ML20077S420

Response Opposing Alternate ASLB Member 830712 Recommended Decision That Class 104 License Be Granted Upon Condition That Less than 50% of Use of Reactor Be Dedicated to Commercial Purposes.Certificate of Svc Encl

ML20077S420
Person / Time
Site:	05000142
Issue date:	09/06/1983
From:	Cormier W CALIFORNIA, UNIV. OF, BERKELEY, CA
To:	Atomic Safety and Licensing Board Panel
References
NUDOCS 8309220073
Download: ML20077S420 (13)

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, uswac 10 S921 MI:12 UNITED STATES OF AMERICA 0FFICE OF SECR?.TA!;y -

NUCLEAR REGULATORY COMMISSION CCOMETyn /. sgpv g, ciudCy BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of )

) Docket No. 50-142 THE REGENTS OF THE UNIVERSITY ) (Proposed Renewal of Facility OF CALIFORNIA ) License Number R-71)

)

(UCLA Research Reactor) ) September 6, 1983

)

UNIVERSITY'S EXCEPTIONS TO RECOMMENDED DECISION BY ALTERNATE BOARD MEMBER DONALD L. REIDHAAR GLENN R. WOODS CHRISTINE HELWICK 590 University Hall 2200 University Avenue Berkeley, California 94720 Telephone: (415) 642-2822 Attorneys for Applicant THE REGENTS OF THE UNIVERSITY OF CALIFORNIA 8309220073 830906 PDR ADOCK 05000142 PDR G

I. INTRODUCTION i

On April 22, 1983 the Board denied University and Staff motions for summary disposition of Contention II and appointed an Alternate Board Member to conduct further proceedings and report concerning the extent to which the UCLA reactor has been used for commercial and for educational and research purposes.S[ A special evidentiary proceeding was held before the Alternate Board Member '

on May 24-26, 1983. The parties filed proposed findings of fact, conclusions of law and arguments and reply briefs. The Alternate Board Member issued his report in the form of a Recommended Decision (Decision) on July 12, 1983. The report contained the recommendation that UCLA be granted a Class 104 license conditional upon the limitation that less than 50% of the use of the reactor as recorded and reported by UCLA in " console hours" be for commercial use.

Decision,' at 27. The parties were permitted to take exception to the Alternate Board Member's report. Order, at 9. '

II. EXCEPTIONS i

, s l 1. University takes exception to findings, conclusions and recommendations that are based on the Board's ruling,S! i n-j terpreting 10 CFR S50.22, that if a reactor is "used" more than L 3 1/

~ " Memorandum and Order (Ruling on Motions for Summary Disposition of Contention II [ Class of License] and XVIII [ Financial Qualifica- -

tions])", (Order), at 8.

S[ Order, at 8. '

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50% of the time for commercial purposes, it must be licensed as a commercial facility. University subnits that the Board's t ,

"%-of-operating-time test" is incorrect.$ D5 cision, at 26, 31 (Finding 27) , '32 (Findings ,28, 29 and 32), and 33 (Recommenda-

tion 3).

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2. University takes exception to findings that the UCLA facility has engaged in activities for commercial purposes by inferring th'e nature of the UCLA facility's activities from the nature of the specific facility user's activities. Decision, at 12, 25, 26, 27, and 32 (Findings 28 and 29).

3. University takes exception to the failure to con-sider the arguments of University (and Staff) and the considerable evidence of record that University devotes the costs of owning 4

4 and operating the UCLA reactor facility to education and resaarch purposes and not to commercial purposes. .

4. University takes exception to the finding that the reactor has educational use only when it is operating and has no use when it is not operating. Decision, at 24, and 30 (Finding 16).

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5. University takes exception to the use of the term 3/

In a related pleading filed herewith, " University's Response in Support of Staff's Petition for Reconsideration" (Response),

i University joins Staff in urging the Board to reconsider its April 22, 1983 ruling concerning the interpretation to be given S50.22.

" console hours" as a measure of the educational uses of the reactor. The report confuses operating time measured by the running-time-meter-with the term used by Mr. Ashbaugh as his approximation of the student-instruction time that occurs at the reactor console. Decision, at 11, 26, 28 (Finding 5) .

6. University takes exception to the recommendation that UCLA establish a uniform measurement for all categories of reactor use in terms of " console hours" and that UCLA report

" console hours" to the Commission. Decision, at 32 (Findings 30 and 31) and 33 (Reco:mmendations 1 and 2) .

III. DISCUSSION The Alternate Board Member's report is based on a mis-interpretation of the Commission's regulations. Section 50.22 requires an assessment of the purposes for which the costs of owning and operating the facility are incurred. There is no support for the Board's view, also adopted by the Alternate Board' Member (Decision, at 26), that the Commission intended that its class of license decisions would turn on the percentage of the use of the reactor. Application of the "%-Of-use" test to the case of the UCLA facility leads to obvious difficulties. In the first place there is no single, objective measure of the "use" of the reactor. Decision, at 22-25. The Alternate Board Member proposes

.his own measure based on " console hours", a term developed by t

University's witness. However, the record is clear that this term was used as an approximate measure of instruction time at the reactor console. Moreover, in attempting to establish a e

" uniform measurement" of reactor usage the Alternate Board Member is led.to the untenable conclusion (for a facility that operates only 5% of the time) that the reactor facility has no "use" except when it is operating. Decision, at 24. The evidence of record is substantial that the reactor facility has considerable use in laboratory analysis, lecture and preparation work, main-tenance, demonstrations and other support activities even when the reactor is not operating, notwithstanding that there is no simple way of measuring such uses. Decision, at 13-17, Tr. 12-14, 77-78, 288-307, 328-332, UCLA's Exhibits 5 and 6.

Secondly, "use" of the reactor measured in operating time. bears no relation to the actual costs of operating the facility.

Documents submitted in connection with University's motion for summary disposition 1/ establish that the vast majority of operating costs are fixed costs which have not varied with changes in the number of operating hours (measured in " port-hours") reported for non-academic users. Tr. 50-56, 61. For example, it is to be noted (Rebok letter, Attachment D) that although annual port-hours of use reported for non-academic users increased from an average of less than 2 hours2.314815e-5 days <br />5.555556e-4 hours <br />3.306878e-6 weeks <br />7.61e-7 months <br /> in the six years prior to l'978 to an average

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In particular, the Rebok letter of January 25, 1982 (with its Attachment D) and the Affidavit of Don C. Rebok, para. 5-8.

over 200 hours0.00231 days <br />0.0556 hours <br />3.306878e-4 weeks <br />7.61e-5 months <br /> in the 1987-81 period there was no commensurate change in any of the major categories of operating cost or total operating costs over the same period. Moreover, it is clear that non-academic uses of the reactor have not displaced academic uses -

over this same period. UCLA Exhibit 2. Even in a manufacturing concern, a method of cost allocation based on variations in an activity that bore no relation to the manner in which costs were actually incurred would be rejected as unacceptable. A fortiori with University's reactor laboratory, where actual reactor operating time amounts to less than 5% of total time and where, more importantly, reactor operations support the complex and essentially non-quantifiable human activities cf research and education. It is entirely appropriate that the major fixed costs of owning, operating, and maintaining the UCLA reactor facility be allocated to the University's educational and research purposes. Rebok letter, Peterson, ff. Tr. 448 at pp 3-7.

The Board was apparently led to its "%-of-use" test based on CBG's assertion that the UCLA accounting method leads to an absurdity. However, CBG applies its own accqunting method in arriving at the apparent absurdity. CBG asserts that UCLA's method allocates 98% of the costs to less than 10% of the use and notes that in the extreme that method could justify "9000 hours0.104 days <br />2.5 hours <br />0.0149 weeks <br />0.00342 months <br />" of commercial activity per year (if the year had that many hours). But that assertion is based on CBG's definition of "use" and its own method of accounting. By contrast, UCLA's " method",

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which is unexceptionable, requires examination of the way in which its costs of operation are actually incurred and what costs could be avoided if the activity in question was curtailed or discontinued. This method is in accordance with accepted .

cost accounting principally which generally state that an incurred cost should be identified as to the function or purpose for which it is incurred or expended. Peterson, at 4, Decision, at 20.

It is clear with respect to any of CBG's " extreme" situations that most if not all of the elements of cost presently incurred to support the education and research programs would no -

longer be incurred. Most of the costs of a lecturer, two senior reactor operators, a secretary processing student paperwork and a proportionate share of salary benefits, supplies and expenses coul_d be avoided. Moreover, additional costs would have to be incurred to support the greatly increased " commercial" activity, a significant portion of the manager's time and hence his costs would no doubt be involved in marketing, secretarial costs would be incurred to process the paperwork, etc. In short, in any of the extreme situations proposed by CBG, under UCLA's method, the majority of the costs would be readily discerned to be devoted to i commercial activity. But CBG's extreme example is not the situation represented by the UCLA facility. There is no evidence that the costs incurred at the UCLA facility as described in the Rebok letter and Attachments are not incurred for educational and research purposes and there is no evidence that any major categories of f cost could be avoided if " commercial" activity were discontinued.

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As pointed out, S50.22 requires an assessment of the purposes for which the costs of owning and operating the facility are incurred. Reactor facilities at nonprofit educational in-stitutions, where the research and educational purposes of the facility are clearly demonstrated, require no detailed cost accounting ~. But for facilities where the research and educational purpose is not manifest 5/ and reasonable questions concerning the purpose of such facilities are raised, the Commission intends that an assessment be made of the various elements of cost to determine which, if any, have been (or will be) incurred for the purpose of engaging in commercial activity. Of course, the Board's method, based on determining the percentage of operating time spent on commercial activities, would not work with new license applications because ordinarily such facilities would not then be operating.

A. The UCLA Reactor Facility is Not Used for Commercial Purposes The Alternate Board Member's report assumes that the UCLA reactor is used for " commercial" purposes but fails to address University's arguments and evidence of record that the

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Such facilities might include Class 104(c) licensees that are not nonprofit educational institutions operating reactors to support bona fide science and/or engineering programs.

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assumption is based on erroneous characterization of University's activities .5/ UCLA's single, non-academic user is " commercial" in that the reactor services he obtains promote his "for-profit" business interests. However, the use he obtains cannot fairly -

be imputed as University's use.

The Commission is properly concerned with the purpose of the licensee in providing the service, not the purpose of the non-academic user. There is no evidence that UCLA competes with any commercial facilities in making its services available to its non-academic user on a fee-for-service basis. The record is also clear that the non-academic user is charged the same fee that -

has been charged academic users. Decision, at 29, Tr. 56, 138-140, 168-170. The tota? fees collected from the single non-academic user in the year of his greatest use of the reactor is a small peregntage of the costs of operating the facility and, hence, is clearly not profitable. Decision, at 29; Peterson ff. Tr.

448 at 3, 7-8. Moreover, the record clearly shows that the single, non-academic user has contributed the use of his equipment and has lectured and instructed students in his area of expertise in a way that measurably benefits the educational and research I programs of the reactor facility and UCLA generally, and is reason enough for accommodating his use of the facility. Tr. 44, 192-197, 214-218, 220, 224; UCLA Findings 8-11. The University l

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~ " University's Proposed Findings of Fact and Conclusions of Law (Concerning Hearing on Contention II)", June 23, 1983 (UCLA Findings), at 7-12.

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regularly makes its facilities and services available to the public on a fee-for-service basis (for example, computer center services, library services, parking services, hospital services, recreational services) without regard to whether the public user is " commercial". Providing services on a fee basis to both academic and non-academic (commercial) users where the fees do not result in a profit to the activity cannot be fairly regarded as commercial activity. There is no evidence to support a finding that the UCLA facility is engaged in commercial activity.

B. A Proper Method of Accounting for the Uses of the Reactor Would Consider the Reactor-Dependent Activities .

that Take Place Even When'the Reactor is Not~ Operating The Alternate Board Member adopts a narrow, restrictive definition of "use" of the reactor which disregards any use of the reactor facility when the reactor is not operating. In so doing, the Alternate Board Member rejected the testimony of the accounting experts. University's expert, a partner of the " big eight" accounting firm (Deloitte, Haskins and Sells) that functions as the outside auditors of the University, outlined several methods that could be used to allocate costs and chose a " conservative" method that related reactor-dependent class hours to academic and non-academic "research" measured in " port-hours". Tr. 425-428, 433. Staff's financial analyst considered reactor-dependent student hours an appropriate method to allocate costs. Peterson, ff. Tr. 448, at 2, 5-8.

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Although the Alternate Board Member stated that there was "little argreement" among the accounting experts, the record is clear that University's expert and Staff's expert re'garded their methods as equally valid and consistent in requiring that '-

reactor-dependent activities be considered. Tr. 433-435, 437, 441, 459, 462-463. CBG's accounting expert, who professed no experience in university accounting, disagreed with the methods chosen by Staff and University witnesses to account for reactor-dependent activities. However, he did state that a basic principle of cost accounting "is that costs should follow services rendered", a statement of principle that is not much different from the statement of University's expert that costs should be allocated on the basis of " benefits that are derived." Baefsky, ff. Tr. 636, at 2; Tr. 425. Moreover, CBG's expert seemed to concede that if the reactor was " critically necessary" for a parti.cular class lecture, that class lecture could properly be considered a use of the reactor. Tr. 721. The evidence of record supports the view that any allocation of costs of the reactor facility should consider reactor-dependent activities.

Having rejected the expert opinion, the Alternate Board Member proposed his own method based on the concept of " console hours" which was described by University's Mr. Ashbaugh. Tr. 363.

However, the report confuses " console hours" with the running-time-meter which University's Ostrander mentioned. Decision, at 11, Tr. 157-158, 363. Mr.- Ashbaugh stated that " console hours" t

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were his approximations based on his first-hand knowledge and that no record was kept of console hours. Tr. 308, 313, 355, 363-366, 386-387, 410-411. The Alternate Board Member's adoption of a cost accounting method based on his understanding of " console <

hours" is not supported by the record. Apparently, the Alternate Board Member's reason for adopting his method was because there was "no objective method for establishing the educational use of the reactor when it is not operational." Decision, at 24. How-ever, he overlooks the fact that UCLA has never had to record and report the educational use of its facility. University sub-mits that under the correct interpretation of S50.22 such reporting should not be required as it would impermissibly result in sub-jecting University to a new regulation not applicable to other licensees. The Alternate Board Member's allocation of uses is incorrect.

IV. CONCLUSION For the reasons above, University respectfully requests that the Board reject the recommendations of the Alternate Board Member and find that the 104 (.c) license of the UCLA facility shoul'd be renewed without conditions.

Dated: September 6, 1983.

DONALD REIDHAAR GLENN R. WOODS CHRISTINE HELWICK By ^>D^ O WILLIAM H. CORMIER Representing UCLA L-

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of )

) Docket No. 50-142 THE REGENTS OF THE UNIVERSITY ) (Proposed Renewal of Facility OF CALIFORNIA ^

) License Number R-71)

)

(UCLA Research Reactor) )

CERTIFICATE OF SERVICE I hereby certify that copies of the attached: UNIVERSITY'S EXCEPTIONS TO RECOMMENDED DECISION BY ALTERNATE BOARD MEMBER.

in the above-captioned proceeding have been served on the following by deposit in the United States mail, first class, postage prepaid, addressed as indicated, on this date: September 6,1983 .

John H. Frye, III, Chairman Mr. Daniel Hirsch Administrative Judge Cte. to Bridge the Gap -

ATOMIC SAFETY AND LICENSING BOARD 1637 Butler Avenue, (203 U.S. Nuclear Regulatory Commission Los Angeles, CA 90025 Washington, D.C. 20555 Mr. John Bay, Esq.

Dr. Emmeth A. Luebke 3755 Divisadero (203 Administrative Judge San Francisco, CA 94123 ATOMIC SAFETY AND LICENSING BOARD U.S. Nuclear Regulatory Commission Mr. Daniel Hirsch Washingtbn, D.C. 20555 Box 1186 Ben Lomond, CA 95005 Mr. Glenn O. Bright Administrative Judge Nuclear Law Center ATOMIC SAFETY AND LICENSING BOARD c/o Dorothy Thompson U.S. Nuclear Regulatory Commission 6300 Wilshire Blvd., #1200 Washington, D.C. 20555 Los Angeles, CA 90048

. Ms. Carole F. Kagan, Esq. Ms. Lynn G. Naliboff ATOMIC SAFETY AND LICENSING BOARD Deputy City Attorney U.S. Nuclear Regulatory Commission City Hall Washington, D.C. 20555 1685 Main Street Santa Monica, CA 90401 Counsel for the NRC Staff OFFICE OF THE EXECUTIVE LEGAL DIRECTOR Chief, Docketing and Service Section U.S. Nuclear Regulatory Commission OFFICE OF THE SECRETARY Washington, D.C. 20555 U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Mr. James A. Laurenson Administrative Judge ATOMIC SAFETY AND LICENSING BOARu U.S. Nuclear Regulatory Commission u q ~ ,

Washington, D.C. 20555 i WILLIAM H. CORMIER UCLA Representative THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

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