CJ c 20s ' A Hl c or Mr John T Conway Executive Director Joint Committee on Atomic Ene rgy Congr e ss of the United States Deer John I am respo ding of qu e stions to your letter of Febru a ry 8 1966 enclosing a list General 1 Q Has AEC's b as ic 1956 poli cy de ci s i on not to impo s e physical security c ontr ols b ee n r eview ed prior to this time A Ther e · hss b ee n no fo r m l policy r eview of this quest io n prior to thi o time In 19G4 howcvc r the Ocm era l Mar ager ap_prove 1 proc ed ur es und er whi ch the controls on SNM under a contrac t invol ving fin anci al r esponsibi l it y f o r los s would b ecome consist ent with the fi na ncial r esp ons i b ili t y po l icy est s bli shed in 1956 f or l e ss ee s 2 Q Is it bein g re vi ewed now and can you deGcrib e y our t entative conclu s io ns A Ye s the 1956 po li cy i s unde r act iv e r ev iew but no conclusions have yet b ee n r eac he d n - 3 •• t l- J I l A ' d -' '-···l o f I • rro bl em 1 0 I De scrib e the orga ni zat i on s et up to s t udy t his _ ove rall us t he charter of th e s t ud gro up Tell rll - ' V co t Q l' l i - JC As one fa c2 t of t hiG r evi ew a n ad hoc cc m r u ttee t n1e r t he dir ect i on of Allan I al Jc ri t z and cc 11r j_stj_ n z of r eprese nt ati Ye s f r om the Dir e ct or of i e 0 ul e ·tio n v nd th Di v i si or c o f I nt e s t i c na l J f f a i r5 r ecu r i ty n nd l 'ucl eGr i- teriel r J'iG ns geI C e nt h as ·oe en est ab l i sh d t o c ss emble in t o u sing l e doc'll Ii' nt fo r Conrnic aio 1 r eview and possible a ct ion all AEC po li d es and p ·ocedu r es fe r the s a f eguards of sp ecial nucl e- r Ll 3 t er ial conll 'i t 1ente h eld ei i her under domestic or foreign ----------- IEcuR1TY N AT AL • • • I - - ' •• l t 'F ATI CN ft·- • Ur o u1b o 1u r e' Ca j --- ··---·----· r 5 '- t je ' 6 i J • - L - ·- -- -·-· - _ m • l- ·So -· --- --- ----- -- -· J -·- -- --· · t ' 't- I -' · I _ Mr John T Conway - 2 - This report is intended to identify those areas where re spon• sibilities between the several parts of the AEC organization may not be clear where requirements may be inconsistent and where enforcement rights may be in question Preceding the Labowitz committee the Director of Regulation and the General Manager have collaborated in studies on several reco gn ized areas where overlaps in responsibilities physical occur e g accountabi l ity at mixed facilities at mixed facilities delineation of the security control interfaces between Regulation and Operation and designation of focal points The response to your letter of December 3 1965 contained in Chairman Seaborg's reply of January 25 1966 is the result of a collaborative review 4 Q Are you considering any immediate or long-range organizational changes 5 A The Coonnission organizational need Q Describe some of the changes in AEC regulations requirements being considered will consider both irmiediate and long-range changes sho uld current studies indicate the and contract A The Director of Regulation is now developing proposed revisions to the AEC r eg ul at i ons 10 CFR 70 which would extend existing transfer and reportin g requirements to cover privately-owned special nuclear material in addition to that o med by the AEC and leased to · industry Some additional aspects that are being studied are a Whether the regulations or individua l lic enses shou ld set forth th e responsibility of the lic en se e to guard against theft or diversion of sp ecia l nuclear material but without s tipul ati ng p ecise techr iq u s mich he would be req'Jirccl to follow b Whether licensees should be required by regulation to conduct inventories not less often than annually in accordance with minimum standards No changes are being conoidered in cor tr act l' C ··- r v · l ·· -· _ requirements • c _·· ir John T Conway 6 Q What requirements - 3 - if any are imposed on licensees concerning maintenance of accountability Are you considering imposing detailed inventory and record-keeping procedures on licensees A AEC Regulations 10 CFR 70 contain the require ments discussed below It should be noted that in addition to these require• ments explicitly for the purpose of accountability there are numerous additional requirements directed toward health and aid in accountsafety but which when followed by a licensee ability of specia l nuclear materials 70 51 requires receipt that each licensee keep records showing the inventory and transfer of special nuclear material 70 52 requires loss es of special the Commission that • any lo sses other than normal operating nuclear materials be reported promptly to _70 53 requires each licen see to submit to the Commission reports of spec i a l nuclear mater ials distribut ed pur suan t to section 53 and received transferred or possessed by the licens ee or for which t he li cense e is financially re spo nsible These re ports ar e 1 equired as of December 31 and June 30 of each year and are to be filed within 30 da ys after the end of the period covered by the r epor t Where losses or burn-up of less tlwn 10 grams occur and no receipts or shipments had been made during a report period the December 31 report is the only one required • cf 70 54 requires each li censee who transfers and eac h licensee who receives special nucl ear material to submit a report of each such transfer of specia l nuclear materia l distributed by the Commission pursuant to sec ti on 53 promptly afte r such transfer takes place The Commission is not conside ring imposing pr ecise in ventory and record-k eeping det nils on lic ensees f or the reason that apj ropriat for one licensed operation ould almost details surely not provide management the details necessary in anot her operation However as n oted in the re sponse to Question 5 the Canmission is con s i dering establishing minimum guide lin es and standards within which the licensee could design his own internal record Gyste to asGure that it most app ropri ately to the AEC meets his needs while sti ll b ing responsive • requirements I I · 8 Q - 4 - Mr John T Conway 7 Q ' ·' How doe s t he AEC's sa f esuards not contractors and who a re system for licensees who are compare with the I AEA system A The purpose of the IAEA_inspection is t o detect whether or not mat erial is b eing div ert ed for military us e s Domestic inspec t i ons determin e whethe r or not materia l is being used for the purpose intended and estab lish the ca us e and rea son ableness of l os ses The technic al methods empl oyed during IAEA i ns pe ct ions are similar to those fo llowed in nuclear mate rials surveys of li censees howeve r the frequency of IAEA inspection may now be hi ghe r for ce r tai n facilities s uch as Yankee Differ enc e s in proc edural details are be i ng review ed as a part of the I abowitz Stu dy Q Is a ccountabilit y at AEC facilities handled di fferently than at li ce nsee faci l it ies Is AEC also r eviewing its system of accountability fo r contractors exe mpt from li cen sin g A Yes there are a number of significant differences All AEC f ac ilities are operated on cost - type contracts Tne current AEC inven to ry exclusive 01· mate rials transferred to DoD is abo ut $5 billion The AEC th e refore in its management role has set up r e quir ement s on i ts oper ating contractors who within those guidelines and subject to AEC appr oval develop deta il ed practices desisned to minimize l osses con sistent with the pr ocess Close surve ill ance by the A EC is mainta i ned over discards and waste streams and in particular on accumulations of large quantities of unmeasured scrap Where the AEC ha s consider ed that additional accountab i lity actions at one of its faciliti e s are necessary such acti ons are taken No special revi ew is b eins ma de of the AEC sy st em of account ability for con tractors exempt from licensin g A number of such r evi ews has been made ove r the pas t 15 years the most re cent in 1960 by the Stanford Research Ins titute -- c v· ' · • w J' - • _ j• '' 'I r 1 19 I John T Conway - 5 Q Are any processing to AEC inspection facilities I A t facilities in the United e g any DoD installations States not subject State licensed All special nuclear material except that delivered to the of the President under Department of Defense by direction Section 91B is subject to some fonn of AEC inspection 1' '1 JMEC I 1 Q Please answer the four questions February 2 1966 letter I I in Mr Holifield's What specific actions has the AEC taken since discovery of the NUMECloss to determine if similar situations exist at other licensed processing conversion and fabrication facilities I I raised A I I I ' · b Proce ss losses and materials unaccounted for as reported to the AEC by other plants and resulting from accountability surveys made during the past year have not raised questions which could not be resolved quickly to the AEC's satisfaction Our · personnel conducting nuclear material surveys have satisfied th emselves that the reported nonnal operational losses were within acceptable limits Q What is the basis of the statement in Mr Hollingsworth's developed that letter that no evidence_has_Qeen would suggest that the L JUM EC losses occurred under circumstances that would indicate possible diversion A The nuclear materials survey performed in November at NUHECwas sp e c ifically designed to ascertain the nature of the losses and the disposition of the materials This survey went far beyond that which is normally p2rformed at contractor-licens ee plants in that the physical inventory t ests were more extensive For example 731 air filters were examined by gamma spectrometry and 177 containers of combustible waste were similarly verified That survey revealed no evidence which would lead us to · believe or suspect that the material had been · 1 1 · diverted ' Hr J o m T Com ay c Q - 6 - Has the AEC detennined whethe r an inquiry by the of Inspection or the Federal AECI s Division is warranted Bureau of Investigation A In the absence of evidence or suspicion of violation of law we have determined that an inquiry Our Division of by the FBI is not now warranted Inspection is presently reviewing the survey report and a determin a tion has not been made as to the need for further inquiry by that Division d Q What specific action has the AEC taken or does the AEC plan to take to improve the AEC's regulations requir ements and procedures to help assure that lo sses such as those described above do not go undetected for long periods of time A i 2 Q Did insp e ctions by persons r eporting directly to the Director of Regulation disclose any irr eg ularities at NUMEC A The re were no irre gular itie s of a sa f eg uards infracti ons of health and sa fety requirements action taken to correct them satisfacto rily i 3 Q How do you derive A J -- The General Manager and the Director of Regulation have und e rway a number of s tudies jointly and cooperativ e ly undertaken to ascertain the possible need for additional control by regulation or by dir ec tion These stud ies are being pursued dili gen tl y with a view t oward c ompletion a t the earlie s t possible time As soon as the Commiosion has completed its review we shall advise the Commit tee of a ny act ions we int en d to take $764 000 from 61 kilograms nature some were noted and of U-235 The doll a r v lt e of l osses canno t be de riv ed by a direct multipli ca tion of quantities unaccou n te d for tim e s t he d o llar value per kil ogram exce pt unde r th e unusual situation here the isot op ic rati o o t r 11 d-1 1 receive d sh ipp ed l os t or one wi t h the other Rather the on inventory is id cntic ij value of losses is deriv ed by e valuating material delivered to NUMECand subtracting ther e from the vD lue returned by NlJMEC further su i tr oc t i nb Lhe value of the r emaining inventory Becau s e much of the matc -ia'l at NUMECossociotP d with the Hest nghouse Astronucle r job hes been de3roded the · - · ' Mr h n T Conway - 7 es ti mated l oss of $764 000 i nc l udes no t on ly t h e value of ma terial missin g bu c a lso r e fl e ct t h e loss in value of t he in ventory remaining as i t ha s bee n d egrad e d fro m 93% to an average of appro - tma t ely 16% U- 235 Thus we de rived th e va l ue of t he loss 11 as f ol l ows STATUS OF WAN L CONT RACT $ l U-2 35 Q g Tho sand 1012 $12 181 4 UF6 de li ve r e d 'L Re tu r n s to WAl an d to OR 919 11 055 l 2 Tota l which NUYi EC is ob li gated t o re t urn t o AZC or pay for 93 1 126 3 2 I nventory as of Oc t obe r 31 196 5 32 4 Loss -- l The ·dollar value of each by direct multiplication each cat eg ory 61 4 362 7 $ 763 6 J 4 l ine ex cep t L oss tt was de r ive d of indiv i dua l componen t s of 2 For purp oses of this compu tation c r edit ha s been given Cont r actua ll y Nl NEC for UF6 heels return e d by ffu ' -' EC is obli ga te L to pay for these heels 3 his value is deriv e d by subtraction as di scussed bove 4 Upon recovery of the re sidues before Nove ber 23 1966 these quantities and the cor r espondi ng dollars may be adjusted upward or dowr ward Adjust ment s cou l d resul t from recovery of more or less U- 23 5 than estimate d co be in inv e ntory or should the i sotopic r a ti o be di fferen t f r om tha t es t i mated ' __ ' • ' Mr J ohn T Conway '4 Q Please - 8 - discuss the fi na l results of the survey at NUMEC A IL The survey of NUMECencompassed two primary objectives a to determine the · total cumulative U-235 lo ss ir l for the NUHECApollo plant operatio n since start-up in 1957 and to evaluate the extent to which such 11 lossesrr could be accounted for in terms of known loss mechanisms e g liquid was t es stack gases burial ground disposals and measu rement biases in order to arrive at a materia l-un accounted -f or quantity 2 and b to attempt to find explana high U-235 loss abou t 6% attributed by NUHECto the Laboratory WANL Purchase tions for the unexpectedly of total U-235 received Westinghouse Astronuclear Orde r 59-NP-12674 The survey dis c losed a t otal cu mulative loss of 178 kg U-235 s ince plant start-up in 1957 This represents 1 21% of total receipts of 14 693 kg U-235 Of this 178 kg known lo ss mechanisms have been established for 84 2 kg or 0 57% le av i ng a materi a l-unaccounted-for of 93 8 kg or 0 64% based on tot al Nill1EC receipts l Loss as used here means the di ff erence re sulting fr-om the total cwnulative U-235 received by NUMEC less the sum of a total cumulative shipments of U- 235 by NUHECto others and b Nill1ECI s physic 1 in v e ntory of U-235 as of 10 31 65 Z Na te -ial unaccounted for l- UE occurs when af ter a physical inv e ntory of a pl ant th ere is i c lif ference betw ee n the physical inv e ntory ind t 1e book in 'entory aft ·er t 1e latter has been adjusted for accic le ntal l oss es nor mal o zrational los ses discharge to tan ks sewers stac s buri nl grounds etc ·and other known removals of material Thus MlJF is usually the result of uncertainties of measurements un known los ses and undetected errors - _ ··· jv ·I ·· -- · ' --- - - - -- --- - - - · ' _ ' Mr J ohn T Conway The estimate - 9 of all the discards ' are tabulated as follows U-235 Accidental losses Norma l operational l os ses a Liquid waste effluent discards b Bur ia l pit d i scards non-recoverable contamin ated ear th burden c Stack gas los se s d Liqu id waste in storage drums e Trackout c ontami nated laundry and shoe covers Kgl 3 0 58 0 2 2 14 0 2 0 5 0 84 2 In addition to t he above known discards NUME C has exhumed 5 5 kg U-235 from the 1963 burial pit which has now been brought back on to the physica l inventory The su -vey indicates tha t the to tal loss attributed to the WAJ TL contract wil l be about 60 8 kg U-235 as a ga inst the earlier e s t imates of 52 6 kg U-235 While it is not possible t o reconstruct the specifi c events which resulted in this high loss certain circumstances as described by NUHECh ave led to the following conc l usions N1R-tEC's cumulative losses from time of plant start - up in 1957 have been higher than those determined by other compan i es NUHE C underestim ated its process having comparable operations l osses Adequate documentation of internal plant transfe r s was n ot maintain ed Losses on individual contracts as they occurred were not estab li shed As a result this acc umul a tion of unrecorded and unr eported l osses from pr i or cont r a ct s continued and b ecame a recognized loss 1en the inventory was a t a low l eve l foll owin g cc m letio n of the WAl 1Lcon tr act when NUHEC's mm account b i 1i ty methods improved and as a result of an AEC surv ey c or C n April 1965 The report reflects t ha t the WAl 'L co n r ct b ca r 1e the fi 1 a l repo sito ry of these c u l nt ive l os s es The r e fl e ction of this cumulative loss as a WANLcont n c t loss is large ly attributable to the inability of l-iu- ·L C to mainta in continued identity of material ' · _ ·-· - i - 10 - Hr John T Conway as to the It should operation the very contract contract for which it was originally received be noted however that in their scrap recovery as distinguished from their fabrication processes nature of the operation results in the loss of identity The survey team concluded that a major contributing factor to these circumstances was that mf fEC management had not assigned the necessary caliber of full-time professional talent to the complex j ob o f materials management The NUMECCorporation has advised the AEC that they too now recognize the need for a tho rou gh professional and high - level materials management staff 5 Q Pl ease discuss $1 134 849 34 A discrepancy between the amount billed a nd the amount lost $764 000 The amount billed $1 134 849 34 is based on the contract which provided that at a specifie d date which has terminated NU lEC would reimburse WANLfor the value of SNM charged to its account l ess the value of the SNM returned to the AEC The amount lost ' $764 000 is based on the difference betw een the amount billed and the estimated value for material held on inventory October 31 1965 Additional A Ques tions Q Are mass balance in spections for inventories made or requir ed by the AEC7 A Yes but only for p r oprietary r eas ons to assure correct payment to the AEC for lo sses of SNM Surveys of fixed-price contractors licen s ees are not designed to meet safeguard control ob je ctives F or example they do not inquire into the nature magnitude and dispositio n of l osses a s such surveys do at our CP F contractors Althouen much inform a tion of a safeguards natur e is der ived from such proprietary type surveys it is incid ct t a l to the primary objective of ascertaining correct payments for losses ' J · · · '•a· I • • ··· z ' ··--·· ' ' ' _ 1 f · ' ' - ' 1 ' i C ' _ I Xr John T Conway B Q Pl e se provide mag itude A ' - 11 - ' data t hereof on processing lo ss es i r cluding the ' In orde r to ach cve a co r mon understanding of the term 11 lossesir the definition as used in the NUM ECreport is r epea t ed L oss means the difference resulting from the total cumulative U-235 received less the sum of a total cumulati ve shipm en ts of U-235 to others and b physical i nventory of U-2 35 The total cumula ti ve l oss expresse d as a percent of total cumulative receipts ·is given for each of the following c ompanies Kg U-235 Minnesota Mining Manufacturing Co Nuclear Fuel Servi' ces Unit ed Nucl ear Cor p Kerr McGee NUNEC C D % Loss Co r pany Recei pt 0 59 0 61 0 28 0 48 1 21 5 178 Q Do AEC inspect A No The AEC' s New Brunswick Laboratory New Jersey is utilized for analyses Q In connection ors with themselves l osses 1 861 · 21 575 23 142 1 041 14 693 11 132 67 perform analyses of samples New Brunswick at NUMEC please state lo ss a t NUMEC since plant i Kgs -- The total cumulative s t art - up in 1957 has been establis · e d as 178 kg U-2 35 pendir g final recovery of residues ii Enrichme 1t -- The quc ntity of 178 kg U-235 repr esen ts enri ched r 1aleria l ranging from slightly e nriched to fu lly enriched a t 93 15% U-235 Some spec ial nuclear material enriched greate r than 93 15 % has also been processed at Ni iNEC iii Dollar Value -- The dollar value of 178 kg U-235 calcllates based on $12 000 pe r kg U-2 35 at 93% enrichment to abo ut $2 136 000 ' • · ·- -1 r' ·r J j Vvs •• '- · · · a ' ' I tv'J r John ' Conway - 12 - v Hhether i - c ' · · - r es are included -- In general most fi ed price con J cts cal l for payment of loss it the tir e contr ict is clo sed Sor ie contracts e g the WANL contract contain provisi on s which assess interest charges on outstandi z losses after certain ti me periods set forth in the c ontract NUN EChas been assesse d at 4 3 4% per annum a use-char ge on the value of the material not returned fro m January 28 1965 through Dece mber 23 1965 On that Effect ive that date dat e Nill·IBCpaid th e A'EC $500 000 intere st charges at ci e r a te of 6% on the unpaid bill $634 849 34 ccr 2 v ffnether tl e l os s · cL- c 2s norma l process loss -- Yes the loss at t- 6 CC 02s i r clu le normal processing l osses Tne loss as used in reference to NU 1ECmeans the difference U-235 received by Nlll-1E C resulting from the total cumulative l ess the sum of a total cu mulativ e shipments of U-235 by Nm1EC to others and b N1 ·1E C 's physical inventory of U-235 a s of Octob e r 31 1965 In the case of NUMECthis would include accidental lo sses normal ope ration a l losses discharge to tanks sewers stacks burial grounds etc and other known r emovals of mate rials as well as any unknown losses or undetected errors and measurement uncertainties E Q Are AEC_ special price A F ' I I nuclea r material licen s ees and fixed li ab l e for rnor rnal processin g losses Yes In addition to normal pr ocess losses the y are liab l e f or all other losses sustai ned incl uding materia l- unaccountedfor In general th ey a re lia b le f or ·al l los se s r es ulting from the difference be twee n material rec e ived l es s a the product delivered and b acceptab le recovered scrap returned to the AEC Q Are other lic e ns e es being checked the exper i ence at Nill·illC A i contractors for lo sses in view of Licens ee s h av e been checked f9r losses pr i or to the e - -pe ri en ce at ln JXECfr om the standpoint of establishing lo sse s to ensure correct financial payment to the AEC Whil e the NUM EC exp e rience did not affect the checking of losses in this on a regard it has re-e mphasized the need to determine current basis and not at time of contract close-out the mag nitude nature disposition and reasonableness of such losses • _ - Hr J ohn T Conway 13 - If there is any additional do not hesitate to contact informati on whi ch you might me or my staff Sincerely wish please yours SJ r D $ 11 GSWORTH General Manager I © I ' f I -- - ' ' '1 1 ·- · __ ______ _ t-- - - - __ --- - · - -·- ·- H _ _• • • -- - -- ·- - ·-·- -·--·- - -·-- -- - ·- • ·- · - -