ML20198M129

Affirmation Vote Approving W/Comments SECY-97-201 Re Changes to Paragraph (H) of 10CFR50.55a, Codes & Stds

ML20198M129
Person / Time
Issue date:	09/11/1997
From:	Mcgaffigan E NRC COMMISSION (OCM)
To:	Hoyle J NRC OFFICE OF THE SECRETARY (SECY)
Shared Package
ML20198M078	List: ML20198M074 ML20198M092 ML20198M110 ML20198M123 ML20198M129
References
SECY-97-201-C, NUDOCS 9710280073
Download: ML20198M129 (1)

Text

,

AFFIRM ATIO N VOTE RESPONSE SHEET C*

TO: John C. Hoyle, Secretary FROM: COMMISSIONER MCGAFFIGAN

SUBJECT:

SECY-97-201 - CHANGES TO PARAGRAPH (h) OF 10 CFR PART 50.55a, " CODES AND STANDARDS"

'x JJ Approved Disapproved Abstain Not Participating Request Discussion i

COMMENTS:

I approve the staff's proposal to issue t.he direct final rule that updates Paragraph (h) of 10 CFR 50.55a, " Codes and Standards." I commend the staff for its work on this rulemaking. This is a good example of prompt rulemaking l to correct a long-outdated regulation.

The Congressional Letters in Attachment 3 to set,Y-97-201 should be revised.

Specifically, the first sentence in the Discussion section of SECY-97-201 shou'd be added to the end of the first paragraph of each Congressional letter to acknowledge the statutory mandate for the approach we are taking:

... which has been withdrewn by the IEEE. The issuance of this direct final rule ... affecting an industry."

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SIGNATURE [U U L ReleaseVote /v / l / U DATE Withhold Vote / /

Entered on "AS" Yes 2 No i

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TA "!8?a 7A8

• l CORRESPONDENCE PDR u

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p ue vg UNITED STATES

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n NUCLE.40 B(GULATORY COMMISSION '

+$ .I- wAss.NGn t ac. psss.oooi Tg

• • • • • y/ October 8, 4397 IN RESPONSE, PLEASE

. ste:run REFER TO: M971008 MEMORANDUM FOR: L. Joseph Callan Execu ive Director for Operations '

A FROM: John C. Hoy e, Secretary

SUBJECT:

STAFF REQUIREMENTS - AFFIRMATION SESSION, 11:30 A.M., WEDNESDAY, OCTOBER 8, 1997, COMMISSIONERS' CONFERENCE ROOM, ONE WHITE FLINT NORTH, ROCKVILLE, MARYLAND (OPEN TO PUBLIC ATTENDANCE) 12 SECY-97-201 - Chances to Paraoraoh (h) of 10 CFR Part

! 50.SSa, " Codes and Standards" The Commission approved issuance of a direct final rule to incorporate by' reference a national consensus standard in 10 CFR 50.55a(h) which establishes minimum functional and design requirements for the power, instrumentation, and control portions of safety systems for nuclear power plants. The staff should publish the proposed rule and the direct final rule in the Federal Reaister and allow for a 75 day comment period before the final rule becomes effective.

The staff should amend the Congressional Letters to include the '

!first sentence from the Discussion section of SECY-97-201 at the end of the first-paragraph to acknowledge the statutory mandate for :his approach. .

> j

.d

. ll, SECY-97-203 - Secuovah Fuels Corocration & General Atomicer O' /

Docket No. 40-8027-EA; LBP-95-18 and LBP-96-24. Memoranda and Orders (Acorovino settlements)

'The Commission approved an order responding to appeals which challenged the settlement agreements in the cases of Sequoyah Fuels - (LBP-95-18) and General Atomics (LBP-96-24). In earlier orders (CL.-96-3 and CLI-97-1), the Commission had granted the intervenors' petitions for review and all parties filed 1riefs with the Commission regarding both LBP-95-18 and LBP-96-24.

The Commission approved the attached order (cs provided to the Commission in the Cordes Memorandum dated October 1, 1997 and modified by the editorial changes from the Commission) accepting the staff's settlements with Sequoyah Fuels Corporation and M jo iq o u 8 1 4 9(P.

General Atomics and rejecting the intervenors' arguments for setting aside the set element agreements.

(Subsequently, on October 8, 1997 the Secretary signed the Order.)

Attachment:

As stated cc: Chairman Jackson Commissioner Dieus Commissioner Diaz Commissioner McGaffigan EDO OGC CIO CFO OCAA OCA OIG l

Office Directors, Regions, ACRS, ACNW, ASLBP (via E-Mail)

PDR - Advance DCS - P1-17 o

00CKETED INITED STATES OF AMERICA lJ$h'}?C .

NUCLEAR REGULATORY-COMMISSION W DCT -8 P3 :46 COMMISSIONERS:

Shirley Ann-Jackson, Chairman OFU.t .

a Greta J. Dicus I

SU'd'f stk Y#r ' / s.

-Nils J. Diaz ADJUD't . , ,;/gp Edward McGaffigan, Jr.

)

In the Matter of )

)

SEQUOYAH FUELS CORPORATION )

and GENERAL ATOMICS )

) Docket No. 40-8027-EA L (Gore, Oklahoma Site )

! Decontamination and ) '

L Decommissioning Funding) )

) g y n ()g!..gtp?

CLI-97-13 MEMORANDUM AND ORDER On January 22, 1997, the Commission issued an order (CLI-9_7-1, 4 5 NRC 1) granting.both a joint petition of Native Americans for a Clean Environment ("NACE") and the Cherokee Nation (collectively "intervenors") and a petition of the State of Oklahoma (" Oklahoma") for Commission review of an Atomic 1.

Safety and Licensing Board Memorandum and Order, LBP-96-24, 44 NRC 249 (1996). The Board order had approved a settlement agreement between.the NRC staff and General Atomics ("GA")

regarding GA's financial responsibility for cleaning up the Gore, Oklahoma, facility owned and operated by GA's subsidiary, Sequoyah Fuels Corp. ("SFC").

Earlier in this proceeding, the Board had issued a similar order approving the staff's settlement with SFC regarding SFC's

{W000 0 '

, .i- > 1 own responsibility for the_ clean-up of the Gore site. LBP-95-18, 42 NRC 150 (1995). The Commission had granted intervenors'

-petitions for review of that order, and had also granted-Oklahoma permission to file with the Commission a brief amicus curiae.

CLI-96-3, 43'NRC 16 (1996).- 1 All parties have filed briefs with the Commission regarding both LBP-95-18 and LBP-96-24, with Oklahoma and intervenors (collectively " opponents") objecting to the settlements and urging reversal o, hose two orders, and-with the staff, SFC and GA urging their al" :mance. For the reasons set forth below, we affirm LBP-95-18 and LBP-96-24 and approve both the GA and SFC settlements without modification.

BACKGROUND This proceeding! stems'from an October 15, 1993, enforcement order in- which the staf f held SFC ar.d GA jointly and severally-

-responsible for providing financial assurance for the decommissioning of the Gore facility under 10 C.F.R. S-40.36. 58 Fed. Reg. 55,087 (Oct. 25, 1993). The staff considered SFC responsible under the terms of its license and GA responsible under the theory that it " exercised and exercises de facto-control over the day-to-day business of SFC." Id at 55,089-91.

The staff ultimately _ negotiated separate settlements with SFC and GA.

3 I. The SFC Settlement h

Under'this settlement-agreement, SFC agreed to commit all of its-present and future net assets and net revenues to funding-the 1

decontamination and' decommissioning of the SFC-site. In f exchange, the staff agreed to forgo further enforcement or other action against SFC to secure any additional decommissioning L funding _beyond that specified_in the settlement.

In LBP-95-18, a majority of a three-judge Board approved the '

SFC settlement as being in the public interest. The majority-rejected intervenors' arguments that.the settlement would permit SFC's assets to be consumed by creditors or GA, rather than used r

i to fund decommissioning. According to the majority, neither the-f ' agreement nor the underlying enforcement action could affect the status of legitimate SFC de'sts, and therefore intervenors' line of argument was outside_the scope of the enforcement proceeding.

-Moreover,;the majority found that the. funds originally set aside for decommissioning were committed by-SFC to be used for that purpose under the agreement. 42 NRC at 152-54. The majority also reasoned that the " avoidance of_ protracted and needless litigation is in the public interest." Id at 155.

In a. separate-statement, Judge Bollwerk declined to ioin in approving the settlement without knowing more about the stuff's periodic review of SFC's financial records contemplated by the agreement and the NRC's position'as a creditor in the event that SFC filed-for bankruptcy. Id&.at 156-59.

-Chi appeal, the opponents challenge the settlement agreement

4 on the ground that it does not actually ensure that SFC will commit all possible financial resources to decontaminate and decommission the SFC facility. More specifically, they argue that the settlement fails to provide a decommissioning cost estimate for the Gore site, to establish a fixed dollar amount as SFC's contribution to the decommissioning costs, and to prevent SFC from-improperly disbursing those funds that are earmarked for clean-up to instead pay the debts of GA, including an outstanding

$10.6 million loan from Kerr-McGee Chemical Corporation (GA's i predecessor as owner of SFC) or other unnecessary expenses.

The staff and SFC respond that the NRC has obtained the maximum possible assurances from SFC, that the staff can take i

l action to enforce the terms of the agreement if necessary, and that there is consequently no point in expending further agency and SFC resoarces on litigation. ,

I II. The GA Settlement 1 Under the staff's settlement agreement with GA, the company agreed to pay either $9 million or $5.4 million (depending on the results of a still-pending query to the IRS on the tax status of such payments), to create a decommissioning trust fund for such monies, to relinquish all control over both the fund and the monies, to permit the staff to approve the distribution of all such monies, and to remove two GA officers from SFC's Board of Directors. The staff in turn agreed to forgo further enforcement or other action against GA based on either GA's affiliation with SFC or the staff's theory that GA's exercise of de facto control

5 over SFC's day to-day business activities renders it a "de facto

-)

licensee."-

.In LBP-96-24, 44 NRC 249, the same two-judge majority of the Board approved the-GA settlement as in the public interest. The-l Board reasoned that the GA.and SFC settlements combined to provide = sufficient assurance of adequate funding for the

-decommissioning. The Board also concluded that approval of the-settlement was supported by a balancing of various public-

,z -interest factors -- intensity of negotiations, complexity of I

legal and factual questions, value.of immediate recovery as.

compared with possibility of recovery after extensive litigation, and the parties' own judgments as to the fairness and reasonableness of the settlement. 44-NRC at 257.

Judge Bollwerk again dissented, explaining that, to vote for

-approval of.the GA settlement, he.would first need to see the staff's current best estimate of (a) the total decommissioning costs for the Gore facility, (b) the maximum revenue that.will be

. generated for decommissioning work under the ConverDyn agreement,2 and (c) -the funds available for such work from other

-sources. He also asked, assuming that SFC and GA funds were -

-2 ConverDyn is a general partnership formed in 1992, by General Atomic Energy. Services, GAES Limited Partnership and Allied Signal Energy Services. ConverDyn's purpose is to market UF conversion and other services worldwide to utility-companies. Whens SFC ceased purification andL conversion operations at its Gore facility in 1992, it signed a Standby Agreement with ConverDyn under which ConverDyn would provide-ongoing UF conversion services on behalf of SFC. Under the Standby Agreement (as amended in 1994), ConverDyn pays SFC various fees each year. According to the staff, these fees are expected to provide SFC with $72 million of

.its $89 million antici.cated revenue through the year 2003.

l.

6 insufficient to pay for the complete decommissioning-of the-Gore facility, what: additional clean-up-mechanisms would be available to complete-that decommissioning, and whether the.GA settlement would have any adverse effect on the availability of those t

mechanisms. 44 NRC at 259-262.

On appeal, the opponents. argue that the settlement is contrary to the public interest because: it fails to ensure that GA will commit sufficient resources to decontaminate and i

decommission the Gore facility; it fails-to disclose the terms of a secretf" global settlement" with GA involving the company's facilities in both Gore and San Diego, California; it fails to L -correct numerous problems-created'in the SFC settlement; and it unlawfully grants GA an unconditional and indefinite waiver of decommissioning-funding requirements without public' notice and opportunity for a hearing.

The staff-and GA disagree.- Theyconsidertheagre$mentan-acceptable compromise, given each side's vulnerabilities. They-also argue that the " global settlement" is a fiction and that the Commission's approach to addressing the decommissioning of GA's San Diegol facilities =is beyond the scope of this enforcement Proceeding. Finally, they consider the settlement an exercise of enforcement discretion rather than a waiver of regulations.

7 DISCUSSION It is axiomatic that the Commission, like other adjudicatory bodies, looks with favor upon settlements.2 We consider the facts in the light most favorable to a settlement and are loath to second-guess the parties' (including our staff's) evaluation of their own interests. On the other hand, we do not simply rubber-stamp all enforcement settlements. As explained below, we look independently at such settlements to see whether they meet the public interest. Sag, e.o., Randall U. Orem, CLI-93-14, 37 hRC 423 (1993). As the Second Circuit has stated, " [tl he evaluation of a proposed settlement requires an amalgam of delicate balancing, gross approximations and rough justice."2 i

I. The Standard for Board and Commission Review of Settlements Section 2.203 of the Commission's rules of practice sets forth the Board's function in reviewing settlements in enforcement cases. This section provides that (1) settlements are subject to the Board's approval; (2) the Board, in considering whether to approve a settlement, should " accord [] due weight to the position of the staff;" and (3) the Board may "crder such adjudication of the issues as (it] may deem to be required in the public interest to dispose of the proceeding."

2 Sgg Rockwell International Coro. (Rocketdyne Division),

CLI 5, 31 NRC 3 3 7, 3 4 0 (1990) ; Statement of Policy on Conduct of Licensine Proceedinos, CLI-81-8, 13 NRC 4 52, 456 (1981); 10 C.F.R.

SS 2.759, 2.1241; Isby v. Bavh, 75 F.3d 1191, 1196 (7th Cir. 1996)

(Isby).

' City of Detroit v. Grinnell, 495 F.2d 448, 468 (1974)

(Grinnell), citino Savlor v. Lindslay, 456 F.2d 896, 904 (2d Cir.

1972).

.. t 4

.8

'See alsoL27 Fed. Reg.-377,c380--(Jan. 13, 1962).-- The third element of section 2.203.means, as-we stated earlier in this-proceeding,_that the NRC staff has no "untrammelle,d discretion" to accept compromises once an. enforcement case is before the Board, and that "the presiding officer's approval of settlement is a matter that must give due consideration to the public interest." Secuovah Fuels Coro. and General Atomics, (Gore Oklahoma _ Site),-CLI-94-12, 40 NRC 64, 70-71 (1994). Accord Hgw

York Shiobuildina Coro.,.1 AEC 842 (1961).

Comniission review of Board decisions on legal and policy matters such as the adequacy _of a settlement is de novo,'

although we of course give respectful' attention to the Board's views. In conducting our review, we use the "due weight to ..,;

staff"'and "public interest" standards set forth in 10 C.F.R.

S 2.203 and New York Shiobuildinc.- Moreover, we remain mindful that-the enforcement context of this proceeding necessarily restricts the scope-of remedies that-intervenors may demand to

those set out by- the -NRC staf f in its enforcement order. Egg,

-2. 1 , Bellotti v. NRC, 725 F.2d 1380, 1381 (D.C. Cir. 1983);

Secuovah Fuels Coro., CLI-94-12, 40 NRC at 70; Public Serv. Co.

of Ind. (Marble Hill Nuclear Generating Station, Units 1 and 2),

~'

For this reason, we need not reach intervenors' question whether the Board made the required independent determination, supported-by_the record,.that the GA settlement meets the "public interest" consideration of protecting the public health and safety.

9 CLI-80-10, 11 NnC 438, 440-42 (1980).5 This restriction on the remedies at issue in this proceeding' eliminates the need to consider arguments by the i 1

settlements' opponents seeking to expand the remedies against SFC and GA beyond those sought by the NRC staff. On the other hand, if the intervenors or Oklahoma conclude at some future date that either GA or SFC is violating the terms of its sattlement or if they are dissatisfied with any enforcement action the staff is taking (or not taking), they are free to file a petition under 10 C.F.R. S 2.206 seeking additional or stricter enforcement 5

As we stated in Marble Hill:

We believe that public health and safety is best served by concentrating inspection and enforcement resources on actual field inspections and related scientific and engineering work, as opposed to the conduct of legal proceedings. This consideration calls for a policy that encourages licensees to consent to, rather than contest, enforcement. actions. Such a policy would be thwarted if licensees which consented to enforcement actions were routinely subjected to formal proceedings possibly leading to more severe or different enforcement actions.

Rather than consent and risk a hearing on whether more drastic relief was called for, licensees would, to protect their own interests, call for a hearing on each enforcement order to ensure that the possibility of less severe action would also be considered. The end result would be a major diversion of agency resources from project inspections and engineering investigations to the conduct of hearings.

11 NRC at 441-42.

At the outset of this case, one intervenor candidly acknowledged that it la " precluded from advocating any measures beyond the scope of the October 15th Order. " NACE's Reply to SFC's Answer $n Opposition to NACE's Motion to Intervene, dated Dec. 30, 1993, at 9. See also CLI-94-12, 40 NRC at 70 ("NACE recognizes in this instance that it may only intervene with respect to matters tound to be within the scope of the Staff's enforcement order and may not expand the breadth of tue order or proceeding").

10 actions.'

t II. Analysis of the Settlements Having discussed the general standards we apply in reviewing settlements, we now turn to the settlements in this proceeding.

As noted above, we first give "due weight" to the position of the staff and then consider the general "public interest."

A. "Due Weicht" to Be Accorded the Staff's Position We begin our "due weight" discussion by reiterating our statements earlier in this proceeding that the staff's position, l

l while entitled to due weight, is not itself dispositive of l whether an enforcement settlement should be approved:

Once proceedings have been initiated, ... the Staff's discretion is never absolute. While the agency's enforcement discretion may be at its zenith as the agency decides whether to initiate enforcement action, that discretion does not negate the participatory rights in agency proceedings under statute or regulation once a proceeding has been initiated or a matter set for hearing.

[O]nce an enforcement order has been set for hearing

..., the NRC staff no longer has untrammeled discretion to offer or accept a compromise or settlement. In any pending proceeding, the presiding officer's approval of settlement is a matter that must give due consideration to the public interest.'

' Sig Egllev v. Selin, 42 F.3d 1501, 1515 (6th Cir. 1995);

Bellotti, 725 F.2d at 1383; Secuovah Fuels Coro. (UF. Production Facility), - CLI-3 9- 19, 24 NRC 508, 513-14 (1989); Marble Hill, CLI-80-10, 11 NRC at 442.

8 Secuovah Fuels Coro. and General Atomics, (Gore Oklahoma Site) , CLI-94 -12, 4 0 NRC 64, 70-71 (1994). Intervenors assert that the Board must accord due weight to staff's views only if staf f expressly states that the settlement adequately addresses the (continued...)

l.

11 However, the f act that the Board (and the Commission) give less than absolute deference to the staff's views on a settlement I

hardly means that such views either can be ignored or constitute only a minor factor in the Board's and Commission's evaluation of a settlement -- a result which the opponents apparently desire.

Saa note 8, supra. The presence of the "due weight" language in 10 C.F.R. S 2.203 provides dispositive _ proof of the importance of the staff's views. Several considerations reinforce the usefu)*.ess of the "due weight" approach, both in general and-in this particular proceeding.

Having " lived" with the case as a litigant, the NRC'etaff

'(... continued)  !

health-and-safety concerns raised in staff's original enforcement l order, but not if staff addresses merely whether the settlement is in the public intever.,L. However, intervenors cite no support for this novel prop.isition. Our regulatory standard for approving

. settlements is the "public interest" 10 C.F.R. S 2.203), and the NRC staf f 's__ ___ adjudicatory - submissions- understandably and appropriately focus on'that broader standard.- The public interest includes, but is not limited to, consideration of the public health-and safety (our mandate under the Atomic Energy Act ("AEA")). Our_

statutory authority for the Commission's "public interest" review of settlements under 10 C.F.R. S 2.203 is not the AEA (which is silent regarding settlements) but rather section 5(b) of the Administrative Procedure Act ' ("APA") ,= which permits a - far broader '

scope of considerations.-

Nor can we accept intr $ rvenormi' - related position that- the appropriate test-for settlement approval is whether the settlement satisfies the purpose of the staff's original enforcement order.

Such satisfaction is only one of the factors which we consider when examining.

interest.

the "public health and safety" element of the public Sig Randall C. Orem, CLI-93-14, 37 NRC at 429 (Commission's approval of an enforcement ' settlement was based only in part on the facts that "the original-(enforcement) order sought termination of a licence ...

(and that) this result is achieved under the agreement without - further litigation") . An insistence that a settlement reach in full the same goals as the_ original enforcement order would effectively preclude settlements in

. enforcement cases.

L

i.

l 12 necessarily knows the record as well as, and probably better than,-the Board and the Commission. The staff has a similarly close familiarity with the strengths and weaknesses of its own factual and legal contentions (Lagu, here, its controversial position that SFC's parent corporation, GA, may be viewed as a dg facto NRC licensee). In addition, it is-the staff -- not the Peard or=the Commission -- who has negotiated with the enforcement targets (in this case, for many months) and who g consequently is_in the strongest position at the agency to assess

)-

what those agency targets are willing to concede and how much they are willing to pay.'

Finally, the staff also has the best sense of how it should allocate ics limited enforcemcnt resources, as measured against other priorities, to provide the maximum protection of the public hea3*h and safety, and whether the investment of further time and money in litigating (as compared with settling) a particular case

-is a' responsible use of those_ scarce resources." Such exerciso

' The federal courts, like the Commission, assign substantial importance to factors such as these and consequently accord considerable weight to the opinions of experienced counsel when deciding whether to approve settlements. Sag, gg, Torrisi v.

Tuscon Elec. Power Co., 8 F.3d 1370 (9th Cir. 1993), cert. denied, 512 U.S. 1220 (1994); Granada Investments, Inc. v. DWO Coro., 823 F.- Supp. 440, 453 (N.D. Ohio 1993) . Tha scales tip even more toward judicial approval where, as here,- government officials prosecuting an enforcement case favor the settlement. Egg United States v. Microsoft,- 56 F.3d' 1448, 1462 (D.C. Cir. 1995)

(Microsof1).

" 33g Marble Will,111 NRC at 441-42, cuoted suora at page 9.

Cf Microsoft, 56=F.3d at 1459 ("a settlement, particularly of a major case,_ will allow the - De of.Justico to reallocate necessarily limited resources")partment

13 of enforcement discretion is essential to the efficient working of the Commission's administrative process in enforcement proceedings.

This resource allocation factor is particularly relevant to l the instant settlements. If past is prologue to the future, a  !

full hearing of this proceeding would be quite lengthy and expensive. In the first three years of this case, the parties have submitted nearly 400 filings. The time and expense associated with these filings would likely be relatively small compared with the time and cost of the remainder of this litigation. By the date of the GA settlement, the proceeding had not yet even reached the hearing stage, discovery had barely begun, and the prospect of extensive discovery battles loomed large. The case had also taken a detour through the federal courts. Egg General Atomics v. NRC, 75 F.3d 536 (9th Cir. 1996).

The settlements will permit the NRC to avoid further expenditures of its scarce resources.

Both as a general matter and especially as applied to the instant proceeding, all of the reasons for giving adue weight" to the staff's views justify giving quite substantial deference to the staff's support of the SFC and GA settlements. We are willing, in short, to presume that our staff acted in the agency's best interest in agreeing to the settlements. Only if the settlements' opponents show some " substantial" public interest reason to overcome that presumption will we undo the settlements. Egg Secuovah Fuels, CLI-94-12, 40 NRC at 71 n.10.

1*

14 B. "Public Interest" Factors in Reviewina Settlements I We divide our public interest inquiry into four parts: (1) whether, in view of the agency's original order and the risks and benefits of further litigation, the settlement result appears unreasonable; (2) whether the terms of the settlement appear incapable of effective implementation and enforcement; (3) whether the settlement jeopardizes the public health and safety; and (4) whether the settlement approval process _ deprives interested parties _of meaningful- participation.22

1. Risks and Benefits In reviewing a settlement, the first "public interest" factor we examine is the risks and benefits of settling as compared to litigating the proceeding. More specifically, we consider (1) the liketihood (or uncertainty) of success at trial, ,' 2 ) the range of possible recovery and the related risk of uncollectibility of.a larger trial judgment, and (3) the ccmplexity, length and expense of continued litigation. On balance, we believe that these considerations support approval of the GA'and SFC settlements,

a. GA Settlement To the extent the opponents suggest that the GA settlement

• • In addition to Microsoft,-where the D.C. Circuit considered a statutory "public interest" standard applicable to antitrust enforcement settlements, we-have looked to several other judicial authorities that have used standards similar to ours when reviewing settlemente. Sag, g g., Massachusetts School of Law at Andover v.

United States, 118 F.3d 776, 782 (D.C. Cir. 1997); Armstrono v.

Board of School Directors, 616 F.2d 305, 314 (7th Cir. 1980)

(Armstrona) ; Girsh v. Jenson, 521 F.2d 153, 157 (3d Cir. 1975)

(Girsh) ; Grinnell, 495 F.2d at 462.

• 1 15 i i

can be approved only-if it grants the staff (or the opponents $

l everything they theoretically might have won had the case been J fully litigated -- which in this proceeding would translate into guaranteed full funding of all decommissioning costs -- we reject  ;

l 3

their position. Opponents' argument, if accepted, would deprive

),

the staff's adversaries (here, GA and SFC) of all incentive to settle. Fee also note 8, supra. Such a " settlement" would be indistinguishable from a merits judgment based on a judicial j i findingaof liability. -It is simply " inappropriate ... to measure i  :

l the remedies in the (settlement) decree as if they were fashioned l

. t after trial." Microsoft, 56 F.3d at 1461.

4 Here, the NRC staff faces a substantial possibility of defeat if the case proceeds to t.Tial. The staff's untested "da o facto licensee" theory would li.ely k turn in large part on its

- ability to overcome the legal maxim that shareowners-(here GA) of a corporation (here SFC) are not liable for the corporation's obligations, absent equitable circumstances warranting " piercing

the corporate veil."" on the one hand, there is no governing

, commission or court law directly supporting staff's "de facto 7

licensee" theory. On the other hand, both the Board and the i

j United States Court of Appealc for the Ninth Circuit appear to 1

L conclude that there could be a set of facts which,-if proven, would establish Commission jurisdiction over GA as posited in the 1

1

" Egg, g g , United States v. Cordova Chem. Co., 113 F.3d 572 '

i (6th'Cir. 1997); Joslyn Mfo. Co. v. T.L. James & Co., 893 F.2d 80, 82 (5th Cir. 1990) , cert. denied, 408 U.S. 1108 (1991).

i i

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Q 16 1993 enforcement order." Thus, both the staff and GA understandably concluded that neither side could be certain of a victory on the issue of jurisdiction.

i Absent a settlement, the NRC staff's effort to make GA the ultimate guarantor of the cleanup of SFC's Gore site not only would face difficult legal hurdles but might also run into 1

significant practical problems. The financial information in the record suggests that GA is not necessarily a " deep pocket" and

.that a victory by the staff on the liability issue might not lead to a fully collectible judgment, should SFC default on its cleanup obligation and the NRC attempt to force GA to rpend tens i of millions of dollars on the cleanup effort.

For example, GA asserts that its financial condition has worsened substantially as the result of Ccngrescional funding cutbacks in programs for which GA is a contractor, i e , the Gas-Turbine Modular Helium Reactor program (eliminated in 1995) and the nuclear fusion research program (cut by 20 percent in 1995).

In addition, according to GA, its current business operations and future business opportunities have suffered and continue to suffer as a result of the as-yet-unresolved enforcement order at

" The Board denied GA's motion for summary judgment on this issue and the Court of Appeals did not find the Commission's jurisdiction " plainly lacking. " Secuovah Fuels Coro and General AtomiCg, LBP-94-17. 39 NRC 359, rgyjer declined, CLI-94-11, 4 0 NRC 55 (1994); Ceneral Atomics v. NRC, 75 F.3d 536, 541 (9th Cir.

1996). Particularly in environmental cases, the judiciary has been willing to hold parent companies liable for their subsidiaries' acts when there is strong evidence of parental control. Sag, e.g.,

United States v. Kavser-Roth Coro., 310 F.2d 24 (1st Cir. 1990),

cert. denied, 498 U.S. 1084 (1991).

17 issue in this proceeding, particularly in view of its loss of a significant line of-credit from Citicorp." These statements raise a significant risk that any judgment against GA might well be collectible only in part.

Furthermore,-if the Commission were to reject the settlement and full-scale litigation were to resume, the proceeding would undoubtedly prove complex, lengthy and expensive. The time and expense of involving senior NRC staff and senior corporate management in a full hearing would be considerable. The complex jurisdictional issue of first impression (whether GA was a da facto licensee) not only would generate much discovery and contentious litigation but also could easily result in any final

' Commission decision;being appealed to a United States Court of Appeals. The settlement of the staff's claim 1against GA will permit the parties and the Commission to avoid these expenditures of time and money. As we indicated at the outset, we tend to look more favorably upon settlements that will reduce the amount of money spent on-litigation over liability issues and make that money available for cleanup.

The long and short of the GA settlement is that the'NRC staff has obtained from GA.a commitment to contribute either_$5.4

" That line was, according to GA, essential to mako busine6s acquisitions . backstop letters of credit and performance bonds required by .astic and foreign customers, to levelize fluctuating cash requi..ments, and to - provide a source of funds in an emergency. GA states that the line of credit which it was later able to:obtain provides less credit at less favorable terms and thatL GA's ' opportunities . to pursue business opportunities have consequently been limited.

_. - --- . _ - - . - . . - - _ - -. -. - -, - - - . - ~ - _ -_ _ _

A 18 million or $9 million (depending on the outcome of GA's pending request for an IRS tax ruling) to cleaning up the SFC site at Gore. To be suro, this is a much smaller commitment than the NRC staff theoretically might have obtained had it pursued the enforcement litigation to the end. On the other hand, further litigation raises the substantici possibility of leaving GA free of cleanup responsibility altogether, despite a major investment of NRC staff time and resources. And, even if the original staff enforcement order ultimately survived sll litigation attacks, the victory might prove chimerical. GA may well lack the financial wherewithal to serve as a full guarantor of the cleanup expenses, as the original enforcement order essentially contemplated.

Under these circumstances, we are not inclined to second-guess the views of our staff, GA and the Licensing Board that the GA settlement achieves a reasonable result,

b. SFC Settlement As for the SFC settlement, the staff's position contains no apparent vulnerabilities on the merits similar to the jurisdictional ones affecting its case against GA, and we believe, based on the current nascent record, that the staff might well prevail against SFC if the proceeding were to go to a full hearing. The level of uncertainty associated with the l

staff's case against SFC appears significantly lower than the

- level of uncertainty associated with its case against GA.

This is not to say, however, that the staff acted unreasonably in reaching a settlement with SFC. The settlement L

19 5

has the obvious advantages of halting diversion of SFC resources from' cleanup to litigation and of saving staff resources as well.

3 In addition, in approving the SFC settlement, the Board concluded (and the staff and TIC emphu.'ize on appeal) that, under the SFC ]

o settlement, the Nhc will receive from SFC "All that the NRC would be entitled to receive in the absence of an agreement and a  !

decision issued in NRC's favor." LBP-95-18, 42 NRC at 154

\

, (emphasis added). This conclusion, if taken at face value, mitigates quite strongly in favor of accepting the SFC settlement. However, the settlement's opponents do not take it at face value. They question whether the SFC-pledged funds will actually prove collectible. We turn to that question in the next ,

portion of this decision.

1

2. Imolementation and Enforcement I

The opponents of the-SFC settlement do not agree with the i

Licensing Board that the agreement effectively commits SFC "to furnish all of its assets and revenues" to the cleanup of its Gore-site.25 San LBP-95-18, 42 NRC at 155. In their view, the agreement suffers from a number of allegedly fatal flaws, i

~

including a f ailure .tx) Un vent diversion of SFC funds, an  ;

inadequate reporting requirement, a lack of adequate protection against an SFC bankruptcy, and incomplete financial information.

e

'~

In our-view, none-of these objections is sufficient to upset the SPC settlement agreement, both for the reasons the Licensing i

2$

The opponents raise no similar concerns -about the implementation and enforcement of the GA settlement, nor do we see any such problems with that settlement.

w ,*-itw g --e4,wvvyDW-'m,-=-'1-V1p '- --gv- g-r-- --

• /y- c- -v"- T*-w- 'tg 's

ie i

20 Board gives (42 NRC at 152-55) and for the reasons we give below,

a. Imorener Disbursal of Assets According to the opponents, nothing in the agreement i

prevents SFC from improperly disbursing its assets, i g , taking funda earmarked for decommissioning and instead improperly using i

them to pay unreasonable or unnecessary expenses such as drawing down or retiring GA's debt. The opponents fear that such action by SFC would render uncollectible the assets and revenue which SFC pledges-in its settlement to contribute towards decommissioning the Gore _ facility.

It seems to us t. hat the only two ways to guarantee that funds will not be improperly disbursed would be either to prohibit SFC from paying its debts until after the completion of i

decommissioning or to give the staff the authority to pre-approve all SFC's expenses. In our opinion, both are unacceptable. The I

-first approach is legally questionable we doubt that the NRC may lawfully nullify creditors' valid claims against SFC. Such an i

effort also would be counterproductives if SFC could not pay its debts, it could find no vendors, contractors or employees willing to provide the goods and services needed for decommissioning.

The second approach (NRC pre-approval of all SFC transactions) would,:in our vie , misallocate resources by placing an enormous administrative burden on both the staff and SFC.

We acknowledge-the risk of improper disbursal but agree with the Licensing Board that the "NRC is not left helpless in the

-event of any deception" on.SFC's part. LBP-95-18, 42 NRC at 152.

4 4

21 I

"[Alny transfer of SPC assets and revenues to claimants who had no legal entitlement to them would subject SFC to an enforcement action (by the NRC) ... for violating the settlement Agreement."

JBlu (internal quotation marks omitted). In other words, the r

staff, by using its own investigative auttority and the settlement's reporting requirements (providing for annual

-financial audits),- is in a position under the SFC settlement to discover and counteract improper disbursements."

b. Reoortina Recuirementa The opponents doubt the effectiveness of the-SFC settlement's reporting requirements and consider the staff's authority to require SFC to request the return f misspent funds to be small comfort. They point out that it is far easier to prevent misspending in'the first place than it is to recover misspent funds held by nonlicensees.

They go on-to suggest four amendments to improve the reporting requirements (1) rcquire the annual reports to include specific information regarding decommissioning expenses or to justify the reasonableness of those expenses; (2) provide for public access to the annual reports; (3) require the filing of

- financial reports by other entities related to SFC (Latu,

" For instance, were the staff to discern a pattern of improper disbursements, the agency could then require SFC to obtain staff's pre-approval of all disbursements in excess of a certain dollar' figure. If the recipient of improper disbursements were GA or some other entity with knowledge of the SFC settlement, the staff could seek reimbursement from the recipient. In addition, any willful - violations of the commission's orders may lead to criminal sanctions. See cenerally AEA S 223, 42 U.S.C. S 2273.

22 Sequoyah Holding Corporation ("SHC") , Sequoyah Fuels International Corporation (" SPIC") and ConverDyn); and (4) provide for staff review of SFC's quarterly financial reports.

As we explain below, these " improvements" would be marginal at

-best and do not justify reopening the settlement agreement.

The suggested requirement that the annual reports either include specific information regarding decommissioning expenses or-justify the reasonableness of those expenses would merely

_ provide the staff-with information to which it already has access, both under its general investigatory and enforcement authority and also under the terms of the settlement. San SFC Settlement Agreement 1 5, 42 NRC at 164 ("SFC will make its financial records and books available for audit by the NRC Staff at any reasonable time").

'The suggested public access to SFC's annual reports poses obvious confidentiality problems for a privately-held company.

Intervenors have not offered any solution to these confidentiality problems. Regarding the suggested filing of financial reports by_other entities related to SFC (itg , SHC, SFIC and ConverDyn), none of these entities is even a party to the instant proceeding. Consequently, the settlement-cannot bind them to-file reports.

Finally, regarding the suggested provision of quarterly financial reports to the staff, we note that every three months the staff already-receives from the Environmental Protection Agency (" EPA") copies of SFC's quarterly financial statements as

l' 23 l well as its quarterly reports describing activities conducted and the nature and amount of revenues used for those activities.

c. Bankruotev The next alleged defect in the SFC settlement relates to a y possible future bankruptcy of that company. Intervenors ask whether the NRC can improve its current position as an unsecured j creditor in the event that SFC !iles for bankruptcy, and suggest ,

that the public would be best served by the settlement requiring SFC-to provide advance notice of its intent to file for bankruptcy.

We cannot agree with intervenors' suggestion. It is not at all clear that advance notice would enhance the-NRC's position in a potential SFC bankruptcy. Intervenors speculate that, with advance notice, the NRC might issue some form of immediate order that would give priority to decontamination costs over creditor claims in a bankruptcy proceeding. But no one explains precisely

-why a pre-bankruptcy decontamination order by the NRC would have more weight than a-post-bankruptcy order (or, for that matter, Emore weight than SFC's-existing cleanup obligations).

And, as L the-NRC staff points out in its brief, an NRC order issued on the

. eve of ban':ruptcy, resting on special advance notice given the NRC-but no one else, conceivably could be rendered void by the bankruptcy _ court under its equitable powers.

The Commission, of course,' claims no particolar bankruptcy expertise. - But ' absent a more definitive showing of the utility of1 advance notice than has been presented in this case, we

_ = _ . ._

7_-._

l 24 l

L . decline to add an unbargained-for notice requirement to what seems on balance a reasonable settlement. We are loath to 1

l jeopardize that settlement by adding a new requirement of so little demonstrable worth, sma Clause 11 of the Settlement Agreement, reprinted at 42 NRC 165 (allowing withdrawal from settlement in the event of "any substantive modification").

We see only one other possible means by which the agency I could improve its-position if SFC goes bankrupt -- to require SFC

• 2 to obtain an additional surety-instrument guaranteeing the i decommissioning funds in the event that the licensee goes

bankrupt. However, according to the staff, SFC cannot provide more than the $750,000 letter of credit that it has already obtained. Nothing in the record leads us to believe that the staff is incorrect.

SFC's statuc as the owner of a shut-down facility with significant-decommissioning liabilities would most likely preclude SFC from qualifying for' such an ' additional letter of credit. Consequently, the only realistic situation in which a bank would issus such a letter of credit would be if the letter were fully collateralized by cash -- a situation which would defeat the decommissioning goal by removing that same cash from Lthe pool of money available to decommission the site." We agree with the staff and SFC that this approach would be

" Intervenors respond that it does make sense to collateralize funds, if only to protect them f rom Kerr-McGee's . $10.6 million claim. Our discussion of the Kerr-McGee loan, infra at pages 28 g1 R22 , is dispositive of intervenors' response.

l 25 impractical and counterproductive. Consequently, we do not

. consider the absence of this second approach in the settlement to be a factor mitigating against its approval.

! d. Insufficient Financial Information i

The settlement opponents argue that the settlement l 1

-agreements and the adjudicatory record lack sufficient financial information to assess the settlements' workability. For the reasons set forth below, we consider the absence of these pieces '

of-proprietary information to be either irrelevant or insufficiently important to scuttle the settlement.

(i) "Best Barcain" Intervonors argue that the financial data in the record is insufficAent to permit a fair evaluction of whether the staff obtained the best bargain in the public interest. We reject this argument on two grounds._ First, it ignores the established judicial precedent -- equally applicable in the adminiotrative context -- that-the adjudicator's_" function is not to determine whether the resulting array of rights and liabilities is the one that will best serve society, but only to confirm that the resulting settlement is within the reaches of the public

-interest." Microsoft, 56 F.3d at 1460 -(internal quotation marks omitted,-emphases in original). See cenerc11v 10 C.F.R.

SS 2.759, 2.1241 (requiring only that a settlement be " fair and reasonable"). Second, we need not reject a settlement merely because one of'the parties might have received a more favorable ma

26 result had the case been fully litigated."

(ii) Decommissionina Costs and SFC's Contribution Intervenors want to know the current best estimate of the costs of decommissioning the Gore site and the dollar amout.t for 4

! SFC's contribution to those costs. We do not consider these pieces of information to be essential to an adequate settlement.

i

-As the Board correctly pointed out, the SFC settlement will provide this agency with "all that (it) would be entitled to receive in the absence of an agreement and a decision issued in NRC's favor." LBP-95-18, 42 NRC at 1S4. Additional financial information will not improve our position vis a vis SFC. l The record, in any event, now contains a signi Scant portion of the information sought by intervenors. Under the terms of the settlement, a major element (and, according to the NRC staff, thg major element) of SFC's contribution will be ConverDyn's revenue." The most recent information available to the Commission indicates that SFC's revenues from ConverDyn and other sources are estimated at $88-89 million through the year 2003,

" our approach is similar to that of the federal courts in this regard. Egg,. e.g., Isby, 75 F.3d at 1200; Microsoft, 56 F.3d at 1460,1461 n 9; EEQQ v. Hiram Walker & Sons. Inc., *e68 F.2d 884, 889 (7th Cir.1985) (Hiram Walker); Grinnell, 495 F.2d at 455 n.2

("there is no reason, at least in theory, why a satisfactory settlement could not amount to a hundredth or even a thousandth part of a single percent of the potential recovery").

Egg SFC Settlement Agreement at i 1.b, Attachment to LBP-95-18, 43 NRC at 161; NRC Staff's Answer in Opposition to Intervenors' Petition for Review cf LBP-95-18, dated Dec. 1, 1995, at 8 n.4.

aw

27 and $96 million through the year 2005." SFC's most recent decommissioning cost estimate is $82,268,000."

(iii) Claims on ConverDyn's Revenue The opponents want to kno.s the details of the claims on ConverDyn's revenues which would have a higher payment priority than payments to SFC. They are concerned that the settlement's failure to specify the nature of these other claims on ConverDyn's revenues, together with GA's potential control over ConverDyn,22 removes any assurance that ConverDyn's profits will actually be dedicated to decommissioning rather than used by GA for its own financial purposes.

Although the opponents do not say so explicitly, this argument eseentially calls into quercion the appropriateness of the relationship between Converuyn and its parent companies.

However, the issue of the reaLanableness of this relationship is not before the Commission. The instant proceeding is bounded by the terms of the enforcement order which placed this issue outside of the parameters of this proceeding by providing that the relationship " appears to be a bona fide arrangement among the l

various parties." 58 Fed. Reg. at 55,089. Moreover, as opponents' line of argument is based only on speculation, we see l

" Staff's Appeal Brief, dated March 10, 1997, at 14; Letter from John H. Ellis, president, SFC, to Carl J. Paperiello, NRC, dated Feb. 28, 1997, attached as Appendix 1 to General Atomics' Brief in Support of Af firmation of LBP-96-24, dated March 17, 1997.

" S22 GA's Appeal Brief, dated March 17, 1997, Appendix 1.

22 Sag note 1, sunra, and the organizational chart provided as Appendix A to this order. l

4 i

28 no reason to allos them discovery, especially given the current settlement posture of this case. E22 section II.B.4 of this order, infra, at pages 38 et sea.

(iv) Kerr-McGee Loan

_The opponents are concerned that SFC might misuse some of its assets or revenue to pay off all or part of the $10.6 million loan from Kere-McGee to GA, SHC and SFIC. They argue that SFC's status as a shut-down business with no profit-making future deprives it of any incentive to conserve its resources for future decommissioning, and that GA has an obvious incentive to have SFC pay off as much of GA's' debt to Kerr-McGee as possible. The opponents propose that the settlement be amended to preclude SFC from paying GA's debt to Kerr-McGee unless and until decommissioning is satisfactorily completed. According to the opponents, this amendment would also preclude GA from unjustly enriching itself by using SFC to pay the debts of GA's subsidiaries, SFIC and SHC.

The problem here, as we noted above, is that the Commission has nc authority to nullify private debts. The Kerr-McGee issue,

-in any event, lacks practical significance because Kerr-McGee has already indicated in writing that it does not intend to enforce its_ rights against SFC until the Gore site decommissioning has been completed. Kerr-McGee presumably has every incentive to permit-SFC to proceed with decommissioning unimpeded, for if the SFC effort. fails, Kerr-McGee may well be drawn into the decommissioning process (and expenses) via the "Superfund" law,

4 29 4

i.e., the Comprehensive Environmental Response, Compensation and )

Liability Act -(CERCLA), 42 U.S.C. SS 9601-9675.

(v) Letter of Credit and Decommissionino Reserve Account i i j Opponents' next area of financial inquiry is a variation on l j their Kerr-McGee query -- they want to know whether the 1 i j settlement will make available to SFC's creditors its $750,000  ;

l letter of credit required under 10 C.F.R. S 40.36" and its e  ;

roughly $3.8 mi13 ton decommissioning and reclamation account I

(" decommissioning reserve account") required under its NRC i j license.- We see no real problem with either the letter of credit or the reserve account.

i The letter of credit requires any funds drawn on it to be [-

i

l. placed in a Standby Trust, the contents of which can be used only l for decommissioning. Thus, intervenors' request that the  :

i >

j -settlement be modified to commit the funds e.o decommissioning is i- unnecessary.

The following facts, offered by GA and'SFC, shed further i light on this matter: To enable SFC to obtain the letter of credit, GA deposited the $750,000 in an escrow (or cash

. collateral) account held by GA at Citibank of~ North America; the j: money in the cash. collateral account was-not loaned to GA; and the principal has never been-the property of SFC. The letter of credit is (by its own-terms) an " irrevocable" commitment by the

] bank to pay the NRC $750,000, and is automatically renewed each 3

" The letter of credit is appended as Attachment 3 to - SFC's Reply to Intervenors' Renewed Opposition, dated Se:pt. 29, 1995.

4

l.

30

( year absent 90 days notice by the bank. If the bank gives such 90-day notice, and if SFC cannot within thirty days provide alternative assurance that it can replace the letter of credit, then the NRC may draw down the full amount. Thus, the bank's l

requirement that SFC provide financial backing for the letter of credit is irrelevant te the bank's obligation to the NRC under the same letter of credit. We find these explanations from GA and SFC both uncontroverted and satisfactory, and we therefore  !

l see no need for-further inquiry into the $750,000 letter of credit.8' As for the decommissioning-reserve, intervenors are incorrect to view it as a separate source of decommissioning funding that was set aside and protected from incursions by other business expenses, and that had to be backed by either cash or other assets. The reserve is instead a balance sheet accounting mechanism indicating that retained earnings have been appropriated by a company in accordance with legal or contractual requirements or as a result of authorization by its board of 2*

In a related matter, intervenors object to the fact that the SFC sett',ement does not require the interest from the letter of credit's cash collateral account to be dedicated, along with the

principal, for use1-in decommissioning ~ the site.

Intervenor's Initial Brief, dated March - 25, 1996, at 12-13, relvina on Reg.

Guide 3.66. This objection fails. Because the funds in the account were placed there by GA rather than SFC, any interest from those funds belongs to GA and is irrelevant to the SFC settlement.

Sam SFC's Reply to Intervenors' Opposition to Settlement Agreement, dated Sept. 15, 1995, at 9. Moreover, nothing in Reg. Guide 3.66 requires _ that a cash collateral account even be established to support a. letter of credit, much less that the interest from such an account must be committed to decommissioning funding.

31 directors.85 Indeed, according to the staff, SFC's balance sheet already provides the remedy sought by intervenors, i.e., those reserves are separately identified in SFC's audited financial statements and are bal,need against expenses for " specific waste disposal projects and decommissioning activities" rather than against "other debts and expenses." NRC Staff's Brief Regarding Commission Review of Settlement Agreement Between Sequoyah Fuels Corp. and the NRC Staff, dated April 29, 1995, at-9-10. As the SFC balance sheet already providea what the intervenors seek, we see no advaatage to reiterating these matters in the settlement.

3. Public Health and Safety We must next determine whether the settlements jeopardize public health and safety and therefore are inconsistent with the NRC's governing statutes and rules or with public policy.8' The settlements' opponents raise three arguments regarding this general issue -- one focused on etatutory authority, one on regulatory compliance, and one on general environmental law. We see no violation of law or jeopardy to public health and safety 85 Sgg GA's Reply Brief, dated April 29, 1996, at 9-10. Sag also SFC's Reply to Intervenors' Renewed Opposition, dated Sept.

29, 1995, at 5,- (a reserve is an accounting practice used "to indicate that retained earnings have been appropriated in accordarce with legal or contractual requirements or as a result of authorization by the board of directors") , cuotina Intermediate Accountina. Comorehensive Volume at 744 (5th ed. 1972).

Intervenors have not controverted GA's and SFC's statements.

25 Sgg, y_,s_ , In re Smi t h , 92 6 F . 2 d 102 7, 1029 (11th Cir. 1991)

(settlement is void as against public policy if it directly contravenes a federal statute or policy).

32 that would justify the Commission's rejection of the settlements and the consequent further litigation on the 1993 enforcement order.

a. Statutory Authority Opponents argue that the GA settlement is inconsistent with the Commission's statutory duty under the AEA to protect public health and safety. According to intervenors, the Commission lacks statutory authority to compromise public health and safety.

They assert that although the Commission may compromise the i

l amount of a monetary penalty for noncompliance with a standard or agree on alternate means of compliance, the Commission is barred from negotiating away compliance itself or accepting a compromise that jeopardizes public health and safety."

It is of course true that the Commission would not accept a settlement of an enforcement adjudication where the settlement in actuality jeopardized the public health and safety. But, as the Board found and as we agree, that is not the case with the GA and

" Opponents support their argument by ascribing legal significance to the staff's failure to agree expressly with the statement in the GA settlement that both GA and SFC consider their funding mechanisms to be adequate to pay for the Gore site's decommissioning. Intervenors' Petition for Review of LBP-96-24, dated Nov. 26, 1996, at 7; Oklahoma's Appeal Brief, dated Feb. 11, 1997, at 6; Intervenors' Appeal Brief, dated Feb. 18, 1997, at 7.

We attach no significance to the staff's decision not to join in GA's statement. Even an express statement by the staff that the mechanisms were insufficient in this respect would not necessarily be fatal to the settlement. As explained above, the essence of settlements is compromise (Hiram Walker, 768 F.2d at 889; Armstrono, 616 F.2d at 315), and we will not judge them on the basis of whether the staff (or any other party) achieves in a settlement everything it could possibly attain from a fully and successfully litigated proceeding.

text, suora. Eeg note 18 and associated

l 33 SFC settlements.

The record fully supports a finding that the two settlements do not jeopardize public health and safety. SFC currently predicts revenue from ConverDyn in excess of $88 million through the year 2003, and in excess of $96 million through the year J

2005,.all of which must be devoted to cleaning up the Gore site.

l GA's Appeal Brief, dated March 17, 1997, Appendix 1; Staff's Appeal Brief, dated March 10, 1997, at 14. This amount alone

-would be more than sufficient to cover the $82,268,000 in (

decommissioning expenses (SFC's current estimate). GA's Appeal I

Brief, dated March 17, 1997, at 22. GA's additional sum of either $5.4 or $9 million adds a further cushion. prior to the SFC and GA settlements, the NRC had no contractual guarantee that these funds would be dedicated to decommissioning. Now it does, I

The opponents' apparent view that the NRC must adhere without compromise to the remedial plan of the 1993 enforcement order is similar to a line of argument rejected by the Seventh Circuit in Armstrona v. Board of School Directors, suora -- a decision we find both analogous and persuasxve. There, the court was faced with the contention (made by the intervenors in that proceeding) that "once liability is established in a school desegregation sut.t, ... the plaintiffs may not exchange their right to a particular remedial plan for other remedies or programs or for a speedy resolution of the litigation."

Armstrona, 616 F.2d at 316. The court rejected that approach as too rigid and concluded that "such a rule would effectively

l 34 preclude settlement because, by prohibiting any meaningful compromise as to remedy, it would eliminate the element of exchange which is at the heart of settlement of any litigation."

1 Idi We therefore reject intervenors' argument that we lack authority under the AEA to approve settlements that provide a remedy or a level of assurance regarding public health and sarety that is less than what the Commission originally sought in a contested enforcement order,

b. Reaulatorv como11ance The settlements' opponents suggest that compliance with agency regulations is the sine cua non of protecting the public health and safety, and that the settlements here impermissibly fail to guarantee full compliance with our rule governing financial assurence for decommissioning, 10 C.P.R. S 40.36. The NRC staff agrees that the settlements do not require SFC and GA to meet the literal terms of section 40.36.

We readily agree, of course, that an NRC-licensed facility's compliance with our safety rules can be an important indicator that the facility does not jeopardize public health and safety.

But we cannot agree with the opponents' wooden view that in settling enforcement controversies the NRC cannot agree to alternate devices to protect health and safety. Taken to its logical extreme, insistence on strict regulatory compliance in all cases, as the settlement opponents demand here, would rule out agency use of exemptions and enforcement discretion to relax

! 35 l

rules in particular circumstances -- a position at odds with maintaining regulatory flexibility and with NRC rules and practice. = Sag,-22g., 10 C.F.R. S 40.14 (exemptions); Portland General Electric Co.- (Trojan Nuclear Power Station), CLI-95-13, 42-NRC 125, 127-29 (1995) (enforcement discretion).

In this case, as we discussed at length earlier in this opinion, the NRC staff. faced a situation where GA might well

( prevail in its contest with the staff,-leaving the NRC with l

nothing at all from GA, and where SFC seemed incapable of producing the precise financial guarantees contemplated by section 40.36 but offered to commit all revenues to site cleanup.

In circumstances like these, we cannot say it was unreasonable for the NRC staff to exercise enforcement discretion and to pocket offers of full revenue from SFC and $5.4 to $9 million from GA rather than to continue a quixotic quest for strict regulatory compliance.

In our view, the NRC staff in the end obtained a settlement that substantially meets the financial assurance goals underlying

. section 40.36. We are not inclined to expend further agency resources on an. enforcement fight that is unlikely to result in more assurance than what the NRC staff already has obtained.8' 8'

In a related arnument on regulatory (and statutory) compliance, Oklahoma asserts that both settlements contravene the

-financial assurance requirements of the Commission's regulations (10 C.F.R. S 40.36) and the AEA (4 2 U . S '. C . S 2201(x)) . According to Oklahoma, the settlements permit SFC to " reduce (its) ' net' revenues and its net worth, by incurring new debts, paying off old debts, paying debts to GA, releasing _GA from existing agreements,

[and) transferring assets and income to related entities...",

(continued...)

36

c. Miscellaneous Environmental Issqga Oklahoma asserts that the SFC settlement will adversely affect its own and the EPA's ability "to ensure that remediation will proceed as to pollutants under their jurisdictions since the theories of liability are similar" to those asserted in the instant proceeding. oklahoma's Amicus Curiae Brief, dated April 4

11, 1996, at 9. We disagree. Neither of these governmental entities will be prejudiced by the SFC settlement, given that the SFC settlement itself has no precedential value" and given further that the instant order does not address the merits of any theory of liability in this proceeding.

Oklahoma also argues, for the first time in its Initial

"( . . . continued) thereby reducing the Commission, Oklahoma and the public to the status of unsecured creditors. Oklahoma's Appeal Brief, dated Feb.

11, 1997, at 10-11. Oklahoma continues that the staff, in reaching these settlements, has exceeded its authority by failing to require compliance with section 40.36, by failing to explain why it is waiving that regulation, and by thereby f ailing to provide adequate notice and opportunity for comment on this de facto amendment to this regulation, he disagree with oklahoma's arguments. We have dealt elsewhere in this order with the substance of Oklahoma's financial assurance argument, and we need not do so again here. We would nonetheless add that the staff is neither waiving section 40.36 nor amending it, but is instead merely exercising discretion to allow an Alternative means of meeting the rule's financial assurance goals. Moreover, Section 2201(x) is irrelevant here because the Section applies only to byproduct materials as defined in Section 11e(2) of the AEA -- a kind of material not handled at the Gore facility.

" Sag Settlement Agreement between NRC and GA at 12 ("no

- inference adverse to either party shall be drawn based on the parties having entered into this Settlement Agreement"), appended at Attachment 1 to NRC Staff's and GA's Joint Motion for Approval of Settlement Agreement, dated July 11, 1996.

y l

l' L- 37 l

l Appeal Brief challenging the-GA settlement, that Commission approval of the GA settlement is contrary to the requirements of National-Environmental Policy Act ("NEPA"). According to Oklahoma, it is premature for the Commission to determine finally who is responsible for decommissioning costs and the amount of-such costs, audito bar further action-by the NRC staff, when the  :

decision process for determining these costs has only just begun.

Because Oklahoma failed to raise these arguments-before the Board, it may not do so on appeal." Even were Oklahoma not so barred, we would reject its argument on the merits. The staff can best assess the decommissioning alternatives if it first knows how much money GA has to spend on decommissioning. The settlement provides that information. Thus, our approval of the GA settlement supports rather than preempts the NRC's NEPA

-review.

4. Meaninaful Particination

-Because of'the procedural posture of this adjudication, the settlements' opponents have obtained no discovery on the liability and the decommissioning cost-issues in this proceeding.

As a result, they believe that they lack sufficient information to judge the merits of either settlement, particularly on the issues of (i) GA's financial capabilities and responsibilities and -(ii) the staff's'and the Commission's consideration of GA's

" ggg, 22g2, Philadelchia Elec. Co. (Limerick Generating Station, Units 1 and 2), ALAB-845, 24 NRC 220, 248 n.29 (1986).

Cf2 Hiram Walker, 768 F.2d at 892 (argument opposing a settlement was rejected because it was raised for.the first time on appeal).

m.

.Q 38 San Diego facilities during settlement negotiations. Opponents argue that their lack of access to important information on these isoues vitiates their right to meaningful participation in the Case.-

We cannot agree with the opponents' grievance. Early in this adjudication, we made clear that outside parties "may only

{ intervene with re tot to matters found to be within the scope of the Staff's enforcement order and may not expand the breadth of the order or proceeding." CLI-94-12, 40 NRC at 70. In other '

i t

words, intervenors take enforcement cases as they find them, They may not control how such cases are prosecuted or compromised. Nor may they " simply object to settlement in order to block it." Id. at 71 n.10. Otherwise, of course, the agency would be turning over its prosecutorial powers to private parties, and "the scope of many proceedings would be ' virtually interminable' and ' free-ranging'." Id. at 70, citina Bellotti v.

HEC, 725 F.2d at 1381.

It is useful for concerned intervenors, based on available information, to raise objections to enforcement settlements as outside the public interest, and they have done so here with considerable force. But it would not be sound practice, or even possible, for the Commission to place in intervenors' h'ndc the same information and considerations that may have influenced the NRC staff to strike a compromise with SFC and GA.31 As c .. lined 32 Obviously, less information is available when a case settles than would be if the case were fully litigated. But this fact of (continued...)

I i

39 in general terms earlier in this decision, numerous subjective factors, including agency enforcement priorities and resources, an assessment of adverseries' determination and okill, shared L

J 1-- confidences at settlement meetings, and an evaluation of likelihood of litigation success, go into a decision to settle.

These kinds of matters are simply not susceptible of review by adjudicators and third parties. Cf Heckler v. Chanev, 470 U.S.

\ 821 (1984).

Insofar as the settlement opponents demand discovery access to confidential commercial and corporate information, their requests would surely meet with determined resistance. Cf.

Seouovah Fuels and General Atomics (Gore, Oklahoma, Site),

CLI-95-16, 42 NRC 221 (19 r.3) . We decline to devote further c-adjudicatory resources to this sort of dispute in a case where, in cur judgment, the NRC sta5f already has reached settlements that we view as reasonable in light of the risks, benefits and costs of further litigation. S33 section II.B.1, suora.

In short, we see no value in the kind of reopened discovery a

y proceedinas and information-sharing -- essentially a second major litigation to assess the virtues of settlement -- that the settlement opponents demand. Such an approach not only would

_ produce no fruitful result, in our judgment, but also would serve as a major disincentive to engaging in the arduous, yet

'2(... continued) life does not undercut the viability of a set .lement. Sag Isby, 75 s F.3d at 1199; Microsoft, 56 F.3d at 1461; Girsh, 521 c.2d at 160; Grinnell, 495 F.2d at 462.

r

4 40 desirable, task of settling cimplex enforcement cases. Cf.

Massachusetts School of Law at Andover v. United States, 118 F.3d at 784-85.

One specific matter concerning the parties' knowledge bears further discussion. Intervenors maintain that, in a secret l

" global settlement" addressing all decommissioning claims against GA, the staff evaluated the relativa risks of the various GA r

facilities in San Diego and the SPC site and apparently l

apportioned some cmount of GA resources among them, based on that l

risk assessment. Moreover, intervenors assert that the global settlement was presented to the Commission in a secret ex carte briefing. According to intervenors, such ex carte communication undermines the basic fairness of the hearing process and precludes effective judicial review of our final decision. The remedy sought by the intervenors is full disclosure of all documents relating to the settlement with GA.

In our instant review of the GA settlement, we give no consideration whatever to the decommissioning of GA's San Diego facilities. We judge the current GA settlement purely on its own merits. Disclosure of the San Diego-related documents sought by the opponents is therefore unn_cessary.32 In addition, even were the opponents to demonstrate from the requested documents 32 It is our understanding, in any event, that intervenors have already received large portions of this material through a Frcedom of~Information Act request. These documents show that, in 1996, the Commission considered the NRC staff's then-proposed exercise of enforcement discretion for the GA's San Diego facilities independently and without reviewing or passing on the potential Gore settlement.

m

. jf

i. 41 that-the money available for--decommissioning thetGore site might-lhave been-greater had staff not~ reached an understanding with GA regarding the decommissioning of its San Diego facilities.=such a demonstration would in..ne-way affect our decision today." The NRC's arrangements _'for GA'i San Diego facilities reflects an exercise of enforcement judtment on how best to prioritize and i allocate resources ---an inquiry outside the purview of the adjudicatory process.- 1 CLI-95-16, 42 NRC at 225-26. In any event, the-mere possibility that a party might have received a

{

35 -In ' a related argument, .intervenors assert that the: GA

" secret global. settlement" -unlawfully 'Jrants GA an unconditional and indefinite waiver of decommissioning funding requirements as

- they L apply - to GA's facilities 'in San Dj ?qo, CA, without public inotice-and opportunity-for comment._ -Intervenors' Initial Brief, dated;Feb. 18, 1997, at 22 n.18. Because neither the enforcement order,_ the Board's order approving the GA settlement, nor the instant ~ order addresses GA's San Diego facilities' decommissioning, the matter is beyond the scope of this proceeding.

g.-

42 ,

more favorable result is not"a suffic'ient-reason.to overturn a  ;

settlement.84 CONCLUSION:

For'the-foregoing _ reasons, we affirm LBP-95-18 and l

-LBP-96-24. j IT IS SO ORDERED'.

g o For the Commission

. . . . < ,%o

,/ John C. / Hoyle Sechtary of the. Commission

= Dated-at-Rockville, Maryland, this M day of October, 1997.

3' "A settlement will not be rejected solely because it does not-provide a complete victory" for a particular party. Isby, 75 F.3d at 1200, citina Hiram Walker, 768 F.2d at 889, h

a.

-t 43 APPENDIX A

-CHART ILLUSTRATING THE RELATIONSHIP OF DIFFERENT COMPANIES ,

ASSOCIATED WITH SEQUOYAH FUELS CORPORATION j l;

General Atomica Allied-Signal, Inc.

, Technology Corporation (GATC)

/ \ l'

/ \' Allied-Signal

/ \ Energy Services l I General Atomics General Atomics (GA) Energy Services

\ (GAES)

\ l Sequoyab Holding \ GAES Limited Corporation. \_ Partnership (SHC) (GAESLP) /

/ /

/ /

Sequoyah Fuels / /

International //

Corporation ConverDyn (SFIC)

Sequoyah Fuels Corporation (SFC)

Based on Intervenors' Initial Appeal Brief, filed March 25, 1996, at 2-3 n.1, 4 n.3, 22 n.23, in turn based on GA's Answer to NRC Staff's First Set of Interrogatories, dated June 29, 1994, at 2.

See also SFC's Response in Opposition to Intervenors' Petition for Review [of LBP-95-18) , dated Nov. 27, 1995, at 5 n.5; SFC's Response Brief, dated April 29, 1996, at 7; Inte17enors '

Opposit: ion to Joint Motion for Approval of Settle-ment Agreement Between NRC Staff and GA, dated Aug. 9, 1996, at 3-4, 8; Staff's Appeal Bricf, dated March 10, 1997, at 2.