ML20064G292

GE-Hitachi Global Laser Enrichment LLC - Request for New Facility Clearance Under New Ownership (Redacted)

ML20064G292
Person / Time
Site:	07007016
Issue date:	02/18/2020
From:	Jenny P GE-Hitachi Global Laser Enrichment
To:	Document Control Desk, Office of Nuclear Material Safety and Safeguards
References
GLE-2020-0007
Download: ML20064G292 (14)

Text

I GE-Hitachi Global Laser Enrichment , LLC Pat Jenn Sf'cunty M an1ger/L1Cens1ng M anager PO Bo 780 M / C Hl O 3901 iSlle Hiyne R04d W1lm1ngton, NC 28402 0780 USA T 910 819 744 7 r 910 819 S731 C 910 200 0744 pat jenny g com Letter No GLE-2020-0007 February 18, 2020 U S Nuciear Regulatory Commission Attn: Oocument Con~ol Desk Director, Division of Security Operations Office of Nuclear Security and Incident Response Washington. DC 20555-0001 GE-Hitachi Global Laser Enrichment LLC

• Request for New Facility Cle ranee Under New Ownership

References:

1) Leiter from M Baker (NRC) to P Jenny (GLE), "Approval of Facility Clearance Transfer from Global Nuclear Fuel-Americas to Global aser Enrichment", July 12, 2011

2) Leiter from P Jenny to Dir of 01vis1on of Security Operations (NRC), "Updated SF-328, Certificate Pertaining to Foreign Interests and Update GLE OODEP for G -Hitachi Global Laser Enrichment. LLC", February 28, 2019, GL -2019-0079

3) Letter from P Jenny to Dir. Of D1v1slon of Security Operai1ons (NRC), "Update regarding Certificate Pertaining to Foreign Interests for GE-Hitachi Global Laser Enrichment L C,"

December 17 . 2019. GLE-2019-0134 Pursuant to 10 CFR 95 15 and 95 17, GE-Hitachi Global Laser Enrichment, LC (GL ). as the holder of the current GEH-GLE Fae11ity Clearance (Reference 1) under License No SNM-2019.

Docket No. 70-7016. requests a new stand-alone Facility Clearance (1 e. separate from the materials licen e) to refl ct the new ownership of GL By separate letter concurrent with this request. GLE is requesting termination of License No SNM-2019 The new clearance will allow Gl f *2020-0007 F ry 1 2020 Page 1 of 10

GE-Hitachi Global Laser Enrichment, LLC dassified 1nformatJon. including Sensitive Nudear Technology (SNT) and Restricted Data (RD).

to continue to be used. processed, stored, reproduced . transported and handled at the GLE facility, located at.

Global Laser Enrichment. LC 3901 Castle Hayne Road Wilmington . NC 28402 BACKGROUND :

On February 5, 2019, GLE's controlling pare11t companies, the "GE Parties," entered into a non-binding Term Sheet2 with the "Silex Part1es"3 and "Cameco Parties ,"4 whereby Cameco and Silex Systems (via their designated subsidiaries) may acquire all of the GE Parties' outstanding equity interests in GLE . subject to U.S government approvals and other commercial cond1lJons precedent (Reference 2)

As notified by letter on December 17. 2019 (Reference 3). the Silex Parties and Cameco Parties have OON agreed to formally pursue the joint purchase of the GE Parties' equity interests in G E m accordance with a Membership Interest Purchase Agreement (MIPA) signed on December 13, 2019, and as attached hereto in nclosure 4 The closing of the transaction emboched in the MIPA remains subject to US Government approvals. In the event closing is achieved, GLE will beoome a 100% owned subsidiary of Global Laser Enrichm nt Holdings LLC (GLE Holdco). which in tum will become 100% foreign owned , with Silex Systems indirectly holding a 51% majority equity interest in GLE Hold , and Canadian listed company Cameco Corporation indirectly holding a 49% equity interest in GLE Holdco The propo ed ownership structure of GLE is as follows 1

GENE Hol ng l LC ("GENE"). G -H1 cl11 Nuclear Ener y Amenca I C ("G HA. ) and G n raJ Electnc C ny rGE". and log the WI h GENE and GEHA the "G p rti s")

• The stg Term Sh t was non bmdmg ex pt for certain bmdmg prov1s1ons nm nl r latmg to comm rc1a1 t rms betw en t rties for the p nod between execu on of th t rm sh t and execution of o *de m11Jve trans (Wh1Ch s t e a re menl that is being submitted lo USG !or approval o t trans on)

SIi x Syst ms LIITllled ("Stle_x S stems*. and tog U amcco Corporallon ("Cameco*. nd the *c co P rt1es')

GLE -2020-0007 elml 1 7020 I

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The passing of majority ownership from the GE Parties to a foreign entity precipitates the need to undertake a Foreign Own r hip, Control or Influence (FOCI) determination At th same time. such a determination should consider and allow for the unique and important circumstanc s und rpinning the restructure of GLE. including US industrial security policy o jectives presented here, whereby Silex Systems invented and hcemsed tu GLE lhe 'SILEX technology' which is at the core of GLE's business activ1ues Moreover, under the unique bi-lateral treaty between the US and Australia technology wtlh GL per nnel in the U S . and a robust set of secunty-related agreements and pohcres are otherwise mandated by U S laws and regulations to maintain physical protection and controls over access to classified information Since 2016, Gi..E. GEH, Silex Systems and Cameco have held mulllple discussions with the relevant U S government (USG) agencies to discuss the approvals necessitated by the restructuring of GL *s ownership and the manner in which FOCI should be mitigated, given the unique U.S. industrial security policy objectives that are presented here Gl -2020--0007 F bl\la,y 18 2020 Page 3 of 10

GE-Hitachi Global laser Enrichment, LLC Based on these discussions. a FOCI Mitigation Plan has been carefully developed by GLE and Silex Systems in anticipation of Silex Systems' acquisition of a majority interest in GLE . Importantly, this Plan is underpinned by the 'Agreement for Cooperation between the Government of Australia and the Government of the United States of America concerning Technology for the Separation of Isotopes of Uranium by Laser Excitation* (the SILEX Agreement or SILEX Treaty). which was signed by the two governments and passed into law in 2000 In the U.S., this agreement is also known as a Section 123 Agreement (under the Atomic Energy Act of 1954, as amended) .

FOCI MITIGATION PLAN:

The SILEX Treaty provides the framework for the collaboration that has been ongoing between Silex Systems and GLE to commercialize in the United Stales the Separation of Isotopes by laser EXcitation (SILEX) laser enrichment technology that is owned by Silex Systems The SILEX Treaty specifically authorizes the exchange of RO and SNT for further development and demonstration of the SILEX technology. subject to detailed requirements with respect to maintaining physical protection and other security-related controls over information that is subject to the SILEX Treaty Under the legally binding provisions of the SILEX Treaty, the majority of the technology development program conducted by GLE in the US since 2007 has been on a collaborative basis with members of the Silex Systems team. being Australian citizens. working shoulder to shoulder with members of the GLE .team, being US citizens. The collaboration and sharing of classified (RD) information and SNT under the provisions of the SILEX Treaty and associated security regulations and procedures.

including GLE's NRC-approved Standard Practices Procedures Plan. has been very effective in safeguarding RO and SNT over the past thirteen years Notably. in its Nuctear Proliferation Assessment Statement that accompanied the President's transmission of the SILEX Treaty to Congress in 1999, the U.S. State Department has concluded that "the more important features* of the SILEX Treaty *from the perspective of nonproliferation. are the scope of the agreement and the provisions designed to protect against unauthorized disclosure of any SNT and RD." The SILEX Treaty provisions both authorize the transfer and mandate the protection of SNT and RD, thereby providing a substantial security framework that serves to mitigate potential FOCI concerns presented by Silex Systems' acquisition of the majority interest in GLE 5 s Indeed, under v ry 1m1lar cncumstances the NRC dopled the recommendat10t1 of Departm nt of nergy to waive any add1t1onal FOCI mibg tJon measures In granting a Ileen e to Louisiana Energy Services. (LES) own d by URENCO Letter lrom M Combs, DO

• Office of Secunty and Safety. to R Zimm rrnan. NRC Office of Nudear Security and Incident Response (Mar 31 2005) (ADAMS Accession No Ml050980235) DOE recognized that LES was by 11s origin for tgn controlled, as was ,ts

• ss1fled information and l.e nology. and whd th re was a recogm1ed potenll I that new Restncted Data would be ere t d, DOE v1 wed the policies and th8 terms lipulated by the Agre ment between the United States of Amenca and e Gov mments of the Federal Republic of Germany the Kingdom or the ethertands. and the United Kingdom of Great Bnta1n and Northern Ireland r garding the s bltshment. construction. and operallon of a uranium enrichment installaboo in lhe U S as estabfishing protocols that would be followed that would prev nt the dissemination or such new Restncted Data Gl -2020-0007 Febru8ry 18 2020 Page 4 of 10

,I GE-Hitathi Global laser Enrithment, LLC .

However, in light of a small subset of RD

- as defined in the FOCI Mitigation Plan attached hereto in Enclosure 1, additional and specifically tailored FOCI mitigation measures have been incorporated into that Plan.

The key elements comprising GLE's FOCI Mitigation Plan under Silex Systems majority ownership, including measures to protect R D -

• are as follows:

a) Continued compliance with the SILEX Treaty as the primary agreement underpinning the control and security of classified information (US Restricted Data - RD) and Sensitive Nuclear Technology (SNT) under applicable US regulatory laws; b) Amendment of GLE's Standard Practice Procedures Plan (SPPP) to ensure specific security of, and . in addition to existing provisions for the protection of classified information and SNT; c) Adherence to a new Company Security Agreement (CSA) addressing governance-level

• security arrangements required for the protection and security-;

d) Continued adherence to the MNeed-to-Know* prioclple for access to any and all classified information  ; and e) Continued restriction of access to classified and export-controlled information for Cameco personnel.

With regard to the above noted FOCI Mitigation Plan, the draft CSA, attached hereto in Enclosure 1, draws on standard NRC FOCI mitigation principles, though is carefully tailored to reflect that the legally binding SILEX Treaty specifically authorizes the exchange* of RD and SNT and already mandates significant physical protection and other security-related controls over such information._

As further'described in the FOCI Mitigation Plan, the SILEX Treaty's security and information access controls are at least as rigorous as those that are contained in FOCI mitigation plans that have been approved by the NRC and DOE in the past. Accordingly, the CSA is crafted to p r o t e c t -

not specifically identified by the SILEX Treaty. In terms of key FOCI protections, the draft CSA provides the following:

• Mandates an Independent Board Observer and sets out the terms of engagement of the Board Observer;

• _Sets out certain limitations on the powers or actions of the Governing Board of GLE Holdco; GLE-2020-0007 February 18, 2020 Page 5 of 10

GE-Hitachi Global Laser Enrichment, UC

• Provides terms for the operation of the CSA. including specific provisions for the security

• Provides for a Company Security Committee which is responsible for overseeing the security

• Mandates a unanimous Board resolution of GLE- Holdco's Governing Board relating to security of, and access control for classified information (Restricted Data) in Gt.E's possession;

• Mandates that each owner company shall formally acknowledge and approve the Board Resolution of GLE Holdco's Governing Board relating to security of

- (Restricted Data); and

• Provides terms for annual reviews, reporting of violations, and remedies in relation to the operation of the CSA, regarding security In addition to the CSA, the following key amendments to GLE's Standard Practice Security Plan (SPPP) and other associated plans are proposed to be implemented and take effect upon of closing of theMIPA:

• The SPPP will mandate a Senior Management Officer position having the authority and responsibility to ensure that all measures of the amended SPPP and other security plans and procedures are sufficiently resourced and complied with. This individual will have the fiduciary responsibility to ensure that the Security Program is funded adequately to meet the requirements of the SPPP and associated security. regulations;

• The SPPP will mandate that the abovementioned Senior Management Officer and the GLE Security personnel will be US citizens possessing a.valid Q clearance; I

I I - - - - " - -- " . -. " - -- -- """ . - " - " *-

GLE-2020.0007 February 16, 2020 Page 6 of 10

GE-Hitachi Global Laser Enrichment, LLC

• The SPPP will mandate that Need-to-Know for classified National Security Information (NSI) and RD information will be determined by the Facility Security Officer (FSO) in conjunction with the abovementioned Senior Management Officer.

The Governing Board of all entities participating in the restructure of GLE each intend to pass a resolution authorizing and adopting the implementation of the FOCI Mitigation Plan including but not limited to amendments to the SPPP and adherence to a new CSA. Cameco will further agree and acknowledge its restriction of unauthorized access to classified and export-controlled information.

NATIONAL INTEREST JUSTIFICATION:

The requested Facility Clearance is - needed to facilitate the continued development and commercialization of the SILEX technology in the United States, pursuant to the SILEX Treaty.

Granting this Facility Clearance, in conjunction with the adoption of the FOCI Mitigation Plan, is

_consistent with and furthers US national security and policy interests for a number of reasons. First, the FOCI Mitigation Plan effectively protects the small subset of classified information that is not specifically identified under the SILEX Treaty, which itself has been effective as members of the Silex team and the GLE team have worked together for more than a decade. Second, it furthers the stated objectives of the SILEX Treaty, specifically, to allow ongoing collaborative development and commercialization of the SILEX technology among Australia and the United States, and, from the perspective of non-proliferation, protect against unauthorized disclosure of any SNT or RD. Third, it promotes national industrial base policy objectives by allowing the SILEX technology to be maintained and controlled within the United States.

The SILEX technology is a third-generation enrichment technology that through highly selective laser

_isotope excitation provides efficient, low cost enrichment of uranium. It has a separation factor that is considerably superior to that achieved by centrifuges and is more cost effective than centrifuges, which it may eventually replace. It also has the flexibility to produce high assay low enriched uranium

("HALEU") that. is needed _to support the development of several small modular reactors and advanced reactors.

Maintaining this technology in the United States, through the grantirig of a Facility Clearance and

_ related approval of the FOCI Mitigation Plan that continues to allow Silex Systems to participate in joint development, and collaboration as provided by the SILEX Treaty, will not only preserve this advanced technology for use in the United States, helping to restore U.S. leadership in nuclear technology, but also maintail') the technology under US oversight and non-proliferation control.

GLE-2020-0007 February 18, 2020 Page 7 of 10

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I GE-Hitachi Global Laser Enrichment, LLC If FOCI concerns prevent the issuance of the requested Facility Clearance, the restructuring of GLE needed to continue to develop the SILEX technology in the United States could not proceed, and under these circumstances, the technology would need to be returned to Australia. As a result, U.S.

control of this next-generation SILEX laser enrichment technology would be lost.

Furthermore, the National Industrial Security Program Operating Manual (NISPOM) states in 2-300 that the FOCI policy for companies is intended to "facilitate foreign investment byensuring that foreign firms cannot undermine U.S. security and export controls to gain unauthorized. access to critical technology and classified information." Granting the requested Facility Clearance will allow the continued investment by Silex Systems and Cameco in GLE, thereby contributing to the U.S.

industrial base. Further, there is minimal concern with unauthorized access, as the SILEX Treaty authorizes the transfer of RD and SNT under. strict protocols. GLE believes that the above outlined FOCI Mitigation Plan accomplishes the objectives of the SILEX Treaty and NISPOM while meeting the requirements of both legal instruments.

This submittal requesting a new Facility Clearance for GLE includes the following enclosures:

Enclosure 1 attached hereto, .includes the FOCI Mitigation Plan which provides a detailed discussion on the key elements of the mitigation plan including measures under Silex Systems majority ownership. It provides background to the SILEX technology development program conducted by and between Silex Systems and GLE since 2006, and the importance of the SILEX Treaty in meeting the objectives of the FOCI Mitigation Plan. Enclosure 1 also includes the draft of the new Company Security Agreement in relation to the security by GLE and GLE Holdco.

Enclosure 2 aUached hereto, outlines proposed amendments to GLE's Security Plans, including the SPPP and Program Cyber Security Plan (PCSP) with a Matrix of FOCI Mitigation

• Requirements to the control document. The changes proposed in th_e enclosed security plans which include the intended change of company name for GLE (removal of GE-Hitachi") and the FOCI mitigation controls, are submhted herewi.th for: NRC approval:

• GLEP-00009-R, Standard Practice Procedures Plan for the Protection of Classified Matter (SPPP); and

• GLEP-00015-R. Program Cyber Security Plant (PCSP) and associated documents.

GLE-2020-0007 February 16. 2020 Page 8 of 10

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1 GE-Hitachi Global Laser Enrichment, LLC Enclosure 3 attached hereto, provides FOCI related information for the following participating entitles in the GLE restructure:

r-* ------*-*---- ------r. *--- -- .----**-------- ----- *----* --- - . .. . . -*-- ---.-

Attachment 1 , GE-Hitachi Global Laser Enrichment LLC I Attachment 2 I Global Laser Enrichment Holdings LLC It* Attachment 3 *1[ Silex. Systems . Limited 1Attachment 4 r* I . .

i Attachment 5 I t*- * - - - - - - - - t*

l i: i Attachment 6 J_Cameco Corporation _

i Attachment 7 l .. 1

[-Attachment 8 T i Specifically. thE! Attachments to Enclosure 3 provide the following schedules for each of the participating entities:

l.-Schedule A - Ir---------------------

Owners, Officers, Directors & Executive Personnel (OODEP) List - -- - --- * **

! Schedule B I Form SF,-328, Certificate Pertaining to Foreign Interests and Exhibits ,

I Schedule c i Representatives of Foreign Interests (RFI) / Non-Disclosure Certificates (NOC) :

,---------...-*------------------------------- ------------* - -- - ---**** - I ir-----------

Schedule D ;* Certificate of Organization

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

[Schedule E __ i Governance Documents __ _ _

J i_!chedule F __ Financial J_!.)fo_rmation .

Schedule G

• Board Resolutions L----~-*-*

l ~cheduleH , Affidavit Enclosure 4 attached hereto, the Membership Interest Purchase Agreement of December 13, 2019 GLE-2020-0007 February 18. 2020 Page 9 of 10

GE-Hitachi Global laser Enrichment, LLC We appreciate your review of this Facility Clearance request and accompanying FOCI Mitigation Plan. We look forward to engag_ing in further discussions in the near-term, as the outcome of this request for the new GLE Facility Clearance and the associated FOCI determination is key to other

• USG submissions, including a CF!US review by the US Treasury and other interested USG agencies.

In view of the multiple processes and time involved with the request for a stand-alone Facility

)

Clearance, the FOCI detennination and a CFIUS review, we respectfully request the completion of the NRC's Formal Review by August 31, 2020.

Should you have any questions regarding this matter, please do not hesitate to contact me at 910-819-7447 or at pat.jenny@ge.com.

Sincerely, cc.

M. Bailey (NSIR/NRC)

J. Zimmerman (NMSS/NRC)

L. Dudes (RII/NRC)

M. Goldsworthy (Silex Systems)

S. Exner (Cameco)

T. Owens (GLE)

GLE 2020-0007 February 18. 2020 Page 10 of 10

EnclosJJre.1 (Proprietary and St3cunty.Retated tnfQtrnatio~)

. FO.CI Mitigation Plan ahd Draft Company Se.curi.ty* Agreement GlE 2020-0007 Febiuiliy 11L2020

GE~ttltachl Globai Laser .Enrichment, L1C EncJosure. 2 (Security, Related lhfQrmati(>n)

Amendments to the*GLESecutify Pians:

Attachment 1- Matrix ofFOCl:Mitigation .Requirement to Plan Control .

Attachment .2 - GLEP~00009~F( SPPP for GLE Wilmington Fadlities Atta¢hment 3 -*GLEP~OOQ15; PCSP for GLE Wilmington F~cilities, and associated documents GLE 21i2().Q()07, l'~_ary 18, *2029

GE-H"ac:hl ~lpl>al l,aser Enric:hmeill, LlC Enclosure 3 (Secµrity *Related, Proprietary, and Personally ld~ntifiable Information)

• FOCI lnformation including SF-328 submissions *ror:

.; .AttactlmenJ 1 GE-Hitachi Globc:11 .Laser Enriclimel')t LLC

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• Attachment 2 1-- - --- - - * * - ----.

.§t~bal Laser ~rtchment Hokllng$ LLC

.. Attachment 3*. .Silex Systems Llf!!.lted . ___ __ .

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Attachment 4 0 ...,,,,.*. r ,.,_. ' - - ' ----* * - * >

Attachment ~

Attachment 6

• I-. Attachment . 7.

.- i I j Attachment B --. _____ _J GLE 2020-0007 F11bruary 18. 2020

GE~Hltachl Global l,aser Enrichment; UC En~,.osure 4 (PropffetfJ,Y

' . .. -- at,cJ $,:curity Rt#~tt#d Jpform~tic,nJ Membership Interest PurchaseAgreement ("MIPA") dated Oecember 1:a. 201'9. *

• GLE 2020;0007 i='~.,~.2020.