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                                                           1

          1                      UNITED STATES OF AMERICA

          2                    NUCLEAR REGULATORY COMMISSION

          3                       OFFICE OF THE SECRETARY

          4                                 ***

          5            BRIEFING ON PROPOSED EXPORT OF HIGH ENRICHED

          6                         URANIUM TO CANADA 

          7                                 ***

          8                           PUBLIC MEETING

          9

         10

         11                                  Nuclear Regulatory Commission

         12                                  One White Flint North

         13                                  Green Plaza Area

         14                                  11555 Rockville Pike

         15                                  Rockville, Maryland

         16

         17                                  Monday, July 10, 2000

         18              The Commission met in open session, pursuant to

         19    notice, at 1:30 p.m., the Honorable RICHARD A. MESERVE,

         20    Chairman of the Commission, presiding.

         21    COMMISSIONERS PRESENT:

         22              RICHARD A. MESERVE, CHAIRMAN

         23              NILS J. DIAZ, Member of the Commission

         24              EDWARD McGAFFIGAN, JR., Member of the Commission

         25              JEFFREY S. MERRIFIELD, Member of the Commission

                                                                        2

          1    STAFF AND PRESENTERS SEATED AT THE COMMISSION TABLE:

          2              DR. IAIN C. TREVENA, MDS NORDION

          3              DR. JEAN PIERRE LABRIE, ATOMIC ENERGY OF CANADA, LTD.

          4              MR. GRANT R. MALKOSKE, MDS NORDION

          5              MR. JAMES A. GLASGOW, MORGAN, LEWIS & BOCKIUS, LLP

          6              MR. PAUL LEVENTHAL, NUCLEAR CONTROL INSTITUTE

          7              MR. ALAN KUPERMAN, NUCLEAR CONTROL INSTITUTE

          8              MR. RICHARD J. K. STRATFORD, DEPARTMENT OF STATE

          9              DR. ARMANDO TRAVELLI, ARGONNE NATIONAL LABORATORY

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         22

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         25

                                                                        3

          1                        P R O C E E D I N G S

          2                                                     [1:30 p.m.]

          3              CHAIRMAN MESERVE:  We're here this afternoon for a

          4    briefing on a proposed export of highly-enriched uranium to

          5    Canada.  The purpose of our meeting this afternoon is to

          6    hear from the applicant, MDS Nordion of Canada, from the

          7    Nuclear Control Institute, and from representatives of the

          8    Executive Branch of the United States Government.  This

          9    meeting really arises from a memorandum and order that was

         10    issued by the Commission on June 29, 1999, regarding the

         11    authorization of the proposed export.

         12              All such exports of highly-enriched uranium for

         13    use in reactors are subject to the Schumer amendment.  That

         14    amendment allows the export to occur only if certain

         15    conditions are met that relate basically to a United States

         16    policy for proliferation reasons to encourage the use of

         17    low-enriched uranium rather than high-enriched uranium in

         18    research and related reactors abroad.

         19              We required in our order of June 29, 1999, that

         20    there be annual reports that would be submitted by the

         21    applicant, and the Executive Branch had also agreed to

         22    submit an annual report as to the progress that had been

         23    made in meeting the requirements of the Schumer amendment.

         24              We're here today to have a hearing with regard to

         25    the annual reports that were submitted by Nordion on May

                                                                        4

          1    31st and by the Executive Branch just recently, in early

          2    July.

          3              The Nuclear Control Institute has corresponded

          4    with us on this subject and has raised some concerns as to

          5    compliance with the Schumer amendments, and we'll also be

          6    hearing from them.

          7              The first panel consists of representatives of MDS

          8    Nordion, and they include Grant Malkoske, who is a vice

          9    president; Dr. Iain Travena, who is a senior vice president;

         10    Dr. Jean Pierre Labrie, who is with AECL in Canada; and

         11    James Glasgow, who is a partner at Morgan, Lewis & Bockius.

         12              Why don't we proceed?

         13              COMMISSIONER MERRIFIELD:  Mr. Chairman, before we

         14    turn over to the witnesses, I would like to make a brief

         15    opening statement along the lines of the statement that I

         16    made last year when we had our hearing in 1999, before you

         17    became Chairman.

         18              I'm very sensitive, coming from the State of New

         19    Hampshire, which borders Canada, and coming from a state in

         20    which over 30 percent of the population is of

         21    French-Canadian descent -- I want to make an initial

         22    observation.

         23              What this meeting is about today, as the Chairman

         24    has asserted, is the application of the Schumer amendment

         25    and our efforts and the efforts on the part of the NRC to

                                                                        5

          1    help control the proliferation of highly-enriched uranium.

          2              What this meeting is not about, in my view, is any

          3    kind of an accusation against our neighbor, Canada.

          4              Canada is clearly one of our most trusted allies

          5    of the United States.

          6              I don't think anyone coming before this -- and

          7    having read the briefing papers today, I don't think anyone

          8    would make an accusation of any kind of untrustworthiness of

          9    our Canadian allies.

         10              Indeed, quite contrary, I think the Canadians are

         11    some of the most trusted of our allies in terms of holding

         12    this material.

         13              Nonetheless, obviously we have the requirements of

         14    law, and that is the reason why we are here today, but for

         15    my own part, I certainly want to make it clear that I

         16    believe that Canada has and will continue to be among the

         17    most important trading partners and allies of our country,

         18    and I certainly wouldn't want that to be left off the

         19    record, for my part.

         20              CHAIRMAN MESERVE:  And I'm sure that's something

         21    that the entirety of the Commission would support and agree

         22    with.

         23              Let me turn to my other colleagues and see if they

         24    have an opening comment.

         25              COMMISSIONER McGAFFIGAN:  I'll just make a brief

                                                                        6

          1    comment.

          2              I agree, Canada is a great ally, but we also have

          3    to carry out the law, and that's where Commissioner

          4    Merrifield started.

          5              So, I'll be very interested in whether Nordion has

          6    been doing all it can to help us carry out our

          7    responsibilities under U.S. law.

          8              CHAIRMAN MESERVE:  Why don't we proceed?

          9              DR. TRAVENA:  Okay.

         10              I have some slides to go through, and I have some

         11    speaking notes around those slides.

         12              Thank you very much, Mr. Chairman and

         13    Commissioners, for the opportunity to be here today to

         14    update you on the progress that we're making in our LEU

         15    target development program for the MAPLE reactors and the NU

         16    processing facility.

         17              MDS Nordion is committed to converting the MAPLE

         18    reactors and NU processing facility to the production of

         19    medical isotopes using low-enriched uranium, or LEU, as the

         20    target material in these reactors.

         21              I believe it is important to continually keep in

         22    mind what we are building.

         23              These are not research reactors.

         24              The facilities themselves will consist of two

         25    MAPLE reactors and a NU processing facility that will be

                                                                        7

          1    used solely for the continuous commercial production of

          2    medical isotopes.

          3              These medical isotopes are used in the United

          4    States, Canada, and worldwide to diagnose and treat patients

          5    in critical health-care applications.

          6              Slide two.

          7              It is important to realize the broad context of

          8    what we are doing with our medical isotope supply stream.

          9              The NRU reactor is aging and undergoing an

         10    important upgrade program to enable its continued operation.

         11              Of significant concern to our ongoing secure

         12    supply of isotopes is the fact that the fissile liquid waste

         13    storage tank from NRU molybdenum processing will reach its

         14    design capacity in the spring of 2001.

         15              Indeed, senior officials at the Canadian Nuclear

         16    Safety Commission have expressed their viewpoint that, by

         17    the end of this calendar year, 2000, we will or may have

         18    reached the practical operational limit of this facility.

         19              Undoubtedly, this adds to our sense of urgency in

         20    operating the MAPLE reactors and the NU processing

         21    facilities to ensure we maintain a secure, reliable supply

         22    of medical isotopes.

         23              Nonetheless, we remain committed to an LEU target

         24    development program and are diligently identifying and

         25    addressing the significant technical issues associated with

                                                                        8

          1    introducing these targets into the facilities.

          2              We believe the significant progress to date on our

          3    initial feasibility study and the active U.S.-Canadian

          4    cooperation on this undertaking meets the spirit and the

          5    intent of the U.S. NRC memorandum and order of June 29,

          6    1999, as well as the intent of the Schumer amendment.

          7              All options are being considered to enable a

          8    timely conversion to LEU for medical isotope production in

          9    the MAPLE facilities.

         10              Slide three.

         11              We have planned three phases to the LEU target

         12    development and conversion program.

         13              These phases are, in fact, the same ones as we

         14    proposed in our early contemplation of conversion from NEU

         15    to LEU.

         16              With regard to the completed initial feasibility

         17    study, it is important to recognize that this feasibility

         18    study went significantly beyond the study envisaged in the

         19    U.S. NRC memorandum and order of June 29, 1999, when a

         20    target completion date of three months was stated by Argonne

         21    National Laboratories.

         22              We were able to assess the Commission's interests

         23    in making minor modifications before going active and in

         24    addressing reasonable measures to preserve the ability to

         25    convert at a later date.

                                                                        9

          1              This, we believe, we done in time to consider the

          2    prudency of any suggested minor modifications.

          3              However, beyond that, we were also able to examine

          4    critical technical issues related to extracting molybdenum

          5    from LEU targets and processing the liquid waste from these

          6    targets.

          7              All together, this has enabled us to identify

          8    challenges that must be resolved to enable conversion.

          9              This progress was addressed in the report filed

         10    with the U.S. State Department, USD, and U.S. NRC on April

         11    17 of the year 2000.

         12              The next phase which we will initiate is a

         13    conversion development program which we believe will take to

         14    around the year of the year 2001 to complete.

         15              The final phase will be the conversion program

         16    implementation, which will include the requisite

         17    environmental assessments, safety analyses and licensing to

         18    operate the facilities with LEU targets.

         19              Slide four.

         20              During the initial feasibility study, we have

         21    determined that operation of the MAPLE reactors with LEU

         22    targets is technically feasible, and ACEL has proceeded to

         23    develop the configuration for the LEU target.

         24              This configuration was appended to our annual

         25    report dated May 31, 2000.

                                                                       10

          1              We have also convened several meetings with CNSC

          2    officials to discuss the licensing and regulatory conditions

          3    that must be addressed in Canada.

          4              Our understanding is that we must perform an

          5    environmental assessment, a process during which we expect

          6    to hold meetings where the public is invited to attend and

          7    to comment.

          8              Additional, critical heat flux and irradiation

          9    tests of the LEU targets will have to be performed to

         10    demonstrate the safety margins in the safety analysis

         11    report, and finally, we will have to obtain CNSC approval at

         12    public hearings.

         13              The Canadian regulatory process is consultative,

         14    with no fixed timeline.

         15              We have been advised that the regulatory process

         16    will take a minimum of three years from the time the

         17    regulatory submissions are made.

         18              Somewhat in parallel with the regulatory process,

         19    we will be proceeding with the development, analysis, and

         20    testing of the LEU target.

         21              We must, of course, also establish a qualified

         22    program to manufacture test targets before they are

         23    available for the critical heat flux and irradiation test

         24    program.

         25              Slide five.

                                                                       11

          1              Throughout the initial feasibility study, we have

          2    kept Argonne National Labs informed to the extent possible

          3    without divulging our commercial proprietary information.

          4              A chapter from the NPF safety analysis report was

          5    provided in May 1999.

          6              In September 1999, we provided an update

          7    identifying calcination as a process limitation, and most

          8    recently, we hosted a visit with SGN on June 30, 2000.

          9              In parallel, we have undertaken substantial

         10    technical work with AECL and SGN, the technical experts of

         11    the isotope extraction and calcination process.  This work

         12    was instrumental in being able to assess issues relating to

         13    liquid waste volumes.

         14              As a result, we believe that liquid waste volume

         15    from processing LEU targets is not the limiting factor for

         16    conversion.

         17              We do not believe that completion of the initial

         18    feasibility study within the three-month timeline was

         19    adequate to really understand the key issues.  We took the

         20    initiative to consult with contractors who are intimately

         21    knowledgeable about the processes, and with their qualified

         22    technical assistance, the feasibility study still took until

         23    April of this year to complete and report on.  During this

         24    period, we certainly were alert to the possibility to

         25    identify and capture any opportunities which could be

                                                                       12

          1    applied to facilitate the conversion process later.

          2              During the work with AECL, we have been able to

          3    study the molybdenum dissolution chemistry and recovery

          4    process, comparing LEU and HEU targets.  We are pleased with

          5    the positive and encouraging results we have obtained in

          6    this molybdenum process study.

          7              While our objective is to convert the existing

          8    NPF, we also have identified site space at Chalk River

          9    Laboratories for a new facility should one be required.

         10              Slide six.

         11              Through the feasibility study assessment, we have

         12    determined what we think is a key process challenge that

         13    must be resolved to convert the existing NPF process.

         14              The LEU targets require 4.7 times the amount of

         15    uranium than an ATU target to provide equivalent molybdenum

         16    production.

         17              This places increased demand on the process

         18    solidification and concrete canister storage systems for

         19    waste generated from processing LEU targets.

         20              Our work to date has identified the capability and

         21    capacity of the calcination system as the main issue.

         22              We will also have to address any regulatory issues

         23    related to generation and processing of additional waste

         24    from LEU targets.

         25              For example, at their June 29th public meeting,

                                                                       13

          1    the CNSC asked specifically about how this will be handled. 

          2    We understand these questions will have to be addressed

          3    during an environmental assessment.

          4              Slide seven.

          5              In our deliberations with SGN and ACL, we

          6    identified and extensively explored several options to

          7    address the waste system limitations, the four which you see

          8    listed on the viewgraph.

          9              We believe the viable options in the existing NPF

         10    are the last two.

         11              The currently designed and constructed facilities

         12    and systems are custom-designed to fit the existing building

         13    and process equipment.

         14              However, by proceeding in parallel with

         15    operational process improvements and waste process

         16    development, we expect to address the technical issues

         17    related to solid waste processing and storage.

         18              Slide eight.

         19              We want to assure the Commission that we carefully

         20    explored and considered whether any prudent minor

         21    modifications could be made to NPF prior to its coming

         22    on-line.

         23              We did not identify any minor modifications to

         24    facilitate later conversion.

         25              It is only through operational process

                                                                       14

          1    improvements that we can understand how to reduce the liquid

          2    waste from processing LEU targets to be similar in volume to

          3    HEU targets.

          4              Also, as calcining is the key technical issue, no

          5    additional liquid waste storage tanks are needed.

          6              Unfortunately, the existing cell size cannot

          7    accommodate larger calcining equipment to address the

          8    throughput problem.

          9              We explored and discussed this again at our

         10    meeting on June 30th between Argonne National Laboratories,

         11    SGN, AECL, and MDS Nordion.

         12              We believe the conceptual development program must

         13    thoroughly explore what process changes to the calcining

         14    system can be implemented.

         15              Slide nine.

         16              There has been discussion about simply adding a

         17    pipe from the liquid waste vault to allow future hookup to

         18    processing lines before commencing active operation in NPF. 

         19    This does not solve our waste throughput problem.  We would

         20    still require waste processing cells, equipment, and nuclear

         21    ventilation systems.

         22              The front end of the process would still have to

         23    go through the existing original cells.

         24              The installation of a pipe would have created

         25    regulatory concerns, delayed startup, and jeopardized

                                                                       15

          1    medical isotope supply, all for something that does not

          2    solve our problem.

          3              Significant implementation costs would have been

          4    involved in realizing the total modifications involved.

          5              Slide 10.

          6              We have commented previously on the licensing

          7    concerns we had with this idea and have documented those

          8    concerns in our April 17, 2000, report.

          9              It is, I believe, noteworthy that, at its June

         10    29th public meeting, the Canadian Nuclear Safety Commission

         11    concluded that adding a pipe was not a minor modification.

         12              If the only technical solution to calcining of the

         13    waste from LEU targets is installation of new waste cells,

         14    we will review our approach to this matter.

         15              Because of the high cost that would have been

         16    incurred in that case, we believe we would prefer to

         17    construct a new facility to have processing redundancy and

         18    further enhance our security and reliability of medical

         19    isotope supply.

         20              However, we are not yet at that point in our

         21    evaluation.

         22              Slide 11.

         23              We are proceeding with phase two, the conversion

         24    development program, and as next steps, we will address the

         25    key technical, regulatory, and economic issues relating to

                                                                       16

          1    converting to LEU targets.

          2              We will, through our R&D; program, identify

          3    technical issues for resolution.

          4              We will have to develop a high-level approach to

          5    this conceptual development program to assess those key

          6    issues.

          7              Once again, the key technical challenge will be

          8    the calcining system capability and capacity.

          9              During our visit to SGN on June 30th with ANL, we

         10    explored several options to approve the calcination process. 

         11    We believe we must, in parallel, gain operational experience

         12    to identify process improvements and perform a technical

         13    evaluation with our contractors.

         14              This will meet the starting medical isotope

         15    production with HEU targets.

         16              Although not expressly identified on this slide,

         17    our molybdenum recovery work to date indicates increased

         18    liquid waste volumes from LEU targets to optimize yields. 

         19    However, we believe that, through the conversion development

         20    program, we can develop methods to achieve comparable

         21    volumes of liquid to process LEU targets as they're obtained

         22    from processing HEU targets.

         23              Slide 12.

         24              We must determine, in consultation with the

         25    principle regulators who are interested in these health-care

                                                                       17

          1    products, the regulatory milestones, the timeline that must

          2    be achieved to implement the conversion program.

          3              For example, we must consult with FDA and our

          4    customers to ensure we adequately address the drug

          5    regulations by converting to LEU targets.

          6              Throughout this conversion process, we also want

          7    to work with both nuclear regulators, the U.S. NRC and the

          8    CSNC, to ensure we are meeting the requisite licensing

          9    requirements.  The approach chosen must be both technically

         10    and economically feasible, and of course, it must ensure the

         11    reliable supply of medical isotopes, particularly

         12    molybdenum-99.

         13              Slide 13.

         14              We believe the work performed by MDS Nordion

         15    complies with the spirit and intent of the Schumer amendment

         16    and thus believe that export of HEU targets under license

         17    number XSNM03060 should continue unimpeded and unrestricted. 

         18    There is no alternative target that can be currently used in

         19    the reactor.

         20              We are committed to using an alternative to HEU

         21    once such a target has been developed and can be used for

         22    the MAPLE reactors and the NU processing facility.

         23              Also, the U.S.-Canada development program is being

         24    undertaken to provide assurances that an alternative LEU

         25    target will be used, and in cooperation with the U.S.

                                                                       18

          1    program, we believe we have the capability to develop and

          2    qualify the target for use in reactors licensed in Canada.

          3              Slide 14, the last slide, please.

          4              In summary, MDS Nordion is committed to convert

          5    the MAPLE reactors and NU processing facility through the

          6    use of LEU targets for medical isotope production in a

          7    timely and expeditious manner.

          8              An active LEU target development program is

          9    underway.

         10              Capability of the waste calcination system has

         11    been identified as the key technical constraint.

         12              No prudent minor modifications have been

         13    identified which could be implemented now.

         14              MAPLE and NPF startup with NEU targets is critical

         15    to ensure the current isotope supply.

         16              Also, the supply of HEU targets for the MAPLE

         17    reactors are necessary to maintain security of medical

         18    isotope supply until an LEU target can be implemented.

         19              We also believe we are compliant with the spirit

         20    and intent of our export license and the Schumer amendment.

         21              We must start up the MAPLE facilities with HEU

         22    targets to ensure a reliable and secure supply of medical

         23    isotopes.

         24              The U.S. Government should remain confident in our

         25    conversion program and that a reliable and unimpeded supply

                                                                       19

          1    of HEU targets under the export license is facilitating the

          2    development of an LEU target for implementation in the MAPLE

          3    reactors and NU processing facility.

          4              Only by thoroughly understanding the technical

          5    issues, as shown by our progress to date, can we develop an

          6    LEU target and convert the MAPLE reactors and NU processing

          7    facility in a timely and expeditious manner.

          8              Thank you very much.

          9              CHAIRMAN MESERVE:  Thank you.

         10              Let me turn to my colleagues for questions.

         11              Commissioner Diaz?

         12              COMMISSIONER DIAZ:  Thank you, Mr. Chairman.

         13              I would like to concur with my fellow

         14    commissioners that the issue in here is not our

         15    relationships with Canada or even, at the long run, the

         16    reliability of the supply of medical radio-isotopes, which

         17    is very important, but we are dealing with complying with

         18    the law, and that's really the bottom line of what we need

         19    to do, you know, when we look at your request.

         20              I have, first, a comment.

         21              In slide seven, you made a comment that is not

         22    written, but that -- and essentially, I'm quoting you --

         23    that you expected to address the technical issues, and you

         24    know,  have a handicap of being a technical person, and I

         25    think you really meant that you expected to resolve the

                                                                       20

          1    technical issues to the point that you will get to a

          2    solution, because you're not only addressing them, you're

          3    going to have to come to a solution, and that solution -- we

          4    need to have a time when you're going to have to resolve

          5    them.

          6              DR. TRAVENA:  Yes.  I think it's hard for us to

          7    exactly know when one part will stop and another part will

          8    start.

          9              We believe, through the second phase, we need to

         10    find solutions to the problems, and that will then allow us

         11    to proceed with the final phase of the program, which is the

         12    implementation phase.

         13              COMMISSIONER DIAZ:  I think you stated that you

         14    already know what the issues are, or all of the large

         15    issues.  You know what the issues are.  You might not know

         16    all of the minor issues, but you know what the large issues

         17    are.  Is that correct?

         18              DR. TRAVENA:  We believe calcination is the issue. 

         19    What we don't know is the solution to the problem.  So, that

         20    still has to be determined.

         21              COMMISSIONER DIAZ:  All right.

         22              Once the solution, you know -- I mean the

         23    production begins in the NPF, those shielded vaults will be

         24    closed so that you will not be able to make major

         25    modifications to them.  Is that correct?

                                                                       21

          1              In other words, you will not be able to change

          2    equipment even if somebody comes up with a new piece of

          3    equipment that actually solves the issue.

          4              Is that correct?

          5              DR. TRAVENA:  No, that's not precisely correct.

          6              The way the facilities have been designed is to be

          7    able to completely maintain the process equipment.  So, with

          8    the manipulators, there is an ability to dismantle and

          9    reassemble the equipment.

         10              We also have penetrations in the vaults to be able

         11    to introduce new equipment or new components through a

         12    preventative maintenance program.

         13              So, while the size of the openings is limited,

         14    there is nonetheless the ability to enter new equipment into

         15    the cells.

         16              COMMISSIONER DIAZ:  Okay.  But it has to fit what

         17    the design is, so you have a design that only fits -- it's

         18    like having an access hole and everything has to fit through

         19    that.

         20              DR. TRAVENA:  That's correct.

         21              COMMISSIONER DIAZ:  On your slide number 10, you

         22    stated that, because of the high cost to install waste

         23    cells, construction of a facility to have redundancy is

         24    preferred.  Again, the word is preferred, but does it mean

         25    that you consider that conversion to LEU target is not

                                                                       22

          1    feasible, technically or economically, with the facility as

          2    designed and that, you know, only if you construct a new

          3    facility will you be able to use LEU targets?

          4              DR. TRAVENA:  Yes.  I think the -- if the existing

          5    facility cannot be modified, the thing that we explored

          6    through this area of modifications was do we just add waste

          7    processing to the cells?

          8              We did not think that would give us process

          9    redundancy.

         10              So, really, we see two streams of opportunity. 

         11    The one we really will focus on is to improve the process in

         12    the existing NPF.

         13              Should that hit a dead-end, for whatever reason,

         14    then the next option would be construction of a new

         15    facility, in which case we wouldn't just put in a couple of

         16    waste processing cells; we would look at it and ensure we

         17    had redundancy.

         18              COMMISSIONER DIAZ:  Okay.  But the use of the word

         19    today is it is preferred, meaning that you have already

         20    arrived at a -- not a final but a tentative preliminary

         21    conclusion or a conclusion, maybe not final, that it will

         22    not be possible to modify the existing facilities.

         23              DR. TRAVENA:  No.  Maybe that's not very clear.

         24              COMMISSIONER DIAZ:  Okay.

         25              DR. TRAVENA:  The preference is to find a

                                                                       23

          1    modification to the existing NPF.

          2              COMMISSIONER DIAZ:  Okay.

          3              DR. TRAVENA:  Coming out of the June hearing last

          4    year, you recall there was some discussions around minor

          5    modifications.

          6              That would have led to having new waste processing

          7    cells.

          8              That is not a preferred option for us.

          9              If we had to go down that stream to have new hot

         10    cells, then we would rather have a facility that could give

         11    us process redundancy.

         12              So, the preferred step is to modify the existing

         13    NPF.

         14              The alternate step would be to look at

         15    constructing a new NPF.

         16              It wouldn't have all the apparatus that the

         17    current one does, but it would have more apparatus than just

         18    waste processing cells.

         19              COMMISSIONER DIAZ:  And have you -- in this last

         20    option, have you considered how long will it take if you

         21    have to go that way to actually implement such a solution?

         22              DR. TRAVENA:  We think it could take in the

         23    three-to-five-year timeframe.

         24              If you look, for example, at the facility that we

         25    currently have, that project has been underway since 1996,

                                                                       24

          1    and so, we're nearing the five-year mark.

          2              Now, we think, to a certain extent, some of the

          3    design will be complete, the process design will be

          4    complete.  So, we should be able to, we think, do better

          5    than that, but we believe it's a three-to-five-year

          6    timeframe.

          7              COMMISSIONER DIAZ:  I see.

          8              Notwithstanding the fact that the volume of

          9    uranium is much larger -- you say 4.7 times, I think was the

         10    number you used -- you don't see any significant technical

         11    issues with the target itself?

         12              Have you been able to resolve this with ANL to a

         13    reasonably, you know, achievable conclusion?

         14              DR. TRAVENA:  It's a point where we haven't really

         15    explored in full detail with ANL.

         16              AECL has come up with a target configuration which

         17    is similar to the HEU target configuration, and we believe,

         18    because of the licensing program that we've gone with the

         19    MAPLE reactors, that that concept will work.

         20              However, we do believe we will have to manufacture

         21    some.

         22              In our discussions with the CNSC, we will have to

         23    perform critical heat flux tests and radiation tests, but I

         24    mean basically it's concentric cylinders, and they will

         25    change a little bit in diameter.  So, the concept is very

                                                                       25

          1    similar to what we're currently using, and we're confident

          2    that that will work.

          3              COMMISSIONER DIAZ:  Okay.

          4              Thank you, Mr. Chairman.

          5              CHAIRMAN MESERVE:  Commissioner McGaffigan.

          6              COMMISSIONER McGAFFIGAN:  Let me try to get to the

          7    heart of this fairly quickly.

          8              The timetable for developing a path forward to LEU

          9    targets -- in Mr. Travelli's trip report that we just got on

         10    Friday, and he only wrote on Friday, probably, he says that

         11    you stated your intention to prepare a plan, a plan for

         12    resolution of the obstacles by September 2000.  Is that

         13    correct?

         14              DR. TRAVENA:  Yes.  I think what we need to do is

         15    develop a high-level approach to those critical issues that

         16    need to be examined in the conversion development program.

         17              COMMISSIONER McGAFFIGAN:  In the conversion, not

         18    the NU processing facility but the conversion of the

         19    existing facilities.

         20              DR. TRAVENA:  Well, I guess conversion -- we call

         21    conversion when you go from HEU to LEU.  So, it's a broad

         22    context of conversion.

         23              So, in that regard, there's some technical issues

         24    around calcining, around reduction of liquid waste volume

         25    that have to be sorted out.

                                                                       26

          1              We believe that, in order to get at those

          2    technical issues, we will require operational experience and

          3    we will have to do some development work, an R&D; program.

          4              Then building on from that, there are regulatory

          5    issues that need to be worked through.

          6              COMMISSIONER McGAFFIGAN:  There are lots of

          7    disagreements between your testimony and that of the Nuclear

          8    Control Institute.  I'm going to try to get to some of them.

          9              NCI, in its prepared remarks, hangs a fair amount

         10    on Mr. Travelli's memo, in trying to lay out what they

         11    suggest the license condition be that you all, within

         12    three-and-a-half years, have this process complete, and they

         13    point to the Petten reactor, where we're requiring a

         14    timeline for conversion in that case of the fuel.

         15              So, the question -- you know, Mr. Travelli

         16    suggests in his memo, at the very end of it, that you'd have

         17    a plan by September, technical implementation of a plan

         18    might require about 18 months, safety approvals and

         19    environmental impact statements might require three years or

         20    more.

         21              In their statement, NCI suggests that these be --

         22    could be done in parallel, and indeed, they've had,

         23    presumably on Friday, a conversation with Mr. Aly up at

         24    CNSC, who suggested that the time period for the three years

         25    might already be running.

                                                                       27

          1              It isn't three years from the date of submission

          2    of your requirements.

          3              I don't have the NCI testimony directly in front

          4    of me, but this could be done from -- well, by NCI's clock,

          5    that clock could already be running.

          6              So, is it reasonable to expect of you to have this

          7    completed within three-and-a-half years?

          8              DR. TRAVENA:  I do not think so.

          9              COMMISSIONER McGAFFIGAN:  What time period can you

         10    give us?  I mean a century or less than a century?

         11              DR. TRAVENA:  I think, back to Commissioner Diaz's

         12    point, you know, if you think that there's three phases,

         13    we've done the first phase, and we already saw what happened

         14    to a three-month timeline.

         15              We were really uncomfortable with that, and in

         16    fact, it was proven not to be the case, and so, you know,

         17    we're very sensitive to the fact that we haven't missed what

         18    we think was a non-achievable timeline.

         19              We believe that, in the next phase, that's where

         20    we really need to find the technical solution, as

         21    Commissioner Diaz has said, and then implement those

         22    solutions in the third phase.

         23              So, to your point, we believe that this is a

         24    five-year timeline that we're looking at.  It's in the order

         25    of five years.

                                                                       28

          1              By the time you resolve the technical issues, by

          2    the time you figure out the way to implement them, by the

          3    time you actually do the implementation and get the

          4    licensing approvals, I believe this will be more like a

          5    five-year timeframe.

          6              COMMISSIONER McGAFFIGAN:  How much HEU do you

          7    need?  I'm going to go to their second point, the second

          8    condition.  They suggest that we reduce the license to 70

          9    kilograms, because you've already missed a year-and-a-half,

         10    so we're talking about three-and-a-half years remaining, and

         11    you only need, according to a document that they cite, that

         12    you submitted to CNSC, 20 kilograms a year.  So, 20 times

         13    three-and-a-half equals 70.  So, they're suggesting that we

         14    reduce it.

         15              But what is your requirement?  Is it 20 or is it

         16    26 kilograms per year?

         17              DR. TRAVENA:  The annual rate for utilization in

         18    the reactor is in the order of 20 kilos a year.

         19              However, what that does not give us is any

         20    inventory of targets should there be an interruption in the

         21    supply stream.

         22              So, if you go back to the original license where

         23    we had asked for 40 kilos in 1999, the intention of that was

         24    to have an inventory of targets so that we didn't have a

         25    supply stream interruption through fabrication difficulties,

                                                                       29

          1    through HEU sourcing difficulties, through transportation

          2    difficulties.

          3              COMMISSIONER McGAFFIGAN:  It would strike me that

          4    that would be a one-time thing.

          5              Once you have -- you know, you want to have --

          6    it's 20 plus X, X being what you need.  Beyond that -- but

          7    it isn't 20 plus X every year.

          8              DR. TRAVENA:  No, that's right.

          9              So, the first year was intended to be 20 plus 20. 

         10    So, that would have been a one-year operating supply and a

         11    one-year inventory.

         12              COMMISSIONER McGAFFIGAN:  Right.

         13              DR. TRAVENA:  We did not get that material.

         14              So, if you say what are we operating off, yes,

         15    it's about a 20-year or 20-kilo-a-year run rate, but we do

         16    not have any inventory of target material.

         17              COMMISSIONER McGAFFIGAN:  I see.

         18              DR. TRAVENA:  So, reducing it to 70 kilograms

         19    seems to be a rather unreasonable step to take and not have

         20    any operating inventory.

         21              COMMISSIONER McGAFFIGAN:  But 90 might not be,

         22    based on the arithmetic we've just gone through.  If

         23    three-and-a-half years plus 20 --

         24              DR. TRAVENA:  Or 110 might not be unreasonable,

         25    you know.

                                                                       30

          1              So, I guess you can try and find the right number. 

          2    Whether 130 is exactly the right number today --

          3              COMMISSIONER McGAFFIGAN:  It's robust.  130 is a

          4    robust number which will give you, by your calculation,

          5    five-and-a-half years' supply, with the 20-kilogram margin.

          6              DR. TRAVENA:  I guess, you know, five years of

          7    operating targets at 20 a year is 100, plus 20 kilos for

          8    inventory is 120.

          9              COMMISSIONER McGAFFIGAN:  Okay.

         10              The next item -- I'm a little -- I'm trying to

         11    understand how you're going to -- they suggest that we ask

         12    you to come up with a conversion implementation plan.  I'm

         13    sure you'll say that's premature, but given the option, your

         14    preferred option, how do you do the conversion, assuming all

         15    goes well?

         16              In your preferred option, are there any physical

         17    changes?

         18              There's a pipe that has to go into the calciner to

         19    introduce this oxalic acid and hydrogen peroxide.

         20              Again, I'm trying to learn from Mr. Travelli's

         21    trip report.

         22              What modifications would be required under your

         23    preferred option, and could they -- are they consistent with

         24    providing the supply that's required to your customers, or

         25    does it require a long shutdown, in which case how do you --

                                                                       31

          1    are we ever going to do it?

          2              DR. TRAVENA:  Let me try and come at it a couple

          3    ways.

          4              Are they consistent with providing a long-term

          5    supply?  Yes.

          6              I do not think we would enter into a program that

          7    would jeopardize supply.  That is not our intent, not our

          8    desire.

          9              COMMISSIONER McGAFFIGAN:  How do you do it?

         10              DR. TRAVENA:  We don't know.  We don't know.  And

         11    I think that's, frankly, why we need to operate these

         12    facilities and determine some of the process improvements.

         13              COMMISSIONER McGAFFIGAN:  But can you do it

         14    physically -- if this discussion that came up about how to

         15    deal with the addition of a uranium precipitating agent to

         16    the can -- isn't that something that would require a

         17    physical modification to the facility, and if you're doing a

         18    physical modification to a facility that daily tries to turn

         19    out a certain amount of moly-99, how do you do it?  You can

         20    do it with it operating?

         21              MR. MALKOSKE:  Can I answer that specific point?

         22              When we discussed that specific point with SGN,

         23    first of all, if the pipe into the calciner was the right

         24    thing to do, our consultant has advised us it can be done

         25    without shutting down the facility, because they can

                                                                       32

          1    re-enter equipment in as part of the regular routine

          2    maintenance program, but I think it's also important to know

          3    that, as we discussed that point around the oxalate, it's

          4    not necessarily the right answer.

          5              It was an idea that was discussed.  We don't know

          6    if it's meritous as this point or not, and that's where we

          7    have to really get into the process development program, is

          8    to exactly explore ideas like that and see what makes sense

          9    to implement.

         10              COMMISSIONER McGAFFIGAN:  One last question, if I

         11    could.

         12              The FDA process -- for your current -- for the NU

         13    processing facility you hope to start up shortly, NCI points

         14    out that you are presuming a nine-month approval process or

         15    less from the FDA and Health Canada.  Is that a good number

         16    for us to assume?  I mean you apparently are assuming it

         17    because you have to have a sample to give to them before

         18    they'll approve.

         19              MR. MALKOSKE:  I'll specifically answer that

         20    question, since I addressed it at the previous hearing.

         21              The FDA will determine the timeline that's

         22    appropriate.

         23              With the current facility that we have got now, we

         24    are using HEU and a chemical process that's very similar to

         25    what we had with NRU.  There are some very minor

                                                                       33

          1    differences.

          2              When the FDA is looking at something which is only

          3    a minor difference, and the regulatory bodies do that, then

          4    it becomes a relatively straightforward issue.  However,

          5    it's only the regulatory body that decides how regulatorily

          6    straightforward it is.

          7              With LEU, which is a different starting material,

          8    then you're into something that a regulatory body would say

          9    that's a significant change and they'd have to look at much

         10    more evaluation.

         11              So, we believe the timeframe for that will be

         12    longer.

         13              However, when we're at that stage in the process,

         14    you know, the NRC is going to be aware of that, and it will

         15    be up to us and the NRC to discuss with the FDA about timely

         16    -- looking at the documentation in a timely way.

         17              COMMISSIONER McGAFFIGAN:  Could you introduce an

         18    LEU target and get the data you need while you hadn't made

         19    the total commitment to switch to LEU?

         20              MR. MALKOSKE:  I'm not sure how you'd do that. 

         21    I'm not sure where you'd process that.

         22              COMMISSIONER McGAFFIGAN:  Okay.

         23              MR. MALKOSKE:  What you'd need to do is process it

         24    in your plant.

         25              COMMISSIONER McGAFFIGAN:  Thank you.

                                                                       34

          1              CHAIRMAN MESERVE:  Commissioner Merrifield.

          2              COMMISSIONER MERRIFIELD:  I'd just like to focus

          3    on the issue of time.

          4              The tie-up, as you've explained, is the calciner,

          5    and how long before you've got an understanding that that

          6    modification could or could not be made to accommodate the

          7    LEU?

          8              DR. TRAVENA:  It will be the fall of this year,

          9    probably into the November timeframe, before we start

         10    routine operations, and we believe that only after we've

         11    started the routine operations will we get enough process

         12    history to really start to do development work and

         13    understand what changes we can do.

         14              I don't have exactly a number that I can pull out

         15    of the hat for you, and I think it would be the wrong thing

         16    to do, but that's why we said, by the time we start

         17    operations, working with our contractors, with ACEL and with

         18    SGN, in parallel, I think that's when we can see what

         19    calcining changes can be made, and it's not just necessarily

         20    an equipment change; it's also a process change.

         21              When we were in France on the 30th of June with

         22    Dr. Travelli, we spent a fair bit of time talking about a

         23    process, and a continuous commercial operation -- I think

         24    this is a difference we need to think about.

         25              This isn't a research facility where you run it

                                                                       35

          1    for a half-a-day and then you're down for a period of time. 

          2    You're running this operation day in and day out.  Yes,

          3    there's time for maintenance, there's time for equipment

          4    change-out, but we need to be is smart enough to modify

          5    these processes as we're operating.  So, that's going to be

          6    the target that we need to explore through this development

          7    program.

          8              COMMISSIONER MERRIFIELD:  All right.

          9              So, you bring the facility up in November, and it

         10    would take a matter of months -- without putting a specific

         11    number on it -- a matter of months to make that analysis, or

         12    are we talking years?

         13              DR. TRAVENA:  No, I don't think it's years.

         14              I think it's more months, and that's why we've

         15    kind of said within this next phase, the concept development

         16    phase of about 18 months, going to the end of 2001 -- that's

         17    when we hope to be able to identify and come up with

         18    solutions to these technical issues, and then the final

         19    phase would be implementation, change out of equipment,

         20    change out of processes, go through all the regulatory

         21    submissions to get approval to operate.

         22              COMMISSIONER MERRIFIELD:  Okay.

         23              So, in 2001, you will have your analysis, and you

         24    can say, well, we're going to get on the calciner --

         25    modification of the calciner in the existing process, or you

                                                                       36

          1    make the determination that you really need to build a whole

          2    NU processing facility.  That is sort of your decision tree.

          3              Setting aside regulatory approvals, how long, if

          4    you did go down the route of building a NU processing

          5    facility, from the point of making a determination that

          6    that's the route you want to go, approximately how long

          7    would it take you to build that type of a facility?

          8              DR. LABRIE:  It should take a comparable time, at

          9    least, to the facility we are just completing.  We have to

         10    go through an environmental approval process.  We have to

         11    perform the safety analyses to operate a facility with LEU

         12    targets.  We need construction approval to build this

         13    facility, and eventually we'll need an operating license

         14    once we have completed our final safety analyses, and then

         15    we have to build the facility, commission it, and put it

         16    into routine operation.

         17              So, the current facility -- the project started in

         18    September of '96.

         19              We have now completed all of what we call the

         20    inactive tests at that facility.

         21              We are now ready to start the active commissioning

         22    of the facility.

         23              So, it gives you an idea of the timeline, and

         24    we've gone through the same process of environmental

         25    approval and so on.

                                                                       37

          1              COMMISSIONER McGAFFIGAN:  That's if you add a new

          2    facility, but if you're just making modifications to the

          3    existing facility that are modest, presumably the timeline

          4    is shorter, isn't it?

          5              DR. LABRIE:  We will have to go through a similar

          6    process to make modifications to the existing facility.  We

          7    will be bringing in LEU targets.  Our environmental

          8    assessment is for highly-enriched uranium.

          9              COMMISSIONER McGAFFIGAN:  I understand there's

         10    analysis, but in terms of the physically -- you're talking

         11    about a facility you're started constructing in '96 and are

         12    ready to operate now, and I guess, in Canada, you're allowed

         13    to build a facility and get your operating license, what, at

         14    the end?

         15              You get a construction authorization -- I'm trying

         16    to get the start of this process.

         17              Was it '92 that you did your environmental impact

         18    statement and your safety analyses?

         19              DR. LABRIE:  On the current project?

         20              COMMISSIONER McGAFFIGAN:  On the current project.

         21              DR. LABRIE:  The environmental assessment was

         22    submitted to, at the time, the ACB in October of 1996, and

         23    the approval of the environmental assessment was granted in

         24    April of '97.

         25              We submitted our safety analyses for the --

                                                                       38

          1    leading to the construction approval -- I believe it's in

          2    June of '97, and we received the construction approval in

          3    December of '97.  We completed our final safety analyses --

          4    I believe it was in August of '98, and we received an

          5    operating license for the first MAPLE reactor and for the NU

          6    processing facility in August of '99, and we just received

          7    our operating license, which was an amendment to the

          8    operating license of the MAPLE 1 reactor, in June of 2000,

          9    and that gives you an idea of the time it takes.

         10              COMMISSIONER MERRIFIELD:  Two final questions.

         11              If I get this right, the estimate is, if you had

         12    to go down the route of building a NU processing facility,

         13    rather than modifying the calciner, that would be around $30

         14    million?

         15              DR. TRAVENA:  The $30 million was talked about in

         16    terms of just the waste processing facility.

         17              COMMISSIONER MERRIFIELD:  Okay.

         18              DR. TRAVENA:  But you know, we're not 100-percent

         19    sure.

         20              COMMISSIONER MERRIFIELD:  Let me ask it this way. 

         21    Is that a -- the cost, whatever that is --

         22              DR. TRAVENA:  Yes.

         23              COMMISSIONER MERRIFIELD:  Is that a showstopper

         24    for you?

         25              DR. TRAVENA:  At this point in time, we don't

                                                                       39

          1    know, and I think what we really need to do is take a look

          2    at all of the options and assess this in terms of the

          3    business that we are operating.

          4              So, we're not taking this lightly.  As I've said,

          5    we are committed to the conversion process.  We are

          6    concerned about costs, and our absolute drive is to try and

          7    find a way, if possible, to convert the existing NPF,

          8    because it will be the low-cost option.

          9              So, that's really where we're putting our effort

         10    with ACL, and so, while I don't want to miss your point and

         11    feel that you haven't been -- your point addressed, I'm

         12    concerned about that, but if you go back to your point about

         13    the physical implementation of a change, I would hope that

         14    the physical implementation of a change, if we're modifying

         15    the existing NPF, is of shorter timeline than building a new

         16    NPF, but then, on top of that, you must layer the regulatory

         17    process, and so, that's -- we've got to work that through

         18    with the Canadian Nuclear Safety Commission and see where

         19    that will take us.

         20              COMMISSIONER MERRIFIELD:  One last -- my last

         21    question is this:

         22              In their testimony today, NCI offers a series of

         23    recommendations to the Commission about things that we could

         24    or couldn't require of you all.

         25              One of those is that we require the applicant to

                                                                       40

          1    present to the Commission -- and they say within three

          2    months -- a timetable for expeditious conversion to LEU

          3    targets.

          4              Setting aside whether you can do -- provide a

          5    timetable in three months or whether it would fall later on

          6    in the year, is it possible to come up with a timetable of

          7    the point at which you could convert to LEU targets?

          8              DR. TRAVENA:  We do not think so, and I believe

          9    that because we must go into this development program first.

         10              You know, if you go back to June of '99, somebody

         11    thought we could complete a technical feasibility study in

         12    three months, and so, I think it's dangerous to say today

         13    that conversion will be completed by this date, because we

         14    haven't yet identified or really assessed all the technical

         15    issues.  We haven't come up with a solution to those

         16    technical issues, and so, I don't see how, until that is

         17    done, a person can say here's the timeline that it's going

         18    to take.  I just don't think it's practical.

         19              I think what we need to do is to be committed to a

         20    process, and the process needs to be one of identifying

         21    those issues that need to be resolved, the key technical and

         22    regulatory and environmental issues that need to be

         23    resolved, and to make sure that we are keeping you folks

         24    apprised of the progress that we're making.

         25              So, we already have within the license the

                                                                       41

          1    requirement for an annual report.  We have been meeting with

          2    state department and NRC staff and DOE staff even more

          3    frequently than that to inform them of the progress that we

          4    have been making.

          5              So, I feel we've got a concerted effort to inform

          6    people of the progress that we're making on this issue.

          7              COMMISSIONER MERRIFIELD:  Thank you, Mr. Chairman.

          8              CHAIRMAN MESERVE:  The last question -- the

          9    question was when do you think you'll be able to provide a

         10    timeline, and you said you could not do it in a few months,

         11    but wouldn't your report that you envision preparing by the

         12    end of 2001, which would be this intermediate phase -- isn't

         13    one of the outputs from that -- wouldn't that include a

         14    timeline?

         15              DR. TRAVENA:  I think that should include a

         16    timeline, because then we're far enough down the process to

         17    have assessed the technical issues and an implementation

         18    plan, yes.

         19              So, that final phase, which is the implementation

         20    program, should have with it a timeline.  We should have

         21    identified the technical issues, the solutions to the

         22    technical issues, we should have identified the regulatory

         23    timeframes, as well.

         24              COMMISSIONER DIAZ:  Mr. Chairman, I'm sorry, but

         25    the question is will it include a timeline, not should.  We

                                                                       42

          1    know that it should.  I mean that's a given, it should, but

          2    will it include a timeline?

          3              I mean at some time you have to have it, and it

          4    will have it, not it should.

          5              DR. TRAVENA:  I believe coming out of phase two

          6    that we can provide you a timeline, and I don't see why we

          7    should not.

          8              So, will we?  Yes, we will.

          9              Again, the part of our frustration, frankly, is we

         10    had a regulatory timeframe for the current operations.  It

         11    didn't work out.

         12              Now, that didn't mean we didn't have a timeframe. 

         13    We did have a timeframe.

         14              We monitored progress, we monitored slippage, and

         15    so, we could provide a timeframe, as well, and hopefully we

         16    can achieve it, but the process is not, Mr. Chairman,

         17    completely under our control.

         18              CHAIRMAN MESERVE:  We jumped quickly over the

         19    issue of the targets, because you believe that that's a

         20    technically solvable problem.

         21              The NCI submission, as Commissioner McGaffigan

         22    indicated, they've interpreted something that the CNSC has

         23    told them, that the three-year timeline has run.

         24              Your slide suggests that there is no alternate

         25    target that, in fact, has been fabricated yet, and

                                                                       43

          1    obviously, you haven't done any testing of targets.

          2              So we have a common understanding of when this

          3    three-year clock runs, for when the regulator thinks they

          4    need to evaluate, when do you think that you would be in a

          5    position to submit the necessary -- you or AECL -- to submit

          6    the necessary documentation to the CNSC to get that part of

          7    the project underway?

          8              DR. TRAVENA:  Again, I think it will be towards

          9    the end of year 2001.

         10              The reason for that is what we need to do -- it's

         11    an integrated system.

         12              We've got MAPLE reactors, we've got a NU

         13    processing facility, one relies on the other, the target

         14    affects the process, and so, what we really need to do is to

         15    make sure we understand all the issues around process and

         16    target, so we can take an integrated approach to the CNSC,

         17    and of course, permanent waste disposal is an issue, as

         18    well.

         19              So, that's the timeline that we believe we would

         20    approach the CNSC with licensing, and that's when I think

         21    the three-year timeframe would start to march.

         22              CHAIRMAN MESERVE:  Okay.

         23              Thank you very much.

         24              COMMISSIONER McGAFFIGAN:  Can I ask one more

         25    question?

                                                                       44

          1              NCI, in its testimony, says that -- you've been

          2    with the project -- that you committed in 1990 -- in

          3    December 1990, nearly 10 years ago, AECL declared -- maybe

          4    this should be directed to AECL -- declared in support of a

          5    license application for export of HEU that it was committed

          6    to develop an LEU target by '98 and phase out HEU by 2000.

          7              Is that true?

          8              DR. LABRIE:  There was a project which preceded

          9    this one in which we had looked at the -- using the current

         10    technology to try to undertake -- it was going to go -- this

         11    is a project that was discontinued because it was not

         12    economically viable, and it triggered, really --

         13              COMMISSIONER McGAFFIGAN:  -- this lawsuit in

         14    Canada.  Okay.

         15              Would you agree with the next sentence, that

         16    despite this early commitment, the applicant intentionally

         17    designed the NPF to handle a process flow and level of waste

         18    adequate for HEU targets but which it knew would be

         19    inadequate for LEU targets?

         20              DR. LABRIE:  The facility we have is a facility we

         21    have been contracted by MDS Nordion to undertake, and it's

         22    been built and meets all Canadian standards, safety

         23    standards and so on.

         24              MR. GLASGOW:  May I ask a point of clarification,

         25    Mr. Chairman?

                                                                       45

          1              CHAIRMAN MESERVE:  Please.

          2              MR. GLASGOW:  I have heard at various times of, of

          3    course, an intent or interest on the Commission's part about

          4    trying to nail down some timelines and the like, and I think

          5    that's understandable.

          6              But in trying to shape the contours of the Schumer

          7    amendment and ascertain what this amendment means in this

          8    kind of a situation, the Commission spoke in its June 16

          9    order about appropriate deference and consideration of the

         10    Canadian regulator and to also appropriate attention to the

         11    Executive Branch.

         12              And while I'm sure these things are well in the

         13    Commission's mind, I just would like to come back to them

         14    briefly and just point them out, for their role and for the

         15    effect they have on the scope, the depth, the intensity of

         16    the Commission's examination of specific technical points

         17    and the deference that is appropriate to the views of the

         18    Executive Branch as well as the Canadian regulatory body.

         19              And the point of clarification, though, is that --

         20    may I understand that we are not today, during this public

         21    meeting, having the process that is contemplated by section

         22    110.52 in the regulations, which speaks to consideration of

         23    modification, suspension of licenses, and we would trust

         24    that, in view of the abundant determination here and

         25    statements made of the good faith and progress of the

                                                                       46

          1    applicant, that that is not on the Commission's mind,

          2    particularly since the Executive Branch does not recommend

          3    that, but for point of clarification, we understand that,

          4    before there can be any modification, suspension of license,

          5    it would be necessary to have procedures specified in

          6    110.52, coupled with the hearing and other procedures

          7    specified in subpart (i).

          8              CHAIRMAN MESERVE:  I'd like to thank you all for

          9    your participation here this afternoon.  We have some other

         10    speakers this afternoon who will be addressing the same

         11    matter, and our next panel is some representatives from the

         12    Nuclear Control Institute.  Thank you very much for

         13    participating.

         14              Could the next panel approach the table?

         15              They consist of Paul Leventhal, who is the

         16    president of the Nuclear Control Institute, and Alan

         17    Kuperman, who is a senior policy analyst with NCI.

         18              Please proceed.

         19              MR. LEVENTHAL:  Mr. Chairman, thank you very much.

         20              NCI's testimony today will be presented by myself

         21    -- I'm Paul Leventhal, President, and I'd like to begin with

         22    some general points, and then Alan Kuperman, our senior

         23    policy analyst, who has been handling this subject in some

         24    considerable detail over a period of years, will provide the

         25    detailed technical presentation.

                                                                       47

          1              I'd like to thank you, Mr. Chairman, and the other

          2    members of the Commission for the considerable attention

          3    that you're devoting to the subject at this time and over

          4    the past year, and we surely appreciate the courtesies

          5    you've extended to Nuclear Control Institute in considering

          6    our petition to intervene.

          7              The larger point I'd like to make is that we

          8    should not lose sight of the fact that this is an important

          9    element of the international RARTR program, the reduced

         10    enrichment for research and test reactors program, the

         11    objective of which, I'm sure you know, is to eliminate

         12    commerce in highly-enriched uranium.

         13              And unlike the plutonium issue, which is a very

         14    difficult one -- of course, it takes on almost religious and

         15    ideological proportions, with a very considerable industrial

         16    interest into keeping things pretty much the way they were

         17    originally conceived despite the fact that realities on the

         18    ground have changed with regard to fuel consumption -- in

         19    the case of HEU, it isn't nearly as complicated, but it is,

         20    as you just heard from the industry witness, difficult.

         21              Right now, there's about 50 kilograms of

         22    highly-enriched uranium a year in commerce for the purpose

         23    of producing medical isotopes, and given the increasing

         24    demand for these life-saving isotopes and the apparent

         25    interest in new producers coming into the field, this number

                                                                       48

          1    could double or triple over the next decade.

          2              So, we are talking about a not inconsiderable

          3    amount of highly-enriched uranium, which potentially could

          4    be eliminated from commerce if this case is given the

          5    attention that it very much deserves.

          6              Considerable progress, as you know, has been made

          7    on the fuel side of the ledger in the reduced enrichment

          8    program. Where, at the peak, there was as much as three

          9    metric tons a year being injected into commerce, most of it

         10    by the United States, worldwide we're now down to a few

         11    hundred kilograms a year, and the U.S. supply is zero, and

         12    we would like to very much achieve the same objective with

         13    regard to HEU for the purpose of medical isotope production.

         14              Now, clearly, the devil is in the details, and the

         15    Commission has to determine what is credible and what is

         16    incredible in terms of testimony that you just heard, but

         17    you should rest assured that other isotope producers are

         18    watching this case very closely, and in particular, the

         19    European community, where Mallinkrodt is the principle

         20    producer, the Belgians also are taking an interest in this

         21    case, as are the Koreans.

         22              There are a number of smaller producers, including

         23    South Africa, Indonesia, Argentina.

         24              There's an opportunity here, in other words, to

         25    establish a regime that all producers can ultimately come

                                                                       49

          1    into step with, but since the largest producer is MDS

          2    Nordion, this case takes on particular importance.

          3              Now, the last line of questioning was an

          4    interesting one, about what the applicant committed to in

          5    1990 and why it didn't fulfill that commitment to develop

          6    the LEU target and to have it in place, ready to go by the

          7    year 2000, and that could be the subject of a separate

          8    hearing.

          9              But surely certain technical safety assumptions

         10    were made which Argonne National Laboratory apparently felt

         11    to be not grounded in fact, but nonetheless, the licensee

         12    proceeded with a design that was not compatible with LEU,

         13    and you are now faced with a situation as to how to proceed

         14    from this point forward so that five years from now you

         15    don't find yourself exactly at the point where you were five

         16    years ago with a request by the applicant to please continue

         17    producing HEU, because by golly, it turned out to be

         18    infeasible and too costly to convert.

         19              There is adequate indication right now that the

         20    technical solution is within reach.

         21              The question is, is the Commission prepared to

         22    provide, along the lines that we recommend and Alan Kuperman

         23    will momentarily go through, to establish conditionality, to

         24    establish a timeline so that it is clear to the applicant

         25    that the wiggle room that he still desires will no longer be

                                                                       50

          1    tolerated by the Commission, the indulgence of the Executive

          2    Branch will not be supported by the Commission, which is in

          3    a position to take an independent regulatory position based

          4    on both law and policy.

          5              So, I just wanted to draw the larger context.  The

          6    RARTR program hangs in the balance.  It is not an

          7    insignificant program.

          8              It is an opportunity to eliminate commerce in one

          9    of the two materials used to make nuclear weapons, and

         10    therefore, we consider it extremely important that you take

         11    every opportunity to impose the restrictions necessary to

         12    make sure that the job gets done.

         13              With that, I'd like to turn to Mr. Kuperman now,

         14    who will present the balance of our testimony.

         15              MR. KUPERMAN:  Thank you.

         16              Thank you, Mr. Chairman and members of the

         17    Commission.

         18              I want to associate myself with Mr. Leventhal's

         19    remarks about how grateful we are that you're giving this

         20    case such close oversight, as was envisioned by the Schumer

         21    amendment.

         22              In my presentation today, I would like to make

         23    four points summarizing our testimony, and from the

         24    questions you asked during the first panel, it seems like

         25    many of you, if not all of you, have read it extremely

                                                                       51

          1    closely.

          2              So, what I'll try and do is maybe just emphasize a

          3    few of the points we find most important and maybe associate

          4    them with some of the comments that the witnesses made

          5    during the first panel.

          6              These four points -- I'll make one just quickly to

          7    summarize the key points of last year's order by the

          8    Commission; second, summarize the positive aspects of the

          9    applicant's response; third, look at some of the more

         10    troubling aspects of the applicant's non-response to last

         11    year's order; and then, finally, go over the four

         12    recommendations that we've made to the Commission.

         13              I would like to quote just one quote from the --

         14    last year's order by the Commission, if you'll indulge me,

         15    because I think it's central to the Commission's

         16    consideration today.

         17              Quote, "It is the Commission's understanding that

         18    Argonne National Laboratory will be able to complete a

         19    conversion feasibility study promptly, within approximately

         20    three months of receiving the necessary technical

         21    information.  The Commission further understands that Atomic

         22    Energy Canada Limited will cooperate fully with Argonne

         23    National Laboratory to complete a feasibility study as soon

         24    as possible.  In light of these commitments, the Commission

         25    is encouraged that AECL may have a feasibility study in hand

                                                                       52

          1    in time to consider whether minor modifications could be

          2    made prior to the MAPLE reactors and their processing

          3    facility coming on line that would permit the use of LEU

          4    targets or take other reasonable measures that would at

          5    least preserve the opportunity to move to LEU targets in the

          6    future," unquote.

          7              The point of this provision, as the Commission

          8    expressed it, was based on the reasonable assumption that,

          9    if you made modifications prior to startup, it would be,

         10    one, less expensive and, two, it would avoid the problem of

         11    interrupting production of isotopes, as compared with trying

         12    to make those modifications after the startup of the

         13    facility, so that if you made the modifications prior to

         14    startup, it would be more likely that, in the end, the

         15    facility actually would be converted to LEU.

         16              Point two, the positive aspects of the applicant's

         17    response:

         18              I think that the applicant should be commended for

         19    some of the progress that it has made over the past year,

         20    and in fact, it's quite remarkable that, although prior to

         21    this year, all sorts of possible obstacles were raised to

         22    conversion to LEU, it now turns out, after a year, that

         23    almost all -- in fact, all but one of those potential

         24    obstacles has disappeared.

         25              And the only remaining obstacle, as the witnesses

                                                                       53

          1    said during the first panel, has to do with the calciner,

          2    and even that no longer has to do with the volume of the

          3    flow in the facility, it only has to do with the mass of

          4    uranium that's associated with these targets.

          5              And there's no way to reduce the mass of uranium

          6    in the targets, now it's just a question of can you modify

          7    the calciner in a way so that the throughput capacity and

          8    amount per waste can is sufficient that it can process the

          9    LEU targets.

         10              All of the other problems have gone away.  That's

         11    the good news.

         12              Point three, the bad news, the troubling aspects

         13    of the applicant's response over the last year:

         14              First, the applicant did not share information

         15    with Argonne, as the Commission expressed was its

         16    expectation in last year's order, and the reason it was the

         17    Commission's expectation, I believe, is that the applicant

         18    said it would share information with Argonne.

         19              It got Argonne to sign a confidentiality

         20    agreement, it got Argonne to sign intellectual property

         21    agreements, all premised on the notion that the applicant

         22    would then share information with Argonne so Argonne could

         23    prepare the feasibility study, but the applicant then

         24    refused to do so.

         25              The applicant did, on its own produce a

                                                                       54

          1    feasibility study, but it submitted that to the Commission

          2    seven months later than the Commission said it expected the

          3    feasibility study and only two months prior to the planned

          4    startup of the new production facility.

          5              By delaying the presentation of this feasibility

          6    study to the Commission, the applicant effectively made it

          7    impossible to make modifications to the new production

          8    facility prior to startup.

          9              Had the feasibility study been prepared on time,

         10    within three months, by September 1999, the applicant then

         11    would have had nine full months to analyze this calciner

         12    issue and try and resolve it prior to startup, possibly even

         13    making modifications prior to startup, which would avoid

         14    this whole question of a possible shutdown during conversion

         15    or certainly reduce that problem.

         16              Indeed, the first meeting to discuss this calciner

         17    issue that involved Argonne was 10 days ago.

         18              That's more than one year after last year's order

         19    by the Commission.

         20              It was 10 days prior to this meeting, and I would

         21    suggest it's not a coincidence that they tried to get it in

         22    under the wire, but that's the sort of meeting that should

         23    have taken place nine months ago.

         24              My point is that not only did the applicant

         25    blatantly fail to live up to its commitments to provide the

                                                                       55

          1    necessary information to Argonne, but by delaying the

          2    feasibility study, it undermined the Commission's primary

          3    intent of enabling modifications to the new production

          4    facility prior to startup, and as was discussed during the

          5    last panel, this is -- there is a pattern of this sort of

          6    behavior by the applicant over the last full 10 years of

          7    saying that it's going to do something and then actually not

          8    doing so.

          9              Were this the first time, I think our

         10    recommendations might not be as forceful as they are, but

         11    the fact that this is over 10 years, commitments that have

         12    been made and then reneged upon, makes us skeptical of the

         13    commitments that the applicant is making and compels us to

         14    urge the Commission to impose further conditions on the

         15    license to ensure that the applicant does actually live up

         16    to its commitments this time for the first time.

         17              Finally, fourth, the recommendations that NCI is

         18    making today to the NRC, as it considers, according to its

         19    order of last year, whether to, quote/unquote, "modify,

         20    suspend, or revoke the license," unquote:

         21              Our first recommendation and our primary

         22    recommendation is that the Commission add conditions to the

         23    license to impose a strict timetable on conversion, and I

         24    think, going over the history as I just did, you understand

         25    why we're so concerned about this.

                                                                       56

          1              There is a need -- the applicant has shown that,

          2    if it is not held to a strict timetable, it has a habit of

          3    not fulfilling its commitments or not fulfilling its

          4    commitments on time, and there is also a strong precedent,

          5    as Commissioner McGaffigan mentioned, in the Petten case,

          6    where the U.S. Government required both that a conversion be

          7    done as quickly as possible but, two, secondly, that there

          8    was a drop-dead date.

          9              In other words, you're not getting anymore HEU

         10    after this date, whether or not you've converted, and that's

         11    the sort of a strict timetable that we think would be

         12    prudent in this case.

         13              Now, it's the question of the details of the

         14    timetable.

         15              I think there was some confusion in the last panel

         16    about this three years that might be required for obtaining

         17    regulatory approvals in Canada.

         18              First of all, the discussion we had with the chief

         19    scientist at the Canadian Nuclear Safety Commission on this

         20    issue -- it wasn't on Friday.  It was a couple of months

         21    ago, and what he told me was that, when the CNSC talks about

         22    three years for regulatory approval, they're talking about

         23    from the time that the applicant starts working on this

         24    problem, in other words from the time the applicant starts

         25    designing an LEU target.

                                                                       57

          1              So, it's not three years from the time there's a

          2    final target design that is then submitted to the CNSC; it's

          3    from the beginning of the process, which Dr. Aly said had

          4    already started.

          5              In other words, the clock already started ticking,

          6    and if you look at the applicant's testimony today, you'll

          7    see that they consider the preliminary design work on the

          8    LEU target to be one of their major accomplishments of the

          9    last year.

         10              So, whenever that accomplishment started is when

         11    the three-year timetable -- which is an estimate, but it's

         12    when that timetable started for regulatory approval.

         13              CHAIRMAN MESERVE:  Excuse me.  I don't mean to

         14    interrupt, but let me just ask a question.

         15              Did Dr. Aly tell you that the clock had started on

         16    the three years?

         17              MR. KUPERMAN:  Yes.  In fact -- because I was

         18    asking, well, why is it going to take three years, and he

         19    said no, no, no, no, it's three years from the -- the entire

         20    process from the beginning of designing.

         21              CHAIRMAN MESERVE:  Did he tell you that he thought

         22    that the beginning had already been accomplished, that the

         23    clock was running at the time you talked to him?

         24              MR. KUPERMAN:  Yes.

         25              CHAIRMAN MESERVE:  Okay.

                                                                       58

          1              MR. KUPERMAN:  I don't know if he used the word

          2    "the clock is running," because I don't know if I used the

          3    word "the clock is running," but yes, that the three years

          4    already had started.

          5              The second -- continuing on this first

          6    recommendation, there's the question of what really needs to

          7    be done for conversion, and there are these three steps that

          8    have been discussed in terms of coming up with a plan first,

          9    doing the technical work second; three, getting regulatory

         10    approval, and I was encouraged by the testimony of Dr.

         11    Malkoske in the first panel where he said, I believe,

         12    quote/unquote, that these could be conducted in parallel or

         13    at least partly in parallel, and maybe you can check the

         14    transcript afterwards.

         15              That's exactly what we say in our testimony.

         16              If that's the case, that means that the

         17    time-limiting, the limiting factor here is the regulatory

         18    approval, which is somewhere in the range of three years,

         19    and as I say, that clock already started.  So, we're talking

         20    about less than three years for the Canadian side of

         21    regulatory approval.

         22              On top of that, you have to add the FDA approval

         23    in the U.S. and the parallel approval by Health Canada, but

         24    we're talking somewhere in the range of three-and-a-half

         25    years maximum, and again just to sort of put this in

                                                                       59

          1    context, the applicant said today that to build an entirely

          2    new production facility would require three to five years to

          3    design, build it, and get regulatory approval and then, in

          4    the next breath, said that, to make a minor modification to

          5    the calciner and get regulatory approval would also take in

          6    the range of three to five years, which is something I think

          7    the Commission may want to probe further into.

          8              Our second of the four recommendations has to do

          9    with the question of how much HEU the applicant actually

         10    requires over the five-year course of the license.

         11              I think during its testimony today, the applicant

         12    conceded that it doesn't need the 130 kilograms that was

         13    approved by the Commission last year, but maybe we need to

         14    start thinking about exactly how much it does need over the

         15    course of the license.

         16              The license runs five years starting from last

         17    year, and the facility still has not started up.

         18              So, as Commissioner McGaffigan indicated, the

         19    facility will only run for three-and-a-half years under this

         20    license.

         21              So, the facility can only require around 70

         22    kilograms of HEU over the three-and-a-half years of this

         23    license.

         24              Now, it might require -- if it hadn't converted in

         25    three-and-a-half years, it might require more HEU after

                                                                       60

          1    that, but presumably that would be a new license, because

          2    the existing license time would have expired.

          3              So, that's why we urge that the Commission

          4    immediately reduce the amount of HEU approved under the

          5    existing license to no more than 100 kilograms, and perhaps

          6    it should go down lower, to 70, which is what, apparently,

          7    they would need, or maybe 70-plus, this little buffer of 10

          8    or something, but considering that the Commission is trying

          9    to hold the applicant to sort of a short tether, I don't

         10    think the Commission would be well advised to give the

         11    applicant a large buffer.  That would sort of be at cross

         12    purposes.

         13              Our third of the four recommendations is -- has to

         14    do with somehow providing an extra incentive for the

         15    applicant to start acting in a more expeditious manner than

         16    it has been doing.

         17              The applicant, during the last panel, said

         18    repeatedly that the feasibility study took us a year and not

         19    three months, but it's not clear that it needed to take a

         20    year rather than three months.

         21              After all, it was based on the applicant's

         22    testimony last year that the Commission thought it would

         23    take three months.

         24              Well, now, the applicant is saying that,

         25    coincidentally, it's going to take three months again for

                                                                       61

          1    the next feasibility study, by September 2000, but perhaps

          2    one way to provide the applicant with extra incentive, to

          3    actually meet this deadline, would be to say -- for the

          4    Commission to say, well, we're suspending the license until

          5    we get that new feasibility study.

          6              Then my guess is you would get the feasibility

          7    study in three months.

          8              If you don't have that sort of condition, my guess

          9    is you won't get the feasibility study in three months,

         10    anymore than you got the earlier feasibility study in three

         11    months.

         12              Just to be clear, this sort of a conditional

         13    suspension of the license for what should be only three

         14    months would not interfere with the production of medical

         15    isotopes and the safe and secure supply of those isotopes,

         16    which NCI wholeheartedly supports.

         17              The NRU reactor and processing plant, and

         18    especially the processing plant, according to the applicant,

         19    can operate at least through April of 2001.

         20              Now, this is directly contradictory to the

         21    testimony of the applicant just a year ago, where it swore

         22    up and down that the NRU waste tank was going to run out by

         23    the end of 2000.

         24              Now all of a sudden we have some extra months.

         25              One of the good consequences of that is the

                                                                       62

          1    Commission now can suspend the license until the feasibility

          2    study is produced to the Commission's satisfaction, and as I

          3    say, there would be no interruption in the production of

          4    medical isotopes.

          5              Finally, fourth -- and I think this is -- aside

          6    from our first recommendation, this is perhaps -- well,

          7    maybe they're all equally important, but this one is, in

          8    some ways, the most troubling concern, and I think

          9    Commissioner McGaffigan really, really focused in like a

         10    laser beam on what the problem is here, and that is how do

         11    you get there from here?

         12              How do you convert the existing NU processing

         13    facility from HEU to LEU without interrupting the supply of

         14    medical isotopes, which no one wants to do, and as we said

         15    earlier, there's two reasons why the supply of medical

         16    isotopes could be interrupted by such a conversion or

         17    there's two potential obstacles.

         18              One is that it could be quite expensive, and so,

         19    the applicant might say it's not justified.

         20              In fact, it cites -- in its view-graphs today, it

         21    says that we have to determine whether it's, quote/unquote,

         22    "economically feasible" or not before we decide whether

         23    we're going to go ahead with it, but the second problem is

         24    would trying to convert require a lengthy shutdown of the NU

         25    processing facility and, thereby, interrupt the production

                                                                       63

          1    and supply of medical isotopes?

          2              Last year, the applicant testified that, in fact,

          3    it would require a shutdown.

          4              It said that, for safeguards reasons, we would

          5    have to shut it down and clean out the pipes, clean out the

          6    HEU before we could introduce LEU, or else we wouldn't know

          7    if there was some MUF, some material unaccounted for.

          8              Well, how do you do that without interrupting the

          9    supply?

         10              Now, Commissioner McGaffigan today focused on a

         11    second problem, which is, well, where do you process these

         12    LEU targets in order to get FDA approval?

         13              How do you do that?  Because the FDA presumably is

         14    going to require that the LEU targets be processed in the

         15    same facility that they would be processed in on a

         16    commercial basis.

         17              In other words, you have to run LEU targets

         18    through the NPF before you can even go to the FDA, but once

         19    you've introduced LEU targets to the NPF, it means you've

         20    stopped using HEU targets in the NPF.

         21              But you haven't yet gotten FDA approval for the

         22    LEU targets.

         23              So, now you're in this window, which the applicant

         24    is saying is going to be nine months or more, where you stop

         25    producing isotopes with HEU, but your LEU target isotopes

                                                                       64

          1    aren't licensed by the FDA.

          2              Well, now you're interrupting the supply of vital

          3    medical isotopes.

          4              Certainly no reasonable person would want to do

          5    that, right?

          6              So, then the applicant is going to come back and

          7    say, therefore, we can't convert, or the only way we can

          8    convert is to build a second NU processing facility, which

          9    is well more than $30 million, because just the waste cells

         10    is $30 million.

         11              So maybe we're talking $50 million.

         12              Is the applicant then going to say that that is

         13    not justified on economic grounds, that there is a economic

         14    loophole in the Schumer amendment and therefore we're not

         15    required to convert?

         16              It's extremely troubling, and that's why, from the

         17    beginning of this process, we have wanted and urged that the

         18    feasibility study be done quickly and that modifications be

         19    done prior to startup of the new production facility,

         20    because the applicant, we warned, was going to present the

         21    Commission with a fate accompli, and it looks like that's

         22    exactly what the applicant is doing.

         23              So, what we would recommend is that, if it turns

         24    out that the only obstacle to conversion is the expense,

         25    because the applicant has to build a second NU processing

                                                                       65

          1    facility -- and the reason that it has to build a second NU

          2    processing facility is because of its own dilatory behavior,

          3    because it refused to act expeditiously enough to modify the

          4    original NU processing facility -- well, then that is no

          5    excuse under the Schumer amendment for not converting to

          6    LEU, and if that is, in fact, the case, then the applicant

          7    is going to have to either accept the cost of the NU

          8    processing facility or cease getting any HEU in the interim

          9    from the United States.

         10              Now, maybe I'm wrong.  Maybe there's a magical way

         11    to convert from HEU to LEU without shutting down isotope

         12    production for an extended period, but if there is, then

         13    it's the applicant's responsibility to present that

         14    blueprint to the Commission.

         15              So, that's why our fourth recommendation is that

         16    we urge the Commission to require the applicant to present a

         17    blueprint as quickly as possible for how the heck you get

         18    from here to there; how do you get from HEU targets to LEU

         19    targets without interrupting the supply of vital medical

         20    isotopes?

         21              Thank you very much.

         22              CHAIRMAN MESERVE:  Commissioner McGaffigan.

         23              COMMISSIONER McGAFFIGAN:  You give me too much

         24    credit about focusing like a laser beam.  I'm stumbling

         25    through trying to understand how this works, and I almost

                                                                       66

          1    don't want to ask you questions, because my questions really

          2    are more for them.

          3              But you sort of get into a Catch-22 position with

          4    this FDA approval unless the LEU targets can be processed,

          5    FDA would allow them to be processed, introduced in the

          6    reactor, processed somewhere else, and use that.

          7              But on the economics of -- if they do end up with

          8    a new NU processing facility, a second processing facility

          9    -- and Commissioner Merrifield tried to ask them about the

         10    30 million, the 50 million, whatever the number is -- they

         11    are going to get an auxiliary benefit out of that in terms

         12    of assurance of supply, and since you were involved in the

         13    Schumer amendment, aside from your final point about perhaps

         14    disregarding all of the costs, which under the law might be

         15    pretty difficult, but how do we allocate the extra assurance

         16    of supply benefit that they will get, you know, against

         17    whatever the cost will be?

         18              I actually don't have any idea of the economics of

         19    these facilities, what the amount of -- how $50 million

         20    corresponds to the monthly revenues that they generate or

         21    whatever, the annual revenues they generate, but I'm trying

         22    to put all this in some perspective.

         23              If assurance of supply, having a second processing

         24    facility, has a real benefit associated with it, aside from

         25    the benefit from non-proliferation perspective, do you have

                                                                       67

          1    any analytical way we should approach that?

          2              MR. KUPERMAN:  That's a good question.

          3              I don't have, offhand, a calculus that should be

          4    used, but I do think that there is a more fundamental answer

          5    to your question, and that is whose responsibility is it

          6    under the Schumer amendment if a operator or isotope

          7    producer willingly builds a facility that cannot use either

          8    LEU fuel or LEU targets, and there's a precedent for this,

          9    and that's the FRM-2 research reactor in Germany, which was

         10    constructed after the Schumer amendment was enacted into law

         11    in 1992, and the Technical University of Munich, in that

         12    case, willingly, knowingly designed a reactor that could not

         13    use LEU, that was designed to use HEU, and that was a core

         14    design that actually, in that size core, could not be

         15    converted to LEU -- in fact, no matter how high a density of

         16    LEU you were able to design.

         17              The U.S. Government -- the Germans then said, aha,

         18    under the Schumer amendment, if we can't convert to LEU, you

         19    must supply us HEU, and the U.S. Government said no, sir,

         20    you knew what the rules were, and they put out a statement

         21    in 1994, the state department did, saying that the U.S.

         22    would not supply HEU to this German reactor, and so, I think

         23    that may be the most important precedent for this Nordion

         24    case, where the applicant knowingly and willingly designed a

         25    facility that had a waste system -- in fact, they designed

                                                                       68

          1    the whole NPF to be able to use HEU and not to be able to

          2    use LEU.

          3              If, as a result of that, they have to build an

          4    entirely new production facility, I think that's their

          5    problem under the Schumer amendment.

          6              So, that would be my first answer.

          7              MR. LEVENTHAL:  If I could just add to that, I

          8    think what's really needed here is a clear statement from

          9    the Commission that this whole process, beginning in 1990,

         10    where the last major license was approved on the basis of a

         11    commitment made by the licensee that conversion would take

         12    place by the time the next major license was to come into

         13    play a decade later, the fact that every opportunity that

         14    has presented itself up to this point has not been

         15    satisfied, then any additional costs that the applicant must

         16    go through to be able to approve the LEU target in order to

         17    have it licensed is not -- will not be taken into

         18    consideration by the Commission as an extraordinary cost

         19    that prejudices the conversion itself.

         20              In other words, that's the cost of doing business. 

         21    They made a decision every step of the way that they were

         22    going to begin with an HEU processing facility when the

         23    Commission clearly expected that the next facility would be

         24    an LEU facility, and whatever additional step they have to

         25    take has to be done at their own expense and does not

                                                                       69

          1    disqualify conversion under the Schumer amendment.

          2              I think that's what the Commission has to state in

          3    either modifying the license or further elaborating on the

          4    current license.

          5              MR. KUPERMAN:  Presumably on your mind and on

          6    others' minds may be, well, we can't require them to do

          7    something that would be so expensive that they couldn't sell

          8    their product, and I think, on that point, it's very

          9    important to look back a few years.

         10              When they decided they were going to build these

         11    two reactors and the NU processing facility, which they said

         12    cost $130 million -- I believe that's Canadian -- there was

         13    concerns that that also would be a prohibitive cost.

         14              And what they did is they came to the U.S., which

         15    is the major market for their product, and they got together

         16    with the pharmaceutical companies that buy their moly-99,

         17    and they said, look, we want to assure the supply of

         18    radio-isotopes, but it's going to increase the cost, and

         19    unless you guys are willing to pay that extra cost, we can't

         20    do it.

         21              And as I understand it, in a meeting which I think

         22    was 1995, the American pharmaceutical companies said, okay,

         23    we're willing to accept an increase in the cost of moly-99

         24    in order to build these two new reactors and NPF and assure

         25    the supply.

                                                                       70

          1              So, perhaps if they have to build a second NPF,

          2    then they're going to have to do the same sort of thing,

          3    come to the U.S. and say, now, on non-proliferation grounds,

          4    we need to build a second NPF, and that's going to raise the

          5    price marginally again, and we need you pharmaceutical

          6    companies to eat that cost for the sake of

          7    non-proliferation.

          8              So, it's not as if there's some sort of drop-dead

          9    figure where, if the price goes up X, now it's not

         10    profitable for them.

         11              They were able to get a $130 million cost

         12    amortized, essentially, by the pharmaceutical companies.

         13              CHAIRMAN MESERVE:  Commissioner Merrifield.

         14              COMMISSIONER MERRIFIELD:  I'm a little troubled by

         15    your last statement, Mr. Kuperman.

         16              I mean what you're saying is Nordion can come down

         17    to the U.S. and meet with the pharmaceutical companies again

         18    and say we've got these additional proliferation concerns,

         19    we need more money to build this processing facility.

         20              Around a table, I mean that all sounds very good,

         21    but we've got letters from members of the medical community

         22    about these materials.

         23              To the extent -- setting aside everything else --

         24    to the extent that the medical community agrees to those

         25    payments, those are costs that are passed off to someone in

                                                                       71

          1    the United States, presumably the pharmaceutical company

          2    isn't going to eat that cost, that cost is passed off to

          3    either insurance companies or consumers, and within that

          4    consideration is the notion that there is some percentage of

          5    people there for whom that additional marginal cost,

          6    whatever that is, will put the cost of those life-saving

          7    medical treatments beyond their reach.

          8              I just want to sort of throw that out on the

          9    table, because you know, we can't consider these things in a

         10    vacuum.  These are people's lives.

         11              We can't simply say, well, we're just going to

         12    throw more money at it.

         13              There will be people who will not have medical

         14    treatments and their lives will not be saved.

         15              MR. LEVENTHAL:  I'm not sure it's that extreme a

         16    situation, Commissioner Merrifield.

         17              I think one thing the Commission should look into

         18    is what percentage of the final delivered cost of the

         19    medical isotope to the patient is represented by the

         20    production itself, and our understanding is that it's a

         21    very, very small percentage, and it's one that would not

         22    make the delivered costs of the medical isotope, by any

         23    means, prohibitive.

         24              The RARTR program has always been premised on the

         25    notion that there is some additional cost to conversion, and

                                                                       72

          1    the objective of the program has been to try to establish a

          2    level playing field so that no one producer gains

          3    competitive advantage over the others by continuing to

          4    produce targets, in this case, with highly-enriched uranium

          5    while others have to undertake a higher cost and make

          6    themselves non-competitive, and I think here the Commission

          7    could have the objective of trying to establish what the

          8    basic cost is of conversion, it will be well understood,

          9    hopefully it will show that it is a very, very small

         10    percentage of the final delivered cost of the medical

         11    isotopes to the patients, and then you help to establish a

         12    level playing field which the other producers can then fall

         13    into line with.

         14              COMMISSIONER MERRIFIELD:  I understand that.  I

         15    don't want to go too far down this road, but the point I'm

         16    trying to make is it may be a relatively small increment,

         17    but to the extent that you're passing that on to consumers,

         18    there is someone out there who that will be more than what

         19    they're willing to bear.

         20              I was a political science major in college, not an

         21    economics major, but I do remember my Ec 1 and 2, and that

         22    seems like a pretty simple economic principle, that

         23    increasing marginal costs for someone does make a

         24    difference.

         25              Anyway, I don't want to quibble on that.

                                                                       73

          1              You did focus in your statement, Mr. Kuperman, on

          2    the SRM, staff requirements memo that the Commission put out

          3    last June.

          4              In our order, we also stated that, under the

          5    Schumer amendment, cost is a factor to determining the

          6    feasibility of LEU targets or for a reactor, and in that

          7    context, we recognized that the applicant will have to

          8    consider the commitments as made to the Canadian government

          9    and its customers in regards to ensuring supply and keeping

         10    costs to a minimum.

         11              Now, you made a series of four recommendations to

         12    us about things we should or shouldn't do.

         13              What level of confidence do you have that, if we

         14    were to take your recommendations, that they would not

         15    impact supply or increase the cost?

         16              MR. KUPERMAN:  I think Paul addressed the cost

         17    issue.

         18              As he said, the numbers we've seen are somewhere

         19    -- the costs of moly as a percentage of the cost of the

         20    final delivered pharmaceutical is less than 5 percent, but I

         21    do take your point about supply and demand, of course, one

         22    way would be for the pharmaceutical company to make a

         23    slightly smaller profit, then the actual price to the

         24    customer wouldn't go up, and so, no single patient would

         25    miss one single dose of isotope.

                                                                       74

          1              As for the other recommendations, I think

          2    recommendation two on reducing the total amount of HEU under

          3    the license is not a problem, because the applicant itself

          4    said it only uses 20 kilograms a year.

          5              The license will only have three-and-a-half years

          6    of life by the time they start up production, so they don't

          7    need much more than 70 kilograms.

          8              On the third recommendation, where we suggest that

          9    the license be suspended for three months until they finish

         10    their feasibility study, again, they would still have at

         11    least six months before the NRU shuts down.

         12              So, I don't think that's likely to impact -- and

         13    when I say NRU, I mean the processing facility.  The reactor

         14    is supposed to run till 2005.

         15              So, I don't think that would interrupt the supply

         16    of medical isotopes.

         17              Recommendation 4 is that they provide a better

         18    blueprint for conversion.

         19              So, that certainly wouldn't interrupt the supply

         20    of medical isotopes.

         21              So, the only question is really recommendation 1,

         22    which is that you ask the applicant to present to you a

         23    serious blueprint, a serious timetable for conversion, and

         24    that it stick to it, but I think the language we used is

         25    that you should -- we would recommend that the Commission

                                                                       75

          1    state that it is going to suspend the license if the

          2    applicant slips significantly behind on that timetable

          3    without good cause.

          4              Now, if it does have good cause for slipping

          5    behind, if it turns out that something they thought was

          6    technically possible is not technically possible, if it

          7    turns out that they present information on a timely basis to

          8    the CNSC but the CNSC withholds action for several years, it

          9    would seem to me that would be a reasonable and legitimate

         10    excuse for delaying the timetable.

         11              So, then the only question would be what happens

         12    if they present a timetable to you and then they knowingly

         13    and willingly act in a dilatory manner again?  Would that

         14    endanger -- and then the Commission might be compelled to

         15    suspend the license.

         16              Would that endanger the production and supply of

         17    medical isotopes?

         18              Theoretically, it could.  In a sense, I think the

         19    applicant is playing a game of chicken with the Commission,

         20    saying we dare you to say that we're being as dilatory as

         21    we're being, and then you guys will be responsible for

         22    cutting off the supply of medical isotopes.

         23              I don't think that the Commission should in any

         24    way let itself be intimidated in that manner, but then

         25    there's also sort of the fall-back option:  Well, what

                                                                       76

          1    happens in the worst of all situations if a big boulder fell

          2    on the NPF and stopped production?

          3              Would American medical community be cut off from

          4    medical isotopes?

          5              Well, no, they wouldn't.  There are other

          6    producers around the world who have surplus capacity.

          7              There's Mallinkrodt which produces at the Petten

          8    reactor.

          9              There's IRE in Belgium which produces at several

         10    reactors.

         11              There's South Africans who produce, Argentina has

         12    a small production, and there's several who are getting into

         13    the business, and the U.S., as you know, is considering

         14    getting into the business.

         15              In fact, as I understand it, no one in this

         16    business makes a profit at this point.  It's all sort of

         17    based on the idea that, in the future, the market will grow

         18    so large that it will be profitable, and they're sort of

         19    fighting for market share desperately in order to ensure

         20    that future of profitability.

         21              But at the current time, there is a massive

         22    surplus of capacity for production of medical isotopes.

         23              So, I think in the worst case situation where they

         24    act in bad faith and you were compelled to cut them off, no,

         25    I don't think that the supply of medical isotopes to the

                                                                       77

          1    U.S. would be endangered.

          2              COMMISSIONER MERRIFIELD:  Thank you.

          3              MR. LEVENTHAL:  If I could add just very briefly

          4    to that, I think the Commission has a responsibility to

          5    establish what might be described as a dynamic tension

          6    between the non-proliferation interest of ending commerce in

          7    HEU for the purpose of producing medical isotopes on the one

          8    hand and ensuring that the production of medical isotopes is

          9    not arbitrarily cut off because of something the Commission

         10    does, and I think the best way to kind of referee that

         11    tension is for the Commission to establish that it wants

         12    timelines established and honored and will not look kindly

         13    upon any further slippage.

         14              I think that's what's really needed.

         15              It's an expression by the Commission to the

         16    applicant that we want no further dallying on this, we want

         17    a firm commitment to meet the expectations, and the

         18    Commission is going to follow this every step of the way,

         19    and I think, with close oversight, you will not run into the

         20    kind of draconian situation that you are concerned about,

         21    but I think what hasn't yet occurred is for the applicant to

         22    hear loud and clear from the NRC, and hopefully from the

         23    Executive Branch, as well, that we really want to see this

         24    accomplished, because it's one of the larger U.S.

         25    non-proliferation objectives to complete the RARTR program

                                                                       78

          1    with regard to isotope production as well as with regard to

          2    fuel.

          3              CHAIRMAN MESERVE:  I was not a participant last

          4    year in the process that led to the Commission's memorandum

          5    and order of June 29th, so this is a new issue to me.

          6              I have been struck and welcome the comment that

          7    you made that there had been very significant progress in

          8    the last year in that the issue about the target seems to be

          9    one that everyone agrees is going to be resolvable -- there

         10    are some time issues associated with when that can be done

         11    -- and that, similarly, with regard to the NU processing

         12    facility, that all of the issues associated with conversion

         13    to LEU have been narrowed down to one processing step, and

         14    in fact, dealing with one problem in one processing step,

         15    and it seems to me that that does suggest to me that there

         16    really has been rather remarkable progress that's been made

         17    in a year.

         18              Now, the applicant, having, I think, established

         19    something of a track record for us, at least in its most

         20    recent submissions that it's really addressing aggressively,

         21    says, well, we think the lowest-cost option for dealing with

         22    this problem is to have some experience with the calcining

         23    step, see if we can make processing improvements that will

         24    enable us to use this facility we've just constructed, and

         25    that, on its face, seems plausible to me, too, in that if

                                                                       79

          1    your problem is a processing stage, you want to do some

          2    experiments with it and run it.

          3              Do you disagree with their strategy?  I realize

          4    you have some problems with the timeline, but in terms of

          5    the strategy that they've articulated to us as to how

          6    they're going to address the problem, it sounds to me like

          7    we've really made some quite remarkable progress.

          8              MR. LEVENTHAL:  Well, there's some history to

          9    this, of course.

         10              Yes, they've come to these understandings over the

         11    past year, but there's been a long attempt to dialogue

         12    between Argonne and the Canadians on some of these technical

         13    problems which were anticipated, and I think Argonne

         14    correctly foresaw that the volume of liquid waste was not

         15    going to be a problem, and now the applicant has

         16    acknowledged that over the past year.

         17              What we're pointing to is a history of dilatory

         18    activity that always seems to push the timeline further and

         19    further into the future without a firm commitment to

         20    actually convert, and in that regard, I would take some

         21    exception to the Executive Branch testimony, which includes

         22    statements that the Executive Branch believes that MDS

         23    Nordion is making a credible good-faith effort to study the

         24    feasibility of converting their new medical isotope

         25    production process to LEU.

                                                                       80

          1              Well, if that's the best that we believe they're

          2    making a good-faith effort on, which is to further study the

          3    feasibility, I'm personally not satisfied with that.

          4              What we want to see is a credible good-faith

          5    effort to actually convert within a timeline.  That's what I

          6    think is needed now, and the Executive Branch doesn't seem

          7    to be demanding it, but I believe the NRC, as an independent

          8    regulatory commission, with the licensing authority, can

          9    demand that and make it very clear that we want to see this

         10    job done, not simply studied further.

         11              So, yes, they've made progress over the past year,

         12    but it's taken them a decade to reach that point, and they

         13    should have reached it by the time this license came up, so

         14    that this license could have been LEU instead of HEU.

         15              CHAIRMAN MESERVE:  Commissioner Diaz.

         16              MR. KUPERMAN:  Could I just briefly also address

         17    your specific question as whether I disagree with their

         18    strategy or not?

         19              CHAIRMAN MESERVE:  Please be brief, because I'm

         20    worried about our time for our Executive Branch.

         21              MR. KUPERMAN:  Okay.

         22              You know, this whole question of the feasibility

         23    study has been looking at can you convert from the existing

         24    NPF, from NEU to LEU.  It's taken a year.  They now say it's

         25    going to take three more months for the feasibility study

                                                                       81

          1    and then another 18 months to solve technical problems, but

          2    it would seem to me it's putting the cart before the horse

          3    in terms of strategy, because the fundamental question is

          4    can you get there from here?

          5              I mean is it possible to convert the existing NPF

          6    without interrupting the supply of medical isotopes?  If

          7    it's not, then that's something you should know now and they

          8    should know that a year ago, whether there's any path

          9    forward that would allow that.

         10              If it's not, then they should have, a year ago,

         11    decided to build a new production facility.

         12              Otherwise, we're going to find ourselves at the

         13    end of 2001 saying -- answering a question that we knew the

         14    answer to three years ago, which is that there is no way to

         15    convert the existing facility without interrupting the

         16    supply of medical isotopes.

         17              So, yeah, I guess I do question some aspects of

         18    their strategy without at all taking away from what I said

         19    in our prepared testimony, which is that they've made a heck

         20    of a lot of progress in resolving problems that they said

         21    were problems and that turned out not to be problems.

         22              CHAIRMAN MESERVE:  Thank you.

         23              Commissioner Diaz?

         24              COMMISSIONER DIAZ:  Yes.

         25              First I'd like to go back to the statement that

                                                                       82

          1    you quoted the Commission.  It's on page 2 of your

          2    testimony, and I find it very interesting, because being

          3    surrounded by lawyers, I always expect that lawyers will

          4    catch these little innuendos in here, but if you read this

          5    statement, it is quite interesting.

          6              It is the Commission's understanding that Argonne

          7    National Lab will be able to complete a feasibility study

          8    promptly, within approximately three months of receiving the

          9    necessary technical information.  If Argonne doesn't receive

         10    the necessary technical information, this is an open-ended

         11    statement.

         12              So, the Commission did not state it, you know,

         13    precisely, what we wanted, and so, what that tells me is

         14    that we need to look in this case -- and maybe you agree or

         15    disagree with that -- when do we use should's and when do we

         16    use will's and when do we use shall's, because obviously

         17    this does not compel anybody except Argonne, if they receive

         18    the technical information, to do it in three months, but

         19    they didn't receive it, they didn't have to do it.

         20              So, anyhow, my fellow lawyers will, I'm sure, take

         21    a look at that issue.

         22              Let me go back at some of your recommendations. 

         23    I'd like to go quickly into this.

         24              Of course, you know, the first recommendation

         25    about three-and-a-half years, being a technical person, it

                                                                       83

          1    is not possible to determine at this time, with the

          2    information the Commission has in front, to put a precise

          3    amount of time, which goes back to the issue of timetable,

          4    which every single one of the recommendations goes back to.

          5              The second one is reduce the amount to 100

          6    kilograms, which might appear to be reasonable.

          7              However, it does kind of conflict with the

          8    recommendation of suspending the license until the

          9    feasibility study, and my question is, being that there has

         10    to be a balance between the supply -- because even if there

         11    are other suppliers, an interruption of supply, in medical

         12    business, it's a traumatic issue, it's not something that

         13    you change, I mean the quality control and the quality

         14    assurance and the requirements.

         15              From your experiences, what is a reasonable amount

         16    of time that, let's say, a regulatory body can say give me a

         17    timetable within one year, 18 months?

         18              What is an amount of time that now that you've

         19    been looking at this for so long that will appear to be

         20    reasonably achievable, that will still allow, you know,

         21    ensuring the supply but will provide some covenant or some

         22    requirement that a timetable will be provided?

         23              Certainly it's not three months and certainly it's

         24    not six months.

         25              Do you have some idea of what a reasonable time

                                                                       84

          1    would be or do you have a suggestion?

          2              MR. LEVENTHAL:  Well, my understanding is that,

          3    after the visit to SGN in France, Argonne felt that the

          4    solution identification part of the feasibility study could

          5    be completed within three months' time, and that's what

          6    we're asking for.

          7              We're asking for a suspension for that three-month

          8    period to provide the applicant the opportunity and the

          9    incentive to actually complete that on an expedited basis,

         10    and we feel, without that extra incentive of a suspension,

         11    they're not likely to meet it, and I think you heard from

         12    the first panel that now they're talking about a longer

         13    period of time than three months.

         14              So, if you're really interested in moving the

         15    process along on an expedited basis, you have to provide the

         16    incentive, we feel.

         17              The Commission has the discretion to indicate what

         18    it wants by a date certain in order that the licensing

         19    process proceed in a manner that you're comfortable with,

         20    and it's this dynamic tension that I referred to before.

         21              How do you assure that the non-proliferation

         22    objective is met without raising the risk of interrupting

         23    the supply, and that's where I think you're in a position of

         24    setting deadlines, timelines, and firm statements of

         25    expectations.

                                                                       85

          1              COMMISSIONER DIAZ:  I understand, but it seems to

          2    me like, you know, although, you know, not questioning the

          3    technical judgement of Argonne National Lab, I'm looking at

          4    the realities of life and adjustment of markets and supplies

          5    and potential disruptions, and I think that three months is

          6    a short period of time to impose such a restriction.

          7              MR. KUPERMAN:  Well, I would just cite the

          8    Executive Branch's prepared testimony today, where actually

          9    this timeline, they say, is not just Argonne's.  They say,

         10    quote, "Argonne, Nordion, and AECL have agreed on the

         11    following timeline," unquote.  That's from their prepared

         12    testimony, on page 3.

         13              So that seems to be in contradiction to what Dr.

         14    Malkoske said today as a witness, where he said we don't

         15    want to state any timeline or be held to any timeline at

         16    this time, but -- so, maybe there's a need for the

         17    Commission to reconcile those two points, and again, the

         18    question maybe also to look into is whether these are in

         19    parallel or not, which Malkoske said they could be.

         20              COMMISSIONER DIAZ:  Thank you very much.

         21              CHAIRMAN MESERVE:  Thank you.

         22              I read that paragraph to say there will be a plan

         23    for resolution that is in three months, and then 18 months

         24    to achieve the resolution of the technical issues, which may

         25    be consistent with the 2001 date that they were talking

                                                                       86

          1    about.

          2              In any event, I'd like to thank you very much for

          3    your presentation.  It's been helpful.

          4              And now we're going to hear from the Executive

          5    Branch.

          6              CHAIRMAN MESERVE:  Our participants from the

          7    Executive Branch include Richard Stratford, who is the

          8    Director of the Office of Nuclear Energy Affairs,

          9    Nonproliferation Bureau of the State Department; Robin

         10    DeLaBarre, who is also from the Office of Nuclear Energy

         11    Affairs, and Christine Martin; Richard Goorevich, who is the

         12    Director, Nuclear Transfer and Supplier Policy Division of

         13    DOE; Sean Tyson, International Policy and Analysis Division

         14    of DOE; and Dr. Armando Travelli, who is a gentleman who

         15    we've referenced before, who is the manager of the RARTR

         16    program at Argonne.

         17              Welcome.  I apologize that we've been late in

         18    getting to you.

         19              MR. STRATFORD:  That's fine, Mr. Chairman.  Thank

         20    you very much.

         21              Mr. Chairman and members of the Commission, I'll

         22    be brief.

         23              You have the submission of the Executive Branch in

         24    the form of my letter of July 6th as well as the remarks

         25    that were prepared and circulated for this meeting.

                                                                       87

          1              To those remarks, I would only like to add the

          2    following:

          3              The debate over whether to continue to ship HEU to

          4    Canada for use in the MAPLE reactors to produce medical

          5    isotopes seems to boil down to one issue.

          6              That is whether or not changes to the waste

          7    calcining process can be made now that either can't be made

          8    after the facility goes hot or that the changes would be so

          9    significantly more expensive in the future as to preclude

         10    making them for economic reasons.

         11              The applicant says there aren't any such changes. 

         12    SGN, which designed and built the waste calcining equipment,

         13    says there are no such changes.  Argonne, with over 20

         14    years' involvement in the RARTR program, concurs that there

         15    are no such changes.

         16              Dr. Alan Krass of my office, who visited the

         17    facility last month, came home and reported to me that he

         18    knew of no such changes.

         19              The only claim that changes can and should be made

         20    now comes from the intervenors, who don't identify what

         21    those changes might be.

         22              Yet, the argument is that those changes, whatever

         23    they are, should be made before startup.

         24              Then it is argued that these changes won't take

         25    very long and there is no harm to delaying startup until the

                                                                       88

          1    changes are designed and implemented.

          2              Well, how long a delay are we talking about? 

          3    Answer:  Totally unknown.

          4              If we decide to go to baffles, they have not been

          5    designed, they have not been tested.

          6              If we go to introducing a precipitating agent,

          7    ditto.

          8              Moreover, there is the regulatory process to go

          9    through in Canada before any changes can be made.

         10              I notice that the intervenors made the same

         11    arguments to the AECB, now the Canadian Nuclear Safety

         12    Commission, which ruled decisively against the assertion,

         13    noting, quote, "The Commission accepts that modifications

         14    now to the processing facility could negatively affect

         15    safety and, therefore, does not accept the intervenor's

         16    request to withhold approval," close quote.

         17              If that same decision had been made by the NRC in

         18    reference to a U.S. facility, I wonder how we would react to

         19    a decision by another state to deny export of fuel to such a

         20    U.S. facility until the as-yet-unspecified changes had

         21    nevertheless been made in the face of such a decision.

         22              The second point I wish to make has to do with the

         23    cooperative, not antagonistic nature of the RARTR program

         24    and the conversion process.

         25              The effort to minimize the use of HEU in research

                                                                       89

          1    reactors and medical isotope production has been a long,

          2    difficult, and admittedly slow process, but it has also been

          3    largely successful, and largely, in my judgement, because it

          4    has been a cooperative effort.

          5              We have made clear from day one that we are

          6    not-slash-not, as we put it in cable traffic, about the

          7    business of shutting down medical isotope production

          8    programs, research programs, or calling into question the

          9    bona fides of our cooperating partners, unless, of course,

         10    there's a good reason to raise a question, but that reason

         11    does not exist here, in our judgement.

         12              Considering that the RARTR program has been going

         13    on for over 20 years but only the last four years has been

         14    focused on target development, I'm not surprised that it

         15    takes time to figure out how to convert a medical isotope

         16    production reactor and its isotope separation and waste

         17    process.

         18              Please note one aspect of what I just said because

         19    of the discussion about a commitment in 1990 but a plan,

         20    nevertheless, to build an HEU target-using facility.

         21              Number one, HEU was still the commodity of choice. 

         22    There is still not anybody in the world who uses LEU for

         23    targets except for the Australians on a very minor basis.

         24              Remember, it was only four years ago, in 1996,

         25    that we turned any serious attention in this country to

                                                                       90

          1    target development.

          2              There have been issues over confidentiality, but

          3    they have been resolved.

          4              There was, past tense, a question of whether an

          5    LEU target could be used, also resolved.

          6              There is the issue of the waste calcining process,

          7    and we hear that it is on the way to being resolved.

          8              We in the Executive Branch do not have a question

          9    about anybody's bona fides, nor, apparently, do the Canadian

         10    regulatory authorities, nor do we want to turn what should

         11    be and has been a straightforward effort at cooperation into

         12    a legalistic, antagonistic, or accusatory process in which

         13    allegations of bad faith seem to be the order of the day.

         14              We do believe that good-faith efforts are being

         15    made by the parties to examine, develop, and implement a

         16    path to conversion.

         17              We have not found it necessary to negotiate

         18    conversion schedules, hold, quote, "feet to the fire,"

         19    unquote, or otherwise treat our cooperating partners as if

         20    they weren't fully committed to the conversion process.

         21              My third point is one I believe I made last year,

         22    and it relates to NCI's statement here that ATU for fuel

         23    exports are now at zero, but they're not going to be at zero

         24    for very much longer, because we have been successful in

         25    getting commitments to convert Grenoble, BR-2, and Petten,

                                                                       91

          1    in return for which we committed to make good-faith efforts

          2    to obtain approval to export HEU to fuel those reactors

          3    pending conversion.

          4              So, you're going to be seeing licenses for fuel. 

          5    In the case of Petten, NCI is right.  We set a limit on

          6    Petten, and the limit was 2006, after which you're cut off,

          7    and Petten will be using fuel that is already assumed to be

          8    okay and usable.

          9              That six years is for nothing more than getting a

         10    licensing amendment.

         11              So, if I were to say, okay, let's do six years for

         12    Canada, I suspect I would get violent objections from the

         13    intervenors.  No, no, that's too long.  But are we going to

         14    start second-guessing the six years that we gave The

         15    Netherlands in diplomatic notes and start having yearly

         16    reviews of whether or not the regulatory authority is moving

         17    fast enough for our judgement?

         18              I hope the fact that HEU exports will rise on a

         19    temporary basis will be seen as part of a success story, not

         20    a diminution of our efforts to minimize the use of HEU.

         21              The fourth point -- and I think this is our real

         22    one -- is that the present review process is working.  We do

         23    not think it is necessary to require additional reports or

         24    more frequent reports.

         25              Regardless of speculation about various timelines,

                                                                       92

          1    I do not think that we will know in three months, in six

          2    months, or in nine months that baffles or a precipitation

          3    process can be designed, engineered, tested, and approved by

          4    regulatory authorities.

          5              We don't know which one is the solution, or if any

          6    of them are the solution.

          7              Hence, to terminate the license pending the

          8    submission of a report that outlines what changes will be

          9    made and how, as the intervenors argue, is a formula for

         10    blocking shipments and startup on an indefinite basis.  If

         11    one was to do that, then are we supposed to come back in

         12    three months and have another discussion of whether the

         13    latest report is satisfactory to us, which it won't be,

         14    because I don't think it will identify the way forward.

         15              I noted Commissioner Merrifield's comment and I

         16    interpreted him to be saying something like let's get

         17    serious here.

         18              Are we seriously thinking about cutting off the

         19    principle source of medical isotopes for this country? 

         20    Well, by operation, we might have to do that under certain

         21    circumstances.  We recognize that.

         22              But in my judgement, those circumstances would

         23    have to border on outright fraud, not an external judgement

         24    that conversion is not moving fast enough.

         25              Witness what I said about Petten.  We gave Petten

                                                                       93

          1    six years just for a regulatory process.

          2              Do we want to start calling up the regulatory

          3    authority and saying please send someone over here for a

          4    discussion of whether or not you're moving fast enough,

          5    otherwise we're going to ignore the diplomatic notes and cut

          6    you off at an earlier date.

          7              Yet, in a situation where we don't have a clue how

          8    to solve the technical problems, we're having discussions of

          9    timelines that deal in three-month segments.  Just don't

         10    think that makes sense.

         11              And if we did have to cut off supply to Canada by

         12    operation of law, what do I think would happen?  I think

         13    we'd have a medical crisis on our hands, and what would

         14    happen at that point?  I think two things would happen.

         15              First, there would be efforts by some to change

         16    the law, and there would very quickly be serious scrutiny of

         17    how we got into a medical crisis in the U.S., and second, I

         18    have to say that my judgement is that there would be a

         19    realization in the Executive Branch that an external source

         20    of supply would have to be found immediately, and recall

         21    that when the Nuclear Nonproliferation Act of 1978 forced us

         22    to terminate supply of nuclear fuel to India, the French has

         23    to step in and satisfy our obligations for us under the

         24    U.S.-India agreement.

         25              So, would we complain if the Canadians, at that

                                                                       94

          1    point, during a medical crisis, turned to an external

          2    source?  Frankly, I don't think so.

          3              So, in a nutshell, we think the process has been

          4    going very well.  A lot of the technical problems have been

          5    cleared away.  We now know exactly where we have to focus. 

          6    There will be a plan on how to get there, and we think that

          7    the existing review process of reports on an annual basis,

          8    followed by a public meeting such as this one, if the

          9    Commission desires, is a sensible way to proceed.

         10              We're not going to have something in three months. 

         11    We might have something in 12 months, and terminating the

         12    license at this point I think would be a serious mistake.

         13              With respect to the amount, I leave it to the

         14    applicant to argue for what they need.  I would simply note

         15    that what the Commission approved last year -- last year,

         16    when the reactor wasn't even ready to start up, what you

         17    approved was 40 kg's in calendar year '99 followed by 22

         18    kg's in each of the four out-years.

         19              We are now almost exactly one year later in time,

         20    and we are facing startup fairly soon.

         21              So, what's the most sensible number?  Probably 40

         22    in calendar-year 2000 followed by 22 in the three out-years. 

         23    That's the most sensible way to look at the numbers.

         24              So, thank you, Mr. Chairman.  I will stop here. 

         25    We're happy to answer any questions.

                                                                       95

          1              CHAIRMAN MESERVE:  Thank you very much.

          2              Commissioner Merrifield.

          3              COMMISSIONER MERRIFIELD:  Just to clarify the last

          4    statement that you made, you seem to indicate that it does

          5    make sense for us to come back a year hence to review the

          6    continuing process?

          7              MR. STRATFORD:  Absolutely.  You made exactly the

          8    right judgement a year ago.  I think it's still the right

          9    judgement.

         10              COMMISSIONER MERRIFIELD:  I also wanted to make

         11    one other question.

         12              You mentioned the ongoing discussions,

         13    negotiations we've been having with other foreign partners. 

         14    You mentioned The Netherlands and agreements that have been

         15    made between State Department and between representatives of

         16    The Netherlands relative to those reactors, and we'll be

         17    seeing those agreements coming before the Commission at some

         18    point in the future.

         19              It wasn't your intention to leave any doubt that

         20    the Commission does have an independent role in reviewing

         21    those agreements.

         22              MR. STRATFORD:  No, absolutely, and that's the

         23    reason the notes are phrased the way they are, because the

         24    people at Grenoble and the people at Petten came back and

         25    say, okay, we agree to convert, you agree to supply us

                                                                       96

          1    stuff, which my immediate answer, having been in this

          2    business a long time, is no, sorry, independent regulatory

          3    agency in the U.S.

          4              What I can do is I can give you a statement to the

          5    effect that the Executive Branch will make its best efforts

          6    to obtain an export license from the appropriate authorities

          7    for the export of that material, but then, in at least one

          8    set of those notes, there is another line which says, in

          9    essence, oh, by the way, if we fail and you don't get the

         10    HEU for any reason whatsoever, all bets are off, including

         11    your commitment to convert.

         12              So, it's a quid pro quo, but it explicitly

         13    acknowledges the independence of your role.

         14              COMMISSIONER MERRIFIELD:  Thank you.

         15              CHAIRMAN MESERVE:  NCI, as you heard, has raised a

         16    large number of concerns about perceived delaying tactics by

         17    MDS Nordion.

         18              Do you share those concerns?

         19              MR. STRATFORD:  No.

         20              I recognize that there was a serious to and fro on

         21    confidentiality, and I don't blame Nordion for that, but we

         22    resolved that issue.

         23              I realize that there are concerns that there has

         24    been foot-dragging, but I'm not sure I'd characterize it as

         25    foot-dragging.

                                                                       97

          1              The biggest focus seems to be that the feasibility

          2    study didn't come in on time.  That's the big one, as I see

          3    it.

          4              Well, I'm not sure that it might not have been

          5    able to come in a little earlier, but I'm not sure that

          6    that's a distinction without a difference.

          7              I see a process that is working.  It is not to

          8    everyone's satisfaction.

          9              There are, I suspect, suspicions on both sides,

         10    between our two sides, but it's working, and if you look at

         11    where the amount of progress has been made over the last 12

         12    months, it is really substantial.

         13              We took Argonne -- not we -- they took Argonne off

         14    to see SGN.  That was a very productive discussion.  People

         15    know where they have to focus.

         16              But I cannot guarantee that I'm going to be able

         17    to come back in a year and say baffles are the answer or

         18    precipitating agent is the answer or even, gee, we're just

         19    going to have to move to an all-new facility.  I don't know

         20    that we're going to be there.

         21              But I'm not going to start throwing around

         22    allegations of bad faith because we're not there.  What I am

         23    going to try to do is what I did in April, which is get

         24    everybody into a room and knock heads so we start making

         25    progress a little faster than we did before.

                                                                       98

          1              CHAIRMAN MESERVE:  Thank you.

          2              Commissioner Diaz.

          3              COMMISSIONER DIAZ:  Yes.

          4              Mr. Stratford, I guess a lot of the thing goes

          5    back to this issue of providing a reasonable timetable, and

          6    I think, you know, I stated before that I think that, you

          7    know, three months might not be a reasonable timetable

          8    considering the implications of the medical supplies.

          9              However, you know, in your testimony, I seem to

         10    imply that you are concerned about establishing a timetable

         11    that will be required, and I don't think that's, you know --

         12    or is that what you said?

         13              MR. STRATFORD:  That's very close to what I said,

         14    Commissioner, and there's a couple of aspects to that.

         15              Number one, I haven't a clue what the timetable

         16    is.  I know it's not three months.  I don't know whether

         17    it's six, nine, a year, or something else, and it's a

         18    timetable for what?

         19              Because what I heard in arguments from NCI was,

         20    well, it's a timetable in which you shouldn't allow startup

         21    or a license until what you have in front of you is a clear

         22    path towards conversion:  This is what we're going to do and

         23    this is when we're going to do it.  And I don't know when

         24    we're going to know that, and I don't think, if we don't

         25    know it three months from now -- let's say we set a

                                                                       99

          1    nine-month timetable.

          2              Do we want to come back here again in nine months

          3    and have a debate about why this plan is so bad because it

          4    doesn't tell us exactly what we need to do or how much it's

          5    going to cost?

          6              I don't think we need to do that.  What I do think

          7    we need to do is come back a year from now and see where we

          8    are and what has been achieved.

          9              I think if you hold people's feet to the fire by

         10    setting timetables, number one, you're going to find the

         11    timetable is not met, and number two, I think it's genuinely

         12    going to leave a bad taste in a lot of mouths, and if you're

         13    going to have timetables for these guys, then where are we

         14    going to go on Petten, Grenoble, and BR-2?

         15              Timetables for regulatory proceedings?  Timetables

         16    for Grenoble development of fuel, which is going to be a

         17    bear, by the way.

         18              COMMISSIONER DIAZ:  Is it reasonable to establish

         19    a timetable not to study, necessarily, but to determine the

         20    feasibility of what needs to be done, not to do it?  What's

         21    wrong with that?

         22              There's an issue of words in here, to study.  You

         23    never finish.

         24              I think the issue is we need to have a

         25    determination of the feasibility of conversion, and I think

                                                                      100

          1    that, you know -- and I think I heard NCI -- I think they

          2    were very reasonable -- saying that, you know, if there are,

          3    you know, circumstances of regulatory authorities -- but

          4    from the technical viewpoint of the applicant, the

          5    determination of the feasibility of conversion is key to

          6    this issue, and I don't know either what is the real

          7    timetable.

          8              Maybe we should request or require that the

          9    applicant tell us what is the time in which they could

         10    establish or determine what the feasibility is, and that's a

         11    real important step, and it seems to me like it would be a

         12    reasonable, you know, step forward to clarify where do we

         13    stand on the issue of conversion, and unless we have that,

         14    we're not going anywhere fast.

         15              MR. STRATFORD:  What, in my judgement, is

         16    reasonable is to ask everybody to come back at some date

         17    certain, whether that be six months or a year, and say where

         18    we are in determining feasibility.

         19              What is not reasonable is to say come back in six

         20    months and tell me it is feasible and this is how you're

         21    going to do it.

         22              If I turn to the -- you know, the anti-missile

         23    guys and say, okay, I've had enough, I want a timetable in

         24    which you're going to come back and tell me it can be done,

         25    can't do that.

                                                                      101

          1              All they can do is keep running tests until they

          2    know a lot more than they do.

          3              COMMISSIONER DIAZ:  A determination of feasibility

          4    is a very clear specific term.  It requires that options be

          5    analyzed and solutions be, you know, established and that,

          6    you know, a preferred approach be set, and that's a

          7    determination, and I think, you know, that -- and I know

          8    what the timetable is, but whether it's a year from now or

          9    15 months from now, I think we need to have such, you know,

         10    conclusion of the feasibility of doing it, not to study it

         11    but to determine whether it is feasible, and maybe the

         12    conclusion is it's not feasible, you know, but we need to

         13    know that, and I think we need to go through the process of

         14    establishing what is, you know, the critical pathway for the

         15    technical issues and put them down.

         16              MR. STRATFORD:  In my judgement, what would be

         17    reasonable would be requesting that, in the next annual

         18    report, that all of the parties -- the applicant, the

         19    Executive Branch, Argonne working for DOE -- make their best

         20    efforts to focus the report on the options and which of

         21    those options might or might not be feasible and, to the

         22    extent possible, provide their view on whether any of them

         23    are feasible and, if so, how it might be done.  That, I

         24    think, is a reasonable request.

         25              COMMISSIONER DIAZ:  It is good to see you again,

                                                                      102

          1    sir.  I haven't seen you for too long.  I think I was a

          2    child when I first met you.

          3              Has the issue of proprietary information been

          4    resolved to the satisfaction that you have the technical

          5    information required to do your job, sir?

          6              MR. TRAVELLI:  I think it is today.  Essentially

          7    what it boils down to is that MDS Nordion decided that all

          8    those issues which created problems with confidentiality

          9    were such that they were resolved.

         10              Essentially, MDS Nordion either had resolved or

         11    felt confident that they could resolve those issues in such

         12    a way that the information that otherwise would have needed

         13    to be transmitted to Argonne no longer needs to be

         14    transmitted, and instead, the remaining issue, which is

         15    about calcining, is less sensitive for Nordion because it is

         16    a process developed by another company, and so, we received,

         17    10 days ago, a good amount of information about this

         18    residual problem, and we think that, from this point in, we

         19    can work with MDS Nordion to make suggestions or to provide

         20    whatever assistance we can in this area, and since this is

         21    the only area which now is important and the confidentiality

         22    issues are not as important as for the others, I would say

         23    that, yes, they have been resolved.

         24              COMMISSIONER DIAZ:  Okay.

         25              From your expert viewpoint and since timetables

                                                                      103

          1    are obviously a key issue, what do you think would be a

          2    reasonable timetable for the determination of the

          3    feasibility of the conversion?

          4              MR. TRAVELLI:  As he said today, Mr. Malkoske

          5    thought that, in about 18 months, there will be a completed

          6    technical study of what would need to be done.

          7              I picture that probably the feasibility could be

          8    established sometime before that, because to solve entirely

          9    the issue would imply first to have the feasibility and then

         10    stepping up to the details.

         11              So, I would say it's between now and 18 months

         12    from now, maybe one year.

         13              COMMISSIONER DIAZ:  A year from now you think will

         14    be a reasonably achievable time?

         15              MR. TRAVELLI:  For the feasibility.  I think that

         16    probably Mr. Malkoske would agree with me, but that's my gut

         17    feeling, that it's not a certainty, but I would guess that

         18    probably a year from now, someone would be able to step up

         19    here and say yes.

         20              CHAIRMAN MESERVE:  Commissioner McGaffigan.

         21              COMMISSIONER McGAFFIGAN:  Mr. Stratford, you

         22    started off by saying there was serious -- at some point you

         23    said there was serious to and fro on confidentiality, you

         24    understood why, but we've resolved that issue.

         25              I honestly thought -- and the reason we had what

                                                                      104

          1    we had in the order last year was that we had similar

          2    testimony last year that all the necessary confidentiality

          3    agreements had been entered into and it looked like

          4    everything was a go and therefore the information was going

          5    to get shared with Argonne, and I think Dr. Travelli

          6    testified he could do something in three months, or his

          7    colleague who was with him last year testified that he could

          8    do something in three months.

          9              Last year's order, in hindsight, looks like it's

         10    Alice In Wonderland-like, but based on the testimony we had

         11    last year, it's what the lawyers in this room thought would

         12    -- you know, based on what various folks had said -- was a

         13    reasonable thing, but the heart of it was that the

         14    confidentiality was resolved.

         15              Dr. Travelli now tells us that the way

         16    confidentiality has been resolved is that basically Nordion

         17    has solved all the issues on its own except for this one

         18    issue where they feel comfortable bringing Argonne in, and

         19    that's a very interesting different approach to how to

         20    resolve confidentiality from what I was under the impression

         21    of last year.

         22              So, why was I wrong last year in thinking the

         23    confidentiality issue was resolved?  I don't have the

         24    transcript.  I didn't pull it out, but I could have sworn

         25    that the overall testimony last year was that that issue was

                                                                      105

          1    behind us as of June of '99.

          2              MR. STRATFORD:  That was my recollection, too, and

          3    I may have overstated the phrase to-ing and fro-ing, but I

          4    think there were certainly some indications of concerns

          5    about transfer of information.

          6              But I think, you know, as to the details of that,

          7    I think I just have to leave that to Argonne to address that

          8    again.

          9              COMMISSIONER McGAFFIGAN:  Well, we may not need to

         10    go further.

         11              Dr. Travelli, do you have the resources at Argonne

         12    -- assuming over the next 18 months you're going to interact

         13    seriously with MDS Nordion and ACEL, do you have the

         14    resources to do that, to help them resolve this calciner

         15    issue?

         16              MR. TRAVELLI:  I believe we do, but that will be

         17    done during the next fiscal year.

         18              COMMISSIONER McGAFFIGAN:  Well, some of it might

         19    be the next three months.

         20              MR. TRAVELLI:  We do have the resources to address

         21    that probably during the next three months, and we have been

         22    told by the Department of Energy that we can count on

         23    similar support for the next year.

         24              COMMISSIONER McGAFFIGAN:  So, you have the

         25    resources.

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          1              The issue, then, of what to expect -- I mean,

          2    essentially, Mr. Stratford has taken your memo of your trip

          3    report and made it part of his testimony, so either of you

          4    can answer this, but the plans to resolve obstacles is just

          5    a plan to resolve obstacles.

          6              Then, in an 18-month period -- they should have

          7    that within a couple months, is what both of you have said. 

          8    Then, over the next 18 months, they figure out whether the

          9    obstacles can be overcome doing experiments.

         10              I mean, to some extent, Commissioner Diaz has

         11    already been through this.

         12              At some point during that period, they get a sense

         13    as to whether the low-cost solution, namely modifying the

         14    current facility, is going to work or not, and you've

         15    guesstimated that that might be a year into that 18-month

         16    period, Dr. Travelli.

         17              MR. TRAVELLI:  Yes.

         18              COMMISSIONER McGAFFIGAN:  At the end of the

         19    process -- you know, I was struggling earlier with -- based

         20    on your experience with reactors, Dr. Travelli, and these

         21    sorts of processing facilities, how do they make the

         22    conversion without disrupting supply?

         23              If it's as simple as what you all were suggesting

         24    last week -- and they are not buying onto, but adding a

         25    uranium precipitating agent, which apparently requires some

                                                                      107

          1    modification -- how do they do that, and also, you're not

          2    familiar with the FDA process, but this issue of getting the

          3    LEU targets, you know, processed so that they can produce

          4    the moly-99, so they can go to FDA and say, look, this is

          5    what the product that we're going to be selling is -- how

          6    does all that work?  Do you have a clue?

          7              MR. TRAVELLI:  I can tell you what my impression

          8    is, but probably our colleagues from Canada would be in

          9    better condition to answer your question.

         10              From a technical point of view, to make sure, for

         11    instance, that the calcining process works, you can do tests

         12    in a laboratory, and then we found out at SGN that they

         13    still have their pilot plant which they had working there to

         14    test the system which is now being implemented in Canada.

         15              That pilot plant is still available at SGN, so

         16    that after one has a design about how the system should be

         17    modified, they could modify in that way the pilot plant and

         18    do the actual tests at SGN to confirm the validity of the

         19    design.  That is from a technical point of view.

         20              To have the FDA approval, I don't know exactly

         21    what the requirements are, but the point is that the new

         22    facility is going to enter into operation soon, and the FDA

         23    has not yet seen what the results of that facility is.

         24              So, obviously, the FDA allows for some

         25    extrapolation.

                                                                      108

          1              COMMISSIONER McGAFFIGAN:  I am not a technical --

          2    is it conceivable, if it were not for the FDA approval

          3    process, that you could satisfy the Canadian regulator with

          4    these tests at SGN or whatever in terms of the safety

          5    analysis that you would need to do, and then could you then

          6    carry out the conversion without disrupting supply, and then

          7    one day switch over from HEU to LEU targets?

          8              MR. TRAVELLI:  Not entirely, because SGN is

          9    involved only in the calcination process, and the FDA will

         10    be more interested --

         11              COMMISSIONER McGAFFIGAN:  -- in waste processing.

         12              MR. TRAVELLI:  Not in the waste.  The FDA will be

         13    involved in --

         14              COMMISSIONER McGAFFIGAN:  I'm leaving FDA out. 

         15    I'm trying to figure out how the Canadian regulator gets

         16    satisfied on a safety case and an environmental case.

         17              MR. TRAVELLI:  At least for the calcining process,

         18    they could do that that way.

         19              The main issue will be the other parts of the

         20    process, and that, I don't know really how MDS Nordion plans

         21    to address that problem.

         22              COMMISSIONER McGAFFIGAN:  I'm just troubled, Mr.

         23    Chairman, as to how, even if everything turns out swimmingly

         24    and the technical types resolve all the technical issues and

         25    it's technically feasible and they even can do the low-cost

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          1    option, what today's testimony, more than anything, has made

          2    me worry about is how do they actually do it without

          3    disrupting supply, and there's various regulatory Catch-22's

          4    that seem to lie over this process, even if it's wildly

          5    successful technically, but I may be confused.

          6              CHAIRMAN MESERVE:  Is there anyone from MDS

          7    Nordion who can address that quickly?

          8              DR. TRAVENA:  I got your question before, and I

          9    didn't understand it, that's why I didn't answer it in full,

         10    so I'll explain what needs to happen, and the issue really

         11    is -- there's two issues.

         12              One is IAEA and HEU control.  So, as you're

         13    looking at can you convert, the issue is can you move LEU

         14    through the system at the same time as you've got HEU in the

         15    tanks, and that's going to be a complex issue, because

         16    things are going to be mixed.

         17              Now, I believe that, with the right kind of

         18    controls and with the willingness of the IAEA to recognize

         19    that we have an awkward situation, that we could, with

         20    special monitoring, work through that issue, but we haven't

         21    talked to IAEA yet.

         22              But you know, talking to the State Department

         23    experts, they seem to think that this is a reasonable thing,

         24    given the end result that we want to achieve.

         25              The second issue is with respect to the FDA, and

                                                                      110

          1    the FDA's issue is associated with what's called good

          2    manufacturing processes, which means you don't want to carry

          3    out a process that's different from your existing process in

          4    the same equipment unless you've somehow cleaned and

          5    prepared that equipment before you run the good stuff again.

          6              So, for example, if we have a process that today

          7    is using an HEU target and you have equipment that's for

          8    that and it's perhaps dedicated equipment so it's in line,

          9    you can, from a drug manufacturing perspective, if you clean

         10    the lines after you've used the LEU, then you can go back to

         11    HEU again.

         12              So, for example, you could carry out the tests --

         13    we haven't figured out the details yet -- that says we'll

         14    run HEU, we'll flush the system, we'll run LEU through the

         15    system, and then we'll flush the system again from the

         16    processing product perspective before we go back to HEU.

         17              So, it is possible.

         18              For example, when we're currently looking at how

         19    we look at the product from our MAPLE reactors going through

         20    our existing processing facilities at Nordion and we have

         21    only one set of cells where we do our moly processing,

         22    we're, in fact, doing just that, but in fact, because things

         23    are a little bit easier there, we, in fact, will have

         24    duplicate process equipment in the cell, and we'll put the

         25    other glassware in the cell to do the stuff from MAPLE,

                                                                      111

          1    because we don't want to miss the MAPLE stuff with the stuff

          2    from the NRU reactor.

          3              COMMISSIONER McGAFFIGAN:  Just to follow up very

          4    briefly, the flushing process you talk about -- does that

          5    disrupt supply?

          6              DR. TRAVENA:  No, we're talking about a washing

          7    process.

          8              COMMISSIONER McGAFFIGAN:  Does it takes hours

          9    rather than --

         10              DR. TRAVENA:  We don't know yet, we haven't done

         11    it, but it's common --

         12              COMMISSIONER McGAFFIGAN:  You can do it without

         13    disrupting supply.

         14              DR. TRAVENA:  Yeah, we believe we can.  It's a

         15    little bit awkward, and we haven't figured out exactly how

         16    to do it yet.

         17              COMMISSIONER McGAFFIGAN:  Thank you, Mr. Chairman.

         18              CHAIRMAN MESERVE:  I'd like to thank all of the

         19    participants for their presence today.

         20              We've run quite a bit longer than we had

         21    anticipated, and I apologize to those who had made other

         22    plans for the late afternoon, but I think it does reflect

         23    the seriousness with which the Commission approaches its

         24    obligations in this matter.

         25              I'd like to thank you all again, and with that,

                                                                      112

          1    we're adjourned.

          2              [Whereupon, at 4:07 p.m., the briefing was

          3    concluded.]

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