ML20140G483
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ATOMIC ENEBGY COMMISSION
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In.the matte'r of the application by ) m. m <
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GENERAL ELECTRIC COMPANY )
and )
SOUTHWEST ATOMIC ENERGY ASSOCIATES ) DOCKET NO. 50-231
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For a Provisional Construction Pemit) for the Southwest Experimental Fast )
Oxide Reactor (SEFOR) ) },-
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Appearances Jules Pearlman, Esq. g on behalf of General E'.ectric Company Mr. ~J. Robert Welsh, President lj of Southwest Atomic Energy Associates Troy B. Conner, Jr., Esq. and Howard B. Helman, Esq.
i on behalf of the U. S. Atcanic Enercy Commission l Regulatory Staff l
i Limited Appearance Mr. Edward L. Wilson by limited appearance presented a j statement of position as a representative of the Arkansas State Board of Health ;
SUPPLEME!EAL INITIAL DECISION
- 1. An Initial Decision herein, issued on September 10, 1965, condi-tionally granted a provisional construction pemit for the experimental j
l The Applicant SAEA was not represented by counsel in this proceed-ing. SAEA has delegated to GE responsibility for prosecuting j this application. The position of the GE attorney was thus stated; "I am an attorney repnsenting General Electric and then-l fare will be the sole counsel for the Applicants."
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, 9705090179 970505 _. _ _ . . . . _.
PDR FOIA l VARADY97-34 PDR l /
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. reactor facility proposed by the Applican'ts. That decision pointed out
.,that the evidence of record upon three matters did not warrant findings and conclusions ecsential to support an unconditional authorization. It was therein provided that the parties might submit additional infomation
{ and pleadings concerning those reserved matters. The then authorized provisional construction pemit expressed, and the decision explained, that the action taken was subject to further consideration and possible i- M l l modification. Se parties have submitted more evidence and pleadings, i
and the matters reserved are now to be decided.
- 2. Applicants have supplied more infomation about their proposed ;
( environmental surveillance program and coordination with the Arkansas i
State Board of Health, (Reserved Point 1). It appears therefrom that i l
the deficiencies noted in paragraph 35 of the Initial Decision'have been i
fully cured. Accordingly, the Board approves and adopts the Applicants' l-Supplemental Proposed Findings 1 and 2. It follows that the provisional construction pemit as heretofore authorized should no longer be condi-
.l tional with respect to the proposed environmental surveillance progam.
i 3 Related to the foregoin6 matter is Reserved Point 3 in the l Initial Decision, the inadequacy of evidence to support affirmative l
safety judgments based on meteorological conditions likely to exist in !
2/ Re Initial Decision, anticipating the filing of additional information, stated at 9 43:
". . . Thereafter this Board will reconsider the matters ;
reserved and its ultimate conclusions in the light of the l
complete record as supplemented and will issue an appropriate decision or order. ..."
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an extreme accident situation. Substantial evidence has now been provided r
on the ncord to show that the Applicants' augnented plans for site meteorological studies as detailed in the statements by the Applicants' consulting meteorologists will provide an acceptable basis for an assess-ment of the suitability of the site. Therefore, the Board adopts Appli .
cents' Supplemental Proposed Findings 3 and 4, and finds that the reser-vation with respect to this point has been satiofied. Accordingly, that condition should be removed.
- 4. Difficulty has been experienced in resolving the Initial Deci-sion's Reserved Point 2 involving the national security issue and alien control implications which were not satisfactorily explained as pointed out in paragraphs 8-13 of the Initial Decision. Applicants have sub-z.itted more evidence as described hereinafter. Further consideration has
, led the Board to nject Applicants' Supplemental Proposed Findings 5 i
and 6 which are here quoted:
"5 Neither General Electric nor SAEA nor any of the aanbers of SAEA or the ccupanies which they zwpzw-sent is owned, controlled, or dominated by any alien, foreign corporation or foreign Bovernment."
"6. Gese!!aah= 4 has neither a right of control nor i actual control over the SEPOR project or any phase of the project."
5 'the ABC angulatory staff has not responded to the Initial Decision with further information or arguments on the point in question. Appli.
cents' pneentation rests on the current evidentiary record and the
. belief, stated in its supplemental brief, that it is not "necessary or desirable to present any argument on this question." Now at hand are
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significant portions of four SEFOR contracts.
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- 6. Th'e evidence 'does not show that SAEA has any other business or i
activity than the SEFOR project; that SAEA might do other things is not j here material. To the extent that Gesellschaft's contract rights tend 1 toward control of SEFOR, they tend also toward that alien control which Y
1 is forbidden by law.
7 Repetition of findings and discussion is here avoided by referring to para 6raphs 8 through 13 of the Initial Decision for a portrayal of the issue to be decided now. On May 14, 1964 four contracts veze executed '
between: (A) AEC and SAEA; (B) SAEA and Gesellschaft; (C) SAEA and GE (Program Contract); and ) SAEA and GE (SER)R Contract). In evidence now are selected portions and an index of contents of contracts A, C and D, i g Applicants'. argument that the " relevant provisions of the contracts I
. are already a part of the hearing record" because they were described j in the testimony is again rejected. In order to remove and avert mis- 1 understanding it is declared here that the Applicants did not' refuse I or ignore the Board's requests for information concerning the con- l tracts, and such an inference should not be made. Simply stated-- l and as shown in the Initial Decision--that information with which !
the Applicants did respond at the hearing failed to meet a basic l test of probative and substantial evidence: The meanin6 of any con- I tract is best manifested by its terms. The Board did not request {
that the contracts be submitted, thus leaving to the parties the j choice as to whether or how their burden of proof would be met. !
g The word " control" is often used herein to encompass the statutory phrase " owned, controlled or dominated".
g The Applicants' selection of portions, made to spare the record's enlargement by all of the 379 pages of the contracts, seems reason- :
able notwithstanding this decision's later reference to clauses !
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. 5 i-and the whole' of the B contract. All four contracts are expressly inter-related and all exclusively pertain to the construction and operation of SEMR. No other contract governs the SEMR project, although the SAEA intra-member agreement (Initial Decision, paragraph 7 and footnote 6) l primarily defines the members' respective fiscal obligations toward l
paragraphs 8 and 9 of the Initial Lecision, poses a foreign control ques- i l
tion that must be anst;ered.
- 8. The Arkansas land upon which SEMR is to be built is owned by SAEA. Title to the facility upon completion vill be in SAEA. The
^ 61 evidence shows troublescme countervailing facts. Recognizing that decla-rations of heed for the law are made in the contracts, it yet becomes necessary to examine the available documents to determine whether those non-self-executing declarations are clarified or modified. Directly con-j; fronting this examination are the contracts' provisions: against amend-ment without notice to or concurrence by AEC; against conflict with the ;
AEC-SAEA contract; and declaring that Gesellschaft "is auare of the i limitation in the Atcaic Energy Act . . . vith respect to foreign indivi-duals or government agencies."
9 The real interests of all SEMR participants are more fully dis-cernible now than at the time of the Initial Decision. The contracts make it clear that the largest single financial supporter of the SEMR project is the U. S. Atomic Energy Commission with obligations in excess of$12'millionforresearch, development,andtesting. SAEA is a conduit j 6/ Findings and cocments hereinafter stated derive frca the SAEA-Gesell-
- schaft contract unless it is otherwise stated or clearly indicated.
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for, and a ' contributor to, effectuating the project; it has, under its
, AEC contract, obl16 htions encompassing the construction of the facility
- and its use which have been virtually transferred to GE by contracts
- C and D noted above. SAEA vill be the relatively passive owner of SEFOR with various rights and ostensible duties, but GE will build and operate the facility. However, the contributions and participation by {
SAEA are shared with Gesellschaft.
- 10. Transparently, SAEA and Gesellschaft are 50-50 partners in SEFOR.
- Costs of construction are to be borne equally up to the estimated total SAEA obligation of $10 million; any savings made below that figure are to be shared equally. Only if the estimate is exceeded does SAEA pay more, j
and then only up to an additional $900,000; any excesa costs beyond that I amount are to be borne by GE. The SAEA-Gesellschaft funding obligations substantially end upon ccanpletion of construction. The AEC-financed operating program then begins, with the results thereof to be shared by all contracting parties. <
- 11. Neither shared costs nor vestment of leBal title effectively defines that control which must be ascertained here. The inquiry now reaches for meanin6ful facts denoting actual or potential exercise of guiding direction of the activity to be carried on. That business for which licensing is sought is the desi n 6and construction and use of SEPOR.
In those matters SAEA's authority in important areas relating to control is not greater than that of Gesellschaft. Notwithstanding that AEC and GE have contracts with CAEA which enmesh the SEFOR project, this inquiry into control focuses on the relation of SAEA to the facility.
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Consideration inf now accorded to facets of SEFOR control which are,shown by the contract to be in SAEA and Gesellschaft respectively.
Gesellschaft acts for the benefit of itself and Euratem, each having identical rights with regard to the results Of the SEFOR program for which they provide technical and financial cooperation. SAEA and Gesellschaft I "will cooperate" in the project, in which "SAEA will represent the rights, claims and interests of Gesellschaft as well as its own." Gesellschaft participated in negotiating the other three contracts and will abide by their terms, "as provided in this agreement." Design and construction costs are to be borne as above described.
13 A high level group denominated the Project Review Comittee will be fomed by SAEA and Gesellschaf't to function with respect to the design and construction and use of SEFOR; it will review perfomance under the GE contracts. A second group, the Technical Policy Comnittee, will be formed by Gesellschaft and GE to review, on a semi-annual basis, "the technical policy questions underlying GE's proposed (SEFOR] plans . ..
for the next six months." SAEA and AEC, at their option, may have repre-sentatives to pt .icipate in meetings of this comittee. Such technical policy questions will be se+tled by mutual agreement of Committee members, or by EAEA as " impartial arbitrator" if agreement is not reached. Any such disagreement will be so presented to SAEA as to permit resolution "with a minimum of study." GE will not be bound by changes in plans which might adversely affect safety or increase total costs or impinge upon the GE obligations in a cited section of a GE-SAEA contract which is not l
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0 r in evidence. In any event, the three corporate participants vill confer j j ,
with AEC at least twice a year to review progress and plans. ' It appears
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! from.the foregoing that substantial control of SEFOR is to be exercised a
by the two major ccumittees in each of which Gesellschaft has essentially
! a50% voice. By way of contrast, SAEA has such a voice in only one of l 4 !
- these committees, being but a referee of disputes ".n the other. Hon
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the measure of SEFOR control by Gesellschaft exceeds that vested in SAEA.
- 14. For Gesellschaft's financial and other contributions to SEEDR
! the SAEA-Gesellschaft contract reauins that, with respect to all existing ,
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or future SAEA contracts with AEC or GE concerning SEFOR, "SAEA will consult with Gesellschaft on all matters of
] policy and on all questions affecting costs to be decided 1 or determined by SAEA or on which it is to be consulted or as to which it must agree. Specifically, SAEA vill i censult with Gesellschaft with respect to . . . the selection of any arbitrator, engineer or other profes-sional or specially qualified person for any purpose under any such agreement. . . . [if) . . . they should be unable to agree as to any such matter, it will be resolved by arbitration . . .."
If the two parties fail to agree upon any matter within the scope of the above required consultations, it is to be settled by artitration as speci-fied in the contract. It is noted from the indexes that the two GE-SAEA contracts include arbitration clauses and the AEC-SAEA contract has a technical disputes and arbitration clause, none of which are in the ,.
Y record. The above provisions show that the reins of control of SEPOR are held by Gesellschaft at least as strongly as by SAEA. Indeed, j Arbitration of disagreements under the SA R -essellschaft contract will be effected by a panel of th ne arbitrators one to be appointed by each party and those two to select the third member. Even though SAEA might not here be required to consult Gesellschaft before nominating its arbitrator, it appears that Gesellschaft >
must concur in SAEA's selection of arbitrators under the other SEFOR contracts.
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I Gesellschaft's reach into SEFOR affairs penetrates and permeates every ,
., aspect of SEMR control which SAEA may attempt to exercise; in all such l matters SAEA must have either Gesellschaft's concurrence or an arbitrated ,
detemination wherein the Gesellschaft voice is no less dominant than l
1s that of SAEA.
15 The contract specifies that Gesellschaft may designate scientists i
and engineers "to participate at all levels in" the SEFOR project, pro-vided that they are qualified in the judgment of GE and that they will be under GE's direction; they will be paid by Gesellschaft. It does not appear from the evidence of record that SAEA has or expects to assert comparable authority to place selected representatives among those who vill carry or.t the SEFCR project. The day-to-day operation of SEFOR appears in this respect, to be more influenced by Gesellschaft than by SAEA.
i Both SAEA and Gesellschaft are entitled, to the extent pemitted by law cnd by the AEC and the AEC agreement, to "have access to, and . ..
receive, full and complete infomation regarding" the SEFOR project; they -
equally may have " full use and disposition of such infomation."
- 16. Future uses of SEm R, beyond completion of the program under contract, are not foreseeable now, but deteminations and courses of action with respect thereto are to be arrived at in concert. Neither I
SAEA nor Gesellschaft vill impede efforts by the other party to develop with GE a further research and developnent program. Such parties as do not participate in later programs are entitled to the fruits of that l research without royalties or license fees. In the event of temination of the other SEFOR contract, this contract may be teminated upon an l equally assessed cost basis.
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~17 Upo"n veiching the matters hereinabove described against the ,
.a 1 protestations of the'vitnesses disclaiming foreign control and also l 7
against the specific and general similar declarations of the contracts, it is concluded that the SEFDR project for which the license here is sought would be significantly and substantially under the control and domination of Gesellschaft. This foreign corporation by contract has 1
secured a substantial contributor's beneficial ownership in SEFOR notwith-standing its lack of le6al title.
!/ In vital areas affecting policy deci-sionsthecontractsvestatleasta50%negativecontrolinGesellschaft.
In assigning personnel to carry on the project Gesellschaft has greater rights than SAEA and thus may exercise a day-to-day dominating influence in SEEDR. Impellingly important to the conclusions herein reached is the
- carefully and comprehensively expressed coamitment by SAEA that, upon all 1
matters affecting SEEDR under existing or future contracts, it must either find accord with Gesellschaft or relegate the issue to arbitration.
- 18. This Board has concluded that the statute proscribes alien control such as exists under these agreements and that the Camission is forbidden to issue licenses under such circumstances. The governing statute, from which Issue No. 4 derives, makes it the clear duty of the Board to decide 8/ It is obvious that S/.EA vill not have complete ownership of SEPOR because it is disabled from independently exercising those preroga-tives ordinarily vested in an owner. Instead, SAEA can effectively manage, direct, and use SEPOR only with the consent of Gesellschaft.
If control is not thus vested in Gesellse'aaft, neither is it vested in SAEA. 'Ibe Board can not sumise that 379 paces of_ contract pro-visions nullify or tolerably dilute this foreign control. It has found that the exhibited contract clauses do not do so.
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,, that issue adversely to the contentions of the Applicants and the Staff:
". . . No license may be issued to any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, a foreign corpora-tion, or a foreign government. In any event, no license may be issued to any person within the United States, if in the opin-ion of the Ccemission, the issuance of a license to such per-son would be inimical to the c mmon defense and security or to the health and safety of the public."
The hearing record shows that the SEFOR " entity . . . is ovned, controlled, or dominated by an alien, a foreign corporation, or a foreign government."
19 The parties have submitted written statements by lawyers in Gemany, in New York, and in the Office of the Cmptroller General of the United States which opine the validity of the contracts ' obligations upon the parties. The two opinions of the Comptroller General considered in depth the legal authority of the AEC to obligate and expend funds for SEFOR. Neither those opinions nor the Staff's review, as noted at paragraph 13 of the Initial Decicion, analyze or perceive an impediment because of the alien control matter herein discussed. The SEEDR parti-cipants promoting this project have not provided on this record substan-tial evidence or persuasion that the declared purposes of the Atomic-Energy Act, measured within the empass of Issue No. 4, would be served by granting the authorization herein requested. It follows, for the reasons hereinabove set out, *ha.T,the application under consideration must be denied.
- 20. 'Ibe issuance of a provisional construction permit was condi-tionally authorized by the Initial Decision which was expressly subject
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to reconsidgration. Upon the basis of the foregoing reconsideration
- < the Board is uncble ,to find, in detemining Issue No. 4, that the
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incuance of'a provisional pemit for the construction of the facility would be consistent with the Atcmic Energy Act's provisions against f areign control. Hence, the conditional authorization for a provisional construction pemit must be rescinded.
i Order IT IS ORDERED, this 7th day of January 1966, . under the authorities cited in the Initial Decision and pursuant to the reservations therein
, expressed, that the conditional authorizaticn for a provisional construc-l tion pemit for SEFOR is made unconditional with respect to the safety- '
i related matters of-(a) the Applicants' plans for an environmental surveil-lance program and cocrdination with the Arkansas Board of Health, and (b) the adequacy of the Applicants,' showing with respect to local meteorological surveys and analyses; HOWEVER, IT IS FUm'HER ORDERED that the conditional authorization for a provi- l sional construction pemit for SEFOR is set aside and the request therefor is denied because the evident measure of alien control of the project is not pemitted by law; and IT IS FURTHER ORDERED, purcuant to $ 2 760 of the Ccmmission's Rules I and Regulations, that this Supplemental Initial Decision shall constitute g It was pointed out in 9 44 of the Initial Decision that, ". . . the Applicants may elect to proceed with construction at the risk attend-ant upon Board reconsideration."
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the final action of the Commission unless within forty-five days after I
its date a timely petition for review is filed or the Commission directs !
that the record be certified to it for final decision.
AIOMIC SAITIT AND LICEITSDiG BOARD Dixon Callihan hb O~ N hsvm Crd
'IhesnasH. Pij;f5rd '
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[ J'. D~. B6dd, Chairman Issued:
January 7, 1966 Germantown, Maryland s
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IMI5ED STREEB 0F AIERECA i
. Amusc numere coseassics I In the Matter at 1
Dookst Eti-, 56 431 esmeral'Elsetrio deuguay i
Soutbeest Atomic Energy Assoaistas h)J ,
f CEWIEICME (W EERGB i
I hereby certify that ecstas at the SWEEEEEIRI IIIfrAL mor vntrar
! iseest January 7,1966 in the emotiones matter aero served as the en11ow-
) ing hy deposit in the Maited States Mail, first e3 ass er air unil, this 7th ear at January, 1966:
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Southuest Atemde Energy Associates Dr. A. Dimon M1h i 306 Pyramid Dm13Aias Oak Ridge Entiemm1 Ishoretary Litt3a Rock, Arhassas 72203 P. O. Seu Y l Oak Ridge, 5samasses 37931 i Attentica: Mr. J. Rahert 18sleb 4
Genormi Elastrie campmer Dr. thamme E. Piseura l
Ateele Poser Benipennt separtussut Processor at Esc 3eer magineering l
175 Cartner Avennas University of Calisessia i
P. O. Bau 25b as:the3ey, California 9b)$1 i Ben Jose, Caliserais 95325 Atteertions Adme Pear 3mma, Bot. Trer Cassier Esq.
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! Een. eens thresher County Ceart Eense thekington, D. C. 90545 Payettevi8e,Artsames 71731 I i
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Gek nidae Operations offies l U. S. Atasio Energy Commissiast
! Dr. James T. Derrom State Bealth Offieur P. O. Boa E Admanes state Board of Bealth Oak Ridge, sammesses 37831 Little Boek, Arksoises 72300 l
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- . RE l'0?KET 50-231, GEtERAL ELECTRIC COMPANY A!C SCUTHWEST ATOMIC El'ERGY ASS,0CIATES, WE HAVE PEEN AEVISED BY TELEPHONE.
'THAT ATOMIC S AFETY hND LICENSING E0ARD YESTERDAY ISSUED AN ORDER SETTING ASIDE INITIAL DECISION OF SEPTEMEER 10, 1965 ORANTING CONSTRUCTION PERMIT ON OROUND TEIS PROJECT INVOLVES ;
ALIEN CCNTROL NCT PERMITTED BY LAW. WE BELIEVE THE ORDER IS UNSUPPORTED BY FACTS OR LAW AND WILL FILE PETITION FOR REVIEW AND SUPPORTING ERIEF PURSUANT TO SECTION 2.762 0F THE RULES OF PRACTICE PROMPTLY AFTER RECEIPT OF ORDER. IMMEDIATE EFFECT OF ORDER IS TO REQUIRE SUSPENSION OF WORK AT PROJECT SITE.
CONTINUING CONSTRUCTION PENDING YOUR REVIEW COULD NOT IMP u R NATIONAL SECURITY WHILE SUSPENSION OF WORK WOULD DELAY AN EXPERIMENTAL PROGRAM VITAL TO THE DEVEIDPMENT OF THE FAST BREEDER .
REACTOR, CAUSE SUBSTANTIAL ECONOMIC DETRIMENT TO CONTRACTORS PERFORMING WORK AT THE SITE AND TO THOSE FINANCIALLY OBLIGATED TO CARRY OUT THE PROJECT, AND RESULT IN LAYOFF OF WORKERS EMPIDYED I AT THE SITE. WE P2000NIZE THAT THE ORDER COULD EE AFFIRMED AND ARE FULLY AWARE OF THE ECONOMIC RISK ASSOCIATED WITH CONTINUING l l
l WORK PENDING YOUR REVIEW. HOWEVER WE BELIEVE THE ORDER IS ERRONEOUS AND THAT OUR POSITION WILL EE CONVINCINGLY DEENSTRATED IN PROCEEDINGS TO FOLLOW. ACCORDINGLY WE RESPECTFULLY REQUEST THAT THE ORDER EE STAYED PENDING YOUR REVIEW SO THAT WORK MAY CONTINUE AT THE SITE. IN VIEW OF THE HARDSHIP TO INDIVIDUALS EMPIDYED IN THE SITE WORK AND THE ECONOMIC DETRIMENT TO CON-
, TRACTORS AND PARTIES TO THE PROJECT THAT WILL RESULT FROM EVEN A SHOET SUSPENSION OF THE WORK. YOUR EARLY CONSIDERATIONS OF THIS MATTER IS RESPECTFULLY REQUESTED. A COPY OF THIS MESSAGE IS BEING SERVED SIELTANEOUSLY ON TROY B. CONNORS JR, TRIAL COUNSEL U.S. A.E.C. REQULATORY STAFF. (COPIES DR JAMES T. HERRON STATE HEALTH OFFICER ARKANSAS STATE BOARD OF HEALTH LITHE ROCK,
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ARKANSAS, HONORABLE GENE THRASHER COUNTY COURT HOUSE
,FAYETTEVILLE, ARK'. AND J. ROEERT WELSH PRESIDENT SCUTHUEST ATOMIC ENERGY ASSCCIATES PO E0X 1106 SHREVEPORT, LOUISIANA.
, GENERAL ELECTRIC CO AND SOUTHWEST ATOMIC ENERGY ASSOCIATES BY JULES PEARU!AN ATTOFNEY 175 CURTNER AVEITJE, SAN JOSE, CALIFCRNIA 2-s ,
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