ML20205K850
| ML20205K850 | |
| Person / Time | |
|---|---|
| Issue date: | 08/10/1988 |
| From: | Stello V NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| Shared Package | |
| ML19321B636 | List: |
| References | |
| FRN-53FR36338, RULE-PR-50 AC94-1-04, AC94-1-4, SECY-88-230, NUDOCS 8811010373 | |
| Download: ML20205K850 (5) | |
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-1 PbR August 10, 1988 SECY-88-230 a
l For: The Comissioners l
l From: Victor Stello, Jr. !
Executive Director for Operations
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Subject:
PROPOSED RULE, 10 CFR PART 50, "NUCLEAR PROPERTY l
INSURANCE" -- EXTENSION OF TIME TO IMPLEMENT t DECONTAMINATION PRIORITY AND TRUSTEESHIP PROVISIONS OF $50.54(w)(5)(1)
Purpose:
To inform the Comission that the EDO intends to publish for coment a proposed rule that would extend the imple-nentation schedule for the stabilization and decontamination ,
priority andcontained regulations trusteeship in 10 provisions CFR 50.54(w)(5) of its p(roperty 1). The insurance effective date would be delayed from October 4,1988 to April 1, 1990. The delay in implementation is necessary .
because the insurers that offer property insurance for power reactors have informed the staff that they will be .
unable to include the stabilization and decontamination t priority and trusteeship provisions in their insurance i policies within the time currently provided. Concurrently, l the extension of the effective date of the rule will allow j the NRC to consider recently submitted petitions for rulemaking that propose changes to improve the efficacy of !
these provisions, j Category: This is a negative consent item. The action proposed clearly falls within established Comission policy as set forth in 10 CFR 1.31(a)(3) which delegates certain rulemaking authority to the Executive Director for Operations.
Discussion: On August the Covitssion published in the 5,1987(52 FR 28963) a final rule which amended Federal Register l
10 CFR 50.54(w). Tht rule increased the amount of on-site property damage insurance that comercial power reactor {
licensees are required to cerry for their facilities. The purpose of the rule was to provide an assured source of funds for on-site decontamination and cleanup of a power reactor facility af ter t.n accident. In that regard, the CONTACT:
R. Wood, NRR 492-1280 8811010373 800810 PDR BECY 88-230 PDR
August 1987 ame....o n required licensees to obtain insurance policies in which any proceeds from such policies are to be paid for stabilization of a reactor after an accident and then for decontamination of the facility before any other purpose. The rule also required that any insurance proceeds are to be paid to a trustee, who would be required to disburse funds according to the decontamination priority.
The Comission believed that these provisions would effectively protect insurance proceeds from claims by bondholders or their representatives or, in the event of licensee default or bankruptcy, by other creditors. The Comission based this belief on coments from the Asr.ociation of the Bar of the City of New York (49 TR 44645, coment 12).
Subsequent to publication of the final rule, the NRC has been informed, both orally and in writing, that the trustee-ship provisions and, to a lesser extent, the stabilization and decontamination priority arovisions of the rule are sufficiently complex and problematic t1at the insurers will be unable to incorporate these provisions in their policies within the time mandated by tne rule.
The insurers and their counsel provide two reasons why they are unable to comply with the date specified in the final rule for adding the stabilization and decontamination priority and trusteeship provisions. First, with res>ect to the trusteeship provision, counsel for insurers iave assured the NRC staff that they have made a good-faith effort to obtain trustees but have been unsuccessful. They believe the reason for their lack of success is the potential trustees' conflicts of interest and reluctance to assume, on the one hand, responsibility for disbursing potentially over
$1 billion in insurance proceeds and the resulting exposure to possible litigation for wrongful disbursement, while, on the other hand, being eligible for only modest fees for this service.
A second reason insurers give for being unable to comply with the effective date of the rule is essentially logistical. As a contract, an insurance policy can only be modified with the consent of all affected parties. Because the Comission's mandated stabilization and decontamination priority and trusteeship provisions adversely affect the current rights under the policy of the bondholders' trustee, it is unlikely that policies could be legally changed until the end of the ,
policy year. NEIL policies renew every November 15. NML '
policies every April 1, and AN!/MAERP policies throughout the year.
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3 When the NRC selected the effective date of October 4, 1988, it believed that one year plus 60 days from publication of the rule would give insurers sufficient time to incorporate appropriate implementing language in their policies. However, given the complexity of the changes, the unexpected (by the insurers) addition of the trusteeship provisions of the rule, and the timing of the rule's publication after the NEIL and NHL annual meetings at which changes must be approved, insurers cannot make changes within the time required. Moreover, insurers have informally told staff that the process of getting approvals from state insurance regulators for policy language changes for both stabilization and decon-tamination priority and trusteeship provisions will also cause delay.
Based on the insurers' statements, there appear to be serious practical difficulties in implementing the decontamination priority and trusteeship provisions of the rule by the date mandated. The NRC has no regulatory authority over insurers and therefore cannot require insurance having specific terms and conditions to be made available if insurers choose not to offer it. Apart from the practical problems in the implementing schedule, there are underlying substantive questions concerning the efficacy of the trusteeship provisions of 10 CFR 50.54(w) in accomplishing its stated objective -- namely, safeguarding insurance proceeds so that they will be used to clean up and decontaminate after a reactor accident and thus protect the health and safety of the public. A sufficient extension of time allowed for implementing these provisions would not only give insurers adequate time to amend their policies, if it ultimately proves necessary to do so, but would also allow the Comission to consider the issues raised in recently submitted letters and the petitions for rulemaking on their merits. See the following: (1) the letter dated January 27, 1988 to Dr. Thomas E. Murley from Peter D. Lederer, Baker &
McKenzie, counsel to Nuclear Mutual Limited (NHL) and Nuclear ElectricInsuranceLimited!!(NEIL-!!);(2)theletterdated January 29, 1988 to Robert S. Wood from Peter D. Lederer, Baker & McKenzie at page 5; (3) Petition for Rulemaking (PRM-50-51) dated June 3, 1988 from Linda S. Stein, Steptoe & Johnson, counsel to American Nuclear Insurers and MAERP Reinsurance Association (AN!/MAERP), at pg. 7; (4) Petition for Rulemaking (PRM-50-51A) dated June 21, 1988 from J. B. Knotts, Jr., Bishop, Cook, Purcell & Reynolds, counsel to the Edison Electric Institute, the Nuclear Utility Management and Resources Council and several power plant ;
licensees, at pgs.10-11; and (5) Petition for Rulemaking i (PRM-50-51B) undated, from Peter D. Lederer, Baker & McKenzie, counsel to NHL and NEIL-!!.
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I The staff believes for several reasons that delaying for a t reasonable time the implementation of the decontamination ;
priorityandtrusteeshipprovisionsofi50.54(w)willnot i l adversely affect protection of public health and safety. :
1 First, the licensee still will be required to carry t
$1.06 billion insurance. This is a substantial amount of coverage that provides a significant financial cushion to i licensees to decontaminate and cleanup after an accident even without prioritization and trusteeship provisions.
Second, to obtain this level and more, most licensees carry :
l the full $750 million coverage offered by NEIL-!!. Thus. L l
a significant percentage of the required insurance already -
is prioritized under the decontamination liability and I excess property insurance language of the NEIL-Il policies.
Finally, there is only an extremely small probability of a i serious accident occurring during the period of delay. Even if a serious accident giving rise to substantial insurance ;
claims were to occur NRC would be able to take appropriate [
enforcement action to assure adequate cleanup to protect j public health and safety, ,
for the foregoing reasons, the staff has concluded that [
an 18-month delay, from October 4.1988 to April 4.1990 ,
in the implementation schedule of the stabilization and decontamination priority and trusteeships provisions is r justified and proposes to amend 10 CFR 50.54(w)(5)(1) !
accordingly. ;
RECOMENDATION: That the Comission Note: f
- 1. The EDO certifies that the proposed rule, if promulgated. I will not have a significant economic effect on a l substantial number of small entities pursuant to the (
Regulatory Flexibility Act of 1980. 5 U.S.C. 605(3) !
and will sign the proposed rule in ten days from the !
date of this paper unless directed otherwise by the Comission. l
- 2. The proposed rule will be published in the Federal i Register for a 30-day consnent period. '
- 3. The proposed rule does not contain a new or amended l infomation collection requirement subject to the l Papemerk Reduction Act of 1980(44U.S.C.3501etseq.). l i
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- 4. The Chief Counsel for Advocacy of the Small Business Administration will be infomed of the certification regarding economic impact on-small entities and the reasons for it as required by the Regulatory Flexibility Act.
- 5. The Office of Governmental and Public Affairs concurs that a public announcement is not needed.
- 6. A regulatory analysis has been prepared and is incorporated into the draft Federal Register notice.
- 7. heither an environmental impact statement nor an environmental assessment has been prepared for this proposed rule because the staff has determined that the proposed rule is the type of action described in categorical exclusion 10 CFR 51.22(c)(2).
- 8. The proposed rule, if promulgated, would not constitute a backfit under 10 CFR 50.109; therefore, a backfit analysis is not required.
- 9. Congressional comittees will not be informed.
- 10. The Office of the General Counsel has reviewed the proposed rule and has no legal objection.
C' pctorSte1o.f&x e .
Executive Director for Operations
Enclosure:
Federal Register Notice SECY NOTE:
In the absence of instructions to the contrary, SECY will notify the staff on August 24, 1989 that the Commission, by ne consent, assents to the action proposed in this paper. gative DISTRIBUTION: