ML20012B710

Forwards Legal Opinion Addressing Validity of Trust Fund Agreement Under State of Ne Law for Decommissioning Fund Plan,Per 900103 Request

ML20012B710
Person / Time
Site:	Fort Calhoun
Issue date:	01/19/1990
From:	Marcil J OMAHA PUBLIC POWER DISTRICT
To:	Wood R NRC
References
NUDOCS 9003160144
Download: ML20012B710 (5)

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~g 402/636-2000 January 19, 19901

.Mr. Robert S. Wood U. S. Nuclear Regulatory Commission 0WSN 12E4 Washington, D. C.

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SUBJECT:

Omaha'Public Power District fort Calhoun Station Unit No. 1 Decommissioning Funding Plan

Dear Mr. Wood:

Attached is the legal opinion you requested in our conversation of January 3, 1990 regarding the OPPD Decommissioning Funding Plan submittal.of October 27, 1989. This opinion addresses the validity of the Trust 3

Agreement under Nebraska Law.

As we, discussed and outlined in our October-27 submittal letter, OPPD is a legal subdivision of the State of Nebraska. All of the District's funds are directed and invested in manners similar to our submittal due to State statutes and our Bond' Indentures.

.Upon completion of your review, we plan to proceed with the implementation

of.our OPPD fort Calhoun Station Unit ~No. 1 Decommissioning Funding Plan.

Sincerely, Y

=s J. W. Marcil Division Manager -' Finance cc: LeBoeuf, Lamb, Leiby & MacRae R. D. Martin, NRC Regional Administrator A. Bournia, NRC Project Manager sP. H. Harrell, NRC Senior Resident Inspector K. J. Morris W

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440283450390 SYtPHEN M. DRUCRNER Omaha-Public Power District 444 South 16th Street Mall Omaha,JNE 68102 i:

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Omaha Public Power District, Omaha, Nebraska

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(the " District")

10 C.F.R. Part 50 - External Trust Fund For Decommissioning the Fort Calhoun Nuclear Power Generating Station Unit No. 1 (the " Fund")

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Gentlemen:

You have asked our opinion with respect to. the District's

-1 proposed trust agreement for the establishment and administration of '.the above referenced Fund.

Specifically, you wish to know I

whether: or not, in the event of the insolvency of the District, l

the assets ' of the. Fund could be reached by creditors of - the

' District and used to discharge obligations of the District other

. than. its. decommissioning obligation.

For the reasons stated

'below, we are of the. opinion that the monies held in the Fund h

'could not be reached by creditors of the District in the event the L

District became insolvent.

The purpose of the-Agreement, ~as expressed in Section 2 thereof, is the establishment,of a separate segregated trust fund for the benefit of the Nuclear Regulatory Commission (the "NRC"),

Land for.the purpose of discharging the District's legal obligation

.to decommission its' Fort Calhoun Nuclear Power Generating Station Unit No. 1 (the " Station").

The creation of. a trust for the purpose of discharging a legal obligation is a valid purpose for which a trust may be-created.y Furthermore, provided the trust instrument so states, the income and/or principal of a trust can be placed beyond the reach of other -creditors of the beneficiary E

See P t erson v.

Lanning, 62 Neb. 634 (1901), Conveyance of property to trustee for sole -purpose of satisfying certain l

specific debts held to be a valid trust enforceable pursuant to its terms; and 76 Am.Jur.2d Trusts 9 19 (1975).

-l Omaha Public' Power District January-17, 1990 Page 2 thereof.2

~Such trusts, containing provisions stating that trust assets and/or income are not attachable by ' creditors of the trust beneficiary, are commonly referred to as

" Spendthrift" or

" Protective" trusts.

Such-Spendthrift or Protective Trusts are valid and' enforceable in Nebraska pursuant to their terms 3 Thus, in the case of the Fund, the purpose for which it is created - (i.e., the discharge of the District's responsibility to provide sufficient monies to decommission the Station), is a valid purpose for which a trust may be established.

Also, since the trust will -discharge a legal obligation of the District, the District is a beneficiary of-the Fund.

As previously noted, the property of trusts may be placed beyond the reach of the creditors of the beneficiaries thereof provideg it is the express intent of the creator of the trust to do so.

Sections 9 and 16 of the Agreement clearly state-that the principal and income of the Fund may be used for no purpose other than for decommissioning, and may not be reached by any creditor of the District:

"All monies, deposits and securities held in the ' Fund pursuant to the Agreement shall be used solely for the costs of decommissioning.

No principal or income payable to, or to become payable under,.the Fund shall vest in the District for any other purposes except those specifically provided herein.

No principal or income of the Fund shall be taken or reached by any legal or equitable process in satisfaction of any debt of the District," (emphasis. original), (Section 9){ and "The District shall have no rights to the monies held in the Fund except as provided in the' Agreement," (Section 16).

1 2

See First National Bank of Omaha v.

First Cado Corp., 189 Neb.

734, 205 N.W.2d 115 (1973); Summers v.

Summers, 177 Neb. 365, 128 N.W.2d 829 (1964); Beals v. Croughwell, 140 Neb. 320, 299 N.W.

638 (1941); -Flanagan v.

Olderog, 118 Neb.

745 (1929);

Weller v.

Noffsinger, 57. Neb. 455 (1899) ; and 76 Am.Jur.2d Trusts 5 163 (1975),- "The protection of a beneficiary against voluntary or involuntary alientation may be validly effected by Protective Trusts".

Supra, Note 2.

4 See Weller v.

Noffsinger, 57 Neb. 455 (1899); and 76 Am.Jur.2d Trusts 9

150 (1975),

"An instrument designed to create a

spendthrift or protective trust is to be construed so far as possible to carry out the intention and purpose of the trustor or founder."

t Omaha Public Power District January 17, 1990 Page 3 Finally, as stated above, Spendthrift or Protective trust are enforceable pursuant to their terms in the State of Nebraska.g Therefore, since the Agreement clearly states that no income or principal of the Fund may be reached in satisfaction of any debt of the District, and since such trust provisions are enforceable in Nebraska, we conclude that, in the event of the insolvency of the District, undistributed income or principal of the Fund could not be reached by the creditors of the District.

It should also be noted that the Agreement as drafted does give the District the authority to direct the investment-of monies in-the

Fund, however such authority is not necessarily inconsistent with the NRC requirement that decommissioning funds be outside the licensee's administrative control.

The District may. direct the investment of the Fund only through the trustee (who holds legal title to Fund assets) and only pursuant to the strict parameters of the Agreement pertaining to the allowable Permitted Investments.

Permitted Investments (as defined in Section 5 the Agreement) are strictly limited to (1) obligations of the United States Government and (ii) investments permitted by

' Nebraska law-to be made by public power districts.

And-excepting only its ability to direct investment, the District has no control over the management and administration of the - Fund whatsoever, such duties being solely the responsibility of the trustee.

Also, the ability of-the beneficiary of a trust to exercise a certain limited degree of authority over the trust property generally will not invalidate a trust.

For example, a valid trust can require-the trustee to obtain the approval of the benefigiary prior to thg j

exercise of certain of the trustee's powers and/or duties.

Likewise, the beneficiary of a trust -may even act as one o invalid f several trustees thereof without rendering such trust j

Thus, even in the event of a court determination that the i

District, due to its ability to direct investment, was-both trustee and beneficiary of the Fund, such a determination should 1

not invalidate the Agreement.

For the foregoing reasons, we are of the opinion that the Agreement as drafted creates a valid Protective Trust enforceable in this state pursuant to its terms, and that, in the event of the insolvency of the District, the property of the Fund, to the extent undistributed, could not be reached by creditors of the District in satisfaction of the District's debts.

While the factual situation underlying the establishment of the Agreement and the Fund is somewhat unique, and while our opinion is limited g_ Supra note 2.'

6 See 76 Am.Jur.2d Trusts 5 336 (1975).

See Jones v. Shrigley, 150 Neb. 137, 33 N.W.2d 510 (1948).

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- Omaha'Public Power District j

January 17, 1990 Page 4 tozthe law of the State of - Nebraska as presently in -- ef fect with respect-to Spendthrift and/or Protective Trusts generally, such' trusts have been consistently upheld by the courts of this state as valid and enforceable.

This opinion is provided solely for'the benefit of the Omaha Public Powcr District.

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ery.truly yours,

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Stephen G5 Olson FOR THE FIRM r

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