ML20150F884
| ML20150F884 | |
| Person / Time | |
|---|---|
| Issue date: | 09/15/1987 |
| From: | NRC |
| To: | Bangart D, Beth Brown NRC |
| Shared Package | |
| ML20150F870 | List: |
| References | |
| FOIA-88-222 NUDOCS 8807190110 | |
| Download: ML20150F884 (5) | |
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1 I Septerber 15, 1987 l
Note to Dick Bangart Bill Brown i
l Attached is a draf t staff paper that we received yesterday for connent.
Also attached are our coments on the paper. Since the issues being addressed by the paper were raisec in Mr. Hartin's letter to HMSS. I wanted you to have the opportunity to review the draft and offer any further coments that you think appropriate.
You can either send cowents to us and we will forward them or you can send them directly to Paul Lohaus or Mike Fliegel in NPSS.
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Septerber 15, 1967 JRF0 COMMENTS Ofl THE 9/14/87 DRAFT C0W:S$10N PAPER "URAtlillM RECOVERY ISSUES" General This draft paper suffers from a superficial effort to dispose of a comitrent rade to the Comission to submit a paper. The issues are raised and dismissed with a wave of the hand. The result is to give the Comission a warm feeling that all is well. As the organization responsible for raising these questions, we feel that we have been given short shrift by this treatment.
From the specific ccerents below, you will see that we feel that there are indeed issues to be addressed.
If the problers of resources and schedules have prevented you from dealing with these questions in a more comprehensive way, then why not say so.
The cemitment you made in SECY 87-158 was to "address these and other ancillary issues in a forthcoming Comission paper..." In this '
paper, "addressing" the issues could mean setting a schedule for future evaluation, er it could mean stating why setting a schedule is not feasible, considering available resources and other connitments. {
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l In the interest of meeting your schedule, we are sending URF0 connents directly to you.
In addition, wa are sending your draft paper 'and our coments to Region IV for their review and possible coments.
Let's talk atout this. l I
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1.
This response fails to recognize several realities:
There is no provision in our regulations to require the establishrent of a sta cby trust, There are unresolved c.estions as to the legality of standby trusts.
Our regulations identi'y the NRC as beneficiary of surety forfeiture--the possible conflict of interest envisioned in the response already exists.
Assumptions regarding the willingness (or legal authority) of a State to take over a re:lamation effort may be in error. The only State with which we share surety responsibilities (Wyoming) is preparing to implement 'ew laws which could remove them from any involverent with uranibr. mill tailings' oversight.
The response seems to ignore the coments made by URF0 and V onRegion the several past occasions een the idea of a standby trust was presented.
While a standby trust ray be a good way to deal with the problem of receiving and disbursing funes from a forfeited surety, such a scheme will require substantial staf' ef fort to develop and implement, starting with rulemaking to give the staff the regulatory basis for requirirg the establisbrent of such trusts.
It is not fair to the Comission to imply that such a solution is in har.d and that the problem has been solved,
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3.
The staff conclusice that no changes in current NRC policies and regulations with respect to sureties are warranted could stand more substantiation.
To say that the state of the industry is not our problem and that it is too bad that sore companies may have trouble ineeting our requirerents is hardly the arguttent for no change to our rules or policies.
The points ecumerated above under connent I are examples of possible changes in legislation, regulations, or policies that are in need of consideration. Derhaps some mention should be given to the ongoing technical assistance contract (Bykoski's) that is studying the whole question of financial sureties. In view of our experience (and more significantly, other Federal agencies') with bonding company failure, should nur reg'.,lations encourage this form of surety?
4 While we obviously support the setting aside of the parent company guarantee policy set forth in December 1985, we were not aware that such action had occurred.
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UNITED STATES c NUCLEAR REGULATORY COMMISSION
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SEP 13 IS85 1
MEMORANDUM FOR:
John G. Davis, Director :
Office of Nuclear Material Safety and Safeguards FROM: Guy H. Cunningham,111 ,
Executive Legal Director l SUEJECT:
USE OF PARENT-COMPANY GUARANTEE UNDER '.0 CFR PART 40, APPEN01X A, CRITERION 9 1
I In your memorand.m of July 30, 1985, you requested a legal opinion on the use 1 of a parent-company guarantee, with ;.cceptable financial test, as a means of providing financial assurance for a mill operator's responsibility for decontamination, decorrvnissioning, and reclamation of the mill and site under 10 CFR Part 40, appendix A, Criterion 9. Specifically, you asked whether the staff may, for reasons of policy, pemit the use of a parent-company guaran' tee based on a financial test while prohibiting a licensee from demonstrating financial assurance directly by means of the same financial test. You stated that, in your Mgment, a third party should participate in any financial arrangement considered satisfactory for the purposes of Criterion 9. In support of this position, the draf t guidance densnent accompanying your memorandum cited the need for additional financial backing beyond the licensee's assets, the depressed state of the uranium industry, and the inherent dif ficulty in assigning value to the assets of a mining operation.
Finally, you asked whether a rule change would be needed in the event that you deeeed it necessary to make this requirement a matter of ccepatibility for Agreement States.
We have concluded that there is legaTTupport for the approach you .have outlined. We have identified two possible constructions of Criterion 9 that would provide a basis for your proposal. The answer to the question whether a rule change would be needed to mee the requirement a matter of compatibility is dependent on the rationale that is used.
Section 203 of the Uranium Mill Tailings and Radiation Control Act. of'1978 (UMTRCA), which added section 161 x. to the Atomic Energy Act, gives the Comission broas discretion to establish financial surety requirements for decontamination, decomissioning, and reclamation of mill sites. It provides, in pertinent part, that the Commission may establish such stancards and instructions 'as the Comission may deem necessary or desirable to ensure--
(1) that an adequate bond, surety or other final arrangement (as detemined by the Commission) will be provided, before termia.ation of any license for byproduct material as defined in ,
EF SEP 131985 section 11 e. (2), by a licensee to permit the corrpletion of all requirements established by the Comission for the decontamination, decomissioning, and reclamation of sites, structures, and equipmer:
used in conjunction with byproduct material as so defined .....
Pursuant to this authority, the' Comission promulgated 10 CFR Part 40, Appendix A. Criterion 9. That criterion requires mill operators to establish financial surety arrangements "to assure that sufficient funds will be available to carry out the oecontamination and decomissioning of the mill at:
site and for the reclamation of any tailings or waste disposal aress." It states that the following financial surety arrangements are "generally acceptable to the Comission": surety bonds, cash deposits, certificates of deposit, deposits of government securities, irrevocable letters or lines of credit, and combinations of those arrangements. It also allow's.for "Such other types of arrar.gements as may be approved by the Comission." Self insurance is not permitted, however, because it "provides no additional assurance other than that which already exists through license requirements.'
Self insurance is, in essence, a means of guaranteeing ngainst risk or of funding regulatory or other liabilities based solely on the assets and financial strength of the guarantor. It can take different forms, depending on the context in which it is used. It may involve setting aside a fund to cover losses, executing an indemnity agreement payable to a regulatory authority, or demonstrating sufficient assets to be granted pemission to provide no additional surety. Throughout the U.S. Code in a variety of !
contexts, Congress has expressly authorized the use of self insurance as an I alternate means of financial surety, when coupled with a financial qualification requirement. For sxample, under section 509 of the Surface Mining Control nd Reclamation Act of 1977 (30 U.S.C. 1259(c)), an applicant for i eft.c6 coal mining and reclamation permit is required to file a ,
rarformance bond covering its obligations under the law and the permit. = An on "a history applicant of financialmay solvency provide its continuous and own bond wvetreut operationseparate sufficientsurety for autbased, horization to self-insure." Pursuant to this authority, the Office of Surface Mining has promulgated regulations authorizing self-bonding based on a financial test for mine operators. See 30 CFR Part 800 (1984). 1/ Similarly, the Envirenmental Protection Agency permits self insurance by oEners or operators of hazardous waste management facilities. EPA uses a' financial test to identify.which owners or operators will be permitted to self insure; 1.e., to provide financial assurance for closure -and post-closure care by demonstrating that their assets are sufficient to meet those responsibilities.
1/ See also, 30 U.S.C. 933 (security for the paynent of black lung EneTits); 43 U.S.C.1815 (offshore oil spill pollution compensation).
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See A0 CFR Fart 264, subpart H. 2/ According to the : raft guidance document, Inis is the financial test that Ihe staff would use, in conjunction with a parent-company guarantee, as a means of financial assarance for rill operators. l 1
As noted above,10 CFR Part 40, Appendix A Criterion 9 prohibits self M insurance. The staff coulo use this prohibition to preclude the use of a-N financial test by a licensee while permitting use of the same test by a
, qtf licensee's carent company if coupled with an appropriate corporate guarantee. !
V Under this construction of Criterion 9, the financial test as a means of financial surety for a licensed mill operator, without more, would constitute self insurance. Accordingly, it could not be used for a licensee under the Connission's regulations. (It should be noted, however, that the statutory language is broader and would not prohibit the use of self insurance based on a financial tes'. if the Comission were to find it acequate as a means of j financialsur2ty.)
As mentioned above, Criterion 9 permits "such other types of arrangements as may be approved by the Comission." This would include a financial test used as a means of determining whether to accept a corporate guarantee by the mill operator's parent corporation. A corporate guarantee is a promise to answer j for the debt or default of another. In the context of Criterion 9, if the ;
mill operater defaulted on its obligation to perfors decontamination, '
decomissioning, and reclamation work, the parent corporation as guarantor would be recuired either to provide the necessary funds for that purpose or to perform the obligation itself. As long as the guarantee were provided by a legal entity other than the licensee, the prohibition against self insurance would not be violated. This approach would ensure that assets other than those of the licensee would stand behind the licensee's obligation.
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With regard to Agreement States, section 204(e)(1) of the UMTRCA added sectioh 274 o. to the Atomic Energy Act. The4-section provices, among other things, that In the licensin and regulction of byproduct material, as defined in section 11 e. (g) 2 of [the Atoen bergy] Act, or of any activity which results in the productior, of byproduct material as so defined under an agreement entered into pursuant to subsection b. (of section 274], a , 1 State shall require-- l l
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Section 3004(6) of the Resource Conservation and Recovery Act (RCRA) does not specify the means of financial assurance that may*be used.
Rather, it authorizes the EPA to establish such financial responsibility standards for owners or operators of hazardous maste management facilities as may be necessary or desirable cc protect human health and the ervironment. Thus, EPA's authority under that statute is similar to the hC's autnority under section 161 x. of the Atomic Energy Act.
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(2) compliance with standards which shall be adopted by t.a State for the protection of the public health, safety, and the environment from hazards associated with such material which are equivalent, to the extent practicable, or more stringent than, standards adopted and enforced by the Comission for the same purpose .... ,
Because this section requires State standards to be "equ', valent, to the extent practicable, or more stringent than" the Comission's standards, tha Comission has made Criterion 9 a ' natter of cocpatibility. See Statement of Policy, "Criteria for Guidance of States and NRC in DiscontiEance af NRC Regulatory Authority and Assum: tion Thereof by States Through Agreement,' 46
. FR 7540, 7543-44 (January 23, 1981). As the prohibition against self insurance is already a part of Criterion 9, a rule change would not be needed.
Thus, under this interpretation of Criterion 9. Agreement States would be required to restrict the use of a financial test to instances in which it was combined with an acceptable corporate guar 3ntee by a corporation other than thelicensee.3f d} An alternate approach would be to construe the financial test as falling f within the provision for "such other arrangements as may be approved by the Comission" in Criterion 9. Self insurance is not defined in Criterion 9.
Without a definition of self insurance, it is unclear exactly what the Comission meant t,y this prohibition. In the context of the rule, it arcears that the Comission meant to prohibit only those financial assurance ,
arrangements that provide "no additional assurance other than that dich already exist: through license conditions"; i.e.' a situation in which ro examination is made of a licensee's financiaT c'on,dition and the licensee does
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nothing more than promise to comply with the regulations and the terms of its
- license. This interpretation is supported by the Final Generic Emironmental Impact Statement on Uranium Milling.t It is also supported 'oy the staff's acceptance of Colorado's policy of permitting its licensees to s,a'tisfy the i financial surety requirement by means of a financial test. Under this interpretation, a financial test, whether used by a licensee or a parent corporation, would not violate the prohibition against self insurance because it would provide "additional assurance other than that which already exists through license requiremer.ts." The additional assurance would derive. from the ccepany's demonstration of assets sufficient to provide reasonable assurance
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3/ We understand that Agreement State regulations are compatibfe with Criterion 9. However, fer at least one Agreement State (Colorado), the staff has not objected to the state's policy of pennitting its licensees to satisfy the financial surety requirement by means of a financial test.
4/ NUREG-0706, Volume 1, at 14-9 (September 1980).
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I SEP 13 1985 of bein; able to meet the expenses of decontamination, decomissioning, and reclamation. For the policy reasons you cite, the staff could decide to permit t*e use of the financial test only when coupled with the corporate guarantee of a third party. Because this approach would be a matter of policy rather taan a legal recuirement, however, Agreement States would be free to establism a different policy. Accordingly, under this interpretation, the only way to make the NRC policy a matter of compatibility for Agreement States would be to promulgate it as a rule.
There are difficulties associated with either approach. The first is consistent with the meaning of self insurance as consnonly understood and as used in numerous statutes and regulations. However, it is inconsistent with the staff's existing interpretation of the regulations and its corresponding policy rtgarding the use of finar.cial tests in Agreenent States, The second approach preserves more options for the states. But it might be challenged as arbitrary because it would establish a different, acre stringent Costnission policy than that for Agreen,ent States. Consequently, it may be preferable for the staff to conduct a rulemaking proceeding to explore these issues more fully before deciriing on a reguletory approach.
In sumary, the staff could prohibit the use of a financial test by a licensee under either of the interpretations outlined above. The approach that is chosen will detennine the effect en Agreement States and the need to conduct a ,
rulemakiq to make the requirevnent a matter of compatibility. Once you have l determined how you wish to proceed, we will review any necessary revisions to the pro;csed staff guidance document.
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Guy H. Cunningham,. I'll
- Executive Legal Director I
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