ML20098F095

Comments on 840314 Partial Initial Decision on Phase I Proceedings Re Util Application to Operate Plant.Conclusions Relating to Brown & Root,Inc Should Be Refrained Pending Development of Evidentiary Record.Served on 841001

ML20098F095
Person / Time
Site:	South Texas
Issue date:	09/27/1984
From:	Reasoner H BROWN & ROOT, INC. (SUBS. OF HALLIBURTON CO.), VINSON & ELKINS
To:	Bechhoefer C Atomic Safety and Licensing Board Panel
References
CON-#484-144 OL, NUDOCS 8410020310
Download: ML20098F095 (11)

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q '~ p VINSON & ELKiNS '

ATTORN EYS AT LAW rimstcTYTo g E,i-1 P' 9 HOUSTON, TEXAS 77oO2 6760 TELtowo.sg 7 3 ess.2222 TWE 9608816391 TELEX 762146 ,

HOs CossatCTICUT Avt..s.w sufft 900 47 CHARLES ST,.stmaELEY SOUAmt WASNINGTON,0.c.2OO36 4303 INTtmFansT Towsm LONDON wtx 7Ps. ENGLAND AUSTIN, TEXAS 737Cl*3898 TELEPM ON E 202 862-6800 TELEPHOut 44 Op mee-723e TELEPMONE sat 47e 2500 cA.Le wNeu. ..TakeX . O coativi. woo . rstra 0 September 27, 1984 is ;r .

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, , i *t Mr. Charles Bechhoefer Chairman ' U U. ty.,q,'$d

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Atomic Safety and Licensing Board M -y9 U. S. Nuclear Regulatory Commission Washington, DC 20555 d(

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Dear Mr. Bechhoefer:

I write as lead counsel representing Brown & Root, Inc.

in the multi-billion dollar lawsuit brought against it by Houston Lighting & Power Company ("HL&P") and the three other co-owners of the South Texas Project, Units 1 and 2

("STP") . As you may be aware, this lawsuit currently is pending before Judge G. P. Hardy, Jr., in the District Court of Matagorda County, Texas, 130th Judicial District, Case No. 81-H-0686-C.

I have reviewed your Partial Initial Decision ("PID"),

dated March 14, 1984, on the Phase I NRC proceedings re-lating to HLSP's application to operate STP, and your more recent decis:.ons of May 22, 1984, June 11, 1984, July 10, 1984, and September 7, 1984, describing the Licensing Board's intentions with respect to the Phase II litigation of Quadrex F.eport issues, i

Your ?ID makes a number of negative observations about Brown & Rcot, even though Brown & Root is not a party and no party has presented Brown & Root's side with regard to any controvert 3d iscue. While we do not object to your deter-minations as to HL&P's character and competence, we are concerned by the negative statements contained in your PID about Brown & Root.

If you reflect upon it, I believe you will recognize that you have no basis acceptable under American administra-tive law standards, or, indeed, any basis that can be sup-ported with logical integrity to reach conclusions regarding Brown & Root. The evidentiary record is flawed and either incomplete or non-existent, for example, on the following issues 8410020310 840927 PDR ADOCK 05000490 C)g g PDR \ -

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Mr. Charloc Dachhoefcr S ptemb3r 27, 1984 j Page 2 i

(1) The experience of the project team Brown &

Root assembled for the South Texas Project.

(2) The impact of cost and schedule pressure from the owners on Brown & Root's efforts and on quali-

_ _ ty assurance at the Project.

(3) The involvement of HL&P' as project manager with complete contractual control over . Brown &

Root in Brown & Root's efforts to design and engi-neer the project and to perform quality assurance functions.

(4) The legitimacy of the Show Cause allegations (which HL&P for tactical reasons chose not to

.- controvert) and the proper allocation of responsi-bility between HL&P and Brown & Root for problems that did exist on the South Texas Project.

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(5) The possibility that HL&P's decision to re-move Brown & Root as architect / engineer was done to provide HL&P a scapegoat to deflect criticism from its co-owners and others.

Ny purpose in writing is to ask that you refrain from reaching conclusions regarding Brown & Root where you do not have an evidentiary record developed in accordance with the settled standards of American jurisprudence and, indeed, elementary fairness. Negative observations or conclusions are devastating to Brown & Root's standing in the industry and are harmful to its defense of the multi-billion dollar lawsuit brought against it by the South Texas Project owners. There are no claims against Brown & Root to which we cannot give meritorious answers in the lawsuit when given the opportunity to respond.

Let me add additional reasons why the record before you prcvides no legitimate bisis for reaching conclusions vis-a-vis Brown & Root. We now know that at the very time hearings before you were underway, HL&P had, unbeknownst to Brown & Root, decided to remove BroWIT & Root as architect-engineer and construction manager. It had already taken steps to begin the selection of a replacement. In these circumstances, it is obvious that HL&P and its lawyers had every reason to foist on Brown & Root blame for every problem real or imagined, making Brown & Root a scapegoat.

While Brown & Root witnesses were presented during the

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,. . Mr. Ch2rlo;:; Bachhoaf;r Saptcmber 27, 1984 -

Page 3 hearings, their. selection and the content of their direct testimony was controlled by HL&P's attorneys.

Further, the unreliability of the record concerning Brown & Root was compounded by the agreement of the NRC staff and HL&P to present the case to you on a " stipulated" set of facts. As you know, counsel for HL&P stipulated that HL&P would not challenge the factual findings in the 79-19 Investigation Report, Notice of Violation or Show Cause Order. See Transcript at 8023-24.1/

HL&P had made a tactical decision, taken contrary to Brown & Root's advice, not to dispute the allegations in the Notice of Violation and Show Cause Order. The allegations prior to HL&P's decision not to contest them were solely claims. Had HL&P chosen to show cause why they were incor-rect in whole, or in part, the NRC could have concluded no penalty was appropriate. After HL&P had already responded by not contesting the allegations, a careful 1/ In pertinent part, HL&P's counsel Mr. Axelrad stated:

As we have previously indicated, it is not the purpose of this panel's testimony to respond to any of the statements of fact set forth in Section A-1 of the Notice of Violation, which are based on I&E Report 79-19. We have not prepared our case with a view to responding to those statements of fact because. . .we do not take issue with the ultimate conclusions on these matters drawn by the NRC Staff in the Notice of Violation.

Although some of this panel's [ Messrs. Warnick, Singleton & Wilson) testimony overlaps the time period covered by I&E Report No. 79-19, neither it nor the ecrlier particular testimony of other witnesses, e.g. Mr. Oprea and Dr. Broom, is intended to derogate in any way the admissions contained in our earlier filings, nor to contro-vert in any *?ay t.he conclusions drawn by the NRC Staff in the Notice of Violation which is already in evidence in this proceeding. [Tr. 8023-24 (September 14, 1981)].

Mr. Charlec B;chhosfer Stptcmber 27, 1984 Page 4 review of the factual assertions set forth in these docu-ments by Brown & Root and HL&P demonstrated that many of the NRC Staff findings were in material error, contained substan-tial misunderstandings, and did not present an accurate picture of activities at STP in late 1979 and early 1980.

Indeed, HL&P's attorneys expressly represented to the Department of Justice that they consented to the Show cause-charges even though many of them were unsubstantiated. (See Silbert-to Lippe letter of June 2, 1981 at page 3, attached as Exhibit A.) The stipulation entered in your hearing

, deprived the Licensing Board of the opportunity to gain a real insight into Brown & Root's true role at STP.

Let me also briefly allude to the Licensing Board's reliance in the PID on Mr. Goldberg's commissioning of the Quadrex Report, ara. your intention in Phase II to " assume (as did the Staff) that the various safety deficiencies alluded to in that Report in fact occurred." We respectful-ly submit that the Board's treatment is without legitimate basis. Because of a prctective order in our litigation with HL&P, I am not free to call to your attention evidence developed in discovery. I do want to call to your attention evidence in your own proceeding.

First, Mr. Goldberg's testimony criticizing Brown &

Root was given in 1982, after HL&P terminated Brown & Root and commenced its multi-billion dollar lawsuit against Brown

& Root. The PID makas no mention of Mr. Goldberg's and HL&P's obvious bias against Brown & Root in 1982 Second, in his September 27, 1983 deposition in your proceeding, Mr. Goldberg questioned the experience, objec-i tivity, and competence of the Quadrex Report reviewers. Mr.

Goldberg has given similar testimony undermining the STP

.Quadrex Review during the Allens Creek NRC construction permit proceeding in April 1982. As you may know, Brown & j Root and Bechtel have both prepared extensive analyses of '

the Quadrex Report findings. They demonstrate the unrelia-bility of the Quadrex findings. Mr. Goldberg in his deposi-tion even acknowledged that he shared some of Brown & Root',s

" rebuttals" to Quadrex's findings. September 27, 1983 NRC Deposition of Jerome H. Goldberg at Tr.99-100.

Thus, there is no basis to " assume" that the safety deficiencies alleged in the Quadrex Report "in fact oc-curred." They did not. As with the allegations in the Show Cause Order and Notice of Violation, at the trial stage

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Mr. Chnrles Bschhonfsr '

S;ptcmb r 27, 1984 Page 5 in the pending litigation we intend to rebut the Quadrex allegations and HL&P's involvement in that faulty report.

While considerable harm to Brown & Root's reputation has already been unfairly caused by your PID, we again respectfully urge that your Board, in its future considera-tion of STP matters, avoid making conclusions regarding Brown & Root. We respectfully submit that the integrity of the NRC's licensing process cannot be assured otherwise.

Si rely, rf r y 1. Rea e Attorney o B & Root, Inc.

HMR/ld cc: Dr. James C. Lamb Mr. Ernest E. Hill Alan S. Rosenthal, Esq.

Dr. W. Reed Johnson Christine N. Kohl, Esq.

Finis E. Cowan, Esq. (Houston Lighting &, Power)

Jack R. Newman, Esq. (Houston Lighting & Power)

Ferd. C. Meyer, Jr., Esq. (City of San Antonio)-

William W. Vernon, Esq. (City of Austin)

Thomas J. Heiden, Esq. (City of Austin)

James W. Wray, Esq. (Central Power & Light) ,

Joe H. Foy, Esq. (Central Power & Light)

, Dan M. Berkovitz, Esq.

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.-e w p. - c=u.uw Iawrence Lippe, Chief General Litication and

. Legal Advice Section

. Criminal Division . .

Department of Justs..ce

. Washington, D.C. 20530 Re: Houston Lighting & Power Company,

. South Texas Project

Dear Mr. Lippe:

Immediately upon receipt of the letter dated March 26, 1981, from Karen A. Morrissette of your Section to the Presi-dent of Houston Lighting & Power Company (HL&P),the Company's General Counsel consulted me with respect to the matters there-in. Subs ecuen.tly, I had the opportunity t.o meet with you, Julian Greenspun of your Section,' and Ms. Morrissette to dis-cuss the letter, an opportunity I certainly appreciated and

- which I believe was mutually beneficial.

I requested the meeting because of HL&P's serious concern about Ms. Morrissette's letter. The letter alleges

. that information from the Nuclear Reculatorv Commission (WRC) indicates that certain employees at the .Sout.h Texas Proj ect (STP) have falsified reports in violation of 18 U.S. Code S 1001. The letter further alleces, that the "historv of deficiencies in the Quality A'ssurance Prograr." at STP "also indicates that the actions of. these empicyees are merely HL&P and symptomatic its contractor,of an overall Brown & Root (B pattern

&R) . of neglect" /.by/4 ff

_ c HL&P rescectfully but firml~v desiTs ' as Ene~cM& a t e ;-~ -

and unjustified this wholly conclusorv a$d"unEUo'occ'dEd. d10.E.r i. - -

~ , cation of an overall cattern of neclect.1> HL&P'c - - -* ae-c.CS.ygges l beyond quesi: ion that it has bean conbcientiously] I.

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responsive to matters brought to its attention by NRC Staff--

an ! that the Company has taken tangible steps mentioned be-construc-Icw to assure the soundness and safety of the STP tion. .

First, howevei, with respect to the specific instance.

referred to in the first paragraph of Ms. Morrissette's letter I understand from our discussiens that the matters involved are covered by NRC Inspection and Enforcement Reports Nos.

80-14 and 80-21. You should be aware that the responsible This m.nployees, one a supervisor,. were promptly terminated.

is proof of management's deterWation not to tolerate con-duct of this nature. .The Justice Department, moreover, de-This is not surprising since the alleged clined prosecution.

false statements involved were not, based on my fifteen years' experience as a federal prosecutor, of the kind for which the Justice Department 'would authorice criminal prosecution of those who made* them.

At our meeting, I was told that because ofthe theJustic:

safet.

considerations associated with nuclear f acilities ,

Depart =ent might . bring. charges where otherwise it 'would not.

Even assuming the soundess of this policy, it is important that the Department be aware of the fact that the quality of the structures and equipment in place at STP have recently been examined by NRC personnel, as well as consultants a.nd independent review' committees retained by HI,&P and Brown &

Root and that'-- with the exception of certain welding work which is now being remedied -- all work in place meets appli-cable- requirements and there are no major safety related proble=s. ,

In responding to the general charge in the second

- _caragraph of Ms. Morrissette's letter, HLi.P's record should be evaluated in light of the extraordinary enforcement sys-tem within which the Ccmpany and all NRC licensees, must op-erate. In the case of STP, prior to November,1979, NRC had conducted fif t/-nine (59)* inspecticns at STP: in 19 80, NRC conducted thirty-eight (38) inspections; and in 19 Furthe..- 81 thr'ough c ra ,

April 13, seven (7) inspecticns were conducted.

ERC has had a resident reactor inspector stationed at the STP construction site itself to review aspects of the con-struction program on a daily basis.

Enen from time to time as a re uit of their intensi.

- oversight, NRC inspectors found problems at STP, Thus, whenmanagement a number of responded promptly and effectively.

items of ncn-compliance were called to the Cc,mpany's attenti::

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in Dece=ber, 1979, -- items which led to a Show Cause Order en April 30, 19 80, -- HL&? informed NRC almost contempor-annously of its adoption of a nine point action program for specific improvements in the STP quality assurance program.

It further described its extensive correction program by latter to NRC in February,19 80.

Although after investigation EL&P could not affirm er deny certain of the alleged items of non-compliance, it decided to treat all violations as " substantiated" and to pro.ceed to a much more f ar-reaching evaluation of the " root causes" of these non-compliances:

-- The Company and its contractor, Brown

& Root, undertook a sienificant review and revision of work procedures to pro-vide clearer and more easily understand-

., able guidance to the crafts and inspec-

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tion personnel. ,

-- Procedures for tracking non-conforming conditions were changed to provide manage-ment with-batter tools for identifying and correcting any underlying problems.

-- Programs to control field design daanges were. modified to assure consistency with basic design requirements.

-- Training and indoctrination programs stress-

. ing the importance of quality-related activ-ities wars intensified. .

-- Work procedures were reviewed to incorporate appropriate ' notice of inspection requirements '

and proper docu=entation of completed inspec-tien activities.

-- Deficiencies En* kudit programs were corrected and the audit staff, as uell as personnel responsible for inspection activities, was i significantly augmented.

-- As discussed below, major changes were made '

to increase the participation and visibility of upper management in OA/Ac activities.

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The activities were undertaken.with the advice and

assistance of highly qualified consultants.

A major part of.the C==pany's corrective measures is a more' prominent role for upper management in quality-

• related activities: .

- Mr. Jordan, President and Chief Executive Office of EL&P, met with NRC I&E Staff in Washington i= mediately after issuance of -

the NRC's enforcement order to obtain a first-hand impression of the gravity with which the Commission regarded the observed '

t deficiencies. He has since that data par- '

• ticipated in numerous meetings at the con- '

struction site to review problems and' prog-1 ress at the STP.

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- Mr. Jordan assigned the Company's Execu-tive Vice President and nest senior'engin-

. eering-oriented executive, Mr. Oprea, to (

essentia11v f_ull-time service on the STP.

> -- Mr. Oprea is on the site regularly, and directly supervises the work of the corpor- l ate quality assurance dire = tor, who has been

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moved to the site.

-- The Company has cbtained a highly. respected

. pers'6n with more than twenty years of experi-anc's to serve as Vice President for Nuclear '

.Ingineering and Construction. Additional qualified personnel have been hired and others are being recruited.-

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The effort to' assure the viability of the quality program at the STP is a continuing tash, but very significant i

improvements have already been realized. Nearly all of dozens I l

l of corrective measures to which the Company has committed it-self to the NRC havi been accomplished. At our meeting, you i F

stated the interest of your Section in "scod faith efforts" by manage.ent of a nuclear facility in.a quality assurance program.' Ms. Morrissette's latter refers to " meaningful efforts." Given the corrective acticns outlined in this letter!

l it is dif ficult to conceive of a more impressive array of good '

ML&P managanent

. faith and meaningful effor:s by ntnsgement.

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lawrence Lipps, Chief 4

' June 2, 1981

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< has worked. closely with the MRC to assure that its prograns ce= ply with the conditions of its construction permits and NEC regulations. Under these circumstances, any suggestion by the Justice Depart =ent that future misconduct by individual employees at STP, particularly e=ployees of its independent s centractor or subcontractors, may be attributed to EL&P or its responsible officers would be unf air and unwarranted.

The NRC's continuing interest in these matters is evidenced in a special early hearing .new underway on the issuance of the operating licenses for the STP which is -

basically directed to questions concerning past and current i=plementatien.of the quality programs at the STP. EL&P appreciates your statement that you do not view the fun =-

tien of your Section in the Justice Department to be a -

" regulator." This is, of. course, the function and responsi-bility of the NRC. . .But EL&P wishes to assure you that if probl=-= of concern to your Section arise, it would welcome the opportunity to review them with you to assure that the

. Department fully understands the associated circumstances and corrective actions taken to comply with NRC requirements.

obviously'; it is ~ 1 ways possible that some individual

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e=plcyees at STP will make mistakes, and may even try to conceal them. Although HL&P is taking every step within its power to encourage employees to act in a responsible and professional manner, the size of the Project is too vast and the nurber of a=ployees and documents too many for any management, how-ever vigilant, to prevent these occurrences altogether. It

. is, of course, EL&P's responsibility to make itself aware of '

such occurrences, to th.e extent practicable, and to take appropriate corrective ~ actions. -

The record is clear that EL&P has done this.

Moreover, as I mm certain you are aware, the construc-tion of nuclear power facilities is controversial. There is i

determined and strenuous opposition on the part of some to the South Texas Project. This has resulted in numerous allegations of violations at STP, some well publicized, which prompt investi gatien by NBC has not substantiated. The significance of other alleg'ations, even if confirmed as occurring, has been . grossly exaggerated. Finally, there are particular sensitivities en the part of all -- regulators and regulated alike -- resulting frca the Three Mile Island incident. -

All cf this makes it especially important that there be adequate ccenunication and cooperation between STP nanage-nent and the gRC and your Section, where advisable, so that S'gP

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aschle=s which confide'nt thatarise youcan willbe findplaced. EL&P in p =per

r. cst anxious persp'to 'do What' is expected to construct and operate the South Texas Project in ec=pliance with its pe==its and NRC regulations. -

Thank you again for the opportunity to meet with you,

1r. Greenspun, and Ms. Morrissette, and to review this =atter with you. -

Sincerely,

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. Earl J. Silbert

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