ML14164A728

NRC-026 - Letter from Jay Silberg, Counsel, Aerotest Operations, Inc., to the NRC Document Control Desk, Response to Request for Additional Information Application for Approval of Indirect Transfer of Control of License of Aerotest (Redacte

ML14164A728
Person / Time
Site:	Aerotest
Issue date:	01/10/2013
From:	NRC/OGC
To:	Atomic Safety and Licensing Board Panel
SECY RAS
References
RAS 26038, ASLBP 14-931-01-LT-BD01, 50-228-LT
Download: ML14164A728 (21)

Text

NRC-026 Submitted: June 13, 2014 Pillsbury Winthrop Shaw Pittman LLP 2300 N Street, NW I Washington, DC 20037-1122 I tel 202.663.8000 I fax 202.663.8007 Jay E. Silberg tel202.663.8063 jay.silberg@pillsburylaw.com NOTE: Attachments to this document contain confidential information submitted under 10 CFR 2.390. This -information is Business Confidential to Aerotest and Nuclear Labyrinth and is identified with brackets as such [] or in the case of attachments in their entirety.

January 10,2013 ATTENTION: Document Control Desk U.S. Nuclear Regulatory Commission White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 AEROTEST RADIOGRAPHY AND RESEARCH REACTOR DOCKET NO. 50-228/LICENSE NO. R-98.

RESPONSE TO REQUEST FOR ADDITIONAL INFORMATION RE:

APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OF CONTROL OF LICENSE OF AEROTEST RADIOGRAPHY AND RESEARCH REACTOR PURSUANT TO 10 CFR 50.80 (T AC NO. ME8811)

Ladies and Gentlemen:

Enclosed please find the response of Aerotest Operations, Inc. ("Aerotest")

and Nuclear Labyrinth LLC ("Nuclear Labyrinth") to the U.S. Nuclear Regulatory Commission's Request for Additional Information Re: Application for Approval of Indirect Transfer of Control of License of Aero test Radiography and Research Reactor Pursuant to 10 CFR 50.80 (TAC No. ME8811), December 10,2012 including supporting affidavits on behalf of both Aerotest and Nuclear Labyrinth. Also enclosed are a request to withhold confidential information from public disclosure and a copy of the response redacting the confidential information. Because of his travel commitments, the signed affidavits of Dr. Slaughter will be transmitted separately, within the next several days.

www.pillsburylaw.com 403691180v1 or O(i.Ss A-s ._.1.-S r p<:£ FH

January 10, 2013 Pag~ 2 Should you have any questions or require additional information regarding this submission, please contact Jay Silberg, counsel to Aerotest at 202-663-8063 or jay. silberg@pillsburylaw .com.

Sincerely yours,

~f\WJ Jay~il~erg J Counsel for Aerotest Operations, Inc.

Enclosures

1. Response to Request to Request for Additional Information - proprietary copy

2. Response to Request to Request for Additional Information- non-proprietary copy

3. Request to Withhold From Public Disclosure cc: U.S. NRC Office ofNuclear Reactor Regulation/NRLPO U.S. NRC Region IV, Regional Administrator NRC, NRR (Traiforos)

NRC, OGC (Uttal)

NRC, OGC (Safford) www.pillsburylaw.com 403691180v1 January to, 201-3 Page 2~**

STATE. OF NIICHIGAN .....

':' .ro~V~~rr:

COUN:'f'YOF OAKLAND

• 1, Michaels. A:nderson,.*stafe that'Tani'the,*:sec*rettir.)iofAerotesrOper~tions,Jnc:.,.and:.thatLam duhr ~uthori~~d tb,'e~ec~t6~ni.ft'i'ie *. th{s.~~~ponse.bkb~half.ofAer~tcs.t Oper~ti~ns,_ I'nc*.-*+() th~.

besi:q(my](l10'N,l~.<ige. ~T1d. b,¢lief,:the_ ~ta(eirjents*c~nt(ljned:iJ1 tl;lis _dpcumynJ:\\)iJh:r~spect to:

.Ae,r~t~st'@.petation~,,'Jri,<;~ :~te *:rrueiand.correcL

• Subsc.;ri1Je4 and :swotif b¢f()re:Ii1e,:.a Notary Public* i1i. ancf'for:tne .State* ofMknigan and County of OaW4nd,Jft1s: c..:t<L 9.af dfJan~~rt*20l,3~ *

• d!:L.,i;};;:l-',.*}J/i.:~~'-.c';*****~*~**<-. cSc~.~'<*i:'c~>'

Notlll'y: Eti~Jic c:*/. / . *.

.lr.::J<>/:/'_1

~

/ .,/7 *

.j. *.:

Aerotest Radiography and Research Reactor Docket No. 50-228 Enclosure 2 Non-Proprietary Copy January 10, 2013

1. a) Provide any additional source(s) of funds that have not been previously disclosed to the NRC to cover the projected operating costs for the first five years of operation of the facility.

In addition to the funds transferred at closing, Nuclear Labyrinth expects to cover the first jive years of costs with fees from services. Exhibit 1 provides customer communications from several ofAerotest 's previous customers indicating their intent to use Aero test's services once the facility is operational and able to provide service. Also included are communications from prospective customers seeking services from Aero test.

1. b) Provide a draft financial support agreement between Nuclear Labyrinth and Aero test sufficient to cover operations and maintenance costs for a period of 6 months. In addition, provide evidence ofNuclear Labyrinth's ability to provide the amount stated in the financial support agreement.

Exhibit 2 provides a draft support agreement between Nuclear Labyrinth and Aerotest. As provided in response to previous RAis, Autoliv will transfer funds sufficient to cover twelve months ' worth of operating and maintenance costs. The support agreement ensures that these funds are used only to fund operations and maintenance costs for the Aerotest facility.

2. a) Update and provide Attachments 6 and 7 to include information required pursuant to 10 CFR 50.33(f)(2) (i.e., the annual operating cost for each of the first five years).

Exhibit 3 provides updated Attachments 6 and 7. Attachment 6 provides the detailed information supporting the operating expense projection for the first year of operation after closing the transaction. As provided in our prior submittals, at closing of the transaction, seller will transfer funds sufficient to fund twelve months of operating expenses during the restart of the facility and its resumption of commercial operations. Attachment 6 is the basis for the amount offunds that seller will provide. Attachment 7 contains the projected income statement for Aero test for each of the first jive years after closing the transaction, inclusive of the first year provided in Attachment 6.

The first year of operating expenses for Aerotest Operations, provided in Attachment 6 and , are based on the actual costs for 2011 as provided in Exhibit 4 Aerotest Historical Financials. Since it is conservatively assumed that there is no revenue for the first year, the projected income statement, provided in Attachment 7, reflects only the initial contribution from Autoliv available to cover expenses.

Revenues are expected to begin in the second year following the transaction. Revenues are projected from participation in four areas: (1) Neutron Interrogation by Radiography; (2)

Nuclear Science and Engineering Research; (3) Training; and (4) Neutron Science/Engineering 403805242vl Research (without the use ofARRR). These revenues will fund reactor operating, training, research, and service activities that will be rendered at the facility. The costs include many of those categories provided in Attachment 6 and others directly related to the specific activity.

Revenues are calculated differently for each activity. [

1 Fuel replacement, NRC, and fuel storage (after closure) costs while integrated in the service charge are tracked separately from the other expenditures for convenience. Historical data shows that the needed contributions for fuel replacement have been approximately five percent of the unadjusted cost of tasks that use the ARRR. Similarly, the NRC fees have historically been approximately 10-15% of that same unadjusted cost. (This does not include NRC fees associated with relicensingor foreign divesture activities).

The projected income statement assumes a three percent cost escalation per year for Tasks 1 and 3. For research Tasks 2 and 4, the plan assumes that in the second year of operation 25 percent of the research capacity is used and that the full research capacity is used by the fifth year. Thus, the plan assumes a 25 percent growth in revenue in the area of research, Tasks 2 and 4, until the completion of the 51h-year where the growth rate will be lowered to three percent (the historical inflation rate). This allows the research activities to grow at a controlled and reasonable pace consistent with research acquisition processes and size of the organization. The plan is conservative for the stated amounts ofsustainable research to ensure funding targets and stated financial obligations can be reasonably met.

2. b) Provide financial attachments, with favorable auditor opinion, to support estimated operating costs listed in Attachments (6) and (7).

Exhibit 4 provides the historic financial results for the operations ofAerotest Operations, Inc. *

("Aerotest") that have been provided to Nuclear Labyrinth, LLC (and, previously, with the exception of the years 2010 and 2011, to X-Ray Industries, Inc. and the NRC for the purposes of the Application for Indirect Transfer of Facility Operating License dated January 19, 201 0).

Financial information for Aerotest is and has been collected by Autoliv ASP, Inc. (the ultimate parent company in the US. ofAerotest) according to its standard accounting procedures for reporting the financial results of operating units or subsidiary companies. On a monthly basis, items of revenue and cost are reported for the previous month by each operating unit or

. subsidiary company according to practices and definitions applicable to Autoliv 's internal financial reporting. The resulting income statement is consolidated into financial reports for Autoliv ASP, Inc. Likewise, balance sheet items are reported monthly according to Autoliv 's standard accounting procedures. An annual audit is performed at the Autoliv ASP, Inc. level by Autoliv 's public accountants (Ernst & Young LLP). Typically, operating unit/subsidiary financial results are reviewed by the Autolivfinance department and Autoliv management with the operating unit/subsidiary management.

2 403805242vl The attached historic financial results for Aero test Operations, Inc. were prepared by the Autoliv finance department by compiling the annual results for the years indicated.

3. a) Identify the method to be used by Nuclear Labyrinth to adjust levels of funds assured for decommissioning.

Nuclear Labyrinth will obtain a letter of credit to adjust funding levels for decommissioning.

3. b) Provide evidence that Nuclear Labyrinth will establish the method stated in a).

Exhibit 5 contains correspondence from Centennial Bank indicating its commitment to provide Nuclear Labyrinth with a Letter of Credit.

4. a) Provide itemized estimated annual fuel storage costs, including but not limited to health physicists, security, overhead cost, insurance, etc, until 2055 and information to demonstrate Nuclear Labyrinth's financial ability to provide funding for fuel storage.

Alternatively, if the fuel storage responsibility will be transferred to a different entity, provide information to demonstrate the viability of this option.

The annual costs associated with that fuel storage are:

$30,000 (20 FTE) 0.20 full time equivalent (FTE), performing required surveillances, reporting requirements, and health physics activities doing the course of the year

$15, 000 Maintenance and supply allowance to ensure the proper operation of the equipment,

$5, 000 Annual training in systems, fuel handling, and health physics activities,

$50.000 NRC (ees

$100,000 Annual Total Funds will be collected annually over the 20 year license period and placed in trust until needed for fuel management activities. Exhibit 6 provides the year 2 balance sheet demonstrating the fuel storage fee that will be collected for each task. Even in the unlikely event that the fuel is not shipped until 2055 after the reactor closure in 2035 (assuming a 20 year license extension beginning in 2015), funds for the remaining 20 years to cover storage costs will be available.

The proposed mission of the Aerotest's reactor will support outstanding, cutting-edge and innovative research and educational methods. The proposed education and research activities include but not necessarily limited to:

1. Perform material diagnostics- Neutron Radiography and Tomography, Neutron Activation Analysis, and Ultra Sensitive Fission Track Analysis

2. Identify and quantify explosives and other contraband by neutron interrogation techniques

3. Advance neutron detection, spectroscopy, imaging, and dosimetry

4. Model Neutron phenomena and diagnostic technologies, Radiation Exposure, and Dose 3

403805242vl

5. Design small-modular uranium thorium reactors These activities will be ongoing even after the closure of the ARRR reactor. The facility will therefore continue to be staffed by trained professionals performing the required maintenance, surveillances and security associated with safe storage of the fuel. These activities will be a small portion of the duties of the technical and administrative staff until such time the fuel can be transported and disposed by the DOE.

4. b) State whether the estimated cost of ] includes management costs for new fuel to be purchased. If not, update the estimate to include the management cost and the sources of funds to cover the new estimate.

The estimated cost of } does not include management costs for new fuel to be purchased. As provided in response to question 5b, we do not expect to purchase new fuel.

As requested at the December 19, 2012 meeting with NRC staff, Aero test's agreement with the Department of Energy for fuel disposal is attached as Exhibit 7.

5. a) Provide a date on when the reactor is expected to return to a fully operational condition.

The reactor is expected to be fully operational by September I, 2013. This estimate is based on the expectation that no new fuel elements will be required as discussed in the response to question 5b.

5. b) Estimate the number of fuel elements that need to be replaced in the future and the associated costs.

• Currently, based on a fully reflective core design, we do not expect to need new fuel elements.

However, fuel evaluations are ongoing and core calculations supporting the new core design will not be completed until the end of March. Once these calculations are complete, core re-load and startup testing will be required to confirm that no new fuel elements are re,quired.

6. a) Provide an updated Funding Agreement to include all funds to be provided by Autoliv at the closing, as well as a revised closing date.

The updated Funding Agreement is provided in Exhibit 8.

6. b) Provide information on how the applicants will ensure that the financial support from Autoliv does not result in any foreign control over nuclear safety, security or reliability ISSUeS.

Autoliv will transfer money to Nuclear Labyrinth and Aerotest at closing. There will be no ongoing relationship between Autoliv and Nuclear Labyrinth or Aerotestfollowing the transaction and therefore no possibility offoreign control.

7. Please provide a proposed license amendment and technical specifications, based on your current license, marked up to clearly show all insertions, deletions and revisions.

4 403805242vl Exhibit 9 includes a proposed markup of the current license. Proposed amendments to the technical specifications were submitted in our July 19, 2012 supplement to the application. No additional changes are proposed, and therefore, no additional markups are being submitted.

Exhibits:

1. Customer Communications

2. Draft Support Agreement

3. Updated Attachment 6 & 7

4. Aerotest Historical Financials

5. Evidence of Letter of Credit

6. Year 2 Balance Sheet

7. Department of Energy Fuel Disposal Contract as amended

8. Updated Funding Agreement

9. Proposed License Amendment Markup 5

403805242vl EXHIBIT (1)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Customer Letters of Intent 403805242vl EXHIBIT (2)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Draft Financial Support Agreement 403805242vl EXHIBIT (3)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390

• Withhold from public disclosure under 10 C.F.R. § 2.390 Updated Attachments 6 & 7 403805242vl EX:UIBIT (4)

PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Aerotest :Uistorical Financials 403805242vl EXHIBIT (5)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.P.R.§ 2.390 Withhold from public disclosure under 10 C.P.R. § 2.390 Evidence of Letter of Credit 403805242vl EXHIBIT (6)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Year 2 Balance Sheet 403805242vl EXHIBIT (7)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.P.R. § 2.390 Department of Energy Fuel Disposal Contract 403805242vl EXHIBIT (8)

PROPRIETARY- BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Updated Funding Agreement 403805242vl EXHIBIT (9)

Proposed License Amendment Markup 403805242vl

• .- ""*'~'""

1

-'4 ._: .:....- ; ..... -

"'!_.~

UNITED STATE$

ATOMIC ENERGY COMMISSION

.~ -~ -

WASHINGTON, D.C. 2054~ . ; ; ....

.; ~~

.:. 1 *~ .. ............. ,.;:~ -** t.* lis.

AEROTEST OPERATIONS, . INC.

DOCKET NO. 50-228 AEROTEST RADIOGRAPHY AND RESEARCH REACTOR {Ar..RR)

ANENDHENT TO FACILITY OPERATING LICENSE Amendment No. 1 License No. R-98

1. The t\tonr1c Eue ... gy Conunission (the Commission) has found that:

tnd It'-t.(.,t A. The application fot>"transfer of licensE;! filed ~!' Q~ 5 IM fel' Aerote$t ,Operations, Inc. (the licensee)li'compl:tes WJ.th tne standards and requirements of the Atomic Energy Act of .195_4, as amended (the Act), and the Co:rrAssion' s rules and regulations set forth in 10 CFR Chapter I; B. Construction of the facility has been substantially completed in conformity with Coristruc.tion Permit No. CPRR-86, and the application, as amended, the provisions of the Ac.t and the rules and regulations of the Commission;

c. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the rules and regulations.

of the *Cc:itnmission; D. There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health an(,] safety of the public, and (ii} that 'Such activities tv-ill be conducted in compliance *with the. rules and regulations of the Commission; E. Aerotest Operations, Inc. is technically* and financially qualified to posse~s, use, and operate the facility in accordance lV'ith the rules and regulations of the Commission;

- 2 .;..  ;

~

\. I

~-***~ f_.~ !*

..:,;*\.."

F. The issuan,ce of this operating license will not he inimic.al to the common defemse and security or to the health and safety of the public, and does not involve a significant hazards con..,.

sideratiqn; G. TI1e receipt, possession, ~nci use of byproduct ari.d special nuclear material as a\ltho:ri~~d by this license will be in accordance 1t1ith the Commission's reguljtions in 10 CFR Parts 30 and 70, including Sections 30.33, 70.23, and 70.31; li. The licensee i.s qualified to be the holder of the license; and I. The transfer of the license is otherwise consistent with applicable provisions of law, regulations, -and orders issu~d by th!:! Co::nnission p_ur.suant thereto*.

2. 'fnc.flity Operat:lng License !\o. R-9a, P."'wiau~l.y issued to .*hn;*l?jet Ce:tie:rt:~<l.

CorpotaHOn. is hereby trppsferree ee:1':\erotest Operations, Inc. and the __ .lJ liccns;~ :i.s reissued iu its entirety to read as follows: "tt 16 l,+et~ ),.~~~- '1

. r'd.M\S ~ ~ *\"0 A. This license applies to the Aero test Rad:i ography and Res~~arch Reactor fiJw.~

(ARRR), previously cal] ed the Aerojet General Nuclear Industrial ~nrrh, Reactor (AGNTR)., a pool-type nuclenr reactor mm~d by ..;it!! gr~, IM. U.C.*

The facility is located at. the Acrotest Operations site near S~mA; Ramon, California, ilnd is described in the ap?lic.ation dated \ .. A~ft'~of Septcm~er 14, 1964. (th: application), and in supplements th:reto, O ... .a,..,;IM.c:.,.lnt:..

includ~ng the appllcat1on for transfer of license dilted Apn:l 24, per-~'_-*""? .)

l974x >antllfhc. a pp\l~hort.ft~r-arol,~ ff-tl.rlsfer ~a.+M MA'ot 19o,2.D12.. WWGV\ 1$_

ow~nu R. Subject to the conditions and requirements incorporated herein, the t-J~,.t~

Commission h(!reby liccn:ses Aerotcs l Operations, Inc.:

~(1(\1).-,

(1) Pursuant to Section 104c of the Act and 10 CFR Patt 50, t.J-l...

11 Licensing of Production and Utilization Facilities"., to possess, use, and operate the reactor at the designated location, in San Ramon, Califotnia, in ~ccordanc.c with the procedures and limitations set forth in this license; (2) Putsui::mt to the Act 11nd 10 CFR Part 70, "Special Nuclear Haterial", to receive, possesl) '*arid use up to 5.0 kilograms of contained uranium 235 in connection with opcra~ion of the reactor; and (3) Pursuant to the Act and 10 CFR Part 30, "Licensing of Byproduct N.:ttcrial", (1) to receive, possess, and use a 2 curie *americium~beryllium m~utron startup source, and (2) to possess, but not to separate, such byproduct material as ME1y be producnd by opera.tion of t:hc reactor.

• • ---~----.:. *. ,~~=**Moo!": .---*.

• • • -- L .....

c. This license shall be deemed to contain and is subject to the conditions specific.d in the fol.lwing Comrni!';Sion* regulations in 10 CFR Chapter I: Part 20, Section 30.34 of Part 30, Sections 50.54 and 50.59 of Part SO. and Section 70.32 of Part 70; is subject to all applicable provisions of the Act and to the rules, regulationso and orders of the Com..'llission nOY or hereafter in effect; and is subject to the additional conditions specified or incorporated below*:

(1) t1nxioum PO\Y"cr Level The licensee is authorized to operate the facility at steady

.s.tate pow~r lev~ls not in excess of 250 kilowatts (thermal).

(2) Technical Specifications r

n rrrtl Jt.*q. The Technical Soecifications contained in Appendix A. as revi~ed through Amendment No. 4, are hereby incorporated in the license.

The licensee shall operate the facility in accordance with th~

Technical Specifications.

L-(3) Physical S~curity Plan

') *l'j'"ih; ~:i~ensee shall maintain in effe~t and ful!Y implemo~ all. .

.~ . prov1s1ons of the NRC-approved phys1cal secur1ty plan, 1nclud1ng

~ \~\ amendments and c:han9es made pursuant to the authority of 10

} ~\ . CFR Sec.tion 50.54(p}.. The approved security plan consists

'\~ t~.\' of the document withheld from public disc1~sure pul'"Suant tc?

\~ '\ 10 CFJ.t 2.790(d)o entitled "Aerote~t Operat1o~so Inc:. Secur1ty Plan" dated August 10, 1976. subm1tted by 1et:ter dated

) ~ober 4s 1976, as revised January 16, 1979.

D. Reports In addition to reports otherwise required undeT this license and 3pplicablc reg.ulat:ions:

(l) The licensee shall report in \:r'iting to the Co::rr:!ission v:U:hin lO_dnys of its observed occurrence any incident or condi~ion relating to the operation of the facility which prevented or coul,d have prevented a nuclear system from perfor::1ing its safety function as described in the Technical Specifications or in the Hazards. Summary r.eport.

(2) Th~ licensee shall report to the Commission in writing. To.-:ithin 30 days of its* ohserved occurrence- any ,substantial V<trianc:c disclosed by opl!t.:ition of the facility fro:t perforn:::mi:e speci-fications contained ih the Hazards Summary Report or the

• Technical Specifications.

(3) The licensee shall report to the Cotl'JUission in ,;rriting within 30 d.:>.ys of its occurrence .any significant change in tracsient or accident analysis, as des:::ribed iri the E.azards St~.L!7"!"

Rep or~.

.."""""":'""" ... -~---*-~*

E. Records In addi don to those otherwise required under this license and Appli-cable rt~gula tions, the licensee shall keep the fallowing:

_... ----~*---* *****-------*

(1) Reactor operating records, including prr~er levels.

(2) *ecords of in-pile irradiations.

(3) Records sho..,.,*ing radioactivity released or discharged into the air or ~at~r beyond the effective control of the licens~e as neasured at~the point of such release or discharge.

(4) Records of ~mergency reactor scra,.t!S; including reasons for emergency* shutdo*~'Tis.

F. Tnis amended licer.se is effective as of the date of issuance and shall e:>:pire at midnight April 16, 2005.

FOR 'fHE ATO:*UC E~iERGY Cmfl!ISSIO:\

KRrl R. Goller, A~sistant Direcrcr for Operating P.~actors Director.:n:e of I.ic~nsing Attachme:r~t! 'I Change 't\o. $ to the Technical Specifications Date of Issuance: October 22, 1974