The White House is considering a recommendation that it revive and underwrite a commercial nuclear fuel reprocessing plant in South Carolina that President Carter blocked because it would produce large amounts of plutonium, a material which can be used not just as a fuel but to make nuclear bombs.
The recommendation, sure to become an issue among those in and out of Congress who are anxious about the proliferation of nuclear weapons, has been made by the Department of Energy to the President's Cabinet Council on Natural Resources.
It affects a half-completed reprocessing plant in Barnwell, S.C., owned by Allied General Services Inc., a consortium made up of Allied Chemical Corp., Gulf Oil Corp. and Royal Dutch Shell. Energy Secretary James B. Edwards, who is from South Carolina, has long favored support for the plant. Under the new proposal, the government would first undertake to buy the plutonium the plant produced, thus guaranteeing it a market for its product. In addition, the government would then promise to buy out further investors in the plant if government policy turned against reprocessing in the future.
The administration, under the proposal, would also commit itself to attempt to provide "an improved regulatory and licensing environment" to facilitate completion and operation of Barnwell.
About $400 million is being sought from additional investors. One interested firm is said to be the Bechtel Group Inc., of which Secretary of State-designate George P. Shultz is president and Defense Secretary Caspar W. Weinberger a former officer.
A White House decision on the new proposal is expected in late July. A copy of the recommendation has been obtained by The Washington Post.
The Barnwell plant is designed to separate plutonium from the spent fuel elements of nuclear power plants. About $250 million had been spent on it when Carter ordered the "indefinite deferral" of commercial reprocessing in this country in 1977.
Carter argued that use of reprocessed plutonium to refuel atomic power plants would not be economically competitive with slightly enriched uranium, and that the spread of reprocessing technology to Third World countries would increase the global availability of plutonium that could readily be used to fabricate nuclear weapons.
President Reagan, however, has repeatedly declared since his inauguration that he favors development of a commercial reprocessing industry in the United States. While he rejected an earlier recommendation from Edwards that the government buy the plant, the president instructed the Energy Department to "develop further recommendations for my further review on how to create a more favorable climate for private reprocessing efforts."
The result is the proposal that has gone to the White House that would provide government protection for private investors in Barnwell against "future policy changes" and which would have the government assure a "near-term demand for services."
"Completion of the Barnwell Nuclear Fuel Plant represents the only practical means of achieving a domestic reprocessing capaibiity within the next l0 years," the report says. "The stated plans of the present owners to abandon the facility, and the current interests of potential domestic and foreign investors in maintaining the facility, require urgent efforts by government and industry if the Barnwell plant is to be operated as a private venture."
The government protection for investors in the plant, sources said, would not apply to the original consortium.
The Energy Department said one possible investor that had indicated an interest in "investing in and utilizing the services of" the plant was a West German industry. "It is the Department of Energy view that such participation is highly desirable," the report to the White House said.
The Energy Department, in its recommendation to the White House, says it would propose to work with the State Department and private industry to "facilitate foreign involvement" in Barnwell to the extent its domestic investors desire it.
While the report mentions the possible use of plutonium reprocessed at Barnwell to produce new fuel for the nation's 75 nuclear power plants, the Energy Department makes it clear the primary argument for Barnwell is the need for plutonium to start the proposed Clinch River fast breeder reactor in Tennessee.
The Clinch River breeder, which would produce more plutonium fuel than it uses, was also placed on hold by Carter in 1977, but it too has been revived by the Reagan administration.
The Energy Department, in its proposal to the White House, said it would negotiate with Barnwell's owners to purchase "quantities of plutonium sufficient to sustain the U.S. breeder development program" and to permit experimentation with the use of plutonium as fuel in conventional nuclear power plants.
James Buckham, president of the consortium that operates Barnwell, said the government would need about half the output of the reprocessing plant "for the rest of the century for the breeder program that has been outlined."
The Energy Department says the government would purchase plutonium at a negotiated price that would be "competitive with or less than the costs to obtain plutonium by alternative means." The only present alternative source of plutonium in this country is the military nuclear weapons program.
"That is very, very expensive plutonium," Buckham said.