Since the late 1960's, there has been an excess of foreign production capability and uranium was available at prices and quantities which could have jeopardized the viability of the domestic industry. This restriction on enriching foreign uranium is incorporated in the Commission's Uranium Enrichment Services Criteria. Enrichment services customers are required to specify the intended end use of all feed material provided to the Commission for enrichment.

If intended for domestic end use, the customer must certify that the uranium is of domestic origin. The customer must also maintain appropriate records to demonstrate the source of the feed material provided.

The legislative history of the restriction on enrichment of foreign uranium indicates that the restriction was considered to be a temporary measure. The Commission was expected to follow developments affecting domestic and foreign uranium supply and propose such changes in the restrictions as would be appropriate consistent with assuring the maintenance of a viable domestic industry.

CRITERIA FOR REMOVAL OF RESTRICTIONS

The legislation provided no definition of viability or other guidelines to determine the appropriate specific conditions for relaxation or removal of the restrictions. The Commission believes it necessary, to satisfy national energy goals, that there be a strong domestic uranium producing industry capable of expanding to meet a large increase in future domestic uranium demand.

Determination of the timing for removal of restrictions is largely dependent on the outlook on uranium supply and demand in the United States and the corresponding situation abroad.

Key factors in assessing the domestic uranium situation are known uranium resources, both ore reserves and potential resources, the capability of finding and developing new reserves on a schedule that will meet the demand, the projected magnitude and rate of growth of future uranium requirements and the adequacy of prices to assure a healthy industry and adequate funds for exploration and construction of new mines and mills.

DOMESTIC URANIUM SUPPLY SITUATION

U.S. uranium resources estimated by the AEC as of the beginning of 1974 are shown in table I.

1 An additional 90,000 tons is estimated to be available as a byproduct of phosphate and copper production through the year 2000.

Mr. BARANOWSKI. Resources are in two categories: ore reserves, which are contained in known deposits and delineated by drilling data; and potential resources, which are estimated to exist in undiscovered deposits postulated to occur in known favorable geologic environments.

Shown on the chart in the first column are reserves at $8 per pound cutoff cost of 277,000 tons of concentrate. As you move up in the cutoff cost to $30, the reserves are increased to 700,000 tons of concentrate. The additional potential resources at $8 are 450,000 tons concentrate, increasing to 1.7 million, for the $30 reserves. Total of $8 resources at 727,000 tons increases to 2,400,000 at $30.

Representative HOSMER. In interpreting that table, are we to assume that these dollar figures are meaningless in terms of inflation? Mr. BARANOWSKI. These estimates are cost and not prices. They do not include some of the costs to the companies. They do not include profit, exploration, inflation and the like.

These were estimated about a year or so ago. So, we would either have to increase these costs or reduce the amount of ore that will be in these cost categories.

Representative HOSMER. I think with the rate of inflation being in the double-digit area that the continued use of figures not based on real world circumstances is misleading.

Mr. BARANOWSKI. The only thing that will change on the tables then, if we redo it based on escalation projections, would be to reduce the amount of resources at $8, $15, and $30.

Representative HOSMER. Just adjust your dollars for the inflation and you can keep them the same, can't you?

Mr. BARANOWSKI. Yes, sir.

Mr. QUINN. These data must be presented as of a given date in time. The data in table I are for January 1, 1974.

Representative HOSMER. Let us read the tables, then, with that in mind; is that correct?

Mr. QUINN. Yes, sir.

Representative LUJAN. Put a parenthesis in there and call them 1973 dollars. Everybody can understand that.

Mr. BARANOWSKI. We can put that on the chart to clarify it.
Chairman PRICE. You may proceed.

Mr. BARANOWSKI. Essentially all known and estimated resources are in the producing areas of the United States. Resources are further evaluated according to various cutoff costs of production. These resources are adequate to take care of our needs for the next decade. Additions to resources are expected from the exploration efforts of private industry.

A sizable and increasing potential resource base must be maintained because of the time required to perform exploration and construct new mines and mills to replace depleted resources. Furthermore, a developed reserve of about 8 years forward requirements is needed to assure amortization of investments and to provide a sound basis for sales contracts.

The U.S. uranium industry presently has the capability of producing about 18,000 tons of U2O, per year from existing mines and mills. Actual production in 1974, however, is expected to be about 12,000 tons.

The capability of the industry could be expanded by opening new mines to produce ores from known resources tributary to existing mills and by building new mills and mines in other areas where reserves are known.

Domestic capability from such resources could reach a level of around 30,000 tons per year in the late 1970's, as shown in figure 2. [Figure 2 follows:]

Mr. BARANOWSKI. While it may be possible to attain such levels at cutoff costs of $8 per pound of U2O, it is more likely that utilization of higher cost ore will be necessary.

Continued expansion of capability in the 1980's and 1990's to meet the growing demand of nuclear reactors will require the discovery of additional low-cost domestic resources, or alternatively, use of increasingly higher cost resources or importation of foreign uranium. Taking a look at the chart (above) the requirements cross over the production from the known reserves by 1979.

ENRICHMENT PLANT OPERATING PLAN

Representative HOSMER. What is your alternative plan?

Mr. BARANOWSKI. This is based on plan 2 in Mr. Quinn's testimony. This is increasing the tails assay to 0.3 percent in 1982.

Representative HOSMER. That would make some considerable

variation.

That is plan 2?

Mr. BARANOWSKI. Plan 2.

Representative HOSMER. Without the purchase.

Mr. BARANOWSKI. Without the purchase of additional uranium by AEC.

Representative HOSMER. If you went to plan 1 requiring a cumulative total of 27,100 tons, whatever that is, you would not have the feed to support that plan, would you?

Mr. BARANOWSKI. Plan 1 would peak it in the early period of time. Representative HOSMER. Right.

Mr. BARANOWSKI. There would be difficulty, I think, in getting all that feed.

I think the industry testified that it would be fairly difficult for 0.3 percent plus the purchase of concentrate by AEC.

Representative HOSMER. Plan 1 would be too difficult?

Mr. BARANOWSKI. Plan 1 is the 0.3 percent tails assay with purchase.

Representative HOSMER. Plan 1A contemplates even more purchases than plan 1.

Mr. QUINN. That is correct.

Representative HOSMER. So, it would be even more difficult. Mr. QUINN. That is correct.

Representative HOSMER. But, as to time scale, the heavy purchases required in 1978, 1979, and 1980 would not allow time to get new mining and milling capability in being, would it?

Mr. BARANOWSKI. On the basis of this schedule (plan 2), about seven mills, equivalent 1,000 tons capacity per year, would have to be installed which would be roughly a mill equivalent every year, between now and 1980.

I will have that later on in the testimony.
It is a fairly significant expansion.

Representative HOSMER. Considering the leadtime you would not be able to get that production in these years.

Mr. BARANOWSKI. Some would be expansions of existing mills; other would be new mills. Some mills would be larger than 1,000 tons. We feel there is a good possibility that the mill capacity will be installed by 1980 to meet this program requirement for concentrate. Representative HOSMER. I am talking about the 1978, 1979, and 1980 increments that would be required if for some reason you had to operate on plan 1 or plan 1A.

Mr. ANDERS. Mr. Hosmer, you are essentially correct. That is one of the reasons for relaxing the embargo-so that we will have additional sources of supply for these pinch periods.

Representative HOSMER. This really does not have much relationship to this time frame because of the leadtime it takes to get these facilities in operation to physically get that feed to the AEC's enrichment completion.

What I am trying to find out is if, in considering that lead time, you could physically get the feed to operate under either plan 1 or 1A, and I think the answer is no.

Mr. BARANOWSKI. This is correct. This plot is based on plan 2. Representative HOSMER. That is right, but we don't know yet what plan we are going to be operating under, do we?

Mr. BARANOWSKI. The Commission has not made a decision on the operating plan; that is correct.

Representative HOSMER. And the Commission does not have an option even to go to plan 1 or plan 1A from domestic resources; it would have to go out and make a government-to-government deal with somebody to get that feed, would it not, in order to go to plan 1A or plan 1?

Mr. QUINN. I think that is correct, Mr. Hosmer. It is for that reason when we testified in June we stated that plan 1 was not a likely case to be implemented.

Representative HOSMER. We realize that but the Commission not having yet come to a rational decision on what it ought to be doing, if it ever gets around to it, it will be so late it might have to go to some kind of an accelerated enriching preproduction schedule. This might have to be done and therefore I think that it is silly for you to come up here and give all these options without also telling us that you will be able to actually select from them. Maybe you haven't any option but the one that Mr. Baranowski is testifying to.

Mr. QUINN. The final operating plan that is selected, of course, must be one that is realistically capable of accomplishment. Representative HOSMER. That is correct.

Mr. QUINN. I think it is very seriously doubtful that plan 1 or plan 1A could be implemented.

Representative HOSMER. My point is that if you are going to have options and you are going to give assurances and we are not going to have a nuclear fuel gap, it seems to me that the AEC is obliged to do a lot more work on the subject and a lot more forward decisionmaking and policymaking than it has up to now.

Mr. QUINN. I think plan 1 was presented not so much as a realistic, alternative operation plan, but rather to give some feel for the effect of different operating conditions on the size of the preproduction reserve inventory.

Representative HOSMER. Yes, it was given for that purpose but it also serves other purposes, Mr. Quinn, the purpose of analyzing the alternative future under which this AEC complex might have to be operated or forming a foundation for it. Now, the plan under which you are operating has no more fundamental, philosophical underpinnings than plans 1 and 1A that you tell me won't work anyway. You are never going to know what plan you will work under until you do the kind of analysis and also realize what it takes as a permanent group of Government people to implement it. The Commission is a transient group which has control of policy. The White House or OMB people also are transients, who make it hard to try to come up with some kind of known policy based on a reasoned objective by informed people that tells us what s.w.u.'s we have to produce, and therefore how much tonnage of UO, we have to convert to feed, to power into the plants at Oak Ridge and Portsmouth and Paducah. Thank you, Mr. Chairman.

URANIUM DEMAND

Chairman PRICE. You may proceed, Mr. Baranowski.

Mr. BARANOWSKI. The demand for uranium as shown on the chart has been projected by the Commission to increase from about 9,000 tons in 1974 to a level of about 35,000 tons in 1980 and about 60,000 tons in 1985.