This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 TAIPEI 002669 
 
SIPDIS 
 
SENSITIVE 
 
STATAE FOR EAP/TC AND NP/NE - BURKHART, STATE PLEASE PASS 
AIT/W AND USTR - WINELAND, USDOC FOR 3132 ITA/CS/DRD EAP 
JHAMILTON, 3005/ITA/CS/ADVOCACYCENTER BLOPP AGELFUSO, USDOC 
FOR 4400 ITA/MAC/OP/M-BMORGAN 
 
E.O. 12958: N/A 
TAGS: KSCA TRGY ENRG BEXP KNNP TW
SUBJECT: ADVOCATING FOR HOLTEC: NUCLEAR SAFETY & THE AEC 
 
REF: A. TAIPEI 2474 
     ¶B. SECSTATE 99089 
     ¶C. TAIPEI 2250 
     ¶D. TAIPEI 2601 
 
¶1.  (SBU) Summary:  On June 10, AIT/T Economic and Commercial 
Chiefs met with Ouyang Min-sheng, Chairman of Taiwan's Atomic 
Energy Commission (AEC) to deliver reftel talking points on 
behalf of Holtec International Corporation.  In addition to 
the nuclear safety issues, AIT/T emphasized Washington 
agencies' concerns regarding the potential conflict of 
interest in the procurement process as well as the lack of 
transparency in the process.  Ouyang and staff members from 
the Institute of Nuclear Energy Research (INER) said there is 
no tradeoff between safety and procurement and that the AEC 
strictly follows US Nuclear Regulatory Commission regulatory 
processes.  Ouyang committed to allowing US and IAEA 
inspection of the stored fuels to allay any nonproliferation 
concerns.  He said that in light of Taiwan's firm 
nuclear-free homeland policy, the AEC cannot afford any 
mistakes in the safety of nuclear power.  INER plans to buy 
and develop the dry storage technology in order to transfer 
it to indigenous firms.  INER does not plan to provide goods 
and services directly to Taipower on the storage cask 
project.  End Summary. 
 
¶2.  (U) On June 10, AIT/T Economic and Commercial Chiefs met 
with Ouyang Min-sheng Chairman of Taiwan's Atomic Energy 
Commission to deliver reftel talking points on behalf of 
Holtec International Corporation and its bid to supply casks 
to Taiwan for dry storage of low-level nuclear waste from the 
Chinshan nuclear power plant.  In addition to the nuclear 
safety issues covered in reftel points, AIT/T emphasized to 
Ouyang Washington agencies' concerns regarding the potential 
conflict of interest in the procurement process.  We noted 
that there may be a pattern developing in procurement 
processes involving the Atomic Energy Commission (AEC), its 
subsidiary research entity the Institute for Nuclear Energy 
Research (INER) and TaiPower.  As described in ref B, we 
noted that there have been two recent nuclear storage 
contracts from Taiwan.  One for control rod reduction 
services and the other for dry storage casks.  With regard to 
the contract for dry storage casks, we noted that US bidders 
have complained that the procuring agency, Taipower, has set 
unrealistically low price levels for the contract.  When US 
firms submit bids well above the level established by 
Taipower, the tender offer is withdrawn and Taipower turns to 
sole-source contracts with INER to supply the goods and 
services desired.  We noted the possibility that it would be 
a conflict of interest to have INER, as a national laboratory 
under the control of the nuclear regulator, AEC, be the 
recipient of the sole-source contracts to supply the goods 
and services to TaiPower. 
 
¶3.  (U) Ouyang had prepared in advance for the meeting with 
his own set of points: 
 
-- Safety is of the utmost concern in the regulatory process. 
 
-- Therefore, Taiwan follows all processes set by the US 
Nuclear Regulatory Commission (NRC) 
 
-- Taiwan procures almost all nuclear-related items from the 
US 
 
-- Regarding dry-cask storage, Taiwan is only interested in 
procuring technology and items which have been licensed by 
the US NRC. 
 
-- The Taipower procurement is a commercial process, while 
AEC focuses on regulatory issues. 
 
-- There is no trade off between procurement and safety. 
 
¶4. (U)  Ouyang argued that INER has not engaged in unfair 
competition with the private sector because it did not 
actually participate in the original tender for the dry 
storage cask project.  AIT replied that, according to our 
understanding, whereas in the dry-cask procurement Taipower 
invited INER to license foreign technology on a sole-source 
basis only after the original procurement failed, in the case 
of the control rod reduction procurement INER did participate 
as a bidder and won by under-bidding private sector firms 
(including at least one US company).  AEC and INER, conceded 
that this is correct.  (Note:  Regarding the control rod 
reduction procurement, which was awarded to INER, US firm 
Duratek has filed a protest with Taiwan's Public Construction 
Commission, which, according to Duratek's agent, made an 
initial determination last week that Taipower had not 
supplied sufficient evidence that INER is qualified and 
directed Taipower to provide further support for the 
selection of INER by July 8.) 
¶5. (SBU) Ouyang had also invited representatives from INER to 
participate, including Mr. WU Ruey-yau, Deputy Director, 
Environment and Energy Technology Center and the director of 
the dry-cask storage project.  Wu said that he had attended 
the recent US NRC regulatory workshop and assured us that 
INER would follow exactly the regulatory standards 
established by the US NRC and discussed in the workshop.  Wu 
also emphasized that safety is a judgment that must be made 
solely by Taiwan's AEC and that INER will follow AEC's 
directions.  He added that INER hopes to provide future 
services to Taipower.  Ouyang said that Taipower has had 
financial difficulties recently, apparently suggesting that 
Taipower can only afford INER's bargain-basement prices for 
its nuclear services. 
 
¶6.  (SBU) Ouyang said that this procurement should not raise 
any concerns on the part of the US.  He said that he could 
understand if the US had nonproliferation concerns about the 
dry storage of the spent fuel; he said Taiwan is prepared to 
commit to IAEA and US inspections of the stored fuel.  He 
added that in any kind of commercial procurement for nuclear 
technology Taiwan firms cannot compete with US 
nuclear-technology firms and has no ambition of developing 
competing firms.  He emphasized that Taiwan's government has 
a firm nuclear-free homeland policy that gives him little 
room for developing nuclear technologies.  Ouyang said that 
the newly appointed Minister of Taiwan's Environmental 
Protection Agency would closely monitor his agency's actions. 
 He said that any mistake in the safety of nuclear power 
would create major political and economic difficulties in 
Taiwan.  (Note:  See ref D report on the Taiwan government's 
anti nuclear stance.  End note.) 
 
¶7.  (SBU) In response to a query from AIT/T, INER said that 
the tender for the dry-storage casks would close on Saturday, 
June 11.  INER observed that it had only invited tenders from 
US firms for the project.  (Note:  AIT understands that US 
entities of French firms have been included in the firms 
invited to bid.  End note.)  INER has formed a panel to 
review the bids, which he described as "independent," but 
which will in fact be headed by INER's Wu Ruey-yau.  INER 
emphasized that it views its main function as to provide 
research and development to transfer technology to indigenous 
companies.  INER does not plan to provide goods and services 
directly to Taipower.  In the case of the storage casks and 
other projects, INER intends to buy and/or develop the 
technology and transfer to a local firm.  Ouyang noted that 
INER has developed its own technology on solid nuclear waste 
and has transferred (sold) this technology to Japan. 
 
¶8.  (U) AIT/T is scheduled to meet with Taipower Acting 
Chairman & President Edward K.M. Chen on June 17 to deliver 
the talking points from ref B. 
 
¶9.  (SBU) Comment:  The essence of AEC's message seems to be 
that the small size of Taiwan's domestic market and 
Taipower's financial difficulties in the past year mean that 
the US should not be concerned with procurement 
irregularities or the budgets being allocated for storing 
nuclear wastes.  Nevertheless, the new information that INER 
hopes to act essentially as a conduit to pass the dry-cask 
storage technology to Taiwan's domestic firms could indicate 
that Taiwan wants to develop and commercialize the technology 
so that local firms will supply this service not only in 
Taiwan, but also seek to compete with foreign suppliers for 
cask business internationally.  We note that Ouyang raised 
the issue of nonproliferation.  AIT/T did not raise the 
subject, but welcomed his unsolicited offer to allow for both 
IAEA and US inspections of the stored nuclear waste. 
PAAL