ML20246C694
| ML20246C694 | |
| Person / Time | |
|---|---|
| Site: | 05000000, 05000603, 05000604 |
| Issue date: | 08/11/1989 |
| From: | Irving S ALL CHEMICAL ISOTOPE ENRICHMENT, INC. |
| To: | Lagrone J ENERGY, DEPT. OF |
| References | |
| 25865, NUDOCS 8908250082 | |
| Download: ML20246C694 (11) | |
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DJ%g August U.S.Nucttan atout,rog,
- A t Jj,199f couwssion Mr. Joe LaGrone, M ge
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Department of E rgyjg g Oak Ridger Operations s
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Oak Ridge, TN 37831 IN RE:
Technology Transfer, o f. C).a ssified Gas Centrifuge Equipraent and Technoldgy froin the Department of Energy to A1CheniIE
Dear Mr. LaGrone:
You have previously requested that I contact you personally to discuss certain key issues affecting the referenced Technology Transfer.
By this letter, I am doing so and addressing the-following:
A.
The-status of our technology transfer.
-B.
The need.for resolution of key imminent issues.
C.
How to make this technology transfer successful.
I think. it is important at this time to address the numerous rumors and innuendo 9 which have plagued the A1ChemIE Project and to address forthrightly the sem and substance of our situation as it now stande, My four years experience with this project have given me a great appreciation of the strong and important national policy favoring technology transfer efforts.
In this regard, it is important to recognize that the A1ChemIE Project does not involve just a sale of surplus DOE equipment to a private corporation; instead, the A1ChemIE Project represents America's most ambitious effort ever to transfer a valuable technology from the exclusive control of our federal government into the private sector.
This transfer effort occurs in an era which strongly favors such actions and recognizes their importance to the American economy.
I personally have come to view this transf.er in light of the congressional policy proclaimed in the Technology Innovation Act (15 USCS Section 3'/01 etc, ) where:
The Congress finds and declares that:
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. Technology and industrial innovation are essential to q,
the economic, environmental, and social well-being of I
citizens of the Unit:ed Statec.
Pine PHoo OMm Park. Sulto 20NI 709 Illino4. Ave.. r%k R!dge. N 37930 (M S) M2-0029 8908250082 890811 PDR ADOCK 05000603
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Technology and industrial innovation offer an improved s
standard of living, increased public and private sector productivity, creation.of now industries and employment
. opportunities, improvod public. services, and enhanced l
competitiveness of United. States products in world markets.
3.
Many J new discoveries and advances in science occur in universities and federal laboratories, whi;e application of this new knowledge to - commercial and useful public purposes depends largely on actions by business and labor; Corporation among academia, federal Laboratories,
- labor, and industry, in such forms as technology transfer, personnel exchange,. joint rosearch' projects, and others, should be renewed, expanded, and strengthened.
4.
Dusinesses have performed an important role in advancing industrial and technological innovation.
5..
Industrial and' technological innovation in the United States may. bo lagging when compared to hiutorical patterns and other industrialized nations.
6.
Increased industrial and technological innovation would reduce trade deficit, stabilize the dollar, increased productivity gains, increase employment,. and stabilize pricea.
7.
Government antitrust,
- economic, t r a d e.,
- patent, procurement, regulatory, research and development, and tax policies have significant. impacts - upon industrial innovation and the development of technology, but~there is insufficient knowledge of their effects in particular sectors of the economy.
8.
No comprehensive national policy exists ' to enhance technologic innovation for commercial and public purposes.
There is a need for such pol _ icy uincluding_a, strong nat_i_o,nal policy suppor_ti_ng domestic technology I'
trannfor and utiliza_ tion of the science and technology resources of the Federal Government.
I. think this congressional act says it all for the purposes of
-s this letter.
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r Mr. Joe LaGrone August 11, 1989 Pago 3 Congress recognizes the importance of a strong technology transfer policy.
Congress recognizes that technology transfer efforts in American lag behind those of other countries.
Congress recognizos that the federal regulatory burden often contributes negatively to technology transfer.
Congress l
recognizes that there is a need to evolve processos and regulations which take into consideration thoso difficulties which traditionally impair our country's ability to got business from under government auspices and into the privato sector.
I believe the transfer of classified gas centrifuge technology l
should be viewed in light of those pronouncements.
DENEFITS OF THIS TECHNOLOGY TRANSFER This technology transfer offers the following benefits to our country:
1.
Significant DOE cost avoidance in removal of equipment from GCEP and in decontamination arid disposal of classified equipment.
2.
A valuable use of a terminated ology which involved the expenditure of several billion
- s of taxpayer money.
3.
A private sector opportunity which:
a.
creates jobs and revenues for both the Oak Ridge, Tennessee and Piketon, Ohio communities.
b.
can capture an international market for domestic purposes.
c.
will use a closed DOE facility (CPDF) which is currently an annual cost loss for the DOE.
d.
can produce desperately needed products in quantities not now available in the world market, e.
- can, by the manufacture of these products, significantly contribute to the development of numerous industries within the United States in such important areas as environmental wasto stream tagging, minimizing boiling water reactor shutdown time and worker exposure to radioactivity, devising anticounterfeiting procedures for coin, currency, and industrial purposes, and provido necessary products for important research endeavors in such fields as high and low energy I
- physics, nucinar spaco reactors, and medical 1
diagnostics.
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p Mr. Joe LaGrone August 11, 1989 Page 4' I believe, that if anything, these benefits are understated.
Tho benefits,
- however, clearly fall within the benefits anticipated by the "Stevenson-Wydler Technology Innovation Act of 1980."
l PROBLEMS WITH THIS TECHNOLOCV TRANSFER The problems effecting this technology transfer are numerous.
Many are the fault of A1 Chem 1E, which is a start-up company experiencing all the problems and concerns attendant to any such venture:
funding difficulties, business plan refinements, management and experience, shareholde'rs factions, resentment in the octablished business conunu' ity, dnd the general development n
of a corporate iddntity.
Other problems are exactly those contemplated by the Technology Transfer Act, especially its recognition in section 3701(7) that government regulatory policies have significant impact on industrial innovation, but that there is insufficient knowledge of their effects in particular sectors of the economy.
I would like to explain some of these effects as they pertain to our particular technology transfer:
1.
A1ChemIE has experienced an unprecedented regulatory burden on its staff and financial resources.
This has occurred because our technology transfer involves classified technology, regulated by the Atomic Energy Act of 1954, and as a result we have been subject to regulatory complience by tho DOE, NRC, the Justice Department, State authorities, the ACRS and others.
Often times, these regulatory requirements have conflicted, and the problems have had to be worked out inter-agency.
This has been a lengthy process on some occasions.
Nonetheless, A1ChemIE has taken these burdens head-on and has obtained necessary congressional action, required NRC construction permits, passed Justice Department
- reviews, complied with competitive bidding requirements, obtained necessary State operating permits, met personnel 0-clearance requirements, filed necessary satety analysis reports and e nvironmen t:a1 assessments, filed necessary safeguards and security planc, and generally spent four years of time and expense simply to get through the compliance phase of this technology transfer so that the company could get into production and bring its honofits to bear for the American People.
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Mr. Joe LaCrone August 11, 1989 Page S At this time I want to state simply and directly my personal recognition that in the past four years A1ChemIE representatives have, at times, acted rudely towards DOE personnel, been intolerant of delays inherent in the process, made representations to DOE personnel which were too optimistic, acted at times. heavy-handed, utilized congressional support without following appropriate inter-DOE chains of command, and made numerous other errors which have affected our relationship with the DOE.
We have made these errors and we have taken action to correct them, and it is a simple fact thht any, technology transfer effort is going to, involve mistakes and occasional ill feelings between the company seeking to bring the technology quickly into operation and the agency seeking to protect its interests in the transfer.
IMPACT OF DOE ACTIONS ON ALCHEMIE BUSINESS PLAN At the same time, the agency decisions of the DOE have frequently had a negativo impact on the A1ChemIE business plan and our ability to got financing and get operational.
I would specifically point out the following instances:
1.
A1ChemIE's earliest Business Plan involved enrichment of mercury-196 isotope for une as an energy savings measure in fluorescent light bulbs.
The Philips Corporation estimated this product would save one-half billion dollars annually among American consumers.
For AlChemIE, it was a one hundred million dollar annual market.
We abandoned this target candidate for enrichment as a result of DOE's concern about environmental and safety considerations (which can be met) and in view of the general climate surrounding the I
mercury situation at Y-12 and K-25.
As a result of abandoning this huge market, A1ChemIE has had to prove market viability to financini sources based on less secure and smaller maeketc.
This has impacted our abil.ity to get financing.
2.
A1ChemIE has agreed to a schedule for equipment removal at GCEP which involven an orderly, room by room removal of i
equipment.
Because of this, we have been unable to sell l
items of equipment which are surplus to our planned scope of operation and which are located in a room not yet scheduled for removal.
This accommodation to DOE's reasonable request has had the impact of impairing A1ChemIE's cash flow.
3.
AlchemIE has had difficulty in obtaining fixed criteria for i
safety analysis reports from DOE.
As a result, we have prepared SAR documents three times, only to find they do not meet the current " current criteria."
The duplicitous effort 1
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' Mr. Joe LaGrone 1 August 11, 1989 Page 6' and'. additional expenses incurred as a result of not having a
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fixed target have cost greater expenditures-to A1 Chem 1E than anticipated by our business plan.
4.-
On. November 20, 1987, AlChemIE and the USDOE executed our contra'ct agreement which provided the - framework for. our technology transfer (contract No. DE-ROOS-880R21776).
I wrote the initial draft of this agreement, and participated L
throughout in its negotiation.
Reflecting - the ' cost avoidance benefit to DOE of our, transaction, AlchemIE agreed in paragraph 4A(iv). thereof that DOE una entitled to approve A1 Chem 1E's. " approach for a's s u r i*n g' t h a t adequate funds will be available' for decontamination and disposal of all classified and/or contaminated equipment, should AlChemIE for any reason, fail to do so."
On February 28, 1989,'by letter from DOE, A1ChemIE learned formally for the first r
time that the only acceptable approach.to the DOE was for our company, which 'is not yet operational, to post in advance a surety instrument fully guaranteeing all conceivable cost for DGD.
As you know, A1ChemIE fought this interpretation, both the approach-and the amount required, because we recognized that thin method of assurance could severely impact our business alan.
It has.
In the existing regulatory climato, lont fq institutions and surety
. organization are most rel ue ', ant to post instruments to guaranteo cost of clean-up of radioactive contaminants.
This is true because of the institutions' fear of absolute liability. which - could conceivably, by future regulation or by ' court decisions, be held to be absolute liability.
In other words, the technology transforce has made diligent efforts to secure the surety instrument tn meet this requirement, but the same is simply not easily forthcoming in the current commercial lending ucctor.
This is one of the type of problems that congress forenhw, and I believe it is incumbent on the DOE and A1ChemIE to intelligently address this concern in a manner which does not doom the technology transfer.
5.
Paragraph 4C of the referenced contract agreement places an obligation upon AlChemIE to complete its compliance requiremonta within a one year period, unlesu extensions are granted by DOE.
DOE has granted A1ChemIE numerous extensions, ranging in length from one month to forty-eight hours.
DOE has also used this extension perogative as a letter for. AlChemIE to agree to contract modifications or clarifications.
In all regards, this date of termination has been like a knife at the jugular of this technology transfer, and I want to relate the commercial difficulties this has caused A1ChemIE.
When seeking financing, a private
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.o Mr. Joe LaGrone August 11, 1989 Page 7 sector company is awaro that lending institutions are required to do "due diligence" before they would make any loan commitment.
Because of the deadlines and the small extensions thereon, A1ChemIE has continually had to place its potential lending sources under tight time tables which are not beneficial to a favorable lending decision.
Lendors don't like to be hurried; A1ChomIE has, of necessity, had to hurry its lendors in order to get matters within our latest extension deadline.
The tight time frame has caused some potentially viable lendors to back off from project financing considerations altogether.
In other words, just as congress expected, technology transfers are plagued by problems at every stage, and no one entity or individual is to fault for those problems, but those type of problems must be recognized and addressed if technology transfer efforts are to succeed in this country.
A1ChemIE and DOE have both exponded millions of dollars of funds and large amounts of personnel resources towards making. this technology transfer successful.
We have both made enormous accomplishments touards this goal, and we now stand poised to take this technology transfer from the drawing boord stage and into operation However, the contract extension c%adline looms again.
DOE feels it has given A1ChemIE enough time to comply.
Lot me annuro you that we havo not had enough time to comply.
This complex and ambitious technology transfer with the requirements placed upon it can succeed, but it cannot du so if there are constant impending timo constraints on performance.
I think it is important that you recognize that A1ChemIE has made continuous and diligent efforts to comply; if we are unable to do so within an arbitrary deadline stated at a time when the full regulatory compliance burden was not fully understooo by citner party, then this should not rorm a basis to kill off this technology transfer.
For this reason, I respectfully request that the DOE continue to work with the A1ChemIE Project in all regards to ensure that this technology transfer has the greatest chances for success.
A1ChemIE has undertaken a reorganization in federal court in i
order to obtain time to moet its compliance requirements and to arrange its affairs so that it possessos a maximum chance for I
success.
I hope ' DOE will recognize this and participate in making this technology transfer a " win-win" cituation instead of 4
a " lose-lose" situation.
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s Mr. Joe LaGrone August 11, 1989 Page 8 Finally, let me address a couple of matters which have come up recently and achieved publicity in the Oak Ridger.
As you are aware, A1 Chem 1E thought it had its financial concerns solved with the involvement of an investment group who agreed to l
provide the necessary bond and necessary operating capital for the project to go forward.
One member of this investment group turned out to be under indictment in California for allegations of fraud.
Upon learning this, the A1ChemIE Doard of Directors immediately undertook an investigation of the individual and the investment group.
Recognizing the cohcorn's of DOE and NRC that our investors be " purer than Concar 's wife, " our board of directors immediat.ely took the step of requesting Mr. Buceta to resign from his involvement in the investment group.
This has been done.
In all regards, the board has acted with the recognition that our personnel and investor s must be reasonable concern of DOE and NRC before the project can go forward.
Certainly, this has been a setback to A1ChemIE's financing efforts.
Nonetheless, I think our prudent actions should impress upon DOE that A1ChemIE does not intend to go forward in any fashion other than an appropriate one.
- Again, I request that the DOE give A1ChemIE the necessary time to consummate the few remaining matters in thin technology transfer in an appropriate fashion so that Federal policy objectived can be met, this project can go forward to success, and the benefits of this project can enure to A1ChemIE, the DOE, and the American People.
Thank you for your attention to this rather long letter.
Very truly yours, C,1)
Stephen A.
Irving Attorney at Law SAI/bc
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. Distribution:
Congresswoman Marilyn Lloyd 2255 Rayburn House Office Duilding Washington, DC 20515 Congressman' Bob McEwen 3
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2431 Rayburn House Office Building Washington, De.20515 Congressman Jimmy Duncan 2206 Rayburn House Office Building Washington, DC 2C515 Admiral'Watkins Department of Energy James Forrest'al Building 100 Independence Avenue SW Washington, DC 20585 Senator James R.
Sasser 298 Ruscell Senate' Office Building Washington, DC 20510 Senator Albert Gore, Jr.
393 Russell Senate Office Building Washington,.DC 20510
.iti. Gene, Joyce-Joyce, Meredith, Knolton & Flitcroft Fost Office Box 3443 Oak-Ridge, TN 37831 Mr. Bob Bernero Director, Office of Nuclear Material Safety cnd Safeguards United States Nuclear Regulatory Commission Washington, DC 20555 Dr. A11an'Bromley Office of Science and Technology Folicy Executive Office Building Washington, DC 20506 Ms. Barbara Briggs 2431 Rayburn House Office Building Washington, DC 20515 Mr. Dirk Forrester 298 Russell Senate Office Building Washington, DC 20510 Mr. Ray Neal 393 Russell Senatre Office Building Washington, DC 20510 i
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. Distribution. Continued:
y Ms. Sue Carlton i
2266 Rayburn House Offico Building Washington,4 DC 20515 Ms..Pam'Steele U.S. Attorney U.S. Post Offico and Courthouse Knoxvil10, TN 37901
!Ms. Patty Foster O.S. Trustoo 610 Plaza Tower
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Knoxville, TN -37929 Mr. Bill.Sonneberg i
U.S. Trusteo 610 Pla7.a Tower i
Knoxville, TN 379'29 l
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