ML20136G398
| ML20136G398 | |
| Person / Time | |
|---|---|
| Site: | Claiborne |
| Issue date: | 03/13/1997 |
| From: | Mcgarry J, Rowden M FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, LOUISIANA ENERGY SERVICES, WINSTON & STRAWN |
| To: | NRC COMMISSION (OCM) |
| References | |
| CON-#197-18207 LBP-96-25, ML, NUDOCS 9703180026 | |
| Download: ML20136G398 (50) | |
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION g
'97 fiAR 13 P3 :56 BEFORE THE COMMISSION OFFICE OF SECRETARY
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00CKETlHG & SERVICE In the Matter of
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BRANCH
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Docket No. 70-3070-ML LOUISIANA ENERGY SERVICES, L.P.
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March 13,.1997 4g (Claiborne Enrichment Center)
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APPLICANT'S BRIEF IN SUPPORT OF ITS PETITION FOR REVIEW OF LBP-96-25
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J. Michael McGarry, III, Esq.
Marcus A. Rowden, Esq.
Robert M. Rader, Esq.
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Robert L. Draper, Esq.
FRIED, FRANK, HARRIS, SHRIVER
& JACOBSON ig WINSTON & STRAWN 1101 Pennsylvania Avenue, N.W.
j g 1400 L Street, N.W.
Suite 900 South i
Washington, D.C.20005-3502 Washington, D.C. 20004 lg COUNSEL FOR APPLICANT
)W LOUISIANA ENERGY SERVICES, L.P.
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DR ADOCK 0700 0
TABLE OF CONTENTS Etit INTRODUCTION..
1
SUMMARY
OF THE PROCEEDING
.3 ARGUMENT
.4 I
The Licensing Board Misinterpreted NEPA and NRC Rules for Considering 1.
the No Action Alternative....
.4 A.
The Board's Ruling Is Unsupported by NEPA and CEQ Guidelines... 4 B.
The Board Departed from NRC Regulations as Well as NRC ant Judicial Precedent.
..7 II.
The Licensing Board Improperly Analyzed the Benefits of the Proposed Action
... 9 A.
The Licensing Board Gravely Misstated the Asserted Benefit of the CEC as a Supposed Reduction in Price for Enriched Uranium Supplies
.9 B.
The Licensing Board Failed to Properly Credit Other Benefits of l
Licensing the CEC
. 14 1.
LES will stabilize and may even reduce prices.
14 2.
LES will bring an environmentally benign and superior production technology to the domestic market...
. 15 3.
The Board ignored the socioeconomic benefits to be derived from the CEC 16 C.
The Licensing Board's Market Forecasting Is Seriously Flawed and Exceeds the NRC's Mandate to Explore Environmental Benefits.
17 l
1.
The Board made clearly erroneous findings regarding the enrichment services market 17 2.
The Licensing Board exceeded the purview of NEPA in evaluating the economics of the CEC.
20 W
TABLE OF CONTENTS (CONTINUED)
.E11Lt III.
The Licensing Board Erred in Finding That LES Has Not Demonstrated Itself Financially QualiSed to Build and Operate the CEC
... 23 1
The NRC Staff Correctly Found That LES Appears to Be Financially A.
Qualified to Construct and Operate the CEC Because It Has a Reasonable Financial Plan Under the Relevant Circumstances
. 24 B.
The Regulatory Framework Shows that the Licensing Board Erred in Equating Part 50 Requirements with Those Applicable to Part 70.. 28 1.
The Licensing Board misapplied the rules of statutory construction
.30 2.
The Licensing Board failed to consider the determination by Congress that uranium enrichment facilities should not'be l
licensed as " production facilities" under Part 50 because of reduced risk...
. 31 l
3.
The Licensing Board ignored the case-specific Hearing Order governing this proceeding
.... 33 l
C.
The Imposition of Part 50 Standards for Financial Qualifications Is Contrary to the NRC's Regulatory Scheme
.35 D.
The Licensing Board Erroneously Required LES to Demonstrate a Present Commitment to Fund the CEC........
. 36 CONCLUSION.
.40 I
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TABLE OF AUTHORITIES
{
COURT CASES All Indian Pueblo Council v. United States,975 F.2d 1437 (10th Cir.1992).............. 8
[
Anson v. Eastburn. 582 F. Supp.18 (S.D. Ind.1983).............................. 21
[
Association Concerned About Tomorrow. Inc. v. Dole. 610 F. Supp.1101 (N. D. Tex 19 8 5 )................................................
. 21
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Barlow v. Kaminsky 144 Conn. 612,136 A.2d 792 (1957)........................ 34 Brooke Grouo Ltd. v. Brown & Williamson Tobacco Coro. 509 U.S. 209 (1993)
. 20 Citi7 ens Aominst Burlinnton. Inc. v. Busev. 938 F.2d 190 (D.C. Cir.1991)......... 9,17,22
(
Coalition for the Environment v. NRC. 795 F.2d 168 (D.C. Cir.1986)............... 28 Farmland Preservation Assn v. Goldschmidt. 611 F.2d 233 (8th Cir.1979)............
8 Florida Public Telecommunications Ass'n v. FCC. 54 F.3d 857 (D.C. Cir.1995)......... 30 Hartford Fire Ins. Co. v. California. 509 U.S. 764 (1993).......................... 20
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Havasunai Tribe v. United States. 752 F. Supp.1471 (D. Ariz.1990).................. 8 Mountain States Lenal Foundation v. Glickman. 92 F.3d 1228 (D.C. Cir.1996)
........ 22
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Mulrov v. Block. 569 F. Supp. 256 (N.D.N.Y.1983).............................
21
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New Ennland Coalition on Nuclear Power v. NRC,582 F.2d 87 (1st Cir.1978)....... 16,28 Prillaman v. Community Medical Center,264 Mont.134, 870 P.2d 82 (1994)
... 30
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Renents v Washtenaw County Coalition Aoninst Anartheid. 97 Mich. App. 532, 296 N.W.2d 94 (1980)............................
......... 30 Robinson v. Knebel. 550 F.2d 422 (8th Cir.1977)
...........................17
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Russello v. United States. 464 U.S.16 (1983)
......30
[
-i-
[
[
Sierra Club v. Adams. 578 F.2d 3 89 (D.C. Cir.1978)..........................
13 Smith v. United States,508 U.S. 223 (1993)
...................................31 Strykers Bay Neinhborhood Council. Inc. v. Karlen. 444 U.S. 223 (1980).............. 10
{
Taylor v. PUC. 217 Mich. 400,186 N.W. 485 (1922)............................. 34 Tonon== Conservation Soc'v v. Chenev. 924 F.2d 1137 (D.C. Cir.1991)............ 9, 17
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United States v. Barial. 31 F.3d 216 (4th Cir.1994).............................. 30
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Vermont Yankee Nuclear Powe Corn. v. NRDC. Inc. 435 U.S. 519 (1978)............ 13 NRC DECISIONS Consumers Power Co. (Midland Plant, Units 1 and 2), ALAB-458,7 NRC 155 (1978).... 22 Duke Power Co. (Catawba Nuclear Station Units 1 and 2), LBP-74-22, 7 AEC 659(1974)............................................... 8 Duke Power Co. (William B. McGuire Nuclear Station, Units 1 and 2), ALAB-669, 15 NRC 453 (1982) 19 Philadelphia Electric Co. (Limerick Generating Station, Units 1 and 2), ALAB-836, 23 NRC 479 (1986)
................................................38 P_hiladelphia Electric Co. (Peach Bottom Atomic Power Station, Units 2 and 3),
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ALAB-701,16 NRC 1517 (1982)...................................... 19 Eublic Service Co. of New Hamoshire (Seabrook Station, Units 1 and 2),
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ALAB-422,6 NRC 33 (1977) 16 Public Service Co. of New Hampshire (Seabrook Station, Units 1 and 2),
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CLI-78-1,7 NRC 1 (1978).
23,24,37 Public Service Co. of New Hampshire (Seabrook Station, Units 1 and 2),
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CLI-90-2, 31 NRC 197 (1990)........................................ 3 8 Tennessee Vallev Authority (Hartsville Nuclear Plant Units I A, 2A,1B and 2B),
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ALAB-3 67, 5 NRC 92 (1977).........................
.... 22
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Virninia Electric Power Co. (North Anna Power Station, Units 1 and 2),
LBP-85 34, 22 NRC 481 (1985).....................
.............. 21 STATUTES 4 2 U. S.C Q 223 2(a)..................................................... 2 8 42 U.S.C. 2243.....................
................................. 2 42 U.S.C. Q 2297(a)(1).......................
....... 20 42 U.S.C. Q 2297b-ll(a)
...............................................20 42 U.S.C. Q 2297c-1(a)
........... 20 42 U. S. C. Q 43 3 2(2)(B)................................................ 21 l
42 U.S.C. Q 43 32(2)(C)(iii)................................................. 5 National Environmental Policy Act of 1969, Pub. L. No.91-190, l
83 Stat. 852 (1970),42 U.S.C. QQ 4321-4370b (NEPA)....................... 1 Section 5 of the Solar, TVind, Waste and Geothermal Power Production Incentives l
Act of 1990, Lb. L. No.101-575,104 Stat. 2834,2835..................... 2 REGULATIONS 10 C.F.R. { 30.32,30.33,40.31,40.32, and 40.33............................. 29 10 C.F.R. 30.33,40.32, and 70.23
............................ 29,33 10 C.F.R. 5 0. 3 3 (f).............................................
3, 2 9, 3 7 10 C.F.R. Q 5 0.3 3 (f)(1)-(2)........................................
... 29 10 C.F.R. Q 50.33(f)(1)-(4)........
.. 36 10 C.F.R. Q 50.33(f)(3)-(4).........
............. 29,37
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10 C.F.R. { 5 0. 40(b)......................................
......... 29,30 10 C.F.R. 50.47........................................................32 10 C.F. R. { 5 0. 81......................................................... 3 3 10 C.F.R. { l 51.71, 51.75, 51.80, 51.91...................................... 21 10 C.F.R. Part 51, App. A, { 4.............................
................ 21 10 C.F.R. Part SO, App. C, { II.A.2
................. 37 10 C.F.R. Part SO, Appendix A, j 5
.7 10 C.F.R. { 70.22(aX8)
.......29 10 C.F.R. { 70.27(hX2XiXI)...................
.... 32 10 C.F.R. Q 70.23(aX5)
.. 3,23,24,29 l
10 C.F.R. { 70. 25....................................................... 3 5 l
10 C.F.R. { 70. 5 5........................................................ 3 9 4 0 C.F.R. { 15 00. 2(b).................................................... 6 1
40 C.F.R. Q 1500.4 (b) and (f)
................................................7 4 0 C.F.R. { 15 00.4(j)...................................................... 6 40 C.F.R. Q 15 02.14(d).................................................
5 1
FEDERAL REGISTER NOTICES 43 Fed. Reg. 55978,55983-84 (1978)................................... 6,7,21 47 Fed. Reg. 3 023 2 ( 19 8 2).............................................. 3 8 50 Fed. Reg. 193 23 ( 19 8 5).............................................. 3 8 53 Fed. Reg. 13 276 ( 198 8)...................................
. 33
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54 Fed. Reg. 14051-52, 14057 (1989).................................... 32 46 Fed. Reg. 18026, 18027 (1981)...
6 56 Fed. Reg. 23 310 (1991).................................
2, 29, 32, 3 3, 34, 3 5 MISCELLANEOUS NRC Regulatory Guide 4.9, Revision 1 (October 1975)......................
.... 8,16 i
LEGISLATIVE HISTORY S. Rep. No. 1699,83d Cong.,2d Sess. 28 (1954).
..............28 I
Licensing Uranium Enrichment Plants: Oversight Hearing Before the Subcommittee on Energy and the Environment of the Committee on Interior & Insular Affairs,101st Cong.,2d Sess.13 (1991)
..'....... 32 Licensing and Regulation ofNuclear Reactors: Hearings before the Joint Committee on Atomic Enernv. 90th Cong., Ist Sess. Part 1, Appendix 12, at 348-349......... 36 TREATISES 2A Sutherland Stat. Constr. Q 47.02 at p.138 (5th ed.1992)...................... 31 I
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION I
p d
In the Matter of
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Docket No. 70-3070-ML
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I LOUISIANA ENERGY SERVICES, L.P. )
ASLBP No. 91-641-02-ML
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(Claiborne Enrichment Center)
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March 13,1997 1
I APPLICANT'S BRIEF IN SUPPORT OF ITS PETITION FOR REVIEW OF LBP-96-25 INTRODUCTION The Commission has grantedVseparate petitions by Applicant Louisiana Energy Services, L.P.
I
("LES") and the NRC Staff for review of the ASLB's second partial initial decision ("PID") in this proceeding? In the PID, the Licensing Board held that the Final Environmental Impact Statement
("FEIS") for LES's proposed Claiborne Enrichment Center (" CEC") was inadequate under NEPAF I
and NRC regulations as regards consideration of the "need" for the facility and the "no action" l
alternative to licensing the faciaty. The PID also held that LES has not demonstrated that it is financially qualified to construct the facility. LES seeks Commission reversal of the Licensing Board's ruling on these three points.
I y
Louisiana Enerav Services. LP. (Claiborne Enrichment Center), CLI-97-3, 45 NRC.__
(February 13,1997).
F Claiborne Enrichment Center, LBP-96-25,44 NRC (December 3,1996).
F National Environmental Policy Act of 1969. Pub. L. No.91-190, 83 Stat. 852 (1970), 42 U.S.C. s 4321-4370b ("NEPA").
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This is the first proceeding to license a privately-owned uranium enrichment plant in the United States. Prior to 1990, both power reactors and enrichment facilities had been " production facilities" under the Atomic Energy Act ("the Act") and NRC regulations. In 1990, Congress -
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amended the Act, adding a new Section 193,42 U.S.C.f 2243, removing enrichment facilities from
" production facilities" requirements and providing separate licensing procedures. San Section 5 of
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- the Solar, Wind, Waste and Geothermal Power Production Incentives Act of 1990, Pub. L. No.101-(
575,104 Stat. 2834,2835. But an NRC rulemaking in response to Section 193 had not sufficiently progressed when LES Sled its application in 1991, such that there were no separate rules to license the proposed CEC. To fill the gap, the Commission issued a case-specific Hearing Order, which designated speciSc regulatory requirements to govern the application, including 10 C.F.R. Part 70 and excluding (with one exception not relevant here) 10 C.F.R. Part 50. San 56 Fed. Reg. 23310 (1991).
The Board erred on the two environmental contentions. First, the Board misinterpreted NEPA and NRC regulations as to how the "no action" alternative must be described, requiring de FEIS to restate as " avoided environmental impacts" each of the impacts of constructing and operating the CEC already covered in the preceding FEIS discussion. Second, in deciding whether the FEIS adequately described the "need" for the project, the Board completely ignored the stated benefits of the CEC - principally, the creation of an alternative, domestic competitor offering secure, reliable
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and competitively priced services, using an environmentally benign, proven technology - and
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attributed to LES, without record citation, the supposed benefit of significant price reduction.
Third, ignoring the distinction created by Congress in enacting Section 193, as well as the case-specific instructions of the Commission, the Licensing Board erred in deciding the financial qualification contention at issue by imposing regulations and concepts not applicable to uranium 2
enrichment facility licensing. Thus, the Board resorted to the highly prescriptive requirements of 10 C.F.R. 50.33(f) and Part 50, Appendix C, applicable to reactor licensees, to decide LES's financial 1
qualifications under Part 70. In doing so, the Board rejected the NRC Staff's conclusion in Section 13.4 of the Safety Evaluation Report ("SER") that LES has presented a reasonable financial plan under the relevant circumstances and thus " appears to be" financially qualified - the applicable financial qualification standard specified in 10 C.F.R. 70.23(a)(5). The Board's failure to adhere to the licensing criteria established by Congress and the Commission, and dutifully followed by LES and the NRC Staff, has resulted in the erroneous resolution ofIntervenor's contentions J.4, K, and Q. LES asks the Commission to reverse the Licensing Board's decision and find that Intervenor's Contentions J.4, K, and Q are without merit.
SUMMARY
OF THE PROCEEDING l
LES seeks an NRC materials license to build and operate the Claiborne Enrichment Center
(" CEC" or "the facility"), a uranium enrichment facility in Claiborne Parish, Louisiana. LES filed an i
NRC license application in January 1991, including an Environmental Report ("ER") and Safety Analysis Report ("SAR"), which conforms to applicable NRC guidance. Intervenor opposes I
construction of the CEC and through its admitted contentions has raised nine issues. A hearing s
before the Licensing Board has been conducted pursuant to the Hearing Order issued to govern this proceeding. The hearing has been conducted in two phases. The first phase, involving one contention on emergency planning and two on security and safeguards, was resolved in favor ofLES in the first partialinitial decision. Claibome Enrichment Center. LBP-96-7, 43 NRC 142, d'.d, CLI-96-08,44 NRC (1996). Consequently, no outstanding safety issues remain in this proceeding.
I The Licensing Board recogmzed that these issues present " questions of first impression." PID I
at 3. It is therefore particularly appropriate for the Commission to decide these issues as matters oflaw and policy, without deference to the Board.
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l The second phase of the proceeding involves six contentions. Four concern NEPA-related issues (the adequacy ofLES and NRC Staff consideration of the "need" for the facility; the no action alternative; impacts on local communities; and impacts of decommissioning and tails disposal).
Another involves the adequacy of funding for decommissioning; the last pertains to financial qualifications ofLES. The second PID, the subject of this appeal, addressed three of these remaining six contentions - those concermng the no action alternative, the "need" for the facility, and financial
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qualifications, resolving each against LES and the NRC Staff.
ARGUMENT l
L The Licensing Board Misinterpreted NEPA and NRC Rules for Considerine the No Action Alternative.
A.
The Board's Ruline Is Unsuonorted by NEPA and CEO Guidelines.
Simply stated, the Licensing Board held the FEIS discussion of the no action alternuive
{
insufficient because it did not include " avoided environmental impacts," iA, those impacts that would not occur if the CEC were not licensed, built and operated. PID at 101. " Avoided environmental
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impacts" is not a term used in NEPA or the NRC's environmental regulations. The Board cites no
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authority requiring discussion of " avoided environmental impacts" in describing the no action alternative. Although nowhere defined by law, the Board's term in this context obviously encompasses those impacts avoided by denying a license. As such, " avoided impacts" are simply the
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sum of all environmental impacts that would have resulted from granting the license. Yet, the Licensing Board held the FEIS insufficient because discussion of the no action alternative did not repeat these impacts as " avoided" in a fully self-contained statement. Specifically, the FEIS's
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discussion of the no action alternative refers the reader to a preceding FEIS section in which the environmentalimpacts of the project are discussed. 'Ihe Licensing Board refused to accept a one-to-E 4
l one correlation and declined to consider the preceding FEIS discussion, r.yling such action as a
" formula for mental gymnastics."F PID at 102.
The no action alternative is discussed in FEIS Q 4.4. Apparently, the Board had no quarrel with the FEIS explanation that "no action" here principally means "the denial of the NRC license so the impacts, both positive and negative, discussed in the previous 76 pages of chapter 4 of the FEIS regarding the various environmental consequences of the project would be eliminated and the site is f
assumed to revert to its former use." PID at 94. This means, in turn, "that neither the benefits flowing from the construction and operation of the CEC would be reahzed nor the various costs imposed by the construction and operation of the facility would occur." Id. at 99. Yet, the Board f
faulted the FEIS for faihng to discuss " numerous avoided environmental impacts," already discussed in the preceding FEIS text. Id. The Board's rigid insistence on a particular format for the no action alternative is squarely at odds with NEPA precedent, both federal court and NRC, as well as the guidance from the Council on Environmental Quality ("CEQ").
{
First and foremost, NEPA does not even mention " avoided environmental impacts" or any like concept. Rather, NEPA directs agencies to include in the EIS " alternatives to the proposed I
action." 42 U.S.C. l 4332(2)(C)(iii). CEQ guidance very simply directs that the agency "[i]nclude the alternative of no action" among attematives considered. 40 C.F.R. { 1502.14(d). The environmental effects of no action for a new project like the CEC would simply be maintaining the status quo. In providing that the no action alternative be considered, the CEQ went no further than The Licensing Board improperly criticizes the FEIS's no action alternative discussion as failing to consider "the numerous avoided environmental impacts to, inter alia, surface and ground water and air quality from not building the facility" and suggests (wrongly) that
"[m]ost surprisingly, the avoided impact of not generating depleted uranium tails is not even mentioned." PID at 99. In fact, each of these impacts are thoroughly discussed elsewhere in the FEIS. Ecs FEIS Q 4.1.1 (hydrology),4.1.6 (air pollution) and 4.2.2.8 (radiological impacts of DUF, conversion and U 0, disposal).
3 5
to restate existing law. 43 Fed. Reg. 55978, 55983-84 (1978). Nothing in Section 1502.14(d) remotely suggests that the NRC Staff's treatment of the no action alternative is inadequate.
This is abundantly clear from CEQ guidance:
"No action" in such cases [of proposed projects] would mean the proposed activity would not take place, and the resulting environmental effects from taking no action would be compared with
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the effects of poundng the proposed activity or an alternative activity to go forward.
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Where a choice of "no action" by the agency would result in predictable actions by others, this consequence of the "no action" alternative should be included in the analysis. For example, if denial
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of permission to build a railroad to a facility would lead to construction of a road and increased truck traffic, the EIS should analyze this consequence of the "no action" alternative.
" Forty Most Asked Questions Concerning CEQ's NEPA Regulations," 46 Fed. Reg. 18026,18027 (1981)(emphasis added). Thus, CEQ realized that, except in narrow circumstances, " avoided" environmental impacts are simply the converse of "the effects ofpermitting the proposed activity or an alternative activity to go forward." Additionally, CEQ regulations authorize incorporating information by reference to reduce paperwork,8' and otherwise encourage agencies to " reduce
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excessive paperwork" by preparing " analytic rather than encyclopedic" EIS's, and "[e]mphasizing the portions of the environmentalimpact statement that are useful to decisionmakers and the public,.."
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Accordingly, CEQ directs that federal agencies "to the fullest extent possible":
Implement procedures to make the NEPA process more useful to
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decisionmakers and the public; to reduce papemork and the accumulation of extraneous background data; and to emphasize real environmental issues and alternatives.
Environmental impact statements shall be concise, clear, and to the point and shall be supported by evidence that agencies have made the necessary environmental analyses.
40 C.F.R. s 1500.2(b) (emphasis added). Ssc Alan 40 C.F.R. { 1500.4(j)
(incorporating by reference).
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40 C.F.R. { 1500.4 (b) and (f). The CEQ urges that a well-formatted EIS will" eliminate repetitive dscussion, stress the major conclusions, highlight the areas of controversy, and focus on the issues to be resolved." 43 Fed. Reg. 55978 (1979)(emphasis added).2r
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B.
The Board Departed from NRC Regulations As Well As NRC and Judicial Precedent.
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NRC regulations are consistent with CEQ guidance. In fact, the Board's ruling flatly contradicts NRC format requirements for preparing an EIS, which state in relevant part:
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The discussion of alternatives will take into accounts [ sic), without duplicating, the environmental information and analyses included in
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Sections 4., 6. and 7. of this appendix.
10 C.F.R. Part 51, Appendix A, { 5 (emphasis added). Section 4 of Appendix A specifically includes discussion of the no action alternative. Sections 6 and 7 cover the affected environment in its
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prelicensing state and environmental consequences / mitigating actions. Thus, Appendix A commands that discussion of alternatives will take into account information elsewhere in the FEIS, but without splicating. If even clearer direction were needed, the regulations authorize less important material
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to be " summarized, consolidated or simply referenced. Effort and attention will be concentrated on important issues; useless bulk will be eliminated." 10 C.F.R. Part 51, Appendix A, f 6 (emphasis added). Not only does Appendix A discourage duplication ofno action alternative discussion in other portions of the EIS, it explicitly authorizes the NRC Staff to give less attention to rejected alternatives
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in discussion ordmarily" confined to a brief statement." 10 C.F.R. Part 51, Appendix A, Q 7. This is I'
This advice reflected a broad consensus from diverse interests that preparing an EIS "had become needlessly cumbersome and should be streamlined," and that, before the CEQ rulemalang, "the length and detail ofEIS's made it difficult to distinguish the important from the trivial." 43 Fed. Reg. at 55980. Indeed, the CEQ opined that "[t]he usefulness of the NEPA process to decisionmakers and the public has beenjeopardized in recent years by the length and complexity of environmental impact statements." M. at 55983. From its own experience, the CEQ added that the "only way to give greater assurance that EISs will be used is to make them usable and that means making them shorter." M. (emphasis added).
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exactly what the NRC Staffdid here to descnoe the no action alternative Moreover, the NRC Staff's treatment of the no action alternative conforms to federal case law.st
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The Licensing Board's decision directly conflicts with NRC licensing policy. NRC Staff
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guidance in Reg. Guide 4.9, Rev.1 (October 1975) for describing alternatives to a proposed enrichment facility does not require consideration of" avoided impacts." And in recent years, the Environmental Assessment ("EA") prepared by the NRC Staff for a facility licensed under Part 70 has typically stated the no action alternative briefly, referring the reader to other portions of the EA regarding the benefits thereby lost or environmental impacts avoided. SAs als Duke Power Co.
(Catawba Nuclear Station Units I and 2), LBP-74-22,7 AEC 659,672 (1974)(costs / benefits of a
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8' Sag Havasupai Tribe v. United States. 752 F. Supp.1471,1493 (D. Ariz.1990) (upholding Forest Service's treatment of no action alternative, where draft EIS " includes a 39-page
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description of the existing environment, which in this instance also efectively describes the effect ofselecting the no-action alternative") (emphasis added), af.d, 943 F.2d 32 (9th Cir.
1991), cert. denied. 503 U.S. 959 (1992); All Indian Pueblo Council v. United Ste*= 975
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F.2d 1437,1446 (10th Cir.1992) (upholding sufficiency of EIS on proposed 345 kV transmission line as an alternative source in the event of outages where EIS discussion
" implicitly explains that the agency rejected the no action alternative because it would not
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address the problem of major 345 kV outages, and the related overloading"); Farmland Preservation Ass'n v. Goldschmidt. 611 F.2d 233,238-39 (8th Cir.1979) (two paragraph
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discussion ofno action ahernative held adequate because "[t]here was not much to say about t
that alternative. The adoption of the (no action] alternative would simply have left things as they were").
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8' For example, one EA states in four lines that iflicense renewal were denied, environmental impacts described elsewhere"would not occur." NUREG-1110, Environmental Assessment
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for the Westinghouse Nuclear Fuel Fabrication Plant near Columbia, South Carolina { 2.1 L
(May 1985). SAs als NUREG-1157, Environmental Assessment for the Uranium Hexafluoride Production Facility at Gore, Oklahoma { 2.1 (August 1985); NUREG-0695, EnvironmentalImpact Appraisal Related to the Morris Operation Spent Fuel Storage Facility
{ 11.3 (June 1980); NUREG-1078, Environmental Impact Appraisal for the GE Fuel Fabrication Facility Near Wilmington, North Carolina Q 2.1 (June 1984); Environmental Assessment for the NFS Erwin, Tennessee Fuel Fabrication Plant, { 2.1 (August 1991). The difference between an EA and an EIS is immaterial here; either format permits the NRC Staff to incorporate by reference costs / benefits avoided by inaction.
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no action alternative were simply the flip side of benefits / costs of building the plant, already adequately discussed in the FES).
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Indeed, the only authority cited by the Licensing Board is Citizens Against Burlinnton. Inc.
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- v. Busev. 938 F.2d 190 p.C. Cir.), sal. denied. 502 U.S. 994 (1991), in which the Court mentioned that the EIS discussed "in depth" the two alternatives of approving or not approving an airport
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expansion. Id. at 194, quoted in PID at 98. The Board's extraordinary reliance upon this sparse
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language is misplaced. The terse observation that an EIS treated a subject "in depth" hardly sets a legal standard. In fact, the Board overlooked that the Court itselfendorsed the Staff's approach here:
[The dissent) maintains that the FAA, having decided to discuss the socioeconomic impacts ofinaction in Toledo on Toledo, was obliged then in its "No Action" section to discuss the socioeconomic impacts ofinaction in Toledo in Fort Wayne... [but] information concerning
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Fort Wayne's economy is already available for consumption elsewhere in the EIS. Ecc Tongn== Conservation Soc'v v. Chenev.
924 F.2d 1137,1142-43 & n.5 (D.C. Cir.1991)....
The EIS demonstrates that the discussion of the socioeconomic and environmental impacts ofinaction is the flip side of the discussion of the impacts ofaction.
938 F.2d at 198 n.7 (first emphasis added). The Commission should reverse the Board's findings and
[
hold that the FEIS treatment of the no action alternative is appropriate and sufficient.
[
IL The Licensine Board Iraproperty Analyzed the Benefits of the Proposed Action.
A.
The Licensing Beard Gravely Misstated the Asserted Benefit of the
(
CEC as a Sunnosd Reduction in Price for Enriched Uranium Sunolies.
The Licensing Board erred by redefining the benefits of the CEC stated by the NRC Staff and LES in the FEIS, ER and hearing record, substituting instead its own notion that the CEC can
(
provide NEPA " benefits" only by bringing about a price reduction in enriched uranium supply prices.
As the Board correctly observed, NEP A imposes no threshold level of benefits, either qualitatively 9
or quantitatively, to justify licensing the facility.* Yet, by insisting that the benefit oflicensing the CEC be defined only in terms of reduced prices, the Board imposed such a qualitative requirement.
f Contrary to the Board's suggestion, nowhere did LES assert that its competition with
(
domestic or international suppliers would result in substantially lower prices, or even that minor LES price reductions constitute the principal benefn oflicensing the CEC. Sag ag, PID at 75 (LES cannot sell at lower prices because its total production costs are comparable to those of competitors) and 87 (CEC participation in market might reduce prices $2-3 per SWU). Even the Intervenor recognized that LES was not claiming to reduce prices substantially. PID at 80-81. Rather, the CEC would, as the first privately-owned, United States uranium enrichment plant with advanced centrifuge technology (FEIS at p.1-9), assure secure, reliable supplies to domestic utilities at competitive prices.
Schwartz at
{
12-13,28-29,38-40 fol. Tr. 383. As such, the CEC would offer an environmentally benign and price competitive alternative to USEC supplies. USEC employs an outdated, energy intensive gaseous diffusion technology in need of extensive maintenance and upgrades and possibly
{
facing retirement. FEIS at p.1-5; Schwartz at 18,27,51 fol. Tr. 383.
In quantative terms, CEC production would represent approximately 17% of estimated U.S.
(
needs in the year 2000, providing 1.5 million Separative Work Units ("SWU's") per year. FEIS at
(
pp.1-2,1-5. Asked by the NRC Staff to amplify upon the need for the CEC, LES responded:
The fundamental case for the CEC is that it can and will compete on economic
(
grounds, allowing U.S. electric utilities a comoetitive source of supply so that they in turn can achieve the lowest cost reliable supply of electricity to their rate payers...
(
A competitive domestic market will also act as a self-regulating mechanism to keep the DOE operations, whether managed by DOE or a successor corporation, managing as efficiently as possible. The successful introduction of a world-class technology to f
8 PID at 36-37. Sag nenerally Stryker's Bay Neinhborhood Council. Inc. v. Karlen. 444 U.S.
223,227-28 (1980)(par curiam) 10
I the United States will also provide a more complete pqctive when future decisions to add or replace capacity must be made on a national basis.
Exh. LES 10 at A-3 to A 4 (emphasis added). Elsewhere, LES explained that "the CEC can co-exist with the DOE, competing on the basis of economic or other factors important to the purchasers of enrichment services." Id. at A-2. Of course, increased competition does not necessarily reduce prices, but may only suppress price increases that would otherwise occur, which is in itself clearly an economic benefit. San Schwartz Tr. 386 (noting that market price range without production from the CEC could increase approximately $2-3 per SWU or even higher).
f Accordmgly, the NRC Stafffound that "the need for this facility lies primarily in the need for an additional market competitor in the U.S., rather than in a need to increase world or U.S.
enrichment capacity." FEIS at p.1-5 (emphasis added). Iflicensed, "LES would become the only private producer of enriched uranium in the U.S. Several utilities and industry groups, in commenting i
on the DEIS, supported the addition of a domestic source of enriched uranium to compete with USEC." Id. at 1-9. In short, LES stated that it could provide an alternative, domestic supply at competitive prices, with the reliability of a domestic alternative among the factors important to purchasers LES Exh.10 at A-2. The Licensing Board recognized that this was the principal benefit asserted by LES, as reflected in the FEIS and testimony (PID at 41, 73), but inexplicably failed to address the asserted benefit.
(
As LES's expert testified, "while the output of the facility may be the principal benefit... [o]ther benefits include the incentives for efficiency and the diversity of supply that the CEC will introduce into the enrichment services market and the overall healthy effects ofincreased f
competition." Schwartz at 13 fol. Tr. 383. Because utilities wish to " minimize their costs for nuclear fuel supply while at the same time marimizing security of that supply, there is no question that another domestic supplier of enrichment services... on a commercially competitive basis would be I
11
welcome." M. at 28 (emphasis addeo,, In bidding for enrichment services, utilities " consistently weigh security of supply," along with cost, "as being ofparamount importance." M. at 29. The trend f
in the United States clearly favors " greater diversity in sources of supply." Tr. 397-98. Domestic
[
utilities are "very anxious for opportunities to diversify," and diversity is "certainly a preference,"
other factors bemg equal.5 Tr. 416. The American Nuclear Society commented that " diversification f
of domestic enrichment supply should be a benefit to the nuclear electric utilities, in that they are now f
provided a choice between domestic sources of enrichment services." FEIS, Vol. 2 at 3-4.
Numerous licensees, representing about half of the nation's licensed power reactors, variously explained how "an alternate source of indigenous enrichment services would create healthy b
competition in the U.S. market, [and] provide domestic utilities with an opportunity to modestly diversify their enrichment contract portfolio to reduce the risk associated with sole source dependence." M. at 3-98. These potential LES customers emphasized that the CEC "provides an additional degree of assurance of supply" (id. at 3-37); "will offer U.S. utilities a much needed choice
[
ofdomestic supply" (id. at 3-39); and will " diversify supply sources, [and) improve reliability."* M.
Hence, even assuming comparable prices, United States utilities " prefer to have numerous qualified suppliers in each segment of nuclear fuel supply, including uranium enrichment
{
services." Schwartz at 39 fol. Tr. 383. In sharp contrast to secure domestic supplies, approximately 25% ofnear-term enrichment capacity is of Russian origin, which is currently limited by trade restrictions in Western Europe and the United States, and is "potentially
{
vulnerable to the political and economic uncertainties still facing Russia." M. at 17.
See also FEIS, Vol. 2 at 3-29 (utility "would welcome a new common domestic source of
[
enrichment services... [that] would prevent the United States from relying on foreign suppliers of enrichment services") (emphasis added); 3-89 (" CEC will provide a second source ofNorth American enrichment services which will foster competition... [and] also address utility's concern on continued and reliable supply"); 3-125 (commenting favorably on "the additional domestic competition to be gained" by the CEC) (emphasis added); 3-134 (pointing out the value of an " additional domestic supplier") (emphasis added); 3-136 (CEC would help " assure an unfettered competition in the domestic enrichment market") (emphasis added). Also, the Nuclear Power Oversight Committee commented favorably on the text of the draft DEIS that the CEC "would provide a competitive and reliable nationalsource of 12
[
[
{
at 3-119. As one utility pointed out: "Even as prices were increasing for domestic utilities [ ) they remamed DOE customers regardless ofprice due to assurance of supply concerns." Id. at 3-98. The
[
Board referenced capacity expansion by the Japanese and Urenco as evidence of" national policy
[
considerations" abroad (PID at 53), but surprisingly disregarded the domestic policy considerations unanimously expressed by these FEIS commenters.
By ignoring the singular importance utilities attach to an alternative domestic supplier, the
[
Board failed to consider the benefits of security, diversity and reliability of domestic supplies. In licensing, the NRC focuses principally upon national security, public health and safety, Vermont Yankee Nuclear Power Corn. v. NRDC. Inc. 435 U.S. 519, 550 (1978). Decreased reliance on
(
foreign enrichment services is clearly pertinent to reliability of domestic energy supplies and, hence, national security.
Rather than claiming that the CEC would create price reductions, LES asserted that it would beprice cmpetitiw within the forecast price range, allowing domestic utilities "to minimize their fuel
{
cost and marimize the security of.mpply...." PID at 73 (emphasis added). The Board agreed that LES could offer prices within the " forecast price range." PID at 84,91. The record contains
[
extensive evidence, including FEIS comments by nuclear utilities interested in an additional domestic
(
supplier of enrichment services, indicating that LES can reasonably expect to compete successfully in the domestic market in the same price range as USEC and foreign competitors because of the added value ofsecure dorr.estic supplies, given intemational uncertainties. Sgt ER Q l.2; FEIS Q l.4;
(
Schwartz at 12-16, 28-29, 34, 36-41 fol. Tr. 383; LES Exh.10; Tr. 665.
(
uranium enrichment services to U.S. commercial customers and would contribute to U.S.
independence from foreign sources of this sensitive service," achieving " reduced dependence on foreign enrichment services." Id. at 3-91 (emphasis added). These comments supplement and are deemed an integral part of the FEIS Sierra Club v. Adams, 578 F.2d 389,394 (D.C.
Cir.1978).
13 r LJ
The Licensing Board simply created a " straw man" by postulating a benefit never advanced by LES or the NRC Staff, and then found the benefit unrealized because neither LES nor the Staff 1
tried to prove the posited benefit. As such, the Board impermissibly substituted its own concept of which NEPA benefits should derive from operating the CEC.D The Board erred in relying upon Intervenor's market analysis, which failed to account for the strong demand for a reliable and secure alternative source ofdomestic supply. Eg, PID at 78-79. The Board ignored the crucial difference between competing by offering supplies from an alternative domestic source at competitive prices and competing by offering only lower prices.
I B.
The Licensing Board Failed to Properly Credit Other Benefits of Licensing the CEC.
1.
LES will stabilize and may even reduce prices. Even on its own terms of considering favorable price impacts, the Licensing Board took no account that LES's entry into the I
market at comparable prices would stabilize world-wide prices, especially if supplies are disrupted.
l European competitors have had such a moderating effect upon USEC prices in recent years. Tr.
401-02,414-16,419. As LES's expert explained, existing and predicted world-wide supplies are not equally assured. A range of uncertainties, including trade sanctions and political events abroad I
I I
For example, the Board attributed to LES and Staff, without record citations, " assertions that the principal benefit against which the costs of the facility are weighed is the CEC's ability to l
bring price competition to the enrichment services market." PID at 46 (emphasis added).
Later, the Board restated "that the central benefit of the CEC identified by the Applicant in its ER and the Staffin the FEIS is that LES will bring realprice competition to the I
enrichment market as a domestic supplier. Indeed, price competition is the quintessence of economic competition.
" Id. at 83 (emphasis added). Elsewhere, the Board even said that I
LES claimed " bringing the benefit ofsigm/cantprice competition to the enrichment sersices market.
" Id. at 91 (emphasis added).
14
_a
i (especially Russia, which has 25% of projected enrichment capacity) could unexpectedly disrupt supply and drive prices upward. EA, Schwartz at 17,19-22 fol. Tr. 383.*
Also, approximately 15% of all existing gaseous diffusion capacity worldwide consists of uncompetitively high-cost capacity. M. at 17. USEC sources have reported that some plants "may not be economic to run within 10 years." M. at 18. Given the escalating costs of power and the possible retirement ofits older plants as well as the concern for reliable supplies that may limit foreign competition in the United States, USEC might raise its prices in the absence of a domestic competitor. M. at 40. Additionally, the CEC will minimize the effects of currency exchange rate risici and their long-term impact on the prices offered by foreign suppliers. M. at 40-41; Tr. 414-15.
In short, avoiding or moderating price increases that would otherwise take place is beneScial, I
independent ofprice reduction.
While licensing the CEC will not effect a dramatic price reduction, the presence of a new, domestic competitor could produce some price reduction. This happened when increased I
competition from Eurodif, Urenco and spot marketers forced DOE to offer reduced prices in 1984, l
contrary to the trend ofincreased prices for years beforehand. Schwartz at 39-40 fol. Tr. 383. The Board agreed, but cavalierly dismissed the $2-3/SWU impact on market prices forecast to be created by CEC competition as " pocket change." PID at 87. A $2-3/SWU impact (11, $20-30 million for the 100 plus reactors averaging 1000 megawatts in the United States at 100,000 SWU/ year) would save between $600 and $900 million over the life of the CEC.
[
2.
LES will bring an environmentally benign and superior production technology to the domestic market. Funher, the Board overlooked that the CEC would be the first
[
[
In fact, the Board cited Dr. Messer's remarks that a " political change in Russia" could mean "the world would urgently need cheap enrichment quickly and with a high degree of security ofsupply." PID at 179-80 n.33.
15
domestically-licensed facility to bring the benefits of safe and etlicient advanced centrifuge technology to the United States - the same technology employed successfully for many years abroad. When compared to USEC's aging, encrgy-intensive gaseous diffusion plants with a limited competitive future, this advanced technology:s significant, not only from the perspective of maintaining a secure, long-term domestic supply, but dso in minimizing environmental impacts. It is undisputed that the gaseous centrifuge enrichment process is environmentally superior to the gaseous diffusion technology used by USEC, the only other domestic supplier, which requires fifty times more energy to produce the same SWU's. FEIS at p. 2-1. Innumerable commentors on the FEIS time and again applauded this successful technology, with its impeccable operating history in commercial use in Europe for over thirty years, as environmentally friendly.u' Sag,11, FEIS Vol. 2, p. 3-119.
I 3.
The Board ignored the socioeconomic benefits to be derived from the l
CEC. The Board erred in miing (PID at 106) that LES and the NRC Staffimproperly considered socioeconomic benefits in the cost-benefit analysis for the CEC. Regulatory guidance makes clear, I
however, that consideration of those impacts is an appropriate and important element of the overall cost-benefit analysis for the facility. Ssc Reg. Guide 4.9, Rev. I at 4.9-25 and 4.9-26 (Table 2)
(governing uranium enrichment facilities). Any analysis of the overall costs e.nd benefits of the facility must include consideration of socioeconomic benefits such as jobs and tax revenues, which would I
I I
n' Even in power reactor cases (where, unlike here, the "need" for the facility equat(s with need I
for additional capacity), the NRC has always recognized that "need for power" may be based on substituting an environmentally superior facility instead of a shortfall in projected capacity.
Public Service Co. ofNew Hamoshire (Seabrook Station, Units 1 and 2), ALAB-422, 6 NRC 33, 94 n.60, 94-98,114 (1977). In affirming, the First Circuit agreed. New England Coalition on Nuclear Power v. NRC. 582 F.2d 87, 97 (1st Cir.1978).
16
further demonstrate that the benefits of the CEC outweigh the costs, and that the FEIS is sufficient to satisfy NEPA and NRC regulations and supports the licensing of the facility.*
C.
The Licensing Board's Market Forecasting Is Seriously Flawed and Exceeds the NRC's Mandate to Exnlore Environmental Benefits.
- 1. The Board made clearty erroneous findings regarding the enrichment services market. The Licensing Board not only mischaracterized or ignored the beneSts actually asserted by LES and the NRC Staff for the CEC, but also launched headlong into an area leagues beyond the purview of NEPA and the NRC's emironmental responsibilities - forecasting the response of domestic and international enriched uranium producers and domestic purchasers to LES's market entry. Accepting assertions of an Intervenor witness with no nuclear fuel market experience, the l
Board boldly predicted that "LES cannot merely be competitive with the already established producers within the forecast price range and get into the market," or, put differently, LES must bring I
to the market "significantly lower costs that translate into significantly lower prices." PID at 85. The Board concluded that, because so many impediments exist to LES's entry into the market, LES would merely be a "fifth producer" oflittle consequence. PID at 91. These predictions contradicted I
those of the only witness with extensive nuclear fuel market experience.
LES's witness, Michael H. Schwartz, is a principal of Energy Resources International, Inc.
("ERI"), and provides energy and resource consulting services to electric utilities, private industry, l
The Board relied on inapplicable NRC decisions that secondary benefits should not be 5
included in the cost-benefit equation for power reactors Federal case law suggests that this 6
approach may be unique to NRC reactor licensing proceedmgs. Fig, Robinson v. Knebel, 550 F.2d 422 (8th Cir.1977)(FEIS cost-benefit analysis held adequate where loss of productive
{
farmland was offset by favorable effects on the economy, including employment, produced by the proposed project); Citizens Against Burlington. 938 F.2d at 197-98; Tonnass. 924 F.2d at 1143. Even in the reactor licensing decisions cited by the Board, reference to secondary
{
benefits was not necessarily fatal to the cost-benefit analysis or the FEIS as a whole, since those impacts are by definition scondarv.
17
institutions and associations, and government agencies, here and abroad, on nuclear fuels planning and procurement? ERI's published analysis of the international market for uranium enrichment services is relied upon by more than one-half of the electric utility companies with fuel procurement responsibilities domestically, as well as other organizations representing a cross-section of the intemational nuclear industry. Schwartz at 3-4 fol. Tr. 383. In fact, DOE uses ERI projections for its own forecasting. Tr. 431; ass, gg, Exh. I-DO-19, Tables 30 and 31, at 57 n.(c); Exh. I-DO-20,
- p. xi n.3. Of the two witnesses, only Mr. Schwartz was " personally involved in the complete range of nuclear fuel procurement and market analysis related.cdvities, including.. analysis of the domestic and international markets for uranium enrichment services." Schwartz at 3 fol. Tr. 383.
Only Mr. Schwartz has personally prepared uranium enrichment market price projections for clients, assisted utilities in their procurement planning and bid specifications, and assisted client utilities in l
evaluating vendor proposals. Id. at 3-4.
David Osterberg, the Intervenofs witness, by contrast, completely lacks experience in nuclear I
fuel procurement. Mr. Osterberg acknowledged that he had never testified on the supply and demand ofenrichment capacity, never advised utilities on their enrichment service purchase strategy or their nuclear fuel cyci: operations, never published in the areas of enrichment services or nuclear fuel cycle operations, never visited an enrichment facility or spoken to any enrichment service provider, never spoken to any NRC nuclear plant licensee about its fuel cycle purchase plans, and never performed any enrichment forecasts. Tr. 462-465.
L H'
Specific areas of ERI expertise in nuclear fuel supply and management include natural
{
uranium, uranium hexaflouride conversion, uranium enrichment, fuel fabrication, power generation, spent fuel storage, reprocessing, waste disposal, and transportation. ERI's experience also includes assessment of nuclear nonproliferation issues, plutonium disposition
{
options, and utilization in the commercial nuclear fuel cycle oflow enriched uranium derived from high enriched uranium, produced as a result of nuclear weapons programs. Schwartz at 3 fol. Tr. 383.
~
18
L 1
Despite the enormous disparity between the witnesses' credentials and experience, the Board l
unaccountably brushed aside Mr. Schwartz's prediction of the market response to LES's entry and 1
adopted Mr. Osterberg's conclusions, even though Mr. Osterberg had never before ventured into this l
area.* Relying upon either Mr. Osterberg or its own instincts, the Board rejected these expert conclusions by Mr. Schwartz:
1I Market factors other than price alone would enable LES to enter the market. PID at e
- 73. The Board erroneously disagreed. PID at 83-84.
Average enrichment prices will remain in a relatively flat, predictable range, allowing LES to offer competitive prices. PID at 72-73. The Board again rejected Mr.
Schwartz's expert opinion. PID at 88.
Owmg to political instability and uncertainties internationally, particularly with Russia as a major source of enriched uranium, the principal sources of enrichment services l
could be unexpectedly interrupted. Anticipated world-wide demand would then exceed supply. Schwartz at 20-22,40-47, 50-54 fol. Tr. 383. The Board not only i
Il disagreed, but irrationally insisted upon " evidence establishing the likelihood or reasonableness of such a scenario" interrupting international supplies, though a foreign crisis or dispute is, by definition, not amenable to a prediction. PID at 55.
l Currency exchange risks will limit the ability of European producers to lower prices e
l to compete for American business. European suppliers build currency risk into price, i
about 5% to 15% of unit price, and even then are willing to bear this risk only to a degree. Schwartz at 56 fol. Tr. 383. The Board disagreed, giving "little credence" I
to Mr. Schwartz's understanding of how producers react to the foreign exchange market. PID at 90.
LES will be able to compete, despite capital costs of a new facility, because operating e
I costs of a centrifuge facility are extremely low compared to those of gaseous diffusion plants, affording LES much greater flexibility to meet market pricing than gaseous diffusion competitors. PID at 74-75; gg ahn Doudiet at 34 fol. Tr. 563, 659,664.
While a' board has discretion to weigh expert testimony, the Commission has the entire record l
before it and is free to reach different conclusions where compelled by its ownjudgment of the witnesses' qualifications and experience. Eg, Philadelphia Electric Co. (Peach Bottom Atomic Power Station, Units 2 and 3), ALAB-701,16 NRC 1517,1523 (1982) (Appeal I
Board " independently considered" expert witness's qualifications, finding witness unqualified)
Duke Power Co. (William B. McGuire Nuclear Station, Units 1 and 2), ALAB-669,15 NRC g
453, 474-75 (1982) (Appeal Board determines for itself witness's expertise in hydrogen 5
burning or detonation).
19
The Board unreasonably disregarded this flexibility because it did not understand that, to gain market share, recovery of the capital portion of total costs may be temporarily deferred. Tr. 659,664. S.cc PID at 85-86.
LES's Financial Model has adequately asm the viability of the CEC under a range a
of 6nancial market and enrichment services market conditions. Schwartz at 37-39 fol.
Tr. 383. The Board, however, erroneously concluded that both USEC and foreign competitors would "act aggressively to keep LES from entering the market."8 PID I
at 88. This is clearly wrong because aggressive marketing that would keep LES out of the market constitutes illegal predatory pricing." PID at 88.
- 2. The Licensing Board exceeded the purview of NEPA in evaluating the economics of the CEC. The Licensing Board's market forecasting was not only seriously flawed, but unnecessary. It is undisputed that LES will create an annual production capacity of 1.5 million SWU's, amountmg to 17% of the requirements of domestic nuclear power plants. FEIS at pp.1-2.
The record contains extensive evidence that LES will provide an alternative, safe, welcome domestic source of enrichment services, at competitive prices, while stabilizing and possibly reducing prices I
with a superior, environmentally benign production technology. LES thus proved all it had to prove l
under NEPA and NRC regulations on the need for this facility. Nothing in federal environmental law requires a federal agency to assure itself that a federally licensed entrepreneur who wishes to enter I
a competitive market will succeed financially. By its text, NEPA directs federal agencies to develop 8
The Board misconstmed comments that USEC will " aggressively market" SWU (PID at 89) and other services to mean that USEC will act " aggressively to keep LES from entering the market." L4 at 88. The Energy Policy /.ct of1992 simply directs USEC to operate "as a business enterprise on a profitable and efficient basis," 42 U.S.C. Q 2297(a)(1), and to set prices high enough "that will allow it to attain the normal business objectives of a profitmaking corporation." 42 U.S.C. { 2297c-1(a). Mr. Timbers of USEC discussed
" competitive" prices, not price reductions. PID at 89.
8
{
Predatory pricing violates Section 2 of the Sherman Act. Brooke Grouc Ltd. v. Brown &
Williamson Tobacco Coro. 509 U.S. 209,222 (1993). This includes foreign predatory pricing "that was meant to produce and did in fact produce some substantial effect in the
{
United States." Bartford Fire Ins. Co. v. California. 509 U.S. 764,796 (1993). USEC must comply with antitmst law policies. 42 U.S.C. 6 2297b-11(a). Hence, the Board posited illegal conduct as a likely reason for LES's supposed inability to enter the market.
20
methods ad procedures "which will insure thatpresently unquantiped environmental amenities and wilues may be given appropriate consideration in decision making along with economic and technical
{
connderations." 42 U.S.C. { 4332(2)(B) (emphasis added). Hence, while purely economic factors
(
may be weighed by the decisionmaker, such discussion ir an EIS is discretionary and limited to secondary costs and bene 6ts.*
Nor can the Board's lengthy sojourn into market forewing be justified by regulatory
(
requirements for analyzing"need." NRC regulations for preparing a draft and final EIS do not even mention discussion of"need" for the licensed project. Eg,10 C.F.R. Q 51.71, 51.75, 51.80, 51.91.
Only NRC format guidelines address project "need" and, even there, merely state that the EIS "will briefly describe and specify the purpose of[and] the need for the proposed action." 10 C.F.R. Part 51, App. A, f 4.
As the court held in Anson v. Eastburn. 582 F. Supp.18, 22 (S.D. Ind.1983),
regulations calhng for a discussion orc.' d need mean "only that the agency include such statement
[
ofpurpose and need so as to put into c< atext what the EIS is addressing." According to CEQ, the
{
" purpose and need" section of an EIS is normally a page or less. 43 Fed. Reg. at 55983 (1978).
While LES does not question the authority of the NRC to inquire into the "need" for its
[
facility, this facet, as very simply stated in the NRC's guidelines for formatting an EIS, does not
[
justify the Board's free-wheeling exploration of the CEC's competitive prospects. And because the CEC will operate in a competitive market, need for the facility cannot be analyzed (as the Board did)
[
Accordmgly, it is well established that, absent a primary impact on the physical environment, economic factors need not even be examined in an EIS. Association Concerned About
(
Tomorrow. Inc. v. Dole,610 F. Supp. I101,1111 (N. D. Tex.1985); Mulrov v. Block. 569 F. Supp. 256,267 (N.D.N.Y.1983), aff_d, 736 F.2d 56 (2d Cir.1984), satt denied. 469 U.S.
I159 (1985). Even in power reactor cases, consideration of an alternative based on economic
[
superiority, not environmental superiority, is "not the responsibility" of the NRC. Virninia Electric Power Co. (North Anna Power Station, Units 1 and 2), LBP-85-34,22 NRC 481, 492 (1985), AEd, ALAB-822,22 NRC 771 (1985).
21
under a paradigm that ignores diaphe> ment ofcompetitors, particularly for reasons other than price.
By viewing existing suppliers as already having met domestic "need" (PID at 46-56), the Licensing Board illogically relegated LES to a second-tier of competitors whose licensing has to be justified by proof oflikely commercial success. This is not NEPA analysis; it is an attempt at economic regulation, plain and simple. LES sees a business opportunity and is pursuing it. The Licensing Board had no authority to second-guess LES's businessjudgment that it can succeed It cited no instance in which the NRC, any other agency or a court has predicted an applicant's likelihood of business success in determining whether the enterprise will provide a NEPA " benefit" to the market, through reduced prices or othenvise.*
The District of Columbia Circuit has aptly remmded federal agencies that they are ill-equipped "to canvass.. business choices" because agencies have "neither the expertise nor the proper incentive structure to do so." Citizens Against Burlington. 938 F.2d at 197 n.6. The Court added an important caveat the Licensing Board should have heeded:
1 And while Congress clearly wanted NEPA to extend federal agencies' range of vision to environmental concerns, it did not, so far as we can tell, aim at agencies' acquiring l
the skills of successful entrepreneurs. NEPA is supposed to make agencies more sensitive - but only, by defmition, to matters environmental.
Id. Sg alig Mountain States Legal Foundation v. Glickman. 92 F.3d 1228,1235-36 (D.C. Cir.
I 1996) (despite NEPA's "rather sweeping list ofinterests intended to be served,.. they do not l
8 As one Appeal Board said, the Atomic Energy Act did not authorize the NRC to assess whether a proposed facility would be " financially advantageous" for the licensee; the NRC l
leaves "such matters to the business judgment" of the licensee and any regulatory agency
" responsible for scrutinizing the purely economic aspects of proposals." Consumers Power CA (Midland Plant, Units 1 and 2), ALAB-458, 7 NRC 155,162-63 (1978). Or as another I
Appeal Board succinctly stated: "The purpose of NEPA was not to insure that utilities do what best serves their economic self-interest. They can be trusted to do that on their own."
l Tennessee Vallev Authority (Hartsville Nuclear Plant Units I A, 2A, IB and 2B), ALAB-367, 5 NRC 92,103 n.51 (1977)(citation omitted).
22 U
include purely monetary interests, such as the competitive effect that a constmetion project might have on [a competitor's] commercial enterprise."). Accordingly, the Board erred by engaging in this far-flung exploration of LES's competitive prospects within the uranium enrichment supply market.
I The Commission should reverse, fmding that LES and the Staff have properly quantified the beneSt of the CEC as providing United States utilities with a secure and reliable source of supplies through an alternative, price competitive domestic supplier. The record cited above demonstrates auch a need and demand, and the Board has concluded that LES would be capable of producing at prices comparsble to those of other competitors. PID at 91. Hence, the record is sufficient for the Commission to reverse the Board's finding and to find that the discussion of need in the FEIS is adequate and that the benefits of the CEC are substantially as represented by LES and the NRC Staff.
HL The Licensing Board Erred in Finding That LES Has Not Demonstrated Itself Financially Oualified to Build and Operate the CEC.
The Commission has provided in 10 C.F.R. 70.23(a)(5) that it will approve an application l
for a uranium enrichment facility license if, among other things, "the applicant appears to be financially qualified to engage in the proposed [ activity]." (Emphasis added.) LES agrees with the i
NRC Staff that it is sufficient at this stage of the project to have a reasonable financial plan in light ofrelevant circumstances. Srs NRC StaffMemorandum at 20 (April 21,1995); SER Q 13. While LES and the Staff agree that Pan 50 does not directly apply to LES as a Pan 70 applicant, they agree that Part 50 requirements may be used as guidance in determining, under Section 70.23(a)(5),
whether the applicant " appears to be" financially qualified.2st I
I 23' As the Commission held in Seabrook, CLI-78-1,7 NRC at 9, Appendix C "makes clear that the ' reasonable assurance' concept... is more flexible than many of the Commission's safety criteria." Added the Commission: "The history of the adoption of Appendix C indicates that l
the ' reasonable assurance' requirement is not rigid and that it does not normally contemplate refined analyses of an applicant's likely future ability to meet specific cost." Id. at 10. Thus, I
"' reasonable assurance' does not mean a demonstration of near certainty that applicant will 23
F Rather than simply referring to Part 50 for guidance, however, the Licensing Board prescriptively applied Part 50 requirements to determine LES's financial qualifications, as though it were a power reactor licensee. Thus, the Board ruled that LES had to prove that CEC funding is supported by existing contracts and commitments, not just a reasonable fmancial plan under the relevant circumstances (including the developmental stage of the project and its Part 70 character).
The Licensing Board also misinterpreted financial qualificctions rulemaking history, misapplied rules of statutory construction, and, most importantly, simply ignored the case-specific Hearing Order of the Commission for this proceeding. The Board admittedly created a potentially insurmountable Catch-22 (Tr. 684) because no prudent investor or lender will commit funds to a project of this magnitude while it faces, as a prerequisite to its success, a licensing proceeding ofuncertain duration and outcome. Ssc Doudiet at 8-9,31 fol. Tr. 563.
l A.
The NRC Staff Correctly Found That LES Appears to be Financially Qualified to Construct and Operate the CEC Because It Has a Reasonable Financial Plan Under the Relevant Circumstances.
I Consistent with 10 C.F.R. Q 70.23(a)(5) and NRC Staff guidance, LES has developed a l
Financial Plan (Exhibit LES 12, Attachment D) and structured its partnership in a manner that demonstrates that it has reasonable assurance of obtaining the funds necessary to cover the costs of constructing and operating the CEC. Doudiet at 8, fol. Tr. 563; Exh. LES 12, Attachment D. The LES Financial Plan provides such assurance because (1) the LES special purpose partnership of affiliates includes experienced nuclear utilities and nuclear fuel services companies; (2) LES will
[
utilize an advanced technology that has a track record of reliable performance and competitive
[
never be pressed for funds in the course ofconstruction. It does mean that the applicant must have a reasonable financing plan in the light of relevant circumstances." Id. at 18. In the
{
same vein, the Commission acknowledged the limited usefulness of the financial qualifications inquiry, given the number of variables in the financial markets and regulatory climate that render financial forecasting over a protracted period uncertain. Id. at 19.
24
E production costs; (3) LES has demonstrated a detailed understanding of the enrichment services market and has developed a conservative marketing plan for securing contracts for facility cutput prior to constructing the associated capacity; (4) LES has worked up a detailed accounting of l
construction costs, based on past experience of the project sponsors, including fixed price contracts for the major equipment (centrifuges) and a fixed price turnkey construction contract, to eliminate constmetion cost uncertainty; (5) rather than 100% external funding, LES relies upon large equity
[
contributions (30 to 40% of project costs) from the financially strong parents of the LES partners, to maximize the stake of the partners in the success of the project and facilitate the arrangement of I
debt financing; (6) the parents of the LES partners have a strong relationship with major lending l
institutions as likely providers of debt financing; and (7) LES has worked up a detaile'd accounting ofoperational costs, again based on extensive experience of the project sponsors, allowing accurate projections ofproject cash flows. Exh. LES 12, Attachment D, at D-1 through D-16; see also SER lI 13.2.2; Doudiet at 9,12-17,20-21,29-32 fol. Tr. 563.
l The structure of the LES partnership, comprised of special purpose companies that are not heavily funded untiljust prior to construction, is a very typical business approach. Doudiet Tr. 675-
- 76. When a decision to proceed beyond the venture phase is made, the LES partners will nonethele.
be able to accumulate the capital necessary to proceed because their ultimate parents are financially substantial vid the project's potentialis convincingly established. Ld. at 564-66,676-77; SER at p.
13-4 ("LES has identiSed sources of debt and equity capital for construction, and has reasonable assurance of securing them when needed.") (emphasis sdded).
As is common in such ventures, there are by design no early commitments in place, written g
or otherwise, which require the ultimate parents to fund the LES partnership beyond the venture phase. Tr. 575-76. The Staff recognizes that, as a for-profit enterprise, LES and its associated 25
partners will decide whether to proceed as the project reaches each ofits stages of development.
Wood at 6 fol. Tr. 723. Although no irrevocable commitment to proceed has been made, LES has demonstrated the commitment ofits partners and affiliates in that it has been an ongoing, active partnership for seven years, and its partners have already committed over $30 million dollars for the l
venture phase.W Doudiet at 24-25 fol. Tr. 563. LES and the NRC Staff agree that NRC Part 70 regulations do not require inevocable financial commitments for the NRC Staff to determine that an applicant is financially qualified. A Part 70 applicant must demonstrate only that its internal and external sources are capable of providing adequate funds for construction, not that those sources ultimately will provide funds.2 Wood at 7 fol. Tr. 723.
Proceeding beyond the venture phase is subject to four self-imposed conditions: (1) receipt of the NRC license and other required permits; (2) agreements with utilities to purchase production l
capacity initially installed for the CEC;# (3) negotiation of fixed-price contracts to construct the CEC and supply centrifuges; and (4) obtaining equity financing premised upon the continued viability of I
the venture, as determined by current market conditions and reasonable projections for the life of the l
plant. Doudiet at 27 fol. Tr. 563. Constmetion funds will be obtained from affiliated partners or the i
N Moreover, LES has secured, as a significant asset, the license to use the most advanced L
centrifuge technology. Ecc Exh. I-DO-44, Exh. B; LES Exh. 22 (Appendices).
[
For example, Duke Power, Northern States Power, and Louisiana Power & Light (now known as Entergy Louisiana) are certainly " capable" of contributing equity or attracting institutional investors (see SER at p.13-3 to 4). Indeed, just their affiliation in such a venture
[
will be a positive factor in obtaining financing. In addition, it is reasonable to assume, given the positive economics of the project, that necessary capital can be raised even if certain partners or affiliates choose not to participate. Doudiet at 23-24 fol. Tr. 563.
8 The CEC's low operating costs allow it substantial price flexibility. This will help establish a strong competitive position in the enrichment services market. Tr. 424-25, 442-43, 658-59, 664. LES has demonstrated that it can reasonably expect the output of the CEC to be sold at a price that will allow LES to cover the costs of safe operations. Schwartz at 37-38 fol.
Tr. 383; SER at 13.4.
26 J
bond and equity markets, or some combination. Id. at 28-30; Wood at 6 fol. Tr. 723. Although the Board questioned whether sufEcient equity funding would exist if one or more limited partners were to withdraw, the Board misunderstood the Partnership Agreement
- and, in any event, its concerns were unjustified."
Because LES will not proceed with the project unless it has in place enrichment contracts with prices sufEcient to cover both construction and operating costs," including a return on investment, LES has provided reasonable assurance that it will have sufficient funds to operate the CEC safely. Wood at 7 fol. Tr. 723; SER 13.4. Accordingly, the Commission has an adequate 1
8 Contrary to the Board's suggestion (PID at 167 n.26), the LES Partnership Agreement does I
not establish immutable limits on equity contributions by any partner. Rather, it reflects the current allocation ofequity interests and corresponding funding obligations. The Pannership Agreement has been amended several times already to reflect changes in this allocation and I
would be further amended to reflect a reallocation necessitated by the addition or withdrawal of a limhed partner. In fact, the LES Financial Plan expressly contemplates this contingency:
"To the extent that some limited panners elect not to invest additional capital at the time of construction, the limited partners who are then affiliated with the Urenco consonium would provide the necessary equity and appropriate debt support for such initial investment provided, of course, that the conditions for such investment have been fulfilled." LES Exh.
l 12, Attach. D, at 13. Thus, the Board erred in concluding that Urenco is barred from providing "any substantial additional substitute funding." PID at 168 n.26.
l The Board cited outdated comments that Duke Power and LP&L might not panicipate in the 8
project. PID at 171 n. 28. (There are no similar comments by Urenco, Fluor or Northern States Power.) As LES's expen representative pointed out, however, each parent and partner l
has "a very strong business interest" in participating because CEC operation is critical to their core business (Tr. 677), and the CEC is an attractive investment. Tr. 645-48, 747. Also, the general partners have committed to participate if necessary to obtain the NRC license.
l Doudiet at 22-23 fol. Tr. 563; Tr. 693. Even if Duke Power, for example, were to withdraw, "the positive project economics" will enable LES to raise remaining capital. Doudiet at 23-24 fol. Tr. 563; Tr. 753-54. The Board's similar reference to the very dated remarks of Urenco CEO Klaus Messer(PID at 178-79 n. 33) is equally unreliable in light of Urenco's continued participation and clarification ofits intentions. Sic LES Exh.15.
There is no scenario in which construction of the CEC could commence before funding is fully committed. Tr. 695-96,752-53. Hence, no environmental impacts will occur until the project goes forward. Likewise, no potentially adverse radiological health and safety impacts could result until CEC operation commences. Wood at 6-7 fol. Tr. 723; SER 13.4.
record to determine itself that LES has a reasonable financial plan to construct and operate the CEC safely.8 Ssg generally LES Proposed Findings at 147-216 (May 26,1995); LES Reply Findings at 37-42 (June 26,1995); LES Proposed Form of Decision at 25-35 (August 1,1995); NRC Staff Proposed Findings at 81-92 (May 26,1995); NRC StaffProposed Form ofDecision at 66-74 (August 1,1995). LES requests that the Commission so find and reverse the Board's adverse decision.
B.
I The Regulatory Framework Shows that the Licensing Board Erred in Eaustine Part 50 Reauirements with Those Anoticable to Part 70.
The Licensing Board incorrectly found the evidence recited above as insufficient under Part 70 because the Board rigidly imposed Part 50 requirements for financial qualifications upon LES and, even then, misapplied them. Section 182(a) of the Atomic Energy Act of 1954, as amended,42 U.S.C. { 2232(a), requires that each application for a license "shall specifically state such information as the Commission, by rule or regulation, may determine to be necessary to decide such of the I
technical and financial qualifications of the applicant.. as the Commission may deem appropriate l
for the license." This information enables the Commission "to protect the common defense and to protect the health and safety of the public." S. Rep. No. 1699, 83d Cong.,2d Sess. 28 (1954),
i reorinted in 1954 U.S.C.C.A.N. 3456,3483. Thus, the Act does not itself compel the Commission to review the financial qualifications of a Part 70 applicant, nor does it establish a standard of review where review is deemed necessary. Instead, the Act leaves the scope of any financial qualifications review to the discretion of the Commission.*
I 8
The Licensing Board did not address LES's financial qualifications to operate the CEC. PID at 172,181. As this is a unitary proceeding, the same evidence establishes LES's financial qualifications for construction as well as operation.
Eg, New England Coalition on Nuclear Pollution v. NRC, 582 F.2d 87,93 (1st Cir.1978)
("The Act gives the NRC complete discretion to decide what financial qualifications are appropriate."); Coalition for the Environment v. NRC. 795 F.2d 168,173 (D.C. Cir.1986)
("Quite plainly, the statute leaves to the expertise of the agency what sorts of determinations 28
To issue a special nuclear materials license,8 he Commission must determine, "[w]here the t
nature ofproposed activities is such as to require consideration by the Commission, that the applicant appears to be financially quali6ed to engage in the proposed activities in accordance with the regulations in this part." 10 C.F.R. Q 70.23(a)(5)(emphasis added). To further amplify that financial qualifications are not necessarily considered for issuing a Part 70 license, the Note appended to 10 C.F.R. 70.22(a)(8) similarly states that the Commission "may request" financial qualifications information" [w]here the nature of the proposed activities" so requires. Thus, review of an applicant's financial qualifications under Part 70 is required only as warranted by "the nature of the proposed activities."
In sharp contrast, submission of financial qualifications information for power reactor licensees is mandatory. 10 C.F.R. Q 50.33(f). The regulations are quite specific as to the nature of l
those qualifications. 10 C.F.R. Q 50.33(f)(1)-(2). And particularly prescriptive requirements exist for an application submitted by a " newly-formed entity organized for the primary purpose of constructing or operating a facility." 10 C.F.R. 50.33(f)(3)-(4). Moreover, unlike the Part 70 applicant, whose explicit cliterion is that it " appears to be financially qualified," a reactor applicant must demonstrate that it "is... financially qualified... " 10 C.F.R. Q 50.40(b) (emphasis added).
Tracing the rulemaking history of these two sets ofprovisions, the Board ruled that they are essentially fungible because "these financial qualification regulations essentially began as twins," even though their paths "have diverged somewhat since 1967." PID at 147. The Board acknowledged regarding financial capability are necessary.").
The CEC is to be licensed, inist alia, in accordance with 10 C.F.R. Q 30.33,40.32, and 70.23. Egg " Hearing Order," 56 Fed. Reg. 23310 (1991). The Commission's regulations I
governing license requirements for byproduct or source material do not mention financial qualifications. Egg 10 C.F.R. 30.32,30.33,40.31,40.32, and 40.33.
29
that the licensing standards under Section 50.40(b) and Section 70.23(a)(5) are worded differently, but curiously regarded this difference as creating an" ambiguity." Id. at 129. The Board also thought that Section 70.22(a)(8), so brief and simple, " cries out for additional clarification or interpretation."
Id. The Board resolved the so-called " ambiguity" and the need for " additional clarification or interpretation" by pouring into Part 70 the entire regimen of financial qualifications for power reactor licensees under Part 50.
1.
'Ihe Licensing Boani misapplied the rules of statutory construction. The Board held that provisions relating to "the same subject matter should be construed in pari materia" (PID at 129), but fundamentally erred in assuming that Section 70.23(a)(5) and 50.40(b) in fact relate to "the same subject matter." Clearly, they do not; they relate to entirely distinct categories of licenses, each with different regulatory frameworks. Where the legislature includes particular l
language in one section of a statute, but omits it in another section of the same statute, it is generally presumed that the legislature has acted " intentionally and purposely" in the disparate inclusion or i
exclusion. Russello v. United States,464 U.S.16,23 (1983). The courts refrain from concludmg l
"that the differing language in the two subsections has the same meaning in each" and do not
" presume to ascribe this difference to a simple mistake in draftsmanship."W Id. The Board also misunderstood what constitutes an " ambiguous provision." The text of Sections 70.22(a)(8) and I
Like the argument rejected in Florida Public Telecommunications Ass'n v. FCC. 54 F.3d 857, t
860 (D.C. Cir.1995), the Board's equation of Part 50 and Part 70 requirements " inverts the I
usual canon that when Congress uses different language in different sections of a statute, it does so intentionally." Eu abo United States v. Barial. 31 F.3d 216,218 (4th Cir.1994)
(different language in proximate subsections of the same statute must be given effect). Hence, where each of several different sections deals with a distinct topic, one may not interpolate language from one provision to other, clearly independent provisions, except with express
{
reference from one provision to the other. EA, Prillaman v. Community Medical Center.
264 Mont.134, 870 P.2d 82, 84 (1994); Regents v. Washtenaw County Coalition Anainst Acartheid. 97 Mich. App. 532,296 N.W.2d 94, 98 (1980).
j 30
f I
I 70.23(a)(5), setting the standards for requesting information and evaluating financial qualifications, may be brief and stark, but it is not ambiguous.8 Extraneous provisions cannot be introduced to create, rather than explain, ambiguity. "If the mearung of any particular phrase or section standing alone is clear [,] no oth:r section or part of the act may be applied to create doubt." 2A Sutherland Stat. Constr. f 47.02 at p.138 (5th ed.1992)
("Sutherland"). Thus, text outside of the section under purview "may not be considered ifit creates ambiguity." Id. (emphasis added). This, however,is exactly what the Board did. In all, the Board's wholesale borrowing of Part 50 overlooked the very simple yet sage advice that "it is generally accurate to assume that when people say one thing [,) they do not mean something else." Id. at Q 47.01 at p.137. If the Commission wanted the more prescriptive, stringent requirements ofPart 50 to govern the financial qualifications of Part 70 licensees, it knew how to say so.
l 2.
The Licensing Board failed to consider the determination by Congress that uranium enrichment facilities should not be licensed as " production facilities" under Part I
50 because of reduced risk. As noted, Congress amended the Act in 1990 and added a new Section 193 to distinguish uranium enrichment facilities from power reactors, and to assure that uranium enrichment facilities would be licensed under Part 70, not Part 50. In supporting this legislation, the Chairman of the Commission told Congress:
The NRC has for many years regulated other chemical processmg facilities, which also use uranium hexaflouride, under 10 C.F.R. Parts 40 and 70. NRC requirements in 10 i
C.F.R. Part 50 have been promulgated primarily for licensing of nuclear reactors, which are entirely different from the uranium enrichment facilities in concept, complexity and degree of risk.
Words undefined by statute are normally construed according to their " ordinary or natural
{
meaning." Smith v. United States,508 U.S. 223,228 (1993). There is nothing ambiguous about " appears to be" versus "is." Whereas "is" connotes a definitive conclusion, " appears to be" seems to offer a more lenient, conditional or predictive standard.
31
The NRC believes that existing regulations in Parts 2, 40 and 70 will serve as an adequate regulatory framework for licensing enrichment facilities.
Licensing Uranium Enrichment Plants: Oversight Hearing Before the Subcomm. on Energy and the Environment of the Comm. on Interior & Insular Affairs,101st Cong.,2d Sess.13 (1991). The Director of the NRC Office ofNuclear Materials Safety and Safeguards repeated in testimony that "10 CFR Parts 40 and 70 provide an adequate regulator; framework and are an appropriate way to regulate uranium enrichment plants." Id. at 123. He explained:
These NRC opinions were based in substantial part on the fact that gaseous diffusion and centrifuge in uranium enrichment plants are facilities in which the dominant hazard comes from handling heated uranium hexaflouride, hazards posed by this process are much less than those potentially represented by nuclear power plants which have large inventories of radionuclides and the stored energy for dispersing them.
Id. The Director reiterated that nuclear reactors "are entirely different from uranium enrichment facilities in concept, complexity, and degree ofrisk." Id. at 128. Again, in direct answer to an inquiry by Congress as to how the hazards of a uranium enrichment facility " compared to those presented by nuclear power plants," the Director responded that the hazards posed by uranium enrichment "are much less than those potentially presented by nuclear power plants" owing to their large radionuclide inventories and potential for dispersal.* Id. at 138. Hence, the Commission underscored the basic The Commission recognized this difference in its Hearing Order, ruling that LES need not obtain Price-Anderson insurance coverage. 56 Fed. Reg. at 23312. Indeed, acknowledging nunimal risk ofhazards offsite, the Commission has never extended Price-Anderson coverage to any materials licensees, except plutonium fuel fabricators. The same lack of risk also j
renders formal evacuation planning unnecessary. 54 Fed. Reg. 14051-52, 14057 (1989).
The Bovd compared financial qualifications requirements under Parts 50 and 70 because they
" relate te the same subject matter." PID at 129. If the Board is correct, emergency planning requirements for power reactors and Part 70 facilities likewise " relate to the same subject matter." Cpmpare 10 C.F.R. { 50.47 (sixteen highly prescriptive elements) with 10 C.F.R.
{ 70.22(h)(2)(i)(1)(scope ofplanning reduced and emergency plan unnecessary if evaluation I
shows that maximum dose to the public offsite is very small). Thus, though both Part 50 and Part 70 requirements are to protect public health and safety, requirements under Part 70 are 32
differences between power reactors and uranium enrichment plants that led to deleting enrichment activities from Part 50 reactor licensing standards in the first place.
3.
The Licensing Board ignored the case-specific Hearing Order governing this proceeding. The Board paid no heed to the specific instructions of the Commission in the Hcaring Order initiating this proceeding. The Commission directed:
The matters of fact and law to be considered are whether the application satisfies the standards set forth in 10 CFR 30.33,40.32, and 70.23, and the special standards and instructions set forth in 2
section III of this Notice, and whether the requirements of 10 CFR part 51 have been satisfied.
56 Fed. Reg. 23310 (1991). These "special standards and instructions" derived from the requirements ofnew Section 193 as well as "special features of the CEC." M. In all, the Commission posited nine such "special standards and instructions."
At the time it issued the Hearing Order, the Commission had before it the never finalized Advance Notice ofProposed Rulemaking ("ANPR") for regulating uranium enrichment facilities. Ssc I
56 Fed. Reg. 23312. Yet, the Commission applied only one part of the ANPR -- the General Design Criteria of the ANPR, published at 53 Fed. Reg. 13276 (1988). M. This is highly significant because Sections 50.33(f) and 50.40 had been incorporated by reference in the ANPR. 53 Fed. Reg. at 13277. Hence, by selecting only General Design Criteria, the Commission consciously chose to
!J exclude all Part 50 provisions but one from its case-specific Hearing Order, including provisions for financial qualifications. The only exception was treatment of creditor interests under 10 C.F.R.
j far different (and may even be eliminated altogether) due to the reduced radiological risk.
Financial qualifications may be analogously compared.
33
~
l
! 50.81. There cr.n be no doubt then that the Commission intentionally omitted Part 50 financial qualifications from those regulations listed in its Hearing Order.*
Finally, the Commission listed in its Hearing Order those regulations generally applicable to licensing the CEC as 10 C.F.R. Parts 19,20,21,30,40,61, 70 and 140. The Commission also listed other provisions (Parts 51, 71, 73, 74, 25, 95, and 170) that only partly apply. 56 Fed. Reg. at 23313. Part 50 was not among them, except Section 50.81. The familiar rule of expressio unius tal exclusio alterius unmistakably dictates that the remainder of Part 50 was deliberately excluded.8 Equally telling, the Commission described the generally applicable regulations as requiring that the i
8 In interpreting the Hearing Order, it is instructive that the Commission was well informed of Staffdiscussions with LES representatives at the very time Congress was considering bills to I
license uranium enrichment facilities separately. The Commission considered these events in tandem. Thus, in SECY-89-347 (Dec.16,1989), the Staff advised the Commission of I
meetings with LES to develop the CEC, and "to discuss licensing issues and procedures pursuant to 10 CFR Part 50." M. at 2. The Staff then advised that pending legislation would delete uranium enrichment equipment or devices from the definition of a " production facility" I
under the Act, pointing out that this change "would require that future licensing of uranium enrichment plants... such as the proposed LES plant, not be under 10 CFR Part 50 regulations, but instead be under the materials licensing regulations of 10 CFR Parts 40 and
- 70. The Commission has supported this approach." U. at p.4 (emphasis added).
Significantly, the Staff recited the important radiological and technical differences between I
nuclear power reactors and uranium enrichment plants that rendered Part 50 inappropriate.
M. at 5-7. Finally, the Staff observed that ongoing rulemaking to correct the problem of inappropriate Part 50 requirements could be abandoned if the newly proposed legislation were l
enacted because it would remove uranium enrichment facilities from Part 50 and " Parts 40 and 70 have no such [inappropriatel requirements." M. at 7. Ecc also in SECY-89-107 (April 4,1989) (licensing ofuranium enrichment plants was feasible under Parts 40 and 70, l
as the Commission had encouraged).
8 The absence of all other portions of Part 50 from the Hearing Order "should be understood as exclusions," an inference only " overcome by a strong indication of contrary [ Commission]
intent or policy." 2A Sutherland 47.23 pp.216-17. Put differently, that which is expressed puts an end to that which is implied. Taylor v. PUC,217 Mich. 400,186 N.W. 485 (1922).
{
As the Hearing Order provides that the licensmg of the CEC "shall be done in a certain way,"
the Commission's specific directive "catries with it an implied prohibition against doing that thing in any other way." Barlow v. Kaminsky.144 Conn. 612,136 A.2d 792,796 (1957).
34
applicant address the technical,fnancial, and insurance provisions and resources for dealing with the disposition ofdepleted uraruum hexaflouride tails. 56 Fed. Reg. 23313 (emphasis added). Thus, in dealing with LES's responsibility for financial assurance for tail disposal (governed by 10 C.F.R. {
70.25), the Commission had yet another opportunity to include Part 50 financial qualifications requirements, but chose not to do so.
C.
I The Imposition of Part 50 Standards for Financial Qualifications Is Contrary to the NRC's Reeutatory Scheme.
The Board recites financial qualifications rulemaking under Parts 50 and 70 to show that, years ago, the two mies emerged "as twins" (PD at 147), but its discussion merely underscores the Commission's choice to treat differently licensees uncer these distinct provisions. Although Part 50 l
and 70 financial quahfication requirements were initially similar when promulgated decades ago, the Commission has increased and renned Part 50 requirements extensively. As the Board noted, the I
current Part 70 Enancial qualifications rules are unchanged from adoption in 1967. PD at 132. But l
whereas Section 50.40(b) requires the Commission to determine whether the applicant "is financially quali6ed to engage in the proposed activities," Section 70.23(e) states that the application will be approved if the Commission determines that "the applicant appears to be financially l
qualified... to engage in the proposed activities." (Emphasis added.) Further, the Board brushed aside this material distinction as "no real difference" (PD at 134), again violating rules of constmetion. The Board unreasonably concluded that, because these two provisions were adopted contemporaneously, they would be forever linked in meaning, even though Part 50 financial qualifications requirements were substantially amended years later.*
The Board's reliance upon the testimony of Harold L. Price, AEC Director of Regulation, before Congress in 1%7 (PD at 139) is entirely unjustified. First and foremost, Mr. Price was addressing the Snancial qualifications of a reactor license applicant also licensed under Part 70 to receive leased fuel, not the potential owner / operator of a Part 70 facility. Thus, 35
)
Indeed, the highly specific requirements under 10 C.F.R. Q 50.33(f)(1)-(4) and Part 50, Appendoc C, negate any inference that these requirements were to be imposed.mb silentio upon Part 70 licensees. The various amendments of these provisions since 1967 as recounted by the Board (PID at 143-46), sometimes in response to the Commission's reevaluation, and other times in response to court decisions, were all accomplished without a single change to Part 70. Accordingly, the Board clearly erred in treating these two sets ofprovisions as essentially interchangeable.
D.
The Licensing Board Erroneously Required LES to Demonstrate a Present Commitment to Fund the CEC.
The Board held that LES has not demonstrated that it is financially qualified to construct the CEC. PID at 180-81. Specifically, the Board found (1) that LES is a " newly formed entity,"
l organized primanly to construct and operate the CEC; (2) that neither LES nor any ofits general or limited partners have the financial ability, individually orjointly, to fund construction of the CEC, or I
30 to 40% of that amount as the equity portion ofconstruction cost, pursuant to LES's financial l
plan; (3) that none ofthe corporate afBliates of the LES general and limited partners have provided the partners with "fundmg commitments, agreements, or contracts of any kind that would permit the I
immediately following the testimony quoted by the Board, Mr. Price stated that the AEC reviewed an applicant's financial qualifications "to permit conclusior.s as to w'2 ether the l
applicant's financial resources provide reasonable assurance that funds will oc available to pay use, consumption and other charges in the case oflease and supply agreements or to pay the purchase price ofthe materialin the case of the sales contract." Licensing and Regulation of l
Nuclear Reactors: Hearings before the Joint Committee on Atomic Enerav. 90th Cong.,1st Sess. Part 1, Appendix 12, at 349. Hence, the review quoted by the Board was part of an informal agency procedure related to AEC material supply and reimbursement, not financial qualifications for conducting the licensed activity.
In any event, as Mr. Price clearly acknowledged, the AEC regulations did not " prescribe the detailed or specdic criteria or standards against which the applicant's financial qualifications
[
[were] judged, because of the variability in the significance of specific Snancial factors and indicators which exist in the financial arrangements involved in each case." Id. at 348.
36
LES general and limited partners to fund the equity portion of the construction cost of the CEC"; and (4) that LES has not identified specific financial institutions or " loan agreements, commitments, or other contractual arrangements with the lending banks upon which it will rely for the debt portion of the constmetion funds for the CEC." PID at 170-72.
l As noted, LES and the NRC Staffbelieve that Part 50 requirements may be used as guidance for reviewing a Part 70 applicant's financial qualifications, as the NRC Staff did here. The Commission has interpreted the reasonable assurance standard of 10 C.F.R. { 50.33(f) to mean that an " applicant must have a reasonable financing plan in light of relevant circumstances." Seabrook.
CLI-78-1, 7 NRC 1,18 (1978). Transposed to a Part 70 facility, this guidance suggests that LES appears to be financially qualified ifit has a reasonable financing plan for obtaining the funds to construct and operate the CEC.
l Even under Part 50, the standard is " reasonable assurance of obtaining" necessary funds. 10 C.F.R. 50.33(f). Under Part 50, a newly formed entity applicant, " organized for the primary I
purpose of constructing or operating a facility," may be required to submit additional information, l
as the Staff required. Sag 10 C.F.R. Q 50.33(f)(3), (4); 10 C.F.R. Part 50, App. C.II; Wood Testimony at 4, 7 fol. Tr. 723.8 Even as applied to power reactor applicants, Appendix C itself I
I 8
For the CEC, the NRC applied these Part 50 provisions, including that portion of Appendix C which states:
If the sources offunds relied upon include parent companies or other corporate affiliates, information to support the financial capability of each such company or affiliate to meet its commitments to the applicant should be set forth in the application.
10 C.F.R. Part 50, App. C, II.A.2.
37
states that "the kind and depth ofinformation described in this guide is not intended to be a rigid and absolute requirement."8 These provisions clearly call for the applicant to demonstrate the parents / affiliates' capability to finance the project, rather than a present commitment to do so. This is consistent with the regulatory requirement ofdemonstrating " reasonable assurance of obtaining" necessary funds. Thus, using Part 50 standards as a guide for Part 70 compliance, the NRC Staff explained:
NRC regulations do not require irrevocable financial commitments for the NRC Staff I
to determine that a license applicant or licensee is financially qualified... [T]o be found financially qualified, a license applicant must demonstrate that its sources of funds, including its partners, are capable of providing adequate funds for construction, not that it ultimately will provide those funds.
Wood Testimony at 7 fol. Tr. 723 (emphasis in original).* Moreover, NRC Staff oversight will continue after licensing to assure that adequate fundmg is in place prior to construction and operation.
I Finding " reasonable assurance" based on the predicted consummation of financial I
commitments is entirely consistent with and analogous to accepting predictive findings for the approval of a licensee's onsite and offsite emergency plans, as the NRC has done for years in reactor licensing. Early on, the NRC revised Section 50.47(a)(1) to delete the necessity I
of findings regarding "the state of' preparedness measures "to clarify that the findings on emergency planning... are predictive in nature and need not reflect the actual state of preparedness at the time the finding is made." 47 Fed. Reg. 30232 (1982) (emphasis added).
l Even with changes in Section 50.47, the Commissior, has always held fast to "the general predictiw nature of findings on emergency planning and geparedness issues." 50 Fed. Reg. 19323 (1985) (emphasis added). Like the NRC's review of financial qualifications, l
emergency planning and preparedness constitute a secondary, additional level of protection to bolster "all of the other safety requirements for plant design, quality construction, and careful, disciplined operation." Seabrook. CLI-90-2,31 NRC 197,210 (1990), quoting 52 l
Fed. Reg. 6980 (1987), aRd, Massachusetts v. NRC. 924 F.2d 311 (D.C. Cir.1991). And as with an applicant's demonstration of reasonable assurance of obtaining funds, " findings in the emergency planning area are essentially predictive in nature: an emergency plan need not be final in every detail, just sufficiently developed to permit the ' reasonable assurance' finding," followed by " post-hearing verification by the staff." Philadelohia Electric Co.
(Limerick Generating Station, Units 1 and 2), ALAB-836,23 NRC 479,494-95 (1986).
{
As noted earlier, the reduced risk associated with enrichment facilities as compared to power reactors should enable the Commission to be receptive to less prescriptive, more predictive findings that the applicant's reasonable financial plan can be successfully implemented.
38
I 10 C.F.R. { 70.55. The NRC inspection functions can sufficiently monitor progress to assure that appropriate milestones are met, and NRC enforcement authority is available if they are not.
[
To require, as the Board did, an irrevocable commitment of funds at the outset (or even at this stage) of the LES project would eliminate the flexibility afforded by the regulations and ignore the relevant circumstances. Such rigidity is not required by Commission precedent or regulations, and it turns commercial reality on its head. No responsible financial institution or private enterprise will commit funds for a muhi-million project subject to the va taries of an intricate, detailed licensing process spanning years as this one has. The ponderous pace in this proceeding shows exactly why a commitment in advance of a license issuance would be foolhardy. Pmdent business judgment and demands of the commercial marketplace require that venture projects such as the CEC receive regulatory approval before Snancing is finally placed. San Doudiet at 31 fol. Tr. 563.5 l
And contrary to the Board's concern that licensing approval might give LES "a 30-year unreviewed window" tc, decide whether to build the facility and " shop for construction financing" 1
(PID at 151 n.18), investors and banks would not tolerate such protracted delays and accompanying l
expense, but would insist upon a " reasonable timetable." Doudiet at 30 fol. Tr. 563. Thus, the CEC simply cannot be built if construction funds are not available within a reasonable time after license issuance. Moreover, the financial markets will refuse support unless full funding and anticipated revenue (i_g., contracts for enrichment services) are in place. Id. at 29-31.
I Even a contingent equity commitment would be impractical becau',e other events might intervene during the protracted and unpredictable licensing pro;ess. Advance lender commitments are even less plausible; these cannot be obtained before the license is incontestable and its terms are ironclad. Tr. 660,679 80,684,686,697. Onerous license conditions, for example, could impair lender participation, and the dimming prospect of a court challenge is self-evident. It is for this reason that LES pursued a " venture phase" approach, during which the project evolves from engineering to licensing, then to contracting for constmetion and marketing ofproject capacity, and finally to obtaining financing, all prior steps being prerequisite to the last. San PID at 130-31,160.
39
LES has demonstrated that its Financial Plan is reasonable in light of relevant circumstances.
LES requests that the Commission reverse the contrary finding by the Licensing Board and to determine itself that LES appears to be financially qualified to construct and operate the CEC.
CONCLUSION For the reasons stated, the Commission should reverse the decision of the Licensing Board and determine that: (1) the ER and FEIS adequately describe the no action alternative; (2) the ER and FEIS adequately state the need for the CEC; (3) LES appears to be financially qualified to construct and operate the CEC.
I LOUISIANA ENERGY SERVICES, L.P.
l
/Auda Adu, w wm wW
'J. Michael McGarr'y, III, Esq. /<
Marcus A. Rowden, Esq.
Robert M. Rader, Esq.
l Robert L. Draper, Esq.
FRIED, FRANK, HARRIS, SHRIVER
& JACOBSON WINSTON & STRAWN ATTORNEYS FOR LOUISIANA ENERGY SERVICES, L.P.
Dated at Washington, D.C.
this 13th day ofMarch,1997 I
40
t DOCKETED l
UNITED STATES OF AMERICA USNRC NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION 0FFICE OF SECRETARY I
00CKETING & SEayjcg
)
11R,i cli In the Matter of
)
I
)
LOUISIANA ENERGY SERVICES, L.P.
)
Docket No. 70-3070
)
I (Claiborne Enrichment Center)
)
)
CERTIFICATE OF SERVICE I
I hereby certify that copies of" Applicant's Briefin Support ofIts Petition for Review ofLBP 25" were served upon the following by deposit in the United States mail, first class; by hand-l delivery for those marked with an asterisk (*); and via telecopy for those marked with a double asterisk (**), this 13th day ofMarch,1997:
- Administrative Judge
- Administrative Judge Thomas S. Moore, Chairman Richard F. Cole I
Atomic Safety and Licensing Atomic Safety and Licensing Board Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory l
Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 (2 copies)
- Administrative Judge
- Secretary of the Commission Frederick J. Shon I
U.S. Nuclear Regulatory Atomic Safety and Licensing Commission Board Washington, D.C. 20555 U.S. Nuclear Regulatory Attention: Chief, Docketing and Commission Service Section Washington, D.C. 20555 (Original plus 2 copies)
- Office of Commission Appellate
- Eugene Holler, Esq.
Adjudication Office of the General Counsel U.S. Nuclear Regulatory U.d. Nuclear Regulatory
[
Commission Commission Washington, D.C. 20555 Washington, D.C. 20555
- l 1
" Ronald Wascom, Deputy Assistant Joseph DiStefano, Esq.
I Secretary Quinn, Racusin & Gazzola Office of Air Quality &
1401 H Street, N.W.
Radiation Protection Suite 510 l
P.O. Box 82135 Washington, D.C. 20005 Baton Rouge, LA 70884-2135 I
Robert G. Morgan - WC26B Marcus A. Rowden I
Licensing Manager Fried, Frank, Harris, Shriver &
Duke Engineering & Services, Jacobson Inc.
I101 Pennsylvania Avenue, N.W.
I 400 South Tryon Street Suite 900 South Charlotte, NC 28201-1004 Washington, D.C. 20004
- Diane Curran
" Nathalie Walker Harmon, Curran, Gallagher &
Sierra Club Legal Defense Fund Spielberg 400 Magazine St.
I 2001 S Street, N.W.
Suite 401 Suite 430 New Orleans, LA 70130 Washington, D.C. 20009-1125 I
- Adjudicatory File Roland J. Jensen l
Atomic Safety and Licensing Louisiana Energy Services, L.P.
Board Panel 2600 Virginia Avenue, N.W.
U.S. Nuclear Regulatory Commission Suite 608 Washington, D.C. 20555 Washington D.C. 20037 Thomas J. Henderson, Esq.
David S. Bailey, Esq.
Lawyers' Committee for Civil Rights Under Law I
1450 G Street, N.W.
Suite 400 Washington, D.C. 20555
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LOUISIANA ENERGY SERVICES, L.P.
I
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RobertI. Drapgr WINSTON & STRAWN, ATTORNEYS FOR LOUISIANA ENERGY SERVICES, L.P.
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