications have not even been
reviewed by the Commissioners but have merely been processed by
the Staff. 18 / All that NRC now passes on in con-
sidering export license applications are the questions (1) whether
the issuance of the license would be within the scope of and con-
sistent with an Agreement for Cooperation and (2) whether the
issuance of the license would be inimical to the common defense
or security. 19/ However, the determinations on these questions are
based upon the advice of ERDA Division of International Security
Affairs 20/, anc j NRC does not make any independent review of then.
In addition, it should be pointed out, that, under current
procedures, the NRC does not examine any health, safety or
environmental impacts which might be associated with the
grant of a particular license. Thus, for example,



18 / As a result of the recent public furor over the importation of
Plutonium into the United States, see the New York Times , March 23, 1975,
at 22, col. 1, the NRC has changed this policy and announced that,
pending a rulemaking proceeding covering transportation of special
nuclear material, including plutonium, by air, the Commissioners
themselves will review new applications for licenses for the import or
export of significant quantities of plutonium and other special
nuclear materials. See letter, dated April 3, 1975, from Lee Gossick,
Executive Director for Operations of NRC, to Mr. George Murphy,
Executive Director of the Joint Committee on Atomic Energy.

19/ ERDA Interim Analysis 35.
20/ ERDA Interim Analysis 34.



353



-12-



an export license could be issued for a nuclear power generating
system which did not have an emergency core cooling system without
any review of the risks posed by such transaction.

(5) There has been a lack of procedural safeguards within
the export licensing process. In part because the licensing
process has not involved consideration of substantive issues,
there has been no opportunity for interested members of the public,
other than the applicant, to participate in licensing proceedings.
For example, with regard to the licensing proceedings on ap-
plications for the export of special nuclear materials, there
has not been public notice in the Federal Register of the filing
of license applications or the commencement of licensing pro-
ceedings. 21 / Thus, interested persons have had no way of knowing
that export licenses were even under consideration, let alone
of having the opportunity to participate in the proceedings con-
sidering such applications.



21 / ERDA Interim Analysis 38.



II. The United States' Ability to Exercise Effective
Control Over the International Nuclear Fuel Cycle .

Before going on to discuss the specific regulatory proposals
embodied in S.1439, a few words should be said about the argument
which is sometimes made — and which I am sure will be made against
the Bill — that the United States cannot act unilaterally to
impose safeguards (or environmental controls) on the international
fuel cycle without ruling ourselves out of further international
trade. In response to persons calling for a moratorium on
nuclear exports, it is often argued that, if the United States
ceased supplying nuclear equipment, technology and fuels, other nations
with fully developed nuclear industries - nations less "re-
sponsible" than the United States — would step into the breach,
and the risks inherent in the growth of fission power worldwide-
would be increased rather than decreased. 22/



22 / See, e.g., Statement of Senator Pastore, 121 Cong . Rec .
S. 5989-5990 (daily ed. , April 17, 1975).



355



-14-



When the issue is then raised as to whether the United States,
assuming the continuation of its export of nuclear equipment,
technology and fuels, should move to impose stringent standards
on recipient countries, it is further argued that imposition of
more stringent standards would "competitively disadvantaqe" the
United States, once again driving foreign countries, anxious to
obtain nuclear power, co our "irresponsible" competitors. The
result of this argument, if accepted, is that the United States
must require recipient countries to meet standards no different
than those of any other supplier or potential supplier. In
other words, the "lowest common denominator" prevails, and, in
the end, the United States has become just as "irresponsible"
as its irresponsible foreign competitors.

The argument that unilateral standards are ineffective and
counterproductive in the long term simply fails to recognize the
still powerful position of the United States. Though the United
States' monopoly over nuclear technology is being eroded, this
country still holds a commanding position in the world market.
Projections prepared by the Atomic Energy Commission in early 19 74
show that the United States, which was the sole exporter of en-
riching services for fuel for power reactors (outside the Communist
bloc) during the period 1970-73, will continue to supply more than
85% of foreign separative work requirements through 1980 and more
than 71% of such requirements through 1983. 2 3 / The same projections

2_V Atomic Energy Commission Responses to Plaintiffs' Additional
Interrogatories, dated February 14, 1974, in Sierra Club, et al .
v. Energy Research and Development Administration, et al .



356

-15-



estimate that "the United States will eventually supply between
40% and 60% of new foreign requirements for separative work during
the 1980s and 1990s." 24 / And, such projections indicate that
U.S. private sales of nuclear plants and equipment abroad will be
in the range of $1 billion to $3 billion per year through 1983. 25 /
With this commanding position in the market, it is far from clear
that imposition of additional standards by this country would under-
cut the competitiveness of our industry or send prospective foreign
purchasers running off to the French. Indeed, it might be equally
possible that suppliers of technology outside the United States
would follow the United States' lead, for they, too, as nuclear
powers, have an interest in restraining the spread of nuclear weapons
and protecting the world community against terrorist activity or
environmental disaster. Finally, the United States can encourage
foreign countries to accept our standards by offering economic
and other incentives to purchase nuclear equipment and fuels from
us. The point, as Senator Ribicoff stated eloquently in his re-
marks on April 15, 26/ is that time is running out, and several
years from now, as nuclear technology has spread to more and more
countries, the United States may no longer be in such a position
to exercise world leadership. It is thus necessary to act now,
while the opportunity still exists, in order to reduce the risks
associated with the worldwide growth of fission power generating
capacity.



24/ Id.
25/ Id.

26 / 121 Cong . Rec. S.5962 (daily ed. , April 15, 1975)



357

•16-



III. Analysis of S.1439

In light of the circumstances outlined above, the environmental
groups firmly favor the concept behind S.14 39 and the recognition
that there is a need to rationalize and strengthen the United States
nuclear export licensing process. It is essential, in their view,
to transfer, as the Bill does in Section 6(a), safeguards authority
out of a promotional agency such as ERDA and into an independent,
regulatory body. I have a number of specific comments, however,
with regard to the structure of the export licensing process as
suggested by S.1439, which I hope will assist the Committee in its
effort to develop a new and effective regulatory framework for
nuclear exports.

(a) Licensing Authority Should be Centralized in the NRC and
Not in the Department of Commerce - While the environmental groups
strongly concur with the view of the sponsors of the Bill that it
is necessary to centralize licensing functions, they do not believe
that such functions should be centralized within the Department of
Commerce [Section 4]. There are at least three reasons for our
objections to this approach:

(1) To place licensing functions within the Department of
Commerce is to raise, yet again, the same problems of an agency
combining both promotional and regulatory functions which the
Energy Reorganization Act of 1974 27/ was designed to end.

(2) The Department of Commerce does not have the expertise

to make any substantive decisions associated with the consideration
of nuclear export licenses. The way S.1439 is structured, all the



27/ Pub. L. No. 93-438, 88 Stat. 1233 (October 11, 1974)



358



-17-



functions of NRC under Sections 53(a), 62, 82(c), 103 and 104
of the Atomic Energy Act as they relate to the issuance of export
licenses [Section 4(c)(1)] are transferred to the Secretary of
Commerce. This means that, to the extent that any health, safety
or environmental reviews are to be carried out with regard to nuclear
export licenses, they must be carried out by the Department of
Commerce . In our view, under current law, NRC is required, under
the National Environmental Policy Act, to consider the environmental
implications of and alternatives to its export licensing activities
and review such issues as adequacy of emergency core cooling systems,
waste management plans, etc. Obviously the Department of Commerce
is not equipped to carry out such reviews. Rather, NRC is the
appropriate agency to do so.

(3) Speed in handling export license applications is not a
justification for a transfer of functions to the Department of
Commerce. Senator Ribicoff, in introducing the Bill, noted that
the Department of Commerce Office of Export Administration acts
on 95% of all applications within two weeks. 2 8 / It is not at all
clear that this kind of rapid clearance is what is needed in the
sensitive area of nuclear exports. Indeed, the problem with the
licensing process, as it currently exists, is that it has been too
superficial: license applications have been processed by the Atomic
Energy Commission in an extremely short time, and the entire docket
has often consisted of little more than the license application,
a notice of no objection to it, and the order issuing the license
itself. What is needed is a less perfunctory licensing process,
with more detailed scrutiny given to the particulars of individual
license applications.



2_8/ 121 Cong . Rec . S.5961 (daily ed. , April 15, 1975).
J



359

-18-

In sum, if the goal is to centralize licensing functions,
the most rational approach is to transfer to NRC those licensing
functions which are now vested in either ERDA or the Department of
Commerce. 29 / Of course, in order to ensure that the appropriate
kinds of substantive reviews are carried out by NRC, any legis-
lation should require a finding of safeguards comparability and
adequacy, as well as other appropriate findings, i.e., consistency
with the health and safety of the public, and environmental
quality, as a precondition to the issuance of a license. See para-
graph (c) below.

(b) Controls Over the Negotiation of Bilateral Agreements
For Cooperation Should be Strengthened - While the environmental
groups support the transfer in Section 5 of the Bill to the
Secretary of State of the responsibility for negotiating and con-
cluding bilateral Agreements for Cooperation, they do not believe
that the Bill, as presently drafted, focuses enough attention on
this key step in the export process. As noted above, conclusion



29 / In this regard, we would note that it is especially important
to make transfers of technology, the authority over which is now
lodged in ERDA, subject to a full assessment on an individual basis,
as the Bill has attempted to recognize in Sections 4(d) (1) and 7(a).
One problem, however, is that under current practice, see 10 C.F.R.
Part 110 (Supp. 1974), there is no formal individual proceeding for such
transfers, and thus the Bill should remedy this situation.



360



â– 19-



of bilateral Agreements for Cooperation is, most commonly, the
first step in the overall nuclear export process. It establishes
the framework under which specific contracts are entered into and
licenses issued, and lays down the basic parameters of the safeguards
applicable to exported nuclear facilities and fuel. In the past,
safeguards issues have only been considered at the time an Agreement
for Cooperation has been negotiated, and, thereafter, agency action
imposed no additional, substantive conditions on the construction
and operation of exported nuclear power generatina systems or the
use, transportation and management of exported nuclear fuels and
associated radioactive wastes. Even if a safeguard certification
authority is vested in NRC as part of the licensing process [Section
7(a)], the safeguards embodied in an Agreement for Cooperation will be
a dominant factor in consideration of an export license. This is
especially so because, once an Agreement for Cooperation is entered
into, expectations are built up in an agreeing country that such
country will ultimately receive nuclear technology and fuels subject
to the procedures and safeguards to which it has agreed. It will not
be easy eight to ten years down the line, after a prospective
foreign purchaser has invested millions of dollars in nuclear power
generating systems, to deny a license application on the grounds that
the safeguards requirements embodied in an Agreement for Cooperation
are inadequate. 30/ The environmental groups would thus make the



30 / An example of the kinds of expectations that can be built up,
and the pressure which such expectations of foreign countries will
exert on U.S. decision makers, can be found in the recent storm of
protest in Western Europe over what was thought to be a decision by